Tourmaline Oil Corp (Alberta) T.TOU

Alternate Symbol(s): TRMLF

Energy Oil & Gas E&P

Tourmaline Oil Corp. is a natural gas producer, which is focused on producing natural gas in North America. The Company is focused on long-term growth through an aggressive exploration, development, production and acquisition program in the Western Canadian Sedimentary Basin. It operates in three basins, which include the Alberta Deep Basin, NEBC Montney Gas/Condensate and Peace River Triassic Oil. It has ownership interests in 22 natural gas plants in the Alberta Deep Basin. It owns and operates seven natural gas processing facilities with an aggregate capacity of approximately 1.0 Bcf/d with related gas gathering systems and NGL handling infrastructure in the NEBC complex. The Company owns and operates two oil batteries in the Peace River Triassic Oil basin. The Company’s operations are focused on northeast British Columbia and include a large contiguous land base with a Montney resource. Its Montney area assets include Septimus / West Septimus, Groundbirch, Monias and Tower.

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Post by retiredcfon Nov 07, 2024 8:13am

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Post# 36300519

TD

Have a $91.00 target. GLTA

Q3/24: LEADING SPNOI & FFO GROWTH; PROGRESS ON US VACANCIES; 3% DIST'N BUMP

THE TD COWEN INSIGHT

GRT delivered another quarter of strong SPNOI and FFO/unit growth. Despite announcing some progress in leasing-up its U.S. vacancies, mgmt's year-end occupancy targets have (unsurprisingly) been pushed back. While consensus may need to reflect a slower occupancy ramp-up, we remind that with half of GRT's assets in the U.S., the USD's recent strength could provide a substantial offset.

Impact: NEUTRAL

Q3 results were in-line with TD/consensus and continue to reflect GRT's strong embedded growth. Both FFO/unit of $1.35 and our $1.20 calculation of AFFO/unit increased +9% y/ y (see exhibit). Versus our forecast, GRT's Q3 had a small F/X tailwind, offset by slightly higher interest expense.

GRT announced some good progress on its list of U.S. vacancies, signing a 5-year lease for 307,800sf at 8740 South Crossroads Dr, Olive Branch, MS (Memphis market) that commenced in October. That represents 9% of the US vacancies in Q2 and 0.5% of GRT's total portfolio.
GRT's occupancy was 94.3% in-place (-0.2% q/q) and 94.7% committed (+0.2% q/q), reflecting the Memphis lease that commenced post-Q3. We are aware of one of GRT's buildings in the U.S. that recently was placed on the sublet market for up to 750,000sf with 2 years of remaining term.
SPNOI growth (cash basis) held strong at +6.2% y/y (highest since Q3/23). New and renewal leasing generated +31% higher rents. GRT completed an early 5-year extension of a 773,300sf lease in the GTA (likely the Wayfair space at 2020 Logistics Drive, near the airport). This property was acquired (and the lease commenced) in 2019 just as GTA market rents started their rapid ascent.

2024 Outlook Lowered/Delayed: GRT updated its vacancy and leasing assumptions, causing its 2024 SPNOI growth guidance (4-qtr average) to be tightened at the bottom-end of the prior 6.0% to 6.5% range (was previously a range of 7% to 8%). This suggests to us that
the prior occupancy targets of ~97% committed and ~96% in-place by year-end have been either lowered or pushed back, which is not surprising with less than two months remaining in the year. We believe the evolving expectations around the U.S. election over the past two months and corresponding volatility in bond yields likely caused some tenant prospects to postpone their decisions on committing to new leases.

Today's trading valuation (~14x 2025E P/AFFO, 82% P/NAV, 6.3% implied cap rate) feels to us like a trough given GRT's growth track record and consistent annual distribution increases (including today's 3% bump).

Conference call Nov 7: 11:00 a.m. (1-800-579-2543;