Tourmaline Oil Corp. · TSX:TOU
Tourmaline Oil — Q2 2023 Earnings Presentation
53 slides from Tourmaline Oil's earnings presentation, Aug 3, 2023
Slide 1: Corporate Presentation August 2023
Corporate Presentation August 2023
Slide 2: Tourmaline Overview
Tourmaline Overview 2 The Scale, Resource, and Infrastructure Required to Profitably Grow in the WCSB and Provide Returns to Shareholders Aug 2023 Tourmaline Overview 3.4 MM Net Acres, 4.5 Billion Boe 2P Reserves(1) Conroy • Largest natural gas producer in Canada Drilled to Date • 4th largest Canadi
Slide 3: GHG Emissions – Senior E&P Comparison
3 GHG Emissions – Senior E&P Comparison Jan 2023 Tourmaline has amongst the lowest GHG emissions intensity (CO2e/boe) among Canadian Senior E&P’s Canadian Senior E&P GHG Emissions 2021 50,000,000 0.12 45,000,000 0.10 40,000,000 Tourmaline has achieved a 41% reduction 35,000,000 in C02 emissions inte
Slide 4: A History of Full Cycle Profitability
4 A History of Full Cycle Profitability Mar 2023 $7,000 $7.00 Earnings before taxes ($mm) AECO (CAD$/mcf) NYMEX (USD$/MMbtu) $6,000 $6.00 Earnings before tax ($ millions) $5,000 $5.00 (Gas Price) $4,000 $4.00 $3,000 $3.00 $2,000 $2.00 $1,000 $1.00 $0 $0.00 2012 2013 2014 2015 2016 2017 2018 2019 202
Slide 5: Largest North American Natural Gas Producers
5 Largest North American Natural Gas Producers Aug 2023 Tourmaline is the largest natural gas producer in Canada, and the fifth largest gas focused producer in North America MMcf/d 2023E Natural Gas Production – Canada & US 6,000 5,000 Scale is a key component in driving down costs, leveraging trans
Slide 6: Resource Ownership
6 Resource Ownership The next differentiator in North American E&P Aug 2023 Enverus has assessed that Tourmaline holds the largest Tier 1 inventory in North America • >80% of <US$2.00 breakeven gas resource held by gas operators resides in Canada • >1/2 of North American gas producers have nearly fu
Slide 7: Tourmaline: A Significant Canadian Liquids Producer
7 Tourmaline: A Significant Canadian Liquids Producer Aug 2023 Tourmaline is a significant liquids producer in Canada, with continued peer leading growth • Tourmaline is the 6th largest producer of conventional liquids, the largest producer of NGLs, and the second largest condensate producer • Tourm
Slide 8: EP Growth Plan
8 EP Growth Plan(1) Aug 2023 800,000 700,000 600,000 500,000 Spirit River Boe/d 400,000 NEBC 300,000 200,000 Deep Basin 100,000 - 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 Tourmaline Tourmaline Declared After-tax After-tax E&P Capital Free Cash Base Special Ending Surplus Prod
Slide 9: Free Cash Flow Allocation & Dividend Growth Track Record
9 Tourmaline Free Cash Flow Allocation & Dividend Growth Track Record Aug 2023 The majority of Tourmaline’s free cash flow will be returned to shareholders; special dividends will be the preferred method of shareholder returns during periods of high commodity prices • Base dividend will continue to
Slide 10: Alberta Deep Basin
10 Alberta Deep Basin Mar 2023 The contiguous Tourmaline interconnected Deep Basin Cretaceous gas asset is effectively Alberta’s Largest Gas Field R13 R11 R9 R7 R5 R3 R1W6 R25 R23 R21 R19 R17 R15 R13 R11 TCPL T71 Main Line 1 • Current Production 255,0000 - 260,000 boepd • Current Reserves 1,493 mmbo
Slide 11: NEBC Montney Gas/Condensate Complex
11 NEBC Montney Gas/Condensate Complex Aug 2023 D-48-C Sour Current Prod. 240,000 – 250,000 boepd Gas Plant. 30 MMcfpd b-24-H Comp/Dehy Current Reserves 2,721 mmboe (Dec 31, 2022) 140 MMcfpd. Montney Drilling In excess of 6,536 horizontal Northriver D-72-F Comp Sta. Inventory locations. North Jedney
Slide 12: Significant Montney Growth Potential
12 Significant Montney Growth Potential Aug 2023 Tourmaline has access to significant potential Montney growth through fully delineated assets that are economic on current strip. Mboe/d Tourmaline Montney BC and Alberta Montney Peers 500 450 >400 Sundown Full Development • 400 Aitken Creek • 390 Con
Slide 13: Peace River High Complex Triassic Oil
13 Peace River High Complex Triassic Oil Charlie Lake, Montney and Wapiti Cardium Plays Mar 2023 Legend Peace River High R. 11 R. 9 R. 7 R. 5 Tourmaline Lands • 2,652 Horizontal Locations* along Regional Play Tou UpperCharlie Lake HZ Drills Fairways 15-13 Mulligan Tou Lower Charlie Lake HZ Drills Oi
Slide 14: Tourmaline Mid Stream Assets
14 Tourmaline Mid Stream Assets Mar 2023 The infrastructure skeleton in all three core operated complexes is now complete. This infrastructure is essentially all new and in the ‘growth’ areas of the WCSB. Conroy • 25 Working interest gas plants, 15 of which are 100% owned Montney Birley and operated
Slide 15: Historical Reserves Summary
15 Historical Reserves Summary Aug 2023 Reserves (GLJ) Reserves 2018 2019 2020 2021 2022 2015 2016 2017 2018 2019 2020 2021 2022 5,000 (mmboe) (mmboe) (mmboe) (mmboe) (mmboe) (mmboe) (mmboe) (mmboe) PDP 263.2 352.1 436.5 473.5 527.4 736.4 947.3 1,001 4,000 TP 644.1 859.2 1,056 1,207 1,294 1,691 2,18
Slide 16: Gas Development Location Inventory and Economics
16 Gas Development Location Inventory and Economics(1) Mar 2023 NEBC Gundy NEBC North NEBC South PRH PRH AB Deep Basin MNTN MNTN MNTN Charlie Lake Montney Horizontal Horizontal Horizontal Horizontal Horizontal Horizontal Total Well Costs (Drill, Case, Complete, $ Million) 4.27 3.50 4.20 3.30 2.48 3.
Slide 17: Multiple Decades of Economic Inventory
17 Multiple Decades of Economic Inventory May 2023 Tourmaline’s deep inventory ownership provides multiple decades of very profitable development, plus no need to pursue expensive resource additions in A&D market Drilled to Date 75 yrs of 2023 Drilling $3.50 Drilling Inventory(1) Booked Locations Un
Slide 18: A Unique, Expanding Exploration Program
18 A Unique, Expanding Exploration Program Multiple New Zone/New Pool Successes Over the Last 3 Years May 2023 Exploration program success has created significant incremental value in existing core Conroy NEBC (North) New Pool Oil/Gas complexes, the majority of the discoveries can • 2 separate succe
Slide 19: Continuous D&C Performance / Cost Improvements
19 Continuous D&C Performance / Cost Improvements Mar 2023 Wells Drilled by Area Feet Average Lateral Feet per Well by Area Development shifting to NEBC as Deep Basin & 180 9,000 PRA settle into maintenance development 159 45% increase in corporate 160 8,500 lateral length since 2018 137 140 140 8,0
Slide 20: Continuous Capital Efficiency Improvements
20 Continuous Capital Efficiency Improvements Mar 2023 $22,500 Tourmaline maintains best in class capital efficiencies, even $20,900 after accounting for inflationary headwinds in 2022 and 2023 $20,000 $17,500 $15,500 $15,000 $12,500 $/boepd $11,200 $10,000 $9,500 $9,500 $8,900 $9,000 $8,650 $8,000
Slide 21: Continuous Cost Reduction Strategy
21 Continuous Cost Reduction Strategy Mar 2023 Operating Costs General and Administrative Costs ($/boe) ($/boe) $6.00 $5.58 $1.50 $4.87 $5.00 $4.43$4.35 $4.37 $4.30 $3.77 $1.02 $4.00 $1.00 $3.31$3.19$3.33$3.28 $3.14 $0.79 $0.74 $3.00 $0.60 $0.56 $0.54 $0.57 $0.49$0.49 $2.00 $0.50 $0.45 $0.44 $0.46 $
Slide 22: 2023 Natural Gas Transportation and Marketing Overview
22 2023 Natural Gas Transportation and Marketing Overview July 2023 2023 Natural Gas Marketing & Transportation Natural Gas Price Exposure 3% 2% 2% 2% 26% 28% 34% 45% 4% 4% 15% 3% 16% 16% 2% 6% Station 2 9% 17% 9% 9% 5% 13% 14% 8% 7% 5% 5% 16% 32% 23% 16% 5% 5% 2023 2024 2025 2026 AECO Hedged US Gul
Slide 23: Highly Profitable & Strategically Timed Growth
23 Tourmaline Pursues Highly Profitable & Strategically Timed Growth July 2022 Tourmaline matches natural gas growth with contracted egress and local demand increases • Tourmaline’s near term natural gas growth pairs with its 150 MMcfpd Gulf Coast egress expansion (140 MMcfpd of which is supplied to
Slide 24: Tourmaline/Cheniere LNG Export Overview
24 Tourmaline/Cheniere LNG Export Overview Jan 2023 Canada’s Largest Gas Producer and the Largest U.S. LNG Company create a unique Overview • Tourmaline is the largest natural gas producer in Canada at 2.5 bcf/d cross border agreement • Natural gas supplied from Tourmalines Alberta Deep Basin and/or
Slide 25: Guidance
25 Guidance Aug 2023 2023(1) Production – Boe/d 520,000 Cash Flow(i) - $MM $3,620 CFPS - Diluted(i) $10.52 E&P Capital Program(ii) - $MM $1,675 Capital Expenditures(i) $1,860 (excluding acquisitions and dispositions) - $MM Free Cash Flow(iii) - $MM $1,760 Exit Net Debt(i) - $MM $620 Debt to CF 0.2 (
Slide 26: Environmental Performance Investment & Returns
26 Environmental Performance Investment & Returns May 2023 Focusing on investment opportunities that maximize cost savings & environmental impact • Water: recycling, & pipeline infrastructure; ~100% recycling in NEBC, advancing AB towards 100% • Air: diesel displacement, pneumatic / venting reductio
Slide 27: 2024 After Tax Cash Flow Sensitivity & Allocation
27 Tourmaline 2024 After Tax Cash Flow Sensitivity & Allocation Aug 2023 Tourmaline’s low cost structure drives sustainable return on, and of, capital opportunities • TOU’s maintenance budget, and dividend fully funded at US$1.50/mcf • Current strip provides meaningful free cash flow, averaging $1.5
Slide 28: North America's Most Attractive Natural Gas Investment
28 Tourmaline is North America’s Most Attractive Natural Gas Investment Aug 2023 TOU offers the most compelling investment proposition amongst large cap North American peers • Superior Margin: Stronger sales hub pricing and transport at ~50% the cost of US Appalachia peers • Resilient FCF Offering:
Slide 29: Growth Discipline Maximizes Margin & Free Cash Flow
29 Growth Discipline Maximizes Margin & Free Cash Flow Aug 2023 Our strategy is to pursue gradual organic production growth of ~6% through the base EP program, and continuing adding scale through select, bolt on accretive acquisitions, ultimately owning a larger proportion of supply, at a higher mar
Slide 30: Appendix
APPENDIX
Slide 31: Historical EP Performance
31 Historical EP Performance Mar 2023 Production Per Share* Reserves Per Share* 600 14 500 12 Boe / 000 Shares 10 Boe / Share 400 8 300 6 200 4 100 2 0 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Operating Costs / BOE Cash Flow Per
Slide 32: Independently Recognized Canadian 2P Reserves
32 Independently Recognized Canadian 2P Reserves(1) May 2023 Tcf Natural Gas 2P Reserves MMbbl Conventional Liquid 2P Reserves 25 1,800 1,600 21 20 1,400 1,200 15 1,056 1,000 800 10 600 400 5 200 0 0 Peer TOU Peer Peer Peer Peer Peer Peer Peer Peer Peer Peer Peer Peer Peer TOU Peer Peer Peer Peer Pe
Slide 33: Consolidation Financial Lookback
33 Consolidation Financial Lookback Sept 2021 TOU’s acquisitions through 2019 – 2021 were strategic, expansive and very accretive • TOU has acquired ~$2.3bn in assets since 2019, which now generate ~1/3 of TOU’s total free cash flow and total cash flow. These acquired assets sum to 1.2 million net a
Slide 34: EP Growth Plan (Original Business Plan)
34 EP Growth Plan (Original Business Plan) Sep 2008 This is essentially the same business plan that was executed for Duvernay Oil Corp. (2001-2008) • Primary growth mechanism will be a conventional EP Program (including Resource plays). • Build 2-3 core EP areas during initial three years of operati
Slide 35: NEBC North Montney Delineation and Development
35 NEBC NORTH Montney Delineation and Development Aug 2023 NEBC North Montney Development Summary • 18 pads drilled and completed since 2021 • Delineation and development pads progress regional play understanding and reinforce underlying profitability of the assets • Continuing to refine landing zon
Slide 36: Tourmaline Environmental Performance
36 Tourmaline Environmental Performance • Tourmaline strives to continually improve all aspects of environmental performance including the impact of its operations on air, land and water. • Tourmaline has the lowest CO2 emissions and emission intensity of the Canadian Senior producers. • Tourmaline
Slide 37: Sustainability Performance Highlights
37 Sustainability Performance Highlights Jan 2023 Tourmaline has been aggressively and successfully pursuing a comprehensive environmental performance improvement strategy for over seven years. The Company is systematically improving its performance and reducing the impact of all aspects of the Comp
Slide 38: Tourmaline Financial Position
38 Tourmaline Financial Position Excellent Liquidity, Resiliency & Capacity Aug 2023 Tourmaline has ample liquidity and capacity to weather adverse commodity prices Debt Profile, Term, Capacity Change in: 2024 Cash Flow Sensitivities $mm 3,500 3,050 3,050 3,050 3,050 3,000 3,000 3,000 2,785 Oil US$1
Slide 39: Diesel Displacement Initiatives
39 Diesel Displacement Initiatives Sept 2020 Initiative Annual Emissions Impact Net Savings Highline Power • 1.4mm litres/yr fuel displaced $400,000/yr savings • PRH rig running on 100% electricity • 3,100 tC02e/yr Natural Gas Fuel Gas Substitution • 15 mm litres/yr fuel displaced with $10mm/yr savi
Slide 40: Continuous Environmental Performance Improvement
Continuous Environmental Performance Improvement 40 Through Innovative Application of New Technologies • Massive reduction in flaring • Water recycling for fracs Tech Service • Gas fired drilling rigs/fracs • Methane leakage elimination across all operating regimes • COSIA & NGIF industry technology
Slide 41: Environmental Performance Improvement Highlights
Tourmaline Environmental Performance 41 Improvement Highlights June 2019 BC Water Management Alberta Water Management • 95-100% of all water sourced for stimulation operations is • 1st, and only, company in Alberta to be licenced to store recycled and recycle produced water from an in-ground storage
Slide 42: Technology Curve/Future Concepts, Requirements & Opportunities
42 Tourmaline Technology Curve/Future Concepts, Requirements & Opportunities • Cost saving via novel frac water sourcing/recycling • New Waste heat recovery technology • Alternative hz frac programs/processes – Concurrent pairs, delayed flow-backs etc. • Novel drilling technology to reduce time/cost
Slide 43: Schedule A
43 Schedule A DRILLING LOCATIONS Estimated Drilling Inventory This presentation discloses drilling locations in four categories: (i) proved undeveloped locations; (ii) probable undeveloped locations; (iii) unbooked locations; and (iv) an aggregate total of (i), (ii) and (iii). Of the 23,077 (gross)
Slide 44: Schedule A continued
44 Schedule A continued Deep Basin Horizontal well count : • Total horizontal Deep Basin locations = 15,154 (1-2 wells per section per zone depending on zone) • Less 1,356 existing horizontals, and less 20% of existing vertical producers (246) • Remaining Horizontal Locations = 13,534 Deep Basin ver
Slide 45: Schedule B
45 Schedule B Prospective locations are unbooked locations that are not included in inventory. Unbooked locations are internal estimates based on the Company's prospective acreage and an assumption as to the number of wells that can be drilled per section based on industry practice and internal revi
Slide 46: Forward Looking Information
46 Forward Looking Information Certain information contained in this presentation constitutes forward-looking information within the meaning of applicable securities laws. This information relates to future events or the Company's future performance. All information other than information of histori
Slide 47: Forward Looking Information
47 Forward Looking Information With respect to forward-looking information contained in this presentation, assumptions have been made regarding, among other things: future crude oil and natural gas prices; future interests rates and currency exchange rates; the Company's ability to obtain qualified
Slide 48: Forward Looking Statement Advisories
48 Forward Looking Statement Advisories Oil and Gas Advisories Certain crude oil and natural gas liquids ("NGLs") volumes have been converted to millions of cubic feet equivalent ("mmcfe") or thousands of cubic feet equivalent ("mcfe") on the basis of one barrel ("bbl" of crude oil or NGLs to six th
Slide 49: Forward Looking Statement Advisories: Cash Flow
49 Forward Looking Statement Advisories Non-GAAP Financial Measures Cash Flow Management uses the term “cash flow" for its own performance measure and to provide shareholders and potential investors with a measurement of the Company’s efficiency and its ability to generate the cash necessary to fund
Slide 50: Forward Looking Statement Advisories: Free Cash Flow
50 Forward Looking Statement Advisories Non-GAAP Financial Measures (con’t) Free Cash Flow Management uses the term “free cash flow" for its own performance measure and to provide shareholders and potential investors with a measurement of the Company’s efficiency and its ability to generate the cash
Slide 51: Forward Looking Statement Advisories: Operating Netback
51 Forward Looking Statement Advisories Non-GAAP Financial Measures (con’t) Operating Netback Management uses the term “operating netback” as a key performance indicator and one that is commonly presented by other oil and natural gas producers. Operating netback is defined as the sum of commodity sa
Slide 52: Forward Looking Statement Advisories: Non-GAAP Ratios
52 Forward Looking Statement Advisories Non-GAAP Financial Ratios Operating Netback per-boe Management calculates “operating netback per-boe” as operating netback divided by total production for the period. Netback per-boe is a key performance indicator and measure of operational efficiency and one
Slide 53: Forward Looking Statement Advisories: Capital Management Measures
53 Forward Looking Statement Advisories Capital Management Measures Adjusted Working Capital Management uses the term “adjusted working capital” for its own performance measures and to provide shareholders and potential investors with a measurement of the Company’s liquidity. A summary of the compos