Tourmaline Oil Corp. is pleased to report very strong total reserve growth, liquids reserve growth and a continued reserve value increase in the current depressed natural gas price environment. The Company executed on the 2017-2018 plan to concentrate almost entirely on internal EP growth and has produced the best reserve metrics in the Company's 10 year history over the past two years.
- Proved plus probable reserves ("2P") increased by 241.2 mmboe to 2.46 billion boe during 2018, an 11% increase over 2017 year-end reserves of 2.22 billion boe and a 15% increase of 337.9 mmboe which includes annual production of 96.7 million boe. Total proved ("TP") reserves increased 23% to 1.21 billion boe and proved, developed producing ("PDP") reserves of 473.3 mmboe increased 31% over year-end 2017 when including 2018 annual production.
- After ten years of operation, Tourmaline has 2P natural gas reserves of 11.7 tcf and 2P liquid reserves of 505.2 mmboe of oil, condensate and liquids (December 31, 2018). The Company has the largest publicly-reported, independently-assessed, 2P natural gas reserves in Canada.
- 2P reserve net present value ("NPV")(1) of $58.57 per diluted share, TP reserve NPV of $33.67 per diluted share and a PDP reserve NPV of $17.36 per diluted share at December 31, 2018. The Company was able to continue to grow reserve NPV per diluted share in 2018 despite significantly lower natural gas pricing used in the independent reserve report.
- 2P finding, development and acquisition costs ("FD&A") in 2018 were $5.15/boe including changes in future development capital ("FDC") ($3.59/boe excluding change in FDC) based on total capital expenditures of $1.214 billion; TP FD&A in 2018 were $6.79/boe including change in FDC ($4.91/boe excluding change in FDC). 2018 PDP FD&A were $9.11/boe.
- The 2018 2P recycle ratio was 2.6 based on 2P FD&A of $5.15/boe (including FDC), and 2018 estimated cash flow(2) of $13.47/boe. The 2018 TP recycle ratio was 2.0 and the 2018 PDP recycle ratio was 1.5.
- 2P reserve replacement ratio(3) of 3.5 times based on 2P reserve additions of 337.9 mmboe before 2018 production of 96.7 mmboe.
- Tourmaline systematically converts TP and 2P reserves to PDP reserves; 145 wells (gross) of the 239 wells (gross) rig released in 2018 converted pre-existing TP/2P reserves to PDP reserves. The FDC in the 2018 2P reserve category represents approximately 4.5 years of future-projected Company cash flow.
- For the sixth year in a row the Company realized net positive technical revisions to previously booked reserves.
- Full-year 2018 average production of 265,044 boepd was 9% higher than 2017 average production of 242,325 boepd and within the guidance range.
- Q4 2018 liquids production (oil, condensate, NGL) of 51,938 bpd was 14% higher than Q4 2017 average liquids production. Tourmaline is forecasting 2019 average liquids production of 66,000 bpd, representing 39% year-over-year growth, forecast to be amongst the highest liquids growth rates in the industry this year.
- In 2018, Tourmaline's EP capital program of $1.23 billion generated approximately 110 mboepd of new production resulting in a 2018 capital efficiency of $11,200 boepd.
- Q4 2018 average production of 276,568 boepd was 9% higher than Q3 2018 average production of 254,185 boepd.
- Tourmaline has been producing at the 1H 2019 guidance range of 290,000 - 300,000 boepd during the first quarter; the Company will bring on the 50,000 boepd Gundy deep cut facility during June.
- Full-year 2018 EP capital spending was $1.23 billion. Q4 2018 cash flow was $391.5 million and Q4 EP capital spending was $363.2 million. Tourmaline's low cash costs and industry-leading capital execution costs allow the Company to achieve cash flow per share growth, generate free cash flow, and pay a dividend.
- The Company completed a small acquisition in the Peace River High Triassic oil complex for $21.2 million during the fourth quarter of 2018, consolidating acreage in the core Upper Charlie Lake pool at Spirit River proper.
- The 2018 EP capital program included approximately $110.0 million for the Gundy deep cut gas plant, the benefit of which will be realized in 2H 2019.
- The 2019 EP capital program is anticipated to be $1.225 billion(4), reflecting the $75.0 million reduction announced on January 15, 2019. Full-year production guidance remains unchanged at 300,000 boepd.
- 1H 2019 EP capital spending of $600 million is planned compared to forecast 1H 2019 cash flow of $700 - $750 million.
- The Company expects to sell $20.0 - $25.0 million of non-core, non-producing assets during the first half of 2019.
- Tourmaline has secured multiple long-term liquid processing and handling agreements in BC and Alberta to allow for premium pricing for the Company's future liquid streams, including the large volumes at Gundy in BC.
- Tourmaline is currently operating a total of 13 drilling rigs across the three core EP complexes, with the rig count dropping to six during spring break-up.
- The Company's initial delineation well at Attachie, where the Company has 29,000 undeveloped acres, tested at 767 boepd at the end of a 157 hour test (200 bpd oil and 3.4 mmcfpd of sweet natural gas). At least one follow-up appraisal well is planned for 2H 2019, where the Company has a large number of future drilling locations on the existing land block.
- The most recent Cardium horizontal in the Company's frontal foothills overthrust play along the western margin of the Deep Basin was flowing at 21.5 mmcfpd of natural gas with 979 bbls/d of condensate after 70 hours on-stream. Six of the eight wells drilled on this Cardium play are tier 1 locations with estimated EUR ranging between 12-15 bcf of gas and 225-400 mstb of condensate plus liquids per well (ref. GLJ/Deloitte). The Company plans further delineation wells along the 225 km play trend during the balance of 2019.
(1) Reserve NPV per share is calculated as the before tax net present value of the reserves at December 31, 2018 discounted at 10% divided by total diluted shares outstanding at December 31, 2018.
(2) Cash flow is defined as cash provided by operations before changes in non-cash operating working capital. See "Non-GAAP Financial Measures" in this release for additional information. All financial information is unaudited. See unaudited financial information section in this release.
(3) Reserve replacement ratio is calculated by dividing the annual 2P reserve additions (including annual production) by annual production.
(4) The capital reduction has not been reflected in the Company's current formal guidance. The Company intends to update formal guidance, including these capital reductions, along with the year-end financial results in March 2019.