Q1 2024 Tourmaline Oil Corp Earnings Call
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Operator: Good afternoon, ladies and gentlemen, and welcome to the Tourmaline Q1 2024 results conference call. At this time, all lines are in a listen-only mode.
Good afternoon, ladies and gentlemen, and welcome to the Tourmaline Q1, 2024 results conference call.
Operator: Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, May 2, 2024. I would now like to turn the conference over to Mr. Scott Kirker. Please go ahead. Thank you.
Operator: At this time all lines are in a listen only mode. Following the presentation, we will conduct a question and answer session.
Operator: At any time during this call you required immediate assistance. Please press star zero for the operator. This call is being recorded on Thursday may 2nd 2024, I would now like to turn the conference over to Mr. Mr. Scott Kirker. Please go ahead.
Scott Kirker: Thank you, operator, and welcome everyone to our discussion of Tourmaline's financial and operating results as of March 31, 2024 and for the three months ended March 31, 2024 and March 23, 2021. My name is Scott Kirker, and I'm the Chief Legal Officer of Tourmaline Oil Corp. Before we get started, I refer you to the advisories on forward-looking statements contained in the news release as well as the advisories contained in the Tourmaline Annual Information Form and our MD&A, available on CDAR and on our website. I also draw your attention to the material factors and assumptions in those advisories.
Scott Kirker: Thank you operator, and welcome everyone to our discussion of terminally and its financial and operating results as at March 31, 2020 for the three months ended March 31, 24 and 23.
Scott Kirker: My name is Scott Kirk Chief legal officer of turbulent oil Corp.
Scott Kirker: If we get started I refer you to the advisory regarding forward looking statements contained in the news release as well as the advisory is contained in the Terminalling annual information form and our MD&A available on SEDAR and on our website.
Scott Kirker: I also draw your attention to the material factors and assumptions in those advisories.
Scott Kirker: I am here with Mike Rose, Tourmaline's President and Chief Executive Officer, Brian Robinson, our Chief Financial Officer, and Jamie Heard, Tourmaline's Vice President of Capital Markets. We'll start by speaking about some of the highlights of the last quarter and our year so far. After Mike's remarks, we will be open to questions. Go ahead, Mike. Thank you.
Scott Kirker: I'm here with Mike Rowe as <unk>, President and Chief Executive Officer, Brian Robinson, Our Chief Financial Officer, and Jamie <unk>, <unk>, Vice President of capital markets.
Michael L. Rose: I'll start by speaking to some of the highlights of the last quarter and our year so far.
Speaker Change: After Mike's remarks, we will be open for questions go ahead, Mike.
Michael L. Rose: Thanks, Scott. And good morning slash good afternoon to everybody on the line. We're pleased to review our first quarter 24 results and, as Scott said, answer any questions that you may have.
Michael L. Rose: Thanks Scott.
Michael L. Rose: Good morning, slashed good afternoon to everybody on the line.
Michael L. Rose: We're pleased to review our first quarter 'twenty four results and as Scott said to answer your questions that you may have so few of the highlights from the quarter.
Michael L. Rose: First quarter 'twenty four average production was 592000 BOE a day and that's up 13% over the first quarter of 2023, and 526000 BOE a day and within our 590000 to 595000 BOE per day first quarter 'twenty four.
Michael L. Rose: So a few of the highlights from the quarter: first quarter 24 average production was 592,000 BOEs a day, and that's up 13% over the first quarter of 2023 at 526,000 BOEs a day. And within our 590,000 to 595,000 BOE per day first quarter 24 guidance range announced on March 6 of this year. First quarter cash flow was 871 million on total capital expenditures of 556 million, and that generated free cash flow of 310 million in the first quarter.
Michael L. Rose: The guidance range announced on March six of this year first quarter cash flow was $871 million on total capital expenditures of $556 million in.
Michael L. Rose: And that generated free cash flow of $310 million in.
Michael L. Rose: In the first quarter.
Michael L. Rose: In 2024, at strip pricing, as of April 15, 2024, we expect to generate cash flow now of $3.52 billion and free cash flow of $1.40 billion for the full year on unchanged EP capital spending of $2 billion. As a result of improved strip pricing, our cash flow forecast compared to the five-year EP plan released on March 6th of this year has improved by $200 to $500 million each year in the plan.
Michael L. Rose: In 24 at strip pricing.
Michael L. Rose: As of April 15% to 24, we expect to generate cash flow now with 352 billion.
Michael L. Rose: And free cash flow of 141 billion for the full year unchanged E&P capital spending of $2 billion.
Michael L. Rose: As a result of improved strip pricing, our cash flow forecast compared to the five year plan released on March six of this year.
Michael L. Rose: It has improved by $200 million to $500 million in each year in the plan.
Michael L. Rose: Given the strong free cash flow generation in the first quarter and our full year financial outlook, we have elected to increase the quarterly base dividend, effective Q2-24, by 7% or $0.32 per share per quarter from the current $0.30 per share, and as well as declare and pay a special dividend of $0.50 per share on May 16th of this year to shareholders of record on May 9th. Of note, we also reduced our net debt by approximately $85 million during the first quarter.
Michael L. Rose: Given the strong free cash flow generation in the first quarter.
Michael L. Rose: And our full year financial outlook.
Michael L. Rose: We have elected to increase the quarterly dividend effective Q2, 24 by 7%.
Michael L. Rose: <unk> 32 per share per quarter from the current <unk> 30 per share and as well declare and pay a special dividend of <unk> 50 per share on may 16th of this year to shareholders of record on May nine.
Michael L. Rose: Of note, we also reduced our net debt by approximately $85 million during the first quarter.
Michael L. Rose: Just briefly on production, first quarter average liquids production was a record 145,000 barrels per day, and that's up 27% over the corresponding period in 2023 at 114,000 barrels per day. Our full year 24 average production guidance remains unchanged at 580,000 to 590,000 B.O.E. per day with the revised capital budget announced on March 6, 2024. On financial results, we realized Q1'24 net earnings of $245 million, and that underscores the profitability of the business even in extremely weak natural gas pricing environments.
Michael L. Rose: Just briefly on production.
Michael L. Rose: First quarter average liquids production was a record 145000 barrels per day.
Michael L. Rose: That's up 27% over the corresponding period in 'twenty three.
Michael L. Rose: At 114000 barrels per day.
Michael L. Rose: Our full year 'twenty four average production guidance remains unchanged at 500 to 580000 to 590000 Boe per day.
Michael L. Rose: With the revised capital budget.
Michael L. Rose: <unk> on March six 2004.
Michael L. Rose: On financial results, we realized Q1, 'twenty four net earnings of $245 million.
Michael L. Rose: And that underscores the profitability of the business, even in extremely weak natural gas pricing environment.
Michael L. Rose: Exit Q1'24 net debt was $1.69 billion, and as previously announced, we remain committed to a long-term debt target of $1.2 to $1.4 billion and intend to progress towards that target through 2024 and into 2025. And, as mentioned, we have already reduced our net debt by $85 million.
Michael L. Rose: Exit Q1 dollars 24, net debt was $1 69 billion and as previously announced.
Michael L. Rose: We remain committed to our long term debt target of one two to $1 4 billion and intend to progress towards that target through.
Michael L. Rose: 2024 and into 2025 and as mentioned, we reduced our net debt by 85 million already.
Michael L. Rose: And in addition, we have 45.1 million shares of Topaz Energy Corp., which had a market value of approximately $1 billion as of March 31st of this year. And over the next five years, we forecast that we'll generate approximately $8.6 billion in free cash flow at Strip while growing average production during that period by approximately 22%. Some comments on marketing; we expect to exit 2024 with a total of 1.22 BCF per day of natural gas going to export markets in 2024.
Michael L. Rose: And in addition, we are $45 1 million shares of <unk> Energy Corp, which had a market value of approximately $1 billion.
Michael L. Rose: As at March 31 of this year.
Michael L. Rose: And over the next five years, we forecast that we will generate approximately $8 6 billion in free cash flow at strip, while growing average production in.
Michael L. Rose: In that period by approximately 22%.
Michael L. Rose: Some comments on marketing, we expect to exit 2024 with a total of $1 two two bcf per day of natural gas going to export markets.
Michael L. Rose: We have an average of 737 million cubic feet per day hedged at a weighted average fixed price of 543 cents a MCF Canadian. We also have an average of 196 million hedged at a basis to NYMEX of US minus 33 cents a MCF, and an average of 980 million per day of unhedged volumes exposed to export markets in 2024. And of this 980 million cubic feet per day, 59% is exposed to the premium markets, such as the US Gulf Coast, JKM, Dutch TTF, Malin, PG&E, and Sumat.
Michael L. Rose: For 2024, we have an average of 737.
Michael L. Rose: 1 million cubic feet per day hedged at a weighted average fixed price of $5 43, an Mcf Canadian.
Michael L. Rose: We also have an average of $196 million.
Michael L. Rose: Hedged at a basis to Nymex of U S. Minus 30, <unk>, an mcf and an average of 980 million per day of unhedged volumes exposed to export markets in.
Michael L. Rose: In 2024, and I'm, just 980 million cubic feet per day, 59% is exposed to the premium markets such as the U S Gulf Coast J J M.
Michael L. Rose: Dutch TTS Marlin, <unk> and Sue mass.
Michael L. Rose: We have 37 million cubic feet per day hedged at a weighted average fixed JKM price of US$20.34 per MCF in 2024 and at the same time, 22 million cubic feet per day hedged at a weighted average fixed JKM price of US$17.53 per MCF. In the first quarter, we did complete, and we announced it previously, our second LNG agreement, increasing exposure to GAKM by entering into a NETVAC agreement with Trafeguera PTE Limited, and that's based on 62,500 million BTUs per day for a seven-year term starting January 2027, with the potential to extend to December 2039, and that agreement is not dependent upon incremental approvals.
Michael L. Rose: We have 37 million cubic feet per day hedged at a weighted average fixed JK embrace.
Michael L. Rose: Of U S $20 34 per Mcf in 2024 and at the same 22.
Michael L. Rose: Cubic feet per day hedged at a weighted average fixed GKN price of U S $17 53 per Mcf.
Michael L. Rose: In the first quarter.
Michael L. Rose: We did complete and we announced previously our second LNG agreement.
Michael L. Rose: Increasing exposure to <unk> by entering into a netback agreement with Trafigura Pte Ltd.
Michael L. Rose: Based on $62000.
Michael L. Rose: 500 million Btu per day for a seven year term starting January 2027, with the potential to extend to December 2039.
Michael L. Rose: And that agreement is not dependent upon incrementals FERC approvals.
Michael L. Rose: In 2024, in March, we commenced our third LNG agreement, and that's delivering 50,000 million BTUs indexed to the Dutch TTF price, less associated to Dutch. We also entered into four natural gas-to-power agreements, providing exposure to the ASO power market. In 2003, the first of these agreements realized a natural gas price equivalent of $7.57 per MCF, which represents a $4.89 per MCF premium to the ACO Index for the year, and that generated $16.7 million in realized revenue above the ACO 5A Index, so we're happy with that.
Michael L. Rose: In 2024.
Michael L. Rose: March we commenced our third LNG agreement and then that's delivering 50000.
Michael L. Rose: Btu is indexed to the Dutch TTS price less associated deductions.
Michael L. Rose: We also entered into four natural gas to power agreements, providing exposure to the ACL power market in 2003. The first of these agreements agreements realized natural gas price equivalent of $7 57 per Mcf.
Michael L. Rose: Which represents a 489 per Mcf premium to the April index for the year and that generated $16 7 million in realized revenue above vehicle <unk> index. So we're happy with that.
Michael L. Rose: Looking at our EP and operations, we operated between 13 and 15 drilling rigs during the first quarter of this year. We're currently operating six rigs. A strong well performance on the Glock trend continues in the southern deep basin with all of our recent downdip wells significantly outperforming historical trends, and these results are detailed in the updated corporate overview that was also released with our financial results yesterday. The company continues to systematically grow the Deep Basin Complex, and that's through small acquisitions and crown sales.
Michael L. Rose: Looking at our EP and operations.
Michael L. Rose: We operated between 13 and 15 drilling rigs during the first quarter of this year. We're currently operating six rigs.
Michael L. Rose: <unk> well performance on the block trend continues in the southern deep basin with all of our recent down dip wells significantly outperforming historical trends and these results are detailed in the updated corporate overview that was also released with our financial results yesterday.
Michael L. Rose: The company continues to systematically grow the deep basin complex.
Michael L. Rose: And that's through small acquisitions and crown sales.
Michael L. Rose: During the first four months of this year, we've added a little over 35 net sections through 17 separate small transactions or land sales, and that added 49 Tier 1 drilling locations. One of the transactions had 600 BOEs a day of production associated with it. Our improving EP execution continues in the B.C. North Montagny subcomplex.
Michael L. Rose: During the first four months of this year, we've added a little over 35 net sections through 17 separate.
Michael L. Rose: Small transactions or land sales.
Michael L. Rose: That added 49 tier one drilling locations one of the transactions had 600 Boe's a day of production associated with it and total capex for all of that activity.
Michael L. Rose: It was just a little under $19 million.
Michael L. Rose: Our improving EPS execution continues in the BC North Montney sub complex, we drilled the eight well north Montney Laprairie see 54, each pad and a total of 44 and a half days 12 days ahead of schedule on the.
Michael L. Rose: We drilled the 8-well North Montagny Lapreze C54H pad in a total of 44 12 days, 12 days ahead of schedule. The 8 wells with an average horizontal length of just a little bit under 2,000 metres were drilled for a total pad cost of $13.4 million, and that's 19% under the AFE at the time, and we drill these things relatively cheaply given previous performance. So every well in that pad was done in under 6 days. And I think that's all I'll say for formal remarks, and we can go to Q&A, and all of us are here to answer questions.
Michael L. Rose: Eight wells with an average horizontal length of just a little bit under 2000 meters.
Michael L. Rose: Were drilled through a total pad cost of $13 4 million in that 19%.
Michael L. Rose: Under.
Michael L. Rose: At the time and we <unk> these things relatively cheaply given previous performance. So every well on that pad was.
Michael L. Rose: Done in under six days.
Michael L. Rose: And I think that's all I'll say for formal remarks, and we can go to Q&A and all of US are here to answer questions.
Operator: Thank you, ladies and gentlemen. We will now begin the question and answer session. Should you have a question, please press star followed by the number on your touchtone phone. You will hear a three-tone prompt acknowledging your request, and your questions will be pulled in as the answer they are received. Should you wish to decline from the polling process, please press star followed by two. If you are using a speakerphone, please lift the handset before pressing any keys.
Speaker Change: Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by the one on your Touchtone phone.
Operator: Here are three Tom acknowledging your request. Another question. So please hold any answered they are received.
Operator: Should you wish to decline from upholding process. Please press star followed by the two.
Operator: You are using a speaker phone please lift the handset before pressing keys one moment. Please for your first question.
Operator: One moment, please, for your first question. There are no questions at this time. Please proceed.
Operator: There are no questions at this time. Please proceed.
Michael L. Rose: Thanks everyone for dialing in. We'll talk to you next quarter.
Speaker Change: Thanks, everyone for dialing in we will talk to you next quarter.
Speaker Change: Thanks, everybody.
Michael L. Rose: Yes.
Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.
Speaker Change: Ladies and gentlemen, this concludes your conference call for today, we thank you for participating and ask that you. Please disconnect your lines.
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