Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Tourmaline Oil Corp (TRMLF, Financial) reported strong third-quarter cash flow of $742 million, or $2.09 per diluted share.
- The company declared a special dividend of $0.50 per common share, contributing to a total dividend distribution of $3.25 per share for the year.
- Tourmaline Oil Corp (TRMLF) completed the acquisition of Crew Energy, enhancing its asset base.
- The company's Q3 2024 average production increased by 11% over Q3 2023, reaching over 557,000 BOE per day.
- Tourmaline Oil Corp (TRMLF) achieved significant well productivity improvements in the Deep Basin, with a 20% increase in gas and 40% in condensate over the past four years.
Negative Points
- Tourmaline Oil Corp (TRMLF) faced unplanned third-party outages that reduced third-quarter production.
- The company is operating in a low natural gas pricing environment, which has impacted profitability.
- Tourmaline Oil Corp (TRMLF) anticipates potential production deferrals or shut-ins if natural gas prices remain low in 2025.
- The company's net debt at the end of Q3 2024 was $1.7 billion, with a long-term target of $1.5 billion.
- Tourmaline Oil Corp (TRMLF) has a significant portion of its capital budget allocated to facilities and exploration, which may not immediately contribute to production increases.
Q & A Highlights
Q: Can you provide some goalposts on what pricing might correspond to the bottom and top of your 2025 guidance range? Also, what projects would you adjust within that range to manage pricing dynamics?
A: At the bottom end of the range, if current prices continue through the winter, we might reset in Q2. The high end would be something north of $3 or $3.50 per MCF. We make money above $1.50 but are cautious about bringing extra volumes into a weak market. We have flexibility around capital spend, with about $300 million in facility spending in the 2025 budget, including electrification projects and pipelines. We can adjust these based on pricing dynamics.
Q: You mentioned having 38 ducks now. Where do you expect to be at the end of the year, and why did you add a 16th rig in Q4 given current gas prices?
A: We plan to carry roughly 35 ducks into the next year, with some frac activity moving into January. The 16th rig was always planned for Q4 to get pads drilled out, allowing flexibility on when to frac them. Drilling performance has been strong, and costs are down, so we're comfortable with this approach.
Q: Why isn't there a lower CapEx or higher volume in the 2025 guide despite improved well performance and lower costs?
A: The higher CapEx is mostly for facilities or exploration, which won't add immediate production. The improved well performance hasn't been fully carried through in the 2025 guide yet, as we're being conservative.
Q: Why build ducks in the first half of the year instead of saving drilling and product capital for when the market is more supportive?
A: We've decided to drill out pads to be ready to respond. Most of our gas growth has matched egress out of the basin, ensuring good prices, especially for volumes going to California or the Gulf Coast.
Q: What are your thoughts on the ACO Strip pricing in your five-year plan, especially past 2025 with LNG Canada coming online?
A: We believe the ACO Strip understates the impact of LNG Canada's startup. We expect the differential to improve as volumes are shipped west, but we honor the strip in our guidance and five-year plan for now.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
