CALGARY,
AB, Oct. 16, 2023 /CNW/ - Tourmaline Oil Corp.
(TSX: TOU) ("Tourmaline" or the "Company") is pleased
to announce that it has entered into a definitive share purchase
agreement with all of the shareholders of Bonavista Energy
Corporation ("Bonavista")
to acquire all of the shares of Bonavista for $1.45 billion, consisting of $725 million in Tourmaline common shares and
$725 million of cash, less
Bonavista's net
debt(1)(2) at closing (the "Acquisition").
The Acquisition is expected to close in the second half of
November 2023, subject to customary
regulatory and stock exchange approvals.
The Acquisition represents a further important component of the
Company's ongoing consolidation strategy that complements its
long-term EP organic growth plan, adding decades of inventory and
supplementing Tourmaline's existing Deep Basin assets. The
Bonavista assets are a natural extension of Tourmaline's existing
operations in the Deep Basin where the Company is already the
largest producer. The Acquisition is immediately accretive to
Tourmaline's 2024 free cash flow ("FCF")(3)
yield(4). Following closing of the Acquisition,
Tourmaline expects to exit 2023 with production of over 600,000
boepd(5). The Company will release its formal 2024
guidance proforma this Acquisition with an updated 5-year plan
alongside third quarter results on November
1, 2023.
BONAVISTA ACQUISITION
OVERVIEW
- The Acquisition, which includes low-decline, long-life average
production of over 60,000 boepd(6), is expected to
generate net operating income(7) of approximately
$450 million per year in 2024 through
2026 based on strip pricing(8), with anticipated EP
spending(9) of under $225
million per year on the assets.
- The Bonavista assets include
existing 2P reserves of 459 million boe (10) at
October 1, 2023; 839 gross (656.7
net) horizontal internally estimated drilling locations and 1.2
million net acres of land rights.
- Bonavista after tax PDP
reserve net present value at a 10% discount rate is $1.4 billion (based on internally estimated
reserves and IC3 Q4 2023(11) pricing).
- Bonavista YTD cash costs(12) to June 30, 2023 were $10.29/boe, including operating costs of
approximately $6.14/boe. Tourmaline
anticipates considerable cost synergies on the Bonavista assets on a go forward basis.
- The Board of Directors of each of Bonavista and Tourmaline have unanimously
approved the Acquisition.
- Peters & Co. Limited acted as financial advisor to
Tourmaline and TPH&Co, the energy business of Perella Weinberg
Partners, acted as financial advisor to Bonavista.
BASE DIVIDEND INCREASE AND SPECIAL DIVIDEND
DECLARATION
- Given continued strong financial forecast for 2H 2023, as well
as anticipated sustainable FCF coupled with Tourmaline's low-cost
structure, the Board of Directors of the Company has approved an
increase to the quarterly base dividend effective Q4 2023 to
$1.12/share, on an annualized basis,
from the current annualized $1.04/share, representing a 7.7% increase.
- The Board of Directors of the Company has also declared a Q4
2023 special dividend of $1.00/share
that will be paid on November 1,
2023, to shareholders of record on October 24, 2023. This special dividend is
designated as an "eligible dividend" for Canadian income tax
purposes.
Reader Advisories
CURRENCY
All amounts in this news release are stated in Canadian dollars
unless otherwise specified.
FORWARD-LOOKING INFORMATION
This news release contains forward-looking information and
statements (collectively, "forward-looking information")
within the meaning of applicable securities laws. The use of any of
the words "forecast", "expect", "anticipate", "continue",
"estimate", "objective", "ongoing", "on track", "may", "will",
"project", "should", "believe", "plans", "intends" and similar
expressions are intended to identify forward-looking
information. More particularly and without limitation, this
news release contains forward-looking information concerning
Tourmaline's plans and other aspects of its anticipated future
operations, management focus, objectives, strategies, financial,
operating and production results and business opportunities,
including the following: the completion of the Acquisition
including the timing and terms thereof; the Company's anticipated
2023 exit production; the benefits of the Acquisition and the
characteristics of the acquired assets including that the
Acquisition is immediately accretive to the Company's FCF yield in
2024, the anticipated net operating income to be generated from the
acquired assets and the anticipated maintenance capital
expenditures thereon, that the acquired assets hold decades of
inventory and include low-decline, long-life production, that
Tourmaline will realize considerable cost synergies on the acquired
assets; the Company's strong financial forecast for 2H 2023 and
anticipated sustainable FCF ; as well as Tourmaline's future
drilling prospects and plans, business strategy, future development
and growth opportunities, prospects and asset base. The
forward-looking information is based on certain key expectations
and assumptions made by Tourmaline, including expectations and
assumptions concerning the following: prevailing and future
commodity prices and currency exchange rates; prevailing and future
commodity prices and currency exchange rates; applicable royalty
rates and tax laws; interest rates; future well production rates
and reserve volumes; operating costs, the timing of receipt of
regulatory approvals including in connection with the Acquisition;
the performance of existing wells; the success obtained in drilling
new wells; anticipated timing and results of capital expenditures;
the sufficiency of budgeted capital expenditures in carrying out
planned activities; the timing, location and extent of future
drilling operations; the successful completion of acquisitions
(including the Acquisition) and dispositions and the benefits to be
derived therefrom; the state of the economy and the exploration and
production business; the availability and cost of financing, labour
and services; and ability to market crude oil, natural gas and NGL
successfully. Without limitation of the foregoing, future dividend
payments, if any, and the level thereof is uncertain, as the
Company's dividend policy and the funds available for the payment
of dividends from time to time is dependent upon, among other
things, free cash flow, financial requirements for the
Company's operations and the execution of its growth strategy,
fluctuations in working capital and the timing and amount of
capital expenditures, debt service requirements and other
factors beyond the Company's control. Further, the
ability of Tourmaline to pay dividends is subject to applicable
laws (including the satisfaction of the solvency test contained in
applicable corporate legislation) and contractual restrictions
contained in the instruments governing its indebtedness, including
its credit facility.
Statements relating to "reserves" are also deemed to be forward
looking information, as they involve the implied assessment, based
on certain estimates and assumptions, that the reserves described
exist in the quantities predicted or estimated and that the
reserves can be profitably produced in the future.
Although Tourmaline believes that the expectations and
assumptions on which such forward-looking information is based are
reasonable, undue reliance should not be placed on the
forward-looking information because Tourmaline can give no
assurances that it will prove to be correct. Since
forward-looking information addresses future events and conditions,
by its very nature it involves inherent risks and uncertainties.
Actual results could differ materially from those currently
anticipated due to a number of factors and risks. These
include, but are not limited to: the risks associated with the oil
and gas industry in general such as operational risks in
development, exploration and production; delays or changes in plans
with respect to exploration or development projects or capital
expenditures; the uncertainty of estimates and projections relating
to reserves, production, revenues, costs and expenses; health,
safety and environmental risks; commodity price and exchange rate
fluctuations; interest rate fluctuations; marketing and
transportation; loss of markets; environmental risks; competition;
incorrect assessment of the value of acquisitions including the
Acquisition; failure to complete or realize the anticipated
benefits of acquisitions including the Acquisition or dispositions;
ability to access sufficient capital from internal and external
sources; uncertainties associated with counterparty credit risk;
failure to obtain required regulatory and other approvals; climate
change risks; severe weather (including forest fires); inflation;
supply chain risks; the impact of wars or other hostilities
(including the war in Ukraine) and
pandemics (including COVID-19); and changes in legislation,
including but not limited to tax laws, royalties and environmental
regulations. Readers are cautioned that the foregoing list of
factors is not exhaustive.
Additional information on these and other factors that could
affect Tourmaline, or its operations or financial results, are
included in the Company's most recently filed Management's
Discussion and Analysis (See "Forward-Looking Statements" therein),
Annual Information Form (See "Risk Factors" and "Forward-Looking
Statements" therein) and other reports on file with applicable
securities regulatory authorities and may be accessed through the
SEDAR+ website (www.sedarplus.ca) or Tourmaline's website
(www.tourmalineoil.com).
The forward-looking information contained in this news release
is made as of the date hereof and Tourmaline undertakes no
obligation to update publicly or revise any forward-looking
information, whether as a result of new information, future events
or otherwise, unless expressly required by applicable securities
laws.
RESERVES DATA
The reserves data set forth in this new release is based upon
internal estimates. There are numerous uncertainties inherent
in estimating quantities of crude oil, natural gas and NGL reserves
and the future cash flows attributed to such reserves. The
reserve and associated cash flow information set forth above are
estimates only. In general, estimates of economically
recoverable crude oil, natural gas and NGL reserves and the future
net cash flows therefrom are based upon a number of variable
factors and assumptions, such as historical production from the
properties, production rates, ultimate reserve recovery, timing and
amount of capital expenditures, marketability of oil and natural
gas, royalty rates, the assumed effects of regulation by
governmental agencies and future operating costs, all of which may
vary materially. For those reasons, estimates of the
economically recoverable crude oil, NGL and natural gas reserves
attributable to any particular group of properties, classification
of such reserves based on risk of recovery and estimates of future
net revenues associated with reserves prepared by different
engineers, or by the same engineers at different times, may vary.
The Company's actual production, revenues, taxes and
development and operating expenditures with respect to its reserves
will vary from estimates thereof and such variations could be
material.
BOE EQUIVALENCY
In this news release, production and reserves information may be
presented on a "barrel of oil equivalent" or "BOE" basis.
BOEs may be misleading, particularly if used in
isolation. A BOE conversion ratio of 6 Mcf:1 bbl is based on
an energy equivalency conversion method primarily applicable at the
burner tip and does not represent a value equivalency at the
wellhead. In addition, as the value ratio between natural gas
and crude oil based on the current prices of natural gas and crude
oil is significantly different from the energy equivalency of 6:1,
utilizing a conversion on a 6:1 basis may be misleading as an
indication of value.
NON-GAAP AND OTHER FINANCIAL
MEASURES
This news release contains the terms "free cash flow", "net
operating income", "EP spending" and "cash costs", which are
considered non-GAAP financial measures, and the term "net debt",
which is considered a capital management measure. These terms
do not have a standardized meaning prescribed by GAAP.
Accordingly, the Company's use of these terms may not be
comparable to similarly defined measures presented by other
companies. Investors are cautioned that these measures should
not be construed as an alternative to or more meaningful than the
most directly comparable GAAP measures in evaluating the Company's
performance. See "Non-GAAP and Other Financial Measures" in
the most recent Management's Discussion and Analysis for more
information on the definition and description of certain of these
terms.
Non-GAAP Financial
Measures
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 necessary to fund its future growth
expenditures, to repay debt and provide shareholder returns.
Free cash flow is defined as cash flow less capital
expenditures, excluding acquisitions and dispositions. Free
cash flow is prior to dividend payment. "Cash flow" is
defined as cash flow from operating activities less current income
taxes, plus current income taxes paid, less change in non-cash
working capital. The most directly comparable GAAP measure
for cash flow is cash flow from operating activities.
"Capital Expenditures" is a non-GAAP financial measure defined as
Cash flow used in investing activities adjusted for the change in
non-cash working capital (deficit). The most directly comparable
GAAP measure for capital expenditures is cash flow used in
investing activities.
Net Operating Income
Management uses the term "net operating income" as a key
performance indicator and one that is commonly presented by other
oil and natural gas producers. Net operating income for the
purposes of the Acquisition is defined as the sum of revenue less
the sum of royalties, transportation costs and operating
expenses.
Capital Management
Measure
Net Debt
Management uses the term "net debt" as a key measure for
evaluating a company's capital structure and to provide
shareholders and potential investors with a measurement of total
indebtedness. For purposes of the Acquisition, net debt is
defined as all indebtedness (including bank debt) plus working
capital (excludes commodity hedges) and includes all transaction
and related costs.
OIL AND GAS METRICS
This news release contains certain oil and gas metrics which do
not have standardized meanings or standard methods of calculation
and therefore such measures may not be comparable to similar
measures used by other companies and should not be used to make
comparisons. Such metrics have been included in this document
to provide readers with additional measures to evaluate the
Company's performance; however, such measures are not reliable
indicators of the Company's future performance and future
performance may not compare to the Company's performance in
previous periods and therefore such metrics should not be unduly
relied upon.
ESTIMATES OF DRILLING
LOCATIONS
Unbooked drilling locations are the internal estimates of
Tourmaline based on Tourmaline's or the acquired assets prospective
acreage and an assumption as to the number of wells that can be
drilled per section based on industry practice and internal review.
Unbooked locations do not have attributed reserves or
resources (including contingent and prospective). Unbooked
locations have been identified by Tourmaline's management as an
estimation of Tourmaline's multi-year drilling activities based on
evaluation of applicable geologic, seismic, engineering, production
and reserves information. There is no certainty that
Tourmaline will drill all unbooked drilling locations and if
drilled there is no certainty that such locations will result in
additional oil and natural gas reserves, resources or
production. The drilling locations on which Tourmaline will
actually drill wells, including the number and timing thereof is
ultimately dependent upon the availability of funding, regulatory
approvals, seasonal restrictions, oil and natural gas prices,
costs, actual drilling results, additional reservoir information
that is obtained and other factors. While a certain number of
the unbooked drilling locations have been de-risked by Tourmaline
drilling existing wells in relative close proximity to such
unbooked drilling locations, the majority of other unbooked
drilling locations are farther away from existing wells where
management of Tourmaline has less information about the
characteristics of the reservoir and therefore there is more
uncertainty whether wells will be drilled in such locations and if
drilled there is more uncertainty that such wells will result in
additional oil and gas reserves, resources or production.
GENERAL
See also "Forward-Looking Statements" and "Non-GAAP Financial
Measures" in the most recently filed Management's Discussion and
Analysis.
CERTAIN DEFINITIONS:
1H
|
first half
|
2H
|
second half
|
bbl
|
barrel
|
bbls/day
|
barrels per
day
|
bbl/mmcf
|
barrels per million
cubic feet
|
bcf
|
billion cubic
feet
|
bcfe
|
billion cubic feet
equivalent
|
bpd
or bbl/d
|
barrels per
day
|
boe
|
barrel of oil
equivalent
|
boepd
or boe/d
|
barrel of oil
equivalent per day
|
bopd
or bbl/d
|
barrel of oil,
condensate or liquids per day
|
CNG
|
compressed natural
gas
|
DUC
|
drilled but uncompleted
wells
|
EP
|
exploration and
production
|
gj
|
gigajoule
|
gjs/d
|
gigajoules per
day
|
JKM
|
Japan Korea
Marker
|
mbbls
|
thousand
barrels
|
mmbbls
|
million
barrels
|
mboe
|
thousand barrels of oil
equivalent
|
mboepd
|
thousand barrels of oil
equivalent per day
|
mcf
|
thousand cubic
feet
|
mcfpd or
mcf/d
|
thousand cubic feet per
day
|
mcfe
|
thousand cubic feet
equivalent
|
mmboe
|
million barrels of oil
equivalent
|
mmbtu
|
million British thermal
units
|
mmbtu/d
|
million British thermal
units per day
|
mmcf
|
million cubic
feet
|
mmcfpd or
mmcf/d
|
million cubic feet per
day
|
MPa
|
megapascal
|
mstb
|
thousand stock tank
barrels
|
natural
gas
|
conventional natural
gas and shale gas
|
NCIB
|
normal course issuer
bid
|
NGL or
NGLs
|
natural gas
liquids
|
TCF
|
trillion cubic
feet
|
TCFe
|
trillion cubic feet
equivalent
|
ABOUT TOURMALINE OIL CORP.
Tourmaline is Canada's largest
and most active natural gas producer dedicated to producing the
lowest emission and lowest-cost natural gas in North America. We are an investment
grade exploration and production company providing strong and
predictable operating and financial performance through the
development of our three core areas in the Western Canadian
Sedimentary Basin. With our existing large reserve base,
decades-long drilling inventory, relentless focus on execution and
cost management, and industry-leading environmental performance, we
are excited to provide shareholders an excellent return on capital,
and an attractive source of income through our base dividend and
surplus free cash flow distribution strategies.
____________________________________
|
(1)
|
This news release
contains certain specified financial measures consisting of
non-GAAP financial measures, non-GAAP financial ratios and capital
management measures. See "Non-GAAP and Other Financial
Measures" in this news release for information regarding the
following specified financial measures: "free cash flow", "net
debt", "net operating income", "EP spending" and "cash costs".
Since these specified financial measures do not have
standardized meanings under International Financial Reporting
Standards ("GAAP"), securities regulations require that, among
other things, they be identified, defined, qualified and, where
required, reconciled with their nearest GAAP measure and compared
to the prior period. See "Non-GAAP and Other Financial
Measures" in this news release and in the Company's most recently
filed Management's Discussion and Analysis (the "Q2 MD&A"),
which information is incorporated by reference into this news
release, for further information on the composition of and, where
required, reconciliation of certain of these measures.
|
(2)
|
"Net debt" is a capital
management measure defined for these purposes as all indebtedness
(including bank debt) plus working capital (excludes commodity
hedging) and includes all transaction and related costs.
|
(3)
|
"Free cash flow" is a
non-GAAP financial measure defined as cash flow less capital
expenditures, excluding acquisitions and dispositions. Free
cash flow is prior to dividend payments. "Cash flow" is a
non-GAAP financial measure and is defined as cash flow from
operating activities less current income taxes, plus current income
taxes paid, less change in non-cash working capital. "Capital
Expenditures" is a non-GAAP financial measure defined as Cash flow
used in investing activities adjusted for the change in non-cash
working capital (deficit). See "Non-GAAP and Other Financial
Measures" in this news release.
|
(4)
|
Calculated as forecast
2024 FCF per diluted share (based on estimated diluted Common
Shares of 354 million) divided by a Common Share price of
$67.
|
(5)
|
Comprised of
approximately 43% Conventional Natural Gas, 33% Shale Natural Gas,
9% Light and Medium Crude Oil and Condensate and 16%
NGLs.
|
(6)
|
Comprised of
approximately 64% Conventional Natural Gas, 5% Light and Medium
Crude Oil and Condensate and 31% NGLs.
|
(7)
|
"Net operating income"
is a non-GAAP financial measure and is calculated as expected
revenue of $725 million less royalties of $100 million,
transportation costs of $35 million and operating expenses of $140
million. See "Non-GAAP and Other Financial Measures" in this
news release.
|
(8)
|
Based on oil and gas
commodity strip pricing at September 20, 2023.
|
(9)
|
"EP spending" is a
non-GAAP financial measure and is defined as anticipated capital
expenditures, excluding acquisitions, dispositions, exploration
capital and other corporate expenditures.
|
(10)
|
Reserves have been
internally estimated by qualified reserve evaluators in
accordance with National Instrument 51-101 – Standards
of Disclosure for Oil and Gas Activities and the Canadian Oil
and Gas Evaluation Handbook with an effective
date of September 30, 2023.
|
(11)
|
IC3 Q4 2023 pricing is
the average of forecast prices published by Sproule Associates
Ltd., GLJ Ltd. and McDaniel & Associates Consultants Ltd. as at
October 1, 2023 (each of which is available on their respective
websites at www.sproule.com, www.gljpc.com, and
www.mcdan.com)
|
(12)
|
"Cash Costs" is a
non-GAAP financial measure defined as operating, transportation,
general & administrative and interest expenses. See
"Non-GAAP and Other Financial Measures" in this news
release.
|
SOURCE Tourmaline Oil Corp.