Tourmaline Oil Corp (TSX: TOU) has agreed to sell a percentage of its Peace River High oil play to Canadian Non-Operated Resources LP (CNOR), which is backed by U.S. private equity firm Riverstone Holdings and other investors. The deal, announced by Tourmaline in its Q3 2014 financial statement, will see CNOR become a joint venture partner through its acquisition of a 25 percent interest in the Western Canada-based project for $500 million. The deal is expected to close in December. A Calgary oil and gas company, the newly founded CNOR secured an $675 million equity investment in August. The company subsequently invested in Bellatrix Exploration Ltd.
Tourmaline Oil Corp. Announces Q3 2014 Financial And Operating Results And 2015 Capital Program
CALGARY, AB –(Marketwired – November 05, 2014) – Tourmaline Oil Corp. (TSX: TOU) (“Tourmaline” or the “Company”) is pleased to announce record nine-month results and the 2015 EP Capital Program.
Record nine-month 2014 after-tax earnings of $223.7 million, a 145% increase over the comparable period in 2013. Tourmaline’s natural gas plays are profitable full-cycle at prices below $3.00/mcf and the Company’s oil complex is profitable full-cycle at oil prices below $35.00/bbl.
Record nine-month cash flow(1) of $695.8 million, a 90% increase over 2013 cash flow of $366.0 million.
Nine-month 2014 average production of 106,858 boepd is up 51% over the same period of 2013 (70,990 boepd).
Tourmaline has undertaken a series of financial transactions that will provide an additional $1.05 billion in financial capacity for 2015.
Daily natural gas production reached a record 725 mmcfpd in the second half of October.
A 2015 capital budget of $1.60 billion has been approved by the Board of Directors; anticipated 2015 cash flow is approximately $1.50 billion.
2014/2015 Capital Program
2014 full-year capital spending is forecast to be $1.855 billion ($1.355 billion net of dispositions). Incremental expenditures include:
$41.3 million of 2014 spending is directed towards 2015 facility projects to ensure that 2015 facility projects are on or ahead of schedule. These expenditures include acquiring equipment for the Q1 2015 Spirit River gas plant expansion, the Q1 2015 Mulligan Phase 1 oil battery, and the 2015 Wild River plant expansion. These 2014 expenditures will reduce 2015 total annual facility capital.
Approximately $37.5 million for 10 unbudgeted 2014 outside operated wells in all three core areas.
The Company has rig released 110 wells since break-up and anticipates drilling 160 wells via the 20-rig program by year end. This is 20 wells more than originally planned ($110.0 million additional expenditure).
Total 2014 facility and pipeline expenditures were increased to $635 million, with five major projects in the second half of 2014, all of which will be on-stream prior to year end. These new facilities will provide the framework for continued sector-leading growth in 2015 and 2016.
$20.0 million on three Peace River High acquisitions. These acquisitions are part of the ongoing strategy to consolidate the approximately 25% of the regional Charlie Lake oil pool that the Company does not currently own.
$25.0 million spent on crown land sales in NEBC and AB acquiring lands prospective for the expanding, liquid-rich lower Montney play.
A 2015 capital program of $1.60 billion has been approved by the Tourmaline Board of Directors, with anticipated 2015 cash flow of $1.50 billion. The budget includes:
2015 drilling/completion of $1.14 billion, employing a 20-rig program.
2015 facilities of $410 million.
The Company will revisit the EP program and pace of activity during Q2 2015/Spring break-up in light of the commodity price outlook at that time.
(1) See “Non-GAAP Financial Measures” in the attached Management’s Discussion and Analysis.
2H 2014 Financial Transactions
During the 2H of 2014, the Company has undertaken several transactions that will provide considerable additional financial capacity for 2015. These include:
A $300.0 million increase of the existing bank facility to $1.60 billion in September 2014.
A $250.0 million term debt transaction that will provide capacity in addition to the bank facility.
A joint venture on the Peace River High that will provide a $500.0 million cash payment prior to year end 2014.
Tourmaline will continue to operate with debt to cash flow of less than 1.0 times and continue to demonstrate sector-leading production and reserve growth.
Tourmaline has 196.4 mmcfpd of natural gas hedged during the fourth quarter of 2014 at an average price of $4.30/mcf and 110.0 mmcfpd hedged in 2015 at $4.34/mcf.
Current production is 135,000 – 140,000 boepd with further increases in production when the new Spirit River gas plant and Wild River plant expansions come on-stream during November and December, as scheduled.
Q4 2014 is expected to be the most significant production growth period in the Company’s six-year history. The Company remains on track to achieve exit 2014 production of 150,000 – 155,000 boepd, or greater.
Tourmaline has rig released 110 wells since the end of 2014 break-up, significantly ahead of original projections from the 20-rig program.
A full-year 2015 average production level of 164,500 boepd is currently forecast.
Tourmaline is expecting to reach the 1.0 bcf/day production milestone in the fourth quarter of 2015 with total liquid production (oil, condensate, NGLs) at that time in excess of 40,000 bpd with the 20-drilling-rig scenario for the full year.
Alberta Deep Basin results have continued to significantly outperform the economic template of a 30-day IP of 5 mmcfpd utilized in the Company forecasting. Of the 51 wells with 30 days of production history in 2014, the average 30-day IP is 10.1 mmcfpd.
The most recent lowest Montney turbidite delineation well tested at 4.0 mmcfpd with 140 bbls/mmcf of condensate at the wellhead.
Peace River High Joint Venture
Tourmaline has entered into an agreement with Canadian Non-Operated Resources LP for the Peace River High operated area, through which Tourmaline will sell 25% of the existing complex (all lands, wells, production, reserves, and facilities) for $500.0 million.
Subsequent to deal close in December 2014, Canadian Non-Operated Resources LP will be a 25% working interest joint venture partner in the complex and will be responsible for its share of EP expenditures on a go-forward basis.
Tourmaline will accelerate the planned EP program commencing in 2015, with both an accelerated drilling program and infrastructure build-out resulting in expenditures of at least $400.0 million per annum over the duration of the five-year plan. Given the increased pace of activity through the joint venture, the sale of the 25% working interest will not have an impact on Tourmaline’s anticipated 2015 production and reserves from the Peace River complex.
Future acquisitions within the Peace River High Joint Venture area will also be shared 75% Tourmaline and 25% Canadian Non-Operated Resources LP.
Additional information from Tourmaline’s Q3 2014 financial statement are found here.
Source: Tourmaline Oil Corp
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