Q2 earnings halved for Montney producer Tourmaline
Canadian Montney producer Tourmaline Oil, Canada’s largest natural gas producer, said July 31 its earnings in Q2 2024 were cut in half from a year ago, but free cash flow was strong and net debt reduced in the period.
Net earnings fell to C$256.6mn (US$185.3mn) from C$510.7mn a year ago. Free cash flow slipped to C$433.5mn from C$545.5mn, in part reflecting a modest increase in capital expenditures, to C$294.1mn from C$277.3mn.
Net debt at June 30, 2024 was C$1.56bn, down from C$1.8bn at December 31, 2023.
Natural gas production in the second quarter this year averaged 2.54bn ft3/day, a 10% increase from 2.31bn ft3/day in Q2 2023, while total production was 13% higher, at 561,787 barrels of oil equivalent (boe)/day compared to 495,918 boe/day.
Natural gas prices remained low during the quarter, prompting Tourmaline to maximise injection into gas storage facilities in California and Ontario, reducing averaged production levels in Q2 by about 4,778 boe/day. Storage volumes are expected to be withdrawn in Q4 2024 and Q1 2025.
Despite the low gas price environment, Tourmaline achieved an average realised gas price in Q2 2024 of C$3.03/’000 ft3, 30% lower than the comparable average in Q2 2023 but significantly higher than the AECO 5A index price of C$1.20/’000 ft3.
For the remainder of 2024, Tourmaline has an average of 1.03bn ft3/day of production hedged at a weighted average fixed price of C$4.66/’000 ft3, including an average of 161mn ft3/day in premium markets at a fixed price of US$8.57/’000 ft3.
An average 996mn ft3/day of unhedged production is exposed to export markets in 2024, of which 56% is exposed to premium markets. Only 9% of production in the second half this year is exposed to weaker AECO and Station 2 markets in Alberta and BC, respectively.
Tourmaline’s joint venture with California-based Clean Energy Fuels to develop a network of compressed natural gas (CNG) fueling stations to serve the western Canadian heavy transportation market is continuing, the company said. One station is fully operational in Edmonton and four more are under construction, targeting completion in Q1 2025.
Besides opening a new market for Tourmaline’s natural gas production, the CNG joint venture with Clean Energy Fuels helps advance Tourmaline’s diesel displacement initiative, which since June 2017 has seen 151.8mn gallons of diesel used in drilling and completion operations replaced by natural gas. The initiative has resulted in savings of about C$149.4mn and helped reduce emissions of CO2, NOX, SOX and particulates, compared to diesel.