Tourmaline Posts Q1 Loss on Oil Asset Impairment
Tourmaline Oil, Canada’s largest natural gas producer, said May 6 it had a Q1 2020 net loss of C$35.8mn (US$25.3mn) compared with net earnings of C$87.7mn in the year ago period, and attributed much of the swing to a reduced valuation of its only oil-weighted asset.
“Given the very low oil prices prevailing at the end of Q1 2020, Tourmaline has incurred a $250mn non-cash impairment for the Peace River High complex,” the company said. “The two gas-weighted core complexes, NEBC and the Alberta Deep Basin, did not incur any impairments.”
In fact, it said, natural gas fundamentals for 2021 are steadily improving as the North American gas price environment improves. The company has executed hedges above its 2021 Aeco price assumption of C$2.62/’000 ft3 “and will continue to benefit from the strength in the forward natural gas price curve.”
Cash flow in Q1 2020 was C$283.7mn, a decline of 32% from the comparable 2019 period. Significant capex reductions by the industry will result in decreased gas supply and higher prices in North America, Tourmaline said, and each C$0.10/’000 ft3 increase in the benchmark Nymex gas price will increase annual cash flow by about C$50mn.
Tourmaline’s barrel of oil equivalent (boe) production averaged 308,349 boe/day in the first quarter this year, a 5% increase over the same period a year ago. Natural gas production averaged 1.47bn ft3/day, up from 1.44bn ft3/day, while liquids production rose 17%, to 62,569 b/d from 53,565 b/d, in part reflecting the first quarter acquisition of Polar Star Canadian Oil & Gas, which brought additional liquids-rich Montney production.
A second acquisition, of Chinook Energy, closed subsequent to Q1, bringing 3,500 boe/day of production.
Full-year production in 2020 is expected to average in the 305,000-310,000 b/d range, yielding annual cash flow of about C$1bn based on current strip pricing, while production in 2021 is forecast at 320,000 boe/day, which would yield cash flow of C$1.27bn.