Tourmaline Oil Corp.

Good day, ladies and gentlemen, and welcome to the Tourmaline Q3 2022 results conference call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, November 3, 2022. I would now like to turn the conference over to Scott Kerker. Please go ahead.

Thanks, Michelle, and welcome everyone to our discussion of Termline's results as at September 30, 2022, and for the three and nine months ended September 30 in 2022 and 2021. My name is Scott Kerker, and I am Termline's Chief Legal Officer. Before we get started, I refer you to the advisories on forward-looking statements contained in the news release, as well as the advisories contained in the Termline Annual Information Form and RMDNA available on CDAR and on our website. I also draw your attention to the material factors and assumptions in those advisories. I'm here with Mike Rose, Tourmaline's President and Chief Executive Officer, Brian Robinson, Vice President of Finance and Chief Financial Officer, and Jamie Hurd, our Manager of Capital Markets. We will start by speaking to some of the highlights in the last quarter and our year so far, and after Mike's remarks, we'll be open for questions. Go ahead, Mike.

Great. Thanks, Scott. And good morning, everybody. We're pleased to review our Q3 results with you. A few of the highlights, third quarter, $22. After-tax cash flow was $1.05 billion or $3.07 per diluted share. That's up 38% over the corresponding period in 2021. Third quarter free cash flow was $568 million or $1.66 per diluted share. We will pay a special dividend of $2.25 per share on November 18th to shareholders of record on November 9th. And beginning in Q4 this year, will increase the quarterly base dividend by 11% to $0.25 per share, providing for an annualized dividend of $1 per share. Including the payments of both the Q4 special dividend and the base dividend, we will pay a total of $7.90 per share in dividends in 2022, resulting in approximately a 10% yield. Third quarter, 22 EP capital spending was $469 million, and that's within previously disclosed guidance. Third quarter, 22 net earnings were $2.01 billion. Our net debt at September 30th was $565 million, and that's well below our long-term debt target range of $1 to $1.2 billion. And at current strip pricing, full year 22 cash flow, will be $4.76 billion. That's what's anticipated, and that's $13.90 per diluted share. Looking at production, Q3-22 production was 482,000 BOEs per day, and that's within the guidance range of 480,000 to 485,000 BOEs per day. We are executing the Q4-22 production ramp, with anticipated November average production between 520 and 530,000 BOEs per day and anticipated December average production between 530 and 540,000 BOEs per day. Our 2023 average production guidance remains at 545,000 BOEs per day consisting of two and a half bees a day of natural gas and over 125,000 barrels per day of oil condensate and NGLs. A brief marketing update. Average realized nat gas price in Q3 was $5.37 per MCF as we continue to benefit from rising natural gas prices when compared to the corresponding quarter in 2021. Tourmaline currently has $754 million per day accessing U.S. markets through long-term firm transport agreements. That increases to $854 million per day in Q2 of 23 and then to $926 million per day at exit 23. We are amongst the most diversified of all North American large gas producers from a market access standpoint. Right now we have an average of $711 million per day hedged for 23 at a weighted average fixed price of $577 per MCF Canadian and an average of $110 million per day hedged at a basis to NYMEX of US $0.12 per MCF and an average $754 million per day of unhedged volumes exposed to export markets in 23 and those markets include Dawn, Iroquois, Empress, Chicago, Ventura, Sumas, U.S. Gulf Coast, JKM, Malin, and PG&E. And we are pursuing multiple additional market diversification opportunities for both NatGas and our natural gas liquids. Looking at CapEx and the financial outlook, Forecast full year 22 EP capital spending remains at $1.5 billion and full year 23 EP capital spending remains at $1.6 billion. We expect 23 cash flow of $5.4 billion and free cash flow of $3.7 billion at strip pricing as of October 14, 2022. The current seven-year EP growth plan is expected to deliver an estimated free cash flow at strip of $19.4 billion on total CapEx of $13.4 billion during the period. Commencing in Q4 2022, we will increase the base dividend by 11% to $0.25 per share, the quarterly base dividend. And as mentioned, we have elected to declare and pay a special dividend in Q4 of $2.25 per share. We continue to focus on returning the majority of free cash flow to shareholders through base dividend increases, special dividends, and share buybacks. The magnitude of the special dividends will be a function of commodity prices and available quarterly free cash flow. The company now anticipates returning greater than 75% of free cash flow to shareholders in calendar 22, achieving a year-end net debt to cash flow ratio of approximately 0.1 times, which positions us to return between 50 and 90% of free cash flow in calendar 23, while also growing production by approximately 7%. A component of free cash flow will also be used for modest incremental EP investments. Those include new pool, new zone expiration opportunities, asset acquisitions within existing core complexes, and select margin improving infrastructure investments. Tourmaline completed the previously announced Rising Star Resources limited acquisition during the third quarter of 22. A brief EP update. We're currently operating 13 rigs across the three EP complexes. We drilled 86 net wells and completed 75 net wells during the third quarter. And we are the most active driller in Canada on a meters drilled basis. We expect to tie in and bring on production a total of 75 net wells in November and December, and will carry approximately 24 ducts over into early 2023. The distribution of rigs is eight rigs in the deep basin, four we continue to operate in our BC Montigny complex, and then we have one rig working on the Peace River High. Importantly, continuous improvement in new technology applications and our related drilling methodologies has resulted in a 37% improvement in meters drilled per day between April 2020 and July of this year in our BC Montney complex. The Q422 and 23 EP programs include multiple new zone and new pool exploration tests across all three operating complexes. as we expand the highly successful and somewhat unique exploration effort. So lots more to follow from this program over the next quarters. And looking at our environmental performance improvement, we've had a great year on that front and we continue to invest significant capital in these efforts. We actually are investing profits and free cash flow in our environmental performance improvement initiatives, and we are reducing emissions right now. So some of the highlights over the past 12 months, we achieved our net 25% methane reduction target three years earlier than targeted. Our emission testing center, or as we call it, the ETC, the first of its kind in the world at the West Wolf Gas Plant, is fully operational, and we continue to grow the scope of methane emission reduction technology investigations at the site. We received preliminary platinum ratings from the Project Canary or Trustwell assessment on a series of our operated Northeast BC assets, and our score ranks in the top 10% in North America. All of our contracted drilling rig fleet is displacing diesel with nat gas or running fully electric, and we were operating three CAT Tier IV DGB natural gas-powered crack spreads in Western Canada, so the most of any operator in July of 22. Tourmaline's invested over $25 million during the past five years in water recycling and water management facilities as part of an ongoing effort to ultimately eliminate fresh water in our well stimulation activities. And Tourmaline's also a major participant in the Natural Gas Innovation Fund, or NGIF, And that's a corroborative effort to produce lower emission nat gas across the whole spectrum of operations. The company's sponsoring emerging cleantech companies in the areas of diesel displacement, methane emission monitoring and reduction, waste heat recovery, carbon capture, and water recycling technologies. And that's all we were going to say as far as formal remarks, so happy to move to the Q&A portion. Michelle, if you want to give them the instructions on that.