Tourmaline Oil Corp.

Good morning, ladies and gentlemen, and welcome to the Thermalink Q2 2026 results conference call. At this time, all lines are in 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 July 30, 2026. I would now like to turn the conference over to Scott Kirker. Please go ahead.

Thank you, John, and welcome, everyone, to our discussion of Tourmaline's financial and operating results as of June 30, 2026, and for the three and six months into June 30 and 26 and 25. My name is Scott Kirker, and I'm the Chief Legal Officer here at Tourmaline Oil. 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 Termaline Annual Information Form and our MD&A available on CDAR and on our website. I also draw your attention to the material factors and assumptions in these advisories. I am here with Mike Rose, Termaline's President and Chief Executive Officer, Brian Robinson, our Chief Financial Officer, and Jamie Hurd, Termaline's Vice President of Capital Markets. We'll start with Mike speaking to some of the highlights of the last quarter of the year so far. After his remarks, we'll be open for questions. Go ahead, Mike.

Thanks, Scott. Thanks, everybody, for dialing in this morning. So, a few highlights. Q2 26 cash flow was $786 million, generating $192 million of free cash flow in the quarter. We've entered into a long-term agreement to increase propane and butane exports through the new AltaGas reef terminal, increasing terminal lean's exposure to premium LPG export markets by approximately 55% and improving realized margins for these products. Our strong well-oiled performance has continued with first half 26 performance now up 28% for the Northeast BC Montney Complex and 14% for the Alberta Deep Basin over the prior five-year averages. The Northeast BC intra-buildout is on schedule and on budget with five of the six regional connector pipelines Already completed and the eight can plant expansion start up on schedule for Q4 of this year. We're now scheduling a one-year pause between phase one and phase two of the VC infrastructure build-out, enhancing anticipated second half 27 and 2028 free cash flow and shareholder returns. Looking at production, Q2 average production was 594,000 BOEs a day, marginally below the guidance range of 595,000 to 605,000 BOEs per day. That was by choice as we injected more nat gas into storage, deferred activity in response to low Q2 natural gas prices, and also had some price-related shut-ins during the quarter. Storage injections at Dimmsdale, Alberta, Don, Ontario, and Wild Goose in California averaged 8,900 BOEs per day in the quarter, and that was higher than initially planned. These volumes are expected to be largely withdrawn from storage during the fourth quarter of this year and perhaps into the first quarter of 27, obviously at a higher price than we injected them at. Full year 26 production range of 620,000 to 640,000 VOEs per day still anticipated, including a 26 production exit target of 660,000 VOEs per day. Given the activity deferrals from Q2, we have 67 wells ready to frack and an additional 21 wells to turn in line. We'll do that in concert with improving prices. Looking at our financial results and the capital budget, net debt as of June 30th of this year was $1.5 billion, and that's below our long-term debt target of $1.75 billion. Second quarter OPEX was $4.59 per BOE, and that's down 10% from the corresponding quarter in 2025 and 3% from Q1 of this year. Full year 26, operating costs of $4.50 to $4.60 per BUE are expected, and that will take us down between 7% and 9% from full year 2025. And we're maintaining the aggregate operating and transportation cost reduction target of $1.50 per BUE by 2031 relative to first half 25 levels. The full-year 2026 DP capital budget remains at $2.55 billion following the $350 million reduction to the full-year budget that we announced on March 4th of this year. At current strip pricing, 2026 free cash flows now estimated to be $880 million. And the free cash flow benefit from the company's exposure to JKM and TTF pricing via our LNG export-related contracts is expected to continue through the balance of 26 and 2027. We are now scheduling, as mentioned, a one-year growth spending pause between the two phases of the BC Montney build-out and development project. And this will allow the company and shareholders to realize the full operational benefits and free cash flow growth from Phase 1, commencing in the second half of 27 and into 2028, prior to embarking on Phase 2. The pause also lets us assess global natural gas supply demand and various pricing outlooks around the globe. 27 EP spending is thus revised down to $2.55 billion, and 2028 EP spending is revised down to $2.3 billion. On A&D activity, we continue to pursue small tuck-in acquisitions and working interest consolidation opportunities adjacent to existing company lands and operated infrastructure. During the second quarter, we acquired Aduro Resources in the South Maunee Complex, That was for total consideration of $100 million, and that included net debt, and it consisted of $50 million of cash and approximately 1.5 million common shares of Topaz Energy Corp. The acquisition included modest current production and infra, as well as 174 net Tier 1 Monty locations adjacent to the Tourmaline Ground Birch Manias deep cut plant that is currently under construction. And during the quarter, we also completed the sale of Agor on the Adderall lands, as well as certain recently acquired Alberta deep basin lands, the Topaz, for cash proceeds back to Tourmaline of $38.7 million. Briefly on marketing, our average realized natural gas price in Q2 was $3.12 per MCF Canadian. as we continue to benefit from the diversified marketing portfolio and strategic hedging program that we continue to evolve. Thermaline has an average of a little over a BCF a day of natural gas hedge for the remainder of 26 at a weighted average fixed price of $4.97 per MCF Canadian. We have 220 MM BTUs exposed to international pricing, both TTF and JKM in 26. For the balance of 26, JKM and TTF are trading over $15 USD per MM BTU, which is a 60% price appreciation for the same strip as at the beginning of this year. The company is amongst Canada's largest propane producers and similar to the natural gas business, we have a long-standing propane marketing diversification strategy that we've been pursuing. And as mentioned, we've entered into a long-term agreement with AltaGas to increase our propane and butane exports through the Ridley Island Energy Export Facility, commonly known as REEF. The increased LPG volumes will be supplied to reef from our planned unit train rail loading facility located adjacent to the ground birch manias deep cut plant that's already being built. The new rail terminal is expected to improve our realized LPG margins by enabling direct rail shipments to the west coast. And it's all part of that whole integrated Northeast BC infrastructure project. Our expanded natural gas storage capacity is yet another important component of the continued vertical integration of our entire natural gas business. On the EP front, we drilled a total of 43 wells and completed 33 wells during the second quarter of 26. And as you know, considerable EP activity was deferred from Q2 into the second half of this year. Importantly, strong well performance has continued in both gas complexes in the first half of the year. I have mentioned the BC Montney well performance is up 28% in the first half of 26 over the prior five-year average based on the 25 wells that have actually reached IP90. And recall that 25 was up 22% over the previous five years. Alberta Deep Basin is now also up, and it's 14% up in the first half of 26 over the prior five-year averages, and that's based on 30 wells. We continue to evolve our EP approach to optimize deliverability, EUR, and IRR, and so you're seeing those results. It's also in part the result of our machine learning-assisted multidiscipline data integration capability that we've been developing in-house. On the inventory front, as mentioned, the Azuro acquisition added 174 net Tier 1 locations at a cost of $462,000 per location. In the Deep Basin land sales, which included the first disposition of previously restricted Alberta caribou lands and other minor asset consolidations, added 110 locations. at an average cost of $173,000 per location. I think you probably observed that the location prices are a lot higher south of the border in Canadian dollars, as high as $10 million per location. On the BC Infra build-out, it's actually a major Canadian project that is fully funded by cash flow and currently being executed. The overall project, including both phases, will add 1.1 BCF a day of gas and over 50,000 barrels per day of condensate and NGLs. Once completed, it's anticipated to generate over 400 million of structural incremental annual A substantial amount of the Phase 1 build-out is complete. That includes the highway condensate hub. Five of the six major pipeline interconnects, the Birch Facility, the South Montney Electrification Project, and they're already leading to op-ex and transportation cost reductions in this year. And you probably saw that Brian Robinson, our CFO, is going to retire this year. Effective November 1 of this year. Brian has been here since we started Tourmaline in 2008. Has done a brilliant job all the way along at Tourmaline and of course prior to that at Juvenet and Berkeley. Safe to say the best CFO in the sector over the past two and a half decades. I may be a little biased. Brian will remain on the board of directors of Tourmaline following his retirement as CFO, and I'm also very pleased to announce that Jamie Hurd, currently our VP Capital Markets, will succeed Brian as our CFO. Jamie's been doing a tremendous job in the Capital Markets role, and we know that that will continue with his expanded scope beginning in November. And Jamie also inherits the very strong and very deep finance team that Brian has built over his years with Tourmaline. And finally, our board of directors intends to declare a quarterly base dividend of $0.50 per share in early September, which will be payable on September 29, 2026, to shareholders of record at the close of business on September 15, 2026. So that's all for comments and all of us are here to answer your questions.