Tourmaline, through a series of strategic acquisitions, farm-ins and land acquisitions combined with its active capital exploration and development program, has assembled an extensive undeveloped land position with a large, multi-year drilling inventory and operating control of important natural gas processing and transportation infrastructure in two core long-term growth areas – the Alberta Deep Basin and the Greater Peace River High. Tourmaline is executing a large-scale, repeatable capital exploration and development program in these two core long-term growth areas.
Tourmaline’s long-term business strategy is to increase shareholder value by building an extensive asset base over two to three core exploration and production areas and exploiting and developing these areas to increase reserves, production and cash flows at an attractive return on invested capital.
Wells Drilled Western Canada
Tourmaline Facility Permits
Recent Facility Project with Compressors
Compressors are located in the Wilrich ‘sweet-spot’ in the Smoky-Horse-Leland area that Tourmaline has been delineating past few years. Tourmaline is the largest Alberta Deep Basin operator with current production of 165,000 – 170,000 boepd. The Company has achieved the production level through drilling only 350 horizontal wells from an inventory of approximately 6,250 horizontal locations all of which are economic at current pricing.
2021/2022 EP CAPITAL BUDGET
- The recently approved 2022 EP capital budget of $1.125 billion is expected to deliver average production of 500,000-510,000 boepd, $3.7 billion of cash flow (“CF”)(2) and $2.5 billion of FCF on strip pricing(3). The 2022 EP capital budget, essentially a maintenance program, is $62 million less than previous estimates given specific facility projects and select drilling accelerated into 2H 2021. Production, CF, and FCF are all higher than previous 2022 guidance. The Company expects capital efficiencies to improve further in 2022 as a significant portion of the planned 2022 facility expenditures have been accelerated into 2H 2021.
- The 2021 EP capital program has been increased to $1.375 billion with the 2H 2021 increase focused on liquids business/production increases and related liquids margin improvements, and the modest acceleration of drilling activities. Full-year 2021 average production is now expected to be 440,000-445,000 boepd and increased full-year CF of $3.0 billion is now anticipated along with $1.6 billion of FCF. The majority of the incremental facility capital is being expended in Q3, yielding estimated capital spending of $420 million in Q3 and $350 million in Q4. The updated 2H 2021/2022 EP capital program is consistent with previous guidance.
- Material reduction in drilling times throughout 2021, particularly in NEBC, will result in completion of the originally planned full-year 2021 drilling program by November. BC Montney per-well drilling times have been reduced by approximately 20% in 2021 (two days less per well). As a result, the Company has elected to accelerate the drilling of approximately 21 wells from 2022 into Q4 2021 in order to maintain the existing top-tier, Company operated drilling fleet at full capacity, rather than release rigs at this time. The majority of these incremental wells will not be completed and brought on production until 2022.
- The Company will monitor natural gas supply/demand balances and schedule new production startups appropriately through the course of winter and the balance of 2022. Tourmaline has incremental egress on the GTN system of 100 mmcfpd in 2022 and a further 50 mmcfpd in 2023, as well as 140 mmcfpd of egress to the Gulf Coast accessing international LNG commencing in 2023. Total volumes on the GTN system will grow from 330 mmcfpd currently to 480 mmcfpd by 2H 2023, with over 80% of these volumes accessing the California market. Incremental Company gas volumes in 2022/2023 will not be directed at AECO or Station 2.
- Acceleration of both the Gundy Phase 2 and Nig Creek deep cut installations/expansions will add approximately 15,000 bpd of condensate and natural gas liquids (“NGLs”) (including 5,000 bpd of propane) by exit 2021/Q1 2022. Liquids margins will also be improved through utilization of Company operated facilities rather than third party processing options. Margin improvement will also be realized through an increase in Ripet propane exports. 2022 average annual liquids production of approximately 115,000 bpd is now expected, up 2,000 bpd from previous estimates. Edmonton propane and butane prices are up over 200% and 40%, respectively, over the past 12 months.
500,000 BOEPD 2021 EXIT
- The Company expects to achieve the 500,000 boepd average production milestone by exit 2021, earlier than originally anticipated. The accelerated timing is driven by the impact of improved drilling efficiencies and acceleration of the aforementioned liquids midstream projects.
- Tourmaline estimates annual maintenance EP capital of $1.0–$1.05 billion to maintain average production at the 500,000 boepd level.
Areas of Operation
Alberta Deep Basin
Tourmaline is the largest producer in the Alberta Deep Basin, which represents over 50% of the Company’s production and capital expenditures.
The Alberta Deep Basin is a multi-objective tight natural gas sand play area with up to 15 separate lower Cretaceous liquids-rich natural-gas-charged sand reservoirs. Tourmaline’s target exploration and production area is in that portion of the Alberta Deep Basin where the entire lower Cretaceous stratigraphic section is gas saturated with no mobile formation water. The primary vehicle for accessing the extensive reserves in these stacked sandstones is multi-stage fracture stimulation in both horizontal and vertical well-bores.
Tourmaline currently has ownership interests in thirteen natural gas plants in the Alberta Deep Basin, ten of which are 100% owned and operated by Tourmaline. In aggregate, Tourmaline has in excess of 1 Bcf/d of natural gas processing capability within this plant network. Tourmaline’s goal is to be one of the lowest-cost, most efficient operators in the Alberta Deep Basin, and the Company plans to optimize and systematically continue to further reduce costs of operating the Alberta Deep Basin assets.
NEBC Montney Gas/Condensate
Focused on liquids rich natural gas in the Montney. Technological developments, including the drilling of horizontal multi-stage fracture stimulation wells, have allowed access to the thickest, highest pressured and highest deliverability fine grained sandstone reservoirs of the Montney in the NEBC play area. Tourmaline’s Montney EP program has been focused in the Groundbirch/Sunrise/Dawson area of the Peace River Arch, as well as the Gundy CK area, which the Company acquired through a significant asset acquisition in 2016
Tourmaline owns and operates five significant natural gas processing facilities with aggregate capacity of 325 MMcf/d with related gas gathering systems and NGL handling infrastructure. The Company is also planning a new 200 MMcf/d facility at Gundy in 2019 to efficiently process the liquids-rich natural gas produced as a result of ongoing development in the Gundy CK area including installation of an ethane rejection deep-cut gas processing facility. Tourmaline also has the ability to double the capacity of the forthcoming Gundy plant.
Peace River Triassic Oil
Tourmaline’s third core area is the Company’s exploration and production complex at Spirit River-Mulligan-Earring, Alberta. The majority of the current production in the complex is derived from oil and natural gas-charged reservoirs of the Triassic Charlie Lake formation. This area, currently producing approximately 15,000 Boe/d net to Tourmaline, has a large inventory of vertical and horizontal development drilling prospects in the Charlie Lake and Montney formations as well as attractive plays in several other formations.
The Company currently owns and operates two significant oil batteries capable of handling 48,000 bpd of fluids and the associated natural gas is delivered to a third party for processing. Tourmaline also has a 100% owned and operated 60 MMcf/d sour gas processing facility at Spirit River.