Tourmaline Oil NEBC Montney Playbook

NORTH MONTNEY OVERVIEW

Tourmaline continues to expand its position in the greater North Montney play area, a strategy that began in late 2016 with the acquisition of the initial Gundy property which is the current anchor of the Company’s North Montney complex. With completion of the Gundy Phase 2 expansion in early 2022, the property is expected. to produce approximately 400 mmcfpd and 27,500 bpd of condensate and natural gas liquids (“NGLs”).

Over the next five years, Tourmaline’s North Montney growth will shift to the greater Conroy area where the Company is planning to actively develop a separate new operated complex ultimately producing at similar levels to Gundy. Current timing for achieving full production levels at Conroy will be synchronized with the startup of LNG Canada, which the Company believes will be very supportive of Western Canadian natural gas prices. As the key sub-basin for supplying Canadian LNG, the Company expects the North Montney to be the primary growth driver in the entire Western Canadian Sedimentary Basin for the next decade.

NORTH MONTNEY 2022 Update

Drilling

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.

Facility

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.

Tormaline Wells Drilled Last 4 Years by Area

Tourmaline Pipeline Assest

SAGUARO ACQUISITION AND JOINT VENTURE


In April 2021, Tourmaline acquired 50% of the assets of Saguaro Resources Ltd. (“Saguaro”) in the Laprise Conroy North Montney play area of NEBC for cash consideration of $205 million and entered into a joint venture agreement to develop these assets. Tourmaline will operate the joint venture and related facilities. The acquired assets consist of net average production of 9,000 boepd in March 2021 (25% condensate and NGLs) with Q4 2021 anticipated production levels of 12,500 boepd after approximately $35 million of net 2H 2021 capital expenditures, proved plus probable (“2P”) reserves of 187.1 mmboe (internally estimated at December 31, 2020), 645 gross future Montney horizontal locations, and a 50% working interest in, and operatorship of, existing Saguaro facilities. The acquired Saguaro assets are expected to generate a free cash flow (“FCF”)(1) yield of approximately 17% in 2022 at April 30, 2021 strip pricing. In the 2022 – 2024 time period, the development plan currently contemplates a maintenance capital program leading to a higher
growth profile in subsequent years.

The Saguaro assets constitute a portion of Tourmaline’s long-term regional Conroy/North Montney development plan that will include significant new regional gas and liquid processing infrastructure. The acquired assets are immediately adjacent to the Polar Star and Chinook assets acquired in 2020, which in aggregate constitute a major new subsurface development with an estimated 1,298 gross future drilling locations, and a significant new infrastructure project for the Company.

Tourmaline drilled one Montney delineation pad this winter on the Laprise (Polar Star) lands immediately north of the Saguaro assets to better define well deliverability and condensate production profiles as well as ascertain completed well costs as part of the longer-term development planning process. As previously released, the Laprise b-34-L five-well pad significantly exceeded performance expectations, condensate yields averaged 65 bbl/mmcf through 60 days of production. The Company is targeting future drill/complete capital costs of $3.5 million per well, or less, the lowest in the North Montney play area.

STRATEGIC MIDSTREAM ACQUISITION

On April 1, 2021, Tourmaline also closed an infrastructure acquisition in the greater Laprise-Conroy area for cash consideration of $55 million. The acquisition includes a 49km six-inch condensate pipeline (capacity of 34,000 bpd) and a liquids hub/truck terminal at Aitken Creek. The asset is an important component of the Company-owned planned regional North Montney infrastructure complex. The 190 mmcfpd capacity, 55km regional 12-inch gas gathering pipeline included in the 2020 Chinook acquisition is another component in the Company’s long-term regional infrastructure plan.

The acquisition allows Tourmaline Tourmaline NEBC Montney to immediately reduce operating and transportation costs on Company interest condensate production for the acquired Saguaro assets as well as collect fees on additional third party volumes.

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GUNDY AND DOE CONSOLIDATION

Tourmaline has completed three separate modest transactions over the past three quarters at Gundy and Doe, BC for total cash consideration of $54.5 million. These transactions consolidate Tier 1 assets within existing developed Tourmaline operated complexes and will flow into current Tourmaline infrastructure.

The acquired assets include a combined 85.3 mmboe of existing 2P reserves (internally estimated by March 31, 2021) and a Tier 1 future drilling inventory of approximately 163 gross locations. The new assets are already incorporated into ongoing 2021 property development programs.

Gundy 2022 Update

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.

TOPAZ NORTH MONTNEY TRANSACTION

Tourmaline Tourmaline NEBC Montney has entered into a transaction with Topaz Energy Corp.(“Topaz”) in NEBC involving recently Tourmaline acquired BC Montney subsurface assets and a working interest in the Tourmaline facility complex at Gundy Creek for cash consideration of $245 million. The transaction is expected to close in early July 2021.

Topaz will acquire a GORR on the new lands acquired by Tourmaline at Doe, Gundy, Conroy (Saguaro), Laprise (Polar Star), and Birley (Chinook) over the past year (approx. 535,000 gross acres of which 288,000 gross acres are for Montney rights).

Topaz will also acquire a 10% working interest in the Tourmaline Gundy facility complex (Phase 1 and 2) which will be backstopped by a take or pay contract on 40 mmcfpd of Tourmaline production at Gundy for a 10-year period.

Tourmaline DOE Gas Plant

2021 GUIDANCE/FIVE-YEAR PLAN UPDATE

To reflect the impact of incremental 2021 acquisitions, improving commodity prices, and strong well performance, Tourmaline has updated 2021 guidance and revised the Five-Year Development Plan. The updated 2021 guidance and Five-Year Development Plan also reflects a full deconsolidation of Topaz post the close of the Topaz financing in June 2021. The Topaz investment will be accounted for as an equity investment and the common shares that Tourmaline continues to own will be recorded on the Company’s balance sheet as a long-term financial asset.

Average 2021 production grows to an expected range between 405,000 – 420,000 boepd from previous guidance of 400,000 at the midpoint. Forecast 2021 cash flow (“CF”)(2) grows to $2.23 billion(3) ($7.69/fully diluted share) from the previous $2.21 billion ($7.42/fully diluted share). Full-year 2021 FCF is now $1.1 billion (13% FCF yield) unchanged from previous guidance. 2022 forecast full-year CF/FCF grew by 8%/20%, respectively, over prior estimates.

Overall full-year EP capital guidance has been increased to $1.19 billion from $1.075 billion with the increase
related to:

Approximately $35 million of net capital spending in 2H 2021 on the new Saguaro Conroy-Laprise joint venture to optimize overall production levels and reduce short-term operating costs.

Installation of the Gundy Phase 2 Deep Cut expansion facility in Q4 2021 rather than Q1 2022 as the Company is pleased to report that construction of the multiple facility components is well ahead of schedule. This will allow the Company to take advantage of potentially stronger winter 2022 natural gas pricing rather than typically lower spring prices via the original Q2 2022 startup schedule. Note that 75% of the incremental 200 mmcfpd of Gundy Phase 2 production is ultimately flowing on the GTN system to PG&E/California on incremental long-term gas transportation capacity secured by the Company. The resultant shifting of capital ($55 million for plant installation and incremental drilling)
and production at Gundy forward into 2021 from 2022 significantly improves overall corporate 2022
FCF forecast.

The Tourmaline NEBC Montney five-year plan now generates $4.5 billion in FCF over the full five years, up from $4.1 billion in previous
guidance.

Lateral Completions Dissolvable Frac Plug

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