Tourmaline Oil Corp., Canada’s largest natural gas producer, plans to increase spending and advance some drilling in the Montney Shale initially slated for next year in the final weeks of 2021.
The company attributed the decision to “significantly reduced drilling times,” particularly at its northeastern British Columbia assets.
Tourmaline reported a 20% reduction in drilling time per well in Montney, which equates to two days less per well. This means that drilling planned for 2021 would end in November.
“As a result, the Company has chosen to accelerate the drilling of approximately 21 wells from 2022 to 4Q2021 in order to keep the leading drilling fleet operated by the Company at full capacity, rather than freeing up rigs for it. moment, ”said Tourmaline. noted. “The majority of these additional wells will not be completed and put into production until 2022.”
In addition, planned spending for facilities in 2022 has been accelerated through the second half of 2021.
Calgary-based Tourmaline unveiled the plan along with updated capital spending forecasts (capex) for 2021 and 2022. Capital spending this year has been revised up to C $ 1.375 billion (1, 09 billion dollars), compared to the previous forecast of 1.1 billion Canadian dollars (870 million dollars).
Tourmaline said the accelerated drilling program contributed to the increase, along with the focus on increasing liquid production and associated margin improvements.
Average liquids production in 2022 is forecast at 115,000 b / d, 2,000 b / d higher than previous estimates. The company noted that Edmonton’s propane has increased 200% in the past year, with butane prices rising 40%.
Meanwhile, investments for 2022 are set at C $ 1.125 billion ($ 890 million), a reduction of $ 62 million ($ 49 million) from previous estimates. Tourmaline described the 2022 capital program as “essentially a maintenance program” following the acceleration of drilling and increased installation expenses in 2021.
Investments and efficiency gains should lead to increased production.
The company forecasts average production this year of 440,000 to 445,000 boe / d, with annual cash flows of C $ 3 billion ($ 2.4 billion) and C $ 1.6 billion ($ 1.3 billion). billion dollars) of free cash flow (FCF). He plans to end the year with 500,000 boe / d, a milestone he had planned to reach later.
Next year, Tourmaline expects to deliver an average production of 500,000-510,000 boe / d, cash flows of C $ 3.7 billion ($ 2.9 billion) and C $ 2.5 billion. Canadian dollars ($ 2 billion) from FCF based on the current coupon price.
Tourmaline said it would monitor natural gas supply and demand balances and schedule production starts “appropriately” through winter and 2022.
The natural gas market is unusually tight as fall approaches, and a colder-than-expected winter could trigger more volatility.
The company said it had the take-out capacity to accommodate increased production. Tourmaline stated that it had an incremental output on the Gas Transmission Northwest (GTN) network of 100 MMcf / d in 2022 and 50 MMcf / d in 2023. This would bring the total volumes on the GTN system to 480 MMcf. / d by the second half of 2023. More than 80% of volumes would target the California market, Tourmaline said.
Tourmaline also mentioned its 15-year agreement starting in 2023 to supply 140 MMcf / d to Cheniere Energy Inc.’s Corpus Christi Liquefied Natural Gas (LNG) facility in South Texas.
Tourmaline used the FCF this year to raise dividends and reduce debt to C $ 1-1.2 billion ($ 791-950 million).
With debt repayment on track to meet its target by year-end, Tourmaline now plans to “return the vast majority” of FCF to shareholders through dividend increases, special dividends and share buybacks. The company announced that it would increase its basic quarterly dividend from 1 cent C / share (less than 1 cent) to 18 cents (14 cents) payable at the end of 2021.