Tourmaline Oil (TSE:TOU) plans to increase production through the fourth quarter and expects to generate CAD 1.8 billion in free cash flow in 2027 at current strip pricing, executives said on the company’s third-quarter earnings call.
The Canadian energy producer reported third-quarter net earnings of CAD 641.5 million and cash flow of CAD 788 million, or CAD 2.02 per fully diluted share. Average production was 593,700 barrels of oil equivalent per day, slightly below its guidance range of 595,000 to 605,000 boe/d.
President and CEO Mike Rose said the shortfall was deliberate, as Tourmaline deferred production and injected gas into storage to capture stronger prices in the fourth quarter and the first quarter of 2027. The company expects to bring approximately 80 new wells into production during the fourth quarter.
Production ramp and 2027 spending
Rose said current production is averaging 630,000 to 635,000 boe/d and that Tourmaline is targeting an increased 2026 exit rate of approximately 670,000 boe/d. He attributed the expected increase in part to strong well performance in the Northeast British Columbia Montney and Alberta Deep Basin complexes.
Tourmaline plans CAD 2.6 billion in exploration and production capital spending in 2027. Its projected CAD 1.8 billion in free cash flow is 71% higher than its July expectation, Rose said.
CFO Jamie Heard attributed roughly two-thirds to three-quarters of the increase to improved commodity prices. The forecast also assumes a “mega deduction” takes effect in 2027, which Heard estimated would have an impact of CAD 200 million to CAD 300 million that year.
Tourmaline has completed the Aitken c-38-C deep-cut gas processing facility expansion on schedule and expects to begin moving sales gas in the second half of November, Rose said. The Groundbirch-Monias deep-cut plant remains on schedule for startup in the fourth quarter of 2027.
Heard said the company plans to expand its gas storage capacity to 14 billion cubic feet next year from 10 billion currently. Storage and the timing of well activity will allow Tourmaline to sell more gas during stronger winter markets, he said.
Gas pricing and shareholder returns
Tourmaline realized an average natural gas price of CAD 3.41 per thousand cubic feet in the third quarter, compared with CAD 1.59 for the AECO 5A benchmark. Operating expenses fell 7% from a year earlier to CAD 4.48 per boe, while net debt stood at CAD 1.54 billion at September 30, below the company’s CAD 1.75 billion long-term target.
For the remainder of 2026, Tourmaline has hedged an average of 887 million cubic feet per day of natural gas at a weighted average fixed price of CAD 5.07 per thousand cubic feet, Rose said. Heard said the company expects to increase hedging tied to the international TTF and JKM markets, while retaining some exposure to price movements.
Tourmaline increased its quarterly base dividend by 5% in September and plans to use most of the proceeds from a Topaz Energy secondary share offering to repurchase its own shares. The company bought 1.3 million shares between September 23 and October 9 at an average of CAD 61.88 each and plans additional purchases in November and December.
Heard said Tourmaline currently favors buybacks as a means of returning capital, though it will wait for free cash flow to reach its accounts before making allocation decisions. He said management believes the shares trade below fair value, citing improvements to the company’s assets and prospects for natural gas demand.
Emerald and data center plans
Tourmaline has formed Emerald Energy Technologies, a clean technology business with initial operations spanning power generation and transmission, compressed natural gas and related fuels, and resource technologies including carbon capture and water management.
Emerald intends to seek private equity financing that would partly fund its purchase in 2027 of Tourmaline’s water recycling facilities, its interest in an existing compressed natural gas fueling network and power assets. Rose said the businesses have been developed within Tourmaline over several years and are now large enough to bring to market.
Tourmaline, Emerald and Stream Data Centers are also working exclusively on the Malachite One powered-land and data center campus. Site preparation is anticipated to begin later in the fourth quarter, Rose said. He expects an initial rental-based power phase to start consuming Tourmaline gas and generating electricity in early 2028, followed by a ramp to a full gigawatt around 2029.
About Tourmaline Oil (TSE:TOU)
Tourmaline is Canada’s largest and most active natural gas producer dedicated to producing the lowest-development-cost natural gas in North America. We are an investment grade exploration and production company providing strong and predictable operating and financial performance through the development of our two core areas in the Western Canadian Sedimentary Basin. With our existing large reserve base, decades-long drilling inventory, relentless focus on execution, cost management, safety and environmental performance improvement, we are excited to provide shareholders an excellent return on capital and an attractive source of income through our base dividend and surplus free cash flow distribution strategies.
