Tourmaline Oil Corp. (Toronto: TOU) (OTC: TRMLF) is a Canadian intermediate crude oil and natural gas exploration and production (E&P) company, notes resources expert Gordon Pape, editor of Internet Wealth Builder.
The firm is focused on long-term growth through an aggressive exploration, development, production, and acquisition program in the Western Canadian Sedimentary Basin. It is the largest natural gas producer in Canada.
Tourmaline continues to recover from last year’s devastating set-back and recently touched a 52-week high of $27.09, before pulling back. At a time when much of the conventional oil and gas industry continues to struggle, Tourmaline is forging ahead and increasing its dividend for the second time in six months.
Last month, the Calgary-based company reported fourth quarter and year-end results that in most cases surpassed 2019 figures, despite the impact of the pandemic and the big drop in oil prices a year ago.
Natural gas and oil production were up 12% in the fourth quarter to 336,325 barrels of oil equivalent per day (boe/d). For the full year, production gained 7% over 2019 to a record 310,598 boe/d. The company exited the year with production in excess of 400,000 boe/d.
Natural gas prices edged higher over the year and by the fourth quarter were 15% ahead of the same period in 2019, at $3.19 per mcf. Total fourth-quarter revenue was $688.4 million, up 19% from the prior year. For all of 2020, revenue was $2.2 billion, a gain of 2% year-over-year.
Fourth-quarter net earnings were $629.2 million ($2.28 per share), compared to $61.3 million ($0.23 per share) in the fourth quarter of 2019. Full year results saw earnings of $618.3 million ($2.27 per share), so prior to the final quarter the company was in a loss position. Proved plus probable oil and gas reserves increased 27% in 2020.
The board of directors approved a 14% dividend increase to $0.16 per quarter ($0.64 per year), effective with the March payment. This comes on top of another $0.02 increase in December. The yield at the current price is 2.6%.
The company is expecting another strong year in 2021. Cash flow is expected to be $2.2 billion at strip pricing, with free cash flow of $1.1 billion. Tourmaline generated $273.9 million in free cash flow in 2020. Capital spending is projected at just over $1 billion.
The free cash flow in 2021 will be designated for debt reduction, potential dividend increases, selective acquisitions, capital investment in emission reduction technologies, and potential share buybacks.
In its updated five-year plan, Tourmaline expects to generate $4.1 billion of free cash flow at strip pricing over the next five years. I rate the stock a "Buy". This is one of the best-managed mid-sized oil and gas companies you’ll find.
