Earnings Material +

TOURMALINE ACHIEVES RECORD PRODUCTION IN THE FIRST QUARTER AND FORECASTS HIGHER FREE CASH FLOW FOR 2026 AND 2027

Tourmaline Beats Cash Flow Expectations on Hedging Gains

By The Northwire Desk — AI Analysis May 06, 2026 · 17:00 TOU · 66.85 TOURMALINE OIL CORP.

Executive Summary

Headline: TOURMALINE ACHIEVES RECORD PRODUCTION IN THE FIRST QUARTER AND FORECASTS HIGHER FREE CASH FLOW FOR 2026 AND 2027.
Date: May 6, 2026.
Production: Q1 2026 average production was 666,089 boepd, within the guidance range of 660,000 - 670,000 boepd. Full-year 2026 forecast remains 620,000 to 640,000 boepd.
Financials: Q1 Cash Flow was $862.2 million ($2.21 per share). Net Earnings were $657.6 million. Free Cash Flow (FCF) for the quarter was $202.0 million.
Outlook Upgrade: The company raised its full-year 2026 and 2027 FCF outlook to approximately $0.9 billion for each year. This is an increase from the March 2026 guidance which projected ~$0.7 billion in FCF for 2026.
Debt: Net Debt stood at $1.5 billion as of March 31, 2026, below the long-term target of $1.75 billion.
Capital Budget: Full-year 2026 EP capital budget remains at $2.55 billion (consistent with March 2026 reduction).
Financing: Issued $250 million senior unsecured notes at 3.934% interest, five-year term. Total borrowing capacity is now $3.7 billion.
Dividend: Board intends to declare a quarterly base dividend of $0.50 per share in early June (consistent with previous declarations).
Hedging: 930 mmcfpd of natural gas hedged for the remainder of 2026 at a weighted average fixed price of CAD $5.13/mcf.

Material Impact

Positive Surprise on FCF: The most significant aspect is the upgrade to Free Cash Flow guidance from ~$0.7 billion (March 2026) to ~$0.9 billion for both 2026 and 2027. This contradicts the March narrative where capital was cut due to weak local gas prices, suggesting hedging gains and international exposure (TTF/JKM) are outperforming strip pricing assumptions.
Production Stability: Record Q1 production confirms operational efficiency despite the Peace River High asset sale completed in late 2025/early 2026. The company maintained volume targets while reducing capital intensity.
Dividend Consistency: The $0.50/share quarterly dividend is reaffirmed but not increased, aligning with management's previous caution regarding special dividends until pricing improves significantly. This is expected (Routine) rather than a surprise increase.
Debt Management: Net debt reduction to $1.5 billion demonstrates strong balance sheet discipline, reducing refinancing risk in a potentially volatile rate environment.
Market Reaction: The stock closed at $66.85 on the news day, down from $67.95 the previous day. This suggests the market may have partially priced in the positive cash flow or remains cautious about underlying commodity price fundamentals (AECO basis).

TOU · Price

Company Overview

Overview: Tourmaline Oil Corp. is Canada's largest natural gas producer, focusing on the Montney formation in Northeast British Columbia (NEBC) and the Alberta Deep Basin.
Flagship Project: NEBC Montney Development. This includes infrastructure build-outs like the Aitken expansion (Q4 2026 start-up) and Groundbirch deep cut plant (Q4 2027 start-up). These projects aim to reduce operating costs and increase processing capacity for liquids and gas.
Development: The company is transitioning from pure volume growth to cash flow optimization, evidenced by the capital budget reduction in March 2026 while maintaining production targets through improved well performance (IP90s up 22% vs 5-year average).

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