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Tourmaline Oil CEO says oilpatch acquisition environment still 'positive'


CALGARY — There are still plenty of potential oilpatch acquisition targets in Western Canada, but that may change if recently higher global oil prices continue to strengthen, the CEO of Tourmaline Oil Corp. said Thursday.

The company is continuing to look at possible deals as it celebrates higher earnings and production following a year in which it completed four acquisitions, Mike Rose told a conference call with financial analysts to discuss the company's fourth-quarter results.

"There still are lots of opportunities so I'd term it as positive," Rose said when asked about the current environment for oil and gas asset purchases.

"I mean, if oil prices continue to run and solidify then perhaps that pipeline of opportunities slows down, but right now we're always busy evaluating and we only transact on very small proportion of the things we look at."

Benchmark U.S. oil prices have risen by more than 36 per cent so far in 2021.

Tourmaline closed deals to buy two private producers, Modern Resources Inc. and Jupiter Resources Inc., in the fourth quarter, adding 76,000 barrels of oil equivalent per day of output for a total of about $526 million in cash and shares.

The Calgary-based company, the largest natural gas producer in Canada, says it produced an average of about 336,000 boe/d in the fourth quarter, up 12 per cent from just under 300,000 boe/d in the year-earlier period. Current production is above 405,000 boe/d.

Tourmaline reported moving $25 million of its planned 2021 capital program into December, leaving about $1.075 billion to be spent this year, up from $879 million in 2020.

The company's program to eventually convert all of its drilling and well-completion operations from diesel to lower-emitting natural gas to date has resulted in displacing 34.6 million litres of diesel and saved $28 million, including the cost of the natural gas, Rose reported.

One of Tourmaline's rigs is operating entirely on electric power, he added, but that is difficult to replicate because power line infrastructure is limited in many of the areas where the company works.

The company has also opened a methane testing and research facility at a gas plant to find ways to accurately measure fugitive, flare and storage methane emissions with an eventual goal of zero-methane-emission well sites, he said. Methane, the main component of natural gas, is a potent greenhouse gas.

Tourmaline raised its quarterly dividend on Wednesday by 14 per cent to 16 cents per share.

In a report, analysts with Tudor Pickering Holt & Co. said the company has "ample room" to raise the dividend again later this year.

"TOU remains our top way to play gas exposure and we expect the accelerating shareholder returns theme to begin narrowing the valuation gap on U.S. peers," they said.

Tourmaline posted net income in the last three months of 2020 of $629 million, more than 10 times the $61.3 million it reported in the same period of 2019.

It said the increase in net earnings reflected a gain on acquisitions and divestitures of $500 million in the fourth quarter of 2020, along with a five per cent increase in operating netbacks.

This report by The Canadian Press was first published March 11, 2021.

Companies in this story: (TSX:TOU)

Dan Healing, The Canadian Press

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