Tourmaline Oil TSE: TOU management highlighted record production, reserve growth, and an ongoing cost reduction push during the company’s fourth-quarter 2025 earnings call, while also outlining a lower 2026 capital program amid weak Western Canadian natural gas pricing.
Record production and a portfolio shift
CEO Mike Rose said Tourmaline delivered record production in the fourth quarter of 2025, which continued into January 2026. He noted fourth-quarter average liquids production reached a record 152,673 barrels per day, and January 2026 production averaged more than 685,000 barrels of oil equivalent per day, prior to the sale of the Peace River High asset.
Rose also discussed the completion of the Peace River High asset sale in February 2026 for cash proceeds of C$765 million. He described the transaction as a sale of “most mature, highest cost production,” with the company planning to replace volumes with new, lower-cost production flowing through newly constructed Tourmaline facilities. He added that the disposition supports a tighter focus on Tourmaline’s large natural gas complexes.
Financial results and balance sheet priorities
Tourmaline reported fourth-quarter 2025 cash flow of C$890 million, or C$2.29 per fully diluted share. Full-year 2025 cash flow was C$3.4 billion, according to Rose.
On leverage, Rose said net debt at year-end 2025 was C$1.5 billion, which he said included the impact of the Peace River High asset sale and was down from C$2.3 billion in the third quarter of 2025. He described that net debt level as approximately 0.5 times forecast 2026 cash flow. Tourmaline also reiterated a long-term net debt target of C$1.75 billion.
Rose said the company intends to use Peace River High proceeds as follows:
- C$500 million for “permanent long-term debt reduction”
- C$265 million to partially fund Phase 1 of a BC infrastructure build-out over the next two years
When asked about additional balance sheet flexibility, management emphasized that current M&A efforts are focused on small “tuck-in” opportunities around existing or planned infrastructure, and that larger acquisitions are not a major focus at present.
Capital spending reduced as gas prices remain weak
Rose said fourth-quarter 2025 E&P capital expenditures were C$813 million, within original guidance. For 2026, Tourmaline reduced its full-year E&P capital program by C$350 million to C$2.55 billion and cut non-E&P capital by C$50 million, for a total reduction of C$400 million. He said this reduction includes C$175 million of previously planned spending on the Peace River High complex and a further C$175 million cut in the gas complexes.
Rose attributed the deferrals to unusually low prices in key markets, including AECO and Station 2 in Western Canada and markets in the Pacific Northwest and California. He said the company views it as prudent to defer certain gas-focused spending until it sees sustained stronger local pricing, while adding that stronger-than-anticipated well performance to date means the cuts should have a negligible impact on 2026 production guidance.
Management also pointed to further potential flexibility: Rose said the company has identified an additional C$200 million of drilling and completion capital that could be deferred from the 2026 E&P program if prices remain weak. In the Q&A, he indicated additional deferrals would be focused on drilling and completions, preserving timing for two BC plant projects.
On production impacts, Rose said the Peace River High sale and the decision to redirect discretionary Deep Basin deep-cut volumes together will reduce corporate production by about 50,000 BOE per day on a full-year basis.
Cost reductions, processing changes, and hedging
Tourmaline highlighted operating cost improvements. Rose said fourth-quarter operating costs were C$4.66 per BOE, down 3% from the third quarter and more than 9% from the first half of 2025. He said the Peace River High sale is expected to reduce forward operating expenses by a further 7%, and the company’s 2026 operating expense guidance is C$4.50 per BOE.
Rose said Tourmaline is raising its long-term combined operating and transportation cost reduction target from C$1.00 per BOE by 2031 to C$1.50 per BOE, noting approximately C$0.70 per BOE has already been achieved since the first half of 2025.
Tourmaline also said it elected to terminate discretionary deep-cut gas plant deliveries in the Alberta Deep Basin as contracts expire. Rose said this will reduce corporate average ethane production volumes by about 20,000 barrels per day on a full-year basis, but is expected to increase 2026 operating netback by about C$65 million and 2027 operating netback by about C$110 million through the elimination of deep-cut processing fees and related transportation and fractionation charges. In response to analyst questions, Rose characterized ethane recovery economics as difficult, and said the move was tied to contracts coming due and an opportunity to lower costs.
On risk management, Rose said the company has about 880 MMcf/d of natural gas hedged in 2026 at a weighted average fixed price of C$4.54 per Mcf. He also noted exposure to premium Eastern markets in the first quarter and discussed the company’s sensitivity to price changes. Rose said that, all else equal, each C$0.10 per Mcf improvement in AECO pricing would increase 2026 cash flow and free cash flow by roughly C$45 million. Management also reiterated a sensitivity to global benchmarks, saying that for each $1 per Mcf improvement in both JKM and TTF, 2026 cash flow would improve by about C$50 million and 2027 cash flow by about C$70 million.
Reserves growth, infrastructure, and shareholder returns
Rose said Tourmaline added 829 million BOE of 2P reserves in 2025, including a corporate record organic 2P addition of 457 million BOE. He said year-end 2025 proved developed producing reserves were 1.47 billion BOE (up 27%), total proved reserves were 3.26 billion BOE (up 20% year-over-year), and 2P reserves exceeded six billion BOE (up 15%). He also cited reserve replacement of 356% based on 2025 production of 233 million BOE.
Tourmaline noted it increased drilling and completion cost assumptions across its booked inventory to reflect longer horizontals and a growing shift to plug-and-perf completions. Rose said 75% of BC wells are now using plug-and-perf, and that the inventory recalibration increased 2025-only 2P finding and development costs by C$3.21 per BOE.
On infrastructure and integration, Rose said Tourmaline entered into a long-term natural gas storage agreement with AltaGas at the Dimsdale facility, with access to 6 Bcf starting in April 2026 and rising to 10 Bcf in mid-2027 for a 10-year term. He said the company views additional storage as a way to improve performance and operational flexibility during natural gas volatility. Tourmaline also described an agreement to control frac sand capacity in BC via a transload facility expected to begin operating in the second quarter of 2026, which management estimated would save at least C$40 million per year in capital costs.
Tourmaline confirmed timing for two BC projects remains unchanged: Rose said Aitken is on schedule for completion in the fourth quarter of 2026, and the Groundbirch-Monias plant is expected to be completed in the fourth quarter of 2027.
On shareholder returns, Rose said the board declared a quarterly dividend of C$0.50 per share, payable March 31, 2026 to shareholders of record March 16, 2026. He said weak Western Canadian pricing and unusually low prices at the PG&E and Malin hubs this winter will limit free cash flow and constrain the company’s ability to fund a special dividend in the first quarter. Management said it expects sustained stronger pricing and ongoing margin improvement to support further base dividend increases over time, with special dividends used in periods of particularly strong pricing to return incremental free cash flow to shareholders.
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 three 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.
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