Canada’s Tourmaline grows again in the Montney
Tourmaline Oil, Canada’s largest natural gas producer, continued its aggressive acquisition strategy June 11, announcing a definitive agreement to acquire privately-held Black Swan Energy for a total consideration of about C$1.1bn (US$910mn), consisting of 26mn Tourmaline shares and the assumption of up to C$350mn of net debt.
The acquisition represents another component in Tourmaline’s ongoing consolidation strategy in the North Montney, which the company sees as a key sub-basin for supplying Canadian LNG and the primary growth driver in the Western Canadian Sedimentary Basin over the next decade.
“The Black Swan acquisition complements Tourmaline’s core Gundy development and, along with the more recent Polar Star, Chinook, and Saguaro transactions, will establish Tourmaline as the largest current North Montney producer with the most extensive future drilling and project inventory,” it said.
The acquisition is expected to close in the second half of July, subject to regulatory approvals, and will boost Tourmaline’s total production to more than 500,000 barrels of oil equivalent/day by the middle of next year, from about 411,000 boe/day in Q1 2021.
The assets are expected to generate C$150-200mn/yr of free cash flow in 2022 and beyond, prompting Tourmaline’s board to approve a $0.01/share increase to its quarterly dividend, to C$0.17/share, effective in Q3 2021.
Along with 230,000 net acres of North Montney rights representing about 492mn boe of proved+probable (2P) reserves, the acquisition will bring 1,600 potential drilling locations and significant gas processing and transportation infrastructure, including a 50% working interest in two new gas plants at Aiken, with existing capacity of 265mn ft3/day, expandable to 360mn ft3/day.
By the middle of next year, Tourmaline expects to be producing around 500,000 boe/day, including up to 2.3bn ft3/day of natural gas and 115,000 b/day of oil, condensate and natural gas liquids. Q1 production this year consisted of about 1.9bn ft3/day of natural gas and 92,000 b/day of liquids.