Tourmaline Oil Corp.
TSX : TOU

Tourmaline Oil Corp.

March 08, 2011 17:44 ET

Tourmaline Reports 167% Reserve Growth in 2010 and Provides Operations Update

CALGARY, ALBERTA--(Marketwire - March 8, 2011) - Tourmaline Oil Corp. (Tourmaline) (TSX:TOU) is pleased to report 2010 year end reserve information highlights and update Q1 2011 EP activities.

RESERVES OVERVIEW

Tourmaline has generated very strong growth in all reserve categories in 2010. Proved Developed Producing reserves grew to 38.9 mmboe in 2010, a 126% increase over year end 2009 (65% per share year over year), Total Proved reserves grew to 93.0 mmboe in 2010, a 167% increase over 2009 (95% per share) and Proved Plus Probable reserves grew to 158.2 mmboe in 2010, a 166% increase over 2009 (94% per share)

Tourmaline's total 2P reserves after two years of operation is now larger than Duvernay Oil Corp.'s 2P reserves in its final 2008 reserve report.

Finding, Development and Acquisition costs were $9.58/boe for Proved Plus Probable reserves in 2010 ($15.55/boe with changes in future development capital (FDC)), and $15.61/boe for Total Proved Reserves in 2010 ($21.50/boe with FDC). These costs include $339.4 million for land and facilities ($5.25/boe of the $21.50/boe Proved costs including FDC) as the Company completed several large land focused acquisitions and embarked upon several major facilities projects in 2010 as it assembled its extensive EP portfolios.

Finding and Development costs were $11.02/boe for Proved Plus Probable reserves ($14.19/boe with FDC) and a $14.78/boe for Total Proved reserves ($19.48/boe with FDC).

The 2010 independent reserve report includes 263 future locations, approximately 5% of the 5,000 locations currently in the Company's drilling inventory.

Oil and natural gas liquids 2P reserves grew to 20.0 mmboe at year end 2010.

PRODUCTION UPDATE

Current production is approximately 24,000 boepd, consisting of 128.4 mmcfpd of natural gas and 2,600 bopd oil, condensate and liquids.

The two major ongoing facility projects, the Minehead AB gas plant and the Dawson BC pipeline interconnect to the Tourmaline Sunrise plant, will grow total production to 28,500 boepd or greater by early April, in excess of originally projected levels for second quarter 2011. These two projects will bring 25 completed, shut-in gas wells on-stream. Fourth quarter 2010 production averaged 22,953 boepd, a 217% increase over fourth quarter 2009 average production of 7,248 boepd. The Company is expecting full year average production of 27,675 boepd for 2011, which will represent 55% growth over 2010 average production of 17,856 boepd.

COST UPDATE

The Company continues to make progress on further reducing already top decile operating costs. Fourth quarter 2010 operating costs were $5.51/boe, down 12% from third quarter 2010 costs of $6.24/boe and 31% from fourth quarter 2009 costs of $7.94/boe. Tourmaline has numerous projects underway throughout the EP portfolio to further reduce operating costs for 2011.

EP UPDATE

Tourmaline is currently operating 6 drilling rigs and will maintain those levels until Spring break-up in March. A total of 14 gas wells and 2 oil wells have been drilled thus far in 2011.

Alberta Deep Basin

A total of 10 vertical gas wells and 3 horizontal gas wells have been drilled to date in the first quarter of 2011. The Company is operating 5 drilling rigs in the Deep Basin. The Company expects to have a total of 14 horizontal wells drilled by break-up with the Phase 1 horizontal assessment program including 6 Cardium, 2 Wilrich, 2 Falher, 2 Notikewan and 2 Cadomin horizontals drilled, completed and tested by April 1. Initial results have been very strong with a 750 boepd Cardium horizontal in greater Wild River and a 2200 boepd Falher horizontal at Musreau amongst the high deliverability, liquids rich gas wells tested thus far. An additional 18-20 Deep Basin horizontals are planned throughout the Deep Basin complex in the second half of 2011. The Company is now estimating an inventory of up to 1500 horizontal locations on its extensive Deep Basin EP portfolio, complementing the 3100 vertical drilling locations already in inventory.

The main Deep Basin facilities project in Q1 is the Minehead gas plant and associated gathering system. The project remains on schedule, with all components of the plant on-site and first production expected by the beginning of April. The Minehead plant will bring approximately 30-35 mmcfpd of net shut-in gas volumes on-stream.

Peace River High

Tourmaline expects to drill and complete up to 20 horizontals in the greater Dawson Sunrise liquids rich Montney complex during 2011. The Company will operate one drilling rig on a continuous basis through the balance of the year. Average per well drill times are now down to 12-13 days. The Sunrise 5-14-80-16W6M well tested at a stable rate of 14.2 mmcfpd in February, the highest deliverability well in the Company's Dawson-Sunrise program thus far.

The principal facilities project in Dawson-Sunrise in the first quarter is the Dawson interconnect pipeline and compressor project. This project will bring 20 mmcfpd of shut-in gas and associated liquids to the Tourmaline operated gas plant at Sunrise. A late March start-up for this pipeline is currently anticipated.

At Spirit River, a total of 5 horizontals have now been drilled in the Triassic Charlie Lake formation. Three of these wells are on production at average initial rates of 275 bopd and 0.75 mmcfpd, the fourth and fifth wells are currently being completed. The Spirit River battery expansion was completed in late January to accommodate these rapidly increasing production volumes.

Summary Reserve Information

The following tables provide summary reserve and future net revenue information based on forecast prices and costs.

All future net revenues are stated prior to provision for interest, general and administrative expenses and after deduction of royalties and estimated future capital expenditures. Estimated values of future net revenue do not represent fair market value. There is no assurance that the forecast price and cost assumptions will be attained and variances could be material. The recovery and reserve estimates of Tourmaline' crude oil, natural gas liquids and natural gas reserves are estimates only and there is no guarantee that the estimated reserves will be recovered. Actual crude oil, natural gas and natural gas liquid reserves may be greater than or less than the estimates provided herein.



Summary of Oil and Gas Reserves and Net Present Values of Future Net Revenue
As of December 31, 2010

FORECAST PRICES AND COSTS

Light and Medium Oil Natural Gas

Company Company
Company Net of Company Net of
Gross Royalty Gross Royalty
Reserves Category (mbbls) (mbbls) (mmcf) (mmcf)
--------------------------------------
Proved Developed Producing 997 829 211,683 189,799
Proved Developed Non-Producing 163 148 41,052 37,613
Proved Undeveloped 2,711 2,027 234,358 210,995
Total Proved Reserves 3,870 3,004 487,093 438,407
Total Probable Reserves 2,608 1,996 342,272 307,951
Total Proved Plus Probable Reserves 6,479 5,000 829,365 746,357

Natural Gas Total Oil
Liquids Equivalent

Company Company
Company Net of Company Net of
Gross Royalty Gross Royalty
Reserves Category (mbbls) (mbbls) (mboes) (mboes)
--------------------------------------

Proved Developed Producing 2,635 1,859 38,912 34,321
Proved Developed Non-Producing 526 419 7,532 6,837
Proved Undeveloped 4,801 3,929 46,571 41,121
Total Proved Reserves 7,962 6,207 93,015 82,279
Total Probable Reserves 5,512 4,263 65,166 57,584
Total Proved Plus Probable Reserves 13,474 10,470 158,181 139,863


Net Present Values Of Future Net Revenue ($000s)


Before Future Income Taxes Discounted At (%/year)
Reserves Category 0% 5% 10% 15% 20%
-----------------------------------------------------
Proved Developed
Producing 991,358 741,506 594,602 498,869 431,776
Proved Developed
Non-Producing 153,521 115,496 91,923 76,046 64,681
Proved Undeveloped 929,038 564,329 359,676 233,205 149,223
Total Proved Reserves 2,073,916 1,421,331 1,046,201 808,119 645,679
Total Probable
Reserves 1,824,046 911,450 526,287 330,748 218,071
Total Proved Plus
Probable Reserves 3,897,963 2,332,781 1,572,488 1,138,867 863,750


Unit Value Before
Income
Tax Discounted at
10%/year
Reserves Category ($/boe) ($/Mcfe)
-----------------------
Proved Developed Producing 17.32 2.89
Proved Developed Non-Producing 13.45 2.24
Proved Undeveloped 8.75 1.46
Total Proved Reserves 12.72 2.12
Total Probable Reserves 9.14 1.52
Total Proved Plus Probable Reserves 11.24 1.87


Net Present Values Of Future Net Revenue ($000s)
After Future Income Taxes Discounted at (%/year)
Reserves Category 0% 5% 10% 15% 20%
--------------------------------------------------
Proved Developed Producing 991,358 741,506 594,602 498,869 431,776
Proved Developed
Non-Producing 153,521 115,496 91,923 76,046 64,681
Proved Undeveloped 780,176 484,601 313,798 205,301 131,495
Total Proved Reserves 1,925,054 1,341,603 1,000,323 780,216 627,952
Total Probable Reserves 1,368,383 679,952 388,518 240,369 154,912
Total Proved Plus Probable
Reserves 3,293,438 2,021,555 1,388,841 1,020,585 782,864

Total Future Net Revenue ($000s)
(Undiscounted)
As of December 31, 2010
Forecast Prices and Costs

Operating Development
Reserves Category Revenue Royalties Costs Costs
----------------------------------------------
Proved Developed Producing 1,706,099 216,821 468,674 5,920
Proved Developed Non-Producing 298,155 27,332 87,744 26,962
Proved Undeveloped 2,286,336 290,769 475,564 576,921
Total Proved Reserves 4,290,590 534,922 1,031,982 609,803
Total Probable Reserves 3,658,885 446,217 957,942 408,652
Total Proved Plus Probable
Reserves 7,949,475 981,139 1,989,924 1,018,455


Future Net
Revenue
Before Future Net
Abandonment Deducting Revenue
and Future Future After Future
Reclamation Income Income Income
Reserves Category Costs Taxes Taxes Taxes
------------------------------------------------
Proved Developed Producing 23,325 991,358 - 991,358
Proved Developed
Non-Producing 2,597 153,521 - 153,521
Proved Undeveloped 14,044 929,038 148,862 780,176
Total Proved Reserves 39,966 2,073,916 148,862 1,925,054
Total Probable Reserves 22,028 1,824,046 455,663 1,368,383
Total Proved Plus Probable
Reserves 61,994 3,897,963 604,525 3,293,438

Crude Oil & Natural Gas Liquids
Price Forecast
As of January 1, 2011

Bank of
Canada Avg. Edmonton
Noon WTI Par Price
Exchange Cushing 40 degrees
Year Inflation Rate Oklahoma API
% $US/$Cdn $US/bbl $Cdn/bbl
----------------------------------------------
2011 Full Year 2.00 0.980 88.00 86.22
2012 2.00 0.980 89.00 89.29
2013 2.00 0.980 90.00 90.92
2014 2.00 0.980 92.00 92.96
2015 2.00 0.980 95.17 96.19
2016 2.00 0.980 97.55 98.62
2017 2.00 0.980 100.26 101.39
2018 2.00 0.980 102.74 103.92
2019 2.00 0.980 105.45 106.68
2020 2.00 0.980 107.56 108.84
2021+ 2.00 0.980 +2.0%/yr +2.0%/yr

Alberta Natural Gas Liquids

Edmonton
Edmonton Edmonton Pentanes
Year Propane Butane Plus
$Cdn/bbl $Cdn/bbl $Cdn/bbl
----------------------------------------
2011 Full Year 54.32 67.26 90.54
2012 56.25 68.75 91.96
2013 57.28 70.01 92.74
2014 58.56 71.58 94.82
2015 60.60 74.07 98.12
2016 62.13 75.94 100.59
2017 63.87 78.07 103.42
2018 65.47 80.02 106.00
2019 67.21 82.15 108.82
2020 68.57 83.80 111.01
2021+ +2.0%/yr +2.0%/yr +2.0%/yr


Natural Gas
Price Forecast
As of January 1, 2011

Midwest AECO/NIT
Year Nymex @Chicago Spot Sumas Spot
$US/mmbtu $US/mmbtu $Cdn/mmbtu $US/mmbtu
---------------------------------------------------------
2011 Full Year 4.50 4.60 4.16 4.25
2012 5.15 5.25 4.74 4.85
2013 5.75 5.85 5.31 5.40
2014 6.25 6.35 5.77 5.90
2015 6.75 6.85 6.22 6.40
2016 7.10 7.20 6.53 6.75
2017 7.32 7.42 6.76 6.97
2018 7.47 7.57 6.90 7.12
2019 7.62 7.72 7.06 7.27
2020 7.77 7.87 7.21 7.42
2021+ +2.0%/yr +2.0%/yr +2.0%/yr +2.0%/yr


FD&A FD&A F&D F&D
Including Excluding Including Excluding
Changes in Changes in Changes in Changes in
FDC FDC FDC FDC
$/BOE $/BOE $/BOE $/BOE
---------------------------------------------------------
Proved $ 21.50 $ 15.61 $ 19.48 $ 14.78
Proved Plus
Probable $ 15.55 $ 9.58 $ 14.19 $ 11.02


Oil and Gas and Financial Information Advisories

The reserve data provided in this news release is based on independent reserve evaluations conducted by GLJ Petroleum Consultants Ltd. and AJM Petroleum Consultants, effective December 31, 2010. The full GLJ January 1, 2011 price forecast used in the reserve evaluations is available on their website at www.gljpc.com. The reserve data provided in this news release presents only a portion of the disclosure required under National Instrument 51-101. All of the required information will be contained in the Company's Annual Information Form for the year ended December 31, 2010, which will be filed on SEDAR (accessible at www.sedar.com) on or before March 31, 2011.

Unless otherwise indicated, the reserves information set forth in this news release are "company interest" reserves. "Company interest" means, in relation to Tourmaline's interest in reserves, its working interest (operating or non-operating) share before deduction of royalties. Investors are cautioned that "company interest" reserves should not be construed as an alternative to "gross" or "net" reserves calculated in accordance with NI 51-101 and does not have a standardized meaning under this instrument.

Certain financial and operating results included in this news release such as finding, development and acquisition costs, production information and operating costs are based on unaudited estimated results. These estimated results are subject to change upon completion of the audited financial statements for the year ended December 31, 2010, and changes could be material. Tourmaline anticipates filing its audited financial statements and related management's discussion and analysis for the year ended December 31, 2010 on SEDAR on or about March 24, 2011.

Per share reserve information is based on the total common shares outstanding at year end 2010 and 2009, respectively.

Certain natural gas volumes have been converted to boes on the basis of 6 mcf of natural gas to one barrel ("bbl") of crude oil. Boes may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf: 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

The aggregate of the exploration and development costs incurred in the most recent financial year and the change during that year in estimated future development costs generally will not reflect total finding and development costs related to reserves additions for that year.



Definitions:
2P Proved Plus Probable
boe barrel of oil equivalent
boepd barrel of oil equivalent per day
bopd barrel of oil, condensate or liquids per day
mbbls thousand barrels
mcf thousand cubic feet
mmbtu millions of British thermal units
mmboe millions of barrel of oil equivalent
mmcfpd million cubic feet per day


About Tourmaline Oil Corp.

Tourmaline is a Canadian intermediate crude oil and natural gas exploration and production company focused on long-term growth through an aggressive exploration, development, production and acquisition program in the Western Canadian Sedimentary Basin.

Forward-Looking Statements

This news release contains forward-looking information that involves known and unknown risks and uncertainties, most of which are beyond the control of Tourmaline, including, without limitation, those listed under "Risk Factors" and "Forward-Looking Statements" in Tourmaline's final prospectus dated November 15, 2010, a copy of which is available on the SEDAR website at www.sedar.com. All information other than information of historical fact is forward-looking information. The use of any of the words "anticipate", "plan", "contemplate", "continue", "estimate", "expect", "intend", "propose", "might", "may", "will", "shall", "project", "should", "could", "would", "believe", "predict", "forecast", "pursue", "potential" and "capable" and similar expressions are intended to identify forward-looking information. In addition, information relating to reserves is deemed to be forward looking information, as it involves the implied assessment, based on certain estimates and assumptions, that the reserves described can be profitably produced in the future. Forward-looking information in this news release includes, but is not limited to, information concerning the proposed use of proceeds from the Company's initial public offering and concurrent and subsequent private placements, Tourmaline's 2011 capital exploration and development program and the Company's anticipated production levels in 2011. With respect to forward-looking information contained in this news release, Tourmaline has made assumptions regarding: future commodity prices and exchange rates; timing, amount and sufficiency of planned capital expenditures; the impact of competition; general economic and financial market conditions; availability and cost of skilled labour and services; effects of regulation; royalty regimes; operating costs; future well production rates; reserve and resource volumes; the performance of existing wells; the success obtained in drilling new wells; and the receipt, in a timely manner, of regulatory and other approvals. Should one or more of the forgoing risks or uncertainties materialize, or should assumptions underlying the forward-looking information prove incorrect, actual results, performance or achievements could vary materially from those expressed or implied by the forward-looking information. Accordingly, prospective investors should not place undue reliance on these forward-looking statements. These forward-looking statements are made as of the date of this release and, other than as required by applicable securities laws, Tourmaline does not assume any obligation to update or revise them to reflect new events or circumstances.

Contact Information

  • Tourmaline Oil Corp.
    Michael Rose
    Chairman, President and Chief Executive Officer
    (403) 266-5992
    or
    Tourmaline Oil Corp.
    Brian Robinson
    Vice President, Finance and Chief Financial Officer
    (403) 767-3587
    robinson@tourmalineoil.com
    or
    Tourmaline Oil Corp.
    Scott Kirker
    Secretary and General Counsel
    (403) 767-3593
    kirker@tourmalineoil.com
    or
    Tourmaline Oil Corp.
    Suite 3700, 250 - 6th Avenue S.W.
    Calgary, Alberta T2P 3H7
    (403) 266-5992
    (403) 266-5952 (FAX)