Release Date: July 30, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Tourmaline Oil Corp TRMLF generated $192 million in free cash flow in Q2 2026, with cash flow of $786 million.
- Well performance improved significantly, with Northeast BC Montney wells up 28% and Alberta Deep Basin up 14% over prior 5-year averages.
- The company entered a long-term agreement to increase propane and butane exports through the Ridley Island Energy Export facility, enhancing LPG margins by 55%.
- Net debt was reduced to $1.5 billion, below the long-term target of $1.75 billion, and operating costs decreased 10% year-over-year to $4.59 per BOE.
- A 1-year pause between Phase 1 and Phase 2 of the BC infrastructure buildout is expected to boost free cash flow and shareholder returns in 2027-2028.
Negative Points
- Q2 2026 production of 594,000 BOEs per day was slightly below the guidance range of 595,000-605,000 BOEs per day due to storage injections and price-related shut-ins.
- Low natural gas prices in Q2 2026 led to deferred activity, with 67 wells ready to frac and 21 wells to turn in line awaiting better pricing.
- The company faces uncertainty in global natural gas supply-demand dynamics, which could impact the timing of Phase 2 of the BC buildout.
- Liquids production mix may temporarily decline due to slower activity, though it is expected to recover in the fall.
- The data center opportunity remains in early stages with no firm announcements, and such projects are complex and capital-intensive, posing execution risks.
Q & A Highlights
Q: What drove the decision to pause between Phase 1 and Phase 2 of the Northeast BC infrastructure build-out, and how will the saved cash be allocated between reinvestment and shareholder returns?
A: Mike Rose, CEO: The pause allows shareholders to realize the full operational benefits and free cash flow growth from Phase 1, which includes two new plants and already visible OpEx and transportation cost reductions. It balances growth with shareholder returns. We will continue planning Phase 2 but won't make significant capital investments until mid-2027. If there is a 3-year sustained improvement in natural gas prices to $4-$5, we could rethink the pause. Jamie Heard, VP Capital Markets: We are also monitoring demand announcements for new LNG plants, power projects in Alberta, and data center build-outs. The ethos is to let demand pull gas and increase price before we respond with supply.
Q: What is the outlook for AECO gas pricing, and do you have confidence that peers will show discipline to allow demand to pull price?
A: Mike Rose, CEO: California led the complex down in H1 2026 due to a warm winter and record hydro, but it is now leading the complex back up with heat and storage withdrawals. We expect AECO and Station 2 to follow California prices up as GTN maintenance ends. Local supply has remained disciplined, with no major push of supply growth. We do not expect a very full storage picture at the end of the injection season. We see a continuing tightening picture for AECO, and the long-term basis needs to get closer to $1 versus the $1.50-$1.75 seen today. For Tourmaline, a $1 improvement on AECO equates to roughly $0.5 billion of free cash flow.
Q: Can you provide more color on the improvement in well performance and capital efficiency, and whether this could translate to lower capital requirements in the future?
A: Jamie Heard, VP Capital Markets: The remarkable improvement over the 5-year average is due to higher completion intensity, longer laterals, and learnings from machine learning on landing and completion optimization. We have maintained flat or lower capital costs per foot while doing more work per well. We expect OFS costs to come down slightly this year and hope to lower them again next year. These efficiencies have allowed us to put fewer wells on production while maintaining our production profile, thus reducing CapEx. As these results soak into our reserves, you will see commensurate improvements in forward plan efficiencies, driving higher free cash flow.
Q: Given the equity price and the shift to a demand-pull growth model, are you considering being more aggressive with share buybacks (NCIB) for capital returns?
A: Mike Rose, CEO: At current $2 AECO gas, we can cover maintenance capital, growth capital for 2026/27, and the base dividend, with little free cash flow left over. We expect this to change rapidly. Priority 1 for shareholder returns would be a base dividend increase when we have enough free cash flow on a sustained outlook. As free cash flow accretes, we will look at the full gamut of shareholder return options.
Q: Can you talk about the power or data center opportunity for Tourmaline and what it could look like?
A: Mike Rose, CEO: We are not going to build the data center itself. We see it as a gas market diversification opportunity, seeking a gas supply deal with pricing that reflects reliability, land, water, power, and low CI gas. We are over a year into trying to co-locate with a hyper-scaler at our Banshee plant near Edson. Jamie Heard, VP Capital Markets: Our confidence in being able to build a project is increasing. These projects are complex and take time, but when we get it across the line, it will be a big win for Tourmaline.
Q: What is the outlook for liquids and condensate production for 2026, especially with the updated guidance?
A: Jamie Heard, VP Capital Markets: Well results show a 26% upside and strong upticks on liquids. Slowing down activity causes a slight decrease in liquids relative to gas due to higher decline rates. This will come back in the fall as we turn drilled and completed wells in line, ramping the liquids mix. Condensate is a big part of the NEBC buildout, with rich condensate wells contributing to the Aiken and Groundbirch plant startups. Mike Rose, CEO: We are seeing potential for strength in condensate pricing with oil sands build-outs, which also creates new gas demand (0.7 Bcf of gas per million barrels of additional oil sands production).
Q: What type of capital commitments would Tourmaline have for a data center project, and how would the Emerald entity be capitalized?
A: Mike Rose, CEO: It is a low capital commitment from Tourmaline. Our mantra is just gas diversification. There may be opportunities on the power side, but we are keen to help move the gas demand sleeve from data centers along in Alberta. We believe it could be up to 1 Bcf a day of incremental in-basin demand.
Q: What is your outlook for the Ksi Lisims LNG project, and are you more confident in executing a bilateral arrangement for JKM-linked pricing?
A: Mike Rose, CEO: We hope Ksi Lisims goes ahead and that we can be a supplier to that pipeline. Jamie Heard, VP Capital Markets: We like access to international pricing like JKM or TTF and are willing to pay a fixed deduction for shipping and liquefaction costs. We are in some of the lowest-cost LNG facilities globally. For West Coast opportunities, we seek to replicate our Gulf Coast strategy on a similar contract style, as they have a shipping cost advantage.
Q: For long-term LNG agreements, would you look for a locked-in fixed price or variability around international benchmarks?
A: Jamie Heard, VP Capital Markets: We like access to international pricing like JKM or TTF and are willing to pay a fixed deduction below those prices. The deductions are based on shipping and liquefaction costs. We are in some of the lowest-cost LNG facilities globally, which allows us to make money through the entire LNG price cycle. For West Coast opportunities, we are looking under the same lens to blend down liquefaction costs to a competitive level.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
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