Tourmaline Oil Corp.

Scott Kirker - Secretary and General Counsel Mike Rose - Director and Chairman, President and Chief Executive Officer

Thanks, Elena. Welcome everyone to our discussion of Tourmaline's 2015 Q1 results.

My name is Scott Kirker and I am the Secretary and General Counsel for Tourmaline. Before we get started, I refer you to the advisory on forward-looking statements contained in the news release as well as the advisories contained in the Tourmaline Annual Information Form available on SEDAR.

I would like to draw your attention in particular to the material factors and assumptions in those advisories. I am here with Mike Rose, our President and Chief Executive Officer and with Brian Robinson, our Vice President of Finance and Chief Financial Officer.

Mike Rose will start by speaking to some of the highlights and after his remarks, we will all be available for questions. Mike, please go ahead.

Hi. Good morning, everybody.

Thanks for attending the conference call and we are very pleased to go through Q1 and update you on our ongoing EP program. Tourmaline continues to grow at a significant pace in a difficult commodity price environment and maintain an industry-leading balance sheet position.

We had record average production of 143,725 BOE per day in the first quarter of 2015 and that was up 40% year-over-year and most importantly, up 10% over the previous quarter. We had record oil and condensate in NGL production levels in Q1 and liquids production has subsequently exceeded the 20,000 barrel per day level during April.

Our current production range is 150,000 to 157,000 BOE per day and so the strong sequential quarterly growth is continuing and we remain on track to exceed average production of 164,500 BOE per day or greater in 2015, which would be up 46% from 2014. So we think we figure that's probably leading the sector.

We actually had earnings in Q1. We think, in the end when everything is out there, we will be one of the very few companies that does post positive earnings, $22 million on cash flow of $207 million and it does underscore the profitability of the company's assets even in these challenging commodity price environments.

Our total cash costs, so that includes OpEx, transportation, G&A and financing, for the first quarter of 2015 were just over $8 per BOE, again amongst the lowest in industry and we expect these to continue to draw through the course of the year. And we also had some very exciting EP results throughout the portfolio and I will elaborate on those in a moment.

As mentioned, our current production is ranging between 152,000 and 157,000 BOE per day and we will meet or exceed our original production target for the year. Q1 production was reduced by approximately 4,500 BOE per day due to transportation issues on the three pipeline systems that we access and we expect these restrictions to continue going forward.

Bear in mind that the vast majority of Tourmaline production, like over 98% of it, moves on firm transportation arrangements. So the overall impact on the company is minimal.

Moving to the financial update. We are forecasting full-year 2015 cash flow of $1.06 billion and preliminary 2016 cash flow of 1.36 billion, if you are aware of the commodity prices that we use in those forecasts.

We are anticipating an exit 2015 debt to cash flow of 1.14 times. So as mentioned, the extremely strong balance sheet remains in place.

We also have significant unused credit capacity through our existing means of credit right now. Looking at the EP program.

We are currently operating just one rig through break-up and that's in North East BC. Our additional 15 rigs have already been moved to their next locations throughout the three core areas and we expect a resume EP operations in mid-to-late June.

And essentially all the drilling will focus on multiwell pads in previously identified high deliverability sweet spots. And we are expecting that to lead to extremely strong capital efficiencies this year.

In the Alberta Deep Basin, we reached the 100,000 BOE per day production milestone late in March. Our very strong drilling and completion results continued through the first quarter of 2015.

Our 30 day IP rates outperformed the base type curve by a factor of 2, or roughly 10 million a day versus 5 million a day which is what we use in all of our forecasting materials. In 2015, we will continue to focus on previously identified Wilrich sweet spot and Notikewin sweet spots throughout the Deep Basin.

We are especially pleased with our Wilrich results in the greater Smoky-Horse area as we drilled and completed 16 Wilrich horizontals in that sub-area during this past winter season and the combined 30 day average IPs were over 10 million per day there. And this is a big sweet spot with over 100 future Wilrich locations.

So we expect this area to be a major growth area for the company over the next couple of years. Our industry-leading well results are a combination of subsurface horizontal location identification and the application of continuously improving completion technology and we continue to modify our completion programs to increase per well deliverability and I think you are seeing that in the first quarter.

We also acquired two additional 3D seismic programs in the first quarter to further hydrate some of these upcoming sweet spot locations as well as to expand the overall future drilling inventory at multiple different horizons. At Columbia-Harlech at the southeast end of our Deep Basin asset, we believe we have drilled the highest deliverability Notikewin, Wilrich and Falher horizontals to date by industry which sets up an extensive 2016, 2017 development and also brings with it significant drilling inventory expansion.

These three particular horizontal wells tested at rates of over 15 million per day with fairly impressive liquid rates in excess of 30 barrels per million. So we plan follow-up locations to these three wells during the second half of this year and they will set up our gas plant in the first half of 2016, which we will now upsize.

We have over 300 sections of essentially contiguous land in the Columbia-Harlech area and by 2017, 2018 it will be a major producing complex for the company. Our first Triassic Montney horizontal in the greater Smoky area had a 30-day IP of 8.4 million.

It was sweet gas. It produced 12 to 15 barrels per million of condensate at the wellhead.

So total liquids will be greater than that, once it goes through the plant or when it's going through the plant. And these strong results, coupled with the first quarter crown sale additions and the previously announced Edson consolidation has lead to a significant increase in the existing Deep Basin future drilling inventory.

Thus far in 2015, we have added 63.5 sections of new land in the Deep Basin for very little capital exposure. Moving to North East BC Montney gas condensate.

Current production from our North East BC complex is in excess of 44,000 BOE a day. And it will remain at those levels through 2015 until we re-expand facilities in 2016.

We plan to operate two drilling rigs in the complex through to year-end. We are very excited about our Q1 drilling results.

We have drilled our highest-deliverability Montney wells to date in the first quarter, 30 day IPs from specific Upper and Middle Montney wells on the most recent pads have averaged 17.5 million per day. So a significant increase over previous wells.

We have also been able to systematically reduce our EP capital well costs. So drill, complete and stimulate costs for these BC Montney horizontals has been consistently reduced to $3.8 million, which is a 20% reduction from 2014.

On the Peace River High, we will continue to operate three rigs after break-up through to the end of 2015. The construction of our 24,000 barrel per day Mulligan battery is proceeding on schedule and will be completed early in the Q3 of this year and that will continue the downward trend in operating costs for the whole complex.

And with the completion of the battery, we expect the OpEx to be in the $10 to $11 per BOE, which will be amongst the lowest for North American oil plays. We have had a big capital cost reduction win here as well.

Our horizontal drill, complete and stimulate costs for the Charlie Lake horizontals has been reduced by approximately 25%, now down to $3.5 million. And our consolidation of the regional play continued and we are doing that during this more difficult commodity environment.

We acquired an additional 132 sections on the regional Charlie Lake pool that adds approximately 220 locations and we did all that for under $10 million. And looking at our 2015 capital program.

Q1 expenditures were $497 million and included in the press release is the breakdown. In Q2, we are expecting CapEx of $100 million.

So midyear capital spending will be about $600 million which is exactly half of the $1.2 billion budget. So definitely on track and bear in mind, the Q2 CapEx will be significantly less than Q2 2015 cash flow.

The impact of reduced EP service costs that we are currently experiencing has not been factored into our current budget estimate. So there is wind down the road on that as well.

And finally, we continue to maintain a very strong balance sheet. Our current debt to cash flow using our forecast cash flow of $1.06 billion is 1.3 times and we are expecting a 2015 exit debt to cash flow of 1.1 times.

So that's all I was going to say during the conference piece and so we are more than welcome to take questions.

Thanks, Elena. Thanks everyone for attending.

We will see you again next quarter.