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Tourmaline Oil Corp. Reports Q3 2012 Financial Results


INCREASES 2012 EXIT AND 2013 PRODUCTION GUIDANCE AND EXPANDS CAPITAL PROGRAM

CALGARY, Nov. 8, 2012 /CNW/ - Tourmaline Oil Corp. (TSX:TOU) ("Tourmaline" or the "Company") is pleased to report strong Q3 2012 results and increased production guidance for exit 2012 and 2013.  The Company has embarked upon an accelerated growth plan in all three core-operated areas through an expanded 2H 2012/2013 EP capital program and complementary accretive acquisitions.

Q3 2012 Highlights


    --  Previous 2012 exit production guidance levels achieved in
        October
    --  2013 average production guidance increased to 75,000 boepd
        including announced acquisitions
    --  2012 exit production guidance increased to 63,000 - 65,000
        boepd
    --  2012 and 2013 EP capital programs increased
    --  Complementary acquisitions in two of the Company's three
        core-operated areas that are expected to close prior to year
        end
    --  Third quarter 2012 operating costs of $3.66/boe
    --  Musreau Alberta plant expansion completed in September
    --  Several successful Spirit River Charlie Lake pool expansion
        horizontals completed

Production Update

Production levels have reached the Company's previously upwards-revised 2012 
exit guidance levels of 55,000 - 56,500 boepd. These production levels do not 
include production associated with the announced acquisitions. The Company 
remains on track to achieve full-year 2012 average production in excess of 
50,000 boepd; guidance for the year was increased during Q1 2012 from 47,000 
to 50,000 boepd.

Third quarter production of 48,175 boepd represented an increase of 40% over 
third quarter 2011 production of 34,347 boepd. Third quarter production was 
negatively impacted primarily by facility-related unscheduled down-time at 
Spirit River, Alberta and Sunrise, B.C.  Sour-associated gas handling issues 
resulted in liquid production losses at Spirit River of approximately 900 bpd 
for the quarter. At Sunrise, an equipment failure in the refrigeration plant 
resulted in approximately 500 boepd of production losses. The Sunrise plant 
disruption was remedied during the third quarter and was a one-time equipment 
issue; the Spirit River gas-handling issues are being remedied by a gas 
facility expansion that is already underway and expected to be completed 
during the first quarter of 2013. Weather delayed tie-in of several wells 
throughout the EP portfolio during the third quarter. Third quarter production 
was positively impacted by the completion of the Musreau plant expansion in 
the second half of September, which has allowed the Company to meet 2012 exit 
production guidance ahead of schedule. Assuming closing of the Huron and Deep 
Basin acquisitions prior to year end, the 2012 exit production estimate has 
been increased to 63,000 - 65,000 boepd.

The Company is now estimating 2013 average production of 75,000 boepd, 
including the impact of the Huron acquisition, which is anticipated to close 
in late November 2012, and the Deep Basin asset acquisition that closed on 
November 7, 2012.

Cost Structure

Third quarter operating costs of $3.66 /boe were significantly lower than 
forecast - 24% lower than Q2 2012 costs of $4.83/boe and 37% lower than third 
quarter of 2011.

Third quarter cash G&A per boe costs were $0.79/boe, a 16% reduction from 
third quarter 2011, and amongst the lowest in the industry. The Company will 
continue the focus on reducing costs in all aspects of its EP business.

Capital Programs

The 2H 2012 capital program was expanded in conjunction with the equity 
financing in August. The ongoing drilling program was expanded from six to 
eight rigs in July and new facility projects were initiated in the third 
quarter, primarily at Spirit River and Sunrise-Dawson. Outside operated 
drilling in the Alberta Deep Basin also accelerated with six additional 
horizontals drilled and/or completed in the third quarter. Full year EP 
capital spending of $525.0 million is expected, not including acquisitions. 
The Company is planning to run an eight-to-nine rig program through until 
spring break-up 2013. Year end 2012 debt of $353.1 million is currently 
anticipated, including the Deep Basin acquisition for cash and assumption of 
Huron Energy's net debt (approximately $24 MM). This overall net debt level 
equates to 0.80 times annualized, anticipated Q4 2012 cash flow or 0.55 times 
anticipated 2013 cash flows.

2013 Capital Budget

A $650.0 million EP capital program is planned for 2013 - an increase from the 
earlier preliminary 2013 budget estimates of $575.0 million. $485.0 million is 
planned for drilling and completion activity in 2013, yielding an approximate 
total of 115 wells (100 horizontals, 15 verticals) throughout existing core EP 
areas. 2013 facilities and infrastructure spending of $115 million is 
anticipated, including completion of new facilities at Spirit River, Alberta 
and Doe, B.C.  Additional 2013 facilities projects include a 50 mmcfpd 
capacity expansion in the Alberta Deep Basin in 2H 2013 as well as two major 
gas pipeline laterals in the Deep Basin further expanding the extent of 
Tourmaline's gas processing and transportation network.

The $650.0 million 2013 capital program compares to anticipated 2013 cash 
flows of $636.7 million, based on average 2013 production levels of 75,000 
boepd and an assumed gas price of $3.86/mcf AECO and an average Edmonton par 
oil price of $90.00/bbl.

Tourmaline has been seeking to divest its Elmworth/Wapiti Alberta Montney 
assets and anticipates consummating a transaction in the first quarter of 
2013.  Proceeds from the potential disposition would be utilized for either 
additional acquisitions, a further 2013 EP capital program expansion or for 
balance sheet strengthening, depending upon the commodity price outlook at 
that time.

EP Program Overview

Tourmaline has embarked upon an accelerated growth plan for all three core 
areas through an expanded EP capital program and complementary acquisitions. 
The Company has accelerated and expanded its 2H 2012 EP program in response to 
additional available funds raised during the third quarter and an improving 
natural gas price environment.

The operated-rig count was increased to eight rigs, with six rigs currently 
drilling in the Alberta Deep Basin, one rig operating at Spirit River and one 
rig operating in the NEBC Montney complex.

Alberta Deep Basin

The Musreau gas plant expansion was completed in September, bringing operated 
production in the immediate area to 50 mmcfpd and total current Company 
production in the Deep Basin to approximately 230 mmcfpd. The Company has an 
additional 55 mmcfpd of production to bring on-stream from wells already 
completed, tested and shut-in.

Tourmaline is currently operating six drilling rigs in the Deep Basin, five of 
which are pursuing horizontal targets in the Wilrich, Notikewin, and Falher 
formations. The Company has targeted 25 - 30 new Wilrich horizontals to be 
drilled, completed and on-stream between July 2012 and April 2013 via the 
ongoing EP program. The three most recent Wilrich horizontal wells at 
Minehead, Ansel and Sundance tested at final production rates of 24.5 mmcfpd @ 
24.3 MPa, 23.4 mmcfpd @ 23.1 MPa, and 15.1 mmcfpd @ 14.6 MPa, respectively, on 
three-day tests.((1)) All three will be tied in by year end 2012 or early in 
2013.

The Company has entered into an agreement to acquire all the assets of a 
private company in the Wild River area of the Alberta Deep Basin. The assets 
include approximately 3,000 boepd of existing production, a portion of which 
is already operated by Tourmaline, the remaining 30% joint interest in the 
Wild River gas plant, two drilled but uncompleted horizontal wells and a 
significant complementary land and development drilling inventory. The $84.1 
million cash acquisition closed on November 7, 2012.

NEBC Montney

Current production at Sunrise-Dawson is 70 - 75 mmcfpd through the existing 
Tourmaline infrastructure, with an additional 90 mmcfpd completed, tested and 
currently shut-in. The second Tourmaline gas plant at Doe, with a planned 
capacity of 50 mmcfpd, is scheduled for an early April 2013 completion. 
Start-up of this plant, along with closing of the previously announced Huron 
acquisition, is anticipated to bring Company interest NEBC production to 
approximately 30,000 boepd.

Tourmaline is currently operating one drilling rig in NEBC, focussing on the 
highest liquid content gas targets within the vertically stacked series of 
Triassic Montney turbidite lobes. Condensate and NGL rates as high as 60 
bbls/mm have been encountered in new turbidite lobes currently being 
delineated. Drilling and completion capital costs continue to trend downward; 
completed well costs averaged $3.55 million (drill, complete and stimulate) on 
the most recent Dawson four-well Montney pad.

((1)) Production tests are not necessarily indicative of long-term performance 
or ultimate recovery.

Tourmaline is currently planning to employ a second drilling rig in NEBC to 
further delineate the Huron assets in 2013. These assets will provide 
Tourmaline with a significant increase in future liquid-rich Montney lands and 
horizontal drilling targets. Huron has also constructed significant 
complementary infrastructure in the adjoining Montney play areas that can be 
utilized to rapidly bring existing and new production volumes on-stream.

Spirit River

The main emphasis of the 2H 2012 Spirit River drilling program is to delineate 
the significant Charlie Lake pool expansion potential. The Company now 
believes that the original Triassic Charlie Lake oil accumulation is 
substantially larger than originally estimated. Thus far in the second half of 
2012, five new successful horizontals have been drilled in these peripheral 
areas East and South of the original pool. Three of these horizontals have 
been on production for 14 days or longer, with current oil rates of 174, 417 
and 474 bpd, respectively, and total current hydrocarbon production rates of 
432, 492 and 619 boepd, respectively, including associated gas production. The 
Company is planning to have a total of eight pool expansion delineation 
horizontals drilled, completed and producing by year end 2012. The future 
horizontal drilling inventory at Spirit River is now in excess of 200 
locations, as the property grows into a stand-alone third core operating 
complex for the Company.

Current production rates at Spirit River are constrained by limitations within 
the existing gas handling infrastructure. This has resulted in lower total 
Spirit River pool volumes than originally expected for the second half of 2012 
and the first quarter of 2013. These constraints on both oil and total 
production rates are being addressed by a gas facility expansion that will 
increase gas handling capability from 16.0 to 40.0 mmcfpd, with an associated 
significant increase in oil and liquids production capability. This facility 
expansion was initiated in Q3 2012 and is expected to be completed in March 
2013. Current production volumes at Spirit River are 5,500 - 6,000 boepd 
(2,700 - 3,000 bpd oil, 15 - 16 mmcfpd gas) with additional shut-in volumes at 
Spirit River estimated at 3,500 boepd. The Spirit River gas has a hydrocarbon 
liquid content of up to 102 bbls/mm providing an attractive secondary liquid 
target that the Company will pursue in 2013.
                               

CORPORATE SUMMARY - THIRD QUARTER 2012                                                  
                                                                                        
               Three Months Ended September 30,           Nine Months Ended September 30,
                     2012         2011   Change            2012            2011   Change

OPERATIONS                                                                              

Production                                                                              

  Natural gas     255,451      185,414      38%         256,235         154,360      66%
  (mcf/d)

  Crude oil         5,600        3,444      63%           5,940           2,953     101%
  and NGL
  (bbls/d)

  Oil              48,175       34,347      40%          48,646          28,680      70%
  equivalent
  (boe/d)
                                                                                        

Product prices                                                                          
((1))

  Natural gas  $     2.52   $     4.25    (41)%   $        2.42   $        4.35    (44)%
  ($/mcf)

  Crude oil    $    83.34   $    87.01     (4)%   $       83.87   $       88.80     (6)%
  and NGL
  ($/bbl)
                                                                                        

Operating      $     3.66   $     5.77    (37)%   $        4.56   $        5.76    (21)%
expenses
($/boe)
                                                                                        

Transportation $     1.97   $     2.06     (4)%   $        1.87   $        1.99     (6)%
expenses
($/boe)
                                                                                        

Operating      $    15.68   $    21.21    (26)%   $       15.12   $       22.77    (34)%
netback
($/boe)
                                                                                        

Cash general & $     0.79   $     0.94    (16)%   $        0.79   $        1.10    (28)%
administrative
expenses( )
($/boe)((2))
                                                                                        
                                                                                        

Financial                                                                               
($000, except
per share)

Revenue           102,127      100,068       2%         306,726         255,048      20%

Royalties           7,641        8,313     (8)%          19,511          16,043      22%
                                                                                        

Funds from         63,515       62,686       1%         186,472         168,041      11%
operations

Funds from     $     0.38   $     0.40     (5)%   $        1.13   $        1.13       -%
operations per
share
                                                                                        

Net earnings      (4,770)        8,688   (155)%           (782)          26,607   (103)%
(loss)

Net earnings   $   (0.03)   $     0.06   (150)%   $      (0.00)   $        0.18   (100)%
(loss) per
share
                                                                                        

Capital           175,277      249,162    (30)%         445,532         596,789    (25)%
expenditures
                                                                                        

Weighted                                            164,854,721     148,999,440      11%
average shares
outstanding
(diluted)
                                                                                        

Net debt                                              (311,847)       (283,704)      10%
                                                                                 
                                                                                 

((1)  )Product prices include realized gains and losses on financial 
instrument contracts.
((2)  )Excluding interest and financing charges.

Forward-Looking Information

This press release contains forward-looking information within the meaning of 
applicable securities laws. The use of any of the words "expect", 
"anticipate", "continue", "estimate", "objective", "ongoing", "may", "will", 
"project", "should", "believe", "plans", "intends" and similar expressions are 
intended to identify forward-looking information. More particularly and 
without limitation, this press release contains forward-looking information 
concerning Tourmaline's anticipated petroleum and natural gas production, cash 
flows, net debt levels, capital efficiency and capital spending, projected 
operating costs, acquisition and disposition initiatives, the timing for 
facility expansions, as well as Tourmaline's future drilling prospects and 
plans, business strategy, future development and growth opportunities, 
prospects and asset base. The forward-looking information is based on certain 
key expectations and assumptions made by Tourmaline, including expectations 
and assumptions concerning: prevailing commodity prices and exchange rates; 
applicable royalty rates and tax laws; future well production rates and 
reserve volumes; the timing of receipt of regulatory approvals; the 
performance of existing wells; the success obtained in drilling new wells; the 
sufficiency of budgeted capital expenditures in carrying out planned 
activities; the successful completion of acquisition and dispositions; and the 
availability and cost of labour and services. Although Tourmaline believes 
that the expectations and assumptions on which such forward-looking 
information is based are reasonable, undue reliance should not be placed on 
the forward-looking information because Tourmaline can give no assurances that 
they will prove to be correct. Since forward-looking information addresses 
future events and conditions, by its very nature it involves inherent risks 
and uncertainties. Actual results could differ materially from those currently 
anticipated due to a number of factors and risks. These include, but are not 
limited to: the risks associated with the oil and gas industry in general such 
as operational risks in development, exploration and production; delays or 
changes in plans with respect to exploration or development projects or 
capital expenditures; the uncertainty of estimates and projections relating to 
reserves, production, costs and expenses; health, safety and environmental 
risks; commodity price and exchange rate fluctuations; marketing and 
transportation; loss of markets; environmental risks; competition; incorrect 
assessment of the value of acquisitions; failure to complete or realize the 
anticipated benefits of acquisitions or dispositions; ability to access 
sufficient capital from internal and external sources; failure to obtain 
required regulatory and other approvals; and changes in legislation, including 
but not limited to tax laws, royalties and environmental regulations.

Also included in this press release are estimates of Tourmaline's 2012 and 
2013 cash flows, which are based on the various assumptions as to production 
levels, capital expenditures, and other assumptions disclosed in this press 
release and including commodity price assumptions for natural gas (AECO - 
$2.43/mcf) (2012), $3.86/mcf (2013), and crude oil (WTI (US) - $94.65/bbl) 
(2012) and $95.00/bbl (2013) and an exchange rate assumption of $0.99 (US/CAD) 
for 2012 and $1.00 (US/CAD) for 2013. To the extent such estimate constitutes 
a financial outlook, it was approved by management and the Board of Directors 
of Tourmaline on November 7, 2012 and is included to provide readers with an 
understanding of Tourmaline's anticipated cash flow based on the capital 
expenditure and other assumptions described herein and readers are cautioned 
that the information may not be appropriate for other purposes.

Readers are cautioned that the foregoing list of factors is not exhaustive. 
Additional information on these and other factors that could affect 
Tourmaline, or its operations or financial results, are included in the 
Management's Discussion and Analysis forming part of this press release (See 
"Forward-Looking Statements" therein) and reports on file with applicable 
securities regulatory authorities and may be accessed through the SEDAR 
website (www.sedar.com) or Tourmaline's website (www.tourmalineoil.com).

The forward-looking information contained in this press release is made as of 
the date hereof and Tourmaline undertakes no obligation to update publicly or 
revise any forward-looking information, whether as a result of new 
information, future events or otherwise, unless expressly required by 
applicable securities laws.

Additional Reader Advisories

See also "Forward-Looking Statements", "Boe Conversions" and "Non-IFRS 
Financial Measures" in the attached Management's Discussion and Analysis.

"Funds from operations",  "operating netback" and "net debt" as used in this 
press release are financial measures commonly used in the oil and gas 
industry, which do not have any standardized meaning prescribed by 
International Financial Reporting Standards ("IFRS"). See "Non-IFRS Financial 
Measures" in the attached Management's Discussion and Analysis for the 
definition and description of these terms.

Certain Definitions:

bbls     barrels

boe      barrel of oil equivalent

boepd    barrel of oil equivalent per day

bopd     barrel of oil, condensate or liquids per day

gjsd     gigajoules per day

mmboe    millions of barrels of oil equivalent

mbbls    thousand barrels

mmcf     million cubic feet

mmcfpd   million cubic feet per day

mmcfpde  million cubic feet per day equivalent

mcfe     thousand cubic feet equivalent

mmbtu    million British thermal units
          

Conference Call Tomorrow at 9:00 a.m. MT (11:00 a.m. ET)

Tourmaline will host a conference call tomorrow, November 9, 2012 starting at 
9:00 a.m. MT (11:00 a.m. ET). To participate, please dial 1-888-231-8191 
(toll-free in North America), or local dial-in 647-427-7450, a few minutes 
prior to the conference call.

The conference call ID number is 61077869.

MANAGEMENT'S DISCUSSION AND ANALYSIS

This management's discussion and analysis ("MD&A") should be read in 
conjunction with Tourmaline's unaudited interim condensed consolidated 
financial statements and related notes for the three and nine months ended 
September 30, 2012 and the consolidated financial statements for the year 
ended December 31, 2011.  Both the consolidated financial statements and the 
MD&A can be found at www.sedar.com.  This MD&A is dated November 7, 2012.

The financial information contained herein has been prepared in accordance 
with International Financial Reporting Standards ("IFRS").  All dollar 
amounts are expressed in Canadian currency, unless otherwise noted.

Certain financial measures referred to in this MD&A are not prescribed by 
IFRS. See "Non-IFRS Financial Measures" for information regarding the 
following Non-IFRS financial measures used in this MD&A: "funds from 
operations", "operating netback", "working capital (adjusted for the fair 
value of financial instruments)" and "net debt".

Additional information relating to Tourmaline can be found at www.sedar.com.

Forward-Looking Statements - Certain information regarding Tourmaline set 
forth in this document, including management's assessment of the Company's 
future plans and operations, contains forward-looking statements that involve 
substantial known and unknown risks and uncertainties. The use of any of the 
words "anticipate", "continue", "estimate", "expect", "may", "will", 
"project", "should", "believe" and similar expressions are intended to 
identify forward-looking statements. Such statements represent Tourmaline's 
internal projections, estimates or beliefs concerning, among other things, an 
outlook on the estimated amounts and timing of capital investment, anticipated 
future debt, production, revenues or other expectations, beliefs, plans, 
objectives, assumptions, intentions or statements about future events or 
performance. These statements are only predictions and actual events or 
results may differ materially. Although Tourmaline believes that the 
expectations reflected in the forward-looking statements are reasonable, it 
cannot guarantee future results, levels of activity, performance or 
achievement since such expectations are inherently subject to significant 
business, economic, competitive, political and social uncertainties and 
contingencies. Many factors could cause Tourmaline's actual results to differ 
materially from those expressed or implied in any forward-looking statements 
made by, or on behalf of, Tourmaline.

In particular, forward-looking statements included in this MD&A include, but 
are not limited to, statements with respect to: the size of, and future net 
revenues from, crude oil, NGL (natural gas liquids) and natural gas reserves; 
future prospects; the focus of and timing of capital expenditures; 
expectations regarding the ability to raise capital and to continually add to 
reserves through acquisitions and development; access to debt and equity 
markets; projections of market prices and costs; the performance 
characteristics of the Company's crude oil, NGL and natural gas properties; 
crude oil, NGL and natural gas production levels and product mix; Tourmaline's 
future operating and financial results; capital investment programs; supply 
and demand for crude oil, NGL and natural gas; future royalty rates; drilling, 
development and completion plans and the results therefrom; future land 
expiries; dispositions and joint venture arrangements; amount of operating, 
transportation and general and administrative expenses; treatment under 
governmental regulatory regimes and tax laws; and estimated tax pool 
balances.  In addition, statements relating to "reserves" are deemed to be 
forward-looking statements, as they involve the implied assessment, based on 
certain estimates and assumptions, that the reserves described can be 
profitably produced in the future.

These forward-looking statements are subject to numerous risks and 
uncertainties, most of which are beyond the Company's control, including the 
impact of general economic conditions; volatility in market prices for crude 
oil, NGL and natural gas; industry conditions; currency fluctuation; 
imprecision of reserve estimates; liabilities inherent in crude oil and 
natural gas operations; environmental risks; incorrect assessments of the 
value of acquisitions and exploration and development programs; competition; 
the lack of availability of qualified personnel or management; changes in 
income tax laws or changes in tax laws and incentive programs relating to the 
oil and gas industry; hazards such as fire, explosion, blowouts, cratering, 
and spills, each of which could result in substantial damage to wells, 
production facilities, other property and the environment or in personal 
injury; stock market volatility; ability to access sufficient capital from 
internal and external sources; the receipt of applicable approvals; and the 
other risks considered under "Risk Factors" in Tourmaline's most recent annual 
information form available at www.sedar.com.

With respect to forward-looking statements contained in this MD&A, Tourmaline 
has made assumptions regarding: future commodity prices and royalty regimes; 
availability of skilled labour; timing and amount of capital expenditures; 
future exchange rates; the impact of increasing competition; conditions in 
general economic and financial markets; availability of drilling and related 
equipment and services; effects of regulation by governmental agencies; and 
future operating costs.

Management has included the above summary of assumptions and risks related to 
forward-looking information provided in this MD&A in order to provide 
shareholders with a more complete perspective on Tourmaline's future 
operations and such information may not be appropriate for other purposes.  
Tourmaline's actual results, performance or achievement could differ 
materially from those expressed in, or implied by, these forward-looking 
statements and, accordingly, no assurance can be given that any of the events 
anticipated by the forward-looking statements will transpire or occur, or if 
any of them do so, what benefits that the Company will derive therefrom.  
Readers are cautioned that the foregoing lists of factors are not exhaustive.

These forward-looking statements are made as of the date of this MD&A and the 
Company disclaims any intent or obligation to update publicly any 
forward-looking statements, whether as a result of new information, future 
events or results or otherwise, other than as required by applicable 
securities laws.

Boe Conversions - Per barrel of oil equivalent amounts have been calculated 
using a conversion rate of six thousand cubic feet of natural gas to one 
barrel of oil equivalent (6:1). Barrel of oil equivalents (Boe) 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.

PRODUCTION
                                                                            
                Three Months Ended                Nine Months Ended         
             September   September            September   September  
                   30,         30,                  30,         30,
                  2012        2011   Change        2012        2011   Change

Natural        255,451     185,414              256,235     154,360  
Gas
(mcf/d)                                 38%                              66%

Crude oil        5,600       3,444                5,940       2,953  
and NGL
(bbl/d)                                 63%                             101%

Oil             48,175      34,347               48,646      28,680  
equivalent
(Boepd)                                 40%                              70%
                                                                            

Production for the three months ended September 30, 2012, averaged 48,175 
Boe/d, a 40% increase over the average production for the same quarter of 2011 
of 34,347 Boe/d.  Production was 88% natural gas weighted in the third 
quarter of 2012 compared to 90% natural gas weighted in the third quarter of 
2011.

For the nine months ended September 30, 2012, production increased 70% to 
48,646 Boe/d from 28,680 Boe/d for the same period of 2011.

The Company's significant production growth when compared to 2011 can be 
attributed to new wells that have been brought on-stream since September 30, 
2011, as well as property and corporate acquisitions.

REVENUE
                                                                                    
                    Three Months Ended                    Nine Months Ended         

(000s)         September     September              September     September  
                     30,           30,                    30,           30,
                    2012         2011    Change          2012          2011   Change

Revenue                                                                      
from:                                                                               

Natural $ 59,195 $ 72,494 $ 170,225 $ 183,458 Gas (18)% (7)%

Oil and 42,932 27,574 136,501 71,590 NGL 56% 91%

Total $ 102,127 $ 100,068 $ 306,726 $ 255,048 revenue from gas, oil and NGL sales 2% 20%


                                                                               

Revenue for the three months ended September 30, 2012 increased 2% to $102.1 
million from $100.1 million for the same quarter of 2011. For the nine months 
ended September 30, 2012, revenue was $306.7 million, a 20% increase over 
revenue of $255.0 million for the same period of 2011.  Revenue growth is 
consistent with the increase in production over the same periods, partially 
offset by lower realized commodity prices.  Revenue includes all petroleum, 
natural gas and NGL sales and realized gains on financial instruments.

Tourmaline Prices:
                        
                    Three Months Ended                    Nine Months Ended         
               September     September              September     September  
                     30,           30,                    30,           30,
                    2012          2011   Change          2012          2011   Change

Natural      $      2.52   $      4.25            $      2.42   $      4.35  
Gas
($/mcf)                                   (41)%                                (44)%

Oil and      $     83.34   $     87.01            $     83.87   $     88.80  
NGL
($/bbl)                                    (4)%                                 (6)%

Oil          $     23.04   $     31.67            $     23.01   $     32.57  
equivalent
($/Boe)                                   (27)%                                (29)%
                                                                                    

The realized average natural gas prices for the three and nine months ended 
September 30, 2012 were 41% and 44%, respectively, lower than the same periods 
of the prior year.  Realized crude oil and NGL prices decreased 4% and 6% for 
the three and nine months ended September 30, 2012, respectively, compared to 
the same periods of 2011.

The realized natural gas price for the quarter ended September 30, 2012 was 
$2.52/mcf, which is 10% (September 30, 2011 - 16%) higher than the AECO 
benchmark due to a combination of higher heat content in the Company's Alberta 
Deep Basin natural gas production and positive commodity contracts. Realized 
prices exclude the effect of unrealized gains or losses. Once these gains and 
losses are realized they are included in the per unit amounts.

Benchmark Oil and Gas Prices:
                                                                      
                                           Three Months Ended         
                              September 30,     September 30,  
                                       2012              2011   Change

Natural Gas                                                           

  NYMEX Henry Hub           $          2.89   $          4.06    (29)%
  (US$/mcf)                                                    

  AECO (CAD$/mcf)           $          2.30   $          3.67    (37)%

Oil                                                                   

  NYMEX (US$/bbl)           $         92.20   $         89.54       3%

  Edmonton Par (CAD$/bbl)   $         84.87   $         92.35     (8)%
                                                                 

Reconciliation of AECO Index to Tourmaline's Realized Gas Prices:
                                                                      
                                           Three Months Ended         

September 30, September 30, ($/mcf) 2012 2011 Change

AECO index $ 2.30 $ 3.67 (37)%

Heat/quality differential 0.18 0.24 (25)%

Realized gain 0.04 0.34 (88)%

Tourmaline realized $ 2.52 $ 4.25 natural gas price (41)%

Currency - Exchange Rates:


                                           
                     Three Months Ended         
          September 30,   September 30,  
                   2012            2011   Change

CAD/US$   $      1.0043   $      1.0201     (2)%

ROYALTIES
                      Three Months Ended           Nine Months Ended
                 September     September     September     September

30, 30, 30, 30, (000s) 2012 2011 2012 2011

Natural Gas $ 592 $ 3,270 $ (1,509) $ 4,879

Oil and NGL 7,049 5,043 21,020 11,164

Total $ 7,641 $ 8,313 $ 19,511 $ 16,043 royalties

Royalties as 7.5% 8.3% 6.4% 6.3% a percentage of revenue


                                                            

For the quarter ended September 30, 2012, the average effective royalty rate 
decreased to 7.5% compared to 8.3% for the same quarter of 2011.  For the 
nine months ended September 30, 2012, the average effective royalty was 6.4% 
compared to 6.3% for the same period of 2011.  The Company continues to 
benefit from the New Well Royalty Reduction Program and the Natural Gas Deep 
Drilling Program in Alberta as well as the Deep Royalty Credit Program in 
British Columbia.

The Company expects its royalty rate for 2012 to remain unchanged at 7% as 
previously forecasted at June 30, 2012.  The royalty rate is sensitive to 
commodity prices, however, and as such, a change in commodity prices will 
impact the actual rate.

OTHER INCOME

For the quarter ended September 30, 2012, other income was $0.9 million, which 
includes $0.8 million in processing income, compared to $1.4 million for the 
same quarter of 2011, of which $1.3 million related to processing income. 
Processing income has been decreasing as a smaller amount of third-party 
production has been processed in Tourmaline owned-and-operated facilities as 
the Company grows the amount of its own production, thus reducing capacity for 
third-party volumes.  For the nine months ended September 30, 2012, other 
income was $3.7 million compared to $3.4 million for the same period of the 
prior year.

OPERATING EXPENSES
                                         
                   Three Months Ended                    Nine Months Ended          

($000s,       September     September              September     September  
except              30,           30,                    30,           30,
per                2012          2011                   2012          2011
unit
amounts)                                Change                               Change

Operating   $    16,236   $    18,239            $    60,736   $    45,101  
expenses                                 (11)%                                  35%

Per Boe     $      3.66   $      5.77    (37)%   $      4.56   $      5.76    (21)%
                                                                              

Operating expenses include all periodic lease and field-level expenses and 
exclude income recoveries from processing third-party volumes.  For the third 
quarter of 2012, total operating expenses decreased 11% from $18.2 million in 
the third quarter of 2011 to $16.2 million in 2012 due to the impact of 
redirecting natural gas from third-party facilities to Tourmaline 
owned-and-operated infrastructure.  On a per Boe basis, the costs decreased 
37% from $5.77/Boe for the third quarter of 2011 to $3.66/Boe in the third 
quarter of 2012 due to increased production and increased operational 
efficiencies.  Tourmaline's operating expenses in the third quarter of 2012 
include third-party processing, gathering and compression fees of 
approximately $4.3 million or 27% of total operating costs (September 30, 
2011- $5.5 million or 30% of total operating costs).

For the nine months ended September 30, 2012, total operating expenses were 
$60.7 million, or $4.56/Boe, compared to $45.1 million, or $5.76/Boe for the 
same period of 2011. Although total operating expenses increased commensurate 
with production, the costs per Boe decreased 21% reflecting increased 
operational efficiencies.

The Company now expects its full year 2012 operating costs to average 
approximately $4.75 per Boe, which is a reduction from its previous guidance 
of $5.00 per Boe.  Actual costs per Boe can change, however, depending on a 
number of factors including the Company's actual production levels.

TRANSPORTATION

Transportation costs for the three months ended September 30, 2012 were $8.7 
million or $1.97 per Boe (three months ended September 30, 2011 - $6.5 million 
or $2.06 per Boe, respectively).  Transportation costs for the nine months 
ended September 30, 2012 were $24.9 million or $1.87 per Boe (nine months 
ended September 30, 2011 - $15.6 million or $1.99 per Boe, respectively).  On 
a per Boe basis, transportation costs for the three and nine months ended 
September 30, 2012 are lower primarily due to the expansion of the Company's 
owned-and-operated Sunrise plant in December 2011 whereby increased volumes 
are now going to this plant which is in closer proximity versus previous 
third-party facilities.  The increase in total transportation costs for the 
nine months ended September 30, 2012 can be attributed to increased production.

GENERAL & ADMINISTRATIVE EXPENSES ("G&A")
                                                                                      
                        Three Months Ended                    Nine Months Ended       

(000s)             September     September              September     September  
                         30,           30,                    30,           30,
                        2012          2011   Change          2012          2011   Change

G&A expenses     $     6,667   $     6,082      10%   $    19,550   $    17,587     11%

Administrative         (484)         (939)                  (822)       (2,527)  
and capital
recovery                                      (48)%                               (67)%

Capitalized          (2,685)       (2,167)                (8,184)       (6,436)  
G&A                                             24%                                 27%

Total G&A        $     3,498   $     2,976            $    10,544   $     8,624  
expenses                                        18%                                 22%

Per Boe          $      0.79   $      0.94    (16)%   $      0.79   $      1.10   (28)%
                                                                                   

G&A expenses for the third quarter of 2012 were $3.5 million compared to $3.0 
million for the same quarter of the prior year.  G&A costs per Boe for the 
third quarter of 2012 decreased 16% down to $0.79 per Boe, compared to $0.94 
per Boe for the same quarter of 2011.

For the nine months ended September 30, 2012, G&A expenses were $10.5 million 
or $0.79/Boe compared to $8.6 million or $1.10/Boe for the same period of 
2011.  The increase in G&A expenses in 2012 compared to 2011 is primarily due 
to office staff additions and higher rent expense as the Company increased its 
head office space. The higher total G&A expenses result from the need to 
manage the larger production, reserve and land base.  Notwithstanding this, 
the Company's G&A expenses per Boe continue to trend downward as Tourmaline's 
production base continues to grow faster than its accompanying G&A costs.

G&A costs for 2012 are not expected to exceed $1.00 per Boe.  Actual costs 
per Boe can change, however, depending on a number of factors including the 
Company's actual production levels.

SHARE-BASED COMPENSATION
                   
                     Three Months Ended            Nine Months Ended
                  September       September       September   September

30, 30, 30, 30, (000s) 2012 2011 2012 2011

Share-based $ 7,150 $ 6,516 $ 22,182 $ 17,104 payments

Capitalized (11,091) (8,552) share-based (3,575) (3,258) payments

Total $ 3,575 $ 3,258 $ 11,091 $ 8,552 share-based payments

Per Boe $ 0.81 $ 1.03 $ 0.83 $ 1.09

Tourmaline uses the fair value method for the determination of non-cash related share-based payments expense. During the third quarter of 2012, 75,000 stock options were granted to employees, officers, directors and key consultants at a weighted-average exercise price of $28.92, and 579,291 options were exercised, bringing $6.6 million of cash into treasury. The Company recognized $3.6 million of share-based payment expense in the third quarter of 2012 compared to $3.3 million in the third quarter of 2011.  Capitalized share-based payment expense for the third quarter of 2012 was $3.6 million compared to $3.3 million for the same quarter of the prior year.

For the nine months ended September 30, 2012, share-based expense totalled $11.1 million and capitalized share-based payments were $11.1 million (2011 - $8.6 million and $8.6 million, respectively).   The increase in share-based payment expense in 2012 compared to 2011 reflects the increased number of employees due to increased activity.

DEPLETION, DEPRECIATION AND AMORTIZATION ("DD&A")


                        Three Months Ended              Nine Months Ended

($000s,             September        September       September     September
except per                30,              30,             30,           30,
unit                     2012             2011            2012          2011
amounts)

Depletion,       $     58,733     $     48,059     $   176,530 $     116,928
depreciation
and
amortization

Per Boe          $      13.25     $      15.21     $     13.24 $       14.93

DD&A expense was $58.7 million for the third quarter of 2012 compared to $48.1 
million for the same period of 2011 due to higher production volumes, as well 
as a larger capital asset base being depleted.  The per-unit DD&A rate for 
the third quarter of 2012 was $13.25/Boe compared to $15.21/Boe for the third 
quarter of 2011.

For the nine months ended September 30, 2012, DD&A expense was $176.5 million 
(September 30, 2011 - $116.9 million) with an effective rate of $13.24/Boe 
(September 30, 2011 - $14.93/Boe).  The lower DD&A rate, for both the three 
and nine months ended September 30, 2012 compared to the same periods of 2011, 
reflects strong reserve additions derived from Tourmaline's exploration and 
production program.

FINANCE EXPENSES

Finance expenses for the three and nine months ended September 30, 2012 
totalled $3.6 million and $8.5 million, respectively, and are comprised of 
interest expense and accretion of provisions (September 30, 2011 - $3.0 
million and $5.1 million, respectively).  The increased finance expenses are 
largely due to higher interest expense resulting from a higher balance drawn 
on the credit facility in 2012.

CASH FLOW FROM OPERATIONS, FUNDS FROM OPERATIONS AND NET EARNINGS
                                                                                   
                       Three Months Ended                    Nine Months Ended
                September       September              September   September
                      30,             30,                    30,         30,
                     2012            2011 Change            2012        2011 Change

Cash flow     $               $                      $           $
from
operating                                       
activities         66,713          77,622  (14)%         168,806     166,620     1%
                                                                                   

Funds from    $               $                      $           $
operations
((2))              63,515          62,686     1%         186,472     168,041    11%

Funds from    $               $                      $           $
operations
per share                                       
((1) (2))            0.38            0.40   (5)%            1.13        1.13     -%
                                                                                   

Net           $               $                      $           $
earnings
(loss)            (4,770)           8,688 (155)%           (782)      26,607 (103)%

Earnings      $               $                      $           $
(loss) per
share (
(1))               (0.03)            0.06 (150)%          (0.00)        0.18 (100)%
                                                                                   

Operating     $               $                      $           $
netback
per Boe (                                       
(2))                15.68           21.21  (26)%           15.12       22.77  (34)%

((1) )Fully diluted                                               
((2)) See "Non-IFRS
Financial Measures"                                                                

Funds from operations for the three months ended September 30, 2012 were $63.5 
million or $0.38 per diluted share compared to $62.7 million or $0.40 per 
diluted share for the same period of 2011.  For the nine months ended 
September 30, 2012, funds from operations were $186.5 million or $1.13 per 
diluted share, which is slightly higher than the September 30, 2011 funds from 
operations of $168.0 million or $1.13 per diluted share. Funds from operations 
in 2012 reflect lower natural gas prices over 2011 offset by increased 
production.

The Company incurred an after-tax loss for both the three and nine months 
ended September 30, 2012 of $4.8 million ($0.03 per diluted share) and $0.8 
million ($0.00 per diluted share), respectively, compared to earnings of $8.7 
million ($0.06 per diluted share) and $26.6 million ($0.18 per diluted share), 
respectively, for the same periods of 2011.  The after-tax loss for the first 
nine months of 2012, compared to 2011, reflects significantly lower realized 
natural gas prices, a smaller unrealized gain on financial instruments as well 
as the recognition of the tax effect of the flow-through common shares as the 
costs are incurred.

CAPITAL EXPENDITURES
                    
                      Three Months Ended            Nine Months Ended
                   September       September       September   September

30, 30, 30, 30, (000s) 2012 2011 2012 2011

Land and $ 6,719 $ 10,508 $ 22,018 $ 34,768 seismic

Drilling and 116,721 119,574 289,506 285,391 completions

Facilities 43,333 51,081 131,489 168,413

Property 5,867 65,894 6,841 108,642 acquisitions

Property (65) (357) (12,633) (7,366) dispositions

Other 2,702 2,462 8,311 6,941

Total cash $ 175,277 $ 249,162 $ 445,532 $ 596,789 capital expenditures

During the third quarter of 2012, the Company invested $175.3 million of cash consideration, net of dispositions, compared to $249.2 million for the same period of 2011.  Expenditures on exploration and production were $166.8 million compared to $181.2 million for the same quarter of 2011. The lower expenditures in 2012 are a result of a reduced capital budget due to lower commodity prices realized in 2012.

The following table summarizes the drill, complete and tie-in activities for the period:


                                 Nine Months Ended      
                                September 30, 2012      
                                Gross                Net

Drilled                            53              45.65

Completed                          53              46.78

Tied-in                            33              28.69

LIQUIDITY AND CAPITAL RESOURCES

On April 4, 2012, the Company issued 1.4 million flow-through common shares at 
a price of $28.80 per share for total gross proceeds of $40.4 million. The 
proceeds were used to temporarily reduce bank debt and will be used to fund 
the Company's 2012 capital exploration program.

On August 30, 2012, the Company issued 4.039 million common shares at a price 
of $29.00 per share for total gross proceeds of $117.1 million.  
Subsequently, on September 19, 2012, the Underwriters exercised their 
over-allotment Option and purchased a further 0.6 million shares at a price of 
$29.00 per share for total gross proceeds of $17.4 million.  The proceeds 
were used to temporarily reduce indebtedness, which will then be available to 
be redrawn and applied to fund the expansion of the 2012 exploration and 
production capital program from $410 million to $525 million; to fund its 2013 
capital expenditure program; and to fund general corporate expenditures.

On October 9, 2012, the Company announced that it entered into a flow-through 
common share bought deal financing agreement.  The Company will issue 
1,000,000 flow-through common shares at a price of $36.90 per share for gross 
proceeds of $36.9 million.  In addition, officers, directors and employees of 
Tourmaline will have the opportunity to purchase up to a maximum of 50,000 
additional flow-through common shares at a price of $36.90 on a private 
placement basis.  The proceeds will be used to temporarily reduce bank debt.

In June 2012, the Company amended and restated its bank credit facility to be 
a covenant-based facility rather than a borrowing base facility. This facility 
is a 3-year extendible revolving facility in the amount of $550 million plus a 
$25 million operating revolver from a syndicate of six lenders with an initial 
maturity date of June, 2015. The maturity date may, at the request of the 
Company and with the consent of the lenders, be extended on an annual basis. 
The facility is secured by a first ranking floating charge over all assets of 
the Company and its material subsidiaries.  The facility can be drawn in 
either Canadian or U.S. funds and bears interest at the bank's prime lending 
rate, bankers' acceptance rates or LIBOR (for U.S. borrowings), plus 
applicable margins.  The facility will provide the Company with greater 
flexibility by providing access to an additional $200 million over the 
previous facility.

Under the terms of the bank credit facility, Tourmaline has provided its 
covenant that, on a rolling four quarter basis: (i) the ratio of EBITDA to 
interest expense shall equal or exceed 3.5:1, (ii) the ratio of senior debt to 
EBITDA shall not exceed 3:1, (iii) the ratio of total debt to EBITDA shall not 
exceed 4:1, and (iv) the ratio of senior debt to total capitalization shall 
not exceed 0.5:1.  As at September 30, 2012, the Company is in compliance 
with all debt covenants.

At September 30, 2012, Tourmaline had negative working capital of $101.6 
million, after adjusting for the fair value of financial instruments (the 
unadjusted working capital deficiency was $98.2 million) (December 31, 2011 - 
$146.6 million and $146.3 million, respectively).  Management believes the 
Company has sufficient liquidity and capital resources to fund the remainder 
of its 2012 and 2013 exploration and development program through expected cash 
flow from operations and its unutilized bank credit facility.  As at 
September 30, 2012, the Company's bank debt balance was $210.3 million 
(December 31, 2011 - $81.7 million), and net debt was $311.8 million (December 
31, 2011 - $228.3 million).

SHARES OUTSTANDING

As at November 7, 2012, the Company has 166,971,178 common shares outstanding 
and 13,965,931 stock options granted and outstanding.

COMMITMENTS AND CONTRACTUAL OBLIGATIONS

In the normal course of business, Tourmaline is obligated to make future 
payments.  These obligations represent contracts and other commitments that 
are known and non-cancellable.

Payments Due                                                               2016 and  
by Year                                                                  Thereafter
(000s)                2012         2013         2014          2015                      Total

Operating          $           $            $            $             $          - $
leases                 637        2,266        2,121           526                      5,550

Flow-through                                                                      -  
obligations              -       35,953            -             -                     35,953

Firm                                                                          1,058  
transportation
agreements           7,246       29,693       21,609        12,171                     71,777

Bank debt((1))           -            -            -       235,382                -   235,382
                   $ 7,883     $ 67,912     $ 23,730     $ 248,079     $      1,058 $ 348,662

((1) )Includes interest expense at an annual rate of 3.55% being the rate 
applicable to outstanding bank debt at September 30, 2012.

OFF BALANCE SHEET ARRANGEMENTS

The Company has certain lease arrangements, all of which are reflected in the 
commitments and contractual obligations table, which were entered into in the 
normal course of operations.  All leases have been treated as operating 
leases whereby the lease payments are included in operating expenses or 
general and administrative expenses depending on the nature of the lease.

FINANCIAL RISK MANAGEMENT

The Board of Directors has overall responsibility for the establishment and 
oversight of the Company's risk management framework.  The Board has 
implemented and monitors compliance with risk management policies.

The Company's risk management policies are established to identify and analyze 
the risks faced by the Company, to set appropriate risk limits and controls, 
and to monitor risks and adherence to market conditions and the Company's 
activities. The Company's financial risks are discussed in note 5 of the 
Company's audited consolidated financial statements for the year ended 
December 31, 2011.

As at September 30, 2012, the Company has entered into certain financial 
derivative and physical delivery sales contracts in order to manage commodity 
risk.  These instruments are not used for trading or speculative purposes.  
The Company has not designated its financial derivative contracts as effective 
accounting hedges, even though the Company considers all commodity contracts 
to be effective economic hedges.  Such financial derivative commodity 
contracts are recorded on the consolidated statement of financial position at 
fair value, with changes in the fair value being recognized as an unrealized 
gain or loss on the consolidated statement of income (loss) and comprehensive 
income (loss). The contracts that the Company has entered into in the first 
nine months of 2012 are detailed in note 3 of the Company's interim condensed 
consolidated financial statements for the three and nine months ended 
September 30, 2012.

The following table provides a summary of the unrealized gains and losses on 
financial instruments for the three and nine months ended September 30, 2012:
                     Three Months Ended            Nine Months Ended
                  September       September       September   September

30, 30, 30, 30, (000s) 2012 2011 2012 2011

Unrealized $ (3,551) $ 5,139 $ 1,426 $ 5,510 gain (loss) on financial instruments

Unrealized - (64) (103) (150) (loss) on investments held for trading

Total $ (3,551) $ 5,075 $ 1,323 $ 5,360


                                                               

The Company has entered into physical contracts to manage commodity risk.  
These contracts are considered normal sales contracts and are not recorded at 
fair value in the consolidated financial statements.  These contracts have 
been disclosed in note 3 of the Company's interim condensed consolidated 
financial statements for the three and nine months ended September 30, 2012.

SUBSEQUENT EVENTS

On October 9, 2012, the Company announced that it entered into a flow-through 
common share bought deal financing agreement.  The Company will issue 
1,000,000 flow-through common shares at a price of $36.90 per share for gross 
proceeds of $36.9 million.  In addition, officers, directors and employees of 
Tourmaline will have the opportunity to purchase up to a maximum of 50,000 
additional flow-through common shares at a price of $36.90 on a private 
placement basis.

On October 23, 2012, Tourmaline entered in to an agreement with Huron Energy 
Corp. ("Huron"), a private corporation, pursuant to which Tourmaline will 
acquire all of the issued and outstanding shares of Huron on the basis of 
0.07644 of a Tourmaline common share for each Huron common share. It is 
expected that Tourmaline will issue an aggregate of approximately 7.4 million 
common shares as part of the arrangement, which is expected to close on 
November 30, 2012.  The deal is subject to approval by the Huron 
shareholders.  It is estimated that the acquisition will add approximately 
5,500 boepd of production.

On November 7, 2012, Tourmaline closed an acquisition of a producing oil and 
gas asset, which is estimated to add approximately 3,000 boepd of production, 
for cash consideration of $84.1 million.

APPLICATION OF CRITICAL ACCOUNTING ESTIMATES

Certain accounting policies require that management make appropriate decisions 
with respect to the formulation of estimates and assumptions that affect the 
reported amounts of assets, liabilities, revenues and expenses. Management 
reviews its estimates on a regular basis. The emergence of new information and 
changed circumstances may result in actual results or changes to estimates 
that differ materially from current estimates.  The Company's use of 
estimates and judgments in preparing the interim condensed consolidated 
financial statements is discussed in note 1 of the consolidated financial 
statements for the year ended December 31, 2011.

DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROLS OVER FINANCIAL 
REPORTING

The Company's Chief Executive Officer and Chief Financial Officer have 
designed, or caused to be designed under their supervision, disclosure 
controls and procedures ("DC&P") to provide reasonable assurance that: (i) 
material information relating to the Company is made known to the Company's 
Chief Executive Officer and Chief Financial Officer by others, particularly 
during the periods in which the annual and interim filings are being prepared; 
and (ii) information required to be disclosed by the Company in its annual 
filings, interim filings or other reports filed or submitted by it under 
securities legislation is recorded, processed, summarized and reported within 
the time period specified in securities legislation. All control systems by 
their nature have inherent limitations and, therefore, the Company's DC&P are 
believed to provide reasonable, but not absolute, assurance that the 
objectives of the control systems are met.

The Company's Chief Executive Officer and Chief Financial Officer have 
designed, or caused to be designed under their supervision, internal controls 
over financial reporting ("ICFR") to provide reasonable assurance regarding 
the reliability of the Company's financial reporting and the preparation of 
financial statements for external purposes in accordance with IFRS. There were 
no changes in the Company's ICFR during the period beginning on June 30, 2012 
and ending on September 30, 2012 that have materially affected, or are 
reasonably likely to materially affect, the Company's ICFR.

It should be noted that a control system, including the Company's disclosure 
and internal controls and procedures, no matter how well conceived can provide 
only reasonable, but not absolute assurance that the objectives of the control 
system will be met and it should not be expected that the disclosure and 
internal controls and procedures will prevent all errors or fraud.

BUSINESS RISKS AND UNCERTAINTIES

Tourmaline monitors and complies with current government regulations that 
affect its activities, although operations may be adversely affected by 
changes in government policy, regulations or taxation. In addition, Tourmaline 
maintains a level of liability, property and business interruption insurance 
which is believed to be adequate for Tourmaline's size and activities, but is 
unable to obtain insurance to cover all risks within the business or in 
amounts to cover all possible claims.

See "Forward-Looking Statements" in this MD&A and "Risk Factors" in 
Tourmaline's most recent annual information form for additional information 
regarding the risks to which Tourmaline and its business and operations are 
subject.

IMPACT OF NEW ENVIRONMENTAL REGULATIONS

Environmental legislation, including the Kyoto Accord, the federal 
government's "EcoACTION" plan and Alberta's Bill 3 - Climate Change and 
Emissions Management Amendment Act, is evolving in a manner expected to result 
in stricter standards and enforcement, larger fines and liability and 
potentially increased capital expenditures and operating costs. Given the 
evolving nature of the debate related to climate change and the resulting 
requirements, it is not possible to determine the operational or financial 
impact of those requirements on Tourmaline.

RECENT PRONOUNCEMENTS ISSUED

The following pronouncements from the IASB will become effective for financial 
reporting periods beginning on or after January 1, 2013 and have not yet been 
adopted by the Company. All of these new or revised standards permit early 
adoption with transitional arrangements depending upon the date of initial 
application.
       
      IFRS 9 - Financial Instruments addresses the classification and
      measurement of financial assets.
       
      IFRS 10 - Consolidated Financial Statements builds on existing
      principles and standards and identifies the concept of control as
      the determining factor in whether an entity should be included
      within the consolidated financial statements of the parent
      company.
       
      IFRS 11 - Joint Arrangements establishes the principles for
      financial reporting by entities when they have an interest in
      arrangements that are jointly controlled.
       
      IFRS 12 - Disclosure of Interest in Other Entities provides the
      disclosure requirements for interests held in other entities
      including joint arrangements, associates, special purpose
      entities and other off balance sheet entities.
       
      IFRS 13 - Fair Value Measurement defines fair value, requires
      disclosure about fair value measurements and provides a framework
      for measuring fair value when it is required or permitted within
      the IFRS standards.
       
      IAS 19 - Employee Benefits revises the existing standard to
      eliminate options to defer the recognition of gains and losses in
      defined benefit plans, requires re-measurements of a defined
      benefit plan's assets and liabilities to be presented in other
      comprehensive income and increases disclosure.
       
      IAS 27 - Separate Financial Statements revised the existing
      standard which addresses the presentation of parent company
      financial statements that are not consolidated financial
      statements.
       
      IAS 28 - Investments in Associate and Joint Ventures revised the
      existing standard and prescribes the accounting for investments
      and sets out the requirements for the application of the equity
      method when accounting for investments in associates and joint
      ventures.
       

The Company has not completed its evaluation of the effect of adopting these 
standards on its financial statements.

The IASB also issued Presentation of Items of Other Comprehensive Income, an 
amendment to IAS 1 Financial Statement Presentation. The amendment addresses 
the presentation of other comprehensive income and requires the grouping of 
items within other comprehensive income that might eventually be reclassified 
to the profit and loss section of the income statement. The change became 
effective on July 1, 2012.

NON-IFRS FINANCIAL MEASURES

This MD&A includes references to financial measures commonly used in the oil 
and gas industry such as "funds from operations", "operating netback", 
"working capital (adjusted for the fair value of financial instruments)" and 
"net debt", which do not have any standardized meaning prescribed by IFRS.  
Management believes that in addition to net income and cash flow from 
operating activities, the aforementioned non-IFRS financial measures are 
useful supplemental measures in assessing Tourmaline's ability to generate the 
cash necessary to repay debt or fund future growth through capital 
investment.  Readers are cautioned, however, that these measures should not 
be construed as an alternative to net income or cash flow from operating 
activities determined in accordance with IFRS as an indication of Tourmaline's 
performance.  Tourmaline's method of calculating these measures may differ 
from other companies and accordingly, they may not be comparable to measures 
used by other companies.  For these purposes, Tourmaline defines funds from 
operations as cash provided by operations before changes in non-cash operating 
working capital, defines operating netback as revenue (excluding processing 
income) less royalties, transportation costs and operating expenses and 
defines working capital (adjusted for the fair value of financial instruments) 
as working capital adjusted for the fair value of financial instruments.  Net 
debt is defined as long-term bank debt plus working capital (adjusted for the 
fair value of financial instruments).

Funds from Operations

A summary of the reconciliation of cash flow from operating activities (per 
the statement of cash flow), to funds from operations, is set forth below:
                                                                   
                     Three Months Ended               Nine Months Ended
                 September        September       September       September

30, 30, 30, 30, (000s) 2012 2011 2012 2011

Cash flow $ 66,713 $ 77,622 $ 168,806 $ 166,620 from operating activities

Change in (3,198) 17,666 1,421 non-cash (14,936) working capital

Funds from $ 63,515 $ 62,686 $ 186,472 $ 168,041 operations


                                                                   

Operating Netback

Operating netback is calculated on a per-Boe basis and is defined as revenue 
(excluding processing income) less royalties, transportation costs and 
operating expenses, as shown below:
                      
                        Three Months Ended               Nine Months Ended
                     September       September       September       September

30, 30, 30, 30, ($/Boe) 2012 2011 2012 2011

Revenue, excluding processing income $ 23.04 $ 31.67 $ 23.01 $ 32.57

Royalties (1.72) (2.63) (1.46) (2.05)

Transportation costs (1.97) (2.06) (1.87) (1.99)

Operating expenses (3.66) (5.77) (4.56) (5.76)

Operating netback ((1)) $ 15.68 $ 21.21 $ 15.12 $ 22.77

((1)) May not add due to rounding.

Working Capital (Adjusted for the Fair Value of Financial Instruments)

A summary of the reconciliation of working capital to working capital (adjusted for the fair value of financial instruments) is set forth below:

As at As at (000s) September 30, 2012 December 31, 2011

Working capital $ (98,184) $ (146,317) (deficit)

Fair value of (3,393) (276) financial instruments - short-term (asset) liability

Working capital $ (101,577) $ (146,593) (deficit) (adjusted for the fair value of financial instruments)

Net Debt

A summary of the reconciliation of net debt is set forth below:

As at As at (000s) September 30, 2012 December 31, 2011

Bank debt $ (210,270) $ (81,749)

Working capital (98,184) (146,317) (deficit)

Fair value of (3,393) (276) financial instruments - short-term (asset) liability

Net debt $ (311,847) $ (228,342)

SELECTED QUARTERLY INFORMATION

2012 2011 2010

($000s, unless otherwise noted) Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4

PRODUCTION

Crude oil and NGL (bbls) 515,157 596,992 515,408 415,074 316,890 272,184 217,121 236,502

Gas (mcf) 23,501,484 24,276,149 22,430,621 18,437,079 17,058,132 13,798,653 11,283,617 11,251,067

Oil equivalent (Boe) 4,432,071 4,643,016 4,253,845 3,487,920 3,159,912 2,571,959 2,097,724 2,111,680

Crude oil and NGL (bbls/d) 5,600 6,560 5,664 4,512 3,444 2,991 2,412 2,571

Gas (mcf/d) 255,451 266,771 246,490 200,403 185,414 151,634 125,374 122,294

Oil equivalent (Boe/d) 48,175 51,022 46,746 37,912 34,347 28,263 23,308 22,953

FINANCIAL

Gross revenue, net of royalties 91,863 105,567 94,781 98,309 98,225 87,551 62,019 63,340

Cash flow from operating activities 66,713 42,566 59,527 61,801 77,622 42,112 46,886 46,109

Funds from operations ( (1)) 63,515 61,121 61,836 73,311 62,686 60,415 44,940 44,940

Per diluted share 0.38 0.37 0.38 0.45 0.40 0.41 0.32 0.34

Net earnings (loss) (4,770) 1,012 2,976 16,074 8,688 15,192 2,727 5,865

Per basic share (0.03) 0.01 0.02 0.10 0.06 0.11 0.02 0.05

Per diluted share (0.03) 0.01 0.02 0.10 0.06 0.10 0.02 0.04

Total assets 2,992,552 2,862,502 2,878,261 2,711,024 2,517,607 2,030,285 1,936,836 1,816,043

Working capital (98,184) (15,311) (176,029) (146,317) (120,080) (31,963) (139,138) (49,642)

Working capital (adjusted for the fair value of financial instruments) ( (1)) (101,577) (19,809) (175,696) (146,593) (123,858) (31,592) (136,933) (49,170)

Capital expenditures 175,277 53,831 216,424 232,167 249,162 130,075 217,553 217,064

Total outstanding shares (000s) 165,678 160,459 158,807 158,578 151,906 145,215 138,124 136,191

PER UNIT

Gas ($/mcf) 2.52 2.23 2.54 3.76 4.25 4.38 4.48 4.17

Crude oil and NGL ($/bbl) 83.34 77.75 91.48 93.05 87.01 95.54 83.00 75.94

Revenue ($/Boe) 23.04 21.64 24.48 30.95 31.67 33.61 32.68 30.74

Operating netback ($/Boe) ( (1)) 15.68 14.22 15.52 21.39 21.21 24.52 22.99 22.66

((1) )See Non-IFRS Financial Measures.

The oil and gas exploration and production industry is cyclical in nature. The Company's financial position, results of operations and cash flows are principally impacted by production levels, and commodity prices, particularly natural gas prices. The Company has had continued growth over the last eight quarters summarized in the table above.  The Company's average annual production has increased from 17,856 Boe per day in 2010 to 31,007 Boe per day in 2011, and 48,646 Boe per day in the first nine months of 2012.  The production growth can be attributed to both the Company's exploration and development activities, as well as from acquisitions of producing properties.  Over the same period, natural gas prices have declined, with the largest declines occurring in 2012.  The Company's cash flows from operating activities were $143.3 million in 2010, $228.4 million in 2011, and 2012 estimated cash flows (based on the first nine months annualized) are $225.1 million. The 2012 estimated cash flows reflect the effects of the lower realized natural gas prices in 2012.  Commodity price changes can indirectly impact expected production by changing the amount of funds available to reinvest in exploration, development and acquisition activities in the future.  Decreases in commodity prices not only reduce revenues and cash flows available for exploration, they may also challenge the economics of potential capital projects by reducing the quantities of reserves that are commercially recoverable.  The Company's capital program is dependent on cash flows generated from operations and access to capital markets.

CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(000s) September 30, 2012 December 31, 2011 (unaudited)

Assets

Current assets:

Accounts $ 47,747 $ 60,799 receivable

Prepaid 5,074 5,313 expenses and deposits

Fair value of 3,393 276 financial instruments (note 3)

56,214 66,388

Investments - 233

Exploration and 639,590 620,515 evaluation assets (note 4)

Property, plant 2,296,748 2,023,888 and equipment (note 5)

$ 2,992,552 $ 2,711,024

Liabilities and Shareholders' Equity

Current liabilities:

Accounts $ 154,398 $ 212,705 payable and accrued liabilities


                                      154,398                     212,705

Bank debt (note                       210,270                      81,749
7)

Decommissioning                        55,039                      50,463
obligations (note
6)

Long-term                               8,070                      10,864
obligation

Fair value of                           1,765                          74
financial
instruments (note
3)

Deferred premium                        7,576                      11,316
on flow-through
shares

Deferred taxes                        125,643                     107,977

Shareholders'                                                            
equity:

  Share capital                     2,316,436                   2,140,660
  (note 9)

  Non-controlling                      16,021                      15,079
  interest (note
  8)

  Contributed                          65,755                      47,776
  surplus

  Retained                             31,579                      32,361
  earnings
                                    2,429,791                   2,235,876
                      $             2,992,552     $             2,711,024

Commitments (note 12)
Subsequent events (notes 3 and 13)
See accompanying notes to the interim condensed consolidated financial 
statements. 

CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)

Three Months Ended Nine Months Ended

(000s) except September 30, September 30, per-share amounts 2012 September 30, 2012 September 30, (unaudited) 2011

2011

Revenue:


         

  Oil and natural     $                            $                              $                         $
  gas sales                             99,817                         94,299                   294,914                 
  241,285
                                                                                                                        

Royalties (7,641) (8,313) (19,511) (16,043)

92,176 85,986 275,403 225,242

Realized gain on financial instruments 2,310 5,769 11,812

13,763

Unrealized gain (loss) on financial instruments (note 3) (3,551) 5,075 1,323


    5,360

  Other income                             928                          1,395                     3,673                 
    3,430

91,863 98,225 292,211 247,795

Expenses:

Operating 16,236 18,239 60,736

45,101

Transportation 8,737 6,503 24,896

15,586

General and administration 3,498 2,976 10,544

8,624

Share-based payments 3,575 3,258 11,091

8,552

(Gain) loss on divestitures (324) - (7,596)

3,630

Depletion, depreciation and amortization 58,733 48,059 176,530 116,928

90,455 79,035 276,201 198,421

Results from Operating Activities 1,408 19,190 16,010

49,374

Finance expenses 3,596 3,048 8,532

5,081

Income (loss) before taxes (2,188) 16,142 7,478

44,293

Deferred taxes 2,363 7,275 7,318

17,061

Net income (loss) and comprehensive income (loss) for the period before non-controlling interest (4,551) 8,867 160

27,232

Net income (loss) and comprehensive income (loss) attributable to:


         

  Shareholders of                                                                                            
  the Company                          (4,770)                         8,688                      (782)                 
   26,607

  Non-controlling                                                                                            
  interest (note
  8)                                       219                            179                       942                 
      625
                      $                            $                              $                         $

(4,551) 8,867 160

27,232


         

Net income (loss)                                                                                            
per share
attributable
to common
shareholders
(note 10)                                                                                                               
         

$ $ $ $ Basic (0.03) 0.06 (0.00)

0.19

$ $ $ $ Diluted (0.03) 0.06 (0.00)


     0.18

See accompanying notes to the interim condensed consolidated financial 
statements.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(000s) except per-share amounts (unaudited)                                                                             
         
                                                                                                     Non-  
                                      Share              Contributed             Retained     Controlling

Capital Surplus Earnings Interest Total Equity

Balance at $ $ $ $ $ December 31, 2011 2,140,660 47,776 32,361 15,079 2,235,876

Issue of common shares (note 9) 166,398 - - - 166,398

Share issue costs, net of tax (5,701) - - - (5,701)

Share-based payments - 11,091 - -

11,091

Capitalized share-based payments - 11,091 - -

11,091

Options - exercised (note 9) 15,079 (4,203) - -

10,876

Loss attributable to common shareholders - - (782) -

(782)

Income attributable to non-controlling interest - - - 942


      942

Balance at          $                           $                    $                    $               $
September 30,
2012                              2,316,436                   65,755               31,579          16,021               
2,429,791

(000s) except per-share amounts                                                                   
(unaudited)                                                                                                           
                                                                        Retained            Non-  
                                 Share             Contributed         Earnings      Controlling
                               Capital                 Surplus         (Deficit)        Interest          Total Equity

Balance at          $                      $                   $                 $               $
December 31,
2010                         1,508,052                  29,262          (10,320)          13,909             1,540,903

Issue of common                                                                                   
shares                         423,819                       -                 -               -               423,819

Share issue                                                                                       
costs, net of
tax                            (7,994)                       -                 -               -               (7,994)

Share-based                                                                                       
payments                             -                   8,552                 -               -                 8,552

Capitalized                                                                                       
share-based
payments                             -                   8,552                 -               -                 8,552

Options                                                                                           
exercised                       13,056                 (3,649)                 -               -                 9,407

Income                                                                                            
attributable to
common
shareholders                         -                       -            26,607               -                26,607

Income                                                                                            
attributable to
non-controlling
interest                             -                       -                 -             625                   625

Balance at          $                      $                   $                 $               $
September 30,
2011                         1,936,933                  42,717            16,287          14,534             2,010,471

See accompanying notes to the interim condensed consolidated financial 
statements.

CONSOLIDATED STATEMENTS OF CASH FLOW
                   
                                         Three Months Ended                              Nine Months Ended

(000s) (unaudited)            September 30,           September 30,        September 30,            September 30,
                                       2012                    2011                 2012                     2011

Cash provided by                                                                              
(used in):                                                                                                       

Operations:                                                                                                      

  Net income (loss)     $           (4,770)     $             8,688     $          (782)     $             26,607

  Items not                                                                             
  involving cash:                                                                                                
    Depletion and                                                                             
    depreciation                     58,733                  48,059              176,530                  116,928
    Accretion                           325                     335                  940                    1,009
    Share-based                                                                               
    payments                          3,575                   3,258               11,091                    8,552
    Deferred taxes                    2,363                   7,275                7,318                   17,061
    Unrealized                                                                                
    (gain) loss on
    financial
    instruments
    (note 3)                          3,551                 (5,075)              (1,323)                  (5,360)
    Realized (gain)                                                                           
    on sale of
    investments                           -                       -                 (38)                        -
    (Gain) loss on                                                                            
    divestitures                      (324)                       -              (7,596)                    3,630
    Non-controlling                                                                           
    interest                            219                     179                  942                      625

Decommissioning                       (157)                                                   
expenditures                                                   (33)                (610)                  (1,011)

Changes in non-cash                   3,198                                                   
operating working
capital                                                      14,936             (17,666)                  (1,421)
                                     66,713                  77,622              168,806                  166,620

Financing:                                                                              

  Issue of common                   141,170                   3,862              185,783
  shares                                                                                                  230,846

  Share issue costs                 (5,457)                                      (7,602)
                                                              (529)                                      (10,583)

  Increase                        (104,788)                  95,705              128,521
  (decrease) in
  bank debt                                                                                               140,150
                                     30,925                  99,038              306,702                  360,413

Investing:                                                                                                       

  Exploration and                  (25,890)                (56,396)             (59,921)
  evaluation                                                                                            (164,324)

  Property, plant                 (143,585)                                             
  and equipment                                           (127,229)            (391,403)                (331,189)

  Property                          (5,867)                                      (6,841)
  acquisitions                                             (65,894)                                     (108,642)

  Proceeds from                          65                     357               12,633
  divestitures                                                                                              7,366

  Proceeds from                           -                       -                  168
  sale of
  investments                                                                                                 338

  Repayment of                        (931)                   (931)              (2,794)
  long-term
  obligation                                                                                              (2,794)

  Changes in                         78,570                  73,433             (27,350)
  non-cash
  investing working
  capital                                                                                                   7,052
                                   (97,638)                                                   
                                                          (176,660)            (475,508)                (592,193)

Changes in cash                           -                       -                    -                 (65,160)

Cash, beginning of                        -                                                   
period                                                            -                    -                   65,160

Cash, end of period     $                 -     $                 -     $              -     $                  -

Cash is defined as cash and cash equivalents.
See accompanying notes to the interim condensed consolidated financial 
statements.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the three and nine months ended September 30, 2012 and 2011
(tabular amounts in thousands of dollars, unless otherwise noted) (unaudited)

Incorporation:

Tourmaline Oil Corp. (the "Company") was incorporated under the laws of the 
Province of Alberta on July 21, 2008.  The Company is engaged in the 
acquisition, exploration, development and production of petroleum and natural 
gas properties.  These consolidated financial statements reflect only the 
Company's proportionate interest in such activities.

The Company's registered office is located at 3700, 250 - 6(th) Avenue S.W., 
Calgary, Alberta, Canada T2P 3H7.

1.   BASIS OF PREPARATION

These unaudited interim condensed consolidated financial statements have been 
prepared in accordance with International Accounting Standard ("IAS") 34, 
"Interim Financial Reporting".  These unaudited interim condensed 
consolidated financial statements do not include all of the information and 
disclosure required in the annual financial statements and should be read in 
conjunction with the Company's audited consolidated financial statements for 
the year ended December 31, 2011.

The accounting policies and significant accounting judgments, estimates, and 
assumptions used in these unaudited interim condensed consolidated financial 
statements are consistent with those described in Notes 1 and 2 of the 
Company's audited consolidated financial statements for the year ended 
December 31, 2011.

The unaudited interim condensed consolidated financial statements were 
authorized for issue by the Board of Directors on November 7, 2012.

2.   DETERMINATION OF FAIR VALUE

A number of the Company's accounting policies and disclosures require the 
determination of fair value, for both financial and non-financial assets and 
liabilities. Fair values have been determined for measurement purposes based 
on the following method. When applicable, further information about the 
assumptions made in determining fair values is disclosed in the notes specific 
to that asset or liability.

Measurement:

Tourmaline classifies the fair value of transactions according to the 
following hierarchy based on the amount of observable inputs used to value the 
instrument.
    --  Level 1 - Quoted prices are available in active markets for
        identical assets or liabilities as of the reporting date.
        Active markets are those in which transactions occur in
        sufficient frequency and volume to provide pricing information
        on an ongoing basis.
    --  Level 2 - Pricing inputs are other than quoted prices in active
        markets included in Level 1. Prices are either directly or
        indirectly observable as of the reporting date. Level 2
        valuations are based on inputs, including quoted forward prices
        for commodities, time value and volatility factors, which can
        be substantially observed or corroborated in the marketplace.
    --  Level 3 - Valuations in this level are those with inputs for
        the asset or liability that are not based on observable market
        data.

3.   FINANCIAL RISK MANAGEMENT

The Board of Directors has overall responsibility for the establishment and 
oversight of the Company's risk management framework.  The Board has 
implemented and monitors compliance with risk management policies.

The Company's risk management policies are established to identify and analyze 
the risks faced by the Company, to set appropriate risk limits and controls, 
and to monitor risks and adherence to market conditions and the Company's 
activities.  The Company's financial risks are consistent with those 
discussed in note 5 of the Company's audited consolidated financial statements 
for the year ended December 31, 2011.

As at September 30, 2012, the Company has entered into certain financial 
derivative and physical delivery sales contracts in order to manage commodity 
risk.  These instruments are not used for trading or speculative purposes.  
The Company has not designated its financial derivative contracts as effective 
accounting hedges, even though the Company considers all commodity contracts 
to be effective economic hedges.  As a result, all such commodity contracts 
are recorded on the interim condensed consolidated statement of financial 
position at fair value, with changes in the fair value being recognized as an 
unrealized gain or loss on the interim condensed consolidated statement of 
income (loss) and comprehensive income (loss).

The Company has entered into the following financial derivative contracts 
since December 31, 2011 to September 30, 2012:
                                                            

Financial                                                   
Swaps:                                     

Type of                                                    Fair Value
Contract    Quantity     Time Period      Contract Price

Financial                July 2012 -                              176
Swap        100 bbls/d   June 2013        USD$100.10/bbl

Financial                August 2012 -                            225
Swap        100 bbls/d   July 2013        USD$101.10/bbl

Financial                August 2012 -                            318
Swap        100 bbls/d   December 2013    USD$100.60/bbl

Financial                January 2013 -                           263
Swap        100 bbls/d   December 2013    USD$101.05/bbl

Financial                July 2012 -                              180
Swap        100 bbls/d   March 2013       USD$103.30/bbl

Financial                January 2013 -                           277
Swap        100 bbls/d   December 2013    USD$101.45/bbl

Financial                January 2013 -                           347
Swap        100 bbls/d   December 2013    USD$103.40/bbl

Financial                January 2013 -                           202
Swap        100 bbls/d   December 2013    USD$99.35/bbl
                                          

Financial                               
Swaps/Swaptions:                                           

Type of                                                   Fair Value
Contract    Quantity     Time Period     Contract Price

Financial                April 2012 -                            588
Swap((1))   400 bbls/d   December 2012   USD$109.00/bbl

Swaption(                January 2013                          (150)
(1))                     - December
            400 bbls/d   2013            USD$108.00/bbl

Financial                July 2013 -                             100
Swap((2))   100 bbls/d   December 2013   USD$99.00/bbl

Swaption(                January 2014                          (225)
(2))                     - December
            100 bbls/d   2014            USD$100.00/bbl

Financial                July 2013 -                             136
Swap((2))   100 bbls/d   December 2013   USD$97.50/bbl

Swaption(                January 2014                          (225)
(2))                     - December
            100 bbls/d   2014            USD$100.00/bbl

Financial                July 2013 -                             185
Swap((2))   100 bbls/d   December 2013   USD$103.75/bbl

Swaption(                January 2014                          (225)
(2))                     - December
            100 bbls/d   2014            USD$100.00/bbl

Financial                January 2013                            333
Swap((2))                - December
            100 bbls/d   2013            USD$103.00/bbl

Swaption(                January 2014                          (225)
(2))                     - December
            100 bbls/d   2014            USD$100.00/bbl

Financial                January 2013                          1,095
Swap((3))   10,000       - December
            MMbtu/d      2013            USD$4.15/MMbtu

Swaption(                January 2014                        (1,590)
(3))        10,000       - December
            Mmbtu/d      2014            USD$4.15/MMbtu

((1)) This is a combined transaction (European swaption) whereby the Company 
provided the option to extend an oil swap into 2013 to realize a higher price 
on an oil swap in 2012.  The option to extend can only be exercised on 
December 31, 2012.
((2)) This is a combined transaction (European swaption) whereby the Company 
provided the option to extend an oil swap into 2014 to realize a higher price 
on an oil swap in 2013.  The option to extend can only be exercised on 
December 31, 2013.
((3)) This is a combined transaction (European swaption) whereby the Company 
provided the option to extend a gas swap into 2014 to realize a higher price 
on a gas swap in 2013.  The option to extend can only be exercised on 
December 23, 2013.

No financial derivative contracts were entered into subsequent to September 
30, 2012.

As at September 30, 2012, if the future strip prices for oil were $1.00 per 
bbl higher and prices for natural gas were $0.10 per mcf higher, with all 
other variables held constant, before-tax earnings would have been $1.5 
million (September 30, 2011 - $0.3 million) lower.  An equal and opposite 
impact would have occurred to before-tax earnings and the fair value of the 
derivative contracts liability if oil prices were $1.00 per bbl lower and gas 
prices were $0.10 per mcf lower.  In addition to the financial commodity 
contracts discussed above, the Company has entered into physical contracts to 
manage commodity risk. These contracts are considered normal sales contracts 
and are not recorded at fair value in the consolidated financial statements.

On May 29, 2012, the Company entered into an interest rate swap. The following 
table outlines the realized and unrealized losses on the interest rate 
contract recorded on the consolidated statement of income (loss) and 
comprehensive income (loss) for the three and nine months ended September 30, 
2012:

(000s)                                                                                        
                                         Counter      Three Months Ended       Nine Months Ended
                              Company     Party       September 30, 2012      September 30, 2012
         Type                  Fixed     Floating

(Floating Interest Rate Realized Unrealized Realized Unrealized Term to Fixed) Amount Rate (%) Index (Loss) Gain (Loss) (Loss)

May 29, 2012- May 29, Floating 2014 Swap $150,000 1.35% Rate (49) 240 (65) (367)


                                                                                        

The following table provides a summary of the unrealized gains (losses) on 
financial instruments for the three and nine months ended September 30, 2012 
and 2011:
                   
                              Three Months Ended                           Nine Months Ended

September 30, September 30, September 30, September 30, (000s) 2012 2011 2012 2011

Unrealized $ $ $ $ gain (loss) on financial instruments (3,551) 5,139 1,426 5,510

Unrealized (loss) on investments held for trading - (64) (103) (150)

$ $ $ $ Total (3,551) 5,075 1,323 5,360

The Company has entered into the following physical contracts since December 31, 2011 to September 30, 2012:

Type of Contract Quantity Time Period Contract Price

AECO/Nymex February 2012 Differential 6,000 MMbtu/d - December Nymex less Swap ((1)) 2012 USD$0.42/MMbtu

AECO/Nymex February 2012 Differential - December Nymex less Swap 5,000 MMbtu/d 2012 USD$0.325/MMbtu

AECO/Nymex February 2012 Differential - December Nymex less Swap 7,000 MMbtu/d 2012 USD$0.44/MMbtu

AECO/Nymex Differential November 2012 Nymex less Swap 5,000 MMbtu/d - March 2013 USD$0.405/MMbtu

AECO/Nymex Differential November 2012 Nymex less Swap 5,000 MMbtu/d - October 2013 USD$0.445/MMbtu

AECO/Nymex Differential 10,000 November 2012 Nymex less Swap MMbtu/d - October 2013 USD$0.3975/MMbtu

AECO Costless July 2012 - $1.70/GJ floor - Collar 5,000 Gjs/d December 2012 $2.15/GJ ceiling

AECO Costless July 2012 - $1.80/GJ floor - Collar 5,000 Gjs/d December 2012 $2.25/GJ ceiling

AECO/Nymex November 2012 Differential - December Nymex less Swap 5,000 MMbtu/d 2013 USD$0.425/MMbtu

AECO/Nymex Differential 10,000 January 2013 - Nymex less Swap MMbtu/d December 2013 USD$0.4575/MMbtu

AECO/Nymex Differential 10,000 January 2014 - Nymex less Swap MMbtu/d December 2014 USD$0.415/MMbtu

AECO Fixed January 2013 - Price((2)) 10,000 Gjs/d December 2013 CAD$3.625/GJ

AECO Fixed Price January 2014 - Swaption((2)) 15,000 Gjs/d December 2014 CAD$3.50/Gj

((1)) This is a restructuring of a previously held contract whereby the volumes, contract price and time period of the contract were amended subsequent to December 31, 2011. ((2)) This is a combined transaction (European swaption) whereby the Company provided the option to extend a gas swap into 2014 to realize a higher price on a gas swap in 2013.  The option to extend can only be exercised on December 31, 2013.

The following physical contracts were entered into subsequent to September 30, 2012:

Type of Contract Quantity Time Period Contract Price

AECO Fixed January 2013 - Price((1)) 10,000 Gjs/d December 2013 CAD$3.64/Gj

AECO Fixed Price January 2014 - Swaption((1)) 10,000 Gjs/d December 2014 CAD$3.50/Gj

AECO Fixed April 2013 - Price((2)) 10,000 Gjs/d October 2013 CAD$3.65/Gj

AECO Fixed Price November 2013 Swaption((2)) 10,000 Gjs/d - October 2014 CAD$3.80/Gj

AECO/Nymex Differential November 2012 Nymex less Swap 10,000 MMbtu/d - March 2013 USD$0.355/MMbtu

AECO/Nymex Differential January 2013 - Nymex less Swap 10,000 MMbtu/d December 2013 USD$0.435/MMbtu

((1)) This is a combined transaction (European swaption) whereby the Company provided the option to extend a gas swap into 2014 to realize a higher price on a gas swap in 2013.   The option to extend can only be exercised on December 31, 2013. ((2)) This is a combined transaction (European swaption) whereby the Company provided the option to extend a gas swap into 2014 to realize a higher price on a gas swap in 2013.   The option to extend can only be exercised on October 31, 2013.

4.   EXPLORATION AND EVALUATION ASSETS

(000s)

As at December 31, 2011 $ 620,515

Capital expenditures 64,440

Transfers to property, plant and (47,174) equipment (note 5)

Acquisitions 7,538

Divestitures (5,729)

As at September 30, 2012 $ 639,590

General and administrative expenditures for the nine months ended September 30, 2012 of $3.9 million (December 31, 2011 — $8.2 million) have been capitalized and included as exploration and evaluation assets.  Non-cash share-based payment expense in the amount of $4.5 million (December 31, 2011 - $9.4 million) were also capitalized and included in exploration and evaluation assets.

5.   PROPERTY, PLANT AND EQUIPMENT

Cost

(000s)

As at December 31, 2011 $ 2,276,303

Capital expenditures 397,975

Transfers from exploration and evaluation 47,174 (note 4)

Change in decommissioning liabilities 4,390 (note 6)

Acquisitions 4,103

Divestitures (4,252)

As at September 30, 2012 $ 2,725,693

Accumulated Depletion, Depreciation and Amortization

(000s)

As at December 31, 2011 $ 252,415

Depletion, depreciation and amortization 176,530

As at September 30, 2012 $ 428,945

Net Book Value

(000s)

As at December 31, 2011 $ 2,023,888

As at September 30, 2012 $ 2,296,748

General and administrative expenditures for the nine months ended September 30, 2012 of $4.3 million (December 31, 2011 - $1.8 million) have been capitalized and included as costs of oil and natural gas properties.  Also included in oil and natural gas properties is non-cash share-based payment expense of $6.6 million (December 31, 2011 - $2.3 million).

Future development costs for the nine months ended September 30, 2012 of $1,674 million (December 31, 2011 - $1,539 million) were included in the depletion calculation.

6.   DECOMMISSIONING OBLIGATIONS

The Company's decommissioning obligations result from net ownership interests in petroleum and natural gas assets including well sites, gathering systems and processing facilities.  The Company estimates the total undiscounted amount of cash flow required to settle its decommissioning obligations is approximately $76.7 million (December 31, 2011 - $72.5 million), with some abandonments expected to commence in 2021.    A risk-free rate of 2.49% (December 31, 2011 - 2.49%) and an inflation rate of 2.0% (December 31, 2011 - 2.0%) were used to calculate the fair value of the decommissioning obligations.

(000s) Nine Months Ended Year Ended

September 30, 2012 December 31, 2011

Balance, beginning of 50,463 $ 35,279 period $

Obligation incurred 4,198 6,048

Obligation incurred - 2,430 on corporate acquisitions

Obligation incurred 192 1,845 on property acquisitions

Obligation divested (144) (481)

Obligation settled (610) (1,047)

Accretion expense 940 1,315

Change in future - 5,074 estimated cash outlays

Balance, end of period $ 55,039 $ 50,463

7.   BANK DEBT

In June 2012, the Company amended and restated its bank credit facility to a covenant-based facility rather than a borrowing base facility.  This facility is a three-year extendible revolving facility in the amount of $550 million plus a $25 million operating revolver from a syndicate of lenders with an initial maturity date of June 2015.  The maturity date may, at the request of the Company and with the consent of the lenders, be extended on an annual basis.  The facility is secured by a first ranking floating charge over all assets of the Company and its material subsidiaries.  The facility can be drawn in either Canadian or U.S. funds and bears interest at the bank's prime lending rate, bankers' acceptance rates or LIBOR (for U.S. borrowings), plus applicable margins, which range from 2.00 to 3.25 percent over bankers' acceptance rates depending on the Company's senior debt to EBITDA ratio.

Under the terms of the bank credit facility, Tourmaline has provided its covenant that, on a rolling four quarter basis: (i) the ratio of EBITDA to interest expense shall equal or exceed 3.5:1, (ii) the ratio of senior debt to EBITDA shall not exceed 3:1, (iii) the ratio of total debt to EBITDA shall not exceed 4:1, and (iv) the ratio of senior debt to total capitalization shall not exceed 0.5:1.  As at September 30, 2012, the Company is in compliance with all debt covenants.

As at September 30, 2012, Tourmaline's bank debt balance was $210.3 million (December 31, 2011 - $81.7 million).  In addition, Tourmaline has outstanding letters of credit of $3.5 million (December 31, 2011 - $3.6 million), which reduce the credit available on the facility.

8.   NON-CONTROLLING INTEREST

Tourmaline owns 90.6 percent of Exshaw Oil Corp., a private company engaged in oil and gas exploration in Canada.

A reconciliation of the non-controlling interest is provided below:

Nine Months Ended Year Ended (000s) September 30, 2012 December 31, 2011

Balance, beginning of $ 13,909 period $ 15,079

Share of 1,170 subsidiary's net income for the period 942

Balance, end of period $ 16,021 $ 15,079

9.   SHARE CAPITAL

(a)   Authorized

Unlimited number of Common Shares without par value. Unlimited number of non-voting Preferred Shares, issuable in series.

(b)   Common Shares Issued


                                
                               Nine Months Ended                              Year Ended
                              September 30, 2012                       December 31, 2011

($000s)          Number of                Amount       Number of                  Amount
                    Shares                                Shares

Balance,       158,577,586   $         2,140,660     136,191,061   $           1,508,052
beginning of
period

For cash on      4,639,000               134,531      11,725,000                 335,737
public
offering of
common
shares((3))

For cash on      1,402,000                31,867       1,361,500                  44,290
public
offering of
flow-through
common
shares((1)
(2))

For cash on              -                     -       1,580,000                  39,658
private
placement of
flow-through
common
shares

Issued on                -                     -       6,363,523                 210,124
corporate
acquisitions

For cash on      1,058,992                10,876       1,356,502                  12,532
exercise of
stock
options

Contributed              -                 4,203               -                   4,856
surplus on
exercise of
stock
options

Share issue              -               (7,602)               -                (19,329)
costs

Tax effect               -                 1,901               -                   4,740
of share
issue costs

Balance, end   165,677,578   $         2,316,436     158,577,586   $           2,140,660
of period

((1)) On December 1, 2011, the Company issued 1.36 million flow-through common 
shares at $41.00 per share for total gross proceeds of $55.8 million.  The 
implied premium on the flow-through common shares was determined to be $11.5 
million or $8.47 per share.  A total of 0.16 million shares were purchased by 
insiders.  As at September 30, 2012, the Company had spent the full committed 
amount. The expenditures were renounced to investors in February 2012, with an 
effective date of renunciation of December 31, 2011.
((2) )On April 4, 2012, the Company issued 1.4 million flow-through common 
shares at $28.80 per share for total gross proceeds of $40.4 million.  The 
implied premium on the flow-through common shares was determined to be $8.5 
million or $6.07 per share.  A total of 0.15 million shares were purchased by 
insiders.  As at September 30, 2012, the Company has spent $4.4 million on 
eligible expenditures and is committed to spend the remainder of $36.0 million 
on qualified exploration and development expenditures by December 31, 2013.  
The expenditures will be renounced to investors with an effective renunciation 
date of December 31, 2012.
((3))On August 30, 2012, the Company issued 4.039 million common shares at a 
price of $29.00 per share for total gross proceeds of $117.1 million.  A 
total of 39,000 shares were purchased by insiders.  Subsequently, on 
September 19, 2012, the Underwriters exercised their over-allotment Option and 
purchased a further 0.6 million shares at a price of $29.00 per share for 
total gross proceeds of $17.4 million.

   

10.   EARNINGS PER SHARE

Basic earnings-per-share was calculated as follows:
                
                              Three Months Ended                            Nine Months Ended
                         September 30,         September                 September 30,     September
                                  2012               30,                          2012           30,
                                                    2011                                        2011

Net          $                 (4,770)     $       8,688     $                   (782) $      26,607
earnings
(loss)
for the
period
(000s)

Weighted                   162,032,270       151,044,426                   160,301,308   143,230,945
average
number
of
common
shares -
basic

Earnings     $                  (0.03)     $        0.06     $                  (0.00) $        0.19
(loss)
per
share -
basic
                                                                                          

Diluted earnings-per-share was calculated as follows:
                              Three Months Ended                                   Nine Months Ended
                                               September                                   September
                         September 30,               30,                 September 30,           30,
                                  2012              2011                          2012          2011

Net          $
earnings
(loss)
for the
period
(000s)                         (4,770)     $       8,688     $                   (782) $      26,607

Weighted      
average
number
of
common
shares -
diluted(
(1))                       162,032,270       157,562,227                   160,301,308   148,999,440

Earnings     $
(loss)
per
share -
fully
diluted                         (0.03)     $        0.06     $                  (0.00) $        0.18

((1) )The diluted weighted average number of common shares for the three and 
nine months ended September 30, 2012 are the same as that reported for basic 
weighted average number of common shares as they are anti-dilutive in 
determining earnings-per-share.( )

There were 14,134,531 options excluded from the weighted-average share 
calculation for the nine months ended September 30, 2012 because they were 
anti-dilutive (September 30, 2011 - 1,640,000).

11.   SHARE-BASED PAYMENTS

The Company has a rolling stock option plan.  Under the employee stock option 
plan, the Company may grant options to its employees up to 16,567,758 shares 
of common stock.  The exercise price of each option equals the 
volume-weighted average market price for the five days preceding the issue 
date of the Company's stock on the date of grant and the option's maximum term 
is five years.  Options are granted throughout the year and vest 1/3 on each 
of the first, second and third anniversaries from the date of grant.
                                                                    
                                         Nine Months Ended
                  September 30, 2012           September 30, 2011
                              Weighted               
                               Average                      Weighted
                  Number of   Exercise    Number of          Average
                    Options      Price      Options   Exercise Price

Stock options               $                       $
outstanding,
beginning of
period           14,213,523      16.82   11,997,000            12.24

  Granted           980,000      23.57    1,730,000            28.74

  Exercised     (1,058,992)      10.27    (946,502)             9.94

  Forfeited               -          -    (179,999)            13.64

Stock options               $                       $
outstanding,
end of period    14,134,531      17.78   12,600,499            14.66

The following table summarizes stock options outstanding and exercisable at 
September 30, 2012:
                                                                   
                            Weighted     Weighted                   Weighted

Number Average Average Number Average Range of Outstanding Remaining Exercise Exercisable Exercise Exercise at Period Contractual Price at Price

Price End Life Period End

$7.00 2,445,051 1.15 $ 7.09 2,445,051 $ 7.09 - $8.00

$10.00 4,349,790 1.96 12.86 3,463,123 12.31

- $15.00

$16.68 7,339,690 3.67 24.25 2,179,333 21.00

- $32.78


            14,134,531          2.68   $    17.78     8,087,507   $    13.07

The fair value of options, granted during the year, was estimated on the date 
of grant using the Black-Scholes option-pricing model with the following 
weighted average assumptions and resulting values:
                                                      
                                   September 30,     September 30,
                                            2012              2011

Fair value of options granted    $          8.11   $         10.92
(weighted average)

Risk-free interest rate                    2.38%             2.12%

Estimated hold period prior to           4 years           5 years
exercise

Expected volatility                          40%               40%

Forfeiture rate                               2%                2%

Dividend per share               $          0.00   $          0.00

12.   COMMITMENTS   

On April 4, 2012, the Company issued 1.4 million common shares on a 
flow-through basis at a price of $28.80 per share for gross proceeds of $40.4 
million.   As of September 30, 2012, the Company has spent $4.4 million on 
eligible expenditures and is committed to spend the remaining $36.0 million 
before December 31, 2013.

In the normal course of business, Tourmaline is obligated to make future 
payments.  These obligations represent contracts and other commitments that 
are known and non-cancellable:
                                                                                                      

Payments Due                                                                                  
by Year                                                                           2016 and
(000s)                 2012          2013           2014            2015        Thereafter       Total

Operating           $            $              $              $              $              $
leases                  637         2,266          2,121             526                 -       5,550

Flow-through                                                                                  
obligations               -        35,953              -               -                 -      35,953

Firm                                                                                          
transportation
agreements            7,246        29,693         21,609          12,171             1,058      71,777

Bank debt((1))            -             -              -         235,382                 -     235,382
                    $ 7,883      $ 67,912       $ 23,730       $ 248,079      $      1,058   $ 348,662

((1)) Includes interest expense at an annual rate of 3.55% being the rate 
applicable at September 30, 2012.

13.    SUBSEQUENT EVENTS

On October 9, 2012, the Company announced that it entered into a flow-through 
common share bought deal financing agreement.  The Company will issue 
1,000,000 flow-through common shares at a price of $36.90 per share for gross 
proceeds of $36.9 million.  In addition, officers, directors and employees of 
Tourmaline will have the opportunity to purchase up to a maximum of 50,000 
additional flow-through common shares at a price of $36.90 on a private 
placement basis.

On October 23, 2012, Tourmaline entered into an agreement with Huron Energy 
Corp. ("Huron"), a private corporation, pursuant to which Tourmaline will 
acquire all of the issued and outstanding shares of Huron on the basis of 
0.07644 of a Tourmaline common share for each Huron common share, which is 
expected to close on November 30, 2012.  The deal is subject to approval by 
the shareholders of the company being acquired.

The acquisition will be accounted for under IFRS 3, "Business Combinations", 
by the acquisition method based on the fair value of the assets acquired. The 
initial accounting for the business combination is incomplete as the Company 
is in the process of evaluating the fair value of the assets acquired under 
IFRS in order to complete the purchase price equation for recognition, 
measurement and presentation in the Company's financial results for the year 
ended December 31, 2012.

On November 7, 2012, Tourmaline closed an acquisition of a producing oil and 
gas asset for a cash purchase price of $84.1 million.

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.

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 Phone:  (403) 266-5992 Facsimile:  (403) 266-5952 
Website: www.tourmalineoil.com

SOURCE: Tourmaline Oil Corp.

To view this news release in HTML formatting, please use the following URL: 
http://www.newswire.ca/en/releases/archive/November2012/08/c5626.html

CO: Tourmaline Oil Corp.
ST: Alberta
NI: OIL ERN 

-0- Nov/08/2012 22:08 GMT

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