Tourmaline Oil Corp. Announces Q1 2013 Financial Results: Continues Record Profitable Growth

Tourmaline Oil Corp. Announces Q1 2013 Financial Results: Continues Record 
Profitable Growth 
CALGARY, ALBERTA -- (Marketwired) -- 05/08/13 -- Tourmaline Oil Corp.
(TSX:TOU) ("Tourmaline" or the "Company") is pleased to announce
results for the three months ended March 31, 2013 and provide an
update on its 2013 EP program. 
Q1 2013 Highlights 


 
--  Production for the first quarter of 2013 averaged 68,636 boepd - a 47%
    increase over Q1 2012 and a 20% increase over the fourth quarter of
    2012. 
    
--  Record after-tax earnings for the quarter of $52.2 million compared to
    $3.0 million for the first quarter of 2012. 
    
--  Record quarterly cash flow(1) of $116.6 million - an 89% increase over
    Q1 2012 and representing 24% growth over the previous quarter. 
    
--  First quarter 2013 operating expenses of $4.27/Boe and G&A cash costs of
    $0.80/Boe highlight continued top tier cost structure. 
    
--  Operating netback(2) in the first quarter improved to $20.20/Boe - a 30%
    increase over the same quarter in 2012. 
    
--  Completed a $233.2 million equity financing on March 12, 2013. 
    
--  Completed the sale of the non-producing Elmworth property on March 12,
    2013 for proceeds of $77.5 million. 
    
--  In the process of expanding the Company's credit facility from $575
    million to $750 million, which is substantially less than the overall
    credit capacity of the Company. 
    
 
(1) Cash flow is defined as cash provided by operations before charges in   
    non-cash working capital. See "Non-GAAP Financial Measures" in the      
    attached Management's Discussion and Analysis.                          
(2) Operating netback is defined as revenue (excluding processing income)   
    less royalties, transportation costs and operating expenses. See "Non-  
    GAAP Financial Measures" in the attached Management's Discussion and    
    Analysis.                                                               

 
Production Update 
Tourmaline achieved record Q1 2013 average production of 68,636
boepd, a 47% increase over first quarter 2012, and 20%
quarter-over-quarter growth from Q4 2012. Unplanned downtime in NEBC
and a compressor failure at Musreau in March reduced first quarter
volumes by approximately 750 bo
epd. The majority of the tie-ins from
the winter program were also completed in late March. The Company
achieved the 75,000 boepd production level at the end of March,
without the contribution of the ongoing major facility projects at
Sunrise-Dawson and Spirit River. April production averaged
approximately 74,350 boepd despite unscheduled downtime (third party
facility disruptions in NEBC, and Edson, AB), representing 8% further
growth over the first quarter 2013 average. The new gas plant at
Dawson-Sunrise and the gas handling facility expansion at Spirit
River will bring an additional 12,000-13,000 boepd of shut-in
production on stream during the month of June, bringing corporate
production levels to approximately 86,000-88,000 boepd entering the
third quarter. 
Second half facility expansions at Wild River and Banshee/Minehead in
the Deep Basin, and pipeline debottle-necking at Spirit River will
add substantial additional production volumes during the second half
of 2013, continuing the strong quarterly growth trend. The Company
remains on track to meet or exceed the upwards revised 2013 average
production target of 80,000 boepd. Tourmaline expects to exit 2013
producing natural gas volumes in excess of 500 mmcfpd in a period of
improving natural gas prices. The Company also expects to exceed the
15,000 bopd oil and liquids target by year end. 
EP/Capital Program Update 
During the first quarter of 2013, Tourmaline drilled 20 new gas wells
(18.2 net) and 7 new oil wells (7 net) and no dry holes. The Company
will operate 13 drilling rigs after break-up - an increase from the
originally planned 2H 2013 11-rig program. Eight rigs will be
employed in the Alberta Deep Basin: one pursuing multi-objective,
seismically defined Frontal Foothills vertical targets; one rig will
be testing Cretaceous Notikewin horizontal targets; and six rigs will
be exploiting Cretaceous Wilrich horizontal targets. Major Wilrich
development projects will be pursued at Minehead-Banshee, Lovett
River, Smoky-Resthaven and Wild River during the second half of 2013.
Of the 35 Wilrich horizontals drilled thus far in the 2012-2013
time-frame, 30 have initial production rates in excess of 10 mmcfpd.
The Company expects to drill and complete a total of 50 Wilrich
horizontals during calendar 2013, with the majority of these wells
tied in by year end. 
Two drilling rigs will be employed in NEBC pursing horizontal Montney
gas-condensate targets, one at Sunrise-Dawson executing the ongoing
development, and the second exploiting multiple new opportunities at
Sundown and Groundbirch. Two drilling rigs will be active in the
Greater Spirit River area of Alberta pursuing horizontal Triassic
Charlie Lake oil and gas objectives. The final rig will be testing
large reserve Paleozoic Exploration opportunities in Alberta and
NEBC, beneath Tourmaline's existing EP complexes.  
Full-year 2013 capital spending of $770.0 million is currently
anticipated. During the first quarter of 2013, the Company closed a
$233.2 million equity financing and a $77.5 million non-producing
asset disposition at Elmworth, Alberta. Net debt at the end of the
first quarter was $324.3 million, or approximately 0.5 times
anticipated full year 2013 cash flow of $643 million. 
Tourmaline is also in the process of expanding its bank line of
credit with its banking syndicate to $750.0 million. 


 
CORPORATE SUMMARY - FIRST QUARTER 2013                                      
----------------------------------------------------------------------------
                                              Three Months Ended March 31,  
                                               2013         2012    Change  
                                        ------------------------------------
OPERATIONS                                                                  
Production                                                                  
  Natural gas (mcf/d)                       367,287      246,490        49% 
  Crude oil and NGL (bbls/d)                  7,421        5,664        31% 
  Oil equivalent (Boe/d)                     68,636       46,746        47% 
                                                                            
Product prices(1)                                                           
  Natural gas ($/mcf)                        $ 3.50       $ 2.54        38% 
  Crude oil and NGL ($/bbl)                 $ 88.75      $ 91.48        (3)%
                                                                            
Operating expenses ($/Boe)                   $ 4.27       $ 5.19       (18)%
                                                                            
Transportation expenses ($/Boe)              $ 2.02       $ 1.78        13% 
                                                                            
Operating netback ($/Boe)(3)                $ 20.20      $ 15.52        30% 
                                                                            
Cash general & administrative expenses                                      
 ($/Boe)(2)                                  $ 0.80       $ 0.91       (12)%
                                                                            
                                                  
                          
FINANCIAL ($000, EXCEPT PER SHARE)                                          
Revenue                                     174,987      104,138        68% 
Royalties                                    11,363        8,471        34% 
                                                                            
Cash flow(3)                                116,599       61,836        89% 
Cash flow per share(3)                       $ 0.64       $ 0.38        68% 
                                                                            
Net earnings                                 52,184        2,976     1,653% 
Net earnings per share                       $ 0.29       $ 0.02     1,350% 
                                                                            
Capital expenditures                        190,463      216,424       (12)%
                                                                            
Weighted average shares outstanding                                         
 (diluted)                              181,774,427  163,296,191        11% 
                                                                            
Net debt(3)                               (324,260)     (382,366)      (15)%
                                                                            
(1) Product prices include realized gains and losses on financial instrument
    contracts.                                                              
(2) Excluding interest and financing charges.                               
(3) See "Non-GAAP Financial Measures" in the attached Management's          
    Discussion and Analysis.                                                

 
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, 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; 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 realize
the anticipated benefits of acquisitions; 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 is an estimate of Tourmaline's
2013 cash flow, which is 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 - $3.66/mcf) and crude oil (WTI -
$95.00/bbl US) and an exchange rate assumption of $1.00 (US/CDN). To
the extent such estimate constitutes a financial outlook, it was
approved by management of Tourmaline on May 8, 2013 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-GAAP Financial Measures" in the attached Management's Discussion
and Analysis.  
"Cash flow", "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-GAAP
Financial Measures" in the attached Management's Discussion and
Analysis for the definition and description of these terms. 
Certain Definitions: 


 
bbl                 barrel                                                  
boe                 barrel of oil equivalent                                
boepd or Boe/d      barrel of oil equivalent per day                        
bopd or bbl/d       barrel of oil, condensate or liquids per day            
mmboe               millions of barrel of oil equivalent                    
mbbls               thousand barrels                                        
mmcf                million cubic feet                                      
mmcfpd or mmcf/d    million cubic feet per day                              
mcf
e                thousand cubic feet equivalent                          
mmbtu               million British thermal units                           

 
Conference Call Tomorrow at 8:00 a.m. MT (10:00 a.m. ET) 
Tourmaline will host a conference call tomorrow, May 9, 2013 starting
at 8:00 a.m. MT (10:00 a.m. ET). To participate, please dial (866)
226-1798 (toll-free in North America) or (416) 340-2219 a few minutes
prior to the conference call.  
The conference call ID number is 4162458. 
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
months ended March 31, 2013 and the consolidated financial statements
for the year ended December 31, 2012. Both the consolidated financial
statements and the MD&A can be found at www.sedar.com. This MD&A is
dated May 8, 2013. 
The financial information contained herein has been prepared in
accordance with International Financial Reporting Standards ("IFRS")
and sometimes referred to in this MD&A as Generally Accepted
Accounting Principles ("GAAP") as issued by the International
Accounting Standards Board ("IASB"). 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-GAAP Financial Measures" for information
regarding the following Non-GAAP financial measures used in this
MD&A: "cash flow", "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, expenses, production, cash flow and 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 and cash flow 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. In addition, as the value ratio between natural gas and
crude oil based on current prices of natural gas and crude oil is
significantly different from the energy equivalency of 6:1, utilizing
a conversion on a 6:1 basis may be misleading as an indication of
value. 
PRODUCTION 


 
                       
                        Three Months Ended March 31, 
                                              ------------------------------
                                                    2013      2012   Change 
----------------------------------------------------------------------------
Natural Gas (mcf/d)                              367,287   246,490       49%
Crude oil and NGL (bbl/d)                          7,421     5,664       31%
----------------------------------------------------------------------------
Oil equivalent (Boe/d)                            68,636    46,746       47%
----------------------------------------------------------------------------

 
Production for the three months ended March 31, 2013 averaged 68,636
Boe/d, a 47% increase over the average production for the same
quarter of 2012 of 46,746 Boe/d. Production was 89% natural gas
weighted in the first quarter of 2013 compared to 88% natural gas
weighted in the first quarter of 2012. The Company's significant
production growth when compared to 2012 can be attributed to new
wells that have been brought on-stream since March 31, 2012, as well
as property and corporate acquisitions.  
Full-year average production guidance for 2013 remains unchanged at
80,000 Boe/d (as disclosed by press release February 20, 2013). 
REVENUE  


 
                                                Three Months Ended March 31,
                                              ------------------------------
(000s)                                              2013      2012    Change
----------------------------------------------------------------------------
Revenue from:                                                               
  Natural Gas                                  $ 115,709 $  56,988      103%
  Oil and NGL                                     59,278    47,150       26%
----------------------------------------------------------------------------
Total revenue from gas, oil and NGL sales      $ 174,987 $ 104,138     
  68%
----------------------------------------------------------------------------

 
Revenue for the three months ended March 31, 2013 increased 68% to
$175.0 million from $104.1 million for the same quarter of 2012.
Revenue growth is consistent with the increase in production and
increased natural gas prices over the same periods, partially offset
by lower oil prices. Revenue includes all petroleum, natural gas and
NGL sales and realized gains on financial instruments. 
TOURMALINE PRICES:  


 
                                              Three Months Ended March 31,  
                                              ------------------------------
                                                    2013      2012  Change  
----------------------------------------------------------------------------
Natural Gas ($/mcf)                            $    3.50 $    2.54      38% 
Oil and NGL ($/bbl)                            $   88.75 $   91.48      (3)%
Oil equivalent ($/Boe)                         $   28.33 $   24.48      16% 
----------------------------------------------------------------------------

 
The realized average natural gas price for the three months ended
March 31, 2013 was $3.50/mcf, which is 38% higher than the same
period of the prior year. Realized crude oil and NGL prices decreased
3%, from $91.48/bbl to $88.75/bbl, for the three months ended March
31, 2013 compared to the same period of 2012. 
The realized natural gas price for the quarter ended March 31, 2013
was 9% (March 31, 2012 - 20%) higher than the AECO index price. The
Company receives a premium to the AECO index on its Alberta Deep
Basin natural gas production to reflect a higher heat content, which
has remained consistent year-over-year (March 31, 2013 - 8% and March
31, 2012 - 8%). The realized gain on commodity contracts has
decreased from the same period in the prior year as the market price
of natural gas has increased relative to the prices per the commodity
contracts settled in the period. 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 GAS AND OIL PRICES: 


 
                                              Three Months Ended March 31,  
                                              ------------------------------
                                                    2013      2012  Change  
----------------------------------------------------------------------------
Natural Gas                                                                 
  NYMEX Henry Hub (US$/mcf)                    $    3.48 $    2.50      39% 
  AECO (CAD$/mcf)                              $    3.20 $    2.12      51% 
Oil                                                                         
  NYMEX (US$/bbl)                              $   94.36 $  103.03      (8)%
  Edmonton Par (CAD$/bbl)                      $   88.55 $   92.87      (5)%
----------------------------------------------------------------------------

 
RECONCILIATION OF AECO INDEX TO TOURMALINE'S REALIZED GAS PRICES: 


 
                                              Three Months Ended March 31,  
                                              ------------------------------
($/mcf)                                             2013      2012  Change  
----------------------------------------------------------------------------
AECO index                                     $    3.20 $    2.12      51% 
Heat/quality differential                           0.27      0.18      50% 
Realized gain                                       0.03      0.24     (88)%
----------------------------------------------------------------------------
Tourmaline realized natural gas price          $    3.50 $    2.54      38% 
----------------------------------------------------------------------------

 
CURRENCY - EXCHANGE RATES:  


 
                                              Three Months Ended March 31,  
                                              ------------------------------
                                                    2013      2012  Change  
----------------------------------------------------------------------------
CAD$/US$                                       $  0.9922 $  0.9988      (1)%
----------------------------------------------------------------------------

 
ROYALTIES 


 
                                               Three Months Ended March 31, 
                                               -----------------------------
(000s)                                                2013             2012 
----------------------------------------------------------------------------
Natural Gas                                      $   4,535        $     971 
Oil and NGL                                          6,828            7,500 
----------------------------------------------------------------------------
Total royalties                                  $  11,363        $   8,471 
----------------------------------------------------------------------------
Royalties as a percentage of revenue                   6.5%             8.1%
----------------------------------------------------------------------------

 
For the quarter ended March 31, 2013, the average effective royalty
rate decreased to 6.5% compared to 8.1% for the same quarter of 2012.
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. During the
first quarter of 2013, Tourmaline received payment on claims on the
Natural Gas Deep Drilling Program, resulting in a lower effective
royalty rate for the period. 
The Company expects its royalty rate for 2013 to be approximately 10%
as some of the wells will no longer qualify for royalty incentive
programs due to production maximums being reached and other wells
coming off royalty holidays, thereby increasing 
the Company's overall
royalty rate. 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 March 31, 2013, other income was $1.3 million,
which includes $1.2 million in processing income, compared to $1.5
million for the same quarter of 2012, 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. 
OPERATING EXPENSES 


 
                                              Three Months Ended March 31,  
                                              ------------------------------
(000s) except per unit amounts                      2013      2012  Change  
----------------------------------------------------------------------------
Operating expenses                             $  26,367 $  22,081      19% 
----------------------------------------------------------------------------
Per Boe                                        $    4.27 $    5.19     (18)%
----------------------------------------------------------------------------

 
Operating expenses include all periodic lease and field-level
expenses and exclude income recoveries from processing third-party
volumes. For the first quarter of 2013, total operating expenses
increased 19% from $22.1 million in the first quarter of 2012 to
$26.4 million in 2013 due to the increased variable costs relating to
new production. On a per Boe basis, the costs decreased 18% from
$5.19/Boe for the first quarter of 2012 to $4.27/Boe in the first
quarter of 2013 due to increased production, increased operational
efficiencies and the impact of redirecting natural gas from
third-party facilities to Tourmaline-owned infrastructure.
Tourmaline's operating expenses in the first quarter of 2
013 include
third-party processing, gathering and compression fees of
approximately $8.3 million or 31% of total operating costs (March 31,
2012 - $7.7 million or 35% of total operating costs). 
During 2013 the Company expects to complete the gas plant at Doe in
NEBC and the new natural gas and liquids handling facilities at
Spirit River. These projects will allow for additional volumes to
flow through Company owned-and-operated plants thereby reducing
third-party processing charges on a go-forward basis. 
The Company expects its full year 2013 operating costs to average
approximately $4.25/Boe, which is consistent with previous guidance.
Actual costs per Boe can change, however, depending on a number of
factors including the Company's actual production levels. 
TRANSPORTATION 


 
                                              Three Months Ended March 31,  
                                              ------------------------------
(000s) except per unit amounts                      2013      2012  Change  
----------------------------------------------------------------------------
Gas transportation                             $   8,285 $   5,868      41% 
Oil and NGL transportation                         4,185     1,680     149% 
----------------------------------------------------------------------------
Total transportation                           $  12,470 $   7,548      65% 
----------------------------------------------------------------------------
Per Boe                                        $    2.02 $    1.78      13% 
----------------------------------------------------------------------------

 
Transportation costs for the three months ended March 31, 2013 were
$12.5 million or $2.02/Boe (three months ended March 31, 2012 - $7.5
million or $1.78/Boe, respectively). The increase in total
transportation costs for the three months ended March 31, 2013 can be
attributed to increased production as well as to increased oil and
NGL transportation costs. Pipeline and infrastructure constraints
have resulted in greater use of more expensive truck transportation.  
GENERAL & ADMINISTRATIVE EXPENSES ("G&A") 


 
                                              Three Months Ended March 31,  
                                            --------------------------------
(000s) except per unit amounts                    2013       2012   Change  
----------------------------------------------------------------------------
G&A expenses                                 $   8,607  $   6,840       26% 
Administrative and capital recovery               (414)      (189)     119% 
Capitalized G&A                                 (3,252)    (2,801)      16% 
----------------------------------------------------------------------------
Total G&A expenses                           $   4,941  $   3,850       28% 
----------------------------------------------------------------------------
Per Boe                                      $    0.80  $    0.91      (12)%
----------------------------------------------------------------------------

 
G&A expenses for the first quarter of 2013 were $4.9 million compared
to $3.9 million for the same quarter of the prior year. G&A costs per
Boe for the first quarter of 2013 decreased 12% down to $0.80/Boe,
compared to $0.91/Boe for the same quarter of 2012. 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 2013 are expected to be similar to 2012 on a
dollar-per-Boe basis. Actual costs per Boe can change, however,
depending on a number of factors including the Company's actual
production levels.  
SHARE-BASED PAYMENTS  


 
                                               Three Months Ended March 31, 
                                               -----------------------------
(000s) except per unit amounts                        2013             2012 
----------------------------------------------------------------------------
Share-based payments                             $   7,180        $   7,616 
Capitalized share-based payments                    (3,590)          (3,808)
----------------------------------------------------------------------------
Total share-based payments                       $   3,590        $   3,808 
----------------------------------------------------------------------------
Per Boe                                          $    0.58        $    0.90 
----------------------------------------------------------------------------

 
Tourmaline uses the fair value method for the determination of
non-cash related share-based payments expense. During the first
quarter of 2013, 260,000 stock options were granted to employees,
officers, directors and key consultants at a weighted-average
exercise price of $35.45, and 1,979,883 options were exercised,
bringing $24.0 million of cash into treasury. The Company recognized
$3.6 million of share-based payment expense in the first quarter of
2013 compared to $3.8 million in the first quarter of 2012.
Capitalized share-based payment expense for the first quarter of 2013
was $3.6 million compared to $3.8 million for the same quarter of the
prior year. The decrease in share-based payment expense in the first
quarter of 2013 compared to 2012 reflects an increase in the
percentage of outstanding options that have been fully vested,
compared to those that haven't. Compensation expense associated with
options is recognised in income as the options vest.  
DEPLETION, DEPRECIATION AND AMORTIZATION ("DD&A")  


 
                                                Three Months Ended March 31,
                                                ----------------------------
(000s) except per unit amounts                         2013             2012
------------------------------------------------
----------------------------
Total depletion, depreciation and amortization    $  81,423        $  56,007
Less mineral lease expiries                          (7,582)               -
----------------------------------------------------------------------------
Depletion, depreciation and amortization          $  73,841        $  56,007
----------------------------------------------------------------------------
Per Boe                                           $   11.95        $   13.17
----------------------------------------------------------------------------

 
DD&A expense, net of mineral lease expiries expense, was $73.8
million for the first quarter of 2013 compared to $56.0 million for
the same period of 2012 due to higher production volumes, as well as
a larger capital asset base being depleted. The per-unit DD&A rate
(excluding the impact of mineral lease expiries) for the first
quarter of 2013 was $11.95/Boe compared to $13.17/Boe for the first
quarter of 2012. The lower DD&A rate, for the three months ended
March 31, 2013 compared to the same period of 2012, reflects strong
reserve additions derived from Tourmaline's exploration and
production program, coupled with lower finding and development costs
in 2012 versus those incurred in 2011. 
FINANCE EXPENSES 


 
                                              Three Months Ended March 31,  
                                              ------------------------------
(000s)                                              2013      2012  Change  
----------------------------------------------------------------------------
Interest expense                               $   3,259 $   1,469     122% 
Accretion expense                                    391       307      27% 
Transaction costs on corporate and property                                 
 acquisitions                                        670       172     290% 
Other                                                178       183      (3)%
------------------------
----------------------------------------------------
Total finance expenses                         $   4,498 $   2,131     111% 
----------------------------------------------------------------------------

 
Finance expenses for the three months ended March 31, 2013 totalled
$4.5 million and are comprised of interest expense, accretion of
provisions and transaction costs associated with corporate and
property acquisitions (March 31, 2012 - $2.1 million). The increased
finance expenses are largely due to a higher interest expense
resulting from a higher balance drawn on the credit facility in the
first quarter of 2013 compared to the same period in 2012. The
effective interest rate of 3.29% for the first quarter of 2013 is
relatively unchanged from the same period in 2012 of 3.26%. 
CASH FLOW FROM OPERATING ACTIVITIES, CASH FLOW AND NET EARNINGS 


 
                                               Three Months Ended March 31, 
                                              ------------------------------
(000s) except per unit amounts                      2013      2012   Change 
----------------------------------------------------------------------------
Cash flow from operating activities            $  93,763 $  59,527       58%
  Per share(1)                                 $    0.52 $    0.36       44%
                                                                            
Cash flow (2)                                  $ 116,599 $  61,836       89%
  Per share (1) (2)                            $    0.64 $    0.38       68%
                                                                            
Net earnings                                   $  52,184 $   2,976    1,653%
  Per share (1)                                $    0.29 $    0.02    1,350%
                                                                            
Operating netback per Boe (2)                  $   20.20 $   15.52       30%
----------------------------------------------------------------------------
(1) Fully diluted                                                           
(2) See "Non-GAAP Financial Measures"                                       

 
Cash flow for the three months ended March 31, 2013 was $116.6
million or $0.64 per diluted share compared to $61.8 million or $0.38
per diluted share for the same period of 2012. The increase in cash
flow in 2013 reflects higher natural gas prices over 2012, as well as
increased production.  
The Company had after-tax earnings for the three months ended March
31, 2013 of $52.2 million ($0.29 per diluted share) compared to
earnings of $3.0 million ($0.02 per diluted share) for the same
period of 2012. The increased after-tax earnings in 2013, compared to
2012, reflects higher natural gas prices as well as the sale of a
non-core asset at Elmworth, Alberta and the associated gain realized
on the transaction. 
CAPITAL EXPENDITURES  


 
                                               Three Months Ended March 31, 
                                               -----------------------------
(000s)                                                2013             2012 
----------------------------------------------------------------------------
Land and seismic                                 $   8,505        $  10,838 
Drilling and completions                           181,028          148,295 
Facilities                                          73,135           66,007 
Property acquisitions                                2,450              916 
Property dispositions                              (77,945)         (12,518)
Other                                                3,290            2,886 
----------------------------------------------------------------------------
Total cash capital expenditures                  $ 190,463        $ 216,424 
----------------------------------------------------------------------------

 
During the first quarter of 2013, the Company invested $190.5 million
of cash consideration, net of dispositions, compared to $216.4
million for the same period of 2012. Expenditures on exploration and
production were $262.7 million compared to $225.1 million for the
same quarter of 2012, which is consistent with the Company's
aggressive growth strategy. The decrease in overall net cash capital
spending in 2013 over 2012 is due to two dispositions totalling $77.9
million, the majority of which pertains to the disposition of a
non-producing property for gross proceeds of $77.5 million. The
Company is continuing work on its gas facilities at Doe in NEBC and
Spirit River, Alberta, both of which are scheduled to come on-stream
in the second quarter of 2013. 
The following table summarizes the drill, complete and tie-in
activities for the period: 


 
                                           Three Months Ended March 31, 2013
                                           ---------------------------------
                                                      Gross              Net
----------------------------------------------------------------------------
Drilled                                                  27            25.21
Completed                                                32            29.49
Tied-in                                                  14            13.52
----------------------------------------------------------------------------

 
LIQUIDITY AND CAPITAL RESOURCES  
On March 12, 2013, the Company issued 5.78 million common shares at a
price of $34.25 per share and 0.835 million flow-through common
shares at a price of $42.15 per share, for total gross proceeds of
$233.2 million. The proceeds were used to temporarily reduce bank
debt and will be used to fund the Company's 2013 capital exploration
program. 
At March 31, 2013, Tourmaline had negative working capital of $166.0
million, after adjusting for the fair value of financial instruments
(the unadjusted working capital deficiency was $165.4 million)
(December 31, 2012 - $103.7 million an
d $98.9 million, respectively).
Management believes the Company has sufficient liquidity and capital
resources to fund the remainder of its 2013 exploration and
development program through expected cash flow from operations and
its unutilized bank credit facility. As at March 31, 2013, the
Company's bank debt balance was $158.2 million (December 31, 2012 -
$360.6 million), and net debt was $324.3 million (December 31, 2012 -
$464.3 million).  
SHARES OUTSTANDING 
As at May 8, 2013, the Company has 183,890,321 common shares
outstanding and 13,569,637 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. 


 
                                Less                       Greater          
                              Than 1       1-3       4-5    Than 5          
Payments Due by Year (000s)     Year     Years     Years     Years     Total
----------------------------------------------------------------------------
Operating leases            $  1,628  $ 10,844  $  9,806  $  6,168  $ 28,446
Flow-through obligations      29,657    35,195         -         -    64,852
Firm transportation and                                                     
 processing agreements        27,907   115,151    68,515   221,392   432,965
Bank debt(1)                       -   171,522         -         -   171,522
----------------------------------------------------------------------------
                            $ 59,192  $332,712  $ 78,321  $227,560  $697,785
----------------------------------------------------------------------------
(1) Includes interest expense at an annual rate of 3.29% being the rate     
    applicable to outstanding bank debt at March 31, 2013.                  

 
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, 2012.  
As at March 31, 2013, the Company has entered into certain financi
al
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 and comprehensive
income. The contracts that the Company has entered into in the first
three months of 2013 are detailed in note 3 of the Company's interim
condensed consolidated financial statements for the three months
ended March 31, 2013. 
The following table provides a summary of the unrealized gains and
losses on financial instruments for the three months ended March 31,
2013: 


 
                                               Three Months Ended March 31, 
                                               -----------------------------
(000s)                                                2013             2012 
----------------------------------------------------------------------------
Unrealized loss on financial instruments         $  (3,819)       $  (2,366)
Unrealized loss on investments held for trading          -              (19)
----------------------------------------------------------------------------
Total                                            $  (3,819)       $  (2,385)
----------------------------------------------------------------------------

 
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.
Physical contracts entered into since December 31, 2012 to March 31,
2013 have been disclosed in note 3 of the Company's interim condensed
consolidated financial statements for the three months ended March
31, 2013. 
The Company has entered into several financial derivative and
physical delivery sales contracts subsequent to March 31, 2013. These
contracts are detailed in note 3 of the Company's interim condensed
consolidated financial statements for the quarter ended March 31,
2013. 
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, 2012. 
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"), as defined by National
Instrument 52-109 Certification, 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"), as defined by
National Instrument 52-109, 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 January 1, 2013 and ending on March
31, 2013 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. 
ADOPTION OF NEW ACCOUNTING STANDARDS  
On January 1, 2013, the Company adopted new standards with respect to
consolidations (IFRS 10), joint arrangements (IFRS 11), disclosure of
interests in other entities (IFRS 12), fair value measurements (IFRS
13) and amendments to financial instrument disclosures (IFRS 7). The
adoption of these standards had no impact on the amounts recorded in
the interim condensed consolidated financial statements or on the
comparative periods. 
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 activ
ities, 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. 
NON-GAAP FINANCIAL MEASURES 
This MD&A includes references to financial measures commonly used in
the oil and gas industry such as "cash flow", "operating netback",
"working capital (adjusted for the fair value of financial
instruments)" and "net debt", which do not have any standardized
meaning prescribed by GAAP. Management believes that in addition to
net income and cash flow from operating activities, the
aforementioned non-GAAP 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 GAAP 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 cash flow as cash
flow from operating activities 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). 
Cash Flow 
A summary of the reconciliation of cash flow from operating
activities (per the statements of cash flow), to cash flow, is set
forth below: 


 
                                                Three Months Ended March 31,
                                                ----------------------------
(000s)                                                 2013             2012
----------------------------------------------------------------------------
Cash flow from operating activities (per GAAP)    $  93,763        $  59,527
Change in non-cash operating working capital         22,836            2,309
----------------------------------------------------------------------------
Cash flow                                         $ 116,599        $  61,836
----------------------------------------------------------------------------

 
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 March 31, 
                                               -----------------------------
($/Boe)                                               2013             2012 
----------------------------------------------------------------------------
Revenue, excluding processing income             $   28.33        $   24.48 
Royalties                                            (1.84)           (1.99)
Transportation costs                                 (2.02)           (1.78)
Operating expenses                                   (4.27)           (5.19)
----------------------------------------------------------------------------
Operating netback                                $   20.20        $   15.52 
----------------------------------------------------------------------------

 
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 
                                                   March 31,   December 31, 
(000s)                                                  2013           2012 
----------------------------------------------------------------------------
Working capital (deficit)                         $ (165,385)    $  (98,913)
Fair value of financial instruments - short-                                
 term asset                                             (664)        (4,814)
----------------------------------------------------------------------------
Working capital (deficit) (adjusted for the                                 
 fair value of financial instruments)             $ (166,049)    $ (103,727)
----------------------------------------------------------------------------

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


 
                                                       As at          As at 
                                                   March 31,   December 31, 
(000s)                                                  2013           2012 
----------------------------------------------------------------------------
Bank debt                                      $    (158,211) $    (360,573)
Working capital (deficit)                           (165,385)       (98,913)
Fair value of financial instruments - short-                                
 term asset                                             (664)        (4,814)
----------------------------------------------------------------------------
Net debt                                       $    (324,260) $    (464,300)
----------------------------------------------------------------------------

 
SELECTED QUARTERLY INFORMATION 


 
                      2013                        2012                      
               ------------ ----------------------------------------------- 
($000s, unless                                                              
 otherwise                                                                  
 noted)                 Q1           Q4          Q3          Q2          Q1 
-------------- ------------ ------------------------------------------------
PRODUCTION                                                                  
Gas (mcf)       33,055,857   27,879,639  23,501,484  24,276,149  22,430,621 
Crude oil and                                                               
 NGL(bbls)         667,907      618,483     515,157     596,992     515,408 
Oil equivalent                                                              
 (Boe)           6,177,216    5,265,090   4,432,071   4,643,016   4,253,845 
Gas (mcf/d)        367,287      303,040     255,451     266,771     246,490 
Crude oil and                                                               
 NGL (bbls/d)        7,421        6,723       5,600       6,560       5,664 
Oil equivalent                                                              
 (Boe/d)            68,636       57,230      48,175      51,022      46,746 
-------------- ------------ ------------------------------------------------
FINANCIAL                                                                   
Revenue, net                                                                
 of royalties      161,124      
134,864      91,863     105,567      94,781 
Cash flow from                                                              
 operating                                                                  
 activities         93,763      104,671      66,713      42,566      59,527 
Cash flow (1)      116,599       93,807      63,515      61,121      61,836 
 Per diluted                                                                
  share               0.64         0.54        0.38        0.37        0.38 
Net earnings                                                                
 (loss)             52,184       16,301      (4,770)      1,012       2,976 
 Per basic                                                                  
  share               0.29         0.10       (0.03)       0.01        0.02 
 Per diluted                                                                
  share               0.29         0.09       (0.03)       0.01        0.02 
Total assets     3,735,641    3,580,253   2,992,552   2,862,502   2,878,261 
Working                                                                     
 capital          (165,385)     (98,913)    (98,184)    (15,311)   (176,029)
Working                                                                     
 capital                                                                    
 (adjusted for                                                              
 the fair                                                                   
 value of                                                                   
 financial                                                                  
 instruments)                                                               
 (1)              (166,049)    (103,727)   (101,577)    (19,809)   (175,696)
Capital                                                                     
 expenditures      190,463      296,108     175,277      53,831     216,424 
Total                                                                       
 outstanding                                                                
 shares (000s)     183,408      174,813     165,678     160,459     158,807 
-------------- ------------ ------------------------------------------------
PER UNIT                                                                    
Gas ($/mcf)           3.50         3.29        2.52        2.23        2.54 
Crude oil and                                                               
 NGL ($/bbl)         88.75        83.28       83.34       77.75       91.48 
Revenue                                                                     
 ($/Boe)             28.33        27.18       23.04       21.64       24.48 
Operating                                                                   
 netback                                                                    
 ($/Boe) (1)         20.20        19.17       15.68       14.22       15.52 
-------------- ------------ ------------------------------------------------
 
                                           2011                             
              ------------------------------------------------------------- 
($000s, unless                                                              
 otherwise                                                                  
 noted)                                      Q4            Q3            Q2 
----------------------------------------------------------------------------
PRODUCTION                                                                  
Gas (mcf)                            18,437,079    17,058,132    13,798,653 
Crude oil and                                                               
 NGL(bbls)                              415,074       316,890       272,184 
Oil equivalent                                                              
 (Boe)                                3,487,920     3,159,912     2,571,959 
Gas (mcf/d)                             200,403       185,414       151,634 
Crude oil and                                                               
 NGL (bbls/d)                             4,512         3,444         2,991 
Oil equivalent                                                              
 (Boe/d)                                 37,912        34,347        28,263 
----------------------------------------------------------------------------
FINANCIAL                                                                   
Revenue, net                                                                
 of royalties                            98,309        98,225        87,551 
Cash flow from                                                              
 operating                                                                  
 activities                              61,801        77,622        42,112 
Cash flow (1)                            73,311        62,686        60,415 
 Per diluted                                                                
  share                                    0.45          0.40          0.41 
Net earnings                                                                
 (loss)                                  16,074         8,688        15,192 
 Per basic                                                                  
  share                                    0.10          0.06          0.11 
 Per diluted                                                                
  share                                    0.10          0.06          0.10 
Total assets                          2,711,024     2,517,607     2,030,285 
Working                                                                     
 capital                               (146,317)     (120,080)      (31,963)
Working                                                                     
 capital                                                                    
 (adjusted for                                                              
 the fair                                                                   
 value of                                                                   
 financial                                                                  
 instruments)                                                               
 (1)                                   (146,593)     (123,858)      (31,592)
Capital                                                                     
 expenditures                           232,167       249,162       130,075 
Total                                                                       
 outstanding                                                                
 shares (000s)                          158,578       151,906       145,215 
----------------------------------------------------------------------------
PER UNIT                                                                    
Gas ($/mcf)                                3.76          4.25          4.38 
Crude oil and                                                               
 NGL ($/bbl)                              93.05         87.01         95.54 
Revenue                                                                     
 ($/Boe)                                  30.95         31.67         33.61 
Operating                                                                   
 netback                                                                    
 ($/Boe) (1)                              21.39         21.21         24.52 
----------------------------------------------------------------------------
(1) See Non-GAAP 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.  
Overall, the Company has had continued annual growth over the last
two years summ
arized in the table above. The small decrease in
production from the second quarter to the third quarter of 2012 was
due to weather-related tie-in delays, as well as production
disruptions related to sour gas handling issues at Spirit River and a
one-time equipment issue at Sunrise. The Company's average annual
production has increased from 31,007 Boe per day in 2011 to 50,804
Boe per day in 2012 and 68,636 Boe per day in the first three months
of 2013. The production growth can be attributed primarily to the
Company's exploration and development activities, as well as from
acquisitions of producing properties.  
The Company's cash flows from operating activities were $228.4
million in 2011, $273.5 million in 2012 and 2013 estimated cash flows
(based on the first three months annualized) are $472.9 million.
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  


 
                                                     March 31,  December 31,
(000s) (unaudited)                                        2013          2012
----------------------------------------------------------------------------
Assets                                                                      
Current assets:                                                             
  Accounts receivable                             $     84,026  $     83,868
  Assets held for sale                                       -        33,007
  Prepaid expenses and deposits                          4,539         5,309
  Fair value of financial instruments (notes 2 and                          
   3)                                                      664         4,814
----------------------------------------------------------------------------
Total current assets                                    89,229       126,998
Long-term asset                                          2,580         2,580
Exploration and evaluation assets (note 4)             652,647       639,933
Property, plant and equipment (note 5)               2,991,185     2,810,742
----------------------------------------------------------------------------
Total Assets                                      $  3,735,641  $  3,580,253
----------------------------------------------------------------------------
Liabilities and Shareholders' Equity                                        
Current liabilities:                                                        
  Accounts payable and accrued liabilities        $    254,614  $    225,911
----------------------------------------------------------------------------
Total current liabilities                              254,614       225,911
Bank debt (note 7)                                     158,211       360,573
Decommissioning obligations (note 6)                    68,307        64,757
Long-term obligation                                     6,207         7,139
Fair value of financial instruments (notes 2 and                            
 3)                                                      1,681         2,012
Deferred premium on flow-through shares                 12,665         8,755
Deferred taxes                                         196,279       176,391
Shareholders' equity:                                                       
  Share capital (note 9)                             2,852,056     2,599,614
  Non-controlling interest (note 8)                     16,543        16,298
  Contributed surplus                                   69,014        70,923
  Retained earnings                                    100,064        47,880
----------------------------------------------------------------------------
Total shareholders' equity                           3,037,677     2,734,715
----------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity        $  3,735,641  $  3,580,253
----------------------------------------------------------------------------

 
Commitments (note 12) 
Subsequent events (note 3) 
See accompanying notes to the interim condensed consolidated
financial statements.  
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME  


 
                                                         Three Months Ended 
                                                                  March 31, 
----------------------------------------------------------------------------
(000s) except per-share amounts (unaudited)                 2013       2012 
----------------------------------------------------------------------------
Revenue:                                                                    
  Oil and natural gas sales                            $ 172,491  $  98,773 
  Royalties                                              (11,363)    (8,471)
----------------------------------------------------------------------------
  Net revenue from oil and natural gas sales             161,128     90,302 
  Realized gain on financial instruments                   2,496      5,365 
  Unrealized (loss) on financial instruments(note 3)      (3,819)    (2,385)
  Other income                                             1,319      1,499 
----------------------------------------------------------------------------
Total net revenue                                        161,124     94,781 
Expenses:                                                                   
  Operating                                               26,367     22,081 
  Transportation                                          12,470      7,548 
  General and administration                               4,941      3,850 
  Share-based payments                                     3,590      3,808 
  Gain on divestitures                                   (44,187)    (7,206)
  Depletion, depreciation and amortization                81,423     56,007 
----------------------------------------------------------------------------
Total expenses                                            84,604     86,088 
----------------------------------------------------------------------------
Income from operations                                    76,520      8,693 
Finance expenses                                           4,498      2,131 
----------------------------------------------------------------------------
Income before taxes                                       72,022      6,562 
Deferred taxes                                            19,593      3,174 
----------------------------------------------------------------------------
Net income and comprehensive income for the period                          
 before non-controlling interest                          52,429      3,388 
----------------------------------------------------------------------------
Net income and comprehensive income attributable to:                        
  Shareholders of the Company                             52,184      2,976 
  Non-controlling interest (note 8)                          245        412 
----------------------------------------------------------------------------
                                                       $  52,429  $   3,388 
----------------------------------------------------------------------------
                                                                            
Net income per share attributable to common                                 
 shareholders (note 10)                                                     
------------------
----------------------------------------------------------
  Basic                                                $    0.29  $    0.02 
----------------------------------------------------------------------------
  Diluted                                              $    0.29  $    0.02 
----------------------------------------------------------------------------

 
See accompanying notes to the interim condensed consolidated
financial statements. 
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY 


 
(000s) (unaudited)                                                          
----------------------------------------------------------------------------
                                                           Non-             
                      Share  Contributed  Retained  Controlling       Total 
                    Capital      Surplus  Earnings     Interest      Equity 
----------------------------------------------------------------------------
Balance at                                                                  
 December 31,                                                               
 2012           $ 2,599,614 $     70,923 $  47,880  $    16,298 $ 2,734,715 
Issue of common                                                             
 shares (note                                                               
 9)                 226,564            -         -            -     226,564 
Share issue                                                                 
 costs, net of                                                              
 tax                 (7,175)           -         -            -      (7,175)
Share-based                                                                 
 payments                 -        3,590         -            -       3,590 
Capitalized                                                                 
 share-based                                                                
 payments                 -        3,590     
    -            -       3,590 
Options                                                                     
 exercised                                                                  
 (note 9)            33,053       (9,089)        -            -      23,964 
Income                                                                      
 attributable                                                               
 to common                                                                  
 shareholders             -            -    52,184            -      52,184 
Income                                                                      
 attributable                                                               
 to non-                                                                    
 controlling                                                                
 interest                 -            -         -          245         245 
----------------------------------------------------------------------------
Balance at                                                                  
 March 31, 2013 $ 2,852,056 $     69,014 $ 100,064  $    16,543 $ 3,037,677 
----------------------------------------------------------------------------
                                                                            
(000s) (unaudited)                                                          
----------------------------------------------------------------------------
                                                           Non-             
                      Share  Contributed  Retained  Controlling       Total 
                    Capital      Surplus  Earnings     Interest      Equity 
----------------------------------------------------------------------------
Balance at                                                                  
 December 31,                                                               
 2011           $ 2,140,660 $     47,776 $  32,361  $    15,079 $ 2,235,876 
Share issue                                                                 
 costs, net of                                                              
 tax                   (334)           -         -            -        (334)
Share-based                                                                 
 payments                 -        3,808         -            -       3,808 
Capitalized                                                                 
 share-based                                                                
 payments                 -        3,808         -            -       3,808 
Options                                                                     
 exercised            2,690         (750)        -            -       1,940 
Income                                                                      
 attributable                                                               
 to common                                                                  
 shareholders             -            -     2,976            -       2,976 
Income                                                                      
 attributable                                                               
 to non-                                                                    
 controlling                                                                
 interest                 -            -         -          412         412 
----------------------------------------------------------------------------
Balance at                                                                  
 March 31, 2012 $ 2,143,016 $     54,642 $  35,337  $    15,491 $ 2,248,486 
----------------------------------------------------------------------------

 
See accompanying notes to the interim condensed consolidated
financial statements. 
CONSOLIDATED STATEMENTS OF CASH FLOW  


 
                                                         Three Months Ended 
                                                                  March 31, 
----------------------------------------------------------------------------
(000s) (unaudited)                                         2013        2012 
----------------------------------------------------------------------------
Cash provided by (used in):                                                 
Operations:                                                                 
  Net income                                         $   52,184  $    2,976 
  Items not involving cash:                                                 
    Depletion and depreciation                           81,423      56,007 
    Accretion                                               391         307 
    Share-based payments                                  3,590       3,808 
    Deferred taxes                                       19,593       3,174 
    Unrealized loss on financial instruments(note 3)      3,819       2,385 
    Gain on divestitures                                (44,187)     (7,206)
    Non-controlling interest                                245         412 
  Decommissioning expenditures                             (459)        (27)
  Changes in non-cash operating working capital         (22,836)     (2,309)
----------------------------------------------------------------------------
Total cash flow from operating activities                93,763      59,527 
Financing:                                                                  
  Issue of common shares                                257,124       1,940 
  Share issue costs                                      (9,566)       (445)
  Increase (decrease) in bank debt                     (202,362)    124,921 
----------------------------------------------------------------------------
Total cash flow from financing activities                45,196     126,416 
Investing:                                                                  
  Exploration and evaluation             
               (26,861)    (25,618)
  Property, plant and equipment                        (239,097)   (202,408)
  Property acquisitions                                  (2,450)       (916)
  Proceeds from divestitures                             77,945      12,518 
  Repayment of long-term obligation                        (932)       (931)
  Changes in non-cash investing working capital          52,436      31,412 
----------------------------------------------------------------------------
Total cash flow from investing activities              (138,959)   (185,943)
Changes in cash                                               -           - 
Cash, beginning of period                                     -           - 
----------------------------------------------------------------------------
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 
As at March 31, 2013 and for the three months ended March 31, 2013
and 2012 
(tabular amounts in thousands of dollars, unless otherwise noted)
(unaudited) 
Corporate Information: 
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 Suite 2400, 525 - 8th
Avenue S.W., Calgary, Alberta, Canada T2P 1G1. 
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 consolidated financial statements for the year ended
December 31, 2012. 
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 consolidated financial statements
for the year ended December 31, 2012, except as detailed below.  
On January 1, 2013, the Company adopted new standards with respect to
consolidations (IFRS 10), joint arrangements (IFRS 11), disclosure of
interests in other entities (IFRS 12), fair value measurements (IFRS
13) and amendments to financial instrument disclosures (IFRS 7). The
adoption of these standards had no impact on the amounts recorded in
the interim condensed consolidated financial statements or on the
comparative periods. 
The unaudited interim condensed consolidated financial statements
were authorized for issue by the Board of Directors on May 8, 2013. 
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, 2012. 
As at March 31, 2013, 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 and comprehensive income. 
The Company has entered into the following financial derivative
contracts since December 31, 2012 to March 31, 2013: 


 
------------------------------------------------------------------------
Type of                                                                 
 Contract   Quantity       Time Period(1) Contract Price      Fair Value
------------------------------------------------------------------------
Financial                  April 2013 -   USD$97.865/bbl                
 Swap       200 bbls/d     March 2014(2)  average             (59)      
Financial                  July 2013 -    USD$98.00/bbl                 
 Swap       200 bbls/d     June 2014(3)   average             160       
Financial                  April 2013 -                                 
 Swap       5,000 MMbtu/d  March 2014     USD$4.12/MMbtu      (122)     
------------------------------------------------------------------------

 
(1)Transactions with common terms have been aggregated and presented
as the weighted average price. 
(2)The counter-party to these contracts holds options at March 31,
2014 to extend a swap on 100 bbls/d (per contract) of oil at WTI
US$100/bbl. 
(3)The counter-party to these contracts holds options at December 31,
2014 to extend a swap on 200 bbls/d of oil at WTI US$114.95/bbl. 
No financial derivative contracts were entered into subsequent to
March 31, 2013. 
As at March 31, 2013, 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 $1.7 million (March 31, 2012 - $0.7 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 and comprehensive income for the three months ended March 31,
2013: 


 
(000s)                                                                 
-----------------------------------------------------------------------
                                          Counter                      
                                 Company   Party                       
                Type              Fixed   Floating                     
             (Floating          Interest    Rate    Three Months Ended 
Term         to Fixed)  Amount  Rate (%)   Index      March 31, 2013   
                                                  ---------------------
                                                   Realized  Unrealized
                                                    (Loss)     (Loss)  
-----------------------------------------------------------------------
May 29, 2012-                             Floating                     
 May 29, 2014   Swap   $150,000   1.35%     Rate     (46)      (110)   
-----------------------------------------------------------------------

 
The following table provides a summary of the unrealized losses on
financial instruments for the three months ended March 31, 2013 and
2012: 


 
                                                         Three Months Ended 
                                                                  March 31, 
(000s)                                                     2013        2012 
----------------------------------------------------------------------------
Unrealized loss on financial instruments             $   (3,819) $   (2,366)
Unrealized loss on investments held for trading               -        
 (19)
----------------------------------------------------------------------------
Total                                                $   (3,819) $   (2,385)
----------------------------------------------------------------------------

 
The Company has entered into the following physical contracts since
December 31, 2012 to March 31, 2013: 


 
----------------------------------------------------------------------------
Type of                                                                     
 Contract    Quantity        Time Period(1)          Contract Price         
----------------------------------------------------------------------------
AECO Fixed                   April 2013 - March                             
 price       20,000 Gjs/d    2014(2)                 CAD$3.31/Gj average    
AECO Fixed                                                                  
 price       25,000 Gjs/d    April - October 2013(3) CAD$3.72/Gj average    
AECO Fixed                                                                  
 price       10,000 Gjs/d    April - October 2013    CAD$3.36/Gj            
AECO Fixed                   November 2013 - March                          
 price       10,000 Gjs/d    2014                    CAD$3.6725/Gj          
(Buyer)                                                                     
 AECO/Nymex                                                                 
 Differential                                        Nymex less             
 Swap        30,000 MMbtu/d  April - October 2013    USD$0.42/MMbtu average 
----------------------------------------------------------------------------

 
(1) Transactions with common terms have been presented as the
weighted average price. 
(2) The counter-party to these contracts holds options at March 31,
2014 to extend a swap on these contracts (one for 10,000 Gjs/d and
two for 5,000 Gjs/d each) at an average of CAD$3.75/Gj. 
(3) The counter-party to these contracts hold options at October 31,
2013 to extend a swap on these contracts (two for 10,000 Gjs/d and
one for 5,000 Gjs/d) at an average of $4.00/Gj. Subsequently, the
counter-party to these contracts holds another option at October 31,
2014 to extend a further swap on these contracts (two for 10,000
Gjs/d and one for 5,000 Gjs/d) at an average of $4.00/Gj. 
The following physical contracts were entered into subsequent to
March 31, 2013: 


 
----------------------------------------------------------------------------
Type of                                                                     
 Contract     Quantity        Time Period(1)          Contract Price        
----------------------------------------------------------------------------
AECO Fixed                    January - December                            
 Price        20,000 Gjs/d    2014(2)                 CAD$3.7513/Gj average 
AECO Fixed                    November 2013 - March                         
 Price        15,000 Gjs/d    2014                    CAD$3.95/Gj average   
AECO Fixed                                                                  
 Price        10,000 Gjs/d    January - December 2014 CAD$3.728/Gj average  
----------------------------------------------------------------------------

 
(1)Transactions with common terms have been presented as the weighted
average price. 
(2) The counter-party to these contracts holds the option at December
31, 2013 to fix the average price at CAD$3.7513 on 10,000 Gjs/d of
this contract or allow the price to follow the month-ahead index. 
Financial assets and liabilities are only offset if Tourmaline has
the current legal right to offset and intends to settle on a net
basis or settle the asset and liability simultaneously. Tourmaline
offsets derivative contracts assets and liabilities when the
counterparty, commodity, currency and timing of settlement are the
same. The following table provides a summary of the Company's
offsetting derivative contracts positions. 


 
                   March 31, 2013                  December 31, 2012        
         -------------------------------------------------------------------
                Derivative Contracts              Derivative Contracts      
         -------------------------------------------------------------------
(000s)        Asset   Liability        Net      Asset   Liability        Net
----------------------------------------------------------------------------
Gross                                                                       
 amount   $   3,605  $   (4,622) $  (1,017) $   7,623  $   (4,821) $   2,802
Amount                                                                      
 offset      (2,941)      2,941          -     (2,809)      2,809          -
----------------------------------------------------------------------------
Net                                                                         
 amount   $     664  $   (1,681) $  (1,017) $   4,814  $   (2,012) $   2,802
----------------------------------------------------------------------------

 
4. EXPLORATION AND EVALUATION ASSETS 


 
(000s)                                                                      
----------------------------------------------------------------------------
As at December 31, 2012                                           $ 639,933 
  Capital expenditures                                               27,955 
  Transfers to property, plant and equipment (note 5)                (8,562)
  Acquisitions                                                        1,536 
  Divestitures                                                         (633)
  Expired mineral leases                                             (7,582)
----------------------------------------------------------------------------
As at March 31, 2013                                              $ 652,647 
----------------------------------------------------------------------------

 
General and administrative expenditures for the three months ended
March 31, 2013 of $1.3 million (December 31, 2012 - $5.2 million)
have been capitalized and included as exploration and evaluation
assets. Non-cash share-based payment expenses in the amount of $1.1
million (December 31, 2012 - $5.8 million) were also capitalized and
included in exploration and evaluation assets. Expired mineral lease
expenses have been included in the "Depletion, depreciation and
amortization" line item on the consolidated statements of income and
comprehensive income. 
5. PROPERTY, PLANT AND EQUIPMENT 
Cost 


 
(000s)                                                                      
----------------------------------------------------------------------------
As at December 31, 2012                                         $ 3,305,685 
  Capital expenditures                                              241,593 
  Transfers from exploration and evaluation (note 4)                  8,562 
  Change in decommissioning liabilities (note 6)                      3,493 
  Acquisitions                                                        3,305 
  Divestitures                                                       (3,641)
----------------------------------------------------------------------------
As at March 31, 2013                                            $ 3,558,997 
----------------------------------------------------------------------------

 
Accumulated Depletion, Depreciation and Amortization 


 
(000s)                                                                      
----------------------------------------------------------------------------
As at December 31, 2012                                           $ 494,943 
  Depletion, depreciation and amortization expense (net of                  
   mineral lease expiries)                                           73,841 
  Divestitures                                                         (972)
----------------------------------------------------------------------------
 
As at March 31, 2013                                              $ 567,812 
----------------------------------------------------------------------------

 
Net Book Value 


 
(000s)                                                                      
----------------------------------------------------------------------------
As at December 31, 2012                                        $   2,810,742
As at March 31, 2013                                           $   2,991,185
----------------------------------------------------------------------------

 
General and administrative expenditures for the three months ended
March 31, 2013 of $1.9 million (December 31, 2012 - $6.1 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 $2.5 million (December 31,
2012 - $9.1 million).  
Future development costs for the three months ended March 31, 2013 of
$2,324 million (December 31, 2012 - $2,233 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 $95.2 million (December
31, 2012 - $92.7 million), with some abandonments expected to
commence in 2021. A risk-free rate of 2.49% (December 31, 2012 -
2.49%) and an inflation rate of 2.0% (December 31, 2012 - 2.0%) were
used to calculate the fair value of the decommissioning obligations. 


 
                                                Three Months     Year Ended 
                                                       Ended   December 31, 
(000s)                                        March 31, 2013           2012 
----------------------------------------------------------------------------
Balance, beginning of period                   $      64,757  $      50,463 
 Obligation incurred                                   2,065          5,685 
 Obligation incurred on corporate acquisitions             -          4,643 
 Obligation incurred on property acquisitions            131          4,235 
 Obligation divested                                      (6)          (319)
 Obligation settled                                     (459)          (993)
 Reclassification of obligation associated                                  
  with assets held for sale                                -           (285)
 Accretion expense                                       391          1,328 
 Change in future estimated cash outlays               1,428              - 
----------------------------------------------------------------------------
Balance, end of period                         $      68,307  $      64,757 
----------------------------------------------------------------------------

 
7. BANK DEBT 
As at March 31, 2013, Tourmaline's bank debt balance was $158.2
million (December 31, 2012 - $360.6 million). In addition, Tourmaline
has outstanding letters of credit of $4.1 million (December 31, 2012
- $4.4 million), which reduce the credit available on the facility.
As at March 31, 2013, the Company is in compliance with all debt
covenants. 
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: 


 
                                                  Three Months    Year Ended
                                                         Ended  December 31,
(000s)                                          March 31, 2013          2012
----------------------------------------------------------------------------
Balance, beginning of period                     $      16,298 $      15,079
  Share of subsidiary's net income for the                                  
   period                                                  245         1,219
----------------------------------------------------------------------------
Balance, end of period                           $      16,543 $      16,298
----------------------------------------------------------------------------

 
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 


 
                              Three Months Ended                 Year Ended 
                                  March 31, 2013          December 31, 2012 
                      ------------------------------------------------------
(000s except per share   Number of                  Number of               
 amounts)                   Shares        Amount       Shares        Amount 
----------------------------------------------------------------------------
Balance, beginning of                                                       
 period                174,813,059 $   2,599,614  158,577,586 $   2,140,660 
For cash on public                                                          
 offering of common                                                         
 shares(2)(4)            5,780,000       197,965    4,639,000       134,531 
For cash on public                                                          
 offering of flow-                                                          
 through common                                                             
 shares(1) (3)(4)          835,000        28,599    2,452,000        62,685 
Issued on corporate                                                         
 acquisitions                    -             -    7,401,682       244,404 
For cash on exercise                                                        
 of stock options        1,979,883        23,964    1,742,791        17,712 
Contributed surplus on                                                      
 exercise of stock                                                          
 options                         -         9,089            -         6,745 
Share issue costs                -        (9,566)           -        (9,497)
Tax effect of share                                                         
 issue costs                     -         2,391            -         2,374 
----------------------------------------------------------------------------
Balance, end of period 183,407,942 $   2,852,056  174,813,059 $   2,599,614 
----------------------------------------------------------------------------

 
(1) 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 March 31, 2013, the
Company had spent the full committed amount. The expenditures were
renounced to investors in February 2013 with an effective
renunciation date of December 31, 2012. 
(2)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. 
(3) On November 1, 2012, the Company issued 1.05 million flow-through
common shares at $36.90 per share for total gross proceeds of $38.7
million. The implied premium on the flow-through common shares was
determined to be $7.9 million or $7.55 per share. A total of 0.05
million shares were purchased by insiders. As at March 31, 2013 the
Company had spent $9.1 million on eli
gible expenditures and is
committed to spend the remainder of $29.6 million on qualified
exploration and development expenditures by December 31, 2013. The
expenditures were renounced to investors in February 2013, with an
effective renunciation date of December 31, 2012. 
(4) On March 12, 2013, the Company issued 5.78 million common shares
at a price of $34.25 per share and 0.835 million flow-through common
shares at a price of $42.15 per share, for total gross proceeds of
$233.2 million. The implied premium on the flow-through common shares
was determined to be $6.6 million or $7.90 per share. A total of
30,000 common and 85,000 flow-through common shares were purchased by
insiders. As at March 31, 2013, the Company had not incurred any
eligible expenditures and is committed to spend the entire $35.2
million on qualified exploration and development expenditures by
December 31, 2014. The expenditures will be renounced to investors
with an effective renunciation date of December 31, 2013. 
10. EARNINGS PER SHARE 
Basic earnings-per-share was calculated as follows: 


 
                                                Three Months Ended March 31,
                                                ----------------------------
                                                          2013          2012
----------------------------------------------------------------------------
Net earnings for the period (000s)               $      52,184 $       2,976
Weighted average number of common shares - basic   176,986,036   158,616,377
----------------------------------------------------------------------------
Earnings per share - basic                       $        0.29 $        0.02
----------------------------------------------------------------------------

 
Diluted earnings-per-share was calculated as follows: 


 
                                                Three Months Ended March 31,
                                                          2013          2012
----------------------------------------------------------------------------
Net earnings for the period (000s)               $      52,184 $       2,976
Weighted average number of common shares -                                  
 diluted                                           181,774,427   163,296,191
----------------------------------------------------------------------------
Earnings per share - fully diluted               $        0.29 $        0.02
----------------------------------------------------------------------------

 
There were 2,322,333 options excluded from the weighted-average share
calculation for the three months ended March 31, 2013 because they
were anti-dilutive (March 31, 2012 - 3,818,024). 
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
18,340,794 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. 


 
                                                Three Months Ended March 31,
              --------------------------------------------------------------
                                         2013                           2012
              --------------------------------------------------------------
                                     Weighted                       Weighted
                   Number of          Average     Number of          Average
                     Options   Exercise Price       Options   Exercise Price
----------------------------------------------------------------------------
Stock options                                                               
 outstanding,                                                               
 beginning of                                                               
 period           15,325,232  $         19.87    14,213,523  $         16.82
 Granted             260,000            35.45        50,000            24.73
 Exercised        (1,979,883)           12.10      (229,167)            8.47
 Forfeited           (28,333)           25.27             -                -
----------------------------------------------------------------------------
Stock options                                                               
 outstanding,                                                               
 end of period    13,577,016  $         21.27    14,034,356  $         16.98
----------------------------------------------------------------------------

 
The following table summarizes stock options outstanding and
exercisable at March 31, 2013: 


 
                            Weighted                                        
                  Number     Average      Weighted      Number      Weighted
Range of     Outstanding   Remaining       Average Exercisable       Average
 Exercise      at Period Contractual      Exercise   at Period      Exercise
 Price               End        Life         Price         End         Price
----------------------------------------------------------------------------
$7.00 -                                                                     
 $10.00        2,456,351        0.94 $        8.72   2,456,351 $        8.72
$12.00 -                                                                    
 $18.35        4,363,791        2.02         16.51   3,530,902         16.10
$20.68 -                                                                    
 $29.93        4,031,208        3.63         26.79   1,067,193         27.33
$30.76 -                                                                    
 $38.07        2,725,666        4.40         32.03     143,999         30.91
----------------------------------------------------------------------------
              13,577,016        2.78 $       21.27   7,198,445 $       15.54
----------------------------------------------------------------------------

 
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: 


 
                                                     March 31,     March 31,
                                                          2013          2012
----------------------------------------------------------------------------
Fair value of options granted (weighted average) $       12.29 $        8.58
Risk-free interest rate                                  2.55%         2.59%
Estimated hold period prior to exercise                4 years       4 years
Expected volatility                                        40%           40%
Forfeiture rate                                             2%            2%
Dividend per share                               $        0.00 $        0.00
----------------------------------------------------------------------------

 
12. COMMITMENTS 
On March 12, 2013, the Company issued 0.835 million common shares on
a flow-through basis at a price of $42.15 per share for gross
proceeds of $35.2 million. As of March 31, 2013, the Company had not
incurred any eligible expenditures and is committed to spend the
entire $35.2 million before December 31, 2014. 
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. 


 
                           Less                           Greater           
Payments Due by Year     Than 1         1-3        4-5     Than 5           
 (000s)                    Year       Years      Years      years      Total
----------------------------------------------------------------------------
Operating leases      $   1,628  $   10,844 $    9,806 $    6,168 $   28,446
Flow-through                                                                
 obligations             29,657      35,195          -          -     64,852
Firm transportation                                                         
 and processing                                                             
 agreements              27,907     115,151     68,515    221,392    432,965
Bank debt(1)                  -     171,522          -          -    171,522
----------------------------------------------------------------------------
                      $  59,192  $  332,712 $   78,321 $  227,560 $  697,785
----------------------------------------------------------------------------

 
(1) Includes interest expense at an annual rate of 3.29% being the
rate applicable to outstanding bank debt at March 31, 2013. 
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.  
Contacts:
Tourmaline Oil Corp.
Michael Rose
Chairman, President and Chief Executive Officer
(403) 266-5992 
Tourmaline Oil Corp.
Brian Robinson
Vice President, Finance and Chief Financial Officer
(403) 767-3587
robinson@tourmalineoil.com 
Tourmaline Oil Corp.
Scott Kirker
Secretary and General Counsel
(403) 767-3593
kirker@tourmalineoil.com 
Tourmaline Oil Corp.
Suite 3700, 250 - 6th Avenue S.W.
Calgary, Alberta  T2P 3H7
(403) 266-5992
(403) 266-5952 (FAX)
www.tourmalineoil.com
 
 
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