Tourmaline Oil Corp. Announces Record Q2 2014 Financial and Operating Results-Increases Drilling Program and 2014 Exit

Tourmaline Oil Corp. Announces Record Q2 2014 Financial and Operating Results-Increases Drilling Program and 2014 Exit Production 
CALGARY, ALBERTA -- (Marketwired) -- 08/06/14 --   Tourmaline Oil
Corp. (TSX: TOU) ("Tourmaline" or the "Company") is pleased to
announce record financial and operating results for the first half of
2014. 
Highlights 


 
 
--  Record cash flow(1) of $484.1 million during the first six months of
    2014, a 97% increase over 1H 2013. 
--  Record earnings of $156.3 million in the 1H of 2014, a 90% increase over
    1H 2013. 
--  Q2 2014 production of 109,953 boepd, up 57% over Q2 2013. 
--  2014 exit production volume of 150,000 - 155,000 boepd currently
    estimated. 
--  Average 30-day IP rate of 10.8 mmcfpd vs. internal template 30-day IP
    rate of 5.0 mmcfpd for the 32 Deep Basin horizontal wells drilled and
    completed thus far in 2014. 
--  Tourmaline has drilled 56 gas wells, 12 oil wells and no dry holes thus
    far in 2014. 

(1) See "Non-GAAP Financial Measures" in the attached Management's
Discussion and Analysis. 
Financial Update 


 
 
--  The Company is forecasting 2014 full-year cash flow of $1.05 billion and
    cash flow of $1.48 billion in 2015. 
--  The Company completed the expansion of its banking credit facility to
    $1.3 billion during the second quarter. 
--  The Company will continue to operate with a debt to cash flow ratio of
   less than 1.0 times. 

Production Update 
Second quarter 2014 production averaged 109,953 boepd, a 57% increase
over second quarter 2013 and a 7% increase over the previous quarter.
Second quarter production was reduced by approximately 3,000 boepd
due to unscheduled outages related to mainline maintenance on the
Alberta TCPL system and compressor issues on the Alliance system in
NEBC in June. Additional maintenance on the mainline and the Robb
lateral are planned by TCPL in August. 
The Company remains on track to meet or exceed the full year average
production target of 120,000 boepd. The significant 2H 2014 Company
operated facility projects remain on schedule with the new Sundown
B.C. facility expected to come on stream on August 15 (50 mmcfpd net
addition), the Musreau AB and Doe B.C. plant expansions are set to be
completed by October 1 (100 mmcfpd net addition from both
expansions), and the new Spirit River AB gas plant is currently
scheduled for an October 15 start-up (6,000 boepd net addition). The
Company also accelerated the next plant expansion at Wild River,
originally scheduled for Q2 2015, to December of 2014 (50 mmcfpd net
addition). 
During the July 2014 to December 2015 period, the increased operated
drilling program of 20 rigs is expected to yield approximately 285
horizontal wells throughout the Company's three operated EP
complexes. This is 25 more horizontals than originally forecast by
exit 2014 and 75-80 additional horizontals by year end 2015. The
additional wells are expected to add incremental production near the
end of 2014 and in particular during 2015. Guidance for 2015 will be
revisited once 2015 facility project timing is determined. 
Tourmaline is currently forecasting a 2014 exit production volume of
150,000 - 155,000 boepd. 
EP Program Update 
Tourmaline is currently operating a total of 20 drilling rigs, with
14 rigs in the Alberta Deep Basin, 3 rigs active in NEBC and 3 rigs
active on the Peace River High Charlie Lake horizontal oil play. This
expanded drilling program is expected to yield 150 horizontal wells
in the Alberta Deep Basin, 75 horizontal wells in the NEBC Montney
gas-condensate complex and 60 Charlie Lake horizontals on the Peace
River High between July 2014 and year end 2015. Where required,
facility expansions to accommodate the anticipated increased
production volumes have been accelerated. 
Alberta Deep Basin 
The post break-up Deep Basin drilling program commenced in mid-May,
earlier than anticipated, with all 14 rigs active by mid-July. Twenty
new Deep Basin wells have already been drilled and rig released post
break-up thus far. 
Production results from the Deep Basin in 2014 continue to exceed the
production and economic template utilized by the Company. Of the 32
wells with over 30 days of production to date, the average 30 day IP
rate is now 10.8 mmcfpd, well ahead of the forecast 30 day IP rate of
5.0 mmcfpd. Not included is the most recent Wilrich pad to come
on-stream, Minehead 7-27, with the 2 wells on the pad averaging 21
mmcfpd and 16 mmcfpd during the first 18 days of production. The
Lovett 7-15 well, a horizontal Wilrich well in the Frontal Foothills,
has averaged 23 mmcfpd during the first 7 days of production and it
is currently flowing 24.8 mmcfpd @ 14.7 MPa. 
The main emphasis of the 2H 2014/2015 Deep Basin program is
horizontal targets in the Cretaceous Wilrich, Notikewin and Falher
formations. Within this overall 14 rig program, the Company also
plans several horizontals targeting Montney gas-condensate, 10 - 12
horizontals targeting additional Cretaceous horizons and 4 - 5
verticals targeting new exploration play concepts in the Greater
Alberta Deep Basin. The Company has cased three Exploration NPW
discoveries that tested new play concepts in the Deep Basin thus far
in 2014 and will production test these new wells during the third
quarter. 
Tourmaline expects to reach the 0.5 bcf/day gas production milestone
from the Alberta Deep Basin late in 2014. 2014 YTD operating costs in
the Deep Basin are approximately $4.45/boe. 
NEBC Montney Gas Condensate 
With the start-up of the Sundown facility in mid-August and
completion of the Doe plant expansion in late September, production
volumes from Tourmaline's B.C. Montney gas-condensate complex are
anticipated to reach the 45,000 - 47,500 boepd level during the
fourth quarter. 
Tourmaline has drilled 107 Montney horizontals to date at
Dawson-Sunrise-Sundown and has an expanded future drilling inventory
now in excess of 1,100 horizontal Montney locations in B.C. The
Company is operating three drilling rigs in B.C. and expects to drill
75 - 80 horizontal wells during the next 18 months, including 15
delineation locations in the condensate rich lower turbidite horizon,
where condensate rates in the 90 - 100 bbls/mmcf range have been
observed from the four initial discovery wells. 
The Company continues to add attractive new lands and drilling
inventory throughout the B.C. Montney complex, with 5 sections added
at greater Dawson in the second quarter. 
2014 YTD operating costs in the B.C. Montney complex are
approximately $3.67/boe. 
Peace River High Charlie Lake Oil Complex 
Current production from the Peace River High Charlie Lake oil complex
is 12,000 boepd with approximately 5,000 boepd of additional volume
awaiting facility access. Start-up of the new Spirit River 3-10 gas
plant early in Q4 and additional tie-ins are expected to yield a 2014
exit production level of 18,000 - 20,000 boepd from this complex. 
Tourmaline has now drilled 82 Charlie Lake horizontal oil wells and
no dry holes in the complex to date and with three rigs active
expects to add approximately 45 new horizontals per year. Completed
and stimulated well costs are averaging $4.0 - 4.5 M with 2P reserves
of 350 mstboe per horizontal in the current independent engineering
report (December 2013). Seven additional concurrently stimulated well
pairs will be drilled and completed prior to year-end 2014, with 10
additional pairs planned in 2015. The Company believes these
concurrent pairs may lead to a step change in horizontal well
performance. 
The Company has a comprehensive Peace River High infrastructure plan
in place for 2014 and 2015 that will allow for tie-in of rapidly
growing production volumes, improved production on-times and reduced
operating costs. The first component of the infrastructure plan is
the Tourmaline-operated Spirit River sour gas injection plant which
is expected to start-up in mid-October of this year. The second
component of the plan is the Mulligan oil battery, of which the first
8,000 bpd phase will be operational by Spring break-up 2015. The
Company is also pursuing a complementary series of water disposal,
oil blending and direct oil tie-in opportunities to continually
improve netbacks. 2014 YTD operating costs for the Spirit
River-Mulligan-Earring complex are approximately $14.83/boe; these
costs are anticipated to drop to the $10.00/boe level over the next
several quarters as the full infrastructure plan is implemented.
Overall, long-term corporate operating costs in the $4.25 - $4.50/boe
range are anticipated. 


 
 
CORPORATE SUMMARY - SECOND QUARTER 2014                                   
--------------------------------------------------------------------------
 
                                           Three Months Ended June 30,    
                                               2014         2013  Change  
                                      ------------------------------------
OPERATIONS                                                                
Production                                                                
 Natural gas (mcf/d)                        562,912      378,872      49% 
 Crude oil and NGL (bbl/d)                   16,134        7,033     129% 
 Oil equivalent (boe/d)                     109,953       70,178      57% 
 
Product prices(1)                                                         
 Natural gas ($/mcf)                   $       4.71 $       3.92      20% 
 Crude oil and NGL ($/bbl)             $      74.53 $      87.06     (14)%
 
Operating expenses ($/boe)             $       5.24 $       4.29      22% 
 
Transportation expenses ($/boe)        $       2.13 $       1.97       8% 
 
Operating netback ($/boe)(3)           $      24.02 $      21.28      13% 
 
Cash general & administrative expenses                                    
 ($/boe)(2)                            $       0.64 $       0.82     (22)%
 
FINANCIAL ($000, EXCEPT PER SHARE)                                        
Revenue                                     350,538      190,789      84% 
Royalties                                    36,474       14,854     146% 
 
Cash flow(3)                                231,542      128,870      80% 
Cash flow per share (diluted)(3)       $       1.13 $       0.68      66% 
 
Net earnings                                 66,437       30,004     121% 
Net earnings per share (diluted)       $       0.32 $       0.16     100% 
 
Capital expenditures                        297,733      158,751      88% 
 
Weighted average shares outstanding                                       
 (diluted)                                                                
 
Net debt(3)                                                               
 
CORPORATE SUMMARY - SECOND QUARTER 2014                                     
----------------------------------------------------------------------------
 
                                             Six Months Ended June 30,      
                                               2014          2013   Change  
                                       -------------------------------------
OPERATIONS                                                                  
Production                                                                  
 Natural gas (mcf/d)                        544,558       373,112       46% 
 Crude oil and NGL (bbl/d)                   15,519         7,226      115% 
 Oil equivalent (boe/d)                     106,278        69,411       53% 
 
Product prices(1)                                                           
 Natural gas ($/mcf)                   $       5.03  $       3.71       36% 
 Crude oil and NGL ($/bbl)             $      72.60  $      87.93      (17)%
 
Operating expenses ($/boe)             $       5.09  $       4.28       19% 
 
Transportation expenses ($/boe)        $       1.90  $       2.00       (5)%
 
Operating netback ($/boe)(3)           $      25.90  $      20.75       25% 
 
Cash general & administrative expenses                                      
 ($/boe)(2)                            $       0.61  $       0.81      (25)%
 
FINANCIAL ($000, EXCEPT PER SHARE)                                          
Revenue                                     699,805       365,776       91% 
Royalties                                    67,038        26,217      156% 
 
Cash flow(3)                                484,129       245,469       97% 
Cash flow per share (diluted)(3)       $       2.41  $       1.32       83% 
 
Net earnings                                156,305        82,188       90% 
Net earnings per share (diluted)       $       0.78  $       0.44       77% 
 
Capital expenditures                        764,129       349,214      119% 
 
Weighted average shares outstanding                                         
 (diluted)                              200,906,366   185,301,611        8% 
 
Net debt(3)                                (827,246)     (345,525)     139% 
 
(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.                                                    

Conference Call Tomorrow at 9:00 a.m. MT (11:00 a.m. ET) 
Tourmaline will host a conference call tomorrow, August 7, 2014
starting at 9:00 a.m. MT (11:00 a.m. ET). To participate, please dial
1-866-226-1793 (toll-free in North America), or local dial-in
416-340-8410, a few minutes prior to the conference call.  
The conference call ID number is 4197608. 
Forward-Looking Information 
This press release contains forward-looking information within the
meaning of applicable securities laws. The use of any of the words
"forecast", "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 plans and other aspects of its anticipated
future operations, management focus, objectives, strategies,
financial, operating and production results and business
opportunities, including anticipated petroleum and natural gas
production for various periods, cash flows, capital spending,
projected operating and drilling and other operational costs, debt
levels, the timing for facility expansions and facility start-up
dates, 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; interest rates; future well production rates and reserve
volumes; operating costs; the timing of receipt of regulatory
approvals; the performance of existing wells; the success obtained in
drilling new wells; anticipated timing and results of capital
expenditures; the sufficiency of budgeted capital expenditures in
carrying out planned activities; the timing, location and extent of
future drilling operations; the successful completion of acquisitions
and dispositions; the availability and cost of labour and services;
the state of the economy and the exploration and production business;
the availability and cost of financing, labor and services; and
ability to market oil and natural gas successfully.  
Statements relating to "reserves" are also deemed to be forward
looking statements, as they involve the implied assessment, based on
certain estimates and assumptions, that the reserves described exist
in the quantities predicted or estimated and that the reserves can be
profitably produced in the future. 
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; interest rate
fluctuations; marketing and transportation; loss of markets;
environmental risks; competition; incorrect assessment of the value
of acquisitions; failure to complete or realize the anticipated
benefits of acquisitions or dispositions; ability to access
sufficient capital from internal and external sources; failure to
obtain required regulatory and other approvals; and changes in
legislation, including but not limited to tax laws, royalties and
environmental regulations. Readers are cautioned that the foregoing
list of factors is not exhaustive. 
Also included in this press release are estimates of Tourmaline's
2014 and 2015 annual cash flow and capital spending which are based
on the various assumptions as to production levels, including
estimated average production of 120,000 boepd for 2014 and 159,500
boepd for 2015, capital expenditures, and other assumptions disclosed
in this press release and including commodity price assumptions for
natural gas (AECO - $4.64 /mcf for 2014 and $4.43/mcf for 2015), and
crude oil (WTI (US) - $97.40/bbl for 2014 and $93.38/bbl for 2015)
and an exchange rate assumption of (US/CAD) $0.92 for 2014 and $0.90
for 2015. To the extent any such estimate constitutes a financial
outlook, it was approved by management and the Board of Directors of
Tourmaline on August 6, 2014 and is included to provide readers with
an understanding of Tourmaline's anticipated cash flows based on the
capital expenditure and other assumptions described herein and
readers are cautioned that the information may not be appropriate for
other purposes.  
Additional information on these and other factors that could affect
Tourmaline, or its operations or financial results, are included in
the Company's most recently filed Management's Discussion and
Analysis (See "Forward-Looking Statements" therein), Annual
Information Form (See "Risk Factors" and "Forward-Looking Statements"
therein) and other 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. 
See also "Forward-Looking Statements" in the attached Management's
Discussion and Analysis.  
Additional Reader Advisories 
Boe Conversions 
Boes may be misleading, particularly if used in isolation. A boe
conversion ratio of 6 mcf:1 bbl is based on an energy equivalency
conversion method primarily applicable at the burner tip and does not
represent a value equivalency at the wellhead. As the value ratio
between natural gas and crude oil based on the current prices of
natural gas and crude oil is significantly different from the energy
equivalency of 6:1, utilizing a 6:1 conversion basis may be
misleading as an indication of value. 
Production Tests 
Any references in this release to IP rates are useful in confirming
the presence of hydrocarbons, however, such rates are not
determinative of the rates at which such wells will continue to
produce and decline thereafter and are not necessarily indicative of
long-term performance or ultimate recovery. While encouraging,
readers are cautioned not to place reliance on such rates in
calculating the aggregate production for the Company. Such rates are
based on field estimates and may be based on limited data available
at this time. 
Non-GAAP Financial Measures 
This press release includes references to financial measures commonly
used in the oil and gas industry, "cash flow", "operating netback"
and "net debt", which do not have standardized meanings prescribed by
International Financial Reporting Standards ("GAAP"). Accordingly,
the Company's use of these terms may not be comparable to similarly
defined measures presented by other companies. Management uses the
terms "cash flow", "operating netback", and "net debt", for its own
performance measures and to provide shareholders and potential
investors with a measurement of the Company's efficiency and its
ability to generate the cash necessary to fund a portion of its
future growth expenditures or to repay debt. Investors are cautioned
that the non-GAAP measures should not be construed as an alternative
to net income determined in accordance with GAAP as an indication of
the Company's performance. See "Non-GAAP Financial Measures" in the
attached Management's Discussion and Analysis for the definition and
description of these terms.  
Certain Definitions 


 
 
bbls         barrels                                           
boe          barrel of oil equivalent                          
boepd        barrel of oil equivalent per day                  
bopd         barrel of oil, condensate or liquids per day      
gjsd         gigajoules per day                                
mmboe        millions of barrels of oil equivalent             
mbbls        thousand barrels                                  
mmcf         million cubic feet                                
mcf          thousand cubic feet                               
mmcfpd       million cubic feet per day                        
mmcfpde      million cubic feet per day equivalent             
mcfe         thousand cubic feet equivalent                    
mmbtu        million British thermal units                     
mstboe       thousand stock tank barrels of oil equivalent     

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 as at and for the
three and six months ended June 30, 2014 and the consolidated
financial statements for the year ended December 31, 2013. Both the
consolidated financial statements and the MD&A can be found at
www.sedar.com. This MD&A is dated August 6, 2014. 
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)", "net debt", "adjusted
EBITDA", "senior debt", "total debt", and "total capitalization". 
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        Six Months Ended 
                                           June 30,                June 30, 
                            ------------------------------------------------
                                2014    2013 Change     2014    2013 Change 
----------------------------------------------------------------------------
Natural gas (mcf/d)          562,912 378,872     49% 544,558 373,112     46%
Oil (bbl/d)                    9,713   5,401     80%   9,204   5,544     66%
NGL (bbl/d)                    6,421   1,632    293%   6,315   1,682    275%
----------------------------------------------------------------------------
Oil equivalent (boe/d)       109,953  70,178     57% 106,278  69,411     53%
----------------------------------------------------------------------------

Production for the three months ended June 30, 2014 averaged 109,953
boe/d, a 57% increase over the average production for the same
quarter of 2013 of 70,178 boe/d. For the six months ended June 30,
2014, production increased 53% to 106,278 boe/d from 69,411 boe/d for
the same period in 2013. The Company's significant production growth,
when compared to 2013, can be primarily attributed to new wells that
have been brought on-stream since June 30, 2013, as well as property
and corporate acquisitions. Production was 85% natural gas weighted
in the second quarter of 2014 compared to 90% in the second quarter
of 2013. The accelerated growth in oil and NGL production is the
result of increased drilling in the Spirit River/Peace River High
Charlie Lake oil plays, incremental liquids recovered in the Wild
River area via deep cut processing, which began in late 2013, and
strong condensate recoveries from new wells tied-in in N.E.B.C. 
Full-year average production guidance for 2014 remains unchanged at
120,000 boe/d (as disclosed in the Company's MD&A dated March 17,
2014). 
REVENUE 


                               Three Months Ended          Six Months Ended 
                                         June 30,                  June 30, 
                        ----------------------------------------------------
(000s)                       2014     2013 Change      2014     2013 Change 
----------------------------------------------------------------------------
Revenue from:                                                               
 Natural gas             $241,108 $135,068     79% $495,870 $250,777     98%
 Oil and NGL              109,430   55,721     96%  203,935  114,999     77%
----------------------------------------------------------------------------
Total revenue from                                                          
 natural gas, oil and                                                       
 NGL sales               $350,538 $190,789     84% $699,805 $365,776     91%
----------------------------------------------------------------------------

Revenue for the three months ended June 30, 2014 increased 84% to
$350.5 million from $190.8 million for the same quarter of 2013.
Revenue for the six-month period ended June 30, 2014 grew 91% from
$365.8 million in 2013 to $699.8 million in 2014. Revenue growth is
consistent with the increase in production and the rise in natural
gas prices for the same periods, partially offset by weaker NGL
prices. Revenue includes all petroleum, natural gas and NGL sales and
realized gain (loss) on financial instruments. 


 
 
TOURMALINE PRICES:                                                          
 
                             Three Months Ended           Six Months Ended  
                                       June 30,                   June 30,  
                      ------------------------------------------------------
                           2014     2013 Change       2014     2013 Change  
----------------------------------------------------------------------------
Natural gas ($/mcf)    $   4.71 $   3.92     20%  $   5.03 $   3.71     36% 
Oil ($/bbl)            $  98.31 $  94.31      4%  $  96.37 $  94.64      2% 
NGL ($/bbl)            $  38.57 $  63.08    (39)% $  37.97 $  65.78    (42)%
----------------------------------------------------------------------------
Oil equivalent ($/boe) $  35.03 $  29.88     17%  $  36.38 $  29.11     25% 
----------------------------------------------------------------------------
 
BENCHMARK GAS AND OIL PRICES:                                               
 
                                                Three Months Ended June 30, 
                                               -----------------------------
                                                     2014      2013  Change 
                                               -----------------------------
Natural gas                                                                 
  NYMEX Henry Hub (USD$/mcf)                    $    4.58 $    4.02      14%
  AECO (CAD$/mcf)                               $    4.70 $    3.55      32%
Oil                                                                         
  NYMEX (USD$/bbl)                              $  102.99 $   94.17       9%
  Edmonton Par (CAD$/bbl)                       $  104.54 $   92.95      12%
----------------------------------------------------------------------------
 
RECONCILIATION OF AECO INDEX TO TOURMALINE'S REALIZED GAS PRICES:           
 
                                               Three Months Ended June 30,  
                                               -----------------------------
($/mcf)                                             2014      2013  Change  
----------------------------------------------------------------------------
AECO index                                      $   4.70  $   3.55      32% 
Heat/quality differential                           0.28      0.30      (7)%
Realized gain (loss)                               (0.27)     0.07    (486)%
----------------------------------------------------------------------------
Tourmaline realized natural gas price           $   4.71  $   3.92      20% 
----------------------------------------------------------------------------
 
CURRENCY - EXCHANGE RATES:                                                  
 
                                               Three Months Ended June 30,  
                                              ------------------------------
                                                    2014      2013  Change  
----------------------------------------------------------------------------
CAD$/USD$                                      $  0.9172 $  0.9772      (6)%
----------------------------------------------------------------------------

The realized average natural gas price for the three and six months
ended June 30, 2014 was 20% and 36%, respectively, higher than the
same periods of the prior year. The higher natural gas price reflects
the higher AECO prices experienced during the periods. Included in
the realized price is a loss on commodity contracts in the second
quarter of 2014 of $13.9 million (six months ended June 30, 2014 -
$42.5 million) compared to a gain of $2.5 million for the same period
of the prior year (six months ended June 30, 2013 - $3.6 million).
The increased focus on hedging activities allows for more predictable
cash flows to support the larger capital budget. As a result, a
larger volume of natural gas has been subject to pricing per the
commodity contracts in place, creating realized losses when the price
of natural gas increases. Realized prices exclude the effect of
unrealized gains or losses on commodity contracts. Once these gains
and losses are realized they are included in the per-unit amounts.
Partially offsetting the loss on commodity contracts was a 6% premium
to AECO pricing received due to the higher heat content (three months
ended June 30, 2013 - 8%). 
Realized oil prices were relatively unchanged for the three and six
months ended June 30, 2014. For the three-month period ending June
30, 2014, NGL prices decreased 39% from $63.08/bbl to $38.57/bbl,
when compared to the same period in 2013. NGL prices decreased 42%
for the six-month period ended June 30, 2014, when compared to the
same period of the prior year. The proportion of ethane in the NGL
mix, which is priced significantly lower than the other products,
increased from approximately 9% in 2013 to 39% in the second quarter
of 2014 due to deep cut processing in the Wild River area of Alberta,
resulting in a corresponding decrease in the realized NGL pricing.
The economics of the deep cut processing activities are favourable
when compared to leaving the ethane in the natural gas stream. 
ROYALTIES 


                                             Three Months                   
                                                    Ended  Six Months Ended 
                                                 June 30,          June 30, 
                                        ------------------------------------
(000s)                                      2014     2013     2014     2013 
----------------------------------------------------------------------------
Natural gas                              $20,888  $ 7,512  $40,472  $12,047 
Oil and NGL                               15,586    7,342   26,566   14,170 
----------------------------------------------------------------------------
Total royalties                          $36,474  $14,854  $67,038  $26,217 
----------------------------------------------------------------------------
Royalties as a percentage of revenue        10.4%     7.8%     9.6%     7.2%
----------------------------------------------------------------------------

For the quarter ended June 30, 2014, the average effective royalty rate
increased to 10.4% compared to 7.8% for the same quarter of 2013. For
the six-month period ended June 30, 2014, the average effective
royalty rate increased from 7.2% in 2013 to 9.6% in 2014. The
increase in the average effective royalty rate for 2014 can be
attributed to higher oil and NGL production which have higher royalty
rates, as well as an increase in natural gas prices. Royalties are
paid based on a monthly reference price and do not take into account
the lower price received on hedged volumes in an environment of
natural gas price appreciation, effectively resulting in a higher
royalty rate. 
The Company continues to benefit from the New Well Royalty Reduction
Program and the Natural Gas Deep Drilling Program in Alberta, as well
as the Deep Royalty Credit Program in British Columbia.  
The Company expects its royalty rate for 2014 to remain at
approximately 10%. The royalty rate is however sensitive to commodity
prices and product mixes, and as such, a change in commodity prices
or product mix will impact the actual rate. 
OTHER INCOME 


 
 
                               Three Months Ended          Six Months Ended 
                                         June 30,                  June 30, 
                        ----------------------------------------------------
(000s)                       2014     2013 Change      2014     2013 Change 
----------------------------------------------------------------------------
Other income             $  4,502 $  1,249    260% $  9,401 $  2,568    266%
----------------------------------------------------------------------------

Other income increased from $1.2 million in the second quarter of 2013
to $4.5 million in 2014. For the six-month period ended June 30,
2014, other income increased from $2.6 million in 2013 to $9.4
million in 2014. The increase in processing income is mainly due to
fees charged to working interest partners on Tourmaline operated
wells where gas is being processed through the Company-owned Banshee
gas processing plant. Tourmaline has experienced a rapid growth in
production volumes from wells in that area. 
OPERATING EXPENSES 


 
 
                               Three Months Ended          Six Months Ended 
                                         June 30,                  June 30, 
                        ----------------------------------------------------
(000s) except per-unit                                                      
 amounts                     2014     2013 Change      2014     2013 Change 
----------------------------------------------------------------------------
Operating expenses       $ 52,398 $ 27,409     91% $ 97,887 $ 53,776     82%
----------------------------------------------------------------------------
Per boe                  $   5.24 $   4.29     22% $   5.09 $   4.28     19%
----------------------------------------------------------------------------

Operating expenses include all periodic lease and field-level expenses
and exclude income recoveries from processing third-party volumes.
For the second quarter of 2014, total operating expenses were $52.4
million compared to $27.4 million in 2013. Operating costs for the
six months ended June 30, 2014 were $97.9 million, compared to $53.8
million for the same period in 2013, reflecting increased costs
relating to the growing production base. 
On a per-boe basis, the costs increased from $4.29/boe for the second
quarter of 2013 to $5.24/boe in the second quarter of 2014. For the
six months ended June 30, 2014, operating costs increased from
$4.28/boe in the prior year to $5.09/boe. The production of oil and
NGLs incurs higher per-unit operating costs compared to natural gas.
As the Company's production profile becomes more heavily weighted to
oil and NGLs, we anticipate an increase in per-unit operating
expenses. The per-unit operating costs in the Wild River area have
also increased as approximately 70 mmcfpd of natural gas is being
processed through third-party fractionation facilities in an effort
to recover more valuable natural gas liquids. The Company's operating
expenses also increased with the addition of volumes from the
Santonia acquisition, which were subject to higher per-unit costs. It
is expected that as this new production is processed through
Tourmaline facilities and is subject to the same efficiencies, the
costs associated with these incremental volumes will fall more in
line with the corporate average.  
The Company's operating expenses in the second quarter of 2014
include third-party processing, gathering, and compression fees of
approximately $15.1 million or 29% of total operating costs (three
months ended June 30, 2013 - $7.5 million or 27% of total operating
costs). For the six-month period ended June 30, 2014, the Company's
operating expenses included $27.5 million related to third-party
processing, gathering and compression fees (28% of total operating
costs) compared to $15.8 million (29% of total operating costs) for
the same period in the prior year. 
The Company expects its full year 2014 operating costs to average
approximately $4.90/boe, which has increased from previous guidance
of $4.40/boe (as disclosed in the Company's MD&A dated May 7, 2014).
Forecast operating costs have been increased to reflect the growth in
oil and NGL production as well as additional costs for processing and
fractionation of liquids extracted through deep cut facilities. The
Company continues to invest capital in Company owned-and-operated
plants in an effort to increase processing capacity and maintain its
low operating cost structure. Actual costs per boe can change
depending on a number of factors including the Company's actual
production levels. 
TRANSPORTATION 


                              Three Months Ended          Six Months Ended  
                                        June 30,                  June 30,  
                       -----------------------------------------------------
(000s) except per-unit                                                      
 amounts                    2014     2013 Change      2014     2013 Change  
----------------------------------------------------------------------------
Natural gas                                                                 
 transportation         $ 13,859 $  8,762     58% $ 24,625 $ 17,047     44% 
Oil and NGL                                                                 
 transportation            7,443    3,845     94%   12,006    8,030     50% 
----------------------------------------------------------------------------
Total transportation    $ 21,302 $ 12,607     69% $ 36,631 $ 25,077     46% 
----------------------------------------------------------------------------
Per boe                 $   2.13 $   1.97      8% $   1.90 $   2.00     (5)%
----------------------------------------------------------------------------

Transportation costs for the three months ended June 30, 2014 were
$21.3 million or $2.13/boe compared to $12.6 million or $1.97/boe for
the same period of the prior year. Total transportation costs for the
three and six months ended June 30, 2014 increased as a result of
higher production volumes. The increase in per-unit transportation
costs for the second quarter of 2014 over the same period of 2013 is
due to the use of more expensive truck transportation, necessitated
by strong growth in oil and NGL production. These increased costs
will be mitigated by facility interconnects scheduled to come on
stream in 2014 and 2015. 
For the six months ended June 30, 2014, transportation costs were
$36.6 million or $1.90/boe compared to $25.1 million or $2.00/boe for
the first six months of 2013. The first half of 2014 saw unutilized
transportation costs decrease when compared to the same period of
2013 as production increased. This reduction in unutilized
transportation is reflected in the lower per-unit cost for the
six-month period ended 2014, compared to 2013. 
GENERAL & ADMINISTRATIVE EXPENSES ("G&A") 


 
 
                           Three Months Ended             Six Months Ended  
                                     June 30,                     June 30,  
                  ----------------------------------------------------------
(000s) except per-                                                          
 unit amounts          2014      2013  Change       2014      2013  Change  
----------------------------------------------------------------------------
G&A expenses       $ 12,404  $  8,829      40%  $ 22,897  $ 17,436      31% 
Administrative and                                                          
 capital recovery    (1,356)     (312)    335%    (2,183)     (726)    201% 
Capitalized G&A      (4,609)   (3,301)     40%    (8,965)   (6,553)     37% 
----------------------------------------------------------------------------
Total G&A expenses $  6,439  $  5,216      23%  $ 11,749  $ 10,157      16% 
----------------------------------------------------------------------------
Per boe            $   0.64  $   0.82     (22)% $   0.61  $   0.81     (25)%
----------------------------------------------------------------------------

G&A expenses for the second quarter of 2014 were $6.4 million
($0.64/boe) compared to $5.2 million ($0.82/boe) for the same quarter
of the prior year. G&A expenses for the six-month period ended June
30, 2014 were $11.7 million ($0.61/boe) compared to $10.2 million
($0.81/boe) for the same period in 2013. The increase in G&A expenses
in 2014 compared to 2013 is primarily due to staff additions needed
to manage the larger production, reserve and land base, as well as
the higher drilling rig count. The Company increased its staff count
by approximately 25% from June 2013 to June 2014. The decrease in G&A
expenses per boe reflects Tourmaline's growing production base which
continues to increase at a faster rate than the accompanying G&A
costs. 
G&A costs for 2014 are expected to be approximately $0.60/boe. 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    Six Months Ended 
                                               June 30,            June 30, 
                                    ----------------------------------------
(000s) except per-unit amounts           2014      2013      2014      2013 
----------------------------------------------------------------------------
Share-based payments                 $ 13,612  $  8,964  $ 27,014  $ 16,144 
Capitalized share-based payments       (6,806)   (4,482)  (13,507)   (8,072)
----------------------------------------------------------------------------
Total share-based payments           $  6,806  $  4,482  $ 13,507  $  8,072 
----------------------------------------------------------------------------
Per boe                              $   0.68  $   0.70  $   0.70  $   0.64 
----------------------------------------------------------------------------

The Company uses the fair value method for the determination of
non-cash related share-based payments expense. During the second
quarter of 2014, 991,000 stock options were granted to employees,
officers, directors and key consultants at a weighted-average
exercise price of $55.15 and 1,486,353 options were exercised,
bringing $24.0 million of cash into treasury.  
The Company recognized $6.8 million of share-based payments expense
in the second quarter of 2014 compared to $4.5 million in the second
quarter of 2013. Capitalized share-based payments for the second
quarter of 2014 were $6.8 million compared to $4.5 million for the
same quarter oif the prior year.  
For the six months ended June 30, 2014, share-based payment expense
totalled $13.5 million and a further $13.5 million in share-based
payments were capitalized (six months ended June 30, 2013 - $8.1
million and $8.1 million, respectively). Share-based payments are
higher in 2014 compared to the same periods in 2013, which reflects
the increased value attributed to the options and a higher number of
options outstanding. 
DEPLETION, DEPRECIATION AND AMORTIZATION ("DD&A") 


 
 
                                     Three Months Ended    Six Months Ended 
                                               June 30,            June 30, 
                                    ----------------------------------------
(000s) except per-unit amounts           2014      2013      2014      2013 
----------------------------------------------------------------------------
Total depletion, depreciation and                                           
 amortization                        $127,102  $ 82,317  $242,637  $163,740 
Less mineral lease expiries            (5,739)   (7,444)  (13,309)  (15,026)
----------------------------------------------------------------------------
Depletion, depreciation and                                                 
 amortization                        $121,363  $ 74,873  $229,328  $148,714 
----------------------------------------------------------------------------
Per boe                              $  12.13  $  11.72  $  11.92  $  11.84 
----------------------------------------------------------------------------

DD&A expense, excluding mineral lease expiries, was $121.4 million for
the second quarter of 2014 compared to $74.9 million for the same
period of 2013. For the six-month period ended June 30, 2014, DD&A
expense (excluding mineral lease expires) was $229.3 million compared
to $148.7 million in the same period of 2013. The increase in DD&A
expense in 2014 over the same period in 2013 is 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) was $12.13/boe for the second quarter of 2014 compared to
the rate of $11.72/boe for the same quarter in 2013. The per-unit
DD&A rate (excluding the impact of mineral lease expiries) was
$11.92/boe for the six-month period ended June 30, 2014 compared to
the rate of $11.84/boe in the same period of the prior year. 
Mineral lease expiries for the three months ended June 30, 2014 were
$5.7 million, compared to expiries in the same quarter of the prior
year of $7.4 million. For the six months ended June 30, 2014 expiries
were $13.3 million compared with $15.0 million for the same period in
2013. Tourmaline expects to continue to see mineral lease expiries of
a similar magnitude on a go-forward basis. 
FINANCE EXPENSES 


 
 
                               Three Months Ended          Six Months Ended 
                                         June 30,                  June 30, 
                        ----------------------------------------------------
(000s)                       2014     2013 Change      2014     2013 Change 
----------------------------------------------------------------------------
Interest expense         $  5,379 $  2,540    112% $ 10,319 $  5,977     73%
Accretion expense             623      488     28%    1,161      879     32%
Transaction costs on                                                        
 corporate and property                                                     
 acquisitions               1,496        -    100%    1,496      670    123%
----------------------------------------------------------------------------
Total finance expenses   $  7,498 $  3,028    148% $ 12,976 $  7,526     72%
----------------------------------------------------------------------------

Finance expenses are comprised of interest expense, accretion of
provisions and transaction costs associated with corporate and
property acquisitions. Finance expenses for the three and six months
ended June 30, 2014 totalled $7.5 million and $13.0 million,
respectively (three and six months ended June 30, 2013 - $3.0 million
and $7.5 million, respectively). The increase in finance expenses in
2014 over 2013 is due to the recognition of transaction costs
associated with a corporate acquisition in the period as well as a
higher average bank debt outstanding, partially offset by a lower
average effective interest rate. The average bank debt outstanding
for the six months ended 2014 was $602.5 million (2013 - $301.7
million), with an average effective interest rate of 3.02% (2013 -
3.28%). 
DEFERRED INCOME TAXES 
For the three months ended June 30, 2014, the provision for deferred
income tax expense was $25.2 million compared to $14.3 million for
the same period in 2013. For the six-month period ended June 30,
2014, the provision for deferred income tax expense was $58.1 million
compared to $33.9 million for the same period in 2013. The increase
is consistent with the higher pre-tax earnings recorded in the second
quarter and first half of 2014 compared to the respective periods in
2013. 
CASH FLOW FROM OPERATING ACTIVITIES, CASH FLOW AND NET EARNINGS 


 
 
                                Three Months Ended         Six Months Ended 
                                          June 30,                 June 30, 
                          --------------------------------------------------
(000s) except per-unit                                                      
 amounts                       2014     2013Change      2014     2013Change 
----------------------------------------------------------------------------
Cash flow from operating                                                    
 activities                $231,756 $128,432    80% $481,146 $222,195   117%
 Per share(1)              $   1.13 $   0.68    66% $   2.39 $   1.20    99%
Cash flow (2)              $231,542 $128,870    80% $484,129 $245,469    97%
 Per share (1) (2)         $   1.13 $   0.68    66% $   2.41 $   1.32    83%
Net earnings               $ 66,437 $ 30,004   121% $156,305 $ 82,188    90%
 Per share (1)             $   0.32 $   0.16   100% $   0.78 $   0.44    77%
Operating netback per boe                                                   
 (2)                       $  24.02 $  21.28    13% $  25.90 $  20.75    25%
----------------------------------------------------------------------------
(1) Fully diluted                                                           
(2)See "Non-GAAP Financial Measures"                                        

Cash flow for the three months ended June 30, 2014 was $231.5 million
or $1.13 per diluted share compared to $128.9 million or $0.68 per
diluted share for the same period of 2013. Cash flow for the six
months ended June 30, 2014 was $484.1 million or $2.41 per share
compared to $245.5 million or $1.32 per share for the same period of
2013.  
The Company had after-tax earnings for the three months ended June
30, 2014 of $66.4 million or $0.32 per diluted share compared to
$30.0 million or $0.16 per diluted share for the same period of 2013.
For the six-month period ended June 30, 2014, after-tax earnings were
$156.3 million or $0.78 per diluted share compared to $82.2 million
or $0.44 per diluted share for the first half of 2013. The increase
in both cash flow and after-tax earnings in 2014 reflects higher
natural gas prices, as well as a significant increase in production
over 2013. 
CAPITAL EXPENDITURES 


 
 
                                      Three Months Ended   Six Months Ended 
                                                June 30,           June 30, 
                                     ---------------------------------------
(000s)                                    2014      2013     2014      2013 
----------------------------------------------------------------------------
Land and seismic                      $  7,396  $  8,277 $ 37,150  $ 16,782 
Drilling and completions               136,886    54,975  418,035   236,003 
Facilities                             144,165    58,568  294,598   131,703 
Property acquisitions                    4,192    33,533    4,777    35,983 
Property dispositions                     (100)        -     (100)  (77,945)
Other                                    5,194     3,398    9,669     6,688 
----------------------------------------------------------------------------
Total cash capital expenditures       $297,733  $158,751 $764,129  $349,214 
----------------------------------------------------------------------------

During the second quarter of 2014, the Company invested $297.7 million
of cash consideration, net of dispositions, compared to $158.8
million for the same period of 2013. Expenditures on exploration and
production were $288.4 million compared to $121.8 million for the
same quarter of 2013, which is consistent with the Company's
aggressive growth strategy. During the six-month period ended June
30, 2014, the Company invested $764.1 million of cash consideration,
net of dispositions, compared to $349.2 million for the same period
in 2013. Expenditures on exploration and production were $749.8
million compared with $384.5 million for the same period in 2013. 
The growth in facilities expenditures includes work on the expansion
of the facilities at Doe, Musreau and Wild River; a new sour gas
processing facility in Spirit River; an oil battery at Mulligan in
the Spirit River area; a compressor station at Sundown; and several
large pipeline lateral projects intended to optimize transportation
of, and related logistics for getting, natural gas to Tourmaline
operated processing facilities. 
The following table summarizes the drill, complete and tie-in
activities for the period: 


 
 
                              Six Months Ended              Six Months Ended
                                 June 30, 2014                 June 30, 2013
                ------------------------------------------------------------
                          Gross            Net          Gross            Net
----------------------------------------------------------------------------
Drilled                      68          61.48             37          33.94
Completed                    59          53.23             41          37.29
Tied-in                      35          31.11             24          23.52
----------------------------------------------------------------------------

Corporate Acquisition 
On April 24, 2014, the Company acquired all of the issued and
outstanding shares of Santonia Energy Inc. ("Santonia"). As
consideration, the Company issued 3,228,234 common shares at a price
of $54.94 per share. Total transaction costs incurred by the Company
of $1.5 million associated with this acquisition were expensed in the
interim consolidated statement of income and comprehensive income.
The acquisition resulted in an increase in Property, Plant and
Equipment ("PP&E") of approximately $167.5 million and an increase to
Exploration and Evaluation ("E&E") assets of $19.1 million. The
acquisition of Santonia provides for an increase in lands and
production in a highly profitable core area of the Alberta Deep
Basin. 
LIQUIDITY AND CAPITAL RESOURCES  
On February 12, 2014, the Company issued 4.615 million common shares
at a price of $47.50 per share for total gross proceeds of $219.2
million. The proceeds were used to temporarily reduce bank debt and
were used to fund the Company's 2014 exploration and development
program. 
On April 24, 2014, the Company closed the acquisition of Santonia
Energy Inc. ("Santonia") with the issuance of 3.228 million
Tourmaline shares at a closing price on that date of $54.94 per
Tourmaline share, for consideration of $177.4 million. The Company
also assumed Santonia's net debt of $40.6 million, which included
$8.9 million in transaction costs. 
On June 2, 2014, the Company issued 1.15 million flow-through common
shares at a price of $68.15 per share, for total gross proceeds of
$78.4 million. The proceeds were used to temporarily reduce bank debt
and to fund the Company's remaining 2014 and its upcoming 2015
exploration and development programs. 
The Company has a covenant-based bank credit facility in place with a
syndicate of bankers, the details of which are described in note 9 of
the Company's consolidated financial statements for the year ended
December 31, 2013. In May 2014, the facility was increased to $1.3
billion from $900 million, with an initial maturity of June 2017. The
revisions to the credit facility included the removal of the EBITDA
to interest expense covenant as well as a revision to the definition
of senior debt to mean generally the indebtedness, liabilities and
obligations of the Company to the lenders under the credit facility.
The increase in the facility will provide the Company with greater
flexibility when executing its capital program. 
As at June 30, 2014, the Company had negative working capital of
$123.2 million, after adjusting for the fair value of financial
instruments (the unadjusted working capital deficiency was $131.7
million) (December 31, 2013 - $242.6 million and $245.3 million,
respectively). As at June 30, 2014, the Company had $704.1 million
drawn on its credit facility (December 31, 2013 - $590.3 million),
and net debt was $827.2 million (December 31, 2013 - $832.9 million).
Management believes the Company has sufficient liquidity and capital
resources to fund the remainder of its 2014 exploration and
development programs through expected cash flow from operations and
its unutilized bank credit facility. 
SHARES AND STOCK OPTIONS OUTSTANDING 
As at August 6, 2014, the Company has 201,438,624 common shares
outstanding and 14,940,434 stock options granted and outstanding. 
COMMITMENTS AND CONTRACTUAL OBLIGATIONS 
In the normal course of business, the Company is obligated to make
future payments. These obligations represent contracts and other
commitments that are known and non-cancellable. 


 
 
                                                          greater           
Payments Due by Year                              4-5      than 5           
 (000s)                   1 Year  2-3 Years     Years       Years      Total
----------------------------------------------------------------------------
Operating leases       $   4,004 $    9,934 $  10,095 $     3,701 $   27,734
Flow-through                                                                
 obligations                   -     78,373         -           -     78,373
Firm transportation                                                         
 and processing                                                             
 agreements               78,715    352,867   214,682     463,274  1,109,538
Bank debt(1)                   -    769,004         -           -    769,004
----------------------------------------------------------------------------
                       $  82,719 $1,210,178 $ 224,777 $   466,975 $1,984,649
----------------------------------------------------------------------------
(1) Includes interest expense at an annual rate of 2.78% being the rate     
applicable to outstanding bank debt at June 30, 2014.                       

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, 2013. 
As at June 30, 2014, the Company has entered into certain financial
derivative and physical delivery sales contracts in order to manage
commodity risk. These instruments are not used for trading or
speculative purposes. The Company has not designated its financial
derivative contracts as effective accounting hedges, even though the
Company considers all commodity contracts to be effective economic
hedges. Such financial derivative commodity contracts are recorded on
the consolidated statement of financial position at fair value, with
changes in the fair value being recognized as an unrealized gain or
loss on the consolidated statement of income and comprehensive
income. The contracts that the Company has in place at June 30, 2014
are summarized and disclosed in note 3 of the Company's interim
condensed consolidated financial statements for the three and six
months ended June 30, 2014 and 2013. 
The following table provides a summary of the unrealized gains
(losses) on financial instruments for the three and six months ended
June 30, 2014 and 2013: 


 
 
                                    Three Months Ended     Six Months Ended 
                                              June 30,             June 30, 
                                 -------------------------------------------
(000s)                                 2014       2013      2014       2013 
----------------------------------------------------------------------------
Unrealized gain (loss) on                                                   
 financial instruments            $  (4,911) $   3,321 $ (11,177) $    (498)
----------------------------------------------------------------------------

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 in place at June 30, 2014 have been summarized and
disclosed in note 3 of the Company's interim condensed consolidated
financial statements for the three and six months ended June 30, 2014
and 2013. 
There were no financial derivative or physical delivery contracts
entered into subsequent to June 30, 2014. 
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, 2013. 
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. 
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 DC&P or ICFR during the period
beginning on April 1, 2014 and ending on June 30, 2014 that have
materially affected, or are reasonably likely to materially affect,
the Company's ICFR. It should be noted that a control system,
including the Company's disclosure and internal controls and
procedures, no matter how well conceived can provide only reasonable,
but not absolute assurance that the objectives of the control system
will be met and it should not be expected that the disclosure and
internal controls and procedures will prevent all errors or fraud. 
BUSINESS RISKS AND UNCERTAINTIES  
Tourmaline monitors and complies with current government regulations
that affect its activities, although operations may be adversely
affected by changes in government policy, regulations or taxation. In
addition, Tourmaline maintains a level of liability, property and
business interruption insurance which is believed to be adequate for
Tourmaline's size and activities, but is unable to obtain insurance
to cover all risks within the business or in amounts to cover all
possible claims. 
See "Forward-Looking Statements" in this MD&A and "Risk Factors" in
Tourmaline's most recent annual information form for additional
information regarding the risks to which Tourmaline and its business
and operations are subject. 
IMPACT OF NEW ENVIRONMENTAL REGULATIONS 
The oil and gas industry is currently subject to regulation pursuant
to a variety of provincial and federal environmental legislation, all
of which is subject to governmental review and revision from time to
time. Such legislation provides for, among other things, restrictions
and prohibitions on the spill, release or emission of various
substances produced in association with certain oil and gas industry
operations, such as sulphur dioxide and nitrous oxide. In addition,
such legislation sets out the requirements with respect to oilfield
waste handling and storage, habitat protection and the satisfactory
operation, maintenance, abandonment and reclamation of well and
facility sites. Compliance with such legislation can require
significant expenditures and a breach of such requirements may result
in suspension or revocation of necessary licenses and authorizations,
civil liability and the imposition of material fines and penalties. 
The use of fracture stimulations has been ongoing safely in an
environmentally responsible manner in western Canada for decades.
With the increase in the use of fracture stimulations in horizontal
wells there is increased communication between the oil and natural
gas industry and a wider variety of stakeholders regarding the
responsible use of this technology. This increased attention to
fracture stimulations may result in increased regulation or changes
of law which may make the conduct of the Company's business more
expensive or prevent the Company from conducting its business as
currently conducted. Tourmaline focuses on conducting transparent,
safe and responsible operations in the communities in which its
people live and work. 
NON-GAAP FINANCIAL MEASURES 
This MD&A or documents referred to in this MD&A make reference to the
terms "cash flow", "operating netback", "working capital (adjusted
for the fair value of financial instruments)", "net debt", "adjusted
EBITDA", "senior debt", "total debt", and "total capitalization"
which are not recognized measures under GAAP, and do not have a
standardized meaning prescribed by GAAP. Accordingly, the Company's
use of these terms may not be comparable to similarly defined
measures presented by other companies. Management uses the terms
"cash flow", "operating netback", "working capital (adjusted for the
fair value of financial instruments)" and "net debt", for its own
performance measures and to provide shareholders and potential
investors with a measurement of the Company's efficiency and its
ability to generate the cash necessary to fund a portion of its
future growth expenditures or to repay debt. Investors are cautioned
that the non-GAAP measures should not be construed as an alternative
to net income determined in accordance with GAAP as an indication of
the Company's performance. The terms "adjusted EBITDA", "senior
debt", "total debt", and "total capitalization" are not used by
management in measuring performance but are used in the financial
covenants under the Company's credit facility. Under the Company's
credit facility "adjusted EBITDA" means generally net income or loss,
excluding extraordinary items, plus interest expense and income taxes
and adjusted for non-cash items and gains or losses on dispositions,
"senior debt" means generally the indebtedness, liabilities and
obligations of the Company to the lenders under the credit facility
("bank debt"), "total debt" means generally bank debt plus any other
indebtedness of the Company, and "total capitalization" means
generally the sum of the Company's shareholders' equity and all other
indebtedness of the Company including bank debt, all determined on a
consolidated basis in accordance with GAAP. 
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  Six Months Ended
                                                  June 30,          June 30,
                                       -------------------------------------
(000s)                                      2014      2013     2014     2013
----------------------------------------------------------------------------
Cash flow from operating activities                                         
 (per GAAP)                             $231,756  $128,432 $481,146 $222,195
Change in non-cash operating working                                        
 capital                                    (214)      438    2,983   23,274
----------------------------------------------------------------------------
Cash flow                               $231,542  $128,870 $484,129 $245,469
----------------------------------------------------------------------------

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    Six Months Ended 
                                               June 30,            June 30, 
                                    ----------------------------------------
($/boe)                                  2014      2013      2014      2013 
----------------------------------------------------------------------------
Revenue, excluding processing income $  35.03  $  29.88  $  36.38  $  29.11 
Royalties                               (3.65)    (2.33)    (3.48)    (2.09)
Transportation costs                    (2.13)    (1.97)    (1.90)    (2.00)
Operating expenses                      (5.24)    (4.29)    (5.09)    (4.28)
----------------------------------------------------------------------------
Operating netback(1)                 $  24.02  $  21.28  $  25.90  $  20.75 
----------------------------------------------------------------------------
 (1) May not add due to rounding.                                           

Working Capital (Adjusted for the Fair Value of Financial Instruments) 
A summary of the reconciliation of working capital to working capital
(adjusted for the fair value of financial instruments) is set forth
below: 


 
 
                                                       As at          As at 
                                                    June 30,   December 31, 
(000s)                                                  2014           2013 
----------------------------------------------------------------------------
Working capital (deficit)                      $    (131,672) $    (245,314)
Fair value of financial instruments - short-                                
 term (net)                                            8,506          2,691 
----------------------------------------------------------------------------
Working capital (deficit) (adjusted for the                                 
 fair value of financial instruments)          $    (123,166) $    (242,623)
----------------------------------------------------------------------------

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


 
 
                                                       As at          As at 
                                                    June 30,   December 31, 
(000s)                                                  2014           2013 
----------------------------------------------------------------------------
Bank debt                                      $    (704,080) $    (590,319)
Working capital (deficit)                           (131,672)      (245,314)
Fair value of financial instruments - short-                                
 term (net)                                            8,506          2,691 
----------------------------------------------------------------------------
Net debt                                       $    (827,246) $    (832,942)
----------------------------------------------------------------------------

SELECTED QUARTERLY INFORMATION 


 
 
                                      2014          
($000s, unless otherwise                            
 noted)                              Q2          Q1 
--------------------------- ------------------------
PRODUCTION                                          
Natural gas (mcf)            51,225,036  47,339,926 
Oil and NGL(bbls)             1,468,198   1,340,699 
Oil equivalent (boe)         10,005,704   9,230,686 
Natural gas (mcf/d)             562,912     525,999 
Oil and NGL (bbls/d)             16,134      14,897 
Oil equivalent (boe/d)          109,953     102,563 
--------------------------- ------------------------
FINANCIAL                                           
Revenue, net of royalties       313,655     317,336 
Cash flow from operating                            
 activities                     231,756     249,390 
Cash flow (1)                   231,542     252,587 
Per diluted share                  1.13        1.28 
Net earnings (loss)              66,437      89,868 
Per basic share                    0.33        0.47 
Per diluted share                  0.32        0.45 
Total assets                  5,446,094   5,082,535 
Working capital (deficit)      (131,672)   (255,240)
Working capital                                     
 (deficit)(adjusted for the                         
 fair value of financial                            
 instruments) (1)              (123,166)   (248,094)
Cash capital expenditures       297,733     466,396 
Total outstanding shares                            
 (000s)                         201,431     195,567 
--------------------------- ------------------------
PER UNIT                                            
Natural gas ($/mcf)                4.71        5.38 
Oil and NGL ($/bbl)               74.53       70.49 
Revenue ($/boe)                   35.03       37.84 
Operating netback ($/boe)                           
 (1)                              24.02       27.94 
--------------------------- ------------------------
 
                                                  2013                      
($000s, unless otherwise                                                    
 noted)                              Q4          Q3          Q2          Q1 
--------------------------- ------------------------------------------------
PRODUCTION                                                                  
Natural gas (mcf)            41,062,993  36,486,443  34,477,391  33,055,857 
Oil and NGL(bbls)             1,076,395     735,727     640,001     667,907 
Oil equivalent (boe)          7,920,228   6,816,800   6,386,233   6,177,216 
Natural gas (mcf/d)             446,337     396,592     378,872     367,287 
Oil and NGL (bbls/d)             11,700       7,997       7,033       7,421 
Oil equivalent (boe/d)           86,089      74,096      70,178      68,636 
--------------------------- ------------------------------------------------
FINANCIAL                                                                   
Revenue, net of royalties       219,069     167,138     180,505     161,124 
Cash flow from operating                                                    
 activities                     128,852     128,192     128,432      93,763 
Cash flow (1)                   160,732     120,560     128,870     116,599 
Per diluted share                  0.83        0.64        0.68        0.64 
Net earnings (loss)              56,763       9,163      30,004      52,184 
Per basic share                    0.30        0.05        0.16        0.29 
Per diluted share                  0.29        0.05        0.16        0.29 
Total assets                  4,696,471   4,210,171   3,811,192   3,735,641 
Working capital (deficit)      (245,314)   (206,250)    (50,851)   (165,385)
Working capital                                                             
 (deficit)(adjusted for the                                                 
 fair value of financial                                                    
 instruments) (1)              (242,623)   (204,507)    (53,676)   (166,049)
Cash capital expenditures       497,941     468,261     158,751     190,463 
Total outstanding shares                                                    
 (000s)                         189,805     184,621     184,175     183,408 
--------------------------- ------------------------------------------------
PER UNIT                                                                    
Natural gas ($/mcf)                3.84        3.30        3.92        3.50 
Oil and NGL ($/bbl)               71.83       91.65       87.06       88.75 
Revenue ($/boe)                   29.69       27.58       29.88       28.33 
Operating netback ($/boe)                                                   
 (1)                              21.29       18.59       21.28       20.20 
--------------------------- ------------------------------------------------
 
                                      2012          
($000s, unless otherwise                            
 noted)                              Q4          Q3 
--------------------------- ------------------------
PRODUCTION                                          
Natural gas (mcf)            27,879,639  23,501,484 
Oil and NGL(bbls)               618,483     515,157 
Oil equivalent (boe)          5,265,090   4,432,071 
Natural gas (mcf/d)             303,040     255,451 
Oil and NGL (bbls/d)              6,723       5,600 
Oil equivalent (boe/d)           57,230      48,175 
--------------------------- ------------------------
FINANCIAL                                           
Revenue, net of royalties       134,864      91,863 
Cash flow from operating                            
 activities                     104,671      66,713 
Cash flow (1)                    93,807      63,515 
Per diluted share                  0.54        0.38 
Net earnings (loss)              16,301      (4,770)
Per basic share                    0.10       (0.03)
Per diluted share                  0.09       (0.03)
Total assets                  3,580,253   2,992,552 
Working capital (deficit)       (98,913)    (98,184)
Working capital                                     
 (deficit)(adjusted for the                         
 fair value of financial                            
 instruments) (1)              (103,727)   (101,577)
Cash capital expenditures       296,108     175,277 
Total outstanding shares                            
 (000s)                         174,813     165,678 
--------------------------- ------------------------
PER UNIT                                            
Natural gas ($/mcf)                3.29        2.52 
Oil and NGL ($/bbl)               83.28       83.34 
Revenue ($/boe)                   27.18       23.04 
Operating netback ($/boe)                           
 (1)                              19.17       15.68 
--------------------------- ------------------------
(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 summarized in the table above. The Company's average annual
production has increased from 50,804 boe per day in 2012 to 74,796
boe per day in 2013 and 106,278 boe per day in the first six months
of 2014. The production growth can be attributed primarily to the
Company's exploration and development activities, and from
acquisitions of producing properties. 
The Company's cash flows from operating activities were $273.5
million in 2012 and $479.2 million in 2013. Estimated 2014 cash flows
from operating activities (based on the first six months annualized)
are $962.3 million, due mainly to strong growth in production levels
and strengthening commodity prices. 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. Changes in commodity prices impact revenues
and cash flows available for exploration, and also the economics of
potential capital projects as low commodity prices can potentially
reduce the quantities of reserves that are commercially recoverable.
The Company's capital program is dependent on cash flows generated
from operations and access to capital markets. 
CONSOLIDATED FINANCIAL STATEMENTS  


 
 
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION                               
 
(000s) (unaudited)                           June 30, 2014 December 31, 2013
----------------------------------------------------------------------------
Assets                                                                      
Current assets:                                                             
 Accounts receivable                         $     150,722 $         136,041
 Prepaid expenses and deposits                      12,514             6,918
 Fair value of financial instruments (note                                  
  3)                                                    47               166
----------------------------------------------------------------------------
Total current assets                               163,283           143,125
Fair value of financial instruments (note 3)            48               663
Long-term asset                                      2,241             2,373
Exploration and evaluation assets (notes 4                                  
 and 5)                                            759,252           700,525
Property, plant and equipment (note 5)           4,521,270         3,849,785
----------------------------------------------------------------------------
Total Assets                                 $   5,446,094 $       4,696,471
----------------------------------------------------------------------------
Liabilities and Shareholders' Equity                                        
Current liabilities:                                                        
 Accounts payable and accrued liabilities    $     286,402 $         385,582
 Fair value of financial instruments (note                                  
  3)                                                 8,553             2,857
----------------------------------------------------------------------------
Total current liabilities                          294,955           388,439
Bank debt (note 7)                                 704,080           590,319
Long-term obligation                                 1,552             3,414
Fair value of financial instruments (note 3)         9,963             5,216
Decommissioning obligations (note 6)                94,209            76,037
Deferred premium flow-through shares (note                                  
 9)                                                 15,582                 -
Deferred taxes                                     280,055           265,025
Shareholders' equity:                                                       
 Share capital (note 9)                          3,571,431         3,062,432
 Non-controlling interest (note 8)                  19,247            17,877
 Contributed surplus                               102,721            91,718
 Retained earnings                                 352,299           195,994
----------------------------------------------------------------------------
Total shareholders' equity                       4,045,698         3,368,021
----------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity   $   5,446,094 $       4,696,471
----------------------------------------------------------------------------
 

 
 
Commitments (note 12)                                                       
See accompanying notes to the interim condensed consolidated financial      
statements.                                                                 
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME                  
 
                                     Three Months Ended    Six Months Ended 
                                               June 30,            June 30, 
                                    ----------------------------------------
(000s) except per-share amounts                                             
 (unaudited)                             2014      2013      2014      2013 
----------------------------------------------------------------------------
Revenue:                                                                    
 Oil and natural gas sales           $365,469  $186,821  $743,237  $359,312 
 Royalties                            (36,474)  (14,854)  (67,038)  (26,217)
----------------------------------------------------------------------------
 Net revenue from oil and natural                                           
  gas sales                           328,995   171,967   676,199   333,095 
 Realized gain (loss) on financial                                          
  instruments                         (14,931)    3,968   (43,432)    6,464 
 Unrealized gain (loss) on financial                                        
  instruments (note 3)                 (4,911)    3,321   (11,177)     (498)
 Other income                           4,502     1,249     9,401     2,568 
----------------------------------------------------------------------------
Total net revenue                     313,655   180,505   630,991   341,629 
Expenses:                                                                   
 Operating                             52,398    27,409    97,887    53,776 
 Transportation                        21,302    12,607    36,631    25,077 
 General and administration             6,439     5,216    11,749    10,157 
 Share-based payments (note 11)         6,806     4,482    13,507     8,072 
 (Gain) loss on divestitures             (201)      777      (201)  (43,410)
 Depletion, depreciation and                                                
  amortization                        127,102    82,317   242,637   163,740 
----------------------------------------------------------------------------
Total expenses                        213,846   132,808   402,210   217,412 
----------------------------------------------------------------------------
Income from operations                 99,809    47,697   228,781   124,217 
Finance expenses                        7,498     3,028    12,976     7,526 
----------------------------------------------------------------------------
Income before taxes                    92,311    44,669   215,805   116,691 
Deferred taxes                         25,172    14,265    58,130    33,858 
----------------------------------------------------------------------------
Net income and comprehensive income                                         
 before non-controlling interest       67,139    30,404   157,675    82,833 
----------------------------------------------------------------------------
Net income and comprehensive income                                         
 attributable to:                                                           
 Shareholders of the Company           66,437    30,004   156,305    82,188 
 Non-controlling interest (note 8)        702       400     1,370       645 
----------------------------------------------------------------------------
                                     $ 67,139  $ 30,404  $157,675  $ 82,833 
----------------------------------------------------------------------------
 
Net income per share attributable to                                        
 common shareholders (note 10)                                              
----------------------------------------------------------------------------
 Basic                               $   0.33  $   0.16  $   0.80  $   0.46 
----------------------------------------------------------------------------
 Diluted                             $   0.32  $   0.16  $   0.78  $   0.44 
----------------------------------------------------------------------------
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,                                                               
 2013           $3,062,432  $     91,718  $ 195,994 $     17,877 $3,368,021 
Issue of common                                                             
 shares (note                                                               
 9)                282,012             -          -            -    282,012 
Issue of common                                                             
 shares on                                                                  
 corporate                                                                  
 acquisition                                                                
 (note 9)          177,359             -          -            -    177,359 
Share issue                                                                 
 costs, net of                                                              
 tax                (9,459)            -          -            -     (9,459)
Share-based                                                                 
 payments                -        13,507          -            -     13,507 
Capitalized                                                                 
 share-based                                                                
 payments                -        13,507          -            -     13,507 
Options                                                                     
 exercised                                                                  
 (note 9)           59,087       (16,011)         -            -     43,076 
Income                                                                      
 attributable                                                               
 to common                                                                  
 shareholders            -             -    156,305            -    156,305 
Income                                                                      
 attributable                                                               
 to non-                                                                    
 controlling                                                                
 interest                -             -          -        1,370      1,370 
----------------------------------------------------------------------------
Balance at June                                                             
 30, 2014       $3,571,431  $    102,721  $ 352,299 $     19,247 $4,045,698 
----------------------------------------------------------------------------
(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            226,564             -          -            -    226,564 
Share issue                                                                 
 costs, net of                                                              
 tax                (7,175)            -          -            -     (7,175)
Share-based                                                                 
 payments                -         8,072          -            -      8,072 
Capitalized                                                                 
 share-based                                                                
 payments                -         8,072          -            -      8,072 
Options                                                                     
 exercised          46,251       (12,740)         -            -     33,511 
Income                                                                      
 attributable                                                               
 to common                                                                  
 shareholders            -             -     82,188            -     82,188 
Income                                                                      
 attributable                                                               
 to non-                                                                    
 controlling                                                                
 interest                -             -          -          645        645 
----------------------------------------------------------------------------
Balance at June                                                             
 30, 2013       $2,865,254  $     74,327  $ 130,068 $     16,943 $3,086,592 
----------------------------------------------------------------------------
See accompanying notes to the interim condensed consolidated financial      
statements.                                                                 
CONSOLIDATED STATEMENTS OF CASH FLOW                                        
 
                                 Three Months Ended        Six Months Ended 
                                           June 30,                June 30, 
                            ------------------------------------------------
(000s) (unaudited)                 2014        2013        2014        2013 
----------------------------------------------------------------------------
Cash provided by (used in):                                                 
Operations:                                                                 
 Net income                  $   66,437  $   30,004  $  156,305  $   82,188 
 Items not involving cash:                                                  
  Depletion, depreciation                                                   
   and amortization             127,102      82,317     242,637     163,740 
  Accretion                         623         488       1,161         879 
  Share-based payments            6,806       4,482      13,507       8,072 
  Deferred taxes                 25,172      14,265      58,130      33,858 
  Unrealized (gain) loss on                                                 
   financial instruments          4,911      (3,321)     11,177         498 
  (Gain) loss on                                                            
   divestitures                    (201)        777        (201)    (43,410)
  Non-controlling interest          702         400       1,370         645 
 Decommissioning                                                            
  expenditures                      (10)       (542)         43      (1,001)
 Changes in non-cash                                                        
  operating working capital         214        (438)     (2,983)    (23,274)
----------------------------------------------------------------------------
Total cash flow from                                                        
 operating activities           231,756     128,432     481,146     222,195 
Financing:                                                                  
 Issue of common shares         102,394       9,547     340,670     266,671 
 Share issue costs               (3,391)          -     (12,645)     (9,566)
 Increase (decrease) in bank                                                
  debt                          103,946     133,638      84,127     (68,724)
----------------------------------------------------------------------------
Total cash flow from                                                        
 financing activities           202,949     143,185     412,152     188,381 
Investing:                                                                  
 Exploration and evaluation     (27,000)    (29,949)    (90,492)    (56,810)
 Property, plant and                                                        
  equipment                    (266,641)    (95,269)   (668,960)   (334,366)
 Property acquisitions           (4,192)    (33,533)     (4,777)    (35,983)
 Proceeds from divestitures         100           -         100      77,945 
 Net repayment of long-term                                                 
  obligation                       (734)       (931)     (1,599)     (1,863)
 Changes in non-cash                                                        
  investing working capital    (136,238)   (111,935)   (127,570)    (59,499)
----------------------------------------------------------------------------
Total cash flow from                                                        
 investing activities          (434,705)   (271,617)   (893,298)   (410,576)
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 INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
As at June 30, 2014 and for the three and six months ended June 30,
2014 and 2013 
(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 interim condensed
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, 2013. 
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, 2013, except as detailed below. 
On January 1, 2014, the Company adopted IFRIC 21, which addresses
payments to government bodies. There was no impact on the Company as
a result of adopting the new standard. 
The unaudited interim condensed consolidated financial statements
were authorized for issue by the Board of Directors on August 6,
2014. 
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 methods. 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, 2013. 
As at June 30, 2014, 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 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 consolidated statement of income and
comprehensive income. 
The Company has the following financial derivative contracts in place
as at June 30, 2014(1): 


 
 
-----------------------------------------------------------------------
-
                                                  2014              2015
------------------------------------------------------------------------
Gas                                                                     
Fixed price               mmbtu/d               43,397             5,000
                          USD$/mmbtu             $4.14             $4.21
 
Nymex call options                                                      
 (writer)                 mmbtu/d                    -                 -
                          USD$/mmbtu                                    
------------------------------------------------------------------------
Oil                                                                     
Financial swaps           bbls/d                   850               874
                          USD$/bbl              $95.07            $93.82
 
Costless collars          bbls/d                 1,100             1,300
                          USD$/bbl     $80.91 - $97.57   $81.15 - $94.29
 
Financial call                                                          
 swaptions(2)             bbls/d                     -               600
                          USD$/bbl                               $104.98
------------------------------------------------------------------------
Total fair value                                                        
------------------------------------------------------------------------
 
----------------------------------------------------------------------------
                                                                  Fair Value
                                         2016     2017     2018       (000s)
----------------------------------------------------------------------------
Gas                                                                         
Fixed price               mmbtu/d           -        -        - $    (2,522)
                          USD$/mmbtu                                        
 
Nymex call options                                                          
 (writer)                 mmbtu/d           -   20,000   20,000      (6,244)
                          USD$/mmbtu             $5.00    $5.00             
----------------------------------------------------------------------------
Oil                                                                         
Financial swaps           bbls/d            -        -        -      (2,567)
                          USD$/bbl                                          
 
Costless collars          bbls/d            -        -        -      (4,465)
                          USD$/bbl                                          
 
Financial call                                                              
 swaptions(2)             bbls/d          600        -        -      (1,538)
                          USD$/bbl     $93.07                               
----------------------------------------------------------------------------
Total fair value                                                $   (17,336)
----------------------------------------------------------------------------
(1)The volumes and prices reported are the weighted average volumes and     
prices for the period.                                                      
(2)This is a European swaption whereby the Company provides the option to   
extend an oil swap into the period subsequent to the call date.             

No financial derivative contracts were entered into subsequent to June
30, 2014. 
The Company has the following interest rate swap arrangements: 


 
 
-----------------------------------------------------------------------
-----
                                         Company                            
                          Type             Fixed         Counter            
                     (Floating          Interest           Party            
                            to    Amount    Rate        Floating  Fair Value
        Term            Fixed)    (000s)     (%)      Rate Index      (000s)
----------------------------------------------------------------------------
May 29, 2014 - May                                                          
 29, 2015                 Swap $ 150,000    1.72%  Floating Rate $     (644)
May 29, 2014 - May                                                          
 29, 2015                 Swap $ 100,000    1.27%  Floating Rate        (22)
May 29, 2015 - May                                                          
 29, 2016                 Swap $ 250,000   1.645%  Floating Rate       (419)
----------------------------------------------------------------------------
Total fair value                                                 $   (1,085)
----------------------------------------------------------------------------

The following table provides a summary of the unrealized losses on
financial instruments for the three and six months ended June 30,
2014 and 2013: 


 
 
                                      Three Months Ended   Six Months Ended 
                                                June 30,           June 30, 
                                     ---------------------------------------
(000s)                                    2014      2013     2014      2013 
----------------------------------------------------------------------------
Unrealized gain (loss) on financial                                         
 instruments                          $ (4,911)    3,321 $(11,177) $   (498)
----------------------------------------------------------------------------

As at June 30, 2014, if the future strip prices for oil were $1.00/bbl
higher and prices for natural gas were $0.10/mcf higher, with all
other variables held constant, the after-tax loss on financial
instruments would have been $3.4 million (June 30, 2013 - $2.2
million) lower. An equal and opposite impact would have occurred to
unrealized gain (loss) and the fair value of the derivative contracts
liability if oil prices were $1.00/bbl lower and gas prices were
$0.10/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. 
The Company has the following physical contracts in place at June 30,
2014(1):  


 
 
                                                 2014       2015 
-----------------------------------------------------------------
Gas                                                              
Fixed price - AECO              mcf/d         171,232     81,507 
                                CAD$/mcf    $    4.16  $    4.35 
 
Basis differentials(2)          mmbtu/d        81,658     51,233 
                                USD$/mmbtu  $   (0.49) $   (0.48)
 
AECO call options                                                
(writers/call swaptions)(3)     mcf/d          23,381     41,552 
                                CAD$/mcf    $    4.28  $    4.55 
-----------------------------------------------------------------
 
                                                 2016       2017       2018 
----------------------------------------------------------------------------
Gas                                                                         
Fixed price - AECO              mcf/d           1,166          -          - 
                                CAD$/mcf    $    4.06                       
 
Basis differentials(2)          mmbtu/d        48,333     20,000     20,000 
                                USD$/mmbtu  $   (0.48) $   (0.49) $   (0.49)
 
AECO call options                                                           
(writers/call swaptions)(3)     mcf/d          34,136     47,410     23,705 
                                CAD$/mcf    $    4.85  $    4.79  $    4.89 
----------------------------------------------------------------------------
(1)Transactions with common terms have been aggregated and presented at the 
weighted average price.                                                     
(2)Tourmaline also has 20 mmcf/d of Nymex-AECO basis differentials at $0.49 
from 2019-2022.                                                             
(3)A financial call swaption is a European swaption whereby the Company     
provided the option to extend a gas swap into the period subsequent to the  
call date.                                                                  

No physical contracts were entered into subsequent to June 30, 2014. 
4. EXPLORATION AND EVALUATION ASSETS  


 
 
(000s)                                                                      
----------------------------------------------------------------------------
As at December 31, 2013                                         $   700,525 
  Capital expenditures                                               90,492 
  Transfers to property, plant and equipment (note 5)               (41,129)
  Acquisitions                                                       22,701 
  Divestitures                                                          (28)
  Expired mineral leases                                            (13,309)
----------------------------------------------------------------------------
As at June 30, 2014                                             $   759,252 
----------------------------------------------------------------------------

Exploration and evaluation ("E&E") assets consist of the Company's
exploration projects which are pending the determination of proven
and probable reserves, as well as undeveloped land. Additions
represent the Company's share of costs on E&E assets during the
period. 
5. PROPERTY, PLANT AND EQUIPMENT ("PP&E")  


 
 
Cost                                                                        
(000s)                                                                      
----------------------------------------------------------------------------
As at December 31, 2013                                         $ 4,664,800 
  Capital expenditures                                              682,467 
  Transfers from exploration and evaluation (note 4)                 41,129 
  Change in decommissioning liabilities (note 6)                      8,185 
  Acquisitions                                                      169,463 
  Divestitures                                                         (431)
----------------------------------------------------------------------------
As at June 30, 2014                                             $ 5,565,613 
----------------------------------------------------------------------------
 
Accumulated Depletion, Depreciation and Amortization                        
(000s)                                                                      
----------------------------------------------------------------------------
As at December 31, 2013                                         $    815,015
  Depletion, depreciation and amortization expense                   229,328
----------------------------------------------------------------------------
As at June 30, 2014                                             $  1,044,343
----------------------------------------------------------------------------
 
Net Book Value                                                              
(000s)                                                                      
----------------------------------------------------------------------------
As at December 31, 2013                                         $  3,849,785
As at June 30, 2014                                             $  4,521,270
----------------------------------------------------------------------------

Future development costs of $3,763 million were included in the
depletion calculation at June 30, 2014 (December 31, 2013 - $3,197
million). 
Capitalization of G&A and Share-Based Payments  
A total of $9.0 million in G&A expenditures have been capitalized and
included in E&E and PP&E assets at June 30, 2014 (December 31, 2013 -
$15.0 million). Also included in E&E and PP&E are non-cash
share-based payments of $13.5 million (December 31, 2013 - $19.3
million). 
Impairment Assessment 
The Company has performed an impairment assessment of its property,
plant, and equipment on a CGU basis and has determined that there are
no indicators of impairment at June 30, 2014; therefore an impairment
test was not performed. Similarly, for the year ended December 31,
2013, the Company did not identify any impairment indicators and as a
result did not conduct an impairment test. 
Corporate Acquisition 
On April 24, 2014, the Company acquired all of the issued and
outstanding shares of Santonia Energy Inc. ("Santonia"). As
consideration, the Company issued 3,228,234 common shares at a price
of $54.94 per share. Total transaction costs incurred by the Company
of $1.5 million associated with this acquisition were expensed in the
interim consolidated statement of income and comprehensive income. 
Results from operations for Santonia are included in the Company's
unaudited interim consolidated financial statements from the closing
date of the transaction. The acquisition has been accounted for using
the purchase method based on fair values as follows: 


 
 
                                                                    Santonia
(000s)                                                           Energy Inc.
----------------------------------------------------------------------------
Fair value of net assets acquired:                                          
----------------------------------------------------------------------------
  Cash                                                          $     2,445 
  Working capital deficiency                                        (10,965)
  Property, plant and equipment                                     167,473 
  Exploration and evaluation                                         19,058 
  Bank debt                                                         (32,079)
  Decommissioning obligations                                        (8,487)
  Deferred income tax asset                                          39,914 
----------------------------------------------------------------------------
Total                                                           $   177,359 
----------------------------------------------------------------------------
Consideration:                                                              
----------------------------------------------------------------------------
  Common shares issued                                          $   177,359 
----------------------------------------------------------------------------

The above noted amounts are estimates based on information available to
the Company at the time of preparation of the June 30, 2014 unaudited
interim consolidated financial statements. Accordingly, the estimates
used to derive the fair values in the purchase price include accruals
and deferred tax assets. A future change in estimates could have an
impact on the above-noted purchase equation. 
Acquisition of Oil and Natural Gas Properties 
For the six months ended June 30, 2014, the Company completed
property acquisitions for total cash consideration of $4.8 million
(December 31, 2013 - $226.9 million) and an additional $0.5 million
in non-cash consideration (December 31, 2013 - $88.6 million). The
Company also assumed $0.4 million in decommissioning liabilities
(December 31, 2013 - $7.3 million). 
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 $141.6 million (December
31, 2013 - $118.9 million), with some abandonments expected to
commence in 2021. A risk-free rate of 2.96% (December 31, 2013 -
3.24%) and an inflation rate of 2.0% (December 31, 2013 - 2.0%) were
used to calculate the fair value of the decommissioning
obligations. 


 
 
                                                   As at              As at 
(000s)                                     June 30, 2014  December 31, 2013 
----------------------------------------------------------------------------
Balance, beginning of period                $     76,037  $          64,757 
  Obligation incurred                              4,817             10,193 
  Obligation incurred on corporate                                          
   acquisition (note 5)                            8,487                  - 
  Obligation incurred on property                                           
   acquisitions                                      382              7,347 
  Obligation divested                                (86)              (960)
  Obligation settled                                  43             (2,254)
  Accretion expense                                1,161              2,038 
  Change in future estimated cash outlays          3,368             (5,084)
----------------------------------------------------------------------------
Balance, end of period                      $     94,209  $          76,037 
----------------------------------------------------------------------------

7. BANK DEBT  
The Company has a covenant-based bank credit facility in place with a
syndicate of bankers, the details of which are described in note 9 of
the Company's consolidated financial statements for the year ended
December 31, 2013. In May 2014, the Company increased its facility to
$1.3 billion, with an initial maturity of June 2017. The revisions to
the credit facility included the removal of the EBITDA to interest
expense covenant as well as a revision to the definition of senior
debt to mean generally the indebtedness, liabilities and obligations
of the Company to the lenders under the credit facility. 
As at June 30, 2014, the Company's bank debt balance was $704.1
million (December 31, 2013 - $590.3 million). In addition, the
Company has outstanding letters of credit of $3.1 million (December
31, 2013 - $2.2 million), which reduce the credit available on the
facility. The average effective interest rate for the six months
ended June 30, 2014 was 3.02% (six months ended June 30, 2013 -
3.28%). As at June 30, 2014, the Company is in compliance with all
debt covenants. 
8. NON-CONTROLLING INTEREST  
The Company 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: 


 
 
                                                     As at             As at
(000s)                                       June 30, 2014 December 31, 2013
----------------------------------------------------------------------------
Balance, beginning of period                 $      17,877 $          16,298
  Share of subsidiary's net income for the                                  
   period                                            1,370             1,579
----------------------------------------------------------------------------
Balance, end of period                       $      19,247 $          17,877
----------------------------------------------------------------------------

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 


 
 
                                As at June 30, 2014  As at December 31, 2013
                           -------------------------------------------------
(000s) except per-share      Number of                Number of             
 amounts                        Shares      Amount       Shares      Amount 
----------------------------------------------------------------------------
Balance, beginning of                                                       
 period                    189,804,864 $ 3,062,432  174,813,059 $ 2,599,614 
For cash on public offering                                                 
 of common shares(1)(2)(3)   4,615,198     219,222    9,275,000     343,881 
For cash on public offering                                                 
 of flow-through common                                                     
 shares(1)(2)(4)             1,150,000      62,790    1,760,000      67,218 
Issued on corporate                                                         
 acquisition                 3,228,234     177,359            -           - 
For cash on exercise of                                                     
 stock options               2,632,828      43,076    3,956,805      47,023 
Contributed surplus on                                                      
 exercise of stock options           -      16,011            -      17,819 
Share issue costs                    -     (12,645)           -     (17,633)
Tax effect of share issue                                                   
 costs                               -       3,186            -       4,510 
----------------------------------------------------------------------------
Balance, end of period     201,431,124 $ 3,571,431  189,804,864 $ 3,062,432 
----------------------------------------------------------------------------
(1) 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 December 31, 2013, the      
Company had spent the full committed amount and the expenditures were       
renounced to investors in February 2014 with an effective renunciation date 
of December 31, 2013.                                                       
(2) On October 8, 2013, the Company issued 3.495 million common shares at a 
price of $41.75 per share and 0.925 million flow-through common shares at a 
price of $51.60 per share, for total gross proceeds of $193.6 million. The  
implied premium on flow-through common shares was determined to be $9.1     
million or $9.85 per share. A total of 45,000 common shares and 75,000 flow-
through common shares were purchased by insiders. As at December 31, 2013,  
the Company had spent the full committed amount. The expenditures were      
renounced to investors in February 2014 with an effective renunciation date 
of December 31, 2013.                                                       
(3) On February 12, 2014, the Company issued 4.615 million common shares at 
a price of $47.50 per share for total gross proceeds of $219.2 million. A   
total of 15,198 common shares were purchased by insiders.                   
(4) On June 2, 2014, the Company issued 1.15 million flow-through shares at 
a price of $68.15 per share for total gross proceeds of $78.4 million. The  
implied premium on flow-through common shares was determined to be $15.6    
million or $13.55 per share. A total of 150,000 flow-through common shares  
were purchased by insiders. As at June 30, 2014, the Company had not spent  
any of the committed amount. The expenditures will be renounced to investors
with an effective renunciation date of December 31, 2014.                   

10. EARNINGS PER SHARE  
Basic earnings-per-share attributed to common shareholders was
calculated as follows: 


 
 
                                Three Months Ended          Six Months Ended
                                          June 30,                  June 30,
                        ----------------------------------------------------
                                 2014         2013         2014         2013
----------------------------------------------------------------------------
Net earnings for the                                                        
 period (000s)           $     66,437 $     30,004 $    156,305 $     82,188
Weighted average number                                                     
 of common shares -                                                         
 basic                    199,335,760  183,942,946  196,081,818  180,480,753
----------------------------------------------------------------------------
Earnings per share -                                                        
 basic                   $       0.33 $       0.16 $       0.80 $       0.46
----------------------------------------------------------------------------

Diluted earnings-per-share attributed to common shareholders was
calculated as follows: 


 
 
                                Three Months Ended          Six Months Ended
                                          June 30,                  June 30,
                        ----------------------------------------------------
                                 2014         2013         2014         2013
----------------------------------------------------------------------------
Net earnings for the                                                        
 period (000s)           $     66,437 $     30,004 $    156,305 $     82,188
Weighted average number                                                     
 of common shares -                                                         
 diluted                  204,681,038  189,201,205  200,906,366  185,301,611
----------------------------------------------------------------------------
Earnings per share -                                                        
 fully diluted           $       0.32 $       0.16 $       0.78 $       0.44
----------------------------------------------------------------------------

There were 1,366,000 options excluded from the weighted-average share
calculation for the three and six months ended June 30, 2014 because
they were anti-dilutive (three and six months ended June 30, 2013 -
2,005,000 and 4,032,000, respectively). 
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
20,143,112 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. 


 
 
                                                   Six Months Ended June 30,
                                --------------------------------------------
                                                  2014                  2013
                                --------------------------------------------
                                              Weighted              Weighted
                                     Number    Average     Number    Average
                                         of   Exercise         of   Exercise
                                    Options      Price    Options      Price
----------------------------------------------------------------------------
Stock options outstanding,                                                  
 beginning of period             16,028,651  $   27.95 15,325,232  $   19.87
  Granted                         1,366,000      52.90  2,105,000      40.19
  Exercised                      (2,632,828)     16.36 (2,746,744)     12.19
  Forfeited                         (48,889)     36.68    (56,111)     24.95
----------------------------------------------------------------------------
Stock options outstanding, end                                              
 of period                       14,712,934  $   32.31 14,627,377  $   24.19
----------------------------------------------------------------------------

The weighted average trading price of the Company's common shares was
$51.92 during the six months ended June 30, 2014 (six months ended
June 30, 2013 - $37.38). 
The following table summarizes stock options outstanding and
exercisable at June 30, 2014: 


 
 
                                    Weighted                                
                          Number     Average  Weighted      Number  Weighted
                     Outstanding   Remaining   Average Exercisable   Average
Range of                      at Contractual  Exercise          at  Exercise
Exercise Price        Period End        Life     Price  Period End     Price
----------------------------------------------------------------------------
$10.00 - $18.35        2,960,932        0.82 $   16.74   2,960,932 $   16.74
$20.68 - $29.93        3,482,005        2.42     26.88   2,509,720     26.97
$30.76 - $39.57        2,799,663        3.26     32.89     877,663     32.21
$40.18 - $48.99        4,479,334        4.22     41.40     476,334     41.20
$53.80 - $56.76          991,000        4.94     55.15           -         -
----------------------------------------------------------------------------
                      14,712,934        2.98 $   32.31   6,824,649 $   24.20
----------------------------------------------------------------------------

The fair value of options granted during the six-month period ended
June 30, 2014 was estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted
average assumptions and resulting values: 


 
 
                                                    June 30,       June 30, 
                                                        2014           2013 
----------------------------------------------------------------------------
Fair value of options granted (weighted                                     
 average)                                      $       18.60  $       13.94 
Risk-free interest rate                                 2.91%          2.57%
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  
In the normal course of business, the Company is obligated to make
future payments. These obligations represent contracts and other
commitments that are known and non-cancellable. 


 
 
                                                          greater           
Payments Due by Year                                       than 5           
 (000s)                   1 Year  2-3 Years  4-5 Years      Years      Total
----------------------------------------------------------------------------
Operating leases      $    4,004 $    9,934 $   10,095 $    3,701 $   27,734
Flow-through                                                                
 obligations                   -     78,373          -          -     78,373
Firm transportation                                                         
 and processing                                                             
 agreements               78,715    352,867    214,682    463,274  1,109,538
Bank debt(1)                   -    769,004          -          -    769,004
----------------------------------------------------------------------------
                      $   82,719 $1,210,178 $  224,777 $  466,975 $1,984,649
----------------------------------------------------------------------------
(1) Includes interest expense at an annual rate of 2.78% being the rate     
applicable to outstanding bank debt at June 30, 2014.                       

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
info@tourmalineoil.com 
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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