John O'Connell discusses Tourmaline Oil
Shares in Tourmaline Oil have almost doubled this year amid a rally in natural gas prices and according to one analyst, investors may be in for a substantial payout after the company struck a deal to sell more of its shares in gas-handling spinoff Topaz Energy.
Tourmaline, a huge producer of natural gas, is set to achieve output equivalent to 500,000 barrels of oil per day next year after a series of acquisitions under Chief Executive Officer Michael Rose. It has struck a deal to divest seven million Topaz shares to a syndicate of dealers for proceeds of $108 million, cutting its stake to 39.7 per cent from 45.2 per cent.
Jeremy McCrea, an analyst with Raymond James, calculates that after the rise in gas prices this year, Tourmaline could pay a special dividend of between $250 million and $450 million working out at a yield of about 2.3 per cent to 4.1 per cent on the current stock price of just over $33 a share on the TSX. The regular dividend yield is two per cent.
Alberta spot natural gas has jumped 45 per cent this year to trade at $3.41 per gigajoule.
Tourmaline is also poised to enter the international LNG export sector. Last month, it announced a deal with LNG giant Cheniere Energy to supply gas to that company’s terminal in Corpus Christi, Texas, for a 15-year term, giving it exposure to high Asian gas prices.
Raymond James said international investors “are increasingly likely to look at Tourmaline as a way to play a gas/LNG theme in Canada.”