Tourmaline Oil is returning more cash to shareholders in a move that market watchers expect could push other energy companies to do the same.

Calgary-based Tourmaline announced an 11 per cent increase to its base dividend after markets closed Monday, pushing its quarterly payout to 20 cents per share. Shareholders will also receive a special dividend of $1.25 per share, the company said, marking the second special dividend Tourmaline has issued since announcing a 75-cent-per-share payout in October 2021.

The company has made no secret of its plan to return “the majority of future free cash flow” to shareholders. Analysts at RBC Capital Markets said in a note to clients Tuesday that the latest increase came “several months earlier” than their models had predicted. RBC is currently forecasting Tourmaline will hike its base dividend two more times this year, eventually reaching 26 cents per share, along with three additional one-dollar-per-share special dividends.

Anthony Petrucci, who covers Tourmaline Oil for Canaccord Genuity with a Buy rating, told clients on Tuesday that the company’s announcement “is likely to surprise the market." He said it might also “boost Canadian [exploration and production] multiples in general, as investors come to the realization that we may witness several quality producers following [Tourmaline’s] lead.”

Several of the Canadian energy companies Petrucci covers are expected to produce free cash flow yields above 20 per cent, he wrote, meaning they will likely generate cash flow this year equivalent to at least one-fifth of their total market value.

Those expected to generate the highest free cash flow yields, and thus most likely to return more cash to shareholders, include Surge Energy (SGY), Crescent Point Energy (CPG) and Vermilion Energy (VET).

In a separate note published by Credit Suisse on Tuesday, looking ahead to quarterly earnings season for oil and gas producers, analysts said the sector was set for “potential record post-dividend [free cash flow] in 2022.”

Assuming current pricing trends hold, Credit Suisse expects several companies to “accelerate buybacks” of their own shares — with Canadian Natural Resources Ltd. (CNQ) set to repurchase as much as $4 billion this year. Credit Suisse also expects Cenovus Energy (CVE) and Suncor Energy (SU) to complete buybacks valued at $1.8 billion and $2.8 billion respectively.

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