Volatility in natural gas prices makes size of special dividends hard to predict: Tourmaline CEO

Michelle Zadikian, BNN Bloomberg

Liquefied natural gas (LNG) dispenses through pipes on-board the Gallina LNG tanker after docking at the National Grid Plc's Grain LNG plant on the Isle of Grain in Rochester, U.K., on Saturday, March 4, 2017. The shipment to England on the Gallina was priced using the U.K.'s National Balancing Point, where front-month gas cost about $7 a million British thermal units on Feb. 7. Photographer: Jason Alden/Bloomberg , Photographer: Jason Alden/Bloomberg

Investors in natural gas producer Tourmaline Oil Corp. can likely expect yet another special dividend to come their way in the first quarter of next year, but the company’s chief executive said the exact size of the payout is difficult to predict because of the wild volatility in commodity prices.

“We don't want to speculate on what the size of it is because you've seen the volatility in gas prices. I mean, it was down 27 cents yesterday. It's up 16 cents today. So, it's kind of trading on the weather right now,” Tourmaline CEO Mike Rose said in an interview on Tuesday.

“We'll see where strip is at, but I think people can do the math on what the monthly free cash flow is at that strip.”

Tourmaline reported earlier this month record quarterly cash flow of $761.3 million in its fiscal third quarter and $369.5 million in free cash flow as natural gas prices surged compared to last year.

The company has shared the wealth with investors by hiking its base dividend twice this year and doled out a special dividend of $0.75 per share in October, with another special payout on the way.

“If strip holds, and we won't continue to accrete too much excess cash flow on the balance sheet, so it would look like the next special [dividend] could happen in Q1 of 2022,” Rose said.

While the company is reaping the benefits of rising commodity prices, Rose’s main focus is still staying disciplined on costs.

“Size has its advantages, but the most important thing is being the lowest cost and most profitable gas producer. So, we don't have to be the largest in North America, just the most successful,” he said.

Investors have piled into Tourmaline’s stock since its most recent pandemic low in March 2020, pushing its share price up by more than 500 per cent.

With decades of industry experience under his belt, Rose founded Tourmaline in 2008 and has held the roles of chairman, president, and chief executive officer ever since – and he doesn’t plan on quitting any time soon, even after building multiple successful energy exploration and production companies.

“That's probably a good suggestion but that's not what's going to happen. I'm not that smart,” he jokingly said when asked when he might retire.

“I mean, I actually don't know how to do anything else. So, I better keep doing this.”