Opinions
Barry Schwartz
Tourmaline Oil Corp
TOU-T
BUY
Sep 02, 2025
Stock price when the opinion was issued
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Temperatures are starting to moderate, and nat gas prices are down. Overproduction in US. Ramp-up of LNG Canada slower than expected, but should be picking up.
She's actually buying more ARX for clients, not trimming. Embedded growth via inventory through reserves. Likes that a lot of its prices are hedged to higher international gas prices (instead of Canadian). Doesn't need to acquire to fund growth, whereas TOU does.
If she were going to own 2 names, she would also own TOU. But she doesn't. ARX is first in the pecking order. If you have the patience perhaps hold onto TOU a bit longer, as we are getting into the colder months.
It sold off because it is being punished by short term investors for long term thinking. It is increasing its capex for the next five years which will result in accelerating cash flow in 2030 and 2031. Investors want companies to return capital to shareholders now but not much has been happening with many of them. Tourmaline has strong management so you could step in for the long term. It has been able to grow and return capital to shareholders but it will be less now with the increased capex.
He has a small position. Chart shows basing since 2023. Thinks it will do quite well for investors; as to when, he's not sure. Great balance sheet. Well run, and he's convinced it'll be taken out one day. So hold on and get rewarded someday.
If it breaks below $50 or so, will probably end up around $40-45.
Spooked the market a bit in terms of production spend, so stock came down. Company's trying to time production increase to coincide with the growing LNG business. Natural gas is needed for years to come -- cleaner energy, plus a bridge to the future. Largest nat gas guys in Canada.
Prices have been depressed, but he sees very strong pricing (relatively speaking) in 2026. Meantime, you get a decent dividend while you wait. Sometimes has special dividends. Trades ~6.6x EV, in line with the group, for 9% production growth and 5% cashflow growth. Should work very well over the next 5 years. Yield is 3.17%.
Core holding. Largest nat gas producer in Canada, most assets in Western Canada. Q2 was fine, but company intends to spend more on infrastructure (absolutely the right thing to do for the long-term health of the company). Nat gas prices are low in Canada right now. Able to sell to US and other markets with the new LNG terminal.
Dividend and special dividends, even with low gas prices. Outstanding management. He's not impatient with this one.
Very strong management. Largest natural gas producer, along with CNQ. Has to do M&A to fund its growth plan. Nat gas prices have suffered. LNG projects still ramping up. There's a gas name she prefers a bit more, and it already has a lot of reserves in inventory.
If you already own it, hold. For new $$, see her Top Picks.
It pays a high dividend plus a special one. It surprised after announcing it would reduce cash flow paid to shareholders so that they can grow the business. Is undervalued.