Creating a rebound story isn’t about hype, it’s about strong fundamentals and long-term vision. That’s why Tourmaline Oil (TSX:TOU) stands out as one Canadian energy stock that looks well-positioned for a comeback, down 10% from annual highs. It’s the country’s largest natural gas producer, flush with cash and rewarding shareholders generously. But to know if it’s truly magnificent, we need to dig into the details, good and bad.
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Into earnings
Let’s start with the recent numbers. In the first quarter of 2025, Tourmaline delivered record production. Daily output hit 637,867 barrels of oil equivalent, up 8% from the same period in 2024. That performance helped generate revenue of $1.89 billion, a 16% increase year over year. Strong volumes also translated into robust cash flow. The company posted $963 million in cash flow and $149 million in free cash flow. That leaves plenty of breathing room for growth and returns.
And Tourmaline isn’t shy about sharing the wealth. It raised its base dividend by 43% to $0.50 per share per quarter and paid a special dividend of $0.35 as well That brings the total annual dividend to $2.35, with a yield of about 3% at the current share price around $63.
The dividend is only part of the story. Tourmaline is also reinvesting. In the same quarter, it announced two acquisitions in the Montney Basin, adding more scale in a region where it already dominates. With these moves, the energy stock isn’t just growing production; it’s strengthening its position in key areas, supporting its longer-term strategy. It exited 2024 with net debt of just 0.4 times cash flow and aims to reduce that to 0.3 to 0.35 by year-end. That leaves room for continued dividend increases or further growth, depending on market conditions.
Considerations
But it hasn’t all been smooth sailing. Despite strong production and cash flow, the energy stock missed earnings expectations. Analysts had expected earnings per share around $1.54, but Tourmaline reported $0.56. That miss weighed on the share price, which has drifted closer to its 52-week low of $54 than its high of $71. It’s a reminder that Tourmaline, like any energy stock, is sensitive to commodity prices and cost swings.
Natural gas prices are a key variable. Tourmaline’s future cash flow depends on where prices go. In the second quarter, the energy stock planned some production slowdowns due to weak pricing. While it expects improvements later this year, especially with LNG Canada coming online, nothing is guaranteed. Lower gas prices could shrink margins, crimp free cash flow and slow dividend growth.
Still, there are reasons to be optimistic. The energy stock’s balance sheet is strong. Its capital spending is disciplined. And its payout is well covered by cash flow, not debt. That means even if gas prices remain soft, Tourmaline has room to maintain its dividend. If prices recover, as many expect in the second half of 2025, the stock could bounce quickly.
Bottom line
This isn’t just a short-term trade. Tourmaline is built for long-term investors who want exposure to energy, with a mix of income and upside. Its focus on natural gas positions it well for the energy transition. Its disciplined growth strategy and low-cost operations give it a margin of safety. And its shareholder-friendly management continues to reward patient investors.
So, is Tourmaline magnificent? That depends on your expectations. It’s not going to deliver massive capital gains every quarter. But if you want a reliable, well-managed energy company that pays you to wait, and has room to rebound when the gas market tightens, it might be one of the best options on the TSX today.
