Valued at a market cap of $22.2 billion, Tourmaline Oil (TSX: TOU) is among the largest companies in Canada. Founded in 2008, Tourmaline is an upstream natural gas producer focused on exploration, development, and production in the Western Canadian Sedimentary Basin.
It operates primarily in Alberta’s Deep Basin, Northeast British Columbia’s Montney formation, and the Peace River High Triassic oil complex. With substantial natural gas reserves, Tourmaline generates revenue through natural gas, crude oil, and natural gas liquids sales. It has strategically expanded its marketing portfolio, including a long-term LNG supply agreement with Cheniere Energy beginning in 2023 that provides valuable exposure to premium JKM pricing.
In the last 10 years, Tourmaline Oil stock has returned 75% to shareholders. However, if we adjust for dividend reinvestments, cumulative returns are closer to 170%. Let’s see if you should own this TSX stock right now.
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Is Tourmaline Oil stock still a good buy in 2025?
Tourmaline Oil delivered strong second-quarter (Q2) results while announcing an ambitious multiyear development plan that positions it for massive free cash flow expansion through the next decade.
Q2 production averaged 620,757 barrels of oil equivalent per day (BOE/day), generating $823 million in cash flow and $317 million in free cash flow.
Tourmaline Oil maintained its full-year capital budget of $2.6 billion to $2.85 billion while declaring a $0.35-per-share special dividend. Management demonstrated disciplined capital allocation by deferring some activities due to weak AECO pricing, prioritizing returns over volume growth.
The centerpiece announcement involved a massive six-year infrastructure buildout targeting 30% production growth to 850,000 BOE/day by 2031. The project includes two new deep-cut gas plants, expansion of four existing facilities, three liquid hubs, and extensive pipeline infrastructure. This represents one of the largest E&P projects in the Western Canadian Sedimentary Basin.
Upon completion, Tourmaline expects annual free cash flow to reach $2.75 billion (at mid-point estimates), representing a 2.5 times improvement from current levels at flat pricing.
The company’s maintenance capital requirement is estimated at $2.5 billion annually to sustain 850,000 BOE/day production. With net debt at just 0.5 times cash flow, Tourmaline maintains financial flexibility throughout the buildout.
Tourmaline secured its third Gulf Coast LNG agreement with Uniper, providing 80,000 MMBtu/day for eight years starting in November 2028. Combined with existing Cheniere agreements, this diversifies revenue streams and provides premium pricing exposure.
With the largest drilling inventory in North America and a focus on liquids-rich, low-cost assets, Tourmaline is positioning itself as a dominant North American gas producer entering a period of expected continental supply tightness.
What is the target price for the TSX stock?
Analysts tracking Tourmaline Oil forecast adjusted earnings to grow from $4.11 per share in 2025 to $6.61 per share in 2027. Comparatively, free cash flow is forecast to double from $900 million in 2025 to $1.8 billion in 2029.
Today, the TSX stock trades at a forward FCF multiple of 20.5 times. If it maintains a similar multiple, Tourmaline Oil stock could gain close to 75% over the next four years. Bay Street remains bullish on TOU stock and estimates it to gain over 30% in the next 12 months, given consensus price targets.
