If you’re hunting for a Canadian energy stock built to last through 2030 and beyond, Tourmaline Oil (TSX:TOU) deserves a serious look. The company checks every box long-term investors care about: a massive reserve base, falling costs, rising production, and a management team that actually does what it says.
Here’s why I think this TSX dividend stock is a good buy right now.
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An enormous reserve base
Tourmaline is Canada’s largest natural gas producer, and its scale is enviable.
At year-end 2025, the company’s 2P (proved plus probable) reserves surpassed six billion barrels of oil equivalent (BOE), a 15% year-over-year increase. Total proved reserves hit 3.26 billion BOEs, up 20% over 2024, according to the company’s earnings call.
Management says the company has only booked about 15% of its estimated drilling inventory of 26,500 gross locations. That means Tourmaline is sitting on decades’ worth of future production that isn’t even on the balance sheet yet.
Reserve replacement came in at 356% in 2025. To put that simply: for every barrel of Tourmaline produced last year, it found more than three new ones to replace it.
One of the most compelling parts of Tourmaline’s story right now is the cost trajectory.
- Operating expenses fell to $4.66 per BOE in Q4, down more than 9% from the first half of the year.
- The recent sale of the higher-cost Peace River High asset will shave another 7% off go-forward operating costs, bringing 2026 guidance to $4.50 per BOE.
- Tourmaline has now set an updated cost-reduction target of $1.50 per BOE by 2031, compared with its first-half 2025 cost structure. Notably, roughly $0.70 per BOE of that has already been achieved.
- By 2031, management expects up to $500 million in annual structural cost savings, regardless of commodity prices.
This should drive future free cash flow and dividends higher.
A strong balance sheet
Natural gas prices in Western Canada have been weak. AECO (Alberta Energy Company) spot prices dipped below $2 per thousand cubic feet (Mcf) earlier this year, and Pacific Northwest hub prices hit unusual lows.
In response, management cut the 2026 capital budget by $400 million to $2.55 billion. It also sold the Peace River High complex for $765 million, using $500 million of those proceeds to permanently reduce debt. Net debt fell from $2.3 billion in Q3 to $1.5 billion by year-end.
The company’s long-term net debt target is $1.75 billion. At current strip pricing, management projects 2026 free cash flow of more than $700 million.
The silver lining here: every $0.10 per Mcf increase in AECO pricing adds roughly $45 million to annual cash flow. If prices normalize toward $2.25 per Mcf, free cash flow crosses $1 billion. That’s significant upside that isn’t baked into today’s stock price.
Why the long-term thesis holds
Tourmaline’s Northeast British Columbia Montney complex is one of the lowest-breakeven gas plays in North America, at roughly $1.40 per Mcf. New plants at Aitken (expected in late 2026) and Groundbirch Manias will add low-cost capacity and further improve margins.
The natural gas leader has growing exposure to international LNG (liquified natural gas) pricing through more than 200 million cubic feet per day of capacity, with sensitivity of $50 million in 2026 free cash flow for every $1 move in global benchmarks like Japan Korea Marker (JKM) and Title Transfer Facility (TTF).
Add in a growing natural gas storage position, and Tourmaline has built a genuinely integrated natural gas business that can manage price volatility better than almost anyone else in the basin.
For patient investors, the combination of a world-class reserve base, rapidly falling costs, and a disciplined capital return framework makes Tourmaline Oil a compelling hold through the end of the decade.
