A European customer can want Canadian gas long before a new export terminal is ready to ship it. That’s a long wait for a shareholder relying on one proposed project. Yet one TSX stock offers a more immediate route. It already produces gas and has arrangements linking some earnings to overseas prices, giving investors a business to own while governments discuss what comes next.
Source: Getty Images
The study comes first
Canada and Europe agreed at the summit to carry out a joint LNG feasibility study, but a government official told reporters there was not yet a timetable for when it could be complete. That makes the announcement a step towards assessing opportunities. It doesn’t approve a terminal, finance construction, or establish when another Canadian cargo will arrive at a European port.
Existing customer commitments show there is commercial interest. Germany’s Uniper previously agreed to buy two million tonnes annually from Ksi Lisims LNG for up to 20 years, with deliveries expected from 2032. That’s a separate project and agreement. It helps explain demand without giving every Canadian gas producer a claim on that particular contract.
For an investor, the shorter route is a producer already connected to different markets. Canadian gas prices can be weak when local supply exceeds available demand or transportation capacity. Arrangements reaching international prices can improve the amount earned on some production, although transportation costs, contract terms, and the overseas market determine how much benefit remains.
A producer with routes to market
Tourmaline Oil (TSX: TOU) has a large Canadian natural-gas business alongside liquids production. Its marketing arrangements provide exposure beyond a single domestic price. That gives the company a practical way to participate in international demand without building an entire export terminal on its own balance sheet. The summit adds interest to an opportunity already operating.
In its second-quarter update, Tourmaline said the free-cash-flow benefit from LNG-related exposure to Asian JKM and European TTF pricing was expected to continue through 2026 and 2027. Those are gas-price benchmarks in different markets. The benefit comes through contractual arrangements, so it isn’t necessary to claim every affected molecule physically travels from Canada to Europe.
That distinction is helpful for anyone buying the shares. You’re owning an existing producer and its sales arrangements, with a broader LNG buildout potentially improving the market over time. I like that starting point more than depending on a new terminal opening precisely on schedule. Production costs and disciplined drilling remain essential to turning better selling opportunities into profit.
Cash arrives before the next project
Tourmaline generated $786.1 million of its cash-flow measure in the second quarter, or $2.02 per diluted share. It reported $192.1 million of free cash flow after its specified capital spending. Both are management-defined measures, but they show why the company has an investment case before the next summit study produces a recommendation.
At a recent share price of $68, the stock cost about 8.4 times earnings. Gas prices and spending change throughout the year. It nevertheless connects the purchase price to an operating business already producing substantial cash.
I’d buy gradually for a diversified Canadian portfolio, keeping the energy allocation modest. Lower overseas prices, expensive transportation, and weaker Canadian prices could all reduce the return. The company’s dividend role should sit beside those risks, with any special payment treated as discretionary. I’d base the purchase on repeatable cash after necessary investment, without needing an extra payout to make the shares attractive.
Bottom line
Tourmaline can benefit from international gas demand while Canada and Europe work through future LNG options. Its existing production and marketing arrangements make that opportunity more concrete than a terminal proposal alone. I’d own it patiently to generate cash across several markets. A new export project could help later, while the business already has a way to earn today.
