Tourmaline CEO Mike Rose is building an oil company for a post-oil era

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Looking back, Tourmaline Oil Corp founder and CEO Mike Rose described the winter of 2020 as a period marked by a “double crisis” in the energy industry.

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The COVID-19 hit, and fears of an economic slowdown, drove natural gas and oil prices down. In Calgary, “for sale” signs went up quietly at several privately owned energy companies.

Part of the tourmaline, however, was flush with cash after spinning. Its business. Mr. Rose saw an opportunity to acquire property once in a generation.

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“In the early phase of the pandemic, no one was traveling, there were no games to watch and we looked at each other and said, ‘We can work extra hard too,'” he said in a recent interview. .

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In the months that followed, Tourmaline spent $2.3 billion — in cash and its stock — to snap up five natural gas plays. As the company grew, gas prices began to rise. They double compared to the previous year. In response, Tourmaline’s share price took off, rising six times since the pandemic hit in March, 2020.

This has made the company a $14 billion stock market darling, and the founder’s stake exceeds $700 million.

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Tourmaline is now Canada’s largest natural gas producer and the fifth largest player in North America. The Calgary-based company is Pittsburgh-based industry leader EQT Corp. produces about half the gas. Looking ahead, Mr. Rose said, “our goal is to control the largest, lowest-development-cost, lowest-emissions natural gas supply in North America.”

The two key words in Mr. Rose’s vision are “minimum emissions.” It sounds like a contradiction, but Mr. Rose is building a major oil and gas company for a postoil and gas era.

“We see rising fossil fuel sentiment,” he said. “However, the pendulum swings back and forth. Look at what has happened recently with gas shortages in Germany, the UK and California. Their experience has shown that gas will play an important role in our future.”

Long before activist Greta Thunberg began calling on leaders to take action on climate change, Mr Rose was repurposing a vast portfolio of wells and processing plants to reduce tourmaline’s greenhouse gas emissions, as well as Also cutting costs. Tourmaline’s CEO calls natural gas a “great enabler,” an eco-friendly, low-emissions fuel that will continue to power Much of the global economy, even as we continue to rely on renewable energy sources, continues to grow.

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“Mike talks about natural gas’s transition to renewable energy as a long-term solution to our energy needs that will last for several decades,” said Chris Potter, chief executive of Calgary-based investment bank Peters & Co Ltd. A long time consultant for Tourmaline.

“I would argue that natural gas is a clean and sustainable solution to our energy needs, because of the commodity’s utility, low relative carbon footprint and availability,” said Mr. Potter. “This places Tourmaline in a very strong position given its production profile, significant reserves and strong ESG track record.”

Tourmaline is already the greenest of Canada’s big energy companies. To compare the environmental impact of oil companies and gas producers, the industry’s standard metric is to measure greenhouse gas emissions intensity per barrel of oil equivalent.

Tourmaline’s GHG emission intensity is determined by Canadian Natural Resources Ltd., Suncor Energy Inc. and less than a third of counterparts like Cenovus Energy Inc. Tourmaline has cut emissions intensity by 31 percent since 2013. The company is targeting a further 25% reduction in the next six years.

As part of its strategy to continue cutting greenhouse gas emissions, Tourmaline is one of 14 companies supporting the Ottawa-based Natural Gas Innovation Fund, which has invested more than $100 million in 50 cleantech startups. As part of the NGIF partnership, Tourmaline hosts a $35 million emissions test center at its gas processing plant near Edson, Alta. There are 20 different companies trying out emissions reduction techniques here.

“Natural gas will be a long-term player in the energy market as everyone in the industry supports the development of a low-emissions product,” said John Adams, chief executive officer of NGIF Capital Corp.

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“The audience for my first fundraising pitch included Mike Rose, for whom I have great respect,” said Mr. Adams. “He runs a highly efficient organization that sees innovation as the key to the company’s long-term success.”

Doing it right by the environment is helping cut costs on tourmaline. In recent years, the company has replaced diesel fuel for its generators with natural gas-powered equipment. Natural gas is the cleanest of fossil fuels, producing half the greenhouse gas emissions of coal and 40 percent less than diesel.

Mr. Rose said the $8 million investment in the project has already saved tourmaline more than $25 million in fuel costs. “As technology develops, we are doing things we have never been able to do before, throughout our operations, on water recycling and emissions,” he said.

“I have always made sure that we do a good job with respect to the environment, so it was no shock to see ESG issues develop into a pressure point in the industry,” said Mr. Rose, who founded the two big energy companies. and sold. The companies – Berkeley Petroleum Corp, launched in 1993 and acquired in 2001 for $1.5 billion, and DuVernay Oil Corp, which made $5.9 billion in 2008 – before launching tourmaline.

As a kid growing up in Streetsville, Ont. (now part of Mississauga), Mr. Rose spent the weekend looking for celestial crystals, playing baseball and exploring the nearby limestone quarries. He left minor-league baseball to study geology at Queen’s University, then moved to Calgary after graduating in 1979 to work in the exploration arm of Shell Canada Ltd.

Working at Shell introduced Mr. Rose to natural gas fields in northern BC and Alberta, an area where he built three companies. At Shell, he is also introduced to a fellow Queen’s graduate who turns out to be his wife, Susan Riddell Rose. She is now the CEO of Perpetual Energy Inc. and an established oil patch entrepreneur.

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The couple have three sons, now adults, who all played in Alberta’s premier baseball development program with the Ocotox Dogs, which draw regularly. 4,000 fans. Mr. Rose joked: “My sons are lucky. None of them inherited my swing.

Despite their CEO responsibilities, Dogs founder and managing director John Irkandia said the couple made nearly every home game. Mr. Rose also coached his sons’ minor league baseball teams for 12 years. Mr. Irkandia, a retired partner at Borden Ladner Gervais LLP, said Mr. Rose’s passion for baseball reflects his success in the business.

“Mike excels at understanding how the small things fit into the big picture, and how to change your strategy over the course of a game,” said Mr. Ircandia. “That puts people in a position to be successful, to make the best use of their talents, which isn’t easy when you’re dealing with 12-year-olds with very different skill levels and different stages of development.”

For his part, Mr Rose said his former team of sons helped shape the values ​​at Tourmaline. “Dogs’ slogan is ‘Get better every day.’ It has become part of the DNA of our company.”

A life spent around baseball — childhood trips to Maine that made him a Boston Red Sox fan — also helps keep him humble. Even the best batsmen only get one hit in three trips to the plate. “Baseball as a sport is unique because you have to learn to deal with failure over and over again. It’s a good life lesson,” he said.

In a cyclical oil patch, many times failure occurs due to carrying debt When commodity prices fall and businesses struggle to make interest payments. Mr. Rose has always run tourmaline with relatively little debt.

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last month, against the background of the growing natural In gas prices, Tourmaline announced plans to increase debt repayment, which is estimated to be $2.5 billion next year, while giving shareholders an increasing portion of its free cash flow. As part of the new outlook, tourmaline paid out a $223 million special dividend earlier this month.

“Years ago, Mike realized that in the future investors might stop buying equity in oil and gas companies, and the debt could pay off,” said Alan Chatten, president of Calgary-based seismic testing firm Explore. “They took steps to ensure that tourmaline could be self-financing, while also moving aggressively to reduce emissions.”

Tourmaline’s plans for future expansion from cash generated from operations proved accurate. Several European banks have cut lending to fossil fuel producers in Alberta’s oil sands. And last month, Caisse de dépôt et Placement du Québec announced plans to sell off all oil company holdings by the end of next year. Regulatory filings show that CAS sold a 3.9-million-share stake in Tourmaline earlier this year.

Mr. Chatene first met Tourmaline’s CEO in 2008, when he was coaching his son’s Little-League baseball team and Mr. Rose was on the other side of the diamond, running the team for one of his sons.

“Mike’s team beat us,” said Mr Chatene, who runs Calgary’s minor league. “I was amazed at the way Mike organized the team, the way the game unfolded, how his strategy evolved.” The following season, Mr. Chatene’s son tourmaline played on the CEO’s team.

Mr Chatene said tourmaline’s strategy in ESG, infrastructure and marketing has evolved over time,…

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