The special dividends that made Tourmaline Oil Corp. TOU-T a stock market darling a few years ago are dwindling, weighing on the company’s share price and pushing casual shareholders to take a closer look at the volatile natural gas market.
The good news: Gas prices could be headed higher soon.
Tourmaline made a splash in 2021, when robust revenue growth, thick margins and strong profits encouraged the Calgary-based natural gas producer to take a relatively novel approach to cash distributions.
Rather than commit to a fixed quarterly payout when gas prices are anything but steady, the company distributed a modest regular dividend and then supplemented this base payout with a special dividend.
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This fluctuating payout is based on excess free cash flow. When commodity prices are high and the company is generating more cash than it needs to cover capital expenditures – mostly expenses related to exploration and production – Tourmaline shares the spoils with investors.
In 2022, free cash flow increased to $3.2-billion, up from $1.5-billion in 2021 as the price of natural gas surged amid global supply shocks. The cash fed a series of special dividends that added up to a whopping $7 a share.
That was much higher than the regular dividends, which added up to 90 cents a share in 2022. Based on an average share price of $66.94 that year, the total yield was nearly 12 per cent.
Cue the disappointment: Since 2022, the fluctuating payouts have dwindled as gas prices declined from their highs. Tourmaline paid a total of $5.50 a share in special dividends in 2023, $2 a share in 2024 and $1.30 a share in 2025.
Sure, regular dividends increased over this period, rising from 90 cents a share in 2022 to $2 a share in 2025.
But the numbers explain why the cash geyser has subsided from its peak.
In the first three quarters of 2025, to Sept. 30, Tourmaline reported combined free cash flow of $343.6-million, down more than 60 per cent from the same period in 2024 (its fourth-quarter results will be released March 4).
What’s more, capital expenditures increased by 46 per cent over this nine-month period.
Tourmaline’s drifting share price, which is 27 per cent below its peak, suggests that investors are perhaps not as enamoured with the concept of fluctuating special dividends when fluctuating means down.
Investors might also be wrestling with Tourmaline’s efforts to tweak its portfolio of Canadian assets.
The company announced in November that it will sell some of its properties in Alberta and use the proceeds to fund growth in British Columbia.
During a call with analysts in November, Mike Rose, Tourmaline’s chief executive officer, said the move will lower the company’s operating expenditures and increase profit margins.
A deal may be getting close. This week, The Globe and Mail reported that Canadian Natural Resources Ltd. has emerged as a potential buyer, pending regulatory feedback on the deal. No price was given.
Additional clarity could help the investment case for Tourmaline.
What could help a whole lot more: Rising natural gas prices.
Although the U.S. Energy Information Administration expects that annual average spot prices will fall by 2 per cent in 2026, as growth in the supply of natural gas keeps pace with rising demand, next year is something else.
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The EIA expects natural gas prices will rebound by 33 per cent in 2027, on average, as demand picks up with exports from liquefied natural gas (LNG) terminals in North America.
Greater strain on electric power grids, as AI data centres expand, should feed more demand for natural gas as well.
Paul Cheng, an analyst at Bank of Nova Scotia, released a similar outlook this week, arguing that gas prices should rise through the first half of 2027, despite a weak start to this year.
“We continue to expect NYMEX and AECO prices to peak in late 2026/early 2027 due to LNG exports and local demand straining winter storage inventories,” Mr. Cheng said in a report, referring to benchmark gas prices in the United States and Canada.
That’s an encouraging outlook for investors.
Given today’s weak gas prices and subdued sentiment toward Tourmaline, betting on the next upswing in natural gas prices could be a good move.
Yeah, those special dividends have been declining. But if Tourmaline’s share price in recent years tells us anything, it’s better to buy the stock when special is more of a thrill than a habit.