CALGARY, Oct. 20, 2016 /CNW/ – Tourmaline Oil Corp. (TSX:TOU) (“Tourmaline” or the “Company”) is pleased to announce that it has entered into an agreement with Shell Canada Energy (“Shell Canada”) to acquire strategic assets located in the Alberta Deep Basin (the “Deep Basin Assets”) and the NEBC Montney Complex (the “Montney Assets”) for total consideration of $1.369 billion (before customary adjustments) including cash consideration of $1.0 billion and the remainder in Tourmaline common shares (the “Acquisition”). The Acquisition is a major step in the Company’s ongoing plan to not only become Canada’s, but also one of North America’s, largest, lowest-cost and most-profitable natural gas and liquids producers.

The cash portion of the Acquisition purchase price will be funded through committed concurrent equity financings totalling $739.4 million and Tourmaline’s existing credit facilities.

THE ACQUISITION AND STRATEGIC RATIONALE

Pursuant to the Acquisition, Tourmaline has agreed to acquire current production of approximately 24,850 boepd, estimated current 2P reserves of 473.5 mmboe(1) and a combined evaluated future drilling inventory of 2,147 locations(2) between the Deep Basin Assets and Montney Assets. The total purchase price of $1.369 billion compares favorably to a current 2P NPV10 of $2.3 billion(3).

The Deep Basin Assets consist of 382 gross sections (154 of which are joint working interest with Tourmaline) and current low-decline production of approximately 18,650 boepd. Tourmaline will also acquire Shell Canada’s infrastructure consisting of three 100%-operated gas plants (estimated processing capacity of 200-225 mmcfpd) and 719 km of pipelines, providing Tourmaline with total operated processing capacity of over 1.0 bcf/day in the Alberta Deep Basin. The Company plans to add approximately 100 mmcfpd of new production in 2017 from the Deep Basin Assets through the drilling of 31 horizontal wells and fill the acquired infrastructure capacity.

The Montney Assets in BC consist of a large, contiguous 100% working interest 101 section land block in an area with 300 metres of Montney gross pay, four separate lobes to develop, and liquid content ranging from 10-80 bbls/mmcf. Current production is approximately 6,200 boepd from 25 existing horizontal wells that have delineated the land block. Estimated 2P reserves are 371 mmboe with an average liquid yield of approximately 30 bbl/mmcf (GLJ Montney Report) with only 375 locations included in the GLJ Montney Report out of an internally estimated 1,647 locations. Tourmaline plans to drill 13 horizontals on the Montney Assets in 2017 and 54 horizontals in 2018 in conjunction with Company infrastructure construction. The natural gas is sweet and the strong liquid content will provide a significant uplift to Tourmaline’s overall condensate production levels. Tourmaline currently drills the lowest-cost completed gas wells in the entire Montney play; transferring this technology to these Montney Assets is expected to yield top-decile play economics/gas supply costs.

The acquired Montney Assets now provide Tourmaline with sufficient size and scope in the Northern Montney play area to drive strategic Company-operated infrastructure development. The Montney Assets also make existing Company lands at Blueberry-Inga-Attachie (approximately 768 potential drilling locations) substantially more valuable through this planned infrastructure development.

Including the effect of the Acquisition and associated development, the Company is expecting 2017 production of approximately 250,000-260,000 boepd, and 2018 production levels of 310,000-320,000 boepd.

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(1)

All reserves information in this press release is gross reserves. Gross reserves are the total working interest reserves before the deduction of any royalties and including any royalty interests receivable. Reserve estimates are based on, in the case of the Montney Assets, a report (the “GLJ Montney Report”) prepared by GLJ Petroleum Consultants Ltd. (“GLJ”) effective June 30, 2016 and in the case of the Deep Basin Assets, a Tourmaline internal evaluation (the “Internal Deep Basin Evaluation”). The Internal Deep Basin Evaluation was prepared by a qualified reserves evaluator in accordance with National Instrument 51‐101 (“NI 51-101”) and the COGE Handbook effective October 1, 2016. (2) See “Estimated Drilling Inventory”. (3) Before tax net present value based on a 10 percent discount rate and GLJ’s July 1, 2016 forecast prices as it relates to the Montney Assets and October 1, 2016 GLJ forecast prices as it relates to the Deep Basin Assets. Estimated values of future net revenues do not necessarily represent the fair market value of the reserves.

FINANCIAL SUMMARY OF THE ACQUIRED ASSETS

The following is the Company’s estimate of certain future operating and financial performance metrics for the combined Deep Basin Assets and Montney Assets:

2017E 2018E Average Production (boepd) 35,000 60,000 % Natural Gas 85% 85% E & P Capital ($millions) 231 381 Wells Drilled (net) 44 81 Operating Netbacks ($/boe) (1)(2) Montney Assets $16.45 $17.39 Deep Basin Assets $14.40 $15.08

(1) See non-GAAP financial measures. Operating netbacks are calculated on a per-boe basis and are defined as revenue (excluding processing income) less royalties, transportation costs and operating expenses. (2) Assumes NYMEX $3.25 U.S. and WTI $60.00 U.S.

OPERATIONAL SUMMARY OF THE ACQUIRED ASSETS

Summary Future Drilling Locations 2,147 Land Montney Assets (Sections) 101 Gross and Net Land Deep Basin Assets (Sections) 382 Gross and 227 Net Natural Gas Processing Capacity (mmcfpd) 200-225 Additional Pipeline Infrastructure 719 km

The Acquisition has an effective date of November 1, 2016 and is expected to close on or about November 30, 2016, subject to customary conditions and regulatory approvals including the approval of the Toronto Stock Exchange (the “TSX”) and the required approval under the Competition Act (Canada). Peters & Co. Limited is acting as financial advisor to Tourmaline with respect to the Acquisition.

PROSPECTUS OFFERING

In connection with the Acquisition, Tourmaline has entered into an agreement with a syndicate of underwriters led by Peters & Co. Limited (the “Underwriters”), pursuant to which the Underwriters have agreed to purchase for resale to the public, on a bought-deal basis, 2,878,000 subscription receipts (“Subscription Receipts”) of Tourmaline at a price of $34.75 per Subscription Receipt for gross proceeds of approximately $100.0 million (the “Prospectus Offering”). The Underwriters will have an option to purchase up to an additional 15% of the Subscription Receipts issued under the Prospectus Offering at a price of $34.75 per Subscription Receipt to cover over-allotments exercisable in whole or in part at any time until 30 days after the closing. The gross proceeds from the sale of Subscription Receipts pursuant to the Prospectus Offering will be held in escrow pending the completion of the Acquisition. If Peters & Co. Limited is satisfied, acting reasonably, that there is no impediment to the completion of the Acquisition in all material respects in accordance with the terms of the agreement entered into in connection with the Acquisition (other than funding) before January 31, 2017, the net proceeds from the sale of the Subscription Receipts will be released from escrow to Tourmaline and each Subscription Receipt will automatically be exchanged for one common share of Tourmaline for no additional consideration without any action on the part of the holder. If the Acquisition is not completed on or before January 31, 2017, then the purchase price for the Subscription Receipts will be returned pro rata to subscribers, together with a pro rata portion of interest earned on the escrowed funds.

The Subscription Receipts issued pursuant to the Prospectus Offering will be distributed by way of a short form prospectus in all provinces of Canada and in the United States, the United Kingdom and certain other jurisdictions as the Company and the Underwriters may agree on a private-placement basis. Completion of the Prospectus Offering is conditional upon closing of the Private Placement (as defined below) and is subject to customary closing conditions, including the receipt of all necessary regulatory approvals, including the approval of the TSX. Closing of the Prospectus Offering is expected to occur on November 10, 2016.

PRIVATE PLACEMENT

Tourmaline has also entered into agreements with certain institutional investors who have committed to subscribe for, on a private-placement basis, 18,274,000 Subscription Receipts at a price of $34.75 per Subscription Receipt for aggregate gross proceeds of $635.0 million (the “Private Placement”). The completion of the Private Placement is subject to customary closing conditions, including the receipt of all necessary regulatory approvals, including the approval of the TSX. Similar to the Prospectus Offering, the gross proceeds from the Private Placement will be held in escrow pending completion of the Acquisition.

In conjunction with the Prospectus Offering and Private Placement, certain officers, directors and employees of Tourmaline and their associates intend to participate by purchasing up to 125,000 Subscription Receipts at a price of $34.75 per Subscription Receipt on a private-placement basis (the “Non-Brokered Offering”).

The proceeds from the Prospectus Offering, Private Placement and Non-Brokered Offering will be used to partially fund the cash portion of the purchase price for the Acquisition.

The securities offered have not been, and will not be, registered under the U.S. Securities Act of 1933, as amended (the “U.S. Securities Act”) or any U.S. state securities laws and may not be offered or sold in the United States absent registration or an available exemption from the registration requirement of the U.S. Securities Act and applicable U.S. state securities laws. This press release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities, in any jurisdiction in which such offer, solicitation or sale would be unlawful.

OPERATIONAL UPDATE AND Q3 PRODUCTION

A combination of weather-related activity delays, third-party plant turnarounds, NGL volume reductions due to a fire-related curtailment at a third-party deep cut facility, and continued firm service cutbacks in Alberta and BC have led to Q3 2016 production levels approximately 8% lower than Q2 2016. The Company is still on track to achieve full-year average production of 190,000-195,000 boepd, yielding approximately 25% year-over-year growth.

As previously disclosed, the Company has over 100 new wells coming on-stream in the second half of the year; almost all of these wells will now start-up in the fourth quarter. The fourth quarter will be one of the highest growth periods in the Company’s history, timed to an anticipated steadily-improving natural gas market. The Company has brought over 20,000 boepd of new production on-stream over the past two weeks.

Tourmaline now expects to achieve the 2016 exit production target of 210,000-215,000 boepd in late November. The Company is revising full-year 2017 average production guidance to 225,000 boepd, up from 215,000 boepd previously, before giving effect to the Acquisition.

FINANCIAL UPDATE

Tourmaline expects Q3 2016 cash flow to be approximately 38% higher than Q2 2016 due to continued strong cost performance and higher than anticipated realized commodity pricing. The Company has also largely achieved the 15% 2H 2016 drill-and-complete capital cost reduction targets thus far with the 2H 2016 EP program in all three core areas. This allows for the drilling of incremental new wells within the same capital budget for both Q4 2016 and 2017. Tourmaline now expects to operate a 14 rig program in 2017, up from 12 rigs previously and still execute a cash flow budget for the year. EP capital spending in the third quarter of 2016 is again expected to be similar to third quarter cash flow.

EP UPDATE

Tourmaline is currently operating 13 drilling rigs with 8 in the Alberta Deep Basin, 2 in NEBC and 3 on the Peace River High.

The Company plans to bring approximately 100 wells on-stream between September and December 2016 ; 31 of which have been brought on production since mid-September.

; 31 of which have been brought on production since mid-September. The three-well 8-15 Upper Charlie Lake pad at Earring-Mulligan, which commenced production in September, is currently producing at 2,358 bpd of 31 API oil and 1.9 mmcfpd of natural gas after 30 days of production.

The first Lower Charlie Lake step-out to the two December 2015 discoveries has averaged 1,919 bpd of 35 API oil and 1.9 mmcfpd of sweet gas (2,236 boepd) over the first 14 days of production. The Company expects to have five additional Lower Charlie Lake horizontals on-stream during the fourth quarter as the Company continues to delineate this significant new pool.

discoveries has averaged 1,919 bpd of 35 API oil and 1.9 mmcfpd of sweet gas (2,236 boepd) over the first 14 days of production. The Company expects to have five additional Lower Charlie Lake horizontals on-stream during the fourth quarter as the Company continues to delineate this significant new pool. The Brazeau 4-32 two well Viking pad has averaged 31 mmcfpd of natural gas and 300 bpd of condensate since production start-up on October 6 .

INCREASED 2017 GUIDANCE AND PRELIMINARY 2018 GUIDANCE

The following is the Company’s increased guidance for 2017 and preliminary guidance for 2018, before and after giving effect to the Acquisition and the associated equity financings:

Base

2017E Pro Forma

2017E Base

2018E Pro Forma

2018E Average Production (boepd) 225,000 260,000 260,000 320,000 % Natural Gas 84% 84% 83% 83% E & P Capital ($mm) $1,100 $1,331 $1,410 $1,791 Operating Netbacks ($/boe) (1)(2) 15.94 15.79 16.62 16.51

(1) See non-GAAP financial measures. Operating netbacks are calculated on a per-boe basis and are defined as revenue (excluding processing income) less royalties, transportation costs and operating expenses. (2) Assumes NYMEX $3.25 U.S. and WTI $60.00 U.S.