News Column

Tourmaline Enjoys Record Cash Flow and Earnings in the First Quarter of 2014

May 7, 2014

CALGARY, ALBERTA--(Marketwired - May 7, 2014) - Tourmaline Oil Corp. (TSX:TOU) ("Tourmaline" or the "Company") is pleased to announce record financial and operating results for the first quarter of 2014.

Highlights

-- Record cash flow(1) of $252.6 million in the first quarter of 2014, a 117% increase over first quarter 2013 cash flow of $116.6 million. -- First quarter 2014 earnings of $89.9 million, a 72% increase over first quarter of 2013. -- Record first quarter 2014 average production of 102,563 boepd, a 49% increase over average production for first quarter of 2013, and a 19% increase over the fourth quarter of 2013. -- Record oil and liquid production at 8,690 bopd of oil and 6,207 boepd of NGLs or 15% of total corporate boepd. -- 20 of 21 Q1 2014 Deep Basin horizontals with 30 days of production history have a 30-day IP rate of 10.2 mmcfpd, compared to the current Company template forecast of 5.0 mmcfpd. -- Tourmaline drilled 34 gas wells, 6 oil wells and no dry holes in Q1 2014.



Financial Update

-- The Company is forecasting 2014 full year cash flow of $1.09 billion and cash flow of $1.48 billion in 2015. -- The Company is in the process of expanding its credit facility from $900 million to $1.3 billion, and expects to complete the process during the second quarter of 2014. -- The Company will continue to operate with a debt to cash flow ratio of less than 1.0 times. -- Q1 2014 operating costs of $4.93 per boe were slightly higher than forecast due to incremental liquid processing costs associated with increased volumes accessing the third-party deep cut facility at Wild River and higher costs associated with temporary production and testing operations at Spirit River and Mulligan. -- First quarter capital spending of $466.4 million was $75 million higher than originally forecast largely due to the addition of a 17th drilling rig with associated completion spread; participation in 5 unbudgeted third-party-operated Deep Basin horizontals; significant participation at Crown Land sales in the Alberta Deep Basin and in NEBC, as well as upfront expenditures related to facility expansions scheduled to come on-stream in the second half of 2014. The B.C land sales have added additional prospective acreage for the Company's new Montney condensate- rich turbidite lobe. -- Continued industry-leading all-in cash cost structure of $7.71/boe (operating costs, transportation, general and administrative, and financing costs). (1) See "non-GAAP Financial Measures" in the attached Management's Discussion and Analysis. CORPORATE SUMMARY - FIRST QUARTER 2014 -------------------------------------------------------------------------- Three Months Ended March 31 -------------------------------------- 2014 2013 Change -------------------------------------- OPERATIONS Production Natural gas (mcf/d) 525,999 367,287 43% Crude oil and NGL (bbl/d) 14,897 7,421 101% Oil equivalent (boe/d) 102,563 68,636 49% Product prices(1) Natural gas ($/mcf) $ 5.38$ 3.50 54% Crude oil and NGL ($/bbl) $ 70.49$ 88.75 (21)% Operating expenses ($/boe) $ 4.93$ 4.27 15% Transportation costs ($/boe) $ 1.66$ 2.02 (18)% Operating netback ($/boe)(3) $ 27.94$ 20.20 38% Cash general and administrative expenses ($/boe)(2) $ 0.58$ 0.80 (28)% FINANCIAL ($000, EXCEPT PER SHARE) Revenue 349,267 174,987 100% Royalties 30,564 11,363 169% Cash flow(3) 252,587 116,599 117% Cash flow per share (diluted)(3) $ 1.28$ 0.64 100% Net earnings 89,868 52,184 72% Net earnings per share (diluted) $ 0.45$ 0.29 55% Capital expenditures 466,396 190,463 145% Weighted average shares outstanding (diluted) 197,932,293 181,774,427 9% Net debt(3) (818,594) (324,260) 152% (1) Product prices include realized gains and losses on financial instrument contracts. (2) Excluding interest and financing charges. (3) See "Non-GAAP Financial Measures" in the attached Management's Discussion and Analysis.



Conference Call Tomorrow at 8:30 a.m. MT (10:30 a.m. ET)

Tourmaline will host a conference call tomorrow, May 8, 2014 starting at 8:30 a.m. MT (10:30 a.m. ET). To participate, please dial 1-800-766-6630 (toll-free in North America), or local dial-in 416-340-8527, a few minutes prior to the conference call.

The conference call ID number is 4190549.

Forward-Looking Information

This press release contains forward-looking information within the meaning of applicable securities laws. The use of any of the words "forecast", "expect", "anticipate", "continue", "estimate", "objective", "ongoing", "may", "will", "project", "should", "believe", "plans", "intends" and similar expressions are intended to identify forward-looking information. More particularly and without limitation, this press release contains forward-looking information concerning Tourmaline's plans and other aspects of its anticipated future operations, management focus, objectives, strategies, financial, operating and production results and business opportunities, including anticipated petroleum and natural gas production for various periods, cash flows, capital spending, projected operating and drilling costs, the timing for facility expansions and facility start-up dates, as well as Tourmaline's future drilling prospects and plans, business strategy, future development and growth opportunities, prospects and asset base. The forward-looking information is based on certain key expectations and assumptions made by Tourmaline, including expectations and assumptions concerning: prevailing commodity prices and exchange rates; applicable royalty rates and tax laws; interest rates; future well production rates and reserve volumes; operating costs the timing of receipt of regulatory approvals; the performance of existing wells; the success obtained in drilling new wells; anticipated timing and results of capital expenditures; the sufficiency of budgeted capital expenditures in carrying out planned activities; the timing, location and extent of future drilling operations; the successful completion of acquisitions and dispositions; the availability and cost of labour and services; the state of the economy and the exploration and production business; the availability and cost of financing, labor and services; and ability to market oil and natural gas successfully.

Statements relating to "reserves" are also deemed to be forward looking statements, as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described exist in the quantities predicted or estimated and that the reserves can be profitably produced in the future.

Although Tourmaline believes that the expectations and assumptions on which such forward-looking information is based are reasonable, undue reliance should not be placed on the forward-looking information because Tourmaline can give no assurances that they will prove to be correct. Since forward-looking information addresses future events and conditions, by its very nature it involves inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to: the risks associated with the oil and gas industry in general such as operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of estimates and projections relating to reserves, production, costs and expenses; health, safety and environmental risks; commodity price and exchange rate fluctuations; interest rate fluctuations; marketing and transportation; loss of markets; environmental risks; competition; incorrect assessment of the value of acquisitions; failure to complete or realize the anticipated benefits of acquisitions or dispositions; ability to access sufficient capital from internal and external sources; failure to obtain required regulatory and other approvals; and changes in legislation, including but not limited to tax laws, royalties and environmental regulations. Readers are cautioned that the foregoing list of factors is not exhaustive.

Also included in this press release are estimates of Tourmaline's 2014 annual cash flow and capital spending as well as, preliminary guidance on 2015 anticipated cash flows, which are based on the various assumptions as to production levels, including estimated average production of 120,000 boepd for 2014 and 159,500 boepd for 2015, capital expenditures, and other assumptions disclosed in this press release and including commodity price assumptions for natural gas (AECO - $4.64 /mcf for 2014 and $4.43/mcf for 2015), and crude oil (WTI (US) - $97.40/bbl for 2014 and $93.38/bbl for 2015) and an exchange rate assumption of (US/CAD) $0.92 for 2014 and $0.90 for 2015. To the extent any such estimate constitutes a financial outlook, it was approved by management and the Board of Directors of Tourmaline on April 24, 2014 and is included to provide readers with an understanding of Tourmaline's anticipated cash flows based on the capital expenditure and other assumptions described herein and readers are cautioned that the information may not be appropriate for other purposes.

Additional information on these and other factors that could affect Tourmaline, or its operations or financial results, are included in the Company's most recently filed Management's Discussion and Analysis (See "Forward-Looking Statements" therein), Annual Information Form (See "Risk Factors" and "Forward-Looking Statements" therein) and other reports on file with applicable securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com) or Tourmaline's website (www.tourmalineoil.com).

The forward-looking information contained in this press release is made as of the date hereof and Tourmaline undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise, unless expressly required by applicable securities laws.

See also "Forward-Looking Statements" in the attached Management's Discussion and Analysis.

Additional Reader Advisories Boe Conversions



Boes may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf:1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. As the value ratio between natural gas and crude oil based on the current prices of natural gas and crude oil is significantly different from the energy equivalency of 6:1, utilizing a 6:1 conversion basis may be misleading as an indication of value.

Production Tests

Any references in this release to IP rates are useful in confirming the presence of hydrocarbons, however, such rates are not determinative of the rates at which such wells will continue to produce and decline thereafter and are not necessarily indicative of long-term performance or ultimate recovery. While encouraging, readers are cautioned not to place reliance on such rates in calculating the aggregate production for the Company. Such rates are based on field estimates and may be based on limited data available at this time.

Non-GAAP Financial Measures

This press release includes references to financial measures commonly used in the oil and gas industry, "cash flow", "operating netback" and "net debt", which do not have standardized meanings prescribed by International Financial Reporting Standards ("GAAP"). Accordingly, the Company's use of these terms may not be comparable to similarly defined measures presented by other companies. Management uses the terms "cash flow", "operating netback", and "net debt", for its own performance measures and to provide shareholders and potential investors with a measurement of the Company's efficiency and its ability to generate the cash necessary to fund a portion of its future growth expenditures or to repay debt. Investors are cautioned that the non-GAAP measures should not be construed as an alternative to net income determined in accordance with GAAP as an indication of the Company's performance. See "Non-GAAP Financial Measures" in the attached Management's Discussion and Analysis for the definition and description of these terms.

Certain Definitions

bbls barrels boe barrel of oil equivalent boepd barrel of oil equivalent per day bopd barrel of oil, condensate or liquids per day gjsd gigajoules per day mmboe millions of barrels of oil equivalent mbbls thousand barrels mmcf million cubic feet mcf thousand cubic feet mmcfpd million cubic feet per day mmcfpde million cubic feet per day equivalent mcfe thousand cubic feet equivalent mmbtu million British thermal units mstboe thousand stock tank barrels of oil equivalent



MANAGEMENT'S DISCUSSION AND ANALYSIS

This management's discussion and analysis ("MD&A") should be read in conjunction with Tourmaline's unaudited interim condensed consolidated financial statements and related notes for the three months ended March 31, 2014 and the consolidated financial statements for the year ended December 31, 2013. Both the consolidated financial statements and the MD&A can be found at www.sedar.com. This MD&A is dated May 7, 2014.

The financial information contained herein has been prepared in accordance with International Financial Reporting Standards ("IFRS") and sometimes referred to in this MD&A as Generally Accepted Accounting Principles ("GAAP") as issued by the International Accounting Standards Board ("IASB"). All dollar amounts are expressed in Canadian currency, unless otherwise noted.

Certain financial measures referred to in this MD&A are not prescribed by IFRS. See "Non-GAAP Financial Measures" for information regarding the following non-GAAP financial measures used in this MD&A: "cash flow", "operating netback", "working capital (adjusted for the fair value of financial instruments)", "net debt", "adjusted EBITDA", "senior debt", "total debt", and "total capitalization".

Additional information relating to Tourmaline can be found at www.sedar.com.

Forward-Looking Statements - Certain information regarding Tourmaline set forth in this document, including management's assessment of the Company's future plans and operations, contains forward-looking statements that involve substantial known and unknown risks and uncertainties. The use of any of the words "anticipate", "continue", "estimate", "expect", "may", "will", "project", "should", "believe" and similar expressions are intended to identify forward-looking statements. Such statements represent Tourmaline's internal projections, estimates or beliefs concerning, among other things, an outlook on the estimated amounts and timing of capital investment, anticipated future debt, expenses, production, cash flow and revenues or other expectations, beliefs, plans, objectives, assumptions, intentions or statements about future events or performance. These statements are only predictions and actual events or results may differ materially. Although Tourmaline believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, levels of activity, performance or achievement since such expectations are inherently subject to significant business, economic, competitive, political and social uncertainties and contingencies. Many factors could cause Tourmaline's actual results to differ materially from those expressed or implied in any forward-looking statements made by, or on behalf of, Tourmaline.

In particular, forward-looking statements included in this MD&A include, but are not limited to, statements with respect to: the size of, and future net revenues and cash flow from, crude oil, NGL (natural gas liquids) and natural gas reserves; future prospects; the focus of and timing of capital expenditures; expectations regarding the ability to raise capital and to continually add to reserves through acquisitions and development; access to debt and equity markets; projections of market prices and costs; the performance characteristics of the Company's crude oil, NGL and natural gas properties; crude oil, NGL and natural gas production levels and product mix; Tourmaline's future operating and financial results; capital investment programs; supply and demand for crude oil, NGL and natural gas; future royalty rates; drilling, development and completion plans and the results therefrom; future land expiries; dispositions and joint venture arrangements; amount of operating, transportation and general and administrative expenses; treatment under governmental regulatory regimes and tax laws; and estimated tax pool balances. In addition, statements relating to "reserves" are deemed to be forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described can be profitably produced in the future.

These forward-looking statements are subject to numerous risks and uncertainties, most of which are beyond the Company's control, including the impact of general economic conditions; volatility in market prices for crude oil, NGL and natural gas; industry conditions; currency fluctuation; imprecision of reserve estimates; liabilities inherent in crude oil and natural gas operations; environmental risks; incorrect assessments of the value of acquisitions and exploration and development programs; competition; the lack of availability of qualified personnel or management; changes in income tax laws or changes in tax laws and incentive programs relating to the oil and gas industry; hazards such as fire, explosion, blowouts, cratering, and spills, each of which could result in substantial damage to wells, production facilities, other property and the environment or in personal injury; stock market volatility; ability to access sufficient capital from internal and external sources; the receipt of applicable approvals; and the other risks considered under "Risk Factors" in Tourmaline's most recent annual information form available at www.sedar.com.

With respect to forward-looking statements contained in this MD&A, Tourmaline has made assumptions regarding: future commodity prices and royalty regimes; availability of skilled labour; timing and amount of capital expenditures; future exchange rates; the impact of increasing competition; conditions in general economic and financial markets; availability of drilling and related equipment and services; effects of regulation by governmental agencies; and future operating costs.

Management has included the above summary of assumptions and risks related to forward-looking information provided in this MD&A in order to provide shareholders with a more complete perspective on Tourmaline's future operations and such information may not be appropriate for other purposes. Tourmaline's actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits that the Company will derive therefrom. Readers are cautioned that the foregoing lists of factors are not exhaustive.

These forward-looking statements are made as of the date of this MD&A and the Company disclaims any intent or obligation to update publicly any forward-looking statements, whether as a result of new information, future events or results or otherwise, other than as required by applicable securities laws.

Boe Conversions - Per barrel of oil equivalent amounts have been calculated using a conversion rate of six thousand cubic feet of natural gas to one barrel of oil equivalent (6:1). Barrel of oil equivalents (boe) may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf:1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. In addition, as the value ratio between natural gas and crude oil based on current prices of natural gas and crude oil is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.

PRODUCTION

Three Months Ended March 31, -------------------------------- 2014 2013 Change --------------------------------------------------------- Natural gas (mcf/d) 525,999 367,287 43% Oil (bbl/d) 8,690 5,688 53% NGL (bbl/d) 6,207 1,733 258% --------------------------------------------------------- Oil equivalent (boe/d) 102,563 68,636 49% ---------------------------------------------------------



Production for the three months ended March 31, 2014 averaged 102,563 boe/d, a 49% increase over the average production for the same quarter of 2013 of 68,636 boe/d. The Company's significant production growth, when compared to 2013, can be attributed to new wells that have been brought on-stream since March 31, 2013, as well as property acquisitions. Production was 85% natural gas weighted in the first quarter of 2014 compared to 89% natural gas weighted in the first quarter of 2013. The accelerated growth in oil and NGL production is the result of increased drilling in the Spirit River/Peace River High Charlie Lake oil plays, the additional incremental liquids recovered in the Wild River area via deep cut processing, which began in late 2013, and stronger than anticipated condensate recoveries from new wells tied-in in N.E.B.C.

Full-year average production guidance for 2014 remains unchanged at 120,000 boe/d (as disclosed in the Company's MD&A dated March 17, 2014).

REVENUE

Three Months Ended March 31, ------------------------------------ (000s) 2014 2013 Change --------------------------------------------------------------------------- Revenue from: Natural gas $ 254,762$ 115,709 120% Oil and NGL 94,505 59,278 59% --------------------------------------------------------------------------- Total revenue from natural gas, oil and NGL sales $ 349,267$ 174,987 100% --------------------------------------------------------------------------- Revenue for the three months ended March 31, 2014 increased 100% to $349.3 million from $175.0 million for the same quarter of 2013. Revenue growth is consistent with the increase in production and strong growth in natural gas prices for the same periods, partially offset by weaker NGL prices. Revenue includes all petroleum, natural gas and NGL sales and realized gains on financial instruments. TOURMALINE PRICES: Three Months Ended March 31, ------------------------------- 2014 2013 Change -------------------------------------------------------- Natural gas ($/mcf) $ 5.38$ 3.50 54% Oil ($/bbl) $ 94.17$ 94.96 (1)% NGL ($/bbl) $ 37.34$ 68.36 (45)% -------------------------------------------------------- Oil equivalent ($/boe) $ 37.84$ 28.33 34% -------------------------------------------------------- BENCHMARK GAS AND OIL PRICES: Three Months Ended March 31, ----------------------------- 2014 2013 Change ------------------------------------------------------------------ Natural gas NYMEX Henry Hub (USD$/mcf) $ 4.72$ 3.48 36% AECO (CAD$/mcf) $ 5.59$ 3.20 75% Oil NYMEX (USD$/bbl) $ 98.61$ 94.36 5% Edmonton Par (CAD$/bbl) $ 99.85$ 88.55 13% ------------------------------------------------------------------ RECONCILIATION OF AECO INDEX TO TOURMALINE'S REALIZED GAS PRICES: Three Months Ended March 31, -------------------------------- ($/mcf) 2014 2013 Change ------------------------------------------------------------------- AECO index $ 5.59$ 3.20 75% Heat/quality differential 0.39 0.27 44% Realized gain (loss) (0.60) 0.03 (2,100)% ------------------------------------------------------------------- Tourmaline realized natural gas price $ 5.38$ 3.50 54% ------------------------------------------------------------------- CURRENCY - EXCHANGE RATES: Three Months Ended March 31, ------------------------------- 2014 2013 Change --------------------------------------------------- CAD$/USD$ $ 0.9067$ 0.9922 (9)% ---------------------------------------------------



The realized average natural gas price for the three months ended March 31, 2014 was $5.38/mcf, which is 54% higher than the comparative period. The higher natural gas price reflects the higher AECO prices experienced during the quarter. Included in the realized price is a loss on commodity contracts in the first quarter of 2014 of $28.5 million compared to a gain of $2.5 million for the same period of the prior year. There has been an increased focus on hedging activities in an effort to obtain more predictable cash flows to support the larger capital budget and realize the benefit of the recent natural gas rally. As a result, a larger volume of natural gas has been subject to pricing per the commodity contracts in place, creating realized losses as the price of natural gas increases. Realized prices exclude the effect of unrealized gains or losses. Once these gains and losses are realized they are included in the per-unit amounts. Partially offsetting the loss on commodity contracts was a 7% premium received due to the higher heat content (March 31, 2013 - 8%).

Realized crude oil prices were relatively unchanged while NGL prices decreased 45%, from $68.36/bbl to $37.34/bbl, for the three months ended March 31, 2014, compared to the same period of 2013. The proportion of ethane in the NGL mix, which is priced significantly lower than the other products, increased from approximately 9% in the first quarter of 2013 to 38% in the first quarter of 2014 due to deep cut processing in the Wild River area of Alberta, resulting in a corresponding decrease in the realized NGL pricing. The economics of the deep cut processing activities are favourable when compared to leaving the ethane in the natural gas stream. ROYALTIES Three Months Ended March 31, ----------------------------- (000s) 2014 2013 ----------------------------------------------------------------------- Natural gas $ 19,584$ 4,535 Oil and NGL 10,980 6,828 ----------------------------------------------------------------------- Total royalties $ 30,564$ 11,363 ----------------------------------------------------------------------- Royalties as a percentage of revenue 8.8% 6.5% -----------------------------------------------------------------------



For the quarter ended March 31, 2014, the average effective royalty rate increased to 8.8% compared to 6.5% for the same quarter of 2013.

The Company continues to benefit from the New Well Royalty Reduction Program and the Natural Gas Deep Drilling Program in Alberta as well as the Deep Royalty Credit Program in British Columbia. The average effective royalty rate increased in 2014 over the same period of 2013 mainly due to increased natural gas prices, and the impact of some wells reaching production maximums or coming off royalty holidays.

The Company expects its royalty rate for 2014 to be approximately 10% as additional wells will no longer qualify for royalty incentive programs due to production maximums being reached and other wells coming off royalty holidays, thereby increasing the Company's overall royalty rate. The royalty rate is also sensitive to commodity prices, however, and as such, a change in commodity prices will impact the actual rate.

OTHER INCOME

Three Months Ended March 31, ------------------------------- (000s) 2014 2013 Change ----------------------------------------------------- Other income $ 4,899$ 1,319 271% -----------------------------------------------------



For the three months ended March 31, 2014, other income was $4.9 million (three months ended March 31, 2013 - $1.3 million), the majority of which relates to processing income. The increase in processing income is mainly due to fees charged to working interest partners on Tourmaline operated wells where gas is being processed through the Company-owned Banshee gas processing plant. Tourmaline has experienced a rapid growth in production volumes from wells in that area.

OPERATING EXPENSES

Three Months Ended March 31, ------------------------------- (000s) except per-unit amounts 2014 2013 Change --------------------------------------------------------------- Operating expenses $ 45,489$ 26,367 73% --------------------------------------------------------------- Per boe $ 4.93$ 4.27 15% ---------------------------------------------------------------



Operating expenses include all periodic lease and field-level expenses and exclude income recoveries from processing third-party volumes. For the first quarter of 2014, total operating expenses were $45.5 million compared to $26.4 million for the first quarter of 2013 reflecting increased costs relating to the growing production base. On a per-boe basis, the costs increased 15% from $4.27/boe for the first quarter of 2013 to $4.93/boe in the first quarter of 2014. The production of oil and NGLs incurs higher per-unit operating costs compared to natural gas, therefore, as the Company's production profile becomes more heavily weighted to oil and NGLs, we anticipate an increase in per-unit operating expenses. In addition, Tourmaline has been actively growing production in the Spirit River area of Alberta and has been securing processing contracts in preparation for that growth, the result of which has been that take-or-pay fees were incurred on temporarily unutilized capacity, which will be accessed as the production in the area continues to grow. There has also been an increase in water and emulsion trucking and additional treating costs resulting from establishing temporary facilities in the expanded areas in which Tourmaline is operating. Once permanent oil, natural gas and water handling facilities are constructed in late 2014 and 2015, these higher costs are expected to decrease. The per-unit operating costs in the Wild River area have also increased as approximately 70 mmcfpd of natural gas has been processed through third-party fractionation facilities in an effort to recover more valuable natural gas liquids. The Company's operating expenses in the first quarter of 2014 include third-party processing, gathering, and compression fees of approximately $12.3 million or 27% of total operating costs (March 31, 2013 - $8.3 million or 31% of total operating costs).

The Company expects its full year 2014 operating costs to average approximately $4.40/boe, which has increased from previous guidance of $4.15/boe (as disclosed in the Company's MD&A dated March 17, 2014). Forecast operating costs have been increased to reflect the growth in oil and NGL production as well as additional costs for processing and fractionation of liquids extracted through deep cut facilities. The Company continues to invest capital in Company owned-and-operated plants in an effort to increase processing capacity and maintain its low operating cost structure. Actual costs per boe can change, however, depending on a number of factors including the Company's actual production levels.

TRANSPORTATION

Three Months Ended March 31, ---------------------------------- (000s) except per-unit amounts 2014 2013 Change ------------------------------------------------------------------ Natural gas transportation $ 10,766$ 8,285 30% Oil and NGL transportation 4,563 4,185 9% ------------------------------------------------------------------ Total transportation $ 15,329$ 12,470 23% ------------------------------------------------------------------ Per boe $ 1.66$ 2.02 (18)% ------------------------------------------------------------------



Transportation costs for the three months ended March 31, 2014 were $15.3 million or $1.66/boe (three months ended March 31, 2013 - $12.5 million or $2.02/boe, respectively). The increase in total transportation costs for the three months ended March 31, 2014 is a result of higher production volumes. Transportation costs in the first quarter of 2013 included charges for unutilized transportation. This charge is lower in 2014 with the increased production and is also reflected in a lower per-unit cost.

GENERAL & ADMINISTRATIVE EXPENSES ("G&A")

Three Months Ended March 31, --------------------------------- (000s) except per-unit amounts 2014 2013 Change ----------------------------------------------------------------------- G&A expenses $ 10,493$ 8,607 22% Administrative and capital recovery (827) (414) 100% Capitalized G&A (4,356) (3,252) 34% ----------------------------------------------------------------------- Total G&A expenses $ 5,310$ 4,941 7% ----------------------------------------------------------------------- Per boe $ 0.58$ 0.80 (28)% -----------------------------------------------------------------------



G&A expenses for the first quarter of 2014 were $5.3 million ($0.58/boe) compared to $4.9 million ($0.80/boe) for the same quarter of the prior year. The increase in G&A expenses in 2014 compared to 2013 is primarily due to staff additions needed to manage the larger production, reserve and land base, as well as the higher active drilling rig count. The Company increased its staff count by approximately 30% from the first quarter of 2013 to the first quarter of 2014. The Company's G&A expenses per boe continue to trend downward as Tourmaline's production base continues to grow faster than its accompanying G&A costs.

G&A costs for 2014 are expected to be approximately $0.60/boe. Actual costs per boe can change, however, depending on a number of factors including the Company's actual production levels.

SHARE-BASED PAYMENTS

Three Months Ended March 31, ----------------------------- (000s) except per-unit amounts 2014 2013 ---------------------------------------------------------------- Share-based payments $ 13,402$ 7,180 Capitalized share-based payments (6,701) (3,590) ---------------------------------------------------------------- Total share-based payments $ 6,701$ 3,590 ---------------------------------------------------------------- Per boe $ 0.73$ 0.58 ----------------------------------------------------------------



The Company uses the fair value method for the determination of non-cash related share-based payments expense. During the first quarter of 2014, 375,000 stock options were granted to employees, officers, directors and key consultants at a weighted-average exercise price of $46.97 and 1,146,475 options were exercised, bringing $19.1 million of cash into treasury. The Company recognized $6.7 million of share-based payments expense in the first quarter of 2014 compared to $3.6 million in the first quarter of 2013. Share-based payments in the first quarter of 2014 are higher compared to the same period of 2013, which reflects the increased value attributed to the options and a higher number of options outstanding.

DEPLETION, DEPRECIATION AND AMORTIZATION ("DD&A")

Three Months Ended March 31, ----------------------------- (000s) except per-unit amounts 2014 2013 --------------------------------------------------------------------------- Total depletion, depreciation and amortization $ 115,535$ 81,423 Less mineral lease expiries (7,570) (7,582) --------------------------------------------------------------------------- Depletion, depreciation and amortization $ 107,965$ 73,841 --------------------------------------------------------------------------- Per boe $ 11.70$ 11.95 ---------------------------------------------------------------------------



DD&A expense, net of mineral lease expiries, was $108.0 million for the first quarter of 2014 compared to $73.8 million for the same period of 2013 due to higher production volumes, as well as a larger capital asset base being depleted. The per-unit DD&A rate (excluding the impact of mineral lease expiries) of $11.70/boe was slightly lower for the first quarter of 2014 versus the first quarter of 2013 ($11.95/boe), reflecting strong reserve additions derived from Tourmaline's exploration and production program.

Mineral lease expiries for the three months ended March 31, 2014 were $7.6 million, which is consistent with the expiries in the same quarter of the prior year of $7.6 million. Tourmaline expects to continue to see mineral lease expiries of a similar magnitude on a go-forward basis.

FINANCE EXPENSES

Three Months Ended March 31, ------------------------------------- (000s) 2014 2013 Change --------------------------------------------------------------------------- Interest expense $ 4,940$ 3,437 44% Accretion expense 538 391 38% Transaction costs on corporate and property acquisitions - 670 -% --------------------------------------------------------------------------- Total finance expenses $ 5,478$ 4,498 22% ---------------------------------------------------------------------------



Finance expenses are comprised of interest expense, accretion of provisions and transaction costs associated with corporate and property acquisitions. Finance expenses for the three months ended March 31, 2014 totalled $5.5 million, which increased over 2013 first quarter finance expenses of $4.5 million due to a higher average bank debt outstanding partially offset by a lower average effective interest rate. The average bank debt outstanding in the first quarter of 2014 was $571.1 million (2013 - $381.2 million), with an average effective interest rate of 3.06% (2013 - 3.29%).

DEFERRED INCOME TAXES

For the three months ended March 31, 2014, the provision for deferred income tax expense was $33.0 million compared to an expense of $19.6 million for the same period in 2013. The increase is consistent with the higher pre-tax earnings recorded in the first quarter of 2014 compared to the first quarter of 2013.

CASH FLOW FROM OPERATING ACTIVITIES, CASH FLOW AND NET EARNINGS

Three Months Ended March 31, ---------------------------------- (000s) except per-unit amounts 2014 2013 Change --------------------------------------------------------------------------- Cash flow from operating activities $ 249,390$ 93,763 166% Per share (1) $ 1.26$ 0.52 142% Cash flow (2) $ 252,587$ 116,599 117% Per share (1) (2) $ 1.28$ 0.64 100% Net earnings $ 89,868$ 52,184 72% Per share (1) $ 0.45$ 0.29 55% Operating netback per boe (2) $ 27.94$ 20.20 38% --------------------------------------------------------------------------- (1) Fully diluted (2) See "Non-GAAP Financial Measures"



Cash flow for the three months ended March 31, 2014 was $252.6 million or $1.28 per diluted share compared to $116.6 million or $0.64 per diluted share for the same period of 2013. The increase in cash flow in 2014 reflects higher natural gas prices over 2013, as well as increased production. After-tax earnings for the three months ended March 31, 2014 are higher at $89.9 million ($0.45 per diluted share) compared to $52.2 million ($0.29 per diluted share) for the same period of 2013, due mainly to higher natural gas prices and increased production.

CAPITAL EXPENDITURES

Three Months Ended March 31, ---------------------------- (000s) 2014 2013 --------------------------------------------------------------- Land and seismic $ 29,754$ 8,505 Drilling and completions 281,149 181,028 Facilities 150,433 73,135 Property acquisitions 585 2,450 Property dispositions - (77,945) Other 4,475 3,290 --------------------------------------------------------------- Total cash capital expenditures $ 466,396$ 190,463 ---------------------------------------------------------------



During the first quarter of 2014, the Company invested $466.4 million of cash consideration compared to $190.5 million, net of dispositions, for the same period of 2013. Expenditures on exploration and production were $461.3 million compared to $262.7 million for the same quarter of 2013, which is consistent with the Company's aggressive growth strategy. The increase in drilling and completion costs reflects the higher rig count from 10 drilling rigs in the first quarter of 2013 to 17 drilling rigs in the first quarter of 2014. The growth in facilities expenditures includes work on the expansion of the facility at West Doe and a new sour gas processing facility in Spirit River (both planned for Q3 2014 start-up), an oil battery at Mulligan in the Spirit River area, as well as several large pipeline lateral projects intended to optimize transportation of, and related logistics for getting, natural gas to Tourmaline operated processing facilities.

The following table summarizes the drill, complete and tie-in activities for the period:

Three Months Ended Three Months Ended March 31, 2014 March 31, 2013 Gross Net Gross Net -------------------------------------------------------------------- Drilled 40 36.15 27 25.21 Completed 45 40.45 32 29.49 Tied-in 27 21.62 14 13.52 --------------------------------------------------------------------



LIQUIDITY AND CAPITAL RESOURCES

On February 12, 2014, the Company issued 4.615 million common shares at a price of $47.50 per share for total gross proceeds of $219.2 million. The proceeds were used to temporarily reduce bank debt and will be used to fund the Company's remaining 2014 exploration and development program.

On April 24, 2014, the Company closed the acquisition of Santonia Energy Inc. ("Santonia") with the issuance of 3.228 million Tourmaline shares with a closing price on that date of $54.94 per Tourmaline share, for consideration of $177.4 million.

The Company has a covenant-based bank credit facility in place with a syndicate of bankers, the details of which are described in note 9 of the Company's consolidated financial statements for the year ended December 31, 2013. The facility has a limit of $900 million with an initial maturity of June 2016. The Company is currently in discussions with the syndicate of lenders as part of its annual lending review with the aim of significantly increasing the size of the bank credit facility.

As at March 31, 2014, the Company had negative working capital of $248.1 million, after adjusting for the fair value of financial instruments (the unadjusted working capital deficiency was $255.2 million) (December 31, 2013 - $242.6 million and $245.3 million, respectively). As at March 31, 2014, the Company had $570.5 million drawn on its credit facility (December 31, 2013 - $590.3 million), and net debt was $818.6 million (December 31, 2013 - $832.9 million). Management believes the Company has sufficient liquidity and capital resources to fund the remainder of its 2014 exploration and development programs through expected cash flow from operations and its unutilized bank credit facility.

SHARES AND STOCK OPTIONS OUTSTANDING

As at May 7, 2014, the Company has 199,929,029 common shares outstanding and 14,104,029 stock options granted and outstanding.

COMMITMENTS AND CONTRACTUAL OBLIGATIONS

In the normal course of business, the Company is obligated to make future payments. These obligations represent contracts and other commitments that are known and non-cancellable.

greater Payments Due by 1 2-3 4-5 than 5 Year (000s) Year Years Years Years Total ---------------------------------------------------------------------------- Operating leases $ 3,698$ 9,865$ 10,162$ 4,934$ 28,659 Firm transportation and processing agreements 69,884 312,506 178,758 394,998 956,146 Bank debt(1) - 612,866 - - 612,866 ---------------------------------------------------------------------------- $ 73,582$ 935,237$ 188,920$ 399,932$ 1,597,671 ---------------------------------------------------------------------------- (1) Includes interest expense at an annual rate of 3.06% being the rate applicable to outstanding bank debt at March 31, 2014.



OFF BALANCE SHEET ARRANGEMENTS

The Company has certain lease arrangements, all of which are reflected in the commitments and contractual obligations table, which were entered into in the normal course of operations. All leases have been treated as operating leases whereby the lease payments are included in operating expenses or general and administrative expenses depending on the nature of the lease.

FINANCIAL RISK MANAGEMENT

The Board of Directors has overall responsibility for the establishment and oversight of the Company's risk management framework. The Board has implemented and monitors compliance with risk management policies.

The Company's risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to market conditions and the Company's activities. The Company's financial risks are discussed in note 5 of the Company's audited consolidated financial statements for the year ended December 31, 2013.

As at March 31, 2014, the Company has entered into certain financial derivative and physical delivery sales contracts in order to manage commodity risk. These instruments are not used for trading or speculative purposes. The Company has not designated its financial derivative contracts as effective accounting hedges, even though the Company considers all commodity contracts to be effective economic hedges. Such financial derivative commodity contracts are recorded on the consolidated statement of financial position at fair value, with changes in the fair value being recognized as an unrealized gain or loss on the consolidated statement of income and comprehensive income. The contracts that the Company has in place at March 31, 2014 are summarized and disclosed in note 5 of the Company's interim condensed consolidated financial statements for the three months ended March 31, 2014 and 2013.

The following table provides a summary of the unrealized losses on financial instruments for the three months ended March 31, 2014 and 2013:

Three Months Ended March 31, ----------------------------- (000s) 2014 2013 ----------------------------------------------------------------------- Unrealized loss on financial instruments $ (6,266)$ (3,819) -----------------------------------------------------------------------



The Company has entered into physical contracts to manage commodity risk. These contracts are considered normal sales contracts and are not recorded at fair value in the consolidated financial statements. Physical contracts in place at March 31, 2014 have been summarized and disclosed in note 3 of the Company's interim condensed consolidated financial statements for the three months ended March 31, 2014 and 2013.

Financial derivative and physical delivery contracts entered into subsequent to March 31, 2014 are detailed in note 3 of the Company's interim condensed consolidated financial statements for the three months ended March 31, 2014 and 2013.

APPLICATION OF CRITICAL ACCOUNTING ESTIMATES

Certain accounting policies require that management make appropriate decisions with respect to the formulation of estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Management reviews its estimates on a regular basis. The emergence of new information and changed circumstances may result in actual results or changes to estimates that differ materially from current estimates. The Company's use of estimates and judgments in preparing the interim condensed consolidated financial statements is discussed in note 1 of the consolidated financial statements for the year ended December 31, 2013.

DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROLS OVER FINANCIAL REPORTING

The Company's Chief Executive Officer and Chief Financial Officer have designed, or caused to be designed under their supervision, disclosure controls and procedures ("DC&P"), as defined by National Instrument 52-109 Certification, to provide reasonable assurance that: (i) material information relating to the Company is made known to the Company's Chief Executive Officer and Chief Financial Officer by others, particularly during the periods in which the annual and interim filings are being prepared; and (ii) information required to be disclosed by the Company in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time period specified in securities legislation.

The Company's Chief Executive Officer and Chief Financial Officer have designed, or caused to be designed under their supervision, internal controls over financial reporting ("ICFR"), as defined by National Instrument 52-109, to provide reasonable assurance regarding the reliability of the Company's financial reporting and the preparation of financial statements for external purposes in accordance with IFRS.

There were no changes in the Company's DC&P or ICFR during the period beginning on January 1, 2014 and ending on March 31, 2014 that have materially affected, or are reasonably likely to materially affect, the Company's ICFR. It should be noted that a control system, including the Company's disclosure and internal controls and procedures, no matter how well conceived can provide only reasonable, but not absolute assurance that the objectives of the control system will be met and it should not be expected that the disclosure and internal controls and procedures will prevent all errors or fraud.

BUSINESS RISKS AND UNCERTAINTIES

Tourmaline monitors and complies with current government regulations that affect its activities, although operations may be adversely affected by changes in government policy, regulations or taxation. In addition, Tourmaline maintains a level of liability, property and business interruption insurance which is believed to be adequate for Tourmaline's size and activities, but is unable to obtain insurance to cover all risks within the business or in amounts to cover all possible claims.

See "Forward-Looking Statements" in this MD&A and "Risk Factors" in Tourmaline's most recent annual information form for additional information regarding the risks to which Tourmaline and its business and operations are subject.

IMPACT OF NEW ENVIRONMENTAL REGULATIONS

The oil and gas industry is currently subject to regulation pursuant to a variety of provincial and federal environmental legislation, all of which is subject to governmental review and revision from time to time. Such legislation provides for, among other things, restrictions and prohibitions on the spill, release or emission of various substances produced in association with certain oil and gas industry operations, such as sulphur dioxide and nitrous oxide. In addition, such legislation sets out the requirements with respect to oilfield waste handling and storage, habitat protection and the satisfactory operation, maintenance, abandonment and reclamation of well and facility sites. Compliance with such legislation can require significant expenditures and a breach of such requirements may result in suspension or revocation of necessary licenses and authorizations, civil liability and the imposition of material fines and penalties. The use of fracture stimulations has been ongoing safely in an environmentally responsible manner in western Canada for decades. With the increase in the use of fracture stimulations in horizontal wells there is increased communication between the oil and natural gas industry and a wider variety of stakeholders regarding the responsible use of this technology. This increased attention to fracture stimulations may result in increased regulation or changes of law which may make the conduct of the Company's business more expensive or prevent the Company from conducting its business as currently conducted. Tourmaline focuses on conducting transparent, safe and responsible operations in the communities in which its people live and work.

NON-GAAP FINANCIAL MEASURES

This MD&A or documents referred to in this MD&A make reference to the terms "cash flow", "operating netback", "working capital (adjusted for the fair value of financial instruments)", "net debt", "adjusted EBITDA", "senior debt", "total debt", and "total capitalization" which are not recognized measures under GAAP, and do not have a standardized meaning prescribed by GAAP. Accordingly, the Company's use of these terms may not be comparable to similarly defined measures presented by other companies. Management uses the terms "cash flow", "operating netback", "working capital (adjusted for the fair value of financial instruments)" and "net debt", for its own performance measures and to provide shareholders and potential investors with a measurement of the Company's efficiency and its ability to generate the cash necessary to fund a portion of its future growth expenditures or to repay debt. Investors are cautioned that the non-GAAP measures should not be construed as an alternative to net income determined in accordance with GAAP as an indication of the Company's performance. The terms "adjusted EBITDA", "senior debt", "total debt", and "total capitalization" are not used by management in measuring performance but are used in the financial covenants under the Company's credit facility. Under the Company's credit facility "adjusted EBITDA" means generally net income or loss, excluding extraordinary items, plus interest expense and income taxes and adjusted for non-cash items and gains or losses on dispositions, "senior debt" means generally the indebtedness, liabilities and obligations of the Company to the lenders under the credit facility and certain other secured indebtedness, liabilities and obligations of the Company ("bank debt"), "total debt" means generally bank debt plus any other indebtedness of the Company, and "total capitalization" means generally the sum of the Company's shareholders' equity and all other indebtedness of the Company including bank debt, all determined on a consolidated basis in accordance with GAAP.

Cash Flow

A summary of the reconciliation of cash flow from operating activities (per the statements of cash flow), to cash flow, is set forth below:

Three Months Ended March 31, ---------------------------- (000s) 2014 2013 ---------------------------------------------------------------------------- Cash flow from operating activities (per GAAP) $ 249,390$ 93,763 Change in non-cash operating working capital 3,197 22,836 ---------------------------------------------------------------------------- Cash flow $ 252,587$ 116,599 ----------------------------------------------------------------------------



Operating Netback

Operating netback is calculated on a per-boe basis and is defined as revenue (excluding processing income) less royalties, transportation costs and operating expenses, as shown below:

Three Months Ended March 31, ----------------------------- ($/boe) 2014 2013 -------------------------------------------------------------------- Revenue, excluding processing income $ 37.84$ 28.33 Royalties (3.31) (1.84) Transportation costs (1.66) (2.02) Operating expenses (4.93) (4.27) -------------------------------------------------------------------- Operating netback $ 27.94$ 20.20 ---------------------------------------------------------------------



Working Capital (Adjusted for the Fair Value of Financial Instruments)

A summary of the reconciliation of working capital to working capital (adjusted for the fair value of financial instruments) is set forth below:

As at As at March 31, December 31, (000s) 2014 2013 --------------------------------------------------------------------------- Working capital (deficit) $ (255,240)$ (245,314) Fair value of financial instruments - short-term liability 7,146 2,691 --------------------------------------------------------------------------- Working capital (deficit) (adjusted for the fair value of financial instruments) $ (248,094)$ (242,623) ---------------------------------------------------------------------------



Net Debt

A summary of the reconciliation of net debt is set forth below:

As at As at March 31, December 31, (000s) 2014 2013 --------------------------------------------------------------------------- Bank debt $ (570,500)$ (590,319) Working capital (deficit) (255,240) (245,314) Fair value of financial instruments - short-term liability 7,146 2,691 --------------------------------------------------------------------------- Net debt $ (818,594)$ (832,942) --------------------------------------------------------------------------- SELECTED QUARTERLY INFORMATION 2014 2013 ------------------------------------------------------------ ($000s, unless otherwise noted) Q1 Q4 Q3 Q2 Q1 ---------------------------------------------------------------------------- PRODUCTION Natural gas (mcf) 47,339,926 41,062,993 36,486,443 34,477,391 33,055,857 Oil and NGL(bbls) 1,340,699 1,076,395 735,727 640,001 667,907 Oil equivalent (boe) 9,230,686 7,920,228 6,816,800 6,386,233 6,177,216 Natural gas (mcf/d) 525,999 446,337 396,592 378,872 367,287 Oil and NGL (bbls/d) 14,897 11,700 7,997 7,033 7,421 Oil equivalent (boe/d) 102,563 86,089 74,096 70,178 68,636 ---------------------------------------------------------------------------- FINANCIAL Revenue, net of royalties 317,336 219,069 167,138 180,505 161,124 Cash flow from operating activities 249,390 128,852 128,192 128,432 93,763 Cash flow (1) 252,587 160,732 120,560 128,870 116,599 Per diluted share 1.28 0.83 0.64 0.68 0.64 Net earnings (loss) 89,868 56,763 9,163 30,004 52,184 Per basic share 0.47 0.30 0.05 0.16 0.29 Per diluted share 0.45 0.29 0.05 0.16 0.29 Total assets 5,082,535 4,696,471 4,210,171 3,811,192 3,735,641 Working capital (deficit) (255,240) (245,314) (206,250) (50,851) (165,385) Working capital (deficit)(adjus ted for the fair value of financial instruments) (1) (248,094) (242,623) (204,507) (53,676) (166,049) Cash capital expenditures 466,396 497,941 468,261 158,751 190,463 Total outstanding shares (000s) 195,567 189,805 184,621 184,175 183,408 ---------------------------------------------------------------------------- PER UNIT Natural gas ($/mcf) 5.38 3.84 3.30 3.92 3.50 Oil and NGL ($/bbl) 70.49 71.83 91.65 87.06 88.75 Revenue ($/boe) 37.84 29.69 27.58 29.88 28.33 Operating netback ($/boe) (1) 27.94 21.29 18.59 21.28 20.20 ---------------------------------------------------------------------------- SELECTED QUARTERLY INFORMATION 2012 ----------------------------------- ($000s, unless otherwise noted) Q4 Q3 Q2 --------------------------------------------------- PRODUCTION Natural gas (mcf) 27,879,639 23,501,484 24,276,149 Oil and NGL(bbls) 618,483 515,157 596,992 Oil equivalent (boe) 5,265,090 4,432,071 4,643,016 Natural gas (mcf/d) 303,040 255,451 266,771 Oil and NGL (bbls/d) 6,723 5,600 6,560 Oil equivalent (boe/d) 57,230 48,175 51,022 --------------------------------------------------- FINANCIAL Revenue, net of royalties 134,864 91,863 105,567 Cash flow from operating activities 104,671 66,713 42,566 Cash flow (1) 93,807 63,515 61,121 Per diluted share 0.54 0.38 0.37 Net earnings (loss) 16,301 (4,770) 1,012 Per basic share 0.10 (0.03) 0.01 Per diluted share 0.09 (0.03) 0.01 Total assets 3,580,253 2,992,552 2,862,502 Working capital (deficit) (98,913) (98,184) (15,311) Working capital (deficit)(adjus ted for the fair value of financial instruments) (1) (103,727) (101,577) (19,809) Cash capital expenditures 296,108 175,277 53,831 Total outstanding shares (000s) 174,813 165,678 160,459 --------------------------------------------------- PER UNIT Natural gas ($/mcf) 3.29 2.52 2.23 Oil and NGL ($/bbl) 83.28 83.34 77.75 Revenue ($/boe) 27.18 23.04 21.64 Operating netback ($/boe) (1) 19.17 15.68 14.22 --------------------------------------------------- (1) See Non-GAAP Financial Measures.



The oil and gas exploration and production industry is cyclical in nature. The Company's financial position, results of operations and cash flows are principally impacted by production levels and commodity prices, particularly natural gas prices.

Overall, the Company has had continued annual growth over the last two years summarized in the table above. The Company's average annual production has increased from 50,804 boe per day in 2012 to 74,796 boe per day in 2013 and 102,563 boe per day in the first three months of 2014. The production growth can be attributed primarily to the Company's exploration and development activities, and from acquisitions of producing properties.

The Company's cash flows from operating activities were $273.5 million in 2012 and $479.2 million in 2013. Estimated 2014 cash flows from operating activities (based on the first three months annualized) are $997.6 million, due mainly to strong growth in production levels and strengthening commodity prices. Commodity price changes can indirectly impact expected production by changing the amount of funds available to reinvest in exploration, development and acquisition activities in the future. Changes in commodity prices impact revenues and cash flows available for exploration, and also the economics of potential capital projects as low commodity prices can potentially reduce the quantities of reserves that are commercially recoverable. The Company's capital program is dependent on cash flows generated from operations and access to capital markets.

CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF FINANCIAL POSITION March 31, December 31, (000s) (unaudited) 2014 2013 ---------------------------------------------------------------------------- Assets Current assets: Accounts receivable $ 160,636$ 136,041 Prepaid expenses and deposits 5,482 6,918 Fair value of financial instruments (note 3) 5 166 ---------------------------------------------------------------------------- Total current assets 166,123 143,125 Fair value of financial instruments (note 3) 16 663 Long-term asset 2,307 2,373 Exploration and evaluation assets (notes 4 and 5) 740,683 700,525 Property, plant and equipment (note 5) 4,173,406 3,849,785 ---------------------------------------------------------------------------- Total Assets $ 5,082,535$ 4,696,471 ---------------------------------------------------------------------------- Liabilities and Shareholders' Equity Current liabilities: Accounts payable and accrued liabilities $ 414,212$ 385,582 Fair value of financial instruments (note 3) 7,151 2,857 ---------------------------------------------------------------------------- Total current liabilities 421,363 388,439 Bank debt (note 7) 570,500 590,319 Long-term obligation 2,483 3,414 Fair value of financial instruments (note 3) 6,380 5,216 Decommissioning obligations (note 6) 82,845 76,037 Deferred taxes 295,652 265,025 Shareholders' equity: Share capital (note 9) 3,300,866 3,062,432 Non-controlling interest (note 8) 18,545 17,877 Contributed surplus 98,039 91,718 Retained earnings 285,862 195,994 ---------------------------------------------------------------------------- Total shareholders' equity 3,703,312 3,368,021 ---------------------------------------------------------------------------- Total Liabilities and Shareholders' Equity $ 5,082,535$ 4,696,471 ---------------------------------------------------------------------------- Commitments (note 12) Subsequent events (notes 3 and 13) See accompanying notes to the interim condensed consolidated financial statements. CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME Three Months Ended March 31, (000s) except per-share amounts (unaudited) 2014 2013 --------------------------------------------------------------------------- Revenue: Oil and natural gas sales $ 377,768$ 172,491 Royalties (30,564) (11,363) --------------------------------------------------------------------------- Net revenue from oil and natural gas sales 347,204 161,128 Realized gain (loss) on financial instruments (28,501) 2,496 Unrealized loss on financial instruments (note 3) (6,266) (3,819) Other income 4,899 1,319 --------------------------------------------------------------------------- Total net revenue 317,336 161,124 Expenses: Operating 45,489 26,367 Transportation 15,329 12,470 General and administration 5,310 4,941 Share-based payments 6,701 3,590 (Gain) on divestitures - (44,187) Depletion, depreciation and amortization 115,535 81,423 --------------------------------------------------------------------------- Total expenses 188,364 84,604 --------------------------------------------------------------------------- Income from operations 128,972 76,520 Finance expenses 5,478 4,498 --------------------------------------------------------------------------- Income before taxes 123,494 72,022 Deferred taxes 32,958 19,593 --------------------------------------------------------------------------- Net income and comprehensive income before non-controlling interest 90,536 52,429 --------------------------------------------------------------------------- Net income and comprehensive income attributable to: Shareholders of the Company 89,868 52,184 Non-controlling interest (note 8) 668 245 --------------------------------------------------------------------------- $ 90,536$ 52,429 --------------------------------------------------------------------------- Net income per share attributable to common shareholders (note 10) --------------------------------------------------------------------------- Basic $ 0.47$ 0.29 --------------------------------------------------------------------------- Diluted $ 0.45$ 0.29 --------------------------------------------------------------------------- See accompanying notes to the interim condensed consolidated financial statements. CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (000s) (unaudited) ---------------------------------------------------------------- Share Contributed Retained Capital Surplus Earnings ---------------------------------------------------------------- Balance at December 31, 2013 $ 3,062,432$ 91,718$ 195,994 Issue of common shares (note 9) 219,222 - - Share issue costs, net of tax (6,923) - - Share-based payments - 6,701 - Capitalized share-based payments - 6,701 - Options exercised (note 9) 26,135 (7,081) - Income attributable to common shareholders - - 89,868 Income attributable to non-controlling interest - - - ---------------------------------------------------------------- Balance at March 31, 2014 $ 3,300,866$ 98,039$ 285,862 ---------------------------------------------------------------- CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (000s) (unaudited) --------------------------------------------------- Non- Controlling Total Interest Equity --------------------------------------------------- Balance at December 31, 2013 $ 17,877$ 3,368,021 Issue of common shares (note 9) - 219,222 Share issue costs, net of tax - (6,923) Share-based payments - 6,701 Capitalized share-based payments - 6,701 Options exercised (note 9) - 19,054 Income attributable to common shareholders - 89,868 Income attributable to non-controlling interest 668 668 --------------------------------------------------- Balance at March 31, 2014 $ 18,545$ 3,703,312 --------------------------------------------------- (000s) (unaudited) ---------------------------------------------------------------- Share Contributed Retained Capital Surplus Earnings ---------------------------------------------------------------- Balance at December 31, 2012 $ 2,599,614$ 70,923$ 47,880 Issue of common shares 226,564 - - Share issue costs, net of tax (7,175) - - Share-based payments - 3,590 - Capitalized share-based payments - 3,590 - Options exercised 33,053 (9,089) - Income attributable to common shareholders - - 52,184 Income attributable to non-controlling interest - - - ---------------------------------------------------------------- Balance at March 31, 2013 $ 2,852,056$ 69,014$ 100,064 ---------------------------------------------------------------- (000s) (unaudited) --------------------------------------------------- Non- Controlling Total Interest Equity --------------------------------------------------- Balance at December 31, 2012 $ 16,298$ 2,734,715 Issue of common shares - 226,564 Share issue costs, net of tax - (7,175) Share-based payments - 3,590 Capitalized share-based payments - 3,590 Options exercised - 23,964 Income attributable to common shareholders - 52,184 Income attributable to non-controlling interest 245 245 --------------------------------------------------- Balance at March 31, 2013 $ 16,543$ 3,037,677 --------------------------------------------------- See accompanying notes to the interim condensed consolidated financial statements. CONSOLIDATED STATEMENTS OF CASH FLOW Three Months Ended March 31, ----------------------------- (000s) (unaudited) 2014 2013 --------------------------------------------------------------------------- Cash provided by (used in): Operations: Net income $ 89,868$ 52,184 Items not involving cash: Depletion, depreciation and amortization 115,535 81,423 Accretion 538 391 Share-based payments 6,701 3,590 Deferred taxes 32,958 19,593 Unrealized loss on financial instruments 6,266 3,819 (Gain) on divestitures - (44,187) Non-controlling interest 668 245 Decommissioning expenditures 53 (459) Changes in non-cash operating working capital (3,197) (22,836) --------------------------------------------------------------------------- Total cash flow from operating activities 249,390 93,763 Financing: Issue of common shares 238,276 257,124 Share issue costs (9,254) (9,566) Decrease in bank debt (19,819) (202,362) --------------------------------------------------------------------------- Total cash flow from financing activities 209,203 45,196 Investing: Exploration and evaluation (63,492) (26,861) Property, plant and equipment (402,319) (239,097) Property acquisitions (585) (2,450) Proceeds from divestitures - 77,945 Net repayment of long-term obligation (865) (932) Changes in non-cash investing working capital 8,668 52,436 --------------------------------------------------------------------------- Total cash flow from investing activities (458,593) (138,959) Changes in cash - - Cash, beginning of period - - --------------------------------------------------------------------------- Cash, end of period $ - $ - --------------------------------------------------------------------------- Cash is defined as cash and cash equivalents. See accompanying notes to the interim condensed consolidated financial statements.



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As at March 31, 2014 and for the three months ended March 31, 2014 and 2013

(tabular amounts in thousands of dollars, unless otherwise noted) (unaudited)

Corporate Information:

Tourmaline Oil Corp. (the "Company") was incorporated under the laws of the Province of Alberta on July 21, 2008. The Company is engaged in the acquisition, exploration, development and production of petroleum and natural gas properties. These interim condensed consolidated financial statements reflect only the Company's proportionate interest in such activities.

The Company's registered office is located at Suite 2400, 525 - 8th Avenue S.W., Calgary, Alberta, Canada T2P 1G1.

1. BASIS OF PREPARATION

These unaudited interim condensed consolidated financial statements have been prepared in accordance with International Accounting Standard ("IAS") 34, "Interim Financial Reporting". These unaudited interim condensed consolidated financial statements do not include all of the information and disclosure required in the annual financial statements and should be read in conjunction with the Company's consolidated financial statements for the year ended December 31, 2013.

The accounting policies and significant accounting judgments, estimates, and assumptions used in these unaudited interim condensed consolidated financial statements are consistent with those described in Notes 1 and 2 of the Company's consolidated financial statements for the year ended December 31, 2013, except as detailed below.

On January 1, 2014, the Company adopted IFRIC 21, which addresses payments to government bodies. There was no impact on the Company as a result of adopting the new standard.

The unaudited interim condensed consolidated financial statements were authorized for issue by the Board of Directors on May 7, 2014.

2. DETERMINATION OF FAIR VALUE

A number of the Company's accounting policies and disclosures require the determination of fair value for both financial and non-financial assets and liabilities. Fair values have been determined for measurement purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.

Measurement:

Tourmaline classifies the fair value of transactions according to the following hierarchy based on the amount of observable inputs used to value the instrument.

-- Level 1 - Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions occur in sufficient frequency and volume to provide pricing information on an ongoing basis. -- Level 2 - Pricing inputs are other than quoted prices in active markets included in Level 1. Prices are either directly or indirectly observable as of the reporting date. Level 2 valuations are based on inputs, including quoted forward prices for commodities, time value and volatility factors, which can be substantially observed or corroborated in the marketplace. -- Level 3 - Valuations in this level are those with inputs for the asset or liability that are not based on observable market data.



3. FINANCIAL RISK MANAGEMENT

The Board of Directors has overall responsibility for the establishment and oversight of the Company's risk management framework. The Board has implemented and monitors compliance with risk management policies.

The Company's risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to market conditions and the Company's activities. The Company's financial risks are consistent with those discussed in note 5 of the Company's audited consolidated financial statements for the year ended December 31, 2013.

As at March 31, 2014, the Company has entered into certain financial derivative and physical delivery sales contracts in order to manage commodity risk. These instruments are not used for trading or speculative purposes. The Company has not designated its financial derivative contracts as effective accounting hedges, even though the Company considers all commodity contracts to be effective economic hedges. As a result, all such commodity contracts are recorded on the interim consolidated statement of financial position at fair value, with changes in the fair value being recognized as an unrealized gain or loss on the interim consolidated statement of income and comprehensive income.

The Company has the following financial derivative contracts in place as at March 31, 2014(1):

---------------------------------------------------------------------------- 2014 2015 2016 ---------------------------------------------------------------------------- Gas Fixed price mmbtu/d 47,236 5,000 - USD$/mmbtu $4.14$4.21 Nymex call options mmbtu/d - - - (writer) USD$/mmbtu ---------------------------------------------------------------------------- Oil Financial swaps bbls/d 1,098 474 - USD$/bbl $95.95$91.77 Costless collars bbls/d 1,100 1,000 - USD$/bbl $80.91 - $97.57$80.00-$95.18 Financial call bbls/d - 600 400 swaptions(2) USD$/bbl $104.98$91.10 ---------------------------------------------------------------------------- Total fair value ---------------------------------------------------------------------------- -------------------------------------------------------------- Fair Value 2017 2018 (000s) -------------------------------------------------------------- Gas Fixed price mmbtu/d - - $ (4,316) USD$/mmbtu Nymex call options mmbtu/d 20,000 20,000 (5,135) (writer) USD$/mmbtu $5.00$5.00 -------------------------------------------------------------- Oil Financial swaps bbls/d - - (614) USD$/bbl Costless collars bbls/d - - (1,548) USD$/bbl Financial call bbls/d - - (665) swaptions(2) USD$/bbl -------------------------------------------------------------- Total fair value $ (12,278) -------------------------------------------------------------- (1)The volumes and prices reported are the weighted average volumes and prices for the period. (2)This is a European swaption whereby the Company provides the option to extend an oil swap into the period subsequent to the call date.



The Company has entered in to the following financial derivative contracts subsequent to March 31, 2014:

---------------------------------------------------------------------------- Type of Contract Quantity Time Period Contract Price ---------------------------------------------------------------------------- Costless collar - 300 bbls/d January - December USD$85.00/bbl floor Oil 2015 USD$91.35/bbl ceiling ----------------------------------------------------------------------------



The Company has the following interest rate swap arrangements:

---------------------------------------------------------------------------- Company Counter Type Fixed Party Fair (Floating Amount Interest Floating Value Term to Fixed) (000s) Rate (%) Rate Index (000s) ---------------------------------------------------------------------------- May 29, 2012 - Swap $ 150,000 1.35% Floating Rate $ (33) May 29, 2014 May 29, 2014 - Swap $ 150,000 1.72% Floating Rate (756) May 29, 2015 May 29, 2014 - Swap $ 100,000 1.27% Floating Rate (58) May 29, 2015 May 29, 2015 - Swap $ 250,000 1.645% Floating Rate (385) May 29, 2016 ---------------------------------------------------------------------------- Total fair value $ (1,232) ----------------------------------------------------------------------------



The following table provides a summary of the unrealized losses on financial instruments for the three months ended March 31, 2014 and 2013:

Three Months Ended March 31, ----------------------------- (000s) 2014 2013 ----------------------------------------------------------------------- Unrealized loss on financial instruments $ (6,266)$ (3,819) -----------------------------------------------------------------------



As at March 31, 2014, if the future strip prices for oil were $1.00/bbl higher and prices for natural gas were $0.10/mcf higher, with all other variables held constant, after-tax earnings would have been $3.6 million (March 31, 2013 - $1.7 million) lower. An equal and opposite impact would have occurred to unrealized gain (loss) and the fair value of the derivative contracts liability if oil prices were $1.00/bbl lower and gas prices were $0.10/mcf lower. In addition to the financial commodity contracts discussed above, the Company has entered into physical contracts to manage commodity risk. These contracts are considered normal sales contracts and are not recorded at fair value in the consolidated financial statements.

The Company has the following physical contracts in place at March 31, 2014(1):

2014 2015 2016 2017 2018 ---------------------------------------------------------------------------- Gas Fixed price - AECO mcf/d 168,281 42,474 1,166 - - CAD$/mcf $4.11$4.25$4.06 Basis mmbtu/d 81,109 51,233 48,333 20,000 20,000 differentials(2) USD$/mmbtu $(0.49)$(0.48)$(0.48)$(0.49)$(0.49) AECO call options mcf/d 22,861 41,552 34,136 37,928 14,223 (writers/call swaptions)(3) CAD$/mcf $4.28$4.55$4.85$4.67$4.64 ---------------------------------------------------------------------------- (1)Transactions with common terms have been aggregated and presented at the weighted average price. (2)Tourmaline also has 20 mmcf/d of Nymex-AECO basis differentials at $0.49 from 2019-2022. (3)A financial call swaption is a European swaption whereby the Company provided the option to extend a gas swap into the period subsequent to the call date.



The Company has entered into the following physical contracts subsequent to March 31, 2014(1):

---------------------------------------------------------------------------- Type of Contract Quantity Time Period Contract Price ---------------------------------------------------------------------------- Fixed price - AECO 25,000 GJs/d November 2014 - March CAD$4.730/gj average 2015 Fixed price - AECO 25,000 GJs/d January - December CAD$4.156/gj average 2015 ---------------------------------------------------------------------------- (1)Transactions with common terms have been aggregated and presented as the weighted average price.



4. EXPLORATION AND EVALUATION ASSETS

(000s) -------------------------------------------------------------------------- As at December 31, 2013 $ 700,525 Capital expenditures 63,492 Transfers to property, plant and equipment (note 5) (16,100) Acquisitions 336 Expired mineral leases (7,570) -------------------------------------------------------------------------- As at March 31, 2014 $ 740,683 --------------------------------------------------------------------------



Exploration and evaluation ("E&E") assets consist of the Company's exploration projects which are pending the determination of proven and probable reserves, as well as undeveloped land. Additions represent the Company's share of costs on E&E assets during the year.

5. PROPERTY, PLANT AND EQUIPMENT ("PP&E")

Cost (000s) --------------------------------------------------------------------------- As at December 31, 2013 $ 4,664,800 Capital expenditures 409,020 Transfers from exploration and evaluation (note 4) 16,100 Change in decommissioning liabilities (note 6) 6,164 Acquisitions 302 --------------------------------------------------------------------------- As at March 31, 2014 $ 5,096,386 --------------------------------------------------------------------------- Accumulated Depletion, Depreciation and Amortization (000s) --------------------------------------------------------------------------- As at December 31, 2013 $ 815,015 Depletion, depreciation and amortization expense 107,965 --------------------------------------------------------------------------- As at March 31, 2014 $ 922,980 --------------------------------------------------------------------------- Net Book Value (000s) -------------------------------------------- As at December 31, 2013 $ 3,849,785 As at March 31, 2014 $ 4,173,406 --------------------------------------------



Future development costs for the three months ended March 31, 2014 of $3,501 million were included in the depletion calculation million (December 31, 2013 - $3,197 million).

Capitalization of G&A and Share-Based Payments

A total of $4.4 million in G&A expenditures have been capitalized and included in E&E and PP&E assets for the three months ended March 31, 2014 (December 31, 2013 - $15.0 million). Also included in E&E and PP&E are non-cash share-based payments of $6.7 million (December 31, 2013 - $19.3 million).

Impairment Assessment

The Company has performed an impairment assessment of its property, plant, and equipment on a CGU basis and has determined that there are no indicators of impairment at March 31, 2014; therefore an impairment test was not performed. Similarly, for the year ended December 31, 2013, the Company did not identify any impairment indicators and as a result did not conduct an impairment test.

6. DECOMMISSIONING OBLIGATIONS

The Company's decommissioning obligations result from net ownership interests in petroleum and natural gas assets including well sites, gathering systems and processing facilities. The Company estimates the total undiscounted amount of cash flow required to settle its decommissioning obligations is approximately $123.5 million (December 31, 2013 - $118.9 million), with some abandonments expected to commence in 2021. A risk-free rate of 2.96% (December 31, 2013 - 3.24%) and an inflation rate of 2.0% (December 31, 2013 - 2.0%) were used to calculate the fair value of the decommissioning obligations.

As at As at March 31, December 31, (000s) 2014 2013 --------------------------------------------------------------------------- Balance, beginning of period $ 76,037$ 64,757 Obligation incurred 2,795 10,193 Obligation incurred on property acquisitions 53 7,347 Obligation divested - (960) Obligation settled 53 (2,254) Accretion expense 538 2,038 Change in future estimated cash outlays 3,369 (5,084) --------------------------------------------------------------------------- Balance, end of period $ 82,845$ 76,037 ---------------------------------------------------------------------------



7. BANK DEBT

The Company has a covenant-based bank credit facility in place with a syndicate of bankers, the details of which are described in note 9 of the Company's consolidated financial statements for the year ended December 31, 2013. The facility has a limit of $900 million with an initial maturity of June 2016.

As at March 31, 2014, the Company's bank debt balance was $570.5 million (December 31, 2013 - $590.3 million). In addition, the Company has outstanding letters of credit of $1.8 million (December 31, 2013 - $2.2 million), which reduce the credit available on the facility. The average effective interest rate for the three months ended March 31, 2014 was 3.06% (three months ended March 31, 2013 - 3.29%). As at March 31, 2014, the Company is in compliance with all debt covenants.

8. NON-CONTROLLING INTEREST

The Company owns 90.6 percent of Exshaw Oil Corp., a private company engaged in oil and gas exploration in Canada. A reconciliation of the non-controlling interest is provided below:

As at As at March 31, December 31, (000s) 2014 2013 ---------------------------------------------------------------------------- Balance, beginning of period $ 17,877$ 16,298 Share of subsidiary's net income for the period 668 1,579 ---------------------------------------------------------------------------- Balance, end of period $ 18,545$ 17,877 ---------------------------------------------------------------------------- 9. SHARE CAPITAL (a) Authorized



Unlimited number of Common Shares without par value.

Unlimited number of non-voting Preferred Shares, issuable in series.

(b) Common Shares Issued

As at March 31, 2014 As at December 31, 2013 --------------------------------------------------------- (000s) except per- Number of Number of share amounts Shares Amount Shares Amount --------------------------------------------------------------------------- Balance, beginning of period 189,804,864 $ 3,062,432 174,813,059 $ 2,599,614 For cash on public offering of common shares(1)(2)(3) 4,615,198 219,222 9,275,000 343,881 For cash on public offering of flow- through common shares(1)(2) - - 1,760,000 67,218 For cash on exercise of stock options 1,146,475 19,054 3,956,805 47,023 Contributed surplus on exercise of stock options - 7,081 - 17,819 Share issue costs - (9,254) - (17,633) Tax effect of share issue costs - 2,331 - 4,510 --------------------------------------------------------------------------- Balance, end of period 195,566,537 $ 3,300,866 189,804,864 $ 3,062,432 --------------------------------------------------------------------------- (1) On March 12, 2013, the Company issued 5.78 million common shares at a price of $34.25 per share and 0.835 million flow-through common shares at a price of $42.15 per share, for total gross proceeds of $233.2 million. The implied premium on the flow-through common shares was determined to be $6.6 million or $7.90 per share. A total of 30,000 common and 85,000 flow-through common shares were purchased by insiders. As at December 31, 2013, the Company had spent the full committed amount and the expenditures were renounced to investors in February 2014 with an effective renunciation date of December 31, 2013. (2) On October 8, 2013, the Company issued 3.495 million common shares at a price of $41.75 per share and 0.925 million flow-through common shares at a price of $51.60 per share, for total gross proceeds of $193.6 million. The implied premium on flow-through common shares was determined to be $9.1 million or $9.85 per share. A total of 45,000 common shares and 75,000 flow- through common shares were purchased by insiders. As at December 31, 2013, the Company had spent the full committed amount. The expenditures were renounced to investors in February 2014 with an effective renunciation date of December 31, 2013. (3) On February 12, 2014, the Company issued 4.615 million common shares at a price of $47.50 per share for total gross proceeds of $219.2 million. A total of 15,198 common shares were purchased by insiders.



10. EARNINGS PER SHARE

Basic earnings-per-share was calculated as follows:

Three Months Ended March 31, ---------------------------- 2014 2013 ---------------------------------------------------------------------------- Net earnings for the period (000s) $ 89,868$ 52,184 Weighted average number of common shares - basic 192,791,721 176,986,036 ---------------------------------------------------------------------------- Earnings per share - basic $ 0.47$ 0.29 ----------------------------------------------------------------------------



Diluted earnings-per-share was calculated as follows:

Three Months Ended March 31, ---------------------------- 2014 2013 ---------------------------------------------------------------------------- Net earnings for the period (000s) $ 89,868$ 52,184 Weighted average number of common shares - diluted 197,932,293 181,774,427 ---------------------------------------------------------------------------- Earnings per share - fully diluted $ 0.45$ 0.29 ----------------------------------------------------------------------------



There were 3,823,000 options excluded from the weighted-average share calculation for the three months ended March 31, 2014 because they were anti-dilutive (March 31, 2013 - 2,322,333).

11. SHARE-BASED PAYMENTS

The Company has a rolling stock option plan. Under the employee stock option plan, the Company may grant options to its employees up to 19,556,654 shares of common stock. The exercise price of each option equals the volume-weighted average market price for the five days preceding the issue date of the Company's stock on the date of grant and the option's maximum term is five years. Options are granted throughout the year and vest 1/3 on each of the first, second and third anniversaries from the date of grant.

Three Months Ended March 31, ---------------------------------------------------------- 2014 2013 ---------------------------------------------------------- Weighted Weighted Average Average Number of Exercise Number of Exercise Options Price Options Price ---------------------------------------------------------------------------- Stock options outstanding, beginning of period 16,028,651 $ 27.95 15,325,232 $ 19.87 Granted 375,000 46.97 260,000 35.45 Exercised (1,146,475) 16.62 (1,979,883) 12.10 Forfeited (18,889) 30.11 (28,333) 25.27 ---------------------------------------------------------------------------- Stock options outstanding, end of period 15,238,287 $ 29.27 13,577,016 $ 21.27 ----------------------------------------------------------------------------



The weighted average trading price of the Company's common shares was $48.49 during the three months ended March 31, 2014 (March 31, 2013 - $35.12).

The following table summarizes stock options outstanding and exercisable at March 31, 2014:

Weighted Average Weighted Weighted Range of Number Remaining Average Number Average Exercise Outstanding Contractual Exercise Exercisable Exercise Price at Period End Life Price at Period End Price ---------------------------------------------------------------------------- $10.00 - $18.35 4,127,582 0.89 $ 15.40 4,127,582 $ 15.40$20.68 - $29.93 3,618,374 2.65 26.86 2,093,868 27.15 $30.76 - $39.57 2,949,331 3.50 32.95 935,664 31.81 $40.18 - $48.99 4,543,000 4.47 41.39 - - ---------------------------------------------------------------------------- 15,238,287 2.88 $ 29.27 7,157,114 $ 20.98 ----------------------------------------------------------------------------



The fair value of options granted during the three month period ended March 31, 2014 was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions and resulting values:

March 31, March 31, 2014 2013 --------------------------------------------------------------------------- Fair value of options granted (weighted average) $ 16.63$ 12.29 Risk-free interest rate 3.08% 2.55% Estimated hold period prior to exercise 4 years 4 years Expected volatility 40% 40% Forfeiture rate 2% 2% Dividend per share $ 0.00$ 0.00 ---------------------------------------------------------------------------



12. COMMITMENTS

In the normal course of business, the Company is obligated to make future payments. These obligations represent contracts and other commitments that are known and non-cancellable.

greater Payments Due by Year 1 2-3 4-5 than 5 (000s) Year Years Years Years Total ---------------------------------------------------------------------------- Operating leases $ 3,698$ 9,865$ 10,162$ 4,934$ 28,659 Firm transportation and processing agreements 69,884 312,506 178,758 394,998 956,146 Bank debt(1) - 612,866 - - 612,866 ---------------------------------------------------------------------------- $ 73,582$ 935,237$ 188,920$ 399,932$ 1,597,671 ---------------------------------------------------------------------------- (1) Includes interest expense at an annual rate of 3.06% being the rate applicable to outstanding bank debt at March 31, 2014.



13. SUBSEQUENT EVENTS

On April 24, 2014, the Company closed the acquisition of Santonia Energy Inc. ("Santonia") with the issuance of 3.228 million Tourmaline shares with a closing price on that date of $54.94 per Tourmaline share, for consideration of $177.4 million.

About Tourmaline Oil Corp.

Tourmaline is a Canadian intermediate crude oil and natural gas exploration and production company focused on long-term growth through an aggressive exploration, development, production and acquisition program in the Western Canadian Sedimentary Basin.

FOR FURTHER INFORMATION PLEASE CONTACT: Tourmaline Oil Corp.Michael Rose Chairman, President and Chief Executive Officer (403) 266-5992 info@tourmalineoil.comTourmaline Oil Corp.Brian Robinson Vice President, Finance and Chief Financial Officer (403) 767-3587 robinson@tourmalineoil.comTourmaline Oil Corp.Scott Kirker Secretary and General Counsel (403) 767-3593 kirker@tourmalineoil.comTourmaline Oil Corp. Suite 3700, 250 - 6th Avenue S.W.Calgary, Alberta T2P 3H7 (403) 266-5992 (403) 266-5952 (FAX) www.tourmalineoil.com Source: Tourmaline Oil Corp.


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