Good morning, ladies and gentlemen, and welcome to the Tourmaline Q2 2022 Results Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on July 28, 2022. I would now like to turn the conference over to Jamie Heard. Please go ahead.
Thank you, operator, and welcome everyone to our discussion of Tourmaline's results for the three and six months ended June 30, 2022 and 2021. My name is Jamie Heard, and I am Manager of Capital Markets for Tourmaline. Before we get started, I refer you to the advisories on forward-looking statements contained in the news release, as well as the advisories contained in the Tourmaline Annual Information Form and our MD&A available on SEDAR and on our website. I also draw your attention to the material factors and assumptions in those advisories. I'm here with Mike Rose, Tourmaline's President and Chief Executive Officer, and Brian Robinson, Vice President, Finance and Chief Financial Officer. We will start by speaking to some of the highlights of the last quarter in our year so far. After Mike's remarks, we will be open for questions. Mike, please go ahead.
Thanks, Jamie. Welcome everybody, and thanks for dialing in. We're pleased to review our Q2 results and go over the related operational and financial updates. First, the highlights. Second quarter 2022 cash flow was a record CAD 1.35 billion, and that's a 137% increase over the second quarter of 2021. Net debt at June 30 was CAD 430 million, which is well below our long-term debt target of CAD 1 billion-CAD 1.2 billion. Second quarter 2022 free cash flow was a record CAD 1.1 billion or CAD 3.25 per diluted share. That enabled us to declare a special dividend of CAD 2 per common share to be paid August 12 to shareholders of record on August 5.
Our trailing twelve-month of distributed dividends now total 0.628 per share, inclusive of this special dividend, and that's an implied 9% trailing yield. Second quarter 2022 E&P capital spending was CAD 229 million, well within guidance. Second quarter 2022 net earnings were CAD 823 million or CAD 2.40 per diluted share. We, with our update, released a new E&P growth plan for the period 2022 to 2028. It generates CAD 31.4 billion of cash flow and CAD 18 billion of free cash flow at strip pricing as of July 18, 2022, on total E&P spending over the period of CAD 12.7 billion. Average annual production growth during this plan is approximately 6%, and the total growth over the period is 40%. Looking at production briefly.
Second quarter 2022 production average was 503,000 BOEs per day, or 506,000 prior to our Q2 storage injections in Dawn and California, and within previously disclosed guidance range. It's a 23% increase over the second quarter of 2021 production of 410,000 BOEs per day. The modest EP activity increase post breakup will lead to a higher Q4 2022 production forecast, now 520,000-525,000 BOEs per day, and that's up from 510,000 BOEs per day in the previous May plan. A full year 2022 average production forecast of 507,000 BOEs per day is now expected.
Full year 2022 average liquids production of over 115,000 barrels per day is expected, and that's up 19% from average 2021 levels, and that's condensate oil and NGLs. Looking at our financial results in a little more detail. As mentioned, both quarterly cash flow and free cash flow were records. At current strip pricing, so July 18 strip, full year 2022 cash flow of CAD 5 billion is now anticipated or CAD 14.69 per fully diluted share. Given the strong commodity price outlook and anticipated record cash flow in 2022, we intend to return a minimum of 60% of free cash flow to shareholders in calendar 2022. We intend to pay quarterly special dividends through the balance of 2022 and now 2023.
The magnitude of these special dividends will be a function of commodity prices and available quarterly free cash flow. We do intend to return the majority of free cash flow, so greater than 60% in 2022 and a range of 50%-75% in 2023, to shareholders through base dividend increases, special dividends, and share buybacks. A component of free cash flow will also be used for modest incremental E&P investments, and that includes new pool, new zone exploration opportunities, continued asset acquisitions within existing core complexes, and select margin-improving infrastructure investments. Moving to marketing. Tourmaline currently has 620 million per day accessing U.S. markets through long-term firm transport agreements, and this volume will grow to 905 million per day by exit 2023.
We are among the most diversified of all North American large gas producers from a market access standpoint, and we continue to explore opportunities to expand this export capability. The company's 140 million per day Gulf Coast LNG deal with Cheniere commences January 1, 2023, and it provides exposure to JKM pricing over the fifteen-year term of the deal. The JKM strip was $31.88 per million BTU as of July 19, 2022. Realized NGL prices were CAD 51.83 per barrel in Q2 2022, and that's up 99% from the Q2 2021 time period. We are the largest NGL producer in Canada.
Looking at our longer-term E&P strategy, the new E&P growth plan extends through 2028, as mentioned, and it incorporates the current 12-13 drilling rig fleet that we have in our employ through second half of 2022 and through the balance of the plan. We felt it was prudent to retain the drilling and completion services that we'd already secured on a go-forward basis. The previous plan could be executed with approximately 11 drilling rigs. The new E&P growth plan also includes phase 1 of the Conroy North Montney development project, commencing production through new Tourmaline facilities in the first quarter of 2026, and with phase 2 startup of that project in 2028.
The new EP growth plan, 2022-2028, generates CAD 31.4 billion of cash flow and CAD 18 billion of free cash flow at strip pricing on total EP spending of CAD 12.7 billion. As mentioned, average annual production growth during the plan is approximately 6%. The updated EP plan will consume approximately 2,500 gross drilling locations through to end 2028, and that's only 11% of our current inventory of over 22,000 locations. We believe the modestly increased capital program on very high return EP projects is a good utilization of free cash flow. Given elevated commodity prices and the related very short payout periods, these incremental expenditures actually increase free cash flow in the year of expenditure.
The total incremental gas production of 250 million per day in the 2023-2024 timeframe via the expanded program, which is up approximately a net 100 million per day from the previous E&P plan, coincides with incremental basin egress, which is consistent with our long-term balanced basin supply narrative. Through expansions on the GTN system and the company's Gulf Coast Cheniere LNG agreement, we have 300 million per day of incremental basin egress commencing in 2023. It more than offsets any of the growth that we'll see in 2023-2024. Of note, these gas volumes will access the two destinations with a sustained premium gas price, international LNG, and California.
Tourmaline is able to deliver a strong, sustainable annual return to shareholders, so greater than 60% of free cash flow in 2022, a meaningful sustained annual production growth profile, so 6% over the next six years, and continued material value accretion through profitable annual reserve additions. Looking at our capital spending and our financial outlook, as mentioned, second quarter 2022 EP CapEx was CAD 223 million and within guidance. The full year 2022 EP capital budget has been increased to CAD 1.5 billion, and that reflects the increased second half 2022 EP program, as well as a further contingency for inflation. Our 2023 EP capital program is estimated at CAD 1.6 billion.
That reflects the 12-13 rig program for the full year and a much increased inflation contingency for 2023 over what was in the May 2022 plan. The E&P program is expected to deliver annual production of 545,000 BOEs per day and cash flow at strip pricing of CAD 5.1 billion and free cash flow of CAD 3.5 billion. Not evaporated from the results that you'll see in 2022. The second half 2022 and 2023 CapEx programs include up to 10 incremental exploration, new zone or new pool wells, and that's following up on multiple successes to date. Net debt at June 30, 2022 was CAD 430 million, well below the long-term debt target of CAD 1 billion-CAD 1.2 billion.
This places the company in an excellent position to concurrently fund the Conroy North Montney development and continue with our free cash flow allocation strategy and returns to shareholders. A little bit more on the Conroy North Montney development. The new E&P growth plan incorporates the full project with January 1, 2026 targeted on stream date for phase 1. The second phase will be on stream in 2028. Each phase consists of 50,000 BOEs per day of production. Phase 2 could be accelerated contingent upon commodity prices and overall basin egress considerations. We've drilled a total of 14 delineation pads within that North Montney project area over the past 18 months, really to confirm well performance and capital costs. Capital costs are definitely on target and well below those of previous operators.
Well performance has exceeded original expectation for the vast majority of the new pads. As part of this North Montney development project, we've negotiated a new long-term transportation and fractionation arrangement with Pembina Pipeline Corporation for the incremental or growth condensate and NGL volumes from the project area. This agreement ensures that all new company liquid volumes will flow upon project startup, along with significant flexibility and strong operating margins for Tourmaline in the overall North Montney development area. As part of the long-term associated facility strategy and build-out, we closed the previously announced acquisition of the 50% non-operated interest in the two Aitken area gas plants during the second quarter of 2022. We're also pleased to announce that we've entered into a binding agreement to acquire Rising Star for CAD 194.3 million.
Closing is expected to occur in the first half of August of this year. The purchase price includes common shares of Topaz Energy Corp that we currently own, with the balance paid in cash. Rising Star assets are located within our Peace River High Charlie Lake complex. Current production from the acquired assets is approximately 5,700 BOEs per day, and we estimate 2P reserves at 50 million BOEs. Rising Star has no outstanding debt. Included in the acquisition are facilities that complement our existing infrastructure, and the pooling of land bases will facilitate drilling of much longer horizontals in the Lower Charlie Lake that we've been delivering very strong results from recently. Do recall that we kind of invented this play about a decade ago.
In a further transaction, we have entered into a definitive agreement to sell a GOR to Topaz on the Rising Star lands, along with a similar GOR on lands acquired during the past year or so, primarily in the Deep Basin. Tourmaline will receive cash proceeds of CAD 52 million from Topaz in third quarter of 2022. We may also pursue dispositions of non-core components of the Rising Star asset base during the balance of 2022. Specifically on E&P in the quarter, we drilled 33.5 net wells and completed 25.5 net wells in second quarter. 26 new net wells were brought on production. A total of 142.7 net wells are anticipated to come on production during the second half of this year.
We currently have 13 drilling rigs and five frac spreads active across our three EP complexes. We're excited about how the two-and-a-half-year-old exploration program is proceeding. Really the best way to manage an exploration program is to not say anything until it's worked, and it most certainly has. The ongoing new pool, new zone exploration effort has yielded three significant successes to date. We have 41 successful producing horizontals into a new liquid-rich gas zone in the Alberta Deep Basin, with just under 500 Bcf equivalent of 2P reserves already booked in the December 31, 2021 GLJ reserve report. We expect a further seven horizontals to be drilled into this horizon in the Deep Basin during the second half.
We have seven producing horizontals into new zones in our South Montney BC complex, with 318 Bcf equivalent of 2P reserves booked at year-end 2021. The third play has no reserves booked yet, but it does have two successful horizontals into the same zone 32 km apart, drilled and successfully tested, so more follow-up planned there. We have new zone, new play exploration wells planned on the Peace River High and in the Deep Basin in completely different zones during the second half of this year. Looking at our ongoing environmental performance improvement, we're very pleased that we received preliminary platinum ratings from Project Canary, the TrustWell assessment of a series of company-operated Northeast BC assets, with an average score of 131 achieved.
To our knowledge, we're the first Canadian gas company with a TrustWell score and this ranks in the top 10% in all of North American E&Ps. On the diesel displacement initiative, all of our contracted rig fleet is displacing diesel with nat gas or actually running fully electric. Tourmaline was operating the available three Tier 4 natural gas-powered frac spreads in Western Canada during July of 2022. This evolving diesel displacement initiative significantly reduces emissions and costs for the company. Finally, we're also pleased to announce that TSX has approved the renewal of our Normal Course Issuer Bid and that'll be in place for the next year. That's all I was gonna say, and it's a lot.
We can turn it over for Q&A now, and Brian and I and Jamie can hopefully answer your questions.
Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press the star followed by the one on your touch tone phone. You will hear three tone prompts acknowledging your request, and your questions will be pulled in the order they are received. Should you wish to decline from the polling process, please press the star followed by the number two. One moment for your first question. Your first question comes from Phil Lee, Odlum Brown. Please go ahead.
Hi. It's Phil here . I just have a couple quick questions. The first is regarding the capital efficiencies outlook that's mentioned in your press release about I think you're looking at about CAD 8,500 per flowing barrel.
In the out years of your capital plan, I'm just wondering about your confidence level around that estimate and just given, you know, obvious concerns about inflation going forward?
Sure. Well, that CAD 8,500 in the out years of the plan includes both a large inflation contingency. In those out years, that's when the facility dollars are being spent, and so it does drive your CAD 8,500 up. We're quite confident in that. I mean, as far as, you know, executing on the facility piece, what we're putting in place is essentially what we put in place at Gundy already in two phases. I mean, we're confident that we can do it, and of course, we'll try and do it for even less than we're currently planning and in shorter time periods. Kind of the run rate capital efficiency in the years where there aren't significant facility expenditures are kind of in that CAD 7,500-CAD 8,000 range.
That's up from, you know, we were targeting CAD 7-CAD 7,500, and so the difference there is inflation. We think we've put in a very large contingency for it in the first two or three years in the plan. Is that helpful?
Okay. Yeah, no, that's great. Regarding your new plan out to 2028, I was looking at the price assumptions, and they're obviously a little higher and obviously the natural gas prices of the whole futures curve has moved up. I'm wondering in terms of how you're thinking about in terms of if the price kind of comes off, you know, are you sticking with the plan? Like, or under what conditions would you revisit the plan in terms of the pricing outlook for gas?
Yeah. Well, I think, I mean, you would realize that nothing is ever fully cast in stone. You're right, the out years have been coming up, but the curves are still significantly backwardated. You know, we would remind all that the world in general is short natural gas. You know, our timing, though, for the startup of the North Montney development, both phases coincides with the startup of LNG Canada. You know, we've thought for a long time that that will be a very positive event for AECO and Station 2 pricing because you'll take a basin that is, you know, roughly in supply-demand balance. It is now, and we expect that to continue. Then you're gonna pull a significant gas volume out, and move it west.
You know, whatever the world price is at that point, I think that will be a very positive local price initiative or development for the basin. Obviously we'll watch prices and, you know, we have the flexibility to, you know, slow things down or speed things up, whatever the right thing to do is. I will remind everyone that a little bit of incremental growth, which equates to about 100 million a day net between 2023 and 2024, all moves out of the basin. None of it goes to AECO. Our deliveries to AECO or Station 2 in the 2023/2024 time period actually drop on a net basis.
We think that's, you know, a very responsible way to bring on, you know, very high return new production, and we'll move it right out of the basin.
Okay, great. Thanks. Just a last question. Can you maybe just comment on your strategy around using Topaz as a funding vehicle? Obviously you're generating a lot of cash, and you could probably just fund it, your bolt-on acquisitions with your cash. I'm just wondering how you think about Topaz in the whole, in your planning capital spending.
Sure. We'll continue to use or you know look at doing transactions with Topaz to enhance the returns on acquisitions that we may or may not make.
Okay, great. Thank you.
Thanks.
There are no further questions at this time. I will now turn it back to Jamie Heard.
Thank you very much, operator. Thanks everyone for dialing in, and have a great day.
Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.