CALGARY - In his first interview since taking Tourmaline Oil Corp. public last month, chief executive Mike Rose said he's confident of the company's success despite low natural gas prices.

The company announced Thursday it had raised $31.5 million from the sale to underwriters of an overallotment of shares and the funds will be applied to an exploration budget of up to $425 million in 2011.

The issuance of 1.5 million extra shares at $21 each brings the initial public offering gross total to $259 million.

The shares, which began trading in November, were up 21 cents to $21.21 in Toronto for total market capitalization of $2.9 billion.

"We're getting a little more capital. So far so good," said Rose.

"I think we had a pretty productive two-and-a-bit years while we were private and so we kind of picked our time to go public, when we were ready, so everything is lining up, except for gas prices."

He said he predicts gas prices will stay "soft" for 12 to 24 months but Tourmaline's low-cost structure, liquids-rich production and lack of debt will enable it to continue to generate cash flow.

"By the second half of this year the liquids alone will be about 5,000 barrels per day," he noted. "We have one oil property at Spirit River (Alberta) that we're developing and then in the Deep Basin (Alberta) and the Montney (B.C.) we're maximizing the condensate that comes with the gas."

Rose founded Berkley Petroleum Corp. in 1993 and sold in 2001 for about $1.55 billion to Anadarko Petroleum. He then started Duvernay Oil Corp. and sold it to Royal Dutch Shell for nearly $6 billion two years ago.

He said he hopes to repeat that financial success with Tourmaline.

"Berkley grew mostly through exploration discoveries with a few complementary acquisitions. Duvernay was mostly a gas development company in the same two areas that we're in now," said Rose.

"So, geographically, we'll be more similar to Duvernay, although we do plan some deeper exploration starting later on in 2011, so maybe a hybrid between the two."

The secret to growing the company is understanding the geology, he said.

"The big secret is really good people who know how to do it and there are fewer and fewer of those around," said Rose, a geologist. "We're all kind of 35-plus-year guys now so we've been doing it for a long time."

Analysts say the Tourmaline team has been shown to be very good at both managing costs and managing the market's expectations.

In 2011 guidance, also released Thursday, it introduced the option of reducing capital spending from the $425 million cited in its IPO prospectus to $350 million depending on how gas prices act between now and spring breakup.

It called for average production of 27,700 barrels of oil equivalent per day next year, representing 57 per cent growth over 2010 average production levels of 17,700 boe/d. Current daily production is about 23,000 boe/d.

About 30 per cent of the company is held by insiders.

Acumen Capital analyst Robert Cooper said Tourmaline's share price strength is related to the team's reputation and its value relative to cash flow projections.

"That's the magic of good management and the magic of having a track record of making investors tons of money," he said.

"It's a $20 stock and they're projecting $2 in cash flow next year. That's 10 times cash flow and there are all kinds of guys who would be salivating at having that kind of cost of capital."

Tourmaline expects to spend $150 million in the first quarter and wind up drilling 77 to 80 wells in 2011. It is estimating cash flow of $274 million in 2011 or $2.01 per share.

Rose said there are no acquisitions on the horizon.

"We were able to grow fairly quickly during the first two years because we did do a series of asset acquisitions and a couple of small corporates but the main focus going forward is to develop the very large inventories we have," he said.

"That's not to say we'll never do an acquisition but we don't have any planned right now."

The company has about 55 million cubic feet equivalent per day behind pipe which it plans to bring on stream in the first quarter of 2011 through facility projects underway at Sunrise-Dawson, B.C. and Minehead, Alta.

dhealing@calgaryherald.com