CALGARY, AB, March 5, 2021 /CNW/ - Topaz Energy Corp.
(TSX: TPZ) ("Topaz" or the "Company") is pleased to announce it has
entered into a non binding agreement with Tamarack Valley Energy
Ltd. ("Tamarack") for the purchase of a newly created gross
overriding royalty interest underpinned by a multi-year minimum
capital development commitment for total purchase consideration of
$13.7 million (the "Royalty
Acquisition"). The Royalty Acquisition demonstrates Topaz's
strategy of generating free cash flow growth while enabling
Tamarack to advance its own growth.
Pursuant to the Royalty Acquisition, Topaz will acquire a newly
created 4% gross overriding royalty interest on predominantly crude
oil production on approximately 45,000 acres of developed and
undeveloped lands in the greater Clearwater area of Alberta ("Clearwater"). In addition, Tamarack
will provide a three year capital development commitment.
Topaz will fund the Royalty Acquisition from its available cash on
hand.
Current production from the Royalty Acquisition lands is
approximately 550 bbl/d which includes 500 bbl/d of Nipisi Slave
Point, low decline light to medium crude oil which is currently
under waterflood. In addition, there are two Clearwater crude oil wells currently being
brought on production and one well being drilled. The Royalty
Acquisition is expected to close on or before March 31, 2021 unless amended by mutual agreement
of the parties, subject to entering into definitive agreements and
satisfaction of customary closing conditions including Tamarack
completing the acquisitions it announced on March 5, 2021.
Strategic Rationale
The Clearwater ranks amongst
the strongest and fastest growing oil plays in the WCSB and is
characterized by appealing economic and environmental
characteristics including low well costs, high quality large OOIP
resource, moderate initial decline profiles, competitive netbacks,
decreased land usage with the use of multi-leg drilling, and
minimal water and no sand requirements as the completion operations
do not require fracture stimulation. The total recoverable resource
in the Clearwater continues to
expand with success from exploration drilling and the play is well
suited for waterflood or enhanced oil recovery projects.
Topaz Acquisition Benefits
The Royalty Acquisition provides Topaz a 32% increase to its
existing Clearwater royalty
acreage and Topaz estimates, based on its 2021 guidance provided on
November 4, 2020, the Royalty
Acquisition is accretive on a free cash flow per share basis in
2021.
ABOUT THE COMPANY
Topaz is a unique royalty and energy infrastructure company
focused on generating free cash flow growth and paying reliable and
sustainable dividends to its shareholders, through its strategic
relationship with one of Canada's
largest natural gas producers, Tourmaline, an investment grade
senior Canadian E&P company, and leveraging industry
relationships to execute complementary acquisitions from other
high-quality energy companies, while maintaining its commitment to
environmental, social and governance best practices.
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements and
forward-looking information (collectively, "forward-looking
statements") that relate to the Company's current expectations and
views of future events or the Company's future performance. Any
statements that express, or involve discussions as to,
expectations, beliefs, plans, objectives, assumptions or future
events or performance (often, but not always, through the use of
words or phrases such as "will likely result", "are expected to",
"expects", "will continue", "is anticipated", "anticipates",
"believes", "estimated", "intends", "plans", "forecast",
"projection", "strategy", "objective" and "outlook") are not
historical facts and may be forward-looking statements and may
involve estimates, assumptions and uncertainties which could cause
actual results or outcomes to differ materially from those
expressed in such forward-looking statements. No assurance can be
given that these expectations will prove to be correct and such
forward-looking statements included in this news release should not
be unduly relied upon. These statements speak only as of the date
of this news release. In particular and without limitation, this
news release contains forward-looking statements pertaining to the
following: the commercial terms and timing of closing of the
Royalty Acquisition; planned funding for the Royalty Acquisition;
anticipated increases in production from the Royalty Acquisition
lands and expansion of Tamarack's capital plan over the next three
years; other expected benefits from the Royalty
Acquisition including providing free cash flow growth and
being accretive on a free cash flow per share basis; and the
Company's business as described under the heading "About the
Company" above. Forward–looking information is based on a number of
assumptions and is subject to a number of risks and uncertainties,
many of which are beyond the Company's control, which could cause
actual results and events to differ materially from those that are
disclosed in or implied by such forward–looking information. Such
risks and uncertainties include, but are not limited to, the
failure to complete the Royalty Acquisition on the terms or
on the timing announced or at all, the failure to realize
some or all of the anticipated benefits of the Royalty Acquisition
including free cash flow growth and the failure of the operators of
the Company's lands to conduct and complete the anticipated
drilling activity on or achieve anticipated production growth from
such lands , and the factors discussed under "Notice to Investors –
Forward-Looking Information" and "Risk Factors" in the supplemented
PREP prospectus dated October 19,
2020. Topaz does not undertake any obligation to update such
forward–looking information, whether as a result of new
information, future events or otherwise, except as expressly
required by applicable law.
Non-GAAP Financial Measures
In addition to using financial measures prescribed by
International Financial Reporting Standards ("IFRS" or "GAAP"),
references are made in this news release to "free cash flow", which
is a measure that does not have any standardized meaning as
prescribed by IFRS. Management uses this term 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 dividends and a
portion of its future growth expenditures or to repay debt.
Accordingly, investors are cautioned that this non-GAAP financial
measure may not be comparable to similarly defined measures
presented by other entities and should not be considered in
isolation nor as an alternative to net income (loss) from
continuing operations or other financial information determined in
accordance with GAAP as an indication of the Company's
performance. References to "free cash flow" are to the amount
of cash estimated to be available for dividends to shareholders in
accordance with the Company's dividend policy and is defined as
cash flow less capital expenditures, where "cash flow" is defined
as cash from (used in) operations before changes in non-cash
working capital.
BOE EQUIVALENCY
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 the 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.
SOURCE Topaz Energy Corp