CALGARY, AB, May 3, 2021 /CNW/ - Topaz Energy Corp. (TSX: TPZ)
("Topaz" or the "Company") is pleased to announce that it has
entered into a definitive agreement with Reserve Royalty Income
Trust ("Reserve Royalty") for the purchase of its subsidiaries
which hold all of the Reserve Royalty assets, for approximately
$26.0 million, payable through the
issuance of 1,794,886 Topaz shares (the "Reserve Royalty
Acquisition").
Reserve Royalty Acquisition
The Reserve Royalty Acquisition adds a large royalty portfolio
consisting of 345,000 gross acres of developed and undeveloped fee
mineral title and royalty interest lands diversified across
Western Canada, providing high
margin, low decline royalty assets and free cash flow growth for
Topaz. Reserve Royalty has aggregate corporate tax pools of
approximately $100 million and no
debt. The Reserve Royalty Acquisition assets generated
average royalty production and royalty production revenue of 609
boe/d (141 bbl/d crude oil, 2.2 mmcf/d conventional natural gas and
103 bbl/d natural gas liquids) and $1.6
million, respectively, during the first quarter of 2021
($6.4 million royalty production
revenue on an annualized basis). Recent drilling activity on
the Reserve Royalty lands includes two liquids-rich Falher natural gas wells in the Ferrier area
which began producing in January 2021. Average gross
production in February 2021 from the
two wells was approximately 14,000 mcf/d (raw) conventional natural
gas in addition to natural gas liquids (free condensate)
production.
Charlie Lake Royalty Acquisition Update
Topaz is also pleased to announce that it has entered into a
definitive agreement with Tamarack Valley Energy Ltd. ("Tamarack")
for the $32.0 million (cash
consideration) royalty acquisition previously announced on
April 12, 2021 ("Charlie Lake Royalty
Acquisition"). Topaz will acquire a newly created 2% gross
overriding royalty interest on crude oil, conventional natural gas
and natural gas liquids from approximately 300,000 gross acres of
Tamarack's developed and undeveloped lands which are focused on
Charlie Lake light oil development
(approximately 210,000 gross acres) ("Charlie Lake Royalty
Acquisition Lands"). Average production from the Charlie Lake
Royalty Acquisition Lands during March
2021 exceeded 13,000 boe/d (approximately 7,410 bbl/d crude
oil, 22.6 mmcf/d conventional natural gas and 1,820 bbl/d natural
gas liquids). Tamarack estimates it will maintain between 12,000
and 13,000 boe/d through future capital development and is
supported by a $60 million minimum
capital development commitment.
The Charlie Lake Royalty Acquisition represents a 71% increase
to Topaz's royalty acreage in the greater Peace River High area and
advances Topaz's position as the largest Charlie Lake royalty holder. The
Charlie Lake light oil play ranks
amongst the most economic light oil plays in North America, is situated in an active
development area with well-established production and egress
infrastructure and is considered to be economically resilient to
crude oil prices as low as US$30
WTI. Wells drilled on the Charlie Lake Royalty Acquisition
lands have consistently achieved industry-leading results in the
area. Recent drilling results by Anegada Oil Corp., the
company to be acquired by Tamarack, include notable production
results during March 2021; one well
which produced over 900 bbl/d of crude oil and another which
produced approximately 700 bbl/d of crude oil. These wells
were drilled at some of the longest lateral lengths in the
Charlie Lake area to date, at an
average length of approximately 4,375 meters.
The Reserve Royalty Acquisition and the Charlie Lake Royalty
Acquisition are expected to close during the second quarter of
2021, subject to the satisfaction of customary closing conditions,
including in respect of the Charlie Lake Royalty Acquisition
Tamarack completing its previously announced acquisition of Anegada
Oil Corp.
Topaz Acquisition Benefits
Based on a conservative annual production base of 500 boe/d
(approximately 114 bbl/d crude oil, 1.7 mmcf/d conventional natural
gas and 100 bbl/d natural gas liquids) from the Reserve Royalty
Acquisition which Topaz estimates will be maintained through future
drilling; 12,500 boe/d (approximately 7,125 bbl/d crude oil, 21.8
mmcf/d conventional natural gas and 1,750 bbl/d natural gas
liquids) from the Charlie Lake Royalty Acquisition which is the
midpoint of Tamarack's future production estimate; and current
commodity prices, Topaz estimates the acquisitions on a combined
basis provide annualized 2021 EBITDA of $9.1
million which represents $0.06
per share (5% growth) to Topaz. The acquisitions enhance
Topaz's future growth outlook and are consistent with the Company's
strategy to acquire value-enhancing assets that are accretive on a
per share basis.
Cumulative Investment Track Record
Since January 1, 2020 Topaz has
invested approximately $385.0 million
in cumulative royalty and infrastructure acquisitions which Topaz
estimates will generate between $41.0
and $43.0 million of annualized
EBITDA in 2021 and between $46.0 and
$48.0 million in 2022, based on
current commodity prices. Topaz's royalty acquisitions are
underpinned by cumulative capital development spending estimated at
$500.0 million over the next two
years, which supports Topaz's expectations for EBITDA growth from
the royalty acquisitions. Topaz estimates its March 31, 2021 adjusted working capital after
accounting for the Charlie Lake Royalty Acquisition will be in
excess of $60.0 million which Topaz
expects will be invested in additional acquisition growth
opportunities.
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. These forward-looking statements relate to
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
Reserve Royalty Acquisition and Charlie Lake Royalty Acquisition;
anticipated increases in production and revenue from the Reserve
Royalty Acquisition and Charlie Lake Royalty Acquisition lands and
estimated capital plan attributable to the assets acquired;
projected annualized EBITDA levels in 2021 and 2022 and future
EBITDA growth in subsequent years from royalty acquisitions;other
expected benefits from the Reserve Royalty Acquisition and Charlie
Lake Royalty Acquisition including providing free cash flow growth
and being accretive on a free cash flow per share basis; the amount
of cumulative capital development estimates; the use of adjusted
working capital to fund additional acquisition growth
opportunities; and the Company's business as described under the
heading "About the Company" above. Forward–looking information is
based on a number of assumptions including those highlighted in
this news release 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 Reserve Royalty
Acquisition, Charlie Lake Royalty Acquisition or other acquisitions
on the terms or on the timing announced or at all and the failure
to realize some or all of the anticipated benefits of these and
other acquisitions including estimated royalty production, royalty
production revenue and free cash flow per share growth, and the
factors discussed in the Company's 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 Topaz's website
(www.topazenergy.ca). 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.
This news release also makes reference to the terms "EBITDA" and
"adjusted working capital", 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 "EBITDA" and "adjusted working capital"
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 the non-GAAP
financial measures 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.
For these purposes, "EBITDA" is net income or loss from
continuing operations, excluding extraordinary items, plus interest
expense, income taxes and the capital portion of any finance lease
received, and adjusted for non-cash items including depletion and
depreciation and share-based compensation and gains or losses on
dispositions. "Adjusted working capital" is current assets less
current liabilities, adjusted for financial instruments and "net
debt (cash)" is total debt outstanding less adjusted 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.
OIL AND GAS METRICS
This news release contains certain oil and gas metrics which do
not have standardized meanings or standard methods of calculation
and therefore such measures may not be comparable to similar
measures used by other companies and should not be used to make
comparisons. Such metrics have been included in this document to
provide readers with additional measures to evaluate the Company's
performance; however, such measures are not reliable indicators of
the Company's future performance and future performance may not
compare to the Company's performance in previous periods and
therefore such metrics should not be unduly relied upon.
SOURCE Topaz Energy Corp