CALGARY, AB, July 15, 2021 /CNW/ - Topaz Energy Corp.
(TSX: TPZ) ("Topaz" or the "Company") is pleased to announce that
in furtherance of its growth strategy of acquiring low-risk,
premium royalty interests to generate free cash flow(1)
growth, it has entered into definitive agreements with Tourmaline
Oil Corp. ("Tourmaline") for the purchase of gross overriding
royalty interests on approximately 296,000 gross acres in the NEBC
Montney play area, for total cash consideration of $145.0 million (the "NEBC Montney Royalty
Acquisition"), which will be funded through Topaz's existing credit
facilities. The NEBC Montney Royalty Acquisition lands were
recently acquired by Tourmaline pursuant to its ongoing NEBC
consolidation strategy, including the acquisition of privately
owned Black Swan Energy as well as developed and undeveloped
acreage from Paramount Resources in the Birch area of the
North Montney trend. Upon
close of the acquisition, Topaz will own royalty interests on 100%
of Tourmaline's NEBC Montney acreage.
NEBC Montney Royalty Acquisition
Pursuant to the NEBC Montney Royalty Acquisition, Topaz will
acquire a newly created gross overriding royalty interest on
natural gas, crude oil, and condensate production on approximately
296,000 gross acres of Tourmaline's developed and undeveloped lands
in the NEBC Montney play area, which will increase Topaz's
existing, contiguous NEBC Montney royalty acreage by 53%. The
gross overriding royalty interest to be acquired by Topaz is: i) 4%
on natural gas production until December 31,
2023 and 3% thereafter; and ii) 2.5% on crude oil and
condensate production.
The NEBC Royalty Acquisition is expected to close on
August 3, 2021, subject to
satisfaction of customary closing conditions.
Strategic Rationale
The NEBC Montney Royalty
Acquisition assets' current production is approximately
50,000 boe/d(3) (19% natural gas liquids)
which is expected to increase to approximately 60,000
boe/d(4) in 2022 upon completion of deep cut
facility enhancements which are currently underway.
Tourmaline has identified over 1,700 gross future drilling
locations on the underlying lands.
Acquisition Benefits
The NEBC Montney Royalty
Acquisition is expected to increase Topaz's 2022 average royalty
production by over 1,800 boe/d(5), enhances Topaz's near
and long-term free cash flow profile and is accretive to Topaz's
2022 per share metrics, including 8% on both
EBITDA(1)(2) and free cash flow(1)(2) and 14%
on royalty production(2). Topaz estimates its pro
forma 2021 exit net debt / EBITDA(1)(2) to be
approximately 1.2x and its 2021 estimated payout
ratio(1)(2) to be 58%, slightly below its 60 to 90%
target range. Upon closing of the NEBC Royalty Acquisition,
Topaz will own royalty interests on approximately 770,000 gross
acres in the NEBC Montney play area, from which production is
expected to average approximately 175,000 boe/d during 2022 and
Tourmaline is well positioned to accelerate growth over the next
decade in order to provide critical supply for future LNG
export.
NEBC Montney (Laprise/Conroy/Gundy)
Royalty and Infrastructure Acquisition Update
On July 1, 2021, Topaz completed
its previously announced (May 18,
2021) acquisition from Tourmaline, for the purchase of gross
overriding royalty interests on approximately 535,000 gross acres
(288,000 gross acres of Montney
rights) in the Laprise/Conroy North Montney play area of NEBC and
working interest ownership in Tourmaline's Gundy infrastructure
which is supported by a ten-year fixed take-or-pay commitment, for
total cash consideration of $245.0
million.
Second Quarter 2021 Results and Updated 2021 Guidance
Topaz plans to release its second quarter 2021 results and
updated 2021 guidance estimates on Thursday,
July 29, 2021 after markets close. Topaz will host a
conference call on Friday, July 30,
2021 starting at 9:00 a.m. MST
(11:00 a.m. EST). To participate in
the conference call, please dial 1-888-664-6392 (North American
toll free) a few minutes prior to the call. Conference ID is
14446806.
Notes:
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(1)
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Refer to "Non-GAAP
Financial Measures."
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(2)
|
Refer to
"Forward-Looking Statements." Topaz's estimated per
share metrics are based on forecast commodity prices for 2022 as
follows: West Coast Station 2 natural gas - $3.05 (CAD/mcf); Oil
WTI $66.94 (US$/bbl).
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(3)
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Comprised of
approximately 243 mmcf/d shale gas and 9,500 bbl/d natural gas
liquids.
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(4)
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Comprised of
approximately 292 mmcf/d shale gas and 11,400 bbl/d natural gas
liquids.
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(5)
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Comprised of
approximately 10.25 mcf/d shale gas and 92 bbl/d natural gas
liquids.
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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: Topaz's future growth outlook and strategic plans; the
anticipated capital expenditure plans and production increases
relating to completed and planned acquisitions; the benefits to be
derived from the NEBC Montney Royalty Acquisition; expected
production increases and capital commitments on the royalty lands;
estimated levels of EBITDA,(1) free cash
flow(1) and net debt / EBITDA(1); future
dividend levels and declaration and payment of dividends and the
timing and amount thereof; other expected benefits from the
NEBC Montney Royalty Acquisition including enhancing Topaz's future
growth outlook and providing value enhancing assets including the
information described under the heading "NEBC Montney Royalty
Acquisition - Acquisition Benefits" above; 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 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 acquisitions including
estimated royalty production, royalty production revenue 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).
Statements relating to "reserves" are also deemed to be forward
looking information, 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.
Without limitation of the foregoing, future dividend payments,
if any, and the level thereof is uncertain, as the Company's
dividend policy and the funds available for the payment of
dividends from time to time is dependent upon, among other things,
free cash flow(6), financial requirements for the
Company's operations and the execution of its growth strategy,
fluctuations in working capital and the timing and amount of
capital expenditures, debt service requirements and other
factors beyond the Company's control. Further, the ability of
Topaz to pay dividends will be subject to applicable laws
(including the satisfaction of the solvency test contained in
applicable corporate legislation) and contractual restrictions
contained in the instruments governing its indebtedness, including
its credit facility.
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,"
"EBITDA per share," "cash flow," "free cash flow," "free cash flow
per share," "payout ratio," "adjusted working capital," "net debt,"
"net debt / EBITDA" and "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," "free cash flow," "adjusted
working capital," "net debt" and "net debt / EBITDA" 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. "EBITDA per share" is defined as EBITDA divided
by the weighted average common shares outstanding during the
respective period. "Cash flow" is cash from (used in) operations
before changes in non-cash working capital. "Free cash flow"
is defined as cash flow less capital expenditures. "Free cash
flow per share" is defined as free cash flow divided by the
weighted average common shares outstanding during the respective
period. "Payout ratio" is dividends paid expressed as a
percentage of cash flow. "Adjusted working capital" is
current assets less current liabilities, adjusted for financial
instruments and "net debt" is total debt outstanding less adjusted
working capital. "Net debt / EBITDA" is year ending net debt
divided by the trailing twelve month EBITDA during the respective
year.
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.
MARKET, INDEPENDENT THIRD-PARTY AND INDUSTRY DATA
Certain market, independent third-party and industry data
contained in this news release is based upon information from
government or other independent industry publications and reports
or based on estimates derived from such publications and reports.
Government and industry publications and reports generally indicate
that they have obtained their information from sources believed to
be reliable, but the Company has not conducted its own independent
verification of such information. This news release also includes
certain data, including production, well count estimates, capital
expenditures and other operational results, derived from public
filings made by independent third parties. While the Company
believes this data to be reliable, market and industry data is
subject to variations and cannot be verified with complete
certainty due to limits on the availability and reliability of raw
data, the voluntary nature of the data gathering process and other
limitations and uncertainties inherent in any statistical survey.
The Company has not independently verified any of the data from
independent third-party sources referred to in this news release or
ascertained the underlying assumptions relied upon by such
sources.
INFORMATION REGARDING PUBLIC-ISSUER COUNTERPARTIES
Certain information contained in this news release relating to
the Company's public issuer counterparties which include Tourmaline
and the nature of its business is taken from and based solely upon
information published by Tourmaline. The Company has not
independently verified the accuracy or completeness of any such
information.
General
See also "Forward-Looking Statements" and "Non-GAAP Financial
Measures" in the most recently filed Management's Discussion and
Analysis.
SOURCE Topaz Energy Corp.