CALGARY, AB, April 12, 2021 /CNW/ - Topaz Energy Corp.
(TSX: TPZ) ("Topaz" or the "Company") is pleased to announce that
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 in the Peace River High area of
Alberta for total purchase
consideration of $32.0 million (the
"Royalty Acquisition"). The Royalty Acquisition provides free cash
flow growth and enhanced financial sustainability for Topaz while
enabling Tamarack to advance its own growth.
Pursuant to the 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) ("Royalty
Acquisition Lands"). Average production from the Royalty
Acquisition Lands during March 2021
exceeded 13,000 boe/d (71% crude oil and natural gas liquids) which
Topaz expects Tamarack 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. Topaz will fund the Royalty
Acquisition from its available cash on hand.
The Royalty Acquisition is expected to close in June 2021, subject to entering into definitive
agreements and satisfaction of customary closing conditions
including Tamarack completing a corporate acquisition it announced
today.
Strategic Rationale
The Royalty Acquisition Lands are contiguous with Topaz's
existing 420,000 gross royalty acres in the Peace River High area
(operated by Tourmaline Oil Corp. ("Tourmaline")) and the Royalty
Acquisition represents a 71% increase to Topaz's royalty acreage in
the Peace River High area and advances its position as the largest
Charlie Lake royalty holder in the
area. 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. Topaz's Peace River High area royalty acreage is
operated by producers who demonstrate active environmental
stewardship and the assets have strong liability management ratings
given the relatively low asset retirement obligations attributed to
the assets.
Topaz Acquisition Benefits
Topaz estimates that, based on the midpoint of the estimated
future production range (12,500 boe/d; 71% crude oil and natural
gas liquids), current commodity prices which are expected to enable
Tamarack to generate significant free cash flow and the
$60 million minimum capital
development commitment, Topaz will generate average annualized
royalty production of 250 boe/d in 2021 and 2022 which represents
2% royalty production growth to Topaz. Based on current
forward commodity prices and Tamarack's estimated capital plans
attributable to the Royalty Acquisition Lands, Topaz estimates that
the Royalty Acquisition will generate annualized royalty production
revenue of approximately $4.4 million
and $4.0 million in 2021 and 2022,
respectively, and annualized free cash flow growth on a per share
basis, of 4% in 2021 and 2022. The Royalty Acquisition
enhances Topaz's future growth outlook and is consistent with its
strategy to acquire value-enhancing assets that are accretive on a
per share basis.
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
Royalty Acquisition; planned funding for the Royalty Acquisition;
anticipated increases in production and revenue from the Royalty
Acquisition lands and Tamarack's estimated capital plan
attributable to the Royalty Acquisition Lands; 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 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 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.
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