CALGARY, AB, Dec. 14, 2020 /CNW/ - Topaz Energy Corp. (TSX:
TPZ) ("Topaz" or the "Company") is pleased to announce it has
entered into a non binding letter of intent with Tamarack Valley
Energy Ltd. ("Tamarack") for the purchase of royalty interests
which includes a minimum capital development commitment (the
"Royalty Acquisition"). The Royalty Acquisition provides free cash
flow growth and diversification for Topaz while enabling Tamarack
to advance its own growth; demonstrating Topaz's growth strategy of
acquiring low-risk, stable and predictable revenue from
high-quality strategic partners.
Pursuant to the Royalty Acquisition, Topaz will acquire a newly
created gross overriding royalty interest on predominantly crude
oil production on developed and undeveloped lands in the
Clearwater area of Alberta ("Clearwater"). In addition, Tamarack
will provide a two year capital commitment of $80 million. Topaz will fund the Royalty
Acquisition from its available cash on hand.
Current production from the Royalty Acquisition lands is
estimated at 2,000 boe/d which Tamarack expects will increase to
10,000 boe/d over the next three years in conjunction with an
expansion of its capital plan. The Royalty Acquisition is expected
to close on or before February 28,
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 today.
Topaz Activity Update
There are currently 12 rigs committed to resume drilling
activity in January 2021 on the
Company's royalty lands operated by Tourmaline following previously
scheduled holiday downtime throughout the month of December.
There is currently one active drilling rig on Topaz's existing
Clearwater royalty acreage. The
operator recently fulfilled its contractual two-well drilling
commitment and the balance of consideration for the previously
disclosed royalty acquisition in the Clearwater has been released from escrow.
Based on encouraging results, the operator has expanded its active
drilling program and expects to drill at least two additional wells
in the near term on Topaz's royalty acreage. Topaz recently
participated alongside the operator in an acreage acquisition to
further expand its royalty acreage in the Clearwater.
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
enhanced sustainability; anticipated additional drilling activity
on the Company's royalty lands operated by Tourmaline and existing
Clearwater royalty acreage; 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 enhanced sustainability 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