CALGARY, AB, Jan. 25, 2021 /CNW/ - Topaz Energy Corp. (TSX:
TPZ) ("Topaz" or the "Company") is pleased to announce that it has
entered into a strategic alliance with a private midstream water
company ("Co-Venturer"), and together, entered into definitive
agreements to each acquire a working interest in certain water
infrastructure assets from an E&P producer ("Producer") along
with a long-term fixed take-or-pay water disposal agreement whereby
the Producer retains operatorship and obtains committed access to
cost efficient and environmentally responsible water disposal,
sourcing and storage (the "Water Infrastructure Acquisition"). The
Water Infrastructure Acquisition provides capital to the Producer
and demonstrates Topaz's growth strategy to provide free cash flow
growth and diversification for Topaz.
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Pursuant to the Water Infrastructure Acquisition, Topaz,
together with its Co-Venturer, will acquire a 99% non-operated
working interest in pipeline connected disposal facilities along
with water storage reservoirs in one of the most prolific areas of
the Alberta Montney for total cash consideration of $24 million (Topaz's 50% share of $12 million was funded from its available cash on
hand). Topaz and its Co-Venturer also entered into an option
agreement ("Option Agreement") which provides an option to invest
up to an additional $20 million in
future expansions in exchange for a pre-determined economic return
through an incremental long-term fixed take-or-pay commitment.
Strategic Rationale
The Alberta Montney has well defined, prolific economic
resources which provide high quality, long life, liquids-rich
natural gas reserves and the Montney is considered one of Canada's most economic liquids-rich-natural
gas plays. Topaz believes the Water Infrastructure
Acquisition demonstrates the Producer's commitment to enhancing
sustainability and environmental stewardship by reducing trucking
and logistics costs and reducing freshwater used for completion
activity.
Topaz Acquisition Benefits
Pursuant to the Water Infrastructure Acquisition, Topaz will
generate $27.8 million total gross
processing revenue over the 15 year term and Topaz will not be
responsible for operating expenses. Incremental net
processing revenue generated from third party utilization of the
facilities could generate incremental return to Topaz. Topaz
estimates, based on its 2021 guidance provided on November 4, 2020, the Water Infrastructure
Acquisition is accretive on a free cash flow per share basis in
2021.
Topaz Activity Update
There are currently 12 active drilling rigs on the Company's
royalty lands operated by Tourmaline Oil Corp. ("Tourmaline") which
includes two drilling rigs on the royalty lands Topaz acquired in
the Deep Basin area of Alberta on
January 4, 2021.
There are currently two active drilling rigs on the Company's
royalty lands in the Clearwater
area of Alberta operated by
Tamarack Valley Energy Ltd.
Topaz has acquired a 4% gross overriding royalty on
approximately 11,000 gross acres in the greater Clearwater area of Alberta, pursuant to an area of mutual
interest agreement, with a private operator for cash consideration
of approximately $0.45
million.
2020 Results and Updated 2021 Guidance
Topaz plans to release its annual and fourth quarter 2020
results and updated 2021 guidance estimates on Wednesday, March 17, 2021 after markets
close. Topaz will host a conference call on Thursday, March 18, 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 26428688.
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 benefits to be derived by the Company and the
Producer from the Water Infrastructure Acquisition including the
amount of gross processing revenue to be derived by Topaz over the
15 year term of the take-or-pay contract, that incremental net
processing revenue generated from third party utilization of the
facilities could generate incremental return to Topaz and that
based on its 2021 guidance provided on November 4, 2020, the Water Infrastructure
Acquisition is accretive on a free cash flow per share basis in
2021; other expected benefits from the Water Infrastructure
Acquisition including enhancing Topaz's future growth outlook
and diversification and providing value enhancing assets that are
accretive on a 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 Water Infrastructure Acquisition on the terms or on
the timing announced or at all and the failure to realize some or
all of the anticipated benefits of the Water Infrastructure
Acquisition 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.
SOURCE Topaz Energy Corp