CALGARY, AB, March 17, 2021 /CNW/ - Topaz Energy Corp. (TSX:
TPZ) ("Topaz" or the "Company") is pleased to announce financial
results for the three months and year ended December 31, 2020.
Despite the challenging backdrop of COVID-19, Topaz achieved the
strategic objectives it established for 2020 demonstrating the
resiliency of its business model. During 2020, Topaz established an
independent management team, expanded its board of directors,
delivered a reliable and sustainable $0.20 per share quarterly dividend and completed
its initial public offering, raising $250.1
million and listing its common shares on the Toronto Stock
Exchange in October.
During the year, Topaz invested $171.5
million of capital on additional high free cash flow margin
assets which contributed annualized 2020 EBITDA(2) of
$19.5 million. To date, Topaz has
assembled a material royalty position in the Cretaceous Clearwater
play in Alberta with royalty
interests on over 190,000 gross acres of developed and undeveloped
land which are supported by cumulative capital development
commitments of $143.0 million. The
Company has also significantly expanded its royalty interests in
the WCSB's largest natural gas complex, the Alberta Deep Basin
("Deep Basin"). On January 1, 2021,
Topaz acquired royalty interests on 720,000 gross acres of land
which Topaz estimates will provide free cash flow(2)
growth on a per share basis, of 8%(5) and
12%(5) in 2021 and 2022, respectively.
In 2020, Topaz generated total EBITDA(2) of
$89.3 million and paid $73.1 million in dividends. Topaz is a unique,
premium energy investment vehicle which is underpinned by its
strategic partners' continued focus and commitment to developing
Topaz's royalty acreage which enables Topaz to provide a reliable
and predictable outcome. Topaz is well funded for growth with cash
on hand and a recently expanded, undrawn $300.0 million credit facility.
Topaz commenced its current operations on November 14, 2019. Highlights of Topaz's
financial results for the three months ended December 31, 2020 ("Q4 2020"), for the year ended
December 31, 2020 ("2020"); as well
as significant transactions completed subsequent to December 31, 2020 ("Subsequent Period") and
updated guidance estimates for 2021 ("2021") are presented
below:
Financial performance
- Generated total revenue and other income(1) of
$30.7 million and $99.9 million in Q4 2020 and 2020,
respectively.
- Generated EBITDA(2) of $27.1
million and $89.3 million,
realizing an EBITDA margin(2) of 88% and 89% in Q4 2020
and 2020, respectively.
Royalty activity update
- Topaz's average royalty production(6) for Q4 2020
and 2020 was 10,335 boe/d and 10,144 boe/d, which generated royalty
production revenue of $17.6 million
and $58.9 million, respectively.
- During Q4 2020, 42 gross wells were spud on Topaz's royalty
acreage (36 gross wells on acreage operated by Tourmaline Oil Corp.
("Tourmaline") and 6 gross wells on Topaz's greater Clearwater acreage); 7 of which were brought
on production(3) by December 31,
2020. In 2020, 173 gross wells were spud on Topaz's royalty
acreage (167 gross wells on acreage operated by Tourmaline and 6
gross wells on Topaz's greater Clearwater acreage); 112 of which were brought
on production(3) by December 31,
2020. Topaz expects the additional wells drilled but not
completed by December 31, 2020 will
be brought on production during 2021. Through February 2021 there were 14 drilling rigs active
on Topaz's royalty acreage; activity is expected to reduce to
accommodate spring breakup.
Infrastructure activity update
- During Q4 2020 and 2020, Topaz generated $10.3 million and $30.8
million, respectively of processing revenue attributed to
its non-operated ownership in processing facilities. During Q4 2020
and 2020, average daily utilization of Topaz's net natural gas
processing capacity was 100% as Topaz's net processing capacity
(71% of which is contracted under fixed take-or-pay) was fully
utilized.
- During Q4 2020 and 2020, Topaz generated $2.8 million and $10.2
million, respectively, of other income which includes
$2.5 million and $9.8 million attributed to its contracted
interest in third party infrastructure income and $0.3 million and $0.4
million attributed to interest income, respectively.
Dividends paid
- The Company paid dividends of $73.1
million ($0.80 per share) in
2020 representing a payout ratio(2) of 82%. On
March 1, 2021, Topaz's Board declared
its 2021 first quarter dividend of $0.20 per share which is expected to be paid on
March 31, 2021 to shareholders of
record on March 15, 2021.
Equity financings
- In 2020, Topaz raised total gross proceeds of $395.4 million through a private placement in
June and July 2020 consisting of 13.2
million Common Shares for gross proceeds of $145.3 million; and completed its initial public
offering in October 2020 ("IPO"). The
IPO consisted of a treasury offering by the Company and a secondary
offering by its majority shareholder, Tourmaline of an aggregate
20.2 million Common Shares for gross proceeds to the Company and
Tourmaline of approximately $250.1
million and $13.0 million,
respectively.
Accretive growth transactions
- Topaz completed $171.5 million of
acquisitions during 2020 including:
-
- two infrastructure acquisitions for $152.5 million which are supported by 15 year
fixed take-or-pay commitments which contributed annualized 2020
EBITDA(2) of $18.5
million; and
- the acquisition of newly created gross overriding royalty
interests on production from 149,000 gross acres of developed and
undeveloped lands in the Clearwater area for $19.0 million which are supported by $83.0 million of capital development
commitments.
- Topaz completed $142.0 million of
acquisitions during the Subsequent Period including:
-
- the acquisition, from Tourmaline, of a newly created gross
overriding royalty interest from production on 720,000 gross acres
of developed and undeveloped lands in the Deep Basin, for total
cash consideration of $130.0 million
("Deep Basin Royalty Acquisition"). Tourmaline estimates it will
direct approximately $150.0 million
per year of its capital plan to the Deep Basin Royalty Acquisition
which is expected to increase production by approximately 5% per
year over the first two years; and
- the acquisition of a non-operated working interest in pipeline
connected water management and conservation facilities for
$12.0 million which is underpinned by
a 15 year fixed take-or-pay commitment whereby Topaz will generate
$27.8 million of processing fees over
15 years and is not responsible for operating costs.
- On March 12, 2021, Topaz entered
into definitive agreements for the acquisition of a 4% newly
created gross overriding royalty on 45,000 acres of developed and
undeveloped land in the greater Clearwater area, including a multi-year
$60.0 million capital development
commitment, for cash consideration of $13.7
million, prior to customary closing adjustments. The
acquisition is scheduled to close March 25,
2021.
Funded for growth
- Topaz's year end December 31,
2020 adjusted working capital(2) was $238.3 million and its $125.0 million credit facility was undrawn. On
February 19, 2021, Topaz completed
the syndication, expansion and extension of its undrawn credit
facility, expanding to a syndicate of seven Canadian banks;
increasing the available borrowing capacity from $125.0 million to $300.0
million; extending the maturity date from June 10, 2022 to February
19, 2024 and reducing the borrowing costs.
2020 Reserves
- Proved developed producing ("PDP") net reserves(4)
totaled 16.1 mmboe as at December 31,
2020, up from 15.5 mmboe as at December 31, 2019. PDP net reserve value
before-tax, discounted at 10%(4) totaled $508.5 million at December
31, 2020, 29% higher than December
31, 2019 ($394.1 million)
despite a decrease in the price forecast incorporated in the annual
independent reserve evaluations from 2019 to 2020. The increase is
primarily attributable to the infrastructure acquisitions Topaz
completed during 2020. The Deep Basin Royalty Acquisition closed
January 1, 2021 and is not included
in Topaz's 2020 reserves. Effective January
1, 2021, the PDP net reserves(4) attributed to
the Deep Basin Royalty Acquisition are 3.3 mmboe which represents a
20% increase relative to Topaz's December
31, 2020 PDP net reserves(4).
Social and Governance Initiatives
- During the year, Topaz has continued to strengthen its
corporate governance foundation including the appointment of a lead
independent director; broadening its diversity from an
expertise/experience and gender perspective (Topaz's Board is
comprised of 75% independent directors, 33% of which are women);
establishing its Audit, Reserves and Governance, Compensation &
Sustainability Committees; each comprised of independent directors;
implementing additional corporate governance policies (available on
the Company's website); and implementing a performance based
executive compensation plan strongly aligned with shareholders'
interests.
- Topaz supports a number of community endeavors focused on
education and social issues including poverty, homelessness,
community outreach and mental health. Organizations supported to
date include the United Way, Lionheart Foundation, Inn from the
Cold and Habitat for Humanity. Topaz has partnered with the
University of Calgary's Haskayne School
of Business to participate in its Bachelor of Commerce Co-operative
Education Program and has provided a multi-year commitment to
provide an annual bursary to a business student demonstrating
interest in science, engineering and the Canadian energy
sector.
2021 Guidance Update(5)
- Topaz's 2021 outlook is supported by our confidence in
Tourmaline's continued focus on developing Topaz's royalty acreage;
and the strategic partnerships developed with operators in the
Clearwater oil play which are
underpinned by contractual capital commitments.
- Topaz's 2021 guidance estimates are presented in the table
below. Topaz's estimates exclude any future acquisitions or
deployment of capital pursuant to its growth strategy.
$mm except
boe/d
|
Year
ended Dec. 31,
2020 (Actual)
|
Year
ended Dec. 31,
2021 (Estimate)
|
Year over year
estimated
increase/(decrease)
|
Annual average
royalty production (boe/d)(6)
|
10,144
|
11,600 –
11,800
|
15%(7)
|
Processing revenue
and other income
|
40.6(9)
|
50.8
|
25%
|
EBITDA(2)
|
89.3
|
128.0 -
130.6
|
45%(7)
|
Annual dividends
($0.80 per share)
|
73.1
|
90.1(8)
|
23%
|
Exit adjusted working
capital(2)
|
238.3
|
119.2 -
121.8
|
(49%)(7)
|
Capital expenditures
(excluding
acquisitions)
|
1.2
|
1.0 – 2.0
|
25%
|
Commodity price
assumptions
|
|
|
|
AECO 5A
(CAD$/mcf)
|
$2.24
|
$2.77
|
24%
|
NYMEX WTI
(US$/bbl)
|
$39.34
|
$60.41
|
54%
|
|
|
(1)
|
Comprised of royalty
production revenue, processing revenue and other income.
|
(2)
|
Refer to "Non-GAAP
Financial Measures."
|
(3)
|
Gross wells brought
on production during the periods presented refers to gross wells
spud within the respective year and does not take into
consideration gross wells spud during previous years.
|
(4)
|
Excerpts of the
evaluation of Topaz's reserves and associated future net revenue as
prepared by Topaz's independent reserves evaluators. A detailed
review of Topaz's reserves information is available in the
Company's 2020 Annual Information Form which is available on the
Company's website or www.sedar.com.
|
(5)
|
Refer to "Forward
Looking Statements."
|
(6)
|
Refer to
"Supplemental Information Regarding Product Types."
|
(7)
|
Estimated using the
midpoint of the 2021 estimates (average royalty production 11,700
boe/d; $129.3 mm EBITDA and $120.5 mm adjusted working
capital).
|
(8)
|
Estimated based on
112.6 million shares outstanding as at March 17, 2021. The
Company's dividend payments remain subject to Board
approval.
|
(9)
|
Excludes interest
income earned in 2020 of $0.4 million.
|
Selected Financial Information(1)
|
|
|
|
|
|
|
For the periods
ended
|
Dec. 31,
2020
|
Dec. 31,
2020
|
Sept. 30,
2020
|
Jun. 30,
2020
|
Mar. 31,
2020
|
Nov.14-
|
($000s) except per
share
|
Year
ended
|
Three
months
|
Three
months
|
Three
months
|
Three
months
|
Dec.31
2019(1)
|
Royalty production
revenue
|
58,886
|
17,611
|
14,826
|
11,935
|
14,514
|
9,832
|
Processing
revenue
|
30,757
|
10,305
|
9,188
|
5,296
|
5,968
|
2,943
|
Other
income(5)
|
10,233
|
2,783
|
2,384
|
2,789
|
2,277
|
1,408
|
Total
|
99,876
|
30,699
|
26,398
|
20,020
|
22,759
|
14,183
|
Cash
expenses:
|
|
|
|
|
|
|
Operating
|
(4,205)
|
(1,643)
|
(691)
|
(1,016)
|
(855)
|
(481)
|
Marketing
|
(589)
|
(176)
|
(201)
|
(122)
|
(90)
|
(98)
|
General and
administrative
|
(3,946)
|
(673)
|
(1,030)
|
(1,249)
|
(994)
|
(1,331)
|
Realized loss on
financial instruments
|
(1,438)
|
(744)
|
(506)
|
(188)
|
─
|
─
|
Interest
expense
|
(620)
|
(484)
|
(76)
|
(60)
|
─
|
─
|
Cash
flow(2)
|
89,078
|
26,979
|
23,894
|
17,385
|
20,820
|
12,273
|
Per basic
share(3)
|
$0.99
|
$0.25
|
$0.26
|
$0.22
|
$0.26
|
$0.15
|
Cash from (used in)
operating activities
|
83,642
|
32,887
|
12,571
|
24,234
|
13,950
|
(350)
|
Per basic
share(3)
|
$0.93
|
$0.31
|
$0.13
|
$0.30
|
$0.17
|
$(0.004)
|
Net income
(loss)
|
3,089
|
8,382
|
(2,935)
|
(1,125)
|
(1,234)
|
653
|
Per basic and diluted
share(3)
|
$0.03
|
$0.08
|
$(0.03)
|
$(0.01)
|
$(0.02)
|
$0.01
|
EBITDA(2)
|
89,313
|
27,126
|
23,922
|
17,445
|
20,820
|
12,273
|
EBITDA
margin(2)
|
89%
|
88%
|
91%
|
87%
|
91%
|
87%
|
Dividends
paid
|
73,131
|
22,489
|
18,642
|
16,000
|
16,000
|
─
|
Per basic
share(3)
|
$0.80
|
$0.20
|
$0.20
|
$0.20
|
$0.20
|
─
|
Payout
ratio(2)
|
82%
|
83%
|
78%
|
92%
|
77%
|
─
|
Capital
expenditures
|
1,256
|
472
|
513
|
159
|
112
|
2
|
Acquisitions
|
171,463
|
17,963
|
153,500
|
─
|
─
|
─
|
Weighted average
shares - basic(4)
|
90,110
|
106,839
|
93,126
|
80,257
|
80,000
|
80,000
|
Average Royalty
Production
|
|
|
|
|
|
|
Natural gas
(mcf/d)(6)
|
56,438
|
57,621
|
55,400
|
55,056
|
57,672
|
58,131
|
Light and medium crude
oil (bbl/d)(6)
|
208
|
192
|
195
|
231
|
216
|
264
|
Natural gas liquids
(bbl/d)(6)(7)
|
529
|
540
|
542
|
484
|
550
|
502
|
Total
(boe/d)
|
10,144
|
10,335
|
9,970
|
9,891
|
10,378
|
10,455
|
Realized Commodity
Prices
|
|
|
|
|
|
|
Natural gas
($/mcf)(6)
|
$2.25
|
$2.65
|
$2.26
|
$2.00
|
$2.05
|
$2.56
|
Light and medium crude
oil ($/bbl)(6)
|
$41.91
|
$48.90
|
$48.66
|
$26.14
|
$46.35
|
$66.15
|
Natural gas liquids
($/bbl)(6)(7)
|
$48.09
|
$54.09
|
$49.27
|
$30.61
|
$56.35
|
$76.30
|
Total
($/boe)
|
$15.86
|
$18.52
|
$16.16
|
$13.26
|
$15.37
|
$19.52
|
Benchmark
Pricing
|
|
|
|
|
|
|
Natural
Gas
|
|
|
|
|
|
|
AECO 5A
(CAD$/mcf)
|
$2.24
|
$2.65
|
$2.25
|
$2.00
|
$2.04
|
$2.49
|
Light and medium
crude oil
|
|
|
|
|
|
|
NYMEX WTI
(USD$/bbl)
|
$39.34
|
$42.70
|
$40.92
|
$28.00
|
$46.17
|
$56.87
|
Edmonton Par
(CAD$/bbl)
|
$45.06
|
$49.21
|
$49.06
|
$30.24
|
$51.89
|
$66.70
|
Natural gas
liquids
|
|
|
|
|
|
|
Edmonton Condensate
(CAD$/bbl)
|
$49.71
|
$55.95
|
$51.71
|
$31.74
|
$66.45
|
$74.77
|
CAD$/USD$
|
$0.7465
|
$0.7678
|
$0.7507
|
$0.7220
|
$0.7443
|
$0.7577
|
Selected statement
of financial position results
($000s) except share
amounts
|
At Dec. 31,
2020
|
At Sept. 30,
2020
|
At Jun. 30,
2020
|
At Mar. 31,
2020
|
At Dec. 31,
2019
|
Total
assets
|
|
1,008,546
|
794,787
|
793,323
|
679,858
|
697,234
|
Working
capital
|
|
237,675
|
21,844
|
148,745
|
25,620
|
20,767
|
Adjusted working
capital(2)
|
|
238,268
|
23,917
|
149,180
|
25,475
|
20,767
|
Net debt
(cash)(2)
|
|
(238,268)
|
(17,082)
|
(149,180)
|
(25,475)
|
(20,767)
|
Common shares
outstanding(4)
|
|
112,449
|
93,208
|
91,690
|
80,000
|
80,000
|
|
|
(1)
|
Financial results
from continuing operations
|
(2)
|
Refer to "Non-GAAP
Financial Measures".
|
(3)
|
Calculated using
basic or diluted weighted average shares outstanding.
|
(4)
|
Shown in thousand
shares outstanding.
|
(5)
|
Other income of $2.8
million and $10.2 million for Q4 2020 and 2020 includes interest
income of $0.3 million and $0.4 million, respectively.
|
(6)
|
Refer to
"Supplemental Information Regarding Product Types."
|
(7)
|
Natural gas liquids
is comprised of condensate; Topaz does not have any material
royalty interests on other natural gas liquids.
|
Royalty Activity Update
Royalty production
revenue
The Company's royalty production revenue is
determined pursuant to the terms of its royalty agreements. The
commodity prices for natural gas, light and medium crude oil and
natural gas liquids (which are comprised of condensate as Topaz
does not currently have any material royalty interests in other
natural gas liquids) are based on market index prices in the month
of production and Topaz's royalty contracts do not permit
transportation or quality deductions. The royalty production
volumes are currently marketed with the respective royalty payor's
production volume and revenue is generally received two
months after the natural gas, crude oil and natural gas liquids
volumes are produced. The Company can elect to take its share of
the royalty production volume in kind, if desired.
Royalty production revenue during Q4 2020 and 2020 was
$17.6 and $58.9 million, respectively. Topaz realized
commodity prices consistent with the respective market index for
each commodity produced.
Royalty production
Topaz's average royalty
production for Q4 2020 and 2020 was 10,335 boe/d and 10,144 boe/d,
respectively. During partial Q4 2019 average royalty production was
10,455 boe/d. Topaz generates royalty revenue on existing
production and may generate royalty revenue on future development
of the royalty lands.
Royalty acreage activity
During Q4 2020, 42
gross wells were spud on Topaz's royalty acreage (36 gross wells on
acreage operated by Tourmaline and 6 gross wells on Topaz's greater
Clearwater acreage); 7 of which
were brought on production(3) by December 31, 2020. In 2020, 173 gross wells were
spud on Topaz's royalty acreage (167 gross wells on acreage
operated by Tourmaline and 6 gross wells on Topaz's greater
Clearwater acreage); 112 of which
were brought on production(3) by December 31, 2020. Topaz expects the additional
wells drilled but not completed by December
31, 2020 will be brought on production during 2021. Through
February 2021 there were 14 drilling
rigs active on Topaz's royalty acreage; Topaz expects activity will
be reduced in the near term to accommodate spring breakup.
|
Three
months
ended
Dec. 31,
2020
|
Year
ended
Dec. 31,
2020
|
Period
from
Nov. 14,
to
Dec. 31,
2019(1)
|
Royalty production
revenue
|
|
|
|
Natural
gas(5)
|
14,061
|
46,379
|
7,155
|
Light and medium crude
oil(5)
|
861
|
3,192
|
841
|
Natural gas
liquids(5)(6)
|
2,689
|
9,315
|
1,836
|
Total
|
17,611
|
58,886
|
9,832
|
Average royalty
production
|
|
|
|
Natural gas
(mcf/d)(5)
|
57,621
|
56,438
|
58,131
|
Light and medium crude
oil (bbl/d)(5)
|
192
|
208
|
264
|
Natural gas liquids
(bbl/d)(5)(6)
|
540
|
529
|
502
|
Total
(boe/d)
|
10,335
|
10,144
|
10,455
|
Realized royalty
production prices
|
|
|
|
Natural gas
($/mcf)(5)
|
$2.65
|
$2.25
|
$2.56
|
Light and medium crude
oil (C$/bbl)(5)
|
$48.90
|
$41.91
|
$66.15
|
Natural gas liquids
(C$/bbl)(5)(6)
|
$54.09
|
$48.09
|
$76.30
|
Total
($/boe)
|
$18.52
|
$15.86
|
$19.52
|
Benchmark
Pricing
|
|
|
|
Natural
gas
|
|
|
|
AECO 5A
(CAD$/mcf)
|
$2.65
|
$2.24
|
$2.49
|
Light and medium
crude oil
|
|
|
|
NYMEX WTI
(USD$/bbl)
|
$42.70
|
$39.34
|
$56.87
|
Edmonton Par
(CAD$/bbl)
|
$49.21
|
$45.06
|
$66.70
|
Natural gas
liquids
|
|
|
|
Edmonton Condensate
(CAD$/bbl)
|
$55.95
|
$49.71
|
$74.77
|
CAD$/USD$
|
$0.7678
|
$0.7465
|
$0.7577
|
Royalty Acreage
Activity(2)
|
|
|
|
Gross wells spud
during the period(4)
|
42
|
173
|
48
|
Gross wells spud and
brought on production(3)(4)
|
7
|
112
|
19
|
|
|
(1)
|
The results of
operations from January 1, 2019 to November 13, 2019 are presented
as discontinued operations. Topaz commenced operations on November
14, 2019 therefore its results of operations from November 14, 2019
to December 31, 2019 are presented as continuing
operations.
|
(2)
|
Refers to the number
of wells spud or brought on production, as indicated, by the
working interest owners (operators). Topaz does not directly
conduct upstream petroleum and natural gas exploration and
development operations.
|
(3)
|
Refers to wells
brought on production which were spud within the respective year;
does not take into consideration wells spud during previous
years.
|
(4)
|
Activity during
partial Q4 2019 reflects activity for the full three months ended
December 31, 2019 for comparative activity related to Topaz's
royalty acreage. Topaz did not commence operations until November
14, 2019.
|
(5)
|
Refer to
"Supplemental Information Regarding Product Types."
|
(6)
|
Natural gas liquids
is comprised of condensate; Topaz does not have any material
royalty interests on other natural gas liquids.
|
Infrastructure Activity Update
Processing
revenue
The Company's processing revenue is
generated through its non-operated ownership in processing
facilities. The facilities provide processing services to customers
on a fee-for-service basis Certain fees include fixed take-or-pay
arrangements under long-term commercial arrangements.
During Q4 2020 and 2020, Topaz generated $10.3 million and $30.8
million, respectively of processing revenue attributed to
its non-operated ownership in processing facilities. Average daily
utilization during Q4 2020 and 2020 of Topaz's net natural gas
processing capacity was 100% which is attributed to full
utilization of Topaz's net processing capacity (71% of which is
contracted under fixed take-or-pay).
Other income
The Company generates income by
way of a contracted interest in third party revenue generated
through fee-for-service processing contracts with no underlying
facility ownership, including but not limited to, processing,
compression and water handling revenue, generated at multiple
facilities owned by Tourmaline pursuant to the respective third
party fee handling agreements. These facilities include natural gas
processing plants, crude oil batteries, pipelines, water disposal
facilities, compressor stations and other miscellaneous facilities
associated with the handling of crude oil, natural gas and natural
gas liquids. The facilities are located across all three of
Tourmaline's core operating areas and are operated by Tourmaline.
Topaz does not have an ownership interest in the underlying
assets.
During Q4 2020 and 2020, Topaz generated $2.8 million and $10.2
million, respectively, of other income which includes
$2.5 million and $9.8 million attributed to its contracted
interest in third party infrastructure income and $0.3 million and $0.4
million attributed to interest income, respectively.
($000s)
|
Three
months ended Dec. 31, 2020
|
Year ended Dec 31, 2020
|
Period
from Nov. 14,
to Dec. 31,
2019(1)
|
Processing
revenue
|
10,305
|
30,757
|
2,943
|
Other
income(3)
|
2,783
|
10,233
|
1,408
|
Total
|
13,088
|
40,990
|
4,351
|
Infrastructure
utilization activity
|
|
|
|
Natural gas
processing facilities(2):
|
|
|
|
Ownership capacity
under fixed take-or-pay contract
|
125,000
|
85,587
|
50,000
|
Variable ownership
capacity
|
48,149
|
40,283
|
35,500
|
Total ownership
capacity
|
173,149
|
125,870
|
85,500
|
Total throughput
volume
|
173,149
|
125,870
|
85,500
|
Total
utilization (%)
|
100%
|
100%
|
100%
|
|
|
(1)
|
The results of
operations from January 1, 2019 to November 13, 2019 are presented
as discontinued operations. Topaz commenced operations on November
14, 2019 therefore its results of operations from November 14, 2019
to December 31, 2019 are presented as continuing
operations.
|
(2)
|
Weighted average
daily rate (Topaz net ownership mcf/d) for the periods
presented.
|
(3)
|
Other income of $2.8
million and $10.2 million for Q4 2020 and 2020 includes interest
income of $0.3 million and $0.4 million, respectively.
|
Additional information
Additional information about Topaz, including the financial
statements and management's discussion and analysis for the year
ended December 31, 2020 as well as
the Company's 2020 Annual Information Form are available
electronically under the Company's profile on SEDAR, www.sedar.com,
and on Topaz's website, www.topazenergy.ca.
Topaz will host a conference call tomorrow, 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. For further information, please visit the
Company's website www.topazenergy.ca.
RESERVES DATA
The reserves data set forth above is based upon the report of
GLJ Petroleum Consultants Ltd. ("GLJ") dated effective December 31, 2020. The price forecast used in the
reserve evaluations is an average of the January 1, 2021 price forecasts for GLJ, Sproule
Associates Ltd. and McDaniel & Associates Consultants Ltd.,
each of which is available on their respective websites,
www.gljpc.com, www.sproule.com and www.mcdan.com.
The reserve data provided in this news release presents only a
portion of the disclosure required under National Instrument
51-101. All of the required information is contained in the
Company's Annual Information Form for the year ended December 31, 2020, which is available on SEDAR at
www.sedar.com.
There are numerous uncertainties inherent in estimating
quantities of crude oil and conventional natural gas reserves and
the future cash flows attributed to such reserves. The reserve and
associated cash flow information set forth above are estimates
only. In general, estimates of economically recoverable crude oil,
natural gas and natural gas liquids reserves and the future net
cash flows therefrom are based upon a number of variable factors
and assumptions, such as historical production from the properties,
production rates, ultimate reserve recovery, timing and amount of
capital expenditures, marketability of oil and natural gas, royalty
rates, the assumed effects of regulation by governmental agencies
and future operating costs, all of which may vary materially. For
those reasons, estimates of the economically recoverable crude oil,
natural gas and natural gas liquids reserves attributable to any
particular group of properties, classification of such reserves
based on risk of recovery and estimates of future net revenues
associated with reserves prepared by different engineers, or by the
same engineers at different times, may vary. The Company's actual
production, revenues, taxes and development and operating
expenditures with respect to its reserves will vary from estimates
thereof and such variations could be material.
All evaluations and reviews of future net revenue are stated
prior to any provisions for interest costs or general and
administrative costs and after the deduction of estimated future
capital expenditures for wells to which reserves have been
assigned. The after-tax net present value of the Company's oil and
gas properties reflects the tax burden on the properties on a
stand-alone basis and utilizes the Company's tax pools. It does not
consider the corporate tax situation, or tax planning. It does not
provide an estimate of the after-tax value of the Company, which
may be significantly different. The Company's financial statements
and the management's discussion and analysis should be consulted
for information at the level of the Company.
The estimates of reserves and future net revenue for individual
properties may not reflect the same confidence level as estimates
of reserves and future net revenue for all properties, due to
effects of aggregations. The estimated values of future net revenue
disclosed in this news release do not represent fair market value.
There is no assurance that the forecast prices and cost assumptions
used in the reserve evaluations will be attained and variances
could be material.
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 the Deep Basin Royalty Acquisition; the amount of
processing fees to be generated over 15 years from the acquisition
of a non-operated working interest in pipeline connected water
management and conservation facilities; the timing for the closing
of a newly created gross overriding royalty with an Operator and
the related multi-year capital development commitment; social and
governance initiatives; the number of drilling rigs to be operated
on royalty lands; expected production increases and capital
commitments on the royalty lands; estimated levels of 2021 EBITDA
and year-end net debt (cash); the future declaration and payment of
dividends and the timing and amount thereof; the forecasts
described under the heading "Guidance" above; other expected
benefits from acquisitions including enhancing Topaz's future
growth outlook 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
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).
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, 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.
FINANCIAL OUTLOOK
Also included in this news release are estimates of the
Company's EBITDA range for the year ending December 31, 2021 and range of year-end adjusted
working capital for 2021, which are based on, among other things,
the various assumptions as to production levels and capital
expenditures and other assumptions disclosed in this news release
including under the heading "Guidance" above and are based on the
following key assumptions: Topaz's estimated capital expenditures
(excluding acquisitions) of $1.0 to
$2.0 million in 2021; the working
interest owners' anticipated 2021 capital plans attributable to
Topaz's royalty lands; 2021 estimated average annual royalty
production range of 11,600 to 11,800 boe/d; 2021 average
infrastructure ownership capacity utilization of 100%; 2021 third
party income of $10.0 million;
December 31, 2021 exit adjusted
working capital range between $119.2
and $121.8 million and 2021 average
commodity prices of: $2.77/mcf (AECO
5A natural gas), US$60.41/bbl (NYMEX
WTI), US$12.18/bbl (WCS oil
differential), US$4.36/bbl (MSW oil
differential) and US$/CAD$ foreign exchange 0.78. To the extent
such estimates constitute financial outlooks, they were approved by
management and the board of directors of Topaz on March 17, 2021 and are included to provide
readers with an understanding of the estimated EBITDA for the year
ending December 31, 2021 based on the
assumptions described herein and readers are cautioned that the
information may not be appropriate for other purposes.
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 margin," "payout ratio," "working capital", "adjusted
working capital", "net debt (cash),", 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," "EBITDA
margin," "payout ratio," "working capital," "adjusted working
capital," and "net debt (cash)" 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 margin" is defined as EBITDA divided by total
revenue and other income (expressed as a percentage of total
revenue and other income). "Payout ratio" is dividends paid
expressed as a percentage of cash flow. "Working capital" is
current assets less current liabilities. "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.
General
See also "Forward-Looking Statements", and "Non-GAAP Financial
Measures" in the most recently filed Management's Discussion and
Analysis.
SUPPLEMENTAL INFORMATION REGARDING PRODUCT TYPES
This news release includes references to Q4 2020, partial Q4
2019, 2020 and estimated 2021 average daily production. The
following table is intended to provide supplemental information
about the product type composition for each of the production
figures that are provided in this news release:
|
|
|
|
|
|
Year
ended
|
Year
ended
|
Three
months
|
Nov. 14
-
|
For the periods
ended
|
Dec. 31, 2021
("2021")
|
Dec. 31, 2020
("2020")
|
Dec. 31, 2020
("Q4 2020")
|
Dec. 31
2019(1) ("partial Q4 2019")
|
Average daily
production
|
|
|
|
|
Light and Medium crude
oil (bbl/d)
|
199
|
208
|
192
|
264
|
Heavy crude oil
(bbl/d)
|
76
|
─
|
─
|
─
|
Conventional Natural
Gas (mcf/d)
|
42,468
|
35,177
|
35,159
|
43,284
|
Shale Gas
(mcf/d)
|
22,008
|
21,261
|
22,462
|
14,847
|
Natural Gas Liquids
(bbl/d)
|
679
|
529
|
540
|
502
|
Total
(boe/d)
|
11,700(3)
|
10,144
|
10,335
|
10,455
|
|
|
(1)
|
The results of
operations from January 1, 2019 to November 13, 2019 are presented
as discontinued operations. Topaz commenced operations on November
14, 2019 therefore its results of operations from November 14, 2019
to December 31, 2019 are presented as continuing operations. Refer
to "Discontinued Operations".
|
(2)
|
Natural Gas Liquids
is comprised of condensate; Topaz does not have any material
royalty interests on other natural gas liquids.
|
(3)
|
Estimated using the
midpoint of the 2021 average annual royalty production range of
11,600 – 11,800 boe/d.
|
SOURCE Topaz Energy Corp