Topaz Energy Corp. Announces Strategic Water Infrastructure Acquisition in the Alberta Montney

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.

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