TOPAZ ANNOUNCES 8% DIVIDEND INCREASE AND FOURTH QUARTER 2021 DELIVERS RECORD FREE CASH FLOW AND 48% LIQUIDS PRODUCTION GROWTH

CALGARY, AB, March 1, 2022 /CNW/ - Topaz Energy Corp. (TSX: TPZ) ("Topaz" or the "Company") is pleased to provide fourth quarter and annual 2021 financial results, announce an 8% increase to its quarterly dividend and affirm the Company's 2022 guidance estimates.  Select financial information is outlined below and should be read in conjunction with Topaz's consolidated financial statements and related management's discussion and analysis ("MD&A") as at and for the year ended December 31, 2021, which are available on SEDAR at www.sedar.com and on Topaz's website at www.topazenergy.ca.

Fourth Quarter 2021 Highlights

• In Q4 2021, Topaz's assets generated record cash flow and free cash flow (FCF)⁽¹⁾ of $68 million and $67 million, respectively. Cash flow and FCF⁽¹⁾ were 34% and 35%, respectively, higher than the prior quarter; and each 153% higher than the prior year. On a per share basis, Q4 2021 FCF⁽¹⁾ of $0.49 per share⁽¹⁾⁽²⁾ increased 96% from Q4 2020 ($0.25 per share).
• Topaz's Board has approved an 8% increase to the Company's quarterly dividend which increases the annual dividend from $0.96 to $1.04 per share, and represents the third dividend increase since the inaugural quarterly dividend was set at $0.20 per share in Q1 2020; representing a 30% cumulative increase to date.
• Record Q4 2021 average royalty production of 17,213 boe/d⁽⁴⁾ was 14% higher than the prior quarter and 67% higher than Q4 2020.  Topaz's oil-focused royalty acquisition strategy has generated Q4 2021 total liquids royalty production of 3,143 bbl/d⁽⁴⁾, a 48% increase relative to the prior quarter and a 329% increase relative to Q4 2020.
• Topaz closed the acquisition of a newly-created 5% gross overriding royalty interest on Whitecap Resources' working interest in the Weyburn Unit for $188 million in cash, which Topaz estimates will provide a return on invested capital⁽¹⁾ of 14% in 2022, based on estimated 2022 FCF⁽¹⁾ of $26 million⁽¹¹⁾.
• Topaz was added to the S&P/TSX Composite Index, the headline index for Canada represented by the largest companies on the Toronto Stock Exchange, in December 2021.
• Expanded the Company's credit facility from $400 million to $700 million⁽⁵⁾ and extended the term to December 2025.  At December 31, 2021 Topaz had net debt⁽¹⁾ of $234 million, or 0.8x net debt to Q4 2021 annualized cash flow⁽¹⁾.

2021 Annual Highlights

• 2021 cash flow and FCF⁽¹⁾ of $191 million and $188 million, respectively, were each 114% higher than 2020 ($89 million and $88 million, respectively).  On a per share basis⁽¹⁾⁽²⁾, 2021 FCF⁽¹⁾ of $1.52 per share was 57% higher than 2020 ($0.97 per share).
• Topaz's 2021 total annual average royalty production of 14,103 boe/d⁽⁴⁾ increased 39% relative to 2020, which includes a 157% increase, to 1,892 bbl/d⁽⁴⁾ of total liquids annual average royalty production. 
• Topaz invested $945 million in royalty and infrastructure acquisitions, excluding decommissioning obligations⁽¹⁾ during 2021 which increased Topaz's gross royalty acreage 77% and natural gas processing capacity 23%; diversified the Company's infrastructure portfolio through the acquisition of water conservation facilities under a 15 year 100% fixed take or pay, and doubled its corporate tax pools to $1.8 billion which extends the Company's long-term cash tax coverage⁽³⁾.  On current strip pricing⁽³⁾, the cumulative 2021 acquisitions, excluding decommissioning obligations⁽¹⁾ are estimated to generate a return on invested capital⁽¹⁾ of 16% in 2022 based on the acquired assets' estimated FCF⁽¹⁾ of $149 million⁽¹²⁾.
• At December 31, 2021, the before-tax net present value of total proved plus probable reserves, discounted at 10 per cent⁽⁶⁾, increased 92% to $1.1 billion (2020 – $592 million). 
• Through strategic partnerships, Topaz has enhanced or established material royalty positions and reliable infrastructure revenue streams in the most economic plays across the WCSB. Topaz's asset portfolio provides embedded organic growth which requires no additional capital by Topaz, as well as significant Excess FCF⁽¹⁾ for self-funded M&A growth after distributions of $1.04 per share (2022 estimated payout ratio⁽¹⁾ 55%).

Fourth Quarter 2021 Update

Royalty Production, Revenue & Activity Growth

• Topaz's acquisitions have added strategic partnerships with prominent Canadian public E&P operators including Headwater Exploration, NuVista Energy and Whitecap Resources to the Company's existing portfolio which includes Tourmaline, Tamarack Valley and Advantage Energy.  Topaz has additional upside optionality through private operators and its diversified royalty portfolio acquired via the Reserve Royalty acquisition.
• Topaz holds 5.3 million gross royalty acres (over 50% undeveloped) in the most economic plays in the WCSB including the NEBC Montney liquids-rich natural gas resource play and the oil-focused Clearwater, Charlie Lake, Provost and West Central areas in Alberta and Weyburn, Saskatchewan resource plays.  The strategically acquired royalty interests provide organic growth as they are supported by committed operator-funded development capital.
• During the fourth quarter, the working interest operators on Topaz's royalty acreage continued active development; 143 gross wells were spud⁽⁷⁾ and 142 gross wells were brought on production⁽⁸⁾. This represents a 3% increase in capital activity relative to the prior quarter, when 139 gross wells were spud on Topaz's royalty acreage.
• Topaz's Q4 2021 royalty production was 82% weighted to natural gas⁽⁴⁾, the price of which has significantly increased over the course of 2021 due to moderated supply growth combined with increasing natural gas demand.  The average AECO (5A) benchmark for Q4 2021 of C$4.66 per mcf was 76% higher than Q4 2020.  
• Based on planned operator drilling actvity, Topaz expects to have 20 to 24 drilling rigs active on its royalty acreage for the balance of the first quarter of 2022, with activity to resume subsequent to spring break-up⁽³⁾.

Infrastructure Revenue Stability

• Topaz's processing revenue provides stable income which supports the Company's dividend, as 78% of Topaz's 215 MMcf/d net natural gas processing capacity is contracted under long term fixed take-or-pay and the Company's variable processing capacity receives priority fill and services high-activity areas.  During Q4 2021, average daily utilization of Topaz's net natural gas processing capacity was 97%, consistent with the prior quarter.  During Q4 2021, Topaz generated $16 million of processing revenue and other income compared to $17 million generated in the prior quarter.

Significant Reserves Growth

• At December 31, 2021, the before-tax net present value of total proved plus probable reserves, discounted at 10 per cent⁽⁶⁾, increased 92% to $1.1 billion (2020 – $592 million); including $400 million attributed to Topaz's infrastructure assets, which increased 29% from year end 2020 ($310 million). The increased infrastructure economic value is primarily attributed to the ownership interest acquisitions in the Gundy NEBC Montney facility and water infrastructure facilities for aggregate economic value (discounted at 10 percent) of $85 million.
• Proved plus probable reserve volume⁽⁶⁾ totaled 42 mmboe as at December 31, 2021, up 81% from 23 mmboe as at December 31, 2020. As a royalty entity not responsible for capital development, Topaz's reserve report only includes developed properties (developed producing and developed non-producing) and does not include any future development capital attributed to undeveloped royalty acreage. Topaz's acquisition growth generated 18 mmboe of proved plus probable reserves, and operator development on Topaz's royalty acreage generated 6 mmboe of additions which exceeded Topaz's 5 mmboe of 2021 royalty production by 20%.

Reliable & Sustainable Dividend Increase

• Topaz's Board has approved an 8% increase to the Company's quarterly dividend and declared the first quarter 2022 dividend at $0.26 per share which is expected to be paid on March 31, 2022 to shareholders of record on March 15, 2022.  The quarterly cash dividend is designated as an "eligible dividend" for Canadian income tax purposes.  

• Topaz's estimated 2022 dividend payout ratio⁽¹⁾ of 55%⁽³⁾ remains below the Company's targeted long-term payout of 60-90% in order to retain Excess FCF⁽¹⁾ for self-funded M&A growth given the broad range of opportunities Topaz continues to identify.
• Topaz's estimated 2022 dividend of $145 million⁽⁹⁾ is well supported whereby over 40% of the 2022 dividend is covered by the Company's stable infrastructure income. To further insulate the Company's dividend and Excess FCF⁽¹⁾ available for M&A growth opportunities, Topaz has entered into certain financial derivative contracts focused on mitigating natural gas price volatility during the summer months which historically have been more susceptible to pipeline maintenance interruptions. Topaz's risk management contracts include 25,000 GJ/d contracted April to October 2022 at a weighted average price of $3.73/GJ ($3.94/mcf) which represents approximately 30%⁽³⁾ of Topaz's respective natural gas royalty production⁽¹⁰⁾.

2021 EBITDA and Guidance Lookback

• In 2021, Topaz generated EBITDA⁽¹⁾ of $194 million which was 117% higher than 2020 EBITDA⁽¹⁾ of $89 million.  Relative to Topaz's November 2021 guidance update, Q4 2021 average royalty production was 3% higher than the midpoint Q4 estimate which contributed to 2021 average annual royalty production of 14,103 boe/d exceeding the 2021 guidance range of 13,800 – 14,000 boe/d; and Q4 2021 total processing revenue and other income was 4% higher than estimated due to higher third party processing activity.

2022 Guidance Estimates

• Topaz affirms its 2022 EBITDA⁽¹⁾⁽³⁾ guidance range between $269 and $271 million, the midpoint of which represents 39% growth over 2021; which is based on internal estimates⁽¹³⁾ including commodity prices of C$4.00/mcf for natural gas (AECO) and US$75.00/bbl WTI for crude oil; and average annual royalty production of 16,200 boe/d⁽⁴⁾ (midpoint), which represents 15% growth over 2021.

2022 Guidance Estimates^(3)(13) C$4.00/mcf AECO / US$75.00/bbl WTI / 0.785 US/CAD FX $mm except boe/d
Annual average royalty production (boe/d)^(4)	16,100 – 16,300
Royalty production natural gas weighting^(4)	~78%
EBITDA^(1)	$269 – $271
Capital expenditures (excluding acquisitions)	$2 – $3
Excess FCF^(1) (after dividend)	$114 – $116
Dividend ($1.04 per share)^(8)	$145
Dividend payout ratio^(1)	55%
Year end 2022 net debt^(1)	$110 – $115
Year end 2022 net debt to cash flow^(1)	0.4x

2022 EBITDA Guidance Sensitivity^(3)(13)
5% annual average royalty production change	+/- $10 million
C$0.50/mcf change in natural gas price	+/- $11 million
US$5.00/bbl change in crude oil price	+/- $7 million
1% change in C$/US$ foreign exchange	+/- $1 million

Capital Allocation Strategy & Financial Flexibility

• Topaz continues to identify a number of acquisition growth opportunities and expects to allocate the majority of its 2022 Excess FCF⁽¹⁾ toward M&A growth and to provide future dividend increases alongside further sustainable growth.  Topaz's 2022 guidance estimate provides for $115 million of Excess FCF⁽¹⁾⁽³⁾ after paying its 2022 dividend of $145 million⁽³⁾⁽⁹⁾.
• Topaz estimates its year end 2022 net debt to cash flow⁽¹⁾⁽³⁾ will be approximately 0.4x before any further acquisition activity and the Company has a $500 million covenant based unsecured credit facility, expandable to $700 million⁽¹⁾, which provides financial flexibility and growth optionality. 

Sustainability Targets & Commitments

• Topaz looks forward to publishing its 2021 Sustainability Report which will include reporting on the Company's progress toward multi-year sustainability commitments and targets established together with Topaz's Board, in the areas of:
• Climate change management;
• Responsible water management;
• Corporate governance;
• Community investment;
• Diversity and inclusion;
• ESG integrated investing; and
• Executive compensation.

Additional information

Additional information about Topaz, including the consolidated financial statements and management's discussion and analysis as at and for the year ended December 31, 2021 as well as the Company's 2021 Annual Information Form are available on SEDAR at www.sedar.com under the Company's profile, and on Topaz's website, www.topazenergy.ca.

Q4 2021 CONFERENCE CALL

Topaz will host a conference call tomorrow, Wednesday, March 2, 2022 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 40291211.

ABOUT THE COMPANY

Topaz is a unique royalty and infrastructure energy company focused on generating FCF⁽¹⁾ growth and paying reliable and sustainable dividends to its shareholders, through its strategic relationship with Canada's largest and most active natural gas producer, 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. Topaz focuses on top quartile energy resources and assets best positioned to attract capital in order to generate sustainable long-term growth and profitability.

The Topaz royalty and energy infrastructure revenue streams are generated primarily from assets operated by natural gas producers with some of the lowest greenhouse gas emissions intensity in the Canadian senior upstream sector, including Tourmaline, which has received awards for environmental sustainability and conservation efforts. Certain of these producers have set long-term emissions reduction targets and continue to invest in technology to improve environmental sustainability.

Topaz's common shares are listed and posted for trading on the TSX under the trading symbol "TPZ" and it is included in the S&P/TSX Composite Index. This is the headline index for Canada and is the principal benchmark measure for the Canadian equity markets, represented by the largest companies on the TSX.

For further information, please visit the Company's website  www.topazenergy.ca.  Topaz's SEDAR filings are available at www.sedar.com.

Selected Financial Information
For the periods ended ($000s) except per share	2021	2020	Q4 2021	Q3 2021	Q2 2021	Q1 2021	Q4 2020
Royalty production revenue	151,894	58,886	59,709	40,558	27,448	24,179	17,611
Processing revenue	46,720	30,757	12,906	12,781	10,562	10,471	10,305
Other income^(4)	12,925	10,233	3,061	3,804	2,943	3,117	2,783
Total	211,539	99,876	75,676	57,143	40,953	37,767	30,699
Cash expenses:
Operating	(4,245)	(4,205)	(946)	(1,238)	(1,089)	(972)	(1,643)
Marketing	(1,311)	(589)	(463)	(355)	(256)	(237)	(176)
General and administrative	(5,051)	(3,946)	(1,281)	(1,478)	(1,026)	(1,266)	(673)
Realized loss on financial instruments	(6,990)	(1,438)	(3,004)	(2,258)	(1,147)	(581)	(744)
Interest expense	(3,001)	(620)	(1,648)	(973)	(220)	(160)	(484)
Cash flow	190,941	89,078	68,334	50,841	37,215	34,551	26,979
Per basic share^(1)(2)	$1.54	$0.99	$0.50	$0.39	$0.32	$0.31	$0.25
Per diluted share^(1)(2)	$1.54	$0.98	$0.50	$0.39	$0.32	$0.31	$0.25
Cash from operating activities	165,017	83,642	56,562	41,990	36,903	29,563	32,887
Per basic share^(1)(2)	$1.33	$0.93	$0.41	$0.33	$0.32	$0.26	$0.31
Per diluted share^(1)(2)	$1.33	$0.92	$0.41	$0.32	$0.31	$0.26	$0.31
Net income	27,564	3,089	16,276	5,014	918	5,356	8,382
Per basic and diluted share^(2)	$0.22	$0.03	$0.12	$0.04	$0.01	$0.05	$0.08
EBITDA^(7)	193,647	89,313	69,978	51,795	37,308	34,566	27,126
Per basic share^(1)(2)	$1.57	$0.99	$0.51	$0.40	$0.32	$0.31	$0.25
Per diluted share^(1)(2)	$1.56	$0.99	$0.51	$0.40	$0.32	$0.31	$0.25
FCF^(1)	188,164	87,822	67,147	49,795	37,232	33,990	26,507
Per basic share^(1)(2)	$1.52	$0.97	$0.49	$0.39	$0.32	$0.30	$0.25
Per diluted share^(1)(2)	$1.51	$0.97	$0.49	$0.38	$0.32	$0.30	$0.25
FCF Margin^(1)	89%	88%	89%	87%	91%	90%	86%
Dividends paid	108,739	73,131	33,422	27,048	25,748	22,521	22,489
Per share^(6)	$0.85	$0.80	$0.24	$0.21	$0.20	$0.20	$0.20
Payout ratio^(1)	57%	82%	49%	53%	69%	65%	83%
Excess FCF^(1)	79,425	14,691	33,725	22,747	11,484	11,469	4,018
Capital expenditures	2,777	1,256	1,187	1,046	(17)	561	472
Adjusted acquisitions^(1)	945,321	171,463	218,834	409,961	160,492	156,034	17,963
Weighted average shares – basic^(3)	123,703	90,110	136,391	128,749	116,842	112,512	106,839
Weighted average shares – diluted^(3)	124,361	90,547	137,167	129,421	117,426	113,019	107,276
Average Royalty Production^(5)
Natural gas (mcf/d)	73,269	56,438	84,415	77,941	65,725	64,729	57,621
Light and medium crude oil (bbl/d)	565	208	1,086	538	340	285	192
Heavy crude oil (bbl/d)	538	─	1,091	693	303	50	─
Natural gas liquids (bbl/d)	789	529	966	897	668	620	540
Total (boe/d)	14,103	10,144	17,213	15,119	12,265	11,743	10,335
Realized Commodity Prices^(5)
Natural gas ($/mcf)	$3.65	$2.25	$4.52	$3.58	$3.11	$3.13	$2.65
Light and medium crude oil ($/bbl)	$81.29	$41.91	$87.51	$80.07	$76.94	$64.66	$48.90
Heavy crude oil ($/bbl)	$69.39	─	$73.23	$67.76	$61.61	$54.34	─
Natural gas liquids ($/bbl)	$83.07	$48.09	$95.37	$80.31	$78.91	$72.11	$54.09
Total ($/boe)	$29.51	$15.86	$37.70	$29.16	$24.59	$22.88	$18.52
Benchmark Pricing
Natural Gas
AECO 5A (CAD$/mcf)	$3.62	$2.24	$4.66	$3.60	$3.11	$3.17	$2.65
Crude oil
NYMEX WTI (USD$/bbl)	$67.92	$39.34	$77.19	$70.52	$66.10	$58.14	$42.70
Edmonton Par (CAD$/bbl)	$80.46	$45.06	$93.45	$83.80	$76.39	$68.98	$49.21
WCS differential (USD$/bbl)	$13.04	$15.81	$14.80	$13.52	$11.51	$12.42	$9.10
Natural gas liquids
Edmonton Condensate (CAD$/bbl)	$84.55	$49.71	$98.68	$86.47	$79.67	$74.98	$55.95
CAD$/USD$	$0.7979	$0.7465	$0.7937	$0.7935	$0.8142	$0.7899	$0.7678
Selected statement of financial position results ($000s) except share amounts			At Dec. 31, 2021	At Sept. 30, 2021	At June 30, 2021	At Mar. 31, 2021	At Dec. 31, 2020
Total assets			1,611,752	1,455,509	1,305,741	997,715	1,008,546
Working capital			43,750	51,053	266,272	94,221	237,675
Adjusted working capital^(1)			43,204	54,446	270,611	94,607	238,268
Net debt (cash)^(1)			233,658	219,476	(167,540)	(94,607)	(238,268)
Common shares outstanding^(3)			139,333	128,803	128,736	112,607	112,449
^(1)Refer to "Non-GAAP and Other Financial Measures". ^(2)As noted, calculated using the basic or diluted weighted average number of shares outstanding during the period. ^(3)Shown in thousand shares outstanding. ^(4)Other income of $12.9 million for 2021 includes interest income of $0.3 million (Q4 2021 - nil, Q3 2021 - $0.02 million, Q2 2021 - $0.1, Q1 2021 - $0.1 million, Q4 2020 - $0.3 million). ^(5)Refer to "Supplemental Information Regarding Product Types". ^(6)Represents the cumulative per share dividends paid to shareholders of record during the respective periods. ^(7)Defined term under the Company's Syndicated Credit Facility.

NOTE REFERENCES

This news release refers to financial reporting periods in abbreviated form as follows: "Q4 2021" refers to the three months ended December 31, 2021; "prior quarter" refers to the three months ended September 30, 2021; "Q4 2020" refers to the three months ended December 31, 2020; "2021" refers to the year ended December 31, 2021; and "2020" refers to the year ended December 31, 2020.

1.	See "Non-GAAP and Other Financial Measures".
2.	Calculated using the weighted average number of basic common shares outstanding during the respective period.  During the three months and year ended December 31, 2021, Topaz's FCF per share, calculated using the weighted average number of diluted common shares outstanding during the periods was $0.49 and $1.51, respectively.
3.	See "Forward-Looking Statements".
4.	See "Supplemental Information Regarding Product Types".
5.	Topaz's $700 million credit facility includes a $200 million accordion feature which may be advanced by Topaz but remains subject to agent consent.
6.	Based on Topaz's December 31, 2021 external independent reserve report.  Refer to Topaz's 2021 Annual Information Form available on SEDAR for additional information.
7.	May include non-producing injection wells.
8.	Includes wells drilled during the current and previous periods on Topaz royalty acreage.
9.	Topaz's dividends remain subject to board of director approval.
10.	Refer to Topaz's most recently filed MD&A for a summary of all outstanding financial derivative contracts.
11.	The Company's 2022 FCF estimate attributed to Topaz's Weyburn Unit gross overriding royalty interest acquisition completed during the fourth quarter of 2021 is based on the following assumptions: estimated 2022 average royalty production of 700 bbl/d comprised of 696 bbl/d of crude oil and 5 bbl/d NGLs; 2022 average commodity prices based on a February 7, 2022 strip price forecast as follows: US$84.82/bbl (NYMEX WTI), US$2.77/bbl (MSW oil differential) and US$/CAD$ foreign exchange 0.786; and estimated transportation and quality deductions based on historic realizations.
12.	The Company's 2022 FCF estimate attributed to adjusted acquisitions completed during 2021 is based on the following assumptions: estimated average annual royalty production (midpoint) of 7,800 boe/d comprised of 30 MMcf/d conventional natural gas, 1,020 bbl/d crude oil, 1,280 bbl/d heavy oil and 500 bbl/d NGLs; 2022 average commodity prices based on a February 7, 2022 strip price forecast as follows: $4.49/mcf (AECO 5A), US$84.82/bbl (NYMEX WTI), US$13.23/bbl (WCS oil differential), US$2.77/bbl (MSW oil differential) and US$/CAD$ foreign exchange 0.786; variable marketing fees payable for royalty production marketed by the respective operator; estimated transportation and quality deductions based on historic realizations; infrastructure contractual agreements providing for fixed processing revenue of $11.6 million in 2022; estimated capital maintenance expenditures of $0.3 million; and estimated 2022 interest expense of $3.0 million attributed to the portion of total 2021 acquisition consideration which was financed with debt.
13.	Management's assumptions underlying the Company's 2022 guidance estimates include:
	i.	Contractually scheduled changes in certain natural gas gross overriding royalty rates as follows: increase from 2% to 3% attributed to the January 2021 Deep Basin GORR acquisition from Tourmaline and reduction from 4% to 3% attributed to the November 2019 GORR acquisition from Tourmaline;
	ii.	Topaz's internal estimates regarding development pace and production performance including estimates for capital allocated to waterflood and other long-term value enhancing projects;
	iii.	Infrastructure utilization and cost estimates in-line with 2021 realizations;
	iv.	No incorporation of potential acquisitions; and
	v.	Topaz's outstanding financial derivative contracts included in its most recently filed MD&A.

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; environment, social and governance initiatives; expected production increases and capital commitments on the royalty lands; estimated levels of 2022 dividend payments, EBITDA, FCF, Excess FCF, dividend payout ratio, return on invested capital and year-end net debt; the number of drilling rigs to be active on Topaz's royalty acreage during 2022 and beyond; the future declaration and payment of dividends and the timing and amount thereof; the forecasts described under the heading "Fourth Quarter 2021 Update" above including under the sub-headings "2022 Guidance Estimates", "Capital Allocation Strategy & Financial Flexibility" and "Sustainability Targets & Commitments", including annual average royalty production, processing revenue and other income, EBITDA, FCF, Excess FCF, annual dividends, exit net debt, and capital expenditures (excluding acquisitions) for 2022; other expected benefits from acquisitions including enhancing Topaz's future growth outlook and plans to allocate capital toward accretive growth acquisitions and sustainable dividend increases; and the Company's business as described under the heading "About the Company" above.

Forward–looking statements are 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 statements.

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 FCF per share growth, and the factors discussed in the Company's recently filed Management's Discussion and Analysis (See "Forward-Looking Statements" therein), 2021 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 statements, 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, FCF, 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 statements, 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 and average royalty production range for the year ending December 31, 2022 and range of year-end exit net debt and net debt to cash flow for 2022, 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 "Fourth Quarter 2021 Update - 2022 Guidance Estimates" above and are based on the following key assumptions: Topaz's estimated capital expenditures (excluding acquisitions) of $2 to $3 million in 2022; the working interest owners' anticipated 2022 capital plans attributable to Topaz's undeveloped royalty lands; estimated average annual royalty production range of 16,100 to 16,300 boe/d in 2022; 2022 average infrastructure ownership capacity utilization of 95%; December 31, 2022 exit net debt range between $110 and $115 million, 2022 average commodity prices of: $4.00/mcf (AECO 5A), US$75.00/bbl (NYMEX WTI), US$13.00/bbl (WCS oil differential), US$3.50/bbl (MSW oil differential) and US$/CAD$ foreign exchange 0.785. 

To the extent such estimates constitute financial outlooks, they were approved by management and the board of directors of Topaz on March 1, 2022 and are included to provide readers with an understanding of the estimated EBITDA and net debt for the year ending December 31, 2022 based on the assumptions described herein and readers are cautioned that the information may not be appropriate for other purposes.

NON-GAAP AND OTHER FINANCIAL MEASURES

Certain financial terms and measures contained in this news release are "specified financial measures" (as such term is defined in National Instrument 52-112 - Non-GAAP and Other Financial Measures Disclosure ("NI 52-112")). The specified financial measures referred to in this news release are comprised of "non-GAAP financial measures", "non-GAAP ratios", "capital management measures" and "supplementary financial measures" (as such terms are defined in NI 52-112). These measures are defined, qualified, and where required, reconciled with the nearest GAAP measure below.

Non-GAAP Measures and Ratios

The non-GAAP financial measures and non-GAAP ratio used herein 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. Investors are cautioned that the non-GAAP financial measures and ratio should not be considered in isolation nor as an alternative to net income (loss) or other financial information determined in accordance with GAAP, as an indication of the Company's performance.  

Non-GAAP Financial Measures

This news release makes reference to the terms "Excess FCF" and "acquisitions, excluding decommissioning obligations", which are considered non-GAAP financial measures under NI 52-112; defined as financial measures disclosed by an issuer that depict the historical or expected future financial performance, financial position, or cash flow of an entity, and are not disclosed in the financial statements of the issuer.

Non-GAAP Ratios

This news release makes reference to the term "return on invested capital" which is considered a non-GAAP ratio under NI 52-112; defined as a financial measure disclosed by an issuer that is in the form of a ratio, fraction, percentage or similar presentation, has a non-GAAP financial measure as one or more of its components, and is not disclosed in the primary financial statements of the entity.

Other Financial Measures

Capital management measures

Capital management measures are defined as financial measures disclosed by an issuer that are intended to enable an individual to evaluate the entity's objectives, policies and processes for managing the entity's capital, are not a component of a line item or a line item on the primary financial statements, and which are disclosed in the notes to the financial statements. The Company's capital management measures disclosed in the notes to the Company's Consolidated Financial Statements as at and for the year ended December 31, 2021 include adjusted working capital, net debt (cash) and FCF.

Supplementary financial measures

This news release makes reference to the terms "cash flow per basic or diluted share", "FCF per basic or diluted share", "EBITDA per basic or diluted share", "FCF margin" and "payout ratio" which are all considered supplementary financial measures under NI 52-112; defined as a financial measure disclosed by an issuer that is, or is intended to be, disclosed on a periodic basis to depict the historical or expected future financial performance, financial position or cash flow of an entity, is not disclosed in the financial statements of the issuer, and is not a non-GAAP financial measure or non-GAAP ratio.

The following terms are financial measures as defined under the Company's Syndicated Credit Facility, presented in note 9 to the Company's Consolidated Financial Statements as at and for the year ended December 31, 2021: (i) consolidated senior debt, (ii) total debt, (iii) EBITDA and (iv) capitalization.

Cash flow, FCF, FCF margin, and Excess FCF

Management uses cash flow, FCF, FCF margin and Excess FCF for its own performance measures and to provide investors with a measurement of the Company's efficiency and its ability to generate the cash necessary to fund or increase dividends, fund future growth opportunities and/or to repay debt; and furthermore, uses per share metrics to provide investors with a measure of the proportion attributable to the basic or diluted weighted average common shares outstanding. 

Cash flow is a GAAP measure which is derived of cash from operating activities excluding the change in non-cash working capital and is presented in the consolidated statements of cash flows.  FCF is a capital management measure presented in the notes to the consolidated financial statements and is defined as cash flow, less capital expenditures.  The supplementary financial measure "FCF margin", is defined as FCF divided by total revenue and other income (expressed as a percentage of total revenue and other income).  The non-GAAP financial measure "Excess FCF", is defined as FCF less dividends paid.  The supplementary financial measures "cash flow per basic or diluted share" and "FCF per basic or diluted share" are calculated by dividing cash flow and FCF, respectively, by the basic or diluted weighted average common shares outstanding during the period. 

A summary of the reconciliation from cash from operating activities (per the consolidated statements of cash flows) to cash flow (per the consolidated statements of cash flows), cash flow per basic or diluted share, FCF, Excess FCF, FCF per basic or diluted share and FCF margin is set forth below:

	Three months ended			Year ended
For the periods ended ($000s)	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2021	Dec. 31, 2020
Cash from operating activities	56,562	32,887	165,017	83,642
Exclude change in non-cash working capital	11,772	(5,908)	25,924	5,436
Cash flow	68,334	26,979	190,941	89,078
Less: Capital expenditures	1,187	472	2,777	1,256
FCF	67,147	26,507	188,164	87,822
Less: dividends paid	33,422	22,489	108,739	73,131
Excess FCF	33,725	4,018	79,425	14,691
Cash flow per basic share^(1)	$0.50	$0.25	$1.54	$0.99
Cash flow per diluted share^(1)	$0.50	$0.25	$1.54	$0.98
FCF per basic share^(1)	$0.49	$0.25	$1.52	$0.97
FCF per diluted share^(1)	$0.49	$0.25	$1.51	$0.97
FCF	67,147	26,507	188,164	87,822
Total Revenue and other income	75,676	30,699	211,539	99,876
FCF margin	89%	86%	89%	88%

^(1)	As noted, calculated using the basic or diluted weighted average number of shares outstanding during the respective periods.

Adjusted working capital and net debt (cash)
Management uses the terms "adjusted working capital" and "net debt (cash)" to measure the Company's liquidity position and capital flexibility, as such these terms are considered capital management measures. "Adjusted working capital" is calculated as current assets less current liabilities, adjusted for financial instruments.  "Net debt (cash)" is calculated as total debt outstanding less adjusted working capital.

A summary of the reconciliation from working capital, to adjusted working capital and net debt (cash) is set forth below:

($000s)	As at Dec. 31, 2021	As at Dec. 31, 2020
Working capital	43,750	237,675
Exclude financial instruments	(546)	593
Adjusted working capital	43,204	238,268
Less: bank debt	(276,862)	─
Net Debt (cash)	233,658	(238,268)

EBITDA and EBITDA per basic or diluted share
EBITDA, as defined under the Company's Syndicated Credit Facility and disclosed in note 9 of the Company's Consolidated Financial Statements as at and for the year ended December 31, 2021, is considered by the Company as a capital management measure which is used to evaluate the Company's operating performance, and provides investors with a measurement of the Company's cash generated from its operations, before consideration of interest income or expense.  "EBITDA" is calculated as consolidated net income or loss from continuing operations, excluding extraordinary items, plus interest expense, income taxes, and adjusted for non-cash items and gains or losses on dispositions. 

EBITDA per basic or diluted share is a supplementary financial measure that is calculated by dividing EBITDA by the basic or diluted weighted average common shares outstanding during the period and provides investors with a measure of the proportion of EBITDA attributed to the basic or diluted weighted average common shares outstanding.

A summary of the reconciliation of net income (per the consolidated statements of net income and comprehensive income), to EBITDA, is set forth below:

	Three months ended		Year ended
For the periods ended ($000s)	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2021	Dec. 31, 2020
Net income	16,276	8,382	27,564	3,089
Unrealized (gain) loss on financial instruments	(3,939)	(1,847)	(1,139)	593
Share-based compensation	961	247	1,977	887
Finance expense	1,774	490	3,465	632
Depletion and depreciation	50,217	22,656	155,422	85,489
Deferred income tax expense	4,693	(2,465)	6,653	(992)
Less: interest income	(4)	(337)	(295)	(385)
EBITDA	69,978	27,126	193,647	89,313
EBITDA per basic share^(1)	$0.51	$0.25	$1.57	$0.99
EBITDA per diluted share^(1)	$0.51	$0.25	$1.56	$0.99

^(1)	As noted, calculated using the basic or diluted weighted average number of shares outstanding during the respective periods.

Payout ratio
"Payout ratio", a supplementary financial measure, represents dividends paid, expressed as a percentage of cash flow and provides investors with a measure of the percentage of cash flow that was used during the period to fund dividend payments. Payout ratio is calculated as cash flow divided by dividends paid.

A summary of the reconciliation from cash flow to payout ratio is set forth below:

	Three months ended		Year ended
For the periods ended	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2021	Dec. 31, 2020
Cash flow (000s)	68,334	26,979	190,941	89,078
Dividends paid (000s)	33,422	22,489	108,739	73,131
Payout ratio (%)	49%	83%	57%	82%

Acquisitions, excluding decommissioning obligations
"Acquisitions, excluding decommissioning obligations", is considered a non-GAAP financial measure, and is calculated as: acquisitions (per the consolidated statements of cash flows) plus non-cash acquisitions but excluding non-cash decommissioning obligations.

A summary of the reconciliation from acquisitions (per the consolidated statements of cash flow) to acquisitions, excluding decommissioning obligations is set forth below:

	Three months ended		Year ended
For the periods ended ($000s)	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2021	Dec. 31, 2020
Acquisitions (consolidated statements of cash flows)	218,834	17,963	919,321	171,463
Non-cash acquisitions (excluding non-cash decommissioning obligations)	─	─	26,000	─
Acquisitions, excluding decommissioning obligations	218,834	17,963	945,321	171,463

Return on invested capital
"Return on invested capital", a non-GAAP ratio, represents estimated FCF, expressed as a percentage of acquisitions, excluding decommissioning obligations. This non-GAAP ratio provides investors with a measure of the return on investment attributed to consideration paid for acquisitions.

Management's estimate of the FCF expected to be generated from the Weyburn Unit gross overriding royalty acquisition completed during the fourth quarter of 2021 (as described above in "Note Reference 11") of $26 million, divided by the cash consideration paid of $188 million, results in a 2022 return on invested capital of 14%.

Management's estimate of the FCF expected to be generated from the acquisitions completed during 2021 (as described above in "Note Reference 12") of $149 million, divided by 2021 acquisitions, excluding decommissioning obligations presented in the table above of $945 million, results in a 2022 return on invested capital of 16%.

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", "Reserves and Other Oil and Gas Information" and "Non-GAAP and Other Financial Measures" in the most recently filed Management's Discussion and Analysis. 

SUPPLEMENTAL INFORMATION REGARDING PRODUCT TYPES

This news release includes references to actual and 2022 estimated average royalty 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:

For the three months ended	Dec. 31, 2021 (Actual)	Sept. 30, 2021 (Actual)	Dec. 31, 2020 (Actual)
Average daily production
Light and Medium crude oil (bbl/d)	1,086	538	192
Heavy crude oil (bbl/d)	1,091	693	─
Conventional natural gas (Mcf/d)	45,280	44,422	35,159
Shale Gas (Mcf/d)	39,135	33,519	22,462
Natural Gas Liquids (bbl/d)	966	897	540
Total (boe/d)	17,213	15,119	10,335
Natural gas weighting	82%	86%	93%
Total liquids weighting	18%	14%	7%

For the year ended	Dec. 31, 2022 (Estimate)^(1,2)	Dec. 31, 2021 (Actual)	Dec. 31, 2020 (Actual)
Average daily production
Light and Medium crude oil (bbl/d)	1,153	565	208
Heavy crude oil (bbl/d)	1,278	538	─
Conventional natural gas (Mcf/d)	36,586	43,282	33,976
Shale Gas (Mcf/d)	39,198	29,987	22,462
Natural Gas Liquids (bbl/d)	1,138	789	529
Total (boe/d)	16,200	14,103	10,144
Natural gas weighting	78%	86%	93%
Total liquids weighting	22%	14%	7%

^(1)	Represents the midpoint of the estimated range of 2022 average annual royalty production.
^(2)	Topaz's estimated royalty production is based on estimated commodity mix; drilling location and corresponding royalty rate; and capital development activity on Topaz's royalty acreage by the working interest owners, all of which are outside of Topaz's control.

SOURCE Topaz Energy Corp

Topaz Energy Corp., Marty Staples, President and Chief Executive Officer, [phone]; Cheree Stephenson, VP Finance and CFO, [phone]