Topaz Energy Corp. Announces Closing of Two Strategic Royalty Acquisitions

CALGARY, AB, Jan. 4, 2021 /CNW/ - Topaz Energy Corp. (TSX: TPZ) ("Topaz" or the "Company") is pleased to announce the completion of two previously announced gross overriding royalty acquisitions which enhance Topaz's future growth outlook and demonstrate the Company's growth strategy to acquire value-enhancing assets from high-quality strategic partners that are accretive on a per share basis.  The acquisitions were funded from the Company's available cash on hand.

DEEP BASIN ROYALTY ACQUISITION

Topaz acquired a newly-created gross overriding royalty interest on natural gas, crude oil, and condensate production on over 720,000 gross acres of Tourmaline Oil Corp.'s ("Tourmaline") developed and undeveloped lands in the Alberta Deep Basin ("Deep Basin"), which is contiguous with Topaz's existing Deep Basin royalty interest acreage, for total cash consideration of $130 million ("Deep Basin Royalty Acquisition"). Current production from the Deep Basin Royalty Acquisition lands is estimated by Tourmaline at 76,000 boe/d which Tourmaline expects will increase to 85,000 boe/d over the next two years in conjunction with an estimated $300 million expansion of its capital plan over the next two years. Tourmaline is currently operating three active drilling rigs on the Deep Basin Royalty Acquisition lands.

Pursuant to the Deep Basin Royalty Acquisition, Topaz acquired a 2% gross overriding royalty interest on natural gas production until December 31, 2021; increasing to a 3% gross overriding royalty interest on natural gas production thereafter; and a 2.5% gross overriding royalty interest on crude oil and condensate production from the lands. Topaz estimates that, based on Tourmaline's estimated capital plan, the Deep Basin Royalty Acquisition will provide royalty production growth of 12% in 2021, and 24% in 2022.

CLEARWATER ROYALTY ACQUISITION

Topaz acquired a newly-created gross overriding royalty interest on predominantly crude oil production on approximately 61,000 gross acres of Tamarack Valley Energy Ltd.'s ("Tamarack") developed and undeveloped lands in the Clearwater area of Alberta ("Clearwater") for total cash consideration of $16 million ("Clearwater Royalty Acquisition"). In addition, Tamarack has provided a two year capital commitment of $80 million. The Clearwater has quickly emerged as one of Canada's most economic oil plays which provides high netbacks, quick economic payback.  Development of this play does not require any use of fresh water volumes for completions and requires limited land use through multi-well pad drilling. Tamarack is currently operating two active drilling rigs on the Clearwater Royalty Acquisition lands.

Current production from the Clearwater Royalty Acquisition lands is estimated by Tamarack at 2,000 boe/d which Tamarack expects will increase to 10,000 boe/d over the next three years in conjunction with an expansion of its capital plan. Pursuant to the Clearwater Royalty Acquisition, Topaz acquired a 2% gross overriding royalty interest.

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 information (collectively, "forward-looking statements") that relate to the Company's current expectations, views of future events or the Company's future performance. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as "will likely result", "are expected to", "expects", "will", "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 addition, this news release may contain forward-looking statements attributed to third-party industry sources. Accordingly, any such forward-looking statements are qualified in their entirety by reference to, and are accompanied by, the information and factors discussed in this news release.  In particular and without limitation, this news release contains forward-looking statements pertaining to the following: expected increases in production from the Deep Basin Royalty Acquisition and Clearwater Royalty Acquisition (together, the "Royalty Acquisitions") lands and expansion of Tourmaline's and Tamarack's capital plans over the next two and three years, respectively; estimated royalty production growth from the Deep Basin Royalty Acquisition in 2021 and 2022; other expected benefits from the Royalty 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 statements are based on a number of key assumptions and expectations and are 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 expectations and assumptions include the following: prevailing and future commodity prices and currency exchange rates; counterparty development plans and capital expenditures on royalty lands; applicable tax laws; interest rates; future well production rates; operating costs; the timing of receipt of regulatory approvals; the success obtained by counterparties in drilling new wells; anticipated timing and results of counterparty capital expenditures; the state of the economy and the oil and gas exploration and production business; and the availability and cost of financing. Such risks and uncertainties include, but are not limited to, the risks associated with the oil and gas industry in general such as operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of estimates and projections relating to reserves, production, revenues, costs and expenses; operational matters, including potential hazards inherent in the Company's operations and the effectiveness of third-party health, safety, environmental and integrity programs; risks arising from co-ownership of facilities including reliance on third-party operators; commodity price and exchange rate fluctuations; interest rate fluctuations; marketing and transportation; environmental risks; competition for, among other things, third-party capital and acquisitions of additional assets; incorrect assessment of the value of acquisitions; ability to access sufficient capital from internal and external sources; failure to obtain required regulatory and other approvals; and changes in legislation, including but not limited to tax laws, royalties and environmental regulations; the failure to realize some or all of the anticipated benefits of the Royalty Acquisitions including estimated royalty production growth, and the factors discussed under "Notice to Investors – Forward-Looking Statements" and "Risk Factors" in the supplemented PREP prospectus dated October 19, 2020. Readers are cautioned that the foregoing list of factors is not exhaustive. 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.

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.

INFORMATION REGARDING PUBLIC-ISSUER COUNTERPARTIES

Certain information contained in this news release relating to the Company's public issuer counterparties which include Tourmaline and Tamarack and the nature of their respective businesses is taken from and based solely upon information published by such issuers. The Company has not independently verified the accuracy or completeness of any such information.

SOURCE Topaz Energy Corp

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

Related Links

https://topazenergy.ca/