Tourmaline Oil Corp (Alberta) T.TOU

Alternate Symbol(s): TRMLF

Energy Oil & Gas E&P

Tourmaline Oil Corp. is a Canada-based crude oil and natural gas exploration and production company. The Company is focused on long-term growth through an aggressive exploration, development, production and acquisition program in the Western Canadian Sedimentary Basin. It operates in three basins, which include the Alberta Deep Basin, NEBC Montney Gas/Condensate and Peace River Triassic Oil. The Company has ownership interests in 16 natural gas plants in the Alberta Deep Basin. It owns and operates five natural gas processing facilities with an aggregate capacity of approximately 325 million cubic feet per day (MMcf/d) with related gas gathering systems and NGL handling infrastructure at NEBC Montney Gas basin. The Company owns and operates two oil batteries at the Peace River Triassic Oil basin, which handles approximately 48,000 barrels per day of fluids and the associated natural gas is delivered to a third party for processing.

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Tourmaline Oil Corp (Alberta)

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Post by retiredcfon Jan 26, 2021 7:38am

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Post# 32385214

TD (on Topaz)

Topaz Energy Corp.

(TPZ-T) C$14.50

Acquires Take-or-pay Backed Midstream Assets at TD Est. ~11% IRR

Event

Makes $12mm Acquisition of Water Handling Infrastructure in Alberta Montney

Impact: POSITIVE

Topaz announced that it jointly purchased a 99% non-operated working interest in water infrastructure assets with a third-party private midstream water company. The assets were acquired from an E&P and include a source water well, water storage ponds, and a water disposal well.

Paid $12mm for Growing Revenue Stream at TD Estimated 11.5% IRR: Topaz paid $12 million for its 50% share of the venture. In exchange, Topaz will receive $27.8 million in revenue over the next 15 years on a take-or-pay basis. Topaz is not responsible for ongoing operating costs, but is responsible for its W.I. share of capital costs (which it expects will be minimal). We understand that revenue is lower in the initial years and escalates in the later years of the contract. Although details were minimal, we roughly estimate that the transaction represents an ~11% IRR to Topaz.
Potential Incremental Revenue (and Return) from Third-party Utilization: Although Topaz did not specify the utilization rate of the infrastructure, we understand that one goal of the midstream partner will be to attract/coordinate third-party revenue from this infrastructure at no incremental cost to Topaz.
Makes Small Additional GORR Acquisition in the Clearwater: The company also acquired a 4% GORR on 11,000 gross acres in the greater Clearwater area for $0.45 million. This follows the previously announced acquisition of a Clearwater GORR in December 2020 (see Inks Capital-backed GORR Deal in High-growth Clearwater Play - December 15, 2020)

TD Investment Conclusion

Topaz offers near-pure-play, no capital cost, royalty exposure to one of the largest, well-capitalized natural-gas-focused producers in North America (Tourmaline). Relative to other royalty entities, the contribution of midstream revenue results in superior, non-commodity-linked, FCF visibility. We believe that growing upstream volumes, combined with continued M&A, will allow the company to create value for equity holders over time. We reiterate our BUY rating and $17.00 target price.