Bullboard - Stock Discussion Forum Topaz Energy Corp T.TPZ

Alternate Symbol(s): TPZEF

Energy Oil & Gas E&P

Topaz Energy Corp. is a royalty and infrastructure energy company. The Company is focused on generating free cash flow growth and paying reliable and sustainable dividends to its shareholders, through its strategic relationship with Canada's natural gas producer, Tourmaline Oil Corp. Its asset portfolio is made up of royalty interests across approximately six million gross acres in the Western... see more

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Topaz Energy Corp > Third Quarter 2021 Financial Results

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Post by Betteryear2 on Nov 04, 2021 4:48pm

Third Quarter 2021 Financial Results

CALGARY, AB, Nov. 4, 2021 /CNW/ - Topaz Energy Corp. (TSX:TPZ) ("Topaz" or the "Company") is pleased to provide third quarter 2021 financial results and new guidance estimates. Selected financial and operational information is outlined below and should be read in conjunction with Topaz's unaudited interim condensed consolidated financial statements for the three and nine months ended September 30, 2021 and related management's discussion and analysis ("MD&A") which are available on SEDAR at www.sedar.com and on Topaz's website at www.topazenergy.ca.

Third Quarter 2021 Highlights

Third quarter 2021 FCF(1) of $49.8 million or $0.39 per share, was 21% higher than the prior quarter, driven by royalty production growth, increased benchmark commodity prices (16% natural gas (AECO) and 7% oil (NYMEX WTI)) and a 23% increase in infrastructure processing revenue and other income.
Record third quarter average royalty production(3) of 15,119 boe/d grew 23% from the prior quarter. Approximately 70% of the quarterly production increase is attributed to royalty acquisitions which closed subsequent to the second quarter.
Record royalty production revenue of $40.6 million, 48% higher than the prior quarter. Topaz's third quarter royalty production was 86% weighted to natural gas, the price of which has significantly increased in 2021 as Canadian natural gas storage deficiencies have created a tightened market. The average AECO (5A) benchmark for the third quarter was C$3.60 per mcf, up 60% from the prior year.
11% increase to Topaz's previous 2021 EBITDA(1) guidance estimate (increased from $176.0 million to $195.0 million), attributed to recent acquisition activity and an increased commodity price outlook. Topaz's Board has also approved its 2022 guidance estimates which provide for approximately $270.0 million of EBITDA(1) (38% growth over 2021) and $130.0 million of Excess FCF(1) which Topaz will allocate toward acquisition growth opportunities and further sustainable dividend increases.
During the third quarter and subsequent period, Topaz has completed $628.0 million of royalty and infrastructure acquisitions which were funded through an equity financing which closed October 26, 2021 as well as availability under Topaz's credit facility, which Topaz recently expanded to $400.0 million. In aggregate, Topaz acquired:
- Newly created gross overriding royalty interests on shale gas, crude oil, and condensate production on approximately 831,000 gross acres of developed and undeveloped lands in the NEBC Montney play area, which established Topaz as the largest Montney royalty holder in Canada;
- A non-operated 10% working interest in the Tourmaline's Oil Corp. ("Tourmaline") Gundy facility complex which is Tourmaline's newest natural gas plant; is situated in close proximity to both TC Energy's North Montney Mainline and Enbridge's T-North expansion; will be capable of 400 MMcf/d of natural gas processing capacity; and has an operating life in excess of 40 years well supported by underlying Montney reserves ("Gundy Infrastructure Acquisition"). Topaz has negotiated a ten-year fixed take-or-pay commitment, from Tourmaline, during which Topaz will earn a fixed fee of $0.70 per Mcf for 100% of its 40 MMcf/d working interest capacity which will generate $10.2 million of annual fixed infrastructure EBITDA(1) as Topaz will not be responsible for operating costs during the ten-year term. Topaz is only exposed to its working interest share of maintenance capital costs which are expected to be low given the facility was recently built.
- Complementary oil-weighted gross overriding royalties on approximately 496,000 gross acres of developed and undeveloped acreage across the greater Clearwater, Provost, Lloydminster and West Central areas in Alberta which are supported by aggregate contractual capital development commitments of $70.0 million.
- A newly created gross overriding royalty on Whitecap Resources Inc.'s ("Whitecap") 65.3% working interest in the Weyburn, Saskatchewan conventional oil unit which is under carbon dioxide (CO2) enhanced recovery.
Second dividend increase (to $0.24 per share declared for the fourth quarter of 2021) which represents 20% year over year growth during Topaz's first year as a public company. During the same time period, Topaz's dividend payout ratio(1) has compressed from 78% in the third quarter of 2020 to 53% in 2021 as a result of significant high-margin revenue growth which provides enhanced financial flexibility.