Topaz Continues to Grow its Business; Announces Growth Initiatives Including Completion of Strategic Infrastructure Acquisition with 15-Year Volume Commitment and Private Placement

STRATEGIC INFRASTRUCTURE ACQUISITION

CALGARY, AB, July 2, 2020 /CNW/ - Topaz Energy Corp. ("Topaz" or the "Company") is pleased to announce that it has completed a strategic infrastructure acquisition whereby it acquired, for cash consideration of $100 million, a 12.5% working interest in Advantage Oil & Gas Ltd.'s ("Advantage") Glacier gas plant, which has raw gas processing capacity of 400 mmcf/d and services the Montney resource play (the "Glacier Plant Acquisition").  Advantage is a Canadian intermediate, natural gas and liquids development and production company with significant operated assets in the Montney resource play in Western Canada.    

In connection with the Glacier Plant Acquisition, Topaz and Advantage entered into a 15-year volume commitment agreement whereby Topaz will earn a fixed natural gas processing fee of $0.66/mcf for a fixed volume of 50 mmcf/d; this equates to incremental annual cash flow of $12 million for Topaz. The volume commitment fee is payable regardless of actual throughput, and Topaz is not responsible for operating or capital costs for its proportionate share of ownership in the gas plant. 

PRIVATE PLACEMENT AND CREDIT FACILITY

Topaz completed a private placement of 13.2 million common shares of the Company for gross proceeds of $145.3 million; 11.7 million common shares were issued on June 29, 2020 and 1.5 million common shares are committed to be issued in a secondary closing on July 6, 2020.  Proceeds from the private placement were used to finance a portion of the Glacier Plant Acquisition as well as funding potential additional royalty or infrastructure acquisition opportunities.  

Topaz has considerable financial flexibility and remains undrawn on its $75 million credit facility with a major Canadian bank that matures June 10, 2022. Additionally, Topaz expects to continue to generate free cash flow in excess of its dividend distribution.

BOARD APPOINTMENT

Topaz is pleased to announce the appointment of Mrs. Darlene Harris to its Board of Directors.  Mrs. Harris is a Chartered Professional Accountant (CPA, CMA) and has devoted over 30 years in increasingly senior roles at Shell Canada.  Mrs. Harris has broad experience in strategic acquisitions & divestments, financial markets, banking, pension management and governance, talent management, and directorship in the oil & gas industry.   

DIVIDEND PAYMENT

Topaz also announces that its second quarter 2020 dividend of $0.20/share was paid on June 30, 2020 to shareholders of record on June 15, 2020. This quarterly cash dividend is designated as an "eligible dividend" for Canadian income tax purposes.

ABOUT TOPAZ ENERGY CORP.

Topaz is a private royalty and infrastructure company, with a business strategy to provide shareholders with consistent yield and growth. 

Topaz currently owns gross overriding royalty interests on 2.2 million net acres of land owned by Tourmaline Oil Corp., as well as non-operated interests in infrastructure assets in the Western Canadian Sedimentary Basin with cumulative natural gas processing capacity of 135 mmcf/d.  The ownership of its infrastructure assets is underpinned by long-term fixed natural gas processing commitments.  Topaz has established strategic business relationships with two high-quality Canadian oil and gas producers and expects to grow its business through future acquisition opportunities with current and additional high-quality counterparties.  Topaz believes that it offers investors a unique investment opportunity offering the best attributes of both the royalty and infrastructure market segments.

CURRENCY

All amounts in this news release are stated in Canadian dollars unless otherwise specified.

FORWARD-LOOKING INFORMATION

This news release contains forward-looking information and statements (collectively, "forward-looking information") within the meaning of applicable securities laws. This information relates to future events or Topaz's future performance. All information other than information of historical fact is forward-looking information. The use of any of the words "anticipate", "plan", "contemplate", "continue", "estimate", "expect", "intend", "propose", "might", "may", "will", "shall", "project", "should", "could", "would", "believe", "predict", "forecast", "pursue", "potential" and "capable" and similar expressions are intended to identify forward-looking information. This information involves known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information. No assurance can be given that these expectations will prove to be correct and such forward-looking information should not be unduly relied upon. This information speaks only as of the date of this news release or, if applicable, as of the date specified in those documents specifically referenced herein. In addition, this news release may contain forward-looking information attributed to third-party sources.

Without limitation of the foregoing, this news release contains forward-looking information pertaining to the following: expectations for Topaz's future financial and operational performance, growth and realization of future value from the gross overriding royalties, owned interest in natural gas processing plants and associated long term take-or-pay commitments, a contracted interest in certain third party revenues for natural gas processing and other acquired or proposed to be acquired assets (collectively, the "Assets"); estimated future revenue and growth opportunities associated with the Assets; the anticipated benefits to be derived from the Glacier Plant Acquisition; the ability to maintain strategic business relationships with two high-quality Canadian oil and gas producers; expectations to grow its business through future acquisition opportunities with current and additional high-quality counterparties; and the belief that it offers investors a unique investment opportunity offering the best attributes of both the royalty and infrastructure market segments.

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 will be dependent upon, among other things, cash flow, 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 the Company's credit facility.

With respect to forward-looking information contained in this news release, assumptions have been made regarding, among other things: future natural gas, crude oil and condensate prices; future interests rates and currency exchange rates; that Topaz' operations and production will not be disrupted by circumstances attributable to the COVID-19 pandemic and the responses of governments and the public to the pandemic or the oil supply conflict between OPEC members; Topaz's ability to obtain and retain qualified staff and equipment in a timely and cost?efficient manner; the regulatory framework governing royalties, taxes and environmental matters; the ability to market production of natural gas and crude oil successfully; its counterparties' future production levels and growth prospects; the applicability of technologies for recovery and production of counterparties' reserves; future capital expenditures to be made by Topaz; future cash flows from production meeting the expectations stated in this news release; the impact of competition on Topaz; and Topaz's ability to obtain financing (equity or debt) on acceptable terms.

The information in this news release, including Topaz's actual results, could differ materially from those anticipated in the forward-looking information due to a number of factors and risks, including the following: the amount of capital expenditures and the results of operations and development activities by lessees on Topaz' lands; changes in laws or royalty regimes; investor demand for any equity offering; credit and other third-party or counterparty risks; failure to realize the benefits of the Glacier Plant Acquisition; the Assets not being developed by counterparties in the manner anticipated by Topaz; the continuance of third party processing and other fees at competitive market rates and current demand levels; volatility in the demand, supply and market prices for natural gas, crude oil and condensate; reliance on counterparties and other third parties with respect to annual revenue streams; the uncertain impacts of COVID-19 on Topaz' business, and the societal, economic and governmental response to COVID-19; Tourmaline's ability to provide necessary management and other services to Topaz; liabilities inherent in petroleum and natural gas operations; uncertainties associated with estimating natural gas, crude oil and condensate reserves and future production levels; competition for, among other things, third party capital and acquisitions of reserves, additional petroleum and natural gas assets and undeveloped lands; incorrect assessments of the value of the Assets or future acquisitions; risks related to the environment and changing environmental laws in relation to the operations conducted on or with respect to the Assets; claims made or legal actions brought or realized against Topaz or its properties or assets; a failure by Topaz to obtain or retain key personnel; a decrease or elimination of the payment of dividends by Topaz as a result of a board determination, financial constraints or restrictions under applicable agreements or corporate laws; general economic, market and business conditions; and changes in tax or environmental laws or royalty or incentive programs relating to the oil and natural gas industry.

The Company has included the above summary of assumptions and risks related to forward-looking information provided in this news release in order to provide readers with a more complete perspective on Topaz's future operations and such information may not be appropriate for other purposes. Topaz's actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits, if any, that the Company will derive therefrom. Readers are cautioned that the foregoing lists of factors are not exhaustive.

These forward-looking statements are made as of the date of this news release and the Company disclaims any intent or obligation to update any forward-looking statements, whether as a result of new information, future events or results or otherwise, other than as required by applicable securities laws.

Boe Conversions

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.

Abbreviations

Non-GAAP Financial Measures

This news release makes reference to the term "cash flow", which is not a recognized measure under GAAP, and does not have a standardized meaning prescribed by GAAP. Accordingly, the Company's use of this term may not be comparable to similarly defined measures presented by other companies. Management uses the term "cash flow" for its own performance measure 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 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.  For these purposes, "cash flow" is defined as cash from operating activities before changes in non-cash working capital. 

SOURCE Topaz Energy Corp.