Topaz’s financial statements and management’s discussion and analysis for the three and nine-months ended September 30, 2020 are available electronically under the Company’s profile on SEDAR, www.sedar.com, and on Topaz’s website, www.topazenergy.ca.
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. For further information, please visit the Company’s website www.topazenergy.ca.
[expand title=”Advisories & Contact”]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: the forecasts described under the heading “Guidance” above; planned funding for the Royalty Acquisition; expected increases in production from the Royalty Acquisition lands and expansion of Tourmaline’s capital plan over the next two years; estimated royalty production, royalty production revenue and free cash flow per share growth from the Royalty Acquisition lands in 2021 and 2022; expected closing date of the Royalty Acquisition; other expected benefits from the Royalty Acquisition 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 information is 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 information. Such risks and uncertainties include, but are not limited to, the failure to complete the Royalty Acquisition on the terms or on the timing announced or at all and the failure to realize some or all of the anticipated benefits of the Royalty Acquisition including estimated royalty production, royalty production revenue and free cash flow per share growth , and the factors discussed under “Notice to Investors – Forward-Looking Information” and “Risk Factors” in the supplemented PREP prospectus dated October 19, 2020. Topaz does not undertake any obligation to update such forward–looking information, 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 processing revenue and other income and EBITDA for the quarter and year ending December 31, 2020 and the year ending December 31, 2021 and the royalty production revenue and free cash flow per share growth to be generated from the Royalty Acquisition in 2021 and 2022, respectively, 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 “Guidance” above and with respect to the royalty production revenue and free cash flow per share growth to be generated from the Royalty Acquisition, the following assumptions: a natural gas price of $2.99/mcf in 2021 and $2.68/mcf in 2022; an average light oil (MSW and PSO) price of $46.53CAD/bbl in 2021 and $46.15CAD/bbl in 2022; a condensate price of $52.10CAD/bbl in 2021 and $50.93CAD/bbl in 2022; a currency exchange rate of $0.76 (US/CAD) in 2021 and 2022; and 109,939,065 Company common shares outstanding. To the extent such estimates constitute financial outlooks, they were approved by management and the board of directors of Topaz on November 10, 2020 and are included to provide readers with an understanding of the royalty production revenue and free cash flow per share growth to be generated from the Royalty Acquisition in 2021 and 2022 based on the assumptions described herein and readers are cautioned that the information may not be appropriate for other purposes.
NON-GAAP FINANCIAL MEASURES
In addition to using financial measures prescribed by International Financial Reporting Standards (“IFRS” or “GAAP”), references are made in this news release to “free cash flow”, which is a measure that does not have any standardized meaning as prescribed by IFRS. Management uses this term for its own performance measures 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 may not be comparable to similarly defined measures presented by other entities and 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. References to “free cash flow” are to the amount of cash estimated to be available for dividends to shareholders in accordance with the Company’s dividend policy and is defined as cash flow less capital expenditures, where “cash flow” is defined as cash from (used in) operations before changes in non-cash working capital.
This news release also makes reference to the terms “EBITDA”, “EBITDA margin,” “payout ratio,” “working capital”, “adjusted working capital”, “net debt (cash),”, which are not recognized measures under GAAP, and 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. Management uses the terms “EBITDA,” “EBITDA margin,” “payout ratio,” “working capital,” “adjusted working capital,” and “net debt (cash)” for its own performance measures 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 the non-GAAP financial measures 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, “EBITDA” is net income or loss from continuing operations, excluding extraordinary items, plus interest expense, income taxes and the capital portion of any finance lease received, and adjusted for non-cash items including depletion and depreciation and share-based compensation and gains or losses on dispositions. “EBITDA margin” is defined as EBITDA divided by total revenue and other income (expressed as a percentage of total revenue and other income). “Payout ratio” is dividends paid expressed as a percentage of cash flow. “Working capital” is current assets less current liabilities. “Adjusted working capital” is current assets less current liabilities, adjusted for financial instruments and “net debt (cash)” is total debt outstanding less adjusted working capital.
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.29dk2902l[/expand]