TOPAZ REPORTS SECOND QUARTER 2025 FINANCIAL RESULTS DEMONSTRATING STRONG ROYALTY AND INFRASTRUCTURE GROWTH
CALGARY, AB, July 28, 2025 /CNW/ - Topaz Energy Corp. (TSX: TPZ) ("Topaz" or the "Company") is pleased to provide second quarter 2025 financial results. Select financial information is outlined below and should be read in conjunction with Topaz's interim condensed consolidated financial statements ("Financial Statements") and related management's discussion and analysis ("MD&A") as at and for the three and six months ended June 30, 2025, which are available on SEDAR+ at www.sedarplus.ca and on Topaz's website at www.topazenergy.ca.
Highlights
- Generated Q2 2025 cash flow of $75.6 million ($0.49 per share(2)) and free cash flow (FCF)(1) of $74.0 million ($0.48 per share). From the prior year, YTD 2025 cash flow of $1.02 per share(2) and free cash flow (FCF)(1) of $1.00 per share(2) each increased 7%.
- 19% higher Q2 2025 royalty production (22,290 boe/d(4)) from the prior year, including 9% higher crude and heavy oil royalty production and 23% higher natural gas and natural gas liquids royalty production. Approximately 70% of the Q2 annual production growth is attributed to royalty acquisitions completed during the prior two quarters, with the remainder attributed to operator-funded royalty acreage development.
- Topaz's share of total WCSB drilling activity across the Company's royalty acreage increased from 15% during Q2 2024 to 21% during Q2 2025(8). 125 gross wells (4.9 net)(7) were drilled and 5 gross wells were reactivated during the quarter despite spring break-up seasonality that typically limits development activity.
- Processing revenue of $20.2 million from Topaz's infrastructure assets increased 37% from the prior year.
- Paid the increased second quarter dividend of $0.34 per share (69% payout ratio(1)) and approved the third quarter dividend of $0.34 per share which represents a 5.3% annualized yield to Topaz's current share price(10).
- Allocated $26.0 million of Excess FCF(1) toward the previously announced Alberta Montney infrastructure acquisition which closed on May 30, 2025. The natural gas processing facility was commissioned ahead of schedule and marks Topaz's second Alberta Montney infrastructure asset acquired over the past year.
Second Quarter 2025 Update
Financial Overview
- Topaz generated total revenue and other income of $81.2 million, 46% from crude and heavy oil royalties, 26% from natural gas and NGL royalties, and 28% from the infrastructure portfolio.
- Cash flow of $75.6 million was 7% higher than Q2 2024, attributed to 19% higher royalty production and 25% higher processing revenue and other income.
- Paid $52.3 million in dividends ($0.34 per share and 69% payout ratio(1)) which represents a 5.5% trailing annualized yield to the Q2 2025 average share price(9) and generated a 91% FCF Margin(1).
- Topaz exited Q2 2025 with $485.2 million of net debt(1) (1.5x net debt to Q2 2025 annualized EBITDA(1)). During the quarter, Topaz extended the maturity date (to April 30, 2029) of the Company's unsecured, covenant-based credit facility which provides for total credit capacity up to $1.0 billion. As at July 28, 2025, Topaz has approximately $0.5 billion of available capacity under the facility(6).
Royalty Activity, Natural Gas Pricing & Hedging
- Q2 2025 average royalty production of 22,290 boe/d(4) includes record crude and heavy oil production of 5,447 bbl/d that increased 9% from Q2 2024. Natural gas and natural gas liquids production of 16,841 boe/d increased 23% from Q2 2024.
- During the quarter, Topaz generated $58.4 million total royalty revenue (99% operating margin(1)) and average realized price of $28.78 per boe (before hedging). During Q2 2025 Topaz realized a $5.2 million total hedging gain.
- Topaz realized a $3.3 million natural gas hedging gain that represents $0.39 per mcf relative to Q2 2025 natural gas royalty production (or 28% relative to Topaz's Q2 2025 realized natural gas price).
- For the second half of 2025, approximately 34% of natural gas is hedged at a weighted average fixed price of C$2.88 per mcf, and approximately 30% of oil and total liquids is hedged at a weighted average floor price of C$97.64 per barrel(12).
- Q2 2025 royalty acreage drilling activity increased 33% from the prior year (125 gross wells or 4.9 net)(7) which represents 21% of Q2 2025 WCSB drilling activity(8). During Q2 2025, 168 total gross wells were brought on production(7) and at June 30, 2025, 94 gross wells were drilled but not yet completed (representing 75% of Q2 2025 new wells drilled).
- Topaz estimates that operators invested $0.5 billion to $0.6 billion of development capital across the Company's royalty acreage in Q2 2025, with drilling activity (125 gross wells spud(7)) diversified as follows: 50 Clearwater, 42 NEBC & Alberta Montney, 23 Deep Basin, 5 SE Saskatchewan and 5 Peace River.
- Based on planned operator drilling activity, Topaz expects that the current 28 – 32 active drilling rigs on its royalty acreage will be maintained through the third quarter of 2025(3).
Infrastructure Activity
- During Q2 2025, Topaz generated $22.8 million in processing revenue and other income which increased 25% from the prior year. The infrastructure assets generated 97% utilization and Topaz incurred $2.2 million in operating expenses, providing a 90% operating margin(1). Topaz incurred $0.8 million in maintenance-related capital expenditures (before capitalized G&A).
- The previously announced Alberta Montney natural gas processing facility acquisition was completed on May 30, 2025 which is fully supported by a 15-year fixed take-or-pay contractual commitment during which Topaz is not responsible for operating or maintenance costs. The acquisition was funded through Topaz's existing credit facility.
Dividend
- Topaz's Board approved the Company's third quarter 2025 dividend of $0.34 per share(11) which is expected to be paid on September 30, 2025, to shareholders of record on September 15, 2025. The quarterly cash dividend is designated as an "eligible dividend" for Canadian income tax purposes.
- Topaz's 2025e dividend remains sustainable down to $0.01 per mcf natural gas and US$55.00 per bbl crude oil(3) attributable to: (i) the Company's high-margin, stable infrastructure revenue which represents 43% of the 2025e dividend(3); (ii) hedging strategy and financial derivative contracts in place(12); (iii) the quality and financial strength of Topaz's asset portfolio and strategic partners' planned development activity; and (iv) the Company's diversified commodity mix and royalty revenue composition.
Guidance Outlook
2025 Guidance Estimates Reconfirmed
- Topaz reconfirms the Company's 2025 guidance estimates(3)(14), including average annual royalty production of 21,000 – 23,000 boe/d(3)(4) and processing revenue and other income between $88.0 and $92.0 million(3). Based on estimated commodity pricing(5), Topaz expects to exit 2025 with net debt between $430.0 and $435.0 million(3)(13) (net debt to EBITDA 1.2x(1)(3)), before consideration of incremental acquisitions, and generate a modest payout ratio at the lower end of the 60% - 90% long-term targeted payout range.
Q2 2025 CONFERENCE CALL
Topaz will host a conference call tomorrow, Tuesday, July 29, 2025 starting at 9:00 a.m. MST (11:00 a.m. EST). To join the conference call without operator assistance, participants can register and enter their phone number at https://emportal.ink/3TBqrOf to receive an instant automated call back. Alternatively, participants can join by calling a live operator at 1-888-510-2154 (North American toll free). The conference call ID is 97380.
ABOUT THE COMPANY
Topaz is a unique royalty and infrastructure energy company focused on generating free cash flow growth and paying reliable and sustainable dividends to its shareholders, through its strategic relationship with Canada's largest and most active natural gas producer, Tourmaline Oil Corp. ("Tourmaline"), an investment-grade senior Canadian E&P company, and leveraging industry relationships to execute complementary acquisitions from other high-quality energy companies. Topaz focuses on top-quartile energy resources and assets best positioned to attract capital in order to generate sustainable long-term growth and profitability.
Topaz's common shares are listed and posted for trading on the TSX under the trading symbol "TPZ" and it is included in the S&P/TSX Composite Index. This is the headline index for Canada and is the principal benchmark measure for the Canadian equity markets, represented by the largest companies on the TSX.
Additional information
Additional information about Topaz, including the Financial Statements and MD&A as at and for the three and six months ended June 30, 2025 are available on SEDAR+ at www.sedarplus.ca under the Company's profile, and on Topaz's website at www.topazenergy.ca.
Selected Financial Information | |||||||||
For the periods ended | YTD 2025 | YTD 2024 | Q2 2025 | Q1 2025 | Q4 2024 | Q3 2024 | Q2 2024 | ||
Royalty production revenue | 127,051 | 120,500 | 58,368 | 68,683 | 60,234 | 52,692 | 60,162 | ||
Processing revenue | 39,756 | 29,260 | 20,167 | 19,589 | 18,838 | 18,279 | 14,754 | ||
Other income(4) | 6,536 | 6,862 | 2,653 | 3,883 | 3,107 | 2,626 | 3,490 | ||
Total | 173,343 | 156,622 | 81,188 | 92,155 | 82,179 | 73,597 | 78,406 | ||
Cash expenses: | |||||||||
Operating | (3,958) | (3,540) | (2,199) | (1,759) | (1,600) | (2,209) | (1,623) | ||
Marketing | (815) | (725) | (370) | (445) | (356) | (279) | (333) | ||
General and administrative | (4,072) | (3,596) | (1,893) | (2,179) | (2,894) | (1,730) | (1,626) | ||
Realized gain (loss) on financial instruments | 5,987 | 3,136 | 5,166 | 821 | 3,464 | 4,716 | 2,276 | ||
Interest expense | (13,121) | (13,403) | (6,267) | (6,854) | (6,940) | (7,123) | (6,544) | ||
Cash flow | 157,364 | 138,494 | 75,625 | 81,739 | 73,853 | 66,972 | 70,556 | ||
Per basic share(1)(2) | $1.02 | $0.96 | $0.49 | $0.53 | $0.49 | $0.46 | $0.49 | ||
Per diluted share(1)(2) | $1.02 | $0.95 | $0.49 | $0.53 | $0.49 | $0.46 | $0.49 | ||
Cash from operating activities | 161,470 | 140,088 | 80,731 | 80,739 | 64,930 | 71,253 | 68,805 | ||
Per basic share(1)(2) | $1.05 | $0.97 | $0.52 | $0.53 | $0.43 | $0.49 | $0.47 | ||
Per diluted share(1)(2) | $1.05 | $0.96 | $0.52 | $0.52 | $0.43 | $0.49 | $0.47 | ||
Net income | 40,447 | 23,920 | 28,161 | 12,286 | 4,426 | 18,040 | 17,724 | ||
Per basic share(2) | $0.26 | $0.17 | $0.18 | $0.08 | $0.03 | $0.12 | $0.12 | ||
Per diluted share(2) | $0.26 | $0.16 | $0.18 | $0.08 | $0.03 | $0.12 | $0.12 | ||
Adjusted net income(1)(8) | 33,959 | 28,819 | 11,734 | 22,225 | 17,581 | 8,252 | 14,422 | ||
EBITDA(7) | 170,316 | 151,539 | 81,801 | 88,515 | 80,504 | 73,984 | 76,885 | ||
Per basic share(1)(2) | $1.11 | $1.05 | $0.53 | $0.58 | $0.53 | $0.51 | $0.53 | ||
Per diluted share(1)(2) | $1.10 | $1.04 | $0.53 | $0.57 | $0.53 | $0.51 | $0.53 | ||
FCF(1) | 154,854 | 135,765 | 74,017 | 80,837 | 71,435 | 64,789 | 69,499 | ||
Per basic share(1)(2) | $1.01 | $0.94 | $0.48 | $0.53 | $0.47 | $0.45 | $0.48 | ||
Per diluted share(1)(2) | $1.00 | $0.93 | $0.48 | $0.52 | $0.47 | $0.44 | $0.48 | ||
FCF Margin(1) | 89 % | 87 % | 91 % | 88 % | 87 % | 88 % | 89 % | ||
Dividends paid | 103,028 | 92,723 | 52,283 | 50,745 | 50,617 | 47,827 | 46,362 | ||
Per share(1)(6) | $0.67 | $0.64 | $0.34 | $0.33 | $0.33 | $0.33 | $0.32 | ||
Payout ratio(1) | 65 % | 67 % | 69 % | 62 % | 69 % | 71 % | 66 % | ||
Excess FCF(1) | 51,826 | 43,042 | 21,734 | 30,092 | 20,818 | 16,962 | 23,137 | ||
Capital expenditures | 2,510 | 2,729 | 1,608 | 902 | 2,418 | 2,183 | 1,057 | ||
Work in progress capital costs | ─ | 15,710 | ─ | ─ | (21,295) | 5,585 | 4,035 | ||
Acquisitions, excl. decommissioning obligations(1) | 43,471 | 99,189 | 26,001 | 17,470 | 331,380 | - | 99,189 | ||
Weighted average shares – basic(3) | 153,772 | 144,859 | 153,774 | 153,770 | 151,423 | 144,909 | 144,878 | ||
Weighted average shares – diluted(3) | 154,418 | 145,410 | 154,401 | 154,430 | 152,149 | 145,622 | 145,491 | ||
Average Royalty Production(5) | |||||||||
Natural gas (mcf/d) | 94,157 | 77,901 | 93,129 | 95,195 | 83,923 | 76,366 | 75,341 | ||
Light and medium crude oil (bbl/d) | 2,030 | 1,826 | 2,133 | 1,925 | 1,678 | 1,834 | 1,925 | ||
Heavy crude oil (bbl/d) | 3,234 | 2,985 | 3,314 | 3,154 | 3,266 | 3,093 | 3,093 | ||
Natural gas liquids (bbl/d) | 1,376 | 1,159 | 1,320 | 1,434 | 1,346 | 1,057 | 1,141 | ||
Total (boe/d) | 22,335 | 18,955 | 22,290 | 22,380 | 20,279 | 18,712 | 18,717 | ||
Total royalty production (% total liquids) | 30 % | 31 % | 30 % | 29 % | 31 % | 32 % | 33 % | ||
Natural gas liquids (% condensate) | 70 % | 70 % | 70 % | 70 % | 68 % | 75 % | 71 % | ||
Realized Commodity Prices | |||||||||
Natural gas ($/mcf) | $1.72 | $1.82 | $1.38 | $2.06 | $1.41 | $0.63 | $1.09 | ||
Light and medium crude oil ($/bbl) | $85.08 | $92.64 | $79.45 | $91.39 | $90.73 | $94.14 | $101.24 | ||
Heavy crude oil ($/bbl) | $77.30 | $82.32 | $72.31 | $82.61 | $80.81 | $83.17 | $89.03 | ||
Natural gas liquids ($/bbl) | $85.09 | $90.89 | $78.97 | $90.78 | $89.10 | $89.73 | $95.28 | ||
Total ($/boe) | $31.43 | $34.93 | $28.78 | $34.10 | $32.29 | $30.61 | $35.32 | ||
Benchmark Pricing | |||||||||
Natural Gas | |||||||||
AECO 5A (CAD$/mcf) | $1.92 | $1.85 | $1.69 | $2.16 | $1.48 | $0.69 | $1.18 | ||
AECO 7A (CAD$/mcf) | $2.05 | $1.74 | $2.07 | $2.02 | $1.46 | $0.81 | $1.44 | ||
Westcoast station 2 (CAD$/mcf) | $0.86 | $1.69 | $0.46 | $1.27 | $0.90 | $0.50 | $0.77 | ||
Crude Oil, Heavy Oil and Natural Gas Liquids | |||||||||
NYMEX WTI (USD$/bbl) | $67.55 | $78.77 | $63.71 | $71.42 | $70.27 | $75.16 | $80.55 | ||
Edmonton Par (CAD$/bbl) | $89.93 | $99.04 | $84.32 | $95.60 | $95.14 | $98.13 | $105.53 | ||
WCS differential (USD$/bbl) | $11.57 | $16.42 | $10.50 | $12.66 | $12.55 | $13.49 | $13.54 | ||
Edmonton Condensate (CAD$/bbl) | $93.14 | $93.23 | $86.85 | $99.49 | $97.90 | $93.95 | $101.27 | ||
CAD$/USD$ | $0.7098 | $0.7361 | $0.7226 | $0.6969 | $0.7149 | $0.7333 | $0.7308 | ||
Selected statement of financial position results | At Jun. 30, | At Mar. 31, | At Dec. 31, | At Sept. 30, | At Jun. 30, | ||||
Total assets | 1,834,377 | 1,857,438 | 1,894,614 | 1,623,841 | 1,660,645 | ||||
Working capital | 50,640 | 46,694 | 51,758 | 27,520 | 29,309 | ||||
Adjusted working capital(1) | 40,319 | 49,448 | 48,372 | 38,434 | 43,794 | ||||
Net debt (cash)(1) | 485,166 | 480,730 | 492,024 | 381,084 | 398,461 | ||||
Common shares outstanding(3) | 153,774 | 153,774 | 153,457 | 144,928 | 144,878 | ||||
(1) Refer to "Non-GAAP and Other Financial Measures". | |||||||||
(2) Calculated using basic or diluted weighted average shares outstanding during the period. | |||||||||
(3) Shown in thousand shares outstanding. | |||||||||
(4) Includes interest income ($mm): Q2 2025: $0.09, Q1 2025: $0.08, Q4 2024: $0.3, Q3 2024: $0.1; Q2 2024: $0.2; YTD 2025: $0.2, YTD 2024: $0.4. | |||||||||
(5) Refer to "Supplemental Information Regarding Product Types." | |||||||||
(6) Cumulative dividend paid as per the number of outstanding shares on the respective quarterly dividend dates. | |||||||||
(7) Defined term under the Company's Syndicated Credit Facility. (8) Adjusted to exclude the impact of non-cash, unrealized gains or losses on financial instruments. | |||||||||
NOTE REFERENCES
This news release refers to financial reporting periods in abbreviated form as follows: "Q2 2025" refers to the three months ended June 30, 2025; "Q1 2025" refers to the three months ended March 31, 2025; "YTD 2025" refers to the six months ended June 30, 2025; and "Q2 2024" refers to the three months ended June 30, 2024. In addition, "2025e" refers to estimated amounts or results for the year ending December 31, 2025.
1. | See "Non-GAAP and Other Financial Measures". |
2. | Calculated using the weighted average number of diluted common shares outstanding during the respective period. |
3. | See "Forward-Looking Statements". |
4. | See "Supplemental Information Regarding Product Types". |
5. | Estimated based on a recent commodity price forecast for July to December 2025: C$2.55 per mcf natural gas (AECO); US$65.00 per bbl crude oil (NYMEX WTI). |
6. | Topaz's $700.0 million credit facility includes a $300.0 million accordion feature (for a total $1.0 billion facility) that may be advanced by Topaz but remains subject to agent consent. As at July 28, 2025 Topaz had $506.0 million net borrowings against the Company's credit facility, providing approximately $494.0 million available, subject to agent consent. Refer to Note 8 of the June 30, 2025 Financial Statements for Topaz's Q2 2025 covenant calculations. |
7. | May include non-producing injection wells. |
8. | Q2 2025 gross wells spud across Topaz royalty acreage (125) represents 21% of the total wells rig released across the WCSB during Q2 2025 of 607 (excluding oil sands/in situ). Q2 2024: 94 gross wells spud across Topaz royalty acreage represents 15% of the 636 total wells rig released across the WCSB during Q2 2024 (excluding oil sands/in situ). (Source: Rig Locator, geoSCOUT and Peters & Co. Limited). |
9. | Calculated based on Topaz's average share price on the TSX during Q2 2025 of $24.57 per share. |
10. | Calculated based on Topaz's closing share price on the TSX on July 25, 2025 of $25.62. |
11. | Topaz's future dividends remain subject to board of director approval. |
12. | Refer to Topaz's most recently filed MD&A for a complete listing of financial derivative contracts in place. Coverage estimates are calculated based on Topaz's YTD 2025 average royalty production. |
13. | Estimate based on Topaz's YTD 2025 average royalty production, before consideration of any incremental acquisitions. |
14. | Management's assumptions underlying the Company's 2025e guidance estimates include: |
ii. | Being subject to any significant, potential changes to the Company's key operators' 2025 capital budgets and/or operational, weather or wildfire-related issues that may impact the 2025 estimated production range; |
iii. | Topaz's internal estimates regarding development pace and production performance including estimates of operators' 2025 capital development plans including capital allocated to waterflood and other long-term value-enhancing projects and excluding exploration spending; all of which being subject to key operators' revisions to 2025 capital budgets and/or operational, weather or wildfire-related issues that may impact 2025 production; |
iv. | Management's estimates for fixed and variable processing fees based on 95% utilization, third party income, and infrastructure utilization and cost estimates based on historic information and adjusted for inflation; |
v. | No incremental, (i.e. not previously announced) acquisition activity; |
vi. | Estimated 2025e expenses and expenditures of $7.0-$9.0mm of cash G&A; $7.0-$9.0mm of operating expenses; $5.0-$7.0mm capital expenditures (excluding acquisitions); 1% marketing fee on certain royalty production; estimated annual borrowing and standby interest costs at a rate of 5.5%; and no estimated corporate income tax attributed to the Company's year-end 2024 tax pools (refer to Topaz's 2024 Annual Information Form available through the SEDAR+ website (www.sedarplus.ca) or Topaz's website (www.topazenergy.ca). |
vii. | 2025 estimated total dividends of approximately $208.0 million based on 153.8 million shares outstanding at July 28, 2025 ($1.35 per share); and |
viii. | Topaz's outstanding financial derivative contracts included in its most recently filed MD&A. |
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: Topaz's future growth outlook, guidance and strategic plans; estimated annual average royalty production for 2025; estimated processing revenue and other income for 2025; anticipated exit 2025 net debt levels and 2025 net debt to EBITDA levels; dividend amounts, dividend increases (including the intention to increase dividends) and the estimated dividend payout ratio; the sustainability of the dividend and the rationale for such sustainability; the anticipated capital expenditure and drilling plans; the estimated amount of development capital invested by operators across the Company's royalty acreage and their drilling activity; the number of drilling rigs to be active on Topaz's royalty acreage during the third quarter of 2025; the future declaration and payment of dividends and the timing and amount thereof; the forecasts described under the headings "Second Quarter 2025 Update" and "Guidance Outlook" (including under the sub-heading "Dividend") and the assumptions and estimates described under the heading "Note References" above; and the Company's business as described under the heading "About the Company" above.
Forward‐looking statements are based on a number of assumptions including those highlighted in this news release including future commodity prices, capital expenditures, infrastructure ownership capacity utilization and operator development plans, 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 statements.
Such risks and uncertainties include, but are not limited to, potential political, geopolitical and economic instability; trade policy, barriers, disputes or wars (including new tariffs or changes to existing international trade arrangements); the failure to complete acquisitions on the terms or on the timing announced or at all and the failure to realize some or all of the anticipated benefits of acquisitions including estimated royalty production, royalty production revenue and FCF per share growth, and the factors discussed in the Company's most recently filed Management's Discussion and Analysis (See "Forward-Looking Statements" therein), 2024 Annual Information Form (See "Risk Factors" and "Forward-Looking Statements" therein) and other reports on file with applicable securities regulatory authorities and may be accessed through the SEDAR+ website (www.sedarplus.ca) or Topaz's website (www.topazenergy.ca).
Statements relating to "reserves" are also deemed to be forward looking statements, as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described exist in the quantities predicted or estimated and that the reserves can be profitably produced in the future.
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 is dependent upon, among other things, FCF, 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 its credit facility.
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.
FINANCIAL OUTLOOK
Also included in this news release are estimates of the average royalty production range and processing revenue and other income range for the year ending December 31, 2025 and estimated year-end exit net debt and net debt to EBITDA for 2025 based on YTD 2025 average royalty production and YTD 2025 annualized processing revenue and other income, 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 Outlook" and "Note References" above and are based on the following key assumptions: Topaz's estimated capital expenditures (excluding acquisitions) of $5.0 to $7.0 million in 2025; the Company's tax pool balances at year-end 2024 and the resulting future tax horizon; the working interest owners' anticipated 2025 capital plans attributable to Topaz's undeveloped royalty lands; estimated average annual royalty production range of 21,000 to 23,000 boe/d in 2025; 2025 average infrastructure ownership capacity utilization of 95%; December 31, 2025 exit net debt (midpoint) range between $430.0 and $435.0 million, 2025 average commodity prices of: C$2.55/mcf (AECO 5A), US$65.00/bbl (NYMEX WTI), US$12.00/bbl (WCS oil differential), US$3.50/bbl (MSW oil differential) and US$/CAD$ foreign exchange 0.73.
To the extent such estimates constitute financial outlooks, they are included to provide readers with an understanding of the estimated revenue, net debt and the other metrics described above for the year ending December 31, 2025 based on the assumptions described herein and readers are cautioned that the information may not be appropriate for other purposes.
NON-GAAP AND OTHER FINANCIAL MEASURES
Certain financial terms and measures contained in this news release are "specified financial measures" (as such term is defined in National Instrument 52-112 - Non-GAAP and Other Financial Measures Disclosure ("NI 52-112")). The specified financial measures referred to in this news release are comprised of "non-GAAP financial measures", "capital management measures" and "supplementary financial measures" (as such terms are defined in NI 52-112). These measures are defined, qualified, and where required, reconciled with the nearest GAAP measure below.
Non-GAAP Measures and Ratios
The non-GAAP financial measure used herein 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. Investors are cautioned that the non-GAAP financial measure should not be considered in isolation nor as an alternative to net income (loss) or other financial information determined in accordance with GAAP, as an indication of the Company's performance.
Non-GAAP Financial Measures
This news release makes reference to the terms "adjusted net income", "acquisitions, excluding decommissioning obligations" and "operating margin", which are considered non-GAAP financial measures under NI 52-112; defined as a financial measure disclosed by an issuer that depicts the historical or expected future financial performance, financial position, or cash flow of an entity, and is not disclosed in the financial statements of the issuer.
Other Financial Measures
Capital management measures
Capital management measures are defined as financial measures disclosed by an issuer that are intended to enable an individual to evaluate the entity's objectives, policies and processes for managing the entity's capital, are not a component of a line item or a line item on the primary financial statements, and which are disclosed in the notes to the financial statements. The Company's capital management measures disclosed in the Company's interim condensed consolidated financial statements as at and for the three and six months ended June 30, 2025 include adjusted working capital, net debt (cash), free cash flow (FCF) and Excess FCF.
Supplementary financial measures
This news release makes reference to the terms "adjusted net income per basic or diluted share", "cash flow per basic or diluted share", "FCF per basic or diluted share", "EBITDA per basic or diluted share", "FCF margin", "operating margin percentage" and "payout ratio" which are all considered supplementary financial measures under NI 52-112; defined as a financial measure disclosed by an issuer that is, or is intended to be, disclosed on a periodic basis to depict the historical or expected future financial performance, financial position or cash flow of an entity, is not disclosed in the financial statements of the issuer, and is not a non-GAAP financial measure or non-GAAP financial ratio.
The following terms are financial measures as defined under the Company's Syndicated Credit Facility, presented in the Company's interim condensed consolidated financial statements as at and for the three and six months ended June 30, 2025: (i) consolidated senior debt, (ii) total debt, (iii) EBITDA and (iv) capitalization.
Cash flow, FCF, FCF margin, and Excess FCF
Management uses cash flow, FCF, FCF margin and Excess FCF for its own performance measures and to provide investors with a measurement of the Company's efficiency and its ability to generate the cash necessary to fund or increase dividends, fund future growth opportunities and/or to repay debt; and furthermore, uses per share metrics to provide investors with a measure of the proportion attributable to the basic or diluted weighted average common shares outstanding.
Cash flow is a GAAP measure which is derived of cash from operating activities excluding the change in non-cash working capital and is presented in the consolidated statements of cash flows. FCF is a capital management measure presented in the notes to the consolidated financial statements and is defined as cash flow, less capital expenditures. The supplementary financial measure "FCF margin", is defined as FCF divided by total revenue and other income (expressed as a percentage of total revenue and other income). The capital management measure "Excess FCF", is defined as FCF less dividends paid. The supplementary financial measures "cash flow per basic or diluted share" and "FCF per basic or diluted share" are calculated by dividing cash flow and FCF, respectively, by the basic or diluted weighted average common shares outstanding during the period.
A summary of the reconciliation from cash from operating activities (per the consolidated statements of cash flows) to cash flow (per the consolidated statements of cash flows), cash flow per basic or diluted share, FCF, Excess FCF, FCF per basic or diluted share and FCF margin is set forth below:
Three months ended | Six months ended | |||
($000s) | Jun. 30, 2025 | Jun. 30, 2024 | Jun. 30, 2025 | Jun. 30, 2024 |
Cash from operating activities | 80,731 | 68,805 | 161,470 | 140,088 |
Exclude net change in non-cash working capital | 5,106 | (1,751) | 4,106 | 1,594 |
Cash flow | 75,625 | 70,556 | 157,364 | 138,494 |
Less: Capital expenditures | 1,608 | 1,057 | 2,510 | 2,729 |
FCF | 74,017 | 69,499 | 154,854 | 135,765 |
Less: dividends paid | 52,283 | 46,362 | 103,028 | 92,723 |
Excess FCF | 21,734 | 23,137 | 51,826 | 43,042 |
Cash flow per basic share(1) | $0.49 | $0.49 | $1.02 | $0.96 |
Cash flow per diluted share(1) | $0.49 | $0.49 | $1.02 | $0.95 |
FCF per basic share(1) | $0.48 | $0.48 | $1.01 | $0.94 |
FCF per diluted share(1) | $0.48 | $0.48 | $1.00 | $0.93 |
FCF | 74,017 | 69,499 | 154,854 | 135,765 |
Total Revenue and other income | 81,188 | 78,406 | 173,343 | 156,622 |
FCF Margin | 91 % | 89 % | 89 % | 87 % |
(1) As noted, calculated using the basic or diluted weighted average number of shares outstanding during the respective periods. |
Adjusted net income
Management uses adjusted net income for its own performance measure and to provide investors with a measurement of the Company's net income prior to the non-cash effects of unrealized gains and losses on financial instruments. Adjusted net income is calculated as net income per the consolidated statement of net income and comprehensive income, less unrealized gains (losses) on financial instruments. The supplementary financial measures "adjusted net income per basic or diluted share" is calculated by dividing adjusted net income by the basic or diluted weighted average common shares outstanding during the period.
A summary of the reconciliation from net income to adjusted net income and adjusted net income per basic and diluted share is set forth below:
Three months ended | Six months ended | |||
($000s) | Jun. 30, 2025 | Jun. 30, 2024 | Jun. 30, 2025 | Jun. 30, 2024 |
Net Income | 28,161 | 17,724 | 40,447 | 23,920 |
Unrealized gains (losses) on financial derivatives | 16,427 | 3,302 | 6,488 | (4,899) |
Adjusted net income | 11,734 | 14,422 | 33,959 | 28,819 |
Adjusted net income per basic share(1) | $0.08 | $0.10 | $0.22 | $0.20 |
Adjusted net income per diluted share(1) | $0.08 | $0.10 | $0.22 | $0.20 |
(1) Calculated using basic and diluted weighted average shares outstanding. | ||||
Operating margin and operating margin percentage
Operating margin (infrastructure assets) is a non-GAAP financial measure derived from processing revenue and other income, less operating expenses. Operating margin percentage (infrastructure assets) is a supplemental financial measure, calculated as operating margin (infrastructure assets), expressed as a percentage of total processing revenue and other income. Operating margin (royalty assets) is a non-GAAP financial measure derived from royalty production revenue, less marketing expenses. Operating margin percentage (royalty assets) is a supplemental financial measure, calculated as operating margin (royalty assets), expressed as a percentage of total royalty production revenue. Operating margin and operating margin percentage are used by management to analyze the profitability of its infrastructure assets and royalty assets. A summary of the reconciliation of operating margin and operating margin percentage, for infrastructure and royalty assets, are set forth below:
Operating margin and operating margin percentage (infrastructure assets)
Three months ended | Six months ended | |||
($000s) | Jun. 30, 2025 | Jun. 30, 2024 | Jun. 30, 2025 | Jun. 30, 2024 |
Processing revenue | 20,167 | 14,754 | 39,756 | 29,260 |
Other income | 2,653 | 3,490 | 6,536 | 6,862 |
Total | 22,820 | 18,244 | 46,292 | 36,122 |
Operating expenses | 2,199 | 1,623 | 3,958 | 3,540 |
Operating margin (infrastructure assets) | 20,621 | 16,621 | 42,334 | 32,582 |
Operating margin % (infrastructure assets) | 90 % | 91 % | 91 % | 90 % |
Operating margin and operating margin percentage (royalty assets)
Three months ended | Six months ended | |||
($000s) | Jun. 30, 2025 | Jun. 30, 2024 | Jun. 30, 2025 | Jun. 30, 2024 |
Royalty production revenue | 58,368 | 60,162 | 127,051 | 120,500 |
Marketing expenses | 370 | 333 | 815 | 725 |
Operating margin (royalty assets) | 57,998 | 59,829 | 126,236 | 119,775 |
Operating margin % (royalty assets) | 99 % | 99 % | 99 % | 99 % |
Adjusted working capital and net debt
Management uses the terms "adjusted working capital" and "net debt" to measure the Company's liquidity position and capital flexibility, as such these terms are considered capital management measures. "Adjusted working capital" is calculated as current assets less current liabilities, adjusted for financial instruments and work in progress capital costs. "Net debt" is calculated as total debt outstanding less adjusted working capital.
A summary of the reconciliation from working capital, to adjusted working capital and net debt is set forth below:
($000s) | As at | As at |
Working capital | 50,640 | 51,758 |
Exclude fair value of financial instruments | 10,321 | 4,614 |
Exclude work in progress capital costs | ─ | (1,228) |
Adjusted working capital | 40,319 | 48,372 |
Less: bank debt | 525,485 | 540,396 |
Net Debt | 485,166 | 492,024 |
EBITDA and EBITDA per basic or diluted share
EBITDA, as defined under the Company's Syndicated Credit Facility and disclosed in note 8 of the Interim Condensed Consolidated Financial Statements as at and for the three and six months ended June 30, 2025, is considered by the Company as a capital management measure which is used to evaluate the Company's operating performance, and provides investors with a measurement of the Company's cash generated from its operations, before consideration of interest income or expense. "EBITDA" is calculated as consolidated net income or loss from continuing operations, excluding extraordinary items, plus interest expense, income taxes, and adjusted for non-cash items and gains or losses on dispositions.
EBITDA per basic or diluted share is a supplementary financial measure that is calculated by dividing EBITDA by the basic or diluted weighted average common shares outstanding during the period and provides investors with a measure of the proportion of EBITDA attributed to the basic or diluted weighted average common shares outstanding.
A summary of the reconciliation of net income (per the Financial Statements), to EBITDA, is set forth below:
Three months ended | Six months ended | |||
($000s) | Jun. 30, 2025 | Jun. 30, 2024 | Jun. 30, 2025 | Jun. 30, 2024 |
Net income | 28,161 | 17,724 | 40,447 | 23,920 |
Unrealized (gain) loss on financial instruments | (16,427) | (3,302) | (6,488) | 4,899 |
Share-based compensation | 834 | 662 | 1,623 | 1,221 |
Finance expense | 6,486 | 6,682 | 13,485 | 13,732 |
Depletion and depreciation | 52,878 | 49,067 | 105,050 | 98,392 |
Deferred income tax expense | 9,960 | 6,267 | 16,368 | 9,733 |
Less: interest income | (91) | (215) | (169) | (358) |
EBITDA | 81,801 | 76,885 | 170,316 | 151,539 |
EBITDA per basic share ($/share)(1) | $0.53 | $0.53 | $1.11 | $1.05 |
EBITDA per diluted share ($/share)(1) | $0.53 | $0.53 | $1.10 | $1.04 |
(1) As noted, calculated using the basic or diluted weighted average number of shares outstanding during the respective periods. |
Payout ratio
"Payout ratio", a supplementary financial measure, represents dividends paid, expressed as a percentage of cash flow and provides investors with a measure of the percentage of cash flow that was used during the period to fund dividend payments. Payout ratio is calculated as cash flow divided by dividends paid.
A summary of the reconciliation from cash flow to payout ratio is set forth below:
Three months ended | Six months ended | |||
Jun. 30, 2025 | Jun. 30, 2024 | Jun. 30, 2025 | Jun. 30, 2024 | |
Cash flow ($000s) | 75,625 | 70,556 | 157,364 | 138,494 |
Dividends ($000s) | 52,283 | 46,362 | 103,028 | 92,723 |
Payout Ratio (%) | 69 % | 66 % | 65 % | 67 % |
Acquisitions, excluding decommissioning obligations
"Acquisitions, excluding decommissioning obligations", is considered a non-GAAP financial measure, and is calculated as: acquisitions (per the consolidated statements of cash flows) plus non-cash acquisitions but excluding non-cash decommissioning obligations.
A summary of the reconciliation from acquisitions (per the consolidated statements of cash flow) to acquisitions, excluding decommissioning obligations is set forth below:
Three months ended | Six months ended | |||
($000s) | Jun. 30, 2025 | Jun. 30, 2024 | Jun. 30, 2025 | Jun. 30, 2024 |
Acquisitions (consolidated statements of cash flows) | 26,001 | 99,189 | 43,471 | 99,189 |
Non-Cash acquisitions | ─ | ─ | ─ | ─ |
Acquisitions (excluding non-cash decommissioning obligations) | 26,001 | 99,189 | 43,471 | 99,189 |
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.
OIL AND GAS METRICS
This news release contains certain oil and gas metrics which do not have standardized meanings or standard methods of calculation and therefore such measures may not be comparable to similar measures used by other companies and should not be used to make comparisons. Such metrics have been included in this news release to provide readers with additional measures to evaluate the Company's performance; however, such measures are not reliable indicators of the Company's future performance and future performance may not compare to the Company's performance in previous periods and therefore such metrics should not be unduly relied upon.
INFORMATION REGARDING PUBLIC ISSUER COUNTERPARTIES
Certain information contained in this news release relating to the Company's public issuer counterparties which include Tourmaline and others, 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.
CREDIT RATINGS
This news release makes reference to Tourmaline's credit rating. Credit ratings are intended to provide investors with an independent measure of credit quality of an issue of securities. Credit ratings are not recommendations to purchase, hold or sell securities and do not address the market price or suitability of a specific security for a particular investor. There is no assurance that any rating will remain in effect for any given period of time or that any rating will not be revised or withdrawn entirely by a rating agency in the future if, in its judgment, circumstances so warrant.
SUPPLEMENTAL INFORMATION REGARDING PRODUCT TYPES
This news release includes references to actual and estimated average royalty production. The following table is intended to provide supplemental information about the product type composition for each of the production figures that are provided in this news release:
For the three months ended | Jun. 30, 2025 | Mar. 31, 2025 | Dec. 31, 2024 | Sept. 30, 2024 | Jun. 30, 2024 |
Average daily production | |||||
Light and medium crude oil (bbl/d) | 2,133 | 1,925 | 1,678 | 1,834 | 1,925 |
Heavy crude oil (bbl/d) | 3,314 | 3,154 | 3,266 | 3,093 | 3,093 |
Conventional natural gas (mcf/d) | 55,345 | 56,360 | 46,901 | 41,687 | 40,202 |
Shale gas (mcf/d) | 37,784 | 38,835 | 37,022 | 34,679 | 35,139 |
Natural gas liquids (bbl/d) | 1,320 | 1,434 | 1,346 | 1,057 | 1,141 |
Total (boe/d) | 22,290 | 22,380 | 20,279 | 18,712 | 18,717 |
For the year ended | 2025 (Estimate)(1)(2) | 2024 (Actual) | 2023 (Actual) |
Average daily production | |||
Light and medium crude oil (bbl/d) | 1,683 | 1,791 | 1,727 |
Heavy crude oil (bbl/d) | 3,275 | 3,083 | 2,740 |
Conventional natural gas (mcf/d) | 51,500 | 43,269 | 42,043 |
Shale gas (mcf/d) | 42,178 | 35,760 | 37,177 |
Natural gas liquids (bbl/d) | 1,430 | 1,180 | 1,181 |
Total (boe/d) | 22,000 | 19,227 | 18,853 |
(1) | Represents the 2025e midpoint guidance estimate. |
(2) | Topaz's estimated royalty production is based on the estimated commodity mix; drilling location and corresponding royalty rate; and capital development activity on Topaz's royalty acreage by the working interest owners, all of which are outside of Topaz's control. |
SOURCE Topaz Energy Corp
For further information: please contact: Topaz Energy Corp., Marty Staples, President and Chief Executive Officer, (587) 747-4830, Cheree Stephenson, VP Finance and CFO, (587) 747-4830
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