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($000s) except per share
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
