Tourmaline and Topaz: A Capital Boost for Royalty Growth

In a strategic move to strengthen its financial position and accelerate growth, Topaz Energy Corp. (TSX: TPZ) announced an upsize to its previously announced bought deal secondary offering to $300 million. This marks a significant increase from the initial offering size of $242 million, reflecting strong investor demand. Tourmaline Oil Corp. (TSX: TOU), as the selling shareholder, will offer 10.7 million common shares of Topaz at $27.80 per share.

The upsized offering provides Topaz with an additional $58 million, bringing the total gross proceeds to $300 million. This influx of capital will enable Topaz to further expand its royalty production growth and enhance its financial flexibility. The company's strategic acquisition of complementary royalty assets in its core areas, including NEBC Montney, Alberta Deep Basin, and Peace River High, has already added significant royalty production and revenue growth. With the additional funds, Topaz can further boost its royalty production and revenue through new acquisitions, drilling and development activities, and infrastructure improvements.

The upsized offering also impacts Tourmaline's equity position and long-term strategy. Following the closing, Tourmaline's equity position in Topaz will reduce to 23.8% (22.9% if the over-allotment option is exercised), aligning with its long-term plan to decrease its stake as Topaz develops independently. This strategic move allows Tourmaline to fund its extensive infrastructure build-out in NEBC, which is expected to add over 150,000 boepd to production over the next five years while maintaining net debt at $1.5 billion. By reducing its equity position in Topaz, Tourmaline can focus on growing its core business, while Topaz benefits from enhanced trading liquidity.



The increased capital will likely have a positive impact on Topaz's financial hedging contracts and commodity pricing strategies. Topaz holds financial hedging contracts that provide superior commodity pricing relative to current commodity price forecasts. The additional capital raised from the upsized offering will enable Topaz to further optimize its hedging portfolio, potentially locking in favorable prices for a more extended period. Moreover, with the increased cash on hand, Topaz can explore opportunistic investments in core royalty areas during favorable market conditions, further enhancing its growth prospects and future cash flows.

In conclusion, the upsized secondary offering to $300 million is a strategic move for Topaz Energy Corp., providing it with additional capital to fuel its royalty production growth and strengthen its financial position. The offering also allows Tourmaline to reduce its equity position in Topaz, enabling it to focus on its core business while maintaining its long-term strategic objectives. With the increased capital, Topaz can optimize its financial hedging contracts and commodity pricing strategies, further enhancing its growth prospects and future cash flows. This transaction reflects the growing confidence and appetite of investors in the energy sector, particularly in royalty and infrastructure companies like Topaz.