Topaz Energy: Record Growth and Strategic Acquisition Drive Q3 2024 Results

Topaz Energy Corp. (TSX: TPZ) has announced its third quarter 2024 financial results, marked by record royalty acreage drilling activity and the successful closing of a strategic royalty acquisition. The company's strong performance highlights its commitment to growth, sustainability, and delivering strong financial performance.

**Record Royalty Acreage Drilling Activity**

Topaz reported a record 216 gross wells drilled across its royalty acreage during the third quarter, driven by 49% of new wells drilled in its high-growth royalty areas, NEBC Montney and Clearwater. This activity attracted 17% of total WCSB development activity during Q3 2024, reflecting the high demand for Topaz's royalty acreage.


**Strategic Royalty Acquisition**

On November 1, 2024, Topaz completed the acquisition of gross overriding royalty interests on approximately 3.0 million gross acres from Tourmaline Oil Corp. (BBB High). This strategic move increased Topaz's royalty acreage by 50%, including a 38% increase in its premium Montney rights acreage, and provided 12% immediate royalty production growth. The acquisition aligns Topaz with Tourmaline's future identified growth projects, enhancing Topaz's long-term growth prospects.


**Financial Performance**

Topaz generated $73.6 million in total revenue and other income, a 28% increase from the previous quarter, with royalty assets contributing 72% and infrastructure assets 28%. Earnings per share (EPS) grew to $0.51, up from $0.46 in Q2 2024.

Cash flow and free cash flow (FCF) were strong, with Topaz generating $67.0 million in cash flow and $64.8 million in FCF, allocated to dividends and debt repayment. Net debt decreased by $17.4 million during the quarter, demonstrating Topaz's financial discipline.

**Dividend Payout and Yield**

Topaz paid $47.8 million in dividends, representing a 71% payout ratio, and maintained a 5.2% annualized yield. The company's consistent dividend increases reflect its commitment to shareholder returns.

**Future Growth Prospects**

Topaz expects its dividends and payout ratio to remain sustainable down to very low commodity prices, supported by financial derivative contracts and high-margin, contracted revenue from its infrastructure portfolio. The company has increased its 2024e annual average royalty production guidance estimate range to 19,100 - 20,000 boe/d, reflecting the incremental royalty production volume attributed to the strategic acquisition for November and December 2024.

Topaz's strategic acquisition and record drilling activity position the company for long-term growth and cash flow generation. With a solid balance sheet, attractive valuation, and a clear path to future growth, Topaz remains an attractive investment opportunity for long-term investors.

In conclusion, Topaz Energy Corp.'s third quarter 2024 financial results, record royalty acreage drilling activity, and the successful closing of the strategic royalty acquisition demonstrate the company's strong financial performance, growth prospects, and commitment to shareholder value. With a solid balance sheet, attractive valuation, and a clear path to future growth, Topaz is well-positioned to drive long-term value creation for shareholders.