Canada’s Topaz grows Montney position

Topaz Energy, a royalty and infrastructure company created by Tourmaline Oil in 2016, said May 18 it will increase its position in Canada’s Montney shale play by 134% with the purchase of additional gross overriding royalty (GORR) interests from Tourmaline.

And it has grown its exposure in the Marten Hills Clearwater heavy oil play by 89% with the acquisition of GORR interests from Cenovus Energy, part of the latter company’s divestment efforts to help pay for its acquisition of Husky Energy.

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In the Montney, Topaz will acquire GORR interests of 4% for natural gas and 2.5% for crude oil and condensate on about 535,000 gross acres and a working interest in Tourmaline’s Gundy infrastructure for a total cash consideration of C$245mn (US$203mn). At Marten Hills, it paid C$102mn in cash to acquire Cenovus Energy’s existing GORR interest on about 192,000 gross acres operated by Headwater Exploration.

Both transactions will be funded by the proceeds of a C$175mn bought deal equity financing and Topaz’s existing cash on hand and credit facilities. Together, they are expected to deliver fixed EBITDA of $10.2mn for 10 years with no capital commitments beyond a working interest share of maintenance capital and royalty revenue from current production of about 27,300 barrels of oil equivalent/day, 62% of which is natural gas.

The equity financing, meanwhile, is being co-led by Peters & Co and BMO Capital Markets, and contemplates the purchase by the syndicate, for re-sale to the public, of 12.3mn common shares of Topaz at a price of C$14.25/share. The underwriters will have an option to purchase up to an additional 15% at the same price for a period of 30 days after closing.

The equity financing is expected to close on June 8 but is not conditional on closing of the two transactions. The Marten Hills acquisition closed May 18; the Montney acquisition is expected to close on or about July 1.