Corporate M&A

Topaz Energy Acquires Reserve Royalty Commercial Trust

By Sakshi Jain
May 03, 2021
2 minutes read

TSX-V listed Topaz Energy Corp. has entered into a definitive sale agreement with Calgary-based Reserve Royalty Income Trust (Reserve Royalty) to acquire 100% of issued and outstanding units of its wholly-owned subsidiary, Reserve Royalty Commercial Trust, in an all-stock transaction valued at approximately C$26.0 million.

In February 2021, Reserve Royalty had engaged Peters & Company to explore opportunities to enhance unitholder value. After reviewing the proposals received in connection with the process, the board determined that this transaction represents the best alternative for unitholders given current industry, economic, and capital markets conditions.

Under the terms of the deal, the purchase price of approximately C$26.0 million is payable via the issuance of approximately 1.7 million Topaz common shares at a deemed price of C$14.5 per share (based on the company’s 5-day volume-weighted average share price prior to the signing of the agreement). The board of directors of Reserve Royalty has unanimously approved the transaction. The transaction will be subject to the approval of at least ~66% of the votes represented by the unitholders who are entitled to be voted on such resolution by Written Resolution at a special meeting of unitholders.

Calgary-based Reserve Royalty Commercial Trust is focused on the production of liquids-rich natural gas and conventional light oil assets in the Sedimentary basin in Western Canada, and currently holds all the oil- and gas-related assets, royalties and liabilities of Reserve Royalty Income Trust. The company’s assets include 345,000 gross acres of developed and undeveloped fee mineral title and royalty interest lands diversified across Western Canada and an aggregate corporate tax pool of approximately C$100 million with no debt.

Reserve Royalty lands also include two liquids-rich Falher natural gas wells in the Ferrier area which began producing in January 2021, and resulted in average gross production of approximately 14,000 million cubic feet per day (Mcf/d) of raw conventional natural gas in addition to NGLs production. During Q1-2021, the company had an average daily production of approximately 609 barrels of oil equivalent per day (boe/d), of which 60% is gas.

Calgary-based Topaz Energy is focused on the acquisition and development of royalty and infrastructure assets in Canada. Topaz Energy was formed in October 2019 through the spin-off of certain royalty interests and natural gas processing assets by Tourmaline Oil.

Peters & Company is acting as the lead financial advisor to Reserve Royalty.

The transaction is subject to customary closing conditions, including the approval of the Toronto Stock Exchange (TSX) and required approval of Reserve Royalty unit holders, which will be taken at a special meeting expected to be held in May 2021.

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