Topaz Energy Announces Strategic Acquisitions in British Columbia and Alberta
TSX-listed Topaz Energy Corp. has entered into a definitive agreement with Calgary-based Tourmaline Oil Corp. to acquire newly-created gross overriding royalty (GORR) interests on shale gas, crude oil, and condensate production from approximately 535,000 gross acres (of which 288,000 gross acres are Montney rights) of developed and undeveloped lands in northeast British Columbia, as well as a 10% working interest in the Gundy facility complex, for a total cash consideration of C$245.0 million.
The GORR interests to be acquired are 4% on shale gas production until December 31st, 2022 and 3% thereafter, and 2.5% on crude oil and condensate production. As a result of the acquisition, Topaz Energy’s existing 215,000 gross acres of contiguous northeast British Columbia Montney royalty lands will increase by 134% to 503,000 gross acres.
Concurrently, Topaz Energy has also entered into an agreement with Calgary-based Cenvovus Energy Inc., to acquire overriding royalty interests (ORRIs) on production from approximately 192,000 gross acres (of which 172,800 gross acres are Clearwater rights) of Marten Hills Clearwater properties in Alberta, for a total cash consideration of approximately C$102 million. The Clearwater acquisition will increase Topaz Energy’s existing 194,000 gross acres of greater Clearwater royalty lands by 89%.
The northeast British Columbia acreage consists of developed and undeveloped lands at Doe, Gundy, Conroy (Saguaro), Laprise (Polar Star), and Birley (Chinook) areas, with approximately 1,700 future drilling locations identified. The Gundy facility complex is a natural gas plant capable of processing 400 million cubic feet per day (MMcf/d) of natural gas, and has an operating life of over 40 years. The current average daily production attributable to the acreage is approximately 22,600 barrels of oil equivalent per day (boe/d), of which approximately 75% is gas.
The Clearwater acreage is currently operated by Headwater Exploration, and includes 12 eight-leg multilateral producing wells, five horizontal water injection wells, two source water wells and one stratigraphic test. The current work commitments on the properties include drilling of additional exploration wells in 2021 and 2022 to delineate the exploration lands. The current average daily production attributable to the acreage is approximately 4,600 barrels of oil per day (bbls/d).
The Clearwater acquisition closed on May 18, 2021. The British Columbia acquisition is subject to customary closing conditions including the accuracy of representations and warranties and the performance of covenants, and is expected to close on or around July 1, 2021.
Calgary-based Topaz Energy is focused on the acquisition and development of royalty and infrastructure assets in Canada. The company was formed in October 2019 through the spin-off of certain royalty interests and natural gas processing assets by Tourmaline Oil.
TSX-listed Tourmaline Oil is engaged in the acquisition, exploration, development, and production of oil & gas properties in Western Canada, with a focus on three core operating areas in the Alberta Deep Basin, Northeast British Columbia (NEBC) Montney Complex, and Peace River High Complex.
Peters & Co. is acting as the financial advisor to Topaz Energy.