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  • Tourmaline Oil’s Topaz Energy Files for IPO and Secondary Offering

Tourmaline Oil’s Topaz Energy Files for IPO and Secondary Offering

Posted on September 25, 2020 by Mathieu Litalien

StockTrades Take:

In a surprise move, Tourmaline Oil Corp (TSX:TOU) announced that its majority-owned Topaz Energy filed its preliminary prospectus as it intends to raise approximately $250 million via IPO and secondary offering. The company is looking to price the offering between $13-15 with a late October closing.

The timing of the announcement is interesting considering the entire energy industry is under considerable pressure. That being said, Tourmaline has been one of the best performing in the sector as its stock price is up by 9.6% year to date.

Topaz touts itself as a low risk, income-oriented business underpinned by predictable and high, free cash flow margins. The company generates revenue via royalties and non-operating ownership in four natural gas plants with processing capacity of approximately 175 MMcf/d.

It intends to pay an annual dividend of $0.80 per share, which is equal to a payout ratio of approximately 84% for the six months ended June 30, 2020. Based on the proposed offering price, that would yield approximately 5.7% at the mid-range. Topaz’ targeted payout ratio is 60-90% of free cash flow.

This will be a very interesting IPO. The energy sector is under intense pressure, but Topaz’s business model lends well to being successful despite of these low commodity prices.

If you are looking for exposure to the industry, this might be one to consider. A word of caution however – revenue has been spotty over the years. It appears, Topaz is moreso geared to those looking to generate high income via a stable dividend, than those looking for high-growth prospects.

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NEWS Release

Topaz Energy Corp. Files Preliminary Prospectus for Initial Public Offering and Secondary Offering of Common Shares

/Not for distribution to U.S. news wire services or dissemination in the United States/

CALGARY, AB, Sept. 25, 2020 /CNW/ – Topaz Energy Corp. (“Topaz” or the “Company”), a unique royalty and energy infrastructure company that is majority owned by Tourmaline Oil Corp. (“Tourmaline”), is pleased to announce that it has filed, and obtained a receipt for, a preliminary long form prospectus (the “Preliminary Prospectus”) with the securities regulatory authorities in each of the provinces of Canada for a proposed initial public offering (the “Treasury Offering”) by Topaz and secondary offering by Tourmaline (the “Secondary Offering” and together with the Treasury Offering, the “Offering”) of Topaz common shares (the “Common Shares”).

The gross proceeds of the Offering are expected to be $252.5 million, comprised of $217.5 million from the Treasury Offering and $35.0 million from the Secondary Offering. The offering price is expected to be between $13 and $15 per Common Share with pricing and closing anticipated to occur in the later part of October.

The Offering is being made on a fully marketed underwritten basis through a syndicate of underwriters co-led by Peters & Co. Limited and Scotiabank.

The Preliminary Prospectus has not yet become final for purposes of a distribution of securities to the publicThe Preliminary Prospectus contains important information relating to the Offering and is still subject to completion or amendment. The Preliminary Prospectus is available on SEDAR at www.sedar.com under the Company’s profile or may be obtained from any of the underwriters listed above. There will not be any sale or any acceptance of an offer to buy the Common Shares until a receipt for the final prospectus has been issued.

No securities regulatory authority has either approved or disapproved the contents of this news release. This news release does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale or any acceptance of an offer to buy these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to the time of receipt for the final long-form prospectus or other authorization is obtained from the securities regulatory authority in such province.

The securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act“), or any state securities laws. Accordingly, these securities may not be offered or sold within the United States unless registered under the U.S. Securities Act and applicable state securities laws or except pursuant to exemptions from the registration requirements of the U.S. Securities Act and applicable state securities laws. This news release does not constitute an offer to sell or a solicitation of an offer to buy any of the securities offered hereby within the United States.

Completion of the Offering is subject to the receipt of customary approvals, including regulatory approvals.

ABOUT THE COMPANY

Topaz is a unique royalty and energy infrastructure company focused on generating free cash flow growth and paying reliable and sustainable dividends to its shareholders, through its strategic relationship with Canada’s largest natural gas producer, Tourmaline, an investment grade senior Canadian E&P company, and leveraging industry relationships to execute complementary acquisitions from other high-quality energy companies, while maintaining its commitment to environmental, social and governance best practices.

FORWARD-LOOKING STATEMENTS

This news release contains forward-looking statements and forward-looking information (collectively, “forward-looking statements“) that relate to the Company’s current expectations and views of future events. These forward-looking statements relate to future events or the Company’s future performance. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, “projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. These statements speak only as of the date of this news release. In particular and without limitation, this news release contains forward-looking statements pertaining to the Company’s business as described under the heading “About the Company” above, the size of the Offering and anticipated offering price per share and timing for closing of the Offering. Forward–looking information is based on a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond the Company’s control, which could cause actual results and events to differ materially from those that are disclosed in or implied by such forward–looking information. Such risks and uncertainties include, but are not limited to, failure to complete the Offering, and the factors discussed under “Notice to Investors – Forward-Looking Information” and “Risk Factors” in the Preliminary Prospectus. Topaz does not undertake any obligation to update such forward–looking information, whether as a result of new information, future events or otherwise, except as expressly required by applicable law.

NON-GAAP FINANCIAL MEASURES

This news release makes reference to the term “free cash flow” and “cash flow”, which are measures that do not have standardized meanings as prescribed by international financial reporting standards (“IFRS” or “GAAP“).  Management uses these terms for its own performance measures and to provide shareholders and potential investors with a measurement of the Company’s efficiency and its ability to generate the cash necessary to fund dividends and a portion of its future growth expenditures or to repay debt. Accordingly, investors are cautioned that these non-GAAP financial measures may not be comparable to similarly defined measures presented by other entities and should not be considered in isolation nor as an alternative to net income (loss) from continuing operations or other financial information determined in accordance with GAAP as an indication of the Company’s performance.  “Free cash flow” is defined as “cash flow” less capital expenditures. “Cash flow” is defined as cash from (used in) operations before changes in non-cash working capital and references to “free cash flow” are to the amount of cash estimated to be available for dividends to shareholders in accordance with the dividend policy of the Company.

SOURCE Topaz Energy Corp

For further information: Topaz Energy Corp., Marty Staples, President and Chief Executive Officer, (587) 747-4830; Cheree Stephenson, VP Finance and CFO, (587) 747-4830

Disclaimer: The writer of this article or employees of Stocktrades Ltd may have positions in securities listed in this article. Stocktrades Ltd may also be compensated via affiliate links in this post. Stocktrades Ltd will run advertisements on our posts. These advertisements do not represent an endorsement by us.

Mathieu Litalien

About the author

Mathieu is an individual investor and has been investing part-time for the better part of the past 20 years. He is primarily interested in fundamental analysis, focusing on the long-term and his portfolio is composed primarily of dividend-paying equities. Mathieu has a moderate risk profile and also looks for growth and value. His passion for finance and the markets have led him to his MBA and writing for Seeking Alpha and Stocktrades. Mathieu also focuses primarily on stock research and content production for Stocktrades.ca Premium and the Stocktrades blog.