CALGARY, AB, Feb. 24, 2026 /CNW/ - Topaz Energy Corp. (TSX: TPZ) ("Topaz" or the "Company") is pleased to provide fourth quarter and annual 2025 financial results. Select financial information is outlined below and should be read in conjunction with Topaz's consolidated financial statements ("Financial Statements") and related management's discussion and analysis ("MD&A") as at and for the three months and year ended December 31, 2025, which are available on SEDAR+ at www.sedarplus.ca and on Topaz's website at www.topazenergy.ca.
2025 Annual Highlights
-- 17% higher royalty production, 20% higher infrastructure revenue and 28%
lower cash expenses.(5)
-- 7% higher cash flow per share and 15% higher earnings per share.
-- Record 91% FCF Margin(1) and 18% higher Excess FCF(1) per share.
-- $2.8 billion of operator-funded capital spending across Topaz's royalty
acreage and 10% increase in gross wells drilled led to record (17%) share
of 2025 WCSB drilling activity.(6)
-- 10% increase (6.2 mmboe) in reserves attributed to 2.4 mmboe from
acquisitions and 11.9 mmboe of operator-funded activity that replaced 1.5
times the 8.2 mmboe produced in 2025.(7)
-- 50% increase in Topaz's Clearwater reserves(8) and approximately 2.0
times higher Clearwater reserve life index $(RLI)$ attributed to notable
waterflood performance that continues to enhance heavy oil recovery.(9)
-- $125.4 million acquisitions including royalty and infrastructure assets
in the Alberta Montney, increased royalty ownership in NEBC Montney
alongside Tourmaline, and Alberta gross overriding and fee mineral title
royalty interests.
-- 4% higher dividend per share and approved the 2026 first quarter dividend
at $0.34 per share ($1.36 per share annualized).
2026 Guidance Outlook
2026e Guidance Estimates(3)(13)
Annual average royalty production (boe/d, 70-72%
natural
gas) 23,500 -- 23,900
Infrastructure processing revenue and other income $92.0 - $94.0 million
Dividend ($1.36 per share)(12) $210.0 million
Dividend payout ratio(1) (%) 68 %
Exit net debt(1) (before incremental acquisitions) $420.0 -- $425.0
-- Topaz's 2026 guidance estimates include 23,500 to 23,900 boe/d(4) royalty
production and $92.0 to $94.0 million annual processing revenue and other
income.(3)(13) Based on estimated commodity pricing,(11) Topaz expects to
exit 2026 with net debt(1) between $420.0 and $425.0 million.(3)(13)
Topaz's royalty guidance range purposefully remains flexible to allow for
adjustments by operators in response to supply/demand and commodity price
factors in the WCSB and is based on Topaz's internal estimates regarding
operators' 2026 development pace and performance and therefore could be
revised in response to changes in operator plans.
2025 Reserves
-- 2025 total proved plus probable developed reserves of 65.7 mmboe(7)
increased 10% from 2024 (59.5 mmboe), driven by 50% and 10% year over
year growth in Clearwater and NEBC Montney reserves, respectively.(8)
These core areas together represent 56% of Topaz's 2025 total reserves,
(7) and the associated RLIs have increased over the past two years by
approximately 2.0 times for Clearwater and 1.3 times for NEBC Montney.(9)
In 2025, 50% of the gross wells spud across Topaz's royalty acreage were
in the Clearwater and NEBC Montney, Topaz's high-growth royalty areas.
Together, these areas have generated 23% production growth over the past
two years.
-- Since inception, Topaz has acquired cumulative developed reserves of 53.7
mmboe; 37.6 mmboe of which has been produced to date, and Topaz holds
65.7 mmboe of developed reserves as at December 31, 2025.(10) As a
royalty entity not responsible for capital, Topaz does not report future
undeveloped reserves. Topaz's 6-year history (1.3 times average annual
reserve replacement)(7) demonstrates that the Company's royalty
acquisitions provide both developed and undeveloped future economic value,
despite the limitations in reserve reporting.(14)
Fourth Quarter 2025 Update
Financial Overview
-- Q4 2025 cash flow of $80.6 million and a 92% free cash flow $(FCF)$ Margin, (1) provided $79.7 million of FCF.(1) Q4 2025 cash flow and FCF,(1) each $0.52 per diluted share,(2) increased 6% and 11%, respectively from Q4 2024. -- Generated Q4 2025 royalty production revenue of $62.5 million ($29.02 per boe), representing 72% of Topaz's total revenue, with 28% ($24.2 million) contributed by infrastructure assets' processing revenue and other income. -- Topaz's Q4 2025 net income of $32.7 million was 64% higher than Q4 2024 driven by 15% higher royalty production, 10% higher processing revenue and other income, 4% lower cash expenses, a 47% higher realized hedging gain and a lower unrealized loss on financial instruments. -- During 2025, Topaz realized a $19.8 million hedging gain ($15.1 million or $0.44 per mcf gain on natural gas contracts). Based on Topaz's 2026 midpoint royalty production guidance, approximately 22% of natural gas is hedged at a weighted average fixed price of C$3.18 per mcf and 12% of total liquids is hedged at a weighted average fixed price of US$67.68/bbl.(18) -- Topaz paid a Q4 2025 dividend of $0.34 per share ($52.4 million), which represents a 65% payout ratio(1) and a 5.1% trailing annualized yield to the fourth quarter average share price.(16) -- Generated $27.3 million of Excess FCF(1) during Q4 2025 which was allocated to debt repayment and acquisition growth. Topaz completed $10.2 million of acquisitions during the fourth quarter. -- Topaz exited 2025 with $517.5 million of net debt,(1) representing 1.5x net debt to annualized Q4 2025 EBITDA.(1) As at February 24, 2026, Topaz has approximately $0.5 billion of available credit capacity(17) which provides financial flexibility for strategic growth opportunities.
Royalty Activity
-- Q4 2025 royalty production averaged 23,399 boe/d,(4) 15% higher than Q4
2024. Topaz's total oil and liquids royalty production of 6,889 bbl/d
achieved another record in Q4 2025.(4)
-- Fourth quarter drilling activity (190 gross wells spud)(15) was
diversified across Topaz's portfolio as follows: 47 Clearwater, 36 NEBC
Montney, 54 Deep Basin, 18 Peace River, 6 Central Alberta, 1 AB Montney
and 28 SE Saskatchewan/Manitoba. In total, 248 gross wells(15) were
brought on production during Q4 2025 (7% increase over 231 gross wells
brought on production during Q4 2024).
-- Based on planned operator drilling activity, Topaz expects that the
current 27-30 active drilling rigs on its royalty acreage will be
maintained through the first quarter of 2026.(3)
Infrastructure Activity
-- During Q4 2025, Topaz generated $24.2 million in processing revenue and
other income which was 10% higher than Q4 2024. In Q4 2025, Topaz
incurred $1.0 million in operating expenses resulting in a 96% operating
margin.(1) During the quarter, the infrastructure assets generated 99%
utilization and Topaz incurred $0.9 million in maintenance-related
capital expenditures (before capitalized G&A).
Acquisition Activity
-- During Q4 2025 the Company completed an acquisition of gross overriding
and fee mineral title royalty interests in Alberta for total cash
consideration of $7.8 million before customary closing adjustments.
Dividend Overview
-- Topaz's Board has declared the first quarter 2026 dividend at $0.34 per
share which is expected to be paid on March 31, 2026, to shareholders of
record on March 13, 2026. The quarterly cash dividend is designated as an
"eligible dividend" for Canadian income tax purposes.
-- Topaz has paid $6.62 per share in dividends to its shareholderrs since
the inaugural dividend during the first quarter of 2020 to December 31,
2025. The unique sustainability of Topaz's 2026e dividend down to $0.01
per mcf natural gas and US$55.00 per bbl crude oil(3) is attributable to:
(i) the Company's high-margin, stable infrastructure revenue which
represents 44% of the 2026e dividend;(3) (ii) hedging strategy and
financial derivative contracts in place;(18) and (iii) the quality and
strength of Topaz's diversified asset portfolio.
FOURTH QUARTER 2025 CONFERENCE CALL
Topaz will host a conference call tomorrow, Wednesday, February 25, 2026 starting at 5:00 a.m. MST (7:00 a.m. EST). To join the conference call without operator assistance, participants can register and enter their phone number at https://emportal.ink/4kVo0Bf to receive an instant automated call back. Alternatively, participants can join by calling a live operator at 1-888-510-2154 (North American toll free). The conference call ID is 05815.
ABOUT THE COMPANY
Topaz is a unique royalty and infrastructure energy 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 and most active natural gas producer, Tourmaline Oil Corp. ("Tourmaline"), an investment-grade senior Canadian E&P company, and leveraging industry relationships to execute complementary acquisitions from other high-quality energy companies. Topaz focuses on top-quartile energy resources and assets best positioned to attract capital in order to generate sustainable long-term growth and profitability.
Topaz's common shares are listed and posted for trading on the TSX under the trading symbol "TPZ" and it is included in the S&P/TSX Composite Index. This is the headline index for Canada and is the principal benchmark measure for the Canadian equity markets, represented by the largest companies on the TSX.
Additional information
Additional information about Topaz, including the Financial Statements and MD&A as at and for the year ended December 31, 2025 are available on SEDAR+ at www.sedarplus.ca under the Company's profile, and on Topaz's website at www.topazenergy.ca.
Selected Financial Information
For the periods 2025 2024 Q4 2025 Q3 2025 Q2 2025 Q1 2025 Q4 2024
ended
($000s) except per
share
Royalty
production
revenue 241,810 233,426 62,468 52,291 58,368 68,683 60,234
Processing
revenue 82,907 66,377 21,930 21,221 20,167 19,589 18,838
Other income(4) 11,787 12,595 2,320 2,931 2,653 3,883 3,107
Total 336,504 312,398 86,718 76,443 81,188 92,155 82,179
Cash expenses:
Operating (6,530) (7,349) (1,027) (1,545) (2,199) (1,759) (1,600)
Marketing (1,537) (1,360) (415) (307) (370) (445) (356)
General and
administrative (9,274) (8,220) (3,338) (1,864) (1,893) (2,179) (2,894)
Realized gain
on financial
instruments 19,826 11,316 5,102 8,737 5,166 821 3,464
Interest
expense (26,227) (27,466) (6,486) (6,620) (6,267) (6,854) (6,940)
Cash flow 312,762 279,319 80,554 74,844 75,625 81,739 73,853
Per basic
share(1)(2) $2.03 $1.91 $0.52 $0.49 $0.49 $0.53 $0.49
Per diluted
share(1)(2) $2.03 $1.90 $0.52 $0.49 $0.49 $0.53 $0.49
Cash from operating
activities 308,760 276,271 69,143 78,147 80,731 80,739 64,930
Per basic
share(1)(2) $2.01 $1.89 $0.45 $0.51 $0.52 $0.53 $0.43
Per diluted
share(1)(2) $2.00 $1.88 $0.45 $0.51 $0.52 $0.52 $0.43
Net income(9) 128,741 105,656 32,694 25,573 42,463 28,011 19,874
Per basic
share(2)(9) $0.84 $0.72 $0.21 $0.17 $0.28 $0.18 $0.13
Per diluted
share(2)(9) $0.83 $0.72 $0.21 $0.17 $0.28 $0.18 $0.13
Adjusted net
income(1)(9) 127,231 113,922 32,908 30,337 26,036 37,950 33,029
Per diluted
share(1)(8)(9) $0.82 $0.77 $0.21 $0.20 $0.17 $0.25 $0.22
EBITDA(7) 338,719 306,027 86,991 81,412 81,801 88,515 80,504
Per basic
share(1)(2) $2.20 $2.09 $0.57 $0.53 $0.53 $0.58 $0.53
Per diluted
share(1)(2) $2.19 $2.08 $0.56 $0.53 $0.53 $0.57 $0.53
FCF(1) 307,501 271,989 79,667 72,980 74,017 80,837 71,435
Per basic
share(1)(2) $2.00 $1.86 $0.52 $0.47 $0.48 $0.53 $0.47
Per diluted
share(1)(2) $1.99 $1.85 $0.52 $0.47 $0.48 $0.52 $0.47
FCF Margin(1) 91 % 87 % 92 % 95 % 91 % 88 % 87 %
Dividends paid 207,687 191,167 52,356 52,303 52,283 50,745 50,617
Per share(1)(6) $1.35 $1.30 $0.34 $0.34 $0.34 $0.33 $0.33
Payout ratio(1) 66 % 68 % 65 % 70 % 69 % 62 % 69 %
Excess FCF(1) 99,814 80,822 27,311 20,677 21,734 30,092 20,818
Capital expenditures 5,261 7,330 887 1,864 1,608 902 2,418
Work in progress
capital costs -- -- -- -- -- -- (21,295)
Acquisitions, excl.
decommissioning
obligations(1) 125,438 430,569 10,234 71,733 26,001 17,470 331,380
Weighted average
shares -- basic(3) 153,806 146,521 153,885 153,794 153,774 153,770 151,423
Weighted average
shares -- diluted(3) 154,424 147,131 154,538 154,442 154,401 154,430 152,149
Average Royalty
Production(5)
Natural gas (mcf/d) 94,241 79,029 99,052 89,596 93,129 95,195 83,923
Light and medium
crude oil (bbl/d) 1,974 1,791 1,928 1,910 2,133 1,925 1,678
Heavy crude oil
(bbl/d) 3,343 3,083 3,515 3,386 3,314 3,154 3,266
Natural gas liquids
(bbl/d) 1,391 1,180 1,446 1,365 1,320 1,434 1,346
Total (boe/d) 22,417 19,227 23,399 21,596 22,290 22,380 20,279
Total royalty
production (% total
liquids) 30 % 31 % 29 % 31 % 30 % 29 % 31 %
Natural gas liquids
(% condensate) 70 % 69 % 71 % 69 % 70 % 71 % 69 %
Realized Commodity
Prices
Natural gas
($/mcf) $1.55 $1.42 $2.08 $0.61 $1.38 $2.06 $1.41
Light and
medium crude
oil ($/bbl) $81.74 $92.57 $74.92 $81.64 $79.45 $91.39 $90.73
Heavy crude oil
($/bbl) $72.52 $82.13 $63.00 $73.43 $72.31 $82.61 $80.81
Natural gas
liquids
($/bbl) $80.93 $90.11 $73.87 $80.18 $78.97 $90.78 $89.10
Total ($/boe) $29.56 $33.17 $29.02 $26.32 $28.78 $34.10 $32.29
Benchmark Pricing
Natural Gas
AECO 5A
(CAD$/mcf) $1.68 $1.46 $2.23 $0.63 $1.69 $2.16 $1.48
AECO 7A
(CAD$/mcf) $1.86 $1.44 $2.34 $1.00 $2.07 $2.02 $1.46
Westcoast
station 2
(CAD$/mcf) $1.02 $1.19 $1.85 $0.47 $0.46 $1.27 $0.90
Crude Oil, Heavy Oil
and Natural Gas
Liquids
NYMEX WTI
(USD$/bbl) $64.81 $75.72 $59.14 $64.95 $63.71 $71.42 $70.27
Edmonton Par
(CAD$/bbl) $85.78 $97.80 $76.69 $86.52 $84.32 $95.60 $95.14
WCS
differential
(USD$/bbl) $11.18 $14.72 $11.19 $10.36 $10.50 $12.66 $12.55
Edmonton
Condensate
(CAD$/bbl) $87.89 $98.88 $78.83 $86.36 $86.85 $99.49 $97.90
CAD$/USD$ $0.7156 $0.7301 $0.7169 $0.7261 $0.7226 $0.6969 $0.7149
Selected statement of At Dec. At Sep. At Jun. At Mar. At Dec. 31,
financial position 31, 2025 30, 2025 30, 2025 31, 2025 2024
results
($000s) except share
amounts
Total assets(9) 2,221,715 2,230,374 2,199,745 2,204,513 2,223,169
Working capital 55,999 (26,633) 50,640 46,694 51,758
Adjusted working
capital (deficit)(1) 53,274 (30,773) 40,319 49,448 48,372
Net debt(1) 517,494 535,412 485,166 480,730 492,024
Common shares
outstanding(3) 153,990 153,831 153,774 153,774 153,457
(1) Refer to "Non-GAAP and Other Financial Measures".
(2) Calculated using basic or diluted weighted average
shares outstanding during the period.
(3) Shown in thousand shares outstanding.
(4) Includes interest income ($mm): Q4 2025 -- 0.05,
Q3 2025 - 0.05, Q2 2025: 0.09, Q1 2025: 0.08, Q4 2024:
0.3; 2025: 0.3, 2024: 0.8.
(5) Refer to "Supplemental Information Regarding Product
Types."
(6) Cumulative dividend paid as per the number of
outstanding shares on the respective quarterly dividend
dates.(7) Defined term under the Company's Syndicated Credit
Facility.(8) Adjusted to exclude the impact of non-cash, unrealized
gains or losses on financial instruments.(9) Prior period figures are adjusted, refer to "Voluntary
Change in Accounting Policy" in the MD&A.
NOTE REFERENCES
This news release refers to financial reporting periods as follows: "Q4 2025" refers to the three months ended December 31, 2025; "Q4 2024" refers to the three months ended December 31, 2024; "2025" refers to the year ended December 31, 2025; and "2024" refers to the year ended December 31, 2024. In addition, "2026e" refers to estimated amounts or results for the year ending December 31, 2026.
1. See "Non-GAAP and Other Financial Measures".
2. Calculated using the weighted average number of diluted
common shares outstanding during the respective period.
3. See "Forward-Looking Statements".
4. See "Supplemental Information Regarding Product Types".
5. Annual financial results (2025 relative to 2024).
"Infrastructure revenue" refers to processing revenue
and other income and "cash expenses" refers to operating,
marketing, G&A, cash interest, offset by realized
gains on financial instruments.
6. During 2025, 694 gross wells (25.3 net) were spud
across Topaz's royalty acreage, a 10% increase from
2024 (630 gross, 23.2 net). Topaz's 694 gross wells
spud in 2025 represents 17% of the 4,051 wells rig
released across the WCSB (excluding oil sands/in situ)
(Source: Rig Locator, geoSCOUT and Peters & Co. Limited).
$2.8 billion (2025 operator spending) is estimated
by Topaz based on wells spud, royalty rates and estimated
capital costs.
7. Based on Topaz's December 31, 2025 external independent
reserve report whereby total proved plus probable
developed reserves of 65.7 mmboe increased 10% from
December 31, 2024 (59.5 mmboe). As a royalty entity
not responsible for capital, Topaz's reserves do not
include future drilling locations attributed to undeveloped
acreage. Topaz's 2025 reserve replacement (excluding
acquisitions) is calculated as: extensions and improved
recovery (10.3 mmboe) plus technical revisions net
of economic factors (1.6 mmboe), divided by 2025 production
(8.2 mmboe) for 1.5 times replacement.
8. Based on Topaz's December 31, 2025 external independent
reserve report whereby Clearwater total proved plus
probable developed reserves increased from 5.1 mmboe
(2024) to 7.7 mmboe (2025) and NEBC Montney total
proved plus probable developed reserves increased
from 26.2 mmboe (2024) to 28.8 mmboe (2025).
9. Reserve life index ("RLI") is used as a measure of
how long reserves are expected to produce at the current
rate of production and is calculated as total year
end reserves (boe) divided by annualized fourth quarter
production (boe/d). From year end 2023 to 2025, Topaz's
Clearwater RLI has increased from 3 to 6 years (approximately
2.0 times increase) and NEBC Montney RLI has increased
from 8 to 10 years (approximately 1.3 times increase).
10. Based on Topaz's external independent reserve reports
for 2020-2025 and derived from disclosure contained
in the Company's Annual Information Forms (see "Reconciliation
of Company Gross Reserves by Principal Product Type")
available on SEDAR+ and refer to note reference 7
above.
11. Estimated based on C$2.25 per mcf natural gas (AECO)
and US$65.00 per bbl crude oil (NYMEX WTI).
12. Topaz's future dividends remain subject to board of
director approval.
13. Management's assumptions underlying the Company's
2026e guidance estimates include:
i. Topaz's internal estimates regarding development
pace and production performance including estimates
of operators' 2026 capital development plans including
capital allocated to waterflood and other long-term
value-enhancing projects and excluding exploration
spending; all of which being subject to key operators'
revisions to 2026 capital budgets and/or operational,
weather or wildfire-related issues that may impact
the 2026 estimated royalty production range;
ii. Management's estimates for fixed and variable
processing fees based on 95% utilization, third party
income, and infrastructure utilization and cost estimates
based on historic information and adjusted for inflation;
iii. No incremental, (i.e. not previously announced)
acquisition activity;
iv. Estimated 2026e expenses and expenditures of $8.0mm
cash G&A; $7.0mm of operating expenses; $4.0-$5.0mm
capital expenditures (excluding acquisitions); 1%
marketing fee on certain royalty production; estimated
annual borrowing and standby interest costs at a combined
rate of 4.75%; and $25.0 to $30.0 million estimated
corporate income tax;
v. 2026 estimated total dividends of approximately
$210.0 million based on 154.6 million shares outstanding
at February 24, 2026 ($1.36 per share);
vi. Topaz's outstanding financial derivative contracts
included in its most recently filed MD&A; and
vii. The assumptions contained under the heading "Financial
Outlook".
14. Topaz's royalty acquisition costs are depleted on
a ratio of production to total reserves. During Q4
2025, the Company voluntarily changed its depletion
policy (retrospectively) to more closely align depletion
expense with the correlated underlying reserves as
Topaz does not record undeveloped reserves due royalty
interests not being responsible for capital. There
is no change to the depletion ratio (production to
developed-only reserves) under the new policy, however
royalty asset value is now segregated between costs
attributed to developed and undeveloped reserves,
whereby the portion of value attributable to undeveloped
reserves is then transferred into the depletion calculation
as development occurs. The policy change impacts prior
period depletion expense, deferred tax expense, net
income, and classification of Topaz's royalty assets.
It has no impact on current or prior period cash flow
or cash expenses. Refer to the Financial Statements
and MD&A (see "Voluntary Change in Accounting Policy").
15. May include non-producing injection wells.
16. Calculated based on Topaz's average share price on
the TSX during Q4 2025 of $26.55 per share.
17. Topaz's $700.0 million credit facility includes a
$300.0 million accordion feature (for a total $1.0
billion facility) that may be advanced by Topaz but
remains subject to agent consent. As at February 24,
2026 Topaz had $537.5 million net borrowings against
the Company's credit facility, providing approximately
$462.5 million available, subject to agent consent.
18. Refer to the MD&A for a complete listing of financial
derivative contracts in place. Coverage estimates
are calculated based on Topaz's 2026 midpoint guidance
estimate.
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 following: Topaz's future growth outlook, guidance and strategic plans; estimated annual average royalty production range for 2026; estimated processing revenue and other income for 2026; anticipated exit 2026 net debt levels; dividend amounts, and the estimated dividend payout ratio; the sustainability of the dividend and the rationale for such sustainability; the maintenance of financial flexibility for strategic growth opportunities; the anticipated operator capital expenditures and drilling plans; the number of drilling rigs to be active on Topaz's royalty acreage during the first quarter of 2026; the future declaration and payment of dividends and the timing and amount thereof; the forecasts described under the headings "Fourth Quarter 2025 Update" (including under the sub-heading "Dividend Overview") and "2026 Guidance Outlook" and the assumptions and estimates described under the heading "Note References" above; and the Company's business as described under the heading "About the Company" above.
Forward--looking statements are based on a number of assumptions including those highlighted in this news release including future commodity prices, capital expenditures, infrastructure ownership capacity utilization and operator development plans, 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 statements.
Such risks and uncertainties include, but are not limited to, potential political, geopolitical and economic instability; trade policy, barriers, disputes or wars (including new tariffs or changes to existing international trade arrangements); the failure to complete acquisitions on the terms or on the timing announced or at all and the failure to realize some or all of the anticipated benefits of acquisitions including estimated royalty production, royalty production revenue and FCF per share growth, and the factors discussed in the Company's most recently filed Management's Discussion and Analysis (See "Forward-Looking Statements" therein), 2025 Annual Information Form (See "Risk Factors" and "Forward-Looking Statements" therein) and other reports on file with applicable securities regulatory authorities and may be accessed through the SEDAR+ website (www.sedarplus.ca) or Topaz's website (www.topazenergy.ca).
Statements relating to "reserves" are also deemed to be forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described exist in the quantities predicted or estimated and that the reserves can be profitably produced in the future.
Without limitation of the foregoing, future dividend payments, if any, and the level thereof is uncertain, as the Company's dividend policy and the funds available for the payment of dividends from time to time is dependent upon, among other things, FCF, financial requirements for the Company's operations and the execution of its growth strategy, fluctuations in working capital and the timing and amount of capital expenditures, debt service requirements and other factors beyond the Company's control. Further, the ability of Topaz to pay dividends will be subject to applicable laws (including the satisfaction of the solvency test contained in applicable corporate legislation) and contractual restrictions contained in the instruments governing its indebtedness, including its credit facility. Topaz does not undertake any obligation to update such forward--looking statements, whether as a result of new information, future events or otherwise, except as expressly required by applicable law.
FINANCIAL OUTLOOK
Also included in this news release are estimates of the average royalty production range and processing revenue and other income range for the year ending December 31, 2026 and range of year-end exit net debt and net debt to EBITDA for 2026, which are based on, among other things, the various assumptions as to as to production levels and capital expenditures and other assumptions disclosed in this news release including under the heading "2026 Guidance Outlook" and "Note References" above and are based on the following key assumptions: Topaz's estimated capital expenditures (excluding acquisitions) of $4.0 to $5.0 million in 2026; the Company's tax pool balances at year-end 2025 and the resulting future tax horizon; the working interest owners' anticipated 2026 capital plans attributable to Topaz's undeveloped royalty lands; estimated average annual royalty production range of 23,500 to 23,900 boe/d in 2026; 2026 average infrastructure ownership capacity utilization of 95%; December 31, 2026 exit net debt range between, 2026 average commodity prices of: $2.25/mcf (AECO 5A), US$65.00/bbl (NYMEX WTI), US$12.00/bbl (WCS oil differential), US$3.00/bbl (MSW oil differential) and US$/CAD$ foreign exchange 0.73.
To the extent such estimates constitute financial outlooks, they are included to provide readers with an understanding of the estimated revenue, net debt and the other metrics described above for the year ending December 31, 2025 based on the assumptions described herein and readers are cautioned that the information may not be appropriate for other purposes.
NON-GAAP AND OTHER FINANCIAL MEASURES
Certain financial terms and measures contained in this news release are "specified financial measures" (as such term is defined in National Instrument 52-112 - Non-GAAP and Other Financial Measures Disclosure ("NI 52-112")). The specified financial measures referred to in this news release are comprised of "non-GAAP financial measures", "capital management measures" and "supplementary financial measures" (as such terms are defined in NI 52-112). These measures are defined, qualified, and where required, reconciled with the nearest GAAP measure below.
Non-GAAP Measures and Ratios
The non-GAAP financial measure used herein does not have a standardized meaning prescribed by GAAP. Accordingly, the Company's use of this term may not be comparable to similarly defined measures presented by other companies. Investors are cautioned that the non-GAAP financial measure should not be considered in isolation nor as an alternative to net income (loss) or other financial information determined in accordance with GAAP, as an indication of the Company's performance.
Non-GAAP Financial Measures
This news release makes reference to the terms "adjusted net income", "acquisitions, excluding decommissioning obligations" and "operating margin", which are considered non-GAAP financial measures under NI 52-112; defined as a financial measure disclosed by an issuer that depicts the historical or expected future financial performance, financial position, or cash flow of an entity, and is not disclosed in the financial statements of the issuer.
Other Financial Measures
Capital management measures
Capital management measures are defined as financial measures disclosed by an issuer that are intended to enable an individual to evaluate the entity's objectives, policies and processes for managing the entity's capital, are not a component of a line item or a line item on the primary financial statements, and which are disclosed in the notes to the financial statements. The Company's capital management measures disclosed in the Financial Statements include adjusted working capital, net debt (cash), free cash flow (FCF) and Excess FCF.
Supplementary financial measures
This news release makes reference to the terms "adjusted net income per basic or diluted share", "cash flow per basic or diluted share", "FCF per basic or diluted share", "EBITDA per basic or diluted share", "FCF margin", "operating margin percentage" and "payout ratio" which are all considered supplementary financial measures under NI 52-112; defined as a financial measure disclosed by an issuer that is, or is intended to be, disclosed on a periodic basis to depict the historical or expected future financial performance, financial position or cash flow of an entity, is not disclosed in the financial statements of the issuer, and is not a non-GAAP financial measure or non-GAAP financial ratio.
The following terms are financial measures as defined under the Company's Syndicated Credit Facility, presented in the Financial Statements: (i) consolidated senior debt, (ii) total debt, (iii) EBITDA and (iv) capitalization.
Cash flow, FCF, FCF margin, and Excess FCF
Management uses cash flow, FCF, FCF margin and Excess FCF for its own performance measures and to provide investors with a measurement of the Company's efficiency and its ability to generate the cash necessary to fund or increase dividends, fund future growth opportunities and/or to repay debt; and furthermore, uses per share metrics to provide investors with a measure of the proportion attributable to the basic or diluted weighted average common shares outstanding.
Cash flow is a GAAP measure which is derived of cash from operating activities excluding the change in non-cash working capital and is presented in the consolidated statements of cash flows. FCF is a capital management measure presented in the notes to the consolidated financial statements and is defined as cash flow, less capital expenditures. The supplementary financial measure "FCF margin", is defined as FCF divided by total revenue and other income (expressed as a percentage of total revenue and other income). The capital management measure "Excess FCF", is defined as FCF less dividends paid. The supplementary financial measures "cash flow per basic or diluted share" and "FCF per basic or diluted share" are calculated by dividing cash flow and FCF, respectively, by the basic or diluted weighted average common shares outstanding during the period.
A summary of the reconciliation from cash from operating activities (per the consolidated statements of cash flows) to cash flow (per the consolidated statements of cash flows), cash flow per basic or diluted share, FCF, Excess FCF, FCF per basic or diluted share and FCF margin is set forth below:
Three months ended Years ended
($000s) Dec. 31, 2025 Dec. 31, 2024 Dec. 31, 2025 Dec. 31, 2024
Cash from
operating
activities 69,143 64,930 308,760 276,271
Exclude net change
in non-cash
working capital (11,411) (8,923) (4,002) (3,048)
Cash flow 80,554 73,853 312,762 279,319
Less: Capital
expenditures 887 2,418 5,261 7,330
FCF 79,667 71,435 307,501 271,989
Less: dividends
paid 52,356 50,617 207,687 191,167
Excess FCF 27,311 20,818 99,814 80,822
Cash flow per
basic share(1) $0.52 $0.49 $2.03 $1.91
Cash flow per
diluted share(1) $0.52 $0.49 $2.03 $1.90
FCF per basic
share(1) $0.52 $0.47 $2.00 $1.86
FCF per diluted
share(1) $0.52 $0.47 $1.99 $1.85
FCF 79,667 71,435 307,501 271,989
Total Revenue and
other income 86,718 82,179 336,504 312,398
FCF Margin 92 % 87 % 91 % 87 %
(1) As noted, calculated using the basic or diluted
weighted average number of shares outstanding during
the respective periods.
Adjusted net income
Management uses adjusted net income for its own performance measure and to provide investors with a measurement of the Company's net income prior to the non-cash effects of unrealized gains and losses on financial instruments. Adjusted net income is calculated as net income per the consolidated statement of net income and comprehensive income, less unrealized gains (losses) on financial instruments. The supplementary financial measures "adjusted net income per basic or diluted share" is calculated by dividing adjusted net income by the basic or diluted weighted average common shares outstanding during the period.
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