Q3 2025 Topaz Energy Corp Earnings Call

Good morning. My name is Sergio, and I will be your conference operator. Today, at this time, I would like to welcome everyone to the Topaz Energy Corp. third quarter 2025 results conference call.

All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session.

If you would like to ask a question during this time, simply press start and the number 1 on your telephone keypad. If you would like to withdraw your question, please press the star followed by the number 2. Thank you.

I will now turn the call over to Mr. Scott speaker, you may begin your conference.

Thank you, Sergio and welcome everyone to our discussion of topaz energy Corps results as at September 30th 2025. If its 3 and 9 months ended September 30th 2025 and 2024, my name is Scott Kirker. And I'm the general counsel for topaz

Before we get started, I refer you to the advisories on forward-looking statements contained in the news release as well as the advisories contained in the topaz, annual information form and its mdna available on Cedar. And on the topaz website

I also draw your attention to the material factors and assumptions in those advisories.

I'm here with Marty Staples topaz President Chief Executive Officer and Sheree Stevenson vice president finance and Chief Financial Officer.

They will start by speaking to some of the highlights of the last quarter and of the year so far. After the remarks, they will be open for questions. Uh, Marty Shere, please go ahead. Thanks, Scott. Uh, good morning, everyone. Topaz had a strong third quarter marked by royalty production growth, infrastructure processing revenue growth, and record Clearwater royalty production volumes.

Hope that is third quarter. Royalty production was 21.6 thousand Boe per day and increased 15% from the prior year.

Q3 2025 royalty production included record heavy oil production of 3.4 thousand barrels per day, 17% higher, natural gas royalty production and an 11% increase in total oil and liquids. Royalty production over the prior year, Pope has generated total. Third quarter revenue of 76.4 million, 49% from crude and heavy oil, royalties 20% from natural gas and NGL, royalties, and 31% from our infrastructure. Portfolio with full processing revenue and other income of 24.2 million,

Which increased 16% over the prior year.

Topaz is infrastructure assets generated at 99% average 80 daily utilization in the quarter.

We estimate that operators invested between 500 and 600 million of development Capital across our acreage in Q3. The total operator spending across our royalty lands year to date between 2 to 2.1 billion,

During the quarter drilling activity on our acreage remains strong as 161. Gross Wells 6.39 were drilled and 12. Gross Wells were reactivated with 52% of the drilling activity coming from the Monty and Clearwater operating areas.

Only 58% of the Q3 2025, new wells, drilled.

Based on operator drilling plans, we expect that the current 27 to 31 active drilling rigs on our royalty acreage will be maintained through the fourth quarter of 2025.

Hope has generated third quarter total revenue of 76.4 million and cash flow of 74.8 million or 49 cents per share and free cash flow, 73, million or 47 cents per share. Both of which increase 7% per share over the prior year.

Our Q3 2025 free Capital margin of 95%. Also increase from 88% last year, due to lower operating costs. A 24% reduction to our effective borrowing rate under the company's credit facility and an 8.7 million edging gain realized during the quarter.

Tapases third quarter, relies a hedging gain of 8.7 million includes a 7.1 million gain on natural gas-based. Financial derivative contracts, which represents a 144% premium to tapases third quarter realized gas price.

For the fourth quarter of 2025 approximately 30% of tapases natural gas growth. Production is hedged at a weighted average fixed price of $3.66. Canadian per mcf.

An approximately 30% of oil and total liquids relative production is hedge. At a weighted average floor price of $77.64 cents Canadian per barrel.

Topaz distributed net 52.3 million in quarterly, dividends 34 cents per share during Q3 which represents a 5.4% trailing annualized dividend yield to the third quarter average share price.

During the quarter Lopez completed. Its previously announced Northeast BC Monty tuck in royalty, acquisition from termine for 71.7 million.

This acquisition provides a new royalty interest on approximately 134,000. Gross Acres.

Of which over 65% is undeveloped and includes 410. Future Tier 1 Monty drilling locations.

This acquisition fully aligns topaz to each of termine, future, growth projects under their multi-year, Northeast, BC, montney buildup plan.

We have reconfirmed our 2025 guidance estimate ranges.

And expect to exit 2025 with net debt between 500 and 510 million or net debt to ibida of 1.5 times. While generating a payout ratio at the lower end of the 60 to 90% long-term targeted range, which provides Financial flip flexibility for acquisition growth.

At this time, we're pleased to answer any questions back to you Sergio.

Still online. Sergio.

Sorry.

I was speaking on mute, thank you, ladies and gentlemen, we'll now begin the question and answer session.

Should you have a question, please? Press the star, followed by the number 1 on. Your touch on phones. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process? Please press the star followed by the number 2. If you are using a speaker-phone, please leave the handset before pressing any keys.

1 moment please for first question.

Your first question comes from Yousef scatter, from scatter Energy Research, please go ahead.

Good morning, Scott, Marty and Sherry uh, my normal question. Uh, can you talk about what the m&a landscape? Looks like right now and especially with uh INTP companies being stretched with these low commodity prices. Is there more opportunity now in the infrastructure area either for, you know, uh facilities that are in great shape. Uh and then you could be uh you know partner there or in Project.

Objects that are in the pipeline uh, that once they're completed, then you can be in the, in the in in the deals at that point.

Use our access free cash flow if if it's available first and and as you saw us, do kind of in the uh latter part of the quarter. We did use some, some debt to facilitate a deal with termine for 71.7 million. So uh we'll continue to be interested and if there's something that fits we'll we'll try to be reactive to that and then from a royalty infrastructure weighted opportunity, set. I think there's opportunities on both sides and and we've proven that over the year, uh, the start of the year we did a deal with Logan energy where it was a realy infrastructure, hybrid deal and and we completed a deal, just recently, that was a pure royalty deal. So we'll look to be, uh, kind of opportunistic on both sides of that.

Okay. Um, some of my clients have asked me, um, if, if you're going to, if how does a royalty structure, uh, work with an ncib? Is that something that if you saw the stock was trading, uh, below what you're you consider, if you know, your fair value would would that be somewhere where you could allocate capital?

Hi, Joseph, yes. So, we've definitely looked at an ncib, and we definitely like the the thought of it, there's definitely, um, good reason or rationale to reinvest back into our own portfolio as per se, but, um, you know, with liquidity and and termine shareholdings. Um, we had sort of pinpointed that, if something you would do, you know, Once termine Sold down a bit further. So, at this time, we've decided to stick with the division.

Strategy and not confuse that messaging, but it's definitely something that we continue to evaluate for for future as the liquidity continues to improve.

Super, thanks, very much that does it for me.

Thank you as a reminder. If you wish to ask a question, simply press star 1

There are no further questions at this time.

You can proceed.

Okay, thanks everyone. Uh, look forward to talking to you in Q4.

Have a great day.

Thanks and yellman. This concludes today's conference call. Thank you all for your participation. You may now disconnect