- Royalty and Infrastructure Acquisitions: $430.6 million completed in 2024.
- Annualized Processing Revenue Increase: 38% growth.
- Year-End Royalty Production Increase: 11% growth to 21,400 BOE per day.
- Year-End Royalty Acreage Increase: 52% growth.
- Q4 Royalty Production: Over 20,300 BOE per day, 8% higher than Q3 2024.
- Q4 Royalty Revenue: $60.2 million, representing 73% of total revenue.
- Q4 Operating Margin: 99% for royalty revenue.
- Q4 Processing Revenue and Other Income: $21.9 million, 19% higher than Q4 2023.
- Infrastructure Portfolio Utilization: 100% with a 93% operating margin.
- Natural Gas Hedging Gain: $11.5 million or $0.40 per mcf in 2024.
- Operators Spud Wells in 2024: 630 gross wells, 23.2 net, a 9% increase from 2023.
- Operator Capital Spending in 2024: Approximately $2.5 billion, a 4% increase from the prior year.
- Year-End 2024 Total Proved Plus Probable Reserves: 59.5 million BOE, a 23% increase from 2023.
- Q4 Total Revenue and Other Income: $82 million.
- Q4 Cash Flow: $73.9 million with an 87% free cash flow margin.
- Q4 Free Cash Flow: $71.4 million.
- Q4 Cash Flow Per Diluted Share: $0.49, a 7% increase from Q3 2024.
- Q4 Free Cash Flow Per Diluted Share: $0.47, a 7% increase from Q3 2024.
- Q4 Dividends Distributed: $50.6 million, $0.33 per share.
- Full Year 2024 Dividends Paid: $191.2 million, a 68% payout ratio.
- 2025 Guidance for Average Royalty Production: 21,000 to 23,000 BOE per day.
- 2025 Guidance for Processing Revenue and Other Income: $88 million to $92 million.
- Expected 2025 Net Debt-to-EBITDA: 1.2 times.
- Expected 2025 Payout Ratio: 63%.
Release Date: February 25, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Topaz Energy Corp (TPZEF, Financial) completed $430.6 million in royalty and infrastructure acquisitions, contributing to significant growth in revenue and production.
- The company achieved a 38% increase in annualized processing revenue and a 52% increase in year-end royalty acreage.
- Fourth quarter royalty revenue of $60.2 million represented 73% of total revenue, with a 99% operating margin.
- Topaz's infrastructure portfolio achieved 100% utilization and a 93% operating margin in the fourth quarter.
- The company generated $71.4 million of free cash flow in Q4, with a strong free cash flow margin of 87%.
Negative Points
- Despite strong financial performance, there is uncertainty in the industry due to fluctuating tariffs and market conditions.
- The company faces challenges in maintaining a balance between dividend growth and acquisition opportunities.
- Topaz's guidance for 2025 includes a wide range of potential operator spending, indicating uncertainty in future capital allocation.
- The M&A landscape is competitive, and the company must carefully navigate acquisition opportunities.
- There is a reliance on operator-funded development, which could be impacted by changes in the macroeconomic environment.
Q & A Highlights
Q: Can you explain the process behind the reserve bookings and how aggressively the waterflood results in the Clearwater have been booked?
A: (Cheree Stephenson, CFO) The reserve bookings are a delineation of our operators' reserves, focusing on proved developed reserves without future undeveloped locations. This year, technical revisions included 1.4 million barrels, with 1.1 million attributed to enhanced recovery from waterflood. The process is an extension of the primary operators' reserves.
Q: With the current balance sheet and payout ratio, what are your capital allocation priorities?
A: (Marty Staples, CEO) We are focused on letting our recent acquisition settle before considering dividend increases. We see M&A opportunities and plan at least one dividend raise this year, managing it alongside commodity prices and growth.
Q: Are you seeing more opportunities in the M&A landscape, and what might be a surprise development in the next year?
A: (Marty Staples, CEO) We see opportunities, especially in hybrid infrastructure royalty deals. The industry is uncertain, creating potential opportunities. Surprises could come from technological changes, such as waterflood developments and new completion designs, which could enhance production and reserves.
Q: Can you discuss the guidance range for industry spending on Topaz lands in 2025?
A: (Cheree Stephenson, CFO) We anticipate operator spending between $2.5 billion and $2.8 billion, similar to 2024. The lower end of guidance accounts for macro uncertainties, but we have good visibility towards the higher end.
Q: Could you elaborate on the recent Montney deal and its growth potential?
A: (Marty Staples, CEO) The deal with Logan Energy involves a GORR on 100,000 acres and a 35% ownership in a facility. We expect production to double in the first year and again by year three. The deal is structured to be accretive to Topaz, with a 7.5 times multiple compressing quickly due to a $50 million capital commitment.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
