TOPAZ REPORTS FIRST QUARTER 2025 FINANCIAL RESULTS INCLUDING RECORD ROYALTY PRODUCTION AND ANNOUNCES DIVIDEND INCREASE
Canada NewsWire
CALGARY, AB, May 5, 2025
CALGARY, AB, May 5, 2025 /CNW/ - Topaz Energy Corp. (TSX: TPZ) ("Topaz" or the "Company") is pleased to provide first quarter 2025 financial results and reconfirm the Company's 2025 guidance estimates. Select financial information is outlined below and should be read in conjunction with Topaz's interim condensed consolidated financial statements ("Financial Statements") and related management's discussion and analysis ("MD&A") as at and for the three months ended March 31, 2025, which are available on SEDAR+ at www.sedarplus.ca and on Topaz's website at www.topazenergy.ca.
First Quarter 2025 Highlights
-- Cash flow of $81.7 million or $0.53 per share(2) and free cash flow
$(FCF)$(1) of $80.8 million or $0.52 per share(2), both 13% higher (per
share) from the prior year.
-- Record royalty production of 22,380 boe/d(4) (including 13% higher
natural gas royalty production); quarterly drilling activity of 218 gross
wells (7.3 net)(7); and share of WCSB drilling activity (19%)(8).
-- Record processing revenue and other income of $23.5 million from Topaz's
infrastructure assets.
-- Second quarter dividend increase to $0.34 per share representing a 5.9%
annualized yield to Topaz's current share price(10).
-- Invested $17.5 million in acquisitions during the first quarter and
reduced net debt 2% since year end.
First Quarter 2025 Update
Financial Overview
-- Topaz generated total revenue and other income of $92.2 million, 43% from
crude and heavy oil royalties, 32% from natural gas and NGL royalties,
and 25% from the infrastructure portfolio.
-- Cash flow of $81.7 million was 20% higher than Q1 2024, attributed to 17%
higher royalty production and 31% higher processing revenue and other
income.
-- Paid $50.7 million in dividends ($0.33 per share and 62% payout ratio(1))
which represents a 5.2% trailing annualized yield to the Q1 2025 average
share price(9) and generated $30.1 million of Excess FCF(1), part of
which was used to fund the previously announced royalty acquisition in
the Alberta Montney.
-- Topaz exited Q1 2025 with $480.7 million of net debt(1) (1.4x net debt to
Q1 2025 annualized EBITDA(1)). Subsequent to Q1 2025, Topaz extended the
maturity date (to April 30, 2029) of the Company's unsecured,
covenant-based credit facility with the existing syndicate of Canadian
banks. No other significant amendments were made to the credit agreement,
which maintains Topaz's total credit capacity up to $1.0 billion. As at
May 5, 2025, Topaz has approximately $0.5 billion of available
capacity(6) under the facility.
Royalty Activity
-- First quarter average royalty production of 22,380 boe/d(4), includes
record natural gas of 95,195 Mcf/d and record total liquids of 6,513
bbl/d, 13% and 4%, respectively, higher than the prior quarter.
-- Topaz generated $68.7 million total royalty revenue (99% operating
margin(1)) and realized 46% higher natural gas and 6% higher total (per
boe) royalty pricing relative to the prior quarter.
-- During the quarter, operators spud 218 gross wells (7.3 net)(7) and
reactivated 20 gross wells, representing record levels of both wells
drilled and share (19%) of WCSB drilling activity(8) across Topaz's
royalty acreage. During Q1 2025, 191 total gross wells were brought on
production(7) and at March 31, 2025, Topaz had 157 gross wells drilled
but not yet completed, representing 72% of Q1 2025 new wells drilled.
-- Topaz estimates that operators invested $0.8 billion to $0.9 billion of
development capital across the Company's royalty acreage in Q1 2025.
Drilling activity (218 gross wells spud(7)) was diversified across
Topaz's portfolio as follows: 50 Deep Basin, 49 Montney, 46 Clearwater,
37 SE Saskatchewan/Manitoba, 27 Peace River and 9 Central Alberta.
Infrastructure Activity
-- Topaz generated $23.5 million in processing revenue and other income
which was 7% higher than the prior quarter. During Q1 2025, Topaz
incurred $1.8 million in operating expenses, providing a 93% operating
margin(1). The infrastructure assets generated 98% utilization and Topaz
incurred $0.1 million in maintenance-related capital expenditures (before
capitalized G&A).
-- Construction of the previously announced Alberta Montney natural gas
processing facility continues to advance and is expected to be
commissioned and on-stream by the end of the second quarter of 2025
("Facility Interest"). The purchase price for the Facility Interest will
be funded by Topaz upon the final commissioning, subject to the
satisfaction of customary closing conditions.
Dividend
-- Pursuant to Topaz's strategy to increase its dividend alongside
sustainable revenue growth, Topaz's Board approved an increase to the
Company's quarterly dividend and declared the second quarter 2025
dividend at $0.34 per share(11) which is expected to be paid on June 30,
2025, to shareholders of record on June 13, 2025. The quarterly cash
dividend is designated as an "eligible dividend" for Canadian income tax
purposes.
-- Topaz's 2025e dividend is sustainable down to $0.01 per mcf natural gas
and US$55.00 per bbl crude oil(3) attributable to: (i) the Company's
high-margin, stable infrastructure revenue which represents 43% of the
2025e dividend(3); (ii) hedging strategy and financial derivative
contracts in place(12); (iii) the quality and financial strength of
Topaz's asset portfolio and strategic partners which mitigates risk of
reduced development activity; and (iv) the Company's diversified
commodity mix (approximately 70% natural gas and 30% total liquids)(3)
and resulting royalty revenue composition (approximately 50% natural gas
and NGL and 50% crude and heavy oil)(3)(5).
Guidance Outlook
2025 Guidance Estimates Reconfirmed
-- Topaz reconfirms the Company's 2025 guidance estimates(3)(14), including
average annual royalty production of 21,000 -- 23,000 boe/d(3)(4) and
processing revenue and other income between $88.0 and $92.0 million(3).
Based on estimated commodity pricing(5), Topaz expects to exit 2025 with
net debt between $430.0 and $435.0 million(3)(13) (net debt to EBITDA(1)
1.2x(3)), before consideration of incremental acquisitions, and generate
a modest payout ratio at the lower end of the 60% - 90% long-term
targeted payout range.
-- Based on operator plans, a record 14 to 16 drilling rigs will remain
active across Topaz's royalty acreage through spring break-up(3),
following which activity is expected to resume to 28 to 30 drilling rigs
active through the second quarter(3).
Q1 2025 CONFERENCE CALL
Topaz will host a conference call tomorrow, Tuesday, May 6, 2025 starting at 7:00 a.m. MST (9:00 a.m. EST). To join the conference call without operator assistance, participants can register and enter their phone number at https://emportal.ink/4gPHBBR to receive an instant automated call back. Alternatively, participants can join by calling a live operator at 416-764-8659 or 1-888-510-2154 (North American toll free). The conference call ID is 56884.
2025 ANNUAL MEETING
Topaz will also host its annual shareholder meeting tomorrow, Tuesday, May 6, 2025 at 9:00 a.m. MST (11:00 a.m. EST) at the Calgary Petroleum Club (McMurray Room) located at 310 5(th) Avenue SW Calgary, Alberta. If you were a shareholder of record of Topaz common shares at the close of business on March 24, 2025, you have received notice of, and are entitled to participate in, and vote at this meeting. We encourage you to vote your common shares and participate in the meeting.
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 three months ended March 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 ended Q1 2025 Q4 2024 Q3 2024 Q2 2024 Q1 2024
($000s) except per share
Royalty production revenue 68,683 60,234 52,692 60,162 60,338
Processing revenue 19,589 18,838 18,279 14,754 14,506
Other income(4) 3,883 3,107 2,626 3,490 3,372
Total 92,155 82,179 73,597 78,406 78,216
Cash expenses:
Operating (1,759) (1,600) (2,209) (1,623) (1,917)
Marketing (445) (356) (279) (333) (392)
General and administrative (2,179) (2,894) (1,730) (1,626) (1,970)
Realized gain on financial instruments 821 3,464 4,716 2,276 860
Interest expense (6,854) (6,940) (7,123) (6,544) (6,859)
Cash flow 81,739 73,853 66,972 70,556 67,938
Per basic share(1)(2) $0.53 $0.49 $0.46 $0.49 $0.47
Per diluted share(1)(2) $0.53 $0.49 $0.46 $0.49 $0.47
Cash from operating activities 80,739 64,930 71,253 68,805 71,283
Per basic share(1)(2) $0.53 $0.43 $0.49 $0.47 $0.49
Per diluted share(1)(2) $0.52 $0.43 $0.49 $0.47 $0.49
Net income 12,286 4,426 18,040 17,724 6,196
Adjusted, per diluted share(1)(8) $0.14 $0.12 $0.06 $0.10 $0.10
EBITDA(7) 88,515 80,504 73,984 76,885 74,654
Per basic share(1)(2) $0.58 $0.53 $0.51 $0.53 $0.52
Per diluted share(1)(2) $0.57 $0.53 $0.51 $0.53 $0.51
FCF(1) 80,837 71,435 64,789 69,499 66,266
Per basic share(1)(2) $0.53 $0.47 $0.45 $0.48 $0.46
Per diluted share(1)(2) $0.52 $0.47 $0.44 $0.48 $0.46
FCF Margin(1) 88 % 87 % 88 % 89 % 85 %
Dividends paid 50,745 50,617 47,827 46,362 46,361
Per share(1)(6) $0.33 $0.33 $0.33 $0.32 $0.32
Payout ratio(1) 62 % 69 % 71 % 66 % 68 %
Excess FCF(1) 30,092 20,818 16,962 23,137 19,905
Capital expenditures 902 2,418 2,183 1,057 1,672
Work in progress capital costs -- (21,295) 5,585 4,035 11,675
Acquisitions, excl. decommissioning obligations(1) 17,470 331,380 -- 99,189 --
Weighted average shares -- basic(3) 153,770 151,423 144,909 144,878 144,839
Weighted average shares -- diluted(3) 154,430 152,149 145,622 145,491 145,337
Average Royalty Production(5)
Natural gas (mcf/d) 95,195 83,923 76,366 75,341 80,461
Light and medium crude oil (bbl/d) 1,925 1,678 1,834 1,925 1,727
Heavy crude oil (bbl/d) 3,154 3,266 3,093 3,093 2,877
Natural gas liquids (bbl/d) 1,434 1,346 1,057 1,141 1,176
Total (boe/d) 22,380 20,279 18,712 18,717 19,192
Total royalty production (% total liquids) 29 % 31 % 32 % 33 % 30 %
Natural gas liquids (% condensate) 70 % 68 % 75 % 71 % 68 %
Realized Commodity Prices(5)
Natural gas ($/mcf) $2.06 $1.41 $0.63 $1.09 $2.51
Light and medium crude oil ($/bbl) $91.39 $90.73 $94.14 $101.24 $83.06
Heavy crude oil ($/bbl) $82.61 $80.81 $83.17 $89.03 $75.10
Natural gas liquids ($/bbl) $90.78 $89.10 $89.73 $95.28 $86.63
Total ($/boe) $34.10 $32.29 $30.61 $35.32 $34.55
Benchmark Pricing
Natural Gas
AECO 5A (CAD$/mcf) $2.16 $1.48 $0.69 $1.18 $2.52
AECO 7A (CAD$/mcf) $2.02 $1.46 $0.81 $1.44 $2.05
Westcoast station 2 (CAD$/mcf) $1.27 $0.90 $0.50 $0.77 $2.62
Crude Oil, Heavy Oil and Natural Gas Liquids
NYMEX WTI (USD$/bbl) $71.42 $70.27 $75.16 $80.55 $76.97
Edmonton Par (CAD$/bbl) $95.60 $95.14 $98.13 $105.53 $92.49
WCS differential (USD$/bbl) $12.66 $12.55 $13.49 $13.54 $19.33
Edmonton Condensate (CAD$/bbl) $99.49 $97.90 $93.95 $101.27 $85.11
CAD$/USD$ $0.6969 $0.7149 $0.7333 $0.7308 $0.7414
Selected statement of financial position results At Mar. 3 At Dec. 3 At Sept. At Jun. 3 At Mar 31,
1, 1, 30, 0,
($000s) except share amounts 2025 2024 2024 2024 2024
Total assets 1,857,438 1,894,614 1,623,841 1,660,645 1,600,415
Working capital 46,694 51,758 27,520 29,309 31,594
Adjusted working capital(1) 49,448 48,372 38,434 43,794 44,786
Net debt (cash)(1) 480,730 492,024 381,084 398,461 322,273
Common shares outstanding(3) 153,774 153,457 144,928 144,878 144,878
(1) Refer to "Non-GAAP and Other Financial Measures".
(2) Calculated using basic or diluted weighted average
shares outstanding during the period.
(3) Shown in thousand shares outstanding.
(4) Includes interest income ($mm): Q1 2025: $0.08:
Q4 2024: $0.3, Q3 2024: $0.1; Q2 2024: $0.2; Q1 2024:
$0.1.
(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.
NOTE REFERENCES
This news release refers to financial reporting periods in abbreviated form as follows: "Q1 2025" refers to the three months ended March 31, 2025; "Q4 2024" refers to the three months ended December 31, 2024; and "Q1 2024" refers to the three months ended March 31, 2024. In addition, "2025e" refers to estimated amounts or results for the year ending December 31, 2025.
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. Estimated based on a recent commodity price forecast
for April to December 2025: C$2.55 per mcf natural
gas (AECO); US$65.00 per bbl crude oil (NYMEX WTI).
6. 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 May 5, 2025
Topaz had $509.5 million net borrowings against the
Company's credit facility, providing approximately
$490.5 million available, subject to agent consent.
Refer to Note 8 of the March 31, 2025 Financial Statements
for Topaz's Q1 2025 covenant calculations.
7. May include non-producing injection wells.
8. Q1 2025 gross wells spud across Topaz royalty acreage
(218) as a percentage of the total wells rig released
across the WCSB during Q1 2025 of 1,123 (excluding
oil sands/in situ). (Source: Rig Locator, geoSCOUT
and Peters & Co. Limited).
9. Calculated based on Topaz's average share price on
the TSX during the first quarter of 2025 of $25.43.
10. Calculated based on Topaz's closing share price on
the TSX on May 1, 2025 of $23.13.
11. Topaz's future dividends remain subject to board of
director approval.
12. Refer to Topaz's most recently filed MD&A for a complete
listing of financial derivative contracts in place.
Coverage estimates are calculated based on the midpoint
of Topaz's 2025e royalty production guidance.
13. Estimate based on the midpoint of Topaz's 2025e guidance
estimates and inclusive of the Company's Q2 2025 dividend
increase to $0.34 per share (quarterly).
14. Management's assumptions underlying the Company's
2025e guidance estimates include:
ii. Being subject to any significant, potential changes
to the Company's key operators' 2025 capital budgets
and/or operational, weather or wildfire-related
issues
that may impact the 2025 estimated production range;
iii. Topaz's internal estimates regarding development pace
and production performance including estimates of
operators' 2025 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 2025 capital budgets and/or operational,
weather or wildfire-related issues that may impact
2025 production;
iv. 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;
v. No incremental, (i.e. not previously announced)
acquisition
activity. 2025e estimates include the previously
announced
(February 3, 2025) Royalty Interest and Facility
Interest
acquisitions in the Alberta Montney. The Royalty
Interest
was acquired January 31, 2025 (2.5% royalty interest
over approximately 0.1 million gross acres). The
Facility
Interest ($26.0 million) is expected to be acquired
upon commissioning and is expected to generate $3.5
million of annualized processing revenue,
incorporated
in the 2025e guidance estimates with an effective
date of July 1, 2025;
vi. Estimated 2025e expenses and expenditures of
$7.0-$9.0mm
of cash G&A; $7.0-$9.0mm of operating expenses;
$5.0-$7.0mm
capital expenditures (excluding acquisitions); 1%
marketing fee on certain royalty production;
estimated
annual borrowing and standby interest costs at a rate
of 6.5%; and no estimated corporate income tax
attributed
to the Company's year-end 2024 tax pools (refer to
Topaz's 2024 Annual Information Form available
through
the SEDAR+ website (www.sedarplus.ca) or Topaz's
website
(www.topazenergy.ca).
vii. 2025 estimated total dividends of approximately
$208.0
million based on 153.8 million shares outstanding
at May 5, 2025 ($1.35 per share);
viii. Topaz's outstanding financial derivative contracts
included in its most recently filed MD&A; and
ix. 2025e midpoint guidance royal production revenue
estimate
sensitivities are as follows:
1. C$0.50/mcf change in natural gas
price +/- $17.0mm
(6%);
2. US$2.00/bbl change in crude oil
price +/- $6.6mm (2%);
3. 1% annual average royalty
production change +/- $2.7mm
(1%);
4. 1% change in CAD/USD foreign
exchange +/- $1.9mm (1%);
and
5. US$1.00/bbl change in WCS
differential +/- $1.8mm
(1%).
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 for 2025; estimated processing revenue and other income for 2025; anticipated exit 2025 net debt levels and 2025 net debt to EBITDA levels; dividend amounts, dividend increases (including the intention to increase dividends) 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 capital expenditure and drilling plans; the number of drilling rigs to be active on Topaz's royalty acreage during the second quarter of 2025; the future declaration and payment of dividends and the timing and amount thereof; the timing for the completion of the acquisition of the Facility Interest including the commissioning of the Facility Interest; the forecasts described under the headings "First Quarter 2025 Update" and "Guidance Outlook" (including under the sub-heading "Dividend") and the assumptions and estimates described under the heading "Note References" above; expected benefits from acquisitions including enhancing Topaz's future growth outlook and the plans to maintain a low payout ratio in order to retain Excess FCF for acquisitions and further dividend increases; 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), 2024 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, 2025 and estimated year-end exit net debt and net debt to EBITDA for 2025 based on the midpoint guidance range, which are based on, among other things, the various assumptions as to production levels and capital expenditures and other assumptions disclosed in this news release including under the heading "Guidance Outlook" and "Note References" above and are based on the following key assumptions: Topaz's estimated capital expenditures (excluding acquisitions) of $5.0 to $7.0 million in 2025; the Company's tax pool balances at year-end 2024 and the resulting future tax horizon; the working interest owners' anticipated 2025 capital plans attributable to Topaz's undeveloped royalty lands; estimated average annual royalty production range of 21,000 to 23,000 boe/d in 2025; 2025 average infrastructure ownership capacity utilization of 95%; estimated timing of completion and commissioning of the Alberta Montney infrastructure acquisition mid-2025; December 31, 2025 exit net debt (midpoint) range between $430.0 and $435.0 million, 2025 average commodity prices of: $2.55/mcf (AECO 5A), US$65.00/bbl (NYMEX WTI), US$12.00/bbl (WCS oil differential), US$3.30/bbl (MSW oil differential) and US$/CAD$ foreign exchange 0.70.
To the extent such estimates constitute financial outlooks, they were approved by management and the board of directors of Topaz on May 5, 2025 and 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 Company's interim condensed consolidated financial statements as at and for the three months ended March 31, 2025 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 Company's interim condensed consolidated financial statements as at and for the three months ended March 31, 2025: (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
($000s) Mar. 31, 2025 Mar. 31, 2024
Cash from operating activities 80,739 71,283
Exclude net change in non-cash working capital (1,000) 3,345
Cash flow 81,739 67,938
Less: Capital expenditures 902 1,672
FCF 80,837 66,266
Less: dividends paid 50,745 46,361
Excess FCF 30,092 19,905
Cash flow per basic share(1) $0.53 $0.47
Cash flow per diluted share(1) $0.53 $0.47
FCF per basic share(1) $0.53 $0.46
FCF per diluted share(1) $0.52 $0.46
FCF 80,837 66,266
Total Revenue and other income 92,155 78,216
FCF Margin 88 % 85 %
(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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