Topaz Energy's record drilling share and a $38.7M acreage tuck-in lift guidance
A record 22% WCSB drilling share, record liquids output and a Charlie Lake capital pivot sharpen the royalty story.
TPZ.TO · Earnings Call · 2026-07-28
Record drilling and a core tuck-in
Topaz Energy reported Q2 2026 results on July 28, and the headline is a step-change in activity on its royalty lands. The company captured a record 22% of WCSB drilling activity in the quarter, with 160 gross wells, while liquids royalty production hit a record 7,178 bbl/d. Northeast BC and Clearwater remain the growth engines, and management punctuated the quarter with a $38.7M acquisition of 300,000 gross acres across NE BC Montney and the Deep Basin. Marty Staples framed it as a deliberate move: “We thought we could be countercyclical on liquids-weighted natural gas, and that's exactly what we did.” — Marty Staples, Unknown · 2026-07-28 The acquisition adds over 500 gross future locations, and management expects an "interesting and exciting development plan" from the unnamed operator over the next 2–5 years. The record drilling share is not just a headline; it underpins the guidance increase. Topaz raised 2026 average royalty production guidance to 23,900–24,300 BOE/d. Cheree Stephenson was direct about the philosophy: “We think of our guidance like we think of the dividend and always up and to the right.” — Cheree Stephenson, Unknown · 2026-07-28 That confidence is backed by two factors: outperformance in non-core areas with less transparency, and continued Clearwater strength.What changed under the surface
The most intriguing development is the Charlie Lake disposition by Tourmaline and Tamarack Valley. Marty noted: “they're redirecting $75 million of that disposition in the Charlie Lake back to the Clearwater.” — Marty Staples, Unknown · 2026-07-28 That reallocation directly benefits Topaz's Clearwater royalty lands, including the Grand Rapids play, where Headwater has expanded to 30 sections. The company also highlighted a technology shift driving better well results: “Topaz had a strong second quarter, marked by a record share of quarterly drilling activity in the WCSB, record liquids royalty production and a core area tuck-in acquisition.” — Marty Staples, Unknown · 2026-07-28 More specifically, operators are moving from ball-drop to plug-and-perf completions in NE BC Montney, improving efficiency and rate. This quarter's results build on a longer arc of waterflood success and reserve growth. In the prior call, Cheree noted: “We definitely saw some significant bookings. We do think that within the Clearwater specifically, there was some catch-up from prior as the reserve evaluators really now have enough years of data in order to sort of acknowledge and back up the waterflood results.” — Cheree Stephenson, CFO and VP Finance · 2026-02-25 And Marty has repeatedly stressed the benefit of royalty coverage on the key operators: “Having a royalty across the majority of those portfolios being Tamarack, Headwater and Tourmaline is a direct benefit for Topaz.” — Jeremy McCrea, Analyst · 2025-07-29 The Q2 update shows those themes are now translating into record activity and higher volumes.Why it matters
Topaz is a pure-play royalty company without capital control, so its guidance raise is a read-through on operator confidence in the basin. The record drilling share and the acreage tuck-in suggest the company is accumulating more of the WCSB's economic inventory at a time when it can be countercyclical. The Charlie Lake capital pivot is particularly notable—it signals that even as operators divest non-core assets, they are concentrating spending on the liquid-rich Clearwater where Topaz has deep royalty coverage. That is a structural tailwind for production volume and valuation.The acquisition strategy, guided by a liquids-weighted focus, is a deliberate bet on the liquid weighted Montney and Clearwater opportunities. With the company trading at a ~4.5% dividend yield and a 1.2x net debt to annualized EBITDA, Topaz has balance sheet headroom to continue this tuck-in approach. The market now has a clearer line of sight to 2026 exit net debt of $435–440M and a payout ratio at the lower end of the 60–90% target, leaving room for further growth without diluting the dividend story.Yes. I mean let's start in Northeast BC. We think we have -- we know we have 3 benches of development there, liquids-weighted Montney development. And so as we see Northeast BC to continue to grow and develop, this was a natural fit for us to add to our portfolio.