Freehold Royalties Ltd. · TSX:FRU
Freehold Royalties — Investor Presentation (June 2017)
30 slides from Freehold Royalties's investor presentation, June 2017
Slide 1: Quality Assets Provide Sustainable Dividends
freeholdroyalties.com Quality Assets Provide Sustainable Dividends June 2017 THE ROYALTY ADVANTAGE TSX : FRU | MAY 2017
Slide 2: Our Strategy
Our Strategy As a leading royalty oil and gas corporation, Freehold's objective is to deliver growth and low risk attractive returns to shareholders over the long term. Freehold accomplishes this by: Creating Value • Drive oil and gas development on our lands through our lease out programs • Acquire
Slide 3: Investment Performance
Investment Performance 20-years of delivering value; Cumulative $125 dividends declared $30.60 per share ($1.5 billion in dividends) $42 $30 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 Freehold Royalties Ltd. S&P/TSX Oil and Gas Exploration & Production Index S&P/TSX Composite
Slide 4: Why Own Freehold
Why Own Freehold Oil price leverage Change in WTI from $50 to $60/bbl increases our free cash flow by ~30% Sustainable Adjusted payout target 60%-80% Cash costs <$7/boe Top tier cash netbacks Strong balance sheet, YE 2017E net debt to trailing funds from operations low risk business ~0.3x with >$140
Slide 5: Royalties = Strong Operating Margins
Royalties = Strong Operating Margins $45 Q1/17 91% of Operating Income from Royalties $40 $35 Mineral Title $30 Royalties 90% $25 Operating $ per boe Margin $20 Q1/2017 39% $15 52% $10 Gross $5 Overriding Royalties $0 9% Operating Margin ($/boe) Working Royalties ($/boe) Interest Ownership Op costs
Slide 6: Oil Price Leverage
Oil Price Leverage $0.14 Monthly Free Cash Flow Per $0.12 Change from $50 to $60/bbl WTI improves funds from operations $0.10 by ~30%% $0.08 Share $0.06 $0.04 $0.02 $0.00 $40/bbl $50/bbl $60/bbl $70/bbl West Texas Intermediate Identical assumptions to Freehold's May 10th 2017 guidance other than WTI
Slide 7: Production Growth
Production Growth 11,000 13 consecutive quarters of production growth Royalty Production (boe/d) 10,000 9,000 8,000 7,000 6,000 Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 TSX : FRU | MAY 2017 7
Slide 8: Sustainable Dividend
Sustainable Dividend Recently increased monthly dividend from $0.04 to $0.05 140% 120% 100% 80% Adjusted payout range 60% 40% 20% 0% Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Basic Payout Ratio Adjusted Payout Ratio Basic Payout Ratio = Dividends declared/funds from operations Adjusted P
Slide 9: Strong Balance Sheet
Strong Balance Sheet 0.3x Net Debt/Funds from Operations (estimated at December 31, 2017) (multiple) 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2015 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2016 2017E Sector Average Freehold Sector average sourced fr
Slide 10: 3-Year Track Record
3-Year Track Record 2014 2015 2016 Production (boe/d) 9,180 10,945 12,219 Heavy oil as a 24% 20% 16% % of production Royalties as a % of 78% 87% 93% operating income Royalty acres (mm) 3.0 3.7 5.9 Tax pools (mm) $473 $966 $1,028 Net debt/funds 1.0x 1.4x 0.8x from operations Acquisitions (mm) $248 $4
Slide 11: 2017 First Quarter Results
2017 First Quarter Results Q1 2017A 2017E Guidance 2017E Guidance (May 10th) (March 2nd) Production Boe/d 12,753 11,300-11,800 11,300-11,800 Royalties % of 84% 87% 84% production Royalties as a % of 91% 94% 91% operating income Adjusted payout 46% 62% 65% ratio Period end net debt (x) 0.7 0.3 0.6 to
Slide 12: Royalty Drilling
Royalty Drilling Q1 Royalty Drilling (non unit) 140 Gross Wells | 8.5 Net Wells Top operators Q1-2017 Gross Wells Montney CIOC, Delphi, Encana Long Run Exploration 19 Sparky, Lloyd, Dina Caltex, CNRL, Rife, Surge Teine Energy 17 Crescent Point 14 Spartan 9 Viking Teine Caltex 7 Cardium Bonterra, Pet
Slide 13: Net Royalty Wells
Net Royalty Wells Q1-2017 saw an increase in activity on our royalty lands 20 18 16 14 12 10 8 6 4 2 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017E TSX : FRU | MAY 2017 13
Slide 14: Corporate Profile
Corporate Profile Focused on oil and gas royalties 2017E production (87% royalty production) 11.3-11.8 mboe/d 2017E operating income from royalties 94% Annual dividend(1) ($0.05 per month) $0.60/share 2017E revenue from oil & ngl's 81% Current dividend yield(2) (3) 4.5% Market capitalization(2) (3)
Slide 15: Quality Assets-Widely Diversified Portfolio
Quality Assets-Widely Diversified Portfolio +10 years of future drilling potential(3,4) 130+ Locations Royalty drilled locations on FRU lands Belly River, Mannville, Jan 2014 – current (1) Pekisko, Devonian FRU lands 550+ Locations Mannville Heavy Oil Play 950+ Locations 400+ Locations Viking Light
Slide 16: Long Term Value Creation
Long Term Value Creation Enhance returns Create value through Deliver value through through strong audit acquisitions, lease outs sustainable dividends function and prudent and generating new debt management royalties TSX : FRU | MAY 2017 16
Slide 17: Freehold
Freehold • Attractive yield • ~4.5% yield at the high end of energy peers • Conservatively managed • 0.3x 2017 YE debt/funds from operations • 60%-80% adjusted payout strategy • Positioned in the highest netback plays • Freehold land continues to attract capital in current commodity environment • Ma
Slide 18: Supplemental Information
Supplemental Information TSX : FRU | MAY 2017
Slide 19: 2017 Guidance
2017 Guidance 2017 Annual Average May 10th, 2017 March 2nd, 2017 November 8th, 2016 Daily production (boe/d) 11,300-11,800 11,300-11,800 11,000 WTI oil price US$/bbl 52.00 52.00 50.00 Western Canadian Select 49.00 49.00 46.00 $/bbl AECO $/mcf 2.60 2.60 3.00 Exchange rate C$/US$ 0.76 0.76 0.75 Operat
Slide 20: Managing Royalties for more than 30 years
Managing Royalties for more than 30 years CN P ENSION T RUST F UNDS Pension fund for employees of Canadian National Railway 100% ownership 100% ownership Manager of the assets 21%(1) ownership 1) Based on 118.0 million shares outstanding as at March 31, 2017 TSX : FRU | MAY 2017 20
Slide 21: Diversified Royalty Payors
Diversified Royalty Payors 1. Diversified group of payors: Top 30 account for over 80% of royalty revenue on a trailing 12 month basis. TSX : FRU | MAY 2017 21
Slide 22: Dividend History
Dividend History Dividend ($/share) WTI $/boe $3.00 $2.91 $80 $70 $2.50 $2.10 $60 $2.00 $1.92 $1.92 $50 $1.70 $1.73 $1.68 $1.68 $1.68 $1.68 $1.68 $1.56 $1.50 $1.40 $40 $1.32 $1.31 $1.10 $1.00 $30 $1.00 $0.78 $0.65 $20 $0.54 $0.50 $10 $0.13 $0.00 $0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2
Slide 23: Funds from Operations Per Share
Funds from Operations Per Share Funds from operations remain strongly correlated with oil prices $4.00 $3.47 $3.50 $3.00 $2.76 $2.44 $2.46 $2.50 $2.14 $2.04 $1.94 $1.95 $1.90 $1.95 $1.83 $1.79 $2.00 $1.72 $1.71 $1.60 $1.50 $1.16 $1.15 $1.03 $0.85 $1.00 $0.57 $0.50 $0.00 1997 1998 1999 2000 2001 2002
Slide 24: Production History
Production History Continuing upward trend over 20-year history 14,000 12,219 12,000 10,945 9,180 10,000 8,850 8,913 8,412 8,484 7,804 7,615 7,636 7,302 7,476 8,000 6,086 6,004 5,817 5,461 5,588 6,000 4,737 4,785 4,338 4,000 2,000 0 2002 2007 1997 1998 1999 2000 2001 2003 2004 2005 2006 2008 2009 20
Slide 25: Disciplined Acquirer
Disciplined Acquirer Cost Initial Production Year Area ($ millions) Acquired (boe/d) 2005 Petrovera (CNRL) 352 3,800 2007 AB/SK 90 700 2010 AB, SK and BC 38 400 2011 NW AB 7 100 2012 AB, SK and BC 60 600 2013 Numerous small acquisitions 10 30 2014 SK/MB/AB 248 1,500 2015 SK/AB/BC 410 2,100 2016 SK/A
Slide 26: FRU Stock Price Tracks Oil Price
FRU Stock Price Tracks Oil Price WTI in US$ 150.00 55% FRU in C$ 30.00 oil and NGL production 125.00 25.00 100.00 20.00 75.00 15.00 50.00 100% 10.00 25.00 unhedged 5.00 - - WTI Oil Price (US$) FRU Share Price (CDN$) TSX : FRU | MAY 2017 26
Slide 27: Owner of Legacy Lands
Owner of Legacy Lands • Mineral titles held in perpetuity • Historic land grant to Hudson’s Bay Company in 1670 by the King of England • HBC surrendered land to Canada in 1870 for cash and 1/20th of lands (Section 8 and ¾ of 26) 8s and 26s in western Canada (HB Lands) • Portion of the HB Lands purch
Slide 28: Advisories
Advisories Forward-Looking Information This presentation offers our assessment of Freehold’s future plans and operations as at May 10, 2017 and contains forward-looking information including, expectation of Freehold’s 2017 average daily production, expected percentage of 2017 operating income from r
Slide 29: Advisories cont.
Advisories cont. We can give no assurance that any of the events anticipated will transpire or occur, or if any of them do, what benefits we will derive from them. The forward-looking information contained herein is expressly qualified by this cautionary statement. To the extent any guidance or forw
Slide 30: Investor Relations
Investor Relations toll free 888.257.1873 telephone 403.221.0833 website freeholdroyalties.com TSX : FRU | MAY 2017
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