Freehold Royalties Ltd. · TSX:FRU

Freehold Royalties — Investor Presentation (June 2012)

43 slides from Freehold Royalties's investor presentation, June 2012

  1. Slide 1: Investor Presentation June 2012

    Investor Presentation June 2012 Value beneath the surface

  2. Slide 2: Advisories

    Advisories TSX : FRU Forward-Looking Information This presentation offers management’s assessment of Freehold’s future plans and operations as at May 9, 2012, and contains forward-looking information pertaining to Freehold’s expected tax horizon, dividend policy and timing for paying dividends, and

  3. Slide 3: Corporate Profile

    Corporate Profile TSX : FRU FRU share price (TSX close June 13/12) $ per share 17.47 Annual dividend ($0.14 per month) $ per share 1.68 Dividend yield percent 9.6 Shares outstanding (June 13/12) million 65 Market capitalization (June 13/12) $ billion 1.1 Net debt to trailing funds from operations ti

  4. Slide 4: Freehold Ownership

    Freehold Ownership* TSX : FRU Geographic Profile Investor Profile 46% Canadian Institutional 91% Canada 9% U.S. 45% Canadian Retail 6% U.S. Retail 3% U.S. Institutional * March 2012 4

  5. Slide 5: Professional Management

    Professional Management TSX : FRU CN P ENSION T RUST F UNDS Pension fund for employees of Canadian National Railway Rife Resources Management Ltd. Manages the assets of 100% owned by CN Pension Trust Funds Freehold and Canpar 26% owned by CN Pension Trust Funds 100% owned by CN Pension Trust Funds 5

  6. Slide 6: Our History

    Our History TSX : FRU • Established as Freehold Royalty Trust in 1996 • Publicly traded, royalty focused oil and gas company • Converted to a corporation January 1, 2011 Wholly owned by CN Pension Trust Funds • Operating since 1979 • Operating since 1983 • Held royalty interest properties • Held wor

  7. Slide 7: Proud Owner of Legacy Lands

    Proud Owner of Legacy Lands TSX : FRU  Mineral titles are held in The 8s and 26s perpetuity  Historic land grant to the Hudson’s Bay Company (HBC) in 1670 by the King of England  HBC surrendered land to Canada in 1870 in exchange for cash and 1/20th of lands (8s and 26s) in western Canada (HB Lan

  8. Slide 8: Benefits of Royalties

    Benefits of Royalties TSX : FRU » No exploration or drilling costs » No Crown or third party royalties » No production or operating costs » No abandonment or reclamation liabilities lower risk higher netback 8

  9. Slide 9: Harvesting Value

    Harvesting Value TSX : FRU 2.8 million gross acres* North Saskatchewan River Cardium Viking Royalty interests Working interests Bakken Oil resource plays Lower Shaunavon * Includes January 2012 acquisition 9

  10. Slide 10: FRU Mirrors Industry Activity

    FRU Mirrors Industry Activity TSX : FRU Number of gross wells Number of wells drilled on Freehold’s royalty drilled by industry lands at no cost to Freehold 30,000 1,000 25,000 800 20,000 600 15,000 400 10,000 200 5,000 0 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 I

  11. Slide 11: Royalty Net Drilling

    Royalty Net Drilling TSX : FRU 53.4% Oil 56.6% Oil 44.3% Oil 57.6% Oil 85.1% Oil 28.2% Hz 26.7% Hz 29.1% Hz 34.5% Hz 57.3% Hz 20 18 16 14 Oil Hz Oil Vert 12 Gas Hz Net Wells Gas Vert 10 Other 8 D&A 6 4 2 0 2007 2008 2009 2010 2011 Year 11

  12. Slide 12: Top Royalty Payors/Operators

    Top Royalty Payors/Operators* TSX : FRU SABRE Energy Ltd. * Top 25 payors account for approximately 85% of royalty revenue 12

  13. Slide 13: Low Capex Requirements

    Low Capex Requirements TSX : FRU Capital Expenditures as a Percentage of Funds from Operations 125% 117% 100% 75% Peer average 54% 50% 20% 25% Freehold average 11% 0% 97 98 99 0 1 2 3 4 5 6 7 8 9 10 11 12e Sector Average Freehold * See non-GAAP Source: measures. Market data 13

  14. Slide 14: Investing Capital

    Investing Capital* TSX : FRU 2012 Capital Allocation 2012 budget ($30 million)  $30 million  60 (16.5 net) wells »44% operated  80% of budget in SE Sask. Drilling and Completions - $21 million Facilities and Equipping - $7 million Land and Seismic - $2 million * See advisory regarding forward-loo

  15. Slide 15: SE Saskatchewan

    SE Saskatchewan* TSX : FRU 65,000 unleased mineral title lands Regina * 169,000 gross acres 15

  16. Slide 16: Recent Royalty Acquisitions

    Recent Royalty Acquisitions TSX : FRU NW Alberta Alberta, Sask., B.C.*  September 30, 2011  January 17, 2012  $7.3 million  $49.5 million  5,000 gross acres  250,000 gross acres  Reserves: 0.2 MMboe  Reserves: 3.1 MMboe  RLI: 4.8 years  RLI: 15.9 years  Production  Production » 100 boe/d

  17. Slide 17: Accretive Royalty Acquisitions

    Accretive Royalty Acquisitions TSX : FRU Initial Production Cost Acquired Year Area ($ millions) (boe/d) 1997 Alberta/Saskatchewan $ 22 700 2001 Southeast Saskatchewan 25 800 2005 Petrovera (CNRL) 352 3,750 2007 Alberta/Saskatchewan 90 680 1997–2009 Numerous small acquisitions 57 1,245 2010 Alberta,

  18. Slide 18: Strong Financial Position

    Strong Financial Position TSX : FRU Debt to Funds From Operations Multiple (times)* 3.0 $192 million 2.5 available credit capacity 2.0 1.5 1.0 0.5 0.0 2008 2009 2010 2011 2012e Sector Average Freehold * See advisory regarding non-GAAP financial measures 18

  19. Slide 19: Guidance

    Guidance* TSX : FRU Key Assumptions (as at May 9, 2012) 2012 Average daily production boe/d 8,100 Average WTI oil price US$/bbl 100.00 Average exchange rate Cdn$/US$ 1.00 Edmonton Par crude Oil Cdn$/bbl 90.00 Western Canada Select (WCS) Cdn$/bbl 75.00 WTI/Edmonton Par differential Cdn$/bbl (10.00) E

  20. Slide 20: Attractive Dividend

    Attractive Dividend TSX : FRU Dividend Selling Price ($/share) ($/boe) $3.00 $2.91 $80 $70 $2.50 $2.10 $60 $2.00 $1.92 $1.92 $1.70 $1.73 $50 $1.68 $1.68 $1.56 $1.50 $1.40 $40 $1.32 $1.31 $1.10 $30 $1.00 $0.78 $0.65 $20 $0.50 $10 $0.13 $0.00 $0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2

  21. Slide 21: Average Benchmark Oil Prices

    Average Benchmark Oil Prices TSX : FRU $120 WTI/Edm. differential $110 $100 $90 $80 $70 Edm./WCS differential $60 $50 Jan-10 Jan-11 Jan-12 WTI (US$/bbl) WCS (Cdn$/bbl) Edm. Par (Cdn$/bbl) 21

  22. Slide 22: FRU Stock Price Tracks Oil Price

    FRU Stock Price Tracks Oil Price TSX : FRU WTI in US$* FRU in C$* $150 strong economic growth $30 $125 $25 $100 $20 $75 $15 $50 $10 economic recovery begins $25 $5 global economic crisis $0 $0 2008 2009 2010 2011 2012 WTI Monthly Average Price (US$) Freehold Monthly Closing Price * To April 30, 2012

  23. Slide 23: Corporate Income Tax

    Corporate Income Tax* TSX : FRU For illustrative purposes only (all factors remaining constant) $45 - $50 million $50 Includes ~$24 million related to  Corporate income tax rate estimated 2012 taxable income, payable in the first quarter of 2013 » ~25% of taxable income $40  Freehold’s effective t

  24. Slide 24: Investment Performance

    Investment Performance* TSX : FRU Cumulative Value Since Inception ($10 initial investment, assuming reinvestment of distributions and dividends) $126 $38 $29 $10 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 YTD Freehold Royalties Ltd. S&P/TSX Oil and Gas Exploration & Production Index S&P/TSX

  25. Slide 25: Supplementary Information

    Supplementary Information Value beneath the surface

  26. Slide 26: Board of Directors

    Board of Directors TSX : FRU Nolan Blades Harry Campbell Peter Harrison Bill Ingram Arthur Korpach Michael Maher David Sandmeyer Rodger Tourigny 26

  27. Slide 27: Land Holdings

    Land Holdings TSX : FRU 2.8 million gross acres(1) Land Profile  23% held in perpetuity (634,000 gross acres of mineral title and royalty assumption lands)  Undeveloped land(2) » 792,000 gross acres » Independently valued at $91 million 27,000 oil and gas wells Mineral title and royalty assumption

  28. Slide 28: Reserves Profile

    Reserves Profile TSX : FRU Net Reserves Net Proved Plus Probable Reserves  14.2 MMboe proved » 62% oil and NGL » 6.5 year RLI  22.2 MMboe P+P » 63% oil and NGL » 9.1 year RLI 98% Light and medium crude oil - 24% Heavy crude oil - 34% of our proved reserves Natural gas liquids - 5% Natural gas - 37

  29. Slide 29: Production Profile

    Production Profile TSX : FRU Production Profile Q1 2012 average  8,733 boe/d  74% royalty production  63% oil and NGL Our oil-weighted production is currently unhedged Light and medium crude oil - 34% Heavy crude oil - 25% Natural gas liquids - 4% Natural gas - 37% * See advisory regarding forwar

  30. Slide 30: Royalty Focused Production

    Royalty Focused Production TSX : FRU 9,000 6,000 3,000 0 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2012e 2010 2010 2010 2011 2011 2011 2011 2012 Royalty Interest Working Interest 30

  31. Slide 31: 2011 Results

    2011 Results TSX : FRU 2011 2010 Change Revenue, net of royalty expenses $ millions 157.9 138.2 +14% Net income $ millions 55.3 49.3 +12% Funds from operations* $ millions 128.2 107.0 +20% Dividends declared $ millions 101.0 98.1 +3% Per share $ 1.68 1.68 - Capital expenditures $ millions 25.6 18.1

  32. Slide 32: 2011 Operational Highlights

    2011 Operational Highlights TSX : FRU Focus on Royalties Percent Royalty Working Total From Interest Interest Company Royalties 000s gross Land holdings acres 2,568 179 2,747 93% Net reserves Mboe 17,322 4,867 22,189 78% Average production boe/d 5,578 1,898 7,476 75% Acquisitions $ millions 7.3 - 7.

  33. Slide 33: 2012 First Quarter Results

    2012 First Quarter Results TSX : FRU Three months ended March 31 2012 2011 Change Revenue, net of royalty expense $ millions 43.0 35.3 +22% Net income(1) $ millions 13.1 11.2 +16% Funds from operations (2) $ millions 25.6 27.3 -6% Dividends declared $ millions 26.8 25.0 +7% Per share(3) $ 0.42 0.42

  34. Slide 34: Production and Revenue

    Production and Revenue TSX : FRU Q1 Production Q1 Revenue Oil & NGL - 63% Oil & NGL - 92% Natural gas - 37% Natural gas - 8% 34

  35. Slide 35: Revenue

    Revenue TSX : FRU $70 $60 $50 $40 $30 $20 $10 $0 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Revenue, net of royalty expense ($ millions) Average selling price ($/boe) 35

  36. Slide 36: Conservative Capital Structure

    Conservative Capital Structure TSX : FRU Debt to Funds from Operations* $192 million (multiple) (WTI US$/bbl) 3.0 $120 available credit capacity 2.5 (March 31, 2012) $100 2.0 $80 1.5 $60 1.0 $40 0.5 $20 0.0 $0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012e Sector Av

  37. Slide 37: Historical Average Benchmark Oil Prices

    Historical Average Benchmark Oil Prices TSX : FRU $150 $125 $100 $75 $50 $25 $0 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 WTI (US$/bbl) Edm. Par (Cdn$/bbl) WCS (Cdn$/bbl) 37

  38. Slide 38: Historical Average AECO Natural Gas Prices

    Historical Average AECO Natural Gas Prices TSX : FRU $15 $12 $9 $6 $3 $0 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 AECO One Month Spot (Cdn$/Mcf) 38

  39. Slide 39: Dividend Payout Ratio

    Dividend Payout Ratio* TSX : FRU $ millions 125 100 88% 85% 96% 92% 75 65% 57% 50 72% 25 53% 0 2009 2010 2011 2012-Q1 Cash flow from operating activities Dividends paid in cash Dividends paid in shares * Dividends as a percentage of cash flow from operating activities 39

  40. Slide 40: Sensitivities

    Sensitivities TSX : FRU Estimated Change in Change Funds From Variable (+/-) Operations WTI oil price US$1.00/bbl 0.02 Canadian/U.S. dollar exchange rate US$0.01 0.02 Light/heavy oil price differential Cdn$1.00/bbl 0.02 AECO natural gas price Cdn$0.25/Mcf 0.02 Interest rate 1% 0.00 Oil and NGL produ

  41. Slide 41: U.S. Tax Considerations

    U.S. Tax Considerations TSX : FRU PFIC (Passive Foreign Investment Company)  Majority of Freehold’s revenue is derived from non-operated royalty interests  Therefore: » Not a “qualified foreign corporation” » Dividends not eligible for the lower tax rate  Tax information available on our website

  42. Slide 42: Tax Treatment of Dividends

    Tax Treatment of Dividends(1) TSX : FRU Is Foreign Tax Is Refund Is Dividend Credit Available Available Taxable to for Excess For Excess U.S. Canadian Recipient Canadian Canadian Withholding in Country Withholding Withholding Recipient Tax Rate of Receipt? Tax?(4) Tax?(5) Yes, as Individual 15% inco

  43. Slide 43: Investor Relations

    Investor Relations tf. 888.257.1873 t. 403.221.0891 w. freeholdroyalties.com Value beneath the surface

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