Freehold Royalties Ltd. · TSX:FRU
Freehold Royalties — Investor Presentation (April 2024)
45 slides from Freehold Royalties's investor presentation, April 2024
Slide 1: Freehold Royalties Ltd. Spring 2024
Freehold Royalties Ltd. SPRING 2024 FREEHOLDROYALTIES.COM | TSX FRU
Slide 2: Corporate Overview
Corporate Overview A Uniquely North American energy royalty company Corporate Snapshot Uniquely North American Growth & Leverage to Oil Market Capitalization ($billion) $2.1 105 PPS Growth CLEARWATER Prod per mm shares 100 Shares Outstanding (million) 150.7 DEEP BASIN MANNVILLE 95 Net Debt ($million
Slide 3: Why Own Freehold
Why Own Freehold A Uniquely North American energy royalty company Dividend Sustainability 7.4% dividend yield Freehold is a low- Coverage down to ~US$50/bbl WTI risk way to Has ALWAYS paid a dividend for 27+ years participate in oil Quality Assets and gas Ownership in the top basins in North America
Slide 4: The Royalty Advantage
The Royalty Advantage Minerals and Royalties Represent a Simple Asset Class High Margin Return of Balance Sheet Model Capital Strength Operating Margin of 89% in 2023 Consistent, sustainable dividend Capacity to fund future growth with no operating or capital cost with >$35/share or $2.1 billion thr
Slide 5: Strong History of Returns
Strong History of Returns Freehold Returns Since IPO (CAGR) Return on Capital Employed (ROCE) 20% Freehold Royalties 15% 10% S&P 500 5% TSX Composite Index 0% -5% TSX Energy Index -10% 0% 2% 4% 6% 8% 10% 12% 14% -15% 2020 2021 2022 2023 Freehold Royalty Peer Average ▪ High margin Royalty Business ab
Slide 6: Sustainable, Consistent Income Provider
Sustainable, Consistent Income Provider 27+ Year Dividend History Cumulative Revenue, FFO & Dividends since IPO $180 $4.0 Annual Dividend Payment ($mm) $160 $3.5 $140 $3.0 $120 $2.5 $100 $ billions $80 $2.0 $60 $1.5 $40 $1.0 $20 $0.5 $0 2014 $0.0 1996 1998 2000 2002 2004 2006 2008 2010 2012 2016 201
Slide 7: Diversified North American Portfolio
Diversified North American Portfolio COMMODITY1 PRODUCTION VOLUMES CLEARWATER Diversified land base provides DEEP 36% BASIN MANNVILLE NATURAL 64% Oil & NGLs free option value on continued technological advancement, CARDIUM CONV GAS GAS VIKING new discoveries, and ~10% ~90% SE SASK increasing develop
Slide 8: High Quality Revenue Stream
High Quality Revenue Stream Oil Weighted Focus High Quality Portfolio ▪ Greater than 90% of Freehold’s 2023 revenue derived from light oil and NGLs WTI Breakeven (US$/B) Breakeven WTI (US$/B) Payout (yrs) Payout (yrs) $90 8.0 ▪ Eagle Ford and Permian represent >35% $80 7.0 of 2023 total revenue $70
Slide 9: Strength & Diversity Amongst Payors
Strength & Diversity Amongst Payors Canada United States North American portfolio provides No payor represents more than 15% Top 10 payors represent exposure to a broad group of oil of 12-months trailing revenue ~ 50% of 12-month trailing revenue and gas plays across North Top 30 payors comprised of
Slide 10: Where we’re going
Where we’re going FREEHOLDROYALTIES.COM | TSX FRU
Slide 11: US Assets
US Assets Strong Economics, Growth Production* (boe/d) % Liquids Eagle Ford 2,500 80% Midland 2,400 86% NORTH DAKOTA BAKKEN N. Dakota 250 76% Oil weighted, high netback 38% Production Delaware 350 78% Total US 5,700 79% 47% Revenue Higher Realized Pricing Attractive Growth Profile MIDLAND Oil Weight
Slide 12: Freehold US Net Production
US Portfolio Rapidly growing Midland adding high netback production; including January 2024 acquisitions increases Midland to 42% of Freehold’s US production 6,000 Freehold US Net Production (boe/d) 5,000 ~42% Midland 4,000 3,000 2,000 ~45% Eagle Ford 1,000 0 Jan-22 Apr-22 Jul-22 Oct-22 Jan-23 Apr-2
Slide 13: Size of the Prize
Size of the Prize >$500 Billion Opportunity Set ▪ ~$530 billion Mineral Title opportunity set in the Total Mineral Title Market Size in the Permian1 Permian basin in Texas with a very active market ▪ Fragmented and private mineral title ownership structure in the US creates a significant market of m
Slide 14: US Asset Advantage
US Asset Advantage Permian dominates in terms of thickness, potential, production & capital Delaware Midland Eagle Ford Montney Bakken Clearwater Primary Development Bench ~290 ft ~56 ft Emerging Development Bench Freehold’s US Focus Areas Permian and Eagle Ford are key focus areas for ~3,700 ft cur
Slide 15: US Resource Advantage
US Resource Advantage Technical Advancements Improving Productivity and Upside ▪ Operators in the Permian have been Emerging Targets in Midland Growing at Impressive Rate moving towards co-completion of Emerging Targets 300% entire resource stack (primary and +234% emerging benches), substantially 2
Slide 16: How Freehold can execute on this opportunity set
How Freehold can execute 5 Yr Cumulative Funds from Operations ($billion) on this opportunity set Assumed Average Annual Production (boe/d) Based on 2024E production, Freehold generates 15,000 16,000 17,000 ~$1.2 bn or ~$8/share in funds flow over the $65 WTI $1.0 $1.1 $1.2 next five years at $75 WT
Slide 17: Canadian Assets
Canadian Assets Stable Production Base Deep Basin Key area for royalty 62% Production optimization initiatives Clearwater 37% 2023/2022 production growth 53% Revenue Mannville Drilling advancements has seen an Diversified, Quality Payors uptick in activity Cardium Viking Low Decline Production Base
Slide 18: Canadian Portfolio
Canadian Portfolio Stable, low decline production base with modest investments (~$40 million) in early-stage 12,000 Clearwater assets over last five years 10,000 Freehold Cdn Net Production (boe/d) 8,000 6,000 4,000 2,000 0 Pre-2020 2020 2021 2022 2023 Source | Company Reports 18
Slide 19: Canadian Leasing Activity
Canadian Leasing Activity Organic growth through leasing Resurgence of operator Drilling associated with leasing activity in SE Saskatchewan activity in 2023 is expected to serve along with advancements in as a key growth driver in 2024 multi-lateral drilling technology drove leasing Record leasing
Slide 20: Canadian Asset Optimization
Canadian Asset Optimization Enhancing a Quality Portfolio 12,000 Optimization Production Adds (boe/d) 11,000 10,000 9,000 8,000 7,000 6,000 Jan-21 Apr-21 Jul-21 Oct-21 Jan-22 Apr-22 Jul-22 Oct-22 Jan-23 Apr-23 Jul-23 Oct-23 Canadian Production Optimization Adds ▪ Capitalizing on our extensive land b
Slide 21: Why Freehold?
Why Freehold? A Low-Risk Investment Vehicle Mirroring North American Development North American Oil Proven Business Model Asset Base Weighted ▪ Free cash flow business Oil & Liquids Canada US % of Geography Canada US ▪ Hedge against inflation Gross Acres (millions) ~6.2 ~1.1 Revenue 90% 96% ▪ High m
Slide 22: Supplemental Slides
Supplemental Slides 22
Slide 23: US vs. Canadian Land
US vs. Canadian Land Canadian Royalty Lands ▪ 89% is Crown (Federal or Provincial) and 11% is mineral title (owned by individuals and companies) ▪ Alberta 81% is crown, 19% private (mineral title) ▪ In Western Canada approximately 80% of the mineral rights are owned by the Crown ▪ The government hol
Slide 24: US Inventory Breakdown
US Inventory Breakdown NORTH DAKOTA BAKKEN US PRODUCTION SPLIT3 Eagle Ford Midland Freehold has built up a quality 2,500 boe/d 2,400 boe/d US portfolio over the last four years, concentrated in the MIDLAND most productive US basins DELAWARE Bakken Delaware 250 boe/d 350 boe/d EAGLE FORD Other 240 bo
Slide 25: 2023 and Fourth Quarter Results
2023 and Fourth Quarter Results 2023 2022 Change Q4-2023 WTI crude oil US$/bbl $77.62 $94.23 (18%) $78.32 Production boe/d 14,714 14,101 4% 14,863 Funds from operations C$mm $240 $317 (24%) $63 Year end net debt C$mm $94 $128 (27%) $94 Netback C$per boe $51.28 $69.48 (26%) $52.59 Dividend payout rat
Slide 26: 2023 Royalty Drilling
2023 Royalty Drilling NORTH DAKOTA BAKKEN Deep Basin Clearwater Mannville Viking MIDLAND Cardium DELAWARE EAGLE FORD SE Saskatchewan CANADA TOP CANADIAN PLAYS UNITED STATES TOP US PLAYS GROSS WELLS NET WELLS GROSS WELLS NET WELLS Viking 96 5.8 Midland 234 0.9 Cardium 89 2.1 Eagle Ford 160 1.5 Clearw
Slide 27: US Acquisition Performance
US Acquisition Performance • Over the last ~5 years, Freehold has invested ~$500 mm in US acquisitions (plus ~$115 mm in 2024) • Freehold has already recovered ~$270 mm of revenue from these acquisitions • Plus 2023 year-end proven reserve value of $338 mm…..and this only includes the approximately
Slide 28: Opportunistic Acquiror
Opportunistic Acquiror Major US acquisitions revenue of ~US$198mm vs. purchase price of ~US$390mm $250,000 Acquisition Cumulative Revenue Purchase Price November 2020 $49 $58 $200,000 August 2021 $20 $52 Cumulative Revenue US$m September 2021 $108 $180 $150,000 July 2022 $21 $100 Total ~$198 $390 $1
Slide 29: 2024E Guidance
2024E Guidance 2024E ANNUAL AVERAGE Average production boe/d 14,700-15,700 West Texas Intermediate crude oil US$/bbl $75.00 AECO natural gas Cdn$/mcf $2.00 NYMEX natural gas US$/mmbtu $2.50 Exchange rate US$/Cdn$ 0.74 29
Slide 30: Portfolio Reinvestment January 2024 Acquisitions
Portfolio Reinvestment January 2024 Acquisitions UNIQUELY NORTH AMERICAN 30
Slide 31: Acquisitions Summary
Acquisitions Summary ▪ Announced agreements to acquire US Midland and Delaware Basin Assets (the “Acquired Assets”) for CAD$115 million (the “Acquisition”) ▪ Adds ~123,000 gross acres concentrated in the core of the Permian basin, positioning Freehold to capture the highest quality drilling activity
Slide 32: Complementing US Asset Base
Complementing US Asset Base ▪ Increases total US production by 600 boe/d (>10%) and increases Freehold’s Permian production by 30% ▪ Acquired Assets have a significant weighting to undeveloped units, which is expected to maximize future production rates and recoveries ▪ Accretive to forecast 2024 fu
Slide 33: Positioning Portfolio Amongst the Best
Positioning Portfolio Amongst the Best ▪ 75% of Acquired Assets net Permian Drilling Inventory by Operator & Break-even Oil Price locations are under the 10,000 highlighted companies 9,000 PV-10 Breakeven ▪ Expands Freehold’s 8,000 at 20:1 WTI:HH ($/bbl) inventory of drilling 7,000 <$40 $40-$45 $45-
Slide 34: Corporate History
Corporate History UNIQUELY NORTH AMERICAN 34
Slide 35: Royalty Production History
Royalty Production History 16,000 15,700 15,041 14,724 14,667 14,605 14,863 14,700 14,005 13,676 14,219 14,000 13,453 12,000 10,740 11,026 10,944 11,137 11,265 Royalty Production (boe/d) 10,000 9,681 9,285 9,143 8,000 6,000 4,000 2,000 0 2024E 2024E Q1-21 Q4-19 Q1-20 Q2-20 Q3-20 Q4-20 Q2-21 Q3-21 Q4
Slide 36: Strong Balance Sheet
Strong Balance Sheet ▪ Freehold exited 2023 with net debt to 5.0x trailing funds from operations of 0.4x 4.5x Net Debt to Funds from Operations ▪ At current commodity price levels 4.0x and dividend level, Freehold has 3.5x capacity to pay down debt or pursue 3.0x acquisitions with free funds over an
Slide 37: Benefitting From Strength of Operators
Benefitting From Strength of Operators ▪ We have seen strong upward 16,000 1,200 momentum in activity on Freehold’s royalty land along with the broader 14,000 Western Canadian Sedimentary 1,000 portfolio 12,000 800 Production (boe/d) Gross wells drilled ▪ Participate in approximately 2.5% of 10,000
Slide 38: 2023 Reserves Overview
2023 Reserves Overview PDP reserve volumes up ~2% (absolute and per share) Reserves PDP Proven Proven + Probable ▪ Increased from 25.8 MMboe to 26.3 MMboe Oil (MMboe) 11.9 14.7 27.8 Proven reserve volumes up ~5% (absolute and per share) Gas (MMboe) 10.9 11.6 18.3 ▪ Increased from 28.9 MMboe to 30.3
Slide 39: ESG Focused
ESG Focused Advancing Freehold’s ESG Strategy January 2023 Sustainability Report published – Outlines commitment to creating value for all stakeholders with sustainability a top priority As a royalty business Freehold is not directly responsible for the operations on our leased land – though we stri
Slide 40: Advisories
Advisories Forward-Looking Statements This presentation offers our assessment of Freehold’s future plans and operations as at February 29, 2024 and contains forward-looking information including, without limitation: Freehold's business plan; dividend yield, annualized dividend and operating forecast
Slide 41: Advisories cont
Advisories cont This presentation offers our assessment of Freehold’s future plans and operations as at February 29, 2024 and contains forward-looking information including, without limitation: Freehold's business plan; dividend yield, annualized dividend and operating forecasts; estimated 2024 prod
Slide 42: Advisories cont
Advisories cont Key operating assumptions with respect to the forward-looking statements contained in this presentation are provided throughout this presentation. In addition, with respect to forward-looking statements contained in this presentation, we have made assumptions regarding, among other t
Slide 43: Advisories cont
Advisories cont Third-Party Information Certain market, third party and industry data contained in this presentation is based upon information from government or other industry publications and reports or based on estimates derived from such publications and reports. Government and industry publicat
Slide 44: Advisories cont
Advisories cont Conversion of Natural Gas to Barrels of Oil Equivalent (BOE) The 6:1 boe ratio is based on an energy equivalency conversion method primarily applicable at the burner tip. It does not represent a value equivalency and is not based on either energy content or current prices. While the
Slide 45: Investor Presentation
INVESTOR PRESENTATION Main (403) 221-0833 Fax (403) 221-0888 FREEHOLDROYALTIES.COM
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