Freehold Royalties Ltd. · TSX:FRU
Freehold Royalties — Q1 2024 Earnings Presentation
42 slides from Freehold Royalties's earnings presentation, May 2024
Slide 1: Freehold Royalties Ltd. Q1-2024
Freehold Royalties Ltd. Q1-2024 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 Production Per Share 105 CLEARWATER Growth Prod per mm shares 100 Shares Outstanding (million) 150.7 DEEP BASIN MANNVILLE 95 N
Slide 3: Why Own Freehold
Why Own Freehold A Uniquely North American energy royalty company Dividend Sustainability 7.7% 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: High Margin Royalty Business
High Margin Royalty Business Delivers returns through all commodity cycles Freehold Returns Since IPO (CAGR) Significant & Sustainable Dividend Yield 12% Base + Variable Dividend Yield Freehold Royalties 10% 8% S&P 500 Freehold 6% TSX Composite Index 4% TSX Energy Index 2% 0% 0% 2% 4% 6% 8% 10% 12%
Slide 6: Sustainable, Consistent Income Provider
Sustainable, Consistent Income Provider 27 Year Dividend History Return on Capital Employed (ROCE) $180 20% Annual Dividend Payment ($ million) $160 15% $140 10% $120 $100 5% $80 0% $60 $40 -5% $20 -10% $0 -15% 2006 1996 1998 2000 2002 2004 2008 2010 2012 2014 2016 2018 2020 2022 2024E 2020 2021 202
Slide 7: Leverage to Oil Price
Leverage to Oil Price High Margin Oil Weighted Portfolio & Exposure to Premium Priced US Assets $50 $45 2024E Cash Flow per BOE ($/boe) $40 $35 $30 $25 $20 $15 Freehold $10 $5 $0 Peer 1 8 2 3 4 5 6 7 9 16 27 35 10 11 12 13 14 15 17 18 19 20 21 22 23 24 25 26 28 29 30 31 32 33 34 36 37 38 39 40 41 42
Slide 8: Diversified North American Portfolio
Diversified North American Portfolio COMMODITY 1 PRODUCTION VOLUMES CLEARWATER Diversified land base provides DEEP 37% BASIN MANNVILLE NATURAL 63% Oil & NGLs free option value on continued technological advancement, CARDIUM CONV GAS GAS VIKING new discoveries, and ~10% ~90% increasing development of
Slide 9: High Quality Revenue Stream
High Quality Revenue Stream Oil Weighted Focus High Quality Portfolio ▪ Greater than 90% of Freehold’s Q1 2024 WTI Breakeven (US$/B) Breakeven WTI (US$/B) Payout (yrs) Payout (yrs) revenue derived from oil and NGLs $90 8.0 $80 7.0 ▪ Eagle Ford and Permian represent >35% $70 6.0 of Q1 2024 total reve
Slide 10: Aligned With Top Operators in North America
Aligned With Top Operators in North America Canada United States Top 10-payors average market Top 10 payors represent Top 30 payors comprised of cap >$10 bn ~50% of 12-month trailing 18 Canadian payors and 12 revenue US 10 Source | Company Reports
Slide 11: Where we're going
Where we’re going FREEHOLDROYALTIES.COM | TSX FRU
Slide 12: 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% 47% Revenue Higher Realized Pricing Attractive Growth Profile MIDLAND Oil Weighted 25% 2023/2022 pr
Slide 13: 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 4,000 ~42% Midland 3,000 2,000 ~45% Eagle Ford 1,000 0 Jan-22 Apr-22 Jul-22 Oct-22 Jan-23 Apr-2
Slide 14: Size of the Prize
Size of the Prize >$500 Billion Opportunity Set ▪ ~$530 billion mineral title opportunity set in the Total Mineral Title Market Size in the Permian1 Permian basin in Texas with a very active market ▪ Fragmented and private mineral title ownership structure in the US creates a significant market of m
Slide 15: US Resource Advantage
US Resource Advantage Permian dominates in terms of thickness, potential, & production Permian Primary Development Bench Emerging Development Bench Freehold’s US Focus Areas Permian and Eagle Ford are key focus areas for current and future opportunities • Thickest stack of pay in North America • Sca
Slide 16: US Resource Advantage – Free "In the Money" Options
US Resource Advantage – Free “In the Money” Options Technical Advancements Improving Productivity and Upside ▪ Permian operators have been Emerging Targets in Midland Growing at Impressive Rate moving towards developing the 300% entire resource stack (both 250% Emerging Targets primary and emerging
Slide 17: US Asset Performance – Exceeding Expectations
US Asset Performance – Exceeding Expectations US investments forecast payout in 2026…and again in 2032….and again… Cumulative Revenue C$ million $1,400 ▪ $565 million of investment into US assets to 2X Payout YE-2023 $1,200 2032 $1,000 ▪ Financial performance exceeding expectations $800 First Payout
Slide 18: How Freehold can execute on this opportunity set
How Freehold can execute 5 Yr Cumulative Funds from Operations ($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 19: 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 20: Canadian Portfolio
Canadian Portfolio Stable, low decline production base with modest investments (~$40 million) in early-stage 12,000 Clearwater assets over last five years 10,000 Freehold Cdn Net Production (boe/d) 8,000 6,000 4,000 2,000 0 2020 2021 2022 2023 2024 Source | Company Reports 20
Slide 21: Canadian Leasing Activity
Canadian Leasing Activity Organic growth through leasing Resurgence of operator Drilling associated with leasing activity in SE Saskatchewan activity in 2023 is expected to serve along with advancements in as a growth driver in 2024 multi-lateral drilling technology drove leasing Record leasing acti
Slide 22: Canadian Asset Optimization
Canadian Asset Optimization Enhancing a Quality Portfolio 12,000 Optimization Production Adds (boe/d) 11,000 10,000 9,000 8,000 7,000 6,000 Jan-21 Apr-21 Jul-21 Oct-21 Jan-22 Apr-22 Jul-22 Oct-22 Jan-23 Apr-23 Jul-23 Oct-23 Canadian Production Optimization Adds ▪ Capitalizing on our extensive land b
Slide 23: Why Freehold?
Why Freehold? A Low-Risk Investment Vehicle Mirroring North American Development North American Oil Proven Business Model Asset Base Weighted ▪ Free cash flow business Oil & Liquids Canada US % of Geography Canada US ▪ Hedge against inflation Gross Acres (millions) ~6.2 ~1.1 Revenue 90% 96% ▪ High m
Slide 24: Supplemental Slides
Supplemental Slides 24
Slide 25: First Quarter Results
First Quarter Results Q1-2024 Q4-2023 Q1-2023 WTI crude oil US$/bbl $76.96 $78.32 $76.13 Production boe/d 14,714 14,863 14,724 Funds from operations C$mm $54 $63 $59 Quarter end net debt C$mm $211 $94 $122 Netback C$per boe $46.62 $52.59 $50.79 Dividend payout ratio % 75% 65% 69% 14,714 boe/d Q1-202
Slide 26: Q1 2024 Royalty Drilling
Q1 2024 Royalty Drilling NORTH DAKOTA BAKKEN Deep Basin Clearwater Mannville Viking MIDLAND Cardium DELAWARE EAGLE FORD SE Saskatchewan CANADA TOP CANADIAN PLAYS UNITED STATES TOP US PLAYS GROSS WELLS NET WELLS GROSS WELLS NET WELLS Viking 39 3.1 Midland 120 0.1 Cardium 22 0.3 Eagle Ford 45 0.4 Clea
Slide 27: US vs. Canadian Land
US vs. Canadian Land Canadian Royalty Lands ▪ 89% is Crown (Federal or Provincial) and 11% is mineral title (owned by individuals and companies) – Alberta 81% is crown, 19% private (mineral title) ▪ In Western Canada approximately 80% of the mineral rights are owned by the Crown ▪ The government hol
Slide 28: US Inventory Breakdown
US Inventory Breakdown NORTH DAKOTA BAKKEN US PRODUCTION SPLIT3 Eagle Ford Midland Freehold has built up a quality 2,500 boe/d 2,400 boe/d US portfolio over the last four years, concentrated in the MIDLAND most productive US basins DELAWARE Bakken Delaware 250 boe/d 350 boe/d EAGLE FORD Other 240 bo
Slide 29: 2024E Guidance
2024E Guidance 2024E ANNUAL AVERAGE Average production boe/d 14,700-15,700 West Texas Intermediate crude oil US$/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$115 million ▪ Adds ~123,000 gross acres concentrated in the core of the Permian basin, positioning Freehold to capture the highest quality drilling activity ▪ Adds ~2,000 inven
Slide 32: Complementing US Asset Base
Complementing US Asset Base ▪ Increases total US production by 600 boe/d (>10%) and increases Freehold’s Permian production by 30% ▪ Acquired Assets have a significant weighting to undeveloped units, which is expected to maximize future production rates and recoveries ▪ Accretive to forecast 2024 fu
Slide 33: Positioning Portfolio Amongst the Best
Positioning Portfolio Amongst the Best ▪ 75% of Acquired Assets net Permian Drilling Inventory by Operator & Break-even Oil Price locations are under the 10,000 highlighted companies 9,000 PV-10 Breakeven ▪ Expands Freehold’s 8,000 at 20:1 WTI:HH ($/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 14,714 14,700 14,005 13,676 14,219 14,000 13,453 12,000 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 Q2-21 Q1-20 Q2-20 Q3-20 Q4-20 Q1-21 Q3-21 Q4-21 Q1
Slide 36: Strong Balance Sheet
Strong Balance Sheet ▪ Freehold exited Q1-2024 with net 5.0x debt to trailing funds from operations 4.5x of 0.9x Net Debt to Funds from Operations 4.0x ▪ At current commodity price levels 3.5x and dividend level, Freehold has 3.0x capacity to pay down debt or pursue acquisitions with free funds over
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: Advisories
Advisories Forward-Looking Statements This presentation offers our assessment of Freehold’s future plans and operations as at May 6, 2024 and contains forward-looking information including, without limitation: Freehold's business plan; dividend yield, annualized dividend and operating forecasts; est
Slide 40: 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 41: Advisories cont
Advisories cont Drilling Locations This Presentation discloses anticipated future drilling or development locations associated with Freehold assets. Certain locations have been identified as booked locations as proved and/or probable reserves have been attributed to such locations in the Trimble Rep
Slide 42: Investor Presentation
INVESTOR PRESENTATION Main (403) 221-0833 Fax (403) 221-0888 FREEHOLDROYALTIES.COM