Freehold Royalties Ltd. · TSX:FRU
Freehold Royalties — Investor Presentation (February 2024)
37 slides from Freehold Royalties's investor presentation, Feb 1, 2024
Slide 1: Freehold Royalties Ltd. Spring 2024
Freehold Royalties Ltd. SPRING 2024 FREEHOLDROYALTIES.COM | TSX FRU
Slide 2: 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 $316 (24%) $63 Year end net debt C$mm $94 $128 (27%) $94 Netback C$per boe $51.28 $69.48 (26%) $52.59 Dividend payout rat
Slide 3: Corporate Overview
Corporate Overview A North American energy royalty company Corporate Snapshot Uniquely North American Growth & Leverage to Oil Market Capitalization ($million) $2.1 105 PPS Growth CLEARWATER Prod per mm shares 100 Shares Outstanding (million) 150.7 DEEP BASIN MANNVILLE 95 Net Debt ($million) $93.7 C
Slide 4: Why Own Freehold
Why Own Freehold A 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 Diversified Assets and gas Ownership in the top basins in North America deve
Slide 5: The Royalty Advantage
The Royalty Advantage Minerals and Royalties Represent a Simple Asset Class Simple Business Return of Balance Sheet Model Capital Strength Long duration asset class; Costs Consistent, sustainable dividend Capacity to fund future growth Freehold ~$16 million to run our with >$35/share or $2.1 billion
Slide 6: 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 7: 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 $0.0 1996 1998 2000 2002 2004 2006 2008 2010 2012 2016 201
Slide 8: Robust Funds Flow Generation
Robust Funds Flow 5 Yr Cumulative Funds from Operations ($billion) Generation 5 Year Average Production (boe/d) At current average production, Freehold 15,000 16,000 17,000 generates ~$1.2 bn or ~$8/share in funds flow $65 WTI $1.0 $1.1 $1.2 over the next five years at $75 WTI; over $400 $75 WTI $1.
Slide 9: Diversified North American Portfolio
Diversified North American Portfolio COMMODITY1 REVENUE BY PLAY1 PRODUCTION VOLUMES CLEARWATER US Other 3% DEEP 36% 64% US BASIN CARDIUM MANNVILLE Permian 38% NATURAL Oil & GAS NGLs 23% CONV GAS VIKING PRODUCTION SE SASK ~10% ~90% ND 47% BAKKEN Eagle Ford REVENUE REVENUE 21% REVENUE Cdn: Gas Weighte
Slide 10: Diversity Amongst Payors
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 18 Top 10-
Slide 11: 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 Viking Low Decline Production Base Cardium
Slide 12: 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
Slide 13: 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 14: US Assets
US Assets Strong Economics, Growth Production* % Liquids (boe/d) NORTH DAKOTA BAKKEN Eagle Ford 2,500 80% Oil weighted, high netback Midland 2,400 86% 38% Production N. Dakota Delaware 250 350 76% 78% 47% Revenue Total US 5,700 79% Higher Realized Pricing Attractive Growth Profile MIDLAND Oil Weight
Slide 15: US Portfolio
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 16: 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 Secondary Development Bench Freehold’s US Focus Areas Permian and Eagle Ford are key focus areas for current and future opportun
Slide 17: 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 18: 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 19: Supplemental Slides
Supplemental Slides
Slide 20: 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 21: 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
Slide 22: Portfolio Reinvestment: January 2024 Acquisitions
Portfolio Reinvestment January 2024 Acquisitions UNIQUELY NORTH AMERICAN
Slide 23: Acquisitions Summary
Acquisitions Summary ▪ Announced agreements to acquire US Midland and Delaware Basin Assets (the “Acquired Assets”) for CAD$115 million (the “Acquisition”) ▪ Adds ~123,000 gross acres concentrated in the core of the Permian basin, positioning Freehold to capture the highest quality drilling activity
Slide 24: Complementing US Asset Base
Complementing US Asset Base ▪ Increases total US production by 600 boe/d (>10%) and increases Freehold’s Permian production by 30% ▪ Acquired Assets have a significant weighting to undeveloped units, which is expected to maximize future production rates and recoveries ▪ Accretive to forecast 2024 fu
Slide 25: Positioning Portfolio Amongst the Best
Positioning Portfolio Amongst the Best ▪ 75% of Acquired Assets net Permian Drilling Inventory by Operator & Break-even Oil Price locations are under the 10,000 highlighted companies 9,000 PV-10 Breakeven ▪ Expands Freehold’s 8,000 at 20:1 WTI:HH ($/bbl) inventory of drilling 7,000 <$40 $40-$45 $45-
Slide 26: Corporate History
Corporate History UNIQUELY NORTH AMERICAN
Slide 27: 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 28: 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 29: 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 30: 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 31: 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 32: 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 33: 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 pro
Slide 34: 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
Slide 35: 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 publica
Slide 36: 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 37: Investor Presentation
INVESTOR PRESENTATION Main (403) 221-0833 Fax (403) 221-0888 FREEHOLDROYALTIES.COM
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