Freehold Royalties Ltd. · TSX:FRU
Freehold Royalties — Investor Presentation (November 2021)
35 slides from Freehold Royalties's investor presentation, Nov 10, 2021
Slide 1: A North American Royalty Company
A North American Royalty Company freeholdroyalties.com TSX FRU Quality Assets • Sustainable Dividends
Slide 2: 2021 Snapshot
2021 Snapshot 154% 5 dividend 4 major 4,000 YTD Share Price boe/d added increases US acquisitions Performance 6.2 1.1 million million 8 5 acres of states provinces acres of GORR land & 0.8 million gross drilling units in the U.S. Fee Title Land 60% target 0.5 $0.72 $1.9 billion annualized enterprise
Slide 3: The Freehold Advantage
The Freehold Advantage Proven Production Platform A North American Royalty Company Strong Revenue $300 5-year historical 15,000 Growth driven by Freehold Canadian Assets revenue of $130mm Royalty Production (boe/d) 14,000 organic drilling and 2022E production ~9,000 $250 13,000 accretive acquisition
Slide 4: Pro Forma Corporate Profile
Pro Forma Corporate Profile Delivering shareholder value from a well positioned royalty portfolio 2022E revenue and production from Oil & NGL(1) 83% revenue / 60% production Q4 2021E production(1) 13,500-13,750 boe/d 2022E production(1) 13,750-14,750 boe/d Annualized dividend(2) ($0.06 per month) $0
Slide 5: 2021 Third Quarter Results
2021 Third Quarter Results Q3-2021 Q3-2020 Change Production boe/d 11,265 9,143 23% Funds from operations mm $48.3 $19.8 143% Period end net debt mm $75.3 $81.7 -8% Corporate netback per/boe $46.60 $23.79 96% Payout ratio 35% 27% 8% Cash costs per/boe $2.49 $3.70 -33% ▪ Production grew 20% from the
Slide 6: Royalties Remain a Simple Asset Class
Royalties Remain a Simple Asset Class At current commodity price levels, Freehold generates significant Revenue free funds flow for dividend 2022E ~$250 million(3) growth, acquisitions or reducing leverage F9-2021 payout(1)(2) of less than Free funds flow (2) flow provides 50% provides room for grow
Slide 7: Freehold has Evolved as a Company
Freehold has Evolved as a Company Freehold remains the largest North American focused oil and gas royalty company ▪ Bigger ▪ More Sustainable – Completed more than $400 million in value enhancing transactions year-to-date – More than 6 million royalty acres in Canada, 0.8 million drilling unit acres
Slide 8: Acquisition Activity: Eagle Ford Transaction
Acquisition Activity Eagle Ford Transaction 9% ▪ Active development in resilient “core of the core” 22% 9% position with a well capitalized investment grade producer, 2,500 $46mm actively developing the acquired assets 51% boe/d 27% NGL ▪ Concentrated land position across 92,000 gross drilling unit
Slide 9: Acquisition Activity: Midland Transaction
Acquisition Activity Midland Transaction NGL ▪ On August 10, 2021 Freehold entered into a definitive 14% agreement with an affiliate of OneMap Mineral Services LLC. Gas ▪ Core Midland basin royalty position anchored by a premier 24% Oil counterparty with multiple years of development 62% ▪ Greater t
Slide 10: Acquisition Activity: Eagle Ford & Permian Transaction
Acquisition Activity Eagle Ford & Permian Transaction Permian ▪ Freehold announced as part of Q2-2021 results and closed on July 15, 2021 the acquisition of certain U.S royalty properties for US$15.5 million ($19.3 million) ▪ Acquisition includes exposure to core acreage in the Delaware, Midland and
Slide 11: Strong Counterparties and ESG Accretive
Strong Counterparties and ESG Accretive Enhances Freehold’s payor portfolio and ESG profile Highly Complementary to Broader Portfolio of High Quality Names ▪ The U.S. acquisitions completed in 2021 have significantly enhanced Freehold’s payor profile – More than 70%(1) pro forma U.S. revenue coming
Slide 12: Pro Forma U.S. Portfolio Overview
Pro Forma U.S. Portfolio Overview ~785,000 gross acres (34,860 net) of mineral title and ORRI’s ( 1 ) ▪ U.S. 2021E production of 2,100 boe/d (66% liquids) Assets in 12 projected to grow to 5,000 boe/d in 2022E (71% basins and eight liquids) states ▪ U.S. portfolio now represents ~35% and 40% of Free
Slide 13: Bigger Better Freehold
Bigger Better Freehold Increased funds flow enable increased returns to our shareholder 200 Post dividend free funds flow more robust than any time in Freehold’s 270 history 2022E Revenue ($mm) ($, mm) 5-year average revenue $130 million 100 $3.50/mcf AECO $4.50/mcf AECO $5.00/mcf AECO US $65/bbl WT
Slide 14: More Sustainable Freehold
More Sustainable Freehold Freehold’s dividend remains sustainable to WTI prices below US$40/bbl 150 100% 2022 Post Dividend Free @ $0.72/yr Dividend ▪ U.S. royalty transactions ensure 80% Payout Ratio Freehold remains sustainable across a 60% Revenue (C$mm) broad commodity price range 40% 20% 0 0% ▪
Slide 15: Why Own Freehold
Why Own Freehold A larger more sustainable North American income vehicle Strong Balance Quality Long High Margins Sustainable Sheet, Low Risk Duration Assets, Business Multi-year Upside ▪ Greater than 97% ▪ Target base returns of 60% ▪ Q3-2021 net debt to ▪ Positioned in the top tier operating margi
Slide 16: Supplemental Information
Supplemental Information freeholdroyalties.com TSX FRU Quality Assets • Sustainable Dividends
Slide 17: The Royalty Advantage
The Royalty Advantage Freehold provides a lower risk/return proposition than traditional E&P’s Financial Strength, Diversified Royalty Environmental, Low Risk Portfolio Social, Governance ▪ Strong operating margins, ▪ Diversified North American ▪ Our approach to ESG is rooted enable lower breakeven
Slide 18: Royalties vs. Exploration and Production Companies
Royalties vs. Exploration and Production Companies Royalties provide lower costs and higher returns to shareholders A Working Interest Barrel A Royalty Interest Barrel Operating netback Operating netback ~ 60% of gross revenue ▪ The royalty model maintains a ~ 100% of gross revenue material operatin
Slide 19: Dividend Sustainability
Dividend Sustainability Freehold has paid out $1.7 billion in dividends since initial IPO Freehold has increased its monthly dividend the last five quarters from $0.015/share to $0.06/share 100% 90% ▪ Freehold announced a 20% dividend increase from $0.05 to $0.06 per month as 80% part of Q3-2021 res
Slide 20: Strong Balance Sheet
Strong Balance Sheet Freehold remains committed to ▪ Freehold exited Q3-2021 with maintaining leverage at levels 5.0 well below 1.5x debt to FFO net debt to trailing funds from operations of 0.5x 4.5 Net Debt to Funds from Operations 4.0 ▪ At current commodity price 3.5 levels and the revised divide
Slide 21: 2021 Q3 Royalty Drilling Results
2021 Q3 Royalty Drilling Results Gross Net Top Drillers Canada 2021 Wells Wells Teine 17 1.8 Tourmaline 15 0.8 Bonterra 13 0.3 2021 Q3 Royalty Drilling Tamarack 12 0.4 Click to edit Master text Non-Unit: 134 styles Gross wells – 5.7 Net Non-Unit Total 134 5.7 Unit: 11 Gross wells – 0.1 Net Unit Well
Slide 22: 2021 YTD Royalty Drilling Results
Gross Net 2021 YTD Royalty Drilling Results Top Drillers 2021 Wells Wells Teine 38 3.9 Tamarack 31 1.2 Bonterra 30 0.8 Surge 30 0.5 2021 YTD Royalty Drilling Click to editCLEARWATER Master text styles Non-Unit: 264 Gross wells – 11.1 Net Tourmaline 18 0.9 Tamarack, Crestwynd Unit: 27 Gross wells – 0
Slide 23: Industry Drilling vs. Freehold
Industry Drilling vs. Freehold Freehold’s royalty portfolio has outperformed ▪ Despite a slowdown in activity in the broader Western Canadian Sedimentary 18,000 25 western Canada, Freehold has basin as a percent of activity historically achieved growth in net 16,000 drilling on its royalty lands 20
Slide 24: Clearwater (Nipisi, Jarvie)
Clearwater (Nipisi, Jarvie) ▪ Expected to be one of Freeholds more active areas in 2021 – Net volumes have grown by 75% since change in operatorship in late 2020 – 2021 exit production rate ~350 boe/d ▪ Freehold maintains a ~4% GORR on approximately 240 2021 drilling locations sections of land ▪ In
Slide 25: 2021 & 2022E Guidance
2021 & 2022E Guidance Guidance Date ▪ Q4-2021 production guidance of Q4-2021 Annual Average November 10, 13,500-13,750 boe/d 2021 Average production boe/d 13,500-13,750 ▪ Increased monthly dividend West Texas Intermediate crude oil US$/bbl $82.00 from $0.05 to $0.06/share Edmonton Light Sweet crude
Slide 26: Safe, Lower Risk Asset Base
Safe, Lower Risk Asset Base 2018 2019 2020 F9-2021 Royalty Production (boe/d) 10,718 10,229 9,605 11,118 Acquisitions (millions) $62 $49 $7 $309 Royalty acres (millions) 6.2 6.7 6.3 6.2 U.S. gross drilling unit acres (millions) 0.8 Tax pools (millions) $905 $838 $775 Net debt/funds from operations 0
Slide 27: Consistent Income Provider
Consistent Income Provider Freehold has provided almost $33/share over its history to its shareholders through dividend payments 2.50 50.00 Cumulative Dividends Per Share 2.00 40.00 Dividends per share 1.50 30.00 1.00 20.00 0.50 10.00 0.00 0.00 2003 2021E 2022E 2000 2001 2002 2004 2005 2006 2007 200
Slide 28: Cash Costs
Cash Costs Freehold has shown a strong trending down in cash costs in 2021 $7.00 ▪ Q3-2021 cash costs of $6.00 $2.49/boe facilitate a strong corporate netback $5.00 Cash Costs ($/boe) for Freehold $4.00 ▪ Q3-2021 cash costs the $3.00 lowest in Freehold’s history $2.00 ▪ Reduction in costs reflect $1
Slide 29: Royalty Production History
Royalty Production History Freehold’s royalty production increased 1% q/q in Q3-2021 with volumes forecast to increase in Q4-2021 15,000 14,250 14,000 13,625 13,000 12,000 11,137 11,265 Royalty Production (boe/d) 10,946 11,000 10,618 10,322 10,312 10,139 10,311 10,149 10,315 10,000 9,605 9,150 9,096
Slide 30: Diversified Royalty Payors
Diversified Royalty Payors Our top payors remain well financed with no significant concentration risk Winter 2021 Winter 2021 | 29
Slide 31: Disciplined Acquirer
Disciplined Acquirer Freehold will continue to look for opportunities that enhance the resiliency and durability of our portfolio across all commodity price cycles Cost Initial Production Year Area ($ millions) Acquired (boe/d) 2012 AB, SK and BC 60 600 2013 Numerous small acquisitions 10 30 2014 SK
Slide 32: Advisories
Advisories Forward-Looking Statements This presentation offers our assessment of Freehold’s future plans and operations as at November 10, 2021 and contains forward-looking information including, without limitation, forward-looking information with regards to the expected terms and conditions of the
Slide 33: Advisories continued
Advisories continued Forward-Looking Statements Continued You are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward looking info
Slide 34: Advisories continued: Non-GAAP Financial Measures
Advisories continued Non-GAAP Financial Measures Within this presentation, references are made to terms commonly used as key performance indicators in the oil and gas industry. We believe that operating netback, operating income, operating margin, payout ratio, free cash flow and cash costs are usef
Slide 35: Investor Relations
Investor Relations tf. 888.257.1873 t. 403.221.0833 w. freeholdroyalties.com freeholdroyalties.com TSX FRU Quality Assets • Sustainable Dividends
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