Freehold Royalties Ltd. · TSX:FRU
Freehold Royalties — Investor Presentation (August 2024)
38 slides from Freehold Royalties's investor presentation, August 2024
Slide 1: Freehold Royalties Ltd.
Freehold Royalties Ltd. August 2024 UNIQUELY NORTH AMERICAN 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 Growth 105 CLEARWATER 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 Focused Coverage down to ~US$50/bbl WTI Target a dividend payout ratio of ~60% Freehold is a low- Have always paid a dividend in 28-year history risk way to participate in oil Quality Assets and gas Ownership in the top basin
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 84% in H1 2024 Consistent, sustainable dividend Capacity to fund future growth with no operating or capital cost with >$35/share or $2.2 billion
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 6% TSX Composite Index 4% TSX Energy Index 2% 0% 0% 2% 4% 6% 8% 10% 12% 14% Peer
Slide 6: Sustainable, Consistent Income Provider
Sustainable, Consistent Income Provider 28 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 $10 $5 $0 Peer 1 15 34 Freehold 2 3 4 5 6 7 8 9 10 11 12 13 14 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 35 36 37 38 39 40 42 43
Slide 8: Diversified North American Portfolio
Diversified North American Portfolio COMMODITY PRODUCTION VOLUMES CLEARWATER Diversified land base provides DEEP 36% BASIN MANNVILLE NATURAL 64% Oil & NGLs free option value on continued technological advancement, CARDIUM CONV GAS GAS VIKING new discoveries, and ~7% ~93% increasing development of SE
Slide 9: High Quality Revenue Stream
High Quality Revenue Stream Oil Weighted Focus High Quality Portfolio ▪ Approximately 93% of Freehold’s H1 2024 WTI Breakeven (US$/bbl) revenue derived from oil and NGLs $90 $80 ▪ Eagle Ford and Permian represent ~43% of $70 Q2 2024 total revenue $60 $50 – Capital is driven by a strong group of $40
Slide 10: Aligned With Top Operators in North America
Aligned With Top Operators in North America Canada United States Top 10-payors average Top 10 payors represent Top 30 payors comprised of market cap >$20 bn ~50% of 12-month 19 Canadian payors trailing revenue and 11 US 10 Source | Company Reports
Slide 11: Where We're Going
Where We’re Going UNIQUELY NORTH AMERICAN FREEHOLDROYALTIES.COM | TSX FRU
Slide 12: US Assets: 36% Production, 45% Revenue
US Assets H1 2024 % Liquids Strong Economics, Growth Production (boe/d) Eagle Ford 2,400 82% Midland 2,050 83% NORTH DAKOTA BAKKEN Oil weighted, high netback Delaware 380 75% 36% Production North Dakota 250 76% 45% Revenue Higher Realized Pricing Attractive Growth Profile MIDLAND 25% 2023/2022 Oil W
Slide 13: Freehold US Net Production (boe/d)
US Portfolio Rapidly growing Midland adding high netback production under leading Permian operators (Exxon is now Freehold’s #3 payor with ~35% of Freehold’s Midland development inventory) 6,000 Freehold US Net Production (boe/d) 5,000 4,000 ~38% Midland 3,000 2,000 1,000 ~44% Eagle Ford 0 Jan-22 Ap
Slide 14: US Resource Advantage
US Resource Advantage Permian dominates in terms of thickness, potential, & production Permian Primary Development Bench Emerging Development Bench Freehold’s US Focus Areas Permian and Eagle Ford are key focus areas for current and future opportunities ▪ Thickest stack of pay in North America ▪ Sca
Slide 15: US Resource Advantage – Free "In the Money" Options
US Resource Advantage – Free “In the Money” Options Technical Advancements Improving Productivity and Upside ▪ Permian operators have been Emerging Targets in Midland Growing at Impressive Rate moving towards developing 300% the entire resource stack Oil Volume Growth Since Jan 2020 (bbl/d) 250% Eme
Slide 16: US Asset Performance – Exceeding Expectations
US Asset Performance – Exceeding Expectations US investments forecast payout in 2026…and again in 2032….and again… Cumulative Revenue C$ million $1,400 ▪ $565 million of investment 2X Payout $1,200 2032 Into US assets to YE-2023 $1,000 ▪ Financial performance exceeding expectations $800 First Payout
Slide 17: Canadian Assets: 64% Production, 55% Revenue
Canadian Assets Stable Production Base Deep Basin Key area for royalty 64% Production optimization initiatives Clearwater 9% H1 2024/2023 production growth 55% Revenue Mannville Stack Drilling advancements has seen an Diversified, Quality Payors uptick in activity Cardium Viking Low Decline Producti
Slide 18: Freehold Cdn Net Production (boe/d)
Canadian Portfolio Stable, low PDP decline production base with modest investments (~$40 million) in early- 12,000 stage Clearwater assets over last five years 10,000 Freehold Cdn Net Production (boe/d) 8,000 6,000 Looking ahead 4,000 ▪ Record leasing in 2023 and strong H1-2024 results; particularly
Slide 19: Canadian Leasing Activity
Canadian Leasing Activity Organic growth through leasing Resurgence of operator Drilling associated with leasing activity activity in SE Saskatchewan in 2023 is expected to serve as a growth along with advancements in driver in 2024; ~20% of 2023 leases have multi-lateral drilling already been drill
Slide 20: Canadian Asset Optimization and Audit/Compliance
Canadian Asset Optimization and Audit/Compliance Enhancing a Quality Portfolio 10,500 10,000 Canadian Production (boe/d) 9,500 9,000 8,500 8,000 7,500 7,000 6,500 6,000 Jan-21 Apr-21 Jul-21 Oct-21 Jan-22 Apr-22 Jul-22 Oct-22 Jan-23 Apr-23 Jul-23 Oct-23 Jan-24 Apr-24 FRU CAD (ex-Opt/Audit/Comp) Optim
Slide 21: Why Freehold?
Why Freehold? A Low-Risk Investment Vehicle Mirroring North American Development North American Oil Proven Asset Base Weighted Business Model Oil & Liquids ▪ Free cash flow business Canada US Canada US % of Geography ▪ Hedge against inflation Gross Acres (millions) ~6.2 ~1.1 Revenue 92% 98% ▪ High m
Slide 22: Supplemental Slides
Supplemental Slides 22
Slide 23: Second Quarter Results
Second Quarter Results Q2-2024 Q1-2024 Q2-2023 WTI crude oil US$/bbl $80.57 $76.96 $73.78 Production boe/d 15,221 14,714 14,667 Funds from operations C$mm $60 $54 $53 Quarter end net debt C$mm $199 $211 $131 Netback C$per boe $49.44 $46.62 $46.07 Dividend payout ratio % 68% 75% 77% Gross Wells Drill
Slide 24: H1 2024 Royalty Drilling
H1 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 45 3.5 Midland 253 0.5 SE Saskatchewan 38 1.6 Eagle Ford 100
Slide 25: 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 26: 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 27: Size of the Prize
Size of the Prize >$500 Billion Opportunity Set ▪ ~$530 billion mineral title opportunity set in the Total Mineral Title Market Size in the Permian1 Permian basin in Texas with a very active market ▪ Fragmented and private mineral title ownership structure in the US creates a significant market of m
Slide 28: 2024E Guidance
2024E Guidance 2024E ANNUAL AVERAGE Average production boe/d 14,700-15,700 West Texas Intermediate crude oil US$/bbl $75.00 AECO natural gas Cdn$/mcf $2.00 NYMEX natural gas US$/mmbtu $2.50 Exchange rate US$/Cdn$ 0.74 28
Slide 29: Corporate History
Corporate History UNIQUELY NORTH AMERICAN 29
Slide 30: Royalty Production History
Royalty Production History 15,700 16,000 15,041 14,724 14,667 15,221 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 Q1-20 Q2-20 Q3-20 Q4-20 Q1-21 Q2-21 Q3-21 Q4-21 Q1-22 Q
Slide 31: Strong Balance Sheet
Strong Balance Sheet ▪ Freehold exited Q2-2024 with net 5.0x debt to trailing funds from operations 4.5x of 0.8x 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 32: 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 ▪ Participate in approximately 2.5% of Production (boe/d) Gross wells drilled 10,000
Slide 33: 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 34: Advisories
Advisories Forward-Looking Statements This presentation offers our assessment of Freehold’s future plans and operations as at July 31, 2024 and contains forward-looking information or statements (collectively, "forward-looking statements" or "forward-looking information") within the meaning of appli
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 publicat
Slide 36: Advisories cont
Advisories cont Production Except as otherwise indicated, all production disclosed herein is considered net production for the purposes of National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities, which includes Freehold's working interest (operating and non-operating) share a
Slide 37: 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 38: Investor Presentation
INVESTOR PRESENTATION Main (403) 221-0833 Fax (403) 221-0888 FREEHOLDROYALTIES.COM
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