Investor Presentation March 2014

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Investor Presentation March 2014 Advisories Forward-Looking Information This presentation offers management’s assessment of Freehold’s future plans and operations and…
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Investor Presentation March 2014 Advisories
  • Forward-Looking Information This presentation offers management’s assessment of Freehold’s future plans and operations and contains forward-looking information pertaining to Freehold’s expected tax horizon, dividend policy and timing for paying dividends, tax treatment of dividends, future business strategy, and assumptions regarding commodity prices, production, capital spending plans, costs, year-end debt, DRIP participation, taxes payable, and shares outstanding. The key assumptions used in the preparation of this presentation are footnoted on the accompanying slides. Risks and uncertainties that could significantly affect these forward-looking statements are outlined in our Annual Information Form, which is filed on sedar.com. Forward-looking information is provided to facilitate a better understanding of our business and prospects but should not be unduly relied upon as actual results could differ materially. We assume no obligation to update or revise these forward-looking statements except as required by law.
  • Additional GAAP Measures and Non-GAAP Financial Measures Within this presentation and identified where applicable, references are made to terms commonly used as key performance indicators in the oil and gas industry, which we believe are useful supplemental measures for management and investors to analyze operating performance, financial leverage, and liquidity. We use these terms to facilitate the understanding and comparability of our results of operations and financial position. However, these terms do not have any standardized meanings prescribed by Canadian generally accepted accounting principles (GAAP) and therefore may not be comparable with the calculations of similar measures for other entities. Additional information is provided in our most recent annual and quarterly reports, which are filed on www.sedar.com. Barrels of Oil Equivalent (boe) ratio: 6 Mcf = 1 barrel 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 at the wellhead and is not based on either energy content or current prices. While the boe ratio is useful for comparative measures, it does not accurately reflect individual product values and might be misleading, particularly if used in isolation. As well, given that the value ratio, based on the current price of crude oil to natural gas, is significantly different from the 6:1 energy equivalency ratio, using a 6:1 conversion ratio may be misleading as an indication of value.
  • Note: All dollar amounts in this presentation are in Canadian dollars, except where noted. Corporate Profile focused on oil and gas royalties Per guidance dated March 6, 2014. Based on FRU closing share price of $22.67 on February 28, 2014. Based on 67.7 million shares outstanding as at December 31, 2013. Based on net debt of $49.0 million as at December 31, 2013 and 12 months trailing funds from operations. Investment Performance* Cumulative dividends declared$27.25per share ($1.2 billion in dividends) * From November 25, 1996 to December 31st, 2013, with dividend reinvestment. 2013 Scorecard vs. Guidance Annual Guidance* * See advisory regarding forward-looking information. Development Opportunities 3.1 million gross acres Heavy Oil North Saskatchewan River Cardium Viking Royalty interests 94% Working interests 6% Oil resource plays Bakken,Mississippian The Royalty Advantage: Netbacks A Working Interest BarrelOperating netback*~ 60% of gross revenue A Royalty Interest Barrel Operating netback* ~ 100%** of gross revenue Royalties Paid(15%) Operating Costs(25%) OperatingNetback(100% ofgrossrevenue) OperatingNetback(60% ofgrossrevenue) * Non-GAAP measure. See slide 39. ** Excludes freehold mineral taxes payable to the Crown. Illustration does not factor in capital costs on working interest properties. The Royalty Advantage: Peers
  • FRU’s liquids weighting and low cost model drive top decile economics.
  • 2013 YTD Avg. Operating Costs ($/boe) 2013 YTD Avg. Operating Netback ($/boe) YTD denotes F9 mo. of operations Royalty-Focused Production 70% royalties Top Royalty Payors/Operators* * Top 30 payorsaccount for over 80% of royalty revenue on a trailing 12 month basis. 2014 Capital Allocation*
  • 58 (14 net) wells
  • Lloydminster Heavy Oil/Cardium Light Oil 60% Southeast Saskatchewan40% * Per guidance dated March 6th, 2014. Capex Requirements Sector average 109% Freehold average 24% * See non-GAAP measures. Royalty Drilling Trends* 53% Oil35% Hz 44% Oil30% Hz 58% Oil37% Hz 57% Oil32%Hz 92%Oil 66% Hz 85% Oil59% Hz 87% Oil 70% Hz * Equivalent net wells drilled on Freehold’s royalty land. Acquisition Strategy
  • Focused on Royalties
  • Accretive Acquisitions
  • Buy existing royalties
  • Development funding
  • Capital contribution in return for a royalty
  • $660 million since inception
  • 90% royalties
  • Equity financings in 2001, 2005, 2009, and 2012. Accretive Acquisitions Equity financings in 2001 ($30M), 2005 ($260M), 2009 ($110M), and 2012 ($68M). Stable, Attractive Dividend* Eligible dividends for Canadian tax purposes. * See advisory regarding forward-looking information. Dividend History Eligible dividend for Canadian tax purposes. Strong Financial Position $161 millionavailable credit capacity(at December 31, 2013) * See advisory regarding non-GAAP financial measures. FRU Stock Price Tracks Oil Price 64% oil and NGL production WTI in US$ FRU in C$ 100% unhedged To February 28, 2014. The Manager CN Pension Trust Funds Pension fund for employees of Canadian National Railway 100% ownership 100% ownership Manager of the assets 27%ownership Freehold Ownership 67,746,470 shares outstanding (December 31st, 2013) Insider holdings CN Pension Trust Funds – 18,261,016 (27.0%) Rife: 4,313,744 (6.4%) (included in above number for CNID) 2013 Relative Performance FRU: 6.3% Freehold * Year to date to December 31st, 2013. 2014 Sensitivities * See advisory regarding forward-looking information. Why Own Freehold? large royalty portfolio Royalty Focus low costs high dividend payout conservative management, low risk profile Supplemental Information Performance Since Corporate Conversion +38.1% +10.6% -17.2% To December 31st, 2013. 3.1 million gross acres 21% held in perpetuity(630,000 gross acres of mineral title and royalty assumption lands; 80% leased) 822,000 gross acres undeveloped Undeveloped land independently valued at $89.1 million 30,000 oil and gas wells Land Holdings* 93% royalties * As at December 31, 2013. Reserves Profile*
  • Net Reserves
  • 14.5 MMboe proved
  • 59% oil and NGL
  • 6.0 year RLI
  • 23.1 MMboe P+P
  • 61% oil and NGL
  • 8.5 year RLI
  • 94% of our proved reserves are producing * As at December 31, 2013. Production Profile
  • 2013 average
  • 8,913 boe/d
  • 70% royalty production
  • 64% oil and NGL
  • 2014 forecast*
  • 8,700 boe/d
  • Our oil-weighted production is currently unhedged * 2014 forecast per guidance dated March 6, 2014. Board of Directors What is a Royalty?
  • A payment based on a percentage of gross production
  • Crown Royalty
  • Mineral rights owned by the government (Crown)
  • Leases auctioned at Crown land sales
  • Royalty rates set by the Crown
  • Held by the Crown in perpetuity
  • Mineral Title Royalty
  • Minerals rights privately owned
  • Lease terms and royalty rate negotiated
  • Held by the private owner in perpetuity
  • Gross Overriding Royalty (GORR)
  • A contractual royalty interest created out of a working interest
  • Expires upon termination of the lease
  • Proud Owner of Legacy Lands The 8s and 26s
  • Mineral titles are held in perpetuity
  • Historic land grant to the Hudson’s Bay Company (HBC) in 1670 by the King of England
  • HBC surrendered land to Canada in 1870 in exchange for cash and 1/20th of lands
  • (Section 8 and ¾ of Section 26) in western Canada (HB Lands)
  • A portion of the HB Lands were purchased by Canpar in 1979
  • Producing HB Lands were purchased from Canpar by Freehold in 1996.
  • 2013 Operational Highlights Royalties Drive Value (1) Includes undeveloped land. (2) Royalty expense includes both Crown charges and royalty payments to third parties. Investor Relations toll free. 888.257.1873 telephone. 403.221.0833 website. freeholdroyalties.com
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