Investor Presentation March 2014
Dec 17, 2015
Investor PresentationMarch 2014
TSX : FRUAdvisories
Note: All dollar amounts in this presentation are in Canadian dollars, except where noted.
Forward-Looking InformationThis 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 MeasuresWithin 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 barrelThe 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.
2
TSX : FRUCorporate Profile
2014e production(1) (68% royalty production)
boe per day8,700
Annual dividend ($0.14 per month)
$ per share1.68
Current dividend yield(2)
percent7
Market capitalization(2)(3)
$ billion1.5
Net debt to funds from operations(4)
times0.4
(1) Per guidance dated March 6, 2014.(2) Based on FRU closing share price of $22.67 on February 28, 2014.(3) Based on 67.7 million shares outstanding as at December 31, 2013.(4) Based on net debt of $49.0 million as at December 31, 2013 and 12 months trailing funds from
operations.
focused on oil and gas royalties
3
TSX : FRUInvestment Performance*
96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
$167
$39 $33
Freehold Royalties Ltd.
S&P/TSX Oil and Gas Exploration & Production Index
S&P/TSX Composite Index
* From November 25, 1996 to December 31st, 2013, with dividend reinvestment. 4
Cumulative dividends declared
$27.25 per share
($1.2 billion in dividends)
TSX : FRU2013 Scorecard vs. Guidance
Previous Guidance
Annual Average 2013 Actual
Nov. 2013
Aug. 2013
May 2013
Mar. 2013
Daily production boe/d 8,900 8,800 8,800 8,700 8,500
WTI oil price US$/bbl 98 98 96 93 95
Western Canada Select (WCS) Cdn$/bbl 75 75 75 69 71
AECO natural gas price Cdn$/Mcf 3.16 3.25 3.00 3.50 3.10
Operating costs $/boe 5.95 5.60 5.30 5.00 5.00
G&A costs $/boe 2.35 2.60 2.60 2.60 2.60
Capital expenditures $ millions 29 32 32 30 30
Dividends paid in shares (assumes average 25% DRIP participation)
$ millions 28 28 28 28 28
Long-term debt at year end $ millions 49 53 44 44 48
Estimated cash taxes payable for 2013 tax year
$ millions 24 24 24 25 25
5
TSX : FRUAnnual Guidance*
Guidance Updated
2014 Key Assumptions (as at March 6, 2014)Mar. 6 2014
Nov. 14 2013
Daily production boe/d 8,700 8,600
WTI oil price US$/bbl 97 95
Western Canada Select (WCS) Cdn$/bbl 83 75
AECO natural gas price Cdn$/Mcf 4.50 3.50
Exchange rate Cdn$/US$ 0.90 0.95
Operating costs $/boe 6.00 5.60
G&A costs $/boe 2.60 2.60
Capital expenditures $ millions 35 30
Dividends paid in shares (assumes average 25% DRIP participation)
$ millions 29 29
Long-term debt at year end $ millions 38 57
Current income tax expense $ millions 32 28
Weighted average shares outstanding millions 68 68
* See advisory regarding forward-looking information. 6
TSX : FRU
CardiumHeavy
Oil
Bakken,Mississippian
Development Opportunities
North Saskatchewan River
3.1milliongross acres
Viking
7
Royalty interests 94%
Working interests 6%
Oil resource plays
TSX : FRUThe Royalty Advantage: Netbacks
Illustration does not factor in capital costs on working interest properties.
* Non-GAAP measure. See slide 39.
** Excludes freehold mineral taxes payable to the Crown.
A Working Interest BarrelOperating netback*
~ 60% of gross revenue
A Royalty Interest BarrelOperating netback*
~ 100%** of gross revenue
OperatingNetback(60% ofgross
revenue)
OperatingNetback(100% of
grossrevenue)
Royalties Paid(15%)
Operating Costs(25%)
8
TSX : FRU The Royalty Advantage: Peers
9
2013 YTD Avg. Operating Netback ($/boe)2013 YTD Avg. Operating Costs ($/boe)
• FRU’s liquids weighting and low cost model drive top decile economics.
YTD denotes F9 mo. of operations
TOU
BNP
PEY
BIR
PGF
ERF
ARX
ZAR
PWT
BTE
WCP
BNE
FRU
LEG
CPG
LTS
PRY
VET
$0.00 $10.00 $20.00 $30.00 $40.00 $50.00 $60.00 $70.00
PEY
TOU
FRU
BIR
BNP
ARX
WCP
ERF
CPG
BNE
VET
LTS
BTE
LEG
PGF
PWT
ZAR
PRY
$0.00 $5.00 $10.00 $15.00 $20.00
TSX : FRURoyalty-Focused Production
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20130
2,000
4,000
6,000
8,000
10,000
Royalty Interest Production Working Interest Production
boe/d
8,91370%royalties
10
TSX : FRUTop Royalty Payors/Operators*
* Top 30 payors account for over 80% of royalty revenue on a trailing 12 month basis. 11
TSX : FRU
$35 million
2014 Capital Allocation*
* Per guidance dated March 6th, 2014.
58 (14 net) wells
Southeast
Saskatchewan
40%
Lloydminster Heavy
Oil/Cardium Light Oil
60%
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TSX : FRUCapex Requirements
2010 2011 2012 2013 2014e0%
25%
50%
75%
100%
125%
150%
Capital Expenditures as a Percentageof Funds from Operations
Sector Average Freehold
* See non-GAAP measures.
Sector average 109%
Freehold average 24%
13
TSX : FRURoyalty Drilling Trends*
14
2007 2008 2009 2010 2011 2012 20130
5
10
15
20
Oil HzOil VertGas HzGas VertOtherD&A
53% Oil35% Hz
57% Oil32% Hz
44% Oil30% Hz
58% Oil37% Hz
85% Oil59% Hz
92% Oil 66% Hz
87% Oil70% Hz
* Equivalent net wells drilled on Freehold’s royalty land.
TSX : FRUAcquisition Strategy
Focused on Royalties
Accretive Acquisition
s
Equity financings in 2001, 2005, 2009, and 2012.
Buy existing royalties
Development funding Capital contribution
in return for a royalty
$660 million since inception 90% royalties
15
TSX : FRUAccretive Acquisitions
Equity financings in 2001 ($30M), 2005 ($260M), 2009 ($110M), and 2012 ($68M).
Year AreaCost
($ millions)
Initial ProductionAcquired
(boe/d)
1997 Alberta/Saskatchewan $22 700
2001 Southeast Saskatchewan 25 800
2005 Petrovera (CNRL) 352 3,800
2007 Alberta/Saskatchewan 90 700
2010 Alberta, Sask. and B.C. 38 400
2011 Northwest Alberta 7 100
2012 Alberta, Sask. and B.C. 60 600
1997–2013 Numerous small acquisitions 69 1,300
Total:$
6638,400
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TSX : FRUStable, Attractive Dividend*
2010 2011 2012 2013 2014e
$1.68 $1.68 $1.68 $1.68 $1.68
Annual Dividend($/share)
Eligible dividends for Canadian tax purposes.
* See advisory regarding forward-looking information. 17
TSX : FRUDividend History
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$0
$10
$20
$30
$40
$50
$60
$70
$80
$0.13
$1.10
$0.65 $0.78
$1.32
$1.56
$1.31
$1.70 $1.73
$1.92
$2.10
$1.92
$2.91
$1.40
$1.68 $1.68 $1.68 $1.68
Annual Dividend ($/share) Freehold's Average Selling Price ($/boe)
Dividend ($/share)
Selling Price($/boe)
Eligible dividend for Canadian tax purposes. 18
TSX : FRUStrong Financial Position
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20130.0
0.5
1.0
1.5
2.0
2.5
3.0
Debt to Funds from Operations*
Sector Average Freehold
(multiple)
* See advisory regarding non-GAAP financial measures.
$161 millionavailable credit capacity
(at December 31, 2013)
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TSX : FRUFRU Stock Price Tracks Oil Price
Jan/2009 Jan/2010 Jan/2011 Jan/2012 Jan/2013 Jan/2014 -
25.00
50.00
75.00
100.00
125.00
150.00
-
5.00
10.00
15.00
20.00
25.00
30.00
WTI Oil Price (US$) FRU Share Price (CDN$)
WTI in US$ FRU in C$
To February 28, 2014.
100%unhedged
64%oil and NGL production
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TSX : FRUThe Manager
CN PENSION TRUST FUNDSPension fund for employees of Canadian National Railway
100% ownership
27% ownership
100% ownership Manager of the assets
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TSX : FRUFreehold 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)
Institutional (57%)
Retail (43%)
Canadian (90%)
U.S/Foreign (10%)
22
TSX : FRU2013 Relative Performance
Lightstream
Penn West
Twin Butte
Trilogy
Bonavista
Baytex
Freehold
S&P/TSX Composite
Zargon
Perpetual
Crescent Point
Surge
Vermilion
ARC
Pengrowth
Advantage
Peyto
Whitecap
Enerplus
-20.5%
-10.4%
-6.8%
-6.3%
1.1%
2.2%
6.3%
6.7%
9.1%
15.6%
18.0%
23.6%
23.7%
28.6%
42.5%
46.3%
47.1%
49.3%
54.7%
FRU: 6.3%
* Year to date to December 31st, 2013.
Freehold
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TSX : FRU2014 Sensitivities
VariableChange
(+/-)
Estimated Change in
Funds From Operations
($ per share)
WTI oil price US$1.00/bbl 0.02
Canadian/U.S. dollar exchange rate US$0.01 0.02
Edmonton Par/WCS differential Cdn$1.00/bbl 0.01
AECO natural gas price Cdn$0.25/Mcf 0.02
Interest rate 1% 0.004
Oil and NGL production 100 bbls/d 0.03
Natural gas production 1,000 Mcf/d 0.01
* See advisory regarding forward-looking information. 24
TSX : FRUWhy Own Freehold?
25
conservative management, low risk profile
large royalty portfolio
high dividend payout
low costsRoyalty
Focus
Supplemental Information
TSX : FRUPerformance Since Corporate Conversion
27To December 31st, 2013.
Dec 2010 Dec 2011 Dec 2012 Dec 201350
75
100
125
150
FRU S&P/TSX Composite S&P/TSX Oil & Gas E&P
+38.1%
+10.6%
-17.2%
TSX : FRULand Holdings*
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 Profile
Mineral title lands - 20%
Gross overriding royalties - 73%
Working interest properties - 7%93%
royalties* As at December 31, 2013. 28
TSX : FRUReserves 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
Net Proved Plus Probable Reserves
Light and medium crude oil - 25%
Heavy crude oil - 29%
Natural gas liquids - 6%
Natural gas - 38%
94% of our proved reserves
are producing
* As at December 31, 2013. 29
TSX : FRUProduction 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
Production Profile
Light and medium crude oil - 34%Heavy crude oil - 25%Natural gas liquids - 5%Natural gas - 36%
30* 2014 forecast per guidance dated March 6, 2014.
TSX : FRUBoard of Directors
Nolan Blades Harry Campbell Peter Harrison Arthur Korpach
Tom Mullane David Sandmeyer Rodger Tourigny Aidan Walsh
31
TSX : FRUWhat 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
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TSX : FRUProud Owner of Legacy Lands
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)
The 8s and 26s
A portion of the HB Lands were purchased by Canpar in 1979 Producing HB Lands were purchased from Canpar by Freehold in
1996.
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TSX : FRU2013 Operational Highlights
RoyaltyInterest
WorkingInterest
TotalCompany
Royalty Percent
Net reserves Mboe 17,500 5,600 23,100 76%
Average production boe/d 6,195 2,718 8,913 70%
Acquisitions(1) $ millions 9 1 10 90%
Royalty expense(2) $ per boe 0.06 6.30 1.96 3%
Operating expense $ per boe - 19.51 5.95 0%
(1) Includes undeveloped land.(2) Royalty expense includes both Crown charges and royalty payments to third parties.
Royalties Drive Value
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Investor Relationstoll free. 888.257.1873telephone. 403.221.0833website. freeholdroyalties.com