Value beneath the surface

Transcription

1 TMX On the Radar Investor Presentation December 13, 2012 Value beneath the surface Advisories Forward-Looking Information This presentation offers management s assessment of Freehold s future plans and operations as at November 8, 2012, 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, 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 forwardlooking statements are outlined in our Annual Information Form, which is filed on sedar.com. Forwardlooking 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. 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 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. 2

2 Corporate Profile focused on oil and gas royalties FRU share price* $ per share Annual dividend ($0.14 per month) $ per share 1.68 Dividend yield* percent 8 Shares outstanding (Sept. 30) million 66 Market capitalization* $ billion 1.4 Net debt to trailing funds from operations times 0.3 * FRU closing price on November 30, What Sets Us Apart large royalty portfolio lower costs and capex than typical E&P company ROYALTY FOCUS high dividend payout conservative management, low risk profile 4

3 The Royalty Advantage: Netbacks A royalty interest offers the benefit of sharing in production revenue without the operational risks and responsibilities typically associated with oil and gas operations. * Non-GAAP measure. See slide 39. ** Excludes freehold mineral taxes payable to the Crown. Working Interest Barrel Operating netback* ~ 60% of gross revenue Royalties Paid (15%) Operating Costs (25%) Operating Netback (60% of gross revenue) Illustration does not factor in capital costs on working interest properties. Royalty Interest Barrel Operating netback* ~ 100%** of gross revenue Operating Netback (100% of gross revenue) 5 Total Return* Cumulative dividends $25.57 per share $149 $10 $36 $ YTD Freehold Royalties Ltd. S&P/TSX Oil and Gas Exploration & Production Index S&P/TSX Composite Index * From November 25, 1996 to November 30, 2012, assuming dividend reinvestment. 6

4 Top Royalty Payors/Operators * SABRE Energy Ltd. Arruga Resources Ltd. * Top 30 payors account for over 85% of royalty revenue for 2012 YTD. 7 Royalty-Focused Production 70% royalties 8600 boe/d 10,000 8,000 6,000 4,000 2, e 0 Royalty Interest Production Working Interest Production * See advisory regarding forward-looking information. 8

5 Harvesting Value from Royalties 2.8 million gross acres* Cardium North Saskatchewan River Royalty interests 93% Working interests 7% Oil resource plays Viking Lower Shaunavon Bakken, Mississippian * Includes January and August 2012 acquisitions. 9 FRU Mirrors Industry Activity Number of wells drilled by industry 30,000 Number of gross wells drilled on Freehold s royalty lands at no cost to Freehold 1,000 25, , ,000 10, ,000 0 Industry Drilling, WCSB Drilling on our Royalty Lands

6 Royalty Drilling Trends Equivalent Net Wells Drilled on Freehold s Royalty Land % Oil 28% Hz 57% Oil 27% Hz 44% Oil 29% Hz 58% Oil 35% Hz 85% Oil 57% Hz 88% Oil 59% Hz 10 Oil Hz Oil Vert Gas Hz Gas Vert Other D&A YTD * 2012 year to date to September Capex Requirements Capital Expenditures as a Percentage of Funds from Operations 150% 125% Sector average 104% 100% 75% Freehold average 23% 50% 25% e 2013e 0% Sector Average Freehold * See non-gaap measures. 12

7 Unleased Mineral Title Lands 100,000 gross acres and growing We own the rights in perpetuity We can choose to drill or lease out 13 Investing Capital 2013 budget $33 million 40 gross wells (13 net risked) Drilling on our title lands Southeast Saskatchewan» Midale, Frobisher, Alida, Tilston and Bakken light oil Lloydminster heavy oil Cardium light oil 2013 Capital Allocation ($33 million) Drilling and Completions - $24 million Facilities and Equipping - $7 million Land and Seismic - $2 million * See advisory regarding forward-looking information. 14

8 Acquisition Strategy Focused on Royalties Buy existing royalties MTLs and GORRS Manufacture royalties Capital contribution in return for a GORR Accretive Acquisitions $650 million since inception 90% royalties 8,300 boe/d initial production $78,000 per boe/d average cost Equity financings in 2001, 2005, 2009, and Conservative Capital Structure Debt to Funds from Operations* (multiple) $185 million available credit capacity (at September 30, 2012) (WTI US$/bbl) $120 $100 $ $ $ $ e Sector Average Freehold Avg. WTI Oil Price $0 * See advisory regarding non-gaap financial measures. Source: CIBC World Markets. 16

9 Stable, Attractive Dividend Annual Dividend ($/share) $1.40 $1.68 $1.68 $1.68 $1.68 $2.00 $1.50 $1.00 $ e Eligible dividends for Canadian tax purposes. $0.00 * See advisory regarding forward-looking information. 17 Annual Guidance * Key Assumptions (as at November 8, 2012) Daily production boe/d 8,600 8,400 WTI oil price US$/bbl Western Canada Select (WCS) Cdn$/bbl AECO natural gas price Cdn$/Mcf Exchange rate Cdn$/US$ Operating costs $/boe G&A costs $/boe Capital expenditures $ millions Dividends paid in shares (DRIP) $ millions Long-term debt at year end $ millions Cash taxes payable in 2012 $ millions Cash taxes payable for 2012 tax year $ millions Cash taxes payable for 2013 tax year (instalments) $ millions Weighted average shares outstanding millions * See advisory regarding forward-looking information. 18

10 Solid Investment Low risk profile The Royalty Advantage Sustainable asset base Stable dividend 19