CALGARY, Alberta, March 20, 2023 (GLOBE NEWSWIRE) — Freehold Royalties Ltd. (Freehold or the Company) (TSX:FRU) is pleased to announce two internal promotions within the Company’s executive team.
Effective April 1, 2023, Rob King will be appointed as Chief Operating Officer and Susan Nagy will be appointed as Vice President, Business Development. Mr. King joined Freehold in 2020 as Vice President, Business Development where he was instrumental in the Company’s expansion into the U.S. Mr. King oversaw the execution of over $550 million in value-enhancing transactions over the last two years, as Freehold expanded its North American footprint, as well as oversaw various optimization initiatives on Freehold’s Canadian legacy acreage. As Chief Operating Officer, Mr. King will provide enhanced senior level leadership in respect of the execution of Freehold’s North American strategy. Mr. King will oversee a multidisciplinary team focused on numerous value drivers, with the goal of maximizing the value of our current and future asset base.
Susan Nagy will be assuming the role of Vice President, Business Development, previously held by Mr. King. Ms. Nagy has been with Freehold since 2008, holding various positions of increasing seniority including most recently as Director, Business Development. During her tenure, Ms. Nagy has been involved in the negotiation of over $1.5 billion in royalty acquisitions, both in Canada and the U.S. Ms. Nagy holds a Bachelor of Commerce degree (with Distinction) from the University of Calgary and is an active member of the Canadian Association of Land and Energy Professionals and the American Association of Professional Landmen. Ms. Nagy will leverage her strong business acumen and leadership abilities to further maximize the success of Freehold.
President’s Message
We have evolved our organization considerably over the past three years with focused leadership, strategic portfolio positioning, and results driven decision making. These key components of our business and leadership structure will continue and I am very pleased to announce the promotion of both Rob and Susan today as they will play a key role in translating our long term strategic vision into action.
The internal promotions display the bench strength we have built within our Company and is a testament to the culture of our organization, including the strong emphasis we have placed on professional development. With the rapid evolution of the Company, this leadership group strengthening will support our focused approach to managing our business, leading to continued value creation for all stakeholders.
David M. Spyker, President and Chief Executive Officer
For further information, contact
Freehold Royalties Ltd.
Matt Donohue
t. 403.221.0833
e. mdonohue@freeholdroyalties.com
w. www.freeholdroyalties.com
Forward-Looking Statements
This news release offers our assessment of Freehold’s future plans and operations as of March 20, 2023 and contains forward-looking statements that we believe allow readers to better understand our business and prospects. These forward-looking statements include our expectations for the following:
- Mr. King will provide enhanced senior level leadership in respect of the execution of Freehold’s North American strategy;
- Ms. Nagy will leverage her strong business acumen and leadership abilities to further maximize the success of Freehold;
- we will maximize value of our current and future asset base; and
- we will have a focused approach to managing our business, leading to continued value creation for all stakeholders.
By their nature, forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond our control. 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 statements.
This news release offers our assessment of Freehold’s future plans and operations as of May 10, 2023 and contains forward-looking statements that we believe allow readers to better understand our business and prospects. These forward-looking statements include our expectations for the following:
- or belief that Freehold remains well positioned to endure all stages of the commodity cycle;
- our ability to maintain the Company’s core identity of providing shareholders with a consistent growing dividend while maintaining low leverage;
- our belief that up to 25% of our Canadian production could be impacted by the shut-ins caused by wildfires;
- our core business strategies of low leverage along with patient and opportunistic portfolio reinvestment;
- our expectation that we can maintain our currently monthly dividend through prolonged periods of lower pricing, should those conditions exist in the future;
- our belief there will be an impact on our Q2-2023 and full year production forecast from the Canadian wildfires;
- forecast 2023 production;
- Freehold’s 2023 guidance, including production guidance, underlying commodity and exchange rate assumptions and funds from operations;
- our expectation that our asset base and cash flow generation is underpinned by exceptional quality payors in the top tier operating areas
- our expectation that we will continue to position our dividend at approximately 60% of forward-looking funds from operations with the ability to withstand periods of lower pricing; and
- our expectation that we will continue to deliver a consistent return profile, for many years to come.
By their nature, forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond our control, including general economic conditions, inflation and supply chain issues, the impacts of the Russian-Ukrainian war on commodity prices and the world economy, industry conditions, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, royalties, environmental risks, taxation, regulation, changes in tax or other legislation, competition from other industry participants, the failure to complete acquisitions on the timing and terms expected, the failure to satisfy conditions of closing for any acquisitions, the lack of availability of qualified personnel or management, stock market volatility, our inability to come to agreement with third parties on prospective opportunities and the results of any such agreement and our ability to access sufficient capital from internal and external sources. Risks are described in more detail in our Annual Information Form for the year-ended December 31, 2022 available at www.sedar.com.
With respect to forward-looking statements contained in this news release, we have made assumptions regarding, among other things, future commodity prices, future capital expenditure levels, future production levels, future exchange rates, future tax rates, future legislation, the cost of developing and producing our assets, our ability and the ability of our lessees to obtain equipment in a timely manner to carry out development activities, our ability to market our oil and gas successfully to current and new customers, the performance of current wells and future wells drilled by our royalty payors, our expectation for the consumption of crude oil and natural gas, our expectation for industry drilling levels, our ability to obtain financing on acceptable terms, shut-in production, production additions from our audit function, our ability to execute on prospective opportunities and our ability to add production and reserves through development and acquisition activities. Additional operating assumptions with respect to the forward-looking statements referred to above are detailed in the body of this news release.
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 statements. Our actual results, performance, or achievement could differ materially from those expressed in, or implied by, these forward-looking statements. We can give no assurance that any of the events anticipated will transpire or occur, or if any of them do, what benefits we will derive from them. The forward-looking information contained in this document is expressly qualified by this cautionary statement. To the extent any guidance or forward-looking statements herein constitute a financial outlook, they are included herein to provide readers with an understanding of management’s plans and assumptions for budgeting purposes and readers are cautioned that the information may not be appropriate for other purposes. Our policy for updating forward-looking statements is to update our key operating assumptions quarterly and, except as required by law, we do not undertake to update any other forward-looking statements.
You are further cautioned that the preparation of financial statements in accordance with International Financial Reporting Standards (IFRS), which are the Canadian generally accepted accounting principles (GAAP) for publicly accountable enterprises, requires management to make certain judgments and estimates that affect the reported amounts of assets, liabilities, revenues, and expenses. These estimates may change, having either a positive or negative effect on net income, as further information becomes available and as the economic environment changes.
To the extent any guidance or forward-looking statements herein constitutes a financial outlook, they are included herein to provide readers with an understanding of management’s plans and assumptions for budgeting purposes and readers are cautioned that the information may not be appropriate for other purposes. You are further cautioned that the preparation of financial statements in accordance with IFRS requires management to make certain judgments and estimates that affect the reported amounts of assets, liabilities, revenues, and expenses. These estimates may change, having either a positive or negative effect on net income, as further information becomes available and as the economic environment changes.
Conversion of Natural Gas to Barrels of Oil Equivalent (BOE)
To provide a single unit of production for analytical purposes, natural gas production and reserves volumes are converted mathematically to equivalent barrels of oil (boe). We use the industry-accepted standard conversion of six thousand cubic feet of natural gas to one barrel of oil (6 Mcf = 1 bbl). 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 and observing trends, 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.
Non-GAAP Financial Ratios and Other Financial Measures
Within this news release, references are made to terms commonly used as key performance indicators in the oil and gas industry. We believe that net revenue, netback, dividend payout ratio, funds from operations per share and cash costs are useful supplemental measures for management and investors to analyze operating performance, financial leverage, and liquidity, and we use these terms to facilitate the understanding and comparability of our results of operations. However, these terms do not have any standardized meanings prescribed by GAAP and therefore may not be comparable with the calculations of similar measures for other entities. This news release also contains the capital management measure net debt, as defined in note 12 to the March 31, 2023 unaudited condensed consolidated financial statements.
Net revenue, which is calculated as revenues less ad valorem and production taxes (as incurred in the U.S. at the state level, largely Texas, which do not charge corporate income taxes but do assess flat tax rates on commodity revenues in addition to property tax assessments) details the net amount Freehold receives from its royalty payors, largely after state withholdings.
The netback, which is also calculated on a boe basis, as average realized price less production and ad valorem taxes, operating expenses , general and administrative and cash interest charges and share-based payouts, represents the per boe netback amount which allows us to benchmark how changes in commodity pricing, net of production and ad valorem taxes, and our cash-based cost structure compare against prior periods.
Cash costs, which is calculated on a boe basis, is comprised by the recurring cash based costs, excluding taxes, reported on the statements of operations. For Freehold, cash costs are identified as operating expense, general and administrative expense, cash-based interest, financing and share-based compensation payouts. Cash costs allow Freehold to benchmark how changes in its manageable cash-based cost structure compare against prior periods.
The following table presents the computation of Cash Costs and the Netback:
| Three Months Ended March 31 | Three Months Ended December 31 | |||||||||||||
| $/boe | 2023 | 2022 | Change | 2022 | Change | |||||||||
| Royalty and other revenue | $ | 57.79 | $ | 71.17 | (19) | % | $ | 71.17 | (19) | % | ||||
| Production and ad valorem taxes | (1.18) | (1.30) | (9) | % | $ | (2.08) | (43) | % | ||||||
| Net revenue | $ | 56.61 | $ | 69.87 | (19) | % | $ | 69.09 | (18) | % | ||||
| Less: | ||||||||||||||
| General and administrative expense | (3.91) | (2.92) | 34 | % | (3.08) | 27 | % | |||||||
| Operating expense | (0.14) | (0.13) | 8 | % | (0.18) | (22) | % | |||||||
| Interest and financing cash expense | (1.77) | (0.65) | 172 | % | (1.91) | (7) | % | |||||||
| Cash payout on share-based compensation | – | – | – | – | – | |||||||||
| Cash costs | (5.82) | (3.70) | 57 | % | (5.17) | 13 | % | |||||||
| Netback | $ | 50.79 | $ | 66.17 | (23) | % | 63.92 | (21) | % | |||||
Dividend payout ratios are often used for dividend paying companies in the oil and gas industry to identify dividend levels in relation to funds from operations that are also used to finance debt repayments and/or acquisition opportunities. Dividend payout ratio is calculated as dividends paid as a percentage of funds from operations.
| Three Months Ended March 31 | Three Months Ended December 31 | |||||||||||||
| (000s) | 2023 | 2022 | Change | 2022 | Change | |||||||||
| Dividends paid | $ | 40,680 | $ | 27,112 | 50 | % | $ | 40,677 | – | |||||
| Funds from operations | $ | 58,569 | $ | 71,893 | (19) | % | $ | 79,973 | (27) | % | ||||
| Dividend payout ratio | 69 | % | 38 | % | 82 | % | 51 | % | 35 | % | ||||
Funds from operations per share, which is calculated as funds from operations divided by the weighted average shares outstanding, provides direction if changes in commodity prices, cash costs, and/or acquisitions were accretive on a per share basis.