Mr. Matt Donohue reports

FREEHOLD ROYALTIES LTD. ENTERS INTO AGREEMENT TO ACQUIRE ROYALTY PRODUCTION AND MINERAL TITLE LANDS FOR $165 MILLION, PROVIDES INCREASED 2016 PRODUCTION GUIDANCE AND ANNOUNCES EQUITY FINANCING

Freehold Royalties Ltd. has entered into a definitive agreement with Husky Energy Inc. to acquire an extensive suite of royalty production and lands for an aggregate purchase price of $165-million, prior to normal closing adjustments. The effective date of the transaction will be Jan. 1, 2016, with closing expected to occur on or about May 25, 2016, subject to regulatory approval and certain other closing conditions.

The transaction will be financed by a $165-million bought deal equity financing led by RBC Capital Markets, CIBC and TD Securities Inc. on behalf of a syndicate of underwriters plus a $20-million concurrent private placement to CN Pension Trust Funds (as defined below).

Acquisition highlights:

• The acquisition of the Husky assets will significantly enhance the company's existing royalty asset base, adding an expected 1,700 barrels of oil equivalent per day (70 per cent natural gas) of 2016 annualized royalty production and $11.4-million of 2016 annualized operating income (62 per cent from oil and natural gas liquids). The transaction is expected to increase royalties as a percentage of 2016 funds from operations to 94 per cent.
• Freehold's total fee lands will increase by 47 per cent to approximately one million acres, while total royalty lands will increase by 74 per cent to approximately 5.9 million acres. Freehold sees considerable upside through the addition of southeast Saskatchewan and Deep basin assets while establishing a new key area in southwest Saskatchewan through the development of the Shaunavon oil trend.
• The transaction is expected to be approximately 2 per cent accretive to 2016 funds from operations per share (on an annualized basis excluding one-time general and administrative integration costs and based on 100-per-cent equity financing).
• Based on the equity financing details described below and the company's latest production guidance, Freehold's 2016 expected ratio of net debt to funds from operations and basic payout (including dividend reinvestment plan proceeds) improves to an estimated 1.7 times and 82 per cent, respectively.
• The Husky assets' production base has a low decline of approximately 17 per cent per year.
• Low counterparty risk is driven by a portfolio of well-established producers with a long history of development in Western Canada.

Increased 2016 production guidance

Assuming closing of the transaction, Freehold has increased its 2016 average production guidance to 11,400 barrels of oil equivalent per day (previously 9,800 barrels of oil equivalent per day). The increase in production guidance reflects the additional production associated with the Husky assets (approximately 1,000 barrels of oil equivalent per day in 2016 from the expected closing date of May 25, 2016, until the end of 2016) plus an increase in expected 2016 production (approximately 600 barrels of oil equivalent per day) associated with active drilling on the company's royalty lands in the first quarter of 2016, lower than expected shut-in heavy oil volumes and positive prior-period adjustments.

Freehold expects to release its 2016 first quarter results after market on May 11, 2016, where it will provide further disclosure on operating and financial assumptions for 2016.

Acquisition financing

Freehold has entered into an agreement with RBC Capital Markets, CIBC and TD Securities, on behalf of a syndicate of underwriters, to issue, on a bought deal basis, 14,286,000 common shares at a price of $11.55 per share for gross proceeds of approximately $165-million pursuant to the public offering. Freehold has also granted the underwriters an overallotment option to purchase, on the same terms, up to an additional 2,142,900 common shares at the issue price. The overallotment option is exercisable by the underwriters, in whole or in part, at any time for a period of 30 days following the closing of the public offering.

Concurrent with the closing of the public offering, the pension trust funds for employees of Canadian National Railway Company intend to purchase approximately 1,732,000 common shares on a non-brokered private placement basis at the issue price for gross proceeds of approximately $20-million pursuant to the private placement.

The aggregate gross proceeds to be raised by the company pursuant to the financing will be approximately $185-million before giving effect to any exercise of the overallotment option by the underwriters. If the underwriters exercise the overallotment in full, the aggregate gross proceeds to be raised by the company pursuant to the financing will be approximately $210-million.

Freehold expects to use the net proceeds from the financing to complete the transaction and the remainder to pay down a portion of its outstanding indebtedness.

Completion of the financing is subject to certain conditions including customary regulatory and stock exchange approvals. In addition, the public offering will require that the transaction close at or before the closing time of the public offering unless otherwise agreed to by the underwriters and Freehold. The common shares to be sold under the public offering will be offered in all provinces of Canada (excluding Quebec) by way of a short form prospectus. The closing of the financing is expected to occur on or about May 25, 2016, but in any event before May 31, 2016.

Conference call

Freehold's management will hold a conference call and webcast on May 2, 2016, at 4:45 p.m. EST (2:45 p.m. MT) to present the transaction.

Dial-in number:

Toll-free participants call:  1-800-585-8367

Conference ID:  5083233

You may also listen via webcast on-line.

A transcript of the broadcast will be posted on the website once it becomes available.

We seek Safe Harbor.