Mr. David Spyker reports

FREEHOLD ROYALTIES ANNOUNCES FIRST QUARTER RESULTS

Freehold Royalties Ltd. has released first quarter results for the period ended March 31, 2023.

President's message

"The execution of Freehold's North American strategy continued during the first quarter. From the COVID-related lows of 2020, when Freehold embarked on our North American expansion, the company has increased its production by over 50 per cent, its revenues by 75 per cent, while maintaining the company's core identity of providing shareholders with a consistent growing dividend while maintaining low leverage.

"As a larger and a more balanced North American entity, Freehold remains well positioned to endure all stages of the commodity cycle, similar to what we realized during Q1 2023. We believe much of the work completed over the past three years has been highlighted during the first quarter as Freehold was able to deliver consistent, sustainable returns to its shareholders.

"Our first quarter highlights included:

• "$77-million in revenue;
• "$59-million in funds from operations (39 cents per share (1));
• "$41-million in dividends paid (27 cents per share);
• "Average production of 14,724 barrels of oil equivalent per day (9,822 boe/d in Canada and 4,902 boe/d in the United States);
• "349 gross wells drilled, 175 wells in Canada and 174 wells in the U.S.;
• "$56.99 per boe average realized price ($69.68 per boe in the U.S. and $50.66 per boe in Canada).

"(1) A non-generally accepted accounting principle financial measure.

"We continued our operational momentum into 2023 with strong drilling activity on both sides of the border (the highest it has been on a net well basis since early 2017) and increasing Canadian production (the highest it has been since late 2019). Our Clearwater assets represented a key growth driver, averaging 450 boe/d, an increase of 25 per cent from the previous quarter. Strength in Canadian production has been achieved with only a modest investment over the last three years.

"Despite commodity prices retreating from the prior quarter and from the same period in 2022, activity levels on both our Canadian and U.S. royalty lands maintained the momentum from our record year in 2022. We have continued to see strong year-to-date leasing activity and a suite of well-financed operators allocating capital to drilling on our royalty lands, driven by continued development in plays such as the Permian, Eagle Ford, Clearwater, Viking and Cardium. Through the first quarter of 2023, we have consistently had between 30 and 40 drilling rigs active on our acreage, with rigs on our U.S. land base averaging over 30 in March, setting the highwater mark since owning the assets. While drilling will slow down in Canada in the near term associated with spring breakup, we expect strong activity through the second quarter within our U.S. land base, a benefit of our North American portfolio.

"Funds flow and production volumes were in line with our expectation for Q1 2023, and as a result, we are maintaining our 2023 production guidance of 14,500 to 15,500 boe/d. We also reiterate our funds flow range of between $250-million and $280-million, underpinned by our West Texas Intermediate (WTI) pricing assumption of $80 (U.S.) per barrel. At these levels, our current dividend implies a dividend payout ratio of approximately 60 per cent. We believe this level is rightsized to provide a robust dividend yield, while retaining optionality for further dividend increases, portfolio reinvestment and/or maintaining flexibility in our balance sheet.

"Subsequent to quarter-end, a number of producers have shut in production on Freehold's royalty lands associated with the ongoing wildfire situation in Alberta. We believe up to 25 per cent of our Canadian production could be impacted by these shut-ins but given the preliminary and ongoing nature of the situation, Freehold does not have an estimate of the impact at this time. Freehold is thankful for the efforts of all personnel engaged in fighting these dangerous wildfires and extend our sympathy to those displaced from their homes in the areas of the fires.

"David M. Spyker, president and chief executive officer"

Dividend announcement

The board of directors of Freehold has declared a monthly dividend of nine cents per share to be paid on June 15, 2023, to shareholders of record on May 31, 2023. The dividend is designated as an eligible dividend for Canadian income tax purposes.

Director retirement

Art Korpach will not be standing for re-election and will retire from Freehold's board of directors at the annual general meeting. Mr. Korpach was appointed to the board in May, 2012, was chair of the compensation committee from 2012 to 2015 and served as chair of the audit committee from 2015 to 2022. Mr. Korpach was instrumental in providing valuable strategic input to Freehold through a number of transactions during his term, as the company benefited from his extensive transaction experience. It would like to thank him for his hard work, wisdom and leadership throughout his time on the board and wish him well in his future endeavours.

2023 guidance

Freehold continues to monitor the continuing wildfire situation in Alberta. It believes there will be an impact on its second quarter 2023 and full-year production forecast but given the preliminary and continuing nature of the situation, Freehold does not have an estimate of the impact at this time and will be maintaining its 2023 guidance. It expects to provide an update when it has more information. The attached table summarizes its key operating assumptions for 2023, where production is expected to be weighted approximately 64 per cent oil and natural gas liquids and 36 per cent natural gas.

Conference call details

A conference call to discuss financial and operational results for the period ended March 31, 2023, will be held for the investment community on Thursday, May 11, 2023, beginning at 7 a.m. MST (9 a.m. EST). To participate in the conference call, approximately 10 minutes prior to the call, please dial 1-800-898-3989 (toll-free in North America). The participant passcode is 9055297 followed by the number sign.

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