Mr. David Spyker reports

FREEHOLD ROYALTIES ANNOUNCES THIRD QUARTER RESULTS WITH INCREASED U.S. PRODUCTION

Freehold Royalties Ltd. has released third quarter results for the period ended Sept. 30, 2023.

President's message

The third quarter marked another strong period for Freehold as the company was able to execute on the core aspects of its North American strategy while providing a consistent and sustainable return for its shareholders. Record production and premium pricing within Freehold's U.S. portfolio were a key driver in funds from operations of $65-million or 43 cents per share for the quarter. Freehold returned $41-million or 27 cents per share in dividends to its shareholders, yielding a payout ratio of 62 per cent, while reducing net debt by 19 per cent quarter over quarter. Freehold's high-margin, North American royalty portfolio enables the current dividend to be well financed at prices significantly below current strip prices.

Freehold's U.S. volumes averaged a record of 5,427 barrels of oil equivalent per day in Q3 2023, representing 12-per-cent organic growth over second quarter 2023 and a 17-per-cent improvement versus the same period in 2022. Flush production from robust completion activity on multiwell, high-net-royalty-interest pads on its Midland and Eagle Ford acreage drove the oil-weighted growth. Well performance across its U.S. asset base for the quarter continues to be in line with expectations. It also continues to benefit from a more oil-weighted production base and Gulf coast pricing in the United States, with U.S. production realizing a 34-per-cent premium to that of its Canadian assets over the quarter.

Canadian production was down from the previous quarter, averaging 9,178 boe/d, primarily due to a negative prior-period adjustment for production in wildfire-impacted areas being off-line in June longer than originally estimated. This adjustment was mainly related to natural gas and natural gas liquids volumes, which mitigated the impact to funds flow. For its Canadian oil production, it saw positive production trends on its Southern Saskatchewan and Clearwater acreage, as drilling resumed postspring breakup. It has achieved a record year of leasing in Canada with 102 leases signed through the first nine months (including 24 new leases in the quarter), concentrated in southeast Saskatchewan and the Mannville stack. The recent advancements in heavy oil drilling technology, along with a resurgence of well-capitalized junior operators, have revitalized demand for its mineral title acreage across Alberta and Saskatchewan, providing future momentum for drilling activity and royalty production.

Highlights included:

• Record U.S. production of 5,427 boe/d, a 12-per-cent increase over Q2 2023; average total production of 14,605 boe/d (9,178 boe/d in Canada (9,418 boe/d before prior-period adjustment) and 5,427 boe/d in the United States);
• 24 new leases with 13 counterparties; 102 leases signed through Q3 2023, a record for Freehold;
• $84-million in revenue; $235-million through nine months of 2023;
• $65-million in funds from operations (43 cents per share); $177-million through nine months of 2023;
• $41-million in dividends paid (27 cents per share); 8-per-cent increase over the same period in 2022;
• 251 gross wells drilled, 116 wells in Canada and 135 wells in the U.S.;
• $61.55-per-barrel-of-oil-equivalent average realized price ($73.28 per boe in the U.S. and $54.61 per boe in Canada).

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 Dec. 15, 2023, to shareholders of record on Nov. 30, 2023. The dividend is designated as an eligible dividend for Canadian income tax purposes.

2023 guidance

Freehold is maintaining its 2023 guidance after incorporating actual results for the first nine months of 2023. It has summarized its key operating assumptions for 2023 with production expected to be weighted approximately 62 per cent to oil and natural gas liquids and 38 per cent to natural gas.

Conference call details

A webcast to discuss financial and operational results for the period ended Sept. 30, 2023, will be held for the investment community on Thursday, Nov. 9, 2023, beginning at 7 a.m. MST (9 a.m. EST).

A live audio webcast will be available on Freehold's website under events and presentations on Freehold's website. To participate in the conference call, you are asked to register.

A dial-in option is also available by dialling 1-800-952-5114 (toll-free in North America) with participant passcode 5329679 followed by the number sign.

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