Matt Donohue reports
FREEHOLD ROYALTIES LTD. ACQUIRES A LONG LIFE CARDIUM ROYALTY ASSET
Consistent with the company's strategy of enhancing the quality of the company's underlying asset base, Freehold Royalties Ltd. has closed the acquisition of a long-life, light oil gross overriding royalty (GORR).
Freehold is acquiring a new 2-per-cent GORR in petroleum and natural gas rights in the Cardium in 173,440 gross (120,960 net) acres of land in the greater Pembina area. The purchase price of the GORR is $52-million plus the assignment by Freehold of minor working interest assets, and the royalty is forecast to generate approximately $3.6-million in operating income (based on strip pricing) and approximately 210 barrels of oil equivalent per day (74 per cent light oil) in 2018. The GORR is to be paid by an exploration and production producer with multiple years of drilling inventory.
The acquisition was financed through its existing credit line. As a result of the acquisition, Freehold's pro forma 2017 year-end net debt to funds from operations is expected to be 0.7 times, with approximately $90-million available on the company's existing facility.
The company sees the transaction as enhancing the sustainability of Freehold's dividend, increasing the number of drilling locations on its royalty lands and adding to the quality of its asset base. Freehold will give 2018 guidance as part of the company's Q4 2017 results, which will be released after market close on March 8, 2018.
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