Investor Presentation Spring/Summer 2022 - Freehold ...
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Investor
Presentation
Spring/Summer
2022
freeholdroyalties.com TSX FRU Quality Assets • Sustainable Dividends
Investment Highlights
A lower risk income vehicle
6.4% dividend yield Torque to commodity
sustainable income to shareholders with dividend coverage down to $40WTI
ESG friendly investment High margin asset class
rated top 1% among global oil producers $109/bbl realized oil price, $3.70/boe cash
costs
Diversified assets Financial strength
exposure to basins across North America low debt levels & strong free cash flow
Spring/Summer 2022 | 2
Dividend yield based on $15.00 share price and $0.08/share monthly dividend rate. ESG rating based on Sustainalytics 2022 ESG ranking. Operating netback and cash costs based on
Q1-2022 results released May 10, 2022. Operating netback and cash costs are Non-GAAP ratios. See “Non-GAAP Ratios and Other Financial Measures” in the advisories
2022 First Quarter Results
Q1/2022 Q1/2021 Change
Production boe/d 13,676 10,944 25%
Funds from operations mm $71.9 $32.4 122%
Period end net debt mm $62.6 $64.8 -3%
Corporate Realized Price per boe $69.17 $37.31 85%
Oil Realized Price per bbl $109.01 $59.16 84%
Payout ratio 38% 24% 14%
Cash costs per boe $3.70 $4.37 -15%
▪ Average production of 13,676 boe/d, up 25% from the same period in 2021
▪ 244 (6.3 net) wells drilled on our royalty lands in Q1-2022 with prospects targeting oil in the Viking, Mississippian,
Clearwater, Permian, and Eagle Ford
▪ Oil realized price of $109.01, up 84% from Q1-2021 reflecting benchmark increase and U.S. pricing benefit
▪ Record funds from operations of $71.9 million, up 122% versus the same period last year
▪ Q1-2022 payout of 38%, up from 24% during the same period last year
– Q1-2022 cash costs of $3.70/boe, down 15% compared to Q1-2021, reflecting ongoing business optimization
▪ Net debt to trailing funds from operations of 0.3x retains balance sheet strength and flexibility
Spring/Summer 2022 | 3
Netback, cash costs, payout ratio are Non-GAAP ratios or other specified financial measures. See “Non-GAAP Ratios and
Other Financial Measures” in the advisories
2022 Q1 Royalty Drilling Results
Top Canadian Drillers
Drilling activity Gross Wells Net Wells
driven by a well
Teine Energy 30 2.6
capitalized group of
North American Permian Haynesville Bonterra Energy Corp. 12 0.4
producers
Whitecap Resources 12 0.2
Tamarack Valley 9 0.2
Obsidian Energy 6 0.1
Clearwater Eagle Ford Total Canadian Wells 144 5.9
Spirit River Top US Drillers
Gross Wells Net Wells
Pioneer Resources 19 0.01
Marathon Oil 15 0.1
Viking Continental Resources 9 0.1
Deep Basin
Laredo Petroleum 6
US Activity Update
Inventory of DUCs and Permits (gross/net)
Gross Permitted Wells Net Permitted Wells
Gross Permitted Wells
400 1.8
Net Permitted Wells
350 1.6
300 1.4
250 1.2
1.0
200
0.8
150 0.6
100 0.4
50 0.2
0 0.0
Permian Bakken Eagle Ford Other Permian Bakken Eagle Ford Other
Gross DUCs Net Royalty DUCs
400 2.0
350 1.8
1.6
300
Gross DUCs
1.4
Net DUCs
250 1.2
200 1.0
150 0.8
0.6
100
0.4
50 0.2
0 0.0
Permian Bakken Eagle Ford Other Permian Bakken Eagle Ford Other
Spring/Summer 2022 | 5
Source: Enverus. Assumes that FRU owned its current US assets as of Q1 2019; Net wells includes estimates of royalty interest in DUCs; Drilled and Uncompleted (DUC) wells are those that have been spud
and are expected to be turned to productionUS Activity Update
US cycle times three times longer than Canada
▪ Permit to drilling is comparable Cycle Time Averages – POST COVID
between Canada and the US, but 600
drilling to on-production is 5 months on 500
Average # Days
average in the US (vs. 2 months in 400
Canada)
May not add due to rounding
300
200
▪ Implication – Q1 2022 permits and
DUCs in the US will contribute to H2 100
2022 production 0
MIDLAND
MANNVILLE
SE SASK
DEEP BASIN
VIKING
CLEARWATER
EAGLE FORD
DELAWARE
CARDIUM
BAKKEN-US
CANADA
CAD US
Average Days Permit to Spud Average Days Spud To Production
Source: Enverus. Assumes that FRU owned its current US assets as of Q1 2019; Net wells includes estimates of royalty interest in permits and DUCs; Drilled and Uncompleted (DUC) wells are those that have been spud and are
expected to be turned to production within next ~6 months. Permit wells are those that are not currently in the process of active drilling, but for which have been identified as a drilling location and is expected to be spud in the
next 12-months
Spring/Summer 2022 | 6Freehold Return Profile
Free cash allocation
▪ Current market opportunities leave room for
growth and strategic acquisition opportunities
▪ >$350 million in acquisitions in 2021
Portfolio ▪ Freehold continues to assess optimal
Growth allocation of free funds between shareholder
returns and portfolio growth, and will continue
to execute on attractive opportunities that
2022E
provide long term shareholder value
Funds from
Operations
▪ Strong free funds flow continues to provide
$230-$250 option value to return capital to shareholders
Million at Continued through continued evaluation of our monthly
US$75/bbl Return of base dividend
Capital ▪ Grew dividend every quarter in 2021 to our
WTI highest per share dividend level in the
past five years
Balance ▪ 2022E net debt to funds from operations
Sheet expected to remain below leverage target,
Maintenance exiting the year at 0.2x
Spring/Summer 2022 | 7
For illustrative purposes and should not be relied on as indicative of future results, assumes midpoint of FRU 2022E production guidance, US$75/bbl WTI, US$13/bbl heavy oil differentials, US$3/bbl light oil differentials, US$4/mcf
NYMEX, $4/mcf AECO. 2022 forecasts assume mid point of FRU 2022 production guidanceNot The Same Old Freehold
Accomplishments over the past 24 months
2022E
Increasing Production
Bringing Revenues to Time
to All Record Levels
Highs 14,200 boe/d
2018
▪ 2022E production forecast to be ~14,200 boe/d, higher than 11,400 boe/d
any period in Freehold’s history 2012
▪ Organic drilling and royalty optimization efforts are directing 7,600 boe/d
capital to Freehold lands
2024E
Q3-2021 ~14,800 boe/d Increasing Production to Record Levels
Organic Growth
11,900 boe/d ▪ Without any further M&A, Freehold’s production is forecast to
generate modest growth over the next several years
▪ Freehold can be patient looking for exceptional opportunities to
Guidance past 2022 is the average of published analyst estimates add to our portfolio, or return excess cash flow to shareholders
Reducing Cash Costs to Historic Lows 2012
2018
$5.21/boe
$5.12/boe 2021
▪ Increased production, and exit from working interest
$3.71/boe
business, have significantly reduced cash costs
▪ Further acquisitions within existing framework, allow us to
grow our business with minimal added costs
Spring/Summer 2022 | 8
For illustrative purposes and should not be relied on as indicative of future results, US$75/bbl WTI, US$13/bbl heavy oil differentials, US$3/bbl light oil differentials,
US$4/mcf NYMEX, $4/mcf AECO. 2022 forecasts assume mid point of FRU 2022 production guidanceSustainable Production Base & Dividend
Accomplishments over the past 24 months
Improving Royalty Netbacks 2021 Realized Oil Price
CD Q1-22 Realized Oil Price
▪ US transactions have added higher value barrels
US Q1-22 Realized Oil Price
▪ Realized price improves materially (10% uplift)
Q1-2022 Realized Oil Price
with recently completed US acquisitions
C$60/bbl C$80/bbl C$100/bbl C$120/bbl
2022E
~$240mm Bringing FFO
Increasing to All Time
Production toHighs
Record Levels
▪ Freehold’s Funds from Operations (FFO) more robust than ever,
2012 2018
$103.9mm $121.3mm providing exceptional optionality to drive shareholder returns
▪ With increased oil weighting, Freehold provides significant upside
to strong commodity price environment
Introducing
Dividend Organic Growth
Sustainability and Growth 2022E
96¢ annually
▪ Freeholdany
Without hasfurther
increased
M&A,its Freehold’s
dividend 6production
times sinceislate
forecast
2020 to 2016
▪ generate modest growth
Dividend increases reflectover the next several
improvement years prices,
in commodity
54¢ annually
▪ increasedcan
Freehold capital
be patient
spendinglooking
on our
forroyalty
exceptional
lands,opportunities
and to
add to our portfolio,
enhancements we haveor continue
made withto return
North American
capital to acquisitions
shareholders
Spring/Summer 2022 | 9
For illustrative purposes and should not be relied on as indicative of future results, assumes midpoint of FRU 2022E production guidance, US$75/bbl WTI, US$13/bbl heavy oil
differentials, US$3/bbl light oil differentials, US$4/mcf NYMEX, $4/mcf AECO. 2022 forecasts assume mid point of FRU 2022 production guidanceNorth American Portfolio Overview
US Production CAN Production Summary Statistics
100% 100% Canada US Total
Top 4 areas ~90%
Gross Acres (mm) 6.2 0.8 6.9
80% 80% 2022E Production (boe/d) 9,900 4,300 14,200
Top 6 areas ~70% 2022E Production (%) 70% 30% 100%
Oil (%) 50% 54% 50%
60% 60%
NGL’s (%) 9% 19% 12%
Natural gas (%) 42% 28% 39%
40% 40% % Inv. Grade ~15% ~70% ~35%
% Private ~45% ~10% ~35%
# of Payors 250 100 350
20% 20%
Average # of Rigs on Assets 9 17 21
# of Producing Wells 11,000 5,500 16,500
0% 0% Average Realized Price (Q1-2022, C$) % Change
Oil ($/bbl) $104 $119 +15%
NGL’s ($/bbl) $65 $45 (30%)
Natural Gas ($/mcf) $4.20 $6.54 +56%
Spring/Summer 2022 | 10
Source: Company Reports. Investment grade revenue only accounts for public payors. YTD assumes prices as of
March 31, 2022. Table columns may not add due to rounding. Rig counts are current as of April 25 th, 2022.Improved Economics
Freehold’s business remains robust across a broad price range
Post Dividend
~$45mm Free Cashflow ~$150mm ▪ At current commodity price levels,
Freehold able to deliver returns to
shareholders several ways
US$40WTI Oil Price US$90WTI
▪ US$1/bbl change in WTI
represents ~$2.5mm in funds from
~75% Payout Ratio ~50%
operations
▪ $0.25/mcf change in AECO
represents ~$1.6mm in funds from
US$40WTI Oil Price US$90WTI operations
▪ At forecasted commodity price
assumptions, dividend payout
0.4x 2022E Exit Net Debt Cash Surplus
remains slightly below 60%
▪ Net debt levels significantly below
US$40WTI Oil Price US$90WTI 1.0x trailing funds from operations
Spring/Summer 2022 | 11
For illustrative purposes and should not be relied on as indicative of future results. 2022E assumes midpoint of FRU 2022E production guidance, US$75/bbl WTI, US$13/bbl heavy oil differentials, US$3/bbl light oil
differentials, US$4/mcf NYMEX, $4/mcf AECO. Payout ratio is a Non-GAAP ratio or other specified financial measure. See “Non-GAAP Ratios and Other Financial Measures” in the Advisories.Strong ESG Performance
ESG values continue to remain integral to Freehold’s business
Environmental Social Governance
Emissions Equity, Diversity & Inclusion Board of Directors
▪ Factoring emissions intensity into ▪ Focus on training and awareness ▪ 78% of directors are independent
acquisition candidates for leadership and employees
▪ 30% gender diversity by 2023
▪ Top ESG rating amongst E&P ▪ Full audit of HR policies and
procedures to ensure best ED&I ▪ Board diversity target in line with
companies by Sustainalytics practices are implemented peer group
▪ 2021 acquisitions ESG accretive ▪ Developing internal committee to
▪ Completed analysis of emissions of further develop ED&I strategy
3rd party producers
Community Support Compensation
▪ Achieved net zero Scope 1 and 2
emissions through purchase of ▪ Robust community support ▪ 97% approval of ‘say on pay’
program in 2021 focusing on
carbon offsets mental health ▪ Newly adopted compensation
measures linked to ESG
Diversification ▪ Multi-year focused community performance
support strategy moving forward
▪ Hired new VP of Diversified Royalties
▪ Thematic programs allow Freehold ▪ >70% of annual compensation at
to identify and act on low-carbon
to target initiatives both internally risk for CEO
opportunities and position for the
future of energy and externally
Spring/Summer 2022 | 12Why Own Freehold
Strong Balance Quality Long
High Margins Sustainable Sheet, Low Risk Duration Assets,
Business Multi-year Upside
▪ Greater than 97% ▪ Dividend increased six ▪ Q1-2022 net debt to ▪ Positioned in the top tier
operating margin provides consecutive quarters, trailing funds from oil plays – Eagle Ford,
Freehold the ability to pay reflecting improved operations 0.3x and Permian, Clearwater,
a meaningful dividend commodity prices and target net debt to funds Viking, and Bakken
across all commodity confidence in our from operations ofContinued Strategy Execution
We remain committed to executing our North American strategy
Acquisition Continue to maintain
Bigger, better
environment remains low-risk identity.
Freehold. Royalty
robust, improved Sustainable debt,
portfolio positioned to
portfolio allows dividend levels enables
generate record
Freehold to Freehold the ability to
volumes and funds flow
remain patient and provide immediate
in 2022 and beyond
opportunistic returns to shareholders
Remain in early stages Valuation remains
of Freehold’s North compelling. Believe
American execution. current share price
Multiple near-term levels offer an
catalysts expected in attractive entry point
2022 for shareholders
Spring/Summer 2022 | 14Supplemental
Information
freeholdroyalties.com TSX FRU Quality Assets • Sustainable DividendsThe Royalty Advantage
Freehold provides a lower risk/return proposition than traditional E&P’s
Environmental, Social,
Financial Strength, Low Risk Diversified Royalty Portfolio
Governance
▪ Strong operating margins, enable ▪ Diversified North American ▪ Our approach to ESG is rooted in
lower breakeven commodity portfolio with exposure to our collective desire to provide a
prices, enhancing the Permian, Eagle Ford, Viking, long-term value proposition to
sustainability of payout Clearwater, Bakken, Mississippian, our shareholders
▪ Q1-2022 corporate netback of and Cardium oil plays plus natural ▪ Royalties offer no exposure to
~$66/boe gas plays targeting the Spirit environmental pressures
▪ Ability to grow the dividend, and River, Montney and Haynesville ▪ Expect to update our ESG
generate meaningful free funds via well funded producers strategy through a sustainability
flow at in the current commodity ▪ 6.2 million royalty acres in report in mid 2022
price environment Canada, 0.8 million gross drilling ▪ Freehold has strong leadership,
▪ Financial flexibility with debt to units in the U.S. an engaged and idea rich
funds from operationsRoyalties vs. Exploration and Production Companies
Royalties provide lower costs and higher returns to shareholders
A Working Interest Barrel A Royalty Interest Barrel
Operating netback Operating netback
~ 60% of gross revenue ~ 100% of gross revenue
▪ The royalty model maintains a
material netback advantage
over traditional E&P’s
100%
▪ Able to generate free funds flow 15 %
Royalties Paid 80%
at lower commodity prices
25 %
60%
▪ Q1-2022 corporate netback Operating Costs
Operating
~$66/boe
Netback 40%
▪ Freehold maintains a >95%
operating margin enabling more
60%
Operating Netback
100% 20%
(60% of gross revenue) of gross revenue
return to shareholders
0%
Spring/Summer 2022 | 17
Payout ratio and netback are Non-GAAP ratios or other specified financial measures. See "Non-GAAP Ratios and Other Financial Measures" in the Advisories.2022E Guidance
2022E Annual Average Guidance May 10, 2022
Average production boe/d 13,750-14,750
Funds from operations million $230-$250
West Texas Intermediate crude oil US$/bbl $75.00
Edmonton Light Sweet crude oil Cdn$/bbl $88.00
AECO natural gas Cdn$/mcf $4.00
NYMEX natural gas US$/mmbtu $4.00
Exchange rate US$/Cdn$ 0.80
Spring/Summer 2022 | 18
Source: Company Reports.Safe, Lower Risk Asset Base
2019 2020 2021 Q1-2022
Production (boe/d) 10,628 9,781 11,844 13,676
Acquisitions (millions) $49 $7 $377 -
Royalty acres (millions) 6.7 6.3 6.2
U.S. gross drilling unit acres (millions) 0.8
Tax pools (millions) $838 $775 $972
Net debt/funds from operations 0.8x 0.9x 0.5x 0.3x
Spring/Summer 2022 | 19Historical Canadian Drilling Results
Drilling (gross wells)
Activity continues to be
2021 2020 2019 focused on oil weighted
Teine Energy 78 77 108 prospects in Freehold’s
Canadian portfolio
Surge Energy 45 26 26
Bonterra Energy 38 17 19
2019 Drilling
Tamarack Valley 35 15 n/a
Deep 2020 Drilling
Tourmaline Oil 20 n/a n/a 2021 Drilling
Basin Clearwater Freehold Lands
Whitecap Resources 17 12 26 Play Outlines
Crescent Point 13 18 25
Mannville
% of Total Wells Oil
40 44 31
Drilled on our Lands
3rd Party
Development 2021 2020 2019 2018
FRU lands Viking
FRU Drilling Cardium
800 685 1,100 1,300
Capital ($mm) S.E. Sask.
% of Total WCSB
7% 7% 7% 8%
Drilling Capital
Shaunavon
Spring/Summer 2022 | 20
Source: Company Reports, CAPP. 3rd party capital development estimates assume average exploration and
development well costs per play times number of locations drilled. 2021 values reflect data as of Q4-2021Strong Balance Sheet
▪ Freehold exited Q1-2022 with 5.0x
Net Debt to Funds from Operations
net debt to trailing funds from 4.5x
operations of 0.3x 4.0x
3.5x
▪ At current commodity price
levels and the revised dividend 3.0x
level, Freehold has capacity to 2.5x
pay down debt or pursue 2.0x
acquisitions with free funds 1.5x
▪ Freehold recently amended its 1.0x
credit facility with an 0.5x
unchanged committed 0.0x
revolving 3-year facility at
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
$285 million
Sector Average Freehold
Spring/Summer 2022 | 21
Sector average sourced from Research estimates
Sector average reflects Canadian upstream producersDividend Sustainability
Freehold has paid out $1.7 billion in dividends since initial IPO
▪ Freehold announced a 33% dividend 100%
increase from $0.06 to $0.08 per 90%
month as part of Q4-2021 results 80%
▪ Forecast funds from operation in 2022 70% Stated Payout Range
has our dividend positioned slightly
Payout %
60%
below 60% payout range 50%
40%
▪ At current commodity price levels,
Freehold is able to pay a meaningful 30%
dividend with potential to grow as 20%
funds from operations improve 10%
▪ Freehold has increased its monthly 0%
2022E
Q4-18
Q1-19
Q2-19
Q3-19
Q4-19
Q1-20
Q2-20
Q3-20
Q4-20
Q1-21
Q2-21
Q3-21
Q4-21
Q1-22
dividend the last six consecutive
quarters
Spring/Summer 2022 | 22
Payout ratio is a Non-GAAP ratio. See "Non-GAAP Ratios and Other Financial Measures" in the Advisories.Top Decile Dividend Return
Freehold offers a compelling yield relative to peers
TSX Composite Index Base Dividend Yields (%)
▪ Freehold has increased the base dividend six
8%
times over the last 18 months to the highest per FRU 1st out of
239
share level in the past five years 7%
▪ Freehold’s base dividend yield ranks 1st out of the 6%
239 TSX’s composite index constituents
5%
▪ While Freehold provides a top decile return
versus its peers through the dividend, it remains 4%
highly sustainable with room for growth
3%
▪ The base dividend remains well covered into
2% No Base Dividend
US$40/bbl WTI
▪ The dividend will continue to be evaluated to 1%
ensure top tier shareholder returns 0%
Source: Company Reports, Scotiabank
Spring/Summer 2022 | 23Why the US?
The rationale behind recent acquisitions
More Opportunity Future Upside – Remaining Drilling Inventory
▪ 70% of US land in major oil and gas
producing states¹ is privately owned vs.
20,000 Bubble size represents total
only ~25% in Canada (WCSB) locations remaining drilling inventory
▪ 650 million acres of mineral title in the
US¹ vs. 270 million in Canada (WCSB)
Canada Land US Land
Composition Composition¹
Permian
Basin
Montney
Eagle Cardium
Ford Clearwater
Mineral Title (25%) Mineral Title (70%) N. Dakota Bakken
Federal/Provincial (75%) Federal/State (30%)
Spring/Summer 2022 | 24
¹included states are those with significant proved oil reserves; Texas, Oklahoma, Louisiana, Nevada, North Dakota, Colorado, Wyoming, Pennsylvania, Ohio & West Virginia
Source: Company Reports, Enverus, Wood Mackenzie and Freehold internal estimatesWhy the US?
The rationale behind recent acquisitions
More Capital Spending More Production
▪ Over last 10 years, 8 times the capital spending ▪ US oil production is almost 3 times, and gas
in the US vs. Canadian upstream production is almost 5 times Canada’s
$350 14 140
$300 12 120
$250 10 100
$200 8 80
mbbl/d
bcf/d
US$bln
$150 6 60
$100 4 40
$50 2 20
$0 0 0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: EIA
U.S. Capital Spending Canadian Capital Spending US Oil Canadian Oil US Gas Canadian Gas
Spring/Summer 2022 | 25
Source: IHS and Canadian Association of Petroleum Producers. Canadian capital spending includes oil sands spending, Company ReportsCanada Surprises to the Upside
Growth driven by well capitalized producers in Canada
Net Royalty Production
by Producer Core Area (boe/d)
400 Clearwater Oil
300
Continued
aggressive growth
200
forecast by all
Q1 2021 Exit Q1 2022 Exit operators
900 Deep Basin Gas
650 Strong production
growth displayed
400
throughout
Q1 2021 Exit Q1 2022 Exit H2-2021
600
Spirit River Gas
500 13 wells licensed,
and in the process
400 of drilling
Q1 2021 Exit Q1 2022 Exit
Spring/Summer 2022 | 26
Source: Company ReportsIndustry Drilling vs. Freehold
20,000 25
▪ Despite a slowdown in activity in western
Canada, Freehold has historically achieved 18,000
Gross Wells Western Canada
growth in net drilling on its royalty lands 16,000 20
Freehold net Wells
▪ Approximately 6% of all spending in Western 14,000
Canada has occurred on Freehold lands over 12,000 15
the past five years
10,000
▪ Approximately 2% of all lower 48 spending 8,000 10
occurred on Freehold land over the past five
6,000
years
4,000 5
▪ Freehold’s royalty portfolio has materially 2,000
outperformed the broader Western Canadian
Sedimentary Basin 0 0
2022E
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
▪ Growth in net wells reflects the quality of
Freehold’s underlying royalty portfolio
Western Canadian Drilling Freehold Net Drilling
Spring/Summer 2022 | 27
Source: Canadian Association of Energy Contractors
Forecast based on Petroleum Services Association of Canada, and Freehold Q4-2021 results.Consistent Income Provider
Freehold has provided almost
$33/share over its history to its
shareholders through dividend
payments
$2.50 $50
Cumulative Dividends Per Share
$2.00 $40
Dividends per share
$1.50 $30
$1.00 $20
$0.50 $10
$0.00 $0
2022E
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Annual Dividend Per Share Cumulative Dividend Per Share
Spring/Summer 2022 | 28Cash Costs
Freehold has shown a strong trending down in cash costs
$7.00
▪ Q1-2022 cash costs of $6.00
$3.70/boe facilitate a
strong corporate netback $5.00
Cash Costs ($/boe)
for Freehold
$4.00
▪ 2021 cash costs down $3.00
11% year over year
$2.00
▪ Reduction in costs reflect
disposition of working $1.00
interest, lower lending and
G&A costs $0.00
Q1-20 Q2-20 Q3-20 Q4-20 Q1-21 Q2-21 Q3-21 Q4-21 Q1-22
Operating Costs ($/boe) Interest Expense ($/boe) General & Administrative ($/boe)
Spring/Summer 2022 | 29
Cash costs are equal to operating costs + interest expense + G&A costs + share based compensation payments (see non-GAAP Financial Measures)
Payout ratio and netback are Non-GAAP ratios or other specified financial measures. See "Non-GAAP Ratios and Other Financial Measures" in the Advisories.Royalty Production History
16,000
14,005 14,250*
14,000 13,676
Royalty Production (boe/d)
12,000 11,137 11,265
10,618 10,946
10,139 10,311 10,149 10,315
10,000 9,605
9,150 9,096
8,000
6,000
4,000
2,000
0
2022E
Q1-19
Q2-19
Q3-19
Q4-19
Q1-20
Q2-20
Q3-20
Q4-20
Q1-21
Q2-21
Q3-21
Q4-21
Q1-22
Spring/Summer 2022 | 30
*Assumes the midpoint of 2022E production guidance.Diversified Royalty Payors
Our top payors remain well financed with no significant concentration risk
Spring/Summer 2022 | 31Disciplined Acquirer
Freehold will continue to look for opportunities that enhance the resiliency
and durability of our portfolio across all commodity price cycles
Cost Initial Production
Year Area ($ millions) Acquired (boe/d)
2012 AB, SK and BC 60 600
2013 Numerous small acquisitions 10 30
2014 SK/MB/AB 248 1,500
2015 SK/AB/BC 410 2,100
2016 SK/AB 162 1,700
2017 SK/AB 87 420
2018 SK/AB 62 275
2019 SK/AB, US 50 410
2020 US 8 -
2021 US 377 4,400
TOTAL $1,475 10,895
Spring/Summer 2022 | 32Advisories
Forward-Looking Statements
This presentation offers our assessment of Freehold’s future plans and operations as at May 10th, 2022 and contains forward-looking information including, without limitation, the expectation of being able to pay dividends with WTI pricing as
low as $40/bbl; the expectation that current market opportunities leave room for growth and strategic acquisition opportunities; Freehold's expectation to continue to assess optimal allocation of free funds between shareholder returns and
portfolio growth, and expectation of continuing to execute on attractive opportunities that provide long term shareholder value; the expectation that strong free funds flow continues to provide option value to return capital to shareholders
through continued evaluation of our monthly base dividend; expected year end 2022 net debt to funds from operations ratio; 2022 forecast funds from operations; 2022 forecast production; the expectation that organic drilling and royalty
optimization efforts are directing capital to Freehold lands; the expectation that without any further mergers and acquisition activity, Freehold’s production is forecast to generate modest growth over the next several years; the expectation
that Freehold can be patient looking for exceptional opportunities to add to our portfolio, or return excess cash flow to shareholders; the expectation that with increased oil weighting, Freehold provides significant upside to strong commodity
price environment; remaining future drilling inventory; expected production growth in certain areas that Freehold has an interest; 2022 forecast production in Canada and the United States; certain sensitivities of changes in WTI pricing and
natural gas pricing and the effects on free cash flow, payout ratio and exit net debt; forecast payout for 2022; the expectation that in the absence of acquisitions and further dividend increases able to pay down debt further in 2022; the
expectation that Freehold's royalty portfolio positioned to generate record volumes and funds flow in 2022 and beyond; the expectation that multiple near-term catalysts for Freehold's North American execution expected in 2022; and the
expectation to update our ESG strategy through a sustainability report in mid 2022; and forecast 2022 dividends.
This forward-looking information is provided to allow readers to better understand our business and prospects and may not be suitable for other purposes. By its nature, forward-looking information is subject to numerous risks and
uncertainties, some of which are beyond our control, including: volatility in market prices for crude oil, NGL and natural gas; the impacts of the Russian-Ukraine war and associated sanctions on the global economy and commodity prices; the
continuing impact of the COVID-19 pandemic on demand and commodity prices; future capital expenditure levels; future production levels; future exchange rates; future tax rates; future legislation; the cost of developing and expanding our
assets; the impacts of inflation and supply chain shortages on the operations of our industry partners and royalty payors; our ability and the ability of our industry partners and royalty payors to obtain equipment in a timely manner to carry
out development activities; our ability to market our product successfully to current and new customers; our expectation for the consumption of crude oil, NGL’s and natural gas; our expectation for industry drilling levels on our royalty lands;
the impact of competition; our ability to obtain financing on acceptable terms; our ability to add production and reserves through our development and acquisitions activities; lack of pipeline capacity; currency fluctuations; changes in income
tax laws or changes in tax laws, regulations, royalties, or incentive programs relating to the oil and gas industry; reliance on royalty payors to drill and produce on our lands and their ability to pay their obligations; uncertainties or imprecision
associated with estimating oil and gas reserves; stock market volatility and our ability to access sufficient capital from internal and external sources; a significant or prolonged downturn in general economic conditions or industry activity;
incorrect assessments of the value of acquisitions; competition for, among other things, capital, acquisitions of reserves, undeveloped lands and skilled personnel; geological, technical, drilling, and processing problems; and environmental risks
and liabilities inherent in oil and gas operations. Risks are described in more detail in Freehold’s annual information form for the year ended December 31, 2021 which is available under Freehold’s profile on SEDAR at www.sedar.com.
Key operating assumptions with respect to the forward-looking statements contained in this presentation are provided throughout this presentation. In addition, with respect to forward-looking statements contained in this presentation, 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, our expectation for the consumption
of crude oil and natural gas, our expectation for industry drilling levels, our expectation as to the drilling results of wells drilled on our royalty lands, our ability to obtain financing on acceptable terms, shut-in production, production additions
from our audit function and our ability to add production and reserves through development and acquisition activities.
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
information. 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 herein 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 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.
Spring/Summer 2022 | 33Advisories continued
Drilling Locations
This presentation discloses anticipated future drilling or development locations associated with Freehold assets and in certain circumstances specific area where Freehold has an interest. Of the 20,000 gross future drilling locations, 4,632
represent booked locations that have been attributed proved and/or probable reserves in the evaluations of the Corporation's Canadian and United States oil and gas reserves effective as of December 31, 2021 as prepared by Freehold's
independent qualified reserves evaluators, Trimble Engineering Associates Ltd. and RSC Group, Inc. The remaining locations are currently considered unbooked locations. Unbooked locations are generated by internal estimates of Freehold
management based on prospective acreage and an assumption as to the number of wells that can be drilled per section based on industry practice and internal review. Unbooked locations do not have attributed reserves or resources. Unbooked
locations have been identified by management as an estimation of the multi-year drilling activities on the Acquired Assets based on evaluation of applicable geologic, seismic, engineering, historic drilling, production, commodity price assumptions
and reserves information. There is no certainty that all unbooked drilling locations will be drilled and if drilled there is no certainty that such locations will result in additional oil and gas reserves, resources or production. Freehold has no control
on whether any wells will be actually drilled in respect of such unbooked locations. The drilling locations on which wells are actually drilled will ultimately depend upon the capital allocation decisions of royalty payors who have working interests in
respect of such drilling locations and a number of other factors including, without limitation, availability of capital, regulatory approvals, oil and natural gas prices, costs, actual drilling results, additional reservoir information that is obtained and
other factors. While certain of the unbooked drilling locations have been de-risked by drilling existing wells in relative close proximity to such unbooked drilling locations, other unbooked drilling locations are farther away from existing wells where
management has less information about the characteristics of the reservoir and therefore there is more uncertainty whether wells will be drilled in such locations and if drilled there is more uncertainty that such wells will result in additional oil
and gas reserves, resources or production. Upon purchase of the Acquired Assets, Freehold will have the reserves associated with the Acquired Assets evaluated by an independent qualified reserves evaluator in accordance with the requirements
of National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities and it will be determined at such time whether any of the unbooked drilling locations disclosed herein are booked for the purposes of such evaluation with
associated proved or probable reserves.
Production
All production disclosed herein is considered net production for the purposes of National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities, which includes Freehold's working interest (operating and non-operating) share after
deduction of royalty obligations, plus our royalty interests. Since Freehold has minimal working interest production, net production is substantially equivalent to Freehold's royalty interest production. In the first quarter of 2022, Freehold's net
production of 13,676 boe/d consisted of 5,305 bbls/d of light oil, 1,139 bbls/d of heavy oil, 1,757 bbls/d of natural gas liquids and 32,845 mcf/d of natural gas. For the full year of 2021, Freehold's net production of 11,884 boe/d consisted of
4,342 bbls/d of light oil, 1,184 bbls/d of heavy oil, 1,217 bbls/d of natural gas liquids and 30,608 mcf/d of natural gas.
Conversion of Natural Gas to Barrels of Oil Equivalent (BOE)
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 and is not based on either energy content or current prices. While the boe ratio is useful for
comparative measures, it does not accurately reflect individual product values and might be misleading, particularly if used insolation. As well, given 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.
Spring/Summer 2022 | 34Advisories continued
Non-GAAP Financial Measures
Within this presentation, references are made to terms commonly used as key performance indicators in the oil and gas industry. We believe that netback, payout ratio 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 and financial position. However, these terms do not have any
standardized meanings prescribed by generally accepted accounting principles ("GAAP") and therefore may not be comparable with the calculations of similar measures for other entities.
Netback, which is calculated on a boe basis as average realized price less production and ad valoreum taxes, operating expenses, general and administrative and cash interest charges, represents the per unit cash flow amount allowing the
Company to benchmark how changes in commodity pricing, net of production and ad valoreum taxes, and our cash-based cost structure compare against prior periods.
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. Payout ratio
is calculated as dividends paid as a percentage of funds from operations.
Cash costs, which is also calculated on a boe basis, is comprised of 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 and cash-based interest and financing charges and share-based pay outs. Cash costs allow Freehold to benchmark how changes in its manageable cash-based cost structure compare against prior periods.
For further information related to these non-GAAP terms, including details of how these ratios are calculated, see our most recent management's discussion and analysis, which is available on SEDAR at www.sedar.com and is incorporated
herein.
This presentation also contains the capital management measures of working capital, net debt, capitalization and net debt to funds from operations as defined in Note 11 to the condensed consolidated financial statements as at and for the
three months ended March 31, 2022.
Spring/Summer 2022 | 35Investor Relations
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