Freehold Royalties to acquire Permian Basin royalty assets for C$112M

Freehold Royalties has entered into definitive agreements with two private sellers to acquire high quality Permian mineral title and royalty assets located in the Midland basin in Texas and the Delaware basin in New Mexico and Texas for approximately $112 million, net of estimates for exchange rates and customary closing adjustments. All references in this news release to dollar amounts are in Canadian dollars unless otherwise indicated. The Acquired Assets are located primarily in Martin County Texas within the Midland Basin capturing some of the thickest stacked pay reservoir quality in North America, with up to ten benches available for development under current practices. Additionally, the Acquired Assets have a significant weighting to undeveloped lands, which is expected to maximize development and recoveries. Future development will be led by a strong portfolio of well capitalized operators with this core inventory ranking as some of the best within their portfolio. Acquired Asset highlights include: Approximately 123,000 gross acres concentrated in the core of the Permian basin, comprised of 2,670 net royalty acres; 76% Midland, 24% Delaware. Upon closing the Acquisitions, Freehold’s total Permian land position will increase by 40% to greater than 0.5 million gross acres and will represent approximately 57% of Freehold’s US gross land base. Over 40% of the Acquired Assets net royalty acres are undeveloped, providing significant future activity potential. 2024 forecast average production of 600 boe/d, generating funds from operations of approximately $15 million, increasing Freehold’s Permian production by approximately 30% and the Company’s US production by 12%. 85% liquids weighted based on production, versus Freehold’s Q3-2023 average US liquids weighting of 78% and the Company’s total liquids weighting of 63%, providing meaningful uplift to Freehold’s average realized price and sustainability of returns. Strong well performance with average 365-day initial gross production rates of approximately 600 boe/d per Permian well. Multiple years of future upside, with greater than 2,000 gross development locations identified. Upon closing the Acquisitions, Freehold’s total US inventory is expected to increase by 25%, bringing the Company’s total proforma US inventory to greater than 10,000 gross locations. This implies approximately 17-years of drilling inventory based on 2022 drilling levels. Future development is underpinned by some of North America’s top operators with the combined Exxon Mobil and Pioneer Natural Resources expected to move into Freehold’s top five payors and represent greater than 25% of future gross locations within the Company’s US inventory. Additional payors from the Acquired Assets include other large well capitalized producers such as Marathon Oil, Endeavor Energy Resources LP and Diamondback Energy. The Acquisitions are expected to double Freehold’s Midland basin activity and on a proforma basis, with one in every seven wells drilled in 2023 year to date in the Midland basin of the Permian will have occurred on Freehold’s lands. The Acquisitions will be funded through the utilization of Freehold’s existing credit facility and are expected to close in January 2024. Freehold will provide an update on its 2024 guidance as part of its 2023 year-end operating and financial results, which are expected to be released after market close on February 28, 2024.