Freehold Royalties Ltd. Enters Into Agreement to Acquire Royalty Production and
Mineral Title Lands
CALGARY, ALBERTA -- (Marketwired) -- 04/14/14 -- Freehold Royalties
Ltd. (Freehold) (TSX: FRU) announced it has entered into a purchase
and sale agreement to acquire royalty interests on certain producing
and non-producing lands in southeast Saskatchewan and Manitoba for
approximately $111 million, prior to normal closing adjustments. The
effective date of the transaction is January 1, 2014, with closing
expected to occur on or about May 2, 2014, subject to regulatory
approval. Total proceeds associated with the purchase and sale
agreement will be funded through Freehold's existing bank credit
line. The acquisition further adds to Freehold's land position within
southeast Saskatchewan while enhancing the company's near-term growth
profile. Based on the outlined transaction price, the deal is
accretive both on a debt and equity-adjusted basis.
In addition, as part of the proposed transaction, Canpar Holdings
Ltd., a wholly-owned subsidiary of CN Pension Trust Funds, has also
agreed to purchase from the Vendor certain undeveloped mineral title
lands for approximately $30 million.
-- 2013 average production of 470 barrels of oil equivalent (boe) per day
(99% oil weighted), from over 400 producing wells. Revenue is derived
from a combination of Lessor Royalties and Non-Convertible Overriding
Royalties, offering Freehold enhanced netbacks.
-- 2013 net operating income of $15.0 million.
-- Increased land exposure comprised of 71,700 acres of Mineral Title
Lands. This includes 15,200 acres of developed, 42,000 acres of unleased
undeveloped and 29,300 acres of leased undeveloped currently not tied
with production (acreage in certain lands may be included in both
developed and undeveloped acreage counts due to zonal development with
balance of rights being undeveloped).
-- Proved plus probable reserves of approximately 1.5 million boe, based on
an independent engineering report prepared by Trimble Engineering
Associates Ltd. as of December 31, 2013.
-- 37 gross new wells drilled within the acquired acreage through 2013.
-- The acquisition also provides Freehold exposure to:
-- A stable oil weighted revenue stream.
-- The ability to grow royalty volumes through future year drilling
-- Increased percentage of mineral title ownership relative to
Freehold's existing acreage.
-- Upon closing, Freehold estimates 2014 year-end net debt of approximately
$140-$145 million (which would leave $65-$70 million in available
capacity on our existing credit line), while implying approximately 1.0
times debt to funds flow (based on guidance provided in our fourth
quarter news release).
After completing the transaction, we expect to increase our production
guidance for 2014 by 6% to 9,100 boe per day; all other operating
assumptions (provided in our fourth quarter news release) remain
unchanged. As we have in the past, we expect to update shareholders
on 2014 guidance for other key operating assumptions when we release
our first quarter results, after market May 14, 2014.
Cautionary Statement Regarding Forward-Looking Information - This
news release offers our assessment of Freehold's future plans and
operations as at April 14, 2014 and contains forward-looking
information including, as to the expected completion of the
acquisition and Freehold's expectations for reserves, production,
year-end debt and future prospects on the acquired lands. 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 the impact of general economic conditions,
industry conditions, volatility of commodity prices, currency
fluctuations, imprecision of reserve estimates, environmental risks,
taxation, royalties, regulation, competition from other industry
participants, the lack of availability of qualified personnel or
management, stock market volatility, and our ability to access
sufficient capital from internal and external sources. Risks are
described in more detail in Freehold's annual information form for
the year ended December 31, 2013 which is available under Freehold's
profile on SEDAR at www.sedar.com.
With respect to forward looking information contained in this news
release, we have made assumptions regarding, among other things,
future oil and natural gas prices; future capital expenditure levels;
future production levels; future exchange rates; the costs 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 expectation for industry drilling levels;
and our ability to obtain financing on acceptable terms.
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. Except as required by law, Freehold
does not assume any obligation to publicly update or revise any
forward-looking information to reflect new events or circumstances.
Conversion of Natural Gas To Barrels of Oil Equivalent (BOE)
To provide a single unit of production for analytical purposes,
natural gas production and reserves volumes are converted
mathematically to equivalent barrels of oil (boe). We use the
industry-accepted standard conversion of six thousand cubic feet of
natural gas to one barrel of oil (6 Mcf = 1 bbl). 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 at the wellhead and is not based on either energy content
or current prices. While the boe ratio is useful for comparative
measures and observing trends, it does not accurately reflect
individual product values and might be misleading, particularly if
used in isolation. As well, given that 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.
Freehold Royalties Ltd.
Manager, Investor Relations
403.221.0833 or tf. 1.888.257.1873
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