Freehold Royalties Ltd. Closes Acquisition of Royalty Production and Mineral
CALGARY, ALBERTA -- (Marketwired) -- 05/05/14 -- Freehold Royalties
Ltd. (Freehold) (TSX: FRU) announces that it has closed the
previously announced acquisition involving royalty interests in
southeast Saskatchewan and Manitoba (Vendor assets). Total
consideration associated with the transaction was $111 million
(before closing adjustments) with Freehold funding the deal through
its existing bank credit line.
In addition, as part of the transaction, Canpar Holdings Ltd., a
wholly-owned subsidiary of CN Pension Trust Funds, purchased certain
undeveloped mineral title lands (Vendor assets) for $30 million
(before closing adjustments).
The effective date of the acquisition is January 1, 2014. With the
closing of the acquisition, Freehold has significantly strengthened
its operating base and future opportunities while maintaining
financial strength and sustainability of its dividend.
-- 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 adding 71,700 acres of Mineral Title Lands.
-- 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.
-- Freehold estimates 2014 year-end net debt of approximately $140-$145
million (which leaves $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
-- We have inc
reased 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 on May 14, 2014.
Freehold is a Calgary based, dividend paying, oil-weighted oil and gas
company focused on providing a sustainable monthly dividend to its
shareholders. We effectively manage our assets to consistently
deliver attractive returns over the long-term. For further
information about Freehold please visit our website at
Cautionary Statement Regarding Forward-Looking Information - This
news release offers our assessment of Freehold's future plans and
operations as at May 2, 2014 and contains forward-looking information
including, 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
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 1.888.257.1873
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