Freehold Royalties (FRU) Q2 2024 earnings summary

Executive summary

• Q2-2024 royalty and other revenue reached $84.5 million, up 15% year-over-year and 14% sequentially, driven by higher oil prices and expanded U.S. assets.

• Net income increased 62% to $39.3 million, with comprehensive income up 116% due to foreign exchange gains.

• Total production averaged 15,221 boe/d, up 3% from Q1-2024 and 4% year-over-year, with U.S. production rising 9% sequentially to a record 5,599 boe/d.

• Dividend payout ratio improved to 68%, with $40.7 million paid in Q2-2024 and a monthly dividend of $0.09/share maintained.

• Portfolio spans 6.2M gross acres in Canada and 1.1M in the U.S., diversified across 360 payors with no single payor over 15% of revenue.

Financial highlights

• Funds from operations reached $59.6 million ($0.40/share), up 14% year-over-year and 10% sequentially.

• Netback per boe was $49.44 in Q2-2024, up 7% year-over-year and 6% from Q1-2024.

• Net debt at quarter-end was $199.1 million (0.8x trailing funds from operations), down from $211 million in Q1-2024.

• Realized oil price averaged $102/bbl in Q2-2024, with overall realized price at $59.74/boe.

• Cash costs increased to $9.80/boe, reflecting higher interest, share-based compensation, and incentive payouts.

Outlook and guidance

• 2024 annual average production guidance is 14,700–15,700 boe/d, weighted 64% oil and NGLs.

• WTI crude oil price assumption for 2024 is US$75/bbl; AECO natural gas C$2.00–2.50/mcf.

• Dividend expected to remain sustainable even at lower commodity prices.

• Robust U.S. and Canadian drilling, leasing, and licensing activity expected to support production growth into 2025.

• Strong DUC and permit inventory in the U.S. expected to support meaningful production additions in 2025.