Freehold Royalties (FRU) Q2 2025 earnings summary

Executive summary

• Achieved record Q2 2025 production of 16,584 boe/d, up 9% year-over-year, with 67% liquids weighting and strong U.S. asset performance, especially in the Permian and Eagle Ford basins.

• U.S. production rose 34% year-over-year, driven by acquisitions and high-performing new wells, while Canadian production declined 5% due to lower gas and NGL volumes but saw higher heavy oil output.

• North American royalty portfolio covers 6.1 million gross acres in Canada and 1.2 million in the U.S., with exposure to major oil and shale basins and over 360 royalty counterparties.

• Liquids production has grown at a 16% CAGR since 2020, with 97% of revenue exposed to oil and a focus on high-margin barrels.

• Net income for Q2 2025 was $6.2 million, down 84% from Q2 2024, mainly due to foreign exchange losses, higher interest, and lower realized prices.

Financial highlights

• Funds from operations in Q2 2025 were $56.6 million ($0.35/share), down 5% year-over-year, with royalty and other revenue at $78.3 million and netback at $42.68/boe.

• Dividend payout ratio was 78% in Q2 2025, with $44 million in dividends paid and a current monthly dividend of $0.09/share.

• Net debt stood at $271 million, with net debt to trailing funds from operations at 1.1x and long-term debt at $292.6 million.

• Cash costs decreased 25% to $7.38/boe in Q2 2025, reflecting higher production and lower share-based compensation.

• Record leasing revenue of $5.8 million in H1 2025, a 50% increase over the previous record in 2018.

Outlook and guidance

• 2025 production guidance is 15,800–17,000 boe/d, weighted 66–67% to crude oil and NGLs, with management expecting continued robust cash flows and shareholder returns.

• Liquids production expected to continue growing, supported by strong U.S. and Canadian asset performance and high liquids weighting in key plays.

• Dividend is sustainable at oil and gas prices materially below current levels, with breakeven WTI at US$50/bbl.

• U.S. wells expected to deliver production rates about ten times higher than Canadian wells.

• Management expects improved Canadian natural gas pricing with LNG Canada startup.