Freehold Royalties Ltd.

This conference has been recorded.

All participants, please stand by. Your meeting is ready to begin. Good afternoon, ladies and gentlemen. Welcome to the third quarter results conference call. I would now like to turn the meeting over to Mr. David Spiker. Please go ahead.

Good afternoon, and thank you for joining us. On the call with me today are David Hendry, our CFO, Rob King, our VP Business Development, and Matt Donahue, our Manager of Investor Relations and Capital Markets. The third quarter of 2021 marked the start of a significant transformation for Freehold, as the company was able to close on more than $250 million in portfolio-enhancing transactions. These transactions were focused on core U.S. and Canadian oil basins and further solidified Freehold's position as a North American royalty company. To start this afternoon, I would like to talk about the dividend increase, and then we'll focus on the excellent operational and financial performance that we've had. With the strength in our business model, we're continuing our measured approach to setting Freehold's monthly dividend, increasing it by 20% from $0.05 a share to $0.06 a share, or $0.72 a share annualized. This represents our fifth increase over the past five quarters. Projected 2021 payout levels are below our stated dividend policy levels, which outlines a payout ratio starting at 60% over the long term, based on forward-looking funds from operations. We feel this dividend increase strikes a balance between returning value to our shareholders, managing our balance sheet, and positioning freehold to remain active on the acquisition front. The opportunities to further build on the quality of our portfolio remains robust. within both US and Canada, and we view it as important to retain the flexibility to evaluate and acquire assets that continue to make us better. On the acquisition front, we were very busy. We announced four transactions which expanded our position in the US Eagle Ford and Permian Plays, along with building on our already strong position in the Clearwater. The largest transaction, which closed late in the quarter, was the acquisition of a best-in-class Eagle Ford Basin asset for approximately US$160 million, about $200 million Canadian. The Segalford property will significantly enhance the quality of Freehold's North American portfolio, projecting to add 2,500 BWE a day of production in 2022, improving both the near-term and long-term sustainability of Freehold's dividend, while providing further option value to return capital to shareholders through multiple years of free cash flow growth. After corner end, Freehold announced that it had closed its previously disclosed transaction to acquire concentrated, high-quality U.S. royalty assets in the Midland Basin for approximately U.S. $55 million, or about $69 million Canadian. The Midland assets, in conjunction with the focused acquisition work completed year-to-date, are expected to add multiple years of production and funds flow growth. The growth of the US portfolio is in line with Freehold's strategy to add to our North American portfolio, focusing in on high-quality development areas with multiple years of drilling upside and growth. These acquisitions were funded through a combination of Freehold's previously announced bought deal equity financing, in which we issued 19.1 million subscription receipts at a price of $9.05 per share, and the utilization of our credit facility and our funds from operations. On the operations front, production for the quarter averaged 11,265 BUE a day, representing a 23% improvement over Q3 2020 and a slight gain versus the previous quarter. The U.S. portfolio averaged 1,748 BUE a day in Q3, a 13% increase from 1544 in Q2. Growth in volumes reflect better well performance, slightly better than forecast activity levels, and the integration of U.S. royalty acquisitions that have been completed so far this year. In Canada, production averaged 9,517 BUE a day for the quarter, up 5% from the same period in 2020, and essentially flat relative to the previous quarter. With the ramp-up in activity on our royalty lands in Q3, we expect Freehold's Canadian portfolio to deliver organic growth into year-end. After realizing actual results of the first three quarters of 2021 and with Freehold's most recent acquisitions now closed, we are implementing guidance for the fourth quarter and expect production volumes to range between 13,500 to 13,750 BUE a day during the period, weighted approximately 60% to oil and NGLs and 40% natural gas. For 2022, Freehold is increasing our previous guidance and is now projecting volumes to average between 13,750 BUE a day to 14,750 BUE a day, with the same weighting of 60% crude oil and NGLs and 40% natural gas. On the drilling front, we had 179 gross, 6 net wells drilled on our lands in Q3, a substantial 450% improvement on a gross basis versus the same period in 2020, as activity continued to return to our land supported by higher commodity pricing and our expanding U.S. land base. For the quarter, drilling was very well balanced across our core play areas, with 27 gross wells drilled in the Viking, 24 in southeast Saskatchewan, 18 in the Cardium, 18 in the Spirit River, 17 in the Clearwater, 14 in the Eagleford, and 11 wells targeting the Midland Delaware Basins. For the first nine months of 2021, 375 gross 11.8 net wells were drilled on freehold royalty lands compared to 261 gross 8.7 net drilled during the same period last year. In Q3 2021, approximately 70% of all gross locations on freeholds Canadian assets targeted Gore prospects with 25% focused on freeholds mineral title lands and 5% from unit wells. 44% of all locations drilled targeted prospects in Alberta, 37% in Saskatchewan, and 19% in the U.S. on a gross basis. Almost 90% of wells drilled focused on oils or liquids prospects. This improved activity was driven by a broad increase in overall industry spending across North America. With the upward move in crude oil pricing, activity continues to increase on freeholds and royalty lands. with approximately 20 rigs, 6 in Canada and 14 in the US running on our lands as of last week. We have considerable optimism heading into the final quarter of 2021 and into 2022 and will continue to focus on positioning Freehold to be a premier North American royalty company with a strong balance sheet, a sustainable dividend and prospects for growth in top tier oil and gas operating areas. I will now pass the call to Dave Hendry to walk through some of the financial highlights.