Freehold Royalties Ltd.

This conference is being recorded. All participants, please stand by. Your conference is ready to begin. Good morning, ladies and gentlemen, and welcome to the first quarter results conference call. I would now like to turn the meeting over to Mr. David Spiker. Please go ahead, sir.

Good morning, everyone, and thank you for joining us today. On the call from Freehold are Rob King, our Chief Operating Officer, and Dave Henry, our Chief Financial Officer. Production for the quarter averaged 14,714 BUE a day, essentially unchanged over the previous quarter. Canadian volumes averaged 95.93 BUE a day, 56% liquids, and the US averaged 51.21 BUE a day, 78% liquids, generating total revenue of $74 million. Severe January weather events both in Canada and the US impacted our production in the quarter. However, volumes made a strong recovery from these unplanned outages, with corporate production in the second half of the quarter over 15,000 BME a day. In the U.S., our light oil-weighted Midland volumes increased 18%, and Delaware volumes increased 59% over Q4 2023. This is due in part to the closing of the previously announced acquisitions of high quality core acreage concentrated in the Midland and Delaware basins of the Permian. These acquisitions contributed approximately 400 Bwe a day to first quarter production, in line with their expectations. We maintained our balance sheet strength and exited the quarter with net debt to trailing funds from operations of 0.9 times after closing $116 million in the previously announced premium acquisitions. With natural gas benchmark pricing being weak throughout the quarter, we continue to see the benefits of our liquids-weighted, premium-priced North American portfolio, with oil and NGLs representing 90% of our revenue, driving a top-tier realized price of $54.81 in BOE. Funds from operations for the quarter total $54 million, or $0.36 per share. funding our $0.09 per month dividend and resulting in a 75% payout ratio for the quarter. Our high margin oil weighted portfolio enables us to provide consistent and sustainable returns to our shareholders while retaining optionality to fund future growth initiatives. On the drilling side, growth drilling activity was strong throughout Q1, with a total of 300 wells drilled across our North American portfolio, a 15% increase over the previous quarter. Approximately 56% of the total growth wells drilled on freehold lands targeted prospects in Texas, 23% in Saskatchewan, and 20% in Alberta. Canadian net drilling increased 55% over the previous quarter, led by increased drilling targeting Viking, southeast Saskatchewan light oil, and heavier oils in the Clearwater and Manville stacks. Following a record year of leasing in Canada, we have seen the momentum continue, with 20 leases signed during the quarter, predominantly in southeast Saskatchewan and the Manville stack. The continued revitalization of these areas through new drilling techniques and core area focus from new management teams represents a significant opportunity for our portfolio. Approximately 75% of the 2024 leasing activity has been associated with public and private junior companies. And the operators that we have issued leases to have been very active. 20% of our drilling year to date has been on the record 122 leases signed in 2023. On our U.S. portfolio, we're encouraged by the growth drilling and the rig activity that we have seen to start the year, with growth drilling up 18% over the previous quarter. Activity in our U.S. assets continues to be driven by large, high-quality, investment-grade payors, in addition to growth-oriented privates. Our drilled, uncompleted well and permitted well inventory remains in a position of strength, providing us confidence in the outlook for our US portfolio for the remainder of the year. As a tidbit, the first major US acquisition that we closed in January 2021 for $74 million pays out this quarter, so just over three years and is still contributing almost 1,000 barrels a day of production. We will talk further about the exceptional performance of our U.S. asset base at our annual general meeting this afternoon. So we're very excited about the quality of our business, a result of the multi-year transformation into a uniquely North American energy royalty company, providing significant returns to our shareholders while retaining the ability to self-fund future growth opportunities. We'll now take the time to answer any questions.

Thank you. We will now take questions from the telephone lines. If you have a question, please press star one on your device's keypad. You may cancel your question at any time by pressing star two. Please press star one at this time if you have a question. There will be a brief pause while participants register for questions. We thank you for your patience. Our first question is from Jamie Kubik from CIBC. Please go ahead.