Freehold Royalties Ltd.

Good day, and thank you for standing by. Welcome to the Freehold Royalty's first quarter 2026 webcast. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, David Spiker, President and CEO. Please go ahead.

Yes, good morning, everyone. Thank you for joining us today. On the call with me is Paul Slack, our Interim CFO, and Todd McBride, our Manager of Investor Relations. For those that don't know Paul, he's been with our organization for the past six years as our controller and has been in the industry for 30 years. So before we get started, Please be advised that certain statements on this call are considered as forward-looking information, and we caution the listener to review the advisory on forward-looking statements in the news release and MD&A found on our website. So in the first quarter of this year, we achieved production of 15,533 BUE a day, with the liquids weighting of 65%. The oil and gas portion of our portfolio contributed 90% of our total revenue, as our liquids-focused strategy continues to drive our business and movie Turkey in its current elevated oil price environment. As we outlined in our conference call in March, our C1 production reflects lower drilling activities in the latter half of 2025, when oil prices were sitting below $60 a barrel WTIs. We did have some seasonal impact of the winter storm that swept through the southern U.S. in late January, and resulted in approximately 300 barrels a day of production downtime in January, or in the quarters, about 100 BUE a day on average. Activity levels in the first quarter were focused on our oil-weighted assets in both Canada and the U.S. We saw continued strong activity levels in our heavy oil plays, the Clearwater and Manville, in addition to very active programs in the Viking and Southeast Disguised for Light Oil, with new drilling in these two light oil plays contributing over 225 barrels a day as we exited Q1. On the US side, drilling was focused in the Permian and continues to be led by some of our top operators in ExxonMobil, Occidental, and Diamondback. Activity in the Eagleford tends to be a bit more seasonal, and we see permitting and drilling activity just being initiated by Chronicle Phillips. and production associated with this field activity will start to show up in the back half of this year. In this current oil price environment, where we have $100 a barrel oil this morning, and balance of year pricing in the mid to upper 80s a barrel, we're starting to see licensing activity pick up in Clearwater, Southeast Saskatchewan, Viking, as well as some of our liquids-rich Gaffier areas in certain parts of the Deep Basin and West End, Philadelphia, Blocknight. We would expect to see drilling activity in these areas after spring breakup, and this activity would contribute to our 2026 expected volumes. Looking ahead in the U.S., permitting and drilling activity has not seen a significant uptick yet. However, we are seeing all available frack spreads and service rigs activated to focus on bringing forward wells that have already been drilled and are awaiting completion. Given the volatility of the oil price and no clear direction yet on the duration of this price strength, operators are still developing their capital deployment strategies. All these tailwinds are positive for the industry, and we expect incremental production ads or any additional activity will show up in the latter half of 2026 and into 2027. Therefore, we are reiterating our 2026 production guidance at this time, a $15,500 to $16,300 BUE day annual production. In the quarter, we generated $59 million of funds from operations, or $0.36 per share, at a little price of $72 a barrel of WTI in the first quarter. With this fund flow, we've made $44 million in dividends to our shareholders, and we invested $19 million in oil-focused mineral tidal lands in undeveloped building areas at the core of the Permian Basin. These lands are in early stages of development with mineral tidal lands held in perpetuity and are in areas that have significant undeveloped resource. Our net debt stands a little higher as a result of these investments this quarter. Our North American portfolio remains very well balanced with 55% of our production coming out of Canada and 45% of the US. The US represents a slightly smaller share of production, but it does deliver a disproportionately higher revenue component, accounting for 51% of our total revenue this quarter. This is driven by the premium pricing and higher liquid weighting that we have in our US assets. In the first quarter, U.S. royalty volumes realized a 31% pricing premium compared to our Canadian production. Beyond the quality and the strong market access of our U.S. oil, our U.S. natural gas also received a 58% premium over our Canadian gas price due to the proximity to U.S. Gulf Coast LNG facilities and significantly more egress auctions than we have in Canada. So as we think through our capital allocation priorities, priorities in this current type of environment. After a monthly dividend, we look to have a bit of a balance of debt repayment along with strategic acquisitions that enhance our portfolio. We continue to see high-quality opportunities to acquire this undeveloped general title land in the core of the Permian, and our focus has been on these types of deals. In the first quarter of this year, we invested $19 million in what we call these ground-game style deals. adding over 200 drilling locations to our inventory under Premier Operators, ExxonMobil, Diamondback, Occidental, Chronicle Phillips, and Double Eagle. Lastly, through our NCIB, we have the option of share buybacks. So this year marks the 30th year of the public company, and over the past 30 years, our production has grown at a 4% compounded annual growth rate, and we've maintained a monthly dividend throughout. Our portfolio offers investors exposure to the premier oil and natural gas basins across North America, including our growing heavy oil segment in northern Alberta, a lighter oil place in southeast Saskatchewan, and exposure to Gulf Coast pricing with our Eagle Ford assets and our growing light oil and natural gas production from the Permian. We invite you all to join us at our annual general meeting at 3 p.m. coffee time this afternoon. It will be held at the 8th Avenue Place Conference Center at Suite 400, 525 8th Avenue, Southwest Calgary. More details, including a link to the webcast over AGM, can be found on our website at freeholderlg.com. So with that, we're pleased to take any questions.

As a reminder, to ask a question, you will need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile our Q&A roster. And our first question will come from the line of Jamie Kubik of CIBC. Your line is open, Jamie.

Yeah, good morning. Thanks for taking my question. I just had a question with respect to the U.S. drilling activity in the quarter. It looked like it was down considerably. year and year. Can you just talk about some of the nuances there and how you think that unfolds over the balance of the year?

Yeah, I think that's really more a reflection of trailing $60 WTI coming out of the last quarter and that plays into the first quarter of this year. Going forward, we are seeing an increase in permitting activity. The U.S. is a little bit different than Canada. If you think of that on-stream time, typically taking 12 to 18 months to go from permitting to drilling a path. What we are seeing is U.S. guys probably taking a little bit more time to decide how they're going to place their capital in this environment because that drilling isn't going to capture a $100 oil price that we see today. So they want to make sure that, you know, as they ramp up their programs, that they're happy with what really is going to become 2027 pricing will impact those volumes. So in Canada, you can see a little bit of a quicker wrap-up. You know, there's quicker cycle times. But in the U.S., you know, I think we're just starting to see – that activity ramp up as a little bit more confident in what, you know, late-year pricing looks like and going into next year.

Okay. That's all for me.

Thanks.

Yeah, thank you. And as a reminder, if you would like to ask a question, please press star 1-1 on your telephone and wait for your names to be announced. And I would now like to turn the call back to Dave for closing remarks.

Excellent. Well, thanks, everyone, for joining today. And like I say, if we can make it over to the AGM this afternoon, we'd love to see you there. And thanks, and have a good day. Take care.

And this concludes today's program. Thank you for participating. You may now disconnect.