Freehold Royalties Acquires Multi-Basin U.S. Royalty Package
TSX-listed Freehold Royalties Ltd. has entered into an agreement with an undisclosed seller to acquire a package of royalty interests in the United States, for a total consideration of US$58.0 million.
The acquired assets include 400,000 Gross Acres of mineral title and overriding royalty interests (ORRIs) located across 12 basins in 8 states, predominantly weighted towards high quality, commodity price resilient areas of the Permian and Eagle Ford basins. The acreage includes over 1,800 producing wells and 5 active rigs, with 31 gross wells drilled on the lands from April – September 2020. Net average daily production during 2021 is estimated at 1,150 barrels of oil equivalent per day (boe/d), of which approximately 62% will be oil. Production is expected to increase to around 1,450 boe/d during 2022, with the acquired assets expected to generate US$12 million of funds from operations in 2021.
“The Acquired Assets enhance our near-term growth profile and further position Freehold ‘ahead of the drill bit’ with royalty acres that we believe will attract capital at or below the current WTI price environment. The U.S. Royalty Transaction further enhances the sustainability of Freehold’s dividend while maintaining the core aspects of Freehold’s strategy including its 60-80% dividend payout and maintaining conservative leverage ratios of less than 1.5x debt to funds from operations”, the company said in a statement.
The company plans to fund the acquisition through a combination of a C$13.4 million non-brokered private placement of 2.8 million subscription receipts with 22% shareholder CN Pension Trust Funds, and a C$43.0 million bought deal offering of 8.96 million subscription receipts led by underwriters RBC Capital Markets and TD Securities.
Calgary-based Freehold Royalties is focused on the acquisition and management of oil & gas royalties, and currently has one of the largest independently owned portfolios of royalty lands in Canada.
The transaction is subject to customary confirmatory due diligence, and is expected to be completed on or about January 5th, 2021.