Freehold Royalties Boosts Growth with Midland Basin Acquisition and Dividend Increase

Freehold Royalties Ltd. (TSX:FRU) has announced the closing of its strategic acquisition in the Midland Basin, Texas, along with an increase in its credit facility and a dividend declaration for December 2024. This move is expected to significantly boost the company's production and royalty revenue, enhancing its financial performance and sustainability.

The acquisition of mineral title and royalty interests in the core of the Midland Basin adds 1,500 – 1,600 boe/d of premium priced, light oil weighted production (~950 bbls/d oil), generating approximately $37 million in 2025E net royalty revenue (net of production and ad valorem taxes and assuming US$70/bbl WTI). This increase in production and revenue is likely to enhance Freehold's free cash flow, supporting the sustainability of its dividend.

In connection with the Acquisition, Freehold increased its credit facilities by $50 million to $450 million. The committed revolving credit facility increased from $380 million to $430 million while the operating facility remained unchanged at $20 million. This increased financial flexibility enables Freehold to pursue more acquisitions or investments in the Midland Basin or other regions.

The board of directors of Freehold has declared a monthly dividend of $0.09 per share to be paid on January 15, 2025, to shareholders of record on December 31, 2024. The dividend is designated as an eligible dividend for Canadian income tax purposes. This dividend declaration reflects the company's confidence in the positive impact of the acquisition on its financial performance.

Freehold Royalties' strategic acquisition in the Midland Basin, combined with its increased credit facility and dividend declaration, positions the company for long-term growth and sustainability. The acquisition's light oil focus complements Freehold's current production mix, potentially leading to synergies in operations, marketing, and logistics. Additionally, the acquisition's immediate accretion on funds flow per share, free cash flow per share, and total production and oil production per share suggests strategic value.

In conclusion, Freehold Royalties' Midland Basin acquisition, credit facility increase, and dividend declaration demonstrate the company's commitment to growth and shareholder value. With a strong production profile and enhanced financial flexibility, Freehold is well-positioned to capitalize on opportunities in the energy sector and maintain its competitive advantage.