Freehold Royalties Q1 Earnings Call Highlights

Key Points

• Freehold Royalties reported Q1 2026 production of 15,533 boe/d, with liquids making up 65% of volumes, and reiterated full-year guidance of 15,500 to 16,300 boe/d. Management said output was held back by weaker drilling late in 2025 and weather-related downtime in January.
• The company’s activity remains focused on oil-weighted assets in Canada and the U.S., with strong drilling in the Clearwater, Mannville, Viking and Southeast Saskatchewan, plus Permian Basin activity led by major operators. Freehold expects more of the benefit from current pricing to show up in the second half of 2026 and into 2027, especially in the U.S. where cycle times are longer.
• Freehold generated CAD 59 million in funds from operations, paid CAD 44 million in dividends, and spent CAD 19 million on mineral title land acquisitions in the Permian Basin. The company says its capital priorities remain the monthly dividend, debt management, and strategic acquisitions.

Freehold Royalties TSE: FRU reported first-quarter 2026 production of 15,533 barrels of oil equivalent per day, with liquids accounting for 65% of volumes, as the company said its oil-weighted portfolio remains positioned to benefit from stronger crude prices.

President and CEO David Spyker said during the company’s first-quarter webcast that oil and gas revenue represented 90% of Freehold’s total revenue in the period, reflecting the company’s continued focus on liquids. He said first-quarter production was affected by lower drilling activity in the second half of 2025, when West Texas Intermediate prices were below $60 per barrel, as well as weather-related downtime from a winter storm in the southern United States in late January.

The storm resulted in approximately 300 barrels per day of production downtime in January, or an average impact of about 100 barrels of oil equivalent per day for the quarter, Spyker said.

Canadian and U.S. activity focused on oil-weighted assets

Spyker said first-quarter activity was concentrated on oil-weighted assets in both Canada and the United States. In Canada, Freehold saw continued strong activity in heavy oil plays including the Clearwater and Mannville, as well as active programs in the Viking and Southeast Saskatchewan light oil plays.

New drilling in the Viking and Southeast Saskatchewan contributed more than 225 barrels per day as the company exited the first quarter, according to Spyker.

In the United States, drilling was focused in the Permian Basin and led by operators including ExxonMobil, Occidental and Diamondback, Spyker said. Activity in the Eagle Ford tends to be more seasonal, and he said permitting and drilling activity was being initiated by ConocoPhillips. Production tied to that activity is expected to begin showing up in the second half of the year.

Spyker said the current price environment — with oil at about CAD 100 per barrel at the time of the call and balance-of-year strip pricing in the mid- to upper-CAD 80s per barrel — is beginning to support increased licensing activity in several Canadian areas.

• Clearwater
• Southeast Saskatchewan
• Viking
• Liquids-rich gas areas in parts of the Deep Basin
• West Central Alberta Glauconite

The company expects drilling activity in those areas after spring breakup, with that activity contributing to 2026 exit volumes.

U.S. operators weighing capital plans amid oil price volatility

In the United States, Spyker said permitting and drilling activity had not yet seen a significant uptick. However, he said available frac spreads and service rigs were being activated to bring forward wells that have already been drilled and are awaiting completion.

“Given the volatility in the oil price and no clear direction yet on the duration of this price strength, operators are still developing their capital deployment strategies,” Spyker said.

He said any incremental production from additional activity would likely appear in the second half of 2026 and into 2027. As a result, Freehold reiterated its 2026 production guidance range of 15,500 to 16,300 barrels of oil equivalent per day.

In response to a question from Jamie Kubik, director of equity research at CIBC, about lower year-over-year U.S. drilling activity, Spyker said the decline reflected the impact of weaker WTI pricing late in 2025. He said the U.S. has longer cycle times than Canada, with permitting to drilling on a pad typically taking 12 to 18 months.

Spyker said U.S. operators are taking more time to determine capital allocation because drilling initiated now would not capture current oil prices and would instead be more influenced by pricing in 2027. In Canada, he said, cycle times are shorter and activity can ramp up more quickly.

Funds flow supports dividends and mineral title acquisitions

Freehold generated CAD 59 million in funds from operations in the first quarter, or CAD 0.36 per share, based on a WTI oil price of $72 per barrel during the period, Spyker said. The company paid CAD 44 million in dividends to shareholders and invested CAD 19 million in oil-focused mineral title lands in undeveloped drilling areas in the core of the Permian Basin.

Spyker said the acquired lands are in early-stage development areas with significant undeveloped resource potential, and the mineral title lands are held in perpetuity. He said net debt was “a little higher” as a result of those investments during the quarter.

The company’s North American portfolio remained balanced by production, with 55% coming from Canada and 45% from the United States. However, Spyker said the U.S. assets contributed 51% of total revenue in the quarter because of premium pricing and higher liquids weighting.

U.S. royalty volumes realized a 31% pricing premium compared with Canadian production in the quarter, he said. U.S. natural gas also received a 58% premium over Canadian gas prices, which Spyker attributed to proximity to U.S. Gulf Coast liquefied natural gas facilities and more egress options than are available in Canada.

Capital allocation priorities include dividends, debt and acquisitions

Spyker said Freehold’s capital allocation priorities in the current price environment include maintaining its monthly dividend, balancing debt repayment with strategic acquisitions, and using its normal course issuer bid as an option for share buybacks.

The company continues to see opportunities to acquire undeveloped mineral title lands in the Permian Basin, he said. During the first quarter, Freehold invested CAD 19 million in what Spyker described as “ground-game style deals,” adding more than 200 drilling locations to its inventory under operators including ExxonMobil, Diamondback, Occidental, ConocoPhillips and Double Eagle.

Spyker also noted that 2026 marks Freehold’s 30th year as a public company. Over that period, he said, production has grown at a 4% compound annual growth rate while the company has maintained a monthly dividend.

Freehold’s portfolio gives investors exposure to oil and natural gas basins across North America, including heavy oil in Northern Alberta, light oil in Southeast Saskatchewan, Eagle Ford assets tied to Gulf Coast pricing, and growing light oil and natural gas production from the Permian, Spyker said.

About Freehold Royalties TSE: FRU

Freehold Royalties Ltd is in acquiring and managing Oil and Gas royalties. It operates in two segments: Canada, which includes exploration and evaluation assets and the petroleum and natural gas interests in Western Canada; and the United States, which includes petroleum and natural gas interests held in the Permian (Midland and Delaware), Eagle Ford, Haynesville and Bakken basins primarily located in the states of Texas, Louisiana, and North Dakota. The majority of its revenue is generated from Canada Segment.

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