Q4 2023 Freehold Royalties Ltd Earnings Call

Operator: Continue to stand by; the conference will begin momentarily. Once again, please continue to stand by; we thank you for your patience. Nous vous remercions de bien vouloir patienter. La conférence commencera bientôt.

To standby, we thank you for your patience.

Now some of them, yes, we lapped a silty duckenfield they'd be tough super.

Operator: This conference is being recorded. Please stand by, your meeting is about to begin. Good morning, ladies and gentlemen. I would like to turn the meeting over to Mr. Davis Spyker. Please go ahead. Good morning everyone, and thank you for joining us today.

This conference is being recorded so it goes to the homes that don't have as you see.

Please standby your meeting is about to begin.

Good morning, ladies and gentlemen, welcome to the fourth quarter results Conference call.

To turn the meeting over to Mr. David Spyker. Please go ahead.

Good morning, everyone and thank you for joining us today.

David Michael Spyker: On the call with me about Freehold are Rob King, our COO, and Dave Henry, our CFO. 2023 was a strong year for Freehold. It really showcased the strengths of our unique North American portfolio, which consists of a robust production base in Canada and a growing oil-weighted position in the US. Total production of 14,714 BUE a day in 2023 was up 4% over the previous year, driven primarily by oil-weighted U.S. production growing 16% year-over-year to 5,102 BUE a day. Growth on our U.S. assets was driven by the Midland Basin, with volumes up 25% over 2022. Our Canadian portfolio had no decline in production year over year.

On the call with me with Freehold, Rob King, our CFO and Dave Hendry our CFO.

2023 was a strong year for freehold really showcased the strength of our unique north American portfolio, which consists of a robust production base in Canada, and a growing oil weighted position in the U S.

Total production of 14714 be Weird day in 2023 was up 4% over the previous year.

Given primarily by oil weighted U S production growing 16% year over year to 51 O to be re a date.

Growth in our U S assets was driven by the Midland Basin with volumes up 25% over 2022.

Our Canadian portfolio had no decline in production year over year.

David Michael Spyker: 2023 production in Canada was 9,612 BWE a day, driven by consistent operator activity. This was achieved in the absence of any material acquisitions and really highlights the quality of our Canadian asset base. For 2024, we're expecting production in the range of 14,700 to 15,700 BWI a day, implying approximately 3% growth at the midpoint over 2023. Revenue in 2023 was $315 million, and funds from operations were $240 million, both in line with expectations, and funded our annual dividend of $163 million, or $1.08 per share. This resulted in a payout ratio of 68% for the full year.

2023 production in Canada was 90, 612, <unk> a day driven by consistent operator activity.

This was achieved in the absence of any material acquisitions and really highlights the quality of our Canadian asset base.

For 2024, we're expecting production in the range of 14700 to 15700 D. We are day, implying approximately 3% growth at the midpoint over 2023.

Revenue in 2023 was $315 million and funds from operations was 240 million both in line with expectations and funded our annual dividend of $163 million or $1 eight per share.

This resulted in a payout ratio of 68% for the full year.

David Michael Spyker: We expect to continue to maintain our current dividend level, striking a balance between strong shareholder returns and retaining the ability to continue to fund business growth through reinvestment of excess free cash flow above the dividend. This strategy has allowed us to reduce our net debt by 27% in 2023, compared to year-end 2022, and facilitate funding of the $115 million in transactions that we announced in December, utilizing the strength of our balance sheet. These December transactions were with two private sellers, and we acquired high quality Permian mineral title and royalty assets in the Midland Basin in Texas and the Delaware Basin in New Mexico. Some of the highlights associated with the assets include a 2024 forecast average production of 600 BWE a day. Increasing Freehold's Permian production by approximately 30% and the company's U.S. production by 12%. These assets are 85% liquids weighted production, and of that, most of it is oil. On a full basis, it's 65% oil weighted, and that versus Freehold's US liquids weighting of 78% and the company's total liquids weighting at 64%, thus providing a meaningful uplift to Freehold's realized price.

We expect to continue to maintain our current dividend level striking a balance between strong shareholder returns and retain the ability to continue to fund business growth through reinvestment of excess free cash flow above the dividend.

This strategy has allowed us to reduce our net debt by 27% in 2023 compared to year end 2022, and facilitate funding of the $115 million in transactions that we announced in December utilizing the strength of our balance sheet.

Okay.

These December transactions were with two private sellers and we acquired high quality Permian mineral title and royalty assets in the Midland Basin in Texas, and the Delaware Basin in New Mexico and Texas.

Some of the highlights associated with your assets include two.

24 forecast average production of 600 a day.

Increasing <unk> production by approximately 30% and the company's U S production by 12%.

These assets are 80, 585% liquids weighted production.

All of that most of it is oil.

Full basis at 65% oil weighted and that versus freehold U S liquids weighting of 78%.

And the company's total liquids weighting of 64%, thus providing meaningful uplift to free holds realized price.

With the assets, we see multiple years of future upside with greater than 2000 gross development locations identified increasing freehold as total U S drilling inventory by 25%.

David Michael Spyker: With the assets, we see multiple years of future upside, with greater than 2,000 gross development locations identified, increasing Freehold's total U.S. drilling inventory by 25%. The future development is expected to be underpinned by some of North America's top operators, with the combined ExxonMobil and Pioneer Natural Resources expected to move into Freehold's top five payer lists and represent greater than 25% of future gross locations within the company's U.S. inventory Pro forma, these transactions are expected to double Freehold's Midland Basin activity, with one in every seven wells drilled in 2023 being on Freehold's land on this combined asset base. In total, 993 wells were drilled on our Rokey lands in 2023.

The feature development is expected to be underpinned by some in north America's top operators with a combined exxonmobil and pioneer natural resources expected to move into freehold as top five payer less and represents greater than 25% our future gross locations within the company's U S inventory.

Pro forma these transactions are expected to double freehold as Midland basin activity with one in every seven wells drilled in 2023 would've occurred on freehold land on this combined asset base.

Yeah.

In total 993 wells were drilled on our royalty lands in 2023.

David Michael Spyker: 95% of the wells are drilled, targeted oil prospects in Canada and the U.S. Approximately 28% of gross wells on Freehold Royalty lands target prospects in Alberta, Approximately 18% in Saskatchewan, and almost half at 46% in Texas with the balance spread across other regions.

95% of the well the drill targeting oil prospects in Canada and the U S.

Approximately 28% of gross wells are freehold royalty lands targeted prospects in Alberta.

Actually 18% in Saskatchewan and.

And almost half at 46% in Texas with the balance spread across other regions.

David Michael Spyker: We estimate that in 2023, approximately $8 billion in gross third-party capital was spent on our lands, up from $6 billion in 2022. Spending was comprised of $7 billion, about $35 million net on our U.S. royalty assets and about $1 billion, or $34 million net, on our Canadian royalty assets. Backstopped by the Quality of Our Asset Base, we delivered a record level of leasing on our Canadian lands in 2023 with 122 leases signed. Approximately 10% of these leases have already had wells drilled, and we expect to see continued momentum of drilling on these lands through 2024. The majority of these 122 new leases are made up of Mississippian Light Oil Targets in southeast Saskatchewan, representing about 51% of the leases, and Manville Heavy Oil Targets in Alberta, representing about 28% of the leases. We continue to see a revitalization of southeast Saskatchewan Light Oil and Manville Heavy Oil with several well-capitalized, growth-oriented junior producers focusing on these areas. Multilateral tilling has been a focus by operators in the heavy oil areas to improve both well productivity and ultimate oil recovery.

We estimate that in 2023, approximately $8 billion in gross third party capital was spent on our lands.

From 6 billion in 2022.

Spending was comprised of 7 billion about $35 million net on our U S royalty assets and about $1 billion, a $34 million net on our Canadian royalty assets.

Yeah.

Yeah.

Yeah.

Backstopped by the quality of our asset base, we delivered record level of leasing on our Canadian lands in 2020 three with 122 leases signed.

Approximately 10% of these leases have had already had well spud and we expect to see continued momentum on the drilling on these lines through 2024.

So the majority of these 122, new leases are made up of Mississippian light oil targets in southeast Saskatchewan.

And about 51% of the leases and manville heavy all targets in Alberta, representing about 28% of the leases.

We continue to see a revitalization of southeast Saskatchewan light oil and manville heavy oil with several well capitalized growth oriented junior producers focusing on these areas.

Multilateral drilling has been a focus by operators I mean have you all areas to improve both well productivity and ultimate oil recovery.

Operator: With our year-end results and our forward look, we are very excited about the position of strength we have in both the quality and the diversity of our portfolio. Looking forward, we continue to expect robust performance from our assets, generating significant funds flow that will underpin our sustainable dividend, maintain our balance sheet strength, and fund growth opportunities on both sides of the border. We will now take the time to answer any questions that investors may have. Thank you. We will now take questions from the telephone lines. If you have a question, please press star 1 on your device's keypad. You may cancel the question at any time by pressing star 2. Please press star 1 at this time.

Yeah.

Okay.

With our year end results and our forward look we're very excited about the position of strength, we have in both the quality and the diversity of our portfolio.

Looking forward, we continue to expect robust performance from our assets generating significant funds flow that will underpin our sustainable dividend well maintain our balance sheet strength and fund further growth opportunities on both sides of the border.

We will now take the time to answer any questions that investors may have.

Thank you we will now take questions from the telephone line. If you have a question. Please press star one on your devices keypad you may cancel the question at any time by pressing star queue. Please press star one at this time, if you have a question there'll be a brief pause all participants register thank you for.

Operator: If you have a question, there will be a brief pause while participants register. Thank you for your patience. And the first question is from Travis Wood from National Bank Finance. Please go ahead. Yeah, good morning, guys. David, you touched on it a bit in your opening remarks with respect to some M&A activity and Exxon moving up the payee list. With a lot of the M&A activity in the US now, how is that changing your outlook on the pace of development on the lands and, maybe as important, the lands that have been acquired over the last year or so? Has there been a shift in how you see activity picking up with some of the deals more recently in the US? Good morning, Travis.

Your patience.

And the first question is from Travis Wood from National Bank financial.

Please go ahead.

Yeah. Good morning, guys I'm, David you touched on it a bit in your opening remarks with respect to.

Some M&A activity in and Exxon moving up the P list.

With with a lot of the M&A activity in the U S. Now how how is that changing your outlook on pace of development on the lands end and maybe.

As important the lands that had been acquired kind of over the over the last year or so has there been a shift in and how you see activity picking up with with some of the deals more recently in the U S.

Yeah, I'm going to turn that over to Rob just to add to answer that pretty active in looking at that as part of the you know how.

How we assess these opportunities are probably going to handle that sure hi, Travis.

David Michael Spyker: I'm going to turn that over to Rob just to answer that. You've been pretty active in looking at it as part of how we assess these opportunities, so Rob, do you want to handle that? Sure. Hi Travis.

Yeah. It certainly has been.

A key focus for us, particularly in the Permian you know just to kind of put some numbers around what we sort of look at the Midland Basin, which is our.

Most work most of our Permian production is is concentrated in that basin has become a lot more consolidated than you know between you know the Exxon pioneer combination in the Diamondback endeavor combination you know those two operators are now more than 50% of our Midland production.

Rob: So yeah, it certainly has been a key focus for us, particularly in the Permian. Those two operators are now more than 50% of Midland production, so there certainly is a lot more concentration under a handful of names. I think that's one of the things that got us super excited about the January transactions that we just closed, just given how much was concentrated under Pioneer in those two transactions. Now the combination of Exxon and Pioneer is about 2,000 of our development inventory locations, which is about 45% of our Permian inventories underneath the combined Pioneer-Exxon. I think what we've also seen, this is just from Exxon's public disclosures, where they talk about how the Pioneer acreage is some of the highest quality in the Midland Basin. Relative to what Pioneer's oil growth forecasts were in the low single-digit rates, Exxon has been talking about an 8-12% annual Permian growth over the next four years, which we anticipate a meaningful amount coming from the Pioneer Okay, that's a great color.

So it certainly is a lot more concentration under a handful of names you know I think that's one of the things that got us Super excited with the the January transactions that we just closed just given how much was concentrated under pioneer in those two transactions you know now that the combination of Exxon and pioneer.

As you know about 2000 of our development inventory locations, which is about <unk>.

45% of our our of our Permian Oh inventories underneath the the combined pioneer Exxon you know and I think what we've also seen this is just from exxon's public disclosure, where they talk about how the pioneer acreage just some of the highest quality in the Midland basin and relative to.

What pioneer's oil growth forecast, where in the <unk>.

Selling single digit rates Exxon has been talking about.

8% to 12% annual Permian grows over the next four years, which we anticipate a meaningful amount coming from the pioneer acreage.

Okay. That's great color. Thanks for that Rob that's all for me.

Rob: Thanks for that, Rob. That's all for me. Thank you. The next question is from Luke Davis from RBC; please go ahead. Just with respect to the most recent permanent acquisitions, can you remind me what the impact they were expected to have on 2024 volumes and if any of your kind of initial assumptions or expectations. Hi Luke, it's Rob here again.

Thank you.

The next question is from Luke Davis from RBC. Please go ahead.

Hi, good morning, guys.

With respect to the most recent Permian acquisitions can you remind me what the impact they were expected to have on 2020 core volumes and if any of your kind of initial assumptions or expectations have changed since the closing.

Yeah, Rob here again.

Rob: So in terms of, we expect the two transactions to add about 600 BOE a day to our 24 production. So we're sort of expecting in that 3% growth range for our existing U.S. assets plus the 600 BOE a day from our most recent acquisitions. I think one of the things that really gets us excited about that deal is that we've added about 30% to our acreage footprint with those two transactions, with really modest overlap with the existing Permian-Midland footprint that we have. So we're really kind of excited about getting more of that, what we like to call, wall-to-wall carpeting across the Midland Basin. In January, at least, we are capturing one in five of the rig activity in the Midland Basin, kind of up from that one in seven number that Dave mentioned in his remarks in 2023. That's helpful.

So in terms of its can we expect the two.

Actions to add about 600 BOE a day to our 24 production. So we're sort of expecting you know in that 3% growth range for our exit for our existing U S assets plus the 600 BOE a day from the from the most recent acquisitions I think one of the things that really gets us.

I'm excited about that deal. It's just you know we've added about 30% to our acreage footprint with those two transactions with really modest overlap with the existing Permian Midland footprint that we have so we're really kind of.

Getting more of that what we like to call a wall to wall carpeting across the Midland Basin.

First in January at least we are capturing one in five of the AR of the rig activity in the Midland Basin, you know kind of up from that one in seven number that Dave mentioned in his remarks in 2023.

That's helpful. Thanks, and historically you've provided some context just in terms of the amount of deals that you've evaluated I'm. Just curious if you can give us a sense for how much is currently available what do you guys have been looking at and sort of contextualize that was in the last year or two sure.

Rob: Thanks. And historically, you've provided some context, just in terms of the amount of deals that you've evaluated. Just curious if you can give us a sense for how much is currently available, what you guys have been looking at, and sort of contextualize that within the last year.

We in Q4 still looked at about 20 deals coming across our our plate, but 1 billion and a half worth of value that sort of on trend for the over 100 deals that came across that we actually evaluated saw a lot more than that but those are the ones that we actually looked at most of those are still in the U S side 70 <unk>.

Rob: In Q4, we still looked at about 20 deals coming across our plate, about a billion and a half worth of value. That's sort of on trend for the over 100 deals that came across that we actually evaluated. I saw a lot more than that, but those are the ones that we actually looked at. Most of those are still on the US side, 70% focused on the US front. We probably took our foot off the accelerator a little bit, just given we got traction on these two deals in the late October, November timeframe, so we sort of turned our attention to evaluating these and getting these two deals across the finish line. 2024 looks strong again.

Sent you know focused on the on the U S front, we probably took our gas put off that accelerated a little bit you know just given we've got traction on these two deals in late October November timeframe, so sort of turned our attention to you know to evaluating these and getting and getting these two deals across the finish line.

2024 looks strong again, yeah, we probably were down and they are in.

Rob: We probably were at the NAIT conference in Houston a few weeks back, and just the amount of conversations and opportunities that have come out over the last three weeks since NAIT have been pretty impressive. That's helpful. Thank you. Thank you. The next question is from Patrick O'Rourke from ATB Capital Markets. Please go ahead.

And then Nate conference in Houston, a few weeks back and just amount of of conversations and opportunities that have come out over the last three weeks since name has been pretty impressive.

That's helpful. Thank you.

Thank you. The next question is from Patrick O'rourke from ATB capital markets. Please go ahead.

Rob: Okay, guys, good morning. And thank you for taking my question here. I'm just kind of wondering, maybe shifting back, and this will be more Canadian oriented. But in terms of the leasing activity, I think that you guys had a record year in 2023 here, you spoke a little bit about it in the preamble there, just wondering if you could sort of unpack a little bit more granularity in terms of what the, you know, the key trends you're seeing. And then I think you spoke to some of the multilateral development in terms of your inventory of available lands for leasing, sort of where you sit in that life cycle and, you know, where the land rush is, maybe inning wise. Yeah, Rob here, Patrick.

Yeah.

Oh, Hey, guys. Good morning, and thank you for taking my question here I'm, just kind of wondering maybe shifting back and this would be more Canadian oriented but in terms of the leasing activity I think that you guys had a record year in 2023 here you spoke a little bit to it in the preamble. There just wondering if you can sort of unpack a little bit more.

More granularity in terms of what the you know the key trends Youre seeing and then I think you spoke to some of the multilateral development in terms of your inventory of available land for leasing sort of where you sit in that lifecycle and and you know where the land rush is maybe inning wise.

Yeah.

Rob: So a little more color on it, as Dave mentioned, 122 leases, 41 counterparties, you know, the vast majority of it was concentrated in two plays, southeast Saskatchewan, Mississippian, and Manville Heavy Oil in eastern Alberta. That's where, gosh, 80 plus percent of the leasing was. You know, Duvernay would be the next largest amount, you know, amount, but that'd be a lot smaller, you know, than those other two.

Rob here Patrick So they are a little more color on it as Dave mentioned 122 leases 41 Counterparties.

The vast majority of bad, Wisconsin traded and into plays a southeast Saskatchewan Mississippian.

Mississippian and Danville heavy oil in eastern Alberta, Yeah, that's where gosh 80 plus percent of the of the leasing was duvernay would be the next largest amount, but that would be a lot smaller than those other two you know the nature of the of the you know the company is taking the leases are set up on that.

Rob: You know, the nature of the companies taking the leases is sort of on that private slash, you know, junior E&P front. And they've already been, you know, active, you know, on, you know, probably importantly, translating that leasing into drilling. We've already seen about 15 of those 122 leases, you know, have spuds on them.

<unk> Slash junior E&P front, and they've already been active on you'll probably importantly, translating that leasing into drilling and we've already seen about 15 of those 122 leases having spots on them. So that's.

Rob: So, you know, that's encouraging for us, you know, we are anticipating, you know, a rotation in our Canadian drilling results from, you know, maybe less Viking, but more southeast Saskatchewan and more Manville Heavy Oil. In terms of the inning that we're at, I mean, I think there's a lot more opportunity set that we see in both southeast Saskatchewan and Manville Heavy, in particular. You know, so I'd say, you know, early innings would be my comment.

That's encouraging for US you know, we all are anticipating a a rotation in our AR and our Canadian drilling.

Solids from maybe less Viking, but more southeast Saskatchewan and more manville heavy oil you know in terms of what inning that we're at I mean, I think there's a lot more opportunity set that we see in both southeast Saskatchewan and mental heavy in particular.

I'd say early early innings of the AR would be it would be my comment.

Rob: I would just add to that a little bit, Patrick, that we talk about multilateral drilling in the heavy oil, but certainly, multilateral drilling has been rolling out in southeast Saskatchewan a little bit with a number of operators. You're looking at the Bakken with the multilateral, and I see some licensing in southwest Saskatchewan now in that Shonavon area, so I think this multilateral technology, you know, that's where I think we're in some of the earliest innings where we can unlock value. And so you're watching that closely, and as Rob referenced, we have lots of opportunities that we see on our land base that will really benefit from some of that work that's being tested. And so I guess the follow-up question for me would be, you know, in terms of your confidence in the productivity and the results you're going to see, and obviously, you know, the challenge with providing guidance on the production side is that you don't have full control over the drill bit; you're at the behest of some of these producers that have leased you out.

We just I, just got a little bit Patrick.

Can we talk about the multilateral drilling in the heavy oil, but certainly multilateral drilling has been rolling out our southeast Saskatchewan, a little bit with the number of operators you are looking at the at the Bakken with the multilateral season licensing.

In southwest Saskatchewan now in that sort of an area. So I think as you know this multilateral technology.

That's where I think we're in some of the earliest innings and where we can unlock unlock value and so are you watching that closely and as Rob referenced we have lots of opportunities.

Opportunities that we see on our land base.

That will really benefit from some of that work that's being tested.

And so I guess the follow up question for me would be you know in terms of your confidence in the productivity and the results you can see them. Obviously, you know the challenge with providing guidance on the production side, you don't have full control over the drill bit you're at the behest of some of these producers that have.

We saw a few I'm just wondering you know what sort of risking and sort of parameters or outlook. You have in terms of when you can have more confidence.

Rob: I'm just wondering, you know, what sort of risking and sort of parameters or outlook you have in terms of when you can have more confidence in providing some, you know, guidance to potential growth there, or how that kind of, you know, evolves over time here in terms of a leg between lease to conversion to, you know, forward outlook for production there. Yeah, I mean some of those 122 leases, about 10% of those we actually had drilling obligations associated with those, so you get some perspective on it. We've kept the average term on those leases to two years, so it does help in terms of incentivizing the driller to either get after it or the land comes back to us and we get to do it all over again. You're right, coming out of spring breakup is really when we'll be able to have a much better feel for how the operators are feeling with some recent softness, particularly on the gas side, but also on the oil side as well. Okay, thank you. The next question is from Aaron Bilkoski from TD Cowen. Sorry, please go ahead. Thanks. Morning guys.

And providing some.

Guidance to potential growth, there or how that kind of.

Oh balls over time here in terms of a lag between lease to a conversion of forward outlook for production there.

Yeah, I mean, some of those 122 leases about about 10% of those we actually had no drilling obligations associated with those so you get some you get some perspective on it and we've kept the average term on those leases to two years. So it does help you know in terms of incentivizing. The you know the drill.

Her to either you don't get after it or the land you know it comes back to us and we got to do it all over again.

You know you're right coming out of spring breakup is really when we'll be able to have a much better feel for sort of how the how the operators are are feeling with some recent softness, particularly on the gas side, but also on the oil side as well.

Okay. Thank you.

Thank you.

The next question is from Aaron Bykowski from Pete from TD, Colin Sorry. Please go ahead.

Thanks, Good morning, guys. So I wanted to follow up a little bit on the look and Patrick's questions you talked about U S assets growing three or 4% before the acquired volumes.

Rob: So I wanted to follow up a little bit on Luke and Patrick. You talked about U.S. assets growing 3% to 4% before the acquired volume. How do you see Canadian production trending throughout the year? And I guess the follow-up question to that is, how much of that opportunity you just spoke about is baked into your 2024 guidance? Aaron Rob here.

Do you see the Canadian production trending throughout the year and I guess a follow up question that is how much of that opportunity. You. Just spoke about is baked into your 2024 guidance already.

And Rob here.

Rob: So in terms of our Canadian production, you know, I think we are experiencing, there's sort of two things that are, that are causing, what I would sort of call a modest downtick in the Canadian volumes. One, there's probably a lot more detail that we need to give, but we'll give it anyway. You know, one, we sort of have a production volume royalty agreement with Tourmaline that is contractually declining by about 100 BOEs a day. You know, this is natural gas volume.

So in terms of our Canadian production I think we are sort of two things that are that are that are causing a yeah, what I would sort of call a modest downtick on the on the page volumes, one there's probably a lot more detail that we need to get but we'll give it anyways.

We sort of have a a production volume royalty agreement with <unk> that is contractually declining by about 100 Boe's a day. This is a natural gas.

Volume so.

Rob: So, you know, the revenue impact is like less than half a percentage point, you know, so it's a very marginal impact on, on, on what matters the most, being cash flow, but does have a volume impact. And that's something that we're just, we're just needing to manage. You know, the other thing I think is that we just talked about it with Patrick in terms of the transition that we're seeing where there's going to be less Viking drilling and more southeast Saskatchewan, more man-filled heavy oil drilling. So the lease conversion that we're expecting is baked into our 24 numbers, it's in the range that we provided, but those sort of two factors on the Canadian side, it's probably going to be where we believe our Canadian volumes Our Canadian portfolio has been 9600BV a day for the last 3 years, and that is only with a modest early-stage investment in Clearwater. Even though 95% of our drilling activity is oil-focused, those gas wells do have more of a BOE impact, although, to Rob's point, not much of a fund flow or cash flow impact on our business.

The revenue impact is like less than half a percentage point. So it's very marginal impact on our on what that what matters. The most of the cash flow, but it does have a volume impact and that's something that we're just not really needing to manage you know the other I think is that we just talked about it with our with Patrick in terms of.

The.

<unk> changed the transition that we're seeing where theres going to be in our portfolio less Viking drilling and more southeast Saskatchewan more manville heavy oil drilling. So those that's those are the lease conversion that we're expecting.

Is baked into our 24 numbers in that and Theyre in Theyre in the range that we provided.

But those are the two factors and the Canadian side, it's probably going to be where are we.

We believe our Canadian volumes are going to be flat to ly slightly one ish percent down.

And then maybe just a little bit more color there. The dark him portfolio you always been 9600 E. B a day for the last three years 90 620 <unk>.

And without just only with your modest.

Early stage and investment in the Clearwater.

And so when we look at that.

Even though that 95% of our drilling activity is oil focused those gas wells do have you more of a bowie impact although to Rob's point not much of a a funds flow or cash flow impact for our business and so when we look at Canada, you'll just taking a little bit more conservative.

Rob: When we look at Canada, we're just taking a little bit more of a conservative stance, given the weakness in gas prices. Again, it's got a pretty strong history of delivering, and as we look at those leases that we've got signed, and we look at the activity that we're seeing, that's kind of why we feel it's probably going to be another 4th year in a row of plus or minus that same 9600BV a day, with the contractual step-down in that PVR of 100BV a day of gas. We think that we can make that up as we go throughout the year, but those are later-in-year volumes that will come out of drilling on the new lands or the leased lands. Thanks. Can I ask you another question?

[laughter] perspective.

Given the weakness in in in gas pricing.

And but you know again, it's got a pretty strong history of delivering and as we look at those leases that we've got signed we look at the activity that we're seeing that's kind of why you were feeling yes, it's probably going to be another year of a fourth year.

In a row of plus or minus that same 96 kind of be a day you know with the contractual step down in that D V. R of.

100, Boe's a day of gas the but we think that we can make that up as we go throughout the year, but you know those are like later in your volumes that will come out of that of the drilling on the on the new labs are the are the least lance.

Thanks could I ask another question and last year's annual report you mentioned pretty hold was advancing the technical due diligence on several modest sized development stage opportunities, including potash I guess, what did you learn from this process and are you still looking at these types of non energy royalty structures.

Rob: In last year's annual report, you mentioned Freehold was advancing the technical due diligence on several modest-sized development stage opportunities, including Potash. I guess, what did you learn from this process? I guess, what did you learn from this process? He's still looking at these types of non-energy royalties. Yeah, we're still looking at them, Aaron, you know, like.

Yeah, we're still looking at them and you know like.

We've you know.

Rob: Yeah, we've had, you know, I'll call it, some really small level success on the potash. You're really acquiring some additional mineral title on that potash side. To date, it hasn't been a needle mover.

We've had you know I'll I'll call some really small.

No level of success on the potash or Youre really acquiring some additional mineral title on the potash side to date it hasn't been a needle mover.

Rob: It's good business. Some of the other opportunities that we're digging into a little bit more on the due diligence side have fallen away, some of it with regulatory concerns that we've stepped away from. And so we're still looking at a lot of stuff, but we take a cautious approach. We do recognize that when you look at the returns that we're getting on the U.S. investments, since we really stepped into the U.S., we've already recovered half of that. Investments through revenue, and you know, it contributed $131 million in revenue last year and 5,100 barrels a day. We've got to be pretty careful when we evaluate an opportunity outside of oil and gas that it can compete for those returns or, in the long term, really make us a much better sustainable company.

It's a good business if somebody offers other opportunities that we were digging into a little bit more on a due diligence side of it.

Have fallen away.

Some of it.

With regulatory.

Concerns that are that we stepped away and so we're still looking at a lot of stuff, but I.

Our cautious approach and we do recognize that you know when you look at the returns that we're getting on the U S and investments.

And you really since we really stuck into the into the U S. We've already recovered half of that.

Investments in revenue in <unk> and contributed $131 million of our revenue last year and 5100 barrels a day.

So we're gonna be pretty careful when we you.

Evaluate I don't know.

Tony outside of.

Oil and gas that you can compete for those returns.

Or in in a long term really make us a much better sustainable company. So we're looking at a lot of stuff.

Rob: So, we're looking at a lot of stuff, but we're taking a cautious approach, you know, we don't want to get ahead of ourselves, you know, knowing what we can invest in our base business right now. Thanks for the answer. I appreciate it. Thank you. Once again, please press star 1 if you have a question. And the next question is from Christopher Jones from Haywood Securities. Please go ahead.

But taking a cautious approach we don't want to get ahead of ourselves.

Knowing what you know what we can invest in in our interface business right now.

Thanks for the answer I appreciate that.

Thank you once again, please press star one if you have a question and the next question is from Christopher Jones from Haywood Securities. Please go ahead.

Christopher Jones: Hey, thanks for taking my question. I'm just coming back to the M&A team. Freehold has been active in acquiring royalty assets in the U.S., but what is your view on corporate consolidation within the mineral space in the U.S.? Do you think it will play catch up with the E&P consolidation that the market has seen? And what opportunities would this create for Freehold? And then maybe just remind us of some of the different dynamics in the U.S. versus Canada. What was the last part of your question? Yeah, just maybe remind us of some of the different dynamics in the US versus Canada and kind of how that relates to the potential. Yeah, I think that, you know, from the consolidation opportunities. We did see a little bit of that with Citio and Brigham early last year on the Royalty front, but we don't get a sense that there's a lot of discussion there, and nor do we think that it makes a lot of sense for us at this point.

Hey, Thanks for taking my question just coming back to the how much do you see freehold has been active in inquiry royalty assets in the U S. But.

What is your view on corporate consolidations within the mineral space in the U S. Do you think it will play catch up with it.

The E&P consolidation that the market has seen and what if any opportunities with this crazy for freehold and then maybe just remind us of some of the different dynamics in the U S versus Canada as it relates to a potential acquisition.

What was the last part of your question there Chris.

Yeah, just maybe remind us of some of the different dynamics in the U S versus Canada, and kind of how that relates to potential acquisition opportunities.

Yeah, but you know from the consolidation.

Opportunities.

Yeah, we did see a little bit of that our with our CTO and Brigham.

Is it early to early last year.

Hum.

On the royalty front.

We don't get a sense that are you know theres a lot of discussion there.

And nor do we view that it makes a lot of sense for us at this point when you look at our U S shareholder base versus our shareholder base, which is a predominantly Canadian shareholder base. When you look at it.

David Michael Spyker: When you look at a U.S. shareholder base versus our shareholder base, which is a predominantly Canadian shareholder base, when you look at we're a dividend-paying company in Canada and U.S. shareholders in a U.S. consolidation, at this point, we're not looking at that as an opportunity. We see, You know, more opportunity just to continue to add land like we did with this December transaction that closed in January. We can just be really, really targeted on the land that we want to bring into the portfolio. We've kind of got a bit of a sweet spot to identify that we're focusing on, and as Rob referenced, your goal, ideally, in acquisition work would be to have wall-to-wall carpeting or full coverage in the sweet spot, so that any drilling activity that would happen in those areas would be on land that we have a royalty interest So if we think about a broader acquisition strategy, that's how we're thinking about it right now. So it's much more... You know, bespoke type acquisitions that really fit specific criteria in building out sweet spots in the basins that we have identified.

So we're a dividend paying company in Canada and U S shareholders.

In the U S consolidation at this point you know, we're not looking at I thought as a as an opportunity we see.

You know more opportunity just to continue to add land like we did with this December transaction that closed in January.

January we can just be really really targeted on on the land that we want to bring into the portfolio. We've kind of got a bit of a sweet spot are identified that we're focusing on and as Rob referenced your goal ideally in in our acquisition work would be the high.

A wall to wall carpeting or fault coverage and in that sweet spot. So that any drilling activity that would happen in those areas would be on land that we have a royalty interest in so if we think broader acquisition strategy because that's how we're thinking about it right now so it's much more.

You don't bespoke type acquisitions that really fit a specific criteria as in a and b.

Our sweet spot in the basins that we've identified.

Rob: Chris, a few of the big differences between Canada and the U.S., the U.S., in the areas that we care about, really Texas, that's effectively 100% privately owned mineral title as opposed to Canada, where the vast majority is held by the provincial crown governments. So the opportunity set, not only do you sort of have in a Midland Basin where there's almost 5 million barrels of oil production daily, but you also have 100% mineral title that's available. Multiply those two together, and you have a significant opportunity set. To kind of put that in context, the average mineral title royalty in Texas is about 25%. Our average net royalty interest in Texas is 0.5%. So even in the land that we have, there's another 24.5% interest that we can continue to have. So that's a bit of why the opportunity set is as big as it is in the U.S., and it's just so, even though there are half a dozen public companies, they control about 2% of the overall value of mineral title that's available in the U.S.

And you know Chris a few of the big differences between Canada and the U S does the U S. In the areas that we care about really being Texas, and that's effectively 100% privately owned.

Mineral title as opposed to Canada, which the vast majority is held by the provincial Crown governments. So you know the opportunities that not only do you sort of have like in the Midland Basin, where there's you know almost 5 million barrels a day of oil production.

You also have 100% mineral title that's available multiply those two together and you just have a significant opportunity set you know it's kind of.

Put that in context, the average mineral title royalty in Texas is about 25% you know our average net royalty interest in Texas is 0.5%. So even on the lands that we have you know there's another 24, 5% interest that we cut off that we can continue to add so yeah, that's a bit of why the opera.

<unk> said it as big as it is in the U S and it's just so.

It is even though there's half a dozen of the public companies they control about 2% of the overall value of.

Mineral title that's available in the U S.

Great. Thank you for that.

Thank you.

Operator: Thank you. There are no further questions registered at this time. I'd like to turn the call back over to Mr. Spyker.

There are no further questions registered at this time I would like to turn the call back over to Mr. Spector.

David Michael Spyker: Alright, thank you everybody for participating today, good active dialogue, and we appreciate the questions, and we look forward to catching up with everybody in May on our Q1 results. Thank you. Thank you. The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation. This conference is no longer being recorded.

Alright. Thank you everybody for participating today are good active dialog and we appreciate your questions and we look forward to catching up with.

Everybody in in May on our Q1 results. Thank you.

Thank you. The conference has now ended please disconnect your lines at this time and we thank you for your participation.

Okay.

Yeah.

Okay.

This conference is no longer being recorded.

Uh huh.

Hey.