National Bank analyst Travis Wood has adjusted the price target for Freehold Royalties (FRHLF, Financial), reducing it from C$16 to C$14. Despite the lowered target, the analyst continues to give the shares an Outperform rating, indicating a positive long-term outlook for the company.
FRHLF Key Business Developments
Release Date: March 13, 2025
- Funds from Operations (Q4 2024): $61 million, translating to $0.40 per share.
- Payout Ratio (Q4 2024): 66%.
- Production (Q4 2024): 15,306 BOE per day, with 65% liquids.
- Funds from Operations (Full Year 2024): $231 million, or $1.53 per share.
- Production (Full Year 2024): 14,962 BOE per day.
- Proved Developed Producing Reserves: 30 million BOE, a 5% increase per share.
- Proven Plus Probable Reserves: 65 million BOE, a 10% increase per share.
- Organic Reserve Replacement (2024): 107% on a PDP basis, 109% on proven plus probable basis.
- Reserve Replacement Including Acquisitions (2024): 170% on PDP, 300% on proved plus probable.
- Drilling Activity (2024): Up 15% year over year.
- Expected Production (2025): 15,800 to 17,000 BOE per day, a 10% year-over-year growth at midpoint.
- Liquids Weighting (2025): Expected to be 66%, up from 64% in 2024.
- Annual Dividend: $1.08 per share, paid monthly.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Freehold Royalties Ltd (FRHLF, Financial) achieved a 15% year-over-year production growth in heavy oil, particularly in the Clearwater and Mannville Stack regions.
- The company strategically positioned 45% of its production into tariff-free US light oil basins, enhancing revenue potential.
- Acquisitions in the Midland Basin have significantly increased Freehold's exposure, allowing them to capture interest in one in every three wells drilled, compared to one in every 12 wells the previous year.
- Freehold's portfolio is balanced with an expected 50% revenue contribution from both Canadian and US assets, providing protection against tariff threats.
- The company reported a 10% increase in proved plus probable reserves per share, continuing a multi-year trend of reserves growth.
Negative Points
- The retirement of CFO David Hendry may lead to a transitional period as the company seeks a successor.
- Natural gas assets are not attracting as much capital due to current gas pricing, potentially impacting future growth in this segment.
- The company's debt level is above 1 times, prioritizing debt repayment over potential stock buybacks.
- The Eagle Ford assets are being maintained rather than expanded, which may limit growth in this area.
- The company faces challenges in maintaining a conservative leverage position while pursuing acquisitions, as indicated by a target leverage range of up to 1.5 times.
