Freehold Royalties Q2 Earnings Call Highlights

Strong quarterly results: Freehold Royalties reported C$78 million in Q2 funds from operations, up 30% sequentially, as higher commodity prices lifted revenue. The company returned C$44 million to shareholders through dividends and reduced net debt to C$251 million. Production guidance maintained: Quarterly production averaged 15,622 BOE per day, with liquids representing 66% of volumes. Freehold kept its 2026 guidance at 15,500–16,300 BOE per day, supported by a 35% increase in drilling activity and expected production growth later in the year. Growth and capital allocation remain priorities: The company expanded its royalty portfolio through Permian Basin acquisitions while balancing further purchases, debt reduction, dividends and potential share buybacks. Improved Permian gas takeaway capacity also eased pricing and production constraints late in the quarter. Freehold Royalties reported second-quarter 2026 funds from operations of C$78 million as stronger commodity prices and rising drilling activity supported results, while the company maintained its full-year production guidance. Production averaged 15,622 barrels of oil equivalent per day during the quarter, with liquids accounting for 66% of volumes. President and Chief Executive Officer David Spyker said production was in line with expectations previously outlined for the year, reflecting more moderate drilling activity through the second half of 2025 when commodity prices were lower. Spyker said drilling activity has since improved and is expected to support production growth in the latter half of 2026. The company maintained 2026 production guidance of 15,500 to 16,300 BOE per day. Royalty and other revenue totaled C$100 million in the second quarter, up 29% from the first quarter, primarily due to stronger realized commodity prices, according to Chief Financial Officer Brad Monaco. Freehold realized C$122 per barrel for crude oil during the quarter, while its average realized price across oil, natural gas liquids and natural gas exceeded C$69 per BOE, compared with about C$55 per BOE in the prior quarter. Funds from operations rose 30% sequentially to C$78 million, or C$0.47 per share. The company returned C$44 million to shareholders through dividends, representing a 57% payout ratio. Cash costs averaged roughly C$6.50 per BOE, improving from C$7.02 per BOE in the first quarter and C$7.38 per BOE in the second quarter of 2025. Monaco said the cost structure remains a key advantage of Freehold’s royalty business model. Freehold reduced net debt by C$24 million during the quarter to C$251 million. Its net debt-to-trailing-funds-from-operations ratio improved to 1.0 times. The company reported a 35% increase in drilling activity from the first quarter, with 300 gross wells drilled on Freehold lands during the second quarter, compared with 223 wells in the prior quarter. On a net basis, Freehold added 1.8 wells in Canada and 0.9 wells in the United States. Freehold’s production mix remained geographically diversified, with Canada representing about 54% of second-quarter production and the U.S. accounting for 46%. Spyker said the U.S. portion, while smaller by production volume, generated higher revenue and realized pricing and remained an important contributor to cash flow. In Canada, 74 wells were drilled despite spring breakup conditions. Activity was concentrated in oil-focused areas including the Clearwater, southeast Saskatchewan and Mannville heavy-oil regions. Spyker said operational improvements involving longer laterals, completion optimization, reservoir targeting and secondary recovery schemes have helped imp.