CALGARY, Alberta – Freehold Royalties Ltd. (Freehold) (TSX:FRU) announces that it has closed its previously announced transaction to acquire a high-quality U.S. royalty asset located in the Eagle Ford oil basin in Texas (the Acquired Assets) for US$180 million before closing adjustments (CAD $227 million) (the U.S. Royalty Transaction). The Acquired Assets are expected to significantly enhance the quality of Freehold’s North American royalty portfolio, improving both the near-term and long-term sustainability of Freehold’s dividend while providing further option value to return capital to our shareholders through multiple years of free cash flow growth. The U.S. Royalty Transaction further advances Freehold’s strategy of being positioned in the highest quality development areas across North America, delivering growth and low risk attractive returns to our shareholders.
The Acquired Assets were partially funded by a previously closed bought deal financing whereby Freehold issued 19,067,000 subscription receipts (the Subscription Receipts) at a price of $9.05 per Subscription Receipt for gross proceeds of approximately $173 million, which included the full exercise of the over-allotment option granted to the underwriters.
On closing of the U.S. Royalty Transaction, the net proceeds from the sale of the Subscription Receipts were released from escrow to Freehold to partially fund the purchase price for the Acquired Assets, with the remainder of the purchase price funded by drawing on Freehold’s credit facilities. In addition, as a result of and on closing of the U.S. Royalty Transaction and in accordance with the terms of the Subscription Receipts, each Subscription Receipt was exchanged for one common share of Freehold. Trading in the Subscription Receipts on the Toronto Stock Exchange is expected to be halted today and the Subscription Receipts delisted following the market close today.
Following the exchange of Subscription Receipts for common shares of Freehold, former holders of Subscription Receipts will be entitled to receive the dividend to be paid to holders of record of common shares on September 30, 2021 (provided they have not transferred the Common Shares prior to such date) with payment occurring on October 15, 2021.
Credit Facility Increase
Concurrently with the closing of the U.S. Royalty Transaction, Freehold amended its credit facility agreement with a syndicate of four Canadian banks increasing the committed revolving facility to $285 million and maintaining the operating facility at $15 million. The amended credit facility agreement includes a permitted increase in the committed revolving facility of up to $360 million. Both the committed revolving and operating facilities mature September 28, 2024.
As previously announced, after giving effect to the U.S. Royalty Transaction, Freehold is forecasting a 2022 production guidance range of 13,500-14,500 boe/d, with the midpoint representing a 26% increase above Q2-2021 average production volumes.
Freehold’s common shares trade on the Toronto Stock Exchange in Canada under the symbol FRU.