Freehold Royalties Ltd.

Q2 royalty and other revenue totaled $100 million, up 29% versus Q1 2026. Funds from operations were $78 million, or $0.47 per share, up 30% from Q1 2026. Average realized pricing improved to just over $69 per BOE from about $55 per BOE in Q1, with crude oil realized at CAD 122 per barrel. Cash costs averaged approximately $6.50 per BOE, down from $7.02 in Q1 and $7.38 in Q2 2025. Production averaged 15,622 BOE/d with 66% liquids. Net debt declined $24 million to $251 million and net debt to trailing FFO improved to 1x. Freehold returned $44 million to shareholders via dividends and invested about $9 million in acquisitions, including about $29 million year to date in Permian mineral title and royalty interests. Management maintained 2026 production guidance at 15,500 to 16,300 BOE/d and said production additions should begin contributing in late 2026 and into 2027.

David Spyker emphasized that the quarter reflected stronger drilling momentum and improving commodity prices after a weaker 2025 period. He pointed to 35% higher drilling activity, 300 gross wells drilled on Freehold lands, and better well economics from longer laterals and improved completions. His tone was constructive on the back half of 2026, saying current activity supports the existing production outlook and that the company is seeing growth in both Canada and the U.S.

Brad Monaco said the quarter benefited from stronger realized prices, with revenue of $100 million and FFO of $78 million, while cash costs improved to about $6.50 per BOE. He highlighted a $24 million reduction in net debt to $251 million and a net debt-to-trailing FFO ratio of 1x, alongside $44 million returned in dividends and $9 million invested in acquisitions. He also framed capital allocation around maintaining flexibility for acquisitions, debt reduction, dividends, and possible buybacks, while noting the company would like to see the payout ratio stay under 60% for a few more quarters before changing the distribution outlook.

Analysts focused on when the recent jump in drilling activity would translate into production, and management said most U.S. activity should ramp into Q4 or Q1, while some Eagle Ford wells may not come on until late 2026 or early 2027. A second theme was well productivity: management said well lengths are up 10% quarter over quarter in the Permian, and year over year productivity is up about 30% in Canada and 15% in the U.S. On capital allocation, management said dividend growth is not imminent; they want to see the payout ratio remain below 60% for several quarters and are also considering the NCIB, balance sheet strength, and acquisition opportunities.