Freehold Royalties Eyes Acquiring US Royalty Assets In Eagle Ford Oil Basin For US$180 Million

Freehold Royalties Ltd. (TSX: FRU) announced on Wednesday that it has entered into a definitive agreement with an unnamed private seller to acquire U.S. royalty assets located in the Eagle Ford oil basin in Texas. The transaction is reported to be for a total consideration of US$180 million.

The acquisition concerns a concentrated royalty land position in the basin covering approximately 92,000 drilling unit acres with an average royalty rate of 1.8%.

Should the transaction close, production and funds from the acquired assets will represent approximately 18% and 22% of the company’s portfolio, respectively. It is also expected that the acquisition will boost the company’s production volume by 40-50% from its 2020 performance, projecting an average of 13,500-14,500 boe/d for 2022.

Furthermore, the company relayed that the forecasted 2022 royalty production of 2,500 boe/d out of the acquired assets is expected to generate approximately $46 million.

The Alberta-based royalty company plans to finance the acquisition of the US royalty assets partly from a $150 million bought deal treasury offering of subscription receipts. Through the offering made with a syndicate of underwriters led by RBC Capital Markets and TD Securities Inc., the company plans to issue 16,580,000 subscription receipts at $9.05 per subscription receipt.

The firm also started requesting from its syndicate of banks to increase its credit facilities to $230 million from $180 million as part of financing the planned acquisition.

Freehold Royalties last traded at $9.50 on the TSX.

Information for this briefing was found via Sedar and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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