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Royalty Interest Working Interest ----------------------------------------------------------- Developed Undeveloped Developed Undeveloped ----------------------------------------------------------- Gross (1) Gross (1) Gross (1) Net Gross (1) Net----------------------------------------------------------------------------Alberta 1,537,959 380,780 111,672 16,793 26,695 5,480Saskatchewan 294,474 199,025 16,703 5,062 7,427 4,417Ontario 88,858 184,834 - - - -British Columbia 84,996 26,571 19,247 1,265 6,131 101Manitoba 6,257 1,584 159 37 - -----------------------------------------------------------------------------Total 2,012,544 792,794 147,781 23,157 40,253 9,998-------------------------------------------------------------------------------------------------------------------------------------------------------- Total Acreage ----------------------------------------------------------- Developed Undeveloped ----------------------------------------------------------- Gross (1) Gross (1)----------------------------------------------------------------------------Alberta 1,649,631 407,475Saskatchewan 311,177 206,452Ontario 88,858 184,834British Columbia 104,243 32,702Manitoba 6,416 1,584----------------------------------------------------------------------------Total 2,160,325 833,047--------------------------------------------------------------------------------------------------------------------------------------------------------(1) Gross acres are the total number of acres in which we have an interest.(2) The royalties received from the sale of oil, natural gas and potash produced from the leased mineral title lands are determined by the individual lease agreements. All but approximately 107,000 gross acres of our mineral title lands are currently leased to third parties.(3) Mineral title properties owned by a number of third party oil and gas companies in respect of which gross overriding royalties, varying from 4.7% to 6.5%, have been reserved to Freehold.(4) Title lands are held in perpetuity.(5) Gross overriding royalty lands consist of properties leased by a number of third party oil and gas companies in respect of which contractual royalties or net profits interests have been reserved to Freehold.Quarterly Review 2012 ------------------------------------------------ Q4 Q3 Q2 Q1 ------------------------------------------------FINANCIAL ($000s, except as noted)Revenue, net of royalty expense 43,832 40,294 34,498 43,036Dividends declared 27,787 27,616 27,399 26,766 Per share ($) (1) 0.42 0.42 0.42 0.42Net income (2) 13,431 11,975 7,862 13,060 Per share, basic and diluted ($) (2) 0.20 0.18 0.12 0.21Cash flow from operating activities 38,183 36,212 27,402 36,335 Per share ($) 0.58 0.55 0.42 0.58Funds from operations (3) 31,475 26,272 20,522 25,613 Per share ($) (3) 0.48 0.40 0.31 0.41Dividends paid in shares (DRIP) 6,672 7,013 6,940 6,789 Average DRIP participation rate (%) (4) 24 25 25 26Property and royalty acquisitions (net) 243 10,789 (99) 49,919Capital expenditures 7,743 9,160 6,598 13,245Long-term debt 18,000 25,000 23,000 18,000Shares outstanding Weighted average, basic (000s) 66,091 65,677 65,159 62,571 At quarter end (000s) 66,270 65,879 65,440 64,993----------------------------------------------------------------------------OPERATING ($/boe, except as noted)Daily production (boe/d) (5) 9,510 8,654 8,501 8,733 Royalty interest production (%) 66 68 76 74Average selling price 51.55 51.71 45.74 54.80Operating netback (3) 44.59 45.59 40.64 49.48Operating expenses 5.51 5.02 3.96 4.68 Working interest properties 16.36 15.47 16.47 17.86Net general and administrative expenses (6) 2.25 1.88 2.13 3.31----------------------------------------------------------------------------BENCHMARK PRICESWTI crude oil (US$/bbl) 88.18 92.22 93.49 102.93Exchange rate (Cdn$/US$) 1.01 1.01 0.99 1.00Edmonton Par crude oil (Cdn$) 83.99 84.33 83.95 92.18Western Canada Select (WCS) (Cdn$/bbl) 69.43 69.99 71.29 81.61WTI/Edmonton Par differential ($/bbl) (4.19) (7.89) (9.54) (10.75)Edmonton Par/WCS differential (Cdn$/bbl) (14.56) (14.34) (12.66) (10.57)AECO natural gas (Cdn$/Mcf) 3.00 2.19 1.83 2.52----------------------------------------------------------------------------SHARE TRADING PERFORMANCEHigh ($) 22.45 20.34 19.67 21.59Low ($) 19.62 17.83 17.25 19.16Close ($) 22.40 19.76 18.44 19.59Volume (000s) 7,435 5,656 7,483 8,076-------------------------------------------------------------------------------------------------------------------------------------------------------- 2011 ------------------------------------------------ Q4 Q3 Q2 Q1 ------------------------------------------------FINANCIAL ($000s, except as noted)Revenue, net of royalty expense 44,217 34,614 39,560 35,322Dividends declared 25,585 25,322 25,111 24,950 Per share ($) (1) 0.42 0.42 0.42 0.42Net income (2) 16,033 11,290 16,717 11,219 Per share, basic and diluted ($) (2) 0.26 0.19 0.28 0.19Cash flow from operating activities 32,595 30,255 31,424 24,096 Per share ($) 0.54 0.50 0.53 0.41Funds from operations (3) 38,245 28,772 33,891 27,322 Per share ($) (3) 0.63 0.48 0.57 0.46Dividends paid in shares (DRIP) 10,232 8,765 7,798 6,695 Average DRIP participation rate (%) (4) 40 35 31 27Property and royalty acquisitions (net) (195) 7,297 44 321Capital expenditures 10,910 5,537 4,537 4,665Long-term debt 48,000 51,000 54,000 61,000Shares outstanding Weighted average, basic (000s) 60,811 60,198 59,716 59,343 At quarter end (000s) 61,141 60,492 59,954 59,536----------------------------------------------------------------------------OPERATING ($/boe, except as noted)Daily production (boe/d) (5) 7,773 7,195 7,445 7,490 Royalty interest production (%) 74 72 77 76Average selling price 61.90 52.80 57.61 52.51Operating netback (3) 56.56 46.86 53.82 48.96Operating expenses 5.28 5.43 4.57 3.44 Working interest properties 19.91 19.47 19.73 14.32Net general and administrative expenses (6) 2.05 2.16 2.36 3.75----------------------------------------------------------------------------BENCHMARK PRICESWTI crude oil (US$/bbl) 94.06 89.75 102.56 94.02Exchange rate (Cdn$/US$) 0.98 1.02 1.03 1.01Edmonton Par crude oil (Cdn$) 97.35 91.74 103.07 87.97Western Canada Select (WCS) (Cdn$/bbl) 85.48 70.63 82.09 70.19WTI/Edmonton Par differential ($/bbl) 3.29 1.99 0.51 (6.05)Edmonton Par/WCS differential (Cdn$/bbl) (11.87) (21.11) (20.98) (17.78)AECO natural gas (Cdn$/Mcf) 3.47 3.72 3.74 3.77----------------------------------------------------------------------------SHARE TRADING PERFORMANCEHigh ($) 19.75 21.58 23.28 22.93Low ($) 14.51 16.04 19.37 19.86Close ($) 19.41 16.36 19.64 22.75Volume (000s) 7,114 7,780 5,317 7,921--------------------------------------------------------------------------------------------------------------------------------------------------------(1) Based on the number of shares issued and outstanding at each record date.(2) Net income and net income per share for the three months ended March 31, 2011 have been restated for revisions made to deferred tax.(3) See Non-GAAP Financial Measures.(4) Average participation in Freehold's DRIP ranged between 24% and 40% over the past eight quarters and is subject to change at the participants' discretion.(5) Reported production for a period may include minor adjustments from previous production periods.(6) Excludes share based and other compensation.Consolidated Balance Sheets December 31 December 31($000s) (unaudited) 2012 2011--------------------------------------------------------------------------------------------------------------------------------------------------------AssetsCurrent assets: Cash $ 102 $ 164 Accounts receivable 23,225 34,763---------------------------------------------------------------------------- 23,327 34,927Deposit on acquisition - 5,000Exploration and evaluation assets 25,905 25,045Petroleum and natural gas interests 399,005 363,967---------------------------------------------------------------------------- $ 448,237 $ 428,939--------------------------------------------------------------------------------------------------------------------------------------------------------Liabilities and Shareholders' EquityCurrent liabilities: Dividends payable $ 9,278 $ 8,560 Accounts payable and accrued liabilities 12,743 14,883 Current taxes payable 23,095 - Current portion of share based and other compensation payable 2,108 3,876---------------------------------------------------------------------------- 47,224 27,319Asset retirement obligation 16,714 14,282Share based and other compensation payable 1,290 1,289Long-term debt 18,000 48,000Deferred income tax liability 49,194 59,163Shareholders' equity: Shareholders' capital 422,728 323,115 Contributed surplus 2,036 1,480 Deficit (108,949) (45,709)---------------------------------------------------------------------------- 315,815 278,886---------------------------------------------------------------------------- $ 448,237 $ 428,939--------------------------------------------------------------------------------------------------------------------------------------------------------Consolidated Statements of Income and Comprehensive Income Three Months Ended Year ended(unaudited) December 31 December 31($000s, except per share and weighted average data) 2012 2011 2012 2011----------------------------------------------------------------------------Revenue: Royalty income and working interest sales $ 45,794 $ 45,304 $ 168,134 $ 157,910 Royalty expense (1,962) (1,087) (6,474) (4,197)---------------------------------------------------------------------------- 43,832 44,217 161,660 153,713----------------------------------------------------------------------------Expenses: Operating 4,820 3,772 15,598 12,782 General and administrative 1,972 1,468 7,746 7,029 Share based and other compensation 999 1,268 2,371 2,190 Interest and financing 421 610 2,235 2,907 Depletion and depreciation 16,372 13,603 64,576 49,251 Accretion of asset retirement obligation 107 83 381 344 Management fee 1,072 857 3,808 3,401---------------------------------------------------------------------------- 25,763 21,661 96,715 77,904----------------------------------------------------------------------------Income before taxes 18,069 22,556 64,945 75,809Income tax: Current expense 5,063 80 27,792 80 Deferred expense (recovery) (425) 6,443 (9,175) 20,470---------------------------------------------------------------------------- 4,638 6,523 18,617 20,550----------------------------------------------------------------------------Net income and comprehensive income $ 13,431 $ 16,033 $ 46,328 $ 55,259----------------------------------------------------------------------------Net income per share, basic and diluted $ 0.20 $ 0.26 $ 0.71 $ 0.92----------------------------------------------------------------------------Weighted average number of shares: Basic 66,090,969 60,811,300 64,880,038 60,021,736 Diluted 66,194,503 60,886,218 64,979,074 60,093,840----------------------------------------------------------------------------Consolidated Statements of Cash Flows Three Months Ended Year ended December 31 December 31($000s) (unaudited) 2012 2011 2012 2011----------------------------------------------------------------------------Operating: Net income $ 13,431 $ 16,033 $ 46,328 $ 55,259 Items not involving cash: Depletion and depreciation 16,372 13,603 64,576 49,251 Share based and other compensation 999 1,268 2,371 2,190 Deferred income tax expense (recovery) (425) 6,443 (9,175) 20,470 Accretion of asset retirement obligation 107 83 381 344 Shares issued in lieu of management fee 1,072 857 3,808 3,401 Expenditures on share based and other compensation - - (3,883) (2,440) Expenditures on reclamation (81) (42) (524) (245) Changes in non-cash working capital 6,708 (5,650) 34,250 (9,860)---------------------------------------------------------------------------- 38,183 32,595 138,132 118,370Financing: Issuance of shares, net of issue costs - - 67,597 - Long-term debt (7,000) (3,000) (30,000) (17,000) Dividends paid (21,060) (15,262) (81,436) (67,204)---------------------------------------------------------------------------- (28,060) (18,262) (43,839) (84,204)Investing: Deposit on acquisition - (5,000) 5,000 (5,000) Property and royalty acquisitions (243) 195 (60,852) (7,467) Capital expenditures (7,743) (10,910) (36,746) (25,649) Change in reclamation fund - - - 2,725 Changes in non-cash working capital (2,149) 1,358 (1,757) 980---------------------------------------------------------------------------- (10,135) (14,357) (94,355) (34,411)----------------------------------------------------------------------------Decrease in cash (12) (24) (62) (245)Cash, beginning of period 114 188 164 409----------------------------------------------------------------------------Cash, end of period $ 102 $ 164 $ 102 $ 164----------------------------------------------------------------------------Consolidated Statements of Changes in Shareholders' Equity Year ended December 31($000s) (unaudited) 2012 2011----------------------------------------------------------------------------Shareholders' capital: Balance, beginning of year $ 323,115 $ 286,224 Shares issued for dividend reinvestment plan 27,414 33,490 Shares issued in lieu of management fee 3,808 3,401 Shares issued for equity offering 70,725 - Issue costs, net of tax effect (2,334) ----------------------------------------------------------------------------- Balance, end of year 422,728 323,115----------------------------------------------------------------------------Contributed surplus: Balance, beginning of year 1,480 1,084 Share based compensation expense 556 396---------------------------------------------------------------------------- Balance, end of year 2,036 1,480----------------------------------------------------------------------------Deficit: Balance, beginning of year (45,709) - Net income and comprehensive income 46,328 55,259 Dividends declared (109,568) (100,968)---------------------------------------------------------------------------- Balance, end of year (108,949) (45,709)----------------------------------------------------------------------------Total shareholders' equity $ 315,815 $ 278,886----------------------------------------------------------------------------
