Freehold Royalties Ltd
TSX:FRU
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Freehold Royalties Ltd
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Good
morning,
ladies
and
gentlemen,
and
welcome
to
the
Fourth
Quarter
Results
Conference
Call.
I
would
now
like
to turn
the
meeting
over
to
Mr.
David
Spyker.
Please
go
ahead,
Mr.
Spyker.
Good
morning and
thank
you
for
attending.
We're
excited
to
share
our
Q4
2021
results
with
you
this
morning.
Joining
me
today
are
David
Hendry,
our
CFO;
Rob
King,
our
Vice
President-Business
Development;
and
Matt
Donohue,
our
Manager of
Investor
Relations
&
Capital
Markets.
2021 was
a
transformational
year
for
Freehold,
so
we
completed CAD
377
million
in
acquisitions
and
set
record
production
levels
at
14,005 boe
per
day
in
Q4.
We
positioned
our
portfolio
with
the
addition
of
royalty
assets
in
the
premier
oil
and
gas
basins
across
North
America,
including
the
Permian,
Eagle
Ford
oil
basins,
Haynesville
gas
basin,
and
the
Clearwater
oil
play.
With
this
work,
we
have achieved
the
following.
We
delivered
CAD
69
million
in
funds
from
operations,
our
highest
quarterly
funds
flow
ever.
This
equates
to
CAD
0.46
per
share.
We
are increasing
our
dividend
by
33%
from
CAD
0.06
per
share
to
CAD
0.08
per
share,
which
is
CAD
0.96
per
share
annualized,
and
this
commences
with
the
April
payment.
We've
increased
the
dividend
every
quarter
in
2021,
and
this
is
the
highest
dividend
level
since
2015.
We
have
the
most underlevered
balance
sheet
of
our
Canadian
royalty
peers,
exiting
the
year
at
0.5
times
net
debt
to
trading
funds
from
operations.
We're
positioned
to grow
our
royalty
volumes
through
drilling
on
our
existing
land
base.
We
had
250 wells
drilled
on
our
lands
in
Q4.
We
have
9 to
12
rigs
continuously
active
on
our
Canadian
lands
to
start
2022. We
have
had
CAD 1
million
in
lease
bonus
revenue
so
far
this
year,
more
than
the
last
three
years
combined.
We
realized
almost
1000
BOE
per
day
of
production
associated with
our
audit,
compliance
and
royalty
optimization
drilling
initiatives
in
2021.
These
are
the
best
acquisitions
per
se
as
they
don't
require
capital.
With
this all,
we
drew
our
Canadian
production
4%
from
Q3
to
Q4 2021
as
a
result
of
this
robust
drilling
activity.
We
are
very
well
positioned
in
the Permian
oil
basin,
an
area
which
has
set
all-time
high
production
levels
in
the
past
two
consecutive
months
with
half
of
the
active
US
drilling
rigs
operating
there.
We
have
17
rigs
operating
on
our
US
lands
currently
with
45
new
wells
permitted
in
the
last
two
weeks
alone.
And
we
are
receiving
premium
pricing
on
our
US
assets.
We
received
CAD 60
per
BOE
for
our
US
royalty
volumes
in
Q4
2021
compared
to
CAD 53
per
BOE
for our
Canadian
royalty
volumes,
a
27%
pricing
premium
due
to
proximity
to
US
Gulf
Coast.
These
are
material
shifts
to
our
portfolio,
and
with
our
updated
guidance
we
are
projecting
between
CAD 230 million
and
CAD 250
million
in
funds
from
operations
in
2022.
The
dividend
increase
we
announced,
strikes
a
balance
between
returning
value
to
our
shareholders,
further
strengthening
our
balance
sheet
and
providing
the
flexibility
to continue
disciplined
acquisition
work.
The
opportunity
to
further
build
on
the
quality
of
our
portfolio
remains
robust,
and
we
view
it
as
important
to
retain
the
flexibility
to
continue
to
evaluate
and
acquire
assets
that
enhance
our
royalty
portfolio.
I
will
now
pass
the
call
to
Dave
Hendry
to
walk
through
some
of the
financial
highlights.
Thanks,
Dave, and
good
morning,
everyone.
As
commodity
prices
improved
over
the
quarter,
Freehold
continued
to
deliver
on
the
core
financial
aspects
of
its
return
proposition,
providing
a
meaningful
dividend
while
also
providing
investors
with
a
lower
risk
investment,
differentiating
itself
from
traditional
oil
and
gas
E&P
companies.
Funds
from
operations
for
Q4
2021
totaled
CAD 68.8
million,
an
all-time
record
for
Freehold,
or
CAD 0.46
per
share,
up
43%
versus
the
previous
quarter,
and
211%
from
the
same
period
in
2020.
For
the
year,
funds
from
operations
totaled
CAD 189.6
million,
or
CAD 1.39
per
share,
which
is
up
129%
year-on-year.
The
significant
increase
in
funds
from
operations
provided
added
financial
strength
and
flexibility
to
how
we
manage
our
business.
Freehold's
royalty
revenue
and
funds
flow
both
benefited
from
the
strong
upward
momentum
in
crude
oil
and
natural
gas
prices
alongside
growing
production,
particularly
in
the
US,
which
received
better
pricing
relative
to
our
Canadian
assets.
Freehold's
dividend
payout
totaled
35%
for
Q4 2021
versus
24%
in
Q4 2020.
As
previously
mentioned,
we
are
increasing
our
monthly
dividend
from
CAD 0.06
per
share
to
CAD 0.08
per
share,
reflecting
our
continued
measured
response
to
an
improved
commodity
price
outlook,
better
than
anticipated
production
associated
with
increasing
third-party
spending
on
our
royalty
lands
in
2021,
which
is
expected
to
continue
into
2022.
For
Q4
2021,
cash
costs
totaled
CAD 3.57
per
BOE
down
meaningfully
from
CAD 4.03
per
BOE
in
Q4
2020.
For
the
year,
cash
costs
totaled
CAD 3.71
per
BOE
the
lowest
in
Freehold's
history
and
down
19%
versus
the
previous
year.
We
continue
to
drive
efficiencies
in
this
area
alongside
increasing
production
volumes.
Net
debt
totaled
CAD 101.2
million
at
December
31
representing
0.5
times
net
debt
to
12-month
trailing
funds
flow
from
operations.
Overall,
Freehold's
net
debt
increased
by
CAD 35
million
versus
the
previous
year.
The
increase
in
net
debt
reflected
acquisitions
completed
over
the
year
with
stronger
funds
from
operations
also
meaningfully
contributing
to
the
funding of
these
acquisitions.
Freehold's
prudent
strategy
of
maintaining
long
term
debt
to
funds
flow
well
below
1.5
times
alongside
a
longer
term
dividend
payout
target
starting
at
60%
of
funds
from
operations
provides
protection
to
the
business
from
commodity
price
volatility,
while
maintaining
capacity
to
continue
to
grow
through
strategic
and
disciplined
acquisition
work.
In
absence
of
additional
acquisition
work,
Freehold
has
the
optionality
to
potentially
reduce
net
debt
to
zero
by
year-end
2022
based
on
guidance
estimates.
Freehold
expanded
its
credit
facilities
with
four
Canadian
banks
in
the
fall
of
2021
to
CAD 300
million,
with
a
permitted
increase
up
to
CAD 375
million
subject
to
lenders
consent
which
provides
capacity
and
flexibility
to
potentially
fund
further
accretive
acquisitions
during
2022.
Now,
back
to
Dave
for
his
final
remarks.
Thanks,
Dave.
So,
in
closing,
we
remain
enthusiastic
about
the
next
12
months. There's
been
a
steady
trending
up
of
capital
spending
and
associated
production
growth
on
our
royalty
lands,
both
in
Canada
and
the
US.
At
current
commodity
price
levels,
our
high
margins
offer
significant
option
value
to
provide
returns
to
our
shareholders.
So
this
increase in
our
monthly
dividend
means
that
we
have
increased
our
payout
every
quarter
in
2021.
And
the
acquisition
work
that
we
completed
last
year
is
expected
to
continue
to
provide
both
near-
and
long-term
value
for
our
shareholders.
There's
been
a
tremendous
amount
of
work
completed
in
the
transformation
of
Freehold
into
a
premier
North
American
royalty
company.
I
think
you
can
see
the
fourth
quarter
has
shown
the
full
impact
of
the
acquisition
activity
throughout
the
year,
resulting
in
these
record
setting
production
and
funds
from
operations
for
Freehold.
I
would
like
to
thank
all
our
shareholders
for their
support
and
also
thank
our
board
employees
that
contribute
the
ideas,
the
energy
and
the
inspiration
that
has
made
an
investment
in
Freehold
a
success.
Thank
you
all
and
we'll
now
take
questions.
Thank
you.
We
will
now
take
questions
from
the
telephone
lines.
[Operator Instructions]
[Operator Instructions]
We
have
our
first
question
from
Luke
Davis.
Please
go
ahead.
Your
line
is
open.
Hey,
thanks.
Good
morning,
guys.
Just
on
M&A,
wonder
if
you
could
provide
some
details
on
how
the
market
develops,
just
given
the
run
in
oil
pricing
here.
Maybe
what
kind of
opportunities
you're
seeing
and
I
imagine
you're
still
focused
on
the
US,
but
I'm
curious
if you
can
comment
just
on
both
sides
of
the border.
Good
morning,
Luke. It's
Rob
King
speaking.
So, yeah,
I
can
provide
a
few
comments
in
terms
of
what
we're
seeing
right
now.
We
started
the
– sort
of
January
is
really
quiet
on
both
sides
of
the
border
in terms
of
terms
of
activity,
but
that
only
lasted
a
couple
of weeks
before
things
– a
number
of
opportunities,
particularly
in
the
US,
started
coming
across
our
desks
all
over
the
size
range
from
call
it
CAD 10
million
of
value
and
less
up
to CAD 500
million
of
value.
So
I
think
one
of
the
challenges
that
our
team
is
having
right
now
is
how
we
allocate
our
time
and
allocate
our
capital
to
looking
at
these
opportunities
because
we're
fortunate
to
have
a
lot
to
look
at.
In
terms
of
what
we're
sort
of
seeing
in
terms
of
bid
ask
spread
and
what
the
market
is
looking
like
because
obviously
the
market
has
been
incredibly
dynamic
in
the
last
several
weeks
here,
just
a
few
examples
of
activity
in
the
US,
in
the
last
month,
we've
seen
three
transactions
north
of
CAD 1
billion
of
value,
and
the
common
thread
between
those
mineral
title
opportunities
was
that
they
were
done
with
the high
teens
cash
flow
yields
in
them.
So,
it's
still
an
attractive –
a
very
attractive
market,
even
in
this
commodity
price
environment
where
you
are
–
we
are
seeing
our
peers seeing
bid ask
spreads
narrow.
I
think,
for
us,
we've
been
–
we
haven't
been
testing
the
market
to
the
same
extent
since
our
acquisition
activity
that
you,
sort
of,
see
in
our
Q4
numbers,
right
now.
We're
starting,
having
some
discussions,
and
things
are
similarly
pointing
to
metrics
that
would
be
in
that
range.
I
think
we're
seeing
the
strength
in
commodity
prices
bringing
out
a
lot
of
sellers.
Obviously
just
from
the
sheer
strength
of
it,
but
it
also
has
changed
the
development
pace
of
the
assets.
So
sellers
that
might
have
looked
to
sell
in
the
back
half
of
2022
or
into
2023
are
now
seeing
their
portfolios
mature
that
much
faster.
And
are
sort
of
– it
provided
that
great
mix
of
near-term
development
with
future
upside
that
buyers
like
us
are
looking
for.
Thanks.
That
was super
helpful.
And
just
curious
what
you're
generally
using
now
for
pricing
when
you're
doing
those
evaluations?
Yeah.
It's
– I
mean,
it's
– that
– that's
a
pretty
dynamic
process.
I
mean,
it's
multiple
pricing
scenarios,
as
you'd
guess.
It's
grounded
in
strip,
but
then
it's
strip
minus
to
running
scenarios.
So
look
at
the
strip
for
a
one-year
or
two-year
time
periods,
and
moderating
to
a
lower
level
or
a
lot
of
flat
pricing
scenarios.
Yeah.
It's
–
you're
touching
on
one
of
the
more
challenging
pieces
of
our
valuation
these
days.
Yeah,
that
makes sense.
Thanks.
And
then
just
one
final
one
for
me.
Can
you
just
give
us
an
update
on
what's
going
on
with
the
CRA
process?
Hi,
Luke.
It's Dave
Hendry
here.
Yes,
we
–
first
off,
we
still
strongly
believe
our
filing
position
is
correct.
Field
officer
has
been
assigned.
We've
talked
with
them.
We've
provided
submissions
to
them
justifying
why
we
believe
our
position
is
correct,
and
they're
going
through
that
–
through
those
submissions
as
well
as
the
rest of
the
material.
I'm
not
expecting
this
to
be
quickly
resolved.
Probably
see
it
may
be
taking
six
months.
I
mean, it's
hard
to tell.
CRA
is
going to
take
as
much
time
as
they
want
and
clearly –
and
they
manage
the
process.
So
with
that,
depending
on
where
we
are
in
that,
our
next
tax
filing
for
the
2021
year
will
be
sort
of
mid-year.
And
so
if
it's
still
outstanding
and
they
haven't
made
a
conclusion
of
their
appeal
process
at
that
point,
there
is
a
chance
that
most
likely
we
would
get
reassessed
on
our
2021
and
then
have
to
deposit
probably
another
CAD
10
million
approximately
until
we
wait
for
the
appeal
decision.
But
to
finalize,
I
think
we
strongly
believe
our
position
is
correct
and
we're
actively
focusing
on
that.
Yeah. That's
helpful.
Thank
you.
That's
it
for
me.
Thank
you.
The
next
question
is
from
Aaron
Bilkoski
from
TD
Securities.
Please
go
ahead.
Your
line
is
open.
Thanks. Good
morning,
guys.
Would
you
be
able
to
give
me
a
sense
of
what
first-year
production
rates
would
look
like
for
your
average
US
well
relative
to
your
average
Canadian
well?
I
mean,
Rob
can
answer
that.
He's
just
pulling
up his
screen
here
right
now.
Yeah.
The
second
question,
I'll
run
these
in
the
background
while
you...
Sure.
I
guess
internally
what
leading
indicators
are
you
guys
watching
for
future
production
additions?
Are
you
guys
seeing
a
ramp
up
in
licenses
or
a
ramp
up
in
active
rigs
on
your
land?
And
I'd
be
curious
to
know
which
plays
are
seeing
the
biggest
rate
of
change?
Yeah.
And maybe
come
back to
your
first
question
then
I'll
come
to
that
question.
So
in
terms
of
our
average
one
year
production
on
our
US
wells,
it's
just
about
just
under 800
barrels
a
day
is
what
we
saw.
This
was
a
number
that
we
ran
back
in
our
Investor
Day
in
December.
So
this
contemplates
wells
on
our
US
properties,
as
if
we
had
known
them
for the
last
four
years
2017
to
2021.
So,
yeah,
just
under
800
barrels
a
day.
In
terms of
activity
on
our
US
assets,
we've
had
a
pretty
consistent
number
of
rigs
over
the
last,
gosh,
four,
five
months
now.
So
that's
now
15-year
to
20-year
range.
So
that's
kind of
given
us
some
confidence.
I
think
we're
also
tracking
is
just
a
number
of
permits
that
are
around
on
our
lands.
And
as
Dave
said
at
the
outset,
in
the
last
two
weeks,
we've
had
45
permits
on
our
US
lands.
And
I
think
that
was –
you
just
put
that
that
45-permit
number
into
context.
In
the
first
two
months,
we've
had
about
50
gross
wells
drilled
in
the
US
on
our
lands.
And
so
45
permits
is
pretty
exciting.
Of
those
on
our
–
in
the
last
two
weeks
on
the
spud
side,
half
of
them
in
the
Eagle
Ford
with
Marathon.
The
other
half
have
been
in
the
Permian,
largely
under
Pioneer,
and
also,
a
handful
of
privates.
Those
permits
that
we
talked
about
to
get
a
45, 35
were
in
Midland,
and
the
vast
majority
of
those
were
under
our
OneMap
lands
that
we
acquired,
closing
in
October
with
most
of
that
coming
from
Pioneer.
10
were
from
Marathon
in
the
Eagle
Ford.
And
just
to give
you
a
little bit
of
a
triangulation,
there's
often,
in
the
Permian
and
Eagle
Ford
about
a
two-
to
three-month
lag
between
permit
to
spud.
So
we
can
see
– if you
see
those
permits
coming
in
February,
that
sort
of
points
to
a
Q2
spud
timeframe.
Perfect.
Final
question
for
me, and
I
guess
it's
a
follow-up
to
one
of
Luke's
questions.
I'd be
curious to
know
what
the
size
of
the
asset
packages
are
that
are
crossing
your
desk,
and
if
there's
a
sweet
spot
in
terms
of
size
for
Freehold
either
your
ability
to
digest
them
or if
there's
a
sweet
spot
in
terms
of
valuation.
Yeah.
Maybe
on
your
second
point
there,
so
definitely
the
sweet
spot
valuation,
that's
far
more
important
and
relevant
and
– than
the
size
in
everything
we
look
at.
If
it
doesn't
make
us
better,
we're
not
interested
in
adding
it
to
our
portfolio.
And
so
that's
–
in
terms
of
size –
to
that
answer,
but
it
literally
is
all
over
the
map
in
terms
of
– I'd
probably
say,
it's
almost
a
barbell.
There's
either –
there's
a
number
of
opportunities
in
that CAD 50
million
or
less.
And
then
what's
interesting
is
the
number
of
opportunities
that
are
a
couple
of hundred
and
more.
And
I
think
that's
–
we're
looking
at
both
ends
of
the
barbell.
And
there's obviously
a
heck
of
a
lot
more
deals
in
that
smaller
range.
But
there
is
–
there
are
more
than
three
that
are
in
that
larger
category
that
are
currently
on
our
desks.
Do
you
find
there's more
competition
for
smaller
deals
or
larger
deals
or
it's
tough
to
tell?
It
did. Yeah.
Definitely
agree
with that
comment
in
terms
of
more
competition
on
the
smaller
end.
And
you
can
certainly
see
that
with
the
marketers.
The
marketers
know
that
they
size
the
packages
[indiscernible]
(00:19:49)
correctly
to
try
and
get
the
most
number
of
competitors
looking
at
it.
I
think
it's
– but
it's
fair
to
say
there's
a
lot
of
opportunities.
And
yes, there's
a
lot
more
competition
we've
observed
in
the
US,
but
there's
also
a
lot
more
opportunities.
Great. Thanks
for
that,
guys.
Thank
you. The
next
question
is
from
Jamie
Kubik.
Please
go
ahead.
Your
line
is
open.
Yeah.
Good
morning,
and
thanks
for
taking
my
question.
I've
got
two
of
them
just
quickly.
So,
volumes
on
your
Canadian
assets
really
strong
in
Q4.
How
should
we
think
about
production
volumes
in
2022
on
the
Canadian
side,
given
where
producer
activity
is
at?
And
also
curious
if
you
can
touch
on
how
the
US
portfolio
is
trending
currently.
Thanks.
On
the
Canadian
side,
I
think,
our
forecasting,
we
think
we're going
to
have
about
20
net
wells
on
our
Canadian
assets
in
2022.
And
just
to
put
that
number
into
context,
that
will
–
we
believe
that
will
replace
our
decline
rate
in
Canada.
So
Canada
is
kind
of
a
flat
to
maybe
modestly
up.
We've
seen
so
far
activity
in
Canada
about a
100
gross
wells
drilled
on
our
lands
in
the
first
two
months,
which
is
definitely
on
pace
for
that
annualized
20
net
wells.
A
lot
of
that
has
been,
well, 30
drillers
make
up
those 100
wells.
20
were
with
[indiscernible]
(00:21:35)
in
the
Viking.
Tamarack
was
very
active
and
the
Clearwater with
a
dozen
wells
on
our
lands,
and
Tundra
and
some
of the
privates
have
also
accelerated
their
activity
we've
observed
in
the
last
in
couple
of
months.
Sorry,
I
don't
know if
that
answers
your
Canada
question.
Your
US
question
I
just can't –
I
can't
remember
it. Sorry,
Jamie.
Yeah,
sorry. I
was
just
curious
on
how
the
production
volumes
are
trending
versus
your
guidance,
I
know
you
split
out
Canada
about
9,300
barrels
a
day,
contributing
in
2022
and
the
US
contributing
at
4,900.
Just
curious
on
what
you're
seeing
so
far
because
obviously
the
mix
in
Q4
was
different
than
that.
Yeah.
Yeah.
I'd
say
sort of
trending
on
pace
to
me,
I
think
we're
where
– we've
put
our
production
guidance
in
November
timeframe,
and I
think
our
expectation
for
2022
is that
we'll
be at
the
high
end
of
that
range.
The
Eagle
Ford
is
showing
a
lot
of
continued
strength
and
probably
even
maybe
a
little
bit
ahead
of
where
I
think
our
expectations
were. That's
both
a
production
comment,
but
also
a
cash
flow
comment.
We're
even
getting
higher
realized
pricing
than
I
think
we
had
actually
expected.
We
were
encouraged seeing
Marathon's
2022
capital
guidance
a
few
weeks
back
where
their
capital
plans
are
supportive,
cooperative
of
the
acquisition
modeling
that
we
have
for
their
– for
our
assets
under
Marathon.
And
in
the
in
the
Eagle
Ford,
they're
actually
talking
about
15
redevelopment,
re-completion
wells
in
the
Eagle
Ford,
obviously
won't
– all
go beyond
our
lands,
but
we
do
not
value
any
re-completions
in
our
analysis.
So
that
is
some
upside
that
we
will
see
in 2022
that
we weren't
expecting.
Okay. And
then
maybe
follow-on
question
here.
How
should
we
think
about
the
free
cash
flow
priorities
for
the
business?
I
mean,
should
we
think
about
the
dividend
being
anchored
at
a
lower
commodity
price
level?
I
mean
– or
should
we
think
about
Freehold
likely
increasing
the
dividend
as
the year
goes
on
if
strip
pricing
or
if
commodity
pricing
outperforms
your
expectations?
I
know
that
you
have
WTI
estimated
$75
a
barrel
for
2022
and
for
the
oil
NYMEX,
clearly
a
dynamic
environment.
But
can
you
talk
about
how
we
should
think
about
the
dividend
moving
forward
to
2022
and
free
cash
flow
priorities?
Hi, Jamie.
It's
Dave
Hendry
again.
Yeah,
I
mean,
obviously,
we
just
updated
our
dividend.
Commodity
prices,
incredibly
volatile,
so
it's
very
hard
to,
sort
of,
know
what
their
predictions
are.
We're
stuck
with
$75
WTI
US
just
because
it's
relatively
consistent
with
a
lot
of
our
peers
and
as
well
as
it's
more
of
a
moderated
position.
On
top
of
that
dividend
that
we
just
announced
of
CAD
0.08
per
share,
the
most
meaningful
contribution
is
acquisition.
So
we're
going
to
see
how
acquisitions
play
out
this
year
to
see
what
the
ask
numbers
are
and
about
can
we
get
some
deals
across
the
line
that
realize
the
returns
that
we're
expecting
so.
So
that's the
key
focus. And
then
we'll
continue
to
monitor
what
commodity
prices.
We
set
that
60%
target
range
for
a
reason,
so
we'll
continue
to
monitor
that.
And
then
we
do
have
still
CAD
146
million
of
debt
to
pay
down.
So
we'll
use
that
as
a
toggle.
So
we'll
balance
those
three
contributions
like
usual.
So –
but
as
far
as
ultimately,
do
we
change
the
dividend,
we
don't
have
a
plan
on
updating
the
dividend
in
the
next
quarter,
we'll
just
evaluate
it
and
see
our
acquisitions
play
along.
Okay.
That's
it
for
me.
Thanks,
guys.
Thank
you.
The
next
question
is
from
Patrick
O'Rourke.
Please
go
ahead.
Your
line
is
open.
Hey.
Good
morning,
guys.
Pretty
comprehensive
questions
from
the
guys
ahead
of
me
there
ought
to
be
a
little bit
quicker
on
the
finger
trigger
there
going
forward.
Just
a
couple
of
quick
things,
though,
that
I
don't
think have
been
touched
on.
And
I'm
curious
too.
In
particular,
you're
showing
some
strength
out
of
the
Canadian
asset
here, and
I
think
that
drove
a
bit
of
the
outperformance
on
the
quarter.
I'm
wondering
if
you
can
comment
now
with
pricing
so
strong
in
Canada
and
the
progressive
nature
of
royalty
or
Crown
royalty.
Crown
royalty
curves
here,
how
you're
sort
of
competitively
positioned
on
your
Freehold
lands?
Yeah,
Good
question,
Patrick.
As
far
as
the
Crown
royalty
structure
goes.
There's
still,
Crown
royalty
holidays
that
that
are
in
place
early
on.
But
when
you
come
off
those
holidays,
our
royalty
lands,
are
very
competitive.
And
so,
right
now,
we
see
drilling
is
active
on
the
royalty
lands
as
I
think
we
see
in
Crown
lands
across
the
portfolio.
And
so
we
see
that
continuing.
On
a
rig
activity
level,
we're
certainly
higher
in
rigs
in
Canada
than
we
were
this
year
last
time.
But
were
still
60
rigs
or
so
under
the
long
term
average
in
Canada
if
we
go
back
a
few
years.
So
we
are
seeing
certainly
increased
activity.
It
hasn't
recovered
to
more
steady
state
pre-pandemic
levels,
and
the
same
in
the
US.
So
we're
seeing
the
rigs
really
focusing
in
the
most
–
still
the
most
cost-effective
basins.
The
Permian
and
Eagle
Ford
in
the
US
is
really
driving
a
lot
of that
drilling.
And
we
did
see
a
good
uptick
in
gas
drilling
in
the
Deep
Basin
in
Q4.
We
expect
to
see
that
continue,
but
the
oil
plays
are
what's
really
being
developed at
a
pretty
good
clip
on
our
lands.
Okay.
Thanks.
And
considering
you
guys
are
using
a
pretty
conservative
planning
budget
here
with
CAD
75
WTI,
would
Freehold
consider
an
approach
to
hedging
any
of
the
production
here?
Yeah.
I
don't –
we –
we've
talked
about
hedging
before,
Patrick,
maybe
the
backstop
acquisition.
But
as
far
as
hedging
in
general,
it's
not
something
that
we're
looking
at.
We
do
have
a
strongest
balance
sheet
of
our
royalty
peers
and
we're
generating
significant
cash
flow
right
now.
So
we
think
that
we've
got
the
balance
with
the
dividend
payment
and
the
focus
on
managing
our
debt
that
we
don't
think
that
hedging
is
the
right
answer
for
us
right
now.
Okay.
Thank
you.
Thank
you.
The
next
question
is
from
[ph]
Matthew
Weeks
(00:29:19). Please
go
ahead.
Your
line
is
open.
Hi.
Good
morning.
I
think
all
my
questions have
been
answered
at
this
point.
So
I'll
just
hop
back
in
the
queue.
Thanks.
Thanks,
[ph]
Matthew
(00:29:32).
Thank
you.
There
are
no
further
questions
registered
at
this
time.
I
will
turn
the
call
back
to
Mr.
Spyker.
Okay. Thanks
everyone
for
participating
today.
It's
a
great
discussion,
and
it's
appreciated
to
hearing
those
questions
at
us
and
good
luck
to
all.
And
we'll
talk to
you
next
quarter.
Thank
you.
The
conference
has
now
ended.
Please
disconnect
your
lines
at
this
time.
And
we
thank
you
for
your
participation.