Freehold Royalties Ltd. ($FRU)

Well, good afternoon, everybody. Can everybody hear me? Coming through? I would load up on some food and drink because we have 2 hours of riveting slide show for you, and you don't want to get weak at the knees because it's good stuff. Welcome. I would like to thank everybody for attending today's Freehold's Annual General Meeting. My name is Marvin Romanow, and I'm the Chair of Freehold's Board of Directors. Do I do the slides, Todd?

Sure, yes.

So hello, first button. I am always impressed when things work. Thank you. So this year, Freehold is celebrating our 30th anniversary. There has been a tremendous amount of growth and progress over the years that I want to share with you today. In 1996, we began with 5,600 barrels a day oil equivalent of production and completed an initial public offering -- equity offering at $10 a share. And you folks may not know, but one of the founders, Peter Harrison, is right in the room here, who was with CN Pension Fund. So although he has great gray hair, he's not the granddaddy of the company. He's just the dad of the company. So well done, Peter, for what you and your colleagues have started. In 2025, our production averaged 16,300 barrels of oil equivalent per day, providing an annual compounded growth rate on production of 4%. Over that time period, we have returned CAD 2.4 billion in dividends to our shareholders. So this represents a cumulative of $37 per share of dividends on a $10 investment 30 years ago. And if you add that to our current share price, the total value delivered to shareholders is $54 a share when you add those 2 numbers. So over 30 years, you've got to take into account the time value of money. So financially, this represents a 12.5% annual compounded return on investment over 30 years that we have been a publicly traded company. So 4% growth rate has delivered a dividend and stock value growth of 12.5%. That's pretty, pretty good. This next chart shows how we have performed compared to our North American royalty peers over the past 10 years because we worry about absolute performance, but we worry about relative performance because we are in the commodity business. And so in addition to our absolute stellar returns, we have outperformed our peers in both Canada and the United States. And over the last few years, we have shifted our focus to a portfolio of liquids-weighted North American royalties. This has allowed us to enhance our positioning through having royalty interest ownership in the top Canadian oil and gas basins, and more recently, the top U.S. oil and gas basins. Our growth over the last 5 years has been driven primarily by our U.S. expansion, but we haven't forgotten Canada. There in the U.S., we have established royalty ownership positions in the world-class basins such as the Eagle Ford and Permian. And probably this next comment I'm going to make is probably the most germane one about our asset base. And the primary strategic driver behind this movement into the U.S. is the vastly superior well performance and well productivities and the resource density, the resource density compared to other investable basins. So there's an old saying in our industry, if you want to look for oil, look at an oil well first. So primary recovery factors in the Permian these days are somewhere between 6% and 10%. So that basin will be alive and well, well beyond the tenure of many of those people in the room. And I won't digress too much, but I started in this industry working southeast Saskatchewan and working some of the heavy oil fields, moving on to international operations. But 30 years ago, people believed some of those basins were dead. And today, we see even more opportunities in southeast Saskatchewan that is still alive and kicking and doing well. So David will talk more about resource density and well productivities in his presentation, and this has delivered higher production, higher volumes, higher revenues, higher cash flows on an absolute basis, but more importantly, on a per share basis. This underpins the business we have today. This portfolio enhancement work we have sold -- with this portfolio enhancement, we have sold our capital-intensive lower-netback working interest production. So we're pretty close to a 99.99% pure royalty play, and we have reduced our cost structure. We have added premium-priced high-netback light oil and gas production from the Eagle Ford and the Permian Basins of Texas, and you'll see our price realizations. But one little example of that, if you look back to 2018, a year with similar crude oil and natural gas prices as we just had in 2025, comparing those 2 years, we generated 40% more funds from operations per share in 2025 than we did in 2018. The bottom line is we have moved and upgraded and have superior barrels in our portfolio. So beyond just a solid track record of production growth, we obviously have focused on shareholder returns. And one marker that I want to highlight for you is that for every $100 of cash flow that the company has taken in since 1996, $56 of that has gone back to you, the shareholders, in the form of dividends while reinvesting the other $44 into managing growth in our business. And as you're all aware, when you file your tax return, that qualifies for the Canadian dividend tax credit, which makes your after-tax returns even more stellar than if you would have invested in the bond. And as noted earlier, that's a total of $2.4 billion to our shareholders. We had another milestone in 2025. We ended our long-standing management agreement with CN Investment Division, the owner of Rife Resources and the founder of Freehold. This agreement has been in place since 1996, and it served our organizations really well. It supported the development of all of the companies within that consortium. And I, on behalf of the Board, would like to take this opportunity to thank the executive and employees for the incredible amount of work to successfully unwind and separate 30 years of shared operations. That was a very labor-intensive and challenging task, but it was done without losing a heartbeat. This work has positioned us as we continue to build and optimize our assets. And despite the termination of this management agreement, CN did not change their holdings in Freehold. And as a result of this termination -- and they still hold 16% of the outstanding shares of the company, and they have been a very supportive and thoughtful and value-added long-term shareholder. So on behalf of the Board, I'm pleased to say that our performance reflects a consistent record of success. Since our beginning in 1996, the company has been built thoroughly, thoughtfully, deliberately with a clear emphasis on keeping that long-term ball and sustainable value in mind. And Dave Spyker, who's sitting right here, who many of you know as our CEO, who's done a stellar job, will share more details with you. So I'm going to move into the more formal part of the meeting and have this very riveting slide for you to look at. Today's meeting marks the 39th AGM for Freehold, and we take great pride in the business that has been built. The sustainability in our business stands out when considering that we have always paid a monthly dividend every month for the last 30 years. That really is a very rare accomplishment in our industry. I'd also like to advise you that this meeting is being webcast. All references today are in Canadian dollars unless they're noted otherwise. And for those attending the AGM for the first time or those new to Freehold, I would like to now take this opportunity to introduce our executive team, and I'm going to ask them to stand when you are introduced. Dave Spyker, our President and CEO; Lisa Farstad, our Vice President of Corporate Services; Susan Nagy, our Vice President of Business Development, Commercial; and Colin Strem, our Vice President of Business Development, Technical. And as we previously disclosed, Shaina Morihira, Freehold's Vice President of Finance and Chief Financial Officer, left the company last month. And I'd like to really thank her for her service and leadership during this time at -- her time at Freehold and her commitment to ensure a smooth transition of responsibilities going forward. And in the interim, Paul Slack. Paul, can you stand up? Thank you, Paul, has been appointed to be Interim Chief Financial Officer while the company completes the CFO search. I'd now like to move to introducing our Board of Directors standing for election today. And would you please stand as your name is called? Gary Bugeaud, Maureen Howe, Douglas Kay, Kimberley Lynch Proctor; Valerie Mitchell; myself, Marvin Romanow, Mathieu Roy, did I get that last name pronounced and correct? Very good. David Spyker, who is the President and CEO, he is the only guy who gets to stand twice; and Aidan Walsh. I would also like to introduce representatives from KPMG, our auditors, Heather Steinley, and Megan Wainman. Very good. So now we'll start the formal part of the meeting. And to make best use of our time, we have prearranged with certain shareholders attending to move and second resolutions, which we will consider in a single motion today, and they are set out in the notice of meeting. Other than the election of Directors, all matters to be considered will be put forward by a single motion. However, shareholders will be able to vote on each of the matters separately by ballot. If you have already sent in your proxy, your vote has already been counted and you do not need to vote at this meeting. We also ask you that if you have questions during this formal part of the meeting, you only refer to the matters set out in the notice of meeting. Following the formal part of the meeting, David Spyker, as I said, will be making this presentation to update you on our business results, our strategies and our future. And both he and I and other of the management team, and in fact, the Board will be happy to answer any additional questions you may have. The meeting will now come to order. I am Chairman of Freehold and will act as Chairman of the meeting. Lyne McDonald over there. Lyne McDonald, Freehold's Corporate Secretary, will act as Secretary of the meeting and representatives of Computershare Trust Company of Canada, they're at the back of the room here, will act as scrutineers. I have received a declaration as to the mailing of the notice of Annual Meeting of Shareholders, information circular, proxy, instrument of proxy and the annual report to shareholders. I direct that this declaration, together with copies of these documents that were mailed to shareholders, be kept by the Secretary with the minutes of the meeting. A quorum for a meeting of shareholders is 25% or greater of the outstanding common shares present in person or by proxy. We're well past that and the scrutineers have confirmed that. The interim scrutineer report also indicates that a significant majority of the shares voted have voted in favor of each of the matters to be considered at today's meeting, including the election of each of the director nominees. I now declare the meeting to be regularly called and properly constituted for the transaction of business. We will conduct each vote by way of ballot other than termination of the meeting. I understand that the scrutineers have collected all of the ballots. And if you have a ballot, please provide it to the scrutineers now. This is how I get to 2 hours. I wait about 20 minutes for this one. Okay. The annual financial report to shareholders, which includes the financial statements of the corporation for the fiscal year ended December 31, 2025, and the auditor's report for the same period was mailed to those shareholders who requested it. There are extra copies of the report available today. They were at the front when you walked into the room. And if you want one, someone will go get one for you. There are also -- these reports are also available on Freehold's website as well as on SEDAR+ website. Our first matter to consider is the nomination and election of the directors of Freehold. In accordance with Freehold's advance notice bylaw, the only individuals entitled to be nominated as directors at this meeting are the persons named as nominees in the information circular. This includes CN's nominees pursuant to its nominee agreement with Freehold. Therefore, as directed by the Board and in accordance with the notice of meeting and the information circular, Gary Bugeaud, Maureen Howe, Douglas Kay, Kimberley Lynch Proctor, Valerie Mitchell, Marvin Romanow, Mathieu Roy, David Spyker and Aidan Walsh are hereby nominated as directors of Freehold Royalties to hold office until the next annual election of directors or until their successors are elected or appointed, subject to the provisions of the Business Corporations Act and the bylaws of the company. Is there any discussion or question from any registered shareholder or proxy holder? Guys are a quiet bunch. I declare that those nominated are duly elected directors of Freehold. Particulars of the vote cast on the election of directors will be available via a news release after the meeting. I now ask for a motion to approve the 2 remaining items of business set forth in Freehold's notice of Annual Meeting and Management Information Circular.

Mr. Chairman, I move that the firm of KPMG LLP chartered accountants be appointed auditors of Freehold until the next annual meeting or until their successors are appointed and that the resolution set forth in Freehold's information circular regarding Freehold's approach to executive compensation be approved and adopted.

Mr. Chairman, I second the motion.

Is there any discussion or question from any registered shareholder or proxy holder? I have been advised by the scrutineers that each of the matters considered today have been approved by the requisite majorities. I direct that the scrutineers' report be annexed to the minutes of this meeting as a schedule. The results of the votes will be made available in a news release to be issued by Freehold and in a report of voting results to be posted on SEDAR+. Unless there are any questions from the floor, I would be happy to entertain a motion that the meeting be terminated.

Mr. Chairman, I move this meeting to be terminated.

Mr. Chairman, I second the motion.

All in favor, signify by raising your hand. Okay. The motion is carried. I declare the formal portion of this meeting terminated. David Spyker will now provide an update on Freehold's activities. And he and I and other members of management and directors will be available to answer questions as they are posed. Thank you very much. Thank you for attending today.

Okay. I'm not going to be wanting to stand behind the podium a little bit. So I'm just going to start off with a slide here. It's a bit of a warm-up slide. I think everybody here knows the story. But really for Freehold Royalties, we are a pure-play royalty company. So that means we have no capital costs, no operating costs, no abandonment costs. And we're a little bit different from the other royalty players that you can invest in, both in the U.S. and Canada. We have a differentiated North American portfolio. So we have assets across the U.S. and assets across Canada. And we think that's important, because really we position ourselves in all the premier basins across North America. And as Marvin talked about, we've been a consistently strong capital allocator, paying our -- in TSX, the leading 6% dividend yield on the energy sector. And that's a monthly dividend at $0.09 a share per month. So I just want to talk a little bit about our 2025 results. And so 2025, we had just under 16,300 BOE a day of production. So that was a 9% growth over 2024 or about a 1% per share growth. And 45% of our production came out of the U.S. and about 53% of our revenue. So you can see that we're pretty balanced across both sides of the border. We've been intentionally building our business to be a crude oil and liquids-weighted business. And with that, we've had 12% growth in liquids year-over-year, and liquids content right now is just over 10,700 BOE a day. And so the liquids contributes 90% of the revenue of the company and is a big part of our business strategy going forward. If we look at funds from operations, that was $235 million. So it's about a 6% decrease FFO per share year-over-year, and that was driven primarily by the 8% decrease in realized pricing, with WTI quite soft in 2025. On the dividend side, we retained -- maintained the dividend throughout last year at $1.08 a share paid monthly, and that equated to a 75% payout ratio. And as Marvin alluded to, the other 25% of that revenue was put toward building the business, and we paid down a little bit of debt. So kind of want to talk about that 30 years of being in business and really the last 10 years have been really kind of fine-tuning the portfolio. You can see as we kind of came out of 2016 and into COVID, the business was not growing. On a total production per share basis, we were in a pretty precipitous decline. And at that time, we decided that we're going to pivot the business outside of Canada. We thought that we could be more competitive in the North American business platform, and we started investing in the U.S. And you can see along with that, we've restored the production per share growth. And again, we've really been focused on rebuilding the liquids production per share as being the primary driver of our business. And along with that, we've really stocked the shelves on oil reserves. So you can see on the chart on the right-hand side that focus on building oil reserves, NGL reserves. Our gas portfolio, we have not been growing that side of the business, and that's where we're really driving our business going forward. And so if we look at where we are today, like I say, about half production, half the revenue are the U.S. Our big focus areas are going to be in the Permian, and that would be the Midland and Delaware subbasins of the Permian and the Eagle Ford. And the Permian would drive about 4,400 barrels a day of production, Eagle Ford about 2,500 barrels a day. And again, if we think of that liquids-weighted theme, the U.S. portfolio is about 75% liquids weighted. So we really have exposure to light oil pricing essentially in the Gulf of Mexico. With that growth, we've just shown from 2022 to 2025 and the focus. So we've had explosive growth. And a lot of that is on the back of very strategic acquisition work. So we've grown that part of the portfolio 220% since 2022. On the Canadian side, that's a well-established assets. These are the seed assets that we got in 1996 and we've built over the years. We haven't invested as much in Canada over the last 5 years compared to the U.S. side. But we're -- the plays that we're quite active in and the kind of the green plays on here really are oil-weighted plays. And as you move a little bit west in Canada, we get into the Cardium, we get into the Deep Basin. We have a Montney position in Northeast BC. Those tend to be a little bit more of the gassy-weighted plays. And so in Canada, I didn't show the slide here, but we're about 50% oil and NGL. So this gas component, even though it doesn't generate as much revenue, is about half of our Canadian volumes. Over the past little bit, where we've seen the capital investment is in these oil plays, tend to be in that Clearwater heavy oil, Mannville heavy oil and the light oil in southeast Saskatchewan. And so with that, we've been able to grow that heavy oil component about 30% over the last few years. We're just not seeing -- with current gas pricing in Canada and an outlook of gas pricing in Canada, we're just not seeing capital being attracted to the western part of the portfolio. So one of the big shifts that we've made over the past 5 or 6 years is really changing the underlying payers that we have in our portfolio. And so today, over 75% of our revenue comes from the payers that you see on this list here. And if we start at the top, these integrated global-scale companies, Exxon, Oxy, ConocoPhillips, they're almost 1/3 of our revenue. And when those guys are thinking of capital allocation, they're not really worried about what the daily oil price is. They're executing that same capital program at $50 oil or $80 oil. It takes them a long time to start shifting a view on how they invest. And so just think of that as just underpinning sustainable production stream that is really driven by these big players. Then we move down. About 8% of our revenue comes from what we call kind of scale operators in North America, the Canadian Natural Resources in Canada, U.S., Diamondback, EOG, Devon, some names that we're all familiar with here. They're $50 billion type market cap companies, specialists in their -- in a broader area. And again, very resilient capital allocation programs, probably a little bit more flexible than this top level here. And then as we move down into the specialist guys in Canada like a Whitecap that's really active on our southeast Saskatchewan or Tamarack Valley who's driving a lot of our Clearwater growth activity, a Tourmaline that's operating for us in the Deep Basin or into some of these pure-play independents or private operators, these are the guys that can really move capital quickly. And so as we're seeing oil prices at the $100 oil mark right now and full year strip at around high-80s, we're starting to see licensing activity pick up from this group of people that tend to be pretty quick. In Canada, it tends to be short-cycle projects that they can bring production on and capitalize on the high oil price. These bigger guys, they're still thinking. These types of projects in the U.S. tend to be on stream time about 12 months to 18 months, these big pads that they're drilling 20, 25 wells a pad. And so they need to be confident that next year's oil price, they're happy with, and then they'll start mobilizing capital. So each of them are starting to talk about that, and we think that that will happen at these commodity prices. I think -- I don't want to get lost on what Marvin talked about, about the 4% annual production growth since 1996 because we get a lot of questions from shareholders, what is going to be your growth rate going forward? And one of the challenges that we have as a company is that we don't control the pace of drilling activity on our lands, the timing of that, where people are drilling. And our job is to really stock the shelves with high-quality inventory that's going to attract capital and continue to grow. But if we look at 30 years, we've a pretty darn good track record of growing at 4% every year. And that's even through times when we got rid of this lower-margin working interest production as we shifted our portfolio into the U.S. And so I'm pretty confident that as we think about the business going forward, 4% annual production growth isn't going to be unreasonable. It's not going to be every year. Some years, you're going to get 0. Some years, you might get 8%. But if you look at these tranches of time periods, I'm pretty confident we can achieve that. We've demonstrated that for 30 years. And through a combination of organic growth initiatives and transaction-led initiatives that we'll be able to accomplish that. This is a super busy slide, but I think it's an important slide, and I want to spend a little bit of time here because this is what we've really been doing, and this is stocking the shelves of opportunity set. So when we say we don't know when some of this stuff is going to happen, we do know for sure that we're in all the right places. And so if we talk about secondary recovery projects, that's what's getting a lot of press right now is some of the waterflood activity that's going on in the Clearwater and moving that over into these Mannville heavy oil plays. And so our big payers that are quite active in the Clearwater would be a Tamarack Valley and a Rubellite. And so we're getting the benefit of these reserve additions and this production decline, moderating production growth associated with that activity. People don't really think about this light oil secondary recovery in, say, the Permian, for example. But there's been a number of enhanced oil recovery projects, particularly in the Permian right now. There are CO2 floods, where early-stage results are a 45% improvement in recovery factor. And so when Marvin talked about oil recoveries projected to be less than 10%, a lot of these big-scale operators like the Exxon and Conoco are talking about doubling that. So you've got a basin that's producing 6 million barrels a day of oil. It's been producing for 100 years. You can double recovery factor. And we're seeing field trials of that across the Permian. Exploration and delineation. We don't have a huge Montney and Duvernay exposure in Canada. So we've got Northeast BC Montney that tends to be of a dryer gas. So we're not seeing capital attracted there. We've got some positioning in the Duvernay. But our equivalent to that would be this Barnett and Woodford in the Permian. So it's a bit of a deeper zone that's just starting to attract a lot of attention right now, 50,000 barrels a day in the last 12 months, just growing production, and we have good exposure to that. So that's our kind of Duvernay equivalent and it sits in the -- down here in the Permian Basin. And what we're seeing what started in the Clearwater is these kind of multilateral drilling that's moved into the Mannville heavy oil, and it's moved into southeast Saskatchewan light oil. And so we're certainly seeing the benefit of that. And so again, like Marvin talked about, the southeast Saskatchewan has been around for a long time, but technology just keeps reinventing ways to get more oil out of that. Production base optimization, that's another big one. Particularly in the Eagle Ford, operators are seeing a lot of opportunity to go back into wells that were completed back in 2010, kind of early stages of frac design in horizontal wells in the Eagle Ford and go refrac those existing wells and get darn near the equivalent of a new well just from a refrac. And so these are all things that we didn't pay for when we bought the U.S., but we could see the resource there, and we just knew that it's going to be a matter of time before people get that out. I think we're just on the verge of this AI-assisted exploitation drilling, pressure pumping designs. And we -- how that's showing up is just in capital efficiencies in the basins, both in U.S. and Canada. So people can get more with less capital. And so we're seeing rig counts decline a little bit, but we're not seeing productivity decline. They're drilling 4-mile wells instead of 1-mile or 2-mile wells. And so even though we're seeing rig counts decline, we're not seeing the production decline. Novel technology just continues to go. Everyone says don't bet against the American petroleum engineer time over time. And what we're seeing is the surfactant treatments. So people are using surfactants to complete their wells, getting a 15% uplift in productivity and reserves. And same with using different proppants in their frac design. Exxon is using this petroleum coke product, some ceramics. And again, very similar 15% increase in recovery. So all these things are just unlocking these massive resources in the portfolio. I can say we haven't been focused on natural gas, but we do have a lot of natural gas optionality in our Deep Basin positioning in our Montney and Northeast BC. The Permian itself is the fastest-growing natural gas basin in North America. The only thing that's holding it back is they can't build pipe fast enough. And unlike Canada, they are building pipe, but they just can't keep up with the demand. So as we think through that, you can see why we've been so intentional about investing in certain basins across North America because we really are stocking the shelf with future opportunities. One of the reasons that we went out of just a pure Canada business is that if we look at the landscape as far as where we could invest, where we could build the business, there wasn't a lot of deal flow in Canada. And so this chart here, the gray bars show the mineral and royalty transactions in Canada. And you can see it's not very much. In 2021, PrairieSky bought Heritage assets for around $1 billion, and there was a couple of other bigger transactions in that year. In some of these other years, those were assets that were dropped down from Tourmaline into Topaz, so not assets that we would be able to have access to. And so you take those big deals out, there's not a lot of transactions available, $400 million a year over the last 10 years with those big transactions in. What we're comparing the blue bars here is the U.S. royalty transactions. And we've only put small-scale royalty transactions, so anything that was done for less than $250 million. And those transactions, those small-scale transactions were about $1.4 billion a year. If I was to put all the transactions on here, the scale would make Canada kind of imperceivable. But -- so what that has done is it's opened up the ability to invest our free cash flow and build the portfolio in a pretty open minerals space in the U.S. I don't think that we're always going to compete -- be able to compete for these bigger packages. And so what we've done over the last 18 months is put together what we call this ground game team in the U.S. And so this team is really looking to buy undeveloped lands from individual owners, farmers, original landowners, homeowners. And because of the extensive mineral title that's in the Permian, we can do that. So we've kind of given our BD team this hunting license to go and hunt for these types of deals. And it provides the ability for a paced capital allocation. We can toggle at any time. We can add this really high-quality inventory that may have less certain development timelines because we're not buying current production, but we're buying on lands in the Permian that hasn't even had a horizontal well drilled on it yet. So you think about the quality of that inventory, and those undrilled sections just represent opportunities for future growth in the business. They tend to be under the high-quality operators like an Exxon or Diamondback, Conoco, Oxy. And it is a quite attractive return on capital. So we've deployed about $60 million in the last 18 months to do that. And what I've shown on here is the land base that we've built with our bigger packages. And these yellow lands are these ground game deals that we're buying kind of in the core of both the Delaware and the Midland Basin, and so just sneakily building this bespoke portfolio. Through this work, we've added about 1,200 gross future drilling locations and people say, well, how many net locations is that, how many net wells is that to you? And I go, well, it's 2.5 and people go, oh. But 2.5, if you think about that, if all those wells came on at once, that's 2,000 barrels a day of annual production. So these are high deliverability wells, and 2.5 net wells is pretty darn good in this light oil, high netback area. We also get lots of questions like has the U.S. done what you thought it was? And I'll be the first to admit, we kind of stumbled a bit out of the gate when we first entered into the U.S. and we thought we might get a little bit more growth out of it than actually materialized. We were buying right during the time of COVID, and we were modeling our models based on the same amount of drilling activity pre-COVID as post-COVID. That didn't materialize. And so we didn't get the production growth. But what we've got is just the stability of a production platform. So in those early years, 2021, '22 and '23, we invested $565 million to kickstart that U.S. portfolio. So at the end of December, Paul tells me we've got $533 million of revenue of that $565 million investment. So that will have paid out in this quarter, or if not this quarter, May of this year. It's imminent. And it's still over 4,500 barrels a day of production. So it still represents more than 25% of the production that we have in the company. So spectacular investments. We have -- the team has done a lot of work to really tune of how they evaluate, how we model the acquisition work. So we took our lessons from those first few years. And if we look at the work that we've done in 2024, the other essentially $435 million of investment, this is what we modeled, what we expected we would get out of that, about 2,200 barrels a day of -- or BOE a day of production. And this is where we're sitting, so above that. So we've really been able to tune our acquisition parameters, learn from those early modeling results, spectacular results, known results, and we expect very similar payback kind of 5 to 6 years on these investments. And so where does that lead us today? So because of the oil-weighted portfolio, because we have no OpEx, because in the U.S., we get a 19% better oil price. It's light oil. It's close to the Gulf Coast markets. It's -- we have more liquids in it. So it's a 34% overall premium to it. We're at the top of the heap when it comes to cash flow per BOE. And that's just the oil-weighted North American nature of our portfolio. And what that does is allow us to pay the dividend that each of you receive every month. And so the yield is attractive. We're well covered down to $50 a barrel oil price, although I don't even hear anyone talking about that right now. But -- and I think it's important, just this multi-decade inventory that we've built. That slide that we spent all the time on really talks about the opportunity set that we've got in the pantry and the confidence that we can continue to build the business. And so today, you can get your 6% dividend yield that I think can participate in a pretty exciting story going forward. And I'm just going to put this up there. I'm not going to repeat it. But yes, I'd love to take any questions that anybody has.

[Indiscernible]

Well, right now in southeast Saskatchewan, there's waterfloods. And then we do have royalty exposure to the miscible floods that the Weyburn -- with the Weyburn Unit that Whitecap is operating. And so those are the 2 big ones right now for EOR in southeast Saskatchewan. Probably I would call the big news in southeast Saskatchewan is this multilateral drilling technology. And so that in itself is probably the biggest new technology in southeast Saskatchewan that we're seeing operators using right now.

Am I on?

Yes. Well, there you go.

Okay. So up in the -- well, probably not the Duvernay, but the Montney more where the reservoir is a little better, is there any talk amongst people you know about maybe doing some sort of pressure maintenance to help with recovery of liquids in those reservoirs?

Well, the issue with the Montney is it tends to be a shale as well. And so when we talk about EOR schemes in the Permian and the shale, you'd be talking about a very similar thing in most of the unconventional Montney. So it's not something that you could waterflood. There is a smaller part of conventional, but... .

Yes.

Yes, and we've heard people talk about gas injection as a potential EOR scheme. It's very -- it'd be very similar to what the view would be in the Permian, where you've got a tight rock reservoir, can't put water in, but -- whether it's CO2 or gas injection to enhance recovery. In the Permian, they're not trying to inject it in a well and get it out at a neighboring well. It tends to be a huff and puff scheme. So they'll inject it at a high pressure into the wellbore, and they'll turn around after injecting CO2 for typically 6 to 8 weeks. And they'll put it on production for 6 months, and then they'll do that again. And that -- kind of 6 cycles is what gives them this 45% increase. So parts of the Montney would be -- you could do that in as well, but it's early-stage type technology.

Shell and Ovintiv have moved back into Canada. Does that mean that we should be focusing in Canada now?

Just going to go back to this slide a little bit. So if we think of Canada, there's -- there tends to be mineral title in Canada as you move kind of from west for -- so that anywhere east of Highway 2 and you move eastward, you can buy mineral title. And most of that mineral title has been acquired by companies like ourselves, a PrairieSky, a Heritage, an Exxon. And so to build the business in Canada, you really have to become a royalty financier. So you're going to offer somebody, I'm going to give you $20 million to drill some wells in exchange for a royalty on those wells. And as we see consolidation in the industry, and a lot of these bigger companies are controlling some of these bigger resource plays like a Montney, we'll use that as an example, companies like Ovintiv or CNRL or Shell aren't looking for royalty financing. They're well financed. They can execute their capital programs. And so as a royalty player, we tend to get squeezed out of those parts of the basin, which you can't buy mineral title lands. They're Crown lands. They're owned by the Crown. And the only way to get exposure is through a royalty financing. And so when we looked at that, say, yes, I'd love to have a little bit more Montney exposure, a little bit more Duvernay exposure, but it's hard to get. And so we looked at that 5 years ago and said, we're better off. We can go compete in the U.S. where we can buy this mineral title and we can build the portfolio that we want there. So it's just more the availability of opportunity.

David, commodity prices have changed recently. And looking to be contango, basis differentials are shrinking. How is that affecting your strategy going forward?

Yes. I think that we went through a period last year where the strategy was -- availability of transactions was quite slow. So we really focused on building this bespoke portfolio with our ground game. Today, we started the year with not much for transactions, but I'll tell you, with oil at $100, everybody wants to sell assets. And so in any dialogue that we had in Canada on a royalty financing side has essentially gone away with commodity price. But in the U.S., there's just a lot more opportunity coming to surface. And so we have the opportunity to invest beyond this ground game, but we are seeing a lot of these ground game opportunities, more of them available. And we are starting to see larger asset suites come available, greater than $150 million plus some of these marketed packages that have been sitting on the sidelines for quite some time. So from an opportunity set, we're certainly seeing a lot more opportunities. I think the challenge is there's a lot of capital sitting on the sidelines as well, looking to invest in the mineral space, particularly in the U.S. So I think it's going to be pretty competitively bid, but our team has done just a really good job of identifying where we can buy these undeveloped spacing units. And so that's where I think that we're going to see a lot of our effort. I'm not sure we're going to be able to spend all the free cash flow that we have. And so it's a bit of a balance between paying down the debt with the windfall of cash that we would get at $100 oil and continue to be very strategic on how we place capital in some of this U.S. ground game.

David, just on debt, what's your target level? You're at 1.2x right now. Is it going to be a 1? Is it going to be a 0. How much -- what's the right magic number for debt?

I don't think there's a magic number on debt. I think that the debt that we're at, we're comfortable with at current debt. And so -- but we will take the opportunity to chip away at it here in this environment. And so when we think of our ideal business, it's a 60% payout ratio long term. It's debt that's probably less than 1 or maybe 0.8x at a longer-term price of $65 or something like that. And so we think that we've got some flexibility to move within those parameters and still execute several aspects of our business right now.

But David, what's your plan versus the surplus this year you've got. Dividends versus share buybacks, where do you sit? [indiscernible] instead of share buyback?

No, I think right now, while we're seeing opportunities, it's more on the M&A front. So I would say first call on capital is dividends. Second call is accretive, high-return M&A. Third call will be debt repayment. And then if we can't find anywhere to invest and we're ripping away at our debt, then maybe there's an opportunity to do some share buybacks, but that would be the kind of the order of priorities that we think about. Well, excellent. I thank everyone for their time today for coming out and for engaging and having some good questions and some good dialogue. And we'll stick around for a while if anyone has questions and like to follow up more on.