By Nia Williams
CALGARY, Alberta, May 2 (Reuters) - Freehold Royalties Ltd
FRU.TO said on Monday it is buying royalty interests from
Husky Energy HSE.TO that represent around 1,700 barrels of oil
equivalent per day of western Canadian production for C$165
million ($131.74 million).
The company will fund the acquisition of the royalty
production and mineral title lands with C$165 million equity
financing led by underwriters RBC Capital Markets RY.TO , CIBC
CM.TO and TD Securities TD.TO . Freehold said it should close
the deal around May 25.
"Overall we see today's transaction as complementing and
enhancing Freehold's underlying royalty asset base while further
increasing our royalty weighting for both production and
cashflow," Chief Executive Tom Mullane said on a conference call
following the acquisition.
Royalty lands are privately held oil and gas properties that
are not subject to the royalties producers pay to governments on
publicly owned lands. Producers pay a mineral tax, while the
royalties go to the property owners, in this case Freehold.
For investors, the royalty streams from the properties can
offer exposure to oil and gas production free from the costs of
finding and developing reserves.
Last year Freehold also bought royalty interests from Penn
West Petroleum PWT.TO for C$321 million and the Husky deal
takes its total fee lands to 1 million acres, and total royalty
lands to 5.9 million acres.
News of the acquisition comes a week after Husky said it was
selling a partial interest in a package of Canadian energy
midstream assets to two Hong Kong-based firms, one of which like
Husky is controlled by billionaire Li Ka-shing, for C$1.7
billion in cash.
Like its peers Husky has been hammered by the nearly
two-year global crude price slump and in December announced
plans to raise cash by selling assets, including around 60,000
barrels per day of non-core conventional oil and gas production.
Husky said proceeds from the Freehold deal would be used to
strengthen its balance sheet, and that work continues on
divesting the other oil and gas properties up for sale.
As part of the deal, Husky would also receive royalty and
working interests in select heavy oil properties in the
Lloydminster region, where it already has an extensive and
growing portfolio of conventional heavy oil production.
($1 = 1.2525 Canadian dollars)
(Editing by Diane Craft)