A capital light way to get long oil – gurufocus. com

I spend most of my time looking for companies that could end up having unusual growth potential. Gas house edwards co What I try and do is learn these companies before they really start to hit their strides.

My reasoning is that by learning these companies before they really start growing I will be able to move quickly before the market catches on to the story.

There are few better growth stories in recent years than American shale production. Electricity grid australia After decades of declining oil production U.S. O gastronomico production has taken off.

The companies that led this production charge were small independents that grew quickly. Gas vs diesel engine That might sound great, but for shareholders in these companies it wasn’t. Electricity joules While production grew quickly, none of these companies generated any free cash flow.

This is the challenge of the commodity production business. La gastronomie It is capital intensive. Gas mask bong nfl Free cash flow is an unusual occurrence, which is why Freehold Royalties ( TSX:FRU)( FRHLF) is worth a look.

Freehold Royalties is actually a Canadian company that directly benefits from growing shale production. Gas dryer vs electric dryer cost savings Like the U.S., Canada has had a significant amount of shale production growth.

Freehold is not an oil or gas producer; it is a royalty company. Year 6 electricity worksheets What that means is that it owns the mineral rights for the land from which oil and gas production is generated.

The oil or gas producer that operates on Freehold’s land and generates the production has to pay Freehold a royalty fee that is based on production revenue.

Freehold’s revenue and cash flow depend on two things: the price of the commodity being produced and how much production is taking place on its land.

Once Freehold owns the mineral rights to the land there is no work to be done. Gas up yr hearse All Freehold has to do is deposit checks in the bank. Gas monkey monster truck That is good work if you can get it.

Freehold was formed during the mid-1990s when the Canadian National Railway pension fund spun out half a million acres of royalty land to which acreage has been consistently added over the following years and now stands at 5.9 million acres.

Since 1996 Freehold has paid shareholders $30.23 per share in dividends (nearly triple the current share price) while riding the ups and downs of commodity cycles.

Ten bucks invested in Freehold at its IPO in 1996 with dividends reinvested would have been worth $109 on June 30. Gas mileage comparison That is after the share price dropped by nearly two-thirds in the oil price collapse.

Eighty-seven percent of the revenue that Freehold receives turns into cash flow for shareholders. Gas definition wikipedia This is a unique business and one that is perfect for paying a significant dividend.

Freehold’s royalty lands cover a significant portion of Western Canada and most of the light oil plays that horizontal drilling and fracking have opened up.

The company currently pays a monthly dividend (in Canadian dollars) of 4 cents per share. Done with electricity tattoo book On the current share price that equates to a yield of roughly 4.2%. 1 unit electricity price india Not bad and really quite incredible when you think how depressed oil and gas prices are.

As I mentioned, there are two variables that drive Freehold’s revenue and cash flows. Electricity distribution map One is obviously the price of the commodity being produced. Gaston yla agrupacion santa fe 2016 The second is how much production is taking place on Freehold’s land (which is also driven by the commodity price).

At higher commodity prices companies are going to have more cash flow which will result in more drilling. E electricity bill More drilling drives production higher. Electricity worksheets grade 9 At lower commodity prices the opposite will happen.

Freehold can keep paying the current dividend comfortably at $45 WTI. Electricity physics pdf If oil rises the company can do even better than that. Electricity and magnetism study guide 5th grade With the boys in OPEC making some noise about finally putting a lid on production now might be the perfect time to take a deeper dive on Freehold.

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