/NOT FOR DISTRIBUTION TO U.S. NEWS WIRE
SERVICES OR DISSEMINATION IN THE U.S./
CALGARY,
AB, Nov. 28, 2022 /CNW/ - Source Rock
Royalties Ltd. ("Source Rock") (TSXV: SRR) (TSXV: SRR.WT), a
pure-play oil and gas royalty company with an established portfolio
of light oil focused royalties in Saskatchewan and Alberta, announces that it has closed the
acquisition of a 2% gross overriding royalty (the "GORR") in
approximately 6,400 net acres (10 sections) of land in S.E.
Saskatchewan (the "GORR Lands").
The purchase price was $3.5 million
and the transaction has an effective date of October 1, 2022.
![Source Rock Royalties Logo (CNW Group/Source Rock Royalties Ltd.) Source Rock Royalties Logo (CNW Group/Source Rock Royalties Ltd.)](https://mma.prnewswire.com/media/1955936/Source_Rock_Royalties_Ltd__SOURCE_ROCK_ROYALTIES_CLOSES_S_E__SAS.jpg)
The GORR Lands are operated by Anova Resources Inc. ("Anova"),
and Elevation Oil & Gas Limited ("Elevation") is partnered with
Anova on the GORR Lands. Source Rock has completed several royalty
deals with Anova since January 2019.
Over this time, Anova has successfully drilled numerous horizontal
wells on Source Rock's royalty lands and has become one of Source
Rock's largest royalty payors. Gross production from the GORR Lands
averaged approximately 500 bbl/d of Frobisher light oil in October 2022. In addition, 8 horizontal wells
were recently drilled on the GORR Lands, and 4 of these wells began
producing over the last two weeks. It is anticipated that the
remaining recently drilled horizontal wells will begin producing
prior to year-end.
Future development on the GORR Lands will be focused on the
Frobisher formation. The
Frobisher is a shallow,
conventional light oil play that does not require hydraulic
fracturing; it is one of the most economic light oil plays in
Canada.
Significant Drill Commitment
As part of the purchase of the GORR, Source Rock has received a
drill commitment for 15 additional net horizontal wells (each a
"Drill Commitment Well") to be drilled on Source Rock's royalty
lands prior to December 31, 2024 (the
"Drill Commitment Deadline"). Source Rock is entitled to
$125,000 in damages for each Drill
Commitment Well not drilled before the Drill Commitment
Deadline.
The Drill Commitment Deadline may be automatically extended as
follows:
- Upon the first time that the price of the NYMEX West Texas
Intermediate ("WTI") Light Sweet Crude Oil Futures Contract (in
U.S. Dollars) settles below $70.00
for 30 consecutive days, it shall be extended by 90 days; and
- Every time thereafter that the price of WTI settles below
$70.00 for 30 consecutive days, it
shall be extended by an additional 30 days.
President's Message
We are very pleased to add to our portfolio of light oil royalty
lands in S.E. Saskatchewan and to
expand our relationship with Anova and Elevation. Anova has
consistently executed on its operational plans since 2019 and they
have proved to Source Rock that they have the necessary expertise
to successfully undertake their drilling plans in S.E. Saskatchewan.
Our royalty acquisition strategy continues to focus on
supporting the drilling activity and acquisitions of proven junior
and intermediate oil and natural gas exploration and production
companies. Although robust commodity prices have vastly improved
balance sheets, segments of the industry remain capital constrained
at a time when rates of return on drilling are very strong and
acquisition metrics are attractive. With equity valuations across
the Canadian energy industry near all-time lows and the
availability of reasonable debt capital for smaller operators being
limited, we believe that 'royalty capital' is an extremely
attractive funding option for exploration and production
companies.
Following completion of this acquisition Source Rock has
approximately $13 million of working
capital ($0.29 per share) to pursue
additional royalty acquisitions and partnerships with
operators.
Brad Docherty, President &
CEO
ATB Capital Markets Inc. acted as a
financial and technical advisor to Source Rock on the
transaction.
About Source Rock Royalties
Ltd.
Source Rock is a pure-play oil and gas royalty company with an
existing, light oil focused portfolio of royalty interests
concentrated in southeast Saskatchewan, east-central Alberta, west-central Alberta and west-central Saskatchewan. Source Rock targets a balanced
growth and yield business model, using funds from operations to
pursue accretive royalty acquisitions and to pay dividends. By
leveraging its niche industry relationships, Source Rock identifies
and acquires both existing royalty interests and newly created
royalties through collaboration with industry partners. Source
Rock's strategy is premised on maintaining a low-cost corporate
structure and achieving a sustainable and scalable business,
measured by growing funds from operations per share and maintaining
a strong netback on its royalty production.
Forward-Looking
Statements
This news release includes forward-looking statements and
forward-looking information within the meaning of Canadian
securities laws. Often, but not always, forward-looking information
can be identified by the use of words such as "plans", "is
expected", "expects", "scheduled", "intends", "contemplates",
"anticipates", "believes", "proposes" or variations (including
negative and grammatical variations) of such words and phrases, or
state that certain actions, events or results "may", "could",
"would", "might" or "will" be taken, occur or be achieved.
Forward-looking statements in this news release include statements
regarding Source Rock's dividend strategy and the amount and timing
of future dividends (and the sustainability thereof), the potential
for future drilling on Source Rock's royalty lands (and in
particular the Drill Commitment Wells being drilled prior to the
Drill Commitment Deadline, if at all), expectations for results
from the drilling on Source Rock's royalty lands, expectations
regarding commodity prices, Source Rock's growth strategy and
expectations with respect to future royalty acquisition and
partnership opportunities, and the ability to complete such
acquisitions and establish such partnerships. Such statements and
information are based on the current expectations of Source Rock's
management and are based on assumptions and subject to risks and
uncertainties. Although Source Rock's management believes that the
assumptions underlying these statements and information are
reasonable, they may prove to be incorrect. The forward-looking
events and circumstances discussed in this news release may not
occur by certain dates or at all and could differ materially as a
result of known and unknown risk factors and uncertainties
affecting Source Rock. Although Source Rock has attempted to
identify important factors that could cause actual actions, events
or results to differ materially from those described in
forward-looking statements and information, there may be other
factors that cause actions, events or results to differ from those
anticipated, estimated or intended. No forward-looking statement or
information can be guaranteed. Except as required by applicable
securities laws, forward-looking statements and information speak
only as of the date on which they are made and Source Rock
undertakes no obligation to publicly update or revise any
forward-looking statement or information, whether as a result of
new information, future events or otherwise.
Neither the TSX Venture Exchange nor its Regulation
Services Provider (as that term is defined in the policies of the
TSX Venture Exchange) accepts responsibility for the adequacy of
this release.
SOURCE Source Rock Royalties Ltd.