/NOT FOR DISTRIBUTION TO U.S. NEWS WIRE
SERVICES OR DISSEMINATION IN THE U.S./
CALGARY,
AB, May 29, 2024 /CNW/ - Source Rock Royalties
Ltd. ("Source Rock") (TSXV: SRR), a pure-play oil and gas royalty
company with an established portfolio of oil focused royalties,
announces results for the three-month period ended March 31, 2024 ("Q1 2024").
Q1 2024 Highlights:
- Record quarterly royalty production of 241 boe/d (95% oil and
NGLs), an increase of 34% over Q1 2023.
- Quarterly royalty revenue of $1,728,050, an increase of 25% over Q1 2023.
- Quarterly Adjusted EBITDA2 of $1,504,104 ($0.033
per share), an increase of 30% over Q1 2023.
- Quarterly funds from operations2 of $1,331,106 ($0.029
per share), an increase of 20% over Q1 2023.
- Declared $814,176 in dividends
($0.018 per share), resulting in a
payout ratio2 of 61%.
- Achieved an operating netback2 of $68.58 per boe and a corporate
netback2 of $60.70.
- 13 gross new horizontal wells began producing on royalty lands
in SE Saskatchewan (10) and
central Alberta (3).
- Ended Q1 2024 with cash and cash equivalents of $2,445,179.
President's Message
We are very pleased to report record royalty production in Q1
2024. This is the first quarter that our 2023 royalty acquisitions
fully contributed to production volumes, in particular our
December 2023 Alberta Clearwater
Formation heavy oil acquisition. We also continue to see strong
drilling activity from various operators targeting the Frobisher
Formation on our SE Saskatchewan
royalty lands.
We are actively evaluating additional royalty acquisitions that
can be completed with our current working capital of ~$3.0 million ($0.065 per share) and future cash flow. Source
Rock is well positioned to compound the growth of our royalty
production and royalty lands, while also paying an attractive and
sustainable monthly dividend.
Financial and Operational Results
|
Three Months Ended
March 31,
|
|
FINANCIAL ($, except
as noted)
|
2024
|
2023
|
Change
|
|
Royalty
revenue
|
1,728,050
|
1,380,251(1)
|
25 %
|
|
Adjusted
EBITDA(2)
|
1,504,104
|
1,157,520
|
30 %
|
|
Per share
(basic)
|
0.033
|
0.026
|
27 %
|
|
Funds from
operations(2)
|
1,331,106
|
1,111,471
|
20 %
|
|
Per share
(basic)
|
0.029
|
0.025
|
16 %
|
|
Total comprehensive
income (loss)
|
217,968
|
222,235
|
-2 %
|
|
Per share
(basic)
|
0.005
|
0.005
|
-
|
|
Per share
(diluted)
|
0.005
|
0.005
|
-
|
|
Dividends
declared
|
814,176
|
673,450
|
21 %
|
|
Per share
|
0.018
|
0.015
|
20 %
|
|
Payout
ratio(2)
|
61 %
|
61 %
|
-
|
|
Cash and cash
equivalents
|
2,445,179
|
11,372,848
|
-78 %
|
|
Per share
(basic)
|
0.05
|
0.25
|
-80 %
|
|
Average shares
outstanding (basic)
|
45,231,865
|
44,896,645
|
1 %
|
|
Shares outstanding (end
of period)
|
45,232,645
|
44,896,645
|
1 %
|
|
OPERATING
|
|
Average daily
production (boe/d)
|
241
|
180(3)
|
34 %
|
|
Percentage oil &
NGLs
|
95 %
|
90 %
|
6 %
|
|
Average price
realizations ($/boe)
|
78.78(4)
|
85.16
|
-7 %
|
|
Operating
netback(2) ($/boe)
|
68.58
|
71.45
|
-4 %
|
|
Corporate
netback(2) ($/boe)
|
60.70
|
68.61
|
-12 %
|
|
(1)
|
Source Rock also
benefited from $148,281 of sales proceeds from royalty production
that occurred after the effective date but prior to the closing
date of an acquisition completed in March 2023. These sales
proceeds were accounted for as a reduction to the purchase price of
the acquisition.
|
|
(2)
|
This is a non-GAAP
financial measure or non-GAAP ratio. Refer to the disclosure under
the heading "Non-GAAP Financial Measures & Ratios" for more
information on each non-GAAP financial measure or ratio.
|
|
(3)
|
Source Rock also
benefited from 19 boe/d (100% oil) for Q1 2023, of royalty
production that occurred after the effective date but prior to the
closing date of an acquisition completed in March 2023.
|
|
(4)
|
Average price
realization was lowered by Q1 2024 being the first full quarter of
Source Rock owning the heavy oil Clearwater GORR.
|
About Source Rock Royalties Ltd.
Source Rock is a pure-play oil and gas royalty company with an
existing, oil focused portfolio of royalty interests concentrated
in southeast Saskatchewan, 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, 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.
Non-GAAP Financial Measures & Ratios
This news release uses the terms "funds from operations" and
"Adjusted EBITDA" which are non-GAAP financial measures and the
terms "payout ratio", "operating netback" and "corporate netback"
which are non-GAAP ratios. These financial measures and ratios do
not have a standardized prescribed meaning under GAAP
and these measures and ratios may not be comparable with the
calculation of similar measures disclosed by other
entities.
"Adjusted EBITDA" (earnings before interest, taxes,
depreciation and amortization) is used by management to
analyze the Corporation's profitability based on the Corporation's
principal business activities prior to how these activities are
financed, how assets are depreciated, amortized and impaired, and
how the results are taxed. Additionally, amounts are removed
relating to share-based compensation expense, the sale of assets,
fair value adjustments on financial assets and liabilities, other
non-cash items and certain non-standard expenses, as the
Corporation does not deem these to relate to the performance of its
principal business. Adjusted EBITDA is not intended to represent
net profit (or loss) as calculated in accordance with IFRS.
The most directly comparable GAAP financial measure to funds
from operations is cash flow from operating activities. "Funds from
operations" is defined as cash flow from operating activities
before the change in non-cash working capital. Source Rock believes
the timing of collection, payment or incurrence of these non-cash
items involves a high degree of discretion and as such may not be
useful for evaluating Source Rock's operating performance. Source
Rock considers funds from operations to be a key measure of
operating performance as it demonstrates Source Rock's ability to
generate funds to fund operations, acquisition opportunities,
dividend payments and debt repayments, if applicable. Funds from
operations should not be construed as an alternative to income or
cash flow from operating activities determined in accordance with
GAAP as an indication of Source Rock's performance.
"Corporate netback" is calculated as funds from operations
divided by cumulative production volumes for the period. Corporate
netback is used by Source Rock to better analyze the financial
performance of its royalties against prior periods and to assess
the cost efficiency of its overall corporate platform as it relates
to production volumes. There is no standardized meaning for
"corporate netback" and this metric as used by Source Rock may not
be comparable with the calculation of similar metrics disclosed by
other entities, and therefore should not be used to make
comparisons.
"Operating netback" represents the cash margin for products
sold. Operating netback is calculated as revenue minus cash
administrative expenses divided by cumulative production volumes
for the period. Operating netback is used by Source Rock to assess
the cash generating and operating performance of its royalties
against prior periods and to assess the costs efficiency of its
operating platform as it relates to production volumes. There is no
standardized meaning for "operating netback" and this metric as
used by Source Rock may not be comparable with the calculation of
similar metrics disclosed by other entities, and therefore should
not be used to make comparisons.
"Payout ratio" is calculated as the aggregate of cash
dividends declared in a period divided by funds from operations
realized in such period. Source Rock considers payout ratio to be a
key measure to assess Source Rock's ability to fund operations,
acquisition opportunities, dividend payments, cash taxes and debt
repayments, if applicable.
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.