/NOT FOR DISTRIBUTION TO U.S. NEWS WIRE
SERVICES OR DISSEMINATION IN THE U.S./
CALGARY,
AB, Dec. 4, 2023 /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 oil
royalties, announces that it has closed the acquisition of a gross
overriding royalty (the "GORR") in 60,800 net acres (95 sections)
of largely contiguous land in the Figure Lake area of central
Alberta (the "GORR Lands") for a purchase price of $8.0 million (the "Purchase Price"). The Purchase
Price is subject to financial adjustments effective October 1, 2023 and was funded with cash on
hand.
The GORR has a 1.5% royalty rate until cumulative royalty
revenue received by Source Rock equals the Purchase Price, at which
time the royalty rate reduces to 1.0%.
Rubellite Energy Inc. ("Rubellite") (TSX: RBY) is the operator
of the GORR Lands. The GORR Lands comprise a portion of Rubellite's
lands in the Figure Lake area and certain adjacent acreage.
Production from the GORR Lands is entirely from the Clearwater
formation and would have generated 43 bbl/d of heavy oil royalty
production in October 2023. The GORR
Lands are 80% undeveloped and there were 36 horizontal wells
contributing to production in October. Rubellite has been actively
drilling the GORR Lands during Q4 2023.
Material Drill Commitment
Source Rock has received a drill commitment for 59 additional
horizontal wells (each a "Drill Commitment Well") to be drilled on
the GORR Lands prior to June 30, 2026
(the "Drill Commitment Deadline"). Source Rock is entitled to
non-performance damages for each Drill Commitment Well not drilled
before the Drill Commitment Deadline. The Drill Commitment Deadline
is subject to specific extension provisions if the NYMEX West Texas
Intermediate crude oil futures contract price declines materially
for extended periods.
ATB Capital Markets Inc. acted as financial
advisor, Dentons Canada LLP acted as counsel
and
Trimble Energy Group acted as technical advisor to
Source Rock on the transaction
President's Message
We are very excited to partner with Rubellite to acquire our
first royalty in the central Alberta
Clearwater fairway. As a light oil focused royalty company
for the 11-year history of Source Rock, this transaction represents
entry into a new core area and our first heavy oil royalty
transaction. With the Trans Mountain pipeline expansion expected to
become operational near-term, which we believe will reduce
volatility and decrease the differential in the pricing of Western
Canadian Select oil, this is an opportune time to obtain exposure
to heavy oil production. This acquisition strengthens our oil
royalty portfolio and complements ongoing efforts to grow our light
oil royalty lands in areas such as S.E. Saskatchewan, where we have been focused for
several years.
This acquisition not only increases Source Rock's existing
royalty production, but also expands our exposure to ongoing
drilling activity through a material commitment by Rubellite on its
core Figure Lake lands.
We have now deployed $16.4 million
on four oil royalty acquisitions in Alberta and S.E. Saskatchewan since November 2022. Following this transaction, our
working capital is approximately $1.4
million ($0.03 per share).
Brad Docherty, President &
CEO
About Source Rock Royalties Ltd.
Source Rock is a pure-play oil and gas royalty company with an
existing portfolio of oil 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 (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, expectations regarding the timing of
completion of the Trans Mountain pipeline expansion and its effect
on the volatility and differential of Western Canadian Select oil
pricing, expectations regarding future operational expenses, 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.