CALGARY, AB, May 30, 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 light oil focused royalties, announces results for the three months ended March 31, 2023.
First Quarter Highlights:
- Record quarterly royalty production of 180(1) boe/d (90% oil and NGLs), an increase of 8% over Q1 2022.
- Record monthly royalty production of 193(1) boe/d (93% oil and NGLs) in March 2023.
- Eight gross new horizontal wells began producing on Source Rock’s royalty lands, all of which were in SE Saskatchewan (7 Frobisher wells and 1 Midale well).
- Closed a $1.6 million light oil royalty acquisition in late March, adding approximately 20 bbl/d (100% oil) of royalty production in Alberta.
- Quarterly royalty revenue of $1,380,251(2), a decrease of 10% over Q1 2022.
- Quarterly Adjusted EBITDA(3) of $1,157,520 ($0.026 per share), a decrease of 17% over Q1 2022.
- Quarterly funds from operations(3) of $1,111,471 ($0.025 per share), a decrease of 5% over Q1 2022.
- Declared a quarterly dividend of $0.015 per share, resulting in a payout ratio(3) of 61%.
- Achieved an operating netback(3) of $71.45 per boe and a corporate netback(3) of $68.61 per boe.
- Ended Q1 2023 with a cash balance of $11,372,848 ($0.25 per share).
|
(1)
|
Source Rock also benefited from 19 boe/d (100% oil) for Q1 2023 and 15 boe/d (100% oil) for March 2023, of royalty production that occurred after the effective date but prior to the closing date of the acquisition completed in March 2023.
|
|
(2)
|
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 the acquisition completed in March 2023. These sales proceeds were accounted for as a reduction to the purchase price of the acquisition.
|
|
(3)
|
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.
|
President’s Message
We are very pleased to report record quarterly and monthly royalty production. Record production volumes were driven by (i) a full quarter of contribution from our November 2022 SE Saskatchewan acquisition; and (ii) eight new horizontal wells producing on our SE Saskatchewan royalty lands in Q1 2023. Three different royalty payors contributed to the activity during the quarter, with the focus of this drilling being on the Frobisher formation.
We are excited to have closed another light oil royalty acquisition late in Q1 2023 and are actively seeking to further expand and diversify our portfolio of royalties. We remain focused on acquiring royalties in lands that are producing and prospective for oil. With approximately $11.5 million ($0.25 per share) of working capital, we are well positioned to increase our base royalty production and exposure to ongoing drilling activity.
Brad Docherty, President & CEO
Financial and Operational Results
|
Three Months Ended March 31,
|
|
FINANCIAL ($, except as noted)
|
2023
|
2022
|
Change
|
|
Royalty revenue
|
1,380,251
|
1,527,386
|
-10 %
|
|
Adjusted EBITDA
|
1,157,520
|
1,402,003
|
-17 %
|
|
Per share (basic)
|
0.026
|
0.041
|
-37 %
|
|
Funds from operations
|
1,111,471
|
1,172,431
|
-5 %
|
|
Per share (basic)
|
0.025
|
0.034
|
-26 %
|
|
Total comprehensive income (loss)
|
222,235
|
647,100
|
-66 %
|
|
Per share (basic)
|
0.005
|
0.019
|
-74 %
|
|
Per share (diluted)
|
0.005
|
0.018
|
-72 %
|
|
Dividends Declared
|
673,450
|
443,438
|
52 %
|
|
Per share
|
0.015
|
0.015
|
–
|
|
Payout ratio (%)
|
61 %
|
38 %
|
61 %
|
|
Cash and cash equivalents
|
11,372,848
|
14,769,345
|
-23 %
|
|
Per share (basic)
|
0.25
|
0.33
|
-24 %
|
|
Average shares outstanding (basic)
|
44,896,645
|
34,547,946
|
30 %
|
|
Shares outstanding (end of period)
|
44,896,645
|
44,896,645
|
–
|
|
OPERATING
|
|
Average daily production (boe/d)
|
180
|
166
|
8 %
|
|
Percentage oil & NGLs (%)
|
90 %
|
92 %
|
-2 %
|
|
Average price realizations ($/boe)
|
85.16
|
102.47
|
-17 %
|
|
Operating Netback ($/boe)
|
71.45
|
94.07
|
-24 %
|
|
Corporate Netback ($/boe)
|
68.61
|
78.67
|
-13 %
|
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.
[expand title=”Advisories”]
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” 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.
Beginning with Q1 2023, Source Rock changed the definition of “payout ratio” to be based on dividends “declared” instead of dividends “paid”, as it was determined that this change will provide more useful disclosure relating to the ratio of the dividend payout relative to financial results for the period being reported on as compared to the period in which the dividend is paid to investors.
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.
/NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR DISSEMINATION IN THE U.S./
[/expand]
SOURCE Source Rock Royalties Ltd.
View original content to download multimedia: http://www.newswire.ca/en/releases/archive/May2023/30/c6408.html