CALGARY, AB, June 1, 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 that it has closed the acquisition of fee title mineral interests in two quarter sections of land (the “Fee Title”) and a 2% gross overriding royalty (the “GORR”) in approximately 5,800 gross acres (9 sections) of land in S.E. Saskatchewan (the “GORR Lands”). The combined purchase price for the transactions was $3.3 million and they have an effective date of May 1, 2023.
The Fee Title is comprised of the following perpetual mineral interests:
- 20% interest in 160 gross acres that is leased at a 20% royalty rate; and
- 16.67% interest in 160 gross acres that is leased at a 20% royalty rate.
Both Fee Title interests recently had initial drilling completed by the respective operators. The purchase of the 20% Fee Title interest includes a commitment to drill two additional horizontal wells on or before October 31, 2023, however it is anticipated that both wells will be drilled in June 2023. Each Fee Title commitment well not satisfied will result in $200,000 in damages being due to Source Rock.
A portion of the GORR Lands are contiguous to or directly offsetting Source Rock’s existing royalty lands that are actively and successfully being developed. The majority of the GORR Lands are 100% working interest lands owned and operated by Anova Resources Inc., which provide Source Rock with exposure to multiple new areas that are highly prospective for future development of 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. Portions of the GORR Lands are also prospective for future development of the Midale and Bakken formations.
Significant Drill Commitment
As part of the purchase of the GORR, Source Rock has received a drill commitment for 12 additional horizontal wells (each a “Drill Commitment Well”) to be drilled on Source Rock’s royalty lands prior to May 31, 2025 (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 $60.00 for 30 consecutive days, it shall be extended by 90 days; and
- Every time thereafter that the price of WTI settles below $60.00 for 30 consecutive days, it shall be extended by an additional 30 days.
We are excited for the near-term drilling activity that is planned on a portion of the Fee Title lands and to receive an additional drill commitment on our royalty lands. We are also very pleased to add acreage to our portfolio of light oil royalty lands in S.E. Saskatchewan. Our royalty acquisition strategy continues to be focused on a balanced approach to increasing our base of oil focused royalty production and expanding and diversifying exposure to drilling activity on highly prospective undeveloped lands.
Following completion of these acquisitions Source Rock has approximately $8.5 million of working capital ($0.19 per share) to pursue additional oil focused royalty acquisitions and partnerships with operators.
Brad Docherty, President & CEO
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.
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.
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