Source Rock Royalties provides Q4 production numbers

Executive Summary

• Source Rock Royalties Ltd. reported unaudited fiscal 2025 and Q4 2025 results, showing declines in both royalty production and revenue compared to the prior year periods.
• The company announced the sale of a 50% interest in two sections of oil sands leases in Alberta to an intermediate operator, receiving $225,000 in cash while retaining a 1.75% Gross Overriding Royalty (GORR).
• Management highlighted 33 new horizontal wells coming online in 2025 but noted a slowdown in drilling activity due to WTI oil prices remaining below $70 USD for an extended period.

Key Details

• Fiscal 2025 Annual Results (Unaudited):
  • Royalty production: 230 barrels of oil equivalent per day (boe/d), a decrease of 8% compared to 2024.
  • Production mix: 92% oil and natural gas liquids (NGLs).
  • Royalty revenue: $6.03 million, a decrease of 22% compared to 2024.
• Q4 2025 Results (Unaudited):
  • Royalty production: 226 boe/d, a decrease of 12% compared to Q4 2024.
  • Production mix: 91% oil and NGLs.
  • Royalty revenue: $1.33 million, a decrease of 29% compared to Q4 2024.
• Sale of Crown Mineral Leases:
  • Transaction: Sale of a 50% interest in two sections of oil sands leases in Alberta.
  • Buyer: A top-tier intermediate operator with expertise in drilling multilateral heavy-oil wells.
  • Consideration: $225,000 cash received for the 50% interest.
  • Retained Interest: 1.75% Gross Overriding Royalty (GORR) in 100% of production from the lands.
  • Return on Investment: 105% return on the initial $110,000 acquisition cost within 6 months.
• Portfolio Status:
  • Following the sale and recent acquisitions, Source Rock owns a 50% interest in 32 sections (20,480 acres) of oil sands and petroleum/natural gas leases in Alberta.
• Drilling Activity:
  • Total new horizontal wells in 2025: 33.
  • Breakdown by location/type:
    • 13 Frobisher wells (S.E. Saskatchewan).
    • 1 Midale well (S.E. Saskatchewan).
    • 13 Clearwater wells (Central Alberta).
    • 5 Viking wells (West-central Saskatchewan).
    • 1 Dina well (East-central Alberta).
• Market Conditions:
  • Drilling activity slowed materially in the second half of 2025 and early 2026 as WTI oil prices remained below $70 USD.
  • Management is uncertain if recent price increases will lead to renewed near-term drilling.
• Future Strategy:
  • Actively engaging with industry relationships to generate additional transactions regarding Crown mineral leases.
  • Evaluating and pursuing acquisition of additional Crown mineral leases.
  • Actively evaluating additional producing oil royalty acquisitions to expand base production and diversify exposure.
• Regulatory Filings:
  • Audited annual and Q4 2025 financial statements, MD&A, and oil and gas reserves information as of Dec. 31, 2025, will be filed on SEDAR+ and announced by news release on or before April 30, 2026.

Notable Quotes

• "Twenty twenty-five was another strong year for Source Rock as a result of consistent drilling activity on our royalty lands."
• "Efficiently achieving 'proof of concept' for our new organic royalty creation strategy has not only provided us with a return on our initial investment (105 per cent in 6 months) but it has also illustrated how our leasing activity can grow our portfolio of oil royalties through transactions with well-capitalized and proven operators."
• "We are also actively evaluating additional producing oil royalty acquisitions with the goal of using our cash balance to expand our base production and diversify our exposure to undeveloped land and future potential drilling locations."