SOURCE ROCK ROYALTIES ANNOUNCES SECOND QUARTER 2025 RESULTS

Executive Summary

• Source Rock Royalties Ltd. reported its financial and operational results for the second quarter and first half of 2025, showing significant declines in production, revenue, and profitability compared to the same period in 2024 due to lower oil prices and reduced drilling activity.
• The company declared three monthly dividends of $0.0065 per share for Q2 2025, resulting in a payout ratio of 76% based on funds from operations.
• Management anticipates continued reduced drilling activity on royalty lands for the remainder of 2025, except for consistent drilling on Figure Lake Clearwater lands, while remaining open to accretive acquisitions.

Key Details

• Production:
  • Q2 2025 average daily production: 237 boe/d (93% oil and NGLs), a 6% decrease year-over-year.
  • YTD 2025 average daily production: 234 boe/d (93% oil and NGLs), a 5% decrease year-over-year.
• Financial Performance (Q2 2025 vs Q2 2024):
  • Royalty Revenue: $1,526,025 (down 27%).
  • Adjusted EBITDA: $1,299,095 ($0.029 per share), down 33%.
  • Funds from Operations (FFO): $1,168,154 ($0.026 per share), down 30%.
  • Total Comprehensive Income: $201,716 ($0.004 per share), down 62%.
• Financial Performance (YTD 2025 vs YTD 2024):
  • Royalty Revenue: $3,202,413 (down 16%).
  • Adjusted EBITDA: $2,759,535 ($0.061 per share), down 20%.
  • Funds from Operations (FFO): $2,460,369 ($0.054 per share), down 18%.
  • Total Comprehensive Income: $557,097 ($0.012 per share), down 25%.
• Dividends:
  • Q2 2025: Declared three monthly dividends of $0.0065 per share; total dividends declared $888,863; payout ratio 76%.
  • YTD 2025: Declared six monthly dividends of $0.0065 per share; total dividends declared $1,777,726; payout ratio 72%.
• Netbacks:
  • Q2 2025 Operating Netback: $60.23/boe (down 29% YoY).
  • Q2 2025 Corporate Netback: $54.16/boe (down 26% YoY).
  • YTD 2025 Operating Netback: $65.15/boe (down 15% YoY).
  • YTD 2025 Corporate Netback: $58.09/boe (down 13% YoY).
• Balance Sheet & Cash:
  • Cash and Cash Equivalents: $5,158,312 (up 59% YoY).
  • Working Capital: $5,543,005 (0.12 per share) as at June 30, 2025.
• Operational Metrics:
  • Average Price Realizations (Q2 2025): $70.88/boe (down 23% YoY).
  • Average Price Realizations (YTD 2025): $75.55/boe (down 12% YoY).
• Corporate Actions:
  • On July 18, 2025, Source Rock eliminated 590,000 stock options and 549,296 RSUs (1,139,296 total incentive securities) by making a cash payment of $715,522 to beneficial holders.
• Outlook:
  • Management expects ongoing reduced drilling activity on royalty lands for the remainder of 2025 due to weaker activity and lower oil prices, with the exception of expected consistent drilling on Figure Lake Clearwater lands.
  • The company continues to evaluate additional royalty and mineral interest acquisitions but emphasizes accretive metrics over forced growth.

Notable Quotes

• "Following a robust year of drilling on our royalty lands in 2024, activity was weaker in the first half of 2025. This coincided with materially lower year-over-year oil prices, resulting in a decline of both royalty production and revenue. Despite this, because of our low-cost business model, we have maintained a strong cash flow profile, a manageable dividend payout ratio and a top-tier netback per barrel." — Brad Docherty, President & CEO
• "We continue to actively evaluate additional royalty and mineral interest acquisitions that can be completed with our cash balance. These efforts have not translated into recent transactions as we strongly believe that prudently deploying shareholder capital on high-quality assets and at accretive metrics is more important than forcing growth." — Brad Docherty, President & CEO