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Source Rock Royalties Ltd. ("Source Rock") (TSXV: SRR), a pure-play oil and gas royalty company with an established portfolio of oil royalties, announces unaudited operational and financial highlights for fiscal 2023 and the fourth quarter of 2023 ("Q4 2023"). Annual royalty production and revenue were the highest results in Source Rock's 11-year history.

Unaudited ⁽¹⁾ annual results for fiscal 2023 were:

• Royalty Production - 208 boe/d (93% oil & NGLs)
  
  
• Royalty Revenue - $6.6 million

In addition, for fiscal 2023 Source Rock also benefited from 12 boe/d (100% oil & NGLs) of production from newly acquired assets, and approximately $0.4 million of royalty revenue relating to such production, which was accounted for as a purchase price adjustment.

Unaudited ⁽¹⁾ results for Q4 2023 were:

• Royalty Production - 218 boe/d (94% oil & NGLs)
  
  
• Royalty Revenue - $1.7 million

In addition, for Q4 2023 Source Rock also benefited from 29 boe/d (100% oil & NGLs) of production from newly acquired assets, and approximately 0.2 million of royalty revenue relating to such production, which was accounted for as a purchase price adjustment.

Royalty production averaged 243 boe/d (95% oil & NGLs) in December 2023 .

Audited Annual and Q4 2023 Financial Statements and Management Discussion and Analysis, as well as oil and gas reserves information as of December 31, 2023 , will be filed on SEDAR+ ( www.sedarplus.ca ) and announced by news release on or before April 29, 2024 .

President's Message

2023 was a transformational year for Source Rock. We followed-up on our November 2022 S.E. Saskatchewan acquisition for $3.5 million with three additional royalty acquisitions in central Alberta and S.E. Saskatchewan . In total, $13 million was deployed in 2023 and $16.5 million of acquisitions have been completed since our IPO in March 2022 . These acquisitions grew our royalty lands by approximately 100%, materially increasing both Source Rock's existing royalty production and our exposure to undeveloped drill locations.

Despite the growth achieved, our corporate cost structure did not increase materially, and our acquisitions plus the consistent drilling activity on our royalty lands led to strong financial results. This financial strength allowed us to transition to a monthly dividend and increase the dividend by 10% in April 2023 and an additional 9% in October 2023 (for a 20% total increase during the year). Since our IPO at $0.90 per share, we have paid $0.15 per share in dividends. Since 2014, we have paid cumulative dividends of $16.9 million .

Given the robust rates of return being achieved by certain operators on our oil focused royalty lands, we expect consistent drilling activity in 2024 on our newly acquired Clearwater royalty lands and periodic drilling of both development and exploration wells on portions of our S.E. Saskatchewan royalty lands. With expanded base production following our 2023 acquisitions and strong drilling activity during the year, current oil prices provide Source Rock with strong base revenue from our existing royalties.

Source Rock's working capital as of February 29, 2024 was approximately $2.2 million ( $0.05 per share), and we have no debt or future financial obligations relating to any of our assets. 2023 was Source Rock's 11 ^th year in business, and the opportunities to expand our royalty partners, and grow and diversify our portfolio of oil royalties, remain very attractive. We continue to identify and evaluate multiple potential royalty acquisitions and intend to execute on further growth in 2024. We are focused on continuing to build a scalable and sustainable business that maintains a high profit margin and pristine balance sheet, and balances growth with providing a strong yield to shareholders.

Brad Docherty , President & CEO

Recap of Acquisitions & Updates

Clearwater , Alberta ( December 2023 Transaction)

• Purchase price: $8,000,000
  
  
• Royalty lands: 60,800 acres (95 sections) of largely contiguous Clearwater lands in Central Alberta
  
  
• Royalty rate: 1.5% gross overriding royalty ("GORR") until cumulative royalty revenue received by Source Rock equals the purchase price, at which time the royalty rate reduces to 1.0%
  
  
• Initial royalty production: ~40 bbl/d (100% heavy oil)
  
  
• Drill commitment: 59 horizontal wells prior to June 30, 2026 (3 wells satisfied)

S.E. Saskatchewan ( June 2023 Transaction)

• Purchase price: $3,300,000
  
  
• Royalty lands: 5,800 acres (9 sections) of land producing from the Frobisher formation
  
  
• Royalty rate: 2% GORR & varying fee title mineral interests in 320 gross acres of land
  
  
• Initial royalty production: ~10 bbl/d (100% light oil)
  
  
• Drill commitment : 12 horizontal wells prior to May 31, 2025 (fully satisfied in January 2024 )

Alberta Light Oil Waterflood Properties ( March 2023 Transaction)

• Purchase price: $1,600,000
  
  
• Royalty lands: 15,000 acres (23 sections) of land in Central Alberta
  
  
• Royalty rate: 5% GORR
  
  
• Initial royalty production: ~20 bbl/d (100% light oil)
  
  
• Capital commitment: $3.2 million prior to December 31, 2024

S.E. Saskatchewan ( November 2022 Transaction)

• Purchase price: $3,500,000
  
  
• Royalty lands: 6,400 acres (10 sections) of land producing from the Frobisher formation
  
  
• Royalty rate: 2% GORR
  
  
• Initial royalty production: ~10 bbl/d (100% light oil)
  
  
• Drill commitment: 15 horizontal wells prior to December 31, 2024 (fully satisfied in September 2023 )

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.

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, the ability to complete such acquisitions and establish such partnerships, and the estimated costs for Source Rock to run its business. 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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