SOURCE ROCK ROYALTIES ANNOUNCES RECORD QUARTERLY & MONTHLY ROYALTY REVENUE

/NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR DISSEMINATION IN THE U.S./

CALGARY, AB, Aug. 30, 2022 /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 in Saskatchewan and Alberta, announces financial and operating results for the three and six months ended June 30, 2022.

Second Quarter Highlights:

• Record quarterly royalty revenue of $1,903,802, an increase of 82% compared to Q2 2021 and 25% higher than Q1 2022.
• Record monthly royalty revenue of $681,323 in May 2022.
• Record quarterly Adjusted EBITDA¹ of $1,715,652 ($0.038 per share), an increase of 81% compared to Q2 2021 and 23% higher than Q1 2022.
• Record quarterly funds from operations¹ of $1,429,610 ($0.032 per share), an increase of 51% compared to Q2 2021 and 22% higher than Q1 2022.
• Quarterly royalty production averaged 168 boe/d (92% oil and NGLs), an increase of 2% compared to both Q2 2021 and Q1 2022.
• Paid a quarterly dividend of $0.015 per share, resulting in a payout ratio¹ of 47%.
• Achieved an operating netback¹ of $112.22 per boe and a corporate netback¹ of $93.51 per boe.
• Ended Q2 2022 with a cash balance of $15,466,841 ($0.344 per share), an increase of 5% from March 31, 2022.

(1)    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

Royalty production in Q2 2022 was steady and robust commodity prices drove record quarterly royalty revenue as well as a new high mark for monthly royalty revenue. We continue to identify, pursue and negotiate numerous potential royalty acquisitions, but commodity price strength and volatility has led us to be patient and prudent. We remain focused on royalty acquisitions that fit our corporate mandate and that can be completed at metrics that align with the significant valuation compression that has occurred across the Canadian oil and gas industry, including the royalty companies.

Our cash position is increasing as we build-up free cash flow and currently represents ~45% of our market capitalization. With short-term interest rates rising materially over recent months we are now receiving enough interest on our cash balance to cover ~50% of our estimated costs to run the business. This provides us with significant flexibility to both expand and diversify our portfolio of royalties, and continue to provide a strong and sustainable yield to shareholders.

Brad Docherty, President & CEO

Financial and Operational Results

	Three Months Ended June 30,			Six Months Ended June 30,
FINANCIAL ($)	2022	2021	Change	2022	2021	Change
Royalty revenue	1,903,802	1,045,974	82 %	3,431,188	1,853,045	85 %
Interest on cash balance	26,702	281	9,402 %	33,179	956	3,371 %
Administrative expenses	188,150	98,936	90 %	313,533	178,326	76 %
Percentage of revenue (%)	10 %	10 %	-	9 %	10 %	-10 %
Adjusted EBITDA^(1)	1,715,652	947,038	81 %	3,117,655	1,674,719	86 %
Percentage of revenue (%)	90 %	91 %	-1 %	91 %	90 %	1 %
Per share (basic)	0.038	0.032	19 %	0.078	0.057	37 %
Funds from operations^(1)	1,429,610	947,319	51 %	2,602,041	1,675,676	55 %
Percentage of revenue (%)	75 %	91 %	-18 %	76 %	90 %	-16 %
Per share (basic)	0.032	0.032	-	0.065	0.057	14 %
Total comprehensive income (loss)	904,617	195,727	362 %	1,551,717	(478,052)	-
Per share (basic)	0.020	0.007	186 %	0.039	(0.016)	-
Per share (diluted)	0.020	0.006	233 %	0.039	(0.015)	-
Dividends Paid	673,449	439,032	53 %	1,116,887^(2)	585,269	91 %
Per share	0.015	0.015	-	0.03	0.03	-
Payout ratio (%)	47 %	46 %	2 %	43 %	35 %	23 %
Cash and cash equivalents	15,466,841	963,733	1,505 %	15,466,841	963,733	1,505 %
Per share (basic)	0.344	0.033	942 %	0.344	0.033	942 %
Average shares outstanding (basic)	44,896,645	29,322,985	53 %	39,750,883	29,286,040	36 %
Shares outstanding (end of period)	44,896,645	29,353,809	53 %	44,896,645	29,353,809	53 %

OPERATING
Average daily production (boe/d)	168	164	2 %	167	154	8 %
Percentage oil & NGLs	92 %	95 %	-3 %	92 %	95 %	-3 %
Average price realizations ($/boe)	124.40	70.25	77 %	113.58	66.65	70 %
Operating netback ($/boe)^(1)	112.22	63.45	77 %	103.14	60.08	72 %
Corporate netback ($/boe)^(1)	93.51	63.48	47 %	86.08	60.44	42 %

(1)  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.

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.

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, 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.

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 paid 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 the fourth quarter of 2021, Source Rock changed the label of "netback" to "corporate netback" to distinguish this measure from "operating netback", which was introduced in the quarter. The composition of the measure remains unchanged.

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.

visit www.sourcerockroyalties.com or contact Brad Docherty, Chairman, President & CEO at [email protected].