What you need to know: • Source Rock is an oil and gas royalty company with interests in lands across Saskatchewan and Alberta. • SRR has grown average daily production at a 16% CAGR since 2021, resulting in adjusted EBITDA growing at a 22% CAGR. • Source Rock offers a >9% dividend yield which has grown at 2.5% annually since initiating the dividend in 2014. • SRR has a strong shareholder base with CN Rail Pension Fund owning 20% and management/board owning 10%. Source Rock Royalties Ltd. (SRR:TSXV) is a pure-play oil and gas royalty company with an existing portfolio of oil-focused royalty interests concentrated in central Alberta, southeast Saskatchewan, and west-central Saskatchewan. SRR has a scalable and sustainable business model, and a track record of successful royalty acquisitions and growing royalty production, while keeping operating expenses low. SRR currently pays a >9% dividend yield and has returned $0.22/share to shareholders since going public in 2022. SRR has a strong balance sheet and shareholder base, with CN Rail Pension Fund as the largest shareholder. Investment Thesis Track Record of Growth. Since 2021, average daily production has grown at a 16% CAGR, resulting in revenue growing at a 22% CAGR and adjusted EBITDA growing at a 22% CAGR. While the recent decline in oil prices will reduce drilling activity in 2025, we expect SRR to use its strong balance sheet to be acquisitive in order to further expand and diversify its portfolio of royalties. Stable Dividend. SRR pays a monthly dividend of $0.0065/share, equating to a >9% yield. This has grown at a 2.5% CAGR over the last decade, a 5.0% CAGR over the last five years and 30% since SRR’s IPO in March 2022. The dividend is well covered at current oil prices with a payout ratio of 58% based on 2024 FFO. Minimal Operating Expenses. SRR’s corporate structure allows for low operating expenses, having just one full-time employee. SRR does not have any future capital costs or liabilities associated with its royalty interests. In 2024, the Company saw only $873K in operating expenses, allowing SRR to post industry-leading netbacks. Pristine Balance Sheet. SRR has a strong balance sheet, highlighted by greater than $5M in cash ($0.11/share) and no debt. This positions the Company for sustainable growth and continued dividend payouts. High Insider Ownership & Alignment. SRR’s CEO and Founder, Brad Docherty, owns 5.5% of the shares outstanding, the remaining management team/board own 5%, and CN Rail Pension Fund owns 20%. No cheap founder shares were ever issued and no insider has sold a share in the 3+ years that SRR has been public. Certain insiders (in particular the CEO) have been fairly consistent buyers. This ensures that management acts in the best interest of shareholders. Valuation. SRR trades at 4.9x 2024A EBITDA compared to the three other O&G royalty companies in Canada at 11.3x 2024A EBITDA, on average. Source Rock has the highest dividend yield and recent growth rates amongst the group. We attribute the discount to SRR’s smaller size, comparatively reduced asset diversification, and liquidity, and not the quality of its business model and assets.