Source Rock Royalties Ltd. (TSXV: SRR) reported record quarterly royalty revenue of $2,134,983 for the three months ended June 30, 2026, marking a 40% increase year-over-year.

The Calgary-based pure-play oil and gas royalty company delivered adjusted EBITDA of $1,932,155, a 49% rise from the same period in 2025, while maintaining a payout ratio of 55% against funds from operations.

Financial Performance

Royalty revenue for the first half of FY26 reached $3,440,390, reflecting a modest 7% growth compared to the prior year. This contrasts with the sharper quarterly acceleration, indicating that the second quarter significantly outperformed the first in terms of revenue generation.

Total comprehensive income surged 333% to $873,950 in the quarter, compared to $201,716 in Q2 2025. For the six-month period, comprehensive income rose 120% to $1,224,304.

Operational Metrics

Average daily production declined 7% to 220 boe/d in Q2 2026, down from 237 boe/d in the prior year. Year-to-date production fell 13% to 203 boe/d. The portfolio remained heavily weighted toward oil and NGLs, constituting 94% of output in the quarter.

Price realizations were the primary driver of financial growth. Average price per boe jumped 50% to $106.54 from $70.88 in Q2 2025. Consequently, the operating netback expanded 60% to $96.51/boe, while corporate netback rose 50% to $81.09/boe.

What the Numbers Show

The divergence between declining production volumes (-7%) and surging revenue (+40%) highlights the company’s high operating leverage to commodity prices. With fixed costs largely absent in a royalty model, the 50% increase in price realizations translated directly into a 49% jump in adjusted EBITDA, demonstrating significant margin expansion without corresponding volume growth.

Balance Sheet and Dividends

Working capital increased to $4,899,871 as of June 30, 2026, up from $4,567,435 at the end of Q1. Cash and cash equivalents stood at $4,086,350, a 21% decrease from $5,158,312 a year ago, likely reflecting ongoing acquisition activity and dividend payments.

The company declared dividends of $0.0065 per share monthly, resulting in a total quarterly payout of $888,863. The payout ratio improved to 55% in Q2, down from 76% in the same quarter last year, providing greater coverage for shareholder returns.

Portfolio Activity

Source Rock acquired a 50% interest in 16.75 sections (10,720 acres) of Crown mineral leases in Alberta for $402,073, bringing total leases to 50.75 sections. Additionally, it secured a 0.5% gross overriding royalty in producing lands in Saskatchewan. Eight new horizontal Clearwater wells began producing on royalty lands in central Alberta during the quarter.

Source Rock Royalties Ltd. has declared a monthly dividend of $0.0065 per common share, payable in cash on July 15, 2026 to shareholders of record on June 30, 2026. This dividend is designated as an "eligible dividend" for Canadian income tax purposes.

Dividend Details

The following table outlines the key dates and amounts for the dividend declaration:

About Source Rock Royalties Ltd.

Source Rock Royalties Ltd. is a pure-play oil and gas royalty company with an established portfolio of oil royalties and Crown mineral leases. The company's portfolio is concentrated in southeast Saskatchewan, central Alberta, and west-central Saskatchewan, with additional ownership in oil sands and petroleum and natural gas leases in Alberta.

Source Rock targets a balanced growth and yield business model, utilizing funds from operations to pursue accretive royalty acquisitions and to pay dividends. The company's strategy focuses 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.