Source Rock Royalties files for rare Canadian small-cap oil IPO

Source Rock Royalties Ltd. is backed by Canadian National Railway Co.’s investment division. CN Rail train Source: iStock/madsci

Source Rock Royalties Ltd., an energy royalties firm backed by Canadian National Railway Co.’s investment division, aims to be the country’s first oil company to complete an initial public offering since Topaz Energy Corp. raised C$230 million ($184 million) in 2020.

In what would be a rare IPO for a junior Canadian energy company, Source Rock is looking to raise a more modest C$10 million, according to a preliminary prospectus filed to the Canadian Securities Administrators on Jan. 10. PI Financial Corp. and Acumen Capital Finance Partners Ltd. are the lead underwriters on the deal, along with Haywood Securities Inc., Canaccord Genuity Corp. and ATB Capital Markets. The prospectus didn’t indicate the timing for the transaction.

In a separate marketing document from Source Rock dated Jan. 11, the firm values itself between C$25.6 million and C$41.7 million. But the companies that pay it royalties are much larger. They include Canadian Natural Resources Ltd., Crescent Point Energy Corp. and Whitecap Resources Inc. and its major shareholder CN Rail.

Source Rock chief executive officer Brad Docherty didn’t immediately respond to an email seeking comment out of normal business hours in Calgary.

CN Canadian Master Trust Fund, owned by CN Rail, has been a shareholder in Source Rock since July 2014 and currently owns approximately 26 per cent of the company’s common shares, documents show. No other shareholder owns more than 10% of the company’s equity. 

CN Rail is also the largest shareholder in Calgary-based oil royalty company Freehold Royalties Ltd., with a 19.9 per cent stake, according to data compiled by Bloomberg.

© 2022 Bloomberg L.P.

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