ROK Resources (ROKRF) Valuation Update - Feb 16

[dan_s]

I have updated my forecast/valuation model for ROK based on yesterday's press release.
> Q4 production of 4,650 Boepd beat my forecast by a wide margin and operating expenses declined by 20%/boe from Q3 to Q4.
> 3rd party year-end reserve report shows net asset values of $0.53Cdn/share for Proved and $1.02Cdn/share for Proved + Probable. < 3rd party reserve reports for companies of this size are usually very conservative.
> ROK's balance sheet is in great shape. Proceeds from asset sales in early 2023 paid off all of the Company's senior debt.
> No new wells in 1H 2024, which is common in Western Canada to avoid higher D&C expenses during the winter and spring breakup.
> My 2024 forecast is based on ROK's production averaging 4,500 Boepd during the first half of 2024 (50% oil, 10% NGLs and 40% natural gas), with production ramping up in 2H 2024 to an exit rate of 5,500 Boepd.
> Free cash flow in 1H 2024 will be used to pay off more debt and build up cash to fund their 2H 2024 drilling program. < I like this strategy.

At the time of this post ROK.V was trading at $0.275Cdn < Just 1.5 X my 2024 operating cash flow per share forecast for 2024.

My current valuation increases to $0.85Cdn or $0.63US for ROKRF.

Conclusion: ROK is a Canadian Junior with a strong balance sheet, lots of "Running Room", generating more than enough operating cash for to annual production growth of 15% to 20% AND generate free cash flow.