What do other analysts think of ROK's Q4 updates?

[dan_s]

From VIII Capital on February 15:
ROK provided Q4/23 highlights, 2023 reserves and H1/24 guidance this morning. We view the update as positive, with ROK showing production levels and cash flow generation in Q4/23 that beat analyst expectations. ROK did provide softer-than-expected H1/24 guidance; however, we believe this is a prudent decision as the company looks to focus on deleveraging over deploying capital in a volatile commodity price environment. < I see this as a positive decision, especially since D&C and other oilfield services are more expensive during the winter months and Spring Breakup.

Positive Q4/23 update: ROK expects Q4/23 production to be 4.65 MBOE/d, which surpasses consensus and our estimate of 4.1 MBOE/d. In our view, part of the beat came from gas volumes exceeding expectations, with the company's liquid weighting in the quarter at 60% versus our 70% estimate. Higher-than-expected production resulted in an estimated cash flow of $10 million, which was ahead of our $9 million estimate and the consensus estimate of $6 million. Notably, we are starting to see an inflection point with the company's operating costs on a BOE basis starting to come down. ROK expects its opex/BOE to be sub-$30/BOE in Q4/23 which is below our $31/BOE estimate. Finally, net debt was in line with our $18.5 million estimate.

ROK to focus on debt repayment and optimization in H1/24: In the first half of the year, ROK will focus on: (i) debt reduction, (ii) improving operational efficiencies, (iii) strategic well reactivations and optimizations, and (iv) advancement of the lithium project.

· The company plans on spending $4.0 - $4.5 million on capex, which compares to our $11 million estimate, with the focus on well reactivations and recompletions.

· ROK expects H1/24 production to average 4.0 MBOE/d which is below our 4.3 MBOE/d estimate and consensus at 4.5 MBOE/d. This is lower than expected due to lower-than-estimated capital spending levels on new drilling, in our view.

If a more constructive commodity price outlook occurs in H2/24, the company expects to include a more active drilling program focused on growth and reducing F&D costs with an emphasis on Frobisher drilling.

ROK showing reserves growth: The company showed some solid reserves growth, with 1P and 2P reserves increasing by 38% and 31%, respectively, and an increase of 10 future proved drilling locations in Southeast Saskatchewan as a result of a successful Frobisher drilling campaign. The bulk of the reserves increases came from acquisitions during the year (offset by the Weyburn disposition) and realized FD&A including changes in FDC of $13.69/BOE and $11.20/BOE on a 1P and 2P basis. Assuming ROK's 2023 operating netback of $24.37/BOE, the company realized recycle ratios of 1.78 and 2.18 on a 1P and 2P basis, respectively.

We reiterate our BUY rating and $0.65Cdn target price. Our target is based on a 50/50 weighting of 2.0x 2024E EV/DACF target multiple and 1x our risked estimated NAVPS. Risks to our price target include commodity prices, cost inflation, equipment, rig & crew availability, and production performance.

From Bill Newman, CFA at Research Capital Corp.
Yesterday, ROK issued an operational update, released year-end reserves, and provided first-half 2024 guidance. ROK finished 2023 strong with record average production in December of 4,650 boe/d, surpassing the upper limit of the projected exit 2023 range of 4,300 boe/d to 4,500 boe/d. Estimated reserves were relatively unchanged despite a significantly lower commodity price deck. Given the recent weakness in commodity prices, ROK has set a modest H1/24 capital budget of $4.0mm to $4.5mm, focused on low risk well reactivations and recompletions. The lower capital budget should allow the Company to reduce its relatively small amount of debt further, positioning the Company for an active drilling program in H2/24. We are maintaining our BUY recommendation and have adjusted our target price to $0.60Cdn (from $0.75) equivalent to a 4.0x multiple of our new 2024 debt-adjusted cash flow forecast.