ROK Resources (ROK) Q1 Results - May 27

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dan_s
Posts: 34463
Joined: Fri Apr 23, 2010 8:22 am

ROK Resources (ROK) Q1 Results - May 27

Post by dan_s »

ROK reported Q1 results after the market closed on Friday.

REGINA, SK / ACCESSWIRE / May 26, 2023 / ROK Resources Inc. ("ROK" or the "Company") (TSXV:ROK)(TSXV:ROK.WT)(OTCQB:ROKRF), has filed its interim Financial Results and Management Discussion and Analysis for the three months ended March 31, 2023.

Financial and Operating Highlights

In Q1 2023, the Company realized production volume of 372,570 total boe (4,140 boe/d), resulting in crude and natural gas sales of $24.1 million and funds from operations of $13.3 million. This equates to an operating netback, after hedging, per boe of $33.71 and an operating income profit margin, after hedging, of 52.0%
> Q1 production compares to my forecast of 4,175 Boepd
> Q1 funds from operations compares to my operating cash flow forecast of $11.8 million.

First Quarter Highlights

> Record production of 4,140 boe/d (70% liquids);
> Net Debt of $8.3 million as of March 31, 2023. A decrease of $27 million from Q4 2022, after Q1 2023 capital expenditures of $5.4 million; < This is very good news. ROK's balance sheet is in great shape after cash used from non-core asset sales to pay off most of their debt.
> Successfully drilled 2 gross (1.6 net) wells: 1 vertical test well in Southeast, Saskatchewan and 1 horizontal Cardium well in Kaybob, Alberta;
> Realized a quarterly hedge gain on commodity contracts of $2.7 million;

Early Repayment of Term Loan and Hedge Strategy

Through a combination of monthly cash flow and strategic non-operated asset dispositions the Company was able to pay down the term loan from the initial balance of $52.5 million to $7.1 million in Q1 2023, with the full repayment of the remaining balance in May 2023. As a result of the early term loan repayment, the Company made the strategic decision to unwind certain commodity swap hedges placed in 2023, 2024 and 2025, as more particularly described in its May 2, 2023 press release.

Impact of Alberta Wildfires

The Alberta wildfires have affected ROK's Kaybob, Alberta operations, resulting in production shut-ins of ~300 Boepd (80% natural gas). It is expected that some production will remain shut-in through Q2 2023 and potentially into Q3 2023, however ROK will provide additional guidance, as further details emerge. < Good news, as this is not as impactful as I thought and most of it is natural gas, so very little impact on my stock valuation.
The Company's corporate 2023 year-end production target of 4,500 Boepd remains unchanged with the 2H 2023 drilling program scheduled to begin in July 2023.

About ROK

ROK is primarily engaged in exploring for petroleum and natural gas development activities in Alberta and Saskatchewan. Its head office is located in Regina, Saskatchewan, Canada and ROK's common shares are traded on the Exchange under the trading symbol "ROK".
Dan Steffens
Energy Prospectus Group
dan_s
Posts: 34463
Joined: Fri Apr 23, 2010 8:22 am

Re: ROK Resources (ROK) Q1 Results - May 27

Post by dan_s »

I have updated my forecast/valuation model for ROK and posted it to the EPG website.
My valuation stays at $1.00CDN and $0.75US per share.

Good Q1 results and their new presentation, which is available on the ROK website, confirms a lot of my forecast model assumptions.

ROK's production will be lower in Q2 and Q3, but should ramp up to over 4,500 Boepd in Q4 since they will be completing several wells in Sept/Oct.
> This year's D&C capex is fully funded by operating cash flow.
> Should start generating a lot of free cash flow in Q4.
> Could have a 2023 exit rate of 5,000 Boepd.

This one has a lot of running room, with path to 10,000 Boepd within two years.

What they accomplished to get all of their senior debt paid off is remarkable.
Dan Steffens
Energy Prospectus Group
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