EPG Webinar on Sept 21 Hosted by ROK

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dan_s
Posts: 34962
Joined: Fri Apr 23, 2010 8:22 am

EPG Webinar on Sept 21 Hosted by ROK

Post by dan_s »

ROK Resources, one of the Canadian Juniors in our Small-Cap Growth Portfolio, will be hosting a webinar for us on Thursday, September 21. ROK's Founder and CEO, Cam Taylor will be joining me on the live webinar.

ROK sold some non-core assets in Q2, using the proceeds to pay off 90% of their debt. The Company's balance sheet is in GREAT SHAPE.

ROKRF closed at $0.26US on August 28th. My current valuation is $0.75US.

"The first six months of 2023 were focused on corporate debt reduction, accretive asset purchases, non-core divestitures and the integration of new assets, as well as the restructuring of the Company's hedge book to provide greater exposure to an inclining commodity price environment. Total debt was reduced by over 90% year-over-year, which has provided the Company with the flexibility to allocate additional development capital across some of the most economic plays in North America."

Q2 2023 HIGHLIGHTS

Production up 8% YoY: Production was up 8% from 3,054 boepd in Q2 2022, to 3,297 boepd in Q2 2023. < Current guidance is for a production exit rate of 4,500 Boepd at the end of 2023. They are currently completing the first three wells of this summer's 11 well drilling program.

Net Debt reduced by 90% YoY: Net debt was reduced from $38.4 million at June 30, 2022, to $3.8 million. Note: 2023 net debt calculation is inclusive of $7.2 million of the current portion of hedges to be realized in the next 12 months based on mark-to-market fair value.

Term loan fully repaid: The Company fully repaid its non-revolving Term Loan, 20 months prior to expiry without penalty. Since March 2022, the Company has retired more than $60 million of debt.

Credit facility renewed: The Company renewed its $22.5 million revolving credit facility.

2024 - 2025 hedges unwound: The Company made the strategic decision to unwind certain 12 to 24-month commodity swap hedges with the elimination of this requirement with the termination of the Term Loan. < ROK is heavily weight to crude oil, so their revenues should ramp up sharply in Q3 and Q4.

Lithium National Instrument 43-101 Technical Report Released: The Company announced the results of Hub City Lithium Corp.'s ("Hub City Lithium") National Instrument 43-101 technical report confirming an inferred lithium resource of 1.15 million tonnes of lithium carbonate equivalent.

Delineated Viewfield lithium asset: Drilled the second lithium test well at Viewfield and confirmed high Lithium concentrations.
Dan Steffens
Energy Prospectus Group
ChuckGeb
Posts: 993
Joined: Thu Nov 21, 2013 2:46 pm

Re: EPG Webinar on Sept 21 Hosted by ROK

Post by ChuckGeb »

My issue with due diligence on this one is their capital structure, namely the 116 million warrants they have outstanding and 20 million options outstanding. Thus total 214.8 million basic shares and 351.5 fully diluted reflected in your capitalization table attached to profile. It appears all warrants and options are currently "in the money" so it is likely they will be exercised and thus dilute share count.

So a bit of head scratching on this one and wondering why you use 265.1 million shares fully diluted in your forecast model. Looking at their table of option grants from year end info circular there is listed 840,000 exercisable options exercisable at $.10 per share expiring 7/18/23 so I must assume these options must have already been exercised.

My take, there are too many good alternative investments in the space that don't require such brain wrangling analysis to figure out what piece of the pie one is buying when he buys a share of this stock.

Possibly you have another way of assessing this issue. Of course I know I can listen in on the upcoming call but I would prefer some independent evaluation of the matter.
dan_s
Posts: 34962
Joined: Fri Apr 23, 2010 8:22 am

Re: EPG Webinar on Sept 21 Hosted by ROK

Post by dan_s »

See page 10 of their June 30th financial statements
> 114,904,426 warrants outstanding on 6-30-2022 have a weighted average exercise price of $0.25.
> If they would all be exercised (highly unlikely) the company would get $28.7 million of cash that could be used to accelerate their drilling program.
> At the least that amount of cash would shore up their balance sheet, which is already in good shape.
> I don't use fully diluted shares in my valuations because many times the warrants are never exercised.

What's impressed me the most about ROK is that they have paid off all of the Term Loan used to make the Federated Acquisition that closed 3-7-2022 in less than 1.5 years. See page 8 of the financial statements.

The Federated Acquisition is a "Company Maker" for ROK and all the debt to close the deal has been paid off.

I have an 8-18-2023 research report on ROK. Send me an email and I'll share it with you ( dmsteffens@comcast.net )

After their presentation on 9/21 we will have Q&A. Ask them.
Dan Steffens
Energy Prospectus Group
ChuckGeb
Posts: 993
Joined: Thu Nov 21, 2013 2:46 pm

Re: EPG Webinar on Sept 21 Hosted by ROK

Post by ChuckGeb »

If the warrants and options are exercisable at roughly CAD $.25 and the shares have a FV of$1 it would seem they would with 100% certainty by exercised on or before their expiration date. Once the get the warrants and options closed out I will take a look at it. For now I am a pass.
dan_s
Posts: 34962
Joined: Fri Apr 23, 2010 8:22 am

Re: EPG Webinar on Sept 21 Hosted by ROK

Post by dan_s »

What you choose to invest in is totally up to you.

We have members with different objectives
> Some will only invest in large-caps that pay dividends
> Some want companies that hedge a high percentage of their, while some want companies that don't hedge.
> Some want to know about early stage small-caps with high potential. < This is what ROK is.
Dan Steffens
Energy Prospectus Group
Fraser921
Posts: 3100
Joined: Mon Mar 22, 2021 11:48 am

Re: EPG Webinar on Sept 21 Hosted by ROK

Post by Fraser921 »

I'm not sure if this has been posted but probably a preview for sept 21 meeting

Updated slide deck:

https://rokresources.ca/assets/rok-resources-inc-investor-presentation-august-16-2023.pdf

Vs Dans last year focus

- paid off higher cost acquisition debt
- potential Lithium opportunity
- new debt facility,

Proceeds from divestiture eliminates 85% of
outstanding term loan, resulting in estimated future
interest savings of ~$5.8mm

Future incremental monthly cash flow of ~$2.4mm for
debt servicing now to be re-deployed into organic
drilling of core assets
Small cap Canadians are looking interesting.
dan_s
Posts: 34962
Joined: Fri Apr 23, 2010 8:22 am

Re: EPG Webinar on Sept 21 Hosted by ROK

Post by dan_s »

Key for ROK is row 52 of my forecast model.
Potential for year-over-year production growth that is fully funded by operating cash flow.

Note that their realized oil price in Q2 was $108.39Cdn per bbl net of cash settlements on their hedges when WTI averaged $73.66US/bbl in Q2
Dan Steffens
Energy Prospectus Group
Fraser921
Posts: 3100
Joined: Mon Mar 22, 2021 11:48 am

Re: EPG Webinar on Sept 21 Hosted by ROK

Post by Fraser921 »

On the Rok call so and so "dumped 100 m" into the Lithium targets

They need to use a softer word like "Investment for the future" !
Fraser921
Posts: 3100
Joined: Mon Mar 22, 2021 11:48 am

Re: EPG Webinar on Sept 21 Hosted by ROK

Post by Fraser921 »

ROK up today 4 % in otherwise a mushy day.

That's why we pay Dan the big bucks!

Dan, whats your reaction to the call?
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