ROK Resources (ROKRF) Update - June 19

[dan_s]

2024 Guidance Highlights

Production Growth: Estimated 2024 average daily production rate of 4,100 boepd to 4,200 boepd (64% liquids) which exceeds 2023 daily average production rate of 3,876 boepd (62% liquids).

Reduction in Capital Expenditures: Total annual capital expenditures of $24 million to $25 million in 2024, a 25% decrease in annual capital expenditures when compared to 2023.

Stable Balance Sheet: 2024 exit Adjusted Net Debt of $19 million to $20 million, implying a debt to cash flow from operations ratio of 0.6x.

Core Area Drill Program: An estimated 13 gross (11.95 net) wells in Southeast Saskatchewan (75% - 85% Frobisher weighted assets), aimed at growing base reserves and future drilling inventory.

Midale Multi-Lateral Drilling: Drilling of 2 to 3 multi-lateral Midale wells to capitalize on Saskatchewan multi-lateral royalty incentive.

Strong Natural Gas Hedge Program: Total natural gas hedges of 1,094,563 MMBtu in 2H 2024 at an average price of $2.09/MMBtu, equating to an estimated hedge gain of $1.0 million to $1.5 million CAD at current strip pricing over this period.

Outlook

The Company is focused on using its current balance sheet to target strategic growth opportunities in core areas, while improving operational efficiencies through continued cost reduction measures. The drill program aims to add Frobisher drilling inventory in both new and existing areas, in addition to proving up Midale prospects with multi-lateral drilling.

Kaybob, Alberta Update

With the current softening of the North American natural gas markets, the Company has shut-in 280 boepd (80% natural gas) in its Kaybob, Alberta area. The strategic shut-ins are expected for the balance of Q3 2024 with reactivation expected in Q4 2024.

About ROK

ROK is primarily engaged in exploring for petroleum and natural gas development activities in Alberta and Saskatchewan. It has offices located in both Regina, Saskatchewan, Canada and Calgary, Alberta, Canada. ROK's common shares are traded on the TSX Venture Exchange under the trading symbol "ROK".

[dan_s]

I have updated my forecast/valuation model for ROK.V based on the guidance above.

At the time of this post ROK.V was trading at $0.26Cdn. First Call's price target is $0.73Cdn.

My updated valuation is now $0.74Cdn (based on a higher oil price than what ROK is using for their guidance). < $0.55US for ROKRF

Based on my 2024 forecast:
> ROK should generate ~$34Cdn million of Adjusted Operating Cash Flow ($0.16Cdn / share)
> Free cash flow should be ~$9Cdn million vs. ROK's guidance of ~$7Cdn million
> Balance sheet will be in good shape at year end with no debt problems.
> 2024 exit rate of 4,600 Boepd with mix of approximately 60% crude oil, 10% NGLs and 30% natural gas.
> PV10 NAV based on just 1P reserves should be over $0.50Cdn per share at 12-31-2024.

My updated forecast model has been posted to the EPG website.