December 18 Webinar hosted by ROK Resources

[dan_s]

Bryden Wright, President of ROK Resources (ROK.V and ROKRF) will be joining me for an update on the Company’s successful 2024 drilling program and a preview of what ROK has planned for 2025.

My forecast/valuation model for ROK can be found on the EPG website under the Small-Caps tab.

ROK reported Net Income of $10.0Cdn million in Q3 2024 with production of 3,773 Boepd.
> Q4 production is estimated to be 3,950 Boepd with a mix of 62% crude oil, 10% NGLs and 28% natural gas.
> 2024 Adjusted Operating Cash Flow should be approximately $24.4Cdn million, with free cash flow of over $4Cdn million.
> With 3 more horizontal wells being completed in Q4, I expect ROK's 2024 exit rate to be ~4,000 Boepd.
> My 2025 forecast, based on production of 4,300 Boepd, is that ROK will generate approximately $32.5Cdn of operating cash flow next year.

The Company successfully executed its Q3 2024 drilling program, drilling 2 gross (1.5 net) wells in Saskatchewan. At September 30, 2024, one well was on-stream, achieving an IP30of 240 boepd1 (85% liquids). Both wells drilled in the quarter had no prior reserve value associated. The 2024 drilling program continues, on average, to outperform internal type curves, with an average IP90 of 130 boepd (85% liquids). The successful results set up the Company with future drilling prospects in core areas of Saskatchewan.

In addition, effective October 1, 2024, the Company sold an existing non-core gross overriding royalty interest held by the Company (the "Non-Core Asset") for $4 million dollars. The proceeds represent 5.5X of 2025 estimated cashflow for the Non-Core Asset, which had a year end 2023 reserve value of $1 million PDP. The proceeds from the accretive transaction were used to further reduce debt, resulting in a revised year end Adjusted Net Debt estimate for 2024 of $12.6 million (24% reduction from previous guidance), or 0.4X of estimated Adjusted Net Debt/debt adjusted cashflow for 2024.

The Company remains well positioned to continue the balance of its 2024 drilling program which includes 3 gross (2.9 net) wells, targeting inventory growth in the Frobisher and testing of its first multi-lateral Midale well in Southeast Saskatchewan. Given the Company's continued drilling success, construction of a multi-well facility remains on schedule for Q4 2024, which will lower operating costs and allow for continued optimization of existing wells.

Q3 2024 HIGHLIGHTS

Production In-line with Forecast: Production averaged 3,773 boepd (71% liquids);

Successful Drill Program: Drilled 2 gross (1.5 net) wells in unbooked areas of Saskatchewan;

Exceeded Debt Reduction Forecast: Achieved adjusted Net Debt of $12.9 million, representing an 8% improvement from the Company's target; and

Revised Year End 2024 Adjusted Net Debt: With the sale of the Non-Core Asset the Company revised its Adjusted Net Debt estimate at 2024 from $16.6 million to $12.6 million (24% reduction from previous guidance)

Q3 2024 FINANCIAL SUMMARY

In Q3 2024, the Company realized average daily production volume of 3,773 boepd (71% liquids), resulting in oil and natural gas sales of $21.3 million and realized hedge gain of $1.0 million. The Company realized Funds from Operations of $7.9 million, after royalties, operating expenses, and processing and other income.

Operating costs, which include expenses incurred to operate wells, gather, treat, and transport production volumes, as well as costs to perform well and facility repairs and maintenance, were consistent with Company expectations for the quarter, averaging $33.71 per boe. This represents a 10% reduction when compared to Q3 2023, when corporate operating costs averaged $37.60 per boe. Recall, costs incurred in the Company's third quarter include one-time annual costs such as property taxes, government fees and levies.

Capital expenditures in Q3 2024 totaled $3.0 million, which included $2.2 million towards the Company's drilling programs, $0.2 million towards well reactivations, $0.3 million towards land and seismic acquisitions, and $0.3 million towards facilities and gathering systems. Total capital allocation, year-to-date, is $10 million.

ROK's balance sheet is in good shape. Net Debt of $14.7Cdn million as of December 31, 2023 has been reduced to $9.1 Cdn million as of September 30, 2024. ROK has NO NEAR-TERM DEBT ISSUES.