Rubellite Energy (RBY.TO & RUBLF) Valuation Update - April 21

[dan_s]

I highly recommend that all of you watch the replay of today's webinar that was hosted by Rubellite Energy.

Sue Riddell Rose, Rubellite's founder and CEO is very impressive.
> This Company has SIGNIFICANT RUNNING ROOM, with 316 low-risk development drilling locations in areas where their multi-laterals (8 to 12 laterals per well) are paying out in less than a year.
> KEY TO MY VALUATION: Rubellite's double digit annual production growth can now be funded entirely by operating cash flow.

RBY.TO was trading at $1.75Cdn at the time of this post.
> The PV10 Net Asset Value based on their December 31 2024 reserve report (prepared by McDaniels) is $5.14Cdn based only on Total Proved reserves (1P) and $6.47Cdn based on Proved + Probable (2P) reserves. (See Slide 7 of the presentation).
> My updated valuation (now based on my lower oil and gas price deck) is $5.50Cdn, based on just 4X annualized operating cash flow per share. That is a very conservative valuation multiple for a company that is free cash flow positive, can fund 10% to 15% annual production growth through at least 2030 entirely with operating cash flow and has no near-term debt issues.
> Their oil hedges significantly reduce oil price risk AND they have exposure to rising natural gas prices in Canada, which should rebound to over $3.00Cdn/mcf by year-end thanks to the new LNG export facility on the West Coast of Canada that is expected to come online in June, 2025. < Rubellite's realized natural gas price was just $1.50Cdn/mcf in Q4 2024.

My Notes from the webinar:
> 8 to 13 years of development drilling locations IN PROVED AREAS. (8 years with a 3 rig program / 13 years with a 2 rig program)
> Currently running 2 drilling rigs that are drilling from pads, so no need to shut down during Spring Break Up. If WTI oil prices stabilize over $70US/bbl, Rubellite may add a 3rd drilling rig in Q3.
> Their multi-lateral wells have open hole laterals (no casing) and they can be completed in 1 day after casing is set in the vertical portion of the well. Most wells have ~600 meter verticals.
> If natural gas prices in Western Canada move over $2.50Cdn/mcf, Rubellite has an area that was acquired as part of the merger with Perpetual Energy (closed 10-31-2024) where natural gas can be increased quickly.
> Q1 2025 oil production should be at or above the high end of their guidance, which is 8,200 bbls per day of heavy oil. < See Slide 20.
> April 2025 production should be over 12,200 Boepd and with two drilling rigs running all year, Q3 and Q4 production is likely to exceed my forecast.
> Rubellite has significant upside in a "Bitumen Area" shown at the top of the map on slide 8, which is not included in their 2024 reserve report. Sue said it is thicker than the heavy oil they are currently producing, but it will flow on its own to new horizontal wells.
> Six "exploration wells" completed in 2024 were all successful in proving up new development areas, not included in the 2025 drilling program. In addition to the 316 proved drilling locations, Rubellite has at least 110 more drilling locations in highly probable acreage they hold.
> East Edson is an area in the Deep Basin that is operated by Tourmaline (TSX: TOU). Rubellite holds a 50% non-op working interest in the core of the play that has significant liquids rich gas production today. TOU is just planning to drill and complete 4 gross (2 net) development wells this year to hold production flat. With higher natural gas prices, East Edson becomes a very valuable asset. See Slide 17.

Bottomline: RBY.TO is "off the radar screen" for most energy sector analysts. When the company releases Q1 results on May 7th, that I now expect to be better than my forecast, it should draw a lot more attention.