ROK Resources (ROK) Update - Apr 3

[dan_s]

ROK's management team will be in Houston on April 17 & 18. They have agreed to host a luncheon for us at The Ballroom at Tanglewood, 5430 Westheimer Rd. You can register for the luncheon on the EPG website. Your invited guests can also attend for free.

ROK has been added to our Small-Cap Growth Portfolio. After the closing of the transaction below, I believe ROK has the potential to make a run similar to what Hemisphere Energy (HMENF) generated for us over the last three years.
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ROK Resources Inc. Announces Completion of $47.25Cdn Million of Non-Core Asset Dispositions & Provides Update on 2023 Guidance

REGINA, SK / ACCESSWIRE / April 3, 2023 / ROK Resources Inc. (TSXV:ROK)(TSXV:ROK.WT) (the "Company" or "ROK") has completed its previously announced dispositions of certain non-core assets (the “Assets”) for total combined proceeds of approximately $47.25 million, before normal closing adjustments (the “Transactions”). The Assets are comprised of ROK’s non-operated interest in the Weyburn Unit and two smaller non-core assets located in Saskatchewan.

The Transactions are consistent with ROK’s strategic plan, focusing on debt reduction and high-grading of the Company’s asset portfolio and drilling inventory. The Company’s outstanding senior term debt will be reduced by 85% from proceeds of the Transactions, resulting in cumulative interest savings of approximately $5.8 million that would have been otherwise paid over the remaining term of the senior term debt.

Notably, since the FCL acquisition in March 2022, the Company has disposed of approximately $74 million in non-core assets representing ~31% of production and ~127% of the purchase price, after closing adjustments. < In addition to reducing debt, this "High Grades" ROK's drilling location inventory.

2023 Guidance

Current corporate production is approximately 3,750 boepd (65% Liquids), net of the above-noted disposition.

In the second half of 2023, ROK intends to focus on increasing shareholder value through; (i) the optimization and integration of asset acquisitions, (ii) debt reduction, and (iii) executing a drilling and recompletion program. For H2 2023E, the Company expects to average 4,120 boepd, generating $19 million in cash flow from operating activities. For Q4 2023E, the Company estimates exit production of 4,500 boepd, generating a total of $38.9 million in annualized cash flow from operating activities, and $5.9 million in annualized free cash flow.

The Company's senior term debt is expected to be paid off entirely by mid-2023. Net debt at December 31, 2023 is expected to be $7.5 million, implying a net debt to cash flow from operating activities ratio of 0.2.

In support of the 2023 drilling program, the Company currently has hedged an average of 1,766 bbls/d of corporate production for the remainder of 2023 at an average price of approximately US$82.17/bbl. The Company is actively monitoring the current commodity price volatility and evaluating all options with regards to its hedging program.

Drilling & Recompletion Program

The second half of 2023 drilling program is expected to investment approximately $11.6 million and will aim to drill 10 gross (9.52 net) new wells within core operating areas in Southeast Saskatchewan, resulting in a 2023 exit target of 4,500 boepd (20% increase from current levels). The Company expects to balance drilling between conventional Frobisher and unconventional Midale, two of the most economic plays in the basin.

At Kaybob, the Company will focus on capital efficient recompletions and reactivations, while continuing to prepare for future Cardium oil and Montney gas development on its 100% working interest lands.

Financial Advisors

Echelon Capital Markets acted as financial advisor to the Company with respect to the Transactions.

McDougall Gauley LLP and McCarthy Tetrault LLP acted as legal advisors to the Company with respect to the Transactions.

About

ROK is primarily engaged in exploring for petroleum and natural gas development activities in Saskatchewan and Alberta. 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".

For further information, please contact:

Cameron Taylor, Chairman and Chief Executive Officer < Will be speaking at EPG's April 18th luncheon in Houston.

Bryden Wright, Chief Operating Officer

Jared Lukomski, Senior Vice President, Land & Business Development

Lynn Chapman, Chief Financial Officer

[dan_s]

More from EPG member in Calgary:

In addition to their new guidance out this AM, the new investor presentation is now live.

Highlights:

Page 7 - Quarterly guidance
Page 8 - number of locations by area
Page 9 Map showing the synergies of the 1100 BOEPD purchased from WCP, closed Jan 2023
Pages 10 &11 discuss drilling plans for each play, number of locations overall and economics ranging from $70-90 WTI
Page 13 shows ROK's value proposition compared to its peers
EV/MBOEPD $24K
2.4X EV/EBITDA
0.2X NET DEBT TO EBITDA
The company has never been better positioned to offer growth, with minimal debt and the ability to surprise on the upside. < Reminds me of Hemisphere Energy and InPlay Oil. 2H 2023 drilling program combined with higher oil prices should draw a lot of attention to ROK.