ROK Resources (ROK) Updated Valuation - April 17
Posted: Mon Apr 17, 2023 11:47 am
This morning I received additional information from ROK Resources and a recently updated profile on the company from a respected Canadian energy sector analyst, Kirk Wilson at Beason Securities whose price target is $0.90Cdn.
Updated details on the Company's hedges and interest expense (they should be virtually debt free in 2 months) had the most impact on my valuation. I have posted my forecast/valuation model to the EPG website.
Keys to my increased valuation of $1.00Cdn are:
> A solid management team with a track record of success.
> A strong balance sheet that should be virtually debt free by the end of the 2nd quarter.
> Since closing a transformational acquisition on March 7, 2022 (FCL) they have increased production from ~3,000 Boepd to 4th quarter 2022 production of 3,549. Current production is ~3,750 Boepd with this year’s drilling program expected to push production up to 4,500 Boepd by year-end (~60% crude oil).
> This year’s D&C program is expected to be fully funded by operating cash flow AND generate ~$6Cdn million of FREE CASH FLOW.
> ROK Resources has lots of running room (112 booked drilling locations per the McDaniel & Associates year-end reserve report) in two of the best oil plays in Canada. BY SPENDING JUST 60% OF OPERATING CASH FLOW, ROK SHOULD DELIVER OVER 30% ANNUAL PRODUCTION GROWTH.
If you live in the Houston area, I highly recommend that you attend tomorrow's luncheon. ROK has the potential to be the next Canadian Junior to generate a triple digit percentage return for us. It has a lot of "Running Room".
Your attendance at our luncheons is important to the success of our in-person networking events.
Updated details on the Company's hedges and interest expense (they should be virtually debt free in 2 months) had the most impact on my valuation. I have posted my forecast/valuation model to the EPG website.
Keys to my increased valuation of $1.00Cdn are:
> A solid management team with a track record of success.
> A strong balance sheet that should be virtually debt free by the end of the 2nd quarter.
> Since closing a transformational acquisition on March 7, 2022 (FCL) they have increased production from ~3,000 Boepd to 4th quarter 2022 production of 3,549. Current production is ~3,750 Boepd with this year’s drilling program expected to push production up to 4,500 Boepd by year-end (~60% crude oil).
> This year’s D&C program is expected to be fully funded by operating cash flow AND generate ~$6Cdn million of FREE CASH FLOW.
> ROK Resources has lots of running room (112 booked drilling locations per the McDaniel & Associates year-end reserve report) in two of the best oil plays in Canada. BY SPENDING JUST 60% OF OPERATING CASH FLOW, ROK SHOULD DELIVER OVER 30% ANNUAL PRODUCTION GROWTH.
If you live in the Houston area, I highly recommend that you attend tomorrow's luncheon. ROK has the potential to be the next Canadian Junior to generate a triple digit percentage return for us. It has a lot of "Running Room".
Your attendance at our luncheons is important to the success of our in-person networking events.