ROK Resources (ROKRF) Webinar Preview - Mar 20
Posted: Wed Mar 20, 2024 2:45 pm
I have reviewed the slides that ROK will speak from during tomorrow's webinar. Here are some highlights that jump out at me.
> ROK is a Canadian Junior Upstream Oil & Gas company that was co-founded by Cam Taylor (Chairman) and Bryden Wright (President) in 2019. Their team has a strong track record.
> ROK had little production until 2022 (thanks to the Pandemic) when they close two strategic acquisitions in March 2022 and January 2023 that push production to over 4,000 Boepd. Since the deal terms were negotiated during the pandemic, ROK was able to acquire good assets at a very low prices.
> After oil prices rebounded, ROK sold Non-Core assets producing ~800 Boepd in April 2023 at a GREAT PRICE. Cash proceeds from the sale paid off ALL of the company's senior term debt. < One of the most incredible deals I've seen. ROK's net debt at December 31, 2023 is $18.5Cdn million.
> December 31, 2023 ROK's 3rd Party Reserve Report shows PV10 of just Proved Reserves (1P) of $130Cdn million and PV10 of 2P of $238Cdn million. So, the PV10 Net Asset Value based on just 1P reserves is approximately $0.51Cd, which compares to today's share price of $0.26Cdn. < No profitable upstream company with free cash flow and lots of Running Room should trade for 50% of 1P PV10 Net Asset Value.
> ROK's 2023 drilling program generated strong production growth from 3,297 Boepd in Q2 to 4,650 Boepd in Q4 2023. < They replaced double the production they sold in April 2023, all paid for with operating cash flow, in 8 months.
> ROK's Q4 production came from two core areas: Kaybob 1,450 Boepd (28% liquids) and 3,200 Boepd in SE Sack (76% liquids). No more wells planned for Kaybob until natural gas prices move over $3.00.
> To save money, ROK's drilling programs start in June and end in early December. This lowers completed well costs.
> No more well completions in 1H 2024, so production will drift lower and average ~4,000 Boepd in the first half of the year. With very little capex spending the Company will generate a lot of free cash flow in Q1 and Q2 each year, using it to pay down debt and build up cash to fully fund the summer/fall drilling program. < This is a wise strategy in Canada.
> My guess is that 2024 production will ramp up like it did in 2H 2023 to a 2024 exit rate over 5,000 Boepd. < The Company has not provided details of this year's drilling program except that it will all be in SE Sack, focused on oil-prone areas. They should have operating cash flow of $35 to $40Cdn million to fund this year's drilling program.
> They are going to update us on their Hub City Lithium Project that looks very promising. The Preliminary Economic Assessment (PEA) says they have a lot of battery grade lithium within their acreage. < There is nothing in my ROK stock valuation for this.
Conclusion: ROK has more production today than Hemisphere Energy, which has been a BIG WINNER for us (over 500% return since I added it to the Small-Cap Portfolio). ROK has a lot of RUNNING ROOM in SE Sack with 95 booked development drilling locations and 30 probable locations. At $80 WTI, they have 25 drill ready Frobisher wells that have pre-drilled IRRs of 175% that should payout in less than 10 months.
> ROK is a Canadian Junior Upstream Oil & Gas company that was co-founded by Cam Taylor (Chairman) and Bryden Wright (President) in 2019. Their team has a strong track record.
> ROK had little production until 2022 (thanks to the Pandemic) when they close two strategic acquisitions in March 2022 and January 2023 that push production to over 4,000 Boepd. Since the deal terms were negotiated during the pandemic, ROK was able to acquire good assets at a very low prices.
> After oil prices rebounded, ROK sold Non-Core assets producing ~800 Boepd in April 2023 at a GREAT PRICE. Cash proceeds from the sale paid off ALL of the company's senior term debt. < One of the most incredible deals I've seen. ROK's net debt at December 31, 2023 is $18.5Cdn million.
> December 31, 2023 ROK's 3rd Party Reserve Report shows PV10 of just Proved Reserves (1P) of $130Cdn million and PV10 of 2P of $238Cdn million. So, the PV10 Net Asset Value based on just 1P reserves is approximately $0.51Cd, which compares to today's share price of $0.26Cdn. < No profitable upstream company with free cash flow and lots of Running Room should trade for 50% of 1P PV10 Net Asset Value.
> ROK's 2023 drilling program generated strong production growth from 3,297 Boepd in Q2 to 4,650 Boepd in Q4 2023. < They replaced double the production they sold in April 2023, all paid for with operating cash flow, in 8 months.
> ROK's Q4 production came from two core areas: Kaybob 1,450 Boepd (28% liquids) and 3,200 Boepd in SE Sack (76% liquids). No more wells planned for Kaybob until natural gas prices move over $3.00.
> To save money, ROK's drilling programs start in June and end in early December. This lowers completed well costs.
> No more well completions in 1H 2024, so production will drift lower and average ~4,000 Boepd in the first half of the year. With very little capex spending the Company will generate a lot of free cash flow in Q1 and Q2 each year, using it to pay down debt and build up cash to fully fund the summer/fall drilling program. < This is a wise strategy in Canada.
> My guess is that 2024 production will ramp up like it did in 2H 2023 to a 2024 exit rate over 5,000 Boepd. < The Company has not provided details of this year's drilling program except that it will all be in SE Sack, focused on oil-prone areas. They should have operating cash flow of $35 to $40Cdn million to fund this year's drilling program.
> They are going to update us on their Hub City Lithium Project that looks very promising. The Preliminary Economic Assessment (PEA) says they have a lot of battery grade lithium within their acreage. < There is nothing in my ROK stock valuation for this.
Conclusion: ROK has more production today than Hemisphere Energy, which has been a BIG WINNER for us (over 500% return since I added it to the Small-Cap Portfolio). ROK has a lot of RUNNING ROOM in SE Sack with 95 booked development drilling locations and 30 probable locations. At $80 WTI, they have 25 drill ready Frobisher wells that have pre-drilled IRRs of 175% that should payout in less than 10 months.