ROK Resources (ROKRF) Valuation Update - Mar 21
Posted: Thu Mar 21, 2024 1:40 pm
I got some new information during today's webinar.
Cam, Bryden and Jarod are a solid team with the right kind of experience to grow ROK Resources into a valuable company. Today it is free cash flow positive and it has a lot of high-quality Running Room in one of North America's top oil basins in Saskatchewan (SK).
Most important is that if WTI does average $80US/bbl in 2024, ROK will have enough cash to drill and complete 16 Frobisher duel lateral wells ($1.3Cdn million each) AND pay off all of their debt this year.
During the presentation Bryden said this year's drilling program would be 12 to 16 Frobisher wells. 12 if WTI averages $70US and 16 if WTI averages $80US. If WTI does go to $90US in Q4 (as many large banks are now using in their price decks), ROK will probably add two more Frobisher wells late in Q4 before releasing the rig.
16 new Frobisher duel lateral wells should push ROK's 2024 exit rate over 6,000 Boepd. Thanks in part to the low royalty rate in SK (2% on first 37,000 bbls of oil per well), if ROK just holds production at 6,000 Boepd (60% oil) they should generate over $100Cdn million of operating cash flow in 2025, compared to $30Cdn million actual in 2023 and my forecast of $46Cdn million in 2024.
Since they are going to focus the drilling on the most oil-prone SE Sach areas and the KayBob ngas production will decline, the Company's production mix should go from a production mix of 50/10/40 (oil/NGL/ngas) to 60/10/30 by Q4 2024.
The 113.1 million publicly traded warrants expire mid-2025, which means that ROK will get a big capital infusion if the stock price is over the warrants' strike price. Yes, it will be dilutive, but the $28+ million of cash would be used to significantly accelerate development of their assets.
We learned today that their Lithium project does have significant value and several near-term catalysts should draw more attention to it. ROK will be coming to Houston this summer to host a luncheon for us. I learned today that Koch Industries is now involved in their Hub City lithium project. I have high respect for Koch. Their involvement is a BIG DEAL.
My updated forecast/valuation model has been posted to the EPG website.
Cam, Bryden and Jarod are a solid team with the right kind of experience to grow ROK Resources into a valuable company. Today it is free cash flow positive and it has a lot of high-quality Running Room in one of North America's top oil basins in Saskatchewan (SK).
Most important is that if WTI does average $80US/bbl in 2024, ROK will have enough cash to drill and complete 16 Frobisher duel lateral wells ($1.3Cdn million each) AND pay off all of their debt this year.
During the presentation Bryden said this year's drilling program would be 12 to 16 Frobisher wells. 12 if WTI averages $70US and 16 if WTI averages $80US. If WTI does go to $90US in Q4 (as many large banks are now using in their price decks), ROK will probably add two more Frobisher wells late in Q4 before releasing the rig.
16 new Frobisher duel lateral wells should push ROK's 2024 exit rate over 6,000 Boepd. Thanks in part to the low royalty rate in SK (2% on first 37,000 bbls of oil per well), if ROK just holds production at 6,000 Boepd (60% oil) they should generate over $100Cdn million of operating cash flow in 2025, compared to $30Cdn million actual in 2023 and my forecast of $46Cdn million in 2024.
Since they are going to focus the drilling on the most oil-prone SE Sach areas and the KayBob ngas production will decline, the Company's production mix should go from a production mix of 50/10/40 (oil/NGL/ngas) to 60/10/30 by Q4 2024.
The 113.1 million publicly traded warrants expire mid-2025, which means that ROK will get a big capital infusion if the stock price is over the warrants' strike price. Yes, it will be dilutive, but the $28+ million of cash would be used to significantly accelerate development of their assets.
We learned today that their Lithium project does have significant value and several near-term catalysts should draw more attention to it. ROK will be coming to Houston this summer to host a luncheon for us. I learned today that Koch Industries is now involved in their Hub City lithium project. I have high respect for Koch. Their involvement is a BIG DEAL.
My updated forecast/valuation model has been posted to the EPG website.