ROK Resources (ROKRF) Valuation Update - Apr 19
Posted: Fri Apr 19, 2024 11:47 am
I spent this morning updating my forecast/valuation model for ROK. The Company reported a loss for the year 2023, which included several 1-time items: $7.3 million loss in Q1 on a debt settlement, $5.7 million gain on acquisitions in Q1, $8.9 million non-cash impairment charge in Q4 and a $5.9 million mark-to-market gain on their hedges in Q4.
As you should know by now, my valuations are based on operating cash flow X a valuation multiple that I believe is reasonable. < 2023 Adjusted Operating Cash Flow was $25.8Cdn million ($0.12Cdn/share).
At the time of this post ROK.V was trading at $0.31Cdn per share. < Less than 3X CFPS last year AND CFPS in 2024 is going to be MUCH HIGHER.
ROK sold a package of non-core assets in Q1 2023 and used the proceeds to pay off all of their Senior Debt.
> The Company's Balance Sheet is now in very good shape.
> Based on my forecast, operating cash flow during 1H 2024 should be $17.7 million ($0.08/Share); more than covering the $10.5 million 6 well capex program that ROK announced yesterday. ROK is fully committed to funding growth entirely with operating cash flow.
> Even if ROK does not drill anymore wells in 2H 2024, their operating cash flow should exceed $20 million in 2H 2024.
ROK won't announce their 2H 2024 drilling program until late June, but based on my forecast they will have more than enough operating cash flow to fund a 10-12 well Forbisher horizontal development drilling program in 2H 2024. Forbisher HZ wells produce mostly oil and this year's drilling program will significantly improve ROK's production mix from ~50% oil in Q4 2023 to ~60% oil and ~11% high value NGLs by Q4 2024.
If WTI averages $82.50US per bbl in Q2 and $85.00US in Q3 and Q4, ROK should generate over $46 million of operating cash flow ($0.21/share) for 2024. I believe at ROK deserves a valuation multiple of 4.5 X 2023 to 2025 annualized operating cash flow per share.
ROK has a lot of high-quality "Running Room" in SE Saskatchewan where they hold 122,424 net acres with 102 gross development drilling locations for oil in the Frobisher zone. Slide 11 of their updated presentation shows that with WTI at $80/bbl their type curve shows the HZ wells paying out in 0.8 wells. They also have over 100 drilling locations that have potential in Midale, which is also oil prone.
My updated forecast has been posted to the EPG website. My valuation increases by $0.05 to $0.70Cdn per share.
Go to the ROK website and study their April presentation slides to better understand the company's potential.
As you should know by now, my valuations are based on operating cash flow X a valuation multiple that I believe is reasonable. < 2023 Adjusted Operating Cash Flow was $25.8Cdn million ($0.12Cdn/share).
At the time of this post ROK.V was trading at $0.31Cdn per share. < Less than 3X CFPS last year AND CFPS in 2024 is going to be MUCH HIGHER.
ROK sold a package of non-core assets in Q1 2023 and used the proceeds to pay off all of their Senior Debt.
> The Company's Balance Sheet is now in very good shape.
> Based on my forecast, operating cash flow during 1H 2024 should be $17.7 million ($0.08/Share); more than covering the $10.5 million 6 well capex program that ROK announced yesterday. ROK is fully committed to funding growth entirely with operating cash flow.
> Even if ROK does not drill anymore wells in 2H 2024, their operating cash flow should exceed $20 million in 2H 2024.
ROK won't announce their 2H 2024 drilling program until late June, but based on my forecast they will have more than enough operating cash flow to fund a 10-12 well Forbisher horizontal development drilling program in 2H 2024. Forbisher HZ wells produce mostly oil and this year's drilling program will significantly improve ROK's production mix from ~50% oil in Q4 2023 to ~60% oil and ~11% high value NGLs by Q4 2024.
If WTI averages $82.50US per bbl in Q2 and $85.00US in Q3 and Q4, ROK should generate over $46 million of operating cash flow ($0.21/share) for 2024. I believe at ROK deserves a valuation multiple of 4.5 X 2023 to 2025 annualized operating cash flow per share.
ROK has a lot of high-quality "Running Room" in SE Saskatchewan where they hold 122,424 net acres with 102 gross development drilling locations for oil in the Frobisher zone. Slide 11 of their updated presentation shows that with WTI at $80/bbl their type curve shows the HZ wells paying out in 0.8 wells. They also have over 100 drilling locations that have potential in Midale, which is also oil prone.
My updated forecast has been posted to the EPG website. My valuation increases by $0.05 to $0.70Cdn per share.
Go to the ROK website and study their April presentation slides to better understand the company's potential.