Notes from ROK webinar on Dec 18

[dan_s]

ROK.V trading at $0.16Cdn and ROKRF at $0.1155US when I posted this. < This stock is trading at ~1.5 X operating CFPS.
First Call's consensus price target (average of 4 analysts) is $0.45Cdn today.
I have calculated the PV10 Net Asset Value at 9-30-2024 to be $0.55Cdn per share. < The share price is below the PV10 NAV of just their PDP reserves, which makes ROK a Screaming Takeover Target.

Key points:
Operations:
> ROK has completed 7 new wells with multi-laterals in oil prone areas in 2024. The group is producing oil above the pre-drill type curve.
> To reach their guidance of 4,000 Boepd in 2H 2024, Q4 production needs to average 4,027 Boepd. < 254 Boepd increase over Q3 production.
> Three new wells completed in November have pushed production over 4,100 Boepd in December.

Financials:
> ROK's free cash flow for the year 2024 should be over $4Cdn million.
> The balance sheet is in very good shape and free cash flow continues to pay down debt.
> Q4 2024 hedges lock in strong operating cash flow in Q4. Based on my forecast, Adjusted Operating Cash Flow should be $7.6Cdn million in Q4. < Free Cash Flow for the nine months ending 6-30-2025 might be enough to pay off ROK's remaining debt.
> Lithium Exploration: ROK's 17.1% equity in EMP Metals (EMPPE) has a market-cap of $7.7Cdn million or $0.035Cdn per share of ROK. EMP has recently announced some promising results + they are working on something with Koch Industries.

Outlook for 2025:
> ROK won't be spending much capex on drilling until after Spring Breakup, so lots of free cash flow will be generated in 1H 2025.
> VERY IMPORTANT FACT LEARNED TODAY: All of ROK's 113.1 million warrants are set to expire in early March 2025 < The strike price is $0.25Cdn, so unless the share price of ROK goes over $0.25 they will all expire. This will significantly increase the upside of ROK's common stock.
> 2025 Drilling Program will probably be just 7-10 wells to maintain production around 4,000 Boepd unless WTI oil firms up over $70US/bbl. Higher natural gas price in Canada might get a few more wells drilled in the Kaybob area in 2H 2025. Kaybob gas wells come online at high rates.
> "Running Room": ROK has 117 "booked" drilling locations and a lot more probable locations in SE Saskatchewan.
> Most of ROKs' core area leasehold is held-by-production, so they have a lot of flexibility. Also, leasehold that is "HBP" makes it more valuable.

WhiteCap Resources (WCP.TO) and other large-caps are reporting outstanding multi-lateral wells in SE Saskatchewan. Most of the wells do not have to be fracked, so they reach payout in 6 to 8 months at the current light oil price in Western Canada (over $85Cdn/bbl).

If natural gas prices in Alberta get back over $3.00Cdn/mcf, ROK has significant upside in their Kaybob area.

A replay of the webinar will be posted to the EPG website this afternoon.

Bottomline: This stock is grossly undervalued by this crazy market. NO COMPANY that's profitable, generating free cash flow, strong balance sheet and over a decade of high-quality "Running Room" should be trading at this much of a discount to PV10 Net Asset Value per share. As I reminded listeners on the live call, Small-Caps get noticed when you least expect it. All it will take is some good well results are all of those warrants expiring to push the share price up (take a look at KGEI has done since announcing good well results a month ago).
ROK's Q4 2024 results should be the best of the year.