ROK Resources plans on six wells after breakup

Apr 23, 2024

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ROK Resources was drilling near Oxbow on Sept. 29, 2023. Photo by Brian Zinchuk

REGINA, –  Regina-based OK Resources Inc. (TSXV:ROK)(OTCQB:ROKRF) announced revised first-half 2024 guidance on April 18, and has filed its Annual Financial Results and Management Discussion & Analysis for the year ended December 31, 2023.

First-Half 2024 Revised Guidance

With the recent stability of WTI pricing, the company anticipates commencing its drilling program after spring break-up in late Q2 2024. Key initiatives for 2024 include reducing corporate finding and development costs and expanding core operating areas in Southeast Saskatchewan. The six well program, which will target Frobisher light oil prospects, will begin with prospects offsetting the best oil well in Saskatchewan in December 2023. To support these endeavors, the first-half 2024 capital budget has been revised from $4.0 – $4.5 million to $10.0 – 10.5 million. This acceleration of development is contingent on various factors, including favorable weather and road conditions following spring break-up.

The company intends to provide second-half 2024 guidance in late Q2 2024.

Highlights of Revised First-Half 2024 Guidance

  • Stability in WTI: Company will increase its capital budget in first-half 2024 to $10.0 – $10.5 million, with an expected benefit to Net Operating income through second-half 2024 as new unhedged production comes on-stream. The Company expects to average ~4,000 boepd in first-half 2024 (61% liquids);
  • Net Debt: Estimated $16.0 – $16.5 million in Adjusted Net Debt at the end of first-half 2024;
  • Expedited Drill Program: Addition of 6 gross (5.4 net) Frobisher wells in late Q2, weather permitting; and
  • Efficient Use of Capital: $1.0 million allocated to reactivations and recompletions, expected to yield average capital efficiencies of $5,000 to $10,000 per boepd.
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2023 Financial and Operating Highlights

  • Record Average Production: Daily average production in 2023 of 3,876 boepd (62% liquids), a 40% increase compared to prior year;
  • Organically Increased Production by 55%: In second-half 2023 the company drilled 13 gross (11.6 net) wells, adding 1,650 boepd, which represents a 55% increase in production over the period;
  • Exceeded 2023 Funds from Operations Forecast: Funds from Operations of $37.2 million in 2023, exceeding the company’s forecast by 3.5% despite weaker commodity pricing;
  • Net Debt: The company exited 2023 with Net Debt of $14.7 million (or Adjusted Net Debt of $18.7 million). This represents a 58%, or $20.6 million, reduction in Net Debt year over year; and
  • Hedge Gain: realized an annual hedge gain on commodity contracts of $6.7 million.
Financial
 Q4 2023 Q4 2022 Year 2023 Year 2022
Net income (loss)
 (3,713,389 ) (5,556,994 ) (10,986,934 ) 80,002,750
Basic ($/share)
 (0.02 ) (0.03 ) (0.05 ) 0.46
Diluted ($/share)
 (0.02 ) (0.03 ) (0.05 ) 0.40
Funds flow
 6,163,667 12,496,785 25,790,378 39,007,318
Basic ($/share)
 0.03 0.06 0.12 0.24
Diluted ($/share)
 0.03 0.06 0.12 0.23
Expenditures on property, plant and equipment
 12,348,404 11,960,612 28,933,947 28,402,308
Operating
Operating Income
Oil and Natural Gas Sales
 23,207,066 23,925,141 87,226,620 87,311,542
Royalties
 (3,902,500 ) (4,135,298 ) (15,392,995 ) (14,321,258 )
Operating Expenses
 (11,501,149 ) (7,804,463 ) (44,095,957 ) (25,356,246 )
Operating Income
 7,803,417 11,985,380 27,737,668 47,634,038
Realized gain on commodity contracts
 1,021,804 2,336,149 6,710,873 4,124,648
Processing and other income
 1,074,743 574,624 2,778,326 1,787,246
Funds from Operations
 9,899,964 14,896,153 37,226,867 53,545,932
Average daily production
Crude oil (bbl/d)
 2,116 2,453 2,064 1,848
NGLs (boe/d)
 495 219 417 177
Natural gas (mcf/d)
 9,591 5,263 8,372 4,473
Total (boe/d)
 4,210 3,549 3,876 2,770
Operating Netback per boe
Oil and Natural Gas Sales
 59.91 73.28 61.65 86.36
Royalties
 (10.08 ) (12.67 ) (10.88 ) (14.17 )
Operating Expenses
 (29.69 ) (23.91 ) (31.17 ) (25.08 )
Operating Netbacks ($/boe)
 20.14 36.70 19.60 47.11
Funds from Operations ($/boe)
 25.56 45.63 26.31 52.96
Operating Income Profit Margin
 33.6 % 50.1 % 31.8 % 54.6 %
Funds from Operations Profit Margin
 42.7 % 62.3 % 42.7 % 61.3 %
Share information
Common shares outstanding, end of period
 218,418,315 211,580,484 218,418,315 211,580,484
Weighted average basic shares outstanding
 217,267,463 199,711,392 214,720,034 164,762,938
Weighted average diluted shares outstanding
 217,267,463 222,398,843 214,720,034 170,622,352

Net Debt

The continued reduction of Net Debt quarter over quarter is a result of organically generated funds flows utilized to reduce company indebtedness. ROK uses “Net Debt” as a measure of the company’s financial position and liquidity, however it is not intended to be viewed as an alternative to other measures calculated in accordance with IFRS.

 December 31, 2023 December 31, 2022
Cash and cash equivalents
 – 5,258,881
Accounts receivable
 13,021,111 10,862,673
Prepaid expenses and deposits
 364,090 1,144,672
Current portion of risk management contracts
 4,521,075 4,418,471
Accounts payable and accrued liabilities
 (17,560,130 ) (13,678,677 )
Adjusted working capital (2)
 346,146 8,006,020
Credit Facility (8.2%) (1)
 14,501,748 –
Lease obligations (1)
 545,851 –
Senior Loan Facility (15%) (1)
 – 43,347,566
Less: adjusted working capital (2)
 (346,146 ) (8,006,020 )
Net debt
 14,701,453 35,341,546

 

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