Brian Zinchuk is editor and owner of Pipeline Online
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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