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ROK Resources Files Financial Results and Management Discussion & Analysis for the Second Quarter of 2024 and Provides Operations Update

Wednesday, 21 August 2024 07:30 AM

ROK Resources, Inc.

Topic:
Earnings

NOT FOR DISTRIBUTION TO THE U.S. NEWSWIRE OR FOR DISSEMINATION IN THE UNITED STATES

REGINA, SK / ACCESSWIRE / August 21, 2024 / ROK Resources Inc. (" ROK " or the " Company ") (TSXV:ROK)(OTCQB:ROKRF) has filed its interim Financial Results and Management Discussion & Analysis for the six months ended June 30, 2024.

The Company executed on its previously announced post spring-break up drilling program in late Q2 2024, utilizing Funds Flow of $5.0 million towards the drilling of 4 gross (3.44 net) wells in Southeast Saskatchewan. The Company purposefully utilized Q1 2024 to deliver on: (i) debt reduction, (ii) improvement of operational efficiencies, (iii) strategic well optimizations, and (iv) advancement of the lithium project, and began its Southeast Saskatchewan development program in the second quarter.

The Company remains well positioned to continue its 2024 drilling program through year-end, with the flexibility to allocate capital across its light oil prospects in Saskatchewan. Despite operational delays due to abnormally wet weather in Q2 2024, the Company's 2024 guidance remains relatively unchanged.


1H 2024 Guidance

1H 2024 Actuals

2H 2024 Guidance

2024 Year Guidance

Capital Expenditures (MM)

$

9.50

$

8.00

$

16.00

$

24.00

Exit Production (boepd) 1,2

4,000

3,805

4,500

4,500

Funds from Operations (MM)

$

15.00

$

15.03

$

15.00

$

30.03

Exit Adjusted Net Debt (MM)

$

16.50

$

15.10

$

20.00

$

20.00

Average WTI (US$)

$78/bbl

$80/bbl

$75/bbl

$76.50/bbl

Notes:

  1. 63% liquids

  2. 300 boepd shut-in on June 15, 2024 at Kaybob due to AECO pricing

  3. 2H 2024 production guidance assumes Kaybob volumes are back on-stream before year-end

Q2 2024 HIGHLIGHTS

  • Production In-line with Forecast: Production averaged 3,937 boepd (63% liquids), a YoY increase of 19.4%;

  • Operating Netback Increase: Operated Netback of $17.87 per boe compared to $16.06 per boe in Q1 2024;

  • Successful Frobisher Drill Program: Drilled 4 gross (3.44 net) wells with an average IP30 of 148 boepd;

  • Successful Optimization Program: Continued success with casing gas compressor installations on Midale producers, resulting in average capital efficiencies of $3,850/boepd and 4-to-6 month payouts;

  • Adjusted Net Debt Reduction: Adjusted Net Debt reduced from $18.7 million at the end of Q4 2023 to $15.1 million at the end Q2 2024; and

  • Credit Facility Renewed: The Company maintains a $22.5 million credit facility through June 30 th , 2025.

2024 OPERATIONS UPDATE AND OUTLOOK

Year to date, the Company has successfully drilled 5 gross (4.33 net) wells in 2024, currently producing a total of 735 boepd (640 boepd net to ROK). In addition, since beginning casing gas compressor installations on existing Midale wells in Southeast Saskatchewan, the Company has added 280 boepd (IP90) to the base production levels of 15 wells. Management has identified an additional 22 locations for compressor installations over the next 18 months.

Key initiatives for 2024 remain unchanged with the Company focusing on using its current balance sheet to target strategic opportunities in core areas, improving operational efficiencies through targeted well optimizations and undertaking operational cost reduction measures. The remaining drill program aims to add Frobisher drilling inventory while proving up Midale prospects with multi-lateral drilling. The Company anticipates completing its 2024 drilling program by drilling a total of 7 to 9 gross wells in 2H 2024.

KAYBOB, ALBERTA, UPDATE

As previously mentioned, with the current softening of the North American natural gas markets, the Company has continued to shut-in 300 boepd (80% natural gas) in its Kaybob, Alberta area. The strategic shut-ins are expected for the balance of Q3 2024 with reactivation expected by year-end.

Q2 2024 FINANCIALS

Financial

Q2 2024

Q2 2023

YTD 2024

YTD 2023

Net income (loss)

81,503

(326,538

)

(5,530,751

)

(63,747

)

Basic ($/share)

0.00

(0.00

)

(0.03

)

(0.00

)

Diluted ($/share)

0.00

(0.00

)

(0.03

)

(0.00

)

Funds flow

5,000,885

4,955,562

11,343,103

14,639,438

Basic ($/share)

0.02

0.02

0.05

0.07

Diluted ($/share)

0.02

0.02

0.05

0.06

Expenditures on property, plant and equipment

5,275,862

3,559,136

7,094,622

9,004,786


Operating

Oil and Natural Gas Sales

21,742,281

17,737,937

42,673,516

41,875,450

Royalties

(3,782,175

)

(3,788,007

)

(7,737,218

)

(8,559,392

)

Operating Expenses

(11,555,289

)

(9,770,012

)

(22,279,328

)

(19,241,548

)

Operating Income

6,404,817

4,179,918

12,656,970

14,074,510

Realized gain (loss) on commodity contracts

(65,261

)

2,459,098

860,756

5,125,545

Processing and other income

647,195

260,805

1,509,273

995,536

Funds from Operations

6,986,751

6,899,821

15,026,999

20,195,591

Average daily production

Crude oil (bbl/d)

2,074

1,692

2,140

2,077

NGLs (boe/d)

411

340

435

370

Natural gas (mcf/d)

8,715

7,591

9,198

7,613

Total (boe/d)

3,937

3,297

4,107

3,716

Operating Netback per boe

Oil and Natural Gas Sales

60.68

59.13

57.08

62.26

Royalties

(10.56

)

(12.63

)

(10.35

)

(12.73

)

Operating Expenses

(32.25

)

(32.57

)

(29.80

)

(28.61

)

Operating Netbacks ($/boe)

17.87

13.93

16.93

20.92

Funds from Operations ($/boe)

19.50

23.00

20.10

30.03

Operating Income Profit Margin

29.4

%

23.6

%

29.7

%

33.6

%

Funds from Operations Profit Margin

32.1

%

38.9

%

35.2

%

48.2

%


Share information





Common shares outstanding, end of period

218,419,315

214,873,217

218,419,315

214,873,217

Weighted average basic shares outstanding

218,419,315

214,382,652

218,418,831

213,156,298

Weighted average diluted shares outstanding

236,352,197

252,620,714

236,351,713

261,173,477

Q2 2024 FINANCIAL SUMMARY

In Q2 2024, the Company realized average daily production volume of 3,937 boepd (63% liquids), resulting in oil and natural gas sales of $21.7 million and realized hedge loss of $0.1 million. The Company realized Funds from Operations of $7.0 million, after royalties, operating expenses, and processing and other income.

Operating costs, which include expenses incurred to operate wells, gather, treat, and transport production volumes, as well as costs to perform well and facility repairs and maintenance, were consistent with Company expectations for the quarter, averaging $32.25 per boe, with lower maintenance and workover costs for the period when compared to 2023. Operating costs are expected to average $30 per boe in 2024.

Capital expenditures in the first half of 2024 totaled $8.0 million, which included $4.4 million towards the Company's drilling programs, $1.0 million towards well reactivations, $0.8 million towards land and seismic acquisitions, and $0.9 million towards facilities and gathering systems. Compared to the Company's first-half 2024 capital budget of $9.5 million, lower costs were incurred due to delays associated with abnormally wet conditions in Southeast Saskatchewan.

NET DEBT

Net Debt as at June 30, 2024, and December 31, 2023, as outlined below:

June 30, 2024

December 31, 2023

Accounts receivable

12,439,856

13,021,111

Prepaids and deposits

347,352

364,090

Risk management contracts

(1,634,514

)

4,521,075

Accounts payable

(17,924,739

)

(17,560,130

)

Adjusted working capital (2)

(6,772,045

)

346,146


Credit Facility (8.4%) (1)

9,982,332

14,501,748

Lease obligations (1)

475,173

545,851

Less: adjusted working capital (2)

6,772,045

(346,146

)

Net debt

17,229,550

14,701,453


  1. Represents undiscounted face value of debt balances and lease obligations outstanding as of each respective date presented.

  2. Calculation of adjusted working capital excludes current portion of debt as presented on the statement of financial position. The mark-to-market fair value of the current portion of risk management contracts is included within adjusted working capital.

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.

Complete reports and statements will be made available on SEDAR+ at www.sedarplus.ca and on the Company website www.rokresources.ca .

About ROK

ROK is primarily engaged in exploring for petroleum and natural gas development activities in Alberta and Saskatchewan. It has offices located in both Regina, Saskatchewan, Canada and Calgary, Alberta, Canada. ROK's common shares are traded on the TSX Venture Exchange under the trading symbol "ROK".

For further information, please contact:

Cameron Taylor, Chairman and Chief Executive Officer
Bryden Wright, President and Chief Operating Officer
Jared Lukomski, Senior Vice President, Land & Business Development
Lynn Chapman, Chief Financial Officer
Phone: (306) 522-0011
Email: [email protected]
Website: www.rokresources.ca

Non-IFRS Measures

The non-IFRS measures referred to above do not have any standardized meaning prescribed by IFRS Accounting Standards (" IFRS ") and, therefore, may not be comparable to similar measures used by other companies. Management uses this non-IFRS measurement to provide its shareholders and investors with a measurement of the Company's financial performance and are not intended to represent operating profits nor should they be viewed as an alternative to cash provided by operating activities, net income or other measures of financial performance calculated in accordance with IFRS. The reader is cautioned that these amounts may not be directly comparable to measures for other companies where similar terminology is used.

" Operating Income " is calculated by deducting royalties and operating expense from total sales revenue. Total sales revenue is comprised of oil and gas sales. The Company refers to Operating Income expressed per unit of production as an " Operating Netback ". " Operating Income Profit Margin " is calculated by the Company as Operating Income as a percentage of oil and natural gas sales. " Funds from Operations " is calculated by adding other income and realized gains/losses on commodity contracts ("hedging") to Operating Income.

The following table reconciles the aforementioned non-IFRS measures:


Q2 2024

Q2 2023

YTD 2024

YTD 2023

Oil and Natural Gas Sales

21,742,281

17,737,937

42,673,516

41,875,450

Royalties

(3,782,175

)

(3,788,007

)

(7,737,218

)

(8,559,392

)

Operating Expenses

(11,555,289

)

(9,770,012

)

(22,279,328

)

(19,241,548

)

Operating Income

6,404,817

4,179,918

12,656,970

14,074,510

Realized gain (loss) on commodity contracts

(65,261

)

2,459,098

860,756

5,125,545

Processing and other income

647,195

260,805

1,509,273

995,536

Funds from Operations

6,986,751

6,899,821

15,026,999

20,195,591


Sales volume (boe)

358,303

300,006

747,563

672,576


Per boe

Oil and Natural Gas Sales

60.68

59.13

57.08

62.26

Royalties

(10.56

)

(12.63

)

(10.35

)

(12.73

)

Operating Expenses

(32.25

)

(32.57

)

(29.80

)

(28.61

)

Operating Netback

17.87

13.93

16.93

20.92

Funds from Operations

19.50

23.00

20.10

30.03

Operating Income Profit Margin

29.4

%

23.6

%

29.7

%

33.6

%

Funds from Operations Profit Margin

32.1

%

38.9

%

35.2

%

48.2

%

" Net Debt " includes all indebtedness of the Company, such as the Credit Facility and Lease Obligations (each as defined within the Company's interim condensed financial statements for the six months ended June 30, 2024), net of Adjusted Working Capital. " Adjusted Working Capital " is calculated as current assets less current liabilities, excluding current portion of debt and lease liability as defined on the Company's statement of financial position within the Company's interim condensed financial statements for the six months ended June 30, 2024. " Adjusted Net Debt " is calculated by removing the "mark-to-market fair value of the current portion of risk management contracts" and "lease obligations" (each as defined within the Company's interim condensed financial statements for the six months ended June 30, 2024) from Net Debt.

The following table reconciles Net Debt to Adjusted Net Debt:

June 30, 2024

December 31, 2023

Net Debt

17,229,550

14,701,453

Remove: Current portion of risk management contracts

(1,634,514

)

4,521,075

Remove: Lease obligations

(475,173

)

(545,851

)

Adjusted Net Debt

15,119,863

18,676,677

" Funds Flow " includes all cash from (used in) operating activities and is calculated before the change in non-cash working capital. " Funds Flow Basic ($/share) " and " Funds Flow Diluted ($/share) " are calculated by dividing Funds Flow by the weighted average number of basic shares and weighted average number of diluted shares outstanding, respectively, for the relevant period, as presented within the Company's interim condensed financial statements for the six months ended June 30, 2024. These are considered key measures of operating performance and capital management as they demonstrate the Company's ability to generate the cash necessary to repay debt and fund capital investments. Management believes that by excluding the temporary impact of changes in non-cash operating working capital, each of these provide useful measures of ROK's ability to generate cash that are not subject to short-term movements in non-cash operating working capital.

The following table reconciles cash flow from operating activities to Funds Flow:



Q2 2024

Q2 2023

YTD 2024

YTD 2023

Cash provided by operating activities

6,484,206

9,366,721

10,659,931

14,422,676

Change in non-cash working capital

(1,483,321

)

(4,411,159

)

683,172

216,762

Funds Flow

5,000,885

4,955,562

11,343,103

14,639,438

Conversion Measures

Production volumes and reserves are commonly expressed on a barrel of oil equivalent (" boe ") basis whereby natural gas volumes are converted at the ratio of 6 thousand cubic feet (" Mcf ") to 1 barrel of oil (" bbl "). Although the intention is to sum oil and natural gas measurement units into one basis for improved analysis of results and comparisons with other industry participants, boe's may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf to 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. In recent years, the value ratio based on the price of crude oil as compared to natural gas has been significantly higher than the energy equivalency of 6:1 and utilizing a conversion of natural gas volumes on a 6:1 basis may be misleading as an indication of value.

Abbreviations

bbls/d

bopd


barrels per day

barrels per day

boepd


barrels oil equivalent per day

IP


Initial Production

NGLs


Natural Gas Liquids

Mboe

Mg/l


Thousands of barrels of oil equivalent

Milligrams per Litre

MMboe


Millions of barrels of oil equivalent

PDP


Proved Developed Producing

TP


Total Proved Reserves

TPP


Total Proved and Probable Reserves

WTI

CA$

US$


West Texas Intermediate, the reference price paid in U.S. dollars at Cushing, Oklahoma for the crude oil standard grade

Canadian dollars

U.S. dollars

Cautionary Statement Regarding Forward-Looking Information

This news release includes certain " forward-looking statements " under applicable Canadian securities legislation that are not historical facts. Forward-looking statements involve risks, uncertainties, and other factors that could cause actual results, performance, prospects, and opportunities to differ materially from those expressed or implied by such forward-looking statements. Forward-looking statements in this news release include, but are not limited to, statements with respect to the Company's objectives, goals, or future plans and the expected results thereof. Forward-looking statements are necessarily based on several estimates and assumptions that, while considered reasonable, are subject to known and unknown risks, uncertainties and other factors which may cause actual results and future events to differ materially from those expressed or implied by such forward-looking statements. Such factors include but are not limited to general business, economic and social uncertainties; litigation, legislative, environmental, and other judicial, regulatory, political and competitive developments; delay or failure to receive board, shareholder or regulatory approvals; those additional risks set out in ROK's public documents filed on SEDAR at www.sedar.com ; and other matters discussed in this news release. Although the Company believes that the assumptions and factors used in preparing the forward-looking statements are reasonable, undue reliance should not be placed on these statements, which only apply as of the date of this news release, and no assurance can be given that such events will occur in the disclosed time frames or at all. Except where required by law, the Company disclaims any intention or obligation to update or revise any forward-looking statement, whether because of new information, future events, or otherwise.

Neither the Exchange nor its Regulation Services Provider (as that term is defined in the policies of the Exchange) accepts responsibility of the adequacy or accuracy of this release.

SOURCE: ROK Resources Inc.

Topic:
Earnings
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