ROK Resources Inc. has completed its previously announced dispositions of certain non-core assets (the "Assets") for total combined proceeds of approximately $47.25 million, before normal closing adjustments (the "Transactions"). The Assets are comprised of ROK's non-operated interest in the Weyburn Unit and two smaller non-core assets located in Saskatchewan.
The Transactions are consistent with ROK's strategic plan, focusing on debt reduction and high-grading of the Company's asset portfolio and drilling inventory. The Company's outstanding senior term debt will be reduced by 85% from proceeds of the Transactions, resulting in cumulative interest savings of approximately $5.8 million that would have been otherwise paid over the remaining term of the senior term debt.
Notably, since the FCL acquisition in March 2022, the Company has disposed of approximately $74 million in non-core assets representing ~31% of production and ~127% of the purchase price, after closing adjustments.
2023 Guidance
Current corporate production is approximately 3,750 boepd (65% Liquids), net of the above-noted disposition.
In the second half of 2023, ROK intends to focus on increasing shareholder value through; (i) the optimization and integration of asset acquisitions, (ii) debt reduction, and (iii) executing a drilling and recompletion program. For H2 2023E, the Company expects to average 4,120 boepd, generating $19 million in cash flow from operating activities1. For Q4 2023E, the Company estimates exit production of 4,500 boepd, generating a total of $38.9 million in annualized cash flow from operating activities1, and $5.9 million in annualized free cash flow.
The Company's senior term debt is expected to be paid off entirely by mid-2023. Net debt at December 31, 2023 is expected to be $7.5 million, implying a net debt to cash flow from operating activities ratio of 0.2.
In support of the 2023 drilling program, the Company currently has hedged an average of 1,766 bbls/d of corporate production for the remainder of 2023 at an average price of approximately US$82.17/bbl. The Company is actively monitoring the current commodity price volatility and evaluating all options with regards to its hedging program.
Drilling & Recompletion Program
The second half of 2023 drilling program is expected to investment approximately $11.6 million and will aim to drill 10 gross (9.52 net) new wells within core operating areas in Southeast Saskatchewan, resulting in a 2023 exit target of 4,500 boepd (20% increase from current levels). The Company expects to balance drilling between conventional Frobisher and unconventional Midale, two of the most economic plays in the basin.
At Kaybob, the Company will focus on capital efficient recompletions and reactivations, while continuing to prepare for future Cardium oil and Montney gas development on its 100% working interest lands.
Financial Advisors
Echelon Capital Markets acted as financial advisor to the Company with respect to the Transactions.
McDougall Gauley LLP and McCarthy Tetrault LLP acted as legal advisors to the Company with respect to the Transactions.
