REGINA, SK – ROK Resources Inc. (“ROK” or the “Company“) (TSXV:ROK)(TSXV:ROK.WT) is pleased to announce that it has successfully closed the acquisition previously announced on December 19, 2022 (the “Acquisition“) of the assets (1,400 Boepd at closing) located in ROK’s core operating area of Southeast Saskatchewan (the “Assets“), in exchange for total consideration of approximately $23 million CAD in cash consideration after closing adjustments and approximately 400 boepd of non-core, Southwest Saskatchewan assets.
The Acquisition was funded through the previously announced $75 million CAD senior loan facility (the “Senior Loan Facility”), which is comprised of a $52.5 million term facility (the “Term Facility“) carrying a 2-year term and interest rate of BA plus 6.25% and a $22.5 million syndicated facility (the “Syndicated Facility“) with a sliding scale interest rate, currently set as BA plus 3.75%. The term loan carries a monthly principal payment requirement of $2 million and has no prepayment penalty. The Company’s previous loan facility with Anvil Channel Energy Solutions has been repaid in full and replaced with the Senior Loan Facility, resulting in an interest cost reduction in excess of 30%.
Highlights & Strategic Rationale
The Acquisition is aligned with ROK’s long-term business strategy of responsible exploration and development, complemented by strategic acquisitions of diversified and sustainable assets in favorable operating areas. Additional highlights include:
- All-cash transaction provides debt adjusted accretion of >15% 2023 cash flow per share and >75% TPP Reserves per share.
- High quality land positions (48,720 net acres) located in the Pinto, Steelman & Gainsborough areas of Southeast Saskatchewan.
- Significant booked reserve base (65+ net drilling locations) and long-term resource development upside, adding 18 years of reserve life, not including secondary recovery from future waterflood applications.
- Stable base production, currently producing approximately 1,400 boepd (69% Liquids).
- Integrated operations enable low-cost structures (80% of acquired assets are operated).
First-Half 2023 Guidance
Current corporate production is approximately 4,400 boepd (69% Liquids), of which 3,200 boepd is producing from ROK’s core operating area in Southeast Saskatchewan. Over the first six months of 2023, ROK intends to focus on increasing shareholder value through well optimization and integration of the acquired Assets, debt reduction, and a $10 million dollar capital program that includes 3 gross (2.63 net) wells drilled in Southeast Saskatchewan and Kaybob.
Over this period, the Company expects to average 4,200 – 4,300 boepd and generate $25 – $27 million1 in funds from operations, of which $10 million will be allocated directly to principal reduction on the Term Facility. Net Debt at June 30, 2023 is expected to be $53 – $55 million.
ROK will provide second half 2023 guidance in the second quarter of 2023. The second half of 2023 is expected to include a robust drilling program aimed at expediting growth in core operating areas. Across the Southeast Saskatchewan core area, the Company expects to balance drilling between conventional Frobisher and unconventional Midale, two of the most economic plays in the basin. Within the Kaybob South Core area the Company will further develop the Cardium oil and Montney gas development on its 100% working interest lands. The Company will also evaluate the sale of additional non-core, non-operated assets to reduce debt and further focus operations on properties that align with management’s expertise and ROK’s growth strategy.
1. Assumes average pricing of $80/bbl USD WTI and $3.50/mcf AECO.