Rok Resources Inc. (ROK:TSX.V) updated its amount of reserves to account for its two 2023 transactions, and the result was a 24% increase in the total, reported Research Capital Corp. analyst Bill Newman in an April 20 research note.
"Through the completion of these transactions, Rok has increased reserves within a more concentrated land base while significantly reducing net debt," Newman wrote.
Possible Gains Compelling
On this news, Research Capital reiterated its Buy rating and CA$0.75 per share price target on this Canadian company engaged in oil and gas exploration and development in Saskatchewan and Alberta. Its current stock price, in comparison, is about CA$0.38.
The price gap implies a nearly 100% potential gain for investors.
Net Effects of Transactions
The first of the two deals mentioned was an acquisition in January 2023 of about 1,000 barrels of oil equivalent per day (1 Moe/d) of net production in southeast Saskatchewan, Newman relayed. The second, transacted earlier this month, was the disposition of non-core assets with combined production of about 500 barrels of oil equivalent per day.
As for reserves, Newman highlighted these deals resulted in a 24% boost to net Proven and Probable (2P) reserves, a 35% uptick in the 2P net present value and an increase in booked drilling locations to 124 from 58, from a current production base of about 3.75 Mboe/d.
Regarding net debt, it dropped to about CA$10 million (CA$10M) from CA$35.4M thanks to the transactions.
Strong Financial Position
Research Capital remains bullish on Rok.
"Rok has repositioned the company with a high working interest in two focus core areas with a large drilling inventory, providing years of organic growth potential," wrote Newman.
With its current financial situation, Newman pointed out, Rok has enough cash flow to fund operations and continue paying down its debt, which it is doing. In fact, the company could pay it all off this year.
Also, Rok has options for what to do with some of its cash, and they include returning some capital to shareholders in the form of a dividend or share buyback and/or using it to accelerate growth.
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