Oil & Gas Co. in Saskatchewan Clears its Debt in Q2/25
Research Report

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Disclosures for Research Capital Corp., ROK Resources Inc., August 14, 2025

Company Description: ROK Resources Inc. is engaged in exploration and development of oil and natural gas in Southeast Saskatchewan and in Kaybob Alberta. Risks: While this is not an exhaustive list, we view the following risks as being noteworthy to investors in ROK. REGULATORY POLICY RISK| Various levels of government extensively regulate the energy industry with influence over exploration and production activities, prices, taxes, royalties and export restrictions. New regulations or modifications to existing regulations could adversely impact the Company’s profitability. COMMODITY PRICE RISK| The company’s cash flow is highly dependent on the price it receives for oil and natural gas. Periods of significant weakness in the price of oil and natural gas would negatively affect ROK’s cash flow and ultimately its ability to spend capital to maintain ongoing operations. FINANCIAL RISK| ROK funds its capital program through its working capital, internally generated cash flow, a credit facility and external capital markets. Should ROK notice a significant decrease in cash flow from operations or be unable to utilize its financing sources, there would likely be an adverse impact on the company’s future development or production activities. EXCHANGE RATE RISK| With crude oil sales based on US dollar benchmark, ROK is exposed to currency fluctuations in foreign exchange rates between the Canadian dollar and the US dollar. EXPLORATION RISK| The company’s current and future proved reserves will decline as reserves are produced. Future revenue will depend on ROK’s ability to replace reserves through acquisition or exploration and development of new reserves. Exploration and development drilling is capital intensive and is subject to numerous estimates and interpretations of geological and geophysical data. A portion of ROK’s capital expenditures in 2022 and 2023 is expected to be directed to appraisal and exploration activities. Important Disclosures Analyst Certification I, Bill Newman, CFA, certify the views expressed in this report were formed by my review of relevant company data and industry investigation, and accurately reflect my opinion about the investment merits of the securities mentioned in the report. I also certify that my compensation is not related to specific recommendations or views expressed in this report. Each analyst of Research Capital Corporation whose name appears in this report hereby certifies that (i) the recommendations and opinions expressed in this research report accurately reflect the analyst’s personal views and (ii) no part of the research analyst’s compensation was or will be directly or indirectly related to the specific conclusions or recommendations expressed in this research report. 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ROK Resources Inc. (ROK:TSX.V) paid off its CA$12.1 million (CA$12.1M) debt in Q2/25, and other financial results during the quarter generally were as Research Capital Corp. expected, reported Analyst Bill Newman in an Aug. 14 research note.

"This positions ROK for strong growth in 2026, potentially including a step-up in high-return, open-hole multilateral drilling activity (OHML)," Newman wrote, referring to the company's many locations in Saskatchewan's Frobisher and Midale formations that are amenable to this drilling technique. OHML wells are associated with strong capital efficiency, rapid payouts and favorable royalty incentives, making them attractive.

Overall, ROK Resources has 110 booked drilling locations, most of them in Saskatchewan, and these encompass the OHML ones. With so many drill locations, ROK Resources has huge growth potential, noted Newman.

50% Uplift Implied

Research Capital reiterated its CA$0.30 per share target on the Canadian oil and gas explorer-developer, trading at the time of Newman's report at about CA$0.20 per share, the analyst noted. From this price, the return to target is 50%.

ROK Resources remains a Buy. The company has 218.6 million shares outstanding and a CA$43.72M market cap. Its 52-week range is CA$0.13–0.23 per share.

All Debt Eliminated

During Q2/25, ROK Resources monetized its crude oil hedge contracts and generated CA$6.9M, Newman reported. It used these funds to fully repay its credit facility that had been restructured into a CA$5M demand facility with more flexible terms.

At quarter's end, the company had CA$3.6M of working capital. Given oil's current low prices, ROK intends to limit capital spending and maintain financial flexibility, which Newman considers a prudent approach, he wrote.

A Look at the Numbers

Newman presented the key Q2/25 results. During Q2/25, ROK Resources produced an average of 3,729 barrels of oil equivalent per day (3,729 boe/d), an amount consistent with Research Capital's 3,633 boe/d estimate.

Adjusted funds flow amounted to CA$9M, or CA$0.04 per share, due to the gains realized from the hedge contract monetization. As such, the total was about three times Research Capital's estimate of CA$3M, or CA$0.01 per share.

Q2/25 operating costs were CA$31.07 per barrel of oil equivalent (CA$31.07/boe), up from CA$25.47/boe in the previous quarter. The increase mostly was due to higher workover and maintenance expenses and one-time facility repair costs.

From an operational standpoint, Q2/25 was "quiet," noted the analyst. The company only did two completions and spent only CA$1M in capex. It did not drill any new wells.

What is on Tap

Newman noted what to expect from ROK Resources in the near term. In Q3/25 the company plans to drill two low-cost re-entries and one OHML well in the Midale. In doing so, it will utilize existing infrastructure to minimize the capital spend.

As for the rest of the 2025 development program, original plans called for it commence in Q4/25, but the start could be pushed back if oil prices remain low.