ROK Resources Files Financial Results for the Third Quarter of 2023 & Releases Operational Update

Rhea-AI Summary

ROK Resources Inc. (TSXV:ROK)(OTCQB:ROKRF) reported Q3 2023 highlights, including a 10% YoY production increase, net debt reduction by 51% YoY, and operational updates. The company's Q3 2023 financial summary showed average daily production of 3,858 boepd, generating a net operating income of $7.1 million. Capital expenditures totaled $8.5 million, $4.0 million less than forecasted. ROK's net debt as of September 30, 2023, was $15.0 million.

Positive

• 10% YoY production increase
• Net debt reduced by 51% YoY
• Average daily production volume of 3,858 boepd in Q3 2023
• Net operating income of $7.1 million in Q3 2023
• Capital expenditures $4.0 million less than forecasted
• Q3 2023 production outperformed forecast by 11%

Negative

• Operating costs higher compared to previous periods
• Increased operating expenses due to overdue facility turnarounds and evaluation stage costs
• Net debt of $15.0 million as of September 30, 2023

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

REGINA, SK / ACCESSWIRE / November 21, 2023 / ROK Resources Inc. ("ROK" or the "Company") (TSXV:ROK)(TSXV:ROK.WT)(OTCQB:ROKRF) has filed its interim Financial Results and Management Discussion & Analysis for the three and nine months ended September 30, 2023.

Q3 2023 HIGHLIGHTS

• Production up 10% YoY and 17% QoQ: Production averaged 3,858 boepd in the period, representing 10% growth compared to Q3 2022 and 17% growth compared to Q2 2023.
• Outperformed production forecast: Production exceeded the Company's average Q3 2023 forecast of 3,475 boepd by 11%.
• Net Debt reduced by 51% YoY: Net debt reduced from $30.7 million at Q3 2022 to $15.0 million in Q3 2023.

Consistent with previous disclosure, the Company's capital program remained weighted to the second half of 2023, with a focus on Southeast Saskatchewan light oil growth. Total debt has been reduced by over 51% year-over-year, which has provided the Company with the flexibility to allocate development capital across some of the most economic plays in North America.

OPERATIONS UPDATE

In Q3 2023 the Company successfully drilled and completed 6 gross (5.9 net) wells in Southeast Saskatchewan, consisting of 3 gross (2.9 net) Frobisher horizontal wells and 3 gross (2.98 net) Midale horizontal wells. The Company had the 8^th best performing Mississippian oil well in Saskatchewan for Q3 2023 with monthly volume of 6,962 bbls and an IP30 of 232 bbls/d.

In Q4 2023 the Company has drilled 3 gross (3 net) Frobisher horizontal wells in Southeast Saskatchewan and 1 gross (0.30 net) Gething gas well in Kaybob Alberta. In December, the Company will drill 2 gross (1.45 net) wells, both unbooked horizontal Frobisher locations in core operating areas.

Current corporate production is approximately 4,000 boepd with 2 gross (2 net) Midale horizontal wells in "clean-up" period post-frac, plus an additional 6 gross (4.75 net) wells forecasted to be on-stream no later than Q1 2024.

OUTLOOK

The Company has had success with early Q3 2023 drilling results and will complete its drilling program in late Q4 2023, a few weeks behind schedule. With operational delays impacting on-stream dates, management expects some wells to begin producing in early Q1 2024. Management will evaluate production results and release a 2024 capital budget and production guidance in Q1 2024.

As a result of uncertainty on production timing of Q4 2023 drilling, exit 2023 production guidance is as follows:

* Before inclusion of any mark-to-market fair value of hedges to be realized in the following 12 months

Financial			Q3 2023				Q3 2022			YTD 2023				YTD 2022
Net income (loss)			(7,752,269	)			10,810,729				(7,273,545	)			85,559,744
Basic ($/share)			(0.04	)			0.05				(0.03	)			0.52
Diluted ($/share)			(0.04	)			0.05				(0.03	)			0.50
Funds flow			5,303,180				13,472,784				22,170,046				33,052,787
Basic ($/share)			0.02				0.07				0.10				0.20
Diluted ($/share)			0.00				0.00				0.10				0.19
Expenditures on property, plant and equipment			7,580,757				11,938,870				16,585,543				16,441,696
Operating
Operating Income
Oil and Natural Gas Sales			22,144,104				26,554,511				64,019,554				63,386,401
Royalties			(2,931,103	)			(4,303,644	)			(11,490,495	)			(10,185,960	)
Operating Expenses			(13,353,260	)			(9,926,624	)			(32,594,808	)			(17,551,783	)
Operating Income			5,859,741				12,324,243				19,934,251				35,648,658
Realized gain on commodity contracts			563,524				1,552,524				5,689,069				1,788,499
Processing and other income			708,047				627,612				1,730,119				1,212,622
Net Operating Income			7,131,312				14,504,379				27,353,439				38,649,779
Average daily production
Crude oil (bbl/d)			1,986				2,170				2,046				1,644
NGLs (boe/d)			432				240				391				163
Natural gas (mcf/d)			8,647				6,535				7,961				4,206
Total (boe/d)			3,858				3,500				3,764				2,507
Operating Netback per boe
Oil and Natural Gas Sales			62.38				82.47				62.30				92.60
Royalties			(8.26	)			(13.37	)			(11.18	)			(14.88	)
Operating Expenses			(37.60	)			(30.83	)			(31.72	)			(25.64	)
Operating Netbacks ($/boe)			16.52				38.27				19.40				52.08
Operating Netbacks, after hedging ($/boe)			18.09				43.10				24.94				54.69
Operating Income Profit Margin			26.5	%			46.4	%			31.1	%			56.2	%
Operating Income Profit Margin, after hedging			29.0	%			52.3	%			40.0	%			59.1	%
Share information
Common shares outstanding, end of period			215,393,217				201,247,706				215,393,217				201,247,706
Weighted average basic shares outstanding			215,249,087				199,711,392				213,861,560				164,762,938
Weighted average diluted shares outstanding			215,249,087				222,398,843				213,861,560				170,622,352

Q3 2023 FINANCIAL SUMMARY

In Q3 2023, the Company realized average daily production volume of 3,858 boepd (63% Liquids), resulting in crude and natural gas sales of $22.1 million oil and natural gas sales and realized hedge gain of $0.5 million. This generated a net operating income of $7.1 million, after royalties, operating expenses, and processing and other income.

Capital expenditures in the quarter totaled $8.5 million, $4.0 million less than forecasted. The Company's active drilling program in Southeast Saskatchewan contributed $7.5 million to the total, with the remainder being allocated primarily to abandonment/reclamation work and land purchases. The Company expects an increase in Q4 2023 capital expenditures and maintains its 2023 capital target of ~$30 million.

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 higher compared to previous periods. The Company proactively chose to perform seven facility turnarounds that were overdue on the recent acquisitions. Annual costs incurred in Q3 2023 such as property taxes, government fees and levies and increased water and emulsion trucking costs during evaluation stages of new wells also contributed to the increased operating expenses of the quarter. The Company expects operating costs to normalize back to previous levels in Q4 2023 and through 2024.

NET DEBT

Net Debt as at September 30, 2023, and December 31, 2022, as outlined below:

		September 30, 2023				December 31, 2022
Cash and cash equivalents			-				5,258,881
Accounts receivable			12,614,460				10,862,673
Prepaids and deposits			609,242				1,144,672
Risk management contracts			(1,704,538	)			4,418,471
Accounts payable			(12,981,473	)			(13,678,677	)
Adjusted working capital (2)			(1,462,309	)			8,006,020
Credit Facility (8.2%) (1)			13,113,586				-
Lease obligations (1)			438,252				-
Senior Loan Facility (15%) (1)			-				43,347,566
Less: adjusted working capital (2)			1,462,309				(8,006,020	)
Net debt			15,014,147				35,341,546

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 are available on SEDAR+ at www.sedarplus.ca and on the Company website www.rokresources.ca.

LITHIUM UPDATE

The Company, as a twenty-five (25%) percent shareholder and manager of operations of Hub City Lithium Corp., remains on track for the release of the Preliminary Economic Assessment in Q4 2023.

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: investor@rokresources.ca
Website: www.rokresources.ca

Non-IFRS Measures

The non-IFRS measures referred to above do not have any standardized meaning prescribed by International Financial Reporting 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. "Net Debt" includes all indebtedness of the Company, such as the Term Loan, Credit Facility, and Senior Loan Facility (as defined within the Company's interim condensed financial statements for the nine months ended September 30, 2023), net of Adjusted Working Capital. "Adjusted Working Capital" is calculated as current assets less current liabilities, excluding current portion of debt as presented on the Company's statement of financial position within the Company's interim condensed financial statements for the nine months ended September 30, 2023.

"Funds Flow" includes all cash for (used in) operating activities and is calculated before the change in non-cash working capital. "Funds flow", "funds flow basic ($/share)" and "funds flow diluted ($/share)" are capital management measures and are key measures of operating performance 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, funds flow, funds flow basic ($/share) and funds flow diluted ($/share) provide useful measures of ROK's ability to generate cash that are not subject to short-term movements in non-cash operating working capital. Funds flow on a per share basis (basic and diluted) is calculated by dividing funds flow by the weighted average number of basic shares and weighted average number of diluted shares outstanding for the relevant period.

The following table reconciles cash flow from operating activities to funds flow:

			Q3 2023				Q3 2022			YTD 2023				YTD 2022
Cash provided by operating activities			5,600,679				12,427,942				22,250,783				28,783,787
Change in non-cash working capital			(297,499	)			1,044,842				(80,737	)			4,269,000
Funds Flow			5,303,180				13,472,784				22,170,046				33,052,787

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		barrels per day
boe		barrels of oil equivalent
Boepd IFRS		barrels oil equivalent per day International Financial Reporting Standards as issued by the International Accounting Standards Board
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 QoQ		Proved Developed Producing Quarter of quarter
TP		Total Proved Reserves
TPP		Total Proved and Probable Reserves
WTI YoY		West Texas Intermediate, the reference price paid in U.S. dollars at Cushing, Oklahoma for the crude oil standard grade Year over year

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.sedarplus.ca; 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.

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FAQ

What is ROK Resources Inc.'s ticker symbol?

ROK Resources Inc.'s ticker symbols are TSXV:ROK and OTCQB:ROKRF.

What were the Q3 2023 production highlights for ROK Resources Inc.?

In Q3 2023, ROK Resources Inc. reported a 10% YoY production increase and outperformed its forecast by 11%.

What was ROK Resources Inc.'s net debt as of September 30, 2023?

ROK Resources Inc.'s net debt as of September 30, 2023, was $15.0 million.

What were the Q3 2023 financial results for ROK Resources Inc.?

ROK Resources Inc. reported average daily production volume of 3,858 boepd, generating a net operating income of $7.1 million.

What were the capital expenditures for ROK Resources Inc. in Q3 2023?

ROK Resources Inc.'s capital expenditures in Q3 2023 totaled $8.5 million, $4.0 million less than forecasted.

What were the negative aspects in ROK Resources Inc.'s Q3 2023 report?

Operating costs were higher compared to previous periods, and net debt as of September 30, 2023, was $15.0 million.