DESCRIPTION: Rock Energy provides investors with exposure to a stable cash flow stream from the company's highly profitable heavy oil operations at Lloydminster, as well as significant resource upside in the Montney and Nikanassin in west central Alberta, with a drilling inventory of more than 300 horizontal locations.
The information provided below is based on the most recent information we have received from analysts, newsletters and other contributors to Streetwise Reports' The Gold Report or The Energy Report. We encourage you to visit the company's web site and call the company for more specifics on this company before you decide to invest.
"Rock Energy reported an 11% YOY increase in production (to 3,720 boed in the second quarter). . .Lots of junior producers would envy Rock Energy's options. With heavy oil-oriented properties in the Lloydminster area—along the Alberta/Saskatchewan border—and natural gas-oriented properties in the Elmworth area of Alberta, Rock can choose where to deploy its capital. Given the disparity between oil and gas prices, there is no surprise that it favored heavy oil in Q2, drilling eight wells at 100% working interests.
Rock's production has traditionally been split roughly 50/50 between oil and gas, but that ratio had crept up to two-thirds oil in Q2, as commodity prices dictated diverting more capital to oil projects. The company does have a Montney gas discovery at Elmworth that it will follow-up with in H2."
Kim Page, Wellington West Capital Markets
(08/12/10)
"Heavy oil focus continuing to deliver q/q growth but slight miss on Q2. RE reported Q2 volumes of 3,720 boe/d, up 5% q/q, slightly lower than 3,875 boe/d we expected. Mid- to long-term growth forecasts remain intact. . .Anticipating updates on heavy oil developments and Elmworth drilling. Key details on RE's Radcan and nitrogen-surfactant heavy oil-completion operations and results from Nikanassin/Montney drills expected this fall.
Reiterate Strong Buy rating and $7.50 target price. Valuation is compelling, trading at 3.8x '11E EV/DACF vs. peers at 5.8x; we believe Elmworth acreage remains a call option on gas price recovery."
The Energy Report Interview with Keith Schaefer (08/03/10)
"I like. . .Rock Energy. CEO Al Bey knows how to secure land positions, and he has a very good cost-control system in place. Some of their properties are able to deliver profits of three to seven times the money that Rock puts into them. For every dollar that they put into the search for the oil, they're able to return $3–$7 to the shareholders. That's a fantastic "recycle ratio."
They just brought on John Van De Pol as President and CFO. John's been involved in a couple of winners in the past, has a lot of experience and does it right. He's very methodical. For a shareholder, he's exactly the type of guy who gives you a lot of confidence. They still have a large undeveloped land package, with a drilling inventory of at least two to three years ahead of them. They'll be able to continue to grow production quite strongly. Rock is also one of the pioneers in using this new radial drilling technology. They're finding that the amount of oil they can get out of each of their land sections is increasing quite dramatically, and that's been a big, big bonus."
View Entire Article: Keith Schaefer: Stick with Wet Gas, Heavy Oil Plays
Gordon Currie, Salman Partners
(07/29/10)
"The fact that the Canadian dollar has settled back below parity is a small positive for Canadian producers. Heavy oil prices continue to be a bright spot, though the differential widened out from 17.5% in the first quarter to 24.3% in the second quarter, a time when demand for heavy oil is normally seasonally higher. Circumstances continue to favor oil producers, including domestic stocks like BlackPearl Resources Inc. (TSX:PXX $3.05; BUY; Target Price: $4.50), Rock Energy Inc. (TSX:RE $5.10; BUY; Target Price: $5.75) and Twin Butte Energy Ltd. (TSX:TBE $1.33; BUY; Target Price: $1.60); and our TOP PICK, international explorer TransGlobe Energy Corporation (TSX:TGL C$7.66; NASDAQ:TGA US$7.37; TOP PICK; Target Price: US$9)."
Kurt Molnar, Stifel Nicolaus
(07/12/10)
"We are initiating coverage of Rock Energy Inc. with a Buy rating. Rock Energy currently focuses the vast majority of its invested capital on its heavy oil assets, which provide the low-risk foundation for its relatively rapid growth in production and cash flow. . .they are also pursuing a number of innovative completion and reservoir management techniques in the hope of making material improvements in recovery factors on the large accumulation of heavy oil-in-place on its assets. This effort will likely drive production and reserve growth in the next 18 months, while we believe Rock's early stage delineation of its Montney/Nikanassin play at Elmworth is the potential driver for five-year growth potential of the company. We estimate that successful commercialization of the Nikanassin and Montney on just 10% of Rock's Elmworth lands could double the company's currently booked reserves."
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