Calgary, Alberta--(Newsfile Corp. - August 31, 2021) - Saturn Oil & Gas Inc. (TSXV: SOIL) (FSE: SMK) ("Saturn" or the "Company") is pleased to report its financial and operating results for the three and six months ended June 30, 2021.
John Jeffrey, Chief Executive of Saturn, commented: "We are proud to a report a historic quarter in the development of the Company. The acquisition of the Oxbow Asset provides a substantial platform for Saturn's future growth by contributing numerous new drilling opportunities and production optimization projects, as well as a stable long-term cash flow stream to fund these initiatives."
Second Quarter 2021 Highlights:
- Successfully closed a transformational acquisition of assets in the Oxbow area of Southeast Saskatchewan (the "Oxbow Asset") for cash consideration of $76.8 million, after closing adjustments;
- At closing, the Oxbow Asset contributed 6,400 boe/d, 43 million boe of proved and probable reserves, 290,109 net acres of land (137,186 undeveloped net acres) and over 350 drilling locations (260 booked locations with certified reserves);
- Completed $119.2 million of debt and equity financing, including a $87.0 million senior secured term loan, an upsized and oversubscribed brokered private placement and a non-brokered private placement (collectively the "Private Placements") which raised total gross proceeds of $32.2 million;
- Generated second quarter petroleum and natural gas sales of $12.6 million and Adjusted Funds Flow(1) of $2.9 million;
- Achieved strong operating netbacks for the three and six months ended June 30, 2021 of $29.58 per boe and $30.87 per boe; and
- Exited the second quarter with net debt of $74.5 million.
| Three months ended | | Three months ended | Six months ended | Six months ended | |||||||||
| (CAD $000s, except per share amounts) | June 30, 2021 | June 30, 2020 | June 30, 2021 | June 30, 2020 | |||||||||
| FINANCIAL HIGHLIGHTS | |||||||||||||
| Petroleum and natural gas sales | 12,589 | 426 | 13,911 | 3,591 | |||||||||
| Cashflow used in operating activities | (30,265 | ) | (954 | ) | (30,478 | ) | (961 | ) | |||||
| per share - Basic | (0.10 | ) | (0.00 | ) | (0.11 | ) | (0.00 | ) | |||||
| - Diluted | (0.10 | ) | (0.00 | ) | (0.11 | ) | (0.00 | ) | |||||
| Adjusted funds flow (1) | 2,884 | (529 | ) | 2,342 | 1,132 | ||||||||
| per share - Basic | 0.01 | (0.00 | ) | 0.01 | 0.00 | ||||||||
| - Diluted | 0.01 | (0.00 | ) | 0.01 | 0.00 | ||||||||
| Net loss | (29,597 | ) | (3,023 | ) | (31,128 | ) | (2,365 | ) | |||||
| per share - Basic | (0.10 | ) | (0.01 | ) | (0.13 | ) | (0.01 | ) | |||||
| - Diluted | (0.10 | ) | (0.01 | ) | (0.13 | ) | (0.01 | ) | |||||
| Property acquisition | 76,820 | - | 76,820 | - | |||||||||
| Net Debt(1), end of period | 74,504 | 29,907 | 74,504 | 29,907 | |||||||||
(1) See non-GAAP measures
| Three months ended | Three months ended | Six months ended | Six months ended | |||||||||
| (CAD $000s, except per share amounts) | June 30, 2021 | June 30, 2020 | | June 30, 2021 | June 30, 2020 | |||||||
| OPERATING HIGHLIGHTS | ||||||||||||
| Average Production Volumes | ||||||||||||
| Crude oil (bbl/d) | 1,741 | 136 | 991 | 410 | ||||||||
| Natural gas (mcf/d) | 408 | - | 205 | - | ||||||||
| NGLs (bbl/d) | 66 | - | 33 | - | ||||||||
| Total boe/d | 1,875 | 136 | 1,058 | 410 | ||||||||
| % Oil and NGLs | 96% | | 100% | 97% | 100% | |||||||
| Average realized prices | ||||||||||||
| Crude oil ($/bbl) | 77.50 | 34.31 | 75.81 | 48.12 | ||||||||
| Natural gas ($/mcf) | 2.89 | - | 2.89 | - | ||||||||
| NGLs ($/bbl) | 33.67 | - | 33.67 | - | ||||||||
| Combined ($/boe) | 73.79 | 34.31 | 72.61 | 48.12 | ||||||||
| Operating netbacks | ||||||||||||
| Oil and gas sales | 73.79 | 34.31 | 72.61 | 48.12 | ||||||||
| Royalties | (9.61 | ) | (0.53 | ) | (8.86 | ) | (1.69 | ) | ||||
| Operating expenses | (24.46 | ) | (16.76 | ) | (23.85 | ) | (11.72 | ) | ||||
| Transportation expenses | (1.92 | ) | - | (1.71 | ) | - | ||||||
| Operating netbacks(1) | 37.80 | 17.02 | 38.19 | 34.71 | ||||||||
| Realized gain (loss) on financial derivatives | (8.22 | ) | 79.15 | (7.32 | ) | 17.02 | ||||||
| Operating netbacks(1) after realized gain (loss) on financial derivatives | 29.58 | 96.17 | 30.87 | 51.73 | ||||||||
| Common shares outstanding | 502,907 | 233,246 | 502,907 | 233,246 | ||||||||
| Weighted average common shares outstanding | ||||||||||||
| Basic | 305,343 | 233,246 | 276,569 | 233,246 | ||||||||
| Diluted | 379,656 | 233,246 | 351,473 | 233,246 |
(1) See non-GAAP measures
Message to Shareholders
Saturn has made a transformational acquisition by adding the Oxbow Asset to our existing Saskatchewan operations. The Company now has a long-term steady cash flow source that we are re-deploying to increase shareholder value. We are immediately focused on the repayment of debt and concurrently directing a portion of free cash flow to fund our deep inventory of production growth projects.
"Maintaining a strong balance sheet is a priority for Saturn," commented Scott Sanborn, Chief Financial Officer. "The accelerated repayment of debt increases the Company's financial capacity for future acquisitions."
The Company has re-established its drilling program that was suspended with the onset of the COVID-19 pandemic in 2020 and expects to be actively drilling going forward, starting in Q3 2021. Saturn now has two growth vehicles, the Viking Asset and the Oxbow Asset that collectively hold over 550 identified drilling locations which represents over two decades of inventory. Also impactful is the great number of existing but non-producing wells that we see potential to optimize with workovers, recompletions and repairs, to enhance current production levels. Saturn believes that there are over 400 non-producing candidate wells that the Company can return to economic production over the coming years.
A primary management focus has been the integration of the people and systems required to operate the substantial increase in operated production. To date, the integration program has been on track and very successful. At the field level, the operations team located in Carlyle Saskatchewan, led by Brad Caldwell, Operations Manager, comprises an outstanding group of industry veterans that have many years of experience operating in the area, directly on the Oxbow assets and have now been transitioned to Saturn. The further additions of Scott Sanborn, Chief Financial Officer and Kevin Smith, Vice President Corporate Development, along with a number of other talented industry professionals, have recently joined the Saturn Team and have been crucial to making the transition program as efficient as possible.
The second quarter financial statements incorporate the 23-days of operations from the Oxbow Asset from the June 7, 2021 closing date to quarter end date of June 30, 2021. Average daily revenue for this 23-day period was approximately $520,000 and has generated average daily free cash flow of approximately $265,000 using second quarter operating netbacks, net of hedging adjustments. The Company's average daily production for July 2021 was 6,700 boe/d (95% oil and NGLs), based on field estimates. Saturn anticipates new production from the drilling and workover programs, planned for the second half of 2021, will offset the natural declines incurred to date for the Company's pro forma base production. Management forecasts the exit rate production for year end 2021 to be approximately 7,000 boe/d. Saturn continues to prioritize balance sheet strength, along with a disciplined approach to production growth focused capital expenditures.
Management looks forward to updating shareholders with a full quarter of consolidated operational results for the third quarter of 2021 on or about November 29, 2021.
Oxbow Update
On June 7, 2021 Saturn closed on the acquisition of the Oxbow Asset for total cash considerations of $76.8 million, after closing adjustments. The Oxbow Asset is performing in line with our expectations with natural declines of approximately 1% per month. In July 2021, the Company participated in the drilling of 2 gross (0.54 net) non-operated wells in Queensdale, Southeast Saskatchewan, which were brought onto production in August of 2021, with initial net production rates exceeding the average type curves of wells in this area. Saturn anticipates completing an operated drilling program at Oxbow in Q4 2021. Further details will be provided to investors as the capital budgets are finalized.
The Company commissioned a NI 51-101 third party evaluation of the Oxbow Asset, which was completed by Ryder Scott Canada in August 2021, effective date April 1, 2021. The new report confirms management's internal evaluation, certifying 43 million barrels of proved plus probable reserves and 260 booked drilling locations. A summary of the new report will be filed on www.sedar.com in early September 2021.
Viking Update
Saturn is reinitiating its drilling program at the Viking Asset in Q3 2021 with the expected drilling of three Extended Reach Horizontal (ERH) wells and workovers of existing wells for total expected capital expenditures of $4.5 million. The locations for the three wells have been surveyed and the Company expects to spud in September 2021.
Investor Webcast
Saturn will host a webcast at 10:00 AM MT (12:00 PM Noon ET) on August 30, 2021, to discuss the second quarter financial report and provide investors an update. Participants can access the live webcast via this link, by phoning 1-855-703-8985 (Toll Free, Meeting ID: 944 2187 6014 #) or through the Company's website www.saturnoil.com. A recorded archive of the webcast will be available afterwards on the Company's website.
About Saturn Oil & Gas Inc.
Saturn Oil & Gas Inc. is a growing Canadian energy company focused on generating positive shareholder returns through the continued responsible development of high-quality, light oil weighted assets, supported by an acquisition strategy that targets highly accretive, complementary opportunities. Saturn has assembled an attractive portfolio of free-cash flowing, low-decline operated assets in Southeastern Saskatchewan and West Central Saskatchewan that provide a deep inventory of long-term economic drilling opportunities across multiple zones. With an unwavering commitment to building an ESG-focused culture, Saturn's goal is to increase reserves, production and cash flows at an attractive return on invested capital. Saturn's shares are listed for trading on the TSX.V under ticker 'SOIL' and on the Frankfurt Stock Exchange under symbol 'SMK'.
The Company's unaudited interim financial statements and corresponding Management's Discussion and Analysis for the six month period ended June 30, 2021 are available on SEDAR at www.sedar.com and on Saturn's website at www.saturnoil.com. Copies of the materials can also be obtained upon request without charge by contacting the Company directly. Please note, currency figures presented herein are reflected in Canadian dollars, unless otherwise noted.
Further information and a corporate presentation is available on Saturn's website at www.saturnoil.com.
Saturn Oil & Gas Investor & Media Contacts:
John Jeffrey, MBA - Chief Executive Officer
Tel: +1 (587) 392-7902
www.saturnoil.com
Kevin Smith, MBA - VP Corporate Development
Tel: +1 (587) 392-7900
info@saturnoil.com
Reader Advisory
NON-GAAP MEASURES
This news release includes non-GAAP measures as further described herein. These non-GAAP measures do not have a standardized meaning prescribed by IFRS and, therefore, may not be comparable with the calculation of similar measures by other companies. Management believes that the presentation of these non-GAAP measures provides useful information to investors and shareholders as the measures provide increased transparency and the ability to better analyze performance against prior periods on a comparable basis.
"Adjusted funds flow" adjusts funds flow for items outside the scope of operations such as transactions costs and decommissioning expenditures.
"Operating netbacks" are determined by deducting realized derivative commodity contract losses or adding realized derivative commodity contract gains and deducting, royalties, operating expenses and transportation expenses from petroleum and natural gas sales. Operating netbacks are per boe measures used in operational and capital allocation decisions. Presenting operating netbacks on a per boe basis allows management to better analyze performance against prior periods on a comparable basis.
"Net debt" represents cash, accounts receivable, deposits and prepaid expenses, deposits, accounts payable and accrued liabilities, Senior Term Loan, Term Notes, Promissory Notes, Convertible Notes and the Revolving Loan.
BOE PRESENTATION
Boe means barrel of oil equivalent. All boe conversions in this news release are derived by converting gas to oil at the ratio of six thousand cubic feet ("Mcf") of natural gas to one barrel ("Bbl") of oil. Boe may be misleading, particularly if used in isolation. A Boe conversion rate of 1 Bbl: 6 Mcf is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio of oil compared to natural gas based on currently prevailing prices is significantly different than the energy equivalency ratio of 1 Bbl: 6 Mcf, utilizing a conversion ratio of 1 Bbl: 6 Mcf may be misleading as an indication of value.
FORWARD-LOOKING INFORMATION AND STATEMENTS.
Certain information included in this press release constitutes forward-looking information under applicable securities legislation. Forward-looking information typically contains statements with words such as "anticipate", "believe", "expect", "plan", "intend", "estimate", "propose", "project", "scheduled", "will" or similar words suggesting future outcomes or statements regarding an outlook. Forward-looking information in this press release may include, but is not limited to, the drilling of development wells, workover program and the maintenance of bas production and the business plan, cost model and strategy of the Company.
The forward-looking statements contained in this press release are based on certain key expectations and assumptions made by Saturn, including expectations and assumptions concerning: the timing of and success of future drilling, development and completion activities, the performance of existing wells, the performance of new wells, the availability and performance of facilities and pipelines, the geological characteristics of Saturn's properties, the application of regulatory and licensing requirements, the availability of capital, labour and services, the creditworthiness of industry partners and the ability to source and complete asset acquisitions.
Although Saturn believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because Saturn can give no assurance that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, risks associated with the oil and gas industry in general (e.g., operational risks in development, exploration and production; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to production, costs and expenses, and health, safety and environmental risks), constraint in the availability of services, commodity price and exchange rate fluctuations, the current COVID-19 pandemic, actions of OPEC and OPEC+ members, changes in legislation impacting the oil and gas industry, adverse weather or break-up conditions and uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures. These and other risks are set out in more detail in Saturn's Annual Information Form for the year ended December 31, 2020.
Forward-looking information is based on a number of factors and assumptions which have been used to develop such information but which may prove to be incorrect. Although Saturn believes that the expectations reflected in its forward-looking information are reasonable, undue reliance should not be placed on forward-looking information because Saturn can give no assurance that such expectations will prove to be correct. In addition to other factors and assumptions which may be identified in this press release, assumptions have been made regarding and are implicit in, among other things, the timely receipt of any required regulatory approvals and the satisfaction of all conditions to the completion of the share consolidation. Readers are cautioned that the foregoing list is not exhaustive of all factors and assumptions which have been used.
The forward-looking information contained in this press release is made as of the date hereof and Saturn undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise, unless required by applicable securities laws. The forward-looking information contained in this press release is expressly qualified by this cautionary statement.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this press release.
All dollar figures included herein are presented in Canadian dollars, unless otherwise noted.
To view the source version of this press release, please visit https://www.newsfilecorp.com/release/94995
