Saturn achieved strong corporate reserves growth in 2019 marked by a 57% increase in proved developed producing, 65% in total proved and 63% in proved plus probable reserves
CALGARY, Alberta, April 16, 2020 (GLOBE NEWSWIRE) — Saturn Oil & Gas Inc. (“Saturn” or the “Company”) (TSX.V: SOIL) (FSE: SMK) is pleased to announce the results of our independent 2019 year-end reserves evaluation by Ryder Scott Company, LP (“Ryder Scott”) with an effective date of December 31, 2019 (the “Ryder Scott Report”) in accordance with the definitions, standards and procedures contained in the Canadian Oil and Gas Evaluation Handbook (“COGE Handbook”) and National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities (“NI 51-101”). The reserves evaluation was based on Evaluator Average forecast pricing and foreign exchange rates. Reserves included herein are stated on a company gross basis (working interest before deduction of royalties without inclusion of any royalty interests) unless noted otherwise.
Highlights of the Company’s proved developed producing (“PDP”), total proved (“TP”) and total proved plus probable (“TP+P”) reserves from the Ryder Scott Report are provided below. All finding and development (“F&D”)1 and finding, development and acquisition (“FD&A”)1 costs below include changes in future development capital (“FDC”), and recycle ratios1 are calculated based on Saturn’s 2019 estimated unaudited average operating netback1 of $51.98/bbl. Additional details of the Ryder Scott Report, including the Company’s NI 51-101 Forms (F1, F2 and F3) regarding our Statement of Reserves Data and Other Oil and Gas Information, have been filed on SEDAR at www.sedar.com and posted on Saturn’s website at http://saturnoil.com/. Currency figures presented herein are reflected in Canadian dollars, unless otherwise noted.
Successful 2019 Capital Program Significantly Expanded Reserves
Saturn’s 2019 capital program of $16.4 million focused on the development of the Company’s prolific and highly economic light oil Viking play in Saskatchewan. Ongoing efforts to control both capital expenditures and operating costs combined with strong operating performance led to continued improvements in the Company’s capital efficiencies. Our disciplined capital program was directed to the drilling and completion of 17.0 net extended reach horizontal (“ERH”) Viking light oil wells and the acquisition of 19.3 net sections of land in our core areas. Following are highlights of changes within each reserves category compared to 2018.
Proved Developed Producing
- 57% increase to 875.0 thousand barrels (“Mbbls”)
- 53% increase on a per share (basic) basis
- 26% growth in net present value discounted at 10% (before tax) (“NPV10 BT”)
- Achieved FD&A costs of $29.38/bbl and F&D costs of $27.34/bbl, 27% and 19% lower than 2018
- Generated FD&A and F&D recycle ratios of 1.8x and 1.9x, respectively
- Total PDP reserve additions of 600.6 Mbbls replaced 213% of production
- PDP reserves represent 24% of TP reserves, consistent with the prior year
- 65% increase to 3,612.5 Mbbls
- 60% increase on a per share (basic) basis
- 29% growth in NPV10 BT
- Achieved FD&A costs of $28.98/bbl and F&D costs of $28.26/bbl, 23% and 21% lower than 2018
- Generated both FD&A and F&D recycle ratios of 1.8x
- Total TP reserve additions of 1,704.5 Mbbls replaced 603% of production
- TP reserves represent 49% of TP+P reserves, consistent with the prior year
Total Proved + Probable
- 63% increase to 7,418.0 Mbbls
- 58% increase on a per share (basic) basis
- 22% growth in NPV10 BT
- Achieved FD&A costs of $26.21/bbl and F&D costs of $25.82/bbl, 9% and 7% lower than 2018
- Generated both FD&A and F&D recycle ratios of 2.0x
- Total TP+P reserve additions of 3,145.6 Mbbls replaced 1,113% of production
(1) Non-IFRS Measure. See “Information Regarding Disclosure on Oil and Gas Reserves and Non-IFRS Measures” within this press release.
“I am extremely proud of Saturn’s success in delivering robust reserves growth across all categories while demonstrating the benefit of maintaining operational excellence, focusing on cost controls and prioritizing ESG initiatives,” said John Jeffrey, CEO of Saturn. “Saturn’s long-term sustainability is underpinned by our ability to respond quickly to changing market conditions and our active risk management and hedging program. Despite the prevailing global volatility, Saturn is positioned for resiliency, and to continue pursuing accretive opportunities to expand our high-quality asset base, enhance funds flow and support continued financial flexibility.”
Summary of Corporate Reserves
The following is a summary of the Company’s estimated corporate reserves as at December 31, 2019, as evaluated by Ryder Scott.
|Reserves Category||Light and Medium Oil||Heavy Oil||Natural Gas Liquids||Conventional Natural Gas||Barrels of Oil Equivalent||Liquids Ratio|
|Total Proved + Probable||6,937.0||480.9||–||–||7,418.0||100|
Reconciliation of Reserves
|Total Proved + Probable
|As of December 31, 2018||2,190.6||2,364.4||4,555.0|
|Drilling (Extensions and Improved Recovery)||1,239.6||(184.9||)||1,054.7|
|Pricing (Economic Factors)||(0.9||)||(91.8||)||(92.7||)|
|As of December 31, 2019||3,612.5||3,805.4||7,418.0|
(1) Reserve additions under Infill drilling, Improved recovery, and Extensions are combined and reported as “Drilling (Extensions and Improved Recovery)”.
(2) Drilling (Extensions and Improved Recovery) column has a negative Total Probable reconciliation due to the substantial volume of reserves converted from probable to proven/producing.
(3) Technical revisions accounted for 12% of the total proved, 21% of the total probable and 17% of the total proved plus probable reconciliation.
(4) Company Gross Reserves exclude royalty volumes
Net Present Value of Future Net Revenue Before Income Taxes
The following table is a summary of the estimated net present values of future net revenue (before income taxes) associated with Saturn’s reserves as at December 31, 2019, discounted at the indicated percentage rates per year, as evaluated in the Ryder Scott Report.
|Total Proved + Probable||232.64||157.97||111.65||82.03||62.32|
Future Development Capital
The following table provides a summary of the estimated FDC required to bring Saturn’s TP and TP+P undeveloped reserves to production, as reflected in the Ryder Scott Report, which costs have been deducted in Ryder Scott’s estimation of future net revenue associated with such reserves.
|Future Development Costs (MM$)||Proved||+ Probable|
|Total FDC undiscounted||67.2||141.9|
The following table summarizes Ryder Scott’s commodity price forecast and foreign exchange rate assumptions as at December 31, 2019, as applied in the Ryder Scott Report, for the next five years.
|Year||Exchange Rate||WTI @ Cushing||Canadian Light Sweet 40º API||Western Canada Select 20.5º API|
No provision for interest, risk management contracts, debt service charges and general and administrative expenses have been made and it should not be assumed that the net present values of the reserves estimated by Ryder Scott represents the fair market value of the reserves. A reserves committee, comprised of independent board members, reviews the qualifications and appointment of the independent reserves evaluator and reviews the procedures for providing information to the evaluators.
2019 Capital Program Efficiency
|Finding, Development & Acquisition (“FD&A”)(1)||Finding & Development
|Capital Costs ($000s)|
|Exploration and Development capital(2)||16,420.7||16,420.7||16,420.7||16,420.7||16,420.7||16,420.7|
|Net change in FDC(3)||–||31,753.0||64,807.0||–||31,753.0||64,807.0|
|Reserves Additions (Mboe)|
|Total reserves, end of year||875.0||3,612.5||7,418.0||875.0||3,612.5||7,418.0|
|Total reserves, beginning of year||557.1||2,190.6||4,555.0||557.1||2,190.6||4,555.0|
|2019 FD&A and F&D Costs ($/boe)||29.38||28.98||26.21||27.34||28.26||25.82|
|2018 FD&A and F&D Costs ($/boe)||40.09||37.54||28.73||33.92||35.69||27.89|
|2019 Recycle Ratio(4)||1.8x||1.8x||2.0x||1.9x||1.8x||2.0x|
|2018 Recycle Ratio(4)||0.8x||0.8x||1.1x||0.9x||0.8x||1.1x|
(1) The calculation of F&D and FD&A costs incorporates the change in FDC required to bring proved undeveloped and probable reserves into production. In all cases, the F&D or FD&A number is calculated by dividing the identified capital expenditures, after changes in FDC, by the applicable reserves additions. We have disclosed both F&D costs and FD&A costs because historically, acquisition costs have been a significant component of our total capital expenditures and strategy, and also due to the difficulty in allocating changes in future development costs between reserve additions from drilling, technical revisions and acquisitions.
(2) Exploration, development and acquisition capital (unaudited) related to: land acquisition and retention; drilling; completions; tangible well site; and tie-ins.
(3) FDC as per Ryder Scott, based on Ryder Scott’s December 31, 2019 forecast prices and costs.
(4) Recycle ratio is defined as operating netback for the year, divided by F&D or FD&A costs, as applicable, on a per boe basis. Operating netback is calculated as revenue minus royalties, operating costs and transportation expense on a per boe basis. Saturn’s unaudited estimated operating netback in 2019 and 2018 averaged $51.98/bbl and $14.85/bbl, respectively.
(5) Columns may not add due to rounding.
Financial Discipline and Cost Control
In addition to reserves data, Saturn also announces an update on the Company’s commitment to financial discipline and cost controls. In response to the impacts of COVID-19, as well as extremely low commodity prices, Saturn has proactively reduced corporate salaries for all employees by 20%. However, the safety and security of Saturn’s employees and service providers remains a top priority and we continue to follow all required and recommended practices both in the field and the office to help curb the spread of the Coronavirus.
Saturn also announces that pursuant to the Company’s Stock Option Plan (the “Plan”) it has granted a total of 500,000 stock options at a price of $0.10 per common share to Saturn’s new board member, Jim Payne, who was appointed on March 11, 2020. As per the Plan, the options granted are exercisable until August 14, 2024 and vest over a period of 18 months from the date of grant. Grant of the options are subject to the approval of the TSX Venture Exchange. All securities issued on exercise thereof are subject to a hold period expiring four months and one day from the date hereof.
About Saturn Oil & Gas Inc.
Saturn Oil & Gas Inc. (TSX.V: SOIL) (FSE: SMK) is a public energy Company focused on the acquisition and development of undervalued, low-risk assets. Saturn is driven to build a strong portfolio of cash flowing assets with strategic land positions. De-risked assets and calculated execution will allow Saturn to achieve growth in reserves & production through retained earnings. Saturn’s portfolio will become its key to growth and provide long-term stability to shareholders.