Calgary, Alberta – Saturn Oil & Gas Inc. (TSXV: SOIL) (FSE: SMKA) (“Saturn” or the “Company”) is pleased to report its financial and operating results for the three and nine months ended September 30, 2021.
John Jeffrey, Chief Executive of Saturn, commented: “Reinstating the Company’s drilling program in the third quarter was an important step to continuing our growth strategy as a light oil focused producer. The success of the of Q3 2021 drilling program was combined with a period of high oil prices, strong operating netbacks and robust economic returns on invested capital. Saturn looks forward to continuing it’s drilling program and capitalizing on our deep inventory of oil focused drilling locations, funded with internally generated cash flow.”
Third Quarter 2021 Highlights:
- Achieved third quarter average production of 6,970 boe/d (96% oil and NGLs) in 2021 compared to 499 boe/d (100% oil) in the third quarter of 2020;
- Generated adjusted funds flow1 of $13.9 million ($0.55 per consolidated basic share) in the three months ended September 30, 2021 compared to $1.0 million in Q3 2020 ($0.09 per consolidated basic share);
- Achieved an operating netback1 for the three and nine months ended September 30, 2021 of $28.83 per boe and $29.55 per boe;
- Invested $4.5 million development capital in the third quarter, drilling three 100% working interest Viking wells, participating in two (0.54 net) non-operated wells and workovers of existing wells;
- Generated third quarter free funds flow1 of $9.5 million, excluding property acquisition expenditures of $2.6 million relating to the Oxbow Asset;
- Exited the third quarter with $71.8 million net debt1, compared to $74.5 million at the end of the previous quarter, realizing an annualized net debt to adjusted funds flow1 of 1.3x.
| Three months ended September 30, | Nine months ended September 30, | |||||||||||
| (CAD $000s, except per share amounts) | 2021 | 2020 | 2021 | 2020 | ||||||||
| FINANCIAL HIGHLIGHTS | ||||||||||||
| Petroleum and natural gas sales | 48,497 | 2,127 | 62,408 | 5,718 | ||||||||
| Cash flow from (used in) operating activities | 16,160 | 836 | (14,318 | ) | (124 | ) | ||||||
| per share – Basic | 0.03 | 0.00 | (0.04 | ) | (0.00 | ) | ||||||
| – Diluted | 0.03 | 0.00 | (0.04 | ) | (0.00 | ) | ||||||
| Adjusted funds flow (1) | 13,923 | 981 | 16,265 | 2,113 | ||||||||
| per share – Basic | 0.03 | 0.00 | 0.04 | 0.01 | ||||||||
| – Diluted | 0.03 | 0.00 | 0.04 | 0.01 | ||||||||
| Net loss | (23,307 | ) | (795 | ) | (54,433 | ) | (3,160 | ) | ||||
| per share – Basic | (0.05 | ) | (0.00 | ) | (0.16 | ) | (0.01 | ) | ||||
| – Diluted | (0.05 | ) | (0.00 | ) | (0.16 | ) | (0.01 | ) | ||||
| Capital expenditures | 4,445 | 212 | 4,647 | 421 | ||||||||
| Net Debt(1), end of period | 71,761 | 18,766 | 71,761 | 18,766 | ||||||||
(1) See non-GAAP measures
| Three months ended September 30, | Nine months ended September 30, | |||||||||||
| (CAD $000s, except per share amounts) | 2021 | 2020 | 2021 | 2020 | ||||||||
| OPERATING HIGHLIGHTS | ||||||||||||
| Average production volumes | ||||||||||||
| Crude oil (bbl/d) | 6,413 | 499 | 2,819 | 442 | ||||||||
| Natural gas (mcf/d) | 278 | – | 115 | – | ||||||||
| NGLs (bbl/d) | 1,673 | – | 700 | – | ||||||||
| Total (boe/d) | 6,970 | 499 | 3,051 | 442 | ||||||||
| % Oil and NGLs | 96% | 100% | 96% | 100% | ||||||||
| Average realized prices | ||||||||||||
| Crude oil ($/bbl) | 78.38 | 46.31 | 77.78 | 47.43 | ||||||||
| Natural gas ($/mcf) | 35.46 | – | 35.12 | – | ||||||||
| NGLs ($/bbl) | 3.76 | – | 3.59 | – | ||||||||
| Combined ($/boe) | 74.44 | 46.31 | 74.02 | 47.43 | ||||||||
| Operating netbacks | ||||||||||||
| Petroleum and natural gas sales ($/boe) | 75.85 | 46.31 | 75.35 | 47.43 | ||||||||
| Royalties ($/boe) | (10.68 | ) | (0.91 | ) | (10.26 | ) | (1.40 | ) | ||||
| Operating expenses ($/boe) | (27.81 | ) | (11.22 | ) | (26.90 | ) | (11.53 | ) | ||||
| Transportation expenses ($/boe) | (0.55 | ) | – | (0.81 | ) | – | ||||||
| Operating netbacks(1) ($/boe) | 36.81 | 34.18 | 37.38 | 34.50 | ||||||||
| Realized gain (loss) on financial derivatives ($/boe) | (7.98 | ) | 8.71 | (7.83 | ) | 13.85 | ||||||
| Operating netbacks(1) after realized gain (loss) on financial derivatives ($/boe) | 28.83 | 42.89 | 29.55 | 48.35 | ||||||||
| Common shares outstanding | 502,907 | 234,574 | 502,907 | 234,574 | ||||||||
| Weighted average common shares outstanding | ||||||||||||
| Basic | 502,907 | 234,574 | 348,591 | 234,574 | ||||||||
| Diluted | 600,417 | 234,574 | 446,549 | 234,574 | ||||||||
(1) See non-GAAP measures
Message to Shareholders
Saturn has achieved record financial performance with the reporting of the first full quarter following the acquisition of the Oxbow Asset. The operational performance of the Oxbow Asset has been consistent with the Company’s expectations of low decline, high quality, light and medium crude oil production. Saturn has initiated its workover and production optimization program to enhance the production from both of the Company’s core growth areas: the Oxbow Asset and the Viking Asset. The strong cash flows from operations have been directed to the repayment of debt incurred in the acquisition of the Oxbow Asset, while also funding reinvestment into the drilling new wells to grow production.
“Saturn has initiated the repayment of debt in the third quarter of 2021 with the goal of significantly reducing debt levels, in the near term,” commented Scott Sanborn, Chief Financial Officer. “The Company is focused on lowering corporate debt levels by approximately 50% by the end of 2022. As of October 31, 2021 Saturn has repaid over $10 million of principal debt incurred in the Oxbow Acquisition, from operational cash flows.”
Current Company production is approximately 7,050 boe/d (96% crude oil and NGLs), based on field estimates.
Viking Update
Saturn drilled three operated, 100% working interest, Extended Reach Horizontal (“ERH”) wells targeting Viking oil at its Loverna property (the “Loverna Wells”) and performed workovers/re-activations of existing non-producing wells. All three of the Loverna wells were drilled successfully, brought into production in October 2021 and are in-line with the Company’s internal forecasted production rates of light oil.
The success of the Q3 2021 drilling program at the Viking Asset supports the Company’s internal geologic model for the area’s prospectivity, including five sections of undeveloped contiguous land in the southern part of the Loverna area, de-risking up to 10 new ERH drilling locations. Saturn expects to continue drilling in the Viking Asset through Q4 2021 targeting light oil in the Loverna area. The Viking Asset benefits from short cycle times for the drilling of new wells, with expedited site surveys, licensing and the spud of new wells. This allows the Company to efficiently deploy capital towards timely production growth in periods of strong oil pricing and high cash netbacks.
Oxbow Update
Production from the Oxbow Asset was steady throughout Q3 2021, delivering strong cash flows from operations. Saturn participated in two gross, non-operated wells (0.54 net wells) which were brought onto production during the period. Workovers in the third quarter of 2021 at Oxbow were directed primarily to producing wells to reduce declines. Saturn has initiated its workover program in Q4 2021 on previously non-producing wells, returning 12 wells back onto production, with initial indications of strong returns on the modest capital committed. The Company targets workovers on 30-35 non-producing wells per quarter going forward. Saturn expects to initiate its drilling program at the Oxbow Asset in November 2021. The Company is targeting new horizontal wells into the Frobisher formation, which is a strong producing light oil interval in these areas. The drilling program is supported by extensive well control from existing producing wells and from comprehensive regional proprietary seismic coverage.
ESG Initiatives
In coordination with the workover program intended to return non-producing wells back into production, Saturn has started the process of abandoning wells that no longer have economic production potential. Saturn’s goal is to remediate these operational areas and return the land to its previous purpose, which in most cases is back to farmland. Including the well abandonments performed to date, the Company’s goal is to have decommissioned 20-25 non-producing wells by the end of 2021 as a kick start to the 400 well target over the next three years. In total, Saturn has budgeted over $18 million for abandonment and reclamation activities through 2024, with the majority of these funds to be deployed in 2022. Saturn has prefunded these expenditures with a $21 million deposit and an approved $10 million grant from the Accelerated Site Closure Program (ASCP) such that near term operational cash flows can be directed to debt service, debt repayment and growth projects of workovers and new wells drilled. To reduce the Company’s future footprint, Saturn is designing longer reach horizontal wells from multi-well pads that require less surface land use.
Investor Webcast
Saturn will host a webcast at 10:00 AM MST (12:00 PM Noon EST) on November 16, 2021, to discuss the third quarter financial report and provide an investor update. Participants can access the live webcast via https://saturnoil.com/invest/q3-2021-results-webcast. 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 ‘SMKA’.
The Company’s unaudited interim financial statements and corresponding Management’s Discussion and Analysis for the nine month period ended September 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.