Saturn Oil & Gas Inc. Announces Acquisition of Ridgeback Resources Inc. Expanding Production to Approximately 30,000 boe/d and Bought Deal Financing including Strategic Lead Orders from GMT Capital Corp. and Libra Advisors, LLC

• Transformational $525 million¹ ($516 million using the Offering Price for the Consideration Shares) corporate acquisition expands Saturn’s pro forma production by approximately 140%, on closing, to ~30,000 boe/d² of sustainable, light oil focused, high netback production.
• The Ridgeback Acquisition, comprised of 17,000 boe/d (~71% light oil and natural gas liquids)³, with a proved developed producing reserve value of $915 million⁴, forecasted 12-month Net Operating Income³/ Operating Free Funds Flow³ of $311 million / $228 million, 99.4 MMboe of proved plus probable reserves³, and over 700 net drilling locations³, to sustain the acquired production for over 15 years.3

• Pro forma the Acquisition, Saturn will be positioned as a bonafide mid-cap oil producer with a market capitalization of approximately $292 million⁵ and an enterprise value of $850 million, with run rate production of approximately 30,000 boe/d, a combined proved developed producing reserve value of $1.4 billion³, forecasted 2023E EBITDA³ / Free Funds Flow³ of $477 million / $228 million, and 163 MMboe of proved plus probable reserves³.
• Saturn’s strategy remains to efficiently maintain production and maximize free cash flow to rapidly reduce indebtedness which is expected to be fully repaid within three years, and will be evaluating various opportunities to return significant capital to shareholders.
• GMT Capital Corp. and Libra Advisors, LLC have indicated that they will make lead orders and strategic investments in the Company.
• Saturn will seek to appoint up to two new members to the Board of Directors to expand its technical and operational expertise, and separately the Company has entered into new employment agreements with John Jeffrey, President and CEO, and Justin Kaufmann, Chief Development Officer, to align incentives with shareholder interests.

CALGARY, AB, Jan. 20, 2023 /CNW/ – Saturn Oil & Gas Inc. (“Saturn” or the “Company“) (TSXV: SOIL) (FSE: SMKA) (OTCQX: OILSF) is pleased to announce that it has entered into an arms-length arrangement agreement (the “Agreement“), to acquire Ridgeback Resources Inc. (“Ridgeback“) a privately held oil and gas producer focused on light oil in Saskatchewan and Alberta, for a transaction value (“TV“) of $525 million¹ ($516 million using the Offering Price for the Consideration Shares), by way of statutory plan of arrangement under the British Columbia Corporations Act (“BCBCA“) (the “Ridgeback Acquisition“). The Ridgeback Acquisition is expected to close in Q1 2023 (the “Closing Date“), subject to receipt of all regulatory and shareholder approvals.

Through the Ridgeback Acquisition, Saturn will acquire approximately 17,000 boe/d (~71% light oil and natural gas liquids (“NGLs“))⁶ of low decline, capital efficient production, which, at US$80 WTI oil price, is expected to generate an operating netback³ of $48.55 / boe resulting in annualized net operating income³ (“NOI“) of $311 million, implying a 1.66x TV / NOI multiple.  Based on the Ryder Scott Report (as herein defined), the Ridgeback Acquisition has a before-tax Proved Developed Producing³ (“PDP“) NPV10% of $915 million, implying a 0.57x TV / PDP multiple, and a before-tax Total Proved Plus Probable³ (“P+P“) NPV10% of $1.8 billion, implying a 0.28x TV / P+P, with over 430,000 net acres of land, in four core areas, in Saskatchewan and Alberta (the “Ridgeback Assets“).

“This transformational acquisition is an important step for Saturn to establish material scale in its Alberta and Saskatchewan operations, where we will leverage our high quality light oil focused production that has considerable prospective development drilling inventory, our teams track record of operational outperformance and capital efficiency, a strong hedge book, and supportive strategic equity backers like GMT Capital Corp. and Libra Advisors, LLC to mitigate corporate risk, rapidly deleverage, and sustainably grow in a profitable manner for many years to come,” said John Jeffrey, CEO of Saturn. “The attractive acquisition metrics and compelling economics of the Ridgeback Acquisition paired up with our existing portfolio of free cash flow generating assets will allow Saturn to repay all corporate indebtedness within three years, and ultimately provide a significant return of capital to enhance shareholder value.”

The $525 million consideration for the Ridgeback Acquisition will include a $475 million cash payment and the issuance of $50 million of Saturn common shares to the shareholders of Ridgeback (the “Consideration Shares“) at a deemed price of $2.5765 per Consideration Share ($41 million in deemed consideration using the Offering Price of $2.11 per share).  The cash consideration of $475 million will be funded through proceeds from an increase of $375 million to the Company’s existing senior secured term loan (“Senior Secured Term Loan“) and a bought-deal subscription receipt financing for aggregate gross proceeds of approximately $125 million (the “Offering“). Ridgeback has no outstanding debt and is expected to have a working capital surplus of approximately $20 million at the Closing Date. Details of the Offering and the Senior Secured Term Loan are provided below.

Upon completion of the Ridgeback Acquisition, Saturn will focus on maximizing free cash flow from pro forma production base of approximately 30,000 boe/d (82% crude oil and NGL’s), where after spending an expected $161 million of development capital in 2023 to efficiently maintain production levels, the Company expects to generate $232 million in free cash flow⁷ to reduce net debt to $345 million at year end 2023, representing a 0.9x trailing Net Debt/EBITDA multiple.

• Sustainable High Netback Production: The Ridgeback Acquisition brings approximately 17,000 boe/d of light oil focused production that provides high cash netbacks. The Company forecasts production on the Ridgeback Assets can be maintained at approximately 17,500 boe/d by reinvesting approximately 27% of the annual net operating income from the Ridgeback Assets creating substantial and sustainable free cash flow.
• Expands Existing Oxbow Core Production Area: Significantly expands Saturn’s production base in its existing core development area in Southeast Saskatchewan, increasing Saturn’s production in the area by over 65%, with pro forma production at the Closing Date forecasted to be approximately 12,600 boe/d (97% crude oil and NGL’s)⁸.
• Establishes a New Core Operating Area in Alberta: Pro forma the Ridgeback Acquisition, approximately 60% of Saturn’s production will be in Alberta, offering play diversification of highly economic, light oil focused drilling.
• Extensive Portfolio of Light Oil Focused Development Opportunities: The Ridgeback Acquisition brings an inventory over 400 net booked locations and over 300 net unbooked drilling locations5 for sustaining future production levels.
• Increased Size and Scale: Expansion of the production base is expected to enable Saturn to capture operating efficiencies, especially within the Southeast Saskatchewan operating area, which can result in fixed and variable costs being allocated over larger per unit volumes of production.
• Highly Accretive on Cash Flow per Fully Diluted Per Share: The Ridgeback Acquisition increases Saturn’s 2023 expected adjusted funds flow⁹ (“AFF“) at the midpoint to $393 million, or $2.33¹⁰ per fully diluted share an increase of 25% above Saturn’s stand-alone stay flat guidance. Pro forma the Ridgeback Acquisition, Saturn’s 2023 AFF per basic share is forecasted at $3.12.

Attractive Acquisition Metrics

Ridgeback Asset Summary

The Ridgeback Assets consist of over 430,000 net acres of land, in four core areas in Saskatchewan and Alberta, including:

• Southeast Saskatchewan – A strategic extension of Saturn’s existing and adjacent core development area;
• Alberta Cardium – Entry into one of North America’s largest and most economic oil pools, with over 300 development drilling locations;
• Kaybob Montney – Highly economic, de-risked light oil play with fast payback development drilling locations; and
• Deer Mountain Swan Hills – High oil weighted production, with an established enhanced oil recovery program.

The Ridgeback Acquisition more than doubles the light oil production of Saturn’s existing and adjoining core growth asset in Southeast Saskatchewan which targets Frobisher and Midale light oil development and adds exposure to the regional Bakken resource light oil play. The Ridgeback properties in Southeast Saskatchewan are directly East and contiguous to Saturn’s existing production and development area and are a synergistic addition that will be operated from Saturn’s operations hub in Carlyle, Saskatchewan.

The Ridgeback Acquisition offers a strategic extension for Saturn into some of the highest economic light oil development areas of Alberta, with sufficient scale to drive efficient development of the extensive development drilling inventory of over 700 net locations including over 400 net booked locations assessed by an independent third-party reserve evaluator.

Strategic Benefits

The Ridgeback Acquisition is an extension of Saturn’s strategy to become a premier, publicly traded, light oil producer through the acquisition and development of undervalued, low-risk opportunities that support building a strong portfolio of cash flowing assets offering strategic development upside.

• Stable Production with Minimal Maintenance Capital – The Company forecasts keeping the combined production base flat at approximately 30,000 boe/d through 2023 by drilling 80-100 wells across the combined portfolio of assets. The annual replacement of base production declines is expected to be achieved due to stable long-life assets, strong development drilling economics and production optimization underpinning recent drilling.
• Strong Forecasted Free Funds Flow¹³ – Saturn’s strategy of keeping production levels flat is intended to maximize Free Funds Flow¹³ estimated on a pro forma basis at approximately $232 million per year, or approximately $1.84 per basic share with an implied Free Cash Flow Yield of 87%, based on the Offering Price (defined below).
• Diversified Play Exposure Enhances Sustainability – The addition of the high-quality development assets in Alberta enhances Saturn’s inventory of light oil focused drilling locations including: high return, fast payback Montney development at Kaybob and an extensive number of de-risked Cardium drilling locations in the well defined light oil fairway in Greater Pembina.
• Enhanced Oil Recovery Projects with Demonstrated Success – With over five years of operating history, the advanced waterflood project in Deer Mountain provides long life light oil production, with 100% owned and operated infrastructure and LACT connected battery. Saturn expects to deploy enhanced oil recovery programs to other light oil projects in Saturn’s development portfolio that are predominantly on primary recovery.
• High Working Interest and Extensive Infrastructure in Alberta – Each of the Alberta areas have high working interests: Cardium (68%), Deer Mountain (100%) and Kaybob (100%), (collectively, the “Alberta Assets“). Each of the Alberta Assets have extensive operated infrastructure in place to drive low operating costs and realize high cash netbacks from the light oil weighted, sustainable production. The Alberta Assets represent a manageable, low risk expansion opportunity for Saturn into the premium light oil development areas in Alberta.
• Positive Environmental Performance – The Ridgeback Assets benefit from responsibly deployed capital directed to abandonment and reclamation programs with limited inactive liabilities and a strong Liability Management Rating (“LMR“) of over 3x.

Updated Guidance

The following table summarizes the Company’s pro forma updated operating and financial guidance for 2023.  Notably, the Company’s previous guidance, announced on May 31, 2022, was based on a US$90 WTI oil price assumption so has been updated to reflect the same current US$80 WTI oil price assumption. Further, Saturn has revised its standalone, stay-flat guidance assuming the Ridgeback Acquisition closes on February 28, 2023, with a view to maintain production at approximately 30,000 boe/d for the remainder of the year.

Capitalization Overview

The Ridgeback Acquisition will be implemented by way of a court-approved plan of arrangement under the BCBCA.  Concurrent with the execution of the Agreement, shareholders of Ridgeback representing over 80% of the outstanding common and performance shares of Ridgeback (the “Ridgeback Supporting Shareholders“) executed voting support agreements agreeing to vote in favor of the arrangement resolution either in writing or at a meeting of shareholders of Ridgeback (if required), subject to the terms of the voting agreements.  The Consideration Shares issued to the Ridgeback Supporting Shareholders will be subject to a contractual hold period and released as to: (A) 50% on the first anniversary of the Closing Date; and (B) the remaining 50% on the 15-month anniversary of the Closing Date.  The Agreement provides for customary provisions relating to non-solicitation on the part of Ridgeback and a mutual break fee of $25 million payable in each case to the other party if the Agreement is terminated in certain circumstances.  There are no finders fees payable in connection with the Ridgeback Acquisition.  A copy of the Agreement will be filed on Saturn’s SEDAR profile at www.sedar.com.

The Ridgeback Acquisition is expected to close in the first quarter of 2023, subject to certain customary conditions and regulatory and other approvals, including the approval of the TSX Venture Exchange (the “TSXV“) and the Commissioner of Competition pursuant to the Competition Act (Canada) and the Supreme Court of British Columbia.

In concert with signing the Agreement, Saturn has entered into an agreement in respect of the Offering, with Echelon Capital Markets acting as sole bookrunner and co-lead, Canaccord Genuity Corp as co-lead and with syndicate of underwriters including Eight Capital, Beacon Securities Ltd. and Paradigm Capital Inc. (the “Underwriters“) to issue and sell, approximately 59.2 million subscription receipts (“Subscription Receipts“) on a bought deal basis. The Subscription Receipts will be offered at a price of $2.11 per Subscription Receipt (the “Offering Price“) for aggregate gross proceeds of approximately $125 million.  The Company will used the net proceeds of the offering to pay for a portion of the cash consideration of the Ridgeback Acquisition.  The Company has received indications of interest for more than $110 million in strategic lead orders from GMT Capital Corp., Libra Advisors, LLC and other institutional investors.

Each Subscription Receipt represents the right of the holder to receive, upon closing of the Ridgeback Acquisition, without payment of additional consideration, one common share of the Company.

If the Ridgeback Acquisition is not completed as described above by 120 days from the closing date of the Offering or if the Ridgeback Acquisition is terminated at an earlier time, the gross proceeds of the Offering and pro rata entitlement to interest earned or deemed to be earned on the gross proceeds of the Offering, net of any applicable withholding taxes, will be paid to holders of the Subscription Receipts and the Subscription Receipts will be cancelled.

The Subscription Receipts will be offered in all provinces and territories of Canada (excluding Quebec) pursuant to a prospectus supplement to the Company’s base shelf prospectus, which will describe the terms of the Subscription Receipts.  The Offering is expected to close on or about January 31, 2023, and is subject to certain conditions including, but not limited to, the approval of the TSXV.  The Company expects that it will seek the approval of the TSXV to list the Subscription Receipts once issued, such listing being subject to TSXV approval.

This news release does not constitute an offer to sell or a solicitation of an offer to sell any of securities in the United States. The securities have not been and will not be registered under the U.S. Securities Act or any state securities laws and may not be offered or sold within the United States or to U.S. Persons unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available.

Senior Secured Term Loan

Saturn has signed a commitment letter to enter an amended and restated Senior Secured Loan agreement with its U.S. based institutional lender (the “Lender“) to provide addition loan proceeds of $375 million to be used towards the payment of the cash consideration of the Ridgeback Acquisition.  The loan will amortize over three years, with 50% repayable in the first year, 30% in the second year and 20% in the final year, with other terms, including interest being the same as the Company’s existing Senior Secured Loan.  The amended and restated Senior Secured Loan will be secured by a floating and fixed charge debenture and standard security registrations over the Company’s assets and properties.  There are no loan bonuses or finders fees (as defined in the policies of the TSXV) payable in connection with the amended and restated Senior Secured Loan agreement.  Based on forecast production rates and hedged commodity prices, Saturn anticipates repaying the loan in full well in advance of its scheduled amortization payments. Execution of the further amendment is subject to the execution of mutually acceptable credit documentation giving effect to the terms provided in the commitment letter, and the satisfaction of the other customary conditions to closing, including the satisfaction of all conditions to the completion of the Ridgeback Acquisition.

The Company also wishes to announce that it has entered into new executive employment agreements with John Jeffrey, President and CEO and Justin Kaufmann, Chief Development Officer.  Messrs. Jeffrey and Kaufmann’s legacy employment contracts, which were entered into when the Company was of a significantly smaller scale, provided, among other things, for a lump sum payment of 5% or 2% of the market capitalization of the Company on certain termination or change of control events. As the Company has grown, these payments were viewed by the board as “off-market” and new employment agreements have been negotiated.  In consideration of foregoing these legacy contracts, the Company has entered into new agreements with Messrs. Jeffrey and Kaufmann providing for the issuance of performance warrants.  Messrs. Jeffrey and Kaufmann will receive 5,000,000 and 2,000,000 performance warrants (respectively), exercisable for common shares with an exercise price of $2.50 each and vesting as to 1/3 when the Company’s share price equals $4.00 per share, 1/3 at a price of $6.00 per share and 1/3 at a price of $8.00 per share with a 7 year term.  The new contracts provide for a minimum payment on severance or change of control of $5,000,000 or $2,000,000, respectively, less the value of any “in-the-money” performance warrants at such time.

The entry into the new employment agreements and issuance of the performance warrant and any common shares issuable pursuant thereto constitutes a “related party transaction” under applicable securities laws and Multilateral Instrument 61-101 (“MI 61-101“). The related party transaction will be exempt from minority approval, information circular and formal valuation requirements pursuant to the exemptions contained in Sections 5.5(a) and 5.7(1)(a) of MI 61-101, as the fair market value of the gross securities to be issued under the employment agreement does not exceed 25% of the Company’s market capitalization.

GMT Capital Corp., the multibillion-dollar global long/short equity investment manager of the Bay Resource Partners Funds, has committed to invest into the Offering.  Based in Atlanta, GA, the firm maintains research offices in key financial centers around the world. Founded by Tom Claugus in 1993, GMT Capital has a differentiated 20+ year track record of delivering high absolute returns that are often uncorrelated with those of the general markets.  The firm’s deep industry knowledge, global presence, and experience operating across a wide variety of market conditions enable it to allocate assets both long and short across all markets and sectors.  Operationally, GMT is committed to the highest levels of integrity, service, and transparency and is supported by best-in-class counterparty relationships.  Furthermore, as the majority of total firm AUM is employee-owned, GMT’s professionals invest alongside its diverse client base, adding to the long-term stability and sustainability of the firm.

Libra Advisors LLC, founded in 1990 by Ranjan Tandon, is the investment manager for a single family office based in New York with assets significantly in excess of US$1 billion.

Echelon Capital Markets and Canaccord Genuity Corp. are acting as financial advisors to Saturn. CIBC Capital Markets and TD Securities Inc. are acting as financial advisors to Ridgeback. Dentons Canada LLP is acting as legal counsel to Saturn with respect to the Ridgeback Acquisition, the Offering, and the amended Term Loan. Blakes, Cassels and Graydon LLP is acting as legal counsel to Ridgeback. DLA Piper (Canada) LLP is acting as legal advisor to the Underwriters.

Saturn Oil & Gas Inc. (TSXV: SOIL) (FSE: SMK) (OTCQB: OILSF) 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 and production through retained earnings. Saturn’s portfolio will become its key to growth and provide long-term stability to shareholders.

This news release is not an offer of the securities for sale in the United States. The securities offered have not been, and will not be, registered under the U.S. Securities Act of 1933, as amended (the “U.S. Securities Act”) or any U.S. state securities laws and may not be offered or sold in the United States absent registration or an available exemption from the registration requirement of the U.S. Securities Act and applicable U.S. state securities laws. This news release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities, in any jurisdiction in which such offer, solicitation or sale would be unlawful.

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.

All reserves information pertaining to the Ridgeback Acquisition in this news release were prepared for the Company in a report provided by Ryder Scott Company, independent reserves evaluators, effective October 1, 2022, (the “Ryder Scott Report“) calculated using the average forecast price and cost assumptions using the average of three consultants price forecasts including: GLJ Ltd., McDaniel & Associates Consultants Ltd. and Sproule Associates Ltd. effective October 1, 2022, in accordance with National Instrument 51-101 – Standards of Disclosure of Oil and Gas Activities and the Canadian Oil and Gas Evaluation Handbook.  All reserves information pertaining to Saturn in this news release were prepared for the Company in separate reports provided by Ryder Scott Company effective January 1, 2022  (the “Ryder Scott Saturn Reports“) calculated using the average forecast price and cost assumptions using the average of three consultants price forecasts including: GLJ Ltd., McDaniel & Associates Consultants Ltd. and Sproule Associates Ltd. effective January 1, 2022, in accordance with National Instrument 51-101 – Standards of Disclosure of Oil and Gas Activities and the Canadian Oil and Gas Evaluation Handbook.  All reserve references regarding the Ridgeback Assets and from the Ryder Scott Saturn Reports in this news release are “Asset gross reserves”.  Asset Gross reserves are the Ridgeback Assets and Saturn’s total working interest reserves before the deduction of any royalties payable and before the consideration of royalty interests. It should not be assumed that the present worth of estimated future cash flow of net revenue presented herein represents the fair market value of the reserves. There is no assurance that the forecast prices and costs assumptions will be attained, and variances could be material. The recovery and reserve estimates of the Ridgeback Assets and Saturn’s crude oil, NGLs and natural gas reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. Actual crude oil, natural gas and NGLs reserves may be greater than or less than the estimates provided herein.

This news release discloses “booked” drilling locations with respect to the Ridgeback Assets derived from the Ryder Scott Report and account for drilling locations that have associated proved and/or probable reserves, as applicable. Un-booked locations are internal estimates based on the Company’s assumptions as to the number of wells that can be drilled per section based on industry practice and internal review.  Un-booked locations do not have attributed reserves or resources. The drilling locations considered for future development will ultimately depend upon the availability of capital, regulatory approvals, seasonal restrictions, oil and natural gas prices, costs, actual drilling results, additional reservoir information that is obtained and other factors.

Throughout this news release and in other materials disclosed by the Company, we employ certain measures to analyze financial performance, financial position and cash flow. These non-GAAP and other financial measures do not have any standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures provided by other issuers. Non-GAAP and other financial measures should not be considered to be more meaningful than GAAP measures which are determined in accordance with IFRS, such as net income (loss) and cash flow from operating activities as indicators of our performance. The Company’s unaudited condensed consolidated interim financial statements and MD&A as at and for the three and nine months ended September 30, 2022 are available on the Company’s website at www.saturnoil.com and under our SEDAR profile at www.sedar.com. The disclosure under the section “Non-GAAP and Other Financial Measures” including non-GAAP financial measures and ratios, capital management measures and supplementary financial measures in the MD&A is incorporated by reference into this news release.

The following are non-GAAP financial measures: capital expenditures, free funds flow, net operating expenses and operating netback and operating netback net of derivatives. Where applicable, these non-GAAP financial measures are presented on a multiple, per boe or a per share basis resulting in non-GAAP financial ratios. These non-GAAP financial measures and ratios are not standardized financial measures under IFRS and might not be comparable to similar financial measures disclosed by other issuers. See the disclosure under the section “Non-GAAP Financial Measures and Ratios” in our MD&A for the three and nine months ended September 30, 2022, for an explanation of the composition of these measures and ratios, how these measures and ratios provide useful information to an investor, and the additional purposes, if any, for which management uses these measures and ratios.

The following are capital management measures used by the Company: net debt, adjusted EBITDA and adjusted funds flow. See the disclosure under the “Capital Management” note in our unaudited condensed consolidated interim financial statements for the three and nine months ended September 30, 2022, for an explanation of the composition of these measures, how these measures provide useful information to an investor, and the additional purposes, if any, for which management uses these measures.

Where applicable, the supplementary financial measures used in this news release are either a per unit disclosure of a corresponding GAAP measure, or a component of a corresponding GAAP measure, presented in the unaudited condensed consolidated interim financial statements. Supplementary financial measures that are disclosed on a per unit basis are calculated by dividing the aggregate GAAP measure (or component thereof) by the applicable unit for the period. Supplementary financial measures that are disclosed on a component basis of a corresponding GAAP measure are a granular representation of a financial statement line item and are determined in accordance with GAAP.

“Net Operating Income” for the Ridgeback Assets is based on the expected cash flow from operations of the Ridgeback Acquisition for 12 months from the Closing Date, with the production assumption of 17,500 boe/d.

“Recycle Ratio” is calculated as the expected Operating Netback of the Ridgeback Acquisition of $48.55/boe, assuming US$ 80 WTI oil price, divided by the acquisition cost of reserves of $13.01/boe for proved developed producing reserves, $7.73 for total proved reserves and $5.21 per total proved plus probable reserves.

“Enterprise Value” is calculated as market capitalization plus net debt. Management uses enterprise value to assess the valuation of the Company.

Any financial outlook or future oriented financial information in this news release, as defined by applicable securities legislation, including future (but not limited to) operating and fixed costs (and reductions thereto), debt levels, net operating income, funds flow, cash flow and production targets has been approved by management of Saturn. Readers are cautioned that any such future-oriented financial information contained herein should not be used for purposes other than those for which it is disclosed herein. The Company and its management believe that the prospective financial information has been prepared on a reasonable basis, reflecting management’s best estimates and judgments, and represent, to the best of management’s knowledge and opinion, the Company’s expected course of action. However, because this information is highly subjective, it should not be relied on as necessarily indicative of future activities or results.

Certain information included in this news 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”, “will” or similar words suggesting future outcomes or statements regarding an outlook. Forward-looking information in this news release may include, but is not limited to, statements concerning: timing of the Ridgeback Acquisition; Reserves information; satisfaction or waiver of the closing conditions in the Agreement; receipt of required legal and regulatory approvals for the completion of the Ridgeback Acquisition (including court approval, approval of the TSXV and Competition Act (Canada) approval); funding and payment of the purchase price in respect of the Ridgeback Acquisition; estimated assumed liabilities associated with the Ridgeback Assets; expected production and cash flow related to the Ridgeback Assets; expectations regarding future capex and funds flow; expected number of future drilling locations related to the Ridgeback Assets; the anticipated closing date of the Offering and the Senior Secured Term Loan and the terms thereof; the use of proceeds from the Offering and the Senior Secured Term Loan; reserve estimates; future production levels; decline rates; drilling locations; future operational and technical synergies resulting from the Ridgeback Acquisition; management’s ability to replicate past performance; future negotiation of contracts; future consolidation opportunities and acquisition targets; the business plan, cost model and strategy of the Company; future cash flows; and future commodities prices.

The forward-looking statements contained in this news release are based on certain key expectations and assumptions made by Saturn, including expectations and assumptions concerning the receipt of all approvals and satisfaction of all conditions to the completion of the Ridgeback Acquisition, Offering, and Senior Secured Term Loan, 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 characteristics of the Ridgeback Asset, the successful integration of the Ridgeback Assets into Saturn operations, the successful application of drilling, completion and seismic technology, prevailing weather conditions, prevailing legislation affecting the oil and gas industry, commodity prices, royalty regimes and exchange rates, 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 Amended and Restated Annual Information Form for the year ended December 31, 2021.

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 news 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 Ridgeback Acquisition, Offering, and Senior Secured Term Loan. 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 news 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 news release is expressly qualified by this cautionary statement.

Neither the TSXV nor its Regulation Services Provider (as that term is defined in the policies of the TSXV) accepts responsibility for the adequacy or accuracy of this news release.

All dollar figures included herein are presented in Canadian dollars, unless otherwise noted.

SOURCE Saturn Oil & Gas Inc.

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