Calgary, Alberta – Saturn Oil & Gas Inc. (TSXV: SOIL) (FSE: SMKA) (OTCQX: OILSF) (“Saturn” or the “Company“) is pleased to report its financial and operating results for the three months ended March 31, 2023.
“The first quarter of 2023 was a landmark period for Saturn that set new performance records following the closing of the acquisition of Ridgeback Resources, which has enhanced the sustainability and potential profitability of Saturn for years to come,” commented John Jeffrey, Saturn’s CEO. “Building on the successes from last year’s development program, the 13 new horizontal wells drilled in Q1 2023 have been the most productive group of new wells in Saturn’s history.”
First Quarter 2023 Highlights:
- Closed the transformational acquisition of Ridgeback Resources Inc. on February 28, 2023 (the “Ridgeback Acquisition“), for total consideration of approximately $525 million, increasing the Company’s March exit production to approximately 30,000 boe/d(2)(3);
- Realized record average production for the quarter of 17,783 boe/d(2) (88% oil and NGLs) in 2023, representing an increase of 137% compared to 7,499 boe/d(2) (95% oil and NGLs) in the first quarter of 2022;
- Posted record quarterly Adjusted EBITDA(1) of $70.4 million in 2023, an increase of 332% compared to $16.3 million in first quarter of 2022;
- Generated record Adjusted funds flow(1) of $54.5 million ($0.63 per basic share), an increase of 252% compared to $15.5 million ($0.50 per basic share) in first quarter of 2022, with record free funds flow(1) of $30.2 million;
- Achieved operating netbacks, net of derivatives(1) of $46.14 per boe in Q1 2023, an increase of 75% compared to $26.38 per boe in the first quarter of 2022, despite oil prices decreasing year over year;
- Closed a bought-deal equity financing for aggregate gross proceeds of $125 million and expanded the Company’s Senior Term Loan by $375 million in connection with the Ridgeback Acquisition;
- Closed a $30 million unsecured demand letter of credit facility with a syndicate of Canadian banks supported by a Performance Security Guarantee from Export Development Canada, providing Saturn with flexibility to replace cash-collateralized letters of credit;
- Invested $24.3 million of development capital expenditures in the first quarter, drilling 13 (12.8 net) horizontal wells including: eight Viking and five Oxbow wells, which were all brought on production before the end of March; and
- Exited the first quarter with $556.6 million net debt(1).
| Three months ended March 31, | ||||||
| ($000s, except per share amounts) | 2023 | 2022 | ||||
| FINANCIAL HIGHLIGHTS | ||||||
| Petroleum and natural gas sales | 131,407 | 68,442 | ||||
| Cash flow from operating activities | 46,794 | 10,342 | ||||
| per share – Basic | 0.54 | 0.38 | ||||
| – Diluted | 0.54 | 0.37 | ||||
| Adjusted funds flow(1) | 54,454 | 13,472 | ||||
| per share – Basic | 0.63 | 0.50 | ||||
| – Diluted | 0.62 | 0.48 | ||||
| Net income (loss) | 219,050 | (97,618 | ) | |||
| per share – Basic | 2.52 | (3.63 | ) | |||
| – Diluted | 2.51 | (3.63 | ) | |||
| Acquisitions, net of cash acquired | 465,223 | 7,583 | ||||
| Capital expenditures(1) | 24,283 | 10,466 | ||||
| Net debt(1), end of period | 556,605 | 65,210 | ||||
| Three months ended March 31, | ||||||
| (000s, except per boe amounts) | 2023 | 2022 | ||||
| OPERATING HIGHLIGHTS | ||||||
| Average production volumes | ||||||
| Crude oil (bbls/d) | 14,680 | 6,821 | ||||
| NGLs (bbls/d) | 992 | 334 | ||||
| Natural gas (mcf/d) | 12,666 | 2,063 | ||||
| Total boe/d | 17,783 | 7,499 | ||||
| % Oil and NGLs | 88% | 95% | ||||
| Average realized prices | ||||||
| Crude oil ($/bbl) | 93.74 | 109.20 | ||||
| NGLs ($/bbl) | 52.92 | 58,71 | ||||
| Natural gas ($/mcf) | 3.60 | 4.52 | ||||
| Processing expenses ($/boe) | (0.79 | ) | (1.77 | ) | ||
| Petroleum and natural gas sales ($/boe) | 82.11 | 101.41 | ||||
| Operating netback ($/boe) | ||||||
| Petroleum and natural gas sales | 82.11 | 101.41 | ||||
| Royalties | (9.34 | ) | (16.59 | ) | ||
| Net operating expenses(1) | (21.07 | ) | (27.34 | ) | ||
| Transportation expenses | (1.01 | ) | (0.54 | ) | ||
| Operating netback(1) | 50.69 | 56.94 | ||||
| Realized loss on derivatives | (4.55 | ) | (30.56 | ) | ||
| Operating netback, net of derivatives(1) | 46.14 | 26.38 | ||||
| Common shares outstanding, end of period | 138,634 | 32,361 | ||||
| Weighted average, basic | 86,995 | 26,895 | ||||
| Weighted average, diluted | 87,217 | 45,746 | ||||
Message to Shareholders
The acquisition of Ridgeback Resources Inc. (“Ridgeback“) on February 28, 2023, was an important step to both bolstering Saturn’s production base in its flagship production area of Southeast Saskatchewan (the “Oxbow Asset“) and diversifying the Company’s light oil development opportunities into Alberta. With the integration of the talented employees, information systems and oil and gas production are now largely complete, Saturn is focused on an active development program for the second half of 2023, with capital and activities balanced between Alberta and Saskatchewan.
The first quarter was a busy period for the development of Saturn’s legacy assets with the successful drilling of 13 horizontal wells in Saskatchewan, representing a 63% increase over the number of wells drilled in Q1 2022. Saturn’s new wells delivered average initial 30-day production (“IP30“) of 94.0 bbls/d of light oil, which was approximately 37% higher than Saturn’s guidance type curve expectation for its Saskatchewan wells.
As a result of the successful drilling programs through 2022 and to date in 2023, along with the impact of both the 2022 Viking acquisition and the Ridgeback Acquisition, Saturn is proud to have record results across several metrics in Q1 2023, with growth over Q1 2022 as follows:
- 92% higher petroleum and natural gas sales totaling $131,407;
- 137% higher oil and gas production averaging 17,783(3) boe/d;
- 332% higher adjusted EBITDA(1) of $70.4 million; and
- 252% higher Adjusted funds flow(1) of $54.5 million.
The Ridgeback Acquisition contributed financially for only one month in Q1 2023. Had the Ridgeback Acquisition occurred on January 1, 2023, on a pro forma basis, Saturn would have achieved for the period ended March 31, 2023:
- Petroleum and natural gas sales of $204.1 million; and
- Adjusted funds flow(1) of $79.5 million.
Oxbow Update
During the three months ended March 31, 2023, the Oxbow Asset produced 8,494(3) boe/d, an increase of 19% from 7,153 boe/d(3) in the comparative 2022 period. The increase is primarily due to the Ridgeback Acquisition which produced 4,960 boe/d in the month of March, contributing an average of 1,709 boe/d during the first quarter of 2023.
The highlight of Saturn’s Q1 drilling program was the 101/11-21-006-05W2 well (“Weir Hill 11-21“) targeting Frobisher oil in the Oxbow Asset. This well achieved an average IP30 rate of 149 bbls/d of light oil and was a top five best performing oil well in Saskatchewan, based on February 2023 production, ranked against more than 200 wells drilled in province in January 2023. The Weir Hill 11-21 well was a follow up location to three wells drilled in the Weir Hill pool in 2022 that had strong production rates and underscores Saturn’s plans for continued development in this area for the remainder of 2023. The IP30 rate of the five (4.8 gross) Oxbow wells drilled by Saturn in Q1 2023 averaged 79.2 bbls/d of light oil per well, which is 15% above the Company’s expected type curves for Oxbow wells.
Viking Update
The Company’s assets located in West Central Saskatchewan (the “Viking Asset“) produced 5,156 boe/d(3) for the three months ended March 31, 2023. This represents an increase of 1,332% from 360 boe/d(3) in the comparative period in 2022. The increase is due to Saturn’s successful 2022 and Q1 2023 drilling programs, coupled with the impact of the Viking acquisition that was completed during the third quarter of 2022.
Saturn drilled eight (8.0 net) Viking development wells to date in the first three months of 2023, achieving an average IP30 rate of 103.2 bbls/d of light oil per well, a rate that is approximately 52% above the Company’s expected type curves for Viking wells. Development activities in the Viking Asset during Q1 2023 were focused on those areas that provided the most productive Viking wells drilled in 2022. The Viking Asset activities in Q1 2023 included six (6.0 net) wells drilled in the Herschel area and two (2.0 net) wells drilled in the Plato area pool extension that the Company discovered in 2022.
Alberta Update
Saturn’s Alberta assets were acquired as part of the Ridgeback Acquisition and are comprised of Cardium focused development areas located in Central Alberta (the “Cardium Asset“) and the Kaybob and Deer Mountain areas of Northern Alberta (the “North Alberta Assets” and collectively with the Cardium Assets, the “Alberta Assets“). Production from the Alberta Assets include:
- 8,810 boe/d(3) from the Cardium Asset in the month of March, which contributed an average of 3,034 boe/d(3) during the first quarter of 2023; and
- 3,189 boe/d(3) from the North Alberta Assets in the month of March, which contributed an average of 1,099 boe/d(3) in the first quarter of 2023.
Unsecured Letter of Credit Facility
The Company entered into a new $30 million unsecured demand letter of credit facility (the “LC Facility“) with a syndicate of Canadian banks, supported by a performance security guarantee (“PSG“) from Export Development Canada. The LC Facility has no impact to Saturn’s debt balance, and as such provides the Company with additional liquidity by providing Saturn with flexibility to replace cash-collateralized letters of credit.
Production Curtailment from Alberta Wildfires
In light of the ongoing wildfires affecting communities and operations in Alberta, Saturn confirms that the Alberta Assets continue to be curtailed, although no significant damage or loss to its owned or third-party infrastructure has been reported. Approximately 10,000 Boe/d(3) (60% oil and NGLs) of production has been temporarily shut in since May 4, 2023 and Saturn continues to monitor and prepare for resumed production as soon third-party infrastructure is available for restart. The Company wishes to thank its dedicated staff and emergency responders for their tireless efforts dealing with this situation and sends thoughts and best wishes to everyone affected.
Outlook
Saturn is extremely pleased with the initial results of its 2023 drilling program to date and looks forward to recommencing drilling operations in June 2023. For the remainder of the year, the Company’s development budget is approximately equally balanced between Alberta and Saskatchewan, with a continued focus on locations offering the highest potential rates of return. Saturn has contracted one drilling rig for the rest of 2023 at the Oxbow Asset which will be directed to: 1) developing Mississippian aged light oil targets, including the Company’s initial development of identified Spearfish formations; and 2) development of the light oil Bakken resource gained through the Ridgeback Acquisition. An additional drilling rig has been contracted for full time development of Saturn’s Alberta Assets, primarily focused on: 1) targeting Cardium light oil in the West Pembina and Lochend areas, and 2) targeting Montney light oil in the Kaybob area.
Subsequent to quarter-end, Saturn was proud to publish the Company’s first Sustainability Report referencing the Task Force on Climate-related Financial Disclosures (“TCFD”) framework, and showcasing its commitment to responsible operations, strong governance and robust community investments. The report is available on Saturn’s website.
Investor Webcast
Saturn will host a webcast at 10:00 AM MDT (12:00 PM Noon EDT) on Wednesday May 17, 2023, to review the first quarter 2023 financial and operational results. Participants can access the live webcast via https://saturnoil.com/invest/q1-2023-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, West Central Saskatchewan and Central Alberta 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’ on the Frankfurt Stock Exchange under symbol ‘SMKA’ and on the OTCQX under the ticker ‘OILSF’.
The Company’s unaudited interim financial statements and corresponding Management’s Discussion and Analysis for the three month period ended March 31, 2023 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
[email protected]
Notes
(1) See reader advisory: non-GAAP and Other Financial Measures
(2) Based on field reports for average production between March 26, 2023 and March 31, 2023
(3) See reader advisory: Supplemental Information Regarding Product Types
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