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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 and nine months ended September 30, 2022.
“The third quarter of 2022 is the first reporting period reflecting the highly positive impact of the Viking acquisition, closed on July 6, 2022, in terms of increased netbacks and additional production, resulting in record corporate cash flow,” commented John Jeffrey, Chief Executive Officer of Saturn. “Saturn is now actively developing the newly acquired Viking asset with 21 of our recent 27 drilled Viking wells targeting light oil on the new acreage, with a 100% success rate.”
Third Quarter 2022 Highlights:
- Closed the Viking Acquisition for $240.1 million, after interim closing adjustments, funded by equity financings of $75.2 million and a $200 million expansion of our Senior Term Loan facility;
- Realized record average production in the third quarter of 2022 of 10,965 boe/d, a 57% increase compared to 6,970 boe/d in the third quarter of 2021;
- Achieved record quarterly petroleum and natural gas sales of $105.7 million, up 29% from $82.2 million in the second quarter of 2022 and an increase of 124% from $47.1 million in the third quarter of 2021;
- Achieved record quarterly Adjusted EBITDA(1) of $50.3 million, a 179% increase over $18.0 million in Q2 2022;
- Achieved operating netbacks(1) for the third quarter of 2022 of $67.78 per boe compared to $36.59 per boe in Q3 2021 and $76.22 per boe in Q2 2022;
- Generated Adjusted funds flow(1) of $39.8 million in the three months ended September 30, 2022 ($0.69 per basic share), compared to $14.5 million in Q2 2022 ($0.45 per basic share), an increase of 174% (53% per share increase);
- Invested $36.8 million of development capital in the third quarter, drilling 30, 100% working interest wells; 23 in the Viking area and 7 Frobisher wells in the Oxbow area (including 1 disposal well), and spudding an additional four 100% working interest Viking wells prior to the end of the quarter;
| Three months ended September 30, | Nine months ended September 30, | |||||||||||
| (CAD $000s, except per share amounts) | 2022 | 2021 | 2022 | 2021 | ||||||||
| FINANCIAL HIGHLIGHTS | ||||||||||||
| Petroleum and natural gas sales | 105,728 | 47,059 | 256,399 | 60,969 | ||||||||
| Cash flow from (used) in operating activities | 13,472 | 16,160 | 44,215 | (14,318 | ) | |||||||
| per share – Basic | 0.23 | 0.64 | 1.13 | (0.82 | ) | |||||||
| – Diluted | 0.23 | 0.54 | 1.11 | (0.82 | ) | |||||||
| Adjusted funds flow (1) | 39,756 | 13,923 | 66,833 | 16,265 | ||||||||
| per share – Basic | 0.69 | 0.55 | 1.71 | 0.93 | ||||||||
| – Diluted | 0.68 | 0.46 | 1.68 | 0.73 | ||||||||
| Net income (loss) | 167,307 | (23,307 | ) | 91,544 | (54,433 | ) | ||||||
| per share – Basic | 2.89 | (0.93 | ) | 2.34 | (3.12 | ) | ||||||
| – Diluted | 2.87 | (0.93 | ) | 2.30 | (3.12 | ) | ||||||
| Capital expenditures(1) | 36,991 | 4,445 | 53,430 | 4,647 | ||||||||
| Net debt(1), end of period | 232,655 | 71,761 | 232,655 | 71,761 | ||||||||
| OPERATING HIGHLIGHTS | ||||||||||||
| Average production volumes | ||||||||||||
| Crude oil (bbls/d) | 10,163 | 6,413 | 7,914 | 2,819 | ||||||||
| NGLs (bbls/d) | 363 | 278 | 328 | 115 | ||||||||
| Natural gas (mcf/d) | 2,634 | 1,673 | 2,197 | 700 | ||||||||
| Total boe/d | 10,965 | 6,970 | 8,608 | 3,051 | ||||||||
| % Oil and NGLs | 96% | 96% | 96% | 96% | ||||||||
| Average realized prices | ||||||||||||
| Crude oil ($/bbl) | 110.90 | 78.37 | 116.19 | 77.78 | ||||||||
| NGLs ($/bbl) | 55.59 | 35.46 | 61.46 | 35.12 | ||||||||
| Natural gas ($/mcf) | 5.95 | 3.83 | 5.66 | 3.59 | ||||||||
| Processing expenses ($/boe) | (1.25 | ) | (1.05 | ) | (1.50 | ) | (0.81 | ) | ||||
| Combined ($/boe) | 104.81 | 73.39 | 109.10 | 73.21 | ||||||||
| Operating netback ($/boe) | ||||||||||||
| Petroleum and natural gas sales | 104.81 | 73.39 | 109.10 | 73.21 | ||||||||
| Royalties | (12.57 | ) | (10.68 | ) | (15.58 | ) | (10.26 | ) | ||||
| Net operating expenses (1) | (23.86 | ) | (25.57 | ) | (25.77 | ) | (25.17 | ) | ||||
| Transportation expenses | (0.60 | ) | (0.55 | ) | (0.69 | ) | (0.81 | ) | ||||
| Operating netback (1) | 67.78 | 36.59 | 67.06 | 36.97 | ||||||||
| Realized loss on derivatives | (17.18 | ) | (7.98 | ) | (29.28 | ) | (7.83 | ) | ||||
| Operating netback, net of derivatives (1) | 50.60 | 28.61 | 37.78 | 29.14 | ||||||||
| Common shares outstanding | 59,839 | 25,145 | 59,839 | 25,145 | ||||||||
| Weighted average common shares outstanding | ||||||||||||
| Basic | 57,907 | 25,145 | 39,168 | 17,430 | ||||||||
| Diluted | 58,336 | 30,021 | 39,769 | 22,327 | ||||||||
(1) See Non-GAAP and Other Financial Measures
Message to Shareholders
With the close of the Viking acquisition on July 6, 2022, Saturn’s operations were bolstered by the addition of the high cash flowing, light oil producing assets acquired in its core Viking operations area in West-central Saskatchewan. The Viking acquisition had the positive effects of:
- Increasing production by approximately 4,000 boe/d, or 55% above previous levels;
- Lowered overall operating costs per boe of production;
- Reduced Saturn’s corporate royalty rates ; and
- Consequently, increased netbacks per boe and corporate adjusted funds flow.
The accretive nature of the Viking acquisition is evidenced by Adjusted funds flow(1) per basic share increasing 53% to $0.69 per basic share for the three month period ended September 30, 2022 compared to the prior quarter of Q2 2022, despite the benchmark WTI oil price decreasing from an average of USD 108.41 in Q2 2022 to USD 91.58 in Q3 2022.
Operations Update
The third quarter of 2022 has been the most active drilling period in the Company’s history. Saturn has drilled 29 horizontal wells targeting light oil in the Viking and Oxbow core operating areas with a 100% success rate and a 100% working interest. With the ongoing operation of one rig in each core area, Saturn continues to achieve strong results from the newly drilled wells and is drilling, equipping and bringing the new production onstream in a cost-effective basis. Saturn remains on target with expected production rates for new wells in the Oxbow area and has had tremendous success in its development in the Viking area:
- Saturn has now drilled 12 Viking wells in 2022 which have accumulated 30 days of production with on average initial rates 43% above Saturn’s expected type curves used for guidance, with approximately 28% increase of capital costs incurred per location above budget; and
- To date, Saturn has drilled 18 wells in the Oxbow area targeting Frobisher and Tilston light oil formations with 30 days of production data, including wells drilled at the start of the Oxbow drilling program in Q4 2021, with production results and capital costs consistent with guidance assumptions.
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