Saturn Oil & Gas president and CEO John Jeffrey, speaking to European investors via Zoom. Screen capture
CALGARY – Saturn Oil & Gas Inc. has continued its winning streak with its acquisition of oil producing assets in southeast Saskatchewan from Crescent Point. The numbers have meant large improvements year-over-year.
And the large numbers aren’t only in production. The high oil prices as a result of the Russian invasion of Ukraine have meant triple digits in realize prices for their crude. That, in turn, is allowing the company to retire debt.
“The first quarter of 2022 was another record period for production for Saturn, generating $16.3 million in EBITDA,” said Saturn CEO John Jeffrey in a May 5 release. “With March 2022 production reaching 7,600 boepd, Saturn is on pace to meet or exceed the guidance of production averaging 7,800 to 8,200 boepd for 2022.”
First Quarter 2022 Highlights:
The company achieved record production with first quarter 2022 averaging production of 7,499 boepd compared to 233 boepd in the first quarter of 2021, an increase of 3,118 per cent.
Saturn generated record adjusted funds flow of $13.5 million ($0.50 of Adjusted funds flow per basic share) in the three months ended March 31, 2022 compared to $0.1 million in the comparable 2021 period, primarily due to contributions from the operations of the Oxbow Asset.
It achieved operating netbacks for the three months ended March 31, 2022 of $56.94 per boe compared to $40.88 per boe in the first quarter of 2021.
Saturn closed a bought-deal financing and a non-brokered private placement for aggregate gross proceeds of $20.6 million
It completed a strategic acquisition purchasing certain oil and gas assets in the Plato area of West-Central Saskatchewan, referred to as the “Viking Acquisition,” for total consideration of $7.6 million, after interim closing adjustments.
The company invested $9.3 million of development capital in the first quarter drilling eight 100 per cent working interest wells, six into Frobisher formations and two into Tilston formations.
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Saturn generated first quarter free adjusted funds flow of $3.0 million and exited the first quarter with $65.2 million net debt, realizing a net debt to annualized quarterly adjusted funds flow of 1.2x.
Message to shareholders
The first quarter of 2022 was a historical high point for Saturn, with production averaging 7,499 boepd for the period (95 per cent crude oil and NGLs), the company said.
“This is the fourth straight quarterly production record the company has achieved since the closing of the transformational acquisition of the Oxbow Asset in June 2021. Q1 2022 was also a strong period for energy related commodity prices which continued to rise as the global economy set the stage for a recovery in energy demand. Strong energy demand was driven by the continued easing of global restrictions related to the COVID-19 pandemic. Strong global oil prices provided robust Q1 2022 economics for the company.”
That included $109.20 per bbl realized sales price for crude oil and $101.41 per boe average sales price.
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As many oil producers have done with the surge in oil prices, Saturn had paid down debt. The company said, “In Q1 2022 Saturn took an important step of consolidating its debt with the retirement of term notes in full for the amount of $32.1 million. Removing the term notes alleviated many financial constraints, allowing the company to make prudent capital expenditures intended to grow production levels, capitalize on the strong energy price environment and increase shareholder value. Saturn remains committed to rapidly reducing debt levels and expects to make $38.1 million in debt repayments in 2022 to its senior term loan (approximately 58 per cent of net debt as at March 31, 2022).”
Oxbow update
Saturn continued its drilling program at the Oxbow Asset in the first quarter of 2022 with the drilling of eight successful horizontal wells targeting light oil in the Frobisher and Tilston formations, with 100 per cent working interest. Saturn has now drilled a total of 12 horizontal wells at the Oxbow Asset with 100 per cent success rate. All of the wells have been placed onto production with the most recent wells commencing production just prior to break up, which temporarily halted drilling activities. Saturn has budgeted an additional 21.2 net horizontal wells at the Oxbow Asset for the remainder of 2022 which we expect will initiate drilling in early June.
Viking update
Saturn completed a strategic acquisition purchasing certain oil and gas assets in the Plato area of West-Central Saskatchewan for total consideration of $7.6 million, after interim closing adjustments. This acquisition added synergistic production of approximately 240 boepd of 100 per cent light oil and effectively reduced the company’s overall royalty rates and operating costs per boe. The Viking Acquisition also provides numerous high quality development drilling locations which Saturn has incorporated into the five net Viking wells budgeted for drilling in 2022.
Outlook
Saturn reported it is pleased with the initial results of the 2022 drilling program and expects to have an operational update released in the next two weeks with updated production data for the recent Oxbow wells. The fully funded 34.2 net well drilling program for 2022 is approximately 23 per cent completed with a majority of the remaining drilling activity scheduled for June to August. The Company plans to operate two drilling rigs during this period with one rig for each of the core growth areas: the Oxbow Asset and the Viking Asset.
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