Brian Zinchuk is editor and owner of Pipeline Online
Ensign Rig 808 was drilling for Saturn Oil & Gas in the Warmley area, near Corning, on Feb 28, 2028. Across the road, Panther Drilling Rig 3 was drilling for Whitecap. Photo by Brian Zinchuk.
CALGARY – Saturn Oil & Gas Inc. reported its operating and financial results for the three months ended March 31, 2026, on May 6, highlighted by yet another quarter of production that exceeded analyst consensus estimates.
“The first quarter of 2026 represents the seventh consecutive quarter that Saturn has posted production volumes ahead of analyst consensus estimates as we built on the strong volume momentum achieved in Q4/25. In addition, with the onset of the Iranian conflict in March, Saturn’s realized oil price increased materially to nearly $115/bbl in March, up from an average of $75/bbl during January and February,” said John Jeffrey, chief executive pfficer. “This strengthening oil price environment contributed to adjusted funds flow (AFF) of $107 million and free funds flow over $62 million, both of which also exceeded analysts’ consensus forecasts, while we continued to reduce net debt, exiting the quarter at $725 million, a 5% reduction from year-end 2025. In light of continued elevated oil prices, we plan to accelerate approximately $20 million of capital from the second half of 2026 into Q2/26 to capitalize on the stronger pricing environment, supporting strong free funds flow generation that Saturn can direct toward further debt reduction, share buybacks or tuck-in acquisitions.”
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Q1 2026 HIGHLIGHTS
- Production of 43,116 boe/d exceeded the high end of guidance by 3%, as strong momentum from Q4/25 and a successful development program saw new wells continue to outperform type curve(3) estimates.
- Oil and liquids were 81% of production, with higher-value crude oil representing 72% of volumes that benefitted from rising oil prices, as our realized oil price in March increased to $114.92/bbl, 53% higher than the $75.23/bbl average for January and February.
- Adjusted funds flow (“AFF“)(1) totaled $107.2 million ($0.59/share diluted), while adjusted EBITDA was $126.5 million.
- Free funds flow was $62.5 million ($0.34/share diluted) an increase of 13% on a per share basis over the previous quarter.
- Net debt declined 5% quarter-over-quarter to $725 million, reflecting Saturn’s US$16.5 million quarterly amortization payment that reduced the principal outstanding on our senior notes to US$520 million, along with repayments on our credit facility.
- Capital expenditures(1)(4) totaled $44.8 million, and resulted in 23 gross (18.7 net) wells being drilled and brought on production, driving the company’s strong volumes. Of these wells, 21 were drilled in southeast Saskatchewan, including ten open hole multi-lateral (OHML) wells, with two non-operated wells in central Alberta.
- Returned $12.1 million to shareholders during the quarterthrough the repurchase and cancellation of 3.7 million common shares under ournormal course issuer bid (“NCIB“) at a weighted average price of $3.29 per common share, continuing its steady return of capital to Saturn shareholders.
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Ensign Rig 808 was drilling for Saturn Oil & Gas in the Warmley area, near Corning, on Feb 28, 2028. It was likely one of the rigs drilling open hole multi-lateral wells. Photo by Brian Zinchuk.
EXECUTION
“Our Q1/26 capital expenditure program of approximately $45 million was predominantly focused in southeast Saskatchewan, where we had four rigs running,” the company said in a release. “Three of those rigs drilled OHML wells, while the fourth drilled conventional wells. In total, 21 wells were drilled in southeast Saskatchewan in the quarter, including ten OHML wells comprised of five Bakken, three Midale and two Spearfish wells. In addition, we participated in two non-operated Notikewin wells in the West Pembina area of Alberta. The impact of this active development program, together with production momentum carried forward from Q4/25, contributed to average volumes of 43,116 boe/d, again exceeding the Company’s guidance and analysts’ forecasts for the quarter.”
It continued, “Of particular note this quarter was the company’s new 13-06 Spearfish well, which came on production in Q1/26 and achieved an initial production rate at 30 days (IP30) of approximately 365 bbl/d. The well is on track to rank among Saskatchewan’s top producing wells for April, based on independent third-party reports. In addition to our active OHML program, Saturn drilled three fracked Bakken wells and eight conventional wells during the quarter. Strong production results were supported by the performance of new wells, which cleaned up faster than expected, were brought on stream sooner, and continued to outperform internal type curve estimates.
“Alongside our operational progress, Saturn continued to deleverage, reducing net debt to $725 million at quarter-end. This equates to net debt to annualized adjusted EBITDA ratio of 1.4x or 1.7x net debt to annualized AFF, with further improvement in leverage metrics expected should oil prices remain higher for longer. To capitalize on the upward movement in oil, we locked in several smaller-volume contracts in March that provide incremental hedge protection at higher prices over the near-term, including collars with ceilings above $100/bbl Canadian. By maintaining a consistent strategy to hedge approximately 50 to 60 per cent of oil production, net of royalties, on a rolling 12-month basis, Saturn protects downside risk across commodity price cycles while retaining meaningful exposure to pricing upside on our unhedged volumes. The company’s full hedge position is outlined in our Q1/26 financial statements.”
On the stock side, the company said, “Saturn’s active normal course issuer bid (“NCIB“) is at the heart of our current capital return framework. With a prevailing disconnect between the Company’s market value and our net asset value, we continue to believe Saturn’s shares represent the most cost-effective, high-quality barrels on the market. We were able to optimize the accumulation of shares when the stock traded at lower levels earlier in the year, and with the company’s share price increasing more than 2.5x since year-end 2025 have adjusted the daily buyback in tandem. As a result of this successful execution, we have nearly fulfilled the 12.1 million share maximum limit under the current program which expires in August of 2026. Since the inception of our first NCIB, and including the substantial issuer bid completed in 2025, Saturn has returned $59.1 million to shareholders through the repurchase and cancellation of 23.2 million shares, representing 11% of the shares outstanding at the commencement of the program.”
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OUTLOOK
Through the majority of the second quarter, Western Canada experiences a seasonal “spring break-up” period when the ground softens due to melting snow, and the mobilization of rigs and heavy equipment is restricted. With limited ability to drill during much of Q2, the company’s capital spending is typically much lower in this period. As a result, Saturn typically generates its highest free funds flow during the second quarter.
Saturn said, “If oil prices remain elevated in the near-term, and once surface conditions stabilize, the company plans to accelerate approximately $20 million of capital that was originally budgeted for the second half of 2026 into Q2/26. Assuming weather conditions are conducive, this capital is expected to be directed to restarting southeast Saskatchewan development in late May or early June, which is earlier than originally planned. In addition, we intend to add a 5th rig in West Central Saskatchewan targeting our inventory of high-impact and short cycle-time Viking and Success locations. This accelerated program is expected to support our efforts to bring incremental production on-stream within weeks, enabling Saturn to capture strong oil prices and support increased AFF.
“With an agile asset base and approximately 70 per cent of our capital program weighted to the back half of the year, Saturn intends to continue monitoring market conditions and commodity prices. We maintain the flexibility to quickly and efficiently increase our full year 2026 capital expenditures should pricing and broader market conditions remain supportive, and will update the market should budgets or guidance change.”
In the second quarter of 2026, the company’s capital expenditures are expected to range between $35 and $40 million, subject to weather conditions through May and June. Based on this level of capital, production is expected to average between 40,000 to 41,000 boe/d, reflecting the accelerated capital and incremental activity planned in the quarter.
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