Brian Zinchuk is editor and owner of Pipeline Online
CALGARY – Saturn Oil & Gas Inc. saw its production more than triple compared to the same time last year. The company reported its financial and operating results for the three and six months ended June 30, 2023 on Aug. 15.
“The three months ended June 30, 2023 represent the first full quarter of positive contribution from the recently completed acquisition of Ridgeback which has driven record quarterly production and cash flow,” said John Jeffrey, chief executive officer of Saturn, in a release. “Saturn is focused on delivering robust free funds flow, while sustaining high netback production with a very active drilling program for the second half of 2023. Saturn’s drilling program is now underway in both Alberta and Saskatchewan, developing light oil production in some of the most economic plays in North America.”
Second Quarter 2023 Highlights:
- Record quarterly average production of 25,988 boepd, compared to 7,324 boepd in the second quarter of 2022;
- Record quarterly petroleum and natural gas sales of $176.0 million, up from $82.2 million in the second quarter of 2022 and $131.4 million in the first quarter of 2023;
- Operating netback, net of derivatives of $41.87 per boe while the benchmark WTI oil price averaged US$73.75 during the period, compared to $29.91 per boe in the second quarter of 2022 when WTI averaged US$108.41;
- Record quarterly adjusted EBITDA of $92.9 million, compared to $18.0 million in the second quarter of 2022;
- Record quarterly adjusted funds flow of $67.0 million ($0.48 per basic share); compared to $14.5 million ($0.45 per basic share) in the comparable 2022 period;
- Invested $13.8 million of development capital expenditures, drilling 7 (net 3.4) wells; including 2 in southeast Saskatchewan and 5 in west central Saskatchewan, with a 100% success rate;
- Record quarterly free funds flow of $53.1 million ($0.38 per basic share) compared to $8.5 million ($0.26 per basic share) in the comparable 2022 period; and
- Net debt of $510.2 million realizing a net debt to annualized quarterly adjusted funds flow ratio of 1.9x.
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Saturn said it had made great progress on the integration of Ridgeback Resources Inc. and has emerged as a substantial energy producer in Western Canada. As a reflection of the increased scale of the company’s operations, Saturn graduated to the Toronto Stock Exchange in June 2023. The company said it is currently exploiting its deep inventory of light oil development projects in both Alberta and Saskatchewan, with one rig drilling full time in each province.
Saturn’s Alberta production was temporarily impacted by wildfires and corresponding third-party infrastructure downtime, resulting in the curtailment of approximately 2,300 boepd (56 per cent oil and NGLs) of production during the quarter. Currently 100 per cent of the curtailed production is back online and there has been no material damage from the wildfires to Saturn’s infrastructure or facilities.
Saturn said it is diligently reducing its debt load with principal repayments of $51.5 million being made in the quarter.
Oxbow Update
The company’s assets located in southeast Saskatchewan produced 11,388 boepd for the three months ended June 30, 2023, a 62 per cent increase from Q2 2022, and was not impacted by wildfires. The company drilled and completed seven gross horizontal wells (net 3.4) in the second quarter of 2023 with a 100 per cent success rate. Two operated wells were drilled targeting light oil in the Spearfish formation of the Midale area. This is Saturn’s first development program of the Spearfish formations in what is expected to include the drilling of up to a total of six Spearfish wells. The drilling of the Spearfish wells is supported with extensive seismic coverage and Saturn has an existing pipeline network and facilities in this area to tie in new production quickly.
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Viking Update
The company’s assets located in west central Saskatchewan produced 4,860 boepd for the three months ended June 30, 2023 a 1,488 per cent increase from Q2 2022, and was not impacted by wildfires. The company did not drill any new wells in the Viking area in Q2 2023. The production levels of the eight gross wells (8.0 net) drilled in the first quarter of 2023 continue to perform well above the type curves of Saturn’s expected reserve production profile and industry averages for Viking wells. Development drilling for light oil at the Viking Asset is expected to recommence in Q1 2024, the company said.
Alberta Update
Saturn’s assets located in central Alberta produced 7,358 boepd for the three months ended June 30, 2023. The company’s assets in the Kaybob and Deer Mountain areas produced 2,382 boepd for the three months ended June 30,2023. Between the Cardium Asset and the North Alberta Assets the company estimates that the wildfires in Alberta curtailed approximately 2,300 boepd (56 per cent oil and NGLs) in the quarter.
Saturn is currently drilling its second Extended Reach Horizontal well (ERH) in the Lochend area of Alberta and is presently completing the first of what is expected to be a three well program. Lateral lengths of the Lochend ERH Wells are targeting between 1.5 and 3 miles. The new Lochend Cardium wells are in close proximity to Saturn’s extensive infrastructure in this area, including a working interest in a natural gas processing plant, enabling the new production to be put onstream with short cycle times and high netbacks.
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Outlook
Saturn’s H2 2023 drilling program is now well under way with one drilling rig expected to run to the end of 2023 in both Alberta and Saskatchewan. The company is budgeting up to 25 wells in the Oxbow Area for the second half of 2023. The Oxbow development is expected to include the drilling of light oil Bakken formations, utilizing hydraulic stimulation completions technology and certain locations to be drilled as open hole multi-lateral (OHML) wells. OHML is a newly developed drilling technique that is producing strong industry success in Bakken formations in Southeast Saskatchewan in 2023, the company said. OHML is showing the potential to increase estimated ultimate recoveries of light oil and enhancing development economics. The Bakken formation is a well-delineated resource play in which Saturn has over 350 identified locations in close proximity to company infrastructure and an operated gas processing facility, including over 263 gross (200 net) booked unconventional Bakken wells and 100 gross (91 net) un-booked OHML targets.
In addition to the Lochend drilling program now underway, Saturn expects to drill up to two additional ERH wells targeting Cardium light oil in the West Pembina, and up to four ERH wells targeting Montney light oil in the Kaybob area of the North Alberta Asset in 2023.
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