Saturn Oil and Gas update, Part 1: Utilizing the “Saturn blueprint”

CALGARY – Saturn Oil & Gas Inc. (TSX: SOIL) (OTCQX: OILSF), has grown from obscurity a few years ago with just a few hundred barrels of oil production in west central Saskatchewan to one of this province’s larger producers. It has certainly been the fastest growing.

How has the light oil-weighted producer focused on unlocking value through the development of its assets in Saskatchewan and Alberta? Through something they’re calling the “Saturn blueprint.”

The company provided an operations update in a Feb. 19 release, and Pipeline Online spoke to CEO John Jeffrey at length on Feb. 13.

Those few hundred barrels have grown to estimated Q4/24 volumes that averaged over 41,000  boepd. That’s above the high end of its previously announced quarterly guidance of 39,000 to 40,000  boepd, due to the success of the company’s second half 2024 capital program.

“Saturn continues to deliver on our guidance and meet or exceed our goals, clearly demonstrated by Q4 average production estimates of over 41,000 boepd. This production beat is due to outperformance of new wells, the predictable nature of our asset base and our strong technical team who consistently identifies new and innovative ways to optimize production, enhance development and reduce costs,” said Jeffrey in the release. “Applying our Saturn blueprint across the organization showcases how numerous incremental gains throughout our business can create a compounding effect, drive ongoing enhancements in Saturn’s overall corporate performance and set the stage for lasting value creation.”

Just what is that Saturn blueprint? Pipeline Online asked Jeffrey to elaborate.

“We look to core up in key areas where we can find synergies. And that’s what you’ve seen us do in Saskatchewan, specifically the southeast. We’ve tacked on these packages. We’ve been able to reduce costs and then bring out new additional drilling and inventory.”

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Opportunity again?

Vermilion Energy’s southern Saskatchewan assets are being offered for sale. Asked if Saturn was looking at them, Jeffrey said, “This is another one of those opportunities that’s in our backyard and in an area where we have expertise. We’re the biggest land holders. We’re the biggest infrastructure holders. I think it would fit well, but we’ve also been very disciplined about how we buy packages, so we won’t chase the price. You know, a lot of the better deals you’ve seen get done, in our opinion, have been ours.

“So, if the assets are going to go for the right price and our stakeholders are supportive? Then, of course we would want to do a deeper dive, and in the meantime, yeah, we definitely look at everything, especially opportunities in our back yard.”

That blueprint is even more targeted to certain types of assets. Jeffrey explained, “What we target is mid-life cycle assets, specifically those assets that are contiguous to ours.

“So, we’re not heavy oil, we’re not gas; we’re relatively shallow light oil. And we try and build bigger blocks of these assets to benefit from size and scale. But again, specifically we target mid-life cycle, so the infrastructure is built out. It gives us an advantage, because then our half-cycle and full-cycle costs are lower. We don’t have major infrastructure risk. We don’t have major step-out or development risk. We have proven locations, with a large land and facility base that we can then optimize.

“What you’ve seen us do, specifically in southeast Saskatchewan, is reduce costs – including a  26 per cent reduction since we first bought Oxbow. By streamlining our infrastructure in the area, which includes 100 key facilities and 5000 kilometers of pipeline we are able to capture synergies and improve the netbacks just by enhancing efficiencies.

“When we bought Adonai, as a good example, we took the production from a couple of their batteries and spun it into ours, enabling us to greatly increase capital efficiencies because we have the offsetting infrastructure and our overarching processes, our field offices, safety, all of that’s already in place. So when we do these tuck-ins, our overhead costs don’t change, but we can leverage the infrastructure that we have.”

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CAPITAL PROGRAM OVERVIEW

Saturn said it had a strong period of capital efficient execution in Q4/24, drilling 33 gross (26.2 net) wells, highlighted by new wells trending above internal type curve estimates and contributing to higher volumes. “Our successful drilling programs in the Flat Lake and Battrum fields, which were added to the portfolio in mid-2024, increased our confidence in the expected rates of return from these fields for future drilling plans,” the company said in its Feb. 19 release.

Multi-lateral success

Asked about the company’s adoption of multi-laterals wells, and the Saskatchewan Multi-Lateral Well Program which dramatically reduces royalties on applicable wells, Jeffrey said, “We’re one of the biggest beneficiaries of that.

“You’re seeing us take advantage of that, not only in the Bakken, but also some other plays, so that is having a massive impact for us, in improving those economics. So again, that’s definitely driving stronger returns, and underpinning robust economics. We plan to have a drilling rig full time in the Bakken for the next five years, without any major disruptions, exclusively drilling open hole multi-leg (OHML) wells around that area.”

These wells are analogous to a pitchfork pattern, versus a fishbone. Generally each well has six to eight legs, anywhere from one to two miles in length, depending on the land and reservoir, he said.

Saturn said it also realized meaningful year-over-year production improvements across all development areas acquired through the Ridgeback Resources transaction in Q1/23, along with further delineation of its OHML Bakken acreage in Viewfield.

Saturn said it is one of only a few producers having OHML development across multiple plays in its portfolio, owing to the successful drilling of the company’s first ever six-leg horizontal Spearfish well, with plans to further delineate that play in 2025.

“We elected to accelerate a modest amount of Q1/25 development capital into Q4/24 to take advantage of good weather and operational momentum, which will be reflected in a reduction of our 2025 development capital and an increase of approximately $5 to 7 million in the previously guided Q4/24 development capital expenditures of $90 to $95 million,” the company said.

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Southeast Saskatchewan

Conventional / Mississippian – Strong Results with Robust Rates of Return

Area wells have delivered average IP30 rates of approximately 100 boepd, more than 25 per cent above internal type curve expectations. This development area offers some of the most capital-efficient drills in the company ‘s portfolio, has the deepest inventory of locations that Saturn views as “Tier 1” (internally defined as having rates of return in excess of 100 per cent), and supports deployment of a dedicated rig in the area in 2025. Through the use of seismic, the company said it has continued to improve well placement, which has lowered water cuts and improved economics, including the placement of Saturn’s 12-28 well in the Carnduff area. The 12-28 well is the best performing Frobisher well Saturn has ever drilled, which came on production at an IP30 rate of 220 boepd. “Building on these results, we plan to drill four additional Frobisher wells and one Midale well in the contiguous area in 2025,” the company said.

Viewfield – Bakken Well Results Outperformed

Fracked Bakken wells at Viewfield have exceeded internal type curve estimates by an average of 20 per cent, primarily due to Saturn’s strategy of targeting areas having a lower drill density and the potential for increased recovery by deploying innovative drilling and completion techniques. Further, a third-party engineering firm analyzed production per 100 metres drilled by several area operators, and Saturn’s OHML Bakken development earned the highest ranking for overall results and initial production rates, the company said. This operational success supported Saturn’s decision to deploy a full-time drilling rig in the area in 2025, with Saturn planning to drill up to nine Bakken OHML wells.

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Spearfish – Applying the Saturn Blueprint

“We took learnings and success from the Bakken OHML program to the Spearfish, where we drilled the first ever six-leg OHML Spearfish well in October of 2024. The well came on production at twice our internal risked type curve, achieving average IP30 rates over 150 boepd. The company plans to expand development in the area in 2025, with one multi-lateral Spearfish well planned in Q1/25, and another in the second half of 2025, with the potential to expand development into 2026 should results continue to be supportive,” the release said.

Torquay – Developments at Flat Lake

Saturn drilled three wells in the latter part of 2024, and recognizing the variability in the reservoir, customized its completion technique by increasing the stage count and reducing the tonnage of its fracks.

“While a modest change, it had dramatic impacts by driving a successful production response with lower-than-expected water cuts. The company has also identified an opportunity to increase both injection and production in the Oungre and Torquay fields by changing how we manage produced water in the area, which enables us to use it for re-injection rather than disposal, thereby enhancing economics while reducing environmental impact,” Saturn noted in the release.

The first phase of this project was commissioned at the end of Q4/24, resulting in a production response that has exceeded internal expectations. “This provides another clear example of Saturn’s ability to create value by optimizing mid-life cycle assets which received limited focus from previous operators. We are awaiting results from four ‘pre-pressurized’ Bakken drills, which are locations in an area undergoing waterflood in the Torquay, and Saturn anticipates this program will have some of the highest capital efficiencies among our Flat Lake development portfolio,” the release said.

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West Saskatchewan

Viking – High Oil Cuts and Netbacks Among the Highest in the Portfolio

Some of Saturn’s best performing Viking wells are in Plato, Saskatchewan, where the company has proven a contiguous trend between its East and West Plato areas. Plato is expected to be the focus for its Viking development through the next five years, and potentially beyond, if results support further development. “With rapid drilling times, our Viking play affords Saturn flexibility to quickly adjust capital if needed to optimally respond to broader market changes,” the company said.

Lower Shaunavon – Previously Undercapitalized by Legacy Operators

Through the end of 2024, Saturn brought four Lower Shaunavon wells on production, with material type curve outperformance from the first well as the other three continue to clean up. A thick trend has been identified by the company through the lower Shaunavon that could represent a future resource play offering a sizeable location inventory. In addition, Saturn acquired comprehensive 3D seismic data for the Mannville channels in the Battrum and Cantuar units. “After extensive geologic review, we are excited about the planned drilling of our first well in these units during 2025, as the corporate inventory in this area features some of Saturn’s highest rate of return opportunities,” the release said.

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Central Alberta

Cardium – Improving Capital Efficiencies with Extended Reach Horizontal Wells

Here’s a term you might not have heard in a while – ball drop fracks.

At Lochend, Alberta, Saturn drilled Canada’s longest Cardium lateral well at 7,570 metres, and its team designed an innovative hybrid completion system by combining two established technologies, the coiled tubing and ball drop systems, to tackle this technically challenging well.

“Not only did we achieve meaningful cost reductions and improved well completion times on this well, but we can now apply the same successful completion design to other plays in our portfolio. Further innovation is targeted for 2025, as we are currently in the planning stages for the development of our largest pad to date, a ‘Cardium Super-Pad’, which features seven horizontal wells, four of which are expected to commence drilling in November, with the remaining three wells planned in Q1/26. With higher-than-expected volumes from our Cardium wells through the latter part of 2024, Saturn’s natural gas weighting in Q4/24 is expected to align with the slightly elevated levels reported in Q3/24, but is expected to revert to the guidance range of approximately 15 per cent through 2025.”

Montney – Pushing the Montney Oil Trend Further South

In the spring of 2025, Saturn plans to drill a 3-mile lateral at Kaybob, one of the longest-ever Montney wells to be drilled in that area. At this length, it will incorporate its learnings from Lochend and continue to use the rotary steerable system (RSS) to increase the length of its Alberta horizontals.

On Tuesday: Saturn Oil & Gas update, Part 2: Trade war, Canadian oil and Saturn’s take on it

Don’t miss this week’s episode of the Pipeline Online Podcast – Show me the Money! – 1 p.m. Monday live on the Pipeline Online Facebook page, LinkedIn and X. Hint: X works best. 

 

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