Saturn Oil & Gas Inc. Reports Q1 2024 Financial and Operating Results
Saturn Oil & Gas Inc. has published its Q1 2024 financial and operational results, showing significant growth compared to Q1 2023. Their quarterly production averaged 26,394 boe/d, up from 17,783 boe/d last year. Adjusted EBITDA rose to $88.2 million from $69.9 million, while adjusted funds flow increased to $68.2 million from $54.5 million. Capital expenditures reached $34 million, drilling nine gross wells. Despite achieving these results, the company faced challenges such as severe cold weather and lower global oil prices, impacting revenues. Saturn also completed a $50 million equity financing and directed $76.1 million toward debt repayment, ending the quarter with $386.4 million in net debt. Additionally, Saturn announced the acquisition of oil-weighted assets in Southern Saskatchewan for $525 million, which will add 13,000 boe/d of production. This acquisition will be funded through debt commitments and a bought-deal financing.
- Quarterly production increased to 26,394 boe/d from 17,783 boe/d in Q1 2023.
- Adjusted EBITDA rose to $88.2 million, up from $69.9 million in Q1 2023.
- Adjusted funds flow increased to $68.2 million from $54.5 million.
- Invested $34 million in capital expenditures, drilling nine gross wells.
- Generated free funds flow of $34.2 million, up from $30.2 million in Q1 2023.
- Completed a $50 million equity financing.
- Directed $76.1 million toward debt repayment.
- Announced acquisition of Southern Saskatchewan assets adding 13,000 boe/d of production.
- Net income showed a loss of $62.982 million compared to a gain of $219.050 million in Q1 2023.
- Revenue impacted by lower global oil prices and higher price differentials.
- Production in West Central Saskatchewan decreased by 35% due to natural declines and lack of development activity.
- Ended the quarter with $386.4 million in net debt.
Calgary, Alberta--(Newsfile Corp. - May 15, 2024) - Saturn Oil & Gas Inc. (TSX: SOIL) (FSE: SMKA) (OTCQX: OILSF) ("Saturn" or the "Company") is pleased to report its financial and operating results for the three months ended March 31, 2024.
"The first quarter development plan returned some of the best results in Saturn's history," commented Justin Kaufmann, Saturn's Chief Development Officer. "These results were from conventional development in Southeast Saskatchewan and the Cardium in Central Alberta, which exceeded our expectations yielding numerous wells with record breaking initial production rates. This bodes extremely well for Saturn's future capital programs, considering the depth of inventory the Company has around these locations."
First Quarter 2024 Highlights:
Achieved quarterly production averaging 26,394 boe/d, compared to 17,783 boe/d in the first quarter of 2023;
Generated quarterly adjusted EBITDA(1) of
$88.2 million , compared to$69.9 million in the first quarter of 2023;Achieved quarterly adjusted funds flow(1) of
$68.2 million , up from$54.5 million in the first quarter of 2023;Invested
$34.0 million in capital expenditures(1) during the first quarter of 2024, drilling nine gross (8.3 net) wells; including six in Southeast Saskatchewan; and three in Central Alberta;Generated free funds flow(1) of
$34.2 million , up from$30.2 million in the first quarter of 2023;Completed a bought deal equity financing for total gross proceeds of
$50.0 million ;Directed
$76.1 t owards debt repayment on the on the Senior Term Loan; andExited the first quarter of 2024 with
$386.4 million of net debt(1), realizing a net debt to annualized quarterly adjusted funds flow(1) of 1.4x.
| Three months ended March 31, | | ||||||||
| ( | 2024 | 2023 | |||||||
| FINANCIAL HIGHLIGHTS | |||||||||
| Petroleum and natural gas sales | 168,219 | 131,407 | |||||||
| Cash flow from operating activities | 70,222 | 46,794 | |||||||
| Adjusted EBITDA(1) | 88,153 | 69,860 | |||||||
| Adjusted funds flow(1) | 68,178 | 54,454 | |||||||
| per share | - Basic | 0.46 | 0.63 | ||||||
| - Diluted | 0.45 | 0.62 | |||||||
| Free funds flow(1) | 34,212 | 30,171 | |||||||
| per share | - Basic | 0.23 | 0.35 | ||||||
| - Diluted | 0.23 | 0.35 | |||||||
| Net income (loss) | (62,982 | ) | 219,050 | ||||||
| per share | - Basic | (0.42 | ) | 2.52 | |||||
| - Diluted | (0.42 | ) | 2.51 | ||||||
| Acquisitions, net of cash acquired | - | 465,233 | |||||||
| Capital expenditures(1) | 33,966 | 24,283 | |||||||
| Net debt(1), end of period | 386,417 | 556,605 | | ||||||
| Three months ended March 31, | ||||||
| (000s, except per boe amounts) | 2024 | 2023 | ||||
| OPERATING HIGHLIGHTS | ||||||
| Average production volumes | ||||||
| Crude oil (bbls/d) | 18,981 | 14,680 | ||||
| NGLs (bbls/d) | 2,344 | 992 | ||||
| Natural gas (mcf/d) | 30,416 | 12,666 | ||||
| Total boe/d | 26,394 | 17,783 | ||||
| % Oil and NGLs | ||||||
| Average realized prices | ||||||
| Crude oil ($/bbl) | 88.64 | 93.74 | ||||
| NGLs ($/bbl) | 44.24 | 52.92 | ||||
| Natural gas ($/mcf) | 2.44 | 3.60 | ||||
| Processing expenses ($/boe) | (0.45 | ) | (0.79 | ) | ||
| Petroleum and natural gas sales ($/boe) | 70.03 | 82.11 | ||||
| Operating netback ($/boe) | ||||||
| Petroleum and natural gas sales | 70.03 | 82.11 | ||||
| Royalties | (8.82 | ) | (9.34 | ) | ||
| Net operating expenses(1) | (19.80 | ) | (21.07 | ) | ||
| Transportation expenses | (1.31 | ) | (1.01 | ) | ||
| Operating netback(1) | 40.10 | 50.69 | ||||
| Realized loss on derivatives | (1.92 | ) | (4.55 | ) | ||
| Operating netback, net of derivatives(1) | 38.18 | 46.14 | ||||
| Common shares outstanding, end of period | 161,206 | 138,634 | ||||
| Weighted average, basic | 148,558 | 86,995 | ||||
| Weighted average, diluted | 151,457 | 87,217 | ||||
Message to Shareholders
The first quarter drilling was an excellent start to the 2024 capital development program with strong results in the Brazeau area of Central Alberta for Cardium development and in Southeast Saskatchewan with conventional multizone development. During the period nine gross (8.3 net) wells were completed with
Early in 2024 our production facilities were challenged with severe cold weather across our operating areas in Alberta and Saskatchewan. January 12, 2024 was the coldest day in the history of many parts of Alberta and Saskatchewan, in many cases breaking all-time cold records. As a notable example, at Saturn's field office in Kindersley Saskatchewan the all-time cold record of -38.8oC was eclipsed with the temperature reaching a low of -44.4oC. The cold weather hampered Saturn's production by approximately 3,000 boe/d for a ten day period, reducing the average production rate for the first quarter by approximately 350 boe/d.
Revenues were further hampered with relatively lower global oil prices, including the North American benchmark WTI oil price that averaged USD 76.97/bbl for the first quarter of 2024, the lowest level in the past three financial quarters. Compounding the impact of lower global oil prices were higher price differentials between the WTI oil price and the Western Canadian benchmark price Mixed Sweet Blend oil price at Edmonton ("MSW"), which averaged USD -8.63/bbl in the first quarter of 2024, compared to the 2023 average of USD -3.25/bbl. The April 2024 commissioning of the Trans Mountain Pipeline Expansion added 590,000 barrels per day of crude oil and refined product export capacity for Western Canada. The price differential between MSW and WTI has decreased to an April 2024 average of USD -4.17/bbl.
Updates on Debt Repayment
During the first quarter of 2024 Saturn directed
Southeast Saskatchewan Update
During the three months ended March 31, 2024, the Southeast Saskatchewan area produced 11,800(2) boe/d, an increase of
Saturn completed five gross (5.0 net) conventional horizontal wells with three Mississippian aged Frobisher and Tilston zone targets and two Spearfish zone targets in the first quarter of 2024, exceeding the expected type curve initial 30 days production ("IP30") rate by
During the first quarter of 2024, Saturn spud one gross (1.0 net) Open Hole Multi-Lateral ("OHML") well in the Viewfield area of Southeast Saskatchewan with eight horizontal legs of up to two miles each. This OHML well is expected to be put onto production in May 2024, and is the first two-mile lateral based OHML well drilled by Saturn.
West Central Saskatchewan Update
The Company's assets located in West Central Saskatchewan produced 3,342 boe/d(2) for the three months ended March 31, 2024 representing a decrease of
Central Alberta Update
During the three months ended March 31, 2024, the Central Alberta assets produced 8,321(2) boe/d, an increase of
Saturn successfully completed four Cardium horizontal wells in the first quarter of 2024, including one Cardium well that was drilled in December 2023 and three wells drilled in Q1 2024, with
The IP30 rate of the wells ranged from 676 boe/d to 723 boe/d, for an average IP30 of 710 boe/d (approximately
50% light oil and NGLs), which was29% above the expected type curve rate; andThe average cost per Cardium well was
$4.5 million , approximately8% below the budgeted capital spend.
North Alberta Update
During the three months ended March 31, 2024, the North Alberta assets produced 2,931(2) boe/d, an increase of
Subsequent Event
On May 6, 2024, the Company entered into an agreement for the strategic acquisition of two oil-weighted asset packages in Southern Saskatchewan for net cash consideration of approximately
Outlook
Saturn will pick up development activity after the annual break up is over and road bans are lifted, with the deployment of up to four drilling rigs this summer: two rigs dedicated to Southeast Saskatchewan, one rig in West Central Alberta and one rig in Alberta. The concurrent use of four rigs, for the first time, will be a new milestone in Saturn's development growth, maintaining a light oil focus and targeting high rates of return on invested capital. With the anticipated increase in adjusted funds flow ("AFF") from the Acquisition, Saturn will fund its largest development capital program to date with approximately
Investor Webcast
Saturn will host a webcast at 10:00 AM MDT (12:00 PM Noon EDT) on Thursday May 16, 2024, to review the first quarter 2024 financial and operational results and the highlights of the Acquisition. Participants can access the live webcast via https://saturnoil.com/quarterly-results-webcast-registration/. A recorded archive of the webcast will be available afterwards on the Company's website.
About Saturn Oil & Gas Inc.
Saturn Oil & Gas Inc. is a growing Canadian energy company focused on generating positive shareholder returns through the continued responsible development of high-quality, light oil weighted assets, supported by an acquisition strategy that targets highly accretive, complementary opportunities. Saturn has assembled an attractive portfolio of free-cash flowing, low-decline operated assets in Saskatchewan and Alberta that provide a deep inventory of long-term economic drilling opportunities across multiple zones. With an unwavering commitment to building an ESG-focused culture, Saturn's goal is to increase reserves, production and cash flows at an attractive return on invested capital.
Saturn's shares are listed for trading on the TSX under ticker 'SOIL' on the Frankfurt Stock Exchange under symbol 'SMKA' and on the OTCQX under the ticker 'OILSF'.
The Company's unaudited interim financial statements and corresponding Management's Discussion and Analysis for the three month period ended March 31, 2024 are available on SEDAR+ at www.sedarplus.ca and on Saturn's website at www.saturnoil.com. Copies of the materials can also be obtained upon request without charge by contacting the Company directly. Please note, currency figures presented herein are reflected in Canadian dollars, unless otherwise noted.
Further information and a corporate presentation is available on Saturn's website at www.saturnoil.com.
Saturn Oil & Gas Investor & Media Contacts:
John Jeffrey, MBA - Chief Executive Officer
Tel: +1 (587) 392-7900
www.saturnoil.com
Kevin Smith, MBA - VP Corporate Development
Tel: +1 (587) 392-7900
info@saturnoil.com
Notes
(1) See reader advisory: Non-GAAP and Other Financial Measures
(2) See reader advisory: Supplemental Information Regarding Product Types
Reader Advisory
Non-GAAP and Other Financial Measures
Throughout this news release and in other materials disclosed by the Company, we employ certain measures to analyze financial performance, financial position and cash flow. These non-GAAP and other financial measures do not have any standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures provided by other issuers. Non-GAAP and other financial measures should not be considered to be more meaningful than GAAP measures which are determined in accordance with IFRS. The disclosure under the section "Non-GAAP and Other Financial Measures" including non-GAAP financial measures and ratios, capital management measures and supplementary financial measures in the Company's Condensed consolidated interim financial statements and MD&A are incorporated by reference into this news release.
This press release may use the terms "adjusted EBITDA", "adjusted funds flow", "free funds flow" and "net debt" which are capital management financial measures. See the disclosure under "Capital Management" in our condensed consolidated interim financial statements for the three months ended March 31, 2024, for an explanation and composition of these measures and how these measures provide useful information to an investor, and the additional purposes, if any, for which management uses these measures.
Capital expenditures
Saturn uses capital expenditures to monitor its capital investments relative to those budgeted by the Company on an annual basis. Saturn's capital budget excludes acquisition and disposition activities as well as the accounting impact of any accrual changes or payments under certain lease arrangements. The most directly comparable GAAP measure for capital expenditures is cash flow used in investing activities. The following table details the composition of capital expenditures and capital expenditures, net acquisitions and dispositions ("A&D") to the nearest GAAP measure, to cashflow used in investing activities.
| Three months ended March 31, | ||||||
| ( | 2024 | 2023 | ||||
| Cash flow used in investing activities | 49,692 | 499,563 | ||||
| Change in non-cash working capital | (15,726 | ) | (10,057 | ) | ||
| Capital expenditures, net A&D | 33,966 | 489,506 | ||||
| Acquisitions, net of cash acquired | - | (465,223 | ) | |||
| Capital expenditures | 33,966 | 24,283 | ||||
Gross petroleum and natural gas sales
Gross petroleum and natural gas sales is calculated by adding oil, natural gas and NGLs revenue, before deducting certain gas processing expenses in arriving at Petroleum and natural gas revenue as required under IFRS-15. These processing expenses associated with the processing of natural gas and NGLs revenue are a result of the Company transferring custody of the product at the terminal inlet, and therefore receiving net prices. This metric is used by management to quantify and analyze the realized price received before required processing deductions, against benchmark prices. The calculation of the Company's gross petroleum and natural gas sales is shown within the Petroleum and natural gas sales section of the MD&A for the three months ended March 31, 2024.
Net operating expenses
Net operating expense is calculated by deducting processing income primarily generated by processing third party production at processing facilities where the Company has an ownership interest, from operating expenses presented on the Statement of income (loss). Where the Company has excess capacity at one of its facilities, it will process third-party volumes to reduce the cost of ownership in the facility. The Company's primary business activities are not that of a midstream entity whose activities are focused on earning processing and other infrastructure-based revenues, and as such third-party processing revenue is netted against operating expenses in the MD&A. This metric is used by management to evaluate the Company's net operating expenses on a unit of production basis. Net operating expense per boe is a non-GAAP financial ratio and is calculated as net operating expense divided by total barrels of oil equivalent produced over a specific period of time. The calculation of the Company's net operating expenses is shown within the net operating expenses section of the MD&A for the three months ended March 31, 2024.
Operating netback and Operating netback, net of derivatives
The Company's operating netback is determined by deducting royalties, net operating expenses and transportation expenses from petroleum and natural gas sales. The Company's operating netback, net of derivatives is calculated by adding or deducting realized financial derivative commodity contract gains or losses from the operating netback. The Company's operating netback and operating netback, net of derivatives are used in operational and capital allocation decisions. Presenting operating netback and operating netback, net of derivatives on a per boe basis is a non-GAAP financial ratio and allows management to better analyze performance against prior periods on a per unit of production basis. The calculation of the Company's operating netbacks and operating netback, net of derivatives are summarized as follows.
| Three months ended March 31, | |||||||
| ( | 2024 | 2023 | |||||
| Petroleum and natural gas sales | 168,219 | 131,407 | |||||
| Royalties | (21,189 | ) | (14,947 | ) | |||
| Net operating expenses | (47,563 | ) | (33,717 | ) | |||
| Transportation expenses | (3,155 | ) | (1,609 | ) | |||
| Operating netback | 96,312 | 81,134 | |||||
| Realized loss on financial derivatives | (4,601 | ) | (7,275 | ) | |||
| Operating netback, net of derivatives | 91,711 | 73,859 | |||||
| ($ per boe amounts) | |||||||
| Petroleum and natural gas sales | 70.03 | 82.11 | |||||
| Royalties | (8.82 | ) | (9.34 | ) | |||
| Net operating expenses | (19.80 | ) | (21.07 | ) | |||
| Transportation expenses | (1.31 | ) | (1.01 | ) | |||
| Operating netback | 40.10 | 50.69 | |||||
| Realized loss on financial derivatives | (1.92 | ) | (4.55 | ) | |||
| Operating netback, net of derivatives | 38.18 | 46.14 | |||||
Adjusted EBITDA
The Company considers adjusted EBITDA to be a key capital management measure as it is both used within certain financial covenants prescribed under the Company's Senior Term Loan and demonstrates Saturn's standalone profitability, operating and financial performance in terms of cash flow generation, adjusting for interest related to its capital structure. Adjusted EBITDA is defined by the Company as earnings before interest, taxes, depreciation, amortization and other noncash or extraordinary items.
Adjusted funds flow
The Company considers adjusted funds flow to be a key capital management measure as it demonstrates Saturn's ability to generate the necessary funds to manage production levels and fund future growth through capital investment. Management believes that this measure provides an insightful assessment of Saturn's operations on a continuing basis by eliminating certain non-cash charges, actual settlements of decommissioning obligations, of which the nature and timing of expenditures may vary based on the stage of the Company's assets and operating areas, and transaction costs which vary based on the Company's acquisition and disposition activity.
Free funds flow
The Company considers free funds flow to be a key capital management measure as it is used to determine the efficiency and liquidity of Saturn's business, measuring its funds available after capital investment available for debt repayment, pursue acquisitions and gauge optionality to pay dividends and/or return capital to shareholders through share repurchases. Saturn calculates free funds flow as adjusted funds flow in the period less expenditures on property, plant and equipment and exploration and evaluation assets, together "capital expenditures". By removing the impact of current period capital expenditures from adjusted funds flow, management monitors its free funds flow to inform its capital allocation decisions.
The following table reconciles adjusted EBITDA, adjusted funds flow and free funds flow to cash flow from operating activities:
| Three months ended March 31, | ||||||
| ( | 2024 | 2023 | ||||
| Cash flow from operating activities | 70,222 | 46,794 | ||||
| Change in non-cash working capital | (6,565 | ) | 3,653 | |||
| Decommissioning expenditures | 4,521 | 259 | ||||
| Transaction costs | - | 3,748 | ||||
| Net interest(1) | 19,975 | 15,406 | ||||
| Adjusted EBITDA | 88,153 | 69,860 | ||||
| Net interest(1) | (19,975 | ) | (15,406 | ) | ||
| Adjusted funds flow | 68,178 | 54,454 |
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FAQ
What were Saturn Oil & Gas's Q1 2024 production levels?
Saturn Oil & Gas achieved a quarterly production average of 26,394 boe/d.
What is the adjusted EBITDA for Saturn Oil & Gas in Q1 2024?
The adjusted EBITDA for Saturn Oil & Gas in Q1 2024 was $88.2 million.
How much did Saturn Oil & Gas invest in capital expenditures in Q1 2024?
Saturn Oil & Gas invested $34 million in capital expenditures in Q1 2024.
What is the net debt of Saturn Oil & Gas as of Q1 2024?
As of Q1 2024, Saturn Oil & Gas's net debt was $386.4 million.
How did lower global oil prices affect Saturn Oil & Gas in Q1 2024?
Lower global oil prices, along with higher price differentials, negatively impacted Saturn Oil & Gas's revenues in Q1 2024.
What were Saturn Oil & Gas's adjusted funds flow in Q1 2024?
Saturn Oil & Gas reported adjusted funds flow of $68.2 million in Q1 2024.
How much debt repayment did Saturn Oil & Gas make in Q1 2024?
Saturn Oil & Gas directed $76.1 million towards debt repayment in Q1 2024.
What are the details of Saturn Oil & Gas's recent acquisition?
Saturn Oil & Gas announced the acquisition of oil-weighted assets in Southern Saskatchewan for $525 million, adding 13,000 boe/d to their production.
SATURN OIL & GAS INC
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