Saturn Oil & Gas Inc. Reports Q3 2023 Financial and Operational Results Highlighted by Record Quarterly Production and Adjusted EBITDA

Rhea-AI Summary

Saturn Oil & Gas Inc. (TSX: SOIL) (FSE: SMKA) (OTCQX: OILSF) reports record quarterly adjusted EBITDA of over $100 million in Q3 2023, driven by record corporate production and operational efficiencies. Key highlights include 140% increase in average production, $201.1 million in petroleum and natural gas sales, and record quarterly adjusted funds flow of $76.5 million.

Positive

• Record quarterly adjusted EBITDA and adjusted funds flow demonstrate strong financial performance.
• Achievement of lowest operating and transportation costs per boe in the past two years indicates improved operational efficiencies.
• Record average production and petroleum and natural gas sales reflect significant growth and success in Q3 2023.
• Reduction of net debt and principal repayments of $50.7 million demonstrate a commitment to financial stability and debt management.
• Plans for increased development activities and production targets for December 2023 show a positive outlook for the company's future.
• Hosting an investor webcast to discuss financial report and provide updates demonstrates transparency and engagement with stakeholders.

Negative

• None.

Calgary, Alberta--(Newsfile Corp. - November 7, 2023) - 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 and nine months ended September 30, 2023.

"Saturn reached a new milestone in its goal of creating sustainable free cash flow by achieving record quarterly adjusted EBITDA of over $100 million⁽¹⁾ in the third quarter." commented John Jeffrey, Chief Executive Officer of Saturn. "This achievement stemmed from record corporate production in the third quarter of 2023, but was also facilitated by our commitment to driving operational efficiencies, which resulted in the Company achieving its lowest operating and transportation costs per boe in the past two years."

Third Quarter 2023 Highlights:

• Record average production of 26,265 boe/d, a 140% increase compared to 10,965 boe/d in Q3 2022;

• Record petroleum and natural gas sales of $201.1 million, up from $105.7 million in Q3 2022;

• Operating netback, net of derivatives⁽¹⁾ of $43.74 per boe while the benchmark WTI oil price averaged US$82.18/bbl during the period, compared to $50.60 per boe in Q3 2022 when the price of WTI oil averaged US$91.58/bbl;

• Record quarterly adjusted EBITDA⁽¹⁾ of $100.3 million, compared to $50.3 million in Q3 2022;

• Record quarterly adjusted funds flow⁽¹⁾ of $76.5 million, compared to $40.0 million in Q3 2022;

• Invested $35.3 million of development capital expenditures, drilling 18 gross (15.3 net) wells; including 12 in Southeast Saskatchewan, two in West Central Saskatchewan, three in Central Alberta and one in North Alberta, all with a 100% success rate;

• Free funds flow⁽¹⁾ of $41.2 million compared to $3.0 million in Q3 2022; and

• Net debt⁽¹⁾ of $473.8 million realizing a net debt to annualized quarterly adjusted funds flow⁽¹⁾ ratio of 1.5x.

		Three months ended September 30,						Nine months ended September 30,
(CAD $000s, except per share amounts)		2023			2022			2023			2022
FINANCIAL HIGHLIGHTS
Petroleum and natural gas sales		201,066			105,728			508,507			256,399
Adjusted EBITDA(1)		100,332			50,323			263,052			84,553
Adjusted funds flow (1)		76,477			39,996			197,892			67,931
per share - Basic		0.55			0.69			1.62			1.73
- Diluted		0.54			0.69			1.58			1.71
Free funds flow (1)		41,206			3,005			124,493			14,501
per share - Basic		0.30			0.05			1.02			0.37
- Diluted		0.29			0.05			1.00			0.36
Net income (loss)		(111,156	)		167,307			159,167			91,544
per share - Basic		(0.80	)		2.89			1.31			2.34
- Diluted		(0.80	)		2.87			1.27			2.30
Acquisitions, net of cash acquired		-			240,070			466,662			247,562
Capital expenditures(1)		35,271			36,991			73,399			53,430
Net debt(1), end of period		473,843			232,655			473,843			232,655
Common shares outstanding		139,313			59,839			139,313			59,839
Weighted average, basic		139,261			57,907			121,821			39,168
Weighted average, diluted		142,382			58,336			124,905			39,769

 
⁽¹⁾ See Non-GAAP and Other Financial Measures
 

		Three months ended September 30,						Nine months ended September 30,
(CAD $000s, except per share amounts)		2023			2022			2023			2022
OPERATING HIGHLIGHTS
Average production volumes
Crude oil (bbls/d)		19,132			10,163			17,762			7,914
NGLs (bbls/d)		2,287			363			1,810			328
Natural gas (mcf/d)		29,077			2,634			22,825			2,197
Total boe/d		26,265			10,965			23,376			8,608
% Oil and NGLs		82%			96%			84%			96%
Average realized prices
Crude oil ($/bbl)		105.08			110.90			97.36			116.19
NGLs ($/bbl)		43.19			55.59			43.53			61.46
Natural gas ($/mcf)		2.85			5.95			2.90			5.66
Processing expenses ($/boe)		(0.25	)		(1.25	)		(0.50	)		(1.50	)
Petroleum and natural gas sales ($/boe)		83.21			104.81			79.68			109.10
Operating netback ($/boe)
Petroleum and natural gas sales		83.21			104.81			79.68			109.10
Royalties		(10.36	)		(12.57	)		(8.84	)		(15.58	)
Net operating expenses (1)		(20.13	)		(23.86	)		(21.17	)		(25.77	)
Transportation expenses		(1.34	)		(0.60	)		(1.29	)		(0.69	)
Operating netback (1)		51.38			67.78			48.38			67.06
Realized loss on derivatives		(7.64	)		(17.18	)		(4.73	)		(29.28	)
Operating netback, net of derivatives (1)		43.74			50.60			43.65			37.78

 

Message to Shareholders

With the increase in oil prices in the quarter, Saturn ramped up its development activities. The Company invested over $26 million in drilling and completions in Q3 2023 which surpassed the $23 million of drilling and completions expenditures made in the first half of this year. The third quarter also marked Saturn's inaugural drilling program in the province of Alberta, targeting Cardium light oil in Central Alberta and Montney light oil in North Alberta. Saturn was active developing all four core operational areas in Alberta and Saskatchewan during the quarter with the drilling of a total of 18 (15.3 net) new wells. The Company continued to reduce its debt with principal repayments of $50.7 million made in the quarter.

Southeast Saskatchewan Update

The Company's assets located in Southeast Saskatchewan (the "Southeast Saskatchewan Asset") produced 11,628⁽²⁾ boe/d for the three months ended September 30, 2023, a 65% increase from Q3 2022. The Company drilled and completed 12 (11.4 net) horizontal wells in Q3 2023 with a 100% success rate. The final four (4.0 net) gross wells of the six well Spearfish development program were drilled early in the third quarter in the Manor area. The Spearfish wells continue to exhibit excellent production performance above the budgeted type curve. Saturn also drilled three wells targeting Frobisher oil formations which were put on production in late August with good initial performance, including the 101/14-18-006-04W2/00 location which had initial 30-day average production of over 150 bbl/d. The Company rig released five (4.5 net) horizontal wells targeting Bakken light oil in the third quarter, which subsequent to quarter-end were brought on to production with very strong initial production rates. The Frobisher and Bakken well production results will be released after 30 days of production data is available, expected in late November.

West Central Saskatchewan Update

The Company's assets located in West Central Saskatchewan (the "West Central Saskatchewan Asset") produced 3,943 boe/d⁽²⁾ in Q3 2023, compared to 3,945 boe/d⁽²⁾ in Q3 2022. The Company participated in two (0.9 net) non-operated wells targeting the Viking formation that were brought on-stream in August and in-line with type curve expectations.

Central Alberta Update

Saturn's assets located in Central Alberta (the "Central Alberta Asset") produced 8,229 boe/d⁽²⁾ in Q3 2023. During the period Saturn drilled three (2.0 net) operated wells targeting Cardium light oil in the Lochend area. One Lochend well was brought on-stream in August and two were put into production in late October.

North Alberta Update

The Company's assets in the Kaybob and Deer Mountain areas (the "North Alberta Assets") produced 2,465⁽²⁾ boe/d in Q3 2023. Saturn rig released one (1.0 net) well of a four well pad during the period, targeting Montney light oil in the Kaybob area, and expects the four wells to be completed and put on production by mid November. The Montney wells were drilled with horizontal legs in the range of 1.5 and 2 miles.

Outlook

Saturn is continuing to accelerate development activities in both Alberta and Saskatchewan with expectations that the fourth quarter of 2023 will be the most active development period yet for the Company. The Company has recently contracted an additional drilling rig in Saskatchewan and is now running three concurrent drilling programs for the first time in Saturn's history.

The Alberta drilling rig has been moved to West Pembina in our Central Alberta Asset for the drilling of two 100% working interest wells targeting light oil and liquids rich Cardium formations with production expected to be on-stream in early Q1 2024. The Alberta rig is expected to finish the year drilling Cardium light oil targets in the Brazeau area for expected production additions in early Q1 2024.

In West Central Saskatchewan the newly contracted rig is currently drilling a budgeted four well Viking program, including follow-up drilling to the successful Eastern expansion of our Plato Viking field.

Saturn's focus in Q4 2023 in Southeast Saskatchewan is the exclusive development of the deep portfolio of development opportunities acquired with the purchase of Ridgeback Resources Inc. Saturn intends to drill five additional wells targeting Bakken light oil in the Viewfield area before year-end with two of the wells planned to be drilled as open hole multi-lateral ("OHML") wells. Based on recent industry success, OHML wells are showing the potential to increase estimated ultimate recoveries of light oil and enhancing development economics. Saturn has also recently successfully drilled two Frobisher wells in the Crealman area.

Based on the increased development activities across Saturn's four core operational areas, and the Company's continued drilling success Saturn maintains its production target of 27,000 boe/d for December 2023 and believes that the back-end weighted capital spending plan in 2023 will position the Company well for the start of 2024.

Investor Webcast

Saturn will host a webcast at 10:00 AM MT (12:00 PM Noon ET) on November 8, 2023, to discuss the third quarter financial report and provide investors an update. Participants can access the live webcast via: https://saturnoil.com/invest/q3-2023-results-webcast, or through the Company's website www.saturnoil.com. 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 one of Canada's fastest growing energy companies, 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 Southeastern Saskatchewan, West Central Saskatchewan and Central/Northern 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 Toronto Stock Exchange under ticker 'SOIL', on the Frankfurt Stock Exchange under symbol 'SMKA' and on the OTCQX under the ticker 'OILSF'.

For additional information, please contact:

John Jeffrey, MBA - Chief Executive Officer
or
Kevin Smith, MBA - VP Corporate Development

Tel: +1 (587) 392-7900
www.saturnoil.com
info@saturnoil.com
 

Reader Advisory

Non-GAAP and Other Financial Measures

Throughout this news release and in other materials disclosed by the Company, Saturn employs 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 uses the terms "Adjusted EBITDA", "Adjusted funds flow", "free funds flow" and "net debt" which are capital management measures. See the disclosure under "Capital Management" in our Condensed consolidated interim financial statements for the three and nine months ended September 30, 2023, 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.

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.

		Three months ended September 30,						Nine months ended September 30,
($000s)		2023			2022			2023			2022
Cash flow from operating activities		70,466			13,472			208,609			44,215
Change in non-cash working capital		2,618			25,178			(20,662	)		21,941
Decommissioning expenditures		3,393			120			5,288			549
Transaction costs		-			1,226			4,657			1,226
Net interest		23,855			10,327			65,160			16,622
Adjusted EBITDA		100,332			50,323			263,052			84,553
Net interest		(23,856	)		(10,327	)		(65,160	)		(16,622	)
Adjusted funds flow		76,477			39,996			197,892			67,931
Capital expenditures(1)		(35,271	)		(36,991	)		(73,399	)		(53,430	)
Free funds flow		41,206			3,005			124,493			14,501

 
⁽¹⁾ Calculated as expenditures on Property, plant and equipment and exploration and evaluation assets on the condensed consolidated interim statements of cash flows.
 

This press release uses the terms "capital expenditures", "operating netback", "operating netback, net of derivatives", and "net operating expenses", which are non-GAAP financial measures. These non-GAAP financial measures are not standardized financial measures under IFRS and might not be comparable to similar financial measures disclosed by other issuers. Set forth below is a description of the non-GAAP financial measures used in this news release. See also the disclosure under the section "Non-GAAP Financial Measures and Ratios" in our MD&A for the three and nine months ended September 30, 2023, 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 reconciles capital expenditures and capital expenditures, net acquisitions and dispositions ("A&D") to the nearest GAAP measure, cashflow used in investing activities.

		Three months ended September 30,						Nine months ended September 30,
($000s)		2023			2022			2023			2022
Cash flow used in investing activities		17,183			240,002			537,681			276,492
Change in non-cash working capital		18,088			37,059			2,380			24,500
Capital expenditures, net A&D		35,271			277,061			540,061			300,992
Acquisitions, net of cash acquired		-			(240,070	)		(466,662	)		(247,562	)
Capital expenditures		35,271			36,991			73,399			53,430

 

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 our MD&A for the three and nine months ended September 30, 2023.

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 September 30,							Nine months ended September 30,
($000s)		2023			2022				2023			2022
Petroleum and natural gas sales		201,066			105,728				508,507			256,399
Royalties		(25,045	)		(12,680		)		(56,440	)		(36,618		)
Net operating expenses		(48,652	)		(24,067		)		(135,129	)		(60,562		)
Transportation expenses		(3,242	)		(607		)		(8,220	)		(1,621		)
Operating netback		124,127			68,374				308,718			157,598
Realized loss on financial derivatives		(18,455	)		(17,327		)		(30,155	)		(68,809		)
Operating netback, net of derivatives		105,672			51,047				278,563			88,789
($ per boe amounts)
Petroleum and natural gas sales		83.21			104.81				79.68			109.10
Royalties		(10.36	)		(12.57		)		(8.84	)		(15.58		)
Net operating expenses		(20.13	)		(23.86		)		(21.17	)		(25.77		)
Transportation expenses		(1.34	)		(0.60		)		(1.29	)		(0.69		)
Operating netback		51.38			67.78				48.38			67.06
Realized loss on financial derivatives		(7.64	)		(17.18		)		(4.73	)		(29.28		)
Operating netback, net of derivatives		43.74			50.60				43.65			37.78

 

Supplemental Information Regarding Product Types

References to gas or natural gas and NGLs in this press release refer to conventional natural gas and natural gas liquids product types, respectively, as defined in National Instrument 51-101, Standards of Disclosure for Oil and Gas Activities ("NI 51-101"), except where specifically noted otherwise.

The following table is intended to provide the product type composition for each of the production figures provided herein, where not already disclosed within tables above for average production for the three and nine months ended September 30, 2023 and 2022:

	Three months ended September 30, 2023				Three months ended September 30, 2022
	Crude oil (bbls/d)	NGLs (bbls/d)	Natural gas (mcf/d)	Total (boe/d)	Crude oil (bbls/d)	NGLs (bbls/d)	Natural gas (mcf/d)	Total (boe/d)
Southeast Saskatchewan	10,187	789	3,911	11,628	6,347	339	2,065	7,030
West Central Saskatchewan	3,844	20	475	3,943	3,816	24	569	3,935
Central Alberta	3,595	1,117	21,103	8,229	-	-	-	-
North Alberta	1,506	361	3,588	2,465	-	-	-	-
Total boe/d	19,132	2,287	29,077	26,265	10,163	363	2,634	10,965

 

	Nine months ended September 30, 2023				Nine months ended September 30, 2022
	Crude oil (bbls/d)	NGLs (bbls/d)	Natural gas (mcf/d)	Total (boe/d)	Crude oil (bbls/d)	NGLs (bbls/d)	Natural gas (mcf/d)	Total (boe/d)
Southeast Saskatchewan	9,179	713	3,734	10,514	6,359	320	2,005	7013
West Central Saskatchewan	4,555	17	454	4,648	1,555	8	192	1595
Central Alberta	2,824	829	15,419	6,223	-	-	-	-
North Alberta	1,204	251	3,218	1,991	-	-	-	-
Total boe/d	17,762	1,810	22,825	23,376	7,914	328	2,197	8,608

 

Initial Production Rates

Any reference in this news release to initial production rates are useful in confirming the presence of hydrocarbons, however, such rates are not determinative of the rates at which such wells will continue production and decline thereafter. Readers are cautioned not to place undue reliance on such rates in calculating aggregate production for Saturn.

Boe Presentation

Boe means barrel of oil equivalent. All boe conversions in this news release are derived by converting gas to oil at the ratio of six thousand cubic feet ("Mcf") of natural gas to one barrel ("Bbl") of oil. Boe may be misleading, particularly if used in isolation. A Boe conversion rate of 1 Bbl : 6 Mcf is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio of oil compared to natural gas based on currently prevailing prices is significantly different than the energy equivalency ratio of 1 Bbl: 6 Mcf, utilizing a conversion ratio of 1 Bbl : 6 Mcf may be misleading as an indication of value.

Forward-Looking Information and Statements.

Certain information included in this press release constitutes forward-looking information under applicable securities legislation. Forward-looking information typically contains statements with words such as "anticipate", "believe", "expect", "plan", "intend", "estimate", "propose", "project", "scheduled", "will" or similar words suggesting future outcomes or statements regarding an outlook. Forward-looking information in this press release may include, but is not limited to, the Company's drilling and development plans, timing of bringing wells on-stream, 2023 exit production, expectations regarding netbacks, the business plan, cost model and strategy of the Company.

The forward-looking statements contained in this press release are based on certain key expectations and assumptions made by Saturn, including expectations and assumptions concerning: the timing of and success of future drilling, development and completion activities, the performance of existing wells, the performance of new wells, the availability and performance of facilities and pipelines, the ability to allocate capital to pay down debt and grow or maintain production, the geological characteristics of Saturn's properties, the application of regulatory and licensing requirements and the availability of capital, labour and services.

Although Saturn believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because Saturn can give no assurance that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, risks associated with the oil and gas industry in general (e.g., operational risks in development, exploration and production; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to production, costs and expenses, and health, safety and environmental risks), constraints in the availability of services, commodity price and exchange rate fluctuations, actions of OPEC and OPEC+ members, changes in legislation impacting the oil and gas industry, adverse weather or break-up conditions and uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures. These and other risks are set out in more detail in Saturn's Annual Information Form for the year ended December 31, 2022.

Forward-looking information is based on a number of factors and assumptions which have been used to develop such information but which may prove to be incorrect. Although Saturn believes that the expectations reflected in its forward-looking information are reasonable, undue reliance should not be placed on forward-looking information because Saturn can give no assurance that such expectations will prove to be correct. In addition to other factors and assumptions which may be identified in this press release, assumptions have been made regarding and are implicit in, among other things, our capital expenditure and drilling programs, drilling inventory and booked locations, production and revenue guidance, ESG initiatives, debt repayment plans and future growth plans. Readers are cautioned that the foregoing list is not exhaustive of all factors and assumptions which have been used.

The forward-looking information contained in this press release is made as of the date hereof and Saturn undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise, unless required by applicable securities laws. The forward-looking information contained in this press release is expressly qualified by this cautionary statement.

All dollar figures included herein are presented in Canadian dollars, unless otherwise noted.

To view the source version of this press release, please visit https://www.newsfilecorp.com/release/186618

FAQ

What are the ticker symbols for Saturn Oil & Gas Inc.?

The ticker symbols for Saturn Oil & Gas Inc. are TSX: SOIL, FSE: SMKA, and OTCQX: OILSF.

What were the financial highlights for Saturn Oil & Gas Inc. in Q3 2023?

The financial highlights include record petroleum and natural gas sales of $201.1 million, adjusted EBITDA of $100.3 million, and adjusted funds flow of $76.5 million.

What were the operating highlights for Saturn Oil & Gas Inc. in Q3 2023?

The operating highlights include record average production of 26,265 boe/d, with 82% from oil and NGLs, and operating netback of $43.74 per boe.

What is Saturn Oil & Gas Inc.'s outlook for the future?

Saturn plans to accelerate development activities in Alberta and Saskatchewan, with a production target of 27,000 boe/d for December 2023, indicating a positive outlook for the company's future.