Saturn Oil & Gas has reported its financial and operating results for the three and six months ended June 30, 2024.

“Saturn’s capital structure changes implemented in Q2 2024, in conjunction with a major acquisition, will serve as an inflection point in establishing the Company as a leading independent growing energy producer in Western Canada.” commented John Jeffrey, Chief Executive Officer of Saturn. “In June 2024, the Company increased its crude oil production base by over 50% and reduced its interest rate on borrowed funds by approximately 40%, bolstering Saturn’s sustainable free funds flow generation capability per share, with a drastically reduced cost of capital.”

Second Quarter 2024 Highlights:

• Closed an acquisition of two oil-weighted asset packages of approximately 13,000 boe/d in its existing core operating areas in Southern Saskatchewan for total cash consideration of approximately $534.8 million;
• Achieved Q2 2024 exit production of approximately 38,300 boe/d;
• Replaced the Company’s Senior Term Loan with US$650.0 million of Senior Secured Notes bearing an interest rate of 9.625% per annum due June 15, 2029;
• Completed a bought deal equity financing for total gross proceeds of $100.0 million;
• Entered into a $150.0 million credit facility with a syndicate of banks which was undrawn at June 30, 2024;
• Achieved record average production of 30,128 boe/d, compared to 25,988 boe/d in the second quarter of 2023;
• Recognized petroleum and natural gas sales of $208.9 million, up from $176.0 million in the second quarter of 2023;
• Generated record quarterly adjusted EBITDA of $106.0 million, compared to $92.9 million in the second of 2023;
• Achieved quarterly adjusted funds flow of $88.6 million, up from $67.0 million in the second quarter of 2023;
• Invested $22.5 million in capital expenditures during the second quarter of 2024, drilling seven gross (6.0 net) wells including six in Southeast Saskatchewan; and one in West Central Saskatchewan;
• Generated free funds flow of $66.1 million, up from $53.1 million in the second quarter of 2023; and
• Exited the second quarter of 2024 with $792.2 million of net debt, realizing a proforma net debt to annualized quarterly adjusted funds flow of 1.5x.

The second quarter of 2024 was another active period for Saturn with the acquisition of approximately 13,000 boe/d of production in southern Saskatchewan (the “South Saskatchewan Acquisition”). The acquired assets are weighted 96% to high margin crude oil and liquids and are an excellent fit within the Company’s existing core asset base. The South Saskatchewan Acquisition has set the foundation for strong future free funds flow generation, with a low decline production profile and an extensive portfolio of development drilling locations. 

Southeast Saskatchewan Update

The Company’s assets in Southeast Saskatchewan produced an average of 13,224(2) boe/d for the three months ended June 30, 2024, a 16% increase from Q2 2023. The Company drilled and completed six gross horizontal wells (5.0 net) in the second quarter of 2024 with a 100% success rate including the Viewfield 101/11-21-011-06W2 well (the “Viewfield 11-21”) which was drilled as a nine leg Open Hole Mult-Lateral (“OHML”) well. The Viewfield 11-21 was recognized as having the second highest liquids production rate in the Top Saskatchewan Well Results for June 2024 report by ATB Capital Markets, at 295 bbl/d of light oil. The Viewfield 11-21 exited the initial 30-day production period at approximately 350 boe/d. In total the Company drilled two (2.0 net) OHML wells in the Viewfield area in Q2 with an average IP30 of 240 boe/d which is in line with the expected type curve for these wells. Saturn drilled five gross (4.0 net) conventional horizontal wells in Q2 2024 which have now all been put on production for light oil.

On May 6, 2024, the Company completed the acquisition of Adonai Resources II Corp. (the “Adonai Acquisition”) for total cash consideration of $8.3 million which added approximately 260 bbls/d of light oil production and added 30 high quality horizontal drilling locations that are in close proximity to Saturn’s Carnduff operations unit.

West Central Saskatchewan Update

The Company’s assets in West Central Saskatchewan produced 3,125 boe/d(2) for the three months ended June 30, 2024, a 37% decrease from Q2 2023 as a result of limited development activities in the area and natural declines. Saturn drilled one (1.0 net) horizontal well in the second quarter of 2024 as part of a 22 gross Viking wells (18.0 net) program for 2024.

Southwest Saskatchewan Update

The core producing properties in Southwest Saskatchewan include Saturn’s low decline oil weighted Battrum assets, acquired as part of the South Saskatchewan Acquisition, which are geologically concentrated within the Success and Roseray formations of Southwest Saskatchewan. For the three months ended June 30, 2024, Southwest Saskatchewan produced an average of 884 boe/d based on approximately two weeks of production contribution to the three-month period.

Central Alberta Update

Saturn’s assets located in Central Alberta produced 12,894 boe/d(2) for the three months ended June 30, 2024 and included the Company’s assets in the Central Alberta Cardium areas, Kaybob Montney asset and the Deer Mountain Swan Hills asset (the “Deer Mountain Asset”). The Deer Mountain Asset was sold to a private company on June 4, 2024 for net cash proceeds of $25.7 million. As a result of the Deer Mountain Asset sale, the Company has aggregated the North Alberta and Central Alberta business units.

Outlook

Saturn has now started its largest drilling program in its history with four rigs concurrently drilling horizontal wells targeting light oil, with two rigs in Southeast Saskatchewan, one rig in West Saskatchewan and one rig in Central Alberta. In total the Company expects to drill approximately 82 net operated wells in 2024 with an objective to modestly increase production in the range of 1-5% and a primary focus of reducing net debt with free funds flow. The Company expects to pay down the new Senior Notes on their scheduled 10% annual amortization schedule (paid quarterly). Saturn expects to continue to pursue strategic acquisition opportunities that are complementary to existing operations with attractive development opportunities. As the Company de-levers, Saturn intends to implement strategies to return capital to shareholders, which may include dividends or share buy-backs.

Energy Industry Directory: Saturn Oil & Gas