/NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR RELEASE, PUBLICATION, DISTRIBUTION OR DISSEMINATION DIRECTLY, OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO
- Accretive acquisition of select assets in Southeast and
Southwest Saskatchewan that collectively add 13,000 boe/d of 96% liquids-weighted production, 950 gross identified drilling locations(1), expands Tier 1 drilling inventory by 65% and establishes Saturn as the 6th largest producer in the Province ofSaskatchewan (2) US$625 million committed debt financing that will replace the Company's existing senior secured term loan at a significantly reduced interest rate, reduced hedging and no development capital spending restrictions, and an agreement for a new undrawn$150 million reserves-based credit facility commitment, that provides opportunity for greater flexibility and transforms Saturn's borrowing base- Bought deal equity financing of
$100 million with gross proceeds directed to fund the Acquisition supported by Company's largest shareholderGMT Capital Corp. - Pro forma the acquisition, Saturn will be firmly positioned as a top-tier intermediate oil producer with a pro forma market capitalization of
$541 million and an enterprise value of$1.3 billion along with run rate production of approximately 38,000 – 40,000 boe/d, a combined PDP / TP+P reserves base of 105.3 / 223.7 Mmboe, with PDP / TP+P reserve NPV10 values of$2.3 /$4.2 billion , and forecasted next 12 months midpoint adjusted EBITDA / Free Funds Flow of approximately$639 million /$210 million - Enhanced capital flexibility for Saturn to sustainably fund and execute its growth-oriented development program to add high margin, liquids-weighted production while organic free funds flow will be directed towards rapidly reducing indebtedness to 0.9x – 1.0x (from a peak of ~1.25x at closing) within twelve months, after which point the Company will be in a strong financial position to evaluate significant return of capital initiatives to shareholders
The Acquisition is comprised of two distinct asset packages that directly offset existing core properties, which include Battrum area assets located in
The Acquisition will be funded through a
Acquisition Highlights
- Production from the Acquired Assets is expected to be approximately 13,000 boe/d, at the Closing Date, comprising 96% oil and NGLs, (11,400 bbl/d of light/medium crude oil, 1,100 bbl/d NGLs and 3,020 mcf/d of natural gas);
- Low decline production of 16%, with active waterfloods and additional secondary recovery opportunities to further enhance long term value;
- 90%+ of acquired acreage is on crown land, which aids in the accretive nature of future development locations due to provincial royalty incentives;
- Saturn's established infrastructure in the area underpins attractive cost structure, increases operational efficiencies and has sufficient capacity to support future growth;
- The Acquired Assets offer multi-zone development opportunities with stacked pay, provide meaningful operational synergies, further advance Saturn's strategic growth strategy through the addition of approximately 950 gross (780 net) identified drilling locations(1) (approximately 240 gross (200 net) booked locations(1)) expanding the Company's existing drilling inventory of over 20 years, with abundant future reserve booking potential;
- High netback production is generated though premium quality oil, owned and operated infrastructure and advantageous royalty framework in
Saskatchewan ; - The Acquired Assets have a positive Licensee Liability Report ("LLR") rating of 10.0, which as a stand-alone asset would be in the top 10% of all
Saskatchewan producers and is accretive to Saturn's current LLR rating. - The Company is expected to benefit from operating synergies as part of the acquisition:
- Synergistic Operations and Further Scale in
Saskatchewan : Saturn's existing West Central andSoutheast Saskatchewan areas, which offset the Acquired Assets and feature a local field office, will drive material development and operational synergies. Additional synergies will be driven through Company's high-quality infrastructure and existing marketing arrangements. Saturn's exploitation expertise in the Viking play is expected to benefit Lower Shaunavon development, while the Company's experience developing the Viewfield Bakken is directly applicable to the development ofTorquay and Bakken wells at the FlatLake Asset . - Long Life, High Growth, and High Margin Development Runway: Due to the high-quality nature of the drilling inventory, current production levels can be maintained for over 20 years at a drilling pace of 20 to 30 wells per year. The Acquired Assets also have significant upside potential to increase production with an accelerated development capital program should commodity and market dynamics become more constructive.
- Waterflood Provides Foundation for Further Enhanced Oil Recovery: Successful active waterfloods in the Acquired Assets demonstrate proven results in surrounding well performances and offer material production uplift potential with higher rates of return in established waterflood areas.
- Identified Opportunities to Unlock Value: Saturn intends to leverage its proven operating strategy and practices deployed in
Saskatchewan to enhance efficiencies, increase production, reduce operating costs, and expand margins from the Acquired Assets, thereby unlocking value not previously captured.
- Synergistic Operations and Further Scale in
- The Acquired Assets are expected to generate approximately
$251 million of Net Operating Income ("NOI") for the Next 12 Months ("NTM")(3); - Proved Developed Producing ("PDP") reserves of 44.1 million boe(1), with
$926 million of future net revenue discounted at 10% ("NPV10"); - Total Proved plus Probable ("TP+P") reserves of 78.4 million boe(1), with an NPV10 of
$1.4 billion ;
Attractive Acquisition Metrics:
Acquisition | Acquisition Metric | ||
$525MM | |||
Production | 13,000 boe/d | ||
Net Operating Income | $251MM | 2.1x | |
Reserves | |||
PDP Reserves | 44.1 MMboe | ||
PDP Reserve NPV10 | 0.65x | ||
TP+P Reserves | 78.4 MMboe | ||
TP+P Reserves NPV10 | 0.42 |
Pro Forma Metrics and Guidance Highlights
- Pro forma completion of the Acquisition, Saturn forecasts NTM production to average 38,000 to 40,000 boe/d (83% light/medium crude oil and NGLs)(4) at the Closing Date, (see "Revised Corporate Guidance" below for further details);
- PDP Reserves to total 104 million boe(1) with NPV10 of
$2.3 billion , equal to a Net Asset Value ("NAV") of$7.53 per basic share(3); - TP+P reserves to total 217 million boe(1) with an NPV10 of
$4.2 billion , a NAV of$16.87 per basic share(3); - The Acquisition is expected to generate meaningful financial accretion across multiple metrics:
- 13% accretive to PDP NAV per basic share(3), as of the Effective Date;
- 22% accretive to Adjusted funds flow(3) per basic share, over the next 12 months post Closing Date (see "Revised Corporate Guidance" below for further details);
- Net Debt to Adjusted EBITDA(3) increases modestly and is expected to be 1.2x-1.3x on closing of the Acquisition, dropping to approximately 1.0x - 0.9x at
June 30, 2025 , on an annualized basis and approximately two years from the Closing Date.
"The Acquired Assets are a perfect fit with Saturn's existing
Updated Corporate Guidance for 2024
The following table summarizes the Company's pro forma updated operating and financial guidance for the next 12 months following the Closing Date, reflecting changes to the Company's expected stand alone forecast.
Next 12 | Stand Alone | Pro Forma, Post-Closing | Change to | |
WTI oil price average | $US | 80.00 | 80.00 | - |
Average production(4) | Boe/d | 26,365 | 38,000 – 40,000 | +48 % |
Adjusted EBITDA(3), before derivatives | $MM | 477 | 698 – 736 | +50 % |
Adjusted EBITDA(3), net derivatives | $MM | 399 | 620 – 658 | +60 % |
Adjusted Funds Flow(3) | $MM | 337 | 502 – 540 | +53 % |
Adjusted Funds Flow Per Share(3) | $/sh | 2.09 | 2.46 – 2.65 | +22 % |
Development capital expenditures(3) | $MM | 203 | 301 | +53 % |
Free Funds Flow(3) | $MM | 128 | 191 – 229 | +64 % |
Free Funds Flow Per Share(3) | $/sh | 0.79 | 0.94– 1.12 | +30 % |
Free Funds Flow Yield(3) | % | 30 % | 36% - 43% | |
Decommissioning expenditures | $MM | 13 | 14 | +8 % |
Net Debt(3) Closing Date | $MM | 315 | 792 | +151 % |
Net Debt(3) to adjusted EBITDA(1) | Ratio | 0.9x | 1.2x – 1.3x | |
Net Debt at end of 12 month period | $MM | 584 - 682 | ||
Forward | Ratio | 0.9x – 1.0x | ||
Weighted average common shares | MM | 161.5 | 204.1 | +25 % |
Reserve Impact | Stand Alone | Pro Forma | Change | |
PDP Reserves(1) | MMBOE | 61.2 | 105.3 | 72 % |
PDP Reserve NPV10(1) | $MM | 1,402 | 2,328 | 66 % |
PDP NAV per Basic Share(1) | $/sh | 6.73 | 7.53 | 13 % |
TP+P Reserves(1)` | MMBOE | 145.3 | 223.7 | 54 % |
TP+P Reserves NPV10(1) | $MM | 2,790 | 4,234 | 52 % |
TP+P NAV per Basic Share(1) | $/sh | 15.33 | 17.08 | 11 % |
Transformed Debt Capitalization
In connection with the Acquisition, Saturn has secured a
"The evolution of our funding sources marks a pivotal moment in the Company's financial development, substantially reducing Saturn's cost of capital and increasing the Company's capital allocation flexibility," stated
Saturn has also secured a commitment to arrange a new RBL, with a borrowing base and available capacity of
Bought Deal Equity Offering
Concurrent with the Acquisition, Saturn has entered into an agreement in respect of the Offering, with
Each Subscription Receipt represents the right of the holder to receive, upon closing of the Acquisition, without payment of additional consideration, one common share of the Company.
Saturn has also granted the Underwriters an over-allotment option to purchase, in whole or part, up to an additional 6.38 million Subscription Receipts at the Offering Price to cover over-allotments, if any, exercisable at any time and from time to time until the date that is 30 days following the closing of the Offering. If the over-allotment option is exercised in full, gross proceeds from the Offering will be approximately
If the Acquisition is not completed as described above by
The Subscription Receipts (i) will be offered in all provinces and territories of
Advisors
About
Further information available on Saturn's website at www.saturnoil.com.
Notes: | |
(1) | See Reader Advisory "Reserve Disclosure" |
(2) | Source: |
(3) | See Reader Advisory "Non-GAAP and Other Financial Measures" |
(4) | See Production Breakdown by Product Type |
Reader Advisory
This news release is not an offer of the securities for sale in
Boe Disclosure
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.
Abbreviations and Frequently Reoccurring Terms
Saturn uses the following abbreviations and frequently recurring terms in this press release: "WTI" refers to West Texas Intermediate, a grade of light sweet crude oil used as benchmark pricing in
Reserves Disclosure
All reserves information pertaining to the Acquisition in this news release were prepared for the Company in a report provided by
Drilling Locations
This news release discloses "booked" drilling locations with respect to the Acquired Assets derived from the McDaniel Report and account for drilling locations that have associated proved and/or probable reserves, as applicable. Un-booked locations are internal estimates based on the Company's assumptions as to the number of wells that can be drilled per section based on industry practice and internal review. Un-booked locations do not have attributed reserves or resources. The drilling locations considered for future development will ultimately depend upon the availability of capital, regulatory approvals, seasonal restrictions, oil and natural gas prices, costs, actual drilling results, additional reservoir information that is obtained and other factors.
Supplemental Information Regarding Product Types
References herein to boe/d include gas or natural gas and NGLs which 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 are intended to provide the product type composition for the midpoint of Saturn's revised guidance production for the next 12 months post Closing Date:
Midpoint of NTM Production | Saturn Stand Alone | Pro Forma Acquisition |
Light and Medium Crude Oil (bbl/d) | 19,418 | 30,485 |
Natural Gas Liquids (boe/d) | 2,009 | 3,182 |
29,628 | 32,000 | |
Total (boe/d) | 26,365 | 39,000 |
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, such as net income (loss) and cash flow from operating activities as indicators of our performance. The Company's audited financial statements and MD&A for year ended
The following are non-GAAP financial measures: capital expenditures, free funds flow, net operating expenses and operating netback and operating netback net of derivatives. Where applicable, these non-GAAP financial measures are presented on a multiple, per boe or a per share basis resulting in non-GAAP financial ratios. These non-GAAP financial measures and ratios are not standardized financial measures under IFRS and might not be comparable to similar financial measures disclosed by other issuers. See the disclosure under the section "Non-GAAP Financial Measures and Ratios" in our MD&A for the year ended
The following are capital management measures used by the Company: net debt, adjusted EBITDA, adjusted funds flow, and free funds flow. See the disclosure under the "Capital Management" note in our audited financial statements for the year ended
Where applicable, the supplementary financial measures used in this news release are either a per unit disclosure of a corresponding GAAP measure, or a component of a corresponding GAAP measure, presented in the unaudited condensed consolidated interim financial statements. Supplementary financial measures that are disclosed on a per unit basis are calculated by dividing the aggregate GAAP measure (or component thereof) by the applicable unit for the period. Supplementary financial measures that are disclosed on a component basis of a corresponding GAAP measure are a granular representation of a financial statement line item and are determined in accordance with GAAP.
"Net Operating Income" for the Acquired Assets is based on the expected cash flow from operations of the Acquisition for 12 months from the Closing Date, with the production assumption of 13,555 boe/d (comprising 11,785 bbl/d of light and medium crude oil, 1,248 bbl/d of NGLs and 3,130 mcf/d of natural gas.
"Enterprise Value" or "EV" is calculated as market capitalization plus net debt. Management uses Enterprise Value to assess the valuation of the Company.
"Free Funds Flow Yield" is calculated as the free funds flow per basic share divided by the recent trading price of Saturn's shares of
Future Oriented Financial Information
Any financial outlook or future oriented financial information in this news release, as defined by applicable securities legislation, including future (but not limited to) operating and fixed costs (and reductions thereto), debt levels, net operating income, funds flow, cash flow and production targets has been approved by management of Saturn. Readers are cautioned that any such future-oriented financial information contained herein should not be used for purposes other than those for which it is disclosed herein. The Company and its management believe that the prospective financial information has been prepared on a reasonable basis, reflecting management's best estimates and judgments, and represent, to the best of management's knowledge and opinion, the Company's expected course of action. However, because this information is highly subjective, it should not be relied on as necessarily indicative of future activities or results.
Forward-Looking Information and Statements
Certain information included in this news 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", "will" or similar words suggesting future outcomes or statements regarding an outlook. Forward-looking information in this news release may include, but is not limited to, statements concerning: timing of the Acquisition; reserves information; satisfaction or waiver of the closing conditions in the definitive agreement of the Acquisition; receipt of required legal and regulatory approvals for the completion of the Acquisition (including court approval, approval of the
The forward-looking statements contained in this news release are based on certain key expectations and assumptions made by Saturn, including expectations and assumptions concerning the receipt of all approvals and satisfaction of all conditions to the completion of the Acquisition, the Offering, and Existing Senior Secured Term Loan, 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 geological characteristics of Saturn's properties, the characteristics of the Acquired Asset, the successful integration of the Acquired Assets into Saturn operations, the successful application of drilling, completion and seismic technology, prevailing weather conditions, prevailing legislation affecting the oil and gas industry, commodity prices, royalty regimes and exchange rates, the application of regulatory and licensing requirements, the availability of capital, labour and services, the creditworthiness of industry partners and the ability to source and complete asset acquisitions.
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), constraint in the availability of services, commodity price and exchange rate fluctuations, the current COVID-19 pandemic, actions of
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 news release, assumptions have been made regarding and are implicit in, among other things, the timely receipt of any required regulatory approvals and the satisfaction of all conditions to the completion of the Acquisition, Offering, and Existing Senior Secured Term Loan. 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 news 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 news release is expressly qualified by this cautionary statement.
All dollar figures included herein are presented in Canadian dollars, unless otherwise noted.
SOURCE
© Canada Newswire, source