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Saturn Oil + Gas Inc. 18.04.2019

Saturn Oil & Gas Inc. Announces 2018 Year-End Reserves and 492% Increase in Proved Developed Producing Reserves

 

Saturn achieved record corporate reserves growth in 2018 marked by a 492% increase in proved developed producing, 323% in total proved and 467% in proved plus probable reserves

 

CALGARY, ALBERTAApril 18, 2019 - Saturn Oil & Gas Inc. (“Saturn” or the “Company”) (TSX.V: SOIL) (FSE: SMK) is pleased to announce the results of our independent 2018 year-end reserves evaluation conducted by Ryder Scott Company, LP (“Ryder Scott”) with an effective date of December 31, 2018 (the “Ryder Scott Report”).

 

Throughout 2018, Saturn continued to execute our aggressive growth strategy focused within the prolific and highly economic Viking play in Saskatchewan.  Our 2018 capital expenditures program totaled $20.7 million and was directed to the acquisition of 26.3 net sections of land and the drilling and completion of 18 (17 net) Viking light oil wells, including 15 extended reach horizontal ("ERH") wells.  The success of this program is demonstrated by the significant growth in our reserves base year-over-year and strong capital efficiencies, which has set the stage for continued expansion and value creation through 2019 and beyond. 

 

Reserves Highlights

Through 2018, Saturn achieved record growth in reserves at the fastest pace in the Company’s history.  Following are key reserves highlights as at December 31, 2018 across various reserves categories: 

 

Proved Developed Producing (“PDP”)

-          492% increase over 2017 to 557.1 thousand barrels (“Mbbls)

-          320% increase on a per share (basic) basis

-          853% growth in net present value discounted at 10% (before tax) (“NPV10 BT) over 2017

-          Replaced 497% of 2018 annual production

-          Achieved Finding, Development and Acquisition (“FD&A”) costs of $44.78/bbl including change in Future Development Capital (“FDC”)

-          Generated a recycle ratio of 0.94x based on 2018 average operating netbacks of $42.18/bbl

 

Total Proved (“TP”)

-          323% increase over 2017 to 2,190.6 Mbbls

-          200% increase on a per share (basic) basis

-          769% growth in NPV10 BT over 2017

-          Replaced 1,795% of 2018 annual production

-          Achieved FD&A cost of $21.17/bbl including change in FDC

-           Generated a recycle ratio of 1.99x based on 2018 average operating netbacks


 

Total Proved + Probable (“TP+P”)

-          467% increase over 2017 to 4,554.9 Mbbls

-          302% increase on a per share (basic) basis

-          768% growth in NPV10 BT over 2017

-          Replaced 4,025% of 2018 annual production

-          Achieved FD&A cost of $20.56/bbl including change in FDC

-          Generated a recycle ratio of 2.05x based on 2018 average operating netbacks


 

 

“I am extremely proud of our achievements in 2018, delivering an unprecedented year of reserves growth across all categories,” stated John Jeffrey, Chairman & CEO.  “These results highlight the depth of our high value, light oil Viking portfolio in Saskatchewan where we continue to expand our presence.  With a strong balance sheet and excellent capital and operating efficiencies to support our inventory of development opportunities, Saturn is in a strong position to continue creating value for our shareholders in 2019 and beyond.”

 

Reserves Summary

Year-end 2018 reserves were evaluated by independent reserves evaluator Ryder Scott in accordance with the definitions, standards and procedures contained in the Canadian Oil and Gas Evaluation Handbook (“COGE Handbook”) and National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities (“NI 51-101”). A reserves committee, comprised of a majority of independent board members, reviews the qualifications and appointment of the independent reserves evaluator and reviews the procedures for providing information to the evaluators. The reserves evaluation was based on Ryder Scott forecast pricing and foreign exchange rates. Reserves included herein are stated on a company gross basis (working interest before deduction of royalties without inclusion of any royalty interests) unless noted otherwise. Additional reserves information will be included in Saturn’s NI 51-101 Forms regarding Statement of Reserves Data and Other Oil and Gas Information which will be filed on SEDAR on or before April 30, 2019.

 

The following tables outline Saturn’s reserves as at December 31, 2018. No provision for interest, risk management contracts, debt service charges and general and administrative expenses have been made and it should not be assumed that the net present values of the reserves estimated by Ryder Scott represents the fair market value of the reserves.

 

Summary of Corporate Reserves

The following is a summary of the Company’s estimated corporate reserves as at December 31, 2018, as evaluated by Ryder Scott.

 

 Reserves Category

Light and Medium Oil

Heavy Oil

Natural Gas Liquids

Conventional Natural Gas 

Barrels of Oil Equivalent

Liquids Ratio

(bbls)

(bbls)

(bbls)

(Mcf)

(bbls)

(%)

Proved

 

 

 

 

 

 

     Developed Producing

557,080

-

-

-

557,080

100

     Developed Non-producing

-

63,598

-

-

63,598

100

     Undeveloped

1,285,293

284,632

-

-

1,569,925

100

Total Proved

1,842,373

348,231

-

-

2,190,603

100

Probable

1,989,976

374,393

-

-

2,364,369

100

Total Proved + Probable

3,832,348

722,624

-

-

4,554,972

100

 

Reconciliation of Reserves

FACTORS

Total Proved (bbls)

Total Probable (bbls)

Total Proved + Probable (bbls)

As of December 31, 2017

517,800

285,700

803,500

Acquisitions (1)

1,568,430

1,854,600

3,423030

Dispositions

-

-

-

Drilling (Extensions and Improved Recovery)

487,000

355,300

842,300

Discoveries

-

-

-

Technical Revisions

(330,678)

(132,531)

(463,209)

Pricing (Economic Factors)

2,300

1,300

3,600

Production (2)

(54,249)

0

(54,249)

As of December 31, 2018

2,190,603

2,364,369

4,554,972

(1)       Positive additions are comprised of remaining reserves assessed on acquired lands, and account for production occurring between the closing date (August 2018) and evaluation effective date.

(2)       Excludes production on lands acquired during 2018

 

Net Present Value of Future Revenues Before Income Taxes

 

The following table is a summary of the estimated net present values of future net revenue (before income taxes) associated with Saturn’s reserves as at December 31, 2018, discounted at the indicated percentage rates per year, as evaluated in the Ryder Scott Report.

 

Reserves Category

0%

5%

10%

15%

20%

(M$)

(M$)

(M$)

(M$)

(M$)

Proved

 

 

 

 

 

   Developed Producing

31,354

25,038

21,039

18,353

16,440

   Developed Non-Producing

2,231

1,810

1,516

1,307

1,152

   Undeveloped

52,767

35,637

24,793

17,598

12,576

Total Proved

86,352

62,485

47,348

37,258

30,169

Probable

103,925

65,381

44,021

31,118

22,727

Total Proved + Probable

190,276

127,866

91,369

68,376

52,896­­­­

 

 

 

 

 

 

 

Future Development Capital

 

The following table provides a summary of the estimated FDC required to bring Saturn’s TP and TP+P non-producing and undeveloped reserves to production, as reflected in the Ryder Scott Report, which costs have been deducted in Ryder Scott’s estimation of future net income associated with such reserves.

 

 

Total

Total Proved

Future Development Costs (M$)

Proved

+ Probable

2019

24,500

31,475

2020

10,361

34,652

2021

549

10,992

2022

-

-

Remainder

-

-

Total FDC undiscounted

35,410

77,119

 

 

Net Asset Value (“NAV”)

 

The following table sets out a calculation of NAV based on the estimated before-tax estimated net present value of future net income (discounted at 10%) ("NPV10 BT") associated with our PDP, TP and TP+P reserves, as evaluated in the Ryder Scott Report.

 

 

PDP

TP

TP+P

NPV10 BT (M$)

21,039

47,348

91,369

 

Estimated long-term debt, less cash collateralized letters of credit (unaudited) (M$)

(9,603)

 

(9,603)

 

(9,603)

Net Asset Value (M$)

11,436

37,745

81,766

 

 

 

 

Basic shares outstanding (M)

227,963

227,963

227,963

Estimated NAV/share ($)

0.05

0.17

0.36

 

Price Forecast

 

The following table summarizes Ryder Scott’s commodity price forecast and foreign exchange rate and inflation rate assumptions as at December 31, 2018, as applied in the Ryder Scott Report, for the next five years.

 

 Year

Exchange Rate

WTI @ Cushing

Canadian Light Sweet 40º API

Western Canada Select 20.5º API

$C/$US

(US$/bbl)

(C$/bbl)

(C$/bbl)

2019

0.740

55.50

68.24

52.77

2020

0.776

63.00

74.72

58.84

2021

0.779

66.00

78.29

62.17

2022

0.783

70.00

82.99

66.58

2023

0.785

72.00

85.33

68.77

 

To learn more about Saturn Oil & Gas Inc., please visit www.saturnoil.com.

 

About Saturn Oil & Gas Inc.

Saturn Oil & Gas Inc. (TSX.V: SOIL) (FSE: SMK) is a public energy Company focused on the acquisition and development of undervalued, low-risk assets. Saturn is driven to build a strong portfolio of cash flowing assets with strategic land positions.  De-risked assets and calculated execution will allow Saturn to achieve growth in reserves & production through retained earnings. Saturn's portfolio will become its key to growth and provide long-term stability to shareholders.

 

Investor & Media Contact:

Saturn Oil & Gas

John Jeffrey, MBA - CEO

Tel: (306) 955-9946

www.saturnoil.com

 

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

 

Unaudited financial information

Certain financial and operating information included in this news release for the quarter and year ended December 31, 2018, including finding, development and acquisition costs, are based on estimated unaudited financial results for the quarter and year then ended, and are subject to the same limitations as discussed under "Forward-looking information" set out below. These estimated amounts may change upon the completion of audited financial statements for the year ended December 31, 2018 and changes could be material.

 

Disclosure of Oil and Gas Reserves Data and Operational Information

The reserves data estimates contained herein are estimates only and there is no guarantee that the estimated reserves will be recovered or that the related estimates of future net income will be realized. There can be no assurance that the forecast prices and cost assumptions applied by Ryder Scott in evaluating the Company's reserves will be attained, and variances between actual and forecast prices and costs could be material.  Actual reserves may be greater than or less than the estimated volumes provided herein, and it should not be assumed that the estimates of future net income presented herein represent the fair market value of the reserves.  Estimates in respect of individual properties may not reflect the same confidence level as estimates of reserves and future net income for all properties, due to the effects of aggregation.  The Company's belief that it will establish additional reserves over time with conversion of probable undeveloped reserves into proved reserves is a forward-looking statement and is based on certain assumptions and is subject to certain risks, as discussed below under the heading "Forward-looking information".

 

This news release discloses certain metrics commonly used in the oil and natural gas industry – namely ""finding, development and acquisition costs",  "net asset value" and “reserve life index” – that do not have standardized meanings or methods of calculation under applicable laws, International Financial Reporting Standards, the COGE Handbook or other applicable professional standards.  Accordingly, such measures, as determined by the Company, may not be comparable to similarly defined or labelled measures presented by other companies, and therefore should not be used to make such comparisons. These metrics have been included herein to provide readers with additional information to evaluate the Company's performance but should not be relied upon for comparative purposes.  Management uses oil and gas metrics for its own performance measurements and to provide shareholders with measures to compare Saturn’s operations over time. Readers are cautioned that the information provided by these metrics, or that can be derived from the metrics presented in this news release, should not be relied upon for investment or other purposes.

 

Finding, Development and Acquisition costs (“FD&A costs”)

"Finding, development and acquisition costs" or "FD&A costs" are calculated by dividing the sum of all exploration and development capital expenditures for the year inclusive of the net acquisition costs and disposition proceeds (in dollars) by the change in reserves within the applicable reserve’s category inclusive of changes due to acquisitions and dispositions (in bbls). FD&A costs, including FDC, includes all capital expenditures in the year inclusive of the net acquisition costs and disposition proceeds as well as the change in FDC required to bring the reserves within the specified reserves category on production.

 

FD&A costs take into account reserves revisions and capital revisions during the year. The aggregate of the costs incurred in the financial year and changes during that year in estimated FDC may not reflect total FD&A costs related to reserves additions for that year.  FD&A costs have been presented in this news release because acquisitions and dispositions can have a significant impact on Saturn's ongoing reserves replacement costs and excluding these amounts could result in an inaccurate portrayal of its cost structure.  Management uses FD&A as measures of its ability to execute its capital programs (and success in doing so) and of its asset quality.

 

Net Asset Value (“NAV”)

"Net asset value" is calculated by taking each reserve category future net income per the Ryder Scott Report, on a before tax basis, discounted at 10% and adding undeveloped land value and proceeds from stock option exercises and subtracting decommissioning obligations, discounted at 10%, and net debt.  Management uses this to measure the relative change in net asset value over a period of time.

 

Forward-Looking Information and Statements

Certain statements contained in this release include statements which contain words such as "anticipate", "could", "should", "expect", "seek", "may", "intend", "likely", "will", "believe" and similar expressions, relating to matters that are not historical facts, and such statements of our beliefs, intentions and expectations about development, results and events which will or may occur in the future, constitute "forward-looking information" within the meaning of applicable Canadian securities legislation and are based on certain assumptions and analysis made by us derived from our experience and perceptions. Forward-looking information in this release includes, but is not limited to: expected cash flow provided by continuing operations; future capital expenditures, including the amount and nature thereof; oil and natural gas prices and demand; expansion and other development trends of the oil and gas industry; business strategy and outlook; expansion and growth of our business and operations; and maintenance of existing customer, supplier and partner relationships; supply channels; accounting policies; credit risks; and other such matters.

 

All such forward-looking information is based on certain assumptions and analyses made by us in light of our experience and perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate in the circumstances. The risks, uncertainties, and assumptions are difficult to predict and may affect operations, and may include, without limitation: foreign exchange fluctuations; equipment and labour shortages and inflationary costs; general economic conditions; industry conditions; changes in applicable environmental, taxation and other laws and regulations as well as how such laws and regulations are interpreted and enforced; the ability of oil and natural gas companies to raise capital; the effect of weather conditions on operations and facilities; the existence of operating risks; volatility of oil and natural gas prices; oil and gas product supply and demand; risks inherent in the ability to generate sufficient cash flow from operations to meet current and future obligations; increased competition; stock market volatility; opportunities available to or pursued by us; and other factors, many of which are beyond our control.

 

Actual results, performance or achievements could differ materially from those expressed in, or implied by, this forward-looking information and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking information will transpire or occur, or if any of them do, what benefits will be derived there from. Except as required by law, Saturn disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise.

 

The forward-looking information contained herein is expressly qualified by this cautionary statement.

 

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