Today, public energy Company Saturn Oil & Gas Inc. announced it successfully closed the acquisition of light-oil assets in the Oxbow area of Southeast Saskatchewan from Crescent Point Energy Corp. Indeed, Saturn acquired approximately 6,700 boe/d with over 450 net sections of land. Worth noting, these assets are primarily positioned across one of the most economical oil plays in North America.
In this regard, John Jeffrey, CEO of Saturn, commented; “The closing of this transformational acquisition has truly elevated Saturn to new heights. Besides, it puts our mark on the map for a very attractive purchase price.”
Moreover, “we have added high-quality, light oil assets to our portfolio, which now features a robust long-term inventory of future development drilling targets,” continued Mr. Jeffrey. Furthermore, “they are highly economic at current commodity prices. Therefore, the Saturn team is excited about the opportunity to generate compelling returns for our shareholders. Particularly while helping to meet the world’s growing energy needs in an environmentally responsible manner under Canada’s stringent regulatory regime.”
About the Acquisition’s Details
Worth noting, the total consideration for the Acquisition was $93 million. Additionally, Saturn funded this purchase through a combination of proceeds (senior secured term loan, a best-efforts agency private placement, and a concurrent non-brokered private placement).
According to the company, the Acquisition is aligned with its strategy to acquire and develop undervalued, low-risk opportunities. Particularly since they support the building of a strong portfolio with strategic development upside.
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Indeed, the Oxbow Assets currently produce primarily from the Frobisher and Midale formations and feature a sizeable inventory of targets for workover. Besides, they are high in development and optimization.
In brief, Saturn expects the assets to generate $65-70 million in net operating income over the next 12 months.
The benefits for the Company and its investors
The company also said the acquisition positions Saturn as one of the leading producers and landholders in Southeast Saskatchewan. For instance, some of the benefits that investors will have include: First, a production increase of more than 2,000% over current volumes. Moreover, with over 1,300% PDP reserves growth compared to the Company’s year-end 2020 reserves.
Second, a land base increased 775%, with more than 180% growth in booked drilling locations. Third, exposure to a conventional multi-zone asset base concentrated in the Midale / Frobisher formations. Fourth, the potential to generate significant annual free cash flow by optimizing and completing more than 500 existing wellbores over the next three years with low capital expenditures.
Fifth, locked-in area economics with approximately 70% of forecast production hedged over the next year, 60% for the second year, and about 50% for years three and four. Sixth expanded scale provides increased strategic optionality to adapt to changing market conditions. At the same time, financial capacity is improved due to increased cash flow generation and low leverage, as Saturn anticipates being debt-free in 24 months based on current strip pricing.
An ESG move forward? Saturn thinks so
And finally, a robust infrastructure position with multiple sales points and capacity for future growth. Particularly, this would be possible with 60 owned, operated, and well-maintained essential production facilities with excess capacity.
Lastly, Saturn said the acquisition provides the company with strengthened ESG performance; thus, by minimal freshwater usage due to no fracture stimulations. Also, because of the future potential to initiate an enhanced oil recovery initiative using only produced water.
Indeed, the company will minimize its surface footprint due to pipeline-connected, multi-well pad development of the Oxbow Assets. Also, because the company will accelerate liability clean-up; particularly, with the support of over $10 million of federal Accelerated Site Closure Program funding.