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Alphastox Comments on Saturn Oil & Gas (TSXV:SOIL)

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Dear Alphastox Subscribers,

I wanted to shed some light on Saturn Oil and Gas (TSXV: SOIL). The company announced their Q1 2019 results and even though this isn’t a hot cannabis name with parabolic moves, we cannot afford to take our eyes off what really matters for shareholders…revenue, profits and CASH.

We’ve been covering Saturn on and off for the last couple of years and I don’t think the company has ever been in a better financial position. I’m not going to go through the numbers with you in detail as I’ve attached their news release below as well as a link to it here: https://www.globenewswire.com/news-release/2019/05/06/1817344/0/en/Saturn-Oil-Gas-Inc-Announces-Strong-Q1-2019-Results-with-Record-Quarterly-Production.html, but I think it’s important for investors to realize that it might be the sexiest oil company on the exchange, because it’s one that’s in a solid financial position, with an experienced and competent management team that has the war chest and financial backing to take this company to new highs and potential drive substantial value for shareholders.

John and his team came in and totally turned the company around at a time when energy prices were at its low and the company was in financial turmoil. He took on a position that no one before him could make work and somehow turned it around and is on his way to make into a massive success. It’s his perseverance through tough times and determination that pulled SOIL from its worst days and it’s the same fight that could turn it into a major powerhouse in the industry. At a time where so many energy companies are in need of cash but have good assets they can’t continue to fund; SOIL is in a position to take advantage of these opportunities and drastically expand their footprint in the area. This is what I expect from the team and I hope to see a major acquisition sometime this year. If that we’re to happen, SOIL would be in a totally different position financially and valuation wise so make sure to stay tuned. They’re on cruise control now with a great company, now their focus has shifted to how they’re going to turn it into a spectacular cash-cow. He’s already done it once, and he’s on a mission to do it again.

Make sure to keep SOIL on your radar screens right now. I am working to set up another podcast interview with SOIL’s CEO so I will send out a note on our social media channels when that’s ready to go. Like I’ve said before, I am a believer in John and his team and have been for several years now. He’s done everything he’s said he was going to do and frankly has exceeded my expectations and I don’t foresee that stopping anytime soon. I’ve learned it’s better to go unnoticed and slowly build your position organically as well as through acquisition through desperate sellers that try to do it in a hot market. We’re not in a hot energy market now – so for anyone with cash and knowhow on their team, they couldn’t be in a better position.

Let me know your thoughts.

As always, if you have any questions, please feel free to reach out anytime. I look forward to hearing from you.

Best,
Etienne

Disclosure: Transcend Capital Inc. is a shareholder and has been paid a fee

CALGARY, Alberta, May 06, 2019 (GLOBE NEWSWIRE) — Saturn Oil & Gas Inc. (“Saturn” or the “Company”) (TSX.V: SOIL) (FSE: SMK) today announced its financial and operating results for the three month period ended March 31, 2019.
The Company’s unaudited interim financial statements and corresponding Management’s Discussion and Analysis (“MD&A”) for the three month period ended March 31, 2019, are available on SEDAR at www.sedar.com and on Saturn’s website at www.saturnoil.com.  Copies of the materials can also be obtained upon request without charge by contacting the Company directly.  Please note, currency figures presented herein are reflected in Canadian dollars, unless otherwise noted.

Q1 2019 Highlights

  • Achieved record production of 806 barrels of oil per day (bbls/d), an increase of 318% compared to the same period in 2018, and an increase of 53% over the previous quarter, with a peak production rate in the period that exceeded 1,400 bbls/d.
  • Realized strong operating netbacks of $49.25 per bbl, a 232% improvement over the $14.82 per bbl in Q4 2018 due to higher realized prices, and an increase of 16% over the first quarter of 2018 primarily attributable to lower royalties per boe stemming from increased drilling on Crown land where royalties are significantly lower relative to freehold land.
  • Revenue of $4.6 million was 319% higher, or $3.5 million greater than the first quarter of 2018, directly related to Saturn’s successful drilling program and production growth over the past 12 months.
  • Drilled, completed and tied-in nine 100% working interest extended reach horizontal (“ERH”) wells in the first quarter at an average cost per well of approximately $1.09 million, executed despite extreme cold weather in the period which delayed some activity.  The program included:
    • Five wells in Prairiedale which posted an area average initial production rate after 30 days (“IP30”) of 91 bbls/d, with an IP30 of 132 bbls/d for the top-producing area well;
    • Two wells in Milton had an average IP30 of 62 bbls/d, and an IP30 of 74 bbls/d for the area’s top-producing well; and
    • Two wells in Kerrobert posted an area average initial production rate after 60 days (“IP60”) of 144 bbls/d, with the top producing well in the area posting an IP30 of 153 bbls/d.
  • Saturn also further strengthened the Company’s asset portfolio with the acquisition of 9.13 sections of land at an average cost of approximately $202 per hectare, situated within the prolific and highly economic Viking play in Saskatchewan, bringing Saturn’s total acreage to 50.75 gross sections as at March 31, 2019.
  • Capital expenditures in Q1 of $9.85 million were lower than originally budgeted and were funded from the Company’s USD$20 million revolving note facility, coupled with cash flow generated during the period.  Capital expenditures for the balance of 2019 will be reviewed and determined quarterly depending on oil and differential prices, availability of funding sources and the broader operating environment.
  • At March 31, 2019, Saturn had US$17.27 million of borrowings (CAD$23.09 million using March 31, 2019 exchange rate) drawn against the Company’s US$20.0 million Revolving Note (CAD$26.74 million using December 31, 2018 exchange rate).
  • Relocated the Company’s corporate headquarters to Calgary, Alberta, designed to support Saturn’s ongoing growth, enhance market visibility and build further relationships with energy-focused capital markets participants.

“Due to the exceptional operational execution of our team, including through the extremely cold weather experienced in the first quarter, Saturn delivered record production volumes,” stated John Jeffrey, CEO of Saturn.  “As a result of our continued success, we are well positioned to execute our aggressive growth strategy through 2019 with a focus on enhancing production, reserves and cash flow per share, and ultimately to provide compelling returns for shareholders.”

Outlook

Building on the performance momentum achieved in the first quarter, the Company is well positioned to drive further success in 2019. Over the past few years, the Company has assembled a high-quality asset base comprised of light oil properties with proven production in west-central Saskatchewan, and successfully leveraged its extensive operational experience while aggressively managing costs.  This combination has allowed Saturn to continue to generate attractive netbacks while advancing our capital activities in a prudent manner.

Saturn intends to remain focused on generating value for shareholders through the successful execution of its full year 2019 capital budget, estimated at approximately $41.5 million which will be directed to drilling, completion, equip and tie-in of an estimated 36 wells within the Viking light oil area, targeting an exit rate of approximately 2,000 bbls/d.  With increases in reserves, production and cash flow, the Company anticipates benefitting from greater financial flexibility and access to capital to underpin future growth strategies.


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