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Saturn Oil & Gas Inc. Announces 2019 Year-End Reserves Highlighted by 65% Increase in Total Proved Reserves

Saturn achieved strong corporate reserves growth in 2019 marked by a 57% increase in proved developed producing, 65% in total proved and 63% in proved plus probable reserves

CALGARY, Alberta, April 16, 2020 (GLOBE NEWSWIRE) -- Saturn Oil & Gas Inc. (“Saturn” or the “Company”) (SOIL.V) (SMK.F) is pleased to announce the results of our independent 2019 year-end reserves evaluation by Ryder Scott Company, LP (“Ryder Scott”) with an effective date of December 31, 2019 (the “Ryder Scott Report”) 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”). The reserves evaluation was based on Evaluator Average 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.

Highlights of the Company’s proved developed producing ("PDP"), total proved ("TP") and total proved plus probable ("TP+P") reserves from the Ryder Scott Report are provided below. All finding and development ("F&D")1 and finding, development and acquisition ("FD&A")1 costs below include changes in future development capital ("FDC"), and recycle ratios1 are calculated based on Saturn’s 2019 estimated unaudited average operating netback1 of $51.98/bbl. Additional details of the Ryder Scott Report, including the Company’s NI 51-101 Forms (F1, F2 and F3) regarding our Statement of Reserves Data and Other Oil and Gas Information, have been filed on SEDAR at and posted on Saturn’s website at  Currency figures presented herein are reflected in Canadian dollars, unless otherwise noted.

Successful 2019 Capital Program Significantly Expanded Reserves

Saturn’s 2019 capital program of $16.4 million focused on the development of the Company’s prolific and highly economic light oil Viking play in Saskatchewan. Ongoing efforts to control both capital expenditures and operating costs combined with strong operating performance led to continued improvements in the Company’s capital efficiencies. Our disciplined capital program was directed to the drilling and completion of 17.0  net extended reach horizontal (“ERH”) Viking light oil wells and the acquisition of 19.3 net sections of land in our core areas. Following are highlights of changes within each reserves category compared to 2018.

Proved Developed Producing

  • 57% increase to 875.0 thousand barrels (“Mbbls”)
  • 53% increase on a per share (basic) basis
  • 26% growth in net present value discounted at 10% (before tax) (“NPV10 BT”)
  • Achieved FD&A costs of $29.38/bbl and F&D costs of $27.34/bbl, 27% and 19% lower than 2018
  • Generated FD&A and F&D recycle ratios of 1.8x and 1.9x, respectively
  • Total PDP reserve additions of 600.6 Mbbls replaced 213% of production
  • PDP reserves represent 24% of TP reserves, consistent with the prior year

Total Proved

  • 65% increase to 3,612.5 Mbbls
  • 60% increase on a per share (basic) basis
  • 29% growth in NPV10 BT
  • Achieved FD&A costs of $28.98/bbl and F&D costs of $28.26/bbl, 23% and 21% lower than 2018
  • Generated both FD&A and F&D recycle ratios of 1.8x
  • Total TP reserve additions of 1,704.5 Mbbls replaced 603% of production
  • TP reserves represent 49% of TP+P reserves, consistent with the prior year

Total Proved + Probable     

  • 63% increase to 7,418.0 Mbbls
  • 58% increase on a per share (basic) basis
  • 22% growth in NPV10 BT
  • Achieved FD&A costs of $26.21/bbl and F&D costs of $25.82/bbl, 9% and 7% lower than 2018
  • Generated both FD&A and F&D recycle ratios of 2.0x
  • Total TP+P reserve additions of 3,145.6 Mbbls replaced 1,113% of production 

(1) Non-IFRS Measure. See “Information Regarding Disclosure on Oil and Gas Reserves and Non-IFRS Measures” within this press release.

“I am extremely proud of Saturn’s success in delivering robust reserves growth across all categories while demonstrating the benefit of maintaining operational excellence, focusing on cost controls and prioritizing ESG initiatives,” said John Jeffrey, CEO of Saturn. “Saturn’s long-term sustainability is underpinned by our ability to respond quickly to changing market conditions and our active risk management and hedging program. Despite the prevailing global volatility, Saturn is positioned for resiliency, and to continue pursuing accretive opportunities to expand our high-quality asset base, enhance funds flow and support continued financial flexibility.”

Summary of Corporate Reserves

The following is a summary of the Company’s estimated corporate reserves as at December 31, 2019, 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
(Mbbls) (Mbbls) (Mbbls) (Mcf) (Mboe) (%)
  Developed Producing 875.0 - - - 875.0 100
  Developed Non-producing - - - - - -
  Undeveloped 2,549.4 188.0 - - 2,737.5 100
Total Proved 3,424.5 188.0 - - 3,612.5 100
Probable 3,512.5 292.9 - - 3,805.4 100
Total Proved + Probable 6,937.0 480.9 - - 7,418.0 100

Reconciliation of Reserves

FACTORS Total Proved
Total Probable
Total Proved + Probable
As of December 31, 2018 2,190.6   2,364.4   4,555.0  
Acquisitions 765.8   2,438.6   3,204.4  
Dispositions -   -   -  
Drilling (Extensions and Improved Recovery) 1,239.6   (184.9 ) 1,054.7  
Discoveries -   -   -  
Technical Revisions (300.0 ) (720.8 ) (1,020.8 )
Pricing (Economic Factors) (0.9 ) (91.8 ) (92.7 )
Production (282.6 ) -   (282.6 )
As of December 31, 2019 3,612.5   3,805.4   7,418.0  

(1) Reserve additions under Infill drilling, Improved recovery, and Extensions are combined and reported as “Drilling (Extensions and Improved Recovery)”.
(2) Drilling (Extensions and Improved Recovery) column has a negative Total Probable reconciliation due to the substantial volume of reserves converted from probable to proven/producing.
(3) Technical revisions accounted for 12% of the total proved, 21% of the total probable and 17% of the total proved plus probable reconciliation.
(4) Company Gross Reserves exclude royalty volumes

Net Present Value of Future Net Revenue 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, 2019, discounted at the indicated percentage rates per year, as evaluated in the Ryder Scott Report.

Reserves Category 0 % 5 % 10 % 15 % 20 %
(MM$)   (MM$)   (MM$)   (MM$)   (MM$)  
 Developed Producing 34.85   30.09   26.45   23.71   21.61  
 Developed Non-Producing -   -   -   -   -  
 Undeveloped 69.26   48.80   34.60   24.68   17.59  
Total Proved 104.12   78.89   61.05   48.39   39.19  
Probable 128.53   79.08   50.60   33.64   23.13  
Total Proved + Probable 232.64   157.97   111.65   82.03   62.32  

Future Development Capital

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

  Total Total Proved
Future Development Costs (MM$) Proved + Probable
2020 18.7 18.7
2021 22.1 22.1
2022 26.4 26.4
2023 - 30.0
Remainder - 47.8
Total FDC undiscounted 67.2 141.9

Price Forecast
The following table summarizes Ryder Scott’s commodity price forecast and foreign exchange rate assumptions as at December 31, 2019, 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
US$/C$ (US$/bbl) (C$/bbl) (C$/bbl)
2020 0.76 60.00 71.08 55.74
2021 0.77 63.00 73.64 58.14
2022 0.77 66.00 76.86 61.16
2023 0.77 68.00 78.99 63.17
2024 0.77 70.00 81.12 65.16

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. A reserves committee, comprised of independent board members, reviews the qualifications and appointment of the independent reserves evaluator and reviews the procedures for providing information to the evaluators.

2019 Capital Program Efficiency

  Finding, Development & Acquisition (“FD&A”)(1) Finding & Development
Capital Costs ($000s)            
  Exploration and Development capital(2)   16,420.7 16,420.7 16,420.7 16,420.7 16,420.7 16,420.7
  Acquisition capital(2)   1,224.0 1,224.0 1,224.0 - - -
  Net change in FDC(3) - 31,753.0 64,807.0 - 31,753.0 64,807.0
Total capital 17,644.7 49,397.7 82,451.7 16,420.7 48,173.7 81,227.7
Reserves Additions (Mboe)            
  Total reserves, end of year 875.0 3,612.5 7,418.0 875.0 3,612.5 7,418.0
  Total reserves, beginning of year 557.1 2,190.6 4,555.0 557.1 2,190.6 4,555.0
  Production 282.6 282.6 282.6 282.6 282.6 282.6
Total additions 600.6 1,704.5 3,145.6 600.6 1,704.5 3,145.6
2019 FD&A and F&D Costs ($/boe) 29.38 28.98 26.21 27.34 28.26 25.82
2018 FD&A and F&D Costs ($/boe) 40.09 37.54 28.73 33.92 35.69 27.89
2019 Recycle Ratio(4) 1.8x 1.8x 2.0x 1.9x 1.8x 2.0x
2018 Recycle Ratio(4) 0.8x 0.8x 1.1x 0.9x 0.8x 1.1x

(1) The calculation of F&D and FD&A costs incorporates the change in FDC required to bring proved undeveloped and probable reserves into production. In all cases, the F&D or FD&A number is calculated by dividing the identified capital expenditures, after changes in FDC, by the applicable reserves additions. We have disclosed both F&D costs and FD&A costs because historically, acquisition costs have been a significant component of our total capital expenditures and strategy, and also due to the difficulty in allocating changes in future development costs between reserve additions from drilling, technical revisions and acquisitions.
(2) Exploration, development and acquisition capital (unaudited) related to: land acquisition and retention; drilling; completions; tangible well site; and tie-ins.
(3) FDC as per Ryder Scott, based on Ryder Scott’s December 31, 2019 forecast prices and costs.
(4) Recycle ratio is defined as operating netback for the year, divided by F&D or FD&A costs, as applicable, on a per boe basis. Operating netback is calculated as revenue minus royalties, operating costs and transportation expense on a per boe basis. Saturn’s unaudited estimated operating netback in 2019 and 2018 averaged $51.98/bbl and $14.85/bbl, respectively.
(5) Columns may not add due to rounding.

Financial Discipline and Cost Control

In addition to reserves data, Saturn also announces an update on the Company’s commitment to financial discipline and cost controls. In response to the impacts of COVID-19, as well as extremely low commodity prices, Saturn has proactively reduced corporate salaries for all employees by 20%. However, the safety and security of Saturn’s employees and service providers remains a top priority and we continue to follow all required and recommended practices both in the field and the office to help curb the spread of the Coronavirus.

Option Grant

Saturn also announces that pursuant to the Company's Stock Option Plan (the “Plan”) it has granted a total of 500,000 stock options at a price of $0.10 per common share to Saturn’s new board member, Jim Payne, who was appointed on March 11, 2020. As per the Plan, the options granted are exercisable until August 14, 2024 and vest over a period of 18 months from the date of grant. Grant of the options are subject to the approval of the TSX Venture Exchange. All securities issued on exercise thereof are subject to a hold period expiring four months and one day from the date hereof.

About Saturn Oil & Gas Inc.

Saturn Oil & Gas Inc. (SOIL.V) (SMK.F) 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

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, 2019, including operating netback, F&D costs and FD&A costs, are based on estimated unaudited financial results for the 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, 2019 and changes could be material.

Information Regarding Disclosure on Oil and Gas Reserves and Non-IFRS Measures

Our oil and gas reserves statement for the year ended December 31, 2019, which will include complete disclosure of our oil and gas reserves and other oil and gas information in accordance with NI 51-101, will be available on our SEDAR profile at today. The recovery and reserve estimates contained herein are estimates only and there is no guarantee that the estimated reserves will be recovered. In relation to the disclosure of estimates for individual properties or subsets thereof, such estimates may not reflect the same confidence level as estimates of reserves and future net revenue for all properties, due to the effects of aggregation.

This press release contains metrics commonly used in the oil and natural gas industry, such as "recycle ratio", "finding and development costs", "finding and development recycle ratio", "finding, development and acquisition costs", finding, development and acquisition recycle ratio”, “production replacement”, and “production replacement ratio”. Each of these metrics are determined by Saturn as specifically set forth in this news release. These terms do not have standardized meanings or standardized methods of calculation and therefore may not be comparable to similar measures presented by other companies, and therefore should not be used to make such comparisons. Such metrics have been included to provide readers with additional information to evaluate the Company’s performance however, such metrics should not be unduly relied upon for investment or other purposes. Management uses these metrics for its own performance measurements and to provide readers with measures to compare Saturn’s performance over time.

Both F&D and FD&A costs take into account reserves revisions during the year on a per boe basis. The aggregate of the costs incurred in the financial year and changes during that year in estimated FDC may not reflect total F&D costs related to reserves additions for that year. Finding and development costs both including and excluding acquisitions and dispositions have been presented in this press release because acquisitions and dispositions can have a significant impact on our ongoing reserves replacement costs and excluding these amounts could result in an inaccurate portrayal of our cost structure.

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 revenues 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 revenues 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 revenue 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 press release contains financial and performance metrics that are not defined in IFRS and do not have standardized meanings or standardized methods of calculation. As such, these terms may not be comparable to similar measures presented by other companies, and therefore should not be used to make such comparisons. Such metrics have been included herein to provide readers with additional information to evaluate the Company's performance, however such metrics should not be unduly relied upon. 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 press release, should not be relied upon for investment or other purposes.

Within this press release, references are made to “operating netback” which is not defined by IFRS and therefore may not be comparable to performance measures presented by others. Operating netback represents revenue less royalties, operating costs and transportation expense. The operating netback is then divided by the working interest production volumes to derive the operating netback on a per Boe basis. Management believes that in addition to net income (loss) and cash flow from operating activities, operating netback is a useful supplemental measure as it assists in the determination of the Company’s operating performance, leverage and liquidity.  Operating netback is commonly used by investors to assess performance of oil and gas properties and the possible impact of future commodity price changes on energy producers. Investors should be cautioned, however, that these measures should not be construed as an alternative to either net income (loss) or cash flow from operating activities, which are determined in accordance with IFRS, as indicators of the Company’s performance.

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.

Oil and Gas Advisories

Where amounts are expressed on a barrel of oil equivalent (“Boe”) basis, natural gas volumes have been converted to Boe using a ratio of 6,000 cubic feet of natural gas to one barrel of oil (6 Mcf: 1 Bbl). This Boe conversion ratio 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 the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6 Mcf: 1 Bbl, utilizing a conversion ratio at 6 Mcf: 1 Bbl may be misleading as an indication of value. In this release, Mmboe refers to millions of barrels of oil equivalent.