SOIL Saturn Oil and Gas Inc

Saturn Oil & Gas Inc. (“Saturn” or the “Company”) (TSX.V: SOIL) (FSE: SMK) today announced its financial and operating results for the three and six month period ended June 30, 2019. 

The Company’s unaudited interim financial statements and corresponding Management’s Discussion and Analysis (“MD&A”) for the three and six month period ended June 30, 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. 

Q2 and First Half 2019 Highlights

• Achieved record production of 857 barrels of oil per day (bbls/d), an increase of 426% compared to the same period in 2018, and average volumes of 834 bbls/d over the first half of 2019, a level 369% higher than in the first six months of 2018. 
• Generated revenue of $5.5 million in Q2 2019, $4.4 million or 417% higher than the same period in 2018, while first half 2019 revenue of $10.0 million was $7.9 million, or 367%, higher than first half 2018, directly related to Saturn’s successful drilling program, production growth and cost control over the past 12 months.
• Realized strong operating netbacks1 (before realized loss on derivative instruments) in Q2 2019 and first half 2019 of $55.48 per bbl and $52.36 per bbl, respectively, improvements of 11% and 14% over the same periods in 2018, due to lower royalties and operating costs per boe.
• Recorded net income of $1.2 million ($0.01 per share basic and diluted) for Q2 2019 which was more than 1500% higher than Q2 2018, and for the first six months of 2019 totaled $2.8 million ($0.01 per share basic and diluted), growth of 744% compared to the first half of 2018.
• Adjusted EBITDAX1 (before pro-forma adjustments) totaled $3.9 million in Q2 2019, an increase of $3.53 million over Q2 2018, and for first half 2019 was $7.0 million, over $6.1 million higher than first half 2018, with the increases in both periods attributable to Saturn’s successful drilling program and increased operating netbacks.

• Through the first half of 2019, drilled, completed and tied-in nine 100% working interest extended reach horizontal (“ERH”) wells at an average cost per well of approximately $1.09 million, which included the following: °  Five wells in Prairiedale which posted an area average initial production rate after 30 days (“IP30”) of 91 bbls/d2, with an IP30 of 132 bbls/d2 for the top-producing area well;°  Two wells in Milton had an average IP30 of 62 bbls/d2, and an IP30 of 74 bbls/d2 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/d2, with the top producing well in the area posting an IP30 of 153 bbls/d2. 
• Bolstered the asset portfolio in Q2 2019 with the acquisition of 6.75 sections of land within the highly economic Viking play in Saskatchewan at an average cost of approximately $121 per hectare, bringing Saturn’s total acreage to 55.5 gross sections as at June 30, 2019. Subsequent to quarter-end, acquired an additional 1,506 hectares of land for $408,741, bringing Saturn’s total holdings to 59.5 sections.
• At June 30, 2019, Saturn had US$18.17 million of borrowings (CAD$23.78 million using June 30, 2019 exchange rate) drawn against the Company’s US$20.0 million Revolving Note (CAD$26.17 million using the period-end exchange rate).

Results of Oil and Gas Activities
	Three months ended June 30,				Six months ended June 30,
($, except per unit amounts)	2019		2018		2019		2018
Financial
Oil revenue	5,461,802		1,055,832		10,041,657		2,150,409
Net income	1,186,963		71,717		2,825,739		334,953
Per share – basic & diluted	0.01		(0.00	)	0.01		(0.00	)
Production Volumes
Crude oil (bbls/d)	857		163		834		178
Natural gas (Mcf/d)	-		-
Natural gas liquids (bbls/d)	-		-
Total (bbls/d)	857		163		834		178
% liquids	100%		100%		100%		100%
Average Realized Prices
Crude Oil ($/bbl)	70.05		71.15		66.53		66.83
Natural gas ($/Mcf)	-		-
Natural gas liquids ($/bbl)	-		-
Total ($/boe)	70.05		71.15		66.53		66.83
Operating Netback ($/bbl)
Realized price	70.05		71.15		66.53		66.83
Royalties	(3.74	)	(8.04	)	(3.10	)	(8.62	)
Operating costs	(10.83	)	(13.25	)	(11.09	)	(12.11	)
Operating netbacks1	55.48		49.86		52.36		46.10
Realized loss on derivative instruments	(2.59	)	-		(1.53	)	-
Operating netbacks, after realized loss on derivative instruments1	52.89		49.86		50.83		46.10
1 Non-IFRS Measure that does not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other entities.  Refer to the section entitled “Information Regarding Disclosure on Oil and Gas Operational Information and Non-IFRS Measures”.

“Saturn’s record production volumes and robust financial results to date in 2019 have demonstrated the high-quality nature of our light oil-weighted Viking asset base, combined with strong operational performance,” stated John Jeffrey, CEO of Saturn. “Building on the momentum achieved over the first two quarters of this year, we have commenced our second half 2019 drilling program while continuing to accumulate prospective land in our portfolio with the ultimate goal of delivering meaningful shareholder returns despite a very challenging market environment.”

Outlook

As previously announced, Saturn’s second half 2019 drilling program commenced in early August with the drilling of five (5.0 net) ERH wells largely focused in the Company’s core Prairiedale area.  All of these wells are expected to be completed and equipped by early September and on-line and producing by the end of September, positively contributing to Saturn’s fourth quarter volumes.  The Company intends to remain focused on generating value for shareholders through the successful execution of its strategy.  In response to continued oil price volatility, market uncertainty and a goal of maintaining financial flexibility, the Company intends to defer a portion of its previously planned 2019 capital budget until prices and market conditions stabilize.  As a result, Saturn expects its full year 2019 capital program to be approximately $21.9 million, which will result in a total of 27 wells being drilled, completed, equipped and tied-in within its Viking light oil area, with a target 2019 exit rate of approximately 950 bbls/d, representing 67% growth over its 2018 exit rate.  Capital expenditures for the balance of 2019 will be reviewed and determined on a regular basis depending on oil and differential prices, availability of funding sources and the broader operating environment.  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.

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 and 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 & GasJohn Jeffrey, MBA - Chief Executive Officer & Chairman Tel: +1 (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.

Information Regarding Disclosure on Oil and Gas Operational Information and Non-IFRS MeasuresThis news release contains metrics commonly used in the oil and natural gas industry, such as "operating netbacks" and “Adjusted EBITDAX”  These terms are not defined in IFRS and 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. 

Operating Netback: equals petroleum sales (before realized hedging gains or losses on derivative instruments) less royalties and operating costs calculated on a boe basis. 

Adjusted EBITDAX: equals Consolidated Net Income adding back items deducted in determining Consolidated Net Income, including financing charges, exploration expenses, income taxes, depreciation, depletion, amortization and other non-cash items, losses attributable to extraordinary and non-recurring losses for such period minus all non-cash items of income which were included in determining such Consolidated Net Income and earnings attributable to extraordinary and non-recurring gains for such period.  Management believes that such a measure provides an insightful assessment of Saturn’s operational performance on a continuing basis by eliminating certain non-cash charges and charges that are non-recurring or discretionary and utilizes the measure to assess its ability to finance capital expenditures and debt repayments. Adjusted EBITDAX as presented is not intended to represent cash flow from operating activities, net earnings or other measures of financial performance calculated in accordance with IFRS.

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. See "Non-IFRS Measures" contained within Saturn’s MD&A for applicable definitions, calculations, rationale for use and reconciliations to the most directly comparable measure under IFRS.

Boe equivalent

Where applicable, oil equivalent amounts have been calculated using a conversion rate of six thousand cubic feet of natural gas to one barrel of oil. The use of boe amounts may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet of natural gas to one barrel of oil is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Test Results and Initial Production Rates

References herein to average 30-day or 60-day initial production rates and other short-term production rates are useful in confirming the presence of hydrocarbons, however, such rates are not determinative of the rates at which such wells will commence production and decline thereafter and are not indicative of long term performance or of ultimate recovery. While encouraging, readers are cautioned not to place reliance on such rates in calculating aggregate production for Saturn or the assets for which such rates are provided. A pressure transient analysis or well-test interpretation has not been carried out in respect of all wells. Accordingly, the Company cautions that the test results should be considered to be preliminary.

Forward-Looking Information and StatementsCertain 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.

1 Non-IFRS Measure that does not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other entities.  Refer to the section entitled “Information Regarding Disclosure on Oil and Gas Operational Information and Non-IFRS Measures”.

2 See “Information Regarding Disclosure on Oil and Gas Operational Information and Non-IFRS Measures”.