GBC AG: Saturn Oil & Gas Inc. | Rating: BUY
Original-Research: Saturn Oil & Gas Inc. - von GBC AG
Einstufung von GBC AG zu Saturn Oil & Gas Inc.
Unternehmen: Saturn Oil & Gas Inc.
ISIN: CA80412L1076
Anlass der Studie: Research Update
Empfehlung: BUY
Kursziel: 0,46 CAD
Kursziel auf Sicht von: 31.12.2021
Letzte Ratingänderung:
Analyst: Julien Desrosiers; Felix Haugg
Saturn Oil & Gas Inc. successfully closes the acquisition of the Oxbow Assets
Saturn Oil & Gas Inc. announced that it has successfully closed the previously announced transformational acquisition of the Oxbow assets in Southeast Saskatchewan from Crescent Point Energy Corp. As discussed in our recent Transaction Update (http://www.more-ir.de/d/22491.pdf) Saturn acquired approximately 6,700 boe/d (~95% light oil and liquids) with over 450 net sections of land.
Total consideration for the Acquisition was $93 million. As previously announced in the Company's press releases dated May 13, 2021, May 17, 2021, May 28, 2021 and June 4, 2021, the Acquisition was funded through proceeds from an $87.0 million senior secured term loan, as well as a brokered and non brokered private placement which collectively raised total gross proceeds of $32.8 million. The Senior secured term loan was subscripted by a New York based Family Office.
'The closing of this transformational acquisition has truly elevated Saturn to new heights and put our mark on the map for a very attractive purchase price,' said John Jeffrey, CEO of Saturn. 'We have added high-quality, light oil assets to our portfolio, which now features a robust long-term inventory of future development drilling targets that are highly economic at current commodity prices. The Saturn team is excited about the opportunity to generate compelling returns for our shareholders, while helping to meet the world's growing energy needs in an environmentally responsible manner under Canada's stringent regulatory regime.'
Strategic Acquisition Highlights
The Acquisition enhances Saturn's financial and operational strength through the addition of a high-quality and very low decline (12%) light oil asset base that is projected to generate robust free cash flow at current prices. Further, the Acquisition is aligned with the Company's strategy to acquire and develop undervalued, low-risk opportunities that support the building of a strong portfolio with strategic development upside. The Oxbow Assets produce primarily from the Frobisher and Midale formations, feature a sizeable inventory of targets for workover, development and optimization, and are expected to generate $65-70 million in net operating income over the next 12 months.
In addition to acquiring the assets for an attractive purchase price, the Acquisition positions Saturn as one of the leading producers and land holders in Southeast Saskatchewan, offering investors exposure to numerous benefits, including:
- Production increase of more than 2,000% over current volumes, with over 1,300% PDP reserves growth compared to the Company's year end 2020 reserves.
- Land base increase of 775% with more than 180% growth in booked drilling locations.
- Exposure to a conventional multi-zone asset base concentrated in the Midale / Frobisher formations with a large, identified low-risk drilling inventory of highly economic light oil plays, significant workover opportunities, and competitive forecast returns.
- The potential to generate significant annual free cash flow through the optimization and recompletion of more than 500 existing well bores over the next three years with low capital expenditures. Saturn anticipates directing approximately $5 million of annual workover capex to maintain current production levels.
- Locked-in area economics with approximately 70% of forecast production hedged over the next year, 60% for the second year and approximately 50% for years three and four with incremental volumes from growth capital fully exposed to commodity prices.
- Expanded scale provides increased strategic optionality to adapt to changing market conditions while 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.
- A strong infrastructure position with multiple sales points and capacity for future growth with 60 owned, operated and well-maintained key production facilities with excess capacity.
- Strengthened environmental, social and governance ('ESG') performance, supported by minimal freshwater usage due to no fracture stimulations and future potential to initiate an enhanced oil recovery initiative using only produced water. The Company's surface footprint will be minimized due to pipeline-connected, multi-well pad development of the Oxbow Assets, and liability clean up will be accelerated with the support of over $10 million of federal Accelerated Site Closure Program funding.
Financings
The $87.0 million senior secured term loan was subscripted by a New York based Family Office.
Prudential Capital Energy Partners, L.P. agreeing to subordinate its current loans, waiver certain prior loan defaults, extend out the maturity of their existing revolving note facility and cancel 30,505,122 existing share purchase warrants with an exercise price of $0.235 and an expiry of Sept 14, 2022.
Prudential will be granted 43,800,000 million common share purchase warrants at a $0.16 exercise price with expiry at the earlier of the maturity date of the loan (November 2024) or 12 months after early repayment of the loan facility.
Advisors
Alvarez & Marsal Canada Securities ULC ('A&M') acted as exclusive financial advisor to Saturn with respect to the Senior Secured Term Loan and the Acquisition, while Dentons Canada LLP acted as Saturn's legal counsel in connection with the Acquisition, the Private Placements and the Senior Secured Term Loan.
A&M is entitled to receive 3,000,000 compensation special warrants.
Die vollständige Analyse können Sie hier downloaden: http://www.more-ir.de/d/22568.pdf
Kontakt für Rückfragen
GBC AG
Halderstraße 27
86150 Augsburg
0821 / 241133 0
research@gbc-ag.de
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Date (time) of completion of English version: 08/06/2021 (13:26 h)
Date (time) of first distribution of English version: 08/06/2021 (14:30 h)
Target price valid until: max. 31/12/2021
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