Saturn Oil & Gas has reported its financial and operating results for the three and six months ended June 30, 2021.

Highlights:

• Successfully closed a transformational acquisition of assets in the Oxbow area of Southeast Saskatchewan for cash consideration of $76.8 million, after closing adjustments;
• At closing, the Oxbow Asset contributed 6,400 boe/d, 43 million boe of proved and probable reserves, 290,109 net acres of land (137,186 undeveloped net acres) and over 350 drilling locations (260 booked locations with certified reserves);
• Completed $119.2 million of debt and equity financing, including a $87.0 million senior secured term loan, an upsized and oversubscribed brokered private placement and a non-brokered private placement (collectively the 'Private Placements') which raised total gross proceeds of $32.2 million;
• Generated second quarter petroleum and natural gas sales of $12.6 million and Adjusted Funds Flow of $2.9 million;
• Achieved strong operating netbacks for the three and six months ended June 30, 2021 of $29.58 per boe and $30.87 per boe; and
• Exited the second quarter with net debt of $74.5 million.

John Jeffrey, Chief Executive of Saturn, commented: 
"We are proud to a report a historic quarter in the development of the Company. The acquisition of the Oxbow Asset provides a substantial platform for Saturn's future growth by contributing numerous new drilling opportunities and production optimization projects, as well as a stable long-term cash flow stream required to fund these initiatives."

Saturn has made a transformational acquisition by adding the Oxbow Asset to our existing Saskatchewan operations. The Company now has a long-term steady cash flow source that we are re-deploying to increase shareholder value. We are immediately focused on the repayment of debt and concurrently directing a portion of free cash flow to fund our deep inventory of production growth projects.

'Maintaining a strong balance sheet is a priority for Saturn,' commented Scott Sanborn, Chief Financial Officer. 'The accelerated repayment of debt increases the Company's financial capacity for future acquisitions.'

The Company has re-established its drilling program that was suspended with the onset of the COVID-19 pandemic in 2020 and expects to be actively drilling going forward, starting in Q3 2021. Saturn now has two growth vehicles, the Viking Asset and the Oxbow Asset that collectively hold over 550 identified drilling locations which represents over two decades of inventory. Also impactful is the great number of existing but non-producing wells that we see potential to optimize with workovers, recompletions and repairs, to enhance current production levels. Saturn believes that there are over 400 non-producing candidate wells that the Company can return to economic production over the coming years.

A primary management focus has been the integration of the people and systems required to operate the substantial increase in operated production. To date, the integration program has been on track and very successful. At the field level, the operations team located in Carlyle Saskatchewan, led by Brad Caldwell, Operations Manager, comprises an outstanding group of industry veterans that have many years of experience operating in the area, directly on the Oxbow assets and have now been transitioned to Saturn. The further additions of Scott Sanborn, Chief Financial Officer and Kevin Smith, Vice President Corporate Development, along with a number of other talented industry professionals, have recently joined the Saturn Team and have been crucial to making the transition program as efficient as possible.

The second quarter financial statements incorporate the 23-days of operations from the Oxbow Asset from the June 7, 2021 closing date to quarter end date of June 30, 2021. Average daily revenue for this 23-day period was approximately $520,000 and has generated average daily free cash flow of approximately $265,000 using second quarter operating netbacks, net of hedging adjustments. The Company's average daily production for July 2021 was 6,700 boe/d (95% oil and NGLs), based on field estimates. Saturn anticipates new production from the drilling and workover programs, planned for the second half of 2021, will offset the natural declines incurred to date for the Company's pro forma base production. Management forecasts the exit rate production for year end 2021 to be approximately 7,000 boe/d. Saturn continues to prioritize balance sheet strength, along with a disciplined approach to production growth focused capital expenditures.

Management looks forward to updating shareholders with a full quarter of consolidated operational results for the third quarter of 2021 on or about November 29, 2021.

Oxbow Update

On June 7, 2021 Saturn closed on the acquisition of the Oxbow Asset for total cash considerations of $76.8 million, after closing adjustments. The Oxbow Asset is performing in line with our expectations with natural declines of approximately 1% per month. In July 2021, the Company participated in the drilling of 2 gross (0.54 net) non-operated wells in Queensdale, Southeast Saskatchewan, which were brought onto production in August of 2021, with initial net production rates exceeding the average type curves of wells in this area. Saturn anticipates completing an operated drilling program at Oxbow in Q4 2021. Further details will be provided to investors as the capital budgets are finalized.

The Company commissioned a NI 51-101 third party evaluation of the Oxbow Asset, which was completed by Ryder Scott Canada in August 2021, effective date April 1, 2021. The new report confirms management's internal evaluation, certifying 43 million barrels of proved plus probable reserves and 260 booked drilling locations. A summary of the new report will be filed on www.sedar.com in early September 2021.

Viking Update

Saturn is reinitiating its drilling program at the Viking Asset in Q3 2021 with the expected drilling of three Extended Reach Horizontal (ERH) wells and workovers of existing wells for total expected capital expenditures of $4.5 million. The locations for the three wells have been surveyed and the Company expects to spud in September 2021.