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Original-Research: Saturn Oil & Gas Inc. (von GBC AG)

·6-min read
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: Transaction Update Letzte Ratingänderung: Analyst: Julien Desrosiers; Felix Haugg 'Oxbow acquisition is transformative and will transform Saturn Oil & Gas into a leading producer and land holder throughout Saskatchewan' Saturn Oil & Gas acquires the Oxbow asset Saturn Oil & Gas has entered into an agreement to purchase the Oxbow assets for approximately 93M CAD. The Oxbow's assets are located in Southeast Saskatchewan and consist of 450 sections of land which produce approximately 6700 boe/d. The Oxbow property is a mature asset that has extensive infrastructure and facilities with direct pipeline connections to the global sales network. Through the transition Saturn will also be hiring all the employees who are currently working on the properties, thus ensuring a smooth transition in daily production and operations. Saturn Oil & Gas, after the closing of the transaction, will become a major player in the southeast Saskatchewan oilfield, comparable in size to Headwater Exploration, Yangarra Resources and Topaz Energy. More importantly Saturn Oil & Gas estimated 2021 production will consist of 95% liquid oil and only 5% gas. The 5 main highlights of the transaction include: 1. Over 2,000% increase in daily boe production. 2. Lean and cost efficiency structure. 3. Prime assets with proven low depletion rates. 4. Pipeline to international markets. 5. Significant reduction in debt leverage of the company. These assets in our opinion will also be generating a massive positive cashflow, allowing for both the maintenance of the oil production at current level and the initiation of an aggressive debt payback program. Acquisition costs The total acquisition costs are approximately 102M CAD composed of the following elements: 93M CAD as purchase price and 9M CAD in additional fees. Financing The financing of the transaction will be completed in 3 parts; previous earned cash flow, debt and capital raised. The effective date of the acquisition is April 1, 2021, meaning from this date forward all profits made from the production of the acquired assets are transferred to Saturn Oil & Gas. This amount is estimated at 14.7M CAD. The second part is a senior debt of 82M CAD secured by Saturn Oil & Gas assets. This debt runs at an interest rate of 11% + Prime adjusted quarterly for three (3) years, therefore corresponding to a 12.50% annual interest rate. The third part of the financing will be raised capital, which is currently underway. Saturn Oil & Gas is intending to complete a private placement of 15M CAD, with a second capital raise undertaken simultaneously with Echelon Wealth Partners Inc. to complete a 6M CAD best effort private placement. Hedging One of the most important part of the financing in our opinion resides in the hedging of up to 85% of the newly acquired production. This production is expected to decline at a yearly rate of 12% meaning that year two, 74.8% of the production should be hedged, year three 65.8% and the fourth year 57.9% respectively. These hedging estimates are based on a Capex budget of $5 million per year. Production As seen in the previous table, we estimate the yearly production to decline at an average of 12% rate. However, this table doesn't include the current production and any capital deployment to increase oil production. This is purely from the transaction. For the total expected production, please refer to table 1. The acquired assets allow the company to continuously have two options available when increasing the oil production; recompletion of existing wells and the drilling of new wells and inventory. Saturn will acquire 450 sections of land and increase their land base by 775%. Identified with the newly acquired assets is over 444 drill targets (244 booked & 200 unbooked). At current oil prices the capital expenditure for these new drills will according to our estimates be paid off in as quick as 7 months and generate over half a million CAD profit during their lifetime. As for wells recompletion, they require very little capital expense and allows to extract the full potential of wells prematurely shutin. Transaction value benchmark The price paid per boe produced per of Canadian oil & gas assets acquisition has been decreasing in value continuously since Q1 2015, fallen from a price of over $80,000 per boe to $20,000 boe in Q3 2020. Saturn Oil & Gas is acquiring the Oxbow assets producing 6,700 boe/d for $93M CAD which results in a price of $13,731 per boe/d. Based on historical transaction data, as per the graphic above, this transaction would be on of the cheapest EV/Production transaction for any acquisition over $20M CAD within the last 5 years. A launchpad for sustaining economic growth This transaction is without saying, transformative for the company. Acquiring assets more than ten (10) times their own size will spark a new life for Saturn Oil & Gas. It can be legitimately considered as a completely new company. As discussed by the company CEO, John Jeffrey, in our interview (http://www.more-ir.de/d/22451.pdf), this transaction took time and devotion from the entire team to materialize. The company was working on this deal when oil prices were under $45 CAD during very uncertain times. The most impressive accomplishment of the company is to have secured the acquisition of very profitable assets at a very favorable price and concurrently being able to hedge up to 85% of the new production which allows them to repay the financing debt within 2 years. This is the key to unlock a new growth phase for the company, as it allows the company to focus exclusively on their core values while maximizing oil production and lowering costs. This transformative transaction will change the face of the company and allow Saturn to overcome a lot of the hardships Canadian oil companies have faced in the past, thus transitioning to a new and improved company. With the same management staff with a proven record of being one of the best operators in the region, we believe that this transaction unlocks a completely new era in the history of the company. This transaction, in our opinion, is the launchpad of sustainable and economic growth. Die vollständige Analyse können Sie hier downloaden: http://www.more-ir.de/d/22475.pdf Kontakt für Rückfragen GBC AG Halderstraße 27 86150 Augsburg 0821 / 241133 0 research@gbc-ag.de +++++++++++++++ Date (time) of completion of English version: 18/05/2021 (12:30 pm) Date (time) of first distribution of English version: 18/05/2021 (02:00 pm) -------------------übermittelt durch die EQS Group AG.------------------- Für den Inhalt der Mitteilung bzw. Research ist alleine der Herausgeber bzw. Ersteller der Studie verantwortlich. Diese Meldung ist keine Anlageberatung oder Aufforderung zum Abschluss bestimmter Börsengeschäfte.
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