Research-Studie


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.
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Event im Fokus

Termine 2021

10. Juni 2021:Fachkonferenz Immobilien

14./15. Juli 2021: Fachkonferenzen Beteiligungsgesellschaften & Consumer/Leisure

13./14. Oktober 2021: Fachkonferenzen Finanzdienstleistungen/Technologie

10./11. November 2021: Fachkonferenzen Software/IT & Branchenmix

„Je nach aktueller Covid-19 Situation und den bestehenden Vorschriften für Versammlungen entscheidet sich ca. 5 Wochen vor dem Termin, in welcher Form die Konferenzen stattfinden.“

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Nachdem die Vectron Systems AG bislang insbesondere Kassensysteme verkauft hat, wird nun das Digitalgeschäft stärker in den Fokus rücken. Damit sollen die wiederkehrenden Einnahmen und die Wertschöpfung je Kunde deutlich erhöht werden. Über Cloud-Module können die Kunden nun mehrere digitale Services, die sie sonst über viele Einzelverträge abdecken, direkt mit dem Erwerb der Vectron-Kassen über den Fachhandel dazubuchen. Wir haben die Vectron Systems AG im Rahmen eines DCF-Modells bewertet und ein Kursziel in Höhe von 21,15 € ermittelt und vergeben das Rating KAUFEN.

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