Release Date: November 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Saturn Oil & Gas Inc (OILSF, Financial) achieved record production levels, surpassing 39,000 barrels per day, which exceeded market expectations.
- The company successfully integrated the Saskatchewan acquisition of Battrum and Flat Lake assets, reducing operating costs and deploying capital effectively.
- Saturn reported a record adjusted EBITDA of $136 million and adjusted funds flow of $94 million, both surpassing consensus estimates.
- The company implemented a share buyback program, returning over $4.7 million to shareholders through the purchase and cancellation of 1.9 million shares.
- Saturn's strategic acquisitions, such as the $20 million tuck-in acquisition in Brazeau Dam Cardium, significantly increased drilling inventory and production.
Negative Points
- The company is still managing legacy hedge positions, which have impacted cash flows, although efforts are being made to improve the hedge book.
- Operating costs for the newly acquired Battrum and Flat Lake assets are higher than the corporate average, although efforts are underway to reduce these costs.
- Saturn's net debt remains high at $779 million, representing roughly 1.4 times net debt to annualized quarterly adjusted EBITDA.
- The company is exposed to fluctuations in oil prices, with strategic plans dependent on maintaining WTI levels at or above $70 per barrel.
- There is uncertainty regarding future guidance and the impact of hedging activities, with full guidance expected to be released in the coming months.
Q & A Highlights
Q: Can you provide more details on the one-off hedges and whether there are any additional legacy hedges planned for closure in future quarters?
A: John Jeffrey, CEO: We are being opportunistic with hedges, leveraging cash flow and cash availability. We aim to improve our hedge book by buying out unfavorable positions when possible and layering new ones when oil prices spike. Our strategy is to reflect our belief that oil will range between $70 to $90.
Q: How is Saturn managing the increased pace of capital spending, and do you have the necessary systems and staff in place?
A: John Jeffrey, CEO: We are well-staffed and equipped to handle the increased capital spending. Our team has been exceeding expectations, and we are confident in our ability to continue this performance into 2025.
Q: How active do you expect to be with tuck-in acquisitions, and is there a limit to how much you want to spend?
A: John Jeffrey, CEO: We are always looking for opportunities that align with our strategy. We focus on acquiring assets that enhance our core areas and offer good returns. We will continue to pursue acquisitions that fit our long-term blueprint strategy.
Q: Regarding open hole multilateral drilling, do you see it as a boost to economics or expanding location opportunities?
A: Justin Kaufmann, Chief Development Officer: We are exploring this technique in various areas, such as the spearfish, to enhance inflow and improve economics. The technique is chosen based on reservoir parameters and has shown promising results.
Q: Can you provide more color on the water flooding strategy and its expansion potential?
A: Justin Kaufmann, Chief Development Officer: In the Flat Lake area, about half of the acquired 9,000 barrels per day is under current flood. We are focusing on optimizing this area and expanding water flood techniques to maximize production.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
