Saturn Announces Strategic Acquisition, Debt Consolidation and Bought Public Offering

Source: 2/17/2022, Location: North America

Saturn Oil & Gas Inc. has: (i) entered into an arms-length agreement to acquire certain synergistic oil & gas assets in West-central Saskatchewan (the "Strategic Acquisition") for total consideration of approximately $8.3 million (the "Transaction Value" or "TV"), (ii) given notice to repay its second-lien senior secured term notes (the "Term Notes") in the amount of approximately $32.1 million, (iii) entered into an amended and restated term loan agreement with its senior secured lender (the "Lender") of the existing senior secured term loan (the "Senior Term Loan") by expanding the principal amount by approximately $38.0 million (together, the "Debt Consolidation"), and (iv) has entered into an agreement with Echelon Capital Markets Inc. (the "Lead Underwriter"), acting as lead underwriter on behalf of a syndicate of underwriters (collectively, the "Underwriters") pursuant to which the Underwriters have agreed to purchase 2,670,000 units ("Units") from the Company at a price of $3.00 per Unit (the "Issue Price") and offer them to the public by way of short form prospectus for aggregate gross proceeds of $8,010,000 (the "Bought Public Offering").

“The Strategic Acquisition, Debt Consolidation and Bought Public Offering are important achievements to allow Saturn the flexibility to expand our capital spending budget and accelerate the Company’s growth in this strong oil price environment,” stated John Jeffrey, CEO of Saturn.

Strategic Acquisition
Saturn has entered into an arms-length definitive agreement to acquire certain oil & gas assets for total consideration of $8.3 million, prior to closing adjustments. The synergistic assets are located in the Plato area of West-central Saskatchewan and compliment the Company’s existing Viking Assets. The Strategic Acquisition includes:

240 bbl/d of light oil (February 2022 field estimate);
Numerous light oil, de-risked drilling locations; and
Over 100 net sections of crown and freehold land rights.

The Strategic Acquisition is anticipated to generate annualized net operating income ("NOI") of approximately, $4.5 million, implying a 1.8x TV/NOI multiple, assuming a US$75/bbl WTI pricing. The Strategic Acquisition is scheduled to close on February 28, 2022, with an effective date of January 1, 2022. Additional information on the Strategic Acquisition will be available upon closing of the Transaction.

Prior to the acquisition, Saturn’s corporate production for January 2022, based on field estimates, was 7,250 boe/d.

Debt Consolidation
Saturn remains committed to reducing debt levels and forecasts that approximately 45% of adjusted funds flow from operations will be directed towards debt repayment in the near term. The Term Notes are expected to be retired at approximately $32.1 million with proceeds from the expanded Senior Term Loan which is projected to have a total principal amount outstanding of approximately $103.2 million post consolidation. The stated maturity date for the repayment of the Senior Term Loan remains unchanged at June 7, 2024, while the repayment schedule and monthly principal payments have been amended, as follows:

2022 principal payments of $34.5 million (33.3%);
2023 principal payments of $37.9 million (36.7%); and
2024 principal payments of $31.0 million (30.0%).

Based on forecast production rates and hedged commodity prices, Saturn anticipates having the financial flexibility to accelerate debt repayments, if determined by the Company to be the most prudent use of capital. By consolidating the Company’s debt with the Lender, the Company will have the flexibility to amend capital plans and increase responsiveness to market conditions. The repayment of the Term Notes requires certain pre-payment charges as outlined in the credit agreement.

Bought Public Offering Details
Each Unit will consist of one common share (a "Share") and one common share purchase warrant of the Company (a "Warrant"). Each Warrant will be exercisable to acquire one Share for 36 months following the closing date, at an exercise price of $4.00, subject to adjustment in certain events. The Company will make reasonable efforts to list the Warrants.

The Company has also granted the Underwriters an over-allotment option to purchase up to an additional 400,500 Units at the Issue Price, exercisable in whole or in part at any time up to 30 days following the closing date of the Bought Public Offering.

The Company intends to use the net proceeds of the Bought Public Offering to expand capital expenditures, fund a portion of the consideration for the Strategic Acquisition, for working capital and general corporate purposes. The Bought Public Offering will be completed (i) by way of a short form prospectus of the Company to be filed in all of the provinces and territories of Canada, except Quebec, (ii) on a private placement basis in the United States pursuant to exemptions from the registration requirements of the United States Securities Act of 1933, as amended (the “U.S. Securities Act”) and (iii) outside Canada and the United States on a basis which does not require the qualification or registration of any of the Company’s securities under domestic or foreign securities laws.

This news release does not constitute an offer to sell or a solicitation of an offer to sell any of securities in the United States. The securities have not been and will not be registered under the U.S. Securities Act or any state securities laws and may not be offered or sold within the United States or to U.S. Persons unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available.

Closing of the Bought Public Offering is expected to occur on or about March 10, 2022, or such other date as the Company and the Underwriters may agree, and is subject to customary closing conditions, including, the approval of the securities regulatory authorities and the TSX Venture Exchange.

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