Mr. John Jeffrey reports

SATURN OIL & GAS INC. ANNOUNCES $525 MILLION ACCRETIVE CORE-AREA SASKATCHEWAN ASSET ACQUISITION, TRANSFORMATIONAL DEBT RECAPITALIZATION, $150 MILLION RBL COMMITMENT AND A $100 MILLION BOUGHT DEAL EQUITY FINANCING

Saturn Oil & Gas Inc. has entered into a definitive purchase agreement for the strategic acquisition of two oil-weighted asset packages in Southern Saskatchewan that are contiguous with the company's existing Saskatchewan asset base for total net cash consideration of approximately $525-million. The closing date of the acquisition is expected on or about June 14, 2024, with an effective date of Jan. 1, 2024, subject to customary approvals and closing conditions.

The acquisition is composed of two distinct asset packages that directly offset existing core properties, which include Battrum area assets located in southwestern Saskatchewan and Flat Lake area assets located in southeastern Saskatchewan. The acquisition demonstrates Saturn's strategy to drive accretive growth by identifying and acquiring top-quality oil-weighted assets that offer long-term development runways. Moreover, the acquisition facilitates the appropriate operational size required to obtain the lower-cost and more flexible debt capital secured by Saturn, as described in further detail below. The total cost of the acquisition, net of customary closing adjustments, is expected to be $525-million.

The acquisition will be financed through a $625-million (U.S.) debt commitment provided by Goldman Sachs, subject to customary conditions, which will replace Saturn's existing senior secured term loan facility, as well as a bought deal subscription receipt financing for aggregate gross proceeds of approximately $100-million. Saturn has also entered into an agreement with National Bank of Canada, pursuant to which NBC has committed to arrange a $150-million reserves-based loan, subject to customary closing conditions. The RBL further increases the company's liquidity and is expected to remain undrawn at the closing date. The introduction of the new Canadian and U.S. institutions as capital market partners represents the next phase in Saturn's evolution as a growing mid-capitalization oil producer in the Canadian energy sector.

Acquisition highlights:

• Production from the acquired assets is expected to be approximately 13,000 barrels of oil equivalent per day, at the closing date, comprising 96 per cent oil and natural gas liquids (11,400 barrels per day of light/medium crude oil, 1,100 bbl/d NGLs and 3.02 million cubic feet per day of natural gas):
  • Low-decline production of 16 per cent, with active water floods and additional secondary recovery opportunities to further enhance long-term value;
  • Greater than 90 per cent of acquired acreage is on Crown land, which aids in the accretive nature of future development locations due to provincial royalty incentives;
  • Saturn's established infrastructure in the area underpins attractive cost structure, increases operational efficiencies and has sufficient capacity to support future growth;
• The acquired assets offer multizone development opportunities with stacked pay, provide meaningful operational synergies, further advance Saturn's strategic growth strategy through the addition of approximately 950 gross (780 net) identified drilling locations (approximately 240 gross (200 net) booked locations), expanding the company's existing drilling inventory of over 20 years, with abundant future reserve booking potential;
• High netback production is generated though premium-quality oil, owned and operated infrastructure, and advantageous royalty framework in Saskatchewan;
• The acquired assets have a positive licensee liability report rating of 10.0, which as a stand-alone asset would be in the top 10 per cent of all Saskatchewan producers and is accretive to Saturn's current LLR rating;
• The company is expected to benefit from operating synergies as part of the acquisition:
  • Synergistic operations and further scale in Saskatchewan: Saturn's existing west-central and southeastern Saskatchewan areas, which offset the acquired assets and feature a local field office, will drive material development and operational synergies; additional synergies will be driven through company's high-quality infrastructure and existing marketing arrangements; Saturn's exploitation expertise in the Viking play is expected to benefit Lower Shaunavon development while the company's experience developing the Viewfield Bakken is directly applicable to the development of Torquay and Bakken wells at the Flat Lake asset;
  • Long-life, high-growth and high-margin development runway: due to the high-quality nature of the drilling inventory, current production levels can be maintained for over 20 years at a drilling pace of 20 to 30 wells per year; the acquired assets also have significant upside potential to increase production with an accelerated development capital program should commodity and market dynamics become more constructive;
  • Water flood provides foundation for further enhanced oil recovery: successful active water floods in the acquired assets demonstrate proven results in surrounding well performances and offer material production uplift potential with higher rates of return in established water flood areas;
  • Identified opportunities to unlock value: Saturn intends to leverage its proven operating strategy and practices deployed in Saskatchewan to enhance efficiencies, increase production, reduce operating costs and expand margins from the acquired assets, thereby unlocking value not previously captured;
• The acquired assets are expected to generate approximately $251-million of net operating income for the next 12 months;
• Proven developed producing reserves of 44.1 million barrels of oil equivalent, with $926-million of future net revenue discounted at 10 per cent;
• Total proven plus probable reserves of 78.4 million boe, with an NPV10 of $1.4-billion.

             ATTRACTIVE ACQUISITION METRICS
  
                       Acquisition   Acquisition metric

Net purchase price                               $525MM            
Production            13,000 boe/d    $40,385 per boe/d 
Net operating income        $251MM                 2.1x              
Reserves                                              
PDP reserves            44.1 MMboe           $13.61/boe      
PDP reserve NPV10         $926.2MM                0.65x             
TP+P reserves           78.4 MMboe            $7.65/boe       
TP+P reserves NPV10       $1,444MM                 0.42              

Pro forma metrics and guidance highlights:

• Pro forma completion of the acquisition, Saturn forecasts NTM production to average 38,000 to 40,000 boe/d (83 per cent light/medium crude oil and NGLs) at the closing date;
• PDP reserves to total 104 million boe with NPV10 of $2.3-billion, equal to a net asset value of $7.53 per basic share;
• TP+P reserves to total 217 million boe with an NPV10 of $4.2-billion, an NAV of $16.87 per basic share;
• The acquisition is expected to generate meaningful financial accretion across multiple metrics:
  • 13 per cent accretive to PDP NAV per basic share as of the effective date;
  • 22 per cent accretive to adjusted funds flow per basic share, over the next 12 months postclosing date;
• Net debt to adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) increases modestly and is expected to be 1.2 times to 1.3 times on closing of the acquisition, dropping to approximately 1.0 times to 0.9 times at June 30, 2025, on an annualized basis and approximately two years from the closing date.

"The acquired assets are a perfect fit with Saturn's existing Saskatchewan operations and offer meaningful synergies. The acquisition is highly accretive for our shareholders and consistent with our strategy of acquiring quality assets where we can apply our strategic operating approach to enhance margins, grow adjusted EBITDA and increase free funds flow," commented John Jeffrey, chief executive officer. "The financial flexibility offered by our transformed capital structure ideally positions Saturn to efficiently develop our expansive light-oil-focused assets, optimize our cost structure and create value for our shareholders."

Updated corporate guidance for 2024

The attached guidance table summarizes the company's pro forma updated operating and financial guidance for the next 12 months following the closing date, reflecting changes to the company's expected stand-alone forecast.

Transformed debt capitalization

In connection with the acquisition, Saturn has secured a $625-million (U.S.) debt commitment, which will replace the outstanding existing senior secured term loan, allowing the company to optimize its capital structure and cost of capital.

"The evolution of our funding sources marks a pivotal moment in the company's financial development, substantially reducing Saturn's cost of capital and increasing the company's capital allocation flexibility," stated Scott Sanborn, Saturn's chief financial officer. "The debt commitment underscores the company's dedication to prudent financial management and focus on driving long-term shareholder value creation."

Saturn has also secured a commitment to arrange a new RBL, with a borrowing base and available capacity of $150-million on a fully conforming basis that will be undrawn at the closing date. Once entered into, the RBL will ensure Saturn has ample financial flexibility to maintain operations and continue its prudent development of its low-decline, light-oil-weighted asset base.

Bought deal equity offering

Concurrent with the acquisition, Saturn has entered into an agreement in respect of the offering, with Echelon Capital Markets acting as sole lender and bookrunner, with a syndicate of underwriters, to issue and sell 42.6 million subscription receipts on a bought deal basis. The subscription receipts will be offered at a price of $2.35 per subscription receipt for aggregate gross proceeds of approximately $100-million. The company will use the net proceeds of the offering to pay for a portion of the consideration of the acquisition.

Each subscription receipt represents the right of the holder to receive, upon closing of the acquisition, without payment of additional consideration, one common share of the company.

Saturn has also granted the underwriters an overallotment option to purchase, in whole or part, up to an additional 6.38 million subscription receipts at the offering price to cover overallotments, if any, exercisable at any time and from time to time until the date that is 30 days following the closing of the offering. If the overallotment option is exercised in full, gross proceeds from the offering will be approximately $115-million.

If the acquisition is not completed as described above by Aug. 21, 2024, or if the acquisition is terminated at an earlier time, the gross proceeds of the offering and pro rata entitlement to interest earned or deemed to be earned on the gross proceeds of the offering, net of any applicable withholding taxes, will be paid to holders of the subscription receipts, and the subscription receipts will be cancelled.

The subscription receipts: (i) will be offered in all provinces and territories of Canada (excluding Quebec) pursuant to a prospectus supplement to the company's base shelf prospectus, which will describe the terms of the subscription receipts; and (ii) may be distributed in the United States to persons reasonably believed to be qualified institutional buyers (as defined in Rule 144A under the U.S. Securities Act of 1933, as amended), pursuant to an exemption under Rule 144A. The offering is expected to close on or about May 15, 2024, and is subject to certain conditions, including, but not limited to, the approval of the Toronto Stock Exchange. The company expects that it will seek the approval of the exchange to list the subscription receipts once issued, such listing being subject to exchange approval.

Advisers

Echelon Capital Markets is acting as financial adviser to Saturn on the acquisition. Goldman Sachs is acting as strategic adviser to Saturn on the acquisition and has provided the debt commitment (subject to customary conditions), and National Bank Financial Markets is acting as lead arranger and sole bookrunner on the company's new RBL. Dentons Canada LLP is acting as Canadian legal counsel, and Baker Botts LLP is acting as U.S. legal counsel to Saturn with respect to the acquisition, the offering and the debt commitment. DLA Piper LLP is acting as legal adviser to the underwriters. Latham Watkins LLP and Torys LLP are acting as U.S. and Canadian counsel to Goldman Sachs, respectively.

About Saturn Oil & Gas Inc.

Saturn is a growing Canadian energy company focused on generating positive shareholder returns through the continued responsible development of high-quality, light-oil-weighted assets, supported by an acquisition strategy that targets highly accretive, complementary opportunities. Saturn has assembled an attractive portfolio of free-cash-flowing, low-decline, operated assets in Saskatchewan and Alberta that provide a deep inventory of long-term economic drilling opportunities across multiple zones. With an unwavering commitment to building an environmental, social and governance focused culture, Saturn's goal is to increase reserves, production and cash flows at an attractive return on invested capital. Saturn's shares are listed for trading on the Toronto Stock Exchange under ticker SOIL, on the Frankfurt Stock Exchange under symbol SMKA and on the OTCQX under the ticker OILSF.

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