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2022-ENEnglishNews Release

Saturn Oil & Gas Inc. Announces Strategic Acquisition, Debt Consolidation and Bought Public Offering

By February 17, 2022October 30th, 2023No Comments

**CALGARY, ALBERTA – February 17, 2022** – Saturn Oil & Gas Inc. (TSXV: SOIL) (FSE: SMKA) (“**Saturn**” or the “**Company**”) is pleased to announce that the Company 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.

**About Saturn Oil & Gas Inc.**
Saturn Oil & Gas Inc. 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 Southeastern Saskatchewan and West Central Saskatchewan that provide a deep inventory of long-term economic drilling opportunities across multiple zones. With an unwavering commitment to building an ESG-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 TSX.V under ticker ‘SOIL’ and on the Frankfurt Stock Exchange under symbol ‘SMKA’.

Further information and a corporate presentation is available on Saturn’s website at

**Saturn Oil & Gas Investor & Media Contacts:**
John Jeffrey, MBA – Chief Executive Officer
Tel: +1 (587) 392-7902

Kevin Smith, MBA – VP Corporate Development
Tel: +1 (587) 392-7900

**Reader Advisory**
This news release includes non-GAAP measures as further described herein. These non-GAAP measures do not have a standardized meaning prescribed by IFRS and, therefore, may not be comparable with the calculation of similar measures by other companies. Management believes that the presentation of these non-GAAP measures provides useful information to investors and shareholders as the measures provide increased transparency and the ability to better analyze performance against prior periods on a comparable basis.
“Adjusted funds flow” adjusts funds flow for items outside the scope of operations such as transactions costs and decommissioning expenditures. Saturn uses adjusted funds flow as a key measure to demonstrate the Company’s ability to generate funds to repay debt and fund future capital investment. Adjusted funds flow per share is calculated using the same weighted average basic and diluted shares that are used in calculating income (loss) per share.

Certain information included in this press release constitutes forward-looking information under applicable securities legislation. Forward-looking information typically contains statements with words such as “anticipate”, “believe”, “expect”, “plan”, “intend”, “estimate”, “propose”, “project”, “scheduled”, “will” or similar words suggesting future outcomes or statements regarding an outlook. Forward-looking information in this press release may include, but is not limited to: (i) the ability to pay out the second-lien debt, the timing and sufficiency of funds to make the scheduled debt repayment on the Senior Term Loan, strategy of the Company, timing, and ability of the Company to close the Bought Public Offering, timing of receive of TSX Venture Exchange approval of the Offering.

The forward-looking statements contained in this press release are based on certain key expectations and assumptions made by Saturn, including expectations and assumptions concerning: the timing of and success of future drilling, development and completion activities, the performance of existing wells, the performance of new wells, the availability and performance of facilities and pipelines, the geological characteristics of Saturn’s properties, commodity prices, the application of regulatory and licensing requirements, the availability of capital, labour and services, and access to and sufficiency of capital. Readers are cautioned that the foregoing list is not exhaustive of all factors and assumptions which have been used.

Although Saturn believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because Saturn can give no assurance that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, risks associated with the oil and gas industry in general (e.g., operational risks in development, exploration and production; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to production, costs and expenses, and health, safety and environmental risks), constraint in the availability of services, commodity price and exchange rate fluctuations, the current COVID-19 pandemic, changes in legislation impacting the oil and gas industry, adverse weather or break-up conditions and uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures. These and other risks are set out in more detail in Saturn’s Annual Information Form for the year ended December 31, 2020.

The forward-looking information contained in this press release is made as of the date hereof and Saturn undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise, unless required by applicable securities laws. The forward-looking information contained in this press release is expressly qualified by this cautionary statement.

Boe means barrel of oil equivalent. All boe conversions in this news release are derived by converting gas to oil at the ratio of six thousand cubic feet (“Mcf”) of natural gas to one barrel (“Bbl”) of oil. Boe may be misleading, particularly if used in isolation. A Boe conversion rate of 1 Bbl : 6 Mcf is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio of oil compared to natural gas based on currently prevailing prices is significantly different than the energy equivalency ratio of 1 Bbl: 6 Mcf, utilizing a conversion ratio of 1 Bbl: 6 Mcf may be misleading as an indication of value.

Saturn uses the following abbreviations and frequently recurring terms in this press release: “WTI” refers to West Texas Intermediate, a grade of light sweet crude oil used as benchmark pricing in the United States; “bbl” refers to barrel; “bbl/d” refers to barrels per day.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this press release.

All dollar figures included herein are presented in Canadian dollars, unless otherwise noted.