First Berlin Equity Research on 04/11/2022 initiated coverage on Saturn Oil & Gas Inc. (ISIN: CA80412L8832/ Bloomberg: SOIL CN, SMKA GR, OILSF US). Analyst Simon Scholes placed a BUY rating on the stock, with a CAD 7.00 price target.

Abstract
Production at Saturn has multiplied more than 50-fold to 12,000 boepd (barrels of oil equivalent per day) in under two years thanks to two transformative acquisitions in the Oxbow and Viking areas of Saskatchewan. Output, which currently splits ca. 60:40 between Oxbow and Viking, and is over 95% oil by volume, is highly lucrative in both areas. At a WTI crude price of USD75 (ca. USD13 below the current level), the internal rate of return on new Oxbow and Viking wells is 160% and 80% respectively. Going forward, Saturn plans annual drilling of 35-40 new wells in the Viking area and 40 new wells at Oxbow. By 2025 we expect Saturn’s output to exceed 15,400 boepd (+ca. 50% vs. 2022E) and the current net debt position of ca. CAD220m to become net cash of over CAD200m. A DCF model using tiered discount rates for producing developed producing, proven undeveloped, and probable reserves, shows fair value for the Saturn share of CAD7.00. We initiate coverage with a Buy recommendation.