Saturn Oil & Gas Inc. has completed its previously announced acquisition of oil-weighted assets in Southern Saskatchewan.

The net cash purchase price of the acquisition was funded by proceeds of the recently closed 9.625 per cent high yield note offering, together with the proceeds of the recently closed $100-million bought deal subscription receipt financing.

In addition, the company has repaid and retired the entire principal amount of the company’s previously outstanding senior secured term loan. Saturn’s total current outstanding debt is now US$650 million.

Saturn has also secured a $150 million reserves-based loan (RBL) lending facility led by National Bank of Canada and including ATB Financial and Goldman Sachs Bank USA, which is undrawn at closing.

In accordance with their terms, each subscription receipt issued pursuant to the bought deal equity financing was exchanged for one common share in the capital of the company concurrently with the closing of the acquisition, and the net proceeds of approximately $96 million were released from escrow to fund a portion of the purchase price of the acquisition.

Holders of subscription receipts are not required to take any action in order to receive the underlying common shares, and the subscription receipts are expected to be de-listed from trading on the Toronto Stock Exchange as of the close of business on June 17, 2024.

“Saturn will continue to focus on generating high rates of return on invested capital and maximizing the free cash flow from our low decline, oil weighted producing assets in Saskatchewan and Alberta,” said John Jeffrey, chief executive officer.

“The expanded free cash flow, pro forma this acquisition, will be used to pay down the notes on their scheduled 10 per cent annual amortization schedule (to be paid quarterly) and for strategic tuck-in acquisitions.”

As the company de-levers, Saturn said it intends to implement a shareholder return model using dividends and share buy-backs, subject to approvals of the TSX and its board of directors."

Corporate and bond credit ratings

Saturn has received B corporate family rating and BB-rating on the notes from S&P Global Ratings. Additionally, the company has received a B2 corporate family rating and a B2 rating on the notes from Moody’s Ratings.

Advisors

Goldman Sachs and Echelon Capital Markets acted as strategic advisors to Saturn on the acquisition and Goldman Sachs was the lead bookrunner on the note offering.

National Bank of Canada Financial Inc. and ATB Securities Inc. were joint bookrunners on the note offering and were co-arrangers of the new RBL, along with Goldman Sachs.

Echelon Capital Markets acted as financial advisor to Saturn on the acquisition and as co-manager on the note offering. Dentons Canada LLP was the company’s legal counsel on the acquisition, the RBL and the subscription receipt financing.

DLA Piper (Canada) LLP acted as counsel to the underwriters of the subscription receipt financing. Osler, Hoskin & Harcourt LLP and Baker Botts L.L.P. were Canadian and U.S. legal counsel, respectively, to Saturn with respect to the note offering. Latham & Watkins and Torys LLP were legal counsel to Goldman Sachs with respect to the note offering and Blakes Cassels & Graydon LLP was legal counsel to National Bank on the RBL.