Message to Shareholders

In 2022, Saturn delivered strong operating results, strengthened the business for future sustainability and achieved substantial growth:

• Average production increased 133% to 9,593 boe/d, compared to 2021 average production of 4,117 boe/d;

• Adjusted funds flow⁽¹⁾ increased 335% to $118.7 million, compared to $27.3 million in 2021; and

• Adjusted funds flow⁽¹⁾ per basic share increased 89% to $2.67, compared to $1.41 in 2021.

Saturn continued to execute its strategy of pursuing accretive acquisitions and light oil focused field development. The Company invested approximately $337.5 million in combined capital expenditures⁽¹⁾ and property acquisitions in 2022 between the two Viking Asset acquisitions and our 2022 capital expenditure program across the Viking Asset and Oxbow Asset.

The Company's production growth was matched with increased operating netbacks⁽¹⁾. Saturn has continued it focus on light oil acquisition and development to capture the premium global pricing for high quality crude oil. The Company has also concentrated on reducing overall royalties, operating costs and improving average hedging pricing:

• Average royalties decreased to 12.8% in 2022, compared 15.4% in 2021;

• Average net operating expenses⁽¹⁾ decreased 9% to $24.67 per boe in 2022, compared to $27.22 per boe in 2021; and

• Average realized loss on derivatives decreased 42% to $8.29 per boe in Q4 2022, compared to $14.21 in Q4 2021.

As a result, operating netback⁽¹⁾, net of derivatives increased 70% to $43.82 per boe in 2022, compared to $25.71 in 2021.

Current Company production is approximately 28,500 boe/d (83% crude oil and NGLs), based on March 2023 field estimates.

Oxbow Update

The Oxbow asset in Southeast Saskatchewan (the "Oxbow Asset") continues to be the cornerstone of Saturn's free cash flow generation strategy. In the fourth quarter of 2022 Saturn drilled seven horizontal wells in the Oxbow Asset for a yearly total of 26 gross (25.5 net) horizontal wells achieving a capital efficiency of $17,150 per bbl/d. Of the Oxbow wells drilled in 2022, net five were re-drills of existing wells with low to no productivity, resulting in average 30-day initial production ("IP30") of 47.3 bbl/d, and due to the reduced drilling cost of a re-drill, realized a capital efficiency of $13,330 per bbl/d. Low production declines at Oxbow were maintained through extensive production optimization and workover projects of existing wells that resulted in 656 bbls/d of incremental light oil production in 2022 at a low capital efficiency of $4,237 per bbl/d, a cost of production of approximately 1/3 of drilling a new well. The Oxbow Asset had average production of approximately 7,522 boe/d in Q4 2022.

Viking Update

Continued drilling success in the Viking Asset in West Central Saskatchewan throughout 2022 led the Company to increase the allocation of capital to this prolific light oil development area. Saturn successfully drilled 32 gross (32.0 net) horizontal wells in the Viking Asset, all of which are now on production. Saturn achieved average IP30 of 93.7 bbl/d of light oil for the 2022 new Viking wells, 38% higher compared to the Company's initial guidance target IP30 of 68 bbl/d. Viking drilling in 2022 resulted in an attractive capital efficiency of $15,400 per bbl/d.

Saturn closed on two acquisitions in the Viking Asset in 2022 including: the February Plato acquisition of approximately 240 boe/d for cash consideration of $7.5 million, and the July Viking acquisition of approximately 4,000 boe/d for cash consideration of $240.9 million. In aggregate, Saturn increased production 1,650% in the Viking Asset from approximately 294 boe/d in January 2022 to approximately 5,158 boe/d in December 2022.

ESG Initiatives

Saturn continued its dedication to be a responsible environmental steward directing $2.7 million in the fourth quarter of 2022 to abandonment and reclamation activities, for a 2022 total of $14.2 million, through a combination of government grants through the Accelerated Site Closure Program ("ASCP") and cash on hand.

Saturn continues to prioritize the abandonment and reclamation of wells that no longer have economic production potential as part of the Company's Land Reclamation Program. In Q4 2022 the Company downhole abandoned 20 wells and cut and capped 13 wells. In total in 2022, Saturn downhole abandoned 129 wells, cut & capped 113 wells, abandoned 78 flowlines and decommissioned 103 sites. Saturn has increased its year end 2022 Licensee Liability Rating ("LLR") to 1.5, from 1.1 at year end 2021.

Subsequent Event

On February 28, 2023, the Company completed the acquisition of Ridgeback Resources Inc. (the "Ridgeback Acquisition") a privately held oil and gas producer focused on light oil in Saskatchewan and Alberta. The Ridgeback Acquisition adds approximately 17,000 boe/d of current production (71% light oil and NGLs) and 670 net sections of land. The Ridgeback Acquisition bolsters Saturn's core growth asset in the Oxbow Asset, while expanding its operations into Alberta's Cardium play further building size and scale for the Company's growing operations in Western Canada. The Ridgeback Acquisition is consistent with Saturn's strategy to become a premier, publicly traded light oil producer through the acquisition and development of undervalued, low-risk opportunities that support building a strong portfolio of cash flowing assets offering strategic development upside. The acquisition was funded through a $375 million expansion of the Senior Term Loan from the Company's existing senior secured lender, a bought deal financing for gross proceeds of $125 million, and 19.4 million common shares of Saturn for total consideration of $525 million.

Outlook

"After a two-year period of dramatic production increases, Saturn has shifted its current strategy from growth mode to harvest mode. We have assembled a premier portfolio of light oil producing properties, that are generating significant and sustainable free cash flow," stated John Jeffrey, CEO. "With a deep inventory of capital efficient development projects, Saturn is focused on sustaining stable forward production, maintained by internally funded organic projects and an emphasis on rapidly reducing debt levels."

The Company has reduced its exposure to the volatility of global oil prices by entering into hedging contracts, based on WTI oil prices, for volumes of approximately 12,238 bbl/d in 2023, equivalent to 59% of oil and NGL production.

Notes

⁽¹⁾ Adjusted Funds Flow ("AFF"), Net Debt and Adjusted EBITDA are capital management measures. Capital Expenditures, Free Funds Flow ("FFF"), Operating Netback, Operating Netback, net of derivatives and Net Operating Expenses are non-GAAP financial measures. Refer to the Reader Advisory - Non-GAAP and Other Financial Measures section in this press release for additional disclosure and assumptions.

Investor Webcast

Saturn will host a webcast at 9:00 AM MDT (12:00 PM Noon EDT) on Wednesday, March 29, 2023, to review the year end and fourth quarter 2022 financial report. Participants can access the live webcast via https://saturnoil.com/invest/q4-2022-results-webcast. A recorded archive of the webcast will be available afterwards on the Company's website.

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, West Central Saskatchewan and Central Alberta 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'.

The Company's consolidated financial statements and corresponding Management's Discussion and Analysis for the three months and year-ended December 31, 2022 are available on SEDAR at www.sedar.com and on Saturn's website at www.saturnoil.com. Copies of the materials can also be obtained upon request without charge by contacting the Company directly. Please note, currency figures presented herein are reflected in Canadian dollars, unless otherwise noted.

Further information and a corporate presentation is available on Saturn's website at www.saturnoil.com.

Saturn Oil & Gas Investor & Media Contacts:

John Jeffrey, MBA - Chief Executive Officer
Tel: +1 (587) 392-7902
www.saturnoil.com

Kevin Smith, MBA - VP Corporate Development
Tel: +1 (587) 392-7900
info@saturnoil.com

Reader Advisory

Non-GAAP and Other Financial Measures

Throughout this news release and in other materials disclosed by the Company, we employ certain measures to analyze financial performance, financial position and cash flow. These non-GAAP and other financial measures do not have any standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures provided by other issuers. Non-GAAP and other financial measures should not be considered to be more meaningful than GAAP measures which are determined in accordance with IFRS. The Company's audited condensed consolidated financial statements and MD&A as at and for the three and twelve months ended December 31, 2022 are available on the Company's website at www.saturnoil.com and under our SEDAR profile at www.sedar.com. The disclosure under the section "Non-GAAP and Other Financial Measures" including non-GAAP financial measures and ratios, capital management measures and supplementary financial measures in the MD&A is incorporated by reference into this news release.

This press release uses the terms "capital expenditures", "free funds flow", "operating netback", "operating netback, net of derivatives" and "net operating expenses", which are non-GAAP financial measures. These non-GAAP financial measures are not standardized financial measures under IFRS and might not be comparable to similar financial measures disclosed by other issuers. See the disclosure under the section "Non-GAAP Financial Measures and Ratios" in our MD&A for the three and twelve months ended December 31, 2022, for an explanation of the composition of these measures and how these measures provide useful information to an investor, and the additional purposes, if any, for which management uses these measures.

Capital Expenditures

Saturn uses capital expenditures to monitor its capital investments relative to those budgeted by the Company on an annual basis. Saturn's capital budget excludes acquisition and disposition activities as well as the accounting impact of any accrual changes or payments under certain lease arrangements. The most directly comparable GAAP measure for capital expenditures is cash flow used in investing activities. The following table details the composition of capital expenditures and capital expenditures, net acquisitions and dispositions ("A&D") to cashflow used in investing activities.

 

Free Funds Flow

Saturn uses free funds flow as an indicator of the efficiency and liquidity of Saturn's business, measuring its funds after capital investment available to manage debt levels, pursue acquisitions and gauge optionality to pay dividends and/or and return capital to shareholders through activities such as share repurchases. Saturn calculates free funds flow as Adjusted funds flow in the period less capital expenditures. By removing the impact of current period capital expenditures from adjusted funds flow, management monitors its free funds flow to inform its capital allocation decisions. The following table reconciles Adjusted funds flow to Free funds flow.

 

Net Operating Expenses

Net operating expense is calculated by deducting processing income primarily generated by processing third party production at processing facilities where the Company has an ownership interest, from operating expenses presented on the Statement of income (loss). Where the Company has excess capacity at one of its facilities, it will process third-party volumes to reduce the cost of ownership in the facility. The Company's primary business activities are not that of a midstream entity whose activities are focused on earning processing and other infrastructure-based revenues, and as such third-party processing revenue is netted against operating expenses in the MD&A. This metric is used by management to evaluate the Company's net operating expenses on a unit of production basis. Net operating expense per boe is a non-GAAP financial ratio and is calculated as net operating expense divided by total barrels of oil equivalent produced over a specific period of time. The calculations are shown within the Net operating expenses section of this MD&A.

Operating Netback and Operating Netback, net of derivatives

The Company's operating netback is determined by deducting royalties, net operating expenses and transportation expenses from petroleum and natural gas sales. The Company's operating netback, net of derivatives is calculated by adding or deducting realized financial derivative commodity contract gains or losses from the operating netback. The Company's operating netback and operating netback, net of derivatives are used in operational and capital allocation decisions. Presenting operating netback and operating netback, net of derivatives on a per boe basis is a non-GAAP financial ratio and allows management to better analyze performance against prior periods on a per unit of production basis. The calculation of the Company's operating netbacks and operating netback, net of derivatives are summarized as follows.

 

This press release uses the terms "adjusted funds flow", "net debt" and "adjusted EBITDA", which are capital management measures. Please refer to note 21 "Capital Management" in Saturn's financial statements for the three and twelve months ended December 31, 2022, for an explanation of the composition of these measures and how these measures provide useful information to an investor, and the additional purposes, if any, for which management uses these measures.

Where applicable, the supplementary financial measures used in this news release are either a per unit disclosure of a corresponding GAAP measure, or a component of a corresponding GAAP measure, presented in the audited condensed consolidated financial statements. Supplementary financial measures that are disclosed on a per unit basis are calculated by dividing the aggregate GAAP measure (or component thereof) by the applicable unit for the period. Supplementary financial measures that are disclosed on a component basis of a corresponding GAAP measure are a granular representation of a financial statement line item and are determined in accordance with GAAP.

BOE PRESENTATION

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.

FORWARD-LOOKING INFORMATION AND STATEMENTS.

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, the drilling of development wells, workover program and the maintenance of base production and the business plan, cost model and strategy of the Company.

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 ability to allocated capital to pay down debt and grow productions, the geological characteristics of Saturn's properties, the application of regulatory and licensing requirements, the availability of capital, labour and services, the creditworthiness of industry partners and the ability to source and complete asset acquisitions.

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), constraints in the availability of services, commodity price and exchange rate fluctuations, actions of OPEC and OPEC+ members, 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, 2022.

Forward-looking information is based on a number of factors and assumptions which have been used to develop such information but which may prove to be incorrect. Although Saturn believes that the expectations reflected in its forward-looking information are reasonable, undue reliance should not be placed on forward-looking information because Saturn can give no assurance that such expectations will prove to be correct. In addition to other factors and assumptions which may be identified in this press release, assumptions have been made regarding and are implicit in, among other things, our capital expenditure and drilling programs, drilling inventory and booked locations, production and revenue guidance, ESG initiatives, debt repayment plans and future growth plans. Readers are cautioned that the foregoing list is not exhaustive of all factors and assumptions which have been used.

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.

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.

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