Saturn Oil & Gas Inc. engages in the acquisition, exploration, and development of petroleum and natural gas resource deposits in Canada. It is involved in the exploration and development of light oil assets in the Oxbow area of Southeast Saskatchewan; Viking light oil assets in West-Central Saskatchewan; Cardium light oil assets in Central Alberta; Montney and Swan Hills light oil in North Alberta. Saturn Oil & Gas Inc. was incorporated in 2001 and is headquartered in Calgary, Canada.

Canada

Saturn Oil & Gas Inc.

Energy

The company does not pay dividends at all, or it pays them sporadically. There have only been a few years with dividend payments in the past ten years. 

OILSF reported revenue of CAD 895mn in the last 12 months, up 31% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS fell 88% from FY23 to CAD 0.35. Market expects EPS to reach CAD 0.61 in FY25.

The stock's performance has been mixed in the past six months, with growth following a decline. There is no clear price trend compared to its global peers from the same sector and industry (as shown above). It has underperformed this peer group by 17ppts over six months and grown 8ppts faster in the past month. This is largely true for peers from the same country and sector. With respect to the stock's valuation against its peers, its overall price performance is neutral.

The company has reported very strong EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 43.3% in the last 12 months, a decline from 83.4% in FY23. 

Historically, OILSF has reported strong net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 6.0%, down from 42.7% in FY23. 

In the last 12 months, the return on capital employed (RoCE) declined to 3.9%, below the peers. The consensus estimate for FY24 for RoCE is 15.5%, however, this time ahead of the peers. 

Saturn Oil & Gas Inc. reported a return on equity (RoE) of 7.7% in the last 12 months, down from 77.8% in FY23. The market consensus projects an RoE of 16.8% in FY24, this time above its peers. 

Another important profitability metric, return on assets (RoA), amounted to 3.1% in the last 12 months, a decrease from 30.3% in FY23. The market analysts predict that RoA will be 7.6% in FY24, more robust than its peers in this period. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 0.9 in the past several years. This ratio implies a poor shareholder value creation. 

The institutional, legal, and compliance risks associated with the company's country are minimal. In combination with stringent business standards, shareholder rights are very highly protected.

OILSF has very poor trading liquidity. It will take considerable time for the average private investor to sell a common position under normal market conditions. Liquidity is relatively stable and becomes extremely unfavourable on the days with the lowest activity. The trading volume mostly stays the same even under highly turbulent market conditions. Another factor to consider is the substantial number of days with zero trading volumes, i.e., without any ability to sell a position. The stock has a very small market capitalisation, which usually makes its trading liquidity erratic and unpredictable. 

No other major risks have been identified.

The risk of default is moderate. We note resilient historical revenue growth, robust profitability, solid return on capital, and solid cash flow generation, among the positive credit factors. Among the negative credit factors, we point to weak positions in its industry, excessive margin volatility, poor working capital management, and an unfavourable capital structure.

In highly turbulent market conditions, OILSF is exceptionally volatile. In other words, the stock will be among the worst-performers in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be critical. 

In normal market circumstances, OILSF is exceptionally volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will change quite unpredictably. The stock's losses on its worst days (less than 1-5% of the time) will range from significant to immense. 

Considering past and projected metrics, the stock is 'cheaper' than its peers. In particular, the stock is underpriced on P/E, of fair value on EV/EBITDA, undervalued on P/FCF. 

Saturn Oil & Gas Inc.

$ 1.14

3

Saturn Oil & Gas Inc.

$ 1.14

3

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

$ 1.14

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