Stockchase Insights Saturn Oil & Gas SOIL-T RISKY Aug 28, 2024

Passed on last private placement.
Large abandonment liabilities.
Small company that doesn't attractive institutional investment.
Has taken on lots of debt.
No return of capital until 2024.
Weary on prospects of company.

SOIL is a $328.6M company with a revenue base of ~$396M, and over the past 12 months it has generated net income of $392, however, it also was cash flow negative over the past 12 months. All of its cash from operations were eroded by increased CAPEX spending, which was funded by a combination of debt and share issuance. Its debt levels are quite high, but its valuation is also very low, but right now this is common in the oil and gas sector as commodity prices continue to weaken. SOIL has demonstrated some good qualities, and insiders have been buying. Its lack of dividend and relatively small size are probably the main drawbacks here.
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Production has been growing. As the market rally broadens, watch the smaller/mid-cap companies.

They've done some debt equity issues in recent years. The stock is very cheap. If they can stop buying companies, this can do well and help cash flow.

At less than 4X earnings, the stock is one of the cheapest within the sector (no dividend). The stock is down 21% YTD and 35% over one year. Debt is pretty high at 2X cash flow. Revenue has grown nicely, but earnings/cash flow has been less consistent. Certainly if it achieved strong exploration success the stock could do well, but this would be a true statement for any sector stock. Production was a record in the last quarter and net debt was reduced by 5%. Insiders own 2%, associated GMT Capital owns 30%. We would consider management mid-tier and would not see it as a must-own name in the sector.
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