Good morning, everyone. Thank you for joining the Investor Call for Saturn's Q2 Financial and Operations update. My name is Grant MacKenzie. I'm the new Chief Legal Officer of the company, and I'll moderate this webcast. We'll start with a presentation from management, and following that, we'll address any of your questions or comments. Please feel free to submit questions and comments through the Q&A button. Joining us today from the management team are John Jeffrey, Chief Executive Officer, Scott Sanborn, Chief Financial Officer, Justin Kaufmann, Chief Development Officer, and myself. I'll now hand the conference over to John to speak to our results.
Hello, thank you all for joining us live today, to report on a historic quarter for Saturn Oil. Q2 was the first full quarter of corporate production and cash flows post that Ridgeback acquisition, that resulted in record highs in terms of production, EBITDA, cash flow, and free cash flow. As is typical in Western Canada, due to the breakup, the second quarter is the slowest period for drilling and oil field development. Following the Ridgeback acquisition, Saturn took advantage of this time to focus on the critical tasks of integrating our financial, IT, and management systems. Most importantly, we took this time to integrate all staff into one effective team under that Saturn banner. As expected, this was no, no small task to accomplish, but we are delighted to report to our stakeholders that these tasks are now largely completed.
Now, with integration behind us and that rally in oil price, we shift our focus to the continued development of our deep inventory of combined Ridgeback and Saturn drilling locations. We currently have two drill rigs drilling full-time, one in Alberta and one in Saskatchewan, and we expect to continue that for the remainder of the year. In an effort to take advantage of the rally in commodity price, we are planning to fire up a third rig in the Oxbow field. We've had excellent drilling results to date, both in Q1 and early results on our Q2 program, which Justin will outline coming up. Another important objective of the Ridgeback acquisition was to achieve meaningful synergies, which we are currently estimated to have reached about $10 million per year in reduced operating and administrative costs.
Our goal is to continuously review costs to see where further savings can be made. Operating and transport costs per BOE in the second quarter were 18% lower year-over-year. We hope that trend continues looking onto next year. As fantastic as Q2 was for Saturn, we were held back by the tragic wildfires that affected Central and Northern Alberta. We are thankful to report that our employees' homes and communities are currently out of danger, and Saturn has resumed 100% of the production outages that were incurred, and we've had no significant damage to our production facilities. Unfortunately, the wildfires continue throughout many parts of Western Canada. However, they are now far from Saturn's operations. We hope and pray for the safety of those communities still affected.
We estimate that the production impacts from wildfires amounted to about 2,300 BOE per day of lost production in the quarter. It's a small concession that a disproportionate amount of the shut-in production we experienced was natural gas, which receives a much lower price than our light oil or even our NGL produced. It was a limited impact to our cash flows in the quarter. I'll now hand the webcast over to Justin Kaufmann, our Chief Development Officer, for an overview of Q2 drilling and our plans for the rest of the year. Justin?
Thanks, John. Q2 was a light period for oil field activity with the associated seasonal breakups and road bans. Saturn drilled a net three point four wells in the quarter, including two operated Spearfish wells on our Oxbow asset in southeastern Saskatchewan. This was an extremely exciting program as we drilled our first-ever wells in the Spearfish formation. This reservoir contains approximately 40 book locations and the potential for secondary recovery. We are very encouraged by the initial production results of the Spearfish wells, and I've currently now drilled and brought onto production six of these wells with 100% success rate. We look forward to reporting the 30 days average production of these wells when the data is available. It should be great news. We are well underway in what should be Saturn's largest annual capital expenditure budget in our corporate history.
In Alberta, we are drilling extended reach horizontal wells in our Lochend property, targeting Cardium light oil. We recently completed a 1.5 mi well in this reservoir and are currently on the second well of this program, which is a 3 mi well. This will be the longest well in the company's history, with the potential to bring on above-average type curve production due to the virgin reservoir it is accessing. These locations were some of the top prospects from the Ridgeback inventory of light oil targets. For the remainder of the year, we will continue to drill Cardium prospects in central Alberta, including a third Lochend Cardium well, four Kaybob Montney wells, and two West Pembina Cardium wells.
That will keep one rig efficiently busy in Alberta, with initial field estimates also have our program on this rig coming in under budget so far. Saturn also expects to keep a rig busy through 2023 in southeastern Saskatchewan, focused on Mississippian Age light oil targets, as well as drilling a number of Bakken locations. A new drilling technique has found great initial success in the Bakken with open-hole multilateral wells. In these wells, a single vertical well produces from six to eight horizontal legs, drilled conventionally and unstimulated. Offsetting producers to our Bakken have already had great success with this drill pro-pattern, which was initially made popular from development in the Clearwater Play. Open-hole multilateral wells have the potential to increase estimated ultimate recoveries of light oil and enhancing development economics of the Bakken.
If successful on the extended, on the extensive undeveloped land Saturn holds in the Bakken play, there could be well over 100 new locations for future development that are currently not booked. Saturn has extensive infrastructure in this area and an operated gas plant, so we eagerly await getting this program underway this fall. I will now pass the webcast over to Scott for a financial overview of the quarter.
Thanks, Justin. Very excited to get this quarter out. It highlights the multiple company records we had this period, including production volumes, commodity sales, EBITDA, cash flow, and debt repayment, despite the impact of the Alberta wildfires, which I'll touch on later. In addition, it shows a full quarter of operational results following our Ridgeback acquisition, which we closed on February 28th, and a graduation to the Toronto Stock Exchange. Saturn's second quarter production set a record averaging 26,000 BOE per day, up from approximately 18,000 BOE per day in the first quarter. Increased production volumes, coupled with average WTI prices of US $73.75 per barrel, led to record petroleum and natural gas sales of CAD 176 million.
On the cash flow front, the company realized record EBITDA of CAD 93 million, record adjusted funds flow of CAD 67 million or CAD 0.48 per share, and spent CAD 13.8 million in development capital, drilling seven gross or 3.4 net wells to realize record free cash flow of CAD 53 million, of which CAD 51 million was used towards debt repayment. Specifically, the company made CAD 50.7 million in principal repayments on our Senior Term Loan, exiting the quarter with net debt of CAD 510 million, resulting in net debt to annualize quarterly adjusted funds flow of 1.9x , which the company expects to decrease as payments are continued into the third and fourth quarter. Moving to liquidity, as I mentioned last quarter, the company was successful in obtaining a CAD 30 million unsecured demand letter of credit facility with a syndicate of Canadian banks.
This quarter, we converted our CAD 21 million cash deposit with Saskatchewan Ministry of Energy and Resources into a demand letter of credit supported by this facility, thereby releasing the cash back to Saturn and increasing our liquidity without increasing our debt balance. Corporately, this quarter, the company successfully graduated to the Toronto Stock Exchange up from the Venture, thereby providing greater access to institutional capital and displaying its maturing status in the intermediate E&P space. Forward-looking, it provides optionality, such as additional analyst coverage and eligibility to be included in certain index funds, which we believe will drive the share price.
Related to the capital structure of the company, we reduced the perceived overhang on our stock with the expiry of certain listed warrants, together with additional listed warrants expiring post-quarter on July 7th, for a total reduction to dilutive instruments of approximately 30.5 million shares, or roughly 16% of pre-expiry, fully diluted instruments outstanding. The impact of the provincial wildfires had a severe impact on many of our employees and local residents in the surrounding communities. Saturn thanks our employees affected for the diligent work on the ground despite these challenges. The estimated curtailed production caused by the fires was approximately 2,300 BOE per day in the quarter, or approximately 500 BOE-600 BOE per day on an annualized basis. We do carry full business interruption insurance for instances like this and are diligently working with the underwriters on next steps to recoup any losses.
At this time, Saturn has resumed full operations and has ascertained that all own infrastructure to have little or no associated damage. With that, I'll turn it over to Grant with any questions on the quarter.
Thanks, Scott, John, and Justin. We have a few questions here. The first one, maybe just because Scott, you're freshest, we'll hand to you. What's the current corporate liability rating, and do you expect the need for that LC to change at all?
Yeah, thanks for the question, Grant. Currently, post-acquisition, we have about a four point LMR, LLR split between the two provinces. As I mentioned, we did convert that cash deposit to an LC. We are currently working with the province of Saskatchewan for a possible refund on that, which we have met the requirements to do so. We expect that to come through prior to year-end. The LC will be canceled, and that will free up additional room on the eligibility and availability on our credit facility.
Thank you. Could you also comment on current debt balance?
Sure, yep. By the end of the month, by the end of August, we will have approximately CAD 500 million, CAD 507 million, to be specific, bringing our total year-to-date debt repayments to approximately CAD 150 million.
Perfect. Thank you very much. Maybe over to Justin on some ops. What's the timing, Justin, related to operating on the Spearfish wells that you mentioned, and any production updates, please?
Yeah. We started drilling the Spearfish wells around mid-June. We completed the successfully completed the first six wells. Complete drilling near the end of July. Production started to be brought online starting mid-July, and the last wells, first week of August. We should have those IP30 rates by beginning of September. Yeah, that's, that's it. Yeah, beginning of September, IP30 rates.
Perfect. Now, how is this drill program stacking up to your prior years' programs that you've been undertaking?
Well, 2022 was a very successful year, as people remember. We drilled those 32 Viking wells that came on about close to 40% above type curve. These wells are exceeding those production rates on a peak production average. While we don't have IP30 yet, we can see what those current production on a daily basis is. We're gonna be really excited to announce those results. Best, best six group wells drilled as a company so far.
Thanks, Justin. One more question from the floor with respect to current production. Do you, do you have an update, like, I guess, what current production is?
Current production is around 26,500 barrels.
Perfect. There's a couple questions respecting guidance, and specifically with impact to the wildfires and kind of pricing we saw in the first half of the year. John, would you have any comments on any revisions to guidance or any discussion on guidance?
Yeah, absolutely. Again, you know, that, that's a good point. Due to the wildfires, we did see, plus a lower oil price in that first half of the year, it has caused us to delay the capital. Now that we've pushed it back a little bit into the back half of the year, we are working on revising guidance. We hope to have that out shortly, you know, within the next few weeks. That's why we're starting to pick up. We started later in the season than we had hoped, but that's why you're seeing us pick up that third rig in Oxbow to try and catch up on some of those drilling programs.
That is going to lower the overall average for the year, and we will look to get capital updated guidance out again, hopefully in the next few weeks.
Perfect. John, can you confirm if there's any ongoing effects from the wildfires?
No, no ongoing effects, as far as we're concerned. All of our infrastructure and tied-in partners, are, are now unaffected, and we continue to, to operate as usual in that area.
Thank you. Scott, one more question. There's just, any anticipated end-of-year net debt levels? Do we have an idea of where those, those will sit?
As John mentioned, we are, you know, we're, we're currently looking at the amended capital timing of everything, so that will be released in the upcoming weeks, along with, with updated guidance.
Excellent. Yeah, I think that's everything that I see. Barring anything further, I would thank everyone on the panel for attending. Oh, sorry, there's one more question just with respect to the integration of Ridgeback, and the impact that'll have on our quarterly G&A. Scott, would you have any commentary on that?
There's a question coming through, Grant. You know, this quarter is a little bit higher, and that does have certain transition costs on it. You know, the question is, will it be this high every quarter? No, it will not. This has, you know, one or two million in there related to that. You know, on a total basis, we expect it to be in that, you know, CAD 20 million range. It goes a little bit higher, but it will come down in the upcoming course.
Perfect. I believe that's everything we see on the questions from the attendees. Again, I thank the panelists for joining. I believe that's everything for this Q2 update. Thank you, everyone, for your participation.
Thanks for joining. Thank you, Grant.
Thanks, everybody.
Thank you.