Release Date: July 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Baytex Energy Corp (BTE, Financial) delivered strong Q2 2024 results with higher production, disciplined capital spending, and meaningful free cash flow.
- The company returned $97 million to shareholders through share buybacks and quarterly dividends.
- Production per share increased by 23% in Q2 2024 compared to Q2 2023, with production averaging over 154,000 BOE per day.
- Baytex Energy Corp (BTE) expects to generate approximately $700 million of free cash flow in 2024, with 75% weighted to the second half of the year.
- The company has repurchased 7.2% of its shares outstanding since June 30 of the previous year, demonstrating a strong commitment to shareholder returns.
Negative Points
- Total debt remains high at $2.5 billion, with a total debt to EBITDA ratio of 1.1 times.
- The strengthening US dollar relative to the Canadian dollar has increased the balance in US denominated notes, impacting total debt.
- Despite strong operational performance, the share price has traded down, which is a concern for the company.
- The company faces challenges in maintaining production levels, with a focus on balancing capital efficiency and operational performance.
- Wildfires in Alberta, although not directly impacting operations, remain a potential risk factor for the company.
Q & A Highlights
Highlights of Baytex Energy Corp (BTE) Q2 2024 Earnings Call
Q: Could you give us a sense as to what that trajectory looks like in terms of CapEx and production in the second half? And then just the potential, particularly, I think, for debt reduction and buybacks, please?
A: (Eric Greager, President, CEO, Director) We are still pointing to the midpoint of CapEx guidance range of $1.2 million to $1.3 billion, weighted more toward Q3 into Q4. Production is expected to remain level at around 153,000 BOE per day. (Chad Kalmakoff, CFO) We expect another $500 million in free cash flow in the second half, which will accelerate debt paydown.
Q: Could you frame maybe your learnings and results thus far in the Duvernay, and is there anything to say about efficiencies or where costs are coming out?
A: (Eric Greager, President, CEO, Director) The three-well pad came on in May with results in line with expectations. The second four-well pad is expected in August. (Chad Lundberg, COO) We've seen a 5% reduction in drill days and a 10% reduction in costs. Continuous improvements are being made across both the Eagle Ford and Duvernay.
Q: Did you do anything different with those Eagle Ford wells that came on at some of the best rates you've done? And are any of the efficiencies noted built into your guidance and capital costs?
A: (Eric Greager, President, CEO, Director) The wells have shown consistent improvement, with Q2 wells averaging 871 barrels per day of crude oil. (Chad Lundberg, COO) We've seen an 8% reduction in costs due to various efficiency improvements. Continuous improvement is expected.
Q: Are you doing anything different on the second four-well pad in the Duvernay?
A: (Eric Greager, President, CEO, Director) The second four-well pad will have similar features but with nuanced changes in hydraulics and fluid architecture based on updated models. (Chad Lundberg, COO) We're also looking at bound versus unbound well spacing.
Q: Is 20,000 barrels per day a sustainable rate for Peavine, or is there potential for even higher levels?
A: (Eric Greager, President, CEO, Director) Peavine could exit the year around 17,000 barrels per day and may head toward 15,000 over the longer term. The wells continue to surprise to the upside.
Q: Are there any plans to move to the northeast area of Peavine, or is that more of a '25, '26 event?
A: (Eric Greager, President, CEO, Director) Over time, we will move eastward and northeastward, but keeping developments tight geographically increases capital efficiency.
Q: Can you give us a sense of what the well cost differences are from the volatile oil windows to the black oil window in the Eagle Ford?
A: (Eric Greager, President, CEO, Director) Costs tend to be a bit lower in the black oil window due to lower pressure and thermal maturity. (Chad Lundberg, COO) The difference is about $0.5 million per well.
Q: What is your takeaway or thoughts on the market reaction to the results today?
A: (Eric Greager, President, CEO, Director) Disappointed by the share price drop, but we beat consensus estimates on production and AFF per share. We will continue to buy back shares at a discount, which will drive better per-share metrics over time.
Q: Any comments on the importance of continuing to deliver across the board, particularly regarding debt repayment?
A: (Eric Greager, President, CEO, Director) We prioritized extending our debt maturities and reducing the coupon, which positions us well for the future. Debt paydown will accelerate in Q3 and Q4.
Q: Any impact to operations from the wildfires in Alberta?
A: (Eric Greager, President, CEO, Director) No impacts to our operations so far this year. We remain on high alert and are ready to lend a hand where needed.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
