- Baytex Energy (TSX:BTE), an outperforming Canadian energy stock, unveiled its robust 2024 budget and five-year outlook marked by significant free cash flow generation
- The company expects to grow free cash flow by 90 per cent from 2024 to 2028 while cutting its debt by more than half
- Baytex Energy Corp. is an energy company acquiring, developing and producing crude oil and natural gas in the Western Canadian Sedimentary Basin and in the Eagle Ford in the United States
- Baytex Energy stock (TSX:BTE) has lost 23.71 per cent year-over-year, but has managed a 90.73 per cent return since 2018, handily outperforming the TSX’s 37.72 per cent return over the period
Baytex Energy (TSX:BTE), an outperforming Canadian energy stock, unveiled its robust 2024 budget and five-year outlook marked by significant free cash flow generation.
2024 budget highlights
- Free cash flow of C$530 million, with 50 per cent going towards share buybacks and dividends and 50 per cent to strengthen the balance sheet
- Exploration and development expenditures of C$1.2 billion to C$1.3 billion (approximately 60 per cent of forecasted EBITDA) to yield average annual production of 150,000 to 156,000 barrels of oil equivalent per day (boe/d)
- Approximately a 1-2 per cent increase from forecasted H2 2023 production guidance, adjusted for the previously announced sale of the Forgan and Plato assets in the Viking
- Approximately 60-65 per cent of exploration and development expenditures to be allocated to the Eagle Ford light oil assets in the United States, with 35-40 per cent to Canadian assets, evenly split between light oil and heavy oil
Baytex’s 2024 budget in further detail
The company’s 2024 capital program will be 55 per cent weighted to the first half of the year.
The production mix is estimated to be 84 per cent liquids (46 per cent light oil and condensate, 25 per cent heavy oil and 13 per cent natural gas liquids) and 16 per cent natural gas.
Regarding the company’s Canadian light-oil business unit, it intends to bring seven wells onstream in the Pembina Duvernay and 93 wells in the Viking.
In the Canadian heavy oil business unit, the company expects to bring 35 Peavine Clearwater wells onstream, as well as nine wells at Peace River, 40 at Lloydminster Mannville and 4.5 at Morinville.
In the U.S. light-oil business unit, the company will bring 62 Eagle Ford wells onstream, including 46 operated wells, with a targeted 8 per cent improvement in operated drilling and completion costs per completed lateral foot over 2023.
Exploration will also continue across Baytex’s heavy oil portfolio with up to 14 stratigraphic test wells.
Five-year outlook
Baytex’s five-year outlook through 2028 emphasizes financial and operational sustainability, meaningful free cash flow generation, and increased shareholder returns on a per-share basis.
Supposing a constant US$70/bbl WTI price, the company expects to achieve the following over the period:
- Annual production growth of 1-4 per cent with production reaching about 170,000 boe/d by 2028
- A 60 per cent reinvestment rate with annual exploration and development expenditures of C$1.2billion-C$1.4 billion
- A production per share (boe/d per thousand shares) increase of 35 per cent
- Free cash flow per share growth of 90 per cent to about C$2.9 billion
- Approximately C$1.7 billion in capital returned to shareholders
- Total debt declining by 55 per cent to C$1 billion in 2028, with a total debt to EBITDA ratio improving to 0.5x
Based on a constant US$80/bbl and US$90/bbl WTI price, Baytex would expect to generate free cash flow of C$4.6 billion and C$6 billion, respectively, over its five-year outlook.
Risk management
For the first half of 2024, the company has hedged 40 per cent of its net crude oil exposure utilizing two-way collars with a floor price of US$60/bbl and a ceiling price of US$100/bbl.
For the second half of 2024, the company is hedged on approximately 25 per cent of net crude oil exposure utilizing two-way collars with a floor price of US$60/bbl and a ceiling price of US$98/bbl.
Baytex’s normal course issuer bid allows it to purchase up to 68.4 million common shares during the one-year period ending June 28, 2024. Through Nov. 30, the company repurchased 39.1 million shares for C$215 million (average of C$5.49 per share), which comes to 4.5 per cent of shares outstanding.
The company pays a quarterly dividend of C$0.0225 per share (C$0.09 per share annualized).
Tax reassessment with Canada Revenue Agency
Baytex is at risk of paying more than C$400 million in taxes and late-fees from non-capital loss deductions denied by the Canada Revenue Agency during tax reassessments.
The company is confident in its position, will defend itself in the Tax Court of Canada, and has purchased C$272.5 million (C$60 million premium) in insurance to manage the litigation risk.
CEO commentary
“Our 2024 budget and five-year outlook demonstrates the strength of our diversified oil-weighted portfolio in Western Canada and the Eagle Ford shale in Texas,” Eric T. Greager, president and CEO of Baytex Energy, said in a statement. “In 2024, we intend to progress the Pembina Duvernay, further delineate our Clearwater and Mannville heavy oil position, and deliver strong drilling and completion performance in the Eagle Ford. Our business is underpinned by strong drilling economics and greater than 10 years (of) inventory across our portfolio, and our commitment to shareholder returns is expected to drive meaningful per-share growth in production and free cash flow.”
Click here to read Baytex’s full news release.
Baytex Energy Corp. is an energy company acquiring, developing and producing crude oil and natural gas in the Western Canadian Sedimentary Basin and in the Eagle Ford in the United States.
Baytex Energy stock (TSX:BTE) last traded at C$4.73 per share. The stock has lost 23.71 per cent year-over-year, but has managed a 90.73 per cent return since 2018, handily outperforming the TSX’s 37.72 per cent return over the period.
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