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Baytex Energy Corp
Symbol BTE
Shares Issued 557,972,335
Close 2019-10-31 C$ 1.47
Recent Sedar Documents

Baytex Energy earns $15.15-million in Q3

2019-11-01 07:38 ET - News Release

Mr. Brian Ector reports

BAYTEX ANNOUNCES THIRD QUARTER 2019 FINANCIAL AND OPERATING RESULTS

Baytex Energy Corp. has provided its operating and financial results for the three and nine months ended Sept. 30, 2019.

Strong operating performance has continued across the company's asset base during the third quarter. Baytex continues to drive cost and capital efficiencies, stable production and substantial free cash flow. Given the company's year-to-date results, it expects to exceed its 2019 full-year annual production guidance of 97,000 barrels of oil equivalent per day (boe/d) with exploration and development capital expenditures of approximately $560-million. Two thousand nineteen exit production is forecast at 95,000 to 97,000 boe/d.

The company's commitment remains to generate free cash flow and improve its balance sheet. The company delivered free cash flow (adjusted funds flow less exploration and development capital expenditures) of $74-million in Q3 2019 and $271-million through the first nine months of 2019. This strong free cash flow has contributed to a 13-per-cent reduction in the company's net debt this year.

Q3 2019 highlights

  • Generated production of 94,927 boe/d (82 per cent oil and natural gas liquids) in Q3/2019 and 98,125 boe/d (82 per cent oil and NGL) for the first nine months of 2019;
  • Delivered adjusted funds flow of $213-million (38 cents per basic share) in Q3 2019 and $670-million ($1.20 per basic share) for the first nine months of 2019;
  • Redeemed $150-million (U.S.) principal amount of 6.75 per cent senior unsecured notes at par on Sept. 13, 2019;
  • Reduced net debt by $57-million during the quarter ($294-million year to date) as adjusted funds flow exceeded capital expenditures and the Canadian dollar strengthened relative to the U.S. dollar;
  • Realized an operating netback (inclusive of hedging) of $28.66 boe;
  • Eagle Ford production averaged 36,793 boe/d in Q3/2019 and 39,221 boe/d for the first nine months of 2019. The company established average 30-day initial production rates of approximately 2,100 boe/d per well from 20 (4.6 net) wells that commenced production during the quarter, which represents an approximate 20-per-cent improvement over wells brought on stream in 2018;
  • Production in Canada averaged 58,134 boe/d in Q3/2019 and 58,904 boe/d for the first nine months of 2019. The company successfully executed its third quarter development program in Canada with 102 (92.5 net) oil wells drilled;
  • Using the forward strip for the remainder of 2019 (1), the company is forecasting adjusted funds flow for 2019 of approximately $875-million. Based on planned capital expenditures, Baytex expects to generate approximately $300-million of free cash flow in 2019;
  • 2019 full-year pricing assumptions: WTI -- $56 (U.S.)/bbl; LLS -- $62 (U.S.)/bbl; WCS differential -- $12 (U.S.)/bbl; MSW differential -- $5 (U.S.)/bbl, NYMEX Gas -- $2.60 (U.S.)/mcf; AECO Gas -- $1.54/mcf and exchange rate (Canadian/U.S. dollar) -- 1.33;
  • Published the company's fourth biennial corporate sustainability report, demonstrating its commitment to transparency and accountability, and its progress in managing the environmental and social impacts of its business. The company established a greenhouse gas emissions reduction target with an objective of reducing its corporate emission intensity by 30 per cent by 2021, relative to its 2018 baseline.

  
 
                                                                  Three months ended       Nine months ended
                                                     Sept. 30,   June 30,   Sept. 30,   Sept. 30,   Sept. 30,
                                                         2019       2019        2018        2019        2018

Financial (thousands of dollars, except per common share amounts)
Petroleum and natural gas sales                      $424,600   $482,000    $436,761  $1,360,024  $1,070,433
Adjusted funds flow                                   213,379    236,130     171,210     670,279     362,155
Per share -- basic                                       0.38       0.42        0.46        1.20        1.28
Per share -- diluted                                     0.38       0.42        0.45        1.20        1.28
Net income (loss)                                      15,151     78,826      27,412     105,313    (94,071)
Per share -- basic                                       0.03       0.14        0.07        0.19      (0.33)
Per share -- diluted                                     0.03       0.14        0.07        0.19      (0.33)

Capital expenditures
Exploration and development expenditures              139,085    106,246     139,195     399,174     311,559
Acquisitions, net of divestitures                         (30)      1,647           -       1,617     (2,047)
Total oil and natural gas capital expenditures        139,055    107,893     139,195     400,791     309,512

Net debt
Bank loan                                             570,792    414,691     490,565     570,792     490,565
Long-term notes                                     1,359,480  1,543,645   1,527,733   1,359,480   1,527,733
Long-term debt                                      1,930,272  1,958,336   2,018,298   1,930,272   2,018,298
Working capital deficiency                             41,067     70,350      93,792      41,067      93,792
Net debt                                            1,971,339  2,028,686   2,112,090   1,971,339   2,112,090

  
 
                                         BENCHMARK PRICES

Crude oil                                                                    
WTI (US$/bbl)                                    $56.45      $59.81      $69.50      $57.06      $66.75
LLS (US$/bbl)                                     61.88       67.15       75.25       63.54       71.24
LLS differential to WTI (US$/bbl)                  5.43        7.34        5.75        6.48        4.49
Edmonton par ($/bbl)                              68.41       73.84       81.92       69.59       78.19
Edmonton par differential to WTI (US$/bbl)        (4.66)      (4.61)      (6.82)      (4.70)      (6.03)
WCS heavy oil ($/bbl)                             58.39       65.73       61.76       60.24       57.71
WCS differential to WTI (US$/bbl)                (12.24)     (10.68)     (22.25)     (11.74)     (21.93)
Natural gas
NYMEX (US$/mmbtu)                                $ 2.23      $ 2.64      $ 2.90      $ 2.67      $ 2.90
AECO ($/mcf)                                       1.04        1.17        1.35        1.39        1.41
Cdn/US$ average exchange rate                    1.3207      1.3376      1.3070      1.3292      1.2877

  
 
                                                                   Three months ended           Nine months ended
                                                 Sept. 30,      June 30,     Sept. 30,     Sept. 30,     Sept. 30,
                                                     2019          2019          2018          2019          2018
Operating
Daily production
Light oil and condensate (bbl/d)                   42,829        42,585        29,731        43,479        23,965
Heavy oil (bbl/d)                                  25,712        27,320        27,036        26,637        25,824
NGL (bbl/d)                                         9,543        10,986        10,076        10,745         9,549
Total liquids (bbl/d)                              78,084        80,891        66,843        80,861        59,338
Natural gas (mcf/d)                               101,054       105,065        93,414       103,587        89,449
Oil equivalent (boe/d at 6:1)                      94,927        98,402        82,412        98,125        74,246

Netback (thousands of Canadian dollars)
Total sales, net of blending and other
expense                                         $411,650      $461,110      $417,213     $1,309,396    $1,015,356
Royalties                                         (75,017)      (86,617)      (91,945)     (242,959)     (233,989)
Operating expense                                 (97,377)     (100,474)      (77,698)     (298,143)     (213,735)
Transportation expense                             (9,903)      (11,869)       (9,520)      (35,102)      (25,875)
Operating netback                                 229,353       262,150       238,050       733,192       541,757
General and administrative                         (9,934)      (11,506)      (10,158)      (35,576)      (31,729)
Cash financing and interest                       (26,752)      (28,092)      (26,343)      (83,028)      (76,384)
Realized financial derivatives gain (loss)         20,857        12,993      (30,854)        52,664       (70,103)
Other                                                (145)          585           515         3,027        (1,386)
Adjusted funds flow                               213,379       236,130       171,210       670,279       362,155

Netback (per boe)
Total sales, net of blending and other
expense                                             47.14         51.49         55.03         48.88         50.09
Royalties                                           (8.59)        (9.67)       (12.13)        (9.07)       (11.54)
Operating expense                                  (11.15)       (11.22)       (10.25)       (11.13)       (10.54)
Transportation expense                              (1.13)        (1.33)        (1.26)        (1.31)        (1.28)
Operating netback                                   26.27         29.27         31.39         27.37         26.73
General and administrative                          (1.14)        (1.28)        (1.34)        (1.33)        (1.57)
Cash financing and interest                         (3.06)        (3.14)        (3.47)        (3.10)        (3.77)
Realized financial derivatives gain (loss)           2.39          1.45         (4.07)         1.97         (3.46)
Other                                               (0.03)         0.07          0.07          0.11         (0.06)
Adjusted funds flow                                 24.43         26.37         22.58         25.02         17.87


Operating results

Strong operating performance continued across the company's business during the third quarter. It continues to drive cost and capital efficiencies, stable production and substantial free cash flow.

Production during the third quarter averaged 94,927 boe/d (82 per cent oil and NGL), as compared with 98,402 boe/d (82 per cent oil and NGL) in Q2 2019. The company's operating results were consistent with its expectations and reflect the timing of its 2019 development program in Canada and the Eagle Ford, and the impact of a third party facility turnaround at Peace River.

Production in the first nine months of 2019 averaged 98,125 boe/d. Given the company's strong performance year to date, it expects to exceed its 2019 full-year annual production guidance of 97,000 boe/d with exploration and development expenditures of approximately $560-million. Two thousand nineteen exit production is forecast at 95,000 to 97,000 boe/d.

Exploration and development expenditures totalled $139-million in Q3/2019, bringing aggregate spending in the nine months of 2019 to $399-million. The company participated in the drilling of 124 (97.8 net) wells with a 100-per-cent success rate during the third quarter.

Eagle Ford and Viking Light oil

Production in the Eagle Ford averaged 36,793 boe/d (77 per cent liquids) during Q3 2019, as compared with 39,822 boe/d in Q2 2019. The lower volumes during the quarter reflect the timing of completion activity. The company commenced production from 20 (4.6 net) wells during the third quarter, as compared with 29 (5.0 net) wells during the second quarter. The wells brought on stream generated an average 30-day initial production rate of approximately 2,100 boe/d per well, which represents an approximate 20-per-cent improvement over wells brought on stream in 2018.

During Q3 2019, production from the Viking averaged 22,198 boe/d, as compared with 22,565 boe/d in Q2/2019. The company maintained an active pace of development during the third quarter with 72.5 net wells drilled and 49.4 net wells brought on production. It currently has three drilling rigs and two frac crews executing its program and expects to drill approximately 245 net wells this year. Inventory enhancement continues to be a priority. The company has completed multiple deals and swaps year to date adding 220 net unbooked drilling opportunities.

Heavy oil

The company's heavy oil assets at Peace River and Lloydminster produced a combined 28,483 boe/d during the third quarter, as compared with 29,983 boe/d in Q2 2019. The lower volumes reflect the timing of the company's 2019 development program, which is strongly weighted (80 per cent) to the second half of the year and the impact of a third party facility turnaround. During the third quarter, the company drilled 20 net heavy oil wells, including four net multilateral horizontal wells at Peace River. Heavy oil production is expected to increase to more than 30,000 boe/d during the fourth quarter due to new well completions and the expansion of the company's Kerrobert thermal project.

East Duvernay shale light oil

The company continues to prudently advance the delineation of the East Duvernay shale, an early-stage, high operating netback light oil resource play. To date, the company has drilled seven wells at Pembina, which confirms the prospectivity of its acreage. Two wells brought on stream in 2019 generated an average 30-day initial production rate of approximately 1,050 boe/d per well (75 per cent liquids) and are in the top 15 per cent of all wells drilled to date in the play. The success of the company's drilling program in the Pembina area has significantly derisked its approximately 38-kilometre-long acreage fairway, where it holds 275 sections (100-per-cent working interest) of Duvernay land.

Financial review

The company delivered adjusted funds flow of $213-million (38 cents per basic share) in Q3 2019 and $670-million ($1.20 per basic share) through the first nine months of 2019. This resulted in free cash flow (adjusted funds flow less exploration and development capital expenditures) of $74-million in Q3 2019 and $271-million through the first nine months of 2019. This strong free cash flow has contributed to a 13-per-cent reduction in the company's net debt this year including the redemption of its $150-million (U.S.) senior unsecured notes on Sept. 13, 2019.

The company realized an operating netback of $26.27/boe in Q3/2019, as compared with $29.27/boe in Q2 2019 and $31.39/boe in Q3/2018. Including financial derivatives, the company's operating netback improved to $28.66/boe, as compared with $27.32/boe in Q3/2018.

The company's Canadian operations generated an operating netback of $25.43/boe during Q3/2019 while its Eagle Ford asset generated an operating netback of $27.58/boe. During the third quarter, Canadian differentials remained tight, which contributed to strong price realizations.

The attached table summarizes the company's operating netbacks for the periods noted.

                                                                   Three months ended Sept. 30,
                                                                  2019                    2018         
($ per boe except for production)               Canada    U.S.   Total  Canada    U.S.   Total

Production (boe/d)                              58,134  36,793  94,927  45,214  37,198  82,412
Total sales, net of blending and other          $45.96  $48.99  $47.14  $47.66  $63.98  $55.03
Royalties                                        (4.90) (14.42)  (8.59)  (6.28) (19.23) (12.13)
Operating expense                               (13.78)  (6.99) (11.15) (13.15)  (6.72) (10.25)
Transportation expense                           (1.85)      -   (1.13)  (2.29)      -   (1.26)
Operating netback                               $25.43  $27.58  $26.27  $25.94  $38.03  $31.39
Realized financial derivatives gain (loss)           -       -    2.39       -       -   (4.07)
Operating netback after financial derivatives   $25.43  $27.58  $28.66  $25.94  $38.03  $27.32


2019 guidance

Given the company's strong year-to-date operating performance, it now expects to exceed its 2019 full-year annual production guidance of 97,000 boe/d. Two thousand nineteen exit production is forecast at 95,000 to 97,000 boe/d. Baytex remains focused on driving cost and capital efficiencies in its business and anticipates exploration and development expenditures for 2019 of approximately $560-million.

Based on the forward strip for the balance of 2019, the company is forecasting adjusted funds flow of approximately $875-million and expects to generate approximately $300-million of free cash flow, which supports its deleveraging strategy. Adjusted funds flow in excess of exploration and development expenditures, leasing expenditures and asset retirement obligations, will be used to reduce the company's indebtedness.

As the company continues to drive debt levels down, it will be positioned to enhance shareholder returns through a combination of organic growth, disciplined capital allocation, share buybacks and/or reinstatement of a dividend.

The attached table summarizes the company's 2019 annual guidance and compares it with its 2019 year-to-date actual results.

                                                    Previous guidance (1)  Current guidance          YTD 2019 
Exploration and development 
capital ($ millions)                                        $550-$600                 ~$560            $399.2 
Production (boe/d)                                      96,000-97,000               ~97,000            98,125 
Expenses                                                                                                 
Royalty rate (%)                                                   19%            No change                19%
Operating ($/boe)                                       $10.75-$11.25             No change            $11.13 
Transportation ($/boe)                                    $1.25-$1.35             No change             $1.31 
General and administrative ($ millions)                $46 ($1.30/boe)            No change  $35.6 ($1.33/boe) 
Interest ($ millions)                                 $112 ($3.23/boe)            No change  $83.0 ($3.10/boe) 
                                                                                                          
Leasing expenditures ($ millions)                                  $5             No change               4.4 
Asset retirement obligations ($ millions)                         $17             No change              10.9 

(1) As announced on Aug. 1, 2019.

The company is in the process of setting its 2020 capital budget, the details of which are expected to be released in December following approval by the board of directors.

Conference call today -- 9 a.m. MDT (11 a.m. EDT)

Baytex will host a conference call today, Nov. 1, 2019, starting at 9 a.m. MDT (11 a.m. EDT). To participate, please dial toll-free in North America 1-800-319-4610 or international 1-416-915-3239. Alternatively, to listen to the conference call on-line, please go to the ChorusCall website. An archived recording of the conference call will be available shortly after the event by accessing the webcast link above. The conference call will also be archived on the Baytex website.

Additional information

The company's condensed consolidated interim unaudited financial statements for the three and nine months ended Sept. 30, 2019, and the related management's discussion and analysis of the operating and financial results can be accessed on the company's website and will be available shortly through SEDAR and EDGAR.

About Baytex Energy Corp.

Baytex Energy is an oil and gas corporation based in Calgary, Alta. The company is engaged in the acquisition, development and production of crude oil and natural gas in the Western Canadian sedimentary basin and in the Eagle Ford in the United States. Approximately 83 per cent of Baytex's production is weighted toward crude oil and natural gas liquids.

We seek Safe Harbor.

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