Calgary, Alberta–(Newsfile Corp. – May 9, 2024) – Baytex Energy Corp. (TSX: BTE) (NYSE: BTE) (“Baytex”) reports its operating and financial results for the three months ended March 31, 2024 (all amounts are in Canadian dollars unless otherwise noted).
“In the first quarter we safely and efficiently executed the largest exploration and development (“E&D”) program in company history and delivered operating and financial results consistent with our full-year guidance. We expect to deliver substantial free cash flow and meaningful shareholder returns over the next three quarters. Our strong free cash flow profile reflects the efficiency of our E&D program, higher forecast production volumes for the remainder of the year and improved crude oil price realizations in Canada and the Eagle Ford. We are in a strong financial position supported by significant liquidity and a balanced debt maturity profile,” commented Eric T. Greager, President and Chief Executive Officer.
Highlights
- Reported cash flows from operating activities of $384 million ($0.47 per basic share) in Q1/2024.
- Increased adjusted funds flow(1) per share by 21% to $424 million ($0.52 per basic share) in Q1/2024 compared to Q1/2023.
- Increased production per share by 15% in Q1/2024, compared to Q1/2023. Production in Q1/2024 averaged 150,620 boe/d (84% oil and NGL), consistent with our full-year plan.
- Executed a $413 million E&D program, the largest in company history which, at its peak, had 13 rigs running.
- Brought 19 operated Eagle Ford wells onstream in Q1/2024, including three Upper Eagle Ford wells and a successful Lower Eagle Ford refrac.
- Generated production from our Clearwater play at Peavine of 17,599 bbl/d in Q1/2024. Brought 12 wells onstream in Q1/2024 that generated an average 30-day initial production rate of 915 bbl/d per well.
- Completed the drilling of our seven-well Duvernay program with a 21% improvement in drilling days (spud to rig release) and a 10% improvement in drilling costs, compared to 2023.
- Continued development success at Morinville, Alberta (Clearwater equivalent) and the greater Cold Lake region (Waseca).
- Maintained balance sheet strength and with a total debt(2) to Bank EBITDA(2) ratio of 1.1x.
- Subsequent to quarter-end, completed a US$575 million private placement offering of senior unsecured notes due 2032 that bear interest at a rate of 7.375% per annum and extended the maturity of our credit facilities by two years to May 2028.
2024 Guidance
Our 2024 guidance remains unchanged with E&D expenditures of $1.2 to $1.3 billion and production of 150,000 to 156,000 boe/d.
Based on the forward strip(3), we expect to generate approximately $700 million of free cash flow(4) in 2024. We intend to allocate 50% of free cash flow to the balance sheet and 50% to shareholder returns, which includes a combination of share buybacks and a quarterly dividend.
(1) Capital management measure. Refer to the Specified Financial Measures section in this press release for further information.
(2) Calculated in accordance with our amended credit facilities agreement which is available on SEDAR+ at www.sedarplus.ca.
(3) 2024 pricing assumptions: WTI – US$77.50/bbl; WCS differential – US$14.50/bbl; NYMEX Gas – US$2.40/MMbtu; and Exchange Rate (CAD/USD) – 1.36.
(4) Specified financial measure that does not have any standardized meaning prescribed by IFRS and may not be comparable with the calculation of similar measures presented by other entities. Refer to the Specified Financial Measures section in this press release for further information.
Three Months Ended | |||||||||||
March 31, 2024 | December 31, 2023 | March 31, 2023 | |||||||||
FINANCIAL (thousands of Canadian dollars, except per common share amounts) |
|||||||||||
Petroleum and natural gas sales | $ | 984,192 | $ | 1,065,515 | $ | 555,336 | |||||
Adjusted funds flow (1) | 423,846 | 502,148 | 236,989 | ||||||||
Per share – basic | 0.52 | 0.60 | 0.43 | ||||||||
Per share – diluted | 0.52 | 0.60 | 0.43 | ||||||||
Free cash flow (2) | (88 | ) | 290,785 | (1,918 | ) | ||||||
Per share – basic | – | 0.35 | – | ||||||||
Per share – diluted | – | 0.35 | – | ||||||||
Cash flows from operating activities | 383,773 | 474,452 | 184,938 | ||||||||
Per share – basic | 0.47 | 0.57 | 0.34 | ||||||||
Per share – diluted | 0.47 | 0.57 | 0.34 | ||||||||
Net (loss) income | (14,043 | ) | (625,830 | ) | 51,441 | ||||||
Per share – basic | (0.02 | ) | (0.75 | ) | 0.09 | ||||||
Per share – diluted | (0.02 | ) | (0.75 | ) | 0.09 | ||||||
Dividends declared | 18,494 | 18,381 | – | ||||||||
Per share | 0.0225 | 0.0225 | – | ||||||||
Capital Expenditures | |||||||||||
Exploration and development expenditures | $ | 412,551 | $ | 199,214 | $ | 233,626 | |||||
Acquisitions and divestitures | 35,378 | (125,822 | ) | 271 | |||||||
Total oil and natural gas capital expenditures | $ | 447,929 | $ | 73,392 | $ | 233,897 | |||||
Net Debt | |||||||||||
Credit facilities | $ | 849,926 | $ | 864,736 | $ | 409,653 | |||||
Long-term notes | 1,637,155 | 1,597,475 | 554,351 | ||||||||
Total debt (3) | 2,487,081 | 2,462,211 | 964,004 | ||||||||
Working capital deficiency (2) | 152,760 | 72,076 | 31,166 | ||||||||
Net debt(1) | $ | 2,639,841 | $ | 2,534,287 | $ | 995,170 | |||||
Shares Outstanding – basic (thousands) | |||||||||||
Weighted average | 821,710 | 831,063 | 545,062 | ||||||||
End of period | 821,322 | 821,681 | 545,553 | ||||||||
BENCHMARK PRICES | |||||||||||
Crude oil | |||||||||||
WTI (US$/bbl) | $ | 76.96 | $ | 78.32 | $ | 76.13 | |||||
MEH oil (US$/bbl) | 78.95 | 80.62 | 77.42 | ||||||||
MEH oil differential to WTI (US$/bbl) | 1.99 | 2.30 | 1.29 | ||||||||
Edmonton par ($/bbl) | 92.16 | 99.72 | 99.04 | ||||||||
Edmonton par differential to WTI (US$/bbl) | (8.63 | ) | (5.10 | ) | (2.88 | ) | |||||
WCS heavy oil ($/bbl) | 77.73 | 76.86 | 69.44 | ||||||||
WCS differential to WTI (US$/bbl) | (19.33 | ) | (21.88 | ) | (24.77 | ) | |||||
Natural gas | |||||||||||
NYMEX (US$/mmbtu) | $ | 2.24 | $ | 2.88 | $ | 3.42 | |||||
AECO ($/mcf) | 2.05 | 2.66 | 4.34 | ||||||||
CAD/USD average exchange rate | 1.3488 | 1.3619 | 1.3520 |
Notes:
(1) Capital management measure. Refer to the Specified Financial Measures section in this press release for further information.
(2) Specified financial measure that does not have any standardized meaning prescribed by IFRS and may not be comparable with the calculation of similar measures presented by other entities. Refer to the Specified Financial Measures section in this press release for further information.
(3) Calculated in accordance with our amended credit facilities agreement which is available on SEDAR+ at www.sedarplus.ca.
Three Months Ended | |||||||||
March 31, 2024 | December 31, 2023 | March 31, 2023 | |||||||
OPERATING | |||||||||
Daily Production | |||||||||
Light oil and condensate (bbl/d) | 66,036 | 70,124 | 31,678 | ||||||
Heavy oil (bbl/d) | 40,560 | 39,569 | 34,191 | ||||||
NGL (bbl/d) | 19,299 | 23,160 | 7,213 | ||||||
Total liquids (bbl/d) | 125,895 | 132,853 | 73,082 | ||||||
Natural gas (mcf/d) | 148,353 | 165,121 | 82,066 | ||||||
Oil equivalent (boe/d @ 6:1) (1) | 150,620 | 160,373 | 86,760 | ||||||
Netback (thousands of Canadian dollars) | |||||||||
Total sales, net of blending and other expense (2) | $ | 919,984 | $ | 1,003,219 | $ | 495,655 | |||
Royalties | (209,171 | ) | (228,570 | ) | (93,253 | ) | |||
Operating expense | (173,435 | ) | (164,873 | ) | (112,408 | ) | |||
Transportation expense | (29,835 | ) | (29,744 | ) | (17,005 | ) | |||
Operating netback (2) | $ | 507,543 | $ | 580,032 | $ | 272,989 | |||
General and administrative | (22,412 | ) | (22,280 | ) | (11,734 | ) | |||
Cash financing and interest | (53,280 | ) | (56,698 | ) | (18,375 | ) | |||
Realized financial derivatives gain | 5,488 | 12,377 | 5,415 | ||||||
Other (3) | (13,493 | ) | (11,283 | ) | (11,306 | ) | |||
Adjusted funds flow (4) | $ | 423,846 | $ | 502,148 | $ | 236,989 | |||
Netback (per boe) (2) | |||||||||
Total sales, net of blending and other expense (2) | $ | 67.12 | $ | 68.00 | $ | 63.48 | |||
Royalties (5) | (15.26 | ) | (15.49 | ) | (11.94 | ) | |||
Operating expense (5) | (12.65 | ) | (11.17 | ) | (14.40 | ) | |||
Transportation expense (5) | (2.18 | ) | (2.02 | ) | (2.18 | ) | |||
Operating netback (2) | $ | 37.03 | $ | 39.32 | $ | 34.96 | |||
General and administrative (5) | (1.64 | ) | (1.51 | ) | (1.50 | ) | |||
Cash financing and interest (5) | (3.89 | ) | (3.84 | ) | (2.35 | ) | |||
Realized financial derivatives gain (5) | 0.40 | 0.84 | 0.69 | ||||||
Other (3) | (0.98 | ) | (0.78 | ) | (1.45 | ) | |||
Adjusted funds flow (4) | $ | 30.92 | $ | 34.03 | $ | 30.35 |
Notes:
(1) Barrel of oil equivalent (“boe”) amounts have been calculated using a conversion rate of six thousand cubic feet of natural gas to one barrel of oil. The use of boe amounts may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet of natural gas to one barrel of oil is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
(2) Specified financial measure that does not have any standardized meaning prescribed by IFRS and may not be comparable with the calculation of similar measures presented by other entities. Refer to the Specified Financial Measures section in this press release for further information.
(3) Other is comprised of realized foreign exchange gain, other income or expense, current income tax expense or recovery and cash share-based compensation. Refer to the Q1/2024 MD&A for further information on these amounts.
(4) Capital management measure. Refer to the Specified Financial Measures section in this press release for further information.
(5) Calculated as royalties, operating, transportation expense, general and administrative expense, cash interest expense or realized financial derivatives gain (loss) divided by barrels of oil equivalent production volume for the applicable period.
During the first quarter, we delivered operating and financial results consistent with our full-year guidance. We increased production per basic share by 15% in Q1/2024, compared to Q1/2023, with production averaging 150,620 boe/d (84% oil and NGLs). We increased adjusted funds flow(1) per basic share by 21% to $424 million ($0.52 per basic share) and realized a net loss of $14 million ($0.02 per basic share).
Our first quarter drilling program delivered strong results as we safely and efficiently executed the largest E&D program in company history. We drilled 92 (82.7 net) wells with 13 rigs running at the peak and E&D expenditures totaled $413 million (33% of budgeted full-year expenditures).
We remain committed to a disciplined, returns-based capital allocation philosophy to drive increased per-share returns. Our 2024 guidance remains unchanged with E&D expenditures of $1.2 to $1.3 billion and production of 150,000 to 156,000 boe/d. Based on the forward strip(2), we expect to generate approximately $700 million of free cash flow(3) in 2024, all of which is expected to be generated in the next three quarters. We intend to allocate 50% of free cash flow to the balance sheet and 50% to shareholder returns, which includes a combination of share buybacks and a quarterly dividend.
Our strong free cash flow profile for 2024 reflects the efficiency of our exploration and development program, higher forecast production volumes for the remainder of the year and improved crude oil price realizations in Canada and the Eagle Ford. In Canada, we are benefiting from the completion of the Trans Mountain Pipeline Expansion and increased oil export capacity which is contributing to a narrowing of the WTI-WCS spread. In the Eagle Ford, we benefit from our exposure to premium U.S. Gulf Coast pricing for our light oil and condensate production.
Our normal course issuer bid allows for the purchase of up to 68.4 million common shares during the 12-month period ending June 28, 2024 and we restarted our share buyback program in late March. For the period June 29, 2023 to May 8, 2024, we repurchased 47.0 million common shares for $255 million, representing 5.5% of our shares outstanding, at an average price of $5.42 per share.
Subsequent to quarter-end, we undertook steps to extend our debt maturities. On April 1, 2024, we closed a private placement offering of US$575 million aggregate principal amount of senior unsecured notes. The notes bear interest at a rate of 7.375% per annum and mature on March 15, 2032. Net proceeds from the offering were used to redeem US$409.8 million aggregate principal amount of outstanding 8.75% notes and repay a portion of the debt outstanding on our credit facilities. On May 9, 2024, we extended the maturity of our credit facilities by two years to May 2028.
We employ a disciplined commodity hedging program to help mitigate the volatility in revenue due to changes in commodity prices. In Q1/2024, our hedging program generated realized financial derivatives gains of $5 million. For the balance of 2024, we have entered into hedges on approximately 40% of our net crude oil exposure utilizing two-way collars with an average floor price of US$60/bbl and an average ceiling price of US$96/bbl. For H1/2025, we have entered into hedges on approximately 20% of our net crude oil exposure utilizing two-way collars with an average floor price of US$60/bbl and an average ceiling price of US$91/bbl. A complete listing of our financial derivative contracts can be found in Note 17 to our Q1/2024 financial statements.
Operations
In the Eagle Ford, we continue to deliver strong results across the black oil, volatile oil, and condensate thermal maturity windows. In Q1/2024, we brought 19 (18.5 net) operated wells onstream, including 15 Lower Eagle Ford wells, three Upper Eagle Ford wells, and one refrac.
During the first quarter, 10 of the 15 Lower Eagle Ford wells were on production for a sufficient amount of time to establish 30-day peak production rates. These wells generated an average 30-day initial peak production rate of 1,298 boe/d (85% oil and NGLs) per well. For 2024, we are targeting an 8% improvement in our operated drilling and completion costs per completed lateral foot over 2023. On our non-operated Eagle Ford acreage, we brought 18 (3.9 net) wells onstream.
We are focused on optimizing our acreage and have identified Upper Eagle Ford development areas. Our 2024 E&D program includes four Upper Eagle Ford wells, three of which were brought onstream during the first quarter and generated an average 30-day initial peak production rate of 1,214 boe/d per well (72% oil and NGLs). We completed a successful refrac (Medina Unit 3H) on our operated acreage during the first quarter that is expected to generate an internal rate of return of over 100%. Additional refrac opportunities have been identified to supplement to our capital program.
(1) Capital management measure. Refer to the Specified Financial Measures section in this press release for further information.
(2) 2024 pricing assumptions: WTI – US$77.50/bbl; WCS differential – US$14.50/bbl; NYMEX Gas – US$2.40/MMbtu; and Exchange Rate (CAD/USD) – 1.36.
(3) Specified financial measure that does not have any standardized meaning prescribed by IFRS and may not be comparable with the calculation of similar measures presented by other entities. Refer to the Specified Financial Measures section in this press release for further information.
(4) Calculated in accordance with our amended credit facilities agreement which is available on SEDAR+ at www.sedarplus.ca.
In our light oil business unit, we completed our 2024 drilling program in the Pembina Duvernay, expanded our land base and continued development in the Viking. We were pleased with the efficiency of our two-pad, seven-well drilling program in the Duvernay which saw a 21% improvement in drilling days (spud to rig release) and a 10% improvement in drilling costs, compared to 2023. Completion of the three-well pad commenced in April, and completion of the four-well pad is expected to commence in June. In the Viking, we brought 46 net wells onstream in Q1/2024.
In addition, we acquired 30.75 net sections of high-quality Duvernay lands adjacent to our existing acreage. This brings our core Duvernay acreage to 142 net sections. We believe the asset offers significant economic inventory and growth potential.
In our heavy oil business unit, Peavine continued to outperform expectations and we have followed up early exploration success in Morinville and the greater Cold Lake area. Our Clearwater production averaged 17,599 bbl/d during the first quarter, up 8% from Q4/2023. We brought 12 (12.0 net) wells onstream during Q1/2024 and initial well performance exceeded our internal type curve expectations. The 12 wells generated an average 30-day initial peak production rate of 915 bbl/d per well.
During the first quarter, we followed up our recent heavy oil exploration success at Morinville, Alberta. We brought four multi-lateral horizontal wells onstream that targeted the Rex formation (a Clearwater equivalent). At Morinville, we have aggregated approximately 30 sections of prospective lands and production has increased to over 1,000 bbl/d.
In the greater Cold Lake area, we recently brought five Waseca horizontal multi-lateral wells onstream, increasing production from the Waseca to over 1,000 bbl/d. At Angling Lake, we drilled two successful step-out wells targeting the Upper Waseca and a successful Lower Waseca follow-up. At Ethel Lake, we drilled our first two wells targeting the Upper Waseca and are encouraged by early-time productivity. We are planning five additional Waseca follow-up wells in H2/2024.
In addition, we completed a 13 well stratigraphic test program across our heavy oil acreage. The results will guide future exploration and development activity.
Quarterly Dividend
The Board of Directors declared a quarterly cash dividend of $0.0225 per share to be paid on July 2, 2024 to shareholders of record on June 14, 2024.
Additional Information
Our condensed consolidated interim unaudited financial statements for the three months ended March 31, 2024 and the related Management’s Discussion and Analysis of the operating and financial results can be accessed on our website at www.baytexenergy.com and will be available shortly through SEDAR+ at www.sedarplus.ca and EDGAR at www.sec.gov/edgar.shtml.
Conference Call Tomorrow 9:00 a.m. MT (11:00 a.m. ET) |
Baytex will host a conference call tomorrow, May 10, 2024, starting at 9:00am MT (11:00am ET). To participate, please dial toll free in North America 1-844-763-8274 or international 1-647-484-8814. Alternatively, to listen to the conference call online, please enter https://services.choruscall.ca/links/baytex2024q1.html in your web browser. To register, visit our website at https://www.baytexenergy.com/investors/events-presentations.
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 at www.baytexenergy.com. |