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Baytex Releases Preliminary Report for Q419 and Full Year

Zacks Equity Research

Baytex Energy Corporation BTE recently released its preliminary unaudited financial results for fourth-quarter 2019 as well as the full year. The company is expected to release detailed financial results on Mar 4.

Management stated that its preliminary full-year production was higher than the upper end of its previously guided range. The company produced 97,680 barrels of oil equivalent per day (boe/d) in 2019 while its fourth-quarter production was 96,360 boe/d comprising 83% of oil and NGL. This upside can be attributed to a strong performance by its key properties of Eagle Ford, Viking and Heavy Oil.

This Calgary-based exploration and production player was successful in lowering net debt by C$100 million in the fourth quarter. It managed to cut back its debt load by 17% in 2019 as adjusted funds flow was in excess of capital expenditures. As of Dec 31, 2019, Baytex had net debt of C$1.87 billion.

The company experienced an impressive year in terms of reserves development. It saw a 5% rise in the proved developed producing reserve from 135 million barrels of oil equivalent (boe) to 142 million boe. However, proved reserves and proved plus probable reserves were unaltered at 314 million boe and 529 million boe, respectively.

Further, Baytex announced the pricing of unsecured senior notes offering at $500 million. Payment of the interest on the notes, due 2027, will be made bi-annually. It plans to use the net proceeds from the senior notes offering to help restore $400 million in outstanding notes due June 2021.

2020 Guidance Intact

Baytex retains its recently declared 2020 budget plan wherein capital expenditure is projected at C$500-C$575 million to produce 93,000-97,000 barrels of oil equivalent per day (boe/d). The company’s capital spending is pegged at C$560 million for 2019, targeting annual production of 97,000 boe/d.

About C$520 million of the capital programs will be invested in sustaining and maintaining the capital. In addition, C$20 million will be directed toward gas conservation and emission-lowering initiatives.

Meanwhile, Baytex expects to generate free cash flow of minimum C$100 million in 2020. The company already managed to trim its net debt in all the four quarters of 2019.

Of the total capital budget, around 80% will be allocated to the company’s light oil assets at the Viking and Eagle Ford while 15% will be channelled toward its heavy oil assets at Peace River and Lloydminster.

Considering the mid-point of its guided range for production, 62% of the company’s output in Canada is estimated primarily from the Viking while the remainder is anticipated to be drawn from the Eagle Ford. Further, the company expects to drill 220 net wells at Canada’s Viking asset during 2020 while 22 net wells are likely to come online at Eagle Ford.

Baytex’s production blend is predicted to be 84% liquids (44% light oil and condensate, 30% heavy oil and 10% natural gas liquids) and 16% natural gas. For 2020, the company hedged 40% of its projected oil production.

Of late, management named Mark Bly the company’s new chairman. Earlier in 2017, Bly joined as a board member and later in March 2019 was also nominated for the lead Independent director and chair of the Human Resources and Compensation Committee.

Share Price Movement

Baytex shares have gained 5.7% in the past three months compared with the industry’s 16.6% growth.

Zacks Rank & Key Picks

Baytex currently carries a Zacks Rank #3 (Hold). Investors interested in the energy space may consider some better-ranked stocks like Suncor Energy Inc. SU, Cenovus Energy Inc. CVE and Imperial Oil Limited IMO, each holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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