Baytex Energy (BTE-T) releasing its second quarter financials and tightening its full-year production guidance for the second time this year. Cash flow for the quarter came to 35 cents a share, slightly ahead of analysts' predictions of 34 cents a share. Production of 72,812 barrels of oil equivalent a day exceeded Baytex's own forecast of 72,500 barrels a day. President and chief executive officer Ed LaFehr patted Baytex on the back for "substantially grow[ing] production largely within funds from operations." The key word there is "largely." Baytex generated about $165-million in cash flow during the first half of the year, while spending about $175-million. It will ease back a bit during the second half of the year. According to its new guidance, Baytex now plans to spend a total of $310-million to $330-million this year, a decrease from its previous budget of $325-million to $350-million. Its full-year production forecast is now 69,000 to 70,000 barrels a day. This is narrower than the previous range of 68,000 to 70,000 barrels a day, which itself was narrower than the original guidance of 66,000 to 70,000 barrels a day.
Investors were mildly impressed with the second quarter financials. Some were likely hoping for more ambitious new guidance, given that Baytex had already made clear that its average production in the first half of the year would be in the neighbourhood of 71,000 barrels a day. During a conference call this morning, Mr. LaFehr acknowledged the new full-year guidance of 69,000 to 70,000 barrels a day as "conservative," but said Baytex wants to be "prudent" in case it has to pare back activity during the second half of the year. (That seems to be built into the plan anyway. Mr. LaFehr also said during the call that Baytex has been talking to the operator of its core Eagle Ford assets in Texas about reducing the number of drill rigs.)
Other investors may have been hoping for more specifics on what Mr. LaFehr plans to do about Baytex's heavy net debt load of over $1.81-billion, nearly $1-billion higher than the company's current market cap of $850-million. When asked about the debt in a separate conference call in early May, Mr. LaFehr said he would like to see "steps taken over the next 12 to 18 months, where we materially change our financial structure." Today, he gave a few vague hints about the potential steps, saying Baytex is reviewing "many opportunities" that could include royalty sales, joint ventures and non-core asset sales. Yet he also said that sales could prove challenging in today's market and that Baytex does not want or need to do anything "in a knee-jerk fashion." He added that Baytex has "other things on our plate right now, driving performance inside our business." Optimism about the business (in addition to higher oil prices) has helped the stock rise to over $3.60 from about $2.90 in the last month. Of course, pessimism about the debt has helped the stock collapse from its mid-2014 high of over $50.
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