These are my Quick Takes on Baytex Energy's Q2 2025 results in blue. I will update my forecast/valuation model for BTE Friday or Saturday.
-----------------------------
Baytex Energy Corp. (TSX: BTE) (NYSE: BTE) ("Baytex" or the "Company") reports its operating and financial results for the three and six months ended June 30, 2025 (all amounts are in Canadian dollars unless otherwise noted).
"Baytex delivered solid operational and financial results in the second quarter, with top-performing wells in the Pembina Duvernay, setting the highest average 30-day peak oil rates in the West Shale Basin," said Eric T. Greager, President and Chief Executive Officer. "Combined with strong results across heavy oil operations and the Eagle Ford, including continued success with refracs, these results demonstrate the resource potential and value creation opportunities within our portfolio. We remain focused on disciplined capital allocation, prioritizing free cash flow and debt reduction while capitalizing on the most compelling opportunities from our high-quality assets."
Second Quarter 2025 Highlights
Achieved record Pembina Duvernay well performance with the first pad (3 wells) delivering average peak 30-day initial rates of 1,865 boe/d per well (89% oil and NGL). < These well results are very encouraging.
Successfully completed two Lower Eagle Ford refracs, extending inventory duration and improving capital efficiencies.
Delivered production of 148,095 boe/d (84% oil and NGL), which represents a 2% increase in production per basic share compared to Q2/2024. < Beat my forecast of 145,805 Boepd with a mix of 42.5% light oil, 27.5% heavy oil, 14.0% NGL (84% total liquids) and 16% natural gas.
Increased heavy oil production 7% over Q1/2025, driven by strong Peavine, Peace River and Lloydminster performance.
Reported cash flows from operating activities of $354 million ($0.46 per basic share).
Generated net income of $152 million ($0.20 per basic share). < Significantly higher than my forecast of $10.3 million net income.
Delivered adjusted funds flow of $367 million ($0.48 per basic share). < This is good news. My Adjusted Operating Cash Flow forecast was $321.9 million.
Repurchased and cancelled US$41 million principal amount of 8.5% long-term notes. < Good news.
Reduced net debt by 4% ($96 million) and maintained balance sheet strength with a total debt to Bank EBITDA(2) ratio of 1.1x.
2025 Outlook
In light of the current commodity price environment, we are targeting annual production of approximately 148,000 boe/d with full-year exploration and development expenditures of approximately $1.2 billion. Production is expected to average approximately 150,000 boe/d in the second half of 2025. < Perfectly in line with my forecast.
Based on forward strip pricing, we expect to generate approximately $400 million of free cash flow in 2025, with the majority weighted to the second half of the year given our production and capital spending profile. We plan to allocate 100% of free cash flow to debt repayment after funding quarterly dividend payments, targeting net debt of approximately $2 billion by year-end. < Paying off debt is the best move for Baytex.
We remain committed to disciplined capital allocation, prioritizing free cash flow and strengthening our balance sheet. We will continue to monitor market conditions and execute a prudent approach to shareholder returns, which has historically included a combination of share buybacks and quarterly dividend payments.
-------------------------
Bottomline: Everything looks good. Baytex deserves a higher valuation multiple. Most encouraging are the Duvernay well results and the successful refracs in South Texas Eagle Ford that should increase proved reserves. A lot of their Eagle Ford horizontal wells were completed with "recipes" that were not as good as the way HZ wells are completed today. I originally added BTE to the Sweet 16 because I think they have a lot more upside in South Texas .
Dan Steffens
Energy Prospectus Group |
