Baytex Energy (BTE) - 2024 Q4 - Annual Report

Q4 and Full Year 2024 Results Overview Management Commentary The CEO highlighted strong 2024 performance driven by a disciplined, returns-based capital allocation strategy - In 2024, Baytex achieved 10% production per share growth and grew reserves per share across all categories[2] - The company returned $290 million to shareholders through its buyback program and quarterly dividend[2] - The strategic focus for 2025 is to continue prioritizing free cash flow and shareholder returns[2] 2024 Full Year and Reserves Highlights The company reported strong 2024 results with significant free cash flow and per-share reserves growth 2024 Financial & Operational Highlights | Metric | Full Year 2024 | Q4 2024 | | :--- | :--- | :--- | | Cash flows from operating activities | $1,908 million ($2.38/share) | $469 million ($0.60/share) | | Adjusted funds flow | $1,957 million ($2.44/share) | $462 million ($0.59/share) | | Free cash flow | $656 million ($0.82/share) | $255 million ($0.33/share) | | Average Production | 153,048 boe/d | 152,894 boe/d | | Production per share growth (YoY) | 10% | - | | Shareholder Returns | $290 million | - | - Net debt was reduced by 5% in 2024 (13% in U.S. dollars), maintaining a total debt to EBITDA ratio of 1.1x[8] 2024 Reserves Highlights | Metric | 2024 Performance | | :--- | :--- | | PDP reserves per share growth | +8% | | 1P and 2P reserves per share growth | +6% | | Production Replacement (1P basis) | 102% | | Production Replacement (2P basis) | 101% | | PDP Recycle Ratio | 1.9x | | 1P and 2P Recycle Ratio | 2.7x | | Net Asset Value per share (2P) | $7.27 (+13% YoY) | Financial and Operating Summary Tables Financial Results The company generated $1.96 billion in adjusted funds flow and reported a net income of $237 million for 2024 Full Year Financial Comparison (in thousands CAD, except per share) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Petroleum and natural gas sales | $4,208,955 | $3,382,621 | | Adjusted funds flow | $1,956,518 | $1,594,350 | | Free cash flow | $655,582 | $543,620 | | Net income (loss) | $236,597 | $(233,356) | | Net income (loss) per share - basic | $0.29 | $(0.33) | | Total oil and gas capital expenditures | $1,262,553 | $891,445 | | Net debt (end of period) | $2,417,172 | $2,534,287 | Q4 2024 Financial Results (in thousands CAD, except per share) | Metric | Q4 2024 | Q4 2023 | | :--- | :--- | :--- | | Petroleum and natural gas sales | $1,017,017 | $1,065,515 | | Adjusted funds flow | $461,886 | $502,148 | | Free cash flow | $254,838 | $290,785 | | Net income (loss) | $(38,477) | $(625,830) | | Net income (loss) per share - basic | $(0.05) | $(0.75) | Operating Results Average daily production increased to 153,048 boe/d in 2024, with an operating netback of $40.67 per boe Full Year Production Comparison | Production Type | 2024 (boe/d) | 2023 (boe/d) | | :--- | :--- | :--- | | Total liquids (bbl/d) | 129,336 | 103,153 | | Natural gas (mcf/d) | 142,262 | 114,010 | | Total Oil equivalent (boe/d) | 153,048 | 122,154 | Netback per boe Comparison | Netback Component ($/boe) | Full Year 2024 | Full Year 2023 | | :--- | :--- | :--- | | Total sales, net of blending | $70.43 | $70.82 | | Royalties | ($15.71) | ($15.02) | | Operating expense | ($11.67) | ($12.80) | | Transportation expense | ($2.38) | ($2.00) | | Operating netback | $40.67 | $41.00 | Business Outlook and Performance Review 2025 Outlook The 2025 plan prioritizes free cash flow with a capital budget of $1.2 billion to $1.3 billion 2025 Guidance | Metric | 2025 Target | | :--- | :--- | | Exploration & Development Expenditures | $1.2 - $1.3 billion | | Annual Production | 148,000 - 152,000 boe/d | | Q1 Production | ~144,000 boe/d | | Free Cash Flow (at US$70/bbl WTI) | ~$400 million | - Capital allocation strategy targets approximately 50% of free cash flow to the balance sheet and 50% to shareholder returns (buybacks and dividends)[16] - The company is monitoring a new 10% tariff on Canadian energy imports announced by the U.S. government, effective March 4, 2025, but expects its geographic diversification to provide some insulation[15] 2024 Performance Review The company met 2024 guidance, generated $656 million in free cash flow, and reduced net debt - Production averaged 153,048 boe/d, a 10% increase per basic share compared to 2023[18] - Repurchased 48.4 million common shares for $218 million at an average price of $4.50 per share, representing 6% of shares outstanding[19] - Completed the divestiture of the Kerrobert thermal asset for net proceeds of $41.5 million, with proceeds used to reduce debt[21] - Reduced net debt by 5% ($117 million) in Canadian dollars, or 13% (US$241 million) in U.S. dollars[22] Operational Details Strong operational performance was achieved across the Eagle Ford, Canadian light oil, and heavy oil assets - Eagle Ford: Production averaged 89,100 boe/d in 2024. Achieved an 8% improvement in drilling and completion costs per lateral foot over 2023[24] - Canadian Light Oil: Pembina Duvernay production increased 64% to 6,112 boe/d in 2024[26] - Heavy Oil: Peavine production increased 44% to 19,241 bbl/d in 2024. The company also acquired 44.5 net sections of land adjacent to its existing Peavine acreage[27][28] Shareholder Returns The Board of Directors declared a quarterly cash dividend of $0.0225 per share - A quarterly cash dividend of $0.0225 per share was declared, payable on April 1, 2025, to shareholders of record on March 14, 2025[29] Year-end 2024 Reserves Reserves Summary and Key Metrics Year-end reserves showed strong per-share growth, with 2P reserves standing at 660 MMboe - Replaced 102% of production on a 1P basis and 101% on a 2P basis, excluding acquisition and divestiture activity[34] Year-End 2024 Gross Reserves (MMboe) | Category | Light/Medium/Tight Oil | Heavy Oil/Bitumen | NGL | Natural Gas | Total (Mboe) | | :--- | :--- | :--- | :--- | :--- | :--- | | Proved (1P) | 191.8 | 55.4 | 91.9 | 69.1 | 408.2 | | Proved + Probable (2P) | 290.2 | 134.0 | 134.7 | 82.1 | 660.0 | - Net asset value at year-end 2024 (discounted at 10% before tax) increased 13% to $7.27 per share from $6.41 per share at year-end 2023[34] Reserves Reconciliation The 2P gross reserves reconciliation shows a year-end 2024 balance of 660.0 MMboe Proved Plus Probable (2P) Gross Reserves Reconciliation (Mboe) | Category | Dec 31, 2023 | Extensions | Technical Revisions | Dispositions | Production | Dec 31, 2024 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Total (Mboe) | 663,184 | 57,260 | (456) | (4,890) | (56,015) | 660,001 | Future Development Costs (FDC) and F&D Costs Total 2P Future Development Costs are estimated at $8.6 billion, with improved F&D cost efficiency Future Development Costs ($ millions) | Category | Total FDC Undiscounted | | :--- | :--- | | Proved Reserves | $5,556 | | Proved Plus Probable Reserves | $8,608 | Finding & Development (F&D) Costs ($/boe) | Reserves Category | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Proved plus Probable (2P) | $14.81 | $28.68 | $42.34 | | Proved (1P) | $15.06 | $29.82 | $39.40 | | Proved Developed Producing (PDP) | $21.32 | $24.23 | $19.20 | Forecast Prices and Net Present Value (NPV) The before-tax NPV10 of 2P reserves is $8.04 billion, based on a 2025 WTI forecast of US$71.58/bbl Key Forecast Prices | Year | WTI Crude Oil (US$/bbl) | Henry Hub (US$/MMbtu) | AECO Spot ($/MMbtu) | | :--- | :--- | :--- | :--- | | 2025 | 71.58 | 3.31 | 2.36 | | 2026 | 74.48 | 3.73 | 3.33 | | 2027 | 75.81 | 3.85 | 3.48 | Net Present Value of Reserves (Before Tax, $ millions) | Reserves Category | NPV at 5% | NPV at 10% | NPV at 15% | | :--- | :--- | :--- | :--- | | Total Proved (1P) | 6,260 | 5,046 | 4,159 | | Total Proved Plus Probable (2P) | 10,932 | 8,043 | 6,252 | Additional Information and Advisories Conference Call Information A conference call to discuss results is scheduled for March 5, 2025 - A conference call is scheduled for March 5, 2025, at 9:00 a.m. MST to discuss the results[55] Advisory Regarding Forward-Looking Statements This section outlines risks and assumptions related to forward-looking information in the report - Forward-looking statements in the report include 2025 guidance on production, expenditures, free cash flow, and shareholder return plans[58] - Key assumptions underpinning these statements include oil and gas prices, well production rates, capital expenditure levels, and the ability to market production successfully[59] - Numerous risks could cause actual results to differ, such as commodity price volatility, climate change regulations, hedging activities, and geopolitical risk[60] Specified Financial Measures (Non-GAAP) The report uses non-IFRS measures like free cash flow and net debt, with definitions provided - The company uses non-GAAP measures like free cash flow, operating netback, adjusted funds flow, and net debt to provide useful information to investors[65] - Free cash flow is defined as cash flows from operating activities adjusted for working capital changes, transaction costs, and capital expenditures[70] - Adjusted funds flow is defined as cash flows from operating activities adjusted for working capital changes, asset retirement obligations settled, and transaction costs[81] Advisory Regarding Oil and Gas Information Reserves data adheres to Canadian NI 51-101 standards, which differ from U.S. SEC rules - Reserves information is prepared according to Canadian NI 51-101 standards, which are not directly comparable to U.S. SEC standards[84][92] - Key differences include definitions of proved/probable reserves, reporting of gross vs. net production volumes, and the use of forecast prices (NI 51-101) versus a 12-month historical average price (SEC)[92][93][94] - The use of a 6:1 boe conversion ratio for natural gas to oil may be misleading as an indication of value, as the value ratio differs significantly from the energy equivalency ratio[85]