Baytex Energy (US:BTE)2025-08-01 16:00Financial Data and Key Metrics Changes - Adjusted funds flow was CAD 367 million or CAD 0.48 per basic share, with net income of CAD 152 million and free cash flow of CAD 3 million [7] - Net debt decreased by CAD 96 million or 4% to CAD 2.3 billion, supported by a strengthening Canadian dollar [8] - The company repurchased CAD 41 million of its long-term notes as part of its debt reduction strategy [8] Business Line Data and Key Metrics Changes - Heavy oil production grew by 7% quarter over quarter, while overall production averaged 148,095 BOE per day, a 2% increase in production per share compared to the same quarter last year [5][9] - In the Pembina Duvernay, the first pad achieved average thirty-day peak production rates of 1,865 BOE per day per well, with a 12% improvement in drilling and completion costs compared to 2024 [10][11] - In the Eagle Ford, 15 wells were brought on stream, with an approximate 11% improvement in drilling and completion costs [12] Market Data and Key Metrics Changes - The commodity backdrop in Q2 was soft, with WTI averaging CAD 64 per barrel [5] - Approximately 84% of the company's production is weighted toward crude oil and liquids, indicating significant exposure to oil price fluctuations [15] Company Strategy and Development Direction - The company plans to transition to full commercialization in the Pembina Duvernay through 2026 and into 2027, targeting drilling 18 to 20 wells per year [12] - The focus remains on capital discipline, prioritizing free cash flow and reducing net debt, with a target of approximately CAD 2 billion in net debt by year-end [15] - The operational achievements in Q2 provide valuable options for optimizing future plans and maximizing shareholder value [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the quality of the asset portfolio and the ability to execute through volatile market conditions, highlighting strong performance in the Pembina Duvernay and heavy oil operations [14] - The company expects to generate approximately CAD 400 million of free cash flow in 2025, with the majority weighted to the second half of the year [15] - Management remains focused on operational excellence and financial discipline to deliver sustainable long-term value for shareholders [15] Other Important Information - The company maintains substantial financial flexibility with CAD 1.1 billion in credit facility capacity, less than 25% drawn, maturing in June 2029 [8] - The long-term debt maturity profile provides significant runway, with the earliest known maturity in April 2030 [8] Q&A Session Summary Question: What is the average well cost in the Duvernay? - The average well cost is CAD 12.5 million for a 12,000-foot lateral, equating to CAD 1,000 per completed lateral foot [19] Question: What is the plan for commercialization in 2026? - The company plans to move to a one rig program in 2027, targeting 18 to 20 wells per year, with 12 to 15 wells targeted for 2026 [20][21] Question: Are there any changes in decline rates post-refracs in the Eagle Ford? - It is still early to determine decline rates, but initial rates and pressure performance are strong, indicating potential for new reservoir contact [22][23] Question: What factors contributed to the 11% improvement in Eagle Ford costs? - The improvement is attributed to service cost reductions and continued efficiency gains, including the switch to field gas for fracking operations [25][27] Question: How is the relationship with Conoco regarding the non-operating Eagle Ford asset? - The relationship with Conoco is strong, with good communication and satisfaction with the 2025 development plans [41][42] Question: What is the company's hedging strategy going forward? - The company is fairly hedged for 2025, targeting a CAD 60 floor for oil prices and planning to hedge approximately 40% by the end of the year [43][45]