Baytex Energy (US:BTE)2025-08-01 16:02Financial 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 [8] - Free cash flow generated was CAD 3 million, with CAD 21 million returned to shareholders, including CAD 4 million in share repurchases and CAD 17 million in dividends [8] - Net debt decreased by CAD 96 million or 4% to CAD 2.3 billion, supported by a strengthening Canadian dollar [8][9] Business Line Data and Key Metrics Changes - Heavy oil production grew by 7% quarter over quarter, while production averaged 148,095 BOE per day, a 2% increase in production per share compared to the same quarter last year [6][11] - In the Pembina Duvernay, the first pad achieved average thirty-day peak production rates of 1,865 BOE per day per well, with a second pad averaging 1,264 BOE per day per well [11][12] - In the Eagle Ford, 15 wells were brought on stream, with an approximate 11% improvement in drilling and completion costs [13] Market Data and Key Metrics Changes - The commodity backdrop in Q2 was soft, with WTI averaging CAD 64 per barrel [6] - Approximately 84% of the company's production is weighted toward crude oil and liquids, indicating significant exposure to oil price fluctuations [16] 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 [16] - The company is committed to rigorous capital allocation and regularly evaluates opportunities within its portfolio to maximize shareholder value [15] 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 [15] - 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 [16] - Every USD 5 per barrel change in WTI impacts annual adjusted funds flow by approximately CAD 225 million on an unhedged basis, positioning the company well for potential oil price recovery [16] 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 [9] - The average well cost in the Duvernay is CAD 12.5 million, with a target for lower costs over time [20][21] Q&A Session Summary Question: What is the average well cost in the Duvernay? - The average well cost so far this year has been CAD 12.5 million for a 12,000-foot lateral, which is approximately CAD 1,000 per completed lateral foot [20][21] Question: Should we expect a one rig program for 2026? - The company is targeting 12 to 15 wells in 2026, moving to a one rig levelized program in 2027, which will generate 18 to 20 wells per year [22][23] Question: Is the decline rate different post the refracs in Eagle Ford? - It is still early to determine decline rates, but initial rates and pressure performance are strong, indicating positive reservoir characteristics [24][25] Question: What improvements have been made in Eagle Ford? - Improvements are attributed to service cost reductions and efficiency gains, including the use of field gas instead of diesel for fracking operations [30][32] Question: Can you discuss the variability across the three wells in the Pembina Duvernay? - Performance across the wells is consistent, but there are differences due to rock and reservoir characteristics [37][39] Question: What is the expected infrastructure spending for Pembina Duvernay? - Infrastructure spending is expected to be CAD 25 million to CAD 30 million per year in the early years, with significant capacity already in place for gas processing [40][42] Question: How is the refrac program being layered in Eagle Ford? - The company intends to step up the pace of refracs, targeting 6 to 10 refracs in 2026 [43][44] Question: What is the hedging strategy going forward? - The company is targeting a CAD 60 floor for oil prices and aims to have 40% hedged by the end of the year [48][49]