Ring Energy, Inc. press release
Baytex Announces Fourth Quarter and Full Year 2023 Financial and Operating Results and Year End Reserves
NYSE - New York Stock Exchange · Oil · Natural Gas · Natural Gas Liquids · United States
Calgary, Alberta--(Newsfile Corp. - February 28, 2024) - Baytex Energy Corp. (TSX: BTE) (NYSE: BTE) ("Baytex") reports its operating and financial results for the three months and year ended December 31, 2023 (all amounts are in Canadian dollars unless otherwise noted).
"Our 2023 results demonstrate the strength of our oil-weighted portfolio. The strategic acquisition of Ranger added quality scale in the Eagle Ford and reinforced the resiliency and sustainability of our business. In 2023, we increased production per share by 16% and fourth quarter production exceeded guidance with continued strong results in the Eagle Ford and Peavine. During 2023, we increased shareholder returns to 50% of free cash flow, increased our share buyback program and introduced a quarterly dividend. We are well-capitalized and remain committed to creating long-term value and increasing shareholder returns," commented Eric T. Greager, President and Chief Executive Officer.
2023 Highlights
Completed the acquisition of Ranger Oil Corporation ("Ranger") on June 20, 2023. Reported cash flows from operating activities of $474 million ($0.57 per basic share) in Q4/2023 and $1,296 million ($1.84 per basic share) for 2023. Delivered adjusted funds flow(1) of $502 million ($0.60 per basic share) in Q4/2023 and $1,594 million ($2.26 per basic share) for 2023. Generated free cash flow(2)of $291 million ($0.35 per basic share) in Q4/2023 and $544 million ($0.77 per basic share) for 2023. Increased direct shareholder returns to 50% of free cash flow(2) and returned $260 million to shareholders. Repurchased 40.5 million common shares for $222 million, representing 4.7% of our shares outstanding, and declared two quarterly dividends of $0.0225 per share, totaling $38 million in 2023. Increased production per basic share by 16% in 2023, compared to 2022. Production for the full-year 2023 averaged 122,154 boe/d (85% oil and NGL), compared to 83,519 boe/d in 2022 (84% oil and NGL). Production in Q4/2023 averaged 160,373 boe/d (83% oil and NGL), exceeding guidance of 158,000 to 160,000 boe/d, and up 6% from Q3/2023 on exploration and development expenditures of $199 million, 10% below guidance. Divested of our Viking assets at Forgan and Plato in southwest Saskatchewan (production of approximately 4,000 boe/d) for proceeds of $160 million, including closing adjustments. Improved our cash cost structure (operating, transportation, and general & administrative expenses) in Q4/2023 by 12% on a boe basis, as compared to Q4/2022. Maintained balance sheet strength with a total debt to EBITDA(3)ratio(2)of 1.1x. During the fourth quarter we reduced our net debt(1)by 10% ($290 million). Reduced our GHG emissions intensity in 2023 by 9% from 2022 levels and achieved our 65% reduction target, relative to our 2018 baseline, two years early. Proved developed producing reserves increased by 49%, from 124 MMboe to 185 MMboe(4). Proved reserves increased by 55%, from 264 MMboe to 410 MMboe(4). Proved plus probable reserves increased by 51%, from 438 MMboe to 663 MMboe(4). At year-end 2023, the present value of our 2P reserves, discounted at 10% before tax, is estimated to be $7.8 billion ($5.9 billion at year-end 2022).
We recorded a non-cash impairment of $834 million on our legacy non-operated Eagle Ford and retained Viking assets as the carrying value of our oil and gas properties exceeded their recoverable amounts. This resulted in a net loss of $626 million ($0.75 per basic share) in Q4/2023 and $233 million ($0.33 per basic share) in 2023.
(1) Capital management measure. Refer to the Specified Financial Measures section in this press release for further information. (2) Specified financial measure that does not have any standardized meaning prescribed by IFRS and may not be comparable with the calculation of similar measures presented by other entities. Refer to the Specified Financial Measures section in this press release for further information. (3) Calculated in accordance with our amended credit facilities agreement which is available on SEDAR+ at www.sedarplus.com. (4) Baytex's year-end 2023 reserves were evaluated by McDaniel & Associates Consultants Ltd. ("McDaniel"), an independent qualified reserves evaluator, in accordance with National Instrument 51-101 "Standards of Disclosure for Oil and Gas Activities" ("NI 51-101").
| | | Three Months Ended | | | Twelve Months Ended | | | | | | | | | | | | | | December 31, 2023 | | | September 30, 2023 | | | December 31, 2022 | | | December 31, 2023 | | | December 31, 2022 | | | FINANCIAL (thousands of Canadian dollars, except per common share amounts) | | | | | | | | | | | | | | | | | Petroleum and natural gas sales | $ | 1,065,515 | | $ | 1,163,010 | | $ | 648,986 | | $ | 3,382,621 | | $ | 2,889,045 | | | Adjusted funds flow (1) | | 502,148 | | | 581,623 | | | 255,552 | | | 1,594,350 | | | 1,165,151 | | | Per share - basic | | 0.60 | | | 0.68 | | | 0.47 | | | 2.26 | | | 2.09 | | | Per share - diluted | | 0.60 | | | 0.68 | | | 0.46 | | | 2.26 | | | 2.07 | | | Free cash flow (2) | | 290,785 | | | 158,440 | | | 143,324 | | | 543,620 | | | 621,526 | | | Per share - basic | | 0.35 | | | 0.19 | | | 0.26 | | | 0.77 | | | 1.11 | | | Per share - diluted | | 0.35 | | | 0.18 | | | 0.26 | | | 0.77 | | | 1.10 | | | Cash flows from operating activities | | 474,452 | | | 444,033 | | | 303,441 | | | 1,295,731 | | | 1,172,872 | | | Per share - basic | | 0.57 | | | 0.52 | | | 0.56 | | | 1.84 | | | 2.10 | | | Per share - diluted | | 0.57 | | | 0.52 | | | 0.55 | | | 1.84 | | | 2.08 | | | Net income (loss) | | (625,830 | ) | | 127,430 | | | 352,807 | | | (233,356 | ) | | 855,605 | | | Per share - basic | | (0.75 | ) | | 0.15 | | | 0.65 | | | (0.33 | ) | | 1.53 | | | Per share - diluted | | (0.75 | ) | | 0.15 | | | 0.64 | | | (0.33 | ) | | 1.52 | | | Dividends declared | | 18,381 | | | 19,138 | | | - | | | 37,519 | | | - | | | Per share | | 0.0225 | | | 0.0225 | | | - | | | 0.045 | | | - | | | | | | | | | | | | | | | | | | | | Capital Expenditures | | | | | | | | | | | | | | | | | Exploration and development expenditures | $ | 199,214 | | $ | 409,191 | | $ | 103,634 | | $ | 1,012,787 | | $ | 521,542 | | | Acquisitions and (divestitures) | | (125,822 | ) | | 4,051 | | | 937 | | | (121,342 | ) | | (24,297 | ) | | Total oil and natural gas capital expenditures | $ | 73,392 | | $ | 413,242 | | $ | 104,571 | | $ | 891,445 | | $ | 497,245 | | | | | | | | | | | | | | | | | | | | Net Debt | | | | | | | | | | | | | | | | | Credit facilities | $ | 864,736 | | $ | 1,046,756 | | $ | 385,394 | | $ | 864,736 | | $ | 385,394 | | | Long-term notes | | 1,597,475 | | | 1,637,640 | | | 554,597 | | | 1,597,475 | | | 554,597 | | | Total debt (3) | | 2,462,211 | | | 2,684,396 | | | 939,991 | | | 2,462,211 | | | 939,991 | | | Working capital deficiency (2) | | 72,076 | | | 139,952 | | | 47,455 | | | 72,076 | | | 47,455 | | | Net debt(1) | $ | 2,534,287 | | $ | 2,824,348 | | $ | 987,446 | | $ | 2,534,287 | | $ | 987,446 | | | | | | | | | | | | | | | | | | | | Shares Outstanding - basic(thousands) | | | | | | | | | | | | | | | | | Weighted average | | 831,063 | | | 855,300 | | | 546,279 | | | 704,896 | | | 557,986 | | | End of period | | 821,681 | | | 845,360 | | | 544,930 | | | 821,681 | | | 544,930 | | | | | | | | | | | | | | | | | | | | BENCHMARK PRICES | | | | | | | | | | | | | | | | | Crude oil | | | | | | | | | | | | | | | | | WTI (US$/bbl) | $ | 78.32 | | $ | 82.26 | | $ | 82.64 | | $ | 77.62 | | $ | 94.23 | | | MEH oil (US$/bbl) | | 80.62 | | | 84.10 | | | 85.88 | | | 79.29 | | | 97.79 | | | MEH oil differential to WTI (US$/bbl) | | 2.30 | | | 1.84 | | | 3.24 | | | 1.67 | | | 3.57 | | | Edmonton par ($/bbl) | | 99.72 | | | 107.93 | | | 109.57 | | | 100.46 | | | 119.95 | | | Edmonton par differential to WTI (US$/bbl) | | (5.10 | ) | | (1.78 | ) | | (1.94 | ) | | (3.18 | ) | | (2.07 | ) | | WCS heavy oil ($/bbl) | | 76.86 | | | 93.02 | | | 77.37 | | | 79.58 | | | 98.94 | | | WCS differential to WTI (US$/bbl) | | (21.88 | ) | | (12.89 | ) | | (25.65 | ) | | (18.65 | ) | | (18.21 | ) | | Natural gas | | | | | | | | | | | | | | | | | NYMEX (US$/mmbtu) | $ | 2.88 | | $ | 2.55 | | $ | 6.26 | | $ | 2.74 | | $ | 6.64 | | | AECO ($/mcf) | | 2.66 | | | 2.39 | | | 5.58 | | | 2.93 | | | 5.56 | | | | | | | | | | | | | | | | | | | | CAD/USD average exchange rate | | 1.3619 | | | 1.3410 | | | 1.3577 | | | 1.3495 | | | 1.3016 | |
Notes:
(1) Capital management measure. Refer to the Specified Financial Measures section in this press release for further information. (2) Specified financial measure that does not have any standardized meaning prescribed by IFRS and may not be comparable with the calculation of similar measures presented by other entities. Refer to the Specified Financial Measures section in this press release for further information. (3) Calculated in accordance with our amended credit facilities agreement which is available on SEDAR+ at www.sedarplus.com.
| | | Three Months Ended | | | Twelve Months Ended | | | | | | | | | | | | | | December 31, 2023 | | | September 30, 2023 | | | December 31, 2022 | | | December 31, 2023 | | | December 31, 2022 | | | OPERATING | | | | | | | | | | | | | | | | | Daily Production | | | | | | | | | | | | | | | | | Light oil and condensate (bbl/d) | | 70,124 | | | 75,763 | | | 32,105 | | | 53,389 | | | 33,101 | | | Heavy oil (bbl/d) | | 39,569 | | | 35,204 | | | 32,819 | | | 35,460 | | | 28,993 | | | NGL (bbl/d) | | 23,160 | | | 18,004 | | | 7,661 | | | 14,304 | | | 7,575 | | | Total liquids (bbl/d) | | 132,853 | | | 128,971 | | | 72,585 | | | 103,153 | | | 69,669 | | | Natural gas (mcf/d) | | 165,121 | | | 129,780 | | | 85,679 | | | 114,010 | | | 83,101 | | | Oil equivalent (boe/d @ 6:1) (1) | | 160,373 | | | 150,600 | | | 86,864 | | | 122,154 | | | 83,519 | | | | | | | | | | | | | | | | | | | | Netback (thousands of Canadian dollars) | | | | | | | | | | | | | | | | | Total sales, net of blending and other expense (2) | $ | 1,003,219 | | $ | 1,113,180 | | $ | 598,812 | | $ | 3,157,819 | | $ | 2,699,591 | | | Royalties | | (228,570 | ) | | (240,049 | ) | | (121,691 | ) | | (669,792 | ) | | (562,964 | ) | | Operating expense | | (164,873 | ) | | (174,119 | ) | | (104,335 | ) | | (570,839 | ) | | (422,666 | ) | | Transportation expense | | (29,744 | ) | | (27,983 | ) | | (14,817 | ) | | (89,306 | ) | | (48,561 | ) | | Operating netback(2) | $ | 580,032 | | $ | 671,029 | | $ | 357,969 | | $ | 1,827,882 | | $ | 1,665,400 | | | General and administrative | | (22,280 | ) | | (20,536 | ) | | (14,945 | ) | | (69,789 | ) | | (50,270 | ) | | Cash financing and interest | | (56,698 | ) | | (56,495 | ) | | (19,711 | ) | | (159,823 | ) | | (80,386 | ) | | Realized financial derivatives gain (loss) | | 12,377 | | | 2,055 | | | (49,665 | ) | | 36,212 | | | (334,481 | ) | | Other (3) | | (11,283 | ) | | (14,430 | ) | | (18,096 | ) | | (40,132 | ) | | (35,112 | ) | | Adjusted funds flow (4) | $ | 502,148 | | $ | 581,623 | | $ | 255,552 | | $ | 1,594,350 | | $ | 1,165,151 | | | | | | | | | | | | | | | | | | | | Netback per boe(2) | | | | | | | | | | | | | | | | | Total sales, net of blending and other expense (2) | $ | 68.00 | | $ | 80.34 | | $ | 74.93 | | $ | 70.82 | | $ | 88.56 | | | Royalties (5) | | (15.49 | ) | | (17.33 | ) | | (15.23 | ) | | (15.02 | ) | | (18.47 | ) | | Operating expense (5) | | (11.17 | ) | | (12.57 | ) | | (13.06 | ) | | (12.80 | ) | | (13.86 | ) | | Transportation expense (5) | | (2.02 | ) | | (2.02 | ) | | (1.85 | ) | | (2.00 | ) | | (1.59 | ) | | Operating netback (2) | $ | 39.32 | | $ | 48.42 | | $ | 44.79 | | $ | 41.00 | | $ | 54.64 | | | General and administrative (5) | | (1.51 | ) | | (1.48 | ) | | (1.87 | ) | | (1.57 | ) | | (1.65 | ) | | Cash financing and interest (5) | | (3.84 | ) | | (4.08 | ) | | (2.47 | ) | | (3.58 | ) | | (2.64 | ) | | Realized financial derivatives gain (loss) (5) | | 0.84 | | | 0.15 | | | (6.21 | ) | | 0.81 | | | (10.97 | ) | | Other (3) | | (0.78 | ) | | (1.03 | ) | | (2.26 | ) | | (0.90 | ) | | (1.16 | ) | | Adjusted funds flow (4) | $ | 34.03 | | $ | 41.98 | | $ | 31.98 | | $ | 35.76 | | $ | 38.22 | |
Notes:
(1) Barrel of oil equivalent ("boe") amounts have been calculated using a conversion rate of six thousand cubic feet of natural gas to one barrel of oil. The use of boe amounts may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet of natural gas to one barrel of oil is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. (2) Specified financial measure that does not have any standardized meaning prescribed by IFRS and may not be comparable with the calculation of similar measures presented by other entities. Refer to the Specified Financial Measures section in this press release for further information. (3) Other is comprised of realized foreign exchange gain or loss, other income or expense, current income tax expense or recovery and share-based compensation. Refer to the 2023 MD&A for further information on these amounts. (4) Capital management measure. Refer to the Specified Financial Measures section in this press release for further information. (5) Calculated as royalties, operating, transportation expense, general and administrative expense, cash interest expense or realized financial derivatives gain (loss) divided by barrels of oil equivalent production volume for the applicable period.
Strategy and 2024 Outlook
We are a well-capitalized, North American oil-weighted producer with 60% of our producing assets located in the Eagle Ford with the balance in western Canada. We are committed to a disciplined, returns-based capital allocation philosophy to drive increased per-share returns. The key elements of our business strategy include:
Disciplined Capital Allocation. Each of our core assets has 10 or more years of development inventory at our planned pace of development. This provides us the ability to efficiently allocate capital and respond to changes in regional commodity prices and other economic factors. Over our five-year outlook (2024 to 2028), we expect to generate annual production growth of 1% to 4%, with production reaching approximately 170,000 boe/d in 2028.
Free Cash Flow(1). Our commitment to disciplined capital allocation across our portfolio is expected to generate meaningful free cash flow(1). We intend to allocate 50% of free cash flow(1)to debt repayment and 50% to shareholder returns, which includes a combination of share buybacks and a quarterly dividend.
Financial Strength. We are committed to maintaining a strong balance sheet and significant financial liquidity. We are in a strong financial position with a total debt to EBITDA(2)ratio(1)of 1.1x. Upon reaching a total debt(2)target of $1.5 billion, we intend to direct 75% of free cash flow(1)to shareholder returns.
In January, extremely cold temperatures across North America, followed by heavy rainfall in Texas, led to production disruptions. Our production has been restored, however, first quarter production will be approximately 2,000 boe/d lower than our budget expectation. Despite this, our 2024 guidance remains unchanged with exploration and development expenditures of $1.2 to $1.3 billion and production of 150,000 to 156,000 boe/d. In 2024, we intend to progress the Pembina Duvernay, further delineate our Clearwater and Mannville heavy oil positions, and deliver strong drilling and completion performance in the Eagle Ford and Viking.
Based on the forward strip(3), we expect to generate approximately $575 million of free cash flow(1)in 2024. Our capital program is weighted to the first and third quarters and as a result, we expect to generate a significant amount of our 2024 free cash flow(1)during the second and fourth quarters.
2023 Results
On June 20, 2023, we closed the acquisition of Ranger, adding quality scale in the Eagle Ford and reinforcing a resilient and sustainable business. In conjunction with closing, we increased direct shareholder returns to 50% of free cash flow(1), which allowed us to increase the value of our share buyback program and introduce a dividend. The remainder of our free cash flow(1)was allocated to debt reduction.
In 2023, we returned $260 million to shareholders through our share buyback program and dividend. Our normal course issuer bid allows for the purchase of up to 68.4 million common shares during the 12-month period ending June 28, 2024. Through December 31, 2023, we repurchased 40.5 million common shares for $222 million, representing 4.7% of our shares outstanding, at an average price of $5.48 per share. In addition, we declared two quarterly dividends of $0.0225 per share, totaling $38 million.
We increased production per basic share by 16% in 2023, compared to 2022. Production in Q4/2023 averaged 160,373 boe/d (83% oil and NGL), exceeding our guidance for the quarter of 158,000 to 160,000 boe/d, and up 6% from 150,600 boe/d (85% oil and NGL) in Q3/2023. Production for the full-year 2023 averaged 122,154 boe/d, compared to 83,519 boe/d in 2022.
Exploration and development expenditures totaled $1,013 million in 2023 as compared to our annual guidance of $1,035 million. We participated in the drilling of 303 (254.0 net) wells in 2023. For the second half of 2023, exploration and development expenditures totaled $608 million, consistent with our plan following the Ranger acquisition.
Our business improved structurally through the Ranger acquisition with increased exposure to premium U.S. Gulf Coast pricing and improved margins. In Q4/2023, over 40% of our liquids production received WTI equivalent pricing and our realized light oil and condensate price in the Eagle Ford was $105.83/bbl, or US$77.60/bbl. In addition, we improved our cash cost structure (operating, transportation, general & administrative expenses) in Q4/2023 by 12% on a boe basis compared to Q4/2022.
(1) Specified financial measure that does not have any standardized meaning prescribed by IFRS and may not be comparable with the calculation of similar measures presented by other entities. Refer to the Specified Financial Measures section in this press release for further information. (2) Calculated in accordance with our amended credit facilities agreement which is available on SEDAR+ at www.sedarplus.com. (3) 2024 pricing assumptions: WTI - US$75/bbl; WCS differential - US$16/bbl; NYMEX Gas - US$2.25/MMbtu; and Exchange Rate (CAD/USD) - 1.35.
On December 11, 2023, we completed the divestiture of Viking assets at Forgan and Plato in southwest Saskatchewan for proceeds of $160 million, including closing adjustments. Proceeds from the sale were applied against our credit facilities. Production from the assets at the time of the sale was approximately 4,000 boe/d (100% light and medium crude oil). We incurred a non-cash loss of $144 million related to the sale.
During the fourth quarter we reduced our net debt(1)by 10% ($290 million) due to a combination of free cash flow generation, net proceeds from the Viking divestiture and the impact of a strengthening Canadian dollar, relative to the U.S. dollar, on our U.S. dollar denominated debt. Our total debt(2)at December 31, 2023 was $2.5 billion and we have $588 million of undrawn capacity on our credit facilities.
We employ a disciplined commodity hedging program to help mitigate the volatility in revenue due to changes in commodity prices. In 2023, our hedging program generated realized financial derivatives gains of $36 million. For 2024, we have entered into hedges on approximately 40% of our net crude oil exposure utilizing two-way collars with an average floor price of US$60/bbl and an average ceiling price of US$96/bbl. A complete listing of our financial derivative contracts can be found in Note 18 to our 2023 financial statements.
At year-end 2023, we identified indicators of impairment on our legacy non-operated Eagle Ford and retained Viking assets. As a result, we recorded total non-cash impairments of $834 million in Q4/2023 as the carrying value of our oil and gas properties exceeded their recoverable amounts. This non-cash impairment resulted in a net loss of $626 million ($0.75 per basic share) in Q4/2023 and $233 million ($0.33 per basic share) in 2023.