Ring Energy, Inc. press release
Baytex Announces Second Quarter 2024 Results
NYSE - New York Stock Exchange · Oil · Natural Gas · Natural Gas Liquids · United States
Calgary, Alberta--(Newsfile Corp. - July 25, 2024) - Baytex Energy Corp. (TSX: BTE) (NYSE: BTE) ("Baytex") reports its operating and financial results for the three and six months ended June 30, 2024 (all amounts are in Canadian dollars unless otherwise noted).
"We delivered strong second quarter results with higher production, disciplined capital spending and meaningful free cash flow. Importantly and consistent with our full-year plan, we returned $97 million to shareholders through our share buyback program and quarterly dividend. In the Eagle Ford, we brought onstream one of our strongest performing oil-weighted pads to-date. As we continue to execute our plans for 2024, our free cash flow is expected to strengthen in the second half of the year allowing for increased shareholder returns and debt reduction," commented Eric T. Greager, President and Chief Executive Officer.
Highlights
Generated production of 154,194 boe/d (85% oil and NGL) in Q2/2024, up 2% from Q1/2024. Crude oil production (light oil, condensate, and heavy oil) increased 4% from Q1/2024 to average 110,734 bbl/d. Increased production per basic share by 23% in Q2/2024, compared to Q2/2023. Reported cash flows from operating activities of $506 million ($0.62 per basic share) in Q2/2024. Delivered adjusted funds flow(1)of $533 million ($0.65 per basic share) in Q2/2024. Generated free cash flow(2)of $181 million ($0.22 per basic share) in Q2/2024 and returned $97 million to shareholders. Repurchased 16.4 million common shares in Q2/2024 for $79 million, at an average price of $4.84 per share. Paid a quarterly cash dividend of $18 million ($0.0225 per share) on July 2, 2024. Executed a $340 million exploration and development program in Q2/2024, consistent with our full-year plan. Completed a US$575 million private placement offering of senior unsecured notes due 2032 that bear interest at a rate of 7.375% per annum and redeemed US$410 million aggregate principal amount of 8.75% outstanding notes. Extended the maturity of our US$1.1 billion credit facilities by two years to May 2028. Maintained balance sheet strength with a total debt(3)to Bank EBITDA(3)ratio of 1.1x.
2024 Guidance
We are focused on maintaining capital discipline and driving meaningful free cash flow. We are executing our 2024 development plan with a tightened production guidance range of 152,000 to 154,000 boe/d (150,000 to 156,000 boe/d, previously). Our 2024 exploration and development expenditures guidance is unchanged at $1.2 to $1.3 billion.
We expect to generate approximately $700 million of free cash flow(2)(4)in 2024, weighted 75% to H2/2024. We intend to allocate 50% of free cash flow to the balance sheet and 50% to shareholder returns, which includes a combination of share buybacks and a quarterly dividend.
(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.ca. (4) Based on the mid-point of 2024 production and exploration and development expenditures guidance and the following full-year commodity price assumptions: WTI - US$78.50/bbl; WCS differential - US$16/bbl; NYMEX Gas - US$2.30/MMbtu; and Exchange Rate (CAD/USD) - 1.37.
| | | | Three Months Ended | | | Six Months Ended | | | | | | | | | | | | | | June 30, 2024 | | | March 31, 2024 | | | June 30, 2023 | | | June 30, 2024 | | | June 30, 2023 | | FINANCIAL (thousands of Canadian dollars, except per common share amounts) | | | | | | | | | | | | | | | | | Petroleum and natural gas sales | | $ | 1,133,123 | | $ | 984,192 | | $ | 598,760 | | $ | 2,117,315 | | $ | 1,154,096 | | Adjusted funds flow(1) | | | 532,839 | | | 423,846 | | | 273,590 | | | 956,685 | | | 510,579 | | Per share - basic | | | 0.65 | | | 0.52 | | | 0.47 | | | 1.17 | | | 0.90 | | Per share - diluted | | | 0.65 | | | 0.52 | | | 0.47 | | | 1.16 | | | 0.90 | | Free cash flow (2) | | | 180,673 | | | (88) | | | 96,313 | | | 180,585 | | | 94,395 | | Per share - basic | | | 0.22 | | | - | | | 0.17 | | | 0.22 | | | 0.17 | | Per share - diluted | | | 0.22 | | | - | | | 0.16 | | | 0.22 | | | 0.17 | | Cash flows from operating activities | | | 505,584 | | | 383,773 | | | 192,308 | | | 889,357 | | | 377,246 | | Per share - basic | | | 0.62 | | | 0.47 | | | 0.33 | | | 1.09 | | | 0.67 | | Per share - diluted | | | 0.62 | | | 0.47 | | | 0.33 | | | 1.08 | | | 0.66 | | Net income (loss) | | | 103,898 | | | (14,043) | | | 213,603 | | | 89,855 | | | 265,044 | | Per share - basic | | | 0.13 | | | (0.02) | | | 0.37 | | | 0.11 | | | 0.47 | | Per share - diluted | | | 0.13 | | | (0.02) | | | 0.36 | | | 0.11 | | | 0.47 | | Dividends declared | | | 18,161 | | | 18,494 | | | - | | | 36,655 | | | - | | Per share | | | 0.0225 | | | 0.0225 | | | - | | | 0.0450 | | | - | | | | | | | | | | | | | | | | | | | Capital Expenditures | | | | | | | | | | | | | | | | | Exploration and development expenditures | | $ | 339,573 | | $ | 412,551 | | $ | 170,704 | | $ | 752,124 | | $ | 404,330 | | Acquisitions and divestitures | | | 654 | | | 35,378 | | | (112) | | | 36,032 | | | 159 | | Total oil and natural gas capital expenditures | | $ | 340,227 | | $ | 447,929 | | $ | 170,592 | | $ | 788,156 | | $ | 404,489 | | | | | | | | | | | | | | | | | | | Net Debt | | | | | | | | | | | | | | | | | Credit facilities | | $ | 625,976 | | $ | 849,926 | | $ | 986,903 | | $ | 625,976 | | | $ 986,903 | | Long-term notes | | | 1,881,894 | | | 1,637,155 | | | 1,601,468 | | | 1,881,894 | | | 1,601,468 | | Total debt (3) | | | 2,507,870 | | | 2,487,081 | | | 2,588,371 | | | 2,507,870 | | | 2,588,371 | | Working capital deficiency (2) | | | 131,144 | | | 152,760 | | | 226,473 | | | 131,144 | | | 226,473 | | Net debt(1) | | $ | 2,639,014 | | $ | 2,639,841 | | $ | 2,814,844 | | $ | 2,639,014 | | $ | 2,814,844 | | | | | | | | | | | | | | | | | | | Shares Outstanding - basic(thousands) | | | | | | | | | | | | | | | | | Weighted average | | | 814,151 | | | 821,710 | | | 583,365 | | | 817,931 | | | 564,319 | | End of period | | | 804,977 | | | 821,322 | | | 862,192 | | | 804,977 | | | 862,192 | | | | | | | | | | | | | | | | | | | BENCHMARK PRICES | | | | | | | | | | | | | | | | | Crude oil | | | | | | | | | | | | | | | | | WTI (US$/bbl) | | $ | 80.57 | | $ | 76.96 | | $ | 73.78 | | $ | 78.77 | | $ | 74.96 | | MEH oil (US$/bbl) | | | 83.10 | | | 78.95 | | | 75.01 | | | 81.03 | | | 76.22 | | MEH oil differential to WTI (US$/bbl) | | | 2.53 | | | 1.99 | | | 1.23 | | | 2.26 | | | 1.26 | | Edmonton par ($/bbl) | | | 105.30 | | | 92.16 | | | 95.13 | | | 98.73 | | | 97.09 | | Edmonton par differential to WTI (US$/bbl) | | | (3.62) | | | (8.63) | | | (2.95) | | | (6.10) | | | (2.91) | | WCS heavy oil ($/bbl) | | | 91.72 | | | 77.73 | | | 78.85 | | | 84.68 | | | 74.16 | | WCS differential to WTI (US$/bbl) | | | (13.55) | | | (19.33) | | | (15.07) | | | (16.44) | | | (19.92) | | Natural gas | | | | | | | | | | | | | | | | | NYMEX (US$/MMbtu) | | $ | 1.89 | | $ | 2.24 | | $ | 2.10 | | $ | 2.07 | | $ | 2.76 | | AECO ($/Mcf) | | | 1.44 | | | 2.05 | | | 2.35 | | | 1.74 | | | 3.34 | | | | | | | | | | | | | | | | | | | CAD/USD average exchange rate | | | 1.3684 | | | 1.3488 | | | 1.3431 | | | 1.3586 | | | 1.3475 |
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.ca.
| | | | Three Months Ended | | | Six Months Ended | | | | | | | | | | | | | | June 30, 2024 | | | March 31, 2024 | | | June 30, 2023 | | | June 30, 2024 | | | June 30, 2023 | | OPERATING | | | | | | | | | | | | | | | | | Daily Production | | | | | | | | | | | | | | | | | Light oil and condensate (bbl/d) | | | 67,031 | | | 66,036 | | | 35,322 | | | 66,534 | | | 33,510 | | Heavy oil (bbl/d) | | | 43,703 | | | 40,560 | | | 32,821 | | | 42,131 | | | 33,502 | | NGL (bbl/d) | | | 20,167 | | | 19,299 | | | 8,620 | | | 19,733 | | | 7,920 | | Total liquids (bbl/d) | | | 130,901 | | | 125,895 | | | 76,763 | | | 128,398 | | | 74,932 | | Natural gas (Mcf/d) | | | 139,764 | | | 148,353 | | | 77,989 | | | 144,059 | | | 80,017 | | Oil equivalent (boe/d @ 6:1) (1) | | | 154,194 | | | 150,620 | | | 89,761 | | | 152,407 | | | 88,269 | | | | | | | | | | | | | | | | | | | Netback (thousands of Canadian dollars) | | | | | | | | | | | | | | | | | Total sales, net of blending and other expense (2) | | $ | 1,065,438 | | $ | 919,984 | | $ | 545,765 | | $ | 1,985,422 | | $ | 1,041,420 | | Royalties | | | (240,440) | | | (209,171) | | | (107,920) | | | (449,611) | | | (201,173) | | Operating expense | | | (167,705) | | | (173,435) | | | (119,438) | | | (341,140) | | | (231,846) | | Transportation expense | | | (33,314) | | | (29,835) | | | (14,574) | | | (63,149) | | | (31,579) | | Operating netback(2) | | $ | 623,979 | | $ | 507,543 | | $ | 303,833 | | $ | 1,131,522 | | $ | 576,822 | | General and administrative | | | (21,006) | | | (22,412) | | | (15,240) | | | (43,418) | | | (26,974) | | Cash financing and interest | | | (53,946) | | | (53,280) | | | (28,255) | | | (107,226) | | | (46,630) | | Realized financial derivatives (loss) gain | | | (2,257) | | | 5,488 | | | 16,365 | | | 3,231 | | | 21,780 | | Other (3) | | | (13,931) | | | (13,493) | | | (3,113) | | | (27,424) | | | (14,419) | | Adjusted funds flow (4) | | $ | 532,839 | | $ | 423,846 | | $ | 273,590 | | $ | 956,685 | | $ | 510,579 | | | | | | | | | | | | | | | | | | | Netback (per boe) (2) | | | | | | | | | | | | | | | | | Total sales, net of blending and other expense (2) | | $ | 75.93 | | $ | 67.12 | | $ | 66.82 | | $ | 71.58 | | $ | 65.18 | | Royalties (5) | | | (17.14) | | | (15.26) | | | (13.21) | | | (16.21) | | | (12.59) | | Operating expense (5) | | | (11.95) | | | (12.65) | | | (14.62) | | | (12.30) | | | (14.51) | | Transportation expense (5) | | | (2.37) | | | (2.18) | | | (1.78) | | | (2.28) | | | (1.98) | | Operating netback (2) | | $ | 44.47 | | $ | 37.03 | | $ | 37.21 | | $ | 40.79 | | $ | 36.10 | | General and administrative (5) | | | (1.50) | | | (1.64) | | | (1.87) | | | (1.57) | | | (1.69) | | Cash financing and interest (5) | | | (3.84) | | | (3.89) | | | (3.46) | | | (3.87) | | | (2.92) | | Realized financial derivatives (loss) gain (5) | | | (0.16) | | | 0.40 | | | 2.00 | | | 0.12 | | | 1.36 | | Other (3) | | | (1.00) | | | (0.98) | | | (0.39) | | | (0.98) | | | (0.89) | | Adjusted funds flow (4) | | $ | 37.97 | | $ | 30.92 | | $ | 33.49 | | $ | 34.49 | | $ | 31.96 |
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 cash share-based compensation. Refer to the Q2/2024 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 or loss divided by barrels of oil equivalent production volume for the applicable period.
During the second quarter, we delivered operating and financial results consistent with our full-year guidance. We remain committed to a disciplined, returns-based capital allocation philosophy intended to drive increased per-share returns. Our strong free cash flow forecast for 2024 reflects our stable production profile and the efficiency of our exploration and development program.
We increased production per basic share by 23% in Q2/2024, compared to Q2/2023, with production averaging 154,194 boe/d (85% oil and NGLs). Adjusted funds flow(1)was $533 million or $0.65 per basic share, 38% higher than $0.47 per basic share in Q2/2023, and we generated net income of $104 million ($0.13 per basic share). Exploration and development expenditures totaled $340 million and we brought 58 (39.8 net) wells onstream.
During the second quarter we generated free cash flow(2)of $181 million ($0.22 per basic share) and returned $97 million to shareholders. We repurchased 16.4 million common shares for $79 million, at an average price of $4.84 per share, and paid a quarterly cash dividend of $18 million ($0.0225 per share).
During the last twelve months, we returned $378 million to shareholders. We repurchased 57.5 million common shares for $304 million, representing 6.7% of our shares outstanding, at an average price of $5.28 per share, and paid total dividends of $74 million ($0.09 per share).
On June 26, 2024, we renewed our Normal Course Issuer Bid ("NCIB") with the Toronto Stock Exchange for a share buyback program for up to 10% of our public float. The renewed NCIB allows Baytex to purchase up to 70 million common shares during the 12-month period commencing July 2, 2024 and ending July 1, 2025. For the period July 2, 2024 to July 25, 2024, we repurchased 4.8 million common shares for $24 million, at an average price of $5.00 per share.
During the second quarter, we extended our debt maturities and increased the liquidity on our credit facilities. On April 1, 2024, we closed a private placement offering of US$575 million aggregate principal amount of senior unsecured notes. The notes bear interest at a rate of 7.375% per annum and mature on March 15, 2032. Net proceeds from the offering were used to redeem US$409.8 million aggregate principal amount of outstanding 8.75% notes and the associated call premiums and repay a portion of the debt outstanding on our credit facilities. In addition, on May 9, 2024, we extended the maturity of our US$1.1 billion credit facilities to May 2028.
Our total debt(3)at June 30, 2024 was $2.5 billion, largely unchanged from year-end 2023. Continuing to strengthen our balance sheet remains a priority. Based on our forecast free cash flow and shareholder return profile, we expect a reduction in total debt in the second half of 2024. The change in our total debt year-to-date reflects the strengthening U.S. dollar, relative to the Canadian dollar, on our U.S. dollar denominated debt (approximately $70 million), the call premium and issuance costs on our private placement offering and debt refinancing (approximately $50 million), and strategic land acquisitions (approximately $35 million). We are now forecasting interest expense for 2024 of $200 million, up from $190 million, previously.
We employ a disciplined commodity hedging program to help mitigate the volatility in revenue due to changes in commodity prices. For the second half of 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$93/bbl. For H1/2025, we have entered into hedges on approximately 35% 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$91/bbl. A complete listing of our financial derivative contracts can be found in Note 17 to our Q2/2024 financial statements.
Operations
In the Eagle Ford, we continue to deliver strong results across the black oil, volatile oil and condensate windows of our acreage. We generated production of 90,506 boe/d (82% oil and NGL) in Q2/2024. During the second quarter, we brought 11 (10.7 net) operated Lower Eagle Ford wells onstream that were largely focused on the black oil window. We brought onstream one of our strongest performing oil-weighted pads to-date (3-wells, Pluto A1H, B2H and D4H) with the wells generating an average 30-day peak production rate of 1,348 boe/d per well (1,161 bbl/d of crude oil, 104 bbl/d of NGLs, 500 Mcf/d of natural gas).
In aggregate, 8 of 11 wells brought onstream during the second quarter were on production for a sufficient amount of time to establish 30-day peak production rates. These wells generated an average 30-day peak production rate of 1,022 boe/d per well (892 bbl/d of crude oil, 72 bbl/d of NGLs, 349 Mcf/d of natural gas). Due to efficient drilling and completion activities, in the first half of 2024 we realized an 8% improvement in operated drilling and completion costs per completed lateral foot over 2023. On our non-operated Eagle Ford acreage, we brought 19 (4.1 net) wells onstream.
(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.ca.
We are focused on optimizing our acreage and continue to identify Upper Eagle Ford development areas. Our 2024 program includes four Upper Eagle Ford wells. The first three wells were brought onstream in Q1/2024 and continue to deliver strong results. The fourth well was brought onstream in July. In addition, following our successful Q1/2024 Lower Eagle Ford refrac (Medina Unit 3H), we are evaluating additional refrac opportunities to supplement our 2025 capital program.
In our Canadian light oil business unit, the first pad (3-wells) from our 2024 Duvernay program was brought onstream in May and generated an average 30-day peak production rate of 1,350 boe/d per well (890 bbl/d of crude oil, 326 bbl/d of NGLs, 825 Mcf/d of natural gas). These initial results are consistent with expectations. The second pad (4-wells) is expected to be onstream in August. In the Viking, activity resumed in late June following spring breakup.
In our heavy oil business unit, second quarter activity is typically lower due to spring breakup. Peavine continued to outperform expectations with production averaging 19,938 bbl/d (100% heavy oil) during the second quarter, up 13% from Q1/2024. In Q2/2024, we brought 4 (4.0 net) wells onstream at Peavine that generated an average 30-day peak production rate of 760 bbl/d per well (100% heavy oil). Following spring breakup, our heavy oil development program has ramped up with four rigs running across our Peavine, Peace River and Lloydminster regions.
Quarterly Dividend
The Board of Directors declared a quarterly cash dividend of $0.0225 per share to be paid on October 1, 2024 to shareholders of record on September 16, 2024.
2023 ESG Report
On June 20, 2024, the Canadian government passed amendments to the Competition Act that creates uncertainty for companies that wish to publicly communicate their environmental goals, targets and performance. As it is unclear how the new law will be interpreted and enforced, and given the significant potential penalties associated with non-compliance, we have deferred the publication of our 2023 ESG report.