Baytex Energy Q3 Earnings Call Highlights

Key Points

• Baytex is accelerating its growth plan: It targets annual production growth of 8%–10%, reaching approximately 92,000 BOE/d in 2029, with average annual capital spending of about CAD 800 million.
• Duvernay is a key growth driver: Baytex plans to allocate roughly 40% of 2027 capital to the play and bring 21 wells online; it now expects production to reach 25,000 BOE/d in the second half of 2028, about 1½ years ahead of schedule.
• Q3 production and shareholder returns increased: Output averaged 71,606 BOE/d, up about 5% year over year, and the company returned CAD 165 million to shareholders, mainly through share repurchases. Baytex ended the quarter with CAD 522 million in net cash.

Baytex Energy NYSE: BTE plans to accelerate production growth through 2029 after reporting higher third-quarter output and free cash flow of CAD 139 million, executives said on the company’s earnings call.

The company expects 2027 production of 76,000 to 79,000 barrels of oil equivalent per day (BOE/d), up 7% to 11% annually, supported by exploration and development spending of CAD 775 million to CAD 850 million. Its updated three-year outlook targets annual production growth of 8% to 10%, reaching approximately 92,000 BOE/d in 2029, with capital spending averaging about CAD 800 million a year.

President and CEO Chad Lundberg said improvements in capital efficiency, operating costs and execution across the Duvernay and heavy oil portfolio allowed the company to accelerate development. “This acceleration is driven by efficiency gains, not a change in our commitment to capital discipline,” he said.

Quarterly results and capital returns

Third-quarter production averaged 71,606 BOE/d, up approximately 5% from a year earlier, while exploration and development expenditures totaled CAD 186 million. Adjusted funds flow was CAD 330 million, or CAD 0.48 per basic share, CFO Chad Kalmakoff said.

Baytex returned CAD 165 million to shareholders during the quarter, including CAD 149 million used to repurchase 24 million common shares. It also paid a quarterly dividend of CAD 0.0225 per share and ended the period with CAD 522 million in net cash.

For 2027, the company has initially allocated CAD 150 million to share repurchases and expects to maintain its quarterly dividend. Kalmakoff said the buyback allocation could be adjusted based on market conditions and other capital opportunities.

Baytex also raised its 2026 exploration and development spending forecast to CAD 665 million from CAD 625 million. The company lowered its operating cost guidance to approximately CAD 13.30 per BOE from a previous range of CAD 13.75 to CAD 14.25, while raising its transportation cost forecast to approximately CAD 3.75 per BOE.

Lundberg attributed the operating cost improvement partly to higher volumes spreading fixed costs across more production. He also cited changes in equipment maintenance and well operations that reduce wear and repair costs.

Duvernay drives growth plan

Duvernay production reached a quarterly record of 12,800 BOE/d. COO Kendall Arthur said a five-well pad in northern Pembina, brought on stream in late August, generated average 30-day initial production of 1,489 BOE/d per well, including 973 barrels per day of oil.

Drilling and completion costs for full-length 2026 Duvernay wells averaged CAD 930 per foot of completed lateral, 11% below 2025 levels, Arthur said. Shorter cycle times allowed Baytex to add two wells to its drilling program, bringing the 2026 total to 19. Thirteen are expected on stream this year and the remaining six in 2027.

Baytex plans to direct roughly 40% of its 2027 capital investment to the Duvernay, bring 21 wells on stream and lift average production from the play to approximately 18,000 BOE/d. It is targeting a fourth-quarter rate of 22,000 to 23,000 BOE/d.

The company now expects Duvernay output to reach 25,000 BOE/d in the second half of 2028, approximately 1½ years earlier than previously planned. Arthur said acquisitions during the year expanded Baytex’s Duvernay land position by 16% to 106,000 net acres.

Heavy oil and project options

Baytex plans to bring approximately 130 heavy oil wells on stream in 2027 and expects production from the portfolio to grow modestly to approximately 48,000 BOE/d. Its 2027 plan also includes a one-rig Viking program with 66 net wells expected on stream.

The company is testing waterflood projects at Peavine and Morinville. Lundberg said Baytex expects to see a response from the Peavine pilots by mid-2027. If early indicators meet expectations, it could add CAD 20 million to CAD 30 million of capital in the second half of 2027 to begin expanding the project, he said.

Baytex is also targeting a final investment decision in the second half of 2027 for its Gemini modular steam-assisted gravity drainage project. Lundberg said the plan currently includes CAD 10 million for further project work. A decision to proceed could bring roughly another CAD 50 million of spending in late 2027, followed by higher capital spending in 2028, with first oil targeted in 2029.

Asked about the Viking asset, Lundberg said it is not core to the business and that Baytex could consider monetizing it at the right time, potentially in a higher-price environment.

About Baytex Energy (NYSE:BTE)

Baytex Energy Corp. is a Canadian oil and natural gas exploration and production company headquartered in Calgary, Alberta. The company develops and produces crude oil, condensate, natural gas liquids and natural gas.

Baytex's operations are focused on the Western Canadian Sedimentary Basin in Alberta and Saskatchewan and the Eagle Ford shale in South Texas. Its portfolio includes light oil, heavy oil and natural gas assets, with production sold into North American energy markets.

Founded in 1993, Baytex became a publicly traded corporation in 2010 after operating as an income trust.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.