Baytex CEO: Eagle Ford to generate significant cash flow

By Luke Geiver | March 12, 2018

Expect more of the same from Baytex Energy Corp. across its Eagle Ford operations this year. After recording the highest netbacks since 2014 at its Eagle Ford acreage, Baytex said it will give the south Texas play the first call of capital this year. At current crude oil prices, the company believes it can generate significant free cash flow.

For the year, the operating plan is to work within cash flow. If the company can generate free cash flow, debt revolver payments or shareholder investments could be the place for extra cash. From a budget of $325 million to $375 million, the Calgary-based exploration and production company will look to produce 68,000 to 72,000 barrels of oil equivalent between its Texas and Canadian operations. At $55/b West Texas Intermediate, Baytex believes it will be free cash flow positive. For its Eagle Ford operations, at $50/b the company would generate an internal rate of return at roughly 55 percent. At $60/b, IRR levels would reach 75 percent and at $65/b, IRR’s would potentially surpass 100 percent. For the full year, the company has just over 50 percent of its production hedged mostly in the $52.30 range.

In the Eagle Ford, “well performance has consistently surprised us to the positive over the past several quarters,” said Ed LaFehr, president and CEO. In Q4 2017, well production was up by 12 percent compared the same quarter a year ago. In Q4, Baytex generated roughly $100 million from its Eagle Ford operations, an impressive number, according to LaFehr. Enhanced completions and greater sand volumes played a large part for the production uptick. This year, Baytex will run four to five drilling rigs with roughly two frack crews.

According to the company, the U.S. assets, hedging and active crude by rail operations are mitigating volatility in Western Canadian Select crude.

No matter what crude prices do this year, the goal of the company is to continue operating momentum and too address debt.