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Highlights
- The S&P/TSX Capped Energy Index whose firms hold an average market capitalization of over C$ 9 billion per company, has weathered the pandemic setbacks over the past two years.
- Many market experts believe that energy-focused investors gained from smaller-cap oil and gas companies in 2021 and expect this momentum may continue in 2022 as well, primarily due to a surge in crude oil prices.
- One Canadian energy firm, which held a market capitalization of C$ 2.2 billion, saw its stock soar by almost 370 per cent in the past year.
The S&P/TSX Capped Energy Index whose firms hold an average market capitalization of over C$ 9 billion per company, has weathered the pandemic setbacks over the past two years.
Many market experts believe that energy-focused investors gained from smaller-cap oil and gas companies in 2021 and expects that this momentum may continue in 2022 as well, primarily due to a surge in crude oil prices.
The said index kick-started 2022 on a positive note with a year-to-date (YTD) gain of over four per cent.
One North American energy firm, which held a market capitalization of C$ 2.2 billion, saw its stock soar by almost 370 per cent year-over-year (YoY). This firm used 100 per cent of its free cash flow for net debt reduction in the third quarter of fiscal 2021.
We are talking about Baytex Energy Corp (TSX:BTE), a Canadian firm, which produces heavy oil, light oil, natural gas and natural gas liquids in the United States and Canada, presently with a return on equity (ROE) of 126.29 per cent.
Baytex Energy’s operational and financial results in Q3 FY2021
The Calgary, Alberta-based energy firm produced 79,872 barrels of oil equivalent per day in the latest quarter. This total production included 82 per cent of oil and natural gas liquids (NGLs).
Baytex posted petroleum and natural gas sales of C$ 488.73 million in the third quarter of FY2021, notably up from C$ 252.53 million a year ago.
Its third-quarter adjusted funds flow was C$ 198.39 million in 2021 compared to C$ 78.50 million in Q3 2020.
The oil and gas producer earned a net income of C$ 32.71 million in the latest quarter against a net loss of C$ 23.44 million incurred in the prior-year quarter.
In Q3 FY2021, the firm generated a free cash flow of C$ 101 million, bringing the year-to-date (YTD) amount to C$ 284 million, which was used in reducing its net debt to C$ 1.56 billion.
Baytex’s stock galloped by 486 per cent since January 4, 2021
Stocks of Baytex Energy closed at C$ 4.04 per share on Wednesday, January 5. With earnings per share of 2.27, the energy stock catapulted with a one-year growth of 370 per cent.
This oil and gas stock galloped 486 per cent since January 4, 2021, when it recorded its 52-week low of C$ 0.69. On November 4, 2021, the energy company saw its stock hit a 52-week high of C$ 4.39.
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2022 Budget of Baytex Energy: What should you know?
On December 1, 2021, the energy company announced a capital budget range of C$ 400 million to C$ 450 million, for fiscal 2022, with an annual production target of somewhere between 80,000 to 83,000 barrels of oil equivalent per day on an average basis.
The company also highlighted its two main priorities for free cash flow allocation in 2022:
- Baytex will direct 100 per cent of its free cash flow to net debt reduction until it achieves an initial net debt target of 1.2 billion, which is expected to occur in the middle of FY2022.
- On achieving this net debt target, the company may plan to improve shareholders’ returns via share buybacks and dividends, as well as further strengthening its business.
Bottom line
As Baytex repurchased and canceled US$200 million of its 2024 bonds in the latest quarter and it expects to produce free cash flow in excess of C$ 400 million backed by favorable commodity prices.
President and CEO of Baytex Energy Ed LaFehr stated that the company is focused on maintaining capital discipline, generating free cash flow and reducing debt. He also added that the company would drill additional wells in the Clearwater play at the Peace River site to escalate plans for 2022.
