Baytex Energy (BTE) Valuation Update - Apr 5

[dan_s]

I have updated my forecast model for BTE, now using my new oil & gas price deck. My valuation increases by $0.60 to $6.90US per share.

If Baytex's Q1 results and updated guidance for 2024 confirm the assumptions in my forecast model, my valuation will be going higher because I am only using a multiple of 3.75 X annualized operating CFPS to value this stock. That is an extremely low multiple for a company of size.

Baytex should generate over $800Cdn million of free cash flow from operations this year. All of our Canadian companies will be getting much higher realized oil prices after Q1 due in part to the falling oil price differential.

I expect them to raise their dividend slightly, but most of the FCF should be used to aggressively buyback their stock, which IMO is grossly undervalued.

At today's oil price the well level economics are outstanding in South Texas where they have over 12 years of high-quality "Running Room". Most of the South Texas leasehold was acquired when they merged in Ranger Oil; one of the best acquisitions that I've seen.
A valuation multiple of 5X seems more appropriate for BTE.