Baytex Energy (BTE) Valuation Update - July 27

[dan_s]

I have increased my valuation of BTE by $0.30 to $6.50US per share ($8.78Cdn per share).

Baytex reported Q2 results that exceeded my forecast and they have tightened up their guidance for 2H 2024. My valuation is just 3.75 X Adjusted Operating Cash Flow per share, which is a low multiple for a company that now has 25% of year-over-year production growth locked in, is on pace to generate over $700Cdn million of free cash flow, pays a small dividend and has a stock buyback underway.

I now have a lot more confidence in my forecast model. The Company is on pace to generate close to $2Cdn billion of operating cash flow this year. TipRanks' operating cash flow forecast is slightly higher than my forecast.

RBC Capital and Canaccord Genuity updated their forecasts yesterday and both of them have price targets of $6.50Cdn, which equates to $4.81US per share. BTE close at $3.43US on Friday.

TipRanks' current Cash Flow Per Share forecast is $2.50Cdn for 2024 and $2.68Cdn for 2025. There is nothing that I can see which justifies BTE trading at less than 2X CFPS.