Baytex Energy (BTE) Price Target - Jan 15

[dan_s]

Recently HFI Research named Baytex Energy (BTE) as their Top Pick for 2024.

HFI Research is a highly respected firm, so I decided to take a hard look at BTE and update my forecast/valuation based on what I believe to be reasonable production estimates and commodity prices for 2024 and 2025. The Company has provided production guidance for 2024 of 150,000 to 156,000 Boepd. I expect them to beat the guidance, but my 2024 forecast is based on 155,000 Boepd.

HFI came up with a price target of $8.71US and then discounted it by what they called the "Hatred for BTE Discount" of 20% to $6.97US. BTW BTE is also one of Eric Nuttall's Top Picks for 2024.

As of today, First Call's price target is $7.86Cdn or ~$5.82US, which compares to the January 12th closing price of $3.12US.

TipRanks: "In the last 3 months, 7 ranked analysts set 12-month price targets for BTE. The average price target among the analysts is $5.48. The 7 analysts' price targets range from $5.04US to $5.97US."

I have extended my forecast through 2025 and my current valuation is now $6.35US, which is based on 4X annualized operating cash flow for the three year period 2023 to 2025. My forecasts for 2024 and 2025 are actually below the current TipRanks' forecasts for the next two years.

My 2024 forecast is $0.58 EPS and $2.26 operating CFPS, which compares to the consensus TipRanks' 2024 forecast of $0.94 EPS ad $2.57 CFPS.

Baytex acquired Ranger Oil on June 20, 2023 at a very good price. The deal increased Baytex's production by ~73% to 150,601 Boepd in Q3 2023 and it added a lot of high quality "Running Room" in the South Texas Eagle Ford / Austin Chalk. Baytex's revenues are heavily weighted to oil with only 16% of their production being natural gas. This year's drilling program will focus on South Texas.

I expect Baytex to report a significant production increase (over 8,000 Boepd) from Q3 to Q4 2023, so timing on this one should be good.

My updated forecast for BTE will be posted to the EPG website late today, under the Sweet 16 tab.