2024-03-21 10:23:39 ET
Summary
- Baytex Energy Corp. cash flow has improved after acquiring highly profitable Eagle Ford properties.
- The market's focus on impairment charges overlooks the importance of cash flow as an indicator of company health.
- Despite concerns about debt and currency issues, the Eagle Ford business is expected to support the loans and result in no gains or losses.
- The company is now a light oil producer with control over most of the Eagle Ford production. The market will likely revalue the company in the future as a result.
- The cash flow statement showed a strong comparison in the fourth quarter as a result of the Ranger acquisition.
Baytex Energy Corp. ( BTE ) management reported a significant increase in cash flow compared to what it would have been had the company not acquired Ranger Oil ((ROCC)). The fourth quarter cash flow represented more than half of the cash flow for the fiscal year. This is now a light oil upstream company. The market has yet to adjust to the transformational acquisition. But when the market does adjust, shareholders can expect a better stock price.
The Eagle Ford properties acquired are among the most profitable in the company portfolio. They also change the company from a heavy oil producer (subject to a discount from WTI pricing) to a light oil producer whose Eagle Ford production often gets a premium price to the local benchmark. It is not just the transformation to light oil that is important. It is instead the transformation to a light oil producer whose production gets additional return from the premium pricing of that production. This is something the market will value as well....
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Baytex Energy: Big Cash Flow Boost Bodes Well For Future Dividends