2023-07-28 18:54:08 ET
Summary
- Baytex Energy Corp. has reported Q2 2023 financial results.
- Net income per share rocketed to $.37, and the EPS for the first half of the year climbed to $.47 from $.42 compared to last year.
- We look at whether Baytex's stock is still cheap following the 5% rise in its share price.
Baytex Energy: Impressive Quarterly Earnings
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In my previous article on April 28 , I highlighted that Baytex Energy Corp. (BTE) appeared undervalued compared to its peers, and pointed out that this discrepancy didn't seem justified. I predicted that Baytex's announcement about acquiring Ranger Oil should bolster the stock, but its share price hadn't reflected this positive development.
Since then, the stock has risen 5% , and it seems primed for a significant upward surge from here.
Here's why: On July 27, Baytex unveiled its financial results for Q2 2023 , and the results were better than expected. Let's examine the key points:
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In Q2/2023, Baytex managed to produce 89,71 boe/d, with a composition of 86% oil and NGLs.
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The company's operating cash flows amounted to $192 million, equating to $0.33 per share.
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The adjusted funds flow, a key performance metric, came in at $274 million or $0.47 per share.
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Meanwhile, its free cash flow, another key performance metric, stood at $96 million or $0.17 per share.
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Consistent with its annual plan, Baytex expended $171 million on exploration and development activities.
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Readers should also note that during the quarter, Baytex completed a program consisting of six wells in Duvernay, planning to put these wells into operation in Q3/2023.
Baytex is rewarding shareholders, too: In the quarter , it launched a share buyback program and has already repurchased 4.7 million shares in July. Share buybacks are typically a great use of a business's capital when the stock price is undervalued, which is the case here with Baytex.
The company has also declared a quarterly dividend, with shareholders set to receive $0.0225 per share, which annualizes to $0.09 per share - and gives the stock a current yield of 2.3%.
What I really think of Baytex's quarter
Baytex's results were very robust for the quarter. Notably, net income per share rocketed to $.37 , and the EPS for the first half of the year climbed to $.47 from $.42 compared to last year.
This surge came despite lower oil prices, too: $75/barrel over the past six months, compared to $101 last year. The increase is impressive also given that wildfires in Canada curtailed 20K boe/day of its own production and third-party infrastructure closures cut another 4K boe/day in Q2!
Looking ahead, the outlook for 2023 appears even more promising. Post the Ranger Oil acquisition, the company projects a generation of over $400 million of free cash flow in the latter half of 2023 and about $500 million for the full year, supporting its dividend and buybacks.
So, I'm pretty happy with these results. The market seems to echo this sentiment with the stock climbing 7% on Friday!
Given the rebound in oil and natural gas prices, and the added production boost from the Ranger Oil deal, we can anticipate even more favorable financial results for H2 2023.
Don't feel like you've missed out on buying Baytex, though. Despite the recent stock price surge, the valuation remains highly attractive. Shares now carry a forward P/E of 6.9 , well below the industry average of 9.91, and an EV/EBITDA of 3.01 , also well below the industry average of 5.59.
For further details see:
Baytex Energy: Is The Stock Still Dirt Cheap?