Baytex Energy Corp. (NYSE:BTE) Q3 2019 Earnings Conference Call - Final Transcript

Nov 01, 2019 • 11:00 am ET

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Baytex Energy Corp. (NYSE:BTE) Q3 2019 Earnings Conference Call - Final Transcript

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Q & A
Operator
Operator

[Operator Instructions]. Our first question comes from Phil Skolnick with Eight Capital. Please go ahead.

Analyst
Phil Skolnick

Yes, thanks, good morning. A couple of questions. First, just in terms of the Alberta government's announcement yesterday with curtailment relief for rail ramp and -- does that -- should we think of that impacting Baytex at all? And if so, by how much? And how do we think about that?

Executive
Edward D. LaFehr

Yes, on that question, Phil. Curtailment relief has been discussed quite openly with ourselves and the government and had been signaled now for months. And we believe that the differential has reflected that. So the differential move from where it was in 3Q, around CAD13 a barrel. It's moved up steadily, sitting at CAD16, CAD17 a barrel.

And now with Keystone if December has widened out to '19 or '20. But the point here is that with the announcement in that discussion, we're now sitting at a point where heavy oil differentials are at the full cost of rail.

So while we're not expecting to participate in the government program, reason being we continue to rail, 40% of our crude, we were doing that in Q1, all last year and throughout this year, a dominant majority of those barrels move to the Gulf Coast on advantaged pricing for us so we don't need to move more rail.

But with the differential now move to the full cost of rail, we think that will incentivize quite a bit more rail, and that's going to be good for the industry and good for business.

Analyst
Phil Skolnick

Yes, sure. And then in terms of free cash flow, given how robust it is for you guys. How should we think about the priorities of that? And what are the certain levers that you could pull in terms of on production side of things?

Executive
Edward D. LaFehr

Yeah. Well, as you can see, first half of the year was quite strong on production, activity was ramped down in 3Q, our exit rate is projected 95,000 barrels a day to 97,000 barrels a day, we're pointing towards the high end of that. So these assets want to grow on CAD560 million of capital where -- or at least on our old capital range.

So our capital efficiencies are incredibly strong, we'll point to a budget next year, though, that continues to drive free cash flow through these strong capital efficiencies and our strong cost structure that we've delivered.

And the reason we'll do that is the number one priority in the Company remains to de-lever our balance sheet and get that part done. And then we'll get to the point where we can talk about more shareholder-friendly initiatives, such as share buybacks at this point in time with our shares trading where they are. But we need to take another step on the debt first with that free cash flow.

Analyst
Phil Skolnick

Okay. And would share buybacks be more desirable than a dividend?

Executive
Edward D. LaFehr

I think at this point, with where our share price is trading, I would say,