Baytex Energy Corp. (NYSE:BTE) Q3 2019 Earnings Conference Call - Final Transcript
Nov 01, 2019 • 11:00 am ET
Edward D. LaFehr
Pembina area has significantly de-risked our approximately 38-kilometer long acreage fairway, where we hold 275 sections of 100% working interest Duvernay lands. Let's turn to risk management. We continue to manage our commodity price risk through an active hedging program. In the third quarter, we realized a financial derivatives gain of CAD21 million. For the fourth quarter of 2019, we have hedged approximately 53% of our net crude oil exposure at pricing in the mid-CAD60 range for WTI.
For 2020, we have hedges on approximately 33% of our net crude oil exposure, largely utilizing costless three-way option structures that when WTI is between CAD51 per barrel and CAD58 per barrel, we received CAD58 per barrel. And the contracts also provide upside participation to nearly CAD64 per barrel.
Our hedges also include WTI-based fixed price swaps for 4,000 barrels per day at approximately CAD56 per barrel for the first quarter. Additionally, crude by rail is an integral part of our egress and marketing strategy for heavy oil. For Q4 '19, we expect to deliver 11,500 barrels per day, approximately 40% of our heavy oil volumes to market by rail. For 2020, our crude by rail volumes are currently contracted at 7,500 barrels per day.
Full details of our hedge program can be found in our Q3 financial statements. So now, let me conclude by saying we are well positioned to execute our business plan focused on free cash flow generation. As I mentioned at the outset, given our strong operating performance, we now expect to exceed our 2019 annual production guidance of 97,000 BOEs per day.
Based on the forward strip for the balance of 2019, we are forecasting adjusted funds flow of approximately CAD875 million, and we expect to generate approximately CAD300 million of free cash flow, which supports our deleveraging strategy. Over the longer term, as we continue to drive debt levels down, we believe we will be positioned to offer returns through a combination of per share growth, share buybacks and/or dividends.
And lastly, I would point out that we are in the process of setting our 2020 capital budget. The details of which are expected to be released in early December following approval by our Board of Directors.
And with that, I will ask the operator to please open the call for questions.