Baytex Energy Corp T.BTE

RE:Baytex – Why share price is not moving much

[riski]

A good investor looks to the future to determine probability of success. There are no guarantees with Baytex, but it's the best value bet I can find on the market right now. Nothing even comes close.

You are trying to estimate the future which is good, but like many investors you are going to "wait" to see if this or that happens. In other words, you are basically going to wait until it starts moving up quickly...miss out on a lot of gains....then buy only to see it retreat 10% before you panic sell and take a loss. This is how most people invest because they don't have the courage or patience to do it properly and ride out the gyrating stock price. This is why retail traders and investors frequently do worse than pros. 

So your plan to wait until November to decide if this is a good deal or not is a dreadful approach. The stock price will be much higher by then because the merger will be complete and the debt reduction/share buyback will be well on its way at $90+ WTI. Then you will look back at a post you wrote when the share price was $5.40 (and only $4.20 a couple weeks previously) and wonder why you didn't buy (or buy more if you actually have any). 

The market is forward looking. It doesn't wait around for everyone to get comfortable. To make a lot of money, you HAVE to invest when it's uncomfortable. That said, BTE is the most comfortable a situation will be for a non-widow/orphan company.

- The merger is ACCRETIVE to on a cash flow per share basis.
- The stock price has DROPPED after the merger was announced.

This is a glorious opportunity that, remarkably, remains available weeks after the announcement. If you can't find comfort in today's price, I don't know what to say. But I welcome you as a shareholder when the share price starts rocketing up so quickly that FOMO kicks in. My only suggestion is to hold on to your shares at that point. It's going to be worth it.

ResearchSeeker wrote:

This post is for those who are new to the game, and want to know more.

My appologies for not much participation. Duty calls - I should have spelled that "doodie"

 

First Observation

 

Baytex is under owned – which results in a large share trading float relative to the fixed amount of outstanding shares. Add a merger, and it becomes even harder to determine what the number really is.

 

It’s under owned because of NYSE de-listing and low share price performance, added to the possibility of bankruptcy during the pandemic. It’s still a recovery story.

 

Now, uncertainty caused by the merger will place some interested institutions into wait mode. Add the possibility of a recession, long overdue and no fault of Baytex, and the sidelines appear to be sanctuary for all stocks.

 

Short positions are now unclear in terms of percentage of outstanding shares, that will change drastically, relative to the combined outstanding shares of both companies. Whether short or long, you have to see this as a bad time to short, unless your time frame resembles that of a teenager with an iPhone.

 

Second Observation

 

My personal opinion on the merger is as stated previously. Short term, I hate it. Long term, I am neutral because the new CEO needs to show us he intends to eliminate debt, and reduce share count. Adding new senior secured notes at 8.5% interest means, a lot of money that could be used to pay down debt, will go to note holders, and not to people like us. We are getting less for our capital. Bankers that print money out of thin air do not deserve 8.5% interest. People like us, who worked, saved, and invested, need to be rewarded. Imagine the dividend yield at 8.5%!

 

If the debt is eliminated on the same schedule as was posted last year, fine. I will support this merger no sooner than November if the information then shows us they intend to eliminate the debt completely. I would rather see the debt reduced to zero before buying back shares.

 

The old addage “Debt Kills Business” is still valid, no matter what Harvard and Yale teach today. It almost buried this company in the pandemic. What looks good on a whiteboard, may not work in reality.

 

Third Observation

 

The sector Baytex belongs to still looks good. The Policies of the US government and all others that run things the same way, have created problems that will benefit Baytex. No matter what they want reality to be, the reality is the world is still consuming 100 Million Barrels of oil a day or so, increasing as time goes on. The world will never run out of it, only the ability to recover it at a price worth it to produce.

 

We as shareholders need to see Baytex added to additional indexes that force ownership of shares to track those indexes properly. The Russel 2000 to the SP400, and everywhere in between, is what we must see Baytex added to before share price can make a meaningful move.

Give Baytex 75% institutional ownership, and share price will go up. Keep adding debt, and I’m gone at some point. This company, once upon a time, paid a monthly dividend.

 

Adding debt and paying it down is no more effective than a dog chasing it’s tail – there’s no worthy protein reward to be had.

 

RS