Baytex Energy Corp T.BTE

Hedging losses

[JohnnyDoe]

I've read a few posts lately about hedging losses. It's important to understand that hedging losses do not mean that a company is actually losing money. It means they have not realized their revenue potential.
let's take a pair of shoes that you manufacture at a cost of 50 bucks. The MSRP on the shoes is 100 bucks. If the shoes go in sale for 80 bucks you made 30 bucks. The shoe manufacturer doesn't record a 100 dollar sale plus a 20 loss on goods sold. Oil and gas companies hedge because of the extreme volatility in commodity pricing and often times because the bankers (aka gangsters) require them to hedge in order to ensure the banks are protected from loan losses. We're making a ton of money right. We could obviously be making more. Hopefully by next year we are completely debt free and the potential to have to hedge due to banks is eliminated.

[BayStreetWolfTO]

I agree JD, people get confused with hedging loss I'm not sure people understand the fact that even with BTE hedging at these prices annualized free cash flow is over $1 billion dollars.  I think sometimes people think the banks just give you money with no conditions. Banks try to protect their investment...if they want hedges to guarantee they get paid that's the cost of doing

[barneyj44]

Well said Johnnydoe......

[Wildfury]

Yes JD, it does mean a company is losing money, period. They are leaving millions of dollars for the traders that booked their hedges. What does this mean? It means the FCF should have been much greater, more money for buy backs, more money towards debt. Don't talk about shoes compared to oil prices. All that I'm saying is the street knows this and it's a big reason why we're not

[dllscwbysfn]

And when the price of oil drops somewhere along the line you will all be screaming why didnt they hedge more, lol

[jleer42]

Some companies hedge some don't. Hedges lock-in the price which some oil will be sold for removing some of the variance from the revenue stream. This creates stability for financial planning, you get to plan your costs around a more stable income. Yes, depending on the hedges you can have hedging losses and gains. Hedges are hurting now, but when oil went negative it was hedges which kept some

[BayStreetWolfTO]

Wild, great idea I would enjoy this dialog. Could you help explain for the board the following with regards to the CVE hedge change.   1. Explain what they did 2. Explain the cash implications  3. Explain the non cash implications  4. Explain the impact on shareholder equity 5. Explain any impact to assets or liabilities 6. Explain the tax implications transaction

[red2000]

I think, I hear a fly fly and you ? Good job BSW ! BTW , look at the May presentation, the % of bbl hedged decline to 18% or 9,500 bbl/d at 96$ US for 2023 !!! It's not a bad call, if WTI stay at this level  90$ to 105$ ! It's like protected 422,7M$ of revenues !!! Better negociate the reduction of interest rate on the long term notes due in 2027, 8,75% it's pretty expensive !

[JohnnyDoe]

wildfury, there's a difference between losing money and not making money. To be honest with you, I am self employed and it took me a long time to come to terms with this concept even though I knew it to be true. Everytime I took a day off, I was losing money in my mind. Reality is I wasn't making money. I have an accounting background. I certainly wasn't recording days off as losses

[bmeister2]

Good post,johnny D, but my question is can we produce more than what we are doing today or is the permian pretty well shaled out,so to speak. Many of baytex's peers are pounding us and they seem to be able to increase production without excessive capex . Go figure

[JohnnyDoe]

it's challenging right now in the shale basins to raise production. There are shortages throughout the supply chain as well as labour shortages

[red2000]

See page 11 production expected for 2022 to 2026, despite supply and labor problems. From 84,000 boe/d in 2022 to 95,000 boe/d in 2026