2022 Budget and Updated Five-Year Outlook CALGARY, Alberta, Dec. 01, 2021 (GLOBE NEWSWIRE) -- Baytex Energy Corp. (“Baytex”) (TSX: BTE) announces that its Board of Directors have approved a 2022 capital budget of $400 to $450 million, which is designed to generate average annual production of 80,000 to 83,000 boe/d.
“I am excited with the momentum we are building in our business. We expect to generate record free cash flow in 2021 and our priorities for 2022 remain much the same. Our 2022 capital program is designed to generate meaningful free cash flow with modest annual production growth driven by exploration success and scaled up development in the Clearwater. In a US$65/bbl WTI pricing environment, we expect to generate approximately $2.1 billion of cumulative free cash flow through our 2021-2025 five-year outlook,” commented Ed LaFehr, President and Chief Executive Officer.
Highlights of the 2022 Budget
- Funding of Capital Program. Our capital program is expected to be fully funded from adjusted funds flow at a WTI price of US$45/bbl. Based on the forward strip(1) our capital program represents approximately 55% of our adjusted funds flow.
- Free Cash Flow. Based on the forward strip(1) we expect to generate approximately $340 million of free cash flow in 2022. For every US$1/bbl change in WTI, our adjusted funds flow changes by approximately $24 million on an unhedged basis ($15 million including 2022 hedges).
- Capital Efficiency. Our capital program is expected to generate strong capital efficiencies of approximately $15,000 per boe/d across the portfolio.
- Capital Allocation. We will direct approximately 60% of our capital program to our high netback light oil assets in the Viking and Eagle Ford, 25% to our heavy oil assets at Peace River and Lloydminster and 10% to the Clearwater.
- Risk Management. Approximately 42% of our net crude oil exposure has been hedged for 2022 utilizing a combination of a 3-way option structure that provides price protection at US$58/bbl with upside participation to US$68/bbl and swaptions at US$53.50/bbl.
The 2022 capital program is expected to be equally weighted to the first and second half of the year. Based on the mid-point of our production guidance of 81,500 boe/d, approximately 65% of our production is in Canada with the remaining 35% in the Eagle Ford. Our production mix is forecast to be 83% liquids (43% light oil and condensate, 32% heavy oil and 8% natural gas liquids) and 17% natural gas, based on a 6:1 natural gas-to-oil equivalency.
Note:
(1) 2022 pricing assumptions: WTI - US$66/bbl; WCS differential - US$16/bbl; MSW differential – US$5/bbl, NYMEX Gas - US$4.10/mcf; AECO Gas - $3.50/mcf and Exchange Rate (CAD/USD) - 1.28.
2022 Free Cash Flow
In 2021 we made a commitment to maintain capital discipline, maximize free cash flow and reduce our net debt. We expect to generate record free cashflow in 2021 of approximately $420 million, which is accelerating our debt reduction efforts. As a result, we expect to exit 2021 with net debt of approximately $1.4 billion, which represents a 25% reduction from year-end 2020. Over the past three years, we will have reduced our net debt by approximately $900 million.
Based on the forward strip for 2022, we expect to generate approximately $340 million of free cash flow. We remain committed to further strengthening our balance sheet and providing an enhanced return to our shareholders.
Our priorities for the allocation of free cash flow in 2022 are as follows:
- We will allocate 100% of our free cash flow to reducing net debt until we hit our initial $1.2 billion net debt target. We expect this to occur by mid-2022. This debt target represents a net debt to EBITDA ratio of approximately 1.4x at a US$65 WTI price.
- Upon reaching a net debt level of $1.2 billion, we anticipate announcing a plan for enhanced shareholder returns, which could include share buybacks and/or a dividend, while we continue to reduce our net debt to further strengthen the business.
Five-Year Outlook
Our five-year outlook (2021 to 2025) highlights our financial and operational sustainability and ability to generate meaningful free cash flow. Through this plan period, we are committed to a disciplined, returns based capital allocation philosophy, targeting capital expenditures at approximately 50% of our adjusted funds flow, while optimizing production in the 85,000 to 90,000 boe/d range. This generates annual production growth of 2% to 4% with annual capital spending of $400 to $475 million from 2022 to 2025.
We have updated our five-year outlook to include expected inflationary cost increases along with increased drilling on our Clearwater lands. Our base plan assumes development of 20 sections (of our 80-section land base) which have been delineated to-date and includes the drilling of approximately 80 net wells. With this initial phase of drilling, we expect Clearwater production to increase from zero at the beginning of 2021 to approximately 6,000 bbl/d while generating over $100 million of cumulative free cash flow. With continued success, we believe the play ultimately holds the potential for over 200 drilling locations that could support production increasing to over 10,000 bbl/d.
We have grounded our updated five-year outlook on a constant US$65/bbl WTI price and expect to generate approximately $2.1 billion of cumulative free cash flow. Under a constant US$75/bbl pricing scenario, our expected cumulative free cash flow increases to approximately $2.8 billion.
https://www.globenewswire.com/news-release/2021/12/01/2344583/0/en/Baytex-Announces-2022-Budget-and-Updated-Five-Year-Outlook-With-Cumulative-Free-Cash-Flow-of-2-1-Billion.html