Red, Re: FCF for 2022 and beyond/DebtHi Red, I was looking at your chart and that information on Page 13 @ $85 oil and zero debt in 2023 I believe assumes all FCF in 2022/2023 to debt.
This is the big question the BTE management team still needs to answer. Now whether this answer comes during Q1, the AGM or Q2 as initially communicated...the question is what portion of FCF will go to a shareholder returns strategy and what will that strategy focus on.
Now this is just my perspective on the debt. I understand the comments zero out the debt so the debt holders can no longer hold Canadian O&G companies hostage. While I agree with this I think of it in these terms.
Say you're younger and have 5 years left in your mortgage and a current 5 year fixed term. At that point the bank can't do anything unless you stop paying. So the goal is to continue to make your payments and ensure you have enough cash coming in for the remainder of the term.
Now in the Baytex scenario (in my opinion) there is no need to accelerate the 2027 debt. Sure clear the 2024 debt in the 1st half 2022 but you can than pay the 2027 according to terms over the next 5 years Jun 2022 through Jun 2027. In the meantime continue to lower your breakeven and focus on operational efficieny.
Remove $100m of FCF from 2023, 2024, 2025, 2026 & 2027 and eliminate the debt.
Similar to a mortgage would you take all your spending money and pay off your mortgage in 2 years versus 5 but do nothing else? I don't know many that do this but it would certainly be an anomoly.
Those are the answers we look for at some point in the first half of 2022.
Just my opinion but regardless I look forward to hearing the company decision.