RE:RE:RE:RE:RE:RE:More 12 months target for Baytex and others CDN stockIt depends on if interest rates go up from here and on bte's debt structure. If they're exposed to rising interest rates which cut directly into their bottom line in a way that debt servicing costs are greater than gains in operating revenues then net income will decrease. And future interest rates will depend on the rate of inflation regardless of what the Fed does because nobody will lend out money at less than the inflation rate plus premium.
So if higher oil prices actually drive more inflation then interest rates will go up. Those companies with high debt will be exposed to the higher interest rates. When I map or project all of these input factors into possible outcomes for bte sp, I get lost. Lke say wti goes to $110 but that drives inflation to say 7% which drives interest rates to say 9% then what happens to bte net income?
But one way in order to create the conditions to better predict the future financial performance of bte is to reduce exposure to possible increases in interest rates. So I lean towards using fcf to pay down debt and invest in capex to increase reserves because increasing reserves increases total assets and shareholders equity especially if liabilities (debt) is decreasing.