Post about Baytex Inventoryhttps://focusedinvesting.substack.com/p/baytex-energy-for-upside?utm_campaign=post&utm_medium=web
An absolutely essential question for hydrocarbon producers is what resources they have beyond their proved and probable (2P) reserves. Baytex is doing about 250 net wells per year and has 3,000 identified drilling locations, which would be 12 years.
That 12 years is good by comparison with many US producers, but to retain value even 5 years from now they need to keep adding new drilling locations. A few hydrocarbon producers own a vast inventory of resources that have not been explored in enough detail to be probable reserves but clearly will be. Think Tourmaline (TOU) and Canadian Natural (CNQ).
Others, such as Chord Energy (CHRD) in the US, will clearly need to keep acquiring new reserves to sustain production. Recently Baytex has been steadily adding land in Canada. On the Q2 2023 earnings call, CEO Eric Greager spoke to their recent discoveries [cold flow heavy conventional] on some of their land (quotes edited for length and clarity throughout):
we've got a lot of land and a lot to discover -- it's very exciting to see 2 discoveries in a single year. And because in most of these cases, we have already ownership of the rights to the land -- we have teams in place. We have locations and infrastructure. And so the ability for this to be material depends on the size of the discovery, but each one of these is highly accretive based on the very, very low cost of entry.
And on the Q1 2024 earnings call he discussed the 31 net sections added just south of their assets in the Pembina Duvernay:
We're actually very excited about the quality of the resource associated with these almost 31 net sections we've added. There was substantially more acreage posted in the Crown auction than what we bought. So, we were very surgical and intentional about going after the acreage that we wanted. We got all of the acreage we wanted and we're really excited about the quality of the resource associated with it.
Across 2023 they added at least 115k acres. This is roughly what they need to compensate for production.