Baytex Energy Corp T.BTE

Thoughts from Seeking Alpha board

[drifter699]

What's everyone's thoughts on this take from Seeking Alpha board (Michael Blair)?

I believe in much higher oil price so don't agree with his suggestion of all the dilution

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With Baytex limited in its ability to fund material capital outlays for the time being, even a CAD$20 million Clearwater program with 100% returns will take several years before it makes much difference to Baytex EV. If Baytex wants investor support, the company should issue 100 million shares at the current CAD$2.00 range and devote the proceeds to Clearwater development. Playing chicken with commodity prices is why the company is in the doghouse today and management needs to wake up and get the debt down.
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Issue 100 million shares at CAD$2.00 is 16% dilution. Investment CAD$200 million in Clearwater play at 100% IRR to generate CAD$200 million per year incremental cash flow. Company says IRR is more than 100% at today's oil price. At 5x EBITDA added CAD$200 cash flow million is worth CAD$1 billion or about CAD$1.60 per diluted share, a bump of 80%. My arithmetic suggests the dilution is worth the candle.
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Baytex is way ahead if it issues CAD$200 million equity and devotes it to Clearwater. Spoiler alert - less debt, higher cash flow per share, better ratios at all levels.

[riski]

Not the right environment at all for an aggressive equity issue for a drilling program.  Investors across the sector are looking for shareholder returns in the form of debt repayment, share BUYBACKS (not issue), and dividends.   Baytex would be punished badly for raising equity.  That's why no one is doing it.   There is a time and place for this strategy, but

[perstrudent]

Ive argued with him on board. i used to respect him as picking early entry shale picks..10 years ago...but I feel dead wrong on this.  BTE has no need to dilute period..especially for this play. 200 million would be so excessive overkill for this unless you were going for a 10 rig drill program...which isnt the smart move...so much surface infrastructure would be needed for only 1 to 2 year

[bullhorn3]

It seems to me that issuing more shares is 'similar' to issuing more debt... sacrifice immediate financial status for future gains. Look how has debt issuance worked for BTE before.

[Maxmoe]

Agree it makes no sense to sell equity today. Companies should sell stock if the price is at a PREMIUM to its book value, net asset value etc. when it's trading at a huge discount, the company, any company, should be buying back stock unless the NPV of capex is higher than the NPV of current valuations. If that's the case, sell assets with returns lower than the new project. In any case

[Eigen337]

This post has been removed in accordance with Community Policy

[Malton1]

Great post eigen but perhaps you could add some highlighting and distinctive punctuation to make your point (I mean opinion).

[Maxmoe]

Bahaha. Too bad crayon boy doesn't get the sarcasm and or doesn't care. Ignore button is for ignoramus.