Baytex Energy Corp T.BTE

Money saved with hedges off in 2023

[jdmecomber]

I think I am reading this report right.  Baytex has lost $284,816,000 in 2022 with its hedges so far????

So we're looking at an extra $80,000,000 of free cash flow a quarter for 2023?

[Quickdraw123]

  I was hoping for someone to post something like this, it is a huge deal for the buyback program/debt repayment. Thank you!

[JohnnyDoe]

correct. We're looking at significantly increased fcf in 2023But I wanted to comment on hedges. They are an oddity in the energy business. Companies use hedges as part of a risk management strategy to lock in certain revenue and banks often force hedges on oil companies as a condition of a loan. But they aren't physical losses, they are revenue not earned.

[red2000]

Hey hey JD ! Good morning ! So far, we have to keep in mind that hedges for 2023 are at 96$ instead of 68$, which is a 41% upside for 9,500 bbl/d !! For example, if we have the same WTI$ as 2022 Baytex will add 284M$ + the Q4 loss in hedges in 2022, for 2023 and a 41% upside base on new hedges until we reach 96$ per barrel for 9,500 bbl/d. I think Baytex already count it in their 2023 forecast

[Bullchart1]

Why the downgrade today?

[Maxmoe]

A point about hedges that makes me just sigh and shake my head. There is ZERO accolades, credit, whatever for a company that has hedges ABOVE the current spot. Or even if they play the contango futures curve and sell futures at a premium to spot. But god help us all if we are in a raging bull market for oil and spot prices are through the roof. Well then there are angry villagers with torches and

[Maxmoe]

The "losses" are a bit misleading. It more accurately represents opportunity cost if you remember high school economics. If you COULD have sold your oil at $100, but due to your hedge you "only" get $80 is it really a "loss"? You didn't cut a cheque to anybody. But you did earn less than you "could" have. To make the accounting reported more confusing

[jdmecomber]

Thanks guys.  My brain hurts. 

[Maxmoe]

My reminder would be that hedges are temporary and are only "bad" when the price of oil is BOOMING. Which is ...... good?!?. And vice versa. And the book is rarely longer than a year or over 50%. So it just doesn't really matter. Worry about wti and global politics if you want a headache. LOL.