Debt in and of itself isn’t necessarily bad. It is just a source of financing. If you want to do a capital investment, which you can’t fund out of current cash or future earnings, the two main sources of funding are stock issuances or debt financing. Debt (financial leverage) increases returns for good companies and decreases returns for bad companies, technically is a project’s rate of return greater or less than the cost of capital (debt interest rate etc.).
If a company has debt then interest rates may have an impact on the company, as changing interest rates may change the cost of the loans. Not all debt is created equal, revolving debt (usually variable interest) costs are highly sensitive to the current interest rate (good or bad), while long-term debt such as a 10 year note isn’t impacted by the current interest rate. Long-term debt does eventually get rolled-over, but there are ways a company can mitigate interest rate sensitivity of the debt. Baytex currently has about $1b in shorter term debt and $1.5b in long term notes.
In general O&G companies have a higher return on invested capital than their current loan rates, so debt is increasing shareholder returns. The reason people get upset about debt is because of what happened during covid. First, earnings shot to zero or negative for many companies and that positive debt leverage became a negative, as earnings couldn’t service the debt. Second, and much worse in my opinion, is that many lending institutions refused to continue loans to the O&G industry. Basically, when O&G needed financial support they were screwed over by many financial institutions. Different O&G companies have different responses, some say no debt, they will never be beholden to a bank again; others say the leverage is good, but it must be minimal so low debt targets. Probably depends on where you get your funding from, AimCo has stood by O&G and continues to have great relationships with oil companies, HSBC not so much.