Bill Harris, CFABaytex Energy CorpBTE.TOBUYSep 08, 2023

Technical perspective - downward trend not a great sign. Expecting a bottom soon in stock price which would be a good place to buy. Energy prices will rise soon. 

Very cheap valuation. Recent M&A will start to pay off in 2024. Energy outlook looks favorable. Would recommend buying. 

Has grown well in the past 10 years, has great access to capital and generates a lot of free cash. He has better choices, but likes BTE.

For Baytex there is some consolidation here due to some nervousness re the price of oil. Cenovus is similar to Baytex and has dropped to the consolidation level. It could go to the $20 level in the next 3 to 6 months. Don't buy energy now since it could retrace much of its big gains.

Recovered from overhang of the Ranger deal, which made the company better. Respects CEO, great asset base, clear vision to using free cashflow to pay shareholders more and pay down debt. Second-highest free cashflow yield in NA.

No longer a pure play on heavy oil. Moves in and out of favour depending on leverage to oil. See his Top Picks for a heavy oil producer he prefers over this one. He prefers scalable, heavy oil projects that generate strong margins.

Has reduced energy exposure. Unsure on direction of sector. Believes over bought. Seasonality is weak until February. Has sold half of position. 

He's sold a lot of energy lately, but hung onto BTE. The valuation remains cheap. The market doesn't want to see energy companies buying other ones (CPG is getting punished for that today).  BTE boasts over 20% free cash flow yield, trading over 3x operating cash flow, so cheap.

Earnings beat by 5% on last quarter. Very cheap relative to peers. Seeing nice production and cash flow growth. Oil prices volatile. Debt concerns a little bit of concern. Very good exposure to oil price. Almost blue chip quality within sector. 

Recent M&A not being rewarded. Expecting market to digest Ranger acquisition. Expecting better performance in 2024. High quality increase in Eagleford starting to be understand. ~$9 share price not unreasonable. $14 share price also possible. Will continue to own shares. Would buy more shares if possible. Very bullish. 

Impacted by wildfires. Acquisition of Ranger got them into US, but also increased leverage quite a bit. Will have to concentrate on debt reduction. Has promised fairly high portion of free cashflow to shareholders via dividends and buybacks. Fairly attractive at current prices, but better choices in the sector. Yield is 1.7%.

We like BTE better these days. It was in the dog house for a long time (high debt, dividend elimination) but has managed to get things back on track. It has re-started a dividend, and is very cheap. Debt is still higher than most peers, however, and it made a $1.3B acquisition this year while the rest of the sector focused on paying down debt. We do like WCP 'better', but for diversification we think BTE becomes more interesting if it goes below $5.
Unlock Premium - Try 5i Free

Very confident in holding name.
Large ownership position.
Trading at 39% free cash flow yield.
Recent acquisition misunderstood by the market.
At least 10 years of high quality inventory.
CEO recent bought 900,000 shares.
Expecting a ~$14 share price.

Reacceleration from higher crude prices. If oil continues to hang in amidst current supply/demand issues, BTE will do very well. Cashflow per share continues to ramp up.

The oil and gas business is still important to Canada and even though it has become undervalued, it will still be around even with the switch to renewables. Baytex is fine but he prefers the bigger companies, and owns CNQ.