Maintaining Target & Rating: "Incorporating recently reported Q2 results and updated production and capex guidance, we have adjusted estimates for Baytex. Our 2011 EPS/CFPS go from C$1.56/4.58 to C$1.89/4.50 while 2012 estimates go from C$2.21/4.88 to C$2.14/4.86. Our 2013 EPS estimate goes to C$2.96 from C$3.06. Our Neutral rating and C$49 target price remain unchanged at this time. Our target price is set at a modest discount to our risked NAV estimate of C$51.16/sh and equates to 10.5x 2012E EBIDAX of C$635 million, a ~25% premium to peers given superior capital efficiency and growth prospects."
Keeping Growth On Track: "Despite a challenging operating quarter for many producers, Baytex reported operating CFPS of C$1.20 for Q2 versus C$0.96 in Q1, supported by organic and acquisition related heavy oil production growth. Operating CFPS was also above consensus of C$1.14, based on a company survey, but below our last published estimate of C$1.27. In total, production averaged 47,853 boe/d, a 2% increase over Q1. More specifically, heavy oil production at Seal increased 23% over Q1 to 12,850 b/d. During Q2, 11 net cold horizontals were drilled (9 to 20 laterals per well) with approximately 11 more multilaterals planned for the remainder of 2011. Well results for 9 of the wells drilled in Q2 and 3 of the wells drilled in Q1 averaged 680 b/d over 30 days."
Guidance Update & Funding: "Baytex has raised annual production guidance by 500 boe/d to between 49,500 and 50,500 boe/d to reflect the combined effect of a small gas acquisition and additional capex. The acquisition cost of C$22.4 million was funded by drawing on the credit facility which was raised in June to C$700 million. Based on our updated operating cash flow estimate of C$536 million for 2011, we project a modest funding shortfall of C$29 million after deducting revised capex of C$355 million and dividends net of DRIP."
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
