Baytex Energy Corp. Q3 FY2025 earnings call

• Q3 was a strong quarter with record production in Pembina Duvernay, robust free cash flow, and progress on debt reduction.
• Pembina Duvernay set new quarterly production record averaging over 10,000 BOE per day, with a pad brought online in September.
• Completed land swap and commissioned new infrastructure in Southern Duvernay.
• Heavy oil production grew 5% QoQ, Eagle Ford volumes up 3%.
• Generated $143 million free cash flow, reduced net debt to $2.2 billion.
• Heavy oil inventory has ~1,100 locations for ~10 years of drilling at current pace.
• Eagle Ford saw 12% improvement in drilling and completions costs, refracs performing as expected.

Pembina Duvernay set a new quarterly production record averaging just over 10,000 BOE per day. Heavy oil production grew 5% quarter-over-quarter, averaging 47,300 BOE per day. Eagle Ford production remained steady at 82,800 BOE per day, with oil production up 3% from last quarter. Revenue contributions: Pembina Duvernay's production was a key driver, heavy oil and Eagle Ford also contributed significantly to overall results.

• Expect ~$300 million in free cash flow for 2025, down from previous $400 million due to lower commodity prices in H2.
• No change to production guidance.
• Aim to reach $2.1 billion net debt at year-end.

• Abandoned 1 well in Pembina Duvernay due to casing and cement issues during completion, but considered an isolated incident with resolution planned for future programs.

Q: My first question is on the $24 million of acquisitions that you executed here in Q3. I'm guessing that was spread out across the 3 areas mentioned in the release. Should we assume that -- I guess, the question is, was there any material production that came with the transactions? Or was it all undeveloped acreage?

A: It was all undeveloped land, focused in Ardmore (4.5 net sections), Peace River oil sands Pekisko area (40.5 net sections), and Pembina Duvernay Gilby area (checkerboarded area) Q: You mentioned heavy oil production grew 5% QoQ, and then, up another 5% or so here in Q3, and that was after 3 sequential quarterly declines. Can you talk about what's driven that growth? And what we should expect for Q4 and into 2026?

A: We're simply executing the plan. If commodity pricing goes into 50s, plan is more conservative; if prices move higher, we'd lean in. Assets are performing well with strong geology and engineering teams. Heavy oil fairway has good hit rate, Viking assets are steady.

Q: Can you provide some parameters sort of by asset in terms of what you expect those to look like, say, over the next 3 to 5 years. And have you kind of contextualized that in the current commodity price environment versus something a little bit more favorable, call it, mid-cycle price?

A: 2026 commodity pricing is uncertain. If prices in 50s, plan conservative; higher prices, lean in. Canadian portfolio performing well with strong Duvernay results, reliable Viking assets.

Q: Dig into the Duvernay a little bit more. Well performance looks very good. I'm wondering if there's anything that you can tweak going forward, and how you'd expect sort of the productivity parameters to change? And then, you did abandon 1 well, so I'm wondering if you can just flesh out some of the issues you had and maybe some learnings coming out of that.

A: The casing and cement issue with the abandoned well was an isolated incident from upfront drilling construction. Believed to be resolved for future programs. Year-over-year improvement in IPs, working on continuous improvement cycle for Duvernay programs