Baytex Energy Corp (BTE.TO)

Reduced their CapX to below its cash flow, and that cash flow number is at current prices. This is where the sustainability of the company is really important. They are not going to purposely go ahead and try to grow the company, they are going to harvest it and make sure that capital expenditures are less than cash flow.

The debt to cash flow is well over the comfortable zone. They are not going to go bankrupt, however. They did acquisitions in the US at the peak of the cycle. If oil recovers then they will do well and he expects that next summer. He prefers other companies with better balance sheets.

We are seeing little spikes in energy based upon storage levels. Technically there was a strong positive period for energy stocks Feb 25^th to May 9. In that time, this company actually did okay. It then resumed its downward trend like all the other oil stocks. Right now he is not a fan of oil stocks. They can keep going down further. Although the period for seasonal strength in the energy sector starts in February, sometimes you can start to see it happening in December. The opportunity to step in might be there once there is tax loss selling.

He owned it a couple of years ago because they acquired a company he held. They are a leveraged play on the price of oil.

It is hard to argue it is a buy based on technicals. It is difficult to pick a low here. You don’t want to be in this stock at the end of the year, based on seasonals. We had a substantial snap back rally, but long term it is on a down trend. It can’t even overcome its 50 day moving average so it is much weaker than stocks that have done so.

They had to suspend their dividend. They have been through this before. They have great assets, but bought at the top of the market and are struggling with the debt now.

Their leverage has to come down and that probably means asset sales. He is not comfortable holding it, although it will respond if oil prices to up.

There is the leverage and the low dividend score. It is a great company with a diversified portfolio, but the challenge has been the trailing effect of the pullback in commodity prices. It could be an interesting acquisition for a company. He prefers PEY-T, ARX-T.

CEO indicated he wished they had raised more equity when they did the Aurora transaction, which got them their move into the Eagleford in the US. This saddled them with above average debt to cash flow at a time when nobody anticipated oil did what it did. Although it is a great asset it is non-operated, so not as attractive.

Sold his holdings last October at about $37.50, and it is now down to $4.22. Did the Texas Eagleford acquisition at the wrong time, and had to borrow money and do an equity issue. The debt to cash flow is problematical. They suspended the dividend to save cash. This will stay in the doldrums as long as oil prices stay down. If there is a recovery, this could easily double to the $9 area. Purely speculative at this stage.

Debt levels are a little bit large and growing. This is quite accretive when oil prices are in your favour and you are able to grow production. It has a big exposure to the Seal project in Alberta as well as smaller exposure to the Viking in Saskatchewan and the Eagleford in Texas. Thinks this is a timing game. Expects they will survive. If oil prices were to drop-down even lower for a year, they might have some problems. Believes they are going to generate free cash flow next year, after cutting CapX and their dividend.

They are protecting their balance sheet through elimination of the dividend and he thinks they will survive. They have good assets in Western Canada, even if not at these oil prices. If oil prices increase, this will be a relative winner. It is too cheap to sell, so hold it.

They have 3 of the top 15 properties. High quality assets and debt structure they should be able to manage. It is positioned where they should be able to recover.

(A Top Pick Oct 10/14. Down 79.62%.) He sold out at around $21, but still holds some personally. Thinks they will survive.

Good company to be in, but depends on what you are looking for. Recently, suspended their dividend. Unlikely that the dividend will come back soon. Likes their assets in the Eagleford. Sees a lot of torc for this company, a lot of growth in terms of getting production back up once commodity prices go back. It is a safe place to be in this environment.