Baytex Energy Corp.

Q2 production averaged 71.2 thousand BOE/day, above the high end of guidance, and was up 11% year over year. Adjusted funds flow was $254 million, or $0.35 per share; net income was $175 million, or $0.24 per share; and free cash flow was $128 million, or $0.18 per share. Operating netback improved to $55.33 per BOE from $35.36 per BOE in Q1. Baytex invested $122 million in exploration and development, repurchased 22 million shares for $136 million-$139 million, and exited Q2 with net cash of $566 million. Full-year production guidance was raised to 71 thousand BOE/day, with a targeted exit rate of 72 thousand BOE/day, and the capital program remains $625 million. Management said it still expects to repurchase $650 million of shares this year and does not plan to add WTI hedges.

The CEO emphasized that the quarter showed Baytex is executing on a straightforward strategy: grow production, lean on heavy oil expertise, commercialize the Duvernay, lower costs, and return capital to shareholders. He highlighted the strong operating results, the raised production guidance, the clean balance sheet, and the company’s 15% total shareholder return target at a mid-cycle $70 oil price. His tone was upbeat and confident, saying momentum is building and the company has renewed investor interest.

The CFO focused on the financial strength of the quarter: $254 million of adjusted funds flow, $175 million of net income, $128 million of free cash flow, and a net cash position of $566 million. He noted operating netback improved sharply to $55.33 per BOE from $35.36 per BOE in Q1, reflecting strong pricing and cost discipline, and said every $5 move in WTI impacts annualized adjusted funds flow by about $125 million. He also said Baytex repurchased 22 million shares in Q2, has repurchased 69 million shares since the Eagle Ford sale, renewed the NCIB through July 1, 2027, and expects to keep buying back shares steadily through the back half of the year.

Analysts pressed management on the pace and structure of buybacks, asking whether Baytex would be opportunistic around share price and whether an SIB was still possible; management said it prefers steady dollar-cost averaging through the NCIB and has basically ruled out an SIB. Questions on the Duvernay centered on whether strong Gilby results change the development plan; management said it confirms expectations but is too early to call upside and there is no change to plans. Analysts also asked about waterflood pilots, Pekisko drilling timing, hedging policy, and Gemini; management said waterfloods are using produced water with early response expected over 12-18 months, Pekisko tests could start around Q1 2027 at about $2.5 million per well, no new WTI hedges are planned, and Gemini still needs more subsurface, facilities, and regulatory work before a potential H2 2027 FID.