Baytex Energy Corp.

Thank you for standing by. This is the conference operator. Welcome to the Baytex Energy Corp. Second Quarter 2023 Financial and Operating Results Conference Call. As a reminder, all participants are in listen-only mode. The conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star, then 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. I would now like to turn the conference over to Brian Echter, Senior Vice President, Capital Markets and Investor Relations. Please go ahead.

Thank you, Ashia. Good morning, ladies and gentlemen, and thank you for joining us to discuss our second quarter 2023 financial and operating results. Today I'm joined by Eric Greger, our President and Chief Executive Officer, Chad Kelmikoff, our Chief Financial Officer, and Chad Lundberg, our Chief Operating Officer. While listening, please keep in mind that some of our remarks will contain forward-looking statements within the meaning of applicable securities laws. I refer you to the advisories regarding forward-looking statements, oil and gas information, and non-GAAP financial and capital management measures in yesterday's press release. All dollar amounts referenced in our remarks are in Canadian dollars unless otherwise specified. And following our prepared remarks, we will be taking questions from analysts. In addition, if you are listening in today via the webcast, you will have the opportunity to submit an online question and we will do our best to answer all questions submitted. With that, I would now like to turn the call over to Eric.

Thanks Brian. Good morning everyone and welcome to our second quarter conference call. We reached an important milestone this quarter with the closing of the Ranger acquisition on June 20th. This transaction has added quality operating scale in the Eagleford and has reinforced what was already a resilient and sustainable business. We have emerged as a well capitalized and diversified North American E&P company and we're poised to deliver a powerful combination of increased pre-cash flow, and increased shareholder returns on a per-share basis. Before discussing our Q2 results, I'd like to take a minute and highlight the three key pillars to our business as we move forward. Number one is disciplined capital allocation. We are committed to a disciplined, returns-based capital allocation strategy targeting modest, single-digit organic production growth. Each of our core assets has 10 or more years of quality development inventory at our current pace of development, and this provides us the ability to efficiently allocate capital in response to changes in regional commodity prices and other economic, cultural, or regulatory circumstances. Number two is our focus on free cash flow generation. Our commitment to efficient capital allocation across our portfolio is expected to generate meaningful free cash flow. We intend to allocate 50% of this free cash flow to debt repayment and 50% of free cash flow to shareholder returns. And number three is maintaining financial strength. We have a strong balance sheet today with significant financial liquidity. This commitment to a strong balance sheet is unwavering. We've established a total debt target of 1.5 billion Canadian dollars, which represents 1.0 times total debt to EBITDA at US $50 per barrel WTI. This debt level will provide us with full flexibility to run our business through commodity price cycles and generate meaningful returns. For 2023, we continue to forecast exploration and development expenditures of approximately $1 billion, which are expected to generate an average production rate of 120,500 to 122,500 BOE per day. For the second half of 2023, we expect production to average 153,000 to 157,000 BOE per day. Based on the forward strip, we expect to generate over $400 million of free cash flow in the second half of 2023 and approximately $500 million of free cash flow for the full year 2023. With the closing behind us, we have moved quickly to enhance shareholder returns. To date in July, we have repurchased 4.9 million shares, and I am very pleased to announce that our Board of Directors declared a quarterly dividend of 2.25 cents per share, or 9 cents per share on an annual basis. I'll now shift to our Q2 results, which include 11 days of operations from Ranger. Production during the quarter was 89,800 BOE per day, 86% oil and NGLs, which exceeded the high end of our Q2 guidance range due to the timing of operated Eagleford wells brought on stream late in the second quarter. It's important to note that our Q2 production was reduced by approximately 4,500 BOE per day due to the curtailment of production caused by wildfires in Alberta. Wildfires continue to burn in northwest Alberta, and we could see further interruptions through the summer and into the fall. For the month of July, we expect production to be curtailed by approximately 2,000 BOE per day. We are incredibly proud of how our personnel have responded to these challenging conditions with sound, safety-focused decision-making and genuine concern for our communities. I would also like to thank the emergency responders and firefighters who courageously continued to protect our communities. We delivered adjusted funds flow of $274 million, 47 cents per basic share in Q2 and generated free cash flow of $96 million or 17 cents per basic share. Exploration and development expenditures totaled 171 million during the quarter, consistent with our full year plan and we brought 34.9 net wells on stream. Operationally, the highlight was the completion of our six-well DuVernay program and new heavy oil exploration success in the Waseca near Cold Lake, Alberta. As a reminder, our Pembina DuVernay light oil assets are in the demonstration stage of commerciality and offer high operating netbacks with the potential for strong economics and organic growth. Our completions and facility execution tracked ahead of plan, which allowed for an acceleration of the on-streaming of wells. Four of the six wells are in the early stages of flow back and are tracking the type curve initial rate expectations. The remaining two wells are expected to be on-stream by mid-August. In the Waseca, we drilled a six-leg exploration well that was brought on-stream in April. The Waseca formation is analogous to the Clearwater across the fairway and is highly amenable to open-hole development, which drives strong returns and capital efficiencies. We're planning three follow-up wells in the second half of 2023. We have an active second half of 2023 development program ahead of us. In Eagleford, we expect to bring approximately 24 net operated and eight net non-operated wells to sales. In the Viking, we expect to bring 46 net wells on stream. And our heavy oil development program has ramped up with four rigs running, two at Peavine, one at Peace River, and one at Lloydminster. We expect to bring 40 net heavy oil wells on stream, 19 at Peavine, 18 at Lloydminster, and three at Peace River. We also have three SAGD well pairs in Carrobert that are expected to be on stream during the fourth quarter. With respect to risk management, we employ a hedge program to help mitigate the volatility in revenue to the changes in commodity prices. For Q3 23 and Q4 23, we have entered into hedges on approximately 40% and 35% of our net crude oil exposure. Utilizing a combination of two-way collars with a floor price of $60 US per barrel and a ceiling price of $100 US per barrel and a 5,000 barrel purchase put at US 60. For the first half of 24, we've entered into hedges on approximately 22% of our net crude oil exposure utilizing two-way collars with a floor price of US 60 per barrel and a ceiling price of US 99 per barrel. I also want to highlight our 2022 ESG and TCFD reports. Both were published yesterday and are available on our website. We've built into our culture a strong connection and sense of responsibility to our communities and stakeholders. We remain focused on key ESG initiatives, including GHG emissions, abandonment and reclamation, strong and mutually beneficial indigenous relations, safety, and climate risk management. These ESG initiatives are essentially driving our long-term sustainability alongside shareholder returns. I would encourage everyone to read through the reports, as they contain a tremendous amount of information and give great insights into the BATEX team and our culture, something I am immensely proud of. As I wrap up my prepared remarks, I would like to reiterate our commitment to operational excellence and delivering long-term value and enhanced shareholder returns. With the Ranger acquisition behind us, we are building an even stronger North American energy company with a high-quality, diversified oil-weighted portfolio across the Western Canadian sedimentary basin and the Texas Gulf Coast Eagle Fruit. And now, operator, we are ready to open the call for questions.

Thank you. We will now begin the question and answer session. To join the question queue, you may press star, then 1 on your telephone keypad. You will hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star, then two. The first question comes from Greg Party with RBC Capital Markets. Please go ahead.

Good morning. This is Justin Ho on for Greg Party, and thank you very much for taking my question. Just for my first question, we were wondering, now that the Ranger deal has been closed for about a month now, if you could provide us with an update on how the integration process is going so far, and if there's any low-hanging fruit or synergies that you see with respect to the integration with Ranger.

Thanks, Justin. Good morning. Thanks for the question. Yeah, so it is a month past close, and that's important, but we were well ahead of closing with the integration work. So people integration, technical and operational workflow integration, and business process integration was all well underway. We feel really good about all of the integration steps, and it feels to me like as we proceed through the Q3 and the second half of the year planning, like we've been a combined business longer than it might look on paper. So, update-wise, we have taken a number of substantial steps, I think, to begin to unlock additional value through efforts around managing and optimizing the surface gathering system. We're working to add compression horsepower, which should reduce the gathering system pressure expressed at the wellhead. We've been working very diligently with the team on the ground in Houston and in the field on nodal analysis and optimizing artificial lift and have actually liberated quite a lot of horsepower from gas lift into compression, back into compression and move to sales horsepower by optimizing gas lift and optimizing other artificial lift approaches. This is just the kind of blocking and tackling you'd expect these integrated teams to be doing. We will continue to focus on continued technical work around improving and extending stimulated reservoir volumes, improving economic returns around drilling and completions, but also the artificial lift and the gathering and processing analysis at the surface. These take a comprehensive kind of systems-wide engineering approach, so you tinker with one piece and it has knock-on impacts, but we're working on a handful of integrated optimization steps. I think the biggest steps right now that we've focused on through the summer and since close has been around gathering and processing optimization and artificial lift.

That's great. That's great. Many thanks. Maybe just shifting gears, we were also hoping to get a bit more color on the exploration well that you drilled out in Cold Lake and the expectations for IP30s on the remaining three wells. Do you view this as another big potential play and how does it stack up versus the Clearwater, which I heard you mention it was analogous to?

Yeah, yeah, so you know I. We're we're very excited about this. I think it's it's it's really important to point out that both the Waseca at Cold Lake as well as the Rex, the Clearwater equivalent at Moranville that we just that we actually disclosed in Q1. Both of these are very exciting plays. They're small, cold flow heavy conventional discoveries. But what's really important to point out, while neither one of them are going to be sort of needle movers in a larger business, each one represents somewhere between 30 and 100 locations, depending on how you risk adjust probability of outcomes. And given the fact that each one of those locations is you know, $4 or $5 million of PV, and all of that value accretion and value creation essentially came out of thin air. It materialized out of the efforts and the intellectual property of our geoscience teams and the operational and technical prowess of the organization when it comes to, you know, cold flow heavy development. So I'm immensely proud of making something meaningful. Again, hundreds of millions of dollars of value accretion effectively materializing out of just the intellectual property and time it takes to run an exploration program. I would point out that this is the third discovery in three years. Two years ago it was the pea vine, and then two more this year. So three discoveries in three years in cold flow heavy. We sit on a very large acreage position, 1.7 million net acres. And because oil is where oil was, we're going to continue to create a steady diet of these meaningful value accretive opportunities. And I just couldn't be more proud of the technical and operating capability of the team. So in terms of expressing the next wells IPs, I can be bold, but I'm not going to be that bold because it's one exploration well, but the team is pretty confident in understanding the trapping structure of these plays, and I think we can continue to put up good numbers as we continue to release the results of the second half exploration and development program, both in and around Cold Lake and in and around Moranville.

That's great. I'll turn it back now. Thanks again.

Thank you, Justin.

The next question comes from Amir Arif with ATB Capital. Please go ahead.

Thanks. Good morning. Just one quick question for you, Eric. Just on the pace of buybacks, could you just give the sense of how you're planning to to do those relative to your free cash generation? Is it going to be essentially lined up quarter to quarter, so third quarter cash flow would line up with the expected buybacks in the third quarter, or is there a lag expected?

Good morning, Amir. Thanks for the question. So July was a little bit interesting because we had the catch-up and also because for the first half of the year, we wanted to honor the 25% framework, which was in place technically right up to close. And so, you know, we hadn't been in the market because we were essentially blacked out for the entire first half of the year. We generated free cash flow in Q2, and essentially we had the catch-up in July that allowed us to take advantage of that accumulated free cash flow, but at a 25% level. So when you try to reconcile against, you know, why the 4.9 million shares in July. Those are like kind of the mechanics of the arithmetic that go into that consideration. Going forward, you know, with the $400 million of expected free cash flow generation through the balance of the year, you know, if you just do the simple arithmetic given the amount of months outstanding and the $400 million of free cash flow generation expected, you could see us ramp that up. And it would also be logical that we would ramp that up given the fact that where we sit today is likely to be a better opportunity to buy at a lower price than it's likely to be in the future, just given some reasonable expectations. And so if you expected that $400 million to carry kind of proportionally through the year, that would make sense. We do, however, don't want to get we do want to be diligent about not getting too far ahead. For example, if we're generating substantial free cash flow and it's forecasted in December, we're not going to spend all of that on the come in, say, August. And so we're threading the needle between trying to be really diligent about buying as much back as we can today while still recognizing that this is a commodities business and things can change dramatically fairly quickly. We're threading the needle. I think I've given you maybe enough bits and pieces to the mechanics of the math, but you'd be right to expect us to spend half of that $400 million and to do so as quickly as we can get comfortable doing so based on the way things are looking.

I appreciate that color. And just as a second question, just going back to the Eagleford acquired assets, I know it's only been a month, but as you develop it at a slower pace, the more range you're always developing it, could you give us a sense of what the low costs are, and do you see any synergies on the capital side? I know you talked about the operational side a bit.

Yeah, so on the capital side, we're a substantially larger business, and that larger business will allow us to negotiate better terms with suppliers, steel suppliers, prop and suppliers, hydraulic horsepower suppliers and drilling contractors, and all of these things. We've got an opportunity to utilize that new scale opportunity to leverage agreeable terms or more agreeable terms. And we're also planning to run all of our business as close to level-loaded as we can, finding the optimal points of efficiency within each asset, and that will also give us opportunities. As you level-load the drilling and completions business and your steel supplies, that level-loaded nature allows your suppliers, your vendors, to also find opportunities to lower costs and that flows through. And so what I would say is, you know, we continue to see opportunities to make commercial gains in terms of better terms, but also, you know, the two technical teams coming together and working together within the Eagleford, you know, we've had our team that was running, you know, our investment side of our Eagleford Carnes interest, the marathon-operated, Baytex non-operated, together with our operating and technical teams in Houston on the range or operated assets, together with our DuVernay team, because those are very analogous assets, and combining their ideas and their tools and optimizing capital efficiencies. And so we continue to see opportunities to both create higher-performing wells while holding the line on capital. And that should flow through over time into better and better capital efficiencies together with better commercial terms.

Thanks for the call.

The next question comes from Jeremy McCree with Raymond James. Please go ahead.

Hi, guys. Just a couple questions here. Your exploration success just With Waseca and Morneville and even Key Vine, can you give me some more sense of how aggressive your geoscience team is in terms of finding potentially more of these prospects and how big and commercial and relevant could this be in the overall portfolio here now still?

Well, you know, I think in terms of how aggressive they are, we will fund – we will continue to fund – for the foreseeable future, you know, an exploration, an organic exploration program in western, in the WCSB, and it's, you know, let's say notionally it's going to be somewhere in the $10 million range, and that should, you know, fund 10 to 15 strat wells and pilot wells, deepenings, and additional petrophysical reservoir characterization as we expand our interpretation of corridor logs and tighten these things up. We'll continue that investment. I would fully expect that the team is continuing to build out prospect locations and continuing to move around our land position and develop opportunities. I can't give you any specifics because I think that would be wrong in an exploration environment to do so. But we've got a lot of land and a lot to discover. And again, it's very exciting to see two discoveries in a single year and every expectation that that steady diet should continue. And because in most of these cases, in fact, in every case so far, at least in these two this year, we have already ownership of the rights to the land. We have teams in place. We have locations and infrastructure. And so the ability for this to be material depends on the size of the discovery, but each one of these is highly accretive based on the very, very low cost of entry. It's the exploration and intellectual property which already exists in the organization. I know that's a lot of words, but I can't really speak to the scale going forward. I would just say two discoveries in one year and a pretty steady diet, it feels like to me as we move throughout our lands and continue to apply these new interpretations of the stratigraphic sequences that we've learned over the last couple of years.

There's a follow-up there. Does this change the way you look at M&A up in Canada here once again in terms of the potential for these type of exploration wells or other guys where you're thinking it's being missed by different operators? I guess what's the M&A look like?

Yeah, it's possible. I think You know, M&A is always about creating value. And so, you know, you'd have to look at, you know, the opportunity set and how the competitive environment has either bidded up or failed to recognize. In the case of Peavine a couple of years ago, the Clearwater at Peavine, you know, I think the team did an exceptional job of finding it, ring fencing it early and had that first mover advantage there. And then as you well know, you know, the Clearwater, you know, kind of caught fire and was priced to the point where it couldn't really create any value. And this is obviously one of the reasons why you want to have opportunities in various places because these factors will come and go. They will ebb and flow as you have opportunities to, you know, buy EBITDA. In terms of, you know, real... M&A in the near term, I'd say we are absolutely laser focused on execution today. We are going to deliver Q3, Q4, full year 23, and a budget and a reserves book that we are going to be very, very proud of. And that is our singular focus. What happens in 24, 25, and beyond will depend on factors that present themselves in the future. But we're always looking for opportunities to create value over time, but I would say in the next short while, we are absolutely laser-focused on demonstrating this business is as good to everyone else as we know it is, given what we understand about it. That's probably the best I can do, Jeremy. Thank you. Thanks.

The next question comes from Jasper Rich with WowPal. Please go ahead.

Hi, Erik. Thanks for taking my call. So with the range acquisition, you have become a significant operator in the Eagle Ford formation, and you still have ample liquidity. So my question would be, what potential do you see for some smaller tuck-in acquisitions in your core areas, both in the Eagle Ford but also in Canada?

Hi Jasper, thanks for the question. I think in the Eagleford, in the short term, we're going to be focused on execution, we're going to be focused on integration, we're going to be focused on delivering on the second half of the year and also on a 24 budget that again demonstrates the strength of this company to the outside world as much as we believe from the inside. You know, I think specifically around the kinds of activity, you know, it's going to be swaps and trades that create value, building perhaps a larger, you know, operated working interest and continuing to create opportunities for longer laterals, for higher working interest on the lands in which we already operate. small talk-ins, but you really shouldn't expect anything substantial to be taking place in the Eagle Ford or the WCSB in the near term. In the longer term, we are very, very strong believers in the economies of scale. We believe that the Manville is a very high-quality resource, and we've got an expansive position and understand it as well as anyone. And we want to continue both exploring and developing on the lands that we already own. And so Manville's really good. That includes the Clearwater. We're very, very excited about our continued organic growth opportunities in the DuVernay and what that growth leg represents organically. And then continued development in and around our Eagleford position. But we're, you know, as I said earlier, we're laser-focused over the next couple of quarters and into 2024 of delivering on this new BATEX and demonstrating the strength and resiliency of this business.

Thank you. And my second question would be if you would like to add some color on what your internal estimate is for the IP365 on the upper Basika wealth.

Boy, that's going to be a really tough one for me. As we sit here today with one exploration well, these are always designed to be proof of concept, Jasper, so I can't really forecast an IP365. What I can tell you is it's high-quality reservoir. We understand the structure of the reservoir, and we understand what drives its performance. We're one well in. I think there'll be a lot more to share toward the end of the year when we get our reserves work done. Because these wells, you really don't even have enough production data yet to hang a reasonable decline curve off of. So it would be just rank speculation for me. But we're pretty excited about both the Waseca at Cold Lake as well as the Rex or Clearwater at Moranville.

I look forward to seeing the results of the upcoming drilling campaign and the decline curve for the DAF by CKV. And with that, I would like to turn my call over. Thank you, Eric. Thank you, Jasper.

This concludes the question and answer session from the phone lines. I would like to turn the conference back over to Brian Hector for any questions received online.

Okay, thank you, Ashia. And I do have a few questions that have been submitted from the webcast, so I'm going to moderate these now for you, Eric. The first question relates to capital allocation. Can you please discuss the allocation of E&D spending between Canada and the U.S.? So your thoughts on how we allocate capital.

Yeah, so what we've been saying, you know, up to this point really isn't changed we were saying essentially half of our capital would be allocated to what would have been, and in all our prior language, standalone ranger assets, and the other half of the capital allocated to what would have been standalone BATEX, including the non-op Eagleford. That's a way to tie what I'm saying today to the past. That hasn't changed, that half and half. And You know, over time, I think it's going to depend on economic conditions, things like how the WCS basis diff widens or narrows, and what other kind of circumstances express themselves in these various parts of our business. We will be allocating capital to the highest returns first. But we're also keenly aware that, you know, Each one of our assets has points of development efficiency where you really want to run. And for example, in our Peavine, we've been pretty clear that 12,000 to 15,000 BO a day, although this is an absolutely spectacular asset, just anywhere in the world, it's a spectacular asset. It runs most efficiently in this 12,000 to 15,000 BO a day band. And we've been asked, why don't you put all your capital into Peavine? And it's just, I realize that that's sort of a philosophical question, but none of these assets can handle that much. So Peavine will run at a point where it is maximum operational efficiency for lots of reasons. We have also talked about Eagleford, our ranger assets, in the same way. You know, we like two level-loaded rigs running on the ranger lands because that level loads a single frack crew. It allows us to build a responsible refract program into the system. And this is a way that we liberate intellectual horsepower out of the organization to work on all the other demands and dimensions of the business to continue to unlock value. And it's why we've actually been able to – you know, focus on things like artificial lift optimization and gathering and processing optimization and other things. And when we talk about capital allocation, we always start with, show me where these assets, each one of these assets runs most efficiently operationally and from a capital efficiency perspective. And then we will select capital allocation according to the returns where each of the assets are running most efficiently.

Okay, thanks, Eric, for that. A question regarding the balance sheet. You highlighted in your prepared remarks a $1.5 billion total debt target, and the question really is around the timeline to achieve that target. Eric, if you want to comment, or maybe even Chad Kalmakoff.

Sure. Yeah, let me pitch it over to Chad K., Sure. I think we've generally been saying we do see that being in around two years' time. I think we think that still holds. Obviously, if you just take the back half of the year, the $400 million, using that as a proxy, that would be close to the two and a half, maybe just a touch over two and a half years. Obviously, we're pretty exposed to oil and foreign exchange rates that could change that materially. Obviously, a $5 change in oil price up would be close to a $220 million increase in our AFF. So, we still think we're marching towards around that two-year mark, approximately. So, you know, that hasn't changed.

Okay. Thanks, Chad. And maybe almost along the similar lines related to capital allocation, balance sheets, we've introduced a dividend now. Eric, can you just discuss the potential or the outlook maybe towards future dividends, and could we see dividend increases?

Yeah, we certainly could, Brian, and I appreciate the question. There's always a tension between using your free cash flow allocated to shareholder returns, the tension between those who prefer larger dividends and those who prefer share repurchases. And as it stands today, our plans are to continue with the 9 cent per share per year dividend as a fixed base dividend with no plans to, as we sit here today, raise that dividend. But what I will say is one of the nice and elegant mechanisms as you buy back and cancel shares, that reduces the number of shares outstanding against which you end up paying your fixed base dividend. And it lowers the absolute value of the, you know, the total value of the dividend that is paid out of the company, which allows you to then take that additional cash flow. And if the board so chooses, and if our feedback from our investment community is such that it supports, then we could decide to take that additional cash and then grow the fixed base dividend over time. But it was a very thoughtful, you know, this was a very kind of thoughtful dimension of our discussion during our stand-up of the fixed base dividend. Where do we start in order to give us some room so that we can grow? And this was one of the reasons why we started at this kind of notionally 2% fixed base dividend yield to give us some room to raise it over time should the board decide they'd like to do so and should the investment community support that.

Okay, thanks, Eric. I think we have time for just maybe two more questions. One question relates to the Juniper position that they now hold in Batex, Eric. And with the merger now behind us, can you just characterize our long-term relationship with Juniper?

Yeah, so Juniper is our largest shareholder at, I would say right now, probably, as I said here, I'm going to guess at about 19.5%. and the relationship is very strong. We've been in communication with them like we are with all of our shareholders in terms of gaining feedback from the investment community, and I think these guys are long energy investors. They believe in the business. They believe in this business. They believe in the business overall of oil and gas worldwide and the role it plays in fueling economic society over time. And they're in no particular rush, as they tell me, to get out. And so that feels really good to me, although we do recognize that at 19.5%, that's a large position. And I think over time, they'll probably want to get that position down just a little bit. So it creates opportunities for us. One, it's a very strong relationship, and we understand where they are and how they feel about the business, both Baytech specifically, pro forma ranger, but also more broadly, oil and gas in North America, but very specifically around the steps we need to take. And so I get great feedback from them as a common shareholder. They tell me what they think. And we season that in with thoughts from all the rest of the investment community along the way.

All right. Thanks for that question. And the last one, it's a bit of a technical question, Eric, related to the drilling of wells on the ranger lands. And just maybe to summarize, you know, the wells being drilled today versus perhaps the older vintage wells, Are we seeing increased performance? Are there opportunities to drive better performance? And maybe I'll add to the question, on the vintage wells, do you see opportunities for potentially reentries or refract opportunities? So just a question on spacing and the technical side of the Eagleford.

Yeah, so it's a yes to basically, Brian, all three of those questions, the answer would be, in short, yes. Yes, we're seeing better performance in the more recent wells. A lot of this has been driven by just industrial progress and the progress of our space in general in the art and science of fracture stimulation and unconventionals. Higher fracture intensity, tighter stage spacing, tighter per cluster spacing, higher total, you know, higher pressure differentials between the inside surface of the pipe and the end of the perf tunnel drives more and more kinetic energy into the reservoir and that breaks more rock, it shatters more rock, it creates more fracture surface area in the reservoir from which to liberate or deliver oil and natural gas off the surface of the fractures. All of that has been progressive over time and so in any unconventional If you look at the vintaging of the wells, you see well performance on a per-thousand-foot basis go up, so BOE per thousand if you look at 2015, 2016, and so on. This is in our deck. You can see the progression over time. The wells get better over time, and they get better on a unit basis as well as overall. There is still room to continue driving that performance higher. And one of the ways in which you've seen the industry do this, and we're doing it in spades across our unconventionals, is larger bore tubulars delivering more horsepower to the reservoir to be converted into kinetic energy to fracture the rock. And that is a continued evolution. You'll also see things like, in the industry, you'll read about it as a term called simulfrost. whereby you're able to drive more kinetic energy or deliver more kinetic energy to the rock given the units of horsepower you've got at the surface. It's a way of managing the parasitic losses through the pipe due to friction. All of these are very technical, but yes, they've gotten better. Yes, we see opportunities to continue to get better. Despite the fact that we've got development on the land, we see lots and lots of opportunities to continue to get better and sharing those opportunities across our non-op technical team with experience in the Carnes trough, our new operated technical team in the ranger lands, and our existing technical team in the Duvernay to share those learnings in and around unconventional performance and geomechanics. I would say the last question around refracs, it takes advantage of many of the same technical progression These older wells, many of them were completed with substantially muscular fluids, zirconate cross-link stimulation fluids, hybrid fluids, and those fluids had a tendency to create very dilated fractures but limited the fracture surface area because it tended to over-dilate fractures. Today, we use what we call slick water fluids, and we deliver larger jobs, but also driving more fracture surface area per unit of kinetic energy delivered to the reservoir. And so the fact that, again, let me repeat this. It's true in unconventionals as well as conventionals. Oil is where oil was, and it's in the SRVs inside these existing fracture-stimulated wells from a decade ago. we can go back into these wells and we can clean them out, set new liners, re-cement those new liners, and re-stimulate those wellbores and unlock existing resource. Because something like 90% of the resource remains in those existing old wellbores that have an opportunity to be re-stimulated.

All right. Thanks, Eric. That's a great answer to a really good question. We've got one last question that just came in, so I think we will try to get to this one as well before we wrap up, and this relates to sort of the legacy Eagleford position with Batex, and can you just comment on the relationship that we have with the operator?

Yeah, so we have a great relationship with the operator, have for a long time. These assets came into the Batex business in 2014, and the team has worked long and hard over time almost a decade to build a good, high-quality technical and management relationship with the operator and continue to do so. They're a great operator. They do an excellent job, and their performance speaks for itself. And we benefit from that expertise and from the scale, but we also recognize that, you know, you know, having such a large non-op position within Baytex as a standalone organization prior to our Ranger merger, you know, presented certain risks to the business because it was our largest asset and because it was entirely non-op. But the risks weren't because we had a bad relationship or weren't because they aren't a good operator. It was because the capital allocations were entirely the decisions for capital allocation into and out of those assets were entirely beyond our control, and that was at its root, the risk. But we couldn't be happier with the relationship, and we couldn't be happier with the performance of the operator, and want to continue leaning in on both of those.

All right. Thanks, Eric. That does conclude the questions coming in from the webcast today. Again, I think it's been a great success providing this opportunity to facilitate some additional questions from our shareholders. So, everyone, thank you. Thank you, operator. Thanks, everyone, for participating in our second quarter conference call. Have a great day.

This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.