Baytex Energy Corp.

Good morning, everyone, and welcome to our third quarter conference call. For BATEX, this represents the first full quarter of combined operations following the Ranger acquisition and demonstrates the strength of our diversified North American oil-weighted portfolio. The integration has progressed extremely well, and we have delivered strong results from Western Canada and the Eagle Ford in Texas. During the third quarter, We delivered top quartile results from our operated Eagleford assets, continued exceptional clear water results at Peavine, where we now hold the top 30 wells drilled across the entire Clearwater Fairway, and significantly progressed our Pemina DuVernay play with six wells drilled and completed trouble-free earlier this year, which are all tracking to our type curve performance expectations. I'll elaborate on this well performance in a few minutes. I'm also excited to announce two new land extensions at Peavine and Cold Lake as we continue to leverage our heavy oil expertise and recent exploration successes. We continue to execute on our 2023 plan and now anticipate fourth quarter production of 158,000 to 160,000 BOE per day, 84% weighted to oil and NGLs. We are forecasting full year 2023 exploration and production expenditures of just over $1 billion, which is consistent with our previous guidance. Based on the forward strip for the balance of 2023, we expect to generate free cash flow of approximately $400 million during the fourth quarter and $650 million for full year 2023. As a reminder, we increased our direct shareholder return to 50% of free cash flow on closing the Ranger acquisition, which has allowed us to increase the value of our share buyback program and introduce a dividend. The remainder of our free cash flow continues to be allocated to the balance sheet. Our normal course issuer bid allows us for the purchase of up to 68.4 million common shares during the 12-month period ending June 28, 2024. And as a result of our free cash flow profile, we have increased the pace of our share buyback program during the fourth quarter. Through October 31, 2023, we repurchased 28.1 million shares for $155 million, representing 3.3% of our shares outstanding at an average price of $5.51 per share. In addition, we paid an initial quarterly cash dividend of two and a quarter cents per share on October 2nd, 2023, and our board has declared our Q4 cash dividend of two and a quarter cents per share to be paid on January 2nd, 2024. I'll now shift to our Q3 results. Production during the quarter was 150,600 VOE per day, and we delivered adjusted fund flow of $582 million 68 cents per basic share. We generated free cash flow of $158 million, 19 cents per basic share. Exploration and development expenditures totaled $409 million during the quarter, consistent with our full-year plan, and we brought 87.8 net wells on stream. As of September 30th, 2023, our total debt was $2.7 billion, representing a total debt to EBITDA ratio, Q3 23 annualized, of 1.1 times. During the third quarter, we repaid our $150 million U.S. currency term loan. Our total debt at quarter end increased relative to Q2 23 due to the impact of the strengthening U.S. dollar relative to the Canadian dollar. and our US dollar denominated debt, along with working capital adjustments. Based on current commodity prices and forecast free cash flow for the fourth quarter, we expect to exit 2023 with total debt of approximately $2.5 billion. I'm going to shift now and talk more about our recent activity. In the Eagleford, our Q3 program reflects strong results across the black oil and condensate thermal maturity windows of the Lower Eagleford. In our operated assets, the 13 wells generated an average 30-day initial production rate of 1,500 BOEs per day, 78% oil and NGLs per well, ranging from 769 BOEs per day to 2,355 BOEs per day. Seven wells from three pads, these pads are the Bloodstone, the Bubinga, and the Hickory, generated an average 30-day initial production rate of 2,000 BOE per day. 65% oil and NGLs per well. When we compare these results to a data set of 784 wells sourced from public data, our Q3 performance ranks in the top quartile of all wells drilled in 2023 in the Eagleford. And on a production per lateral foot basis, we are solidly in the second quartile. So I'm very pleased with this performance. In addition to delivering strong results, We remain focused on base optimization and continued drilling and completion performance. Our Pemina DuVernay light oil assets are in the demonstration stage of commerciality and offer high operating net backs with strong economics and the potential for significant organic growth. We brought six wells on stream mid-summer. The six wells generated average production rates of approximately 950 BOE per day 89% oil in NGLs in September, ranging from 790 BOE per day to 1,080 BOE per day, and continue to track the type curve performance expectations. Production from the Pembina DuVernay increased to over 7,500 BOE per day in September, up from 2,000 BOE per day in H1 2023, and the 2023 program has significantly advanced our understanding of the reservoir as we continue to progress this light oil resource play. On the heavy oil side, following a relatively quiet second quarter due to spring breakup, our program ramped up during the third quarter with 28 net heavy oil wells on stream, 14 at Peavine, 8 at Lloydminster, and 3 at Peace River. At Peavine, the 14 wells generated an average 30-day initial production rate of 725 barrels per day. per well, ranging from 330 barrels per day to 1,073 barrels per day. Production at Peavine averaged almost 14,000 barrels per day in Q3 23, up 69% from Q3 22, and increased to 16,400 barrels per day during the month of September. We are also following up our recent heavy oil exploration success at Moranville, Alberta and Cold Lake, Alberta during the fourth quarter. Building on our heavy oil expertise, we have expanded our heavy oil development fairway through two land extensions, including a 10-section extension at the Peavine Métis settlement adjacent to our existing 80-section land position at Peavine and a farm in on 17 and three-quarter sections of land prospective for Manville development near Cold Lake in northeast Alberta. We've included a map of these incremental land positions in our updated investor relations presentation. Shifting to risk management, we employ a disciplined hedging program to help mitigate the volatility in revenue due to changes in commodity prices. For the first half of 24, we have entered into hedges on approximately 40% of our net crude oil exposure, utilizing two-way collars with a floor price of $60 per barrel U.S. and a ceiling price of $100 per barrel U.S. For the second half of 2024, we have entered into hedges on approximately 25% of our net crude oil exposure, utilizing two-way collars with a floor price of $60 per barrel US and a ceiling price of $98 per barrel US. 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. I'm very pleased with the operating results across our portfolio which has set the stage for a strong finish to 2023. We do see our shares as undervalued, and we have stepped up our share buyback program during the fourth quarter. We are a strong North American energy company with a high-quality, diversified, oil-weighted portfolio across Western Canada and the Texas Gulf Coast. 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. To submit a question in writing, please use the form in the lower right section of the webcast frame. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star, then 2. We will pause for a moment as callers join the queue. Our first question comes from Greg Party of RBC Capital Markets. Please go ahead.

Yeah, thanks. Thanks for the rundown, Eric. I know it's still early, but what are your broad strokes, I think, in terms of spending, you know, any guidance maybe around production and so forth for 2024?