Baytex Energy Corp (BTE) (Q3 2026) Earnings Call Highlights: Record Duvernay Output, $165 ...

Negative Points

• 2026 exploration and development expenditures increased to $665 million from previous guidance of $625 million, raising capital spending.

• Royalty rate guidance increased to approximately 16% due to higher benchmark prices, impacting margins.

• Transportation costs are expected to be approximately $3.75 per BOE, up from the previous range of $3.40-$3.60 per BOE.

• The company has no WTI hedges in place and no WCS hedges for 2027, leaving exposure to commodity price volatility.

• Potential Gemini SAGD project requires additional capital of approximately $50 million in 2027 and higher CapEx through 2028, with first oil targeted for 2029, adding execution and funding risk.

Q & A Highlights

Q: How does the incremental 2027 capital versus the prior plan break down between the Duvernay, heavy oil, EOR, and Gemini? A: President and COO Chad Lundberg built the bridge from $625 million to $800 million: roughly $90 million of incremental Duvernay capital (an extra three drills and eight completions, 21 wells on stream), about $40 million of incremental heavy oil activity (20 additional drills to reach ~130 wells), $35 million for Lloydminster polymer EOR projects, and $10 million for Gemini (3D seismic and stratigraphic test wells). This drives 8% to 10% annualized growth and 15% Q4-to-Q4 growth.

Q: What needs to be seen to scale up the Peavine waterflood, and how would it fit into the plan? A: CEO Chad Lundberg said the key markers are injectability (already achieved), GOR suppression, and offsetting production response, with a response expected by mid-2027. If the expected tells appear, Baytex could layer in $20 million to $30 million of additional capital in the second half of 2027 to backfill gaps left for future injectors, with production performance picking up within the three-year plan.

Q: With Gemini potentially on the come, how much flexibility does the plan have on CapEx and free cash flow in late 2027 and 2028? A: Chad Lundberg said Baytex expects to exit 2026 at close to $400 million of net cash, and stress testing the $800 million 2027 plan plus the $150 million buyback commitment still leaves ample capacity to fund future Gemini CapEx while maintaining a rock-solid balance sheet.

Q: What is the modeled product split for the Duvernay when it reaches 25,000 BOE per day in 2028, and are inflation assumptions built into the outlook? A: Chad Lundberg said new Duvernay wells come on at roughly 65% oil, 25% liquids, 10% gas (recent pads were 87% to 88% liquids), transitioning to about 40% oil, 40% liquids, 20% gas as reservoirs depressurize, with 2028 modeled in the middle of that range. Lower single-digit inflation is built into the plan for items like steel and diesel, largely offset by efficiency gains in the Duvernay and heavy oil programs.

Q: What drove the better-than-expected operating cost improvement despite industry inflation? A: Chad Lundberg attributed it to volume growth spreading fixed costs over more barrels, plus proactive operating practices: investing in equipment ahead of failure to extend run life and lower total costs, and using timers on lower-producing wells to cut run time while producing the same oil. These efforts are flowing through the repair and maintenance line.

Q: Where does the corporate decline rate go by 2029 under the three-year plan? A: Chad Lundberg said the decline does not go up and ticks down moderately through the plan, even without Clearwater waterflood success, as Duvernay growth is balanced against heavy oil. Material improvements would come from Clearwater waterflood or a Gemini modular SAGD FID in H2 2027, while continued capitalization of Lloydminster EOR projects (with 400 million barrels of oil in place) also supports the base decline.

Q: What are the plans and flexibility for the 2027 dividend and share buyback? A: CFO Chad Kalmakoff said the dividend is planned to remain at $0.09 per year with no increase yet, with an opportunity if the $50 breakeven can be reduced further. The buyback is initially set at $150 million, with flexibility to adjust based on market conditions, relative value, intrinsic value, the commodity cycle, and capital opportunities such as Peavine waterflood and Gemini.

Q: How competitive was securing the additional 15,000 Duvernay acres, and what is the latest on keeping versus monetizing the Viking? A: Chad Lundberg said the process is extremely competitive given Baytex's work since 2018 on delineation, characterization, cost reductions, and infrastructure, and the company will pursue more, though opportunities are now "sections, not townships." On the Viking, he reiterated it is not core, and Baytex would look to monetize at the right time, acting counter-cyclically when higher prices emerge.

Q: Is there another Gemini-style opportunity within the large legacy land position? A: Chad Lundberg noted 750,000 acres across central to northern Alberta, with 1,100 risked locations in the plan and 2,300 unrisked locations in inventory. He said heavy oil teams continually scour the land for opportunities, including potential additional modular SAGD properties, and that Baytex is working on initiatives beyond what has been disclosed that are not yet ready to discuss for technical and competitive reasons.

Q: What is the hedging philosophy, particularly for WCS next year? A: Chad Kalmakoff said hedging is anchored to the balance sheet, which is fortified to live through commodity cycles, so no WTI hedges are planned. WCS hedges run to the end of 2026 with nothing on for 2027; given today's high differential environment, Baytex is not looking to add at these prices but sees opportunity if spreads tighten.

Q: What is the timeline and capital treatment for the Gemini modular SAGD project? A: Chad Lundberg said the target FID is H2 2027, pending design selection by year-end, the provincial royalty framework, and auxiliary items like water source, water disposal, and gas supply. The current $800 million plan includes $10 million for Gemini delineation (pads three and four, 3D seismic, stratigraphic test wells); an FID would add roughly $50 million in late 2027 and step up CapEx in 2028 toward first oil in 2029.

Q: What is the opportunity around the forthcoming Caribou land sale? A: Chad Lundberg said Caribou is a potential opportunity no different from other lands Baytex actively pursues and bids on, with the only difference being it could be a larger land sale. The company will assess the November postings and is working off plans

For the complete transcript of the earnings call, please refer to the full earnings call transcript .