Baytex Energy (BTE – Research Report), the Energy sector company, was revisited by a Wall Street analyst yesterday. Analyst Jeremy Mccrea from BMO Capital maintained a Hold rating on the stock and has a C$2.50 price target.
Jeremy Mccrea has given his Hold rating due to a combination of factors impacting Baytex Energy. The company has a strong position in Canada’s Clearwater and Mannville heavy oil plays, which are known for quick payouts. However, the Eagle Ford wells present a challenge as they require a longer time to achieve payout, especially at the current WTI prices. This situation has led to a cautious approach, as investors were expecting more aggressive spending cuts to manage the elevated balance sheet amidst low commodity prices.
Despite maintaining production and capital expenditure guidance for 2025, the outlook is likely to trend towards the lower end of the range due to commodity price pressures. The company’s hedging strategy, covering a significant portion of its net crude exposure, provides some financial stability but does not fully address the concerns regarding new drilling activities. While there is potential for growth in areas like Clearwater and Duvernay, the current environment suggests a more conservative stance, justifying the Hold rating.
BTE’s price has also changed dramatically for the past six months – from $3.110 to $1.530, which is a -50.80% drop .