By August 21, 2015 Read More →

Baytex Energy looks to reduce costs in Eagle Ford shale production

Baytex Energy suspending monthly cash dividend after Sept. 15

Baytex Energy Corp. (TSX:BTE) says it is “recalibrating” its business model by reducing costs in the Texas Eagle Ford shale and stoping drilling in the Peace River and Lloydminster areas in Western Canada for the rest of this year.

Baytex Energy

Baytex Energy focusing on Eagle Ford shale production.

Baytex Energy announced “difficult but necessary steps” to weather a prolonged oil downturn, including the suspension of its monthly dividend and a drop in spending.

Shares in the Calgary-based oil producer fell as low as $5.50 in Friday trading on the Toronto Stock Exchange, 17 per cent below Thursday’s close. By around mid-morning, the stock had gained some ground, down about nine per cent compared to Thursday.

U.S. benchmark crude prices have touched six-year lows over the past week – around US$41 a barrel. And Baytex said the price of heavy oil, like the type it produces in Alberta, is only about US$25 a barrel.

“It is imperative that we position our company to withstand the current low commodity price environment. We are committed to taking the difficult but necessary steps to ensure the long-term sustainability of our business,” CEO James Bowzer said in a release.

Baytex Energy

Baytex Energy CEO James Bowzer.

Baytex Energy said it’s suspending its monthly cash dividend after the Sept. 15 payment of 10 cents per share to avoid having to borrow more money to pay shareholders. With the current outlook, Baytex said it wouldn’t be generating enough funds from operations to pay a dividend, but will reinstate it when prices recover.

It’s the second time Baytex Energy has slashed its monthly payout to shareholders since oil prices began to plunge late last year. In December, it announced a dividend cut to 10 cents from 24 cents.

Baytex anticipates next year’s exploration and development spending will be around 25 per cent below the 2015 levels, dropping to a range of between $350 million and $400 million. This year, it’s expecting its spending to come in at $500 million, the bottom end of its projected range of $500 million to $575 million.

“By recalibrating our business model in response to the current pricing environment, we believe we are preserving shareholder value in these extraordinary times and positioning our company for greater success when oil prices recover,” said Bowzer.

The Canadian Press.

Posted in: Energy Financial

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