Baytex Energy cutting capital spending, ending dividend payouts to preserve cash

CALGARY – Baytex Energy Corp. (TSX:BTE) has 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 closed down 70 cents, or 10.56 per cent, at $5.93 Friday on heavy trading of 9.6 million shares on the Toronto Stock Exchange going as low as $5.50 earlier in the session.

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 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 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.

The company said it will stop drilling in the Peace River and Lloydminster areas in Western Canada for the rest of this year and also look for further cost reductions the Eagle Ford shale in Texas.

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.

Note to readers: This is a corrected story; An earlier version had the incorrect dividend payment date and previous dividend level