Baytex Energy (TSX:BTE) is up about 25% from the May closing low. Investors who missed the bounce are wondering if BTE stock remains oversold and is good to buy for a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolio.
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Baytex Energy stock
Baytex trades near $2.60 per share at the time of writing, compared to a brief dip below $2 during the market pullback a few months ago. In 2025, the stock is still down 30% and now sits 50% below its level at this time last year.
Long-term followers of Baytex know the ride for investors has not been a fun one. The share price has been on a steady decline for the past three years after topping $8 on the post-pandemic rally. Baytex was actually as low as $0.40 per share at the bottom of the 2020 crash. In 2012, investors paid as much as $58 for the stock.
The big decline in the share price started in 2014 when Baytex made a large acquisition in the Eagle Ford play in Texas, buying Aurora Oil and Gas for $2.8 billion. The deal closed right before West Texas Intermediate (WTI) oil plunged from US$100 per barrel in the summer of 2014 to less than US$50 per barrel by the end of the year as Saudi Arabia flooded the market with oil to drive American shale producers out of business.
Baytex found itself stuck with a heavy debt load and expensive assets that could no longer generate enough cash flow to cover capital expenditures and the generous dividend. Baytex raised the dividend by 9% to an annualized distribution of $2.88 per share when it closed the Aurora deal. At that time, the stock traded for close to $48. By the end of 2014, Baytex had already slashed the distribution to protect cash flow and eventually cancelled the payout as oil prices remained under pressure. The stock was down to $15 by December 2014 and traded below $5 at the end of 2015. Nimble traders had opportunities to make some money on brief spikes in oil prices, but the downward trend continued into the pandemic crash.
Outlook
New management took control of Baytex in 2017. The company worked hard to reduce debt while avoiding the sale of core assets as it waited for a recovery in oil prices. This positioned the company to benefit from the rebound in the price of oil after the pandemic, leading the stock to surge from below $1 to above $8 three years ago.
Another change in the CEO position occurred in late 2022. Baytex then decided to make another Eagle Ford acquisition with its purchase of Ranger Oil in June 2023 for US$2.5 billion. This saddled the company with more debt as the oil market entered another soft patch, with a few brief price spikes caused by geopolitical events.
Baytex finished the first quarter of 2025 with total debt of $2.23 billion. At the time of writing, the company has a market capitalization of about $2 billion. Baytex currently pays a dividend that provides a 3.5% yield. Management is allocating 100% of excess cash after capital expenditures and dividend payments to reduce debt. The company says it still expects to generate $200 million in free cash flow for 2025 at WTI averaging US$60 per barrel, supported by the company’s hedging program.
Analysts broadly expect oil prices to remain under pressure through 2026 as rising supply clashes with weak demand, particularly in China. In the event the trade wars trigger a recession in the United States and across the globe, oil prices could slip back below US$60 per barrel. This would potentially put the dividend at risk of a cut.
Time to buy Baytex?
The stock tends to be volatile, with large moves occurring over very short periods of time. Traders with an appetite for risk might be interested in buying big pullbacks on the hope of making quick money on a spike in oil prices. Buy-and-hold investors, however, should probably look for other opportunities.
