Baytex Energy (TSX:BTE) is up 50% in the past few months. Investors who missed the bounce off the spring tariff rout are wondering if BTE stock is still undervalued and good to buy as an energy pick for a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP).
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Baytex Energy share price
Baytex trades above $3 per share at the time of writing compared to $2 during the April plunge. Long-term followers of BTE know that the share price can go on some wild rides in both directions.
Back in June 2014, Batyex traded around $48 per share. The company had just concluded its US$2.8 billion purchase of Aurora Oil and Gas, giving Baytex strategic assets in the Eagle Ford shale play in Texas. West Texas Intermediate (WTI) oil traded around US$100 per barrel at the time. Baytex anticipated strong revenue and cash flow growth from the deal and raised the dividend by 9% to an annualized payout of $2.88 per share.
Unfortunately, Saudi Arabia flooded the market with supply in the following months in a bid to squeeze out the American shale producers. The price of oil plunged, and by the end of 2014, Baytex had to dramatically cut its dividend to preserve cash flow to cover interest expenses on its large debt position taken on to close the Aurora deal.
Things steadily worsened for Baytex shareholders in the following years. The board eventually shelved the dividend and brought in new management to right the ship. Non-core asset sales helped chip away at the debt position and Baytex was able to hold on to its best assets. The pandemic, however, led to more pain. At the lows of the crash, Baytex traded for less than $0.40 per share.
Rock-bottom interest rates and a surge in oil prices helped the energy sector rebound strongly in 2021 and the first half of 2022. BTE reinstated dividend payments on the jump in cash flow.
The stock soared as high as $9 per share by June 2022 when WTI traded above US$120 per barrel. Management shifted back into acquisition mode, purchasing Ranger Oil, another Eagle Ford player, for US$2.5 billion in 2023. The deal loaded up the balance sheet once again with debt. Since then, oil has largely been on a downward trend, and Baytex’s share price has followed it lower.
Earnings
Baytex generated net income of $152 million, or $020 per share in Q2 2025. This is up from $104 million or $0.13 per share for the same period last year. In the first half of 2025, Baytex generated $221 million in net income compared to $90 million in the first six months of 2024.
Management is focused on debt reduction and is doing a good job of chipping away at the debt position. Net debt at the end of Q2 2025 was $2.3 billion compared to $2.6 billion at the same time last year.
Baytex expects to generate $400 million in free cash flow in 2025. Management plans to apply 100% of free cash flow after dividend payments to reduce debt. Net debt at the end of 2025 is expected to be about $2 billion. Baytex’s current market capitalization is about $2.4 billion.
At the time of writing, the dividend yield is 2.9%.
Oil market outlook
Analysts broadly expect oil prices to face headwinds into 2026. OPEC is planning to increase supply to try to recapture lost market share. At the same time, non-OPEC producers, including Canada and the United States, are setting production records. Demand could weaken if the U.S. slides into a recession and China’s economic challenges worsen.
Time to buy?
Baytex tends to be a volatile stock, and nimble traders can make good money. The current outlook for oil prices, however, isn’t great over the near term. As such, buy-and-hold investors might want to consider other opportunities in the sector that are more stable and offer higher dividend yields.
