As one of the old Canadian royalty trusts (Canroys) that were forced to convert to the C-corp E&P structure a few years back, Baytex Energy (BTE) has been one of the most successful as dividend payer.
Much of that success comes from its production mix, which is extremely liquids-rich. In fact, only 7% of BTE’s production for 2013 will come from dry gas.
The bulk of Batex’s production and reserves are located in the Canadian oil sands and comes from heavy or thermal oil. Recently, the spread between Western Canadian Select (WSC) crude and West Texas Intermediate (WTI) has narrowed significantly — down to about $15 per barrel. Like here in the U.S., WSC crude has been a victim of lacking pipeline infrastructure. But with refiners now willing to move WSC crude via rail, the discount has narrowed.
That will provide extra “oomph” to the company’s cash flows … which, by the way are pretty rich to begin with.
Unlike many of its former Canroy peers, Baytex has been able to maintain its dividend level in the face of low realized prices for WSC crude, with funds from operation more than covering its nearly 6% dividend.