Drill pipes are stacked on a trailer at a Baytex Energy Ltd. in the Pembina oil field near Pigeon Lake, Alberta, Canada on Friday, Feb. 17, 2012.Norm Betts/Bloomberg
Baytex Energy Corp., a company saddled with debt, has struck a deal to collect $500-million thanks to a bought deal.
The company on Wednesday said that it will direct the cash to reducing debt and funding its capital expenses. It is issuing 28.82 million shares at $17.35 each in the deal. The fundraiser could expand to $575-million if market demand is strong.
Encana Corp., Cenovus Energy Inc., and ARC Resources Ltd. are among those who have done bought deals to buffer their balance sheets as the price of oil continues to hamper their finances. Encana will collect at least $1.25-billion in its bought deal. That fundraising effort, scheduled to close next week, could expand to $1.44-billion depending on demand. Cenovus pocketed $1.5-billion in a deal that closed March 3. ARC raised $402-million in a bought deal in January.
Baytex argued the deal is necessary to weather the downturn in commodity prices. The benchmark price for North American crude was worth $48.40 (U.S) per barrel late Wednesday afternoon. Oil slipped below $100 July 31 and has been skidding since.
"The net proceeds will be used to reduce bank indebtedness, increase working capital and fund ongoing capital expenditures," Baytex said in a statement. "The completion of the offering will enhance our financial position and provide increased certainty for us to pursue our planned capital program."
Baytex in February cut its 2015 budget to between $500-million and $575-million and amended its financial covenants. The company in December estimated it would spend between $575-million and $650-million this year. This was down 30 per cent from what it previously expected to spend. Baytex also trimmed its monthly dividend to 10 cents per share from 24 cents per share in December.
Baytex in June bought Aurora Oil & Gas Ltd. in deal valued at $2.8-billion, including about $900-million worth of debt. The original offer, made last February, clocked in at $2.6-billion, with debt composing $744-million of the transaction. (Baytex's long-term debt, however, is years away from maturity. Only a sliver is due in 2017, and the rest is due in 2019 or beyond, according to analysts at the Bank of Montreal).
The company's stock closed at $18.23 per share on the Toronto Stock Exchange Wednesday.
Bankers at the Bank of Nova Scotia and the Royal Bank of Canada will lead Baytex's syndicate of underwriters. RBC, Credit Suisse, and Scotiabank are leading Encana's deal. RBC and Toronto-Dominion Bank led Cenovus' effort. RBC led ARC's bought deal.
This story corrects the final paragraph to say Bank of Nova Scotia instead of Canadian Imperial Bank of Commerce
Carrie Tait