August 11, 2009 / 2:36 PM / 8 years ago

UPDATE 2-Baytex Energy Q2 profit falls

* Q2 earnings/unit C$0.26 vs C$0.38 year ago

* Q2 sales C$192.7 mln vs C$332.3 mln year ago

* Sees 2009 exploration capex of C$165 mln

* Shares down slightly (Adds details, analysts’ comments, updates share movement)

By Ashutosh Joshi

BANGALORE, Aug 11 (Reuters) - Baytex Energy Trust BTE_u.TO posted a lower quarterly profit as the oil explorer continued to be weighed down by weaker crude oil prices.

However, the company beat analysts’ expectations for cash flow per unit as increased heavy oil demand led to stronger heavy oil pricing.

“They came in a little ahead of our forecast...largely because of the heavy oil prices. The price of heavy oil was quite strong,” BMO Capital Markets analyst Gordon Tait said by phone.

“The heavy light differential was quite narrow, but better than expected.”

The heavy oil pricing differential narrowed during the quarter to 13 percent of West Texas Intermediate crude from 18 percent a year ago.

“For the first seven months of 2009, heavy oil differentials were the lowest in a decade and it is largely expected tight heavy oil differentials are here to stay,” Dundee Capital Markets analyst Victor Rodberg wrote in a note to clients.

Rodberg, who has a “buy” rating on the stock, raised the price target to C$24 from C$21.

Baytex Energy, which acquired heavy oil and gas assets in Kerrobert and Coleville areas of Saskatchewan in July, produced 23,284 barrels of heavy oil per day in the second quarter.

Heavy oil demand increased due to industry-wide investment in heavy oil transportation and refining infrastructure, the company said.

It forecast total production for the third and fourth quarters to be about 42,000 barrels of oil equivalent (BOE) per day and 43,000 BOE per day, respectively.

Baytex Energy expects to spend about C$165 million for exploration and development capital expenditures this year.

For the second quarter, cash flow from operations was 81 Canadian cents a unit. Five analysts on average expected cash flow of 75 Canadian cents a unit, according to Reuters Estimates.

The company earned C$27.5 million, or 26 Canadian cents a unit, compared with C$34.4 million, or 38 Canadian cents a unit, a year ago.

Petroleum and gas sales were down 42 percent to C$192.7 million, as the price of oil continued to trade at lower levels than a year ago.

The trust received an average oil price of C$51.91 per barrel before hedging, 40 percent lower than C$86 per barrel it earned last year.

Units of the trust were down 8 Canadian cents at C$22.70 Tuesday afternoon on the Toronto Stock Exchange. (Reporting by Ashutosh Joshi in Bangalore; Editing by Maju Samuel, Anne Pallivathuckal)

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