November 10, 2009 / 4:05 PM / 9 years ago

UPDATE 2-Baytex Energy profit falls 70 pct on weak oil prices

* Q3 net income C$0.37/unit vs C$1.39/unit year ago

* Q3 sales down 43 pct to C$208.2 mln

* Sees Q4 production of 42,500-43,000 boe/d

* Says to drill 4 more horizontal wells at Seal in Q4 (Recasts, adds details, analyst comments)

By Ashutosh Joshi BANGALORE, Nov 10 (Reuters) - Baytex Energy Trust’s BTE_u.TO quarterly profit dropped 70 percent as weaker oil prices continued to hurt the Canadian oil explorer.

Baytex, a major producer of heavy oil, however, said it was bullish over the near-term outlook for heavy oil, backed by rising investment in refining and transportation infrastructure, and looming commencement of shipments on a major oil pipeline.

The company, which is expanding its operations in Seal area in northern Alberta, said it drilled eight wells at the property during the quarter and expects to drill four more horizontal wells in the fourth quarter.

Currently, Baytex has 58 horizontal producing wells at Seal.

“These wells are very economic to drill and the pricing for heavy-medium grade oil is strong. So, I think they generate very economic returns on those wells,” BMO Capital Markets analyst Gordon Tait said by phone.

The analyst said Canadian heavy oil has been seeing increased demand from refineries in the United States, which has been helping Canadian oil producers like Baytex.

Baytex said during the quarter, the difference between price of heavy oil and WTI light oil stood at 15 percent.

“In the fourth quarter, they (the heavy oil differentials) are trending a much tighter range than they have historically. So this is very positive for Baytex,” Canaccord Adams analyst Kyle Preston said.

The trust said it produced an average of 42,623 barrel of oil equivalent per day (boe/d) in the third quarter and expects to produce between 42,500 boe/d and 43,000 boe/d in the fourth quarter. Heavy oil production stood at 25,532 barrels a day.

Baytex said WTI oil prices stood at $68.18 a barrel during the quarter, down 42 percent from a year-ago level, while the company’s average price for a barrel of heavy oil was down 35 percent to C$55.12.

For the third quarter, net income was C$40.7 million ($38.51 million), or 37 Canadian cents per unit, down from C$137.2 million, or C$1.39 per unit, last year.

Funds from operations fell to C$88.8 million, or 80 Canadian cents per unit, from C$146.6 million, or C$1.47 per unit, in the year-ago quarter. The trust, however, said funds from operations rose 2 percent from the prior quarter.

Petroleum and natural gas sales were C$208.2 million, down 43 percent from the year-ago period.

Analysts on average expected earnings of 37 Canadian cents per unit, according to Thomson Reuters I/B/E/S.

Units of the Calgary, Alberta-based trust, which have gained about 22 percent in last three months, were down 14 Canadian cents at C$27.73 Tuesday afternoon on the Toronto Stock Exchange. ($1=1.057 Canadian dollar) (Reporting by Ashutosh Joshi in Bangalore; Editing by Deepak Kannan and Anil D’Silva)

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