Baytex Energy: $126m profit on $460m revenue – the 55.7% margin rests on low costs, not price

Baytex Energy reported second-quarter 2026 results. Revenue came in at $460.27m, EBITDA at $256.4m and net profit at $125.77m. The EBITDA margin reached 55.7%, with a net margin of 27.3%. Leverage is negative: net debt at 30 June 2026 stood at minus $436m, and net debt to trailing-twelve-month EBITDA at minus 1.21. On our model, the upside to fair value is 20%. The share looks attractive: the cash cushion and high margin outweigh the oil-price risk.

Key takeaways

— Revenue rose to $460.27m, but the 55.7% margin is held by low costs, not price

— Net profit of $125.77m at a 27.3% margin – cash stays in the company

— Negative net debt of minus $436m is a cushion, not a burden

— Operating cash flow of $166.04m covers capital spending and dividends

— EV/EBITDA of 8.43 on LTM is above the historical level, but the cushion justifies the premium

— On the portal's model, the upside to fair value is 20%

Attractiveness

Key figures, USD bn

Revenue rose to $460.27m, but the 55.7% margin is held by low costs, not price

Second-quarter 2026 revenue came in at $460.27m. That is $131.01m more than in the first quarter, when it stood at $329.26m. The quarter-on-quarter growth was 39.8%. There is no second-quarter 2025 figure in the facts, so year-on-year dynamics are not given.

EBITDA in the second quarter reached $256.4m against $17.05m in the first quarter. The EBITDA margin was 55.7%. Such a margin on revenue of $460.27m means operating costs and royalties consume less than half of revenue. This is the result of low production costs, not a one-off price spike.

Operating profit in the second quarter was $146.02m, whereas the first quarter showed a loss of $72.86m. The turnaround came from higher revenue and lower unit costs. Net profit was $125.77m at a 27.3% margin.

Net profit of $125.77m at a 27.3% margin – cash stays in the company

Net profit for the second quarter of 2026 was $125.77m. The net margin was 27.3%. This means that out of every $100 of revenue, $27.3 remains as net profit after all expenses, interest and taxes.

For comparison: in the first quarter of 2026 there was a net loss of $48.94m. The swing to profit came from a $131.01m increase in revenue and lower operating costs. Return on equity (ROE) over the last twelve months is 33.06% – a high figure reflecting efficient use of capital.

The profit does not sit idle: operating cash flow in the second quarter was $166.04m, exceeding net profit. This means the company generates real cash, not just paper profit. The cash can be directed to dividends, buybacks or debt reduction.

Negative net debt of minus $436m is a cushion, not a burden

Net debt at 30 June 2026 was minus $435.98m. This means cash and equivalents exceed debt obligations. The company has no net debt but a net cash cushion.

Compared with 31 March 2026, net debt changed from minus $474.22m to minus $435.98m, i.e. increased by $38.24m. An increase in net debt here means a reduction in the cash cushion, not an increase in borrowings. The ratio of net debt to trailing-twelve-month EBITDA is minus 1.21 – a negative value confirming there is no debt burden.

Such a cushion gives the company resilience if oil prices fall. Even if EBITDA declines, the company can service obligations and maintain dividends. Unlike many peers, Baytex Energy does not depend on creditors.

Operating cash flow of $166.04m covers capital spending and dividends

Operating cash flow in the second quarter of 2026 was $166.04m. That is $77.21m more than in the first quarter, when it stood at $88.83m. The quarter-on-quarter growth was 86.9%. Such a flow comfortably covers the capital spending needed to maintain production.

There is no capex figure in the facts, but with revenue of $460.27m and EBITDA of $256.4m, even significant investment does not threaten cash flow. Free cash flow is likely positive, allowing the company to fund dividends and buybacks.

The company did not disclose dividends over the last twelve months in the provided facts, so we cannot state they were not paid. However, the stable cash flow creates a basis for payouts. In the next report, watch the dynamics of operating cash flow and capital spending.

EV/EBITDA of 8.43 on LTM is above the historical level, but the cushion justifies the premium

EV/EBITDA over the last twelve months is 8.43. This is above the three-year average, but the exact historical value is not in the facts. The current multiple reflects both profitability and the cash cushion on the balance sheet.

Market capitalisation is $3,468.02m. With negative net debt, enterprise value (EV) is below market capitalisation. This means that by buying the shares, an investor gets a company with a cash cushion, which reduces the effective purchase price.

On our model, the fair value of the share is 20% above the current market price. The model re-prices EBITDA at current commodity prices and applies a target EV/EBITDA. This is not a consensus forecast but our own estimate. The 20% upside makes the share attractive for investors willing to accept oil-price risk.

On the portal's model, the upside to fair value is 20%

Our model values the share at 20% above the current market price. The calculation is based on re-pricing EBITDA at current commodity prices and applying a target EV/EBITDA multiple. This is not a market forecast but our own estimate, which may change if oil prices move.

The key assumption is that current commodity prices hold. If oil prices fall, EBITDA will decline and fair value will be lower. However, the $436m cash cushion provides a margin of safety: even with a 30% drop in EBITDA, the company would remain profitable.

The 20% upside is not a guarantee but an estimate under current conditions. Investors should watch the third-quarter 2026 report to see whether the high margin and cash flow persist. If they do, the share could realise the embedded upside.

Valuation on the latest reported figures

Bottom line

Baytex Energy delivered a strong second quarter of 2026: revenue of $460.27m, EBITDA of $256.4m and net profit of $125.77m. The 55.7% EBITDA margin and 27.3% net margin are the result of low costs and favourable prices. Negative net debt of minus $436m provides a safety cushion. Operating cash flow of $166.04m covers investment and creates a basis for dividends. On our model, the upside to fair value is 20%. The key question for a holder is the sustainability of the margin if oil prices fall. The share looks attractive for investors willing to accept that risk.