One of the most bullish signals in insider transaction analysis is what’s known as ‘cluster buying.’ This is where three or more insiders at the same organization have purchased company stock within a short period of time.
In this report, we are going to highlight a cluster buying pattern at Baytex Energy Corp (BTE:CN). Baytex is an oil and gas company that is based in Calgary, Canada. It is engaged in the acquisition, development, and production of crude oil and natural gas in the Western Canadian Sedimentary Basin and the Eagle Ford in the US. The company is listed on the Toronto Stock Exchange and currently has a market capitalization of CAD $3.53 billion.
Baytex Energy: Insider Buying
Our data shows that on June 23, three insiders at Baytex bought company stock. Those who picked up shares were:
- CFO Rodney Gray (20,000 shares @ CAD $5.69 per share)
- General Counsel and Corporate Secretary James Maclean (4,000 shares @ CAD $5.61 per share)
- Chairman Mark Bly (12,000 shares @ USD $4.30 per share)
Combined, the insiders spent around CAD $200,000 (approx. USD $160,000) on stock.
This cluster buying pattern looks interesting due to the fact that all three individuals are top-level considers with considerable experience in the oil and gas industry.
Mr Gray joined Baytex in April of 2014 as CFO with over 20 years’ experience in the oil and gas industry. Mr. Maclean is a corporate lawyer with over 15 years of experience advising energy companies with respect to significant transactions, corporate governance, and securities compliance matters. And Mr. Bly is an independent businessman with over 35 years of experience in the oil and gas industry, primarily with BP. Previously, he led several key E&P units for BP in Alaska, the North Sea, and North America.
This level of experience means that the insiders are likely to have a good understanding of Baytex’s operations, financials, and prospects.
Benefitting From High Energy Prices
Baytex is performing well right now due to higher energy prices.
In the first quarter of 2022, for example, the company delivered adjusted funds flow of $280 million ($0.49 per basic share), a 78% increase compared to $157 million ($0.28 per basic share) a year earlier. Meanwhile, free cash flow for the period was $121 million ($0.21 per basic share), a 72% increase year on year. Production for Q1 was 80,867 boe/d, a 3% increase over Q1/2021.
Looking ahead, the company said that it remains intensely focused on maintaining capital discipline and driving meaningful free cash flow in the business. Based on the forward strip, it expects to generate approximately $700 million of free cash flow in 2022. The group expects to allocate approximately 25% of this free cash flow to direct shareholder returns through a share buyback program that commenced in May 2022. The remainder will be used to pay down debt, and once the group has achieved its desired net debt-to-EBITDA ratio of 1.0x, it will consider steps to further enhance shareholder returns.
In light of the momentum the company has right now, we see the insider buying as a bullish indicator.