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Baytex Announces 2018 Budget and Board Succession


CALGARY, Alberta, Dec. 07, 2017 (GLOBE NEWSWIRE) — Baytex Energy Corp. (“Baytex”) (TSX:BTE) (NYSE:BTE) announces that its Board of Directors has approved a 2018 capital budget of $325 to $375 million, which is designed to generate average annual production of 68,000 to 72,000 boe/d.

Commenting on the announcement, Ed LaFehr, President and Chief Executive Officer, said: “Our 2018 budget builds on the operational momentum established in 2017 which has positioned our business for success in today’s crude oil price environment. Focusing on our three high return resource plays, we will continue to grow our production and cash flow, with a modestly increased activity set. Importantly, after integrating the Seal acquisition at Peace River, we have now set the stage for production growth in 2018 and beyond.”

Highlights of the 2018 Budget

  • Funding of Capital Program. As in 2017, we are targeting 2018 capital expenditures to approximate funds from operations in order to minimize additional bank borrowings.
  • Rates of Return. Capital program is expected to generate internal rates of return in excess of 50% on a per well basis.
  • Capital Efficiency. Capital program reflects efficiencies on an annual basis of approximately $12,000 per boe/d ($14,000 per boe/d including facilities).
  • Production Growth. Targeted exit production rate for 2018 of 72,000-73,000 boe/d. This represents 6% growth over our expected exit production rate for 2017 of 68,000-69,000 boe/d.

Our 2018 capital budget assumes a WTI price of US$55/bbl. The 2018 program is approximately 60% weighted to the first half of the year and we have the operational flexibility to adjust our spending plans based on changes in the commodity price environment. This budget will be weighted to drilling and completion activities (approximately 83%) with the balance for facilities (approximately 16%) and land and seismic (approximately 1%).

Based on the mid-point of our guidance range of 70,000 boe/d, approximately 51% of our production is expected to be generated in the Eagle Ford with the remaining 49% from Canada. Our production mix is forecast to be 80% liquids (38% heavy oil, 30% light oil and condensate and 12% natural gas liquids) and 20% natural gas, based on a 6:1 natural gas-to-oil equivalency.

Eagle Ford

Our Eagle Ford asset in South Texas is one of the premier oil resource plays in North America. The assets generate the highest cash netbacks in our portfolio and contain a significant inventory of development prospects.

Approximately 55% of our planned capital investment will be directed to the Eagle Ford. We expect a similar pace of activity to 2017, bringing approximately 30 net wells on production. Development will be concentrated in the Lower Eagle Ford formation across our four areas of mutual interest. We expect strong well performance to continue driven by enhanced completions and as we continue to exploit the oil window on the western portion of our lands. We are currently running 5 drilling rigs and 1 completion crew in the Eagle Ford.

Canada

We are accelerating development of our heavy oil assets at Peace River and Lloydminster and expect to enter 2018 with four drilling rigs running. Approximately 45% of our planned capital investment will be directed to Canada, which represents a 40% increase from 2017. At Peace River, we plan to drill 18 net multi-lateral horizontal wells, doubling the pace of activity from 2017. At Lloydminster, we plan to drill 63 net wells (including 16 net multi-lateral horizontal wells), representing an 80% increase in activity.

Strategic Infrastructure Investment

Our 2018 capital budget includes approximately $30 million of non-recurring strategic infrastructure investment in Peace River and Lloydminster to support future development and growth, including:

  • Construction of a natural gas plant with design capacity of 18 mmcf/d and related pipeline infrastructure (Baytex working interest 50%), which will enable the growth of our expanded position in Peace River. This plant is part of our gas conservation strategy that integrates the use of gas gathering, underground gas storage, fuel gas and power generation.
  • Infrastructure spending on our Seal (Peace River region) lands acquired in January 2017, which will set the stage for development drilling in 2018 and future years. This includes pipelines, compression and road construction. Once complete, we expect to drill approximately nine net multi-lateral horizontal wells in the Seal region in 2018.
  • Expansion of our Kerrobert thermal facility to accommodate a three-well steam-assisted gravity drainage (“SAGD”) program in 2018 and an additional two-well SAGD program in 2019. First production from the SAGD project is targeted for Q4/2018.

2018 Guidance

Exploration and development capital $325 – $375 million
Production 68,000 – 72,000 boe/d
Expenses:
Royalty rate ~ 23%
Operating $10.50 – $11.25/boe
Transportation $1.35 – $1.45/boe
General and administrative ~$44 million, $1.72/boe
Interest ~ $100 million, $3.95/boe

Our 2018 capital budget assumes a WTI price of US$55/bbl. A US$1.00/bbl change in the price of WTI impacts our annual funds from operations by approximately $19 million on an unhedged basis ($11 million on a hedged basis).

2018 Capital Budget and Wells On-Stream by Operating Area

Operating Area Amount (1)
($ millions)
Wells On-stream (net)
United States (2) 200 30
Canada 150 85
Total 350 115
(1) Reflects mid-point of capital budget guidance range.
(2) Based on a Canadian-U.S. exchange rate of 1.275 CAD/USD.

2018 Capital Budget Breakdown

Classification Amount (1)
($ millions)
Drilling, completion and equipping 291
Facilities 55
Land and seismic 4
Total                            350
(1) Reflects mid-point of capital budget guidance range.

Hedging

As part of our normal operations, we are exposed to movements in commodity prices, foreign exchange rates and interest rates. In an effort to manage these exposures, we utilize various financial derivative contracts which are intended to partially reduce the volatility in our funds from operations.

For 2018, including WTI swaptions we anticipate being exercised on December 29, 2017, we have entered into hedges on approximately 40% of our net WTI exposure with 35% fixed at US$51.64/bbl and 5% hedged utilizing a 3-way option structure that provides us with downside price protection at US$54.40/bbl and upside participation to US$60.00/bbl. In addition, we have entered into Brent-based hedges for 3,000 bbl/d at US$60.17/bbl. We have also entered into hedges on approximately 33% of our net WCS exposure at a price differential to WTI of US$14.19/bbl and 22% of our net natural gas exposure through a combination of AECO swaps at C$2.82/mcf and NYMEX swaps at US$3.02/mmbtu.

Board Succession

Baytex has an ongoing board renewal process led by the Nominating and Governance Committee of the Board. Since 2013, Baytex has added three independent Board members from various professional backgrounds. As part of this renewal process, John Brussa and Rusty Goepel, two long-standing board members will be retiring at the 2018 Annual Meeting of Shareholders to be held in May 2018. Baytex thanks Mr. Brussa and Mr. Goepel for their valued contributions during their tenure on the Board.



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