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Baytex Energy Corp.                                            
Supplemental Disclosures about Extractive Activities - Oil and Gas (unaudited)
December 31, 2019




The following disclosures have been prepared by Baytex Energy Corp. (“Baytex” or the “Company”) in accordance with Accounting Standards Codification 932 “Extractive Activities - Oil & Gas” (“ASC 932”) issued by the Financial Accounting Standards Board.

Petroleum and Natural Gas Reserves Information

Proved petroleum and natural gas reserves are the estimated quantities of crude oil, natural gas and natural gas liquids (“NGL”) that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions.

Proved developed petroleum and natural gas reserves are reserves that can be expected to be recovered through existing wells with existing equipment and operating methods, which may require future expenditures.

Proved undeveloped petroleum and natural gas reserves are reserves that are expected to be recovered from known accumulations where a future expenditure is required.

Reserves are estimated quantities of crude oil, NGL and natural gas anticipated from geological and engineering data to be recoverable from known accumulations, from a given date forward, by known technology, under existing operating conditions and considered to be economic at average commodity prices based upon the average first-day-of-the-month prices during the year. Estimates of petroleum and natural gas reserves are subject to uncertainty and will change as additional information regarding the producing fields and technology becomes available and as future economic conditions change. Net reserves presented in this section represent the Company's working interest and overriding royalty share of the gross remaining reserves, after deduction of any crown, freehold and overriding royalties. Such royalties are subject to change by legislation or regulation and can also vary depending on production rates, selling prices and timing of initial production.

The changes in Baytex's net proved crude oil and NGL and natural gas reserves under constant prices and costs for the two-year period ended December 31, 2019 were as follows:

 
Canada
United States
Total
 
Crude Oil & NGL

Bitumen

Natural
Gas

Crude Oil & NGL

Bitumen

Natural
Gas

Crude Oil & NGL

Bitumen

Natural
Gas

 
(mbbl)

(mbbl)

(mmcf)

(mbbl)

(mbbl)

(mmcf)

(mbbl)

(mbbl)

(mmcf)

Net proved reserves
 
 
 
 
 
 
 
 
 
December 31, 2017
30,850

12,115

45,974

94,219

—

168,624

125,070

12,115

214,598

Revisions of previous estimates
6,180

(482
)
(2,887
)
1,933

—

(6,287
)
8,113

(482
)
(9,174
)
Improved recovery
12,205

—

3,740

1,470

—

2,110

13,675

—

5,850

Purchases
57,078

—

20,246

—

—

—

57,078

—

20,246

Extensions and discoveries
2,716

—

2,357

—

—

—

2,716

—

2,357

Production
(11,516
)
(198
)
(14,452
)
(7,756
)
—

(13,312
)
(19,272
)
(198
)
(27,764
)
Sales of minerals in place
(1
)
—

—

—

—

—

(1
)
—

—

December 31, 2018
97,513

11,435

54,978

89,866

—

151,135

187,379

11,435

206,114

Revisions of previous estimates
(1,630
)
429

13,188

(6
)
—

11,900

(1,636
)
429

25,088

Improved recovery
—

—

—

—

—

—

—

—

—

Purchases
1,210

—

85

—

—

—

1,210

—

85

Extensions and discoveries
20,311

—

18,392

9,584

—

16,813

29,895

—

35,205

Production
(15,431
)
(727
)
(16,372
)
(8,084
)
—

(14,485
)
(23,515
)
(727
)
(30,857
)
Sales of minerals in place
(2,289
)
—

(83
)
—

—

—

(2,289
)
—

(83
)
December 31, 2019
99,683

11,136

70,188

91,360

—

165,363

191,043

11,136

235,551

Net proved developed reserves
 
 
 
 
 
 
 
 
 
End of year 2017
20,790

7,376

29,141

33,978

—

67,150

54,768

7,376

96,291

End of year 2018
47,329

8,616

39,222

36,898

—

68,273

84,227

8,616

107,495

End of year 2019
48,755

9,286

44,537

40,025

—

71,748

88,780

9,286

116,285



1
Baytex Energy Corp.                                            
Supplemental Disclosures about Extractive Activities - Oil and Gas (unaudited)
December 31, 2019




Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Petroleum and Natural Gas Reserves

The following information has been developed utilizing procedures prescribed by ASC 932 and based on crude oil, NGL and natural gas reserves and production volumes estimated by Baytex's independent reserves evaluator, McDaniel & Associates Consultants Ltd. The methodology used in calculating our price and cost assumptions for the standardized measure of discounted future net cash flows for reserves estimation is based upon the average first-day-of-the-month prices during the year.

Future production and development costs are based on forecast price assumptions and assume the continuation of existing economic, operating and regulatory conditions. Future income taxes are calculated by applying statutory income tax rates to future pre-tax cash flows after providing for the tax cost of the petroleum and natural gas properties based upon existing laws and regulations. A 10% discount factor was applied to the future net cash flows.

The information contained in the following table should not be considered as representative of realistic assessments of future cash flows, nor should the standardized measure of discounted future net cash flows be viewed as representative of the fair market value of Baytex's petroleum and natural gas properties. Management does not rely upon the following information in making investment and operating decisions. Such decisions are based upon a wide range of factors, including estimates of probable as well as proved reserves, and varying price and cost assumptions considered more representative of a range of possible economic conditions that may be anticipated. The prescribed discount rate of 10% may not appropriately reflect interest rates.

The computation of the standardized measure of discounted future net cash flows relating to proved oil and natural gas reserves was based on an unweighted arithmetic average of the first-day-of-the-month price for each month in 2019 and 2018.

 
Commodity Pricing
 
2019

2018

WTI crude (US$/bbl)
$
55.85

$
65.55

Edmonton Light Crude (Cdn$/bbl)
$
66.73

$
70.32

Western Canadian Select (WCS)(1) (Cdn$/bbl)
$
56.10

$
53.67

AECO-C spot price (Cdn$/mmbtu)
$
1.76

$
1.46

Henry Hub (US$/mmbtu)
$
2.58

$
3.02

Exchange rate (US$/Cdn$)
0.7500

0.7758

(1)
Price used in the preparation of heavy oil and bitumen reserves in Canada.


The standardized measure of discounted future net cash flows relating to net proved petroleum and natural gas reserves are as follows:

 
             Canada
        United States
Total
(thousands of Canadian dollars)
2019

2018

2019

2018

2019

2018

Future cash inflows
$
5,636,229

$
5,942,119

$
5,504,339

$
6,516,072

$
11,140,569

$
12,458,191

Future production costs
(2,301,149
)
(2,344,819
)
(1,790,853
)
(2,313,187
)
(4,092,002
)
(4,658,006
)
Future development costs
(1,520,834
)
(1,349,516
)
(1,131,768
)
(1,244,653
)
(2,652,602
)
(2,594,169
)
Future income taxes
—

—

(213,922
)
(281,755
)
(213,922
)
(281,755
)
Future net cash flows
1,814,246

2,247,784

2,367,796

2,676,477

4,182,043

4,924,261

Deduct:
10% annual discount factor
(550,900
)
(795,412
)
(1,081,329
)
(1,157,890
)
(1,632,229
)
(1,953,302
)
Standardized measure
$
1,263,346

$
1,452,372

$
1,286,467

$
1,518,587

$
2,549,814

$
2,970,959



2
Baytex Energy Corp.                                            
Supplemental Disclosures about Extractive Activities - Oil and Gas (unaudited)
December 31, 2019




Reconciliation of Changes in Standardized Measure of Future Net Cash Flows Discounted at 10% per Year Relating to Net Proved Petroleum and Natural Gas Reserves

As at December 31, 2019
(thousands of Canadian dollars)
Canada

United States

Total

Balance, beginning of year
$
1,452,372

$
1,518,587

$
2,970,959

Sales, net of production costs
(603,159
)
(416,008
)
(1,019,167
)
Net change in prices and production costs related to future production
(22,899
)
(411,465
)
(434,364
)
Changes in previously estimated production costs incurred during the period
(236,918
)
(23,926
)
(260,844
)
Development costs incurred during the period
371,415

177,928

549,343

Extensions, discoveries and improved recovery, net of related costs
177,952

127,763

305,715

Revisions of previous quantity estimates
8,532

98,307

106,839

Sales of reserves in place
(31,147
)
—

(31,147
)
Purchases of reserves in place
1,961

—

1,961

Accretion of discount
145,237

163,151

308,388

Net change in income taxes
—

52,130

52,130

Balance, end of year
$
1,263,346

$
1,286,467

$
2,549,814


As at December 31, 2018
(thousands of Canadian dollars)
Canada

United States

Total

Balance, beginning of year
$
355,205

$
1,145,248

$
1,500,453

Sales, net of production costs
(255,967
)
(478,727
)
(734,694
)
Net change in prices and production costs related to future production
(33,000
)
498,009

465,009

Changes in previously estimated production costs incurred during the period
(773,071
)
104,733

(668,338
)
Development costs incurred during the period
291,550

193,604

485,154

Extensions, discoveries and improved recovery, net of related costs
227,000

44,278

271,278

Revisions of previous quantity estimates
754,912

(12,639
)
742,273

Sales of reserves in place
(15,000
)
—

(15,000
)
Purchases of reserves in place
865,223

—

865,223

Accretion of discount
35,520

116,576

152,096

Net change in income taxes
—

(92,495
)
(92,495
)
Balance, end of year
$
1,452,372

$
1,518,587

$
2,970,959


Capitalized Costs Relating to Petroleum and Natural Gas Producing Activities

As at December 31, 2019
(thousands of Canadian dollars)
Canada

United States

Total

Proved properties
$
6,327,290

$
4,801,007

$
11,128,297

Unproved properties
187,262

132,948

320,210

Total capital costs
6,514,552

4,933,955

11,448,507

Accumulated depletion and depreciation
(3,143,380
)
(2,597,028
)
(5,740,408
)
Net capitalized costs
$
3,371,172

$
2,336,927

$
5,708,099


As at December 31, 2018
(thousands of Canadian dollars)
Canada

United States

Total

Proved properties
$
5,912,361

$
4,832,172

$
10,744,533

Unproved properties
208,012

150,923

358,935

Total capital costs
6,120,373

4,983,095

11,103,468

Accumulated depletion and depreciation
(2,501,569
)
(2,425,075
)
(4,926,644
)
Net capitalized costs
$
3,618,804

$
2,558,020

$
6,176,824



3
Baytex Energy Corp.                                            
Supplemental Disclosures about Extractive Activities - Oil and Gas (unaudited)
December 31, 2019




Costs Incurred in Petroleum and Natural Gas Property Acquisition, Exploration and Development Activities

For year ended December 31, 2019
(thousands of Canadian dollars)
Canada

United States

Total

Property acquisition costs
 
 
 
Proved properties
$
2,636

$
—

$
2,636

Unproved properties
1,523

—

1,523

Development costs (1)
371,415

177,928

549,343

Exploration costs (2)
2,948

—

2,948

Total
$
378,522

$
177,928

$
556,450


For year ended December 31, 2018
(thousands of Canadian dollars)
Canada

United States

Total

Property acquisition costs
 
 
 
Proved properties
$
1,748,570

$
—

$
1,748,570

Unproved properties
98,372

—

98,372

Development costs (1)
291,550

193,604

485,154

Exploration costs (2)
10,567

—

10,567

Total
$
2,149,059

$
193,604

$
2,342,663

(1)
Development and facilities capital expenditures.
(2)
Cost of geological and geophysical capital expenditures and drilling costs for exploratory wells.

Results of Operations for Producing Activities

For year ended December 31, 2019
(thousands of Canadian dollars except per boe amounts)
Canada

United States

Total

Petroleum and natural gas revenues, net of royalties
$
970,257

$
515,421

$
1,485,678

Less:
 
 
 
Operating costs, production and mineral taxes
298,303

99,413

397,716

Transportation and blending expense
112,737

—

112,737

Exploration and evaluation
11,764

—

11,764

Depletion and impairment
651,323

261,766

913,089

Operating income (loss)
(103,870
)
154,242

50,372

Income tax expense
101

1,992

2,093

Results of operations (1)
$
(103,971
)
$
152,250

$
48,279


For year ended December 31, 2018
(thousands of Canadian dollars except per boe amounts)
Canada

United States

Total

Petroleum and natural gas revenues, net of royalties
$
546,515

$
568,601

$
1,115,116

Less:
 
 
 
Operating costs, production and mineral taxes
221,717

89,875

311,592

Transportation and blending expense
105,701

—

105,701

Exploration and evaluation
10,580

11,149

21,729

Depletion and impairment
359,925

482,050

841,975

Operating loss
(151,408
)
(14,473
)
(165,881
)
Income tax recovery
—

(35
)
(35
)
Results of operations (1)
$
(151,408
)
$
(14,438
)
$
(165,846
)
(1)
Excludes corporate overhead and interest costs.


4