Baytex Energy (BTE) Approves FY17 Budget of $300-$350M; Ed LaFehr Will Succeed James Bowzer as CEO

Baytex Energy Corp. (NYSE: BTE) announces that its Board of Directors has approved a 2017 capital budget of $300 to $350 million, which is designed to generate average annual production of 66,000 to 70,000 boe/d. Baytex also announces that Ed LaFehr, President, will succeed James Bowzer as Chief Executive Officer in May 2017.

2017 Budget

Commenting on the budget announcement, James Bowzer, Chief Executive Officer, said: "We have three high quality resource plays in our portfolio and believe 2017 will be a year that builds operational momentum for Baytex. In Canada, after a drilling hiatus, we are excited to get back to work with an active first quarter drilling program. In the Eagle Ford, we expect to maintain a consistent pace of development on our lands throughout 2017. We have designed our 2017 budget to be flexible should we continue to experience a volatile commodity price environment."

Our 2017 capital budget currently reflects a range of $300 to $350 million, which is designed to generate average annual production of 66,000 to 70,000 boe/d. Our expected exit production rates for 2016 and 2017 reflect an organic growth rate of approximately 3-4%. A key attribute of Baytex is the strong capital efficiencies of our asset base. Our 2017 development program reflects capital efficiencies on an annual basis of approximately $11,500 per boe/d ($13,500 per boe/d including facilities).

For the full-year, approximately 70% of our planned capital expenditures will be directed to our Eagle Ford operations. The balance of the spending will be in Canada, largely toward our heavy oil assets at Peace River and Lloydminster. Our 2017 capital budget will be heavily weighted to drilling and completion activities (approximately 89%) with the balance for facilities (approximately 10%) and land and seismic (approximately 1%).

In the Eagle Ford, we expect to have four to five drilling rigs and two completion crews working on our lands, up from two to three rigs in the third quarter of 2016. At this pace of development, we expect to bring approximately 34 net wells on production in 2017. Our costs in the Eagle Ford continue to decrease with wells now being drilled, completed and equipped for approximately US$5 million.

In Canada, after two years of reduced activity and declining production, we are planning an active drilling program designed to stabilize production from our year-end 2016 exit production rate, and ultimately, to position for growth. At Peace River, our capital budget includes drilling 11 net multi-lateral horizontal wells and 8 net stratigraphic wells. At Lloydminster, we plan to drill 52 net wells, of which approximately 55% will be horizontal wells. At Pembina, we expect to drill 2 net natural gas wells.

Based on the mid-point of our 2017 annual average production guidance range of 68,000 boe/d, our production is expected to be equally split between Canada and the Eagle Ford. Our 2017 guidance includes an annual contribution of approximately 3,000 boe/d from our recently announced heavy oil acquisition at Peace River. Our production mix is forecast to be approximately 78% liquids (35% heavy oil, 31% light oil and condensate and 12% natural gas liquids) and 22% natural gas, based on a 6:1 natural gas-to-oil equivalency.

One of the key tenets of our business model is to ensure the sustainability of our operations. We accomplish this by maintaining strong levels of financial liquidity while striving to balance our cash inflows and cash outflows. Similar to 2016, we are targeting our 2017 capital expenditures to approximate funds from operations in order to minimize additional bank borrowings and will remain flexible.

2017 Guidance

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Exploration and development capital                    $300 to $350 million

Production                                           66,000 to 70,000 boe/d



Expenses:

  Royalty rate                                                   approx. 23%

  Operating                                             $11.00 - $12.00/boe

  Transportation                                          $1.10 - $1.30/boe

  General and administrative         approx. $50 million, approx. $2.00/boe

  Interest                          approx. $100 million, approx. $4.00/boe

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2017 Capital Budget and Wells Drilled by Operating Area

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                                              Amount (1)       Wells Drilled

Operating Area                               ($ millions)              (net)

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United States (2)                                     240                 34

Canada (3)                                             85                 73

                                            --------------------------------

Total                                                 325                107



(1)  Reflects mid-point of capital budget guidance range.

(2)  Based on a Canadian-U.S. exchange rate of 1.30 CAD/USD.

(3)  Includes 8 stratigraphic wells.

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2017 Capital Budget Breakdown

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                                                                 Amount (1)

Classification                                                  ($ millions)

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Drilling, completion and equipping                                       290

Facilities                                                                31

Land and seismic                                                           4

                                                               -------------

Total                                                                    325



(1)  Reflects mid-point of capital budget guidance range.

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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 2017, we have entered into hedges on approximately 47% of our net WTI exposure with 6% fixed at US$54.35/bbl and 41% hedged utilizing a 3-way option structure that provides us with downside price protection at approximately US$47/bbl and upside participation to approximately US$59/bbl. We have also entered into hedges on approximately 22% of our net WCS differential exposure and 57% of our net natural gas exposure.

CEO Succession

Baytex announces that Ed LaFehr, President, will succeed James Bowzer as Chief Executive Officer in May 2017. Mr. Bowzer, who has been in the role since September 2012, will work with Mr. LaFehr to ensure a seamless leadership transition and will remain on the Board of Directors following the transition.

Mr. LaFehr joined Baytex in July 2016 as President and has been an integral member of the executive leadership team holding responsibility for the Canadian and U.S. business operations and corporate development. Before joining Baytex, Mr. LaFehr was President of TAQA's North American oil and gas business which led to his subsequent role as Chief Operating Officer of TAQA, globally. He previously served as Senior Vice President for Talisman Energy, accountable for its Canadian assets across Alberta, Saskatchewan and British Columbia. Mr. LaFehr has a long track record of success in the oil and gas industry leading organizations, growing assets and joint ventures, and driving capital and cost efficiency.

Commenting on his appointment, Mr. LaFehr said: "I am thrilled to be leading Baytex as we build operational momentum in 2017. I've had an opportunity to work first-hand with our talented teams on the quality and growth potential of our asset base. I am pleased to be inheriting a highly focused organization poised to build our core oil plays, and take on the challenges and opportunities that lie ahead."

Raymond Chan, Chairman of Baytex, said: "Since Ed's arrival this summer, he has been heavily involved in the development of our long-range plan and 2017 budget and was instrumental in our recently announced heavy oil acquisition at Peace River. Due to his recent experience leading Canadian oil and gas businesses with a focus on unconventional development, he was able to hit the ground running. He has engaged and visited all assets and teams from Peace River and Lloydminster in Canada to Houston and Karnes City in Texas. We are pleased that there will be a smooth transition with Jim, our Board and the entire organization."

In commenting on the CEO transition, Mr. Chan said, "For the past four years, Jim has led our organization with passion and unwavering dedication. He was instrumental in adding the Eagle Ford world class asset to our portfolio and has successfully managed Baytex through some very difficult industry conditions. After an exceptional 35 year career in the oil and gas industry, Jim will be retiring to spend more time with his family. We are grateful to Jim for his leadership and look forward to his ongoing contribution as a board member."

Mr. Bowzer added, "My time as CEO of Baytex has been exceptionally rewarding and I could not be more proud of our team as we adjusted our business to the realities of a low crude oil price environment. We have built an exceptional asset base and I look forward to continuing in my role as a Board member and supporting Ed and the Baytex team as we execute on our plans for future growth."

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