Baytex Energy (BTE) Approves FY16 Capital Budget Up to $400M

Baytex Energy Corp. (NYSE: BTE) announces that its Board of Directors has approved a 2016 capital budget of $325 to $400 million, which is designed to generate average annual production of 74,000 to 78,000 boe/d. Baytex also announces amendments to the financial covenants contained in its bank credit facilities which will provide the company with increased financial flexibility to the end of 2017.

Commenting on the announcement, James Bowzer, President and Chief Executive Officer, said: "We have structured our 2016 capital budget to ensure maximum flexibility with respect to both the timing and level of spend. In the first half of 2016, our budget will emphasize our highest rate of return and highest netback projects in the Eagle Ford. In Canada, we anticipate ramping up activity in the second half of 2016, although the pace will be highly dependent on crude oil prices and project economics."

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. In 2016, we are targeting capital expenditures to approximate funds from operations in order to minimize additional bank borrowings. Our 2016 program will remain very flexible and allows for adjustments to spending based on changes in the commodity price environment.

2016 Capital Budget Highlights

For the full-year, approximately 80% to 90% of our planned capital expenditures will be directed to our Eagle Ford operations, which at current commodity prices, represents the highest individual well economics and highest netbacks in our portfolio. The balance of the spending will be in Canada. Our 2016 capital budget will be heavily weighted to drilling and completion activities (approximately 83%) with the balance for facilities and pipelines (approximately 15%) and land and seismic (approximately 2%).

In the Eagle Ford, we expect to have four to six rigs running throughout the year. We will continue to advance the multi-zone potential of our Sugarkane acreage with individual pads targeting up to three zones in the Eagle Ford formation in addition to the overlying Austin Chalk formation. We expect to bring approximately 35 to 40 net wells on production in 2016.

In Canada, we have designed our 2016 capital program with maximum flexibility in mind. We currently do not anticipate drilling any heavy oil wells in Canada until the second half of the year, and a full ramp-up of planned drilling will be dependent on an improved crude oil price environment. At Peace River, our capital budget includes drilling 12 net horizontal multi-lateral wells and 6 net stratigraphic and service wells. At Lloydminster, we plan to drill 24 net wells, of which approximately 70% will be horizontal wells.

Based on the mid-point of our 2016 production guidance range of 76,000 boe/d, approximately 53% of our production is expected to be generated in the Eagle Ford with the remaining 47% coming from our Canadian assets. Our production mix is forecast to be approximately 78% liquids (34% heavy oil, 32% light oil and condensate and 12% natural gas liquids) and 22% natural gas, based on a 6:1 natural gas-to-oil equivalency.

Amendments to Bank Credit Facilities

As part of on our ongoing initiatives to maintain strong levels of financial liquidity, our lending syndicate has agreed to revise the financial covenants contained in our revolving credit facilities to the end of 2017. Effective for the quarter ending December 31, 2015, our revised financial covenants will be:

--  Senior Debt(1) to Bank EBITDA(2) ratio of 5.25:1 for a period up to and

    including the quarter ending December 31, 2017; stepping down to 3.50:1

    thereafter;



--  Senior Debt to Book Capitalization(3) ratio of 0.65:1 for a period up to

    and including the quarter ending December 31, 2017; stepping down to

    0.55:1 thereafter; and



--  Total Debt(4) to Bank EBITDA ratio of 5.25:1 for a period up to and

    including the quarter ending December 31, 2017; stepping down to 4.00:1

    thereafter.

With our revised financial covenants, we have adequate liquidity and financial flexibility to execute our business plan and adapt to changing market conditions. We have also chosen to reduce our Canadian facility by $200 million to $800 million ($1 billion previously) which will generate savings from reduced standby fees of approximately $1.2 million per year. Our US$200 million U.S. facility remains unchanged. These facilities do not require any mandatory principal payments prior to maturity in June 2019 and can be further extended beyond the maturity date with the consent of the lenders. At the end of 2015, we expect to be approximately 25% drawn on the reduced revolving credit facilities.

In addition to our revolving credit facilities, we have long-term debt of approximately $1.6 billion with no material repayments required until 2021.

Notes:

   (1) "Senior Debt" is defined as the sum of the principal amount of our

       bank loan and principal amount of long-term debt.

   (2) "Bank EBITDA" is calculated based on terms and conditions set out in

       the credit agreement which adjusts net income for financing costs,

       income taxes, certain specified unrealized and non-cash transactions

       (including depletion, depreciation, amortization, impairment,

       exploration expenses, unrealized gains and losses on financial

       derivatives and foreign exchange, and share-based compensation) and

       acquisition and disposition activity and is calculated based on a

       trailing twelve month basis.

   (3) "Capitalization" is defined as the sum of the principal amount of our

       bank loan, principal amount of long-term debt and shareholders'

       equity.

   (4) "Total Debt" is defined as the sum of our bank loan, principal amount

       of long-term debt, and certain other liabilities identified in the

       credit agreement.

Hedging

We employ risk mitigation strategies to reduce the volatility in our funds from operations. For 2016 we have entered into hedges on approximately 40% of our net WTI exposure with 16% fixed at US$63.64/bbl and 24% hedged utilizing a three-way collar structure of US$40/US$50/US$60 per WTI barrel. This three-way collar structure is more fully described in our Q3/2015 MD&A as filed on SEDAR.

2015 Year-End Results

We expect to release our 2015 operating and financial results and year-end reserves prior to market open on March 3, 2016.

You May Also Be Interested In

• KLX Energy narrows Q3 2026 revenue guidance, completes rights offering
• Rithm Capital earns S&P upgrade to ’B+’ following steady revenue diversification
• BofA raises AMD target to $720, sees server CPU TAM tripling to $211B by 2030