• Baytex Energy Corp.
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  • Baytex Energy Corp.

Hedging

  

Baytex is authorized by its Board of Directors to hedge up to 50% of its net exposure to commodity prices, interest rates and foreign exchange notes. Transactions in excess of this level must be pre-authorized by the Board of Directors. The details of our 2014 hedging positions are as follows:

Current Hedge Coverage

 Q1/2014 Q2/2014FY2014
Crude Oil
WTI Financial Hedging
% Hedged  57% 50% 37%
 Fixed Price (US$/bbl) 99.36 99.40 98.56
Fixed Physical Delivery (Pipeline)
Blended WCS (bbl/d) 4,000   4,750
Equivalent Heavy Production (bbl/d) 3,050   3,650
% of Gross Heavy Production  7%   8%
 WCS Dollar Differential to WTI  $18.12   $18.27 
Term Rail (Fixed Price)
Heavy Production (bbl/d) 9,000   6,125
% of Gross Heavy Production 19%   13%
Equivalent WCS Dollar Differential to WTI  $16.58   $14.74
 % of Gross Heavy Production 26%   21%
 Equivalent WCS Dollar Differential to WTI $16.97   $16.67

(1) Percentage of hedged volumes are based on 2014 production guidance, net of royalties (i.e. hedgeable volumes). See notes to financial statements for individual contracts.

(2) Baytex's realized wellhead price includes pricing offsets to WCS that reflect the quality of Baytex's crude oil relative to WCS and the cost of condensate used in blending the heavy oil. In calculating an equivalent WCS dollar differential for the term rail contracts, certain assumptions regarding the cost of condensate have been made. In 2013, Baytex's realized wellhead price averaged 90% of WCS. 

(3) Addtional term rail contracts have been entered into that are WCS Index based (floating) and are excluded from the table above.

(4) For financial reporting purposes, rail agreements are not considered financial instruments. The terms of the various physical contracts are captured in our net realized heavy oil price as opposed to being disclosed as gains (losses) on financial instruments.

(5) Equivalent WCS dollar differential based on the WTI $US forward strip as at March 11, 2014, 1Q14: $102.14; 2014: $99.17.

 Q1/2014 Q2/2014FY 2014
Natural Gas
% Volumes Hedged at Fixed Price (1)  25% 43%  38%
 Average Fixed Price (US$/mmBtu) 4.19  4.16 4.17 
 % Volumes Hedged Using Collars (1)  30%  12% 15%
 Average Collar Floor/Ceiling 4.04/4.52   3.90/4.50 3.97/4.51 
Foreign Exchange
% of Foreign Exchange Hedged  31%  34%  30%
Hedged Amount (US$ millions) 73.9  81.0  286.7
Average Forward Rate (CAD per USD) 1.073  1.075 1.072
Average Collar Floor (CAD per USD)  1.042  1.048 1.045
Interest Rate (2)
 Hedged Amount (US$ millions) 45 45  135 
 Fixed Rate  4.22%  4.22% 4.22% 

(1) Percentage of volumes hedged are based on 2014 production guidance, net of royalties (i.e., hedgable volumes). 

(2) Interest rate hedges for our US dollar bank line draw established in September 2009 are forward-starting pay-fixed swaps where the floating rate 3-month LIBOR has been swapped for the fixed rate noted. Interest rate hedges expire September 2014. 

  
Under the IFRS guideline for hedge accounting, the Corp.'s financial derivative contracts for oil and foreign currency do not qualify as effective accounting hedges. Accordingly, these contracts have been accounted for based on the fair value method.
  
  

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