• Baytex Energy Corp.
  • BTE (TSX)
  • Baytex Energy Corp.
Baytex Energy Corp.

Message to Shareholders


2020 Year-End Message to Shareholders

In one of the most challenging years experienced by our industry, we delivered on our commitment to preserve financial liquidity, capture cost savings and generate free cash flow.  The Covid-19 pandemic required a dynamic response to the oil price collapse and our team delivered.  We re-set our business in the face of extremely volatile crude oil markets and intensified efforts to improve all aspects of our cost structure and capital efficiencies, while protecting the health and safety of our personnel.  We are now benefiting from these actions as we are poised to generate meaningful free cash flow in 2021 and continue our de-leveraging strategy.

In 2020, we reduced our capital budget by 50% and identified cost savings of approximately $100 million.  We produced 79,781 boe/d (82% liquids) with capital expenditures of $280 million, in line with our annual guidance. We also hit all of our cost targets with operating expenses averaging $11.35/boe, transportation expenses of $0.97/boe and general and administrative expenses under $1.20/boe.

We generated free cash flow of $18 million and a $24 million net debt reduction (including the Canadian dollar strengthening relative to the U.S. dollar).  We also negotiated a bank credit facility extension and refinanced our long-term notes, both important measures to ensure our financial liquidity.  We issued US$500 million senior unsecured notes maturing April 2027 which enabled us to redeem two near term notes maturing in 2021 and 2022.  As of December 31, 2020, we held $367 million of undrawn capacity on our credit facilities, resulting in liquidity, net of working capital, of $319 million.  We are well within our financial covenants and our first long-term note maturity of US$400 million is not until June 2024.

In addition, we continue to build on our long term, high quality and diversified oil portfolio.  Our operating teams are well established with a track record of enhancing our inventory and delivering results.  Our proved plus probable reserves at year-end total 462 mmboe and we maintain a strong reserves life index of 17.9 years.  In Canada, we have one of the largest conventional oil portfolios, including high operating netback, light oil production in the Viking and low decline, heavy oil production at Peace River and Lloydminster.  We also hold a dominant land position in the emerging light oil resource play in the Pembina Duvernay, which has similar geologic and reservoir characteristics to our Eagle Ford shale asset in the United States. Our position in the Eagle Ford is defined by one of the highest quality, lowest-cost U.S. resource plays with outstanding drilling economics.

As part of our core values, we are driven to safely and responsibly develop energy resources while reducing environmental impact.  In 2019, we established a GHG emissions reduction target. Our objective was to reduce our corporate GHG emission intensity (tonnes of CO2e per boe) by 30% by 2021, relative to our 2018 baseline. We are pleased to announce that we have exceeded this target, achieving a 46% reduction in our GHG emissions intensity through year-end 2020.  This represents an annual reduction of 1.6 million tonnes of CO2e and is equivalent to taking 340,000 cars off the road annually.

As an element of our corporate culture we continue to set the bar higher.  We have established a new target to reduce our corporate GHG emission intensity by a further 33% from current levels by 2025.  This equates to an approximate 65% reduction by 2025, relative to our 2018 baseline. The entire organization is proud of our emissions reduction strategy which includes gas conservation and combustion, reusing associated gas as fuel for field activities, reduced emissions from storage tanks, along with monitoring and preventing fugitive emissions. 

We look forward to publishing our fifth corporate sustainability report later this year.  We are committed to transparency and accountability, as well as progressing the environmental and social aspects of our business. 

Looking Forward  

We maintain an attractive and deep inventory of development drilling locations with approximately ten years or more in each of our core assets.  In 2021, we will benefit from a disciplined approach to capital allocation as well as our continued drive to improve our cost structure and capital efficiencies.  Our high graded capital program is focused largely on our high netback light oil assets in the Viking and Eagle Ford.  At current commodity prices, we intend to implement a heavy oil program in the second half of the year. 

We are executing our plan to maximize free cash flow and accelerate our debt reduction strategy.  Our 2021 guidance remains unchanged as we target production of 73,000 to 77,000 boe/d with exploration and development expenditures of $225 to $275 million.  During Q4/2020, we resumed drilling activity, which is leading to operational momentum early in 2021 with current production over 78,000 boe/d, At the time of writing, we expect to generate over $250 million ($0.45 per basic share) of free cash flow in 2021 and increase our financial liquidity to over $550 million. 

We maintain a consistent approach to risk management and marketing, utilizing various financial derivative contracts and crude-by-rail to reduce the volatility in our adjusted funds flow.  For 2021, we have entered into hedges on approximately 48% of our net crude oil exposure, largely utilizing a 3-way option structure that provides WTI price protection at US$45/bbl with upside participation to US$52/bbl.  We are also contracted to deliver 5,500 bbl/d of our heavy oil volumes to market by rail.

We continue to enhance our organizational capability at all levels - from the Board, to management and to all employees.  I am particularly proud of our response to the Covid-19 pandemic as we strive to create a more sustainable business and prosperous future.  Our team is resilient and focused and we are totally committed to generating value for shareholders. 

We look forward to executing our plans for the benefit of all stakeholders and we thank you for your support.    


Edward D. LaFehr

President and Chief Executive Officer

February 24, 2021



Forward-Looking Statements

This webpage contains forward-looking statements. We refer you to the end of the Management's Discussion and Analysis section of our 2020 Annual Report for our advisory on forward looking information and statements. 

Non-GAAP Financial Measures

In this webpage we refer to certain measures that are commonly used in the oil and gas industry but are not based on generally accepted accounting principles in Canada, such as adjusted funds flow, operating netback and total monetary debt. For a description of these measures, we refer you to "Non-GAAP Financial Measures" in our 2020 Annual Report