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

Message to Shareholders


2019 Year-End Message to Shareholders

While we have been a publicly listed corporation for more than 25 years, we are taking steps to systematically transform Baytex.  We are now a company with a diversified North American oil portfolio designed to generate free cash flow.  We have shifted our portfolio to predominantly high operating netback, light oil assets while also reducing our cash cost structure and improving capital efficiencies. More recently, we have refinanced our long-term notes and extended the term of our revolving credit facilities to 2024. These steps give us the confidence and flexibility to execute our business plan to continue driving free cash flow and strengthening our balance sheet.

Despite the many challenges facing our industry today, we recognize that developing environmentally and socially responsible energy plays an important role in raising the standard of living for people around the world.  In 2019 we continued our excellent health, safety and environmental performance and published our fourth biennial corporate sustainability report. This report demonstrates our commitment to transparency and to managing the environmental and social impacts of our business.  We have elevated our standards, establishing a target to reduce our greenhouse gas emissions intensity by 30% over the next three years.  We believe our safety and environmental leadership will serve us well as we continue to adapt to changing market conditions.

We have a high quality and diversified oil portfolio and our operating teams are well established with a track record of delivering results.  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 East Shale 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.

Our 2019 operating and financial results demonstrate the benefits of this diversified oil weighted portfolio and our commitment to allocate capital effectively, generate free cash flow and further strengthen our balance sheet.  We produced 97,680 boe/d (82% liquids) and exceeded the high end of our annual guidance with capital expenditures at the low end of guidance totalling $552 million. This resulted in the following financial results: 

  • EBITDA of $1 billion and free cash flow of $329 million. 
  • Net debt reduction of 17%, or $393 million, due to the strong free cash flow and a strengthening of the Canadian dollar relative to the U.S. dollar.
  • Redeemed our US$150 million principal amount of 6.75% senior unsecured notes nearly two years early.

We also demonstrated reserves growth with proved developed producing reserves increasing 5%, finding & development costs of $13/boe and a recycle ratio of 2.3x.  In aggregate, we replaced 112% of 2019 production, adding 40 million boe of proved plus probable reserves through development activities.  In the Eagle Ford, strong well  performance continues to be driven by enhanced completions across our acreage position.  In the Viking, over 90% of our drilling is now comprised of extended reach horizontal wells.  In our heavy oil assets we delivered stable production with limited capital investment. We also continued to advance our Duvernay shale light oil asset with two strong wells in the East Shale Basin.

Subsequent to year-end, we issued US$500 million principal amount of 8.75% senior unsecured notes, maturing on  April 1, 2027 which enabled us to redeem two series of notes; US$400 million principal amount of 5.125% senior unsecured notes due June 1, 2021 and $300 million principal amount of 6.625% senior unsecured notes due July 19, 2022.  Following the redemption of these notes, our next long-term note maturity is June 2024.

We also extended the maturities of our revolving credit facilities and term loan to April 2, 2024. These credit facilities, which total $1.046 billion, are not borrowing base facilities and do not require annual or semi-annual reviews.  Following all of these steps, our credit facilities are approximately one-third undrawn and we retain over $300 million of liquidity with a weighted average interest rate on our long-term debt of approximately 6%.

Looking Forward  

We maintain an attractive and deep inventory of development locations with approximately ten years or more of remaining drilling opportunities in each of our core assets.  We remain committed to delivering stable production, maximizing free cash flow and further strengthening our balance sheet.

Our 2020 annual guidance is unchanged as we target production of 93,000 to 97,000 boe/d with exploration and development expenditures of $500 to $575 million.  At the time of writing, our exploration and development program is expected to be fully funded from adjusted funds flow at the forward strip and we have the operational flexibility to adjust our spending plans based on changes in commodity prices.    

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 2020, 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$58/bbl with upside participation to US$63/bbl.  We are also contracted to deliver 11,500 bbl/d of our heavy oil volumes to market by rail.

Baytex's success is due to very engaged Board, management and employee group who are all strongly aligned and committed to driving value for shareholders. With the combined team, we are confident we have the skills, experience and focus that will create a more prosperous future. 

We look forward to executing our plans in 2020 for the ongoing benefit of all stakeholders and we thank you for your continued support.    


Edward D. LaFehr

President and Chief Executive Officer

March 4, 2020



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  2019 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 2019 Annual Report