Baytex Energy Corp. ("Baytex") (TSX:BTE) (NYSE:BTE) announces that
its wholly-owned subsidiary, Baytex Energy USA Ltd., has entered
into an agreement to sell its non-operated interests in North
Dakota (the "Assets") to Bakken Hunter, LLC (a subsidiary of Magnum
Hunter Resources Corporation) for cash proceeds of US$311 million,
subject to closing adjustments (the "Transaction"). The
Transaction, which is subject to conditions typical of transactions
of this nature, has an effective date of March 1, 2012 and is
expected to close in May, 2012.
The Assets include approximately 950 boe/d of Bakken light oil
production (based on first quarter 2012 field estimates) and
149,700 gross (50,400 net) acres of land, of which approximately
24% is developed. This sale represents 45% of our North Dakota net
acreage and approximately 40% of our current U.S. production. The
Assets are not a primary focus of our U.S. Business Unit as they
are non-operated and generally have a lower average working
interest than our remaining lands.
As of December 31, 2011, the Assets were estimated to have
proved reserves of 12.4 million boe (eight percent natural gas) and
proved plus probable reserves of 17.9 million boe (eight percent
natural gas). Approximately ten percent of the proved plus probable
reserves are proved developed producing reserves. In addition, also
as of December 31, 2011, the Assets were estimated to have 44.8
million boe (ten percent natural gas) of "best estimate" contingent
resource. The reserve and contingent resource volumes referenced
above are based on reports prepared by Sproule Associates Limited
in accordance with National Instrument 51-101 "Standards of
Disclosure for Oil and Gas Activities" of the Canadian Securities
Administrators.
Transaction metrics are as follows:
-- $327,000 per flowing boe (based on first quarter 2012 field estimates).
-- $39.46 per boe of proved reserves (including future development capital
of $178 million).
-- $28.97 per boe of proved plus probable reserves (including future
development capital of $208 million).
-- Approximately 15 times annualized operating cash flow at the field
level.
-- Approximately 45 times annualized funds from operations contributed by
the Assets (after adjusting for the decreased interest expense resulting
from the application of the sale proceeds to net debt).
The proceeds from the Transaction may be used to reduce net debt
or redeployed into other oil and gas assets. Assuming that all of
the proceeds are applied to debt reduction, pro forma total
monetary debt as of December 31, 2011 would be approximately $340
million, which represents a debt-to-funds from operations ratio of
0.6 times (based on our funds from operations over the trailing
twelve month period).
After the Transaction, the U.S. Business Unit will continue to
be an important part of our corporate asset base. Assuming
successful completion of the Transaction, the average working
interest in our remaining North Dakota lands will increase from 39%
to 45%, with approximately 130 identified net drilling locations
representing thirteen years of drilling inventory at the current
pace of development. Almost all of the remaining lands in our U.S.
Business Unit are Baytex-operated. As our 2012 capital budget
includes minimal investment on the divested assets, there will be
no change to our plans to drill approximately 20 to 25 gross
(approximately 10 net) wells on our Bakken/Three Forks play in
North Dakota during this year.
As a result of the Transaction, we are reducing our 2012
production guidance by 500 boe/d to a range of 53,500 to 54,500
boe/d (from 54,000 to 55,000 boe/d). Our 2012 exploration and
development capital budget remains at $400 million.
All dollar amounts in this press release are Canadian dollars
unless otherwise identified.
The common shares of Baytex Energy Corp. are traded on the
Toronto Stock Exchange and the New York Stock Exchange under the
trading symbol BTE.
Advisory Regarding Forward-Looking Statements
In the interest of providing Baytex's shareholders and potential
investors with information regarding Baytex, including management's
assessment of Baytex's future plans and operations, certain
statements in this press release are "forward-looking statements"
within the meaning of the United States Private Securities
Litigation Reform Act of 1995 and "forward-looking information"
within the meaning of applicable Canadian securities legislation
(collectively, "forward-looking statements"). In some cases,
forward-looking statements can be identified by terminology such as
"anticipate", "believe", "continue", "could", "estimate", "expect",
"forecast", "intend", "may", "objective", "ongoing", "outlook",
"potential", "project", "plan", "should", "target", "would", "will"
or similar words suggesting future outcomes, events or performance.
The forward-looking statements contained in this press release
speak only as of the date thereof and are expressly qualified by
this cautionary statement.
Specifically, this press release contains forward-looking
statements relating to: the timing of closing of the divestiture;
the application of the sale proceeds; our pro forma total monetary
debt and debt-to-funds from operations ratio; development plans for
our North Dakota assets, including the number of potential drilling
locations and the number of wells to be drilled in 2012; our
average production rate for 2012; and our exploration and
development capital expenditures for 2012. In addition, information
and statements relating to reserves are deemed to be
forward-looking statements, as they involve implied assessment,
based on certain estimates and assumptions, that the reserves
described exist in quantities predicted or estimated, and that the
reserves can be profitably produced in the future. Cash dividends
on our common shares are paid at the discretion of our Board of
Directors and can fluctuate. In establishing the level of cash
dividends, the Board of Directors considers all factors that it
deems relevant, including, without limitation, the outlook for
commodity prices, our operational execution, the amount of funds
from operations and capital expenditures and our prevailing
financial circumstances at the time.
These forward-looking statements are based on certain key
assumptions regarding, among other things: the receipt, in a timely
manner, of regulatory and other required approvals; petroleum and
natural gas prices and differentials between light, medium and
heavy oil prices; well production rates and reserve volumes; our
ability to add production and reserves through our exploration and
development activities; capital expenditure levels; the
availability and cost of labour and other industry services; the
amount of future cash dividends that we intend to pay; interest and
foreign exchange rates; and the continuance of existing and, in
certain circumstances, proposed tax and royalty regimes. The reader
is cautioned that such assumptions, although considered reasonable
by Baytex at the time of preparation, may prove to be
incorrect.
Actual results achieved during the forecast period will vary
from the information provided herein as a result of numerous known
and unknown risks and uncertainties and other factors. Such factors
include, but are not limited to: failure to obtain the necessary
regulatory and other approvals on the planned timelines;
fluctuations in market prices for petroleum and natural gas;
fluctuations in foreign exchange or interest rates; general
economic, market and business conditions; stock market volatility
and market valuations; changes in income tax laws; industry
capacity; geological, technical, drilling and processing problems
and other difficulties in producing petroleum and natural gas
reserves; uncertainties associated with estimating petroleum and
natural gas reserves; liabilities inherent in oil and natural gas
operations; competition for, among other things, capital,
acquisitions of reserves, undeveloped lands and skilled personnel;
risks associated with oil and gas operations; changes in royalty
rates and incentive programs relating to the oil and gas industry;
changes in environmental and other regulations; incorrect
assessments of the value of acquisitions; and other factors, many
of which are beyond the control of Baytex. These risk factors are
discussed in Baytex's Annual Information Form, Annual Report on
Form 40-F and Management's Discussion and Analysis for the year
ended December 31, 2011, as filed with Canadian securities
regulatory authorities and the U.S. Securities and Exchange
Commission.
There is no representation by Baytex that actual results
achieved during the forecast period will be the same in whole or in
part as those forecast and Baytex does not undertake any obligation
to update publicly or to revise any of the included forward-looking
statements, whether as a result of new information, future events
or otherwise, except as may be required by applicable securities
law.
Advisory Regarding Non-GAAP Financial Measures
In this press release 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 ("GAAP"), such
as funds from operations and total monetary debt.
Funds from operations is a non-GAAP measure that represents cash
generated from operating activities adjusted for finance costs,
changes in non-cash operating working capital and other operating
items. Baytex's funds from operations may not be comparable to
other issuers. Baytex considers funds from operations a key measure
of performance as it demonstrates its ability to generate the cash
flow necessary to fund future dividends and capital investments.
For a reconciliation of funds from operations to cash flow from
operating activities, see Management's Discussion and Analysis of
the operating and financial results for the year ended December 31,
2011.
Total monetary debt is a non-GAAP measure which we define to be
the sum of monetary working capital (which is current assets less
current liabilities (excluding non-cash items such as deferred
income tax assets or liabilities and unrealized gains or losses on
financial derivatives)), the principal amount of long-term debt and
the balance sheet amount of any convertible debentures and
long-term bank loans.
Advisory Regarding Contingent Resources
This press release contain an estimate as of December 31, 2011
of the volumes of "contingent resource" for certain of our
non-operated interests in the Bakken/Three Forks in North Dakota.
This estimate was prepared by an independent qualified reserves
evaluator.
"Contingent resource" is not, and should not be confused with,
petroleum and natural gas reserves. "Contingent resource" is
defined in the Canadian Oil and Gas Evaluation Handbook as: "those
quantities of petroleum estimated, as of a given date, to be
potentially recoverable from known accumulations using established
technology or technology under development, but which are not
currently considered to be commercially recoverable due to one or
more contingencies. Contingencies may include factors such as
economic, legal, environmental, political and regulatory matters or
a lack of markets. It is also appropriate to classify as contingent
resource the estimated discovered recoverable quantities associated
with a project in the early evaluation stage."
The primary contingencies which currently prevent the
classification of the contingent resource as reserves consist of:
preparation of firm development plans, including determination of
the specific scope and timing of the project; project sanction;
access to capital markets; stakeholder and regulatory approvals;
access to required services and field development infrastructure;
oil prices; demonstration of economic viability; future drilling
program and testing results; further reservoir delineation and
studies; facility design work; limitations to development based on
adverse topography or other surface restrictions; and the
uncertainty regarding marketing and transportation of petroleum
from development areas.
There is no certainty that it will be commercially viable to
produce any portion of the contingent resource or that we will
produce any portion of the volumes currently classified as
contingent resource. The estimates of contingent resource involve
implied assessment, based on certain estimates and assumptions,
that the resource described exists in the quantities predicted or
estimated and that the resource can be profitably produced in the
future.
The recovery and resource estimates provided herein are
estimates only. Actual contingent resource (and any volumes that
may be reclassified as reserves) and future production from such
contingent resource may be greater than or less than the estimates
provided herein.
Contacts: Baytex Energy Corp. Anthony Marino President and Chief
Executive Officer (587) 952-3100 Toll Free Number: 1-800-524-5521
Baytex Energy Corp. Derek Aylesworth Chief Financial Officer (587)
952-3120 Toll Free Number: 1-800-524-5521 Baytex Energy Corp. Brian
Ector Vice President, Investor Relations (587) 952-3237 Toll Free
Number: 1-800-524-5521 www.baytex.ab.ca
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