Baytex Energy Corp. · TSX:BTE
Baytex Energy — Investor Presentation (June 2014)
56 slides from Baytex Energy's investor presentation, June 2014
Slide 1: June Presentation
June Presentation
Slide 2: Advisory: Forward-Looking Statements
Advisory 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 made by the presenter and contained in these presentation ma
Slide 3: Advisory (Cont.)
Advisory (Cont.) These forward-looking statements are based on certain key assumptions regarding, among other things: the receipt of regulatory, shareholder and other approvals for the Acquisition; our ability to execute and realize on the anticipated benefits of the Acquisition; petroleum and natur
Slide 4: Advisory (Cont.): Oil and Gas Information
Advisory (Cont.) Oil and Gas Information This presentation contains estimates of the volumes of the "contingent resources" for our oil resource plays in the Bluesky in the Peace River area of Alberta, the Mannville group in northeast Alberta and the Bakken/Three Forks in North Dakota as of December
Slide 5: Advisory (Cont.)
Advisory (Cont.) References herein to initial test production rates, 30-day IP rates and other short-term production rates are useful in confirming the presence of hydrocarbons; however, such rates are not determinative of the rates at which such wells will commence production and decline thereafter
Slide 6: Investment Highlights
Investment Highlights • Focus on per share growth in production and reserves Organic Oil Growth Long-term, Low-Cost Inventory • Sector-leading capital efficiency • Operational excellence Meaningful Dividend • Focus on dividend growth over the long-term Conservative Payout Ratio • Competitive differe
Slide 7: Corporate Profile
Corporate Profile Summary of Securities Trading Symbol TSX / NYSE: BTE Average Daily Volume (1) Canada: 1,377,100 / U.S.: 133,400 Shares Outstanding (Current) 126.7 million Market Capitalization / Enterprise Value $5.7 billion / $6.6 billion Total Monetary Debt (as of 3/31/14) $832 million Monthly D
Slide 8: Operating Areas
Operating Areas Production (Q1 2014) Company Total = 59,502 boe/d Lloydminster Peace River Heavy Oil 33% Heavy Oil 43% Light Oil 13% Gas 11% Operating Income (Q1 2014) Company Total = $197 million ($37/boe) Lloydminster Peace River Heavy Oil 38% Heavy Oil 42% Light Oil 16% Gas 4% 2P Reserves (Year E
Slide 9: Oil-Equivalent Production Growth
Oil-Equivalent Production Growth 60,000 40,000 boe / d 61,000 57,196 53,986 50,132 44,341 20,000 40,239 41,382 34,022 34,647 34,292 36,222 0 (1) 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Percent Oil 73% 71% 73% 76% 77% 76% 79% 84% 87% 89% 89% (1) Based on mid point of guidance range of
Slide 10: Reserve Growth / Contingent Resources
Reserve Growth / Contingent Resources Proved Probable 350 Oil-Equivalent Reserves (MMboe) 318 300 292 252 250 229 159 200 187 197 96 148 168 89 150 141 146 61 68 52 107 123 39 43 100 37 30 159 140 156 144 116 126 129 50 86 102 103 77 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2P RLI (y
Slide 11: Balance Sheet Strength
Balance Sheet Strength ($ millions) Q1 2014 Credit Facilities Unused Used Bank Loan (1) $300.6 Long-Term Debt (2),(3) $465.8 Working Capital Deficiency $65.9 Undrawn $549 million, or 65%(1) Total Monetary Debt (3) $832.3 Debt to EBITDA (4) 1.1x Debt to FFO (4) 1.2x Balance Sheet Strength Debt / Ente
Slide 12: Pending Eagle Ford Acquisition
Pending Eagle Ford Acquisition 12
Slide 13: Strategic Acquisition of Aurora Oil & Gas
Strategic Acquisition of Aurora Oil & Gas - Baytex has entered into an agreement to acquire Aurora Oil & Gas - Aurora is listed on the Toronto and Australia Stock Exchanges (TSX: AEF, ASX: AUT) - Acquisition to be completed by way of a Scheme of Arrangement under Australian law - Cash offer price of
Slide 14: Strategic Rationale
Strategic Rationale Exposure to World Class Oil Resource Play Increased Scale and Diversity of Production • Diversifies asset base into the core of the • Total gross production upon closing is forecast liquids-rich Eagle Ford, one of the premier oil to be 88,000 boe/d (51% heavy oil, 35% light resou
Slide 15: Aurora Acquisition Metrics
Aurora Acquisition Metrics AUD CAD (1) Notes (1) Exchange rate (CAD/AUD) = $1.0115. Aurora Share Price $4.20 $4.25 (2) Aurora reserves based on Baytex internal estimates of Aurora reserves as Shares Outstanding (fully diluted) 458.6 at December 31, 2013 prepared by a non-independent qualified reserv
Slide 16: Baytex 2014E Pro Forma Production and FFO
Baytex 2014E Pro Forma Production and FFO Baytex Pro Forma Production (Mboe/d) 61 88-90 Funds from Operations (C$ billions) $0.7 $1.1-$1.2 Total Monetary Debt (C$ billions) $2.3 Debt to FFO 2.0x Pricing Assumptions Notes WTI US$96/bbl This pro forma analysis provides an indication of what the combin
Slide 17: Baytex Pro Forma Liquidity
Baytex Pro Forma Liquidity (C$ billions) Coupon Principal Due Pro Forma (1) Long Term Notes: Baytex Series B Debentures (US$) 6.750% Feb-2021 $0.2 Baytex Series C Debentures (C$) 6.625% Jul-2022 $0.3 Aurora Debentures (US$) 9.875% Feb-2017 $0.4 Aurora Debentures (US$) 7.500% Apr-2020 $0.3 Early Rede
Slide 18: Pro Forma Production and Reserves
Pro Forma Production and Reserves (1) Baytex Stand-Alone Baytex Pro Forma Aurora Production (2014E) = 60-62 Mboe/d Combined Production = 88 Mboe/d NGL 3% Natural Gas Light Oil Natural Gas 11% 11% 14% Light Oil NGL 13% 22% Heavy Oil Heavy Oil 75% 51% Proved + Probable Reserves (YE 2013) = 318 MMboe P
Slide 19: Key Attributes of Aurora
Key Attributes of Aurora - Material Production and High Quality Reserve Base - Substantial inventory of potential well locations to support future production growth - Reserve upside exists through additional horizons in the Austin Chalk and Upper Eagle Ford formations, downspacing and improving comp
Slide 20: Key Attributes of Aurora (continued)
Key Attributes of Aurora (continued) - Increasing Development Performance and Recovery - A subsidiary of Marathon Oil Corporation is the operator of the majority of Aurora’s Eagle Ford position - Continuous improvements in drilling and completion design have increased 30-day IP rates by approximatel
Slide 21: Eagle Ford Acreage Position
Eagle Ford Acreage Position Aurora holds 22,200 net contiguous acres in the prolific Sugarkane Field located in south Texas in the core of the liquids- rich Eagle Ford shale. The acquisition provides exposure to low-risk, repeatable, high-return assets with leading capital efficiencies. The Sugarkan
Slide 22: Eagle Ford Acreage – Sweet Spot of a World-Class Play
Eagle Ford Acreage – Sweet Spot of a World-Class Play Eagle Ford Sweet Spot EUR Map Acreage Position Amongst Top Operators • EURs exceed 500,000 barrels of oil across • Aurora’s acreage is amongst top operators most of the acreage including COP, MRO, EOG and MUR Source: Drillinginfo, Scotiabank. EUR
Slide 23: Eagle Ford – Opportunity Summary
Eagle Ford – Opportunity Summary Eagle Ford Type Log Current Development - 80,200 highly contiguous gross acres (22,200 net acres) in the most prolific area of the Eagle Ford - Lower Eagle Ford originally developed at 80-acre spacing; current development is now 60-acre spacing (volatile oil) and 40-
Slide 24: Baytex Pro Forma – Three Key Oil Resource Plays
Baytex Pro Forma – Three Key Oil Resource Plays > 80% of Baytex’s pro forma production comes from three oil plays Single Well Economics (excluding acreage acquisition costs) (1) Eagle Ford Peace River Heavy Oil Lloydminster Heavy Oil Condensate Volatile Oil Multi-Laterals Verticals Horizontals Compl
Slide 25: Profit Investment Ratio by Play
Profit Investment Ratio 0.0x 0.5x 1.0x 1.5x 2.0x 2.5x 3.0x Seal Cold Heavy Multi-Lateral - Hz SE Sask Viewfield Bakken - Hz Ante Creek Montney (75% oil) - Hz Marcellus (dry gas) - Hz Kaybob Montney Oil - Tier 1 - Hz Marcellus (SW PA, wet gas) - Hz Lloyd Area Heavy - Vt AB Bakken (east, shallow) - Hz
Slide 26: Summary of the Eagle Ford Acquisition
Summary of the Eagle Ford Acquisition - Baytex is acquiring premier acreage in the core of the Eagle Ford – one of the leading shale oil plays in the U.S. - The assets to be acquired are an excellent fit with our business model and position Baytex in another world-class oil resource play - Provides
Slide 27: Scheme of Arrangement Summary
Scheme of Arrangement Summary Scheme of Arrangement under Australian law expected to take ~125 days to complete Key Dates (1) February 6 Implementation Agreement executed March 24 Scheme of Arrangement documents drafted and finalised April 15 First Court hearing April 17 Dispatch Scheme Booklet and
Slide 28: Key Projects Overview
Key Projects Overview BAYTEX
Slide 29: Peace River Oil Sands
Peace River Oil Sands 306 net sections of oil sands leases 553 million barrels of economic contingent resource * Area Statistics Production (Q1/2014) 25,800 bbl/d 2P Reserves (YE13) (1) 114 mmbbls Drilling Inventory (2) ~ 5 years (1) 2P Reserve breakdown = 67 million barrels (primary) and 47 milli
Slide 30: Multi-Lateral Cold Horizontal Wells
Multi-Lateral Cold Horizontal Wells Reservoir Characteristics (1) Formation Bluesky Depth 600 – 700 metres Oil Quality 11 °API Average Porosity 28% Permeability 0.5 – 5.0 darcies Oil Saturation 70% Recovery Factor 5 – 7% Well Economics (1) Well Design 8-10 laterals Completed Well Cost $2.6-$3.4 MM
Slide 31: Lloydminster Heavy Oil
Lloydminster Lloydminster Heavy Oil Heavy Oil 730 net sections; 212 million barrels of economic contingent resource * Area Statistics Production (Q1/2014) 19,400 bbl/d 2P Reserves (YE13) (1) 114 mmbbls Drilling Inventory (2) ~ 6.5 years (1) Includes SAGD projects at Gemini (44 million barrels) and
Slide 32: Lloydminster Development
Lloydminster Development Vertical Wells Completed Well Cost $450,000 Production (30-day IP) 30-50 bbl/d EUR 30-50 mbbl Capital Efficiency $11,250 per bbl/d Development Cost $11.25/bbl Horizontal Wells Completed Well Cost $950,000 Production (30-day IP) 70-80 bbl/d EUR 60-80 mbbl Capital Efficiency
Slide 33: Bakken / Three Forks Development
Bakken / Three Forks Development 126 net sections; 34 million barrels of economic contingent resource * SASKATCHEWAN Bakken-Three Forks Baytex Lands Production (Q1/2014) 3,100 bbl/d 2P Reserves (YE13) 54 mmbbl NORTH DAKOTA Sheridan North Dakota Development MONTANA Divide Burke Anticline Completed
Slide 34: Bakken / Three Forks Development
Bakken / Three Forks Development • Current development predominantly in the Three Forks formation • Additional potential to develop Middle Bakken • Evolution of frac staging: initially 6 stages/well → 20 stages/well in 2011 → 30+ stages/well in 2012 and beyond • ~ 10 net wells planned for 2014 Dri
Slide 35: Thermal Projects
Thermal Projects • Targeting 10% - 15% of 2017E production from three thermal projects • Thermal provides a source of stable, low decline production Thermal Capacity Area Project Type (1) 2017E Current Status Peace River Cliffdale CSS 3,000 Module 1 (10 wells) operational; Module 2 (15 wells) produc
Slide 36: Corporate Growth Strategy
Corporate Growth Strategy BAYTEX :
Slide 37: 2014 Operating Plan – Targeting 6% Growth
2014 Operating Plan – Targeting 6% Growth 2014 Production Guidance 2014 Capital Budget and Wells Drilled Amount Wells Drilled ($ millions) (net) - $485 million capital budget Peace River • 95% of expenditures directed toward Conventional 178 36 conventional development, 5% to Stratigraphic and Servi
Slide 38: Corporate Growth Strategy
Corporate Growth Strategy Production (boe/d) Conventional Drilling Inventory Peace River Multi-laterals ~ 5 years Lloydminster Heavy Oil ~ 6.5 years North Dakota Bakken 10+ years Conventional Oil and Gas 10+ years Thermal Capacity – 2017(e) Kerrobert SAGD 2,000 bbl/d Cliffdale CSS 3,000 bbl/d Funds
Slide 39: Why Invest in Baytex
Why Invest in Baytex Superior Asset Base Income Payout Proven Track Record - Low cost development - Committed to paying a - Best-in-class balance sheet inventory – oil focus meaningful dividend - Sophisticated risk - Sector leading capital - Over $1.7 billion distributed management efficiency to sha
Slide 40: Appendix: Crude Oil Marketing
Appendix: Crude Oil Marketing
Slide 41: 2014: A Break Out Year for Canadian Heavy?
2014: A Break Out Year for Canadian Heavy? - Market conditions remain positive with the forward market indicating a WCS differential of ~ 20% for the remainder of this year (last nine months) - Positive catalysts unfolding in 2014 should contribute to sustained lower differentials and stronger heavy
Slide 42: Heavy Oil Differential – WCS and Maya
Heavy Oil Differential – WCS and Maya 42
Slide 43: Crude Oil Rail Exports
Crude Oil Rail Exports North Dakota Western Canada 800 Q4 / 2014 Projected Western Canada Rail Capacity (800 - 900 mbbl/d) 700 Mid-2014 Projected Western Canada 600 Rail Capacity (~ 600 mbbl/d) 500 Mbbl/d 400 300 200 100 0 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 Month Month 1 for North Dakot
Slide 44: Marketing - Crude by Rail
Marketing - Crude by Rail Rail a Key Component of Market Access - Trucking flexibility helps optimize value of production - Rail has become an effective vehicle for management of heavy oil differentials - Undiluted heavy oil sales provide Baytex with a sustainable competitive advantage Baytex Heavy
Slide 45: Oil Marketing Portfolio
Oil Marketing Portfolio Q2 2014 Heavy Oil Sales Portfolio WTI Financial Hedging Q2 / 2014 % Hedged 62% Fixed Price US$99.47/bbl Q3 / 2014 % Hedged 41% Fixed Price US$97.53/bbl FY 2014 % Hedged 48% Fixed Price US$98.52/bbl Percentage of hedged volumes are based on 2014 production guidance, net of roy
Slide 46: Heavy Oil Hedge Coverage
Heavy Oil Hedge Coverage Q2/2014 FY 2014 Term Pipeline Blended WCS (bbl/d) 5,000 4,750 Equivalent Heavy Production (bbl/d) 3,850 3,650 % of Gross Heavy Production 9% 8% Financial Derivatives Financial Blended WCS index (bbl/d) 2,325 2,575 % of Gross Heavy Production 5% 7% Term Rail Raw Rail – Fixed
Slide 47: Midstream Heavy Oil Fundamentals – Infrastructure Development
Midstream Heavy Oil Fundamentals – Infrastructure Development Source: Canadian Association of Petroleum Producers “Crude Oil Forecast, Markets and Pipelines Report”, June 2012. 47
Slide 48: Near-Term Pipeline Projects: Seaway and Flanagan South
Midstream Heavy Oil Fundamentals – Near-Term Pipeline Projects: Seaway and Flanagan South Source: Enbridge 48
Slide 49: U.S. Gulf Coast Heavy Oil Demand
U.S. Gulf Coast HeavyUS OilGulf Coast Heavy Oil Demand Demand • U.S. imports of Canadian heavy oil rose • Total U.S. heavy oil imports averaged to 1.69 million bbl/d in December 2013, 3.99 million bbl/d in 2013, 39% and averaged 1.55 mb/d in 2013 originated from Canada • Market penetration to U.S. C
Slide 50: Supplementary Information - Financial
Supplementary Information - Financial 50
Slide 51: Share Ownership Breakdown
Share Ownership Breakdown Ownership Breakdown Institutional 63% Retail 35% US - Retail 10% Europe/Asia - Institutional 4% Insiders 2% US - Institutional 8% Insiders 2% 100% Canada 76% U.S. 18% Canada - Retail 25% Canada - Institutional 51% Europe/Asia 4% Insiders 2% 100% Baytex shareholder base, est
Slide 52: 2014E Funds from Operations and Debt to FFO
2014E Funds from Operations (C$ mm) and Debt to FFO Heavy Oil Differential (% of WTI) 18% 23% 28% WTI (US$/bbl) $90 $710 (1.2x) $671 (1.3x) $632 (1.4x) $95 $743 (1.1x) $703 (1.2x) $661 (1.3x) $100 $776 (1.0x) $733 (1.1x) $690 (1.2x) Table assumes average production for 2014 of 61,000 boe/d (mid poin
Slide 53: 2014E Funds from Operations Sensitivities
2014E Funds from Operations Sensitivities Funds from Operations Impact (C$ Millions) With Current Without Hedges Hedges WTI +/- US$1.00/bbl 10.6 15.4 Natural Gas +/- C$0.25/mcf 3.1 3.4 Heavy Oil Differential +/- 1% 11.4 17.9 FX Rate +/- C$0.01/US$ 10.5 12.1 (1) Funds from Operations impact shown as
Slide 54: Other Commodities / FOREX Hedge Coverage
Other Commodities / FOREX Hedge Coverage Q2/2014 Q3/2014 FY 2014 Natural Gas % of Volumes Hedged at Fixed Price (1) 42% 42% 40% Average Fixed Price (US$/mmBtu) 4.15 4.15 4.17 % of Volumes Hedged Using Collars (1) 12% 12% 14% Average Collar Floor/Ceiling 3.90/4.50 3.90/4.50 3.97/4.51 Foreign Exchange
Slide 55: Capital Program Efficiency
Capital Program Efficiency 3-Year 2011 2012 2013 Average 2011-13 Capital Expenditures ($millions) Exploration and development 367.9 418.6 550.9 1,337.4 Acquisitions (net of dispositions) 148.8 (170.9) (39.1) (61.2) Total 516.6 247.7 511.8 1,276.1 Proved plus Probable Reserve Additions (mboe) Explora
Slide 56: Contact Information
Contact Information Suite 2800, Centennial Place James L. Bowzer 520 – 3rd Avenue S.W. President & Chief Executive Officer Calgary, Alberta T2P 0R3 (587) 952-3000 T: (587) 952-3000 1-800-524-5521 Rodney D. Gray www.baytexenergy.com Chief Financial Officer (587) 952-3160 Brian G. Ector Vice President