EX-99.1 2 asc932.htm EX-99.1 SUPPLEMENTAL DISCLOSURES ABOUT EXTRACTIVE ACTIVITIES_ OIL A ASC 932
Baytex Energy Corp.    
Supplemental Disclosures about Extractive Activities - Oil and Gas (unaudited)
December 31, 2012



The following disclosures have been prepared by Baytex Energy Corp. (“Baytex” or the “Company”) in accordance with Accounting Standards Codification 932 “Extractive Activities - Oil & Gas” (“ASC 932”) issued by the Financial Accounting Standards Board.

Petroleum and Natural Gas Reserve Information

Proved petroleum and natural gas reserves are the estimated quantities of crude oil, natural gas and natural gas liquids (“NGL”) that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions.

Proved developed petroleum and natural gas reserves are reserves that can be expected to be recovered through existing wells with existing equipment and operating methods, which may require future expenditures.

Proved undeveloped petroleum and natural gas reserves are reserves that are expected to be recovered from known accumulations where a future expenditure is required.

Reserves are estimated quantities of crude oil, NGL and natural gas anticipated from geological and engineering data to be recoverable from known accumulations, from a given date forward, by known technology, under existing operating conditions and considered to be economic at average commodity prices based upon the prior 12-month period. Estimates of petroleum and natural gas reserves are subject to uncertainty and will change as additional information regarding the producing fields and technology becomes available and as future economic conditions change. Net reserves presented in this section represent the Company's working interest and overriding royalty share of the gross remaining reserves, after deduction of any crown, freehold and overriding royalties. Such royalties are subject to change by legislation or regulation and can also vary depending on production rates, selling prices and timing of initial production.

The changes in Baytex's net proved crude oil and NGL and natural gas reserves under constant prices and costs for the two-year period ended December 31, 2012 were as follows:

 
Canada
United States
Total
 
Crude
Oil & NGL

Natural
Gas

Crude
Oil & NGL

Natural
Gas

Crude
Oil & NGL

Natural
Gas

 
(mbbl)

(bcf)

(mbbl)

(bcf)

(mbbl)

(bcf)

Net proved reserves
 
 
 
 
 
 
December 31, 2010
99,517

58,113

6,374

4,374

105,891

62,487

Revisions of previous estimates
4,694

853

10,384

5,297

15,078

6,150

Improved recovery
1,548

—

—

—

1,548

—

Purchases
5,457

6,983

—

—

5,457

6,983

Extensions and discoveries
4,242

9,457

1,001

—

5,243

9,457

Production
(11,891
)
(14,390
)
(397
)
(15
)
(12,288
)
(14,405
)
Sales of minerals in place
(557
)
(228
)
—

—

(557
)
(228
)
December 31, 2011
103,010

60,788

17,362

9,656

120,372

70,444

Revisions of previous estimates
(3,870
)
(5,940
)
7,968

4,366

4,098

(1,574
)
Improved recovery
227

—

—

—

227

—

Purchases
737

—

—

—

737

—

Extensions and discoveries
5,333

7,066

912

129

6,245

7,195

Production
(14,029
)
(13,187
)
(611
)
(20
)
(14,640
)
(13,207
)
Sales of minerals in place
(14
)
(16
)
(9,680
)
(5,534
)
(9,694
)
(5,550
)
December 31, 2012
91,394

48,711

15,951

8,597

107,345

57,308

Net proved developed reserves
 
 
 
 
 
 
End of year 2010
47,769

52,965

1,913

122

49,682

53,087

End of year 2011
51,174

47,528

3,345

137

54,519

47,665

End of year 2012
48,017

35,875

4,021

1,951

52,038

37,826




Baytex Energy Corp.    
Supplemental Disclosures about Extractive Activities - Oil and Gas (unaudited)
December 31, 2012



Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Petroleum and Natural Gas Reserves

The following information has been developed utilizing procedures prescribed by ASC 932, as updated by Accounting Standards Update 2010-03 “Oil and Gas Reserve Estimation and Disclosures”, and based on crude oil, NGL and natural gas reserve and production volumes estimated by Baytex's independent reserves evaluator, Sproule Associates Limited. The methodology used in calculating our price and cost assumptions for the standardized measure of discounted future net cash flows for reserve estimation is based upon the average first-day-of-the-month prices during the year.

Future production and development costs are based on forecast price assumptions and assume the continuation of existing economic, operating and regulatory conditions. Future income taxes are calculated by applying statutory income tax rates to future pre-tax cash flows after provision for the tax cost of the petroleum and natural gas properties based upon existing laws and regulations. A 10% discount factor was applied to the future net cash flows.

The information contained in the following table should not be considered as representative of realistic assessments of future cash flows, nor should the standardized measure of discounted future net cash flows be viewed as representative of the fair market value of Baytex's petroleum and natural gas properties. Management does not rely upon the following information in making investment and operating decisions. Such decisions are based upon a wide range of factors, including estimates of probable as well as proved reserves, and varying price and cost assumptions considered more representative of a range of possible economic conditions that may be anticipated. The prescribed discount rate of 10% may not appropriately reflect interest rates.

The computation of the standardized measure of discounted future net cash flows relating to proved oil and natural gas reserves was based on an unweighted arithmetic average of the first-day-of-the-month price for each month in 2011 and 2012.

 
Commodity Pricing
 
2012

2011

WTI crude (US$/bbl)
$
94.71

$
96.13

Edmonton par (Cdn$/bbl)
$
87.90

$
96.98

Heavy oil(1) (Cdn$/bbl)
$
75.19

$
71.70

AECO-C spot price (Cdn$/mmbtu)
$
2.37

$
4.15

Henry Hub (US$/mmbtu)
$
2.75

$
3.77

Exchange rate (Cdn$/US$)
0.9990

0.9842


(1) Heavy oil pricing for 2012 refers to Western Canada Select reference price (2011 - Hardisty Heavy).

The standardized measure of discounted future net cash flows relating to net proved oil, NGL and natural gas reserves are as follows:

 
             Canada
        United States
Total
(thousands of Canadian dollars)
2012

2011

2012

2011

2012

2011

Future cash inflows
$
5,956,639

$
7,536,879

$
1,111,321

$
1,496,671

$
7,067,960

$
9,033,550

Future production costs
(2,206,149
)
(2,393,823
)
(338,396
)
(501,840
)
(2,544,545
)
(2,895,663
)
Future development costs
(803,658
)
(838,032
)
(314,556
)
(300,471
)
(1,118,214
)
(1,138,503
)
Future income taxes
(403,538
)
(787,074
)
(173,864
)
(197,576
)
(577,402
)
(984,650
)
Future net cash flows
2,543,294

3,517,950

284,505

496,784

2,827,799

4,014,734

Deduct:
10% annual discount factor
(815,734
)
(1,219,240
)
(171,060
)
(276,196
)
(986,794
)
(1,495,436
)
Standardized measure
$
1,727,560

$
2,298,710

$
113,445

$
220,588

$
1,841,005

$
2,519,298




Baytex Energy Corp.    
Supplemental Disclosures about Extractive Activities - Oil and Gas (unaudited)
December 31, 2012



Reconciliation of Changes in Standardized Measure of Future Net Cash Flows Discounted at 10% per Year Relating to Proved Petroleum and Natural Gas Reserves

As at December 31, 2012
(thousands of Canadian dollars)
Canada

United States

Total

Balance, beginning of year
$
2,298,710

$
220,588

$
2,519,298

Sales, net of production costs
(634,315
)
(34,285
)
(668,600
)
Net change in prices and production costs related to future production
(267,076
)
(39,700
)
(306,776
)
Changes in previously estimated production costs incurred during the period
155,924

211,792

367,716

Extensions, discoveries and improved recovery, net of related costs
77,179

8,488

85,667

Revisions of previous quantity estimates
(356,809
)
(136,589
)
(493,398
)
Sales of reserves in place
(244
)
(135,316
)
(135,560
)
Purchases of reserves in place
8,384

—

8,384

Accretion of discount
226,413

25,540

251,953

Net change in income taxes
219,394

(7,073
)
212,321

Balance, end of year
$
1,727,560

$
113,445

$
1,841,005


As at December 31, 2011
(thousands of Canadian dollars)
Canada

United States

Total

Balance, beginning of year
$
1,863,962

$
92,226

$
1,956,188

Sales, net of production costs
(675,031
)
(25,135
)
(700,166
)
Net change in prices and production costs related to future production
456,201

47,057

503,258

Changes in previously estimated production costs incurred during the period
(242,908
)
(182,882
)
(425,790
)
Extensions, discoveries and improved recovery, net of related costs
321,812

25,693

347,505

Revisions of previous quantity estimates
207,899

262,588

470,487

Sales of reserves in place
(27,669
)
—

(27,669
)
Purchases of reserves in place
279,744

—

279,744

Accretion of discount
210,932

23,123

234,055

Net change in income taxes
(96,232
)
(22,082
)
(118,314
)
Balance, end of year
$
2,298,710

$
220,588

$
2,519,298


Capitalized Costs Relating to Petroleum and Natural Gas Producing Activities

As at December 31, 2012
(thousands of Canadian dollars)
Canada

United States

Total

Proved properties
$
2,568,719

$
189,590

$
2,758,309

Unproved properties
200,439

39,576

240,015

Total capital costs
2,769,158

229,166

2,998,324

Accumulated depletion and depreciation
(705,198
)
(15,535
)
(720,733
)
Net capitalized costs
$
2,063,960

$
213,631

$
2,277,591


As at December 31, 2011
(thousands of Canadian dollars)
Canada

United States

Total

Proved properties
$
2,237,126

$
234,293

$
2,471,419

Unproved properties
76,592

53,182

129,774

Total capital costs
2,313,718

287,475

2,601,193

Accumulated depletion and depreciation
(424,920
)
(14,339
)
(439,259
)
Net capitalized costs
$
1,888,798

$
273,136

$
2,161,934




Baytex Energy Corp.    
Supplemental Disclosures about Extractive Activities - Oil and Gas (unaudited)
December 31, 2012



Costs Incurred in Petroleum and Natural Gas Property Acquisition, Exploration and Development Activities

For year ended December 31, 2012
(thousands of Canadian dollars)
Canada

United States

Total

Property acquisition costs
 
 
 
Proved properties
$
8,023

$
247

$
8,270

Unproved properties
125,259

10,513

135,772

Property dispositions
(4,363
)
(310,615
)
(314,978
)
Development costs
167,926

238,665

406,591

Exploration costs (3)
5,660

6,374

12,034

Total
$
302,505

$
(54,816
)
$
247,689


For year ended December 31, 2011
(thousands of Canadian dollars)
Canada

United States

Total

Property acquisition costs (1)
 
 
 
Proved properties
$
162,725

$
502

$
163,227

Unproved properties
30,288

2,655

32,943

Property dispositions
(47,396
)
—

(47,396
)
Development costs (2)
284,711

74,033

358,744

Exploration costs (3)
5,672

3,432

9,104

Total
$
436,000

$
80,622

$
516,622

(1) Acquisitions are net of disposition of properties.
(2) Represents development and facilities capital expenditures.
(3) Represents cost of geological and geophysical capital expenditures and drilling costs for exploratory wells.

Results of Operations for Producing Activities

For year ended December 31, 2012
(thousands of Canadian dollars except per boe amounts)
Canada

United States

Total

Petroleum and natural gas revenues, net of royalties
$
979,674

$
45,275

$
1,024,949

Less:
 
 
 
Operating costs, production and mineral taxes
221,384

10,991

232,375

Transportation expense
207,240

—

207,240

Depreciation and depletion
283,370

14,427

297,797

Operating income (loss)
267,680

19,857

287,537

Income taxes
—

10,162

10,162

Results of operations (1)
$
267,680

$
9,695

$
277,375

Depletion rate per net boe
14.95

18.13

15.08


For year ended December 31, 2011
(thousands of Canadian dollars except per boe amounts)
Canada

United States

Total

Petroleum and natural gas revenues, net of royalties
$
1,065,984

$
30,658

$
1,096,642

Less:
 
 
 
Operating costs, production and mineral taxes
203,654

5,523

209,177

Transportation expense
249,850

—

249,850

Depreciation and depletion
239,271

9,197

248,468

Operating income (loss)
373,209

15,938

389,147

Income taxes
—

—

—

Results of operations (1)
$
373,209

$
15,938

$
389,147

Depletion rate per net boe
13.43

18.80

13.57


(1) Excludes corporate overhead and interest costs.