EX-99.12 13 a2016asc9329912.htm EXHIBIT 99.12
Baytex Energy Corp.
Supplemental Disclosures about Extractive Activities - Oil and Gas (unaudited)
December 31, 2016
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 Reserves 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, 2016 were as follows:

| Canada | United States | Total
| Crude Oil & NGL |  | Bitumen |  | Natural Gas |  | Crude Oil & NGL |  | Bitumen |  | Natural Gas |  | Crude Oil & NGL |  | Bitumen |  | Natural Gas |
| (mbbl) |  | (mbbl) |  | (mmcf) |  | (mbbl) |  | (mbbl) |  | (mmcf) |  | (mbbl) |  | (mbbl) |  | (mmcf) |
Net proved reserves |  |  |  |  |  |  |  |  |
December 31, 2014 | 65,709 |  | 14,995 |  | 69,362 |  | 94,869 |  | — |  | 173,339 |  | 160,578 |  | 14,995 |  | 242,701 |
Revisions of previous estimates | (17,060 | ) | (2,128 | ) | (3,611 | ) | (7,005 | ) | — |  | (8,028 | ) | (24,065 | ) | (2,128 | ) | (11,639 | )
Improved recovery | 549 |  | — |  | 12 |  | — |  | — |  | — |  | 549 |  | — |  | 12 |
Purchases | 788 |  | — |  | — |  | — |  | — |  | — |  | 788 |  | — |  | — |
Extensions and discoveries | 628 |  | — |  | 2,460 |  | 12,620 |  | — |  | 24,457 |  | 13,248 |  | — |  | 26,917 |
Production | (10,419 | ) | (811 | ) | (12,640 | ) | (8,471 | ) | — |  | (13,701 | ) | (18,890 | ) | (811 | ) | (26,341 | )
Sales of minerals in place | (920 | ) | — |  | — |  | — |  | — |  | — |  | (920 | ) | — |  | — |
December 31, 2015 | 39,275 |  | 12,056 |  | 55,583 |  | 92,013 |  | — |  | 176,067 |  | 131,288 |  | 12,056 |  | 231,650 |
Revisions of previous estimates | (14,723 | ) | (5,743 | ) | 31,357 |  | (13,650 | ) | — |  | (36,237 | ) | (28,373 | ) | (5,743 | ) | (4,880 | )
Improved recovery | 198 |  | — |  | 1 |  | — |  | — |  | — |  | 198 |  | — |  | 1 |
Purchases | 22 |  | — |  | — |  | — |  | — |  | — |  | 22 |  | — |  | — |
Extensions and discoveries | 33 |  | — |  | 53 |  | 14,727 |  | — |  | 27,018 |  | 14,760 |  | — |  | 27,071 |
Production | (7,453 | ) | (555 | ) | (13,070 | ) | (7,553 | ) | — |  | (13,810 | ) | (15,006 | ) | (555 | ) | (26,880 | )
Sales of minerals in place | (670 | ) | — |  | (1,850 | ) | (313 | ) | — |  | (224 | ) | (983 | ) | — |  | (2,074 | )
December 31, 2016 | 16,682 |  | 5,758 |  | 72,074 |  | 85,224 |  | — |  | 152,814 |  | 101,906 |  | 5,758 |  | 224,888 |
Net proved developed reserves |  |  |  |  |  |  |  |  |
End of year 2014 | 40,931 |  | 8,157 |  | 48,321 |  | 32,227 |  | — |  | 50,768 |  | 73,158 |  | 8,157 |  | 99,089 |
End of year 2015 | 26,449 |  | 7,422 |  | 37,264 |  | 31,790 |  | — |  | 58,498 |  | 58,239 |  | 7,422 |  | 95,762 |
End of year 2016 | 15,103 |  | 880 |  | 33,120 |  | 31,374 |  | — |  | 60,009 |  | 46,477 |  | 880 |  | 93,129 |

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Baytex Energy Corp.
Supplemental Disclosures about Extractive Activities - Oil and Gas (unaudited)
December 31, 2016
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 reserves and production volumes estimated by Baytex's independent reserves evaluators, Sproule Unconventional Limited and Ryder Scott Company, L.P. The methodology used in calculating our price and cost assumptions for the standardized measure of discounted future net cash flows for reserves 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 2016 and 2015.

| Commodity Pricing
| 2016 |  | 2015 |
WTI crude (US$/bbl) | $ | 42.75 |  | $ | 50.28 |
Canadian Light Sweet (Cdn$/bbl) | $ | 52.08 |  | $ | 58.81 |
Western Canadian Select (WCS)(1) (Cdn$/bbl) | $ | 38.13 |  | $ | 46.83 |
AECO-C spot price (Cdn$/mmbtu) | $ | 2.17 |  | $ | 2.68 |
Henry Hub (US$/mmbtu) | $ | 2.55 |  | $ | 2.59 |
Exchange rate (US$/Cdn$) | 0.7350 |  | 0.7870 |

(1) Price used in the preparation of heavy oil and bitumen reserves in Canada.
The standardized measure of discounted future net cash flows relating to net proved petroleum and natural gas reserves are as follows:

| Canada | United States | Total
(thousands of Canadian dollars) | 2016 |  | 2015 |  | 2016 |  | 2015 |  | 2016 |  | 2015 |
Future cash inflows | $ | 625,763 |  | $ | 1,764,415 |  | $ | 3,823,293 |  | $ | 4,534,031 |  | $ | 4,449,056 |  | $ | 6,298,446 |
Future production costs | (356,876 | ) | (949,459 | ) | (1,444,893 | ) | (1,495,597 | ) | (1,801,769 | ) | (2,445,056 | )
Future development costs | (119,549 | ) | (275,877 | ) | (1,250,620 | ) | (1,400,851 | ) | (1,370,169 | ) | (1,676,728 | )
Future income taxes | — |  | — |  | (17,018 | ) | (12,147 | ) | (17,018 | ) | (12,147 | )
Future net cash flows | 149,338 |  | 539,079 |  | 1,110,762 |  | 1,625,436 |  | 1,260,100 |  | 2,164,515 |
Deduct: 10% annual discount factor | (35,103 | ) | (142,292 | ) | (558,359 | ) | (770,705 | ) | (593,462 | ) | (912,997 | )
Standardized measure | $ | 114,235 |  | $ | 396,787 |  | $ | 552,403 |  | $ | 854,731 |  | $ | 666,638 |  | $ | 1,251,518 |

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Baytex Energy Corp.
Supplemental Disclosures about Extractive Activities - Oil and Gas (unaudited)
December 31, 2016
Reconciliation of Changes in Standardized Measure of Future Net Cash Flows Discounted at 10% per Year Relating to Net Proved Petroleum and Natural Gas Reserves

As at December 31, 2016 (thousands of Canadian dollars) | Canada |  | United States |  | Total |
Balance, beginning of year | $ | 396,787 |  | $ | 854,731 |  | $ | 1,251,518 |
Sales, net of production costs | (110,048 | ) | (241,604 | ) | (351,652 | )
Net change in prices and production costs related to future production | (175,100 | ) | (269,064 | ) | (444,164 | )
Changes in previously estimated production costs incurred during the period | 105,521 |  | 126,736 |  | 232,257 |
Development costs incurred during the period | 21,184 |  | 198,912 |  | 220,096 |
Extensions, discoveries and improved recovery, net of related costs | 1,260 |  | 63,327 |  | 64,587 |
Revisions of previous quantity estimates | (139,081 | ) | (248,444 | ) | (387,525 | )
Sales of reserves in place | (13,501 | ) | (3,445 | ) | (16,946 | )
Purchases of reserves in place | 263 |  | — |  | 263 |
Accretion of discount | 27,039 |  | 71,191 |  | 98,230 |
Net change in income taxes | — |  | 63 |  | 63 |
Balance, end of year | $ | 114,324 |  | $ | 552,403 |  | $ | 666,727 |

As at December 31, 2015 (thousands of Canadian dollars) | Canada |  | United States |  | Total |
Balance, beginning of year | $ | 1,917,817 |  | $ | 2,195,351 |  | $ | 4,113,168 |
Sales, net of production costs | (215,008 | ) | (316,975 | ) | (531,983 | )
Net change in prices and production costs related to future production | (1,301,100 | ) | (2,643,661 | ) | (3,944,761 | )
Changes in previously estimated production costs incurred during the period | 350,453 |  | 339,085 |  | 689,538 |
Development costs incurred during the period | 66,888 |  | 449,789 |  | 516,677 |
Extensions, discoveries and improved recovery, net of related costs | 12,799 |  | 156,004 |  | 168,803 |
Revisions of previous quantity estimates | (882,249 | ) | 144,663 |  | (737,586 | )
Sales of reserves in place | (12,765 | ) | — |  | (12,765 | )
Purchases of reserves in place | 2,701 |  | — |  | 2,701 |
Accretion of discount | 167,972 |  | 218,267 |  | 386,239 |
Net change in income taxes | 289,278 |  | 312,209 |  | 601,487 |
Balance, end of year | $ | 396,786 |  | $ | 854,732 |  | $ | 1,251,518 |

Capitalized Costs Relating to Petroleum and Natural Gas Producing Activities

As at December 31, 2016 (thousands of Canadian dollars) | Canada |  | United States |  | Total |
Proved properties | $ | 3,446,133 |  | $ | 4,317,904 |  | $ | 7,764,037 |
Unproved properties | 118,224 |  | 190,238 |  | 308,462 |
Total capital costs | 3,564,357 |  | 4,508,142 |  | 8,072,499 |
Accumulated depletion and depreciation | (1,991,842 | ) | (1,620,026 | ) | (3,611,868 | )
Net capitalized costs | $ | 1,572,515 |  | $ | 2,888,116 |  | $ | 4,460,631 |

As at December 31, 2015 (thousands of Canadian dollars) | Canada |  | United States |  | Total |
Proved properties | $ | 3,436,374 |  | $ | 4,147,907 |  | $ | 7,584,281 |
Unproved properties | 119,520 |  | 459,449 |  | 578,969 |
Total capital costs | 3,555,894 |  | 4,607,356 |  | 8,163,250 |
Accumulated depletion and depreciation | (1,564,255 | ) | (1,345,851 | ) | (2,910,106 | )
Net capitalized costs | $ | 1,991,639 |  | $ | 3,261,505 |  | $ | 5,253,144 |

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Baytex Energy Corp.
Supplemental Disclosures about Extractive Activities - Oil and Gas (unaudited)
December 31, 2016
Costs Incurred in Petroleum and Natural Gas Property Acquisition, Exploration and Development Activities

For year ended December 31, 2016 (thousands of Canadian dollars) | Canada |  | United States |  | Total |
Property acquisition costs |  |  |
Proved properties | $ | 54 |  | $ | — |  | $ | 54 |
Unproved properties | 102 |  | — |  | 102 |
Property dispositions | (9,039 | ) | (54,237 | ) | (63,276 | )
Development costs(1) | 21,184 |  | 198,910 |  | 220,094 |
Exploration costs (2) | 4,689 |  | — |  | 4,689 |
Total | $ | 16,990 |  | $ | 144,673 |  | $ | 161,663 |

For year ended December 31, 2015 (thousands of Canadian dollars) | Canada |  | United States |  | Total |
Property acquisition costs |  |  |
Proved properties | $ | 420 |  | $ | 132 |  | $ | 552 |
Unproved properties | 1,813 |  | — |  | 1,813 |
Property dispositions | (592 | ) | (125 | ) | (717 | )
Development costs(1) | 66,888 |  | 449,789 |  | 516,677 |
Exploration costs (2) | 4,362 |  | — |  | 4,362 |
Total | $ | 72,891 |  | $ | 449,796 |  | $ | 522,687 |

(1) Development and facilities capital expenditures.
(2) Cost of geological and geophysical capital expenditures and drilling costs for exploratory wells.
Results of Operations for Producing Activities

For year ended December 31, 2016 (thousands of Canadian dollars except per boe amounts) | Canada |  | United States |  | Total |
Petroleum and natural gas revenues, net of royalties | $ | 261,912 |  | $ | 340,067 |  | $ | 601,979 |
Less: |  |  |
Operating costs, production and mineral taxes | 142,242 |  | 98,463 |  | 240,705 |
Transportation and blending expense | 37,879 |  | — |  | 37,879 |
Depreciation and depletion | 214,747 |  | 293,562 |  | 508,309 |
Operating income | (132,956 | ) | (51,958 | ) | (184,914 | )
Income taxes | (6,886 | ) | (1,156 | ) | (8,042 | )
Results of operations (1) | $ | (126,070 | ) | $ | (50,802 | ) | $ | (176,872 | )
Depletion rate per net boe | 21.08 |  | 29.79 |  | 25.36 |

For year ended December 31, 2015 (thousands of Canadian dollars except per boe amounts) | Canada |  | United States |  | Total |
Petroleum and natural gas revenues, net of royalties | $ | 453,781 |  | $ | 426,218 |  | $ | 879,999 |
Less: |  |  |
Operating costs, production and mineral taxes | 210,945 |  | 109,242 |  | 320,187 |
Transportation and blending expense | 80,957 |  | — |  | 80,957 |
Depreciation and depletion | 284,011 |  | 377,847 |  | 661,858 |
Operating income | (122,132 | ) | (60,871 | ) | (183,003 | )
Income taxes | 6,961 |  | 1,946 |  | 8,907 |
Results of operations (1) | $ | (129,093 | ) | $ | (62,817 | ) | $ | (191,910 | )
Depletion rate per net boe | 21.30 |  | 35.13 |  | 27.47 |

(1) Excludes corporate overhead and interest costs.
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