Oil and Gas Properties

12 Months Ended

Dec. 31, 2020

Property, plant and equipment [abstract]

OIL AND GAS PROPERTIES


	Cost		Accumulated depletion		Net book value
Balance, December 31, 2018	$	10,744,533	$	(4,926,644)	$	5,817,889
Capital expenditures	549,343		—		549,343

Property acquisitions	2,636		—		2,636
Transfers from exploration and evaluation assets (note 5)	16,204		—		16,204
Change in asset retirement obligations (note 10)	23,894		—		23,894
Divestitures	(2,069)		1,690		(379)
Property swaps	1,773		—		1,773
Impairment	—		(180,000)		(180,000)
Foreign currency translation	(208,017)		89,813		(118,204)
Depletion	—		(725,267)		(725,267)
Balance, December 31, 2019	$	11,128,297	$	(5,740,408)	$	5,387,889
Capital expenditures	275,850		—		275,850


Transfers from exploration and evaluation assets (note 5)	8,585		—		8,585
Change in asset retirement obligations (note 10)	94,994		—		94,994

Property swaps	(1,190)		178		(1,012)
Impairments	—		(2,247,162)		(2,247,162)
Foreign currency translation	(82,860)		120,123		37,263
Depletion	—		(478,859)		(478,859)
Balance, December 31, 2020	$	11,423,676	$	(8,346,128)	$	3,077,548

Baytex recorded total impairments related to oil and gas properties of $2.2 billion for the year ended December 31, 2020 and $180.0 million for the year ended December 31, 2019.

At March 31, 2020, the Company identified indicators of impairment for each of its six CGUs due to a significant decline in forecasted commodity prices. The recoverable amount was not sufficient to support the carrying amount which resulted in an impairment of $2.6 billion recorded at March 31, 2020. The recoverable amount of each CGU was based on its FVLCD which was estimated using a discounted cash flow model of proved plus probable cash flows from an independent reserve report prepared as at December 31, 2019 and was adjusted for operations between December 31, 2019 and March 31, 2020. The after-tax discount rates applied to the cash flows were between 8% and 14%.

The recoverable amount of the Company's CGUs were calculated at March 31, 2020 using the following benchmark reference prices for the years 2020 to 2029 adjusted for commodity differentials specific to the Company. The prices and costs subsequent to 2029 have been adjusted for inflation at an annual rate of 2%.


	2020	2021	2022	2023	2024	2025	2026	2027	2028	2029
WTI crude oil (US$/bbl)	29.17	40.45	49.17	53.28	55.66	56.87	58.01	59.17	60.35	61.56
WCS heavy oil (CA$/bbl)	19.21	34.65	46.34	51.25	54.28	55.72	56.96	58.22	59.51	60.82
LLS crude oil (US$/bbl)	32.17	43.80	52.55	56.68	59.10	60.35	61.52	62.72	63.94	65.19
Edmonton par oil (CA$/bbl)	29.22	46.85	59.27	65.02	68.43	69.81	71.24	72.70	74.19	75.71
Henry Hub gas (US$/mmbtu)	2.10	2.58	2.79	2.86	2.93	3.00	3.07	3.13	3.19	3.25
AECO gas (CA$/mmbtu)	1.74	2.20	2.38	2.45	2.53	2.60	2.66	2.72	2.79	2.85
Exchange rate (CAD/USD)	1.41	1.37	1.34	1.34	1.34	1.33	1.33	1.33	1.33	1.33

The following table demonstrates the sensitivity of the estimated recoverable amount of the Company's CGUs to reasonably possible changes in key assumptions inherent in the estimate.


	Recoverable amount		Impairment		Change in discount rate of 1%		Change in oil price of $2.50/bbl		Change in gas price of $0.25/mcf
Conventional CGU	$	37,444	$	41,000	$	3,000	$	3,500	$	8,500
Peace River CGU	109,631		345,000		9,500		53,500		3,000
Lloydminster CGU	227,967		470,000		25,000		69,500		—
Duvernay CGU	61,197		5,000		5,500		9,500		1,500
Viking CGU	962,134		915,000		57,000		123,000		4,000
Eagle Ford CGU	1,576,423		812,488		120,750		141,500		32,000
	$	2,974,796	$	2,588,488	$	220,750	$	400,500	$	49,000

At December 31, 2020, the Company estimated the recoverable amount of each of its six CGUs due to the volatility in commodity prices during the year and a reduction in future development costs per well for the Viking and Eagle Ford CGUs. The recoverable amount supported the carrying amount for the Conventional, Peace River, Lloydminster, and Duvernay CGUs and no impairment or impairment reversal was recorded. The recoverable amount for the Viking and Eagle Ford CGUs exceeded their carrying amounts which resulted in an impairment reversal of $341.3 million recorded at December 31, 2020. The recoverable amount for each CGU was based on its FVLCD which was estimated using a discounted cash flow model of proved plus probable cash flows from an independent reserve report prepared as at December 31, 2020. The after-tax discount rates applied to the cash flows were between 10% and 17%.

The recoverable amount of the Company's CGUs were calculated at December 31, 2020 using the following benchmark reference prices for the years 2021 to 2030 adjusted for commodity differentials specific to the Company. The prices and costs subsequent to 2030 have been adjusted for inflation at an annual rate of 2%.


	2021	2022	2023	2024	2025	2026	2027	2028	2029	2030
WTI crude oil (US$/bbl)	47.17	50.17	53.17	54.97	56.07	57.19	58.34	59.50	60.69	61.91
WCS heavy oil (CA$/bbl)	44.63	48.18	52.10	54.10	55.19	56.29	57.42	58.57	59.74	60.93
LLS crude oil (US$/bbl)	49.50	52.85	55.87	57.69	58.82	59.97	61.15	62.34	63.56	64.83
Edmonton par oil (CA$/bbl)	55.76	59.89	63.48	65.76	67.13	68.53	69.95	71.40	72.88	74.34
Henry Hub gas (US$/mmbtu)	2.83	2.87	2.90	2.96	3.02	3.08	3.14	3.20	3.26	3.33
AECO gas (CA$/mmbtu)	2.78	2.70	2.61	2.65	2.70	2.76	2.81	2.87	2.92	2.98
Exchange rate (CAD/USD)	1.30	1.31	1.31	1.31	1.31	1.31	1.31	1.31	1.31	1.31

The following table demonstrates the sensitivity of the estimated recoverable amount of the Company's CGUs to reasonably possible changes in key assumptions inherent in the estimate.


	Recoverable amount		Impairment reversal		Change in discount rate of 1%		Change in oil price of $2.50/bbl		Change in gas price of $0.25/mcf
Conventional CGU	$	54,265	$	—	$	1,000	$	3,000	$	9,000
Peace River CGU	104,225		—		1,000		49,500		3,000
Lloydminster CGU	212,979		—		7,000		57,500		500
Duvernay CGU	70,491		—		5,500		12,000		1,500
Viking CGU	1,026,026		116,000		34,500		106,500		5,000
Eagle Ford CGU	1,609,562		225,326		91,600		157,500		38,400
	$	3,077,548	$	341,326	$	140,600	$	386,000	$	57,400

At December 31, 2019, the Company identified indicators of impairment for its Peace River CGU due to a sustained decline in Canadian heavy oil prices and a reduction in planned exploration and development expenditures related to thermal properties in the Peace River CGU. The recoverable amount of the Peace River CGU was based on its VIU which was estimated using a discounted cash flow model using proved plus probable cash flows from an independent reserve report prepared as at December 31, 2019 and an after-tax discount rate of 11%. The recoverable amount was not sufficient to support the carrying amount of the CGU which resulted in an impairment of $180.0 million recorded as at December 31, 2019. There were no indicators of impairment or impairment reversal for the remaining CGUs at December 31, 2019.