BAYTEX ANNOUNCES FOURTH QUARTER AND YEAR-END 2021 RESULTS

Baytex Energy Corp. (“Baytex”)(TSX: BTE) reports its operating and financial results. for the three months and year ended December 31, 2021 (all amounts are in Canadian dollars unless otherwise noted). “In 2021, we made a commitment to maintain capital discipline, maximize free cash flow and reduce our net debt. I am very pleased to say we delivered on all fronts with strong operational execution, record free cash flow and a significantly improved balance sheet.

With continued operating momentum and current commodity prices, we expect to generate over $550 million of free cash flow in 2022 and reach our initial $1.2 billion net debt target during the second quarter. As a result, we are announcing the next phase of our return of capital framework, which includes allocating approximately 25% of our free cash flow to share buybacks commencing in the second quarter. We are also following up our success in the Clearwater where we now have four of the top five initial rate wells drilled to date in the play,” commented Ed LaFehr, President and Chief Executive Officer.

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2021 Highlights
• Production exceeded the high end of guidance at 80,789 boe/d (82% oil and NGL) in Q4/2021 and 80,156 boe/d (82% oil and NGL) for the full-year 2021.

• Exploration and development expenditures totaled $74 million in Q4/2021, bringing aggregate spending for 2021 to $313 million, in line with guidance.
• Delivered adjusted funds flow(1) of $215 million ($0.38 per basic share) in Q4/2021 and $746 million ($1.32 per basic share) for 2021.
• Generated a record level of free cash flow(2) of $137 million ($0.24 per basic share) in Q4/2021 and $421 million ($0.75 per basic share) for 2021.
• Cash flows from operating activities was $241 million ($0.43 per basic share) in Q4/2021 and $712 million ($1.26 per basic share) for 2021.
• Reduced net debt(1) by 24% to $1.4 billion at year-end 2021, from $1.8 billion at year-end 2020.
• Drilled four of the top five wells to-date in the Clearwater play, with our two most recent wells at Peavine generating 30- day initial production rates of 921 bbl/d and 815 bbl/d, respectively.
• Reduced our GHG emissions intensity (tonnes of CO2e per boe) in 2021 by 11% over 2020 levels and have now achieved a 52% reduction, relative to our 2018 baseline.

Reserves Highlights
• Proved developed producing reserves increased by 7%, from 120 mmboe to 129 mmboe. Proved reserves total 278 mmboe (271 mmboe at year-end 2020) and proved plus probable reserves total 451 mmboe (462 mmboe at year-end 2020).
• Finding and development (“F&D”) costs, including changes in future development costs (“FDC”), were $8.20/boe for PDP reserves, $17.67/boe for 1P reserves and $24.55/boe for 2P reserves.
• Generated a PDP recycle ratio of 4.5x and a 1P recycle ratio of 2.1x based on 2021 operating netback(1) of $36.52/boe.
• At year-end 2021, the present value of our reserves, discounted at 10% before tax, is estimated to be $5.1 billion ($3.3 billion at year-end 2020). The increase is largely attributable to a higher commodity price forecast being utilized by our reserves evaluator (consultant average of approximately US$70/bbl WTI).
• Our net asset value at year-end 2021, discounted at 10% before tax, is estimated to be $6.67 per share. This is based on the estimated reserves value plus a value for undeveloped acreage, net of long-term debt and working capital.

2022 Outlook
In 2022, we expect to benefit from our diversified oil weighted portfolio and our commitment to allocate capital effectively. Our capital program is designed to generate stable production from our light and heavy oil assets in Canada and the Eagle Ford in the United States, while scaling up development in the Clearwater.

Our 2022 guidance remains unchanged as we target production of 80,000 to 83,000 boe/d with exploration and development expenditures of $400 to $450 million. Based on the forward strip(1), we expect to generate over $550 million of free cash low(2) in 2022.

  • 2022 Guidance – Exploration and development expenditures $400 – $450 million
  • Production (boe/d) 80,000 – 83,000

Operating Results
Eagle Ford and Viking Light Oil Production in the Eagle Ford averaged 30,428 boe/d (82% oil and NGL) during Q4/2021 and 30,731 boe/d for the full-year 2021. In 2021, we invested $105 million on exploration and development in the Eagle Ford and generated an operating netback(1) of $437 million. During 2021, we participated in the drilling of 67 (15.5 net) wells and brought 93 (23.1 net) wells onstream. We expect to bring approximately 14 net wells onstream in 2022.

Production in the Viking averaged 16,313 boe/d (88% oil and NGL) during Q4/2021 and 17,278 boe/d for the full-year 2021. In 2021, we invested $116 million on exploration and development in the Viking and generated an operating netback(1) of $327 million. During 2021, we participated in the drilling of 123 (121.2 net) wells and brought 116 (114.2 net) wells onstream. We expect to bring approximately 145 net wells onstream in 2022.

Heavy Oil
Our heavy oil assets at Peace River and Lloydminster (excluding our Clearwater development) produced a combined 24,217 boe/d (91% oil and NGL) during Q4/2021 and 23,579 boe/d for the full-year 2021. Our 2021 drilling program was heavily weighted to H2/2021 and included three net Bluesky wells at Peace River and 21.5 net wells at Lloydminster. In 2021, we invested $38 million on exploration and development in Peace River and Lloydminster and generated an operating netback(1) of $231 million. In 2022, we will drill approximately nine net Bluesky wells at Peace River and 37 net wells at Lloydminster.

Peace River Clearwater
We are committed to building and maintaining respectful relationships with Indigenous communities and creating opportunities for meaningful economic participation and inclusion. We have executed two strategic agreements with the Peavine Métis Settlement in the Peace River area that cover 80 sections of land directly to the south of our existing Seal operations. At the time, we identified potential for an early stage exploratory play targeting the Spirit River formation, a Clearwater formation equivalent. When combined with our legacy acreage position in northwest Alberta, we estimate that over 125 sections are highly prospective for Clearwater development.

Our 2021 appraisal program yielded exceptional results with production increasing from zero at the beginning of 2021 to over 3,000 bbl/d in January 2022. Our two eight-lateral wells (6-31 and 14-31) drilled during the fourth quarter and offsetting our highest initial rate well (11-31) generated 30-day initial production rates of 921 bbl/d and 815 bbl/d, respectively. With the performance of these two wells, our Peavine development has now yielded four of the top five initial rate Clearwater wells drilled-to date across the entire play. In addition, our eight lateral appraisal well (14-11) drilled on our northern acreage generated a very economic initial production rate (through its first twenty-five days of production) of approximately 120 bbl/d, consistent with our expectations. On our Seal legacy lands, we drilled a successful exploration well in late 2021 with a 30-day initial production rate of 147 bbl/d and we have a follow-up well scheduled for H2/2022.

Our first quarter 2022 drilling program is underway with two rigs that will see ten wells drilled on our Peavine lands. Importantly, we have successfully executed our first three extended reach horizontal multi-lateral wells at Peavine, which are utilized to provide appropriate set-backs to residents and environmentally sensitive areas. In aggregate, we expect to bring 18 wells onstream this year. To-date, we have de-risked 20 sections of land and pending further success, the play holds the potential for greater than 200 locations. The Clearwater generates strong economics with the ability to grow organically while enhancing our free cash flow profile.

Pembina Area Duvernay Light Oil
Production in the Pembina Duvernay averaged 2,668 boe/d (83% oil and NGL) during Q4/2021 and 2,008 boe/d for the full-year The increased volumes during the fourth quarter reflect two wells brought onstream in October 2021. As a follow-up to our 2021 program, we are currently drilling a three-well pad which is expected to be onstream in Q3/2022.

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