Baytex Energy Reports To TSE Update Request.CALGARY Calgary (kăl`gərē), city (1991 pop. 710,677), S Alta., Canada, at the confluence of the Bow and Elbow rivers. The largest city in Alberta and the fastest-growing major city in Canada, Calgary is a corporate, transportation, and financial , ALBERTA--(BUSINESS WIRE)--June 4, 1998--Baytex Energy Ltd.(TSE See Tokyo Stock Exchange. TSE 1. See Tokyo Stock Exchange (TSE). 2. See Toronto Stock Exchange (TSE). :BTE.A.) (Alberta Stock Exchange Alberta Stock Exchange See Canadian Venture Exchange (CDNX). :BTE.A.) At the request of The Toronto Stock Exchange Toronto Stock Exchange (TSE) Canada's largest stock exchange, trading approximately 1,200 company stocks and 33 options. , Baytex Energy Ltd. ("the Corporation") has been asked to issue a press release commenting on the recent weakness of its listed securities Listed Security Securities that have been accepted for trading purposes by a recognized and regulated exchange. Notes: Listed securities have the advantage of higher liquidity within a regulated environment. . Growth in the First Quarter 1998 was impaired as a result of low oil prices:
Reported cash flow for first quarter $0.32 Per share
Oil prices realized in the first quarter
were 47 percent lower than first quarter 1997 resulting in a cash
flow decrease of $0.21 Per share
Shut-in production during the first
quarter resulted in a cash flow
decrease of $0.08 Per share
Non-execution of an anticipated
acquisition resulted in a cash
flow decrease of $0.13 Per share
-----
Budgeted first quarter cash flow $0.74 Per share
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-----
The drop in cash flow per share was directly attributable to the collapse of oil prices and lower than expected production rates. A business decision was made by the Corporation to defer de·fer 1 v. de·ferred, de·fer·ring, de·fers v.tr. 1. To put off; postpone. 2. To postpone the induction of (one eligible for the military draft). v.intr. development of the Carruthers Carruthers refers to:
See also: favor capital expenditure projects targeting light oil and liquids rich natural gas. This diversion A turning aside or altering of the natural course or route of a thing. The term is chiefly applied to the unauthorized change or alteration of a water course to the prejudice of a lower riparian, or to the unauthorized use of funds. of funds proved successful as the Corporation was able to build a 16 mmcf/d gas plant at Alder alder (ôl`dər), name for deciduous trees and shrubs of the genus Alnus of the family Betulaceae (birch family), widely distributed, especially in mountainous and moist areas of the north temperate zone and in the Andes. Flats, Alberta Alberta (ălbûr`tə), province (2001 pop. 2,974,807), 255,285 sq mi (661,188 sq km), including 6,485 sq mi (16,796 sq km) of water surface, W Canada. and drill a number of significant gas wells. Production from Alder Flats began on May 11, 1998 at 11.5 mmcf/d with associated ngl's and is expected to increase to 13.5 mmcf/d in June June: see month. , 1998. A significant natural gas discovery was made at Leahurst, Alberta and this discovery is scheduled to be placed on production today at 5 mmcf/d. As well, the Corporation drilled several gas discoveries in northern Alberta Norhern Alberta is a region located in the Canadian province of Alberta. Its primary industry is oil and gas, with large heavy oil reserves being exploited at the Athabasca Oil Sands and Wabasca Area in the east of the region. , which are expected to produce between 11 and 20 mmcf/d when brought on production. The Corporation's plan to acquire 4,000 to 6,000 boe/d of production for approximately $100 million has not yet been realized. Baytex was involved in a bidding process for certain assets in the Gold Creek There are several creeks referred to as Gold Creek:
The amount by which analysts or investors expect the price of a security may increase. upside potential The potential price or gain that may be expected in a security or in a security average, generally stated as the dollar . Baytex was advised it was not the successful bidder for these properties. The Corporation is currently disputing the bid process that occurred as it believes it was not treated equitably eq·ui·ta·ble adj. Marked by or having equity; just and impartial. See Synonyms at fair1. [French équitable, from Old French, from equite, equity; see equity. in the process and the matter is now before the Courts. Baytex is continually con·tin·u·al adj. 1. Recurring regularly or frequently: the continual need to pay the mortgage. 2. evaluating numerous strategic investment opportunities and Gold Creek is one of many strategic acquisitions the Corporation is interested in acquiring. Baytex remains confident in its position on the Gold Creek assets and will keep shareholders informed as events transpire. Production reconciliation:
Production reconciliation:
Reported production for the first quarter 16,100 Boe/day
Deferred oil development 8,100 Boe/day
Shut-in production 3,900 Boe/day
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28,100 Boe/day
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Forward The Corporation is currently trading at substantially less than its year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. 1997 net asset value of $19.82 per share, calculated using a present worth discounted at 15 percent. At the end of 1997, reserves of 111.4 mmboe were booked with the Corporation adding significant gas and oil reserves Oil reserves refer to portions of oil in place that are claimed to be recoverable under economic constraints. Oil in the ground is not a "reserve" unless it is claimed to be economically recoverable, since as the oil is extracted, the cost of recovery increases incrementally during the first quarter of 1998. Baytex now is able to economically justify and will therefore, aggressively pursue the development of heavy oil reserves in Saskatchewan and natural gas and condensate condensate, matter in the form of a gas of atoms, molecules, or elementary particles that have been so chilled that their motion is virtually halted and as a consequence they lose their separate identities and merge into a single entity. reserves in Alberta. For the near term the Corporation will be leveraged to oil production with most increases coming from its heavy oil reserve base. Under today's current pricing scenarios, the Corporation is able to lock in $16.80 U.S. oil prices with a $6.07 U.S. to $6.50 U.S. light to heavy oil price differential from October 1 to December 31, 1998. The Corporation has made arrangements to blend its heavy oil with condensate, saving approximately $3.75 per bbl. The three projects that the Corporation is currently developing are expected to have the following breakdown on net-backs for production in the fourth quarter of 1998:
Hoosier Carruthers Reward
------- ---------- ------
WTI $U.S./bbl $16.80 $16.80 $16.80
Differential (6.43) (6.50) (6.07)
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10.37 10.30 10.73
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U.S. to Cdn. Exchange
of 1.4565 15.10 15.00 15.63
Royalties @ 7.3 percent (1.10) (1.10) (1.14)
-------------------------------
14.00 13.90 14.49
Operating Costs (3.25) (4.50) (5.50)
-------------------------------
10.75 9.40 8.99
Pipeline Tariff/Trucking (0.20) (0.15) (1.50)
-------------------------------
Total Net-backs $10.55 $9.25 $7.49
Finding and Development
Costs $2.59 $2.68 $3.72
Recycle Ratio 4.07x 3.45x 2.01x
Rate of Return ( in percent) 60.8 32.7 25.9
The Corporation has secured additional drilling rigs to complete a 157 well drilling Well drilling is the process of drilling a hole in the ground for the extraction of a natural resource such as ground water, natural gas, or petroleum. Drilling for the exploration of the nature of the material underground (for instance in search of metallic ore) is best described program in the second and third quarters of 1998. Total wells drilled will increase substantially from an estimated 225 to 340 for the year. Production from these large scale development programs are expected to add 9,060 boe/d over the next four months. Fourth quarter drilling of approximately 100 wells is expected to add an additional 5,200 boe/d. There remains an additional 280 drilling locations to be completed on these projects in 1999 and 2000. The breakdown of estimated production based on risked drilling is as follows:
Current Production and production to be
brought on in next 30 days 19,350 Boe/day
157 well development program by
Oct. 1/98 (risked) 9,060 Boe/day
100 well 4th quarter development
program (risked) 5,300 Boe/day
Dispositions (3,200)Boe/day
Production declines (2,420)Boe/day
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Expected 1998 exit production rates 28,090 Boe/day
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The Corporation's estimated cash flow for 1999, using the following commodity price assumptions which is a blend of a number of oil and gas analysts projections for 1999 of oil at $18.50 U.S. per bbl and gas of $2.45 Cdn. per mcf.
Cash Flow Exit 1998
Cash flow Estimate Annualized
Production(x) Net Back (000's) Cash Flow (xx)
----------------------------------------------
Natural Gas 75,600 Mcf/d $1.53 $42,219
Light to
Medium Oil 6,400 Bbl/d $14.00 $32,704
Heavy Oil 14,040 Bbl/d $10.36 $53,091
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Total
Barrels of
Equivalent 28,000 Boe/d $128,014 $3.56
(x) assumes a 28 mmcf/d disposition and no exploration success.
(xx) assumes fully diluted shares outstanding of 36 million
With first quarter production of 16,100 boe/d and current production of 16,500 boe/d, Baytex anticipates entering the fourth quarter at 23,000 boe/d after divesting of 3,200 boe/d in the third quarter of 1998. This represents a 63 percent increase in production over the first quarter average without accounting for any potential exploration success or acquisitions that the Corporation may complete. Baytex has $100 million available for acquisitions. Estimated funding sources for the 1998 drilling program are as follows:
Cash flow $75.7 million
Debt $68.0 million
Dispositions $53.0 million
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$196.7 million
Estimated 1998 capital expenditure program:
Quarter one $60.0 million
Quarter two $25.0 million
Quarter three $82.0 million
Quarter four $25.0 million
-------------
$192.0 million
Baytex's philosophy is unchanged, which is to grow profitably and to develop areas where the Corporation will have a competitive advantage. Heavy oil development may not be in-favor today. This is to Baytex's advantage as the Corporation has vast reserves of heavy oil and can take advantage of current market sentiment Market Sentiment The feeling or tone of a market (i.e. crowd psychology). It is shown by the activity and price movement of the securities. Notes: For example, rising prices would indicate a bullish market sentiment. to cut finding and development costs on these projects. Exploration Exploration will also remain a priority as the Corporation controls over 1.3 million acres of undeveloped land. Baytex has assembled as·sem·ble v. as·sem·bled, as·sem·bling, as·sem·bles v.tr. 1. To bring or call together into a group or whole: assembled the jury. 2. a land and prospect inventory which continues to be explored on an on-going basis. The following prospects are currently available for drilling:
Potential Potential
Reserves Reserves
Area Gas Area Oil
---- --- ---- ---
Minehead 300 Bcf Red Earth 25 mmbbls
Airdrie 30 Bcf Ogston 18 mmbbls
Kaybob 250 Bcf Hoosier 80 mmbbls
Gold Creek 450 Bcf Willesden Green 22 mmbbls
Okotoks 120 Bcf Seal 18 mmbbls
Sakwatamau 68 Bcf
Ferrier 25 Bcf
The exploration focus will be on liquids rich gas in order to balance the Corporation's production mix. Certain statements in this release contain forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. including outlook on prices, expectations of future production, business plans for drilling and exploration and expectations of capital expenditures. Information concerning reserves contained in this report may also be deemed to be forward-looking statements as such estimates involve the implied assessment that the resources described can be profitably produced in future. These statements are based on current expectations that involve a number of risks and uncertainties which could cause actual results to differ from those anticipated by the Company. These risks include, but are not limited to: the background risks of the oil and gas industry (e.g., operational risks in development, exploration and production; potential delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates, the uncertainty of estimates and projections relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc production, costs and expenses, and health, safety and environmental risks), and uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures. Additional information on these and other factors which could affect the Company's operation or financial results are included in the Company's Annual Report under the headings "Management's Discussion and Analysis Management's discussion and analysis (MD&A) A report from management to shareholders that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial - Business Risk and Uncertainties" and in the Company's other reports on file with Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. securities regulatory authorities Noun 1. regulatory authority - a governmental agency that regulates businesses in the public interest regulatory agency administrative body, administrative unit - a unit with administrative responsibilities . The Alberta Stock Exchange has neither approved or disapproved of the information contained herein.
CONTACT: Baytex Energy Ltd.
Norbert Kloster, 403/ 269-4282
403/ 205-3845 (FAX)
http://www.baytex.ab.ca
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