Mr. Eric Greager reports

BAYTEX ANNOUNCES FOURTH QUARTER AND FULL YEAR 2023 FINANCIAL AND OPERATING RESULTS AND YEAR END RESERVES

Baytex Energy Corp. has released its operating and financial results for the three months and year ended Dec. 31, 2023 (all amounts are in Canadian dollars unless otherwise noted).

"Our 2023 results demonstrate the strength of our oil-weighted portfolio. The strategic acquisition of Ranger added quality scale in the Eagle Ford and reinforced the resiliency and sustainability of our business. In 2023, we increased production per share by 16 per cent and fourth quarter production exceeded guidance with continued strong results in the Eagle Ford and Peavine. During 2023, we increased shareholder returns to 50 per cent of free cash flow, increased our share buyback program and introduced a quarterly dividend. We are well-capitalized and remain committed to creating long-term value and increasing shareholder returns," commented Eric T. Greager, president and chief executive officer.

2023 highlights

• Completed the acquisition of Ranger Oil Corp. on June 20, 2023;
• Reported cash flows from operating activities of $474-million (57 cents per basic share) in Q4 2023 and $1,296-million ($1.84 cents per basic share) for 2023.
• Delivered adjusted funds flow of $502-million (60 cents per basic share) in Q4 2023 and $1,594-million ($2.26 cents per basic share) for 2023.
• Generated free cash flow of $291-million (35 cents per basic share) in Q4 2023 and $544-million (77 cents per basic share) for 2023.
• Increased direct shareholder returns to 50 per cent of free cash flow and returned $260-million to shareholders. Repurchased 40.5 million common shares for $222-million, representing 4.7 per cent of the company's shares outstanding, and declared two quarterly dividends of 2.25 cents per share, totalling $38-million in 2023.
• Increased production cents per basic share by 16 per cent in 2023, compared with 2022. Production for the full year 2023 averaged 122,154 boe/d (barrels of oil equivalent per day) (85 per cent oil and NGL (natural gas liquids)), compared with 83,519 boe/d in 2022 (84 per cent oil and NGL).
• Production in Q4 2023 averaged 160,373 boe/d (83 per cent oil and NGL), exceeding guidance of 158,000 to 160,000 boe/d, and up 6 per cent from Q3 2023 on exploration and development expenditures of $199-million, 10 per cent below guidance.
• Divested of the company's Viking assets at Forgan and Plato in southwest Saskatchewan (production of approximately 4,000 boe/d) for proceeds of $160-million, including closing adjustments.
• Improved the company's cash cost structure (operating, transportation, and general and administrative expenses) in Q4 2023 by 12 per cent on a boe (barrels of oil equivalent) basis, as compared with Q4 2022.
• Maintained balance sheet strength with a total debt to EBITDA (earnings before interest, taxes, depreciation and amortization) ratio of 1.1 times. During the fourth quarter the company reduced its net debt by 10 per cent ($290-million).
• Reduced the company's GHG (greenhouse gas) emissions intensity in 2023 by 9 per cent from 2022 levels and achieved the company's 65-per-cent reduction target, relative to the company's 2018 baseline, two years early.
• Proved developed producing reserves increased by 49 per cent, from 124 MMboe (million barrels of oil equivalent) to 185 MMboe. Proved reserves increased by 55 per cent, from 264 MMboe, to 410 MMboe. Proved plus probable reserves increased by 51 per cent, from 438 MMboe to 663 MMboe.
• At year-end 2023, the present value of the company's 2P reserves, discounted at 10 per cent before tax, is estimated to be $7.8-billion ($5.9-billion at year-end 2022).

The company recorded a non-cash impairment of $834-million on the company's legacy non-operated Eagle Ford and retained Viking assets as the carrying value of the company's oil and gas properties exceeded their recoverable amounts. This resulted in a net loss of $626-million (75 cents per basic share) in Q4 2023 and $233-million (33 cents per basic share) in 2023.

Strategy and 2024 outlook

The company is a well-capitalized, North American oil-weighted producer with 60 per cent of the company's producing assets located in the Eagle Ford with the balance in Western Canada. The company is committed to a disciplined, returns-based capital allocation philosophy to drive increased per-share returns. The key elements of the company's business strategy include:

• Disciplined capital allocation. Each of the company's core assets has 10 or more years of development inventory at the company's planned pace of development. This provides the company the ability to efficiently allocate capital and respond to changes in regional commodity prices and other economic factors. Over the company's five-year outlook (2024 to 2028), the company expects to generate annual production growth of 1 per cent to 4 per cent, with production reaching approximately 170,000 boe/d in 2028.
• Free cash flow. The company's commitment to disciplined capital allocation across the company's portfolio is expected to generate meaningful free cash flow. The company intends to allocate 50 per cent of free cash flow to debt repayment and 50 per cent to shareholder returns, which includes a combination of share buybacks and a quarterly dividend.
• Financial strength. The company is committed to maintaining a strong balance sheet and significant financial liquidity. The company is in a strong financial position with a total debt to EBITDA ratio of 1.1 times. Upon reaching a total debt target of $1.5-billion, the company intends to direct 75 per cent of free cash flow to shareholder returns.

In January, extremely cold temperatures across North America, followed by heavy rainfall in Texas, led to production disruptions. The company's production has been restored, however, first quarter production will be approximately 2,000 boe/d lower than the company's budget expectation. Despite this, the company's 2024 guidance remains unchanged with exploration and development expenditures of $1.2-billion to $1.3-billion and production of 150,000 to 156,000 boe/d. In 2024, the company intends to progress the Pembina Duvernay, further delineate the company's Clearwater and Mannville heavy oil positions, and deliver strong drilling and completion performance in the Eagle Ford and Viking.

Based on the forward strip, the company expects to generate approximately $575-million of free cash flow in 2024. The company's capital program is weighted to the first and third quarters and as a result, the company expects to generate a significant amount of its 2024 free cash flow during the second and fourth quarters.

2023 results

On June 20, 2023, the company closed the acquisition of Ranger, adding quality scale in the Eagle Ford, and reinforcing a resilient and sustainable business. In conjunction with closing, the company increased direct shareholder returns to 50 per cent of free cash flow, which allowed the company to increase the value of its share buyback program and introduce a dividend. The remainder of the company's free cash flow was allocated to debt reduction.

In 2023, the company returned $260-million to shareholders through its share buyback program and dividend. The company's normal course issuer bid allows for the purchase of up to 68.4 million common shares during the 12-month period ending June 28, 2024. Through Dec. 31, 2023, the company repurchased 40.5 million common shares for $222-million, representing 4.7 per cent of the company's shares outstanding, at an average price of $5.48 per share. In addition, the company declared two quarterly dividends of 2.25 cents per share, totalling $38-million.

The company increased production cents per basic share by 16 per cent in 2023, compared with 2022. Production in Q4 2023 averaged 160,373 boe/d (83 per cent oil and NGL), exceeding the company's guidance for the quarter of 158,000 to 160,000 boe/d, and up 6 per cent from 150,600 boe/d (85 per cent oil and NGL) in Q3 2023. Production for the full year 2023 averaged 122,154 boe/d, compared with 83,519 boe/d in 2022.

Exploration and development expenditures totalled $1,013-million in 2023 as compared with the company's annual guidance of $1,035-million. The company participated in the drilling of 303 (254.0 net) wells in 2023. For the second half of 2023, exploration and development expenditures totalled $608-million, consistent with the company's plan following the Ranger acquisition.

The company's business improved structurally through the Ranger acquisition with increased exposure to premium U.S. Gulf Coast pricing and improved margins. In Q4 2023, over 40 per cent of the company's liquids production received WTI (West Texas Intermediate) equivalent pricing and the company's realized light oil and condensate price in the Eagle Ford was $105.83/bbl, or $77.60 (U.S.)/bbl. In addition, the company improved its cash cost structure (operating, transportation, general and administrative expenses) in Q4 2023 by 12 per cent on a boe basis compared with Q4 2022.

On Dec. 11, 2023, the company completed the divestiture of Viking assets at Forgan and Plato in southwest Saskatchewan for proceeds of $160-million, including closing adjustments. Proceeds from the sale were applied against the company's credit facilities. Production from the assets at the time of the sale was approximately 4,000 boe/d (100 per cent light and medium crude oil). The company incurred a non-cash loss of $144-million related to the sale.

During the fourth quarter the company reduced its net debt by 10 per cent ($290-million) due to a combination of free cash flow generation, net proceeds from the Viking divestiture and the impact of a strengthening Canadian dollar, relative to the U.S. dollar, on its U.S. dollar denominated debt. The company's total debt at Dec. 31, 2023, was $2.5-billion and the company has $588-million of undrawn capacity on its credit facilities.

The company employs a disciplined commodity hedging program to help mitigate the volatility in revenue due to changes in commodity prices. In 2023, the company's hedging program generated realized financial derivatives gains of $36-million. For 2024, the company has entered into hedges on approximately 40 per cent of the company's net crude oil exposure utilizing two-way collars with an average floor price of $60 (U.S.)/bbl and an average ceiling price of $96 (U.S.)/bbl. A complete listing of the company's financial derivative contracts can be found in Note 18 to its 2023 financial statements.

At year-end 2023, the company identified indicators of impairment on its legacy non-operated Eagle Ford and retained Viking assets. As a result, the company recorded total non-cash impairments of $834-million in Q4 2023 as the carrying value of its oil and gas properties exceeded their recoverable amounts. This non-cash impairment resulted in a net loss of $626-million (75 cents per basic share) in Q4 2023 and $233-million (33 cents per basic share) in 2023.

Operations

The integration of the Ranger assets has progressed well. The company continues to optimize base performance and remains focused on strong drilling and completion performance. For 2024, the company is targeting an 8-per-cent improvement in its operated drilling and completion costs per completed lateral foot over 2023.

In the Eagle Ford, the company continues to deliver strong results across the black oil, volatile oil and condensate thermal maturity windows. In Q4 2023, nine (8.9 net) operated wells were brought on stream, bringing the total operated wells on production since closing the Ranger acquisition to 22 (21.8 net) wells. The nine wells brought on stream during the fourth quarter generated an average 30-day initial production rate of approximately 1,600 boe/d (80 per cent oil and NGL) per well. On the company's non-operated acreage, there were no new wells brought on stream during the fourth quarter.

In the Pembina Duvernay, the company commenced drilling operations in January and to date have drilled three of seven wells planned for 2024. Completion activities are scheduled to commence in May. The company continues to advance its understanding of the reservoir and believe the asset offers significant economic inventory growth potential.

In the company's heavy oil business unit, the company's Clearwater production averaged 16,338 boe/d during the fourth quarter, up 48 per cent from Q4 2022. At Peavine, the company brought 31 (31.0 net) wells on stream during 2023 and initial well performance continues to outperform type curve assumptions. In 2024, the company will see continued exploration across its heavy oil portfolio with up to 14 stratigraphic test wells planned.

Quarterly dividend

The board of directors has declared a quarterly cash dividend of 2.25 cents per share to be paid on April 1, 2024, for shareholders of record on March 15, 2024.

Additional information

The company's audited consolidated financial statements for the year ended Dec. 31, 2023, and the related management's discussion and analysis of the operating and financial results can be accessed on the company's website and will be available shortly through SEDAR+ and EDGAR.

About Baytex Energy Corp.

Baytex Energy is an energy company based in Calgary, Alta. The company is engaged in the acquisition, development and production of crude oil and natural gas in the Western Canadian sedimentary basin and in the Eagle Ford in the United States. Approximately 85 per cent of Baytex's production is weighted toward crude oil and natural gas liquids. Baytex's common shares trade on the Toronto Stock Exchange and the New York Stock Exchange under the symbol BTE.

We seek Safe Harbor.