Baytex Announces Updated Guidance for 2015 and Enhanced Sustainability Through a Reduced Capital Program and Suspension of Dividend - Seite 2

Subsequent to the end of the second quarter, the macro environment and outlook for commodity prices has deteriorated considerably, which has put a further strain on our business model. In particular:

• The current spot West Texas Intermediate ("WTI") oil price is approximately US$41/bbl, down 29% from a Q2/2015 average of US$58/bbl;
  
  
• The current spot heavy oil benchmark price, Western Canadian Select ("WCS"), is approximately US$25/bbl, down 46% from a Q2/2015 average of US$46/bbl;
  
  
• The forward curve for WTI in 2016 is approximately US$48/bbl, down 26% from a high in Q2/2015 of approximately US$65/bbl; and
  
  
• The forward curve for WCS in 2016 is approximately US$34/bbl, down 32% from a high in Q2/2015 of approximately US$50/bbl.
  
  

Taking into consideration the deteriorating macro environment and a view that it is likely to last longer than earlier anticipated, we are announcing several additional measures to enhance our sustainability and preserve our per share metrics through 2016.

• We are suspending our monthly cash dividend after the September 15, 2015 payment previously declared. We believe this is a prudent step to minimize additional bank borrowings during this period of extremely low commodity prices. We continue to believe in returning a portion of our funds from operations to shareholders under normal operating conditions. However, based on the current forward strip, we would not generate sufficient funds from operations to pay a dividend. We will reinstate the monthly dividend when commodity prices recover to a supportive level.
  
  
• We expect total exploration and development expenditures for 2015 to approximate $500 million, representing the low-end of our guidance range of $500 to $575 million. We are also tightening our production guidance range for 2015 to 84,000 to 86,000 boe/d (previously 84,000 to 88,000 boe/d).
  
  
  • Despite achieving cost reductions of approximately 20%, current prices do not support further drilling at Peace River or Lloydminster at this time. As a result, we have deferred our heavy oil program in Canada for the reminder of the year. We have drilled six of eight budgeted wells at Peace River and 21 of 26 budgeted wells at Lloydminster.
    
    
  • In the Eagle Ford, we continue to work with our partner on further cost reductions. To-date, we have achieved an approximate 21% reduction in well costs - with wells now being drilled, completed, and equipped for approximately US$6.5 million, as compared to US$8.2 million in 2014. We expect a further 8% reduction to approximately US$6.0 million per well to be achieved in the second half of 2015. Under this new cost structure and assuming a flat US$50/bbl WTI price, the expected internal rate of return (before tax) of a new well in the Eagle Ford remains a robust 38%, demonstrating the efficiency of our capital spending in a low price environment.