Baytex Energy Corp.

Thank you for standing by. This is the conference operator. Welcome to the Baytex Energy Corp. Fourth Quarter and Full Year 2021 Financial and Operating Results Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then 1 on your telephone keypad. Should you need assistance during the conference call, You may signal an operator by pressing star and zero. I would now like to turn the conference over to Brian Echter, Vice President, Capital Markets. Please go ahead.

Thank you, Ariel. Good morning, ladies and gentlemen, and thank you for joining us to discuss our fourth quarter and full year 2021 financial and operating results. Today, I'm joined by Ed LaFerre, our President and Chief Executive Officer, Rod Gray, Executive VP and Chief Financial Officer, and Chad Lundberg, our Chief Operating and Sustainability Officer. While listening, please keep in mind that some of our remarks will contain forward-looking statements within the meaning of applicable securities laws. I refer you to the advisories regarding forward-looking statements, oil and gas information, and non-GAAP financial and capital management measures in yesterday's press release. On the call today, we will also be discussing the evaluation of our reserves at year-end 2021. These evaluations have been prepared in accordance with Canadian disclosure standards, which are not comparable in all respects to United States or other foreign disclosure standards. Our remarks regarding reserves are also forward-looking statements. All dollar amounts referenced in our remarks are in Canadian dollars unless otherwise specified, and with that, I would now like to turn the call over to Ed Corbett.

Thanks, Brian, and good morning, everyone. I'd like to welcome everybody to our year-end 2021 conference call. This past year, we witnessed a remarkable turnaround for the oil and gas industry as economies recovered from the COVID-19 pandemic and energy prices surged. During this period of renewed optimism, we stayed true to our priorities of maintaining capital discipline, maximizing free cash flow, and reducing net debt. And I'm also incredibly excited to announce the next step in our shareholder return framework. Before discussing our year-end results, I'd like to take a moment to comment on the most important asset in our organization, our people. Over the last several years, our team has proven to be resilient and focused and totally committed to generating value for our shareholders. Operationally, we have delivered volumes to market in a safe and efficient manner and executed our programs to benefit all of our stakeholders. We are grateful to all of our employees and contractors for their commitment and perseverance to operating safely and reliably. In 2021, we generated production of just over 80,000 BOEs per day, above the high end of our annual guidance, and delivered record-free cash flow of $421 million, including $137 million for the fourth quarter. We significantly strengthened our business as we allocated 100% of our free cash flow to debt repayment, reducing net debt by 24% to $1.4 billion. Exploration and development expenditures totaled $313 million, in line with our annual guidance. And we continue to advance our exciting new Clearwater Play in northwest Alberta, now with four of the five highest initial rate wells drilled to date in the play. We delivered adjusted funds flow of $215 million, or 38 cents per basic share, in the fourth quarter of 2021, and $746 million, or $1.32 per basic share, for the full year. During 2021, we identified indicators of impairment reversal for our oil and gas properties due to the increase in forecasted commodity prices. As a result, we recorded an impairment of $400 million in the fourth quarter and $1.5 billion for the full year 2021 as the estimated recoverable amounts exceeded the carrying value of our oil and gas properties. This contributed to net income of $563 million in Q4 and $1.6 billion for the full year. With respect to year-end reserves, approved developed producing reserves increased 7% to 129 million BOEs, with a resulting finding and development cost, including changes in future development costs, of $8.20 per BOE. This led to a very strong PDP recycle ratio of 4.5 times, based on the 2021 operating net back of $36.52 per BOE. 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. In 2021, we highlighted our peavine lands in northwest Alberta, where we are targeting the Spirit River Formation, a clearwater formation equivalent. We executed two strategic agreements with the Peavine Métis settlement that covers 80 sections of our land directly to the south of our existing seal operations base. We hold another 45 sections of land within the Clearwater potential, giving us a total of 125 sections of prospective land in the play. This play aligns strongly with our core competencies in heavy oil exploration and multilateral development, and or appraisal program yielded exceptional results with production increasing from zero at the beginning of 2021 to over 3,000 barrels a day in January. Our two eight multilateral wells drilled in the fourth quarter and offsetting our highest initial rate well generated 30 day initial production rates of 921 barrels per day and 815 barrels per day respectively. With the performance of these two wells, our peavine development has now yielded four of the top five initial rate clear water wells drilled to date across the entire play. In addition, our eight lateral appraisal well drilled on our northern acreage generated a very economic initial production rate of approximately 120 barrels per day, consistent with our expectations. This well was drilled in an area of thinner pay and lower permeability and confirmed our regional mapping for the area while delivering a rate comparable to the greater Clearwater trend. On our seal legacy lands, we drilled a successful exploration well in late 2021 with a 30-day initial production rate of 147 barrels per day, and we have a follow-up well scheduled for second half 2022. At Peavine Clearwater, our first quarter 2022 drilling program is underway with two rigs running. We have already drilled six of 10 planned Clearwater wells in Q1, and we expect to bring these wells on production March through April. As part of this program, we have successfully executed our first three extended reach horizontal multilateral wells on our Peavine lands, which are utilized to provide appropriate setbacks to residents and environmentally sensitive areas. In aggregate, we expect to bring 18 wells on stream this year. With continued success, we believe the play ultimately holds the potential for over 200 drilling locations that could support production increasing to over 10,000 barrels per day. The clear water generates strong economics with the ability to grow organically while enhancing our free cash flow profile. For 2022, with continued operating momentum and current commodity prices, we expect to generate over $550 million of free cash flow and reach our initial $1.2 billion net debt target during the second quarter. This allows us to move to the next phase of our return of capital framework, which Rod will now elaborate on.