Baytex Energy Corp.

Thank you for standing by. This is the conference operator. Welcome to the Baytex Energy Corp first quarter 2022 financial and operating results conference 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 one 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, Cherise. Good morning, ladies and gentlemen, and thank you for joining us to discuss our first quarter 2020-22 financial and operating results. Today I am joined by Ed Laferre, our President and Chief Executive Officer, Rod Gray, our 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-gap financial and capital management measures in yesterday's press release. All dollar amounts referenced in our remarks today are in Canadian dollars unless otherwise specified. And with that, I would now like to turn the call over to Ed.

Thanks, Brian, and good morning, everyone. I'd like to welcome everybody to our first quarter 2022 conference call. During the first quarter, we remained focused on capital discipline, generating free cash flow, and reducing debt. We delivered strong operating and financial results with production of almost 81,000 BOEs per day, free cash flow of $121 million, and a 10% reduction in our net debt to $1.28 billion. I'm very pleased to announce that given the strength of our balance sheet and consistent with our desire to offer direct shareholder returns, the Board of Directors has approved the filing of a normal course issuer bid application with the Toronto Stock Exchange for a share buyback program of up to 56 million common shares. representing 10% of our public float. We expect to commence the buyback program in May, which is consistent with the shareholder return framework we discussed last quarter. These are exciting times for BATEX. In addition to the share buyback announcement, we have a number of positive developments to share with you today. First is the success of our Clearwater development at Peavine. Second is our increased 2022 guidance, and third is the update we've made to our five-year plan. Let's start with our Clearwater results. We followed up our 2021 appraisal program on our Peavine acreage with exceptional Q1 2022 drilling program. We have now started up all 10 wells drilled during the first quarter, and production has increased from zero at the beginning of 2021 to approximately 8,000 barrels per day today. During the first quarter, we successfully executed our first six extended-reach horizontal wells, which are utilized to provide appropriate setbacks to residents and environmentally sensitive areas. These ERH wells are among the first of their type to be drilled in Western Canada and consist of four two-mile-long laterals versus a more traditional well design comprised of eight one-mile laterals. Our first three ERH wells on the 4025 pad have established average 30-day initial production rates of approximately 1,100 barrels per day per well and are the strongest wells ever drilled in the Clearwater Plate. In addition, four wells on the 5033 pad were brought on stream in March-April and are expected to generate 30-day initial production rates of 300 to 400 barrels per day per well. Initial well performance continues to outperform our tight curve assumptions, and we now have seven of the top ten initial rate wells drilled to date across the Clearwater Plate. As we continue to progress our development plan, we have committed to drill six additional Clearwater wells during the fourth quarter. We now intend to run a full one-rig program at Peavine through year end. As a result, we expect to drill 24 net wells in 2022, up from our original budget of 18 net wells. Maintaining a consistent one-rig program level loading activity in the second half of 2022 will drive further efficiencies and set the stage for continued strong operating momentum heading into 2023. At current commodity prices, the Clearwater generates among the strongest economics within our portfolio with payouts of less than three months and has the ability to grow organically while enhancing our free cash flow profile. To date, we have de-risked 50 sections of our 80-section Peavine land base, and our updated plans include the drilling of approximately 120 net wells through 2026. When combined with our legacy acreage position in northwest Alberta, we estimate that over 125 sections are highly prospective for Clearwater development. With this updated view of our land base, we expect Clearwater production to increase to approximately 10,000 barrels per day during our five-year plan period, while generating over $400 million of cumulative free cash flow. With continued success, we believe the play ultimately holds the potential for over 200 drilling locations that could support production increasing to over 15,000 barrels per day. We are very excited with the Q1 program and what it means for our business going forward. I will now turn to our 2022 outlook and guidance update. With continued strong operating momentum and production growth on our Clearwater lands, we are increasing our production guidance for 2022 to 83,000 to 85,000 BOE per day, up from 80,000 to 83,000 BOE per day previously. And we expect to exit 2022 producing approximately 87,000 to 88,000 BOE per day. Based on the forward strip, We now expect to generate approximately $700 million or $1.25 per basic share of free cash flow this year. As part of our previously announced return of capital framework, we expect to allocate approximately 25% of our annual free cash flow to direct shareholder returns through the share buyback program I mentioned earlier. The remainder of our free cash flow will continue to be allocated to debt reduction until we achieve a net debt level of $800 million, which represents an expected net debt to EBITDA ratio of one times at a US $55 WTI price. This level of net debt will provide us with flexibility to run our business through the commodity price cycles and generate meaningful returns to our shareholders. At current prices, we expect to achieve this debt level in early 2023. at which point we will consider steps to further enhance shareholder returns. Our operational success, the continued strong economics of our drilling program, and the inflationary pressures being experienced throughout our industry caused us to review our capital program for the year. We are now forecasting 2022 exploration and development expenditures of $450 to $500 million, up from $400 million to $450 million, which was set in a $65 U.S. pricing environment. The incremental capital reflects the additional activity on our Clearwater lands and two to three net incremental wells in the Eagle Fork. This increased activity set will result in $30 million of incremental exploration and development expenditures, which is offset by approximately $10 million of reduced light oil activity. We also updated our 2022 plan to reflect an incremental 8% expected capital cost inflation, which increases our exploration and development expenditures by approximately $30 million. This reflects industry cost pressures related to labor, logistics, fuel, and tangible items such as steel, frack sand, and chemicals. In aggregate, we are now assuming 18% capital cost inflation in 2022, as compared to 2021. Lastly, we have fine-tuned several of our cost assumptions to reflect increased royalties due to higher commodity prices, inflationary pressures, and inflationary pressures on operating and transportation expenses. Offsetting these cost pressures to a certain extent is increased production and a reduction in our interest expense and our net debt is reduced. With a strong outlook for 2022 unfolding, I want to now turn it over to Rod, who will provide a brief update on our five-year plan and liquidity and capital structure.