Baytex Energy Corp. (TSX: BTE) (NYSE: BTE) ('Baytex', the 'Company' or 'we') today announced that it has entered into a definitive agreement (the 'Agreement') to acquire Ranger Oil Corporation (NASDAQ: ROCC) ('Ranger'), a pure play Eagle Ford company (the 'Acquisition').
The total consideration to be paid by Baytex, including assumption of net debt, is approximately US$2.5 billion (C$3.4 billion). The transaction has been unanimously approved by the Boards of Directors of Baytex and Ranger and is expected to close late in the second quarter of 2023. Under the terms of the Agreement, Ranger shareholders will receive 7.49 Baytex shares plus US$13.31 cash, for each Ranger common share, for total consideration of approximately US$44.36 per share. Commenting on the Acquisition, Eric T. Greager, President and Chief Executive Officer of Baytex, said: 'The Ranger acquisition is strategic.
We are acquiring a strong operating capability in the Eagle Ford, on-trend with our non-operated position in the Karnes Trough and driving meaningful per-share accretion on all metrics. The transaction more than doubles our EBITDA and nearly doubles our free cash flow. The Ranger inventory immediately competes for capital in our portfolio and brings 12 to 15 years of quality oil-weighted drilling opportunities. We are building quality scale and a more durable business with a lower breakeven WTI price.'
We are committed to enhancing direct shareholder returns, and through this transaction we are returning more value to our shareholders on a per-share basis. Upon closing of this transaction, we intend to initiate a dividend, which will be a key means of delivering reliable value to shareholders going forward. We are building an even stronger Canadian energy company with a highquality diversified oil-weighted portfolio across the Western Canadian Sedimentary Basin and the Eagle Ford.'
Supports Baytex's strong commitment to ESG performance with a 16% reduction in average GHG emissions intensity.
Strategic Rationale Significant Accretion. The assets are being acquired at an attractive valuation and the Acquisition is immediately accretive to key metrics. Transaction metrics (1) are approximately 2.86x EBITDA (2) at US$75/bbl WTI and $50,000 per barrel of production per day (working interest) which drives 24% accretion to adjusted funds flow per share (3) , 20% accretion to free cash flow per share (4) and 12% accretion to production per share. In addition, the Acquisition is 23% accretive to free cash flow per share for the remaining four years of our five-year plan period (2023 to 2026). Enhanced Shareholder Returns. On closing of the transaction, Baytex intends to increase direct shareholder returns to 50% of free cash flow, introduce a dividend and increase share buybacks. Following closing of the transaction, management expects to recommend that the dividend, to be paid quarterly, be set at $0.0225 per share ($0.09 per share annualized), representing a dividend yield of approximately 1.6%(5)(6) . The dividend is expected to be fully funded to US$47/bbl WTI. Builds Quality Scale and an Operating Platform. The transaction materially increases Eagle Ford scale in Texas while building a quality operating platform in a premier basin. The transaction includes: 162,000 net acres in the crude oil window of the Eagle Ford shale, highly concentrated inGonzales, Lavaca, Fayette and Dewitt counties and on-trend with Baytex's non-operated position in the Karnes Trough. Production of 67-70 Mboe/d (working interest) that is 96% operated (72% light oil, 15% NGLs and 13% natural gas). 174 MMboe of proved reserves (7) (consisting of 120 MMbbls of tight oil, 27 MMbbls of NGLs and 162 Bcf of shale gas (working interest before the deduction of royalties). 258 MMboe of proved plus probable reserves (7) (consisting of 180 MMbbls of tight oil, 39 MMbbls of NGLs and 232 Bcf of shale gas (working interest before the deduction of royalties). Baytex's production is forecast to average 155,000 to 160,000 boe/d (52% light oil, 22% heavy oil, 11% NGLs and 14% natural gas) for the twelve-month period following closing. On a pro forma basis, Baytex is expected to generate annual EBITDA of approximately $2.4 billion (8) and annual free cash flow (4) of approximately $1.0 billion (8) . Enhances Inventory. Baytex estimates 741 net undrilled locations representing an inventory life of 12 to 15 years that immediately competes for capital in the Baytex portfolio. This includes 523 quality Lower Eagle Ford opportunities and 218 additional Upper Eagle Ford and Austin Chalk opportunities. Lower Eagle Ford locations are expected to generate IRRs greater than 75% and payouts of less than eighteen months at US$75/bbl WTI. Baytex believes it can grow production modestly from the acquired assets with two rigs and approximately 50 to 55 net wells per year.
Advisory Regarding Forward-Looking Statements
In the interest of providing Baytex's shareholders and potential investors with information regarding Baytex, including management's assessment of Baytex's future plans and operations, certain statements in this press release are 'forwardlooking statements' within the meaning of the United States Private Securities Litigation Reform Act of 1995 and 'forwardlooking information' within the meaning of applicable Canadian securities legislation (collectively, 'forward-looking statements'). In some cases, forward-looking statements can be identified by terminology such as 'believe', 'continue', ''estimate', 'expect', 'forecast', 'intend', 'may', 'objective', 'ongoing', 'outlook', 'potential', 'project', 'plan', 'should', 'target', 'would', 'will' or similar words suggesting future outcomes, events or performance. The forward-looking statements contained in this press release speak only as of the date thereof and are expressly qualified by this cautionary statement. Specifically, this press release contains forward-looking statements relating to but not limited to: the Acquisition, the expected closing of the Acquisition and the timing thereof; the expected financial effects of the Acquisition, including the expected accretion to adjusted funds flow, free cash flowand production, the expected impact on break-even price, our debt levels and leverage ratio, the expected impact on EBITDA and expected single-well IRRs and paybacks; the expected operational impacts of the Acquisition, including the number of locations to be drilled and the level of oil and natural gas production from wells on the acquired acreage and expected plans as a result of the transaction, including increasing direct shareholder returns to 50%of free cash flow, instituting a dividend and maintaining or increasing share buybacks; the strategic rationale for the acquisition; increased Eagle Ford scale, enhanced inventory and increased shareholder returns; the anticipated introduction of a quarterly dividend upon completion of the Acquisition; the anticipated composition of the Baytex board of directors following the Acquisition and other similar matters. In addition, information and statements relating to reserves are deemed to be forward-looking statements, as they involve implied assessment, based on certain estimates and assumptions, that the reserves described exist in quantities predicted or estimated, and that they can be profitably produced in the future. These forward-looking statements are based on certain key assumptions regarding, among other things: the consummation and success of the transaction and our ability to successfully integrate the acquired business into our existing operations; the timing of receipt of regulatory and shareholder and stockholder approvals; the ability of the combined business to realize the anticipated benefits of the transaction; petroleum and natural gas prices and differentials between light, medium and heavy oil prices; well production rates and reserve volumes; our ability to add production and reserves through our exploration and development activities; capital expenditure levels; our ability to borrowunder our credit agreements; the receipt, in a timely manner, of regulatory and other required approvals for our operating activities; the availability and cost of labour and other industry services; interest and foreign exchange rates; the continuance of existing and, in certain circumstances, proposed tax, carbon tax and royalty regimes; our ability to develop our crude oil and natural gas properties in the manner currently contemplated and current industry conditions, laws and regulations continuing in effect (or, where changes are proposed, such changes being adopted as anticipated). Readers are cautioned that such assumptions, although considered reasonable by Baytex at the time of preparation, may prove to be incorrect. Actual results achieved will vary from the information provided herein as a result of numerous known and unknown risks and uncertainties and other factors. Such factors include, but are not limited to: the ability to obtain stockholder, shareholder, and regulatory approvals, if any, of the transaction; the ability to complete the transaction on anticipated terms and timetable; the possibility that various closing conditions for the transaction may not be satisfied or waived; risks relating to any unforeseen liabilities of Baytex and Ranger; the volatility of oil and natural gas prices and price differentials (including the impacts of rising macroeconomic uncertainties and geopolitical tensions, including Russia's invasion of Ukraine, and Covid-19); restrictions or costs imposed by climate change initiatives and the physical risks of climate change; risks associated with our ability to develop our properties and add reserves; the impact of an energy transition on demand for petroleum productions; changes in income tax or other laws or government incentive programs; availability and cost of gathering, processing and pipeline systems; retaining or replacing our leadership and key personnel; the availability and cost of capital or borrowing; risks associated with a third-party operating our Eagle Ford properties; risks associated with large projects; costs to develop and operate our properties; public perception and its influence on the regulatory regime; current or future control, legislation or regulations; newregulations on hydraulic fracturing; restrictions on or access to water or other fluids; regulations regarding the disposal of fluids; risks associated with our hedging activities; the impact of elevated levels of inflation and government policies aimed at reducing them, such as rising interest rates; variations in interest rates and foreign exchange rates; uncertainties associated with estimating oil and natural gas reserves; our inability to fully insure against all risks; additional risks associated with our thermal heavy oil projects; our ability to compete with other organizations in the oil and gas industry; risks associated with our use of information technology systems; results of litigation; that our credit facilities may not provide sufficient liquidity or may not be renewed; failure to comply with the covenants in our debt agreements; risks of counterparty default; the impact of Indigenous claims; risks associated with expansion into newactivities; risks associated with the ownership of our securities, including changes in market-based factors; risks for United States and other non-resident shareholders, including the ability to enforce civil remedies, differing practices for reporting reserves and production, additional taxation applicable to non-residents and foreign exchange risk and other factors, many of which are beyond our control. The future acquisition by Baytex of its common shares pursuant to a share buyback program, if any, and the level thereof is uncertain. Any decision to acquire shares of Baytex will be subject to the discretion of the board of directors of the Company and may depend on a variety of factors, including, without limitation, the Company's business performance, financial condition, financial requirements, growth plans, expected capital requirements and other conditions existing at such future time including, without limitation, contractual restrictions, satisfaction of the solvency tests imposed on the Company under applicable corporate lawand receipt of regulatory approvals. There can be no assurance that the Company will buyback any shares of the Company in the future. These and additional risk factors are discussed in our Annual Information Form, Annual Report on Form 40-F and Management's Discussion and Analysis ('MD&A') for the year ended December 31, 2022, filed with Canadian securities regulatory authorities and the U.S. Securities and Exchange Commission on February 23, 2023 and in our other public filings. The above summary of assumptions and risks related to forward-looking statements has been provided in order to provide shareholders and potential investors with a more complete perspective on Baytex's current and future operations and such information may not be appropriate for other purposes. There is no representation by Baytex that actual results achieved will be the same in whole or in part as those referenced in the forward-looking statements and Baytex does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of newinformation, future events or otherwise, except as may be required by applicable securities law. This press release contains information that may be considered a financial outlook under applicable securities laws about the Company's potential financial position, including, but not limited to, estimated EBITDA, free cash flowand adjusted funds flow, and the estimate dividend payable by the Company, all of which are subject to numerous assumptions, risk factors, limitations and qualifications, including those set forth herein. The actual results of operations of the Company and the resulting financial results will vary from the amounts set forth in this press release and such variations may be material. This information has been provided for illustration only and with respect to future periods are based on budgets and forecasts that are speculative and are subject to a variety of contingencies and may not be appropriate for other purposes. Accordingly, these estimates are not to be relied upon as indicative of future results. Except as required by applicable securities laws, the Company undertakes no obligation to update such financial outlook. The financial outlook contained in this press release was made as of the date of this press release and was provided for the purpose of providing further information about the Company's potential future business operations following completion of the transaction. Readers are cautioned that the financial outlook contained in this press release is not conclusive and is subject to change.
Baytex Energy Corp.
Baytex Energy Corp. is an energy company based in Calgary, Alberta. 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 84% 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.
Contact:
Tel: 1-800-524-5521
Email: investor@baytexenergy.com
RANGER OIL CORPORATION 