About Baytex

At Baytex, we strive to provide investors with a meaningful dividend while growing our production base organically. Approximately 84% of our production and 91% of our reserves are derived from crude oil and we have amassed a significant inventory of long-term, low cost crude oil projects, most notably at Seal in the Peace River Oil Sands of northwest Alberta and our Lloydminster heavy oil region. Emerging light oil resource plays within our portfolio include the Bakken-Three Forks in North Dakota, and the Viking at both Bon Accord in southeast Alberta and Kerrobert/Whiteside in southwest Saskatchewan. Our sustainable business model is one based on a conservative payout ratio and a strong balance sheet. In addition, we continue to demonstrate superior capital and operational efficiencies.  

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The Canadian government announced significant changes to the taxation of income trusts in October 2006, implementing the tax on distributions by certain publicly traded specified investment flow-through entities. As such, Baytex Energy Trust converted its legal structure from a trust to a corporation at year-end 2010. We viewed 2010 as a transition year as we shifted our business model from a predominantly income-focused model as a trust to a growth-and-income model in the new corporate era. For further information, please see our Corporate Conversion section.

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Baytex manages its exposure to a variety of risks arising directly or indirectly in the conduct of its business, including commodity prices, foreign exchange rates and interest rates. Pursuant to its Risk Management Policy, management of Baytex is authorized to enter into transactions covering, in aggregate, up to 50% of its exposure to the risk being managed. Transactions in excess of this level must be pre-authorized by the Board of Directors.

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Commodity prices and production levels are the main factors that affect our funds from operations and therefore the amount of cash available to distribute to investors. Other factors such as global energy production and policy, political conditions, currency fluctuations and weather conditions also impact our business. For a more detailed description of these risks, see the section of our Annual Information Form (page 9) entitled "Risk Factors". Click here to access this document.

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Common shares cannot be purchased directly from Baytex. You must contact your broker or other financial intermediary in order to purchase our common shares, which are traded on the Toronto Stock Exchange and the New York Stock Exchange (under the trading symbol BTE).

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Baytex’s common shares trade on the Toronto Stock Exchange and the New York Stock Exchange under the symbol BTE.
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Baytex's dividends to shareholders are paid monthly and are dependent upon commodity prices, production levels and the amount of capital expenditures to be funded from funds from operations. The actual amount of the dividends is at the discretion of the Board of Directors. Our objectives are to deliver consistent dividends as a Corporation, maintain a strong balance sheet, and reinvest our capital to maximize production and asset value.

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Baytex currently pays a monthly dividend of Cdn$0.22 on or about the 15th day following the end of each calendar month to Shareholders of record on or about the last business day of each such calendar month.  

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A dividend payment date is the date the company pays cash dividends (in the form of a cheque) to registered shareholders directly, or to the brokerage or investment companies that manage the beneficial shareholders’ account(s). This usually occurs on or around the 15th of the month following the dividend declaration.

 

A dividend record date is the last business day of each month. To qualify and receive a cash dividend, a shareholder must be a holder of record on the dividend record date.

 

An ex-dividend date is two business days prior to the dividend record date. Shareholders who have purchased their shares before the ex-dividend date are entitled to the declared dividend to be paid on or around the 15th day of the following month.

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Baytex has a Dividend Reinvestment Plan (the "DRIP") that provides a convenient and cost-effective method for eligible holders in Canada and the United States to maximize their investment in Baytex by reinvesting their monthly cash dividends to acquire additional common shares. At the discretion of Baytex, common shares will either be issued from treasury or acquired in the open market at prevailing market prices. Pursuant to the terms of the DRIP, common shares issued from treasury are currently issued at a three percent discount to the "average market price" (as defined in the DRIP). Baytex reserves the right at any time to change or eliminate the discount on common shares acquired from treasury. Shareholders are not required to participate in the DRIP. A shareholder who does not participate will continue to receive monthly cash dividends on their common shares in the normal manner. For further information regarding Baytex’s DRIP, please visit our DRIP Information Section.
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The information contained herein is intended to be a general guideline and not an exhaustive discussion of all possible income tax consequences. It is not intended to constitute legal or tax advice to any holder or potential holder of common shares. Holders or potential holders of common shares should consult their own legal or tax advisors as to their particular tax consequences of holding common shares.

 

a. Canadian non-taxable accounts (registered accounts including RRSP accounts)
For investors holding Baytex common shares in TFSAs, RRSPs, RRIFs, RESPs or DPSPs, our common shares are not expected to be treated any differently than our trust units were treated and the conversion should not result in an immediate tax impact. Investors holding our common shares in a registered account should not need to report any amount for capital gains or income from dividends.

 

b. Canadian taxable accounts (non-registered accounts)
For most investors, Baytex’s conversion from a trust to a dividend-paying corporation should not be considered a taxable event and should not trigger a capital gain or loss. The adjusted cost base prior to the conversion should continue as the go-forward adjusted cost base for the calculation of capital gains upon a future sale of Baytex common shares for most investors. As a corporation, we expect to pay eligible dividends which will be subject to a lower rate of taxation in Canada, as compared to the distributions that we paid as a trust.

 

c. US non-taxable accounts
US investors holding Baytex common shares in a non-taxable account should not be required to report any amount as capital gains as a result of the conversion to a corporation. No amounts are generally required to be reported as taxable income where Baytex common shares are held within a qualified retirement plan. This is expected to be the same for Baytex’s future dividends in 2011 and beyond. For non-residents of Canada, dividends from Canadian corporations are generally subject to a 15% tax withheld at source. Under the terms of the Canada/US income tax treaty, US Shareholders that hold their common shares in tax-exempt accounts are eligible for 0% withholding tax on cash dividends paid on their common shares. For more information on applying for tax-exempt status, see the FAQ below titled "Is it possible for US Shareholders holding common shraes in tax-exempt accounts to pay no Canadian withholding tax on their cash dividends?"

 

d. US taxable accounts
As with US non-taxable accounts, the conversion is expected to be a tax-deferred rollover with no capital gains triggered for most US investors. In the US, Baytex’s future dividends for 2011 and beyond will continue to be treated as “qualified dividend income” for US tax purposes and are not expected to be taxed in the US any differently than Baytex’s trust unit distributions were prior to the conversion. On December 2, 2011, registered, non-resident shareholders whose names appeared on the records of the registrar and transfer agent of Baytex were mailed a form by Baytex’s transfer agent requesting information to confirm tax treaty eligibility. Until such form is completed and returned to Baytex’s transfer agent, any applicable tax treaty rate will not be applied when determining the amount of withholding tax. Non-registered, non-resident shareholders’ eligibility for any applicable tax treaty rates will be determined by each shareholder’s broker and not by Baytex or its transfer agent. Certain brokers may require additional information or certifications in order to determine a non-resident shareholder’s eligibility for any applicable rate. Non-resident, non-registered shareholders are encouraged to contact their brokers or other tax, legal or financial advisors in the event that they have any questions or concerns in this regard. The withholding tax may be recovered in whole or in part as a foreign tax credit or a foreign tax deduction. At the end of the year, shareholders subject to United States income taxes will receive a Form 1099 DIV from their broker. If you are a registered shareholder, the Form 1099 DIV will come from our transfer agent, Valiant Trust Company, who can be reached directly at 1-866-313-1872. We strongly recommend that you consult your own legal tax advisor.

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US shareholders that hold their common shares in tax-exempt accounts are eligible for 0% withholding tax on cash dividends paid on their common shares. The process for qualifying for 0% withholding tax is dependent on whether you are a beneficial or registered shareholder.

Beneficial Shareholders

• A shareholder who holds their common shares through a broker, investment dealer, financial institution or other nominee is a beneficial shareholder.
• For US beneficial shareholders holding common shares in a tax-exempt account, Baytex is required to withhold tax and remit such amount to the Canada Revenue Agency. The US shareholder can subsequently apply to the Canada Revenue Agency for a refund of the Canadian withholding tax paid. See the next FAQ for information on how to apply for a refund of Canadian withholding tax.

Registered Shareholders

• A shareholder who holds a physical share certificate to evidence their ownership of common shares is a registered shareholder. A registered shareholder receives cash dividends on their common shares from our transfer agent, Valiant Trust Company.
• To qualify for 0% Canadian withholding tax, a registered shareholder in the US must apply to the Canada Revenue Agency for a tax-exempt status letter. For information on how to obtain a tax-exempt status letter, please contact the International Tax Services Office at Canada Revenue Agency by telephone at 1-800-267-3395, by fax at 613-941-6905 or by clicking the following link to their website: http://www.cra-arc.gc.ca/cntct/international-eng.html
• Once obtained, the tax-exempt status letter should be delivered to our transfer agent at the following address:
  Valiant Trust Company
  Attention: Tax Department
  600 - 750 Cambie Street
  Vancouver, BC V6B 0A2
  
• Should the registered shareholder have their tax-exempt status withdrawn by Canada Revenue Agency, they are required to immediately advise our transfer agent, Valiant Trust Company.

The information contained herein is intended to be a general guideline and not an exhaustive discussion of all possible income tax consequences. It is not intended to constitute legal or tax advice to any holder or potential holder of common shares. Holders or potential holders of common shares should consult their own legal or tax advisors as to their particular tax consequences of holding common shares.

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Beneficial Shareholders

• For US beneficial shareholders holding common shares in a tax-exempt account, Baytex is required to withhold tax and remit such amount to the Canada Revenue Agency.
• To obtain a refund of the Canadian withholding tax (i.e., Part XIII tax) paid, the US beneficial shareholder should complete Form NR7-R “Application for Refund of Part XIII Tax Withheld” and file the form with Copy 3 of the NR4 supplementary (provided by your broker or other intermediary) with the Canada Revenue Agency at each calendar year end. Click the following link to access the Form NR7-R: http://www.cra-arc.gc.ca/E/pbg/tf/nr7-r/README.html
• The Form NR7-R has to be filed with the Canada Revenue Agency no later than two years from the end of the calendar year in which the withholding tax was remitted.

Registered Shareholders

• For US registered shareholders holding common shares in a tax-exempt account, Baytex is required to withhold tax and remit such amount to the Canada Revenue Agency until such time as such shareholder has submitted a copy of their tax-exempt status letter obtained from Canada Revenue Agency.
• To obtain a refund of the Canadian withholding tax (i.e., Part XIII tax) paid, the US registered shareholder should complete Form NR7-R “Application for Refund of Part XIII Tax Withheld” and file the form with Copy 3 of the NR4 supplementary (to be provided by Valiant Trust Company) with the Canada Revenue Agency at each calendar year end. Click the following link to access the Form NR7-R: http://www.cra-arc.gc.ca/E/pbg/tf/nr7-r/README.html
• The Form NR7-R has to be filed with the Canada Revenue Agency no later than two years from the end of the calendar year in which the withholding tax was remitted.

The information contained herein is intended to be a general guideline and not an exhaustive discussion of all possible income tax consequences. It is not intended to constitute legal or tax advice to any holder or potential holder of common shares. Holders or potential holders of common shares should consult their own legal or tax advisors as to their particular tax consequences of holding common shares.

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For the quarter ended September 30, 2011, Baytex's production mix was 71% heavy oil, 14% light oil and natural gas liquids and 15% natural gas.

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For the quarter ended September 30, 2011, Baytex had an average daily production rate of 52,625 boe/d. For the quarter ended September 30, 2011, total oil and gas revenue was $276.3 million, of which 74% was from heavy oil, 19% was from light oil and natural gas liquids and 7% was from natural gas.

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Baytex has an estimated reserve life index of 13.2 years for proved plus probable reserves based on our estimated reserves at December 31, 2010 and assuming an average production rate of 47,500 boe/d for 2011.

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Sproule Associates Limited is the independent reserves evaluator for all of Baytex’s oil and gas properties in accordance with National Instrument 51-101 “Standards of Disclosure for Oil and Gas Activities” of the Canadian Securities Administrators. Sproule also prepared an assessment of contingent resource as at May 1, 2011 on three of our light oil resource plays: the Bluesky in the Seal area of Alberta, the Bakken/Three-Forks in North Dakota and the Viking in southeast Alberta and southwest Saskatchewan .

 

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