Operations

Baytex possesses an array of light oil and natural gas properties. In addition to Baytex's historical light oil and natural gas properties in northern and south-eastern Alberta, the geographic scope of our conventional oil and gas operations has expanded to central Alberta and northeast British Columbia, providing exposure to some of the most prospective areas in Western Canada.

The Canadian Light Oil and Gas Business Unit produces light and medium gravity crude oil, natural gas and natural gas liquids from various fields in Alberta and British Columbia. During 2010, production from this business unit averaged 13,541 boe/d, which was comprised of 47.5 MMcf/d of natural gas and 5,626 bbl/d of light oil and NGL. During 2010, the Canadian Light Oil and Gas Business Unit drilled 31 (21.1 net) wells resulting in six (4.8 net) natural gas wells and 25 (16.2 net) oil wells for a success rate of 100%. Our net undeveloped lands in this business unit were approximately 253,000 acres at year-end 2010.

Viking Resource Play

During 2008, we developed a new resource play in the Viking sand at Dodsland in southwest Saskatchewan and in the Bon Accord area in southeast Alberta. The Viking zone is regionally charged with light oil, and in its more permeable areas, has been a prolific oil horizon since the 1960s. Baytex has targeted the less permeable but undeveloped areas of the play. Our 2009 acquisition of heavy oil producing assets in the Kerrobert area included additional highly prospective Viking light oil lands. In aggregate, Baytex has amassed approximately 54,000 net acres of prospective Viking lands, 70% of which are located in southwest Saskatchewan.

In 2008, we drilled two successful horizontal producing wells, one each in Alberta and Saskatchewan. This was followed up in 2009 with another three successful horizontal wells in Alberta. In 2010, we drilled seven successful multi lateral horizontal wells (without hydraulic fracturing) in Alberta with an average initial production rate of approximately 100 bbl/d per well. We also drilled eight additional horizontal Viking tests in Saskatchewan, with much of the 2010 drilling focused on validating licenses acquired during 2008 that were approaching expiry. To date in the Saskatchewan Viking play (through year-end 2010), excluding a sub-economic well drilled on the eastern fringe of the play, we have achieved a 30-day average peak rate of 67 bbl/d per well from the seven wells that have been fully completed and placed on production.

During the first half of 2011, we drilled five Viking multi-lateral wells in eastern Alberta. Two of the wells drilled in the second quarter and one well drilled in the first quarter established 30-day average peak rates of approximately 125 bbl/d per well. For the remainder of 2011, we plan to continue with this type of development activity in the Viking in Alberta, as well as use single lateral horizontal wells with multi stage hydraulic fracturing in our Viking project in Saskatchewan. We plan to drill approximately 10 additional Viking light oil horizontal wells in the second half of 2011, the majority of which will be unstimulated multi-lateral wells in our Viking play in Alberta. Ultimately, we believe our Viking development in Alberta and Saskatchewan could yield over 300 net drilling locations.

The Contingent Resource Assessment for the Viking, prepared by Sproule Associates Limited, as at December 31, 2010 equaled 10.4 mmbbl, 19.7 mmbbl, and 35.1 mmbbl of crude oil per the low, best and high estimates, respectively.

Cardium Development

Baytex's position in the emerging Cardium play is located in the Pembina trend in west central Alberta. Baytex acquired its initial position in Pembina in June 2007 through a light oil asset acquisition and further expanded its presence in the area through the acquisition of Burmis Energy in June 2008. In the Cardium we have interests in approximately 13,600 gross (7,700 net) acres of land. In 2010, Baytex drilled 11 gross (4.7 net) Cardium horizontal wells, which were completed with multi-stage fracture stimulations. In the first half of 2011, we drilled three 100% working interest Cardium wells. Two were placed on production and established 30-day average peak rates of approximately 230 boe/d per well. For the remainder of 2011, we plan to drill approximately four net Cardium horizontal wells. We have identified the potential to drill up to 60 gross (34 net) locations.