Exhibit 1
Baytex Energy Ltd.
Consolidated Balance Sheets
(Unaudited - thousands)
|
| March 31, 2003 |
| December 31, 2002 |
| ||
Assets |
|
|
|
|
| ||
Current assets |
|
|
|
|
| ||
Cash and short-term investments (note 6) |
| $ | 142,447 |
| $ | 4,098 |
|
Accounts receivable |
| 57,698 |
| 52,667 |
| ||
Crude oil inventory (note 2) |
| 3,267 |
| — |
| ||
|
| 203,412 |
| 56,765 |
| ||
|
|
|
|
|
| ||
Deferred charges and other assets |
| 8,367 |
| 8,679 |
| ||
Petroleum and natural gas properties |
| 833,167 |
| 932,316 |
| ||
|
| $ | 1,044,946 |
| $ | 997,760 |
|
|
|
|
|
|
| ||
Liabilities |
|
|
|
|
| ||
Current liabilities |
|
|
|
|
| ||
Accounts payable and accrued liabilities |
| $ | 109,552 |
| $ | 92,563 |
|
|
|
|
|
|
| ||
Long-term debt (note 3) |
| 304,145 |
| 326,977 |
| ||
Deferred credits |
| 11,056 |
| 12,181 |
| ||
Provision for future site restoration costs |
| 22,134 |
| 21,950 |
| ||
Future income taxes |
| 202,953 |
| 184,402 |
| ||
|
| 649,840 |
| 638,073 |
| ||
|
|
|
|
|
| ||
Shareholders’ Equity |
|
|
|
|
| ||
Share capital (note 4) |
| 400,652 |
| 398,176 |
| ||
Deficit |
| (5,546 | ) | (38,489 | ) | ||
|
| 395,106 |
| 359,687 |
| ||
|
|
|
|
|
| ||
|
| $ | 1,044,946 |
| $ | 997,760 |
|
See accompanying notes to the consolidated financial statements.
1
Baytex Energy Ltd.
Consolidated Statements of Operations and Deficit
(Unaudited - thousands, except per share data)
|
| Three Months Ended March 31, |
| ||||
|
| 2003 |
| 2002 |
| ||
Revenue |
|
|
|
|
| ||
Petroleum and natural gas sales |
| $ | 107,047 |
| $ | 79,130 |
|
Royalties |
| (22,241 | ) | (11,782 | ) | ||
|
| 84,806 |
| 67,348 |
| ||
|
|
|
|
|
| ||
Expenses |
|
|
|
|
| ||
Operating |
| 19,732 |
| 18,271 |
| ||
General and administrative |
| 1,600 |
| 1,587 |
| ||
Interest |
| 6,457 |
| 5,630 |
| ||
Foreign exchange (gain) loss |
| (22,832 | ) | 186 |
| ||
Depletion and depreciation |
| 25,219 |
| 26,002 |
| ||
Site restoration costs |
| 566 |
| 796 |
| ||
|
| 30,742 |
| 52,472 |
| ||
|
|
|
|
|
| ||
Income before income taxes |
| 54,064 |
| 14,876 |
| ||
|
|
|
|
|
| ||
Income taxes |
|
|
|
|
| ||
Current |
| 2,570 |
| 1,995 |
| ||
Future |
| 18,551 |
| 5,577 |
| ||
|
| 21,121 |
| 7,572 |
| ||
|
|
|
|
|
| ||
Net income |
| 32,943 |
| 7,304 |
| ||
|
|
|
|
|
| ||
Deficit, beginning of period |
| (38,489 | ) | (75,954 | ) | ||
|
|
|
|
|
| ||
Accounting policy change for foreign exchange |
| — |
| (7,671 | ) | ||
|
|
|
|
|
| ||
Deficit, beginning of period, as restated |
| (38,489 | ) | (83,625 | ) | ||
|
|
|
|
|
| ||
Deficit, end of period |
| $ | (5,546 | ) | $ | (76,321 | ) |
|
|
|
|
|
| ||
Net income per share |
|
|
|
|
| ||
Basic |
| $ | 0.62 |
| $ | 0.14 |
|
Diluted |
| $ | 0.61 |
| $ | 0.14 |
|
See accompanying notes to the consolidated financial statements.
2
Baytex Energy Ltd.
Consolidated Statements of Cash Flows
(Unaudited - thousands)
|
| Three Months Ended March 31, |
| ||||
|
| 2003 |
| 2002 |
| ||
Cash provided by (used in): |
|
|
|
|
| ||
|
|
|
|
|
| ||
Operating activities |
|
|
|
|
| ||
Net income |
| $ | 32,943 |
| $ | 7,304 |
|
Items not affecting cash: |
|
|
|
|
| ||
Site restoration costs |
| 566 |
| 796 |
| ||
Amortization of deferred charges |
| 260 |
| 260 |
| ||
Foreign exchange (gain) loss |
| (22,832 | ) | 186 |
| ||
Depletion and depreciation |
| 25,219 |
| 26,002 |
| ||
Future income taxes |
| 18,551 |
| 5,577 |
| ||
Cash flow from operations |
| 54,707 |
| 40,125 |
| ||
Change in non-cash working capital |
| (22,922 | ) | (15,318 | ) | ||
Decrease in deferred charges and other assets |
| 52 |
| — |
| ||
Decrease in deferred credits |
| — |
| (4,609 | ) | ||
|
| 31,837 |
| 20,198 |
| ||
|
|
|
|
|
| ||
Financing activities |
|
|
|
|
| ||
Decrease in bank loan |
| — |
| (51,679 | ) | ||
Decrease in deferred credits |
| (1,125 | ) | — |
| ||
Issue of shares (net of issue expenses) |
| 2,668 |
| 105 |
| ||
|
| 1,543 |
| (51,574 | ) | ||
|
|
|
|
|
| ||
Investing activities |
|
|
|
|
| ||
Petroleum and natural gas property expenditures |
| (61,648 | ) | (40,216 | ) | ||
Disposal of petroleum and natural gas properties |
| 135,004 |
| 47,053 |
| ||
Properties held for sale |
| — |
| (46,895 | ) | ||
Change in non-cash working capital |
| 31,613 |
| 71,434 |
| ||
|
| 104,969 |
| 31,376 |
| ||
|
|
|
|
|
| ||
Change in cash and short-term investments |
| 138,349 |
| — |
| ||
|
|
|
|
|
| ||
Cash and short-term investments, beginning of period |
| 4,098 |
| — |
| ||
|
|
|
|
|
| ||
Cash and short-term investments, end of period |
| $ | 142,447 |
| $ | — |
|
See accompanying notes to the consolidated financial statements.
3
Notes to the Consolidated Financial Statements
Three Months Ended March 31, 2003 and 2002
(Unaudited)
1. Accounting Policies
The interim consolidated financial statements of Baytex Energy Ltd. (the “Company”) are presented in accordance with Canadian generally accepted accounting principles. The interim consolidated financial statements have been prepared following the same accounting policies and methods of computation as the consolidated financial statements of the Company as at December 31, 2002. The interim consolidated financial statements contain disclosures, which are supplemental to the Company’s annual consolidated financial statements. Certain disclosures, which are normally required to be included in the notes to the annual consolidated financial statements, have been condensed or omitted. The interim consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto for the year ended December 31, 2002.
2. Crude Oil Inventory
Inventories of crude oil, consisting of production in transit in pipelines at the balance sheet date pursuant to a long-term crude oil supply agreement, are valued at the lower of cost or net realizable value.
3. Long-term Debt
(thousands) |
| March 31, 2003 |
| December 31, 2002 |
| ||
|
|
|
|
|
| ||
Senior secured term notes (US$57,000,000) |
| $ | 83,750 |
| $ | 90,037 |
|
Senior subordinated term notes (US$150,000,000) |
| 220,395 |
| 236,940 |
| ||
|
| $ | 304,145 |
| $ | 326,977 |
|
Interest Expense
The Company has incurred interest expense on its outstanding debt as follows:
|
| Three Months Ended March 31 |
| ||||
|
| 2003 |
| 2002 |
| ||
Bank loan |
| $ | 31 |
| $ | 162 |
|
Amortization of deferred charge |
| 260 |
| 260 |
| ||
Long-term debt |
| 6,166 |
| 5,208 |
| ||
Total interest |
| $ | 6,457 |
| $ | 5,630 |
|
4
4. Share Capital
The Company has an unlimited number of common shares in its authorized share capital.
Issued and Outstanding:
Common shares – (thousands)
|
| # of shares |
| Amount |
| |
Balance – January 1, 2003 |
| 52,819 |
| $ | 398,176 |
|
Flow-though shares issued |
| 103 |
| 810 |
| |
Future tax related to flow-through shares |
| — |
| (192 | ) | |
Exercise of stock options |
| 481 |
| 1,858 |
| |
Balance – March 31, 2003 |
| 53,403 |
| $ | 400,652 |
|
In January 2003, the Company issued 103,050 flow-through common shares at a price of $7.86 per share.
Stock options – (thousands) |
| # of options |
| Weighted average |
| |
Balance – January 1, 2003 |
| 5,126 |
| $ | 6.98 |
|
Granted |
| 79 |
| $ | 8.63 |
|
Exercised |
| (481 | ) | $ | 3.86 |
|
Cancelled |
| (66 | ) | $ | 5.41 |
|
Balance – March 31, 2003 |
| 4,658 |
| $ | 7.35 |
|
Exercisable – March 31, 2003 |
| 1,517 |
| $ | 8.35 |
|
The Company accounts for its stock options using intrinsic values. On this basis, compensation costs are not required to be recognized in the financial statements for stock options granted at market value. Had compensation costs for the Company’s stock option plan been determined based on the fair-value method at the dates of grants under the plan after January 1, 2002, the Company’s pro-forma net income for the three months ended March 31, 2003 would have been reduced by $0.5 million (2002 - $4,300) and basic net income per share would be $0.61 (2002 - $0.14) and diluted net income per share would be $0.60 (2002 - $0.14). The weighted average fair market value of options granted during the three months ended March 31, 2003 was $3.99 per option (2002 – $2.73 per option). The fair value of the stock options granted during the three months ended March 31, 2003 is estimated on the grant date using the Black-Scholes option-pricing model using the following assumptions: risk free interest rate of 4.5%; expected life of 4 years; and expected volatility of 54%.
5. Supplemental Cash Flow Information
|
| Three Months Ended March 31 |
| ||||
(thousands) |
| 2003 |
| 2002 |
| ||
Interest paid |
| $ | 13,939 |
| $ | 12,338 |
|
Income taxes paid |
| $ | 6,686 |
| $ | 334 |
|
6. Subsequent Event
Utilizing the cash proceeds from the sale of properties, on May 5, 2003, the Company redeemed the US$57 million senior secured term notes at principal plus US$4.4 million of yield maintenance payment. The Company’s bank facilities are at $147 million subsequent to the note redemption.
7. Comparative Figures
Certain comparative figures have been reclassified to conform to the current period’s presentation.
5