Exhibit 99.2
Baytex Energy Trust
Supplemental Disclosures about Oil and Gas Producing Activities (unaudited)
December 31, 2008
The following disclosures have been prepared by Baytex Energy Trust (“Baytex” or the “Trust”) in accordance with United States Statement of Financial Accounting Standards No. 69 “Disclosures about Oil and Gas Producing Activities” (“SFAS 69”):
Oil and Gas Reserve Information
Proved oil and gas reserves are the estimated quantities of crude oil, natural gas and natural gas liquids (“NGL”) that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions.
Proved developed oil and gas reserves are reserves that can be expected to be recovered through existing wells with existing equipment and operating methods.
Proved undeveloped oil and gas reserves are reserves that are expected to be recovered from known accumulations where a significant expenditure is required.
Reserves are estimated quantities of crude oil, natural gas and related substances anticipated from geological and engineering data to be recoverable from known accumulations, from a given date forward, by known technology, under existing operating conditions and prices in effect at year end. Estimates of oil and gas reserves are subject to uncertainty and will change as additional information regarding the producing fields and technology becomes available and as future economic conditions change. Reserves presented in this section represent the Trust’s share of reserves, excluding royalty interests of others. Net after royalty reserves are the Trust’s working interest and overriding royalty share of the gross remaining reserves, after deduction of any crown, freehold and overriding royalties. Such royalties are subject to change by legislation or regulation and can also vary depending on production rates, selling prices and timing of initial production.
The changes in the Trust’s net proved oil and gas reserves under constant prices and costs for the two-year period ended December 31, 2008 were as follows:
Canada | United States | Total | ||||||||||||||||||||
Crude Oil & NGL | Natural Gas | Crude Oil & NGL | Natural Gas | Crude Oil & NGL | Natural Gas | |||||||||||||||||
(Mbbl) | (MMcf) | (Mbbl) | (MMcf) | (Mbbl) | (Mmcf) | |||||||||||||||||
Net proved reserves | ||||||||||||||||||||||
December 31, 2006 | 74,790 | 88,560 | - | - | 74,790 | 88,560 | ||||||||||||||||
Revisions of previous estimates | 3,955 | (2,267 | ) | - | - | 3,955 | (2,267 | ) | ||||||||||||||
Improved recovery | 246 | - | - | - | 246 | - | ||||||||||||||||
Purchases | 7,792 | 8,657 | - | - | 7,792 | 8,657 | ||||||||||||||||
Extensions and discoveries | 7,428 | 4,802 | - | - | 7,428 | 4,802 | ||||||||||||||||
Production | (8,315 | ) | (14,849 | ) | - | - | (8,315 | ) | (14,849 | ) | ||||||||||||
December 31, 2007 | 85,896 | 84,903 | - | - | 85,896 | 84,903 | ||||||||||||||||
Revisions of previous estimates | 3,130 | (547 | ) | - | - | 3,130 | (547 | ) | ||||||||||||||
Improved recovery | - | - | - | 78 | - | 78 | ||||||||||||||||
Purchases | 1,102 | 22,671 | 3,281 | 1,580 | 4,383 | 24,251 | ||||||||||||||||
Extensions and discoveries | 402 | 183 | - | - | 402 | 183 | ||||||||||||||||
Production | (9,166 | ) | (14,992 | ) | (57 | ) | (13 | ) | (9,223 | ) | (15,005 | ) | ||||||||||
December 31, 2008 | 81,364 | 92,218 | 3,224 | 1,645 | 84,588 | 93,863 | ||||||||||||||||
Net proved developed reserves | ||||||||||||||||||||||
End of year 2006 | 45,958 | 75,679 | - | - | 45,958 | 75,679 | ||||||||||||||||
End of year 2007 | 48,052 | 72,372 | - | - | 48,052 | 72,372 | ||||||||||||||||
End of year 2008 | 45,384 | 80,916 | 1,161 | 330 | 46,545 | 81,246 |
1
Baytex Energy Trust
Supplemental Disclosures about Oil and Gas Producing Activities (unaudited)
December 31, 2008
Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves
The following information has been developed utilizing procedures prescribed by SFAS 69 and based on crude oil and natural gas reserve and production volumes estimated by Baytex’s independent engineering evaluators, Sproule Associates Limited. In calculating the standardized measure of discounted future net cash flows, year-end constant prices and cost assumptions were applied to Baytex’s annual future production from proved reserves to determine cash inflows. Future production and development costs are based on constant price assumptions and assume the continuation of existing economic, operating, and regulatory conditions. Future income taxes are calculated by applying statutory income tax rates to future pre-tax cash flows after provision for the tax cost of the oil and natural gas properties based upon existing laws and regulations. The Trust is currently not taxable. A 10 percent discount factor was applied to the future net cash flows.
The information contained in the following table should not be considered as representative of realistic assessments of future cash flows, nor should the standardized measure of discounted future net cash flows be viewed as representative of the fair market value of Baytex’s oil and gas properties. Management does not rely upon the following information in making investment and operating decisions. Such decisions are based upon a wide range of factors, including estimates of probable as well as proved reserves, and varying price and cost assumptions considered more representative of a range of possible economic conditions that may be anticipated. The prescribed discount rate of 10 percent may not appropriately reflect interest rates.
The computation of the standardized measure of discounted future net cash flows relating to proved oil and gas reserves at December 31, 2008 was based on the year-end AECO-C spot price for natural gas of $6.34/mmbtu (2007 - $6.52/mmbtu) and on crude oil prices computed with reference to the year-end Edmonton Par spot price of $45.51/bbl (2007 - $93.44/bbl).
The standardized measure of discounted future net cash flows relating to net proved oil and gas reserves are as follows:
Canada | United States | Total | ||||||||||||||||||||||
(thousands of Canadian dollars) | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | ||||||||||||||||||
Future cash inflows | $ | 2,548,386 | $ | 4,239,971 | $ | 161,982 | $ | - | $ | 2,710,368 | $ | 4,239,971 | ||||||||||||
Future production costs | (1,324,077 | ) | (1,503,820 | ) | (66,397 | ) | - | (1,390,474 | ) | (1,503,820 | ) | |||||||||||||
Future development costs | (411,306 | ) | (428,574 | ) | (57,124 | ) | - | (468,430 | ) | (428,574 | ) | |||||||||||||
Future income taxes (1) | - | (80,005 | ) | (6,304 | ) | - | (6,304 | ) | (80,005 | ) | ||||||||||||||
Future net cash flows | 813,003 | 2,227,572 | 32,157 | - | 845,160 | 2,227,572 | ||||||||||||||||||
Deduct: 10% annual discount factor | (251,348 | ) | (788,772 | ) | (35,994 | ) | - | (287,342 | ) | (788,772 | ) | |||||||||||||
Standardized measure | $ | 561,655 | $ | 1,438,800 | $ | (3,837 | ) | $ | - | $ | 557,818 | $ | 1,438,800 |
(1) Not expected to be taxable in Canada.
2
Baytex Energy Trust
Supplemental Disclosures about Oil and Gas Producing Activities (unaudited)
December 31, 2008
Reconciliation of Changes in Standardized Measure of Future Net Cash Flows Discounted at 10% per Year Relating to Proved Oil and Gas Reserves
As at December 31, 2008 (thousands of Canadian dollars) | Canada | United States | Total | |||||||||
Balance, beginning of year | $ | 1,438,800 | $ | - | $ | 1,438,800 | ||||||
Sales, net of production costs | (776,491 | ) | (3,234 | ) | (779,725 | ) | ||||||
Net change in prices and production costs related to future production | (273,125 | ) | - | (273,125 | ) | |||||||
Changes in previously estimated production costs incurred during the period | (162,473 | ) | (62,390 | ) | (224,863 | ) | ||||||
Extensions, discoveries and improved recovery, net of related costs | 5,426 | 280 | 5,706 | |||||||||
Revisions of previous quantity estimates | 35,199 | - | 35,199 | |||||||||
Purchases of reserves in place | 119,553 | 62,209 | 181,762 | |||||||||
Accretion of discount | 159,586 | - | 159,586 | |||||||||
Net change in income taxes | 15,180 | (702 | ) | 14,478 | ||||||||
Balance, end of year | $ | 561,655 | $ | (3,837 | ) | $ | 557,818 |
As at December 31, 2007 (thousands of Canadian dollars) | Canada | United States | Total | |||||||||
Balance, beginning of year | $ | 1,227,079 | $ | - | $ | 1,227,079 | ||||||
Sales, net of production costs | (508,384 | ) | - | (508,384 | ) | |||||||
Net change in prices and production costs related to future production | 209,794 | - | 209,794 | |||||||||
Changes in previously estimated production costs incurred during the period | (120,870 | ) | - | (120,870 | ) | |||||||
Extensions, discoveries and improved recovery, net of related costs | 193,199 | - | 193,199 | |||||||||
Revisions of previous quantity estimates | 82,630 | - | 82,630 | |||||||||
Purchases of reserves in place | 283,831 | - | 283,831 | |||||||||
Accretion of discount | 96,740 | - | 96,740 | |||||||||
Net change in income taxes | (25,219 | ) | - | (25,219 | ) | |||||||
Balance, end of year | $ | 1,438,800 | $ | - | $ | 1,438,800 |
Capitalized Costs Relating to Oil and Gas Producing Activities
As at December 31, 2008 (thousands of Canadian dollars) | Canada | United States | Total | |||||||||
Proved properties | $ | 3,377,726 | $ | 49,282 | $ | 3,427,008 | ||||||
Unproved properties | 63,587 | 57,629 | 121,216 | |||||||||
Total capital costs | 3,441,313 | 106,911 | 3,548,224 | |||||||||
Accumulated depletion and depreciation | (2,795,663 | ) | (49,285 | ) | (2,844,948 | ) | ||||||
Net capitalized costs | $ | 645,650 | $ | 57,626 | $ | 703,276 |
As at December 31, 2007 (thousands of Canadian dollars) | Canada | United States | Total | |||||||||
Proved properties | $ | 2,993,179 | $ | - | $ | 2,993,179 | ||||||
Unproved properties | 64,984 | - | 64,984 | |||||||||
Total capital costs | 3,058,163 | - | 3,058,163 | |||||||||
Accumulated depletion and depreciation | (1,929,982 | ) | - | (1,929,982 | ) | |||||||
Net capitalized costs | $ | 1,128,181 | $ | - | $ | 1,128,181 |
3
Baytex Energy Trust
Supplemental Disclosures about Oil and Gas Producing Activities (unaudited)
December 31, 2008
Costs Incurred in Oil and Gas Property Acquisition, Exploration and Development Activities
For years ended December 31, 2008 (thousands of Canadian dollars) | Canada | United States | Total | |||||||||
Property acquisition costs (1) | ||||||||||||
Proved properties | $ | 190,471 | $ | 12,299 | $ | 202,770 | ||||||
Unproved properties | 4,700 | 57,629 | 62,329 | |||||||||
Development costs (2) | 140,887 | 36,892 | 177,779 | |||||||||
Exploration costs (3) | 6,026 | 1,278 | 7,304 | |||||||||
Total | $ | 342,084 | $ | 108,098 | $ | 450,182 |
For years ended December 31, 2007 (thousands of Canadian dollars) | Canada | United States | Total | |||||||||
Property acquisition costs (1) | ||||||||||||
Proved properties | $ | 245,000 | $ | - | $ | 245,000 | ||||||
Unproved properties | 6,530 | - | 6,530 | |||||||||
Development costs (2) | 130,400 | - | 130,400 | |||||||||
Exploration costs (3) | 12,266 | - | 12,266 | |||||||||
Total | $ | 394,196 | $ | - | $ | 394,196 |
(1) Acquisitions are net of disposition of properties.
(2) Development and facilities capital expenditures.
(3) Cost of geological and geophysical capital expenditures and drilling costs for exploratory wells drilled.
Results of Operations for Producing Activities
For years ended December 31, 2008 (thousands of Canadian dollars except per boe amounts) | Canada | United States | Total | |||||||||
Oil and gas revenues, net of royalties | $ | 946,772 | $ | 4,213 | $ | 950,985 | ||||||
Less: | ||||||||||||
Operating costs, production and mineral taxes | 182,431 | 980 | 183,411 | |||||||||
Transportation costs | 218,706 | - | 218,706 | |||||||||
Depreciation, depletion and accretion | 870,928 | 48,687 | 919,615 | |||||||||
Operating income (loss) | (325,293 | ) | (45,454 | ) | (370,747 | ) | ||||||
Income taxes (1) | - | - | - | |||||||||
Results of operations (2) | $ | (325,293 | ) | $ | (45,454 | ) | $ | (370,747 | ) | |||
Depletion rate per net boe (3) | 74.66 | 822.88 | 78.44 |
For years ended December 31, 2007 (thousands of Canadian dollars except per boe amounts) | Canada | United States | Total | |||||||||
Oil and gas revenues, net of royalties | $ | 640,430 | $ | - | $ | 640,430 | ||||||
Less: | ||||||||||||
Operating costs, production and mineral taxes | 139,763 | - | 139,763 | |||||||||
Transportation costs | 155,754 | - | 155,754 | |||||||||
Depreciation, depletion and accretion | 154,771 | - | 154,771 | |||||||||
Operating income | 190,142 | - | 190,142 | |||||||||
Income taxes (1) | - | - | - | |||||||||
Results of operations (2) | $ | 190,142 | $ | - | $ | 190,142 | ||||||
Depletion rate per net boe | 14.34 | - | 14.34 |
(1) Baytex is currently not taxable.
(2) Excludes corporate overhead and interest costs.
(3) Includes impairment write-down of $799.1 million ($752.1 million – Canada; $47.0 million – United States).
4