EX-99.1 2 a991-q32020fs.htm EX-99.1 Document

Exhibit 99.1
Baytex Energy Corp. Condensed Consolidated Statements of Financial Position
(thousands of Canadian dollars) (unaudited)
As at
NotesSeptember 30, 2020December 31, 2019
ASSETS
Current assets
Cash$ $5,572 
Trade and other receivables 97,389 173,762 
Financial derivatives1741,746 5,433 
139,135 184,767 
Non-current assets
Exploration and evaluation assets5186,391 320,210 
Oil and gas properties62,798,198 5,387,889 
Other plant and equipment 8,161 7,598 
Lease assets10,342 13,619 
Deferred income tax asset1414,187 — 
$3,156,414 $5,914,083 
LIABILITIES
Current liabilities
Trade and other payables $179,482 $207,454 
Financial derivatives179,921 8,668 
Lease obligations5,791 5,798 
Asset retirement obligations910,913 11,579 
206,107 233,499 
Non-current liabilities
Financial derivatives1715,635 — 
Credit facilities7622,654 505,412 
Long-term notes81,182,800 1,328,175 
Lease obligations4,703 8,085 
Asset retirement obligations9740,238 656,395 
Deferred income tax liability  235,308 
2,772,137 2,966,874 
SHAREHOLDERS’ EQUITY
Shareholders' capital105,729,164 5,718,835 
Contributed surplus 14,356 17,712 
Accumulated other comprehensive income646,443 556,224 
Deficit (6,005,686)(3,345,562)
384,277 2,947,209 
$3,156,414 $5,914,083 

See accompanying notes to the condensed consolidated interim financial statements.





1


Baytex Energy Corp.
Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)
(thousands of Canadian dollars, except per common share amounts and weighted average common shares) (unaudited)
Three Months Ended September 30Nine Months Ended September 30
Notes2020 2019 2020 2019 
Revenue, net of royalties
Petroleum and natural gas sales13$252,538 $424,600 $741,841 $1,360,024 
Royalties(40,052)(75,017)(125,928)(242,959)
212,486 349,583 615,913 1,117,065 
Expenses
Operating73,447 97,377 251,597 298,143 
Transportation6,372 9,903 21,745 35,102 
Blending and other10,673 12,950 37,490 50,628 
General and administrative7,741 9,934 24,954 35,576 
Exploration and evaluation58,909 2,138 11,000 8,667 
Depletion and depreciation 106,454 180,422 392,380 551,548 
Impairment 5, 6 — 2,716,349 — 
Share-based compensation112,949 3,401 8,725 14,245 
Financing and interest1527,962 31,766 97,412 97,049 
Financial derivatives loss (gain)1717,027 (28,523)(50,156)(21,742)
Foreign exchange (gain) loss16(26,231)14,237 27,688 (37,978)
Gain on dispositions(98)(18)(246)(1,075)
Other income(293)(738)(2,300)(5,044)
234,912 332,849 3,536,638 1,025,119 
Net income (loss) before income taxes(22,426)16,734 (2,920,725)91,946 
Income tax expense (recovery)14
Current income tax expense322 501 880 1,591 
Deferred income tax expense (recovery)696 1,082 (261,481)(14,958)
1,018 1,583 (260,601)(13,367)
Net income (loss)$(23,444)$15,151 $(2,660,124)$105,313 
Other comprehensive income (loss)
Foreign currency translation adjustment(30,268)25,344 90,219 (67,845)
Comprehensive income (loss)$(53,712)$40,495 $(2,569,905)$37,468 
Net income (loss) per common share
12
Basic$(0.04)$0.03 $(4.75)$0.19 
Diluted$(0.04)$0.03 $(4.75)$0.19 
Weighted average common shares (000's)
12
Basic561,128 557,888 560,484 556,651 
Diluted561,128 560,888 560,484 560,438 

See accompanying notes to the condensed consolidated interim financial statements.

2


Baytex Energy Corp.
Condensed Consolidated Statements of Changes in Equity
(thousands of Canadian dollars) (unaudited)
NotesShareholders’
capital
Contributed
surplus
Accumulated other comprehensive incomeDeficitTotal equity
Balance at December 31, 2018$5,701,516 $19,137 $667,874 $(3,333,103)$3,055,424 
Vesting of share awards 15,721 (15,721)— —  
Share-based compensation — 14,245 — — 14,245 
Comprehensive income (loss)— — (67,845)105,313 37,468 
Balance at September 30, 2019$5,717,237 $17,661 $600,029 $(3,227,790)$3,107,137 
Balance at December 31, 2019$5,718,835 $17,712 $556,224 $(3,345,562)$2,947,209 
Vesting of share awards 1010,329 (10,329)— —  
Share-based compensation 11— 6,973 — — 6,973 
Comprehensive income (loss)— — 90,219 (2,660,124)(2,569,905)
Balance at September 30, 2020$5,729,164 $14,356 $646,443 $(6,005,686)$384,277 

See accompanying notes to the condensed consolidated interim financial statements.
3


Baytex Energy Corp.
Condensed Consolidated Statements of Cash Flows
(thousands of Canadian dollars) (unaudited)
Three Months Ended September 30Nine Months Ended September 30
Notes2020 2019 2020 2019 
CASH PROVIDED BY (USED IN):
Operating activities
Net income (loss) for the period$(23,444)$15,151 $(2,660,124)$105,313 
Adjustments for:
Share-based compensation112,336 3,401 6,973 14,245 
Unrealized foreign exchange (gain) loss16(25,880)13,855 28,125 (38,404)
Exploration and evaluation58,909 2,138 11,000 8,667 
Depletion and depreciation 106,454 180,422 392,380 551,548 
Impairment 5, 6 — 2,716,349 — 
Non-cash financing, accretion, and early redemption expense152,544 5,014 16,072 14,021 
Non-cash other income9(293)— (293)— 
Unrealized financial derivatives loss (gain)177,284 (7,666)(19,425)30,922 
Gain on dispositions(98)(18)(246)(1,075)
Deferred income tax expense (recovery)14696 1,082 (261,481)(14,958)
Asset retirement obligations settled9(1,211)(1,134)(6,080)(10,860)
Change in non-cash working capital 16,391 (17,275)78,829 (59,499)
93,688 194,970 302,079 599,920 
Financing activities
Increase (decrease) in credit facilities(75,944)155,199 111,403 50,445 
Payments on lease obligations(1,456)(1,390)(4,440)(4,402)
Net proceeds from issuance of long-term notes8 — 652,150 — 
Redemption of long-term notes 8 (198,128)(833,672)(198,128)
(77,400)(44,319)(74,559)(152,085)
Investing activities
Additions to exploration and evaluation assets5(484)(1,047)(4,344)(2,441)
Additions to oil and gas properties6(15,418)(138,038)(198,187)(396,733)
Additions to other plant and equipment (40)(19)(2,027)(398)
Property acquisitions  (120) (2,717)
Proceeds from dispositions98 150 149 1,100 
Change in non-cash working capital (444)(11,577)(28,683)(46,646)
(16,288)(150,651)(233,092)(447,835)
Change in cash — (5,572)— 
Cash, beginning of period — 5,572 — 
Cash, end of period$ $— $ $— 
Supplementary information
Interest paid$3,365 $22,315 $55,145 $78,493 
Income taxes paid$1,155 $76 $1,155 $1,158 

See accompanying notes to the condensed consolidated interim financial statements.
4


Baytex Energy Corp.
Notes to the Condensed Consolidated Interim Financial Statements
For the periods ended September 30, 2020 and 2019
(all tabular amounts in thousands of Canadian dollars, except per common share amounts) (unaudited)

1.REPORTING ENTITY
Baytex Energy Corp. (the “Company” or “Baytex”) is an oil and gas corporation engaged in the acquisition, development and production of oil and natural gas in the Western Canadian Sedimentary Basin and the United States. The Company’s common shares are traded on the Toronto Stock Exchange and the New York Stock Exchange under the symbol BTE. The Company’s head and principal office is located at 2800, 520 – 3rd Avenue S.W., Calgary, Alberta, T2P 0R3, and its registered office is located at 2400, 525 – 8th Avenue S.W., Calgary, Alberta, T2P 1G1.

2.BASIS OF PRESENTATION
The condensed consolidated interim financial statements ("consolidated financial statements") have been prepared in accordance with International Accounting Standards 34, Interim Financial Reporting, under International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board (the "IASB"). These consolidated financial statements do not include all the necessary annual disclosures as prescribed by IFRS and should be read in conjunction with the annual consolidated financial statements as at and for the year ended December 31, 2019.

The consolidated financial statements were approved by the Board of Directors of Baytex on November 2, 2020.

The consolidated financial statements have been prepared on a historical cost basis, with the exception of derivative financial instruments which have been measured at fair value. The consolidated financial statements are presented in Canadian dollars which is the functional currency of the Company. References to “US$” are to United States ("U.S.") dollars. All financial information is rounded to the nearest thousand, except per share amounts or when otherwise indicated.

The audited consolidated financial statements of the Company as at and for the year ended December 31, 2019 are available through its filings on SEDAR at www.sedar.com and through the U.S. Securities and Exchange Commission at www.sec.gov.

3.SIGNIFICANT ACCOUNTING POLICIES

The accounting policies, critical accounting judgments and significant estimates used in preparation of the 2019 annual financial statements have been applied in the preparation of these consolidated financial statements, except for the adoption of amendments to IFRS 3 Business Combinations as described below.

Current environment and estimation uncertainty

Management makes judgements and assumptions about the future in deriving estimates used in preparation of these consolidated financial statements in accordance with IFRS. Sources of estimation uncertainty include estimates used to determine economically recoverable oil, natural gas, and natural gas liquids reserves, the recoverable amount of long-lived assets or cash generating units, the fair value of financial derivatives, the provision for asset retirement obligations and the provision for income taxes and the related deferred tax assets and liabilities.

In March 2020, the World Health Organization declared a global pandemic related to the novel coronavirus ("COVID-19"). The emergence of COVID-19 and the steps taken by governments to control the spread of the virus resulted in significant instability in the global economy and a sharp decline in demand for crude oil. This combined with the increased supply of crude oil due to the Russia and Saudi Arabia price war resulted in an unprecedented collapse in global crude oil prices and significant volatility during Q2/2020. Global crude oil prices began to recover and were relatively stable during Q3/2020 as members of OPEC+ agreed to production curtailments and governments began to ease restrictions that allowed economies to begin reopening which increased demand. While these factors have resulted in recent improvements in crude oil prices the outlook for prices remains uncertain due to the potential for additional government restrictions from COVID-19 and uncertainty that members of OPEC+ will maintain production curtailments.

These factors have impacted our results for the nine months ended September 30, 2020. At March 31, 2020, we recorded a total impairment of $2.7 billion which included amounts related to our exploration and evaluation assets (note 5) and oil and gas properties (note 6). There is potential for further impairments or reversal of impairments over the balance of 2020 due to the current volatility in forecasted prices for the commodities we produce. In the current environment, assumptions and estimates regarding future commodity prices, the amount of economically recoverable reserves, exchange rates, and interest rates are subject to greater variability than normal. Actual results may differ from these estimates as the effect of future events cannot be determined with certainty.

5


We have taken action to protect our financial liquidity in response to the recent volatility in commodity prices and instability in the global economy. We have reduced our planned capital expenditures and have reduced production of oil and natural gas when commodity prices do not support economic production. We currently have $425.8 million of availability on our credit facilities and are currently forecasting to remain in compliance with the financial covenants applicable to our credit facilities for the foreseeable future at current forward commodity prices.

Business Combinations

Baytex adopted amendments to IFRS 3 Business Combinations effective January 1, 2020, which will be applied prospectively to acquisitions that occur on or after January 1, 2020. These amendments did not result in changes to the Company's accounting policies for applying the acquisition method but could result in future acquisitions being accounted for as an asset acquisition as opposed to a business combination.

4.    SEGMENTED FINANCIAL INFORMATION

Baytex's reportable segments are determined based on the geographic location and nature of the underlying operations:

Canada includes the exploration for, and the development and production of, crude oil and natural gas in Western Canada;
U.S. includes the exploration for, and the development and production of, crude oil and natural gas in the U.S.; and
Corporate includes corporate activities and items not allocated between operating segments.

CanadaU.S.CorporateConsolidated
Three Months Ended September 302020 20192020 20192020 20192020 2019
Revenue, net of royalties
Petroleum and natural gas sales$158,831 $258,769 $93,707 $165,831 $ $— $252,538 $424,600 
Royalties(12,297)(26,193)(27,755)(48,824) — (40,052)(75,017)
146,534 232,576 65,952 117,007  — 212,486 349,583 
Expenses
Operating57,557 73,701 15,890 23,676  — 73,447 97,377 
Transportation6,372 9,903  —  — 6,372 9,903 
Blending and other10,673 12,950  —  — 10,673 12,950 
General and administrative —  — 7,741 9,934 7,741 9,934 
Exploration and evaluation8,909 2,138  —  — 8,909 2,138 
Depletion and depreciation68,727 115,008 35,820 63,356 1,907 2,058 106,454 180,422 
Share-based compensation —  — 2,949 3,401 2,949 3,401 
Financing and interest —  — 27,962 31,766 27,962 31,766 
Financial derivatives loss (gain) —  — 17,027 (28,523)17,027 (28,523)
Foreign exchange (gain) loss —  — (26,231)14,237 (26,231)14,237 
Gain on dispositions(98)(18) —  — (98)(18)
Other (income) expense(694)—  — 401 (738)(293)(738)
151,446 213,682 51,710 87,032 31,756 32,135 234,912 332,849 
Net income (loss) before income taxes(4,912)18,894 14,242 29,975 (31,756)(32,135)(22,426)16,734 
Income tax expense (recovery)
Current income tax expense — 322 501  — 322 501 
Deferred income tax expense (recovery)10,589 4,734 696 (203)(10,589)(3,449)696 1,082 
10,589 4,734 1,018 298 (10,589)(3,449)1,018 1,583 
Net income (loss)$(15,501)$14,160 $13,224 $29,677 $(21,167)$(28,686)$(23,444)$15,151 
Total oil and natural gas capital expenditures(1)
$3,784 $96,744 $12,020 $42,311 $ $— $15,804 $139,055 
6



CanadaU.S.CorporateConsolidated
Nine Months Ended September 302020 20192020 20192020 20192020 2019
Revenue, net of royalties
Petroleum and natural gas sales $427,000 $817,506 $314,841 $542,518 $ $— $741,841 $1,360,024 
Royalties(33,972)(82,313)(91,956)(160,646) — (125,928)(242,959)
393,028 735,193 222,885 381,872  — 615,913 1,117,065 
Expenses
Operating185,641 221,680 65,956 76,463  — 251,597 298,143 
Transportation21,745 35,102  —  — 21,745 35,102 
Blending and other37,490 50,628  —  — 37,490 50,628 
General and administrative —  — 24,954 35,576 24,954 35,576 
Exploration and evaluation 11,000 8,667  —  — 11,000 8,667 
Depletion and depreciation 249,125 345,692 137,462 201,653 5,793 4,203 392,380 551,548 
Impairment 1,855,000 — 861,349 —  — 2,716,349 — 
Share-based compensation  —  — 8,725 14,245 8,725 14,245 
Financing and interest  —  — 97,412 97,049 97,412 97,049 
Financial derivatives (gain) loss  —  — (50,156)(21,742)(50,156)(21,742)
Foreign exchange loss (gain) —  — 27,688 (37,978)27,688 (37,978)
Gain on dispositions(246)(1,075) —  — (246)(1,075)
Other income (694)—  — (1,606)(5,044)(2,300)(5,044)
2,359,061 660,694 1,064,767 278,116 112,810 86,309 3,536,638 1,025,119 
Net income (loss) before income taxes(1,966,033)74,499 (841,882)103,756 (112,810)(86,309)(2,920,725)91,946 
Income tax expense (recovery)
Current income tax expense469 — 411 1,591  — 880 1,591 
Deferred income tax (recovery) expense(74,687)8,842 (164,298)4,505 (22,496)(28,305)(261,481)(14,958)
(74,218)8,842 (163,887)6,096 (22,496)(28,305)(260,601)(13,367)
Net income (loss)$(1,891,815)$65,657 $(677,995)$97,660 $(90,314)$(58,004)$(2,660,124)$105,313 
Total oil and natural gas capital expenditures(1)
$129,773 $271,520 $72,609 $129,271 $ $— $202,382 $400,791 
(1)     Includes additions to exploration and evaluation assets, oil and gas properties, and property acquisitions, net of proceeds from divestitures.

September 30, 2020December 31, 2019
Canadian assets$1,526,819 $3,484,123 
U.S. assets1,569,346 2,403,310 
Corporate assets60,249 26,650 
Total consolidated assets$3,156,414 $5,914,083 

7


5.    EXPLORATION AND EVALUATION ASSETS
September 30, 2020December 31, 2019
Balance, beginning of period$320,210 $358,935 
Capital expenditures4,344 2,948 
Property acquisitions 1,523 
Divestitures (443)
Property swaps479 417 
Impairment(127,861)(7,822)
Exploration and evaluation expense(11,000)(11,764)
Transfer to oil and gas properties (note 6)(5,830)(16,204)
Foreign currency translation6,049 (7,380)
Balance, end of period$186,391 $320,210 

At September 30, 2020, there were no indicators of impairment or impairment reversal for exploration and evaluation assets in any of the Company's CGUs.

At March 31, 2020, the Company identified indicators of impairment for the exploration and evaluation assets within each of its six CGUs. The estimated recoverable amount was below the carrying value of the exploration and evaluation assets in the Conventional, Peace River, Lloydminster, Viking, and Eagle Ford CGUs and an impairment of $127.9 million was recorded as at March 31, 2020. The recoverable amount of each CGU was based on its fair value less costs of disposal ("FVLCD") and was estimated with reference to arm's length transactions in comparable locations and the discounted cash flows associated with the Company's future development plans. The following table indicates the impairment booked for each CGU at March 31, 2020.
Impairment
Conventional CGU$4,000 
Peace River CGU20,000 
Lloydminster CGU42,000 
Viking CGU13,000 
Eagle Ford CGU48,861 
$127,861 

At December 31, 2019, the Company identified indicators of impairment for the exploration and evaluation assets within the Peace River CGU. The estimated recoverable amount was below the carrying value of the exploration and evaluation assets in the Peace River CGU and an impairment of $7.8 million was recorded as at December 31, 2019. There were no indicators of impairment for exploration and evaluation assets in the remaining CGUs at December 31, 2019.

8


6.    OIL AND GAS PROPERTIES
CostAccumulated
depletion
Net book value
Balance, December 31, 2018$10,744,533 $(4,926,644)$5,817,889 
Capital expenditures549,343 — 549,343 
Property acquisitions2,636 — 2,636 
Transfers from exploration and evaluation assets (note 5)16,204 — 16,204 
Change in asset retirement obligations (note 9)23,894 — 23,894 
Divestitures(2,069)1,690 (379)
Property swaps1,773 — 1,773 
Impairment— (180,000)(180,000)
Foreign currency translation(208,017)89,813 (118,204)
Depletion— (725,267)(725,267)
Balance, December 31, 2019$11,128,297 $(5,740,408)$5,387,889 
Capital expenditures198,187 — 198,187 
Transfers from exploration and evaluation assets (note 5)5,830 — 5,830 
Change in asset retirement obligations (note 9)82,900 — 82,900 
Property swaps(1,190)178 (1,012)
Impairment— (2,588,488)(2,588,488)
Foreign currency translation101,173 (1,694)99,479 
Depletion— (386,587)(386,587)
Balance, September 30, 2020$11,515,197 $(8,716,999)$2,798,198 

At September 30, 2020, there were no indicators of impairment or impairment reversal for oil and gas properties in any of the Company's CGUs.

At March 31, 2020, the Company identified indicators of impairment for each of its six CGUs due to a significant decline in forecasted commodity prices. The recoverable amount was not sufficient to support the carrying amount which resulted in an impairment of $2.6 billion recorded at March 31, 2020. The recoverable amount of each CGU was based on its FVLCD which was estimated using a discounted cash flow model of proved plus probable cash flows from an independent reserve report prepared as at December 31, 2019 and was adjusted for operations between December 31, 2019 and March 31, 2020. The after-tax discount rates applied to the cash flows were between 8% and 14%.

The recoverable amount of the Company's CGUs were calculated at March 31, 2020 using the following benchmark reference prices for the years 2020 to 2029 adjusted for commodity differentials specific to the Company.
2020202120222023202420252026202720282029
WTI crude oil (US$/bbl)29.17 40.45 49.17 53.28 55.66 56.87 58.01 59.17 60.35 61.56 
WCS heavy oil (CA$/bbl)19.21 34.65 46.34 51.25 54.28 55.72 56.96 58.22 59.51 60.82 
LLS crude oil (US$/bbl)32.17 43.80 52.55 56.68 59.10 60.35 61.52 62.72 63.94 65.19 
Edmonton par oil (CA$/bbl)29.22 46.85 59.27 65.02 68.43 69.81 71.24 72.70 74.19 75.71 
Henry Hub gas (US$/mmbtu)2.10 2.58 2.79 2.86 2.93 3.00 3.07 3.13 3.19 3.25 
AECO gas (CA$/mmbtu)1.74 2.20 2.38 2.45 2.53 2.60 2.66 2.72 2.79 2.85 
Exchange rate (CAD/USD)1.41 1.37 1.34 1.34 1.34 1.33 1.33 1.33 1.33 1.33 

This data is combined with assumptions relating to long-term prices, inflation rates and exchange rates together with estimates of transportation costs and pricing of competing fuels to forecast long-term energy prices, consistent with external sources of information. The prices and costs subsequent to 2029 have been adjusted for inflation at an annual rate of 2.0%.

9


The following table demonstrates the sensitivity of the estimated recoverable amount of the Company's CGUs to reasonably possible changes in key assumptions inherent in the estimate.
Recoverable amountImpairmentChange in discount rate of 1%Change in oil price of $2.50/bblChange in gas price of $0.25/mcf
Conventional CGU$37,444 $41,000 $3,000 $3,500 $8,500 
Peace River CGU109,631 345,000 9,500 53,500 3,000 
Lloydminster CGU227,967 470,000 25,000 69,500 — 
Duvernay CGU61,197 5,000 5,500 9,500 1,500 
Viking CGU962,134 915,000 57,000 123,000 4,000 
Eagle Ford CGU1,576,423 812,488 120,750 141,500 32,000 
$2,974,796 $2,588,488 $220,750 $400,500 $49,000 

At December 31, 2019, the Company identified indicators of impairment for its Peace River CGU due to a sustained decline in Canadian heavy oil prices and a reduction in planned exploration and development expenditures related to thermal properties in the Peace River CGU. The recoverable amount of the Peace River CGU was based on its value-in-use ("VIU") which was estimated using a discounted cash flow model using proved plus probable cash flows from an independent reserve report prepared as at December 31,2019 and an after-tax discount rate of 11%. The recoverable amount was not sufficient to support the carrying amount of the CGU which resulted in an impairment of $180.0 million recorded as at December 31, 2019. There were no indicators of impairment or impairment reversal for the remaining CGUs as at December 31, 2019.

7.    CREDIT FACILITIES
September 30, 2020December 31, 2019
Credit facilities - U.S. dollar denominated(1)
$95,933 $206,144 
Credit facilities - Canadian dollar denominated528,893 300,327 
Credit facilities - principal624,826 506,471 
Unamortized debt issuance costs(2,172)(1,059)
Credit facilities$622,654 $505,412 
(1)U.S. dollar denominated credit facilities balance was US$72.0 million as at September 30, 2020 (December 31, 2019 - US$159.0 million).

Baytex has US$575 million of revolving credit facilities (the "Revolving Facilities") and a $300 million non-revolving secured term loan (the "Term Loan") (collectively the "Credit Facilities"). On March 3, 2020, Baytex amended its Credit Facilities to extend maturity from April 2, 2021 to April 2, 2024. These facilities will automatically be extended to June 4, 2024 providing Baytex has either refinanced, or has the ability to repay, the outstanding 2024 long-term notes with existing credit capacity as of April 1, 2024.

The extendible secured Revolving Facilities are comprised of a US$50 million operating loan and a US$325 million syndicated revolving loan for Baytex and a US$200 million syndicated revolving loan for Baytex's wholly-owned subsidiary, Baytex Energy USA, Inc. The $300 million Term Loan is secured by the assets of Baytex's wholly-owned subsidiary, Baytex Energy Limited Partnership.

The Credit Facilities are not borrowing base facilities and do not require annual or semi-annual reviews. The Credit Facilities contain standard commercial covenants in addition to the financial covenants detailed below. There are no mandatory principal payments required prior to maturity which could be extended upon Baytex's request. Advances (including letters of credit) under the Credit Facilities can be drawn in either Canadian or U.S. funds and bear interest at the bank’s prime lending rate, bankers’ acceptance discount rates or London Interbank Offered Rates, plus applicable margins. In the event that Baytex breaches any of the covenants under the Credit Facilities, Baytex may be required to repay, refinance or renegotiate the loan terms and may be restricted from taking on further debt or paying dividends to shareholders.

At September 30, 2020, Baytex had $15.5 million of outstanding letters of credit (December 31, 2019 - $15.2 million) under the Credit Facilities.

10


At September 30, 2020, Baytex was in compliance with all of the covenants contained in the Credit Facilities and is forecasting compliance with these covenants for the foreseeable future based on current forward commodity prices. A decrease or a sustained period of low commodity prices may result in non-compliance with our financial covenants and reduced liquidity on our existing credit facilities. Non-compliance with the financial covenants in our credit facilities could result in our debt becoming due and payable on demand.

The following table summarizes the financial covenants applicable to the Credit Facilities and Baytex's compliance therewith as at September 30, 2020.
Covenant Description
Position as at September 30, 2020Covenant
Senior Secured Debt(1) to Bank EBITDA(2) (Maximum Ratio)
1.1:1.03.5:1.0
Interest Coverage(3) (Minimum Ratio)
5.4:1.02.0:1.0
(1)"Senior Secured Debt" is defined as the principal amount of the credit facilities and other secured obligations identified in the credit agreement. As at September 30, 2020, the Company's Senior Secured Debt totaled $640.3 million which includes $624.8 million of principal amounts outstanding and $15.5 million of letters of credit.
(2)"Bank EBITDA" is calculated based on terms and definitions set out in the credit agreement which adjusts net income or loss for financing and interest expense, income tax, non-recurring losses, certain specific unrealized and non-cash transactions (including depletion, depreciation, exploration and evaluation expense, impairment, deferred income tax expense or recovery, unrealized gains and losses on financial derivatives and foreign exchange, and share-based compensation) and is calculated based on a trailing twelve month basis including the impact of material acquisitions as if they had occurred at the beginning of the twelve month period. Bank EBITDA for the twelve months ended September 30, 2020 was $566.1 million.
(3)"Interest Coverage" is computed as the ratio of Bank EBITDA to financing and interest expense, excluding accretion of debt issue costs and asset retirement obligations, and is calculated on a trailing twelve month basis. Financing and interest expense, excluding accretion of debt issue costs and asset retirement obligations, for the twelve months ended September 30, 2020 was $105.2 million.

8.    LONG-TERM NOTES
September 30, 2020December 31, 2019
5.125% notes (US$400,000 – principal) due June 1, 2021$ $518,600 
6.625% notes ($300,000 – principal) due July 19, 2022 300,000 
5.625% notes (US$400,000 – principal) due June 1, 2024532,960 518,600 
8.75% notes (US$500,000 – principal) due April 1, 2027666,200 — 
Total long-term notes - principal(1)
1,199,160 1,337,200 
Unamortized debt issuance costs(16,360)(9,025)
Total long-term notes - net of unamortized debt issuance costs$1,182,800 $1,328,175 
(1)The decrease in the principal amount of long-term notes outstanding from December 31, 2019 to September 30, 2020 is the result of principal repayments of $830.4 million, the issuance of $664.7 million aggregate principal amount and changes in the reported amount of U.S. dollar denominated debt of $27.6 million.

On February 5, 2020, Baytex issued US$500 million aggregate principal amount of senior unsecured notes due April 1, 2027 bearing interest at a rate of 8.75% per annum payable semi-annually (the "8.75% Senior Notes"). The 8.75% Senior Notes are redeemable at Baytex's option, in whole or in part, at specified redemption prices after April 1, 2023 and will be redeemable at par from April 1, 2026 to maturity. Transaction costs of $12.5 million were incurred in conjunction with the issuance which resulted in net proceeds of $652.2 million.

On February 20, 2020, Baytex used a portion of the net proceeds from the issuance of the 8.75% Senior Notes to complete the early redemption of the US$400 million principal amount of the 5.125% senior unsecured notes due June 1, 2021 at par plus accrued interest. The principal payment was $530.4 million.

On March 5, 2020, Baytex completed the early redemption of the $300 million principal amount of the 6.625% senior unsecured notes due July 19, 2022 at 101.104% of the principal amount, plus accrued interest. The principal payment was $300.0 million plus early redemption expense of $3.3 million.

The long-term notes do not contain any significant financial maintenance covenants. The long-term notes contain a debt incurrence covenant that restricts the Company's ability to raise additional debt beyond the existing Credit Facilities and long-term notes unless the Company maintains a minimum coverage ratio (computed as the ratio of Bank EBITDA (as defined in note 7) to financing and interest expense on a trailing twelve month basis) of 2.00:1.00. At September 30, 2020, the fixed charge coverage ratio was 5.0:1.0.

11


9.    ASSET RETIREMENT OBLIGATIONS
September 30, 2020December 31, 2019
Balance, beginning of period$667,974 $646,898 
Liabilities incurred11,466 21,748 
Liabilities settled(6,080)(15,417)
Liabilities acquired from property acquisitions 1,648 
Liabilities divested(116)(1,331)
Property swaps(514)792 
Accretion (note 15)6,897 13,713 
Government grants(1)
(694)— 
Change in estimate(4,810)19,632 
Changes in discount rates and inflation rates(2)
76,244 (17,486)
Foreign currency translation784 (2,223)
Balance, end of period$751,151 $667,974 
Less current portion of asset retirement obligations10,913 11,579 
Non-current portion of asset retirement obligations$740,238 $656,395 
(1)    During the three months ended September 30, 2020, Baytex recognized $0.7 million of non-cash other income and a reduction in asset retirement obligations related to government grants provided by the Government of Alberta and the Government of Saskatchewan.
(2)    The discount and inflation rates at September 30, 2020 were 1.1% and 1.3%, respectively, compared to 1.8% and 1.4% at December 31, 2019.

10.    SHAREHOLDERS' CAPITAL
The authorized capital of Baytex consists of an unlimited number of common shares without nominal or par value and 10.0 million preferred shares without nominal or par value, issuable in series. Baytex establishes the rights and terms of the preferred shares upon issuance. At September 30, 2020, no preferred shares have been issued by the Company and all common shares issued were fully paid.

The holders of common shares may receive dividends as declared from time to time and are entitled to one vote per share at any meeting of the holders of common shares. All common shares rank equally with regard to the Company's net assets in the event the Company is wound-up or terminated.
Number of Common Shares
(000s)
Amount
Balance, December 31, 2018554,060 $5,701,516 
Vesting of share awards4,245 17,319 
Balance, December 31, 2019558,305 $5,718,835 
Vesting of share awards2,858 10,329 
Balance, September 30, 2020561,163 $5,729,164 

11.    SHARE AWARD INCENTIVE PLAN
The Company recorded compensation expense related to the share awards of $2.9 million and $8.7 million for the three and nine months ended September 30, 2020 ($3.4 million and $14.2 million for the three and nine months ended September 30, 2019) which includes $0.6 million and $1.8 million of cash compensation expense related to the incentive award plan and the associated equity total return swaps.

Share Award Plans

Baytex has a share award plan pursuant to which it issues restricted and performance awards. A restricted award entitles the holder of each award to receive one common share of Baytex at the time of vesting. A performance award entitles the holder of each award to receive between zero and two common shares on vesting; the number of common shares issued is determined by a multiplier. The multiplier, which ranges between zero and two, is calculated based on a number of factors determined and approved by the Board of Directors on an annual basis. The restricted awards and performance awards vest in equal tranches on the first, second and third anniversaries of the grant date.

12


The weighted average fair value of share awards granted was $1.48 per restricted and performance award for the nine months ended September 30, 2020 ($2.63 per restricted and performance award for the nine months ended September 30, 2019).

The number of share awards outstanding is detailed below:
(000s)Number of restricted awards
Number of performance awards(1)
Total number of share awards
Balance, December 31, 20183,243 3,273 6,516 
Granted3,184 3,245 6,429 
Vested and converted to common shares(2,081)(2,164)(4,245)
Forfeited(545)(1,219)(1,764)
Balance, December 31, 20193,801 3,135 6,936 
Granted2,239 3,253 5,492 
Vested and converted to common shares(1,717)(1,141)(2,858)
Forfeited(140)(185)(325)
Balance, September 30, 20204,183 5,062 9,245 
(1)     Based on underlying awards before applying the payout multiplier which can range from 0x to 2x.

Incentive Award Plan

Baytex has a cash-settled incentive award plan (the "Incentive Award" plan) whereby the holder of each incentive award is entitled to receive a cash payment equal to the value of one Baytex common share at the time of vesting. The incentive awards vest in equal tranches on the first, second and third anniversaries of the grant date. The cumulative expense is recognized at fair value at each period end and is included in trade and other payables.

The Company uses equity total return swaps ("Equity TRS") on the equivalent number of Baytex common shares in order to fix the aggregate cost of the Incentive Award plan at the fair value determined on the grant date. The cumulative expense is recognized at fair value each period with realized gains or losses included in share-based compensation expense and unrealized gains or losses included in unrealized financial derivatives gain or loss. The carrying value of the financial derivatives includes the fair value of the Equity TRS which was a liability of $1.8 million on September 30, 2020.

During the nine months ended September 30, 2020, Baytex granted 2.9 million awards under the Incentive Award plan at a fair value of $1.50 per award.

Share Options

Baytex assumed share option plans pursuant to a business combination in 2018. No new grants will be made under the option plans.

The Company accounts for share options using the fair value method. Under this method, compensation is expensed over the vesting period for the share options, with a corresponding increase to contributed surplus.

Share options granted under the option plans had a maximum term of 3.5 years to expiry. One third of the options granted vest on each of the first, second, and third anniversaries of the date of grant. At September 30, 2020, 0.5 million options were outstanding with a weighted average remaining life of 0.4 years and a weighted average exercise price of $5.69 (December 31, 2019 - 2.5 million options with a weighted average exercise price of $6.83).

12.    NET INCOME (LOSS) PER SHARE
Baytex calculates basic income or loss per share based on the net income or loss attributable to shareholders using the weighted average number of shares outstanding during the period. Diluted income or loss per share amounts reflect the potential dilution that could occur if share awards and share options were converted to common shares. The treasury stock method is used to determine the dilutive effect of share awards and share options whereby the potential conversion of share awards and share options and the amount of compensation expense, if any, attributed to future services are assumed to be used to purchase common shares at the average market price during the period.
13


Three Months Ended September 30
20202019
Net lossWeighted average common shares (000s)Net loss per shareNet incomeWeighted average common shares
(000s)
Net income per share
Net income (loss) - basic$(23,444)561,128 $(0.04)$15,151 557,888 $0.03 
Dilutive effect of share awards   — 3,000 — 
Dilutive effect of share options   — — — 
Net income (loss) - diluted$(23,444)561,128 $(0.04)$15,151 560,888 $0.03 
Nine Months Ended September 30
20202019
Net lossWeighted average common shares (000s)Net loss per shareNet incomeWeighted average common shares (000s)Net income per share
Net income (loss) - basic$(2,660,124)560,484 $(4.75)$105,313 556,651 $0.19 
Dilutive effect of share awards   — 3,787 — 
Dilutive effect of share options   — — — 
Net income (loss) - diluted$(2,660,124)560,484 $(4.75)$105,313 560,438 $0.19 

For the three and nine months ended September 30, 2020, all share awards and share options were excluded from the calculation of diluted earnings per share as their effect was anti-dilutive given the Company recorded a net loss. For the three and nine months ended September 30, 2019, no share awards were considered to be anti-dilutive and 3.4 million share options were excluded from the calculation of diluted earnings per share as they were determined to be anti-dilutive.

13.     PETROLEUM AND NATURAL GAS SALES

Petroleum and natural gas sales from contracts with customers for the Company's Canadian and U.S. operating segments is set forth in the following table.
Three Months Ended September 30
20202019
CanadaU.S.TotalCanadaU.S.Total
Light oil and condensate$78,432 $75,620 $154,052 $134,921 $140,344 $275,265 
Heavy oil69,791  69,791 117,961 — 117,961 
NGL1,762 8,914 10,676 1,486 11,045 12,531 
Natural gas sales8,846 9,173 18,019 4,401 14,442 18,843 
Total petroleum and natural gas sales$158,831 $93,707 $252,538 $258,769 $165,831 $424,600 
Nine Months Ended September 30
20202019
CanadaU.S.TotalCanadaU.S.Total
Light oil and condensate$229,745 $257,818 $487,563 $409,117 $442,763 $851,880 
Heavy oil169,638  169,638 381,684 — 381,684 
NGL3,957 25,791 29,748 6,684 47,656 54,340 
Natural gas sales23,660 31,232 54,892 20,021 52,099 72,120 
Total petroleum and natural gas sales$427,000 $314,841 $741,841 $817,506 $542,518 $1,360,024 

Included in accounts receivable at September 30, 2020 is $70.4 million of accrued production revenue related to delivered volumes (December 31, 2019 - $138.0 million).

14


14.    INCOME TAXES
The provision for income taxes has been computed as follows:
Nine Months Ended September 30
2020 2019 
Net loss before income taxes $(2,920,725)$91,946 
Expected income taxes at the statutory rate of 25.95% (2019 – 26.72%)(757,928)24,568 
(Increase) decrease in income tax recovery resulting from:
Share-based compensation1,809 3,806 
Effect of foreign exchange5,022 (5,179)
Effect of change in income tax rates22,231 (10,573)
Effect of rate adjustments for foreign jurisdictions35,982 (20,965)
Effect of change in deferred tax benefit not recognized409,717 (4,803)
Effect of U.S. tax change19,996 — 
Adjustments and assessments2,570 (221)
Income tax recovery$(260,601)$(13,367)
On May 28, 2019 the Alberta government tabled legislation to decrease the corporate income tax rate from 12% to 8% over a multi-year period beginning July 1, 2019 and ending January 1, 2022. On June 29, 2020 the Alberta government announced that the corporate tax rate reduction to 8% previously scheduled for January 1, 2022 would be accelerated to July 1, 2020. Legislation enacting this accelerated timeline was enacted subsequent to quarter end and accordingly the effect is not reflected in the deferred tax recovery recorded for the nine months ended September 30, 2020.
At September 30, 2020, a deferred tax asset of $438.0 million remains unrecognized due to uncertainty surrounding future commodity prices (December 31, 2019 - $28.0 million).

As disclosed in the 2019 annual financial statements, in June 2016, certain indirect subsidiary entities received reassessments from the Canada Revenue Agency (the “CRA”) that denied $591 million of non-capital loss deductions that relate to the calculation of income taxes for the years 2011 through 2015. In September 2016, Baytex filed notices of objection with the CRA appealing each reassessment received. There has been no change in the status of these reassessments since an Appeals Officer was assigned to the Company's file in July 2018. Baytex remains confident that the original tax filings are correct and intends to defend those tax filings through the appeals process.

On April 7, 2020, the U.S. Department of the Treasury and the IRS published final regulations addressing “anti-hybrid” rules under section 267A of the U.S. tax code and thus became substantially enacted. Pursuant to these regulations, the Company is no longer entitled to certain tax benefits previously recognized during 2019. Accordingly, a charge against deferred income taxes in the amount of $20.0 million was recorded in the nine months ended September 30, 2020.

15.    FINANCING AND INTEREST
Three Months Ended September 30Nine Months Ended September 30
2020 2019 2020 2019 
Interest on credit facilities$3,366 $4,650 $11,749 $15,171 
Interest on long-term notes21,943 21,955 69,231 67,382 
Interest on lease obligations109 147 360 475 
Non-cash financing756 1,607 5,863 3,753 
Accretion on asset retirement obligations (note 9)1,788 3,407 6,897 10,268 
Early redemption expense (note 8) — 3,312 — 
Financing and interest$27,962 $31,766 $97,412 $97,049 

15


16.    FOREIGN EXCHANGE
Three Months Ended September 30Nine Months Ended September 30
2020 2019 2020 2019 
Unrealized foreign exchange (gain) loss$(25,880)$13,855 $28,125 $(38,404)
Realized foreign exchange (gain) loss(351)382 (437)426 
Foreign exchange (gain) loss$(26,231)$14,237 $27,688 $(37,978)

17.     FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The Company's financial assets and liabilities are comprised of cash, trade and other receivables, trade and other payables, financial derivatives, credit facilities, and long-term notes. The fair value of the credit facilities is equal to the principal amount outstanding as the credit facilities bear interest at floating rates and credit spreads that are indicative of market rates. The fair value of the long-term notes is determined based on market prices.

The carrying value and fair value of the Company's financial instruments carried on the condensed consolidated statements of financial position are classified into the following categories:
September 30, 2020December 31, 2019
Carrying valueFair valueCarrying valueFair valueFair Value Measurement Hierarchy
Financial Assets
FVTPL
Financial derivatives$41,746 $41,746 $5,433 $5,433 Level 2
Total$41,746 $41,746 $5,433 $5,433 
Financial assets at amortized cost
Cash$ $ $5,572 $5,572 
Trade and other receivables97,389 97,389 173,762 173,762 
Total$97,389 $97,389 $179,334 $179,334 
Financial Liabilities
FVTPL
Financial derivatives$(25,556)$(25,556)$(8,668)$(8,668)Level 2
Total$(25,556)$(25,556)$(8,668)$(8,668)
Financial liabilities at amortized cost
Trade and other payables$(179,482)$(179,482)$(207,454)$(207,454)— 
Credit facilities(622,654)(624,826)(505,412)(506,471)— 
Long-term notes(1,182,800)(586,526)(1,328,175)(1,290,817)Level 1
Total$(1,984,936)$(1,390,834)$(2,041,041)$(2,004,742)

There were no transfers between Level 1 and Level 2 during the nine months ended September 30, 2020 and 2019.

Foreign Currency Risk

The carrying amounts of the Company’s U.S. dollar denominated monetary assets and liabilities recorded in entities with a Canadian dollar functional currency at the reporting date are as follows:
AssetsLiabilities
September 30, 2020December 31, 2019September 30, 2020December 31, 2019
U.S. dollar denominatedUS$36,893 US$8,733 US$924,115 US$841,961 


16



Interest Rate Risk

Interest Rate Swaps

As of September 30, 2020, Baytex had an interest rate swap acquired in a business combination in 2018 outstanding with a notional value of $100 million maturing in October 2020, with a fixed contract price of 2.02% referencing the Canadian Dollar Offered Rate. At September 30, 2020, the fair value of the interest rate swap was a liability of $0.1 million (December 31, 2019 - nil).

Commodity Price Risk

Financial Derivative Contracts

Baytex had the following financial derivative contracts outstanding as of November 2, 2020:
Remaining PeriodVolume
Price/Unit(1)
Index
Oil
Basis SwapOct 2020 to Dec 20206,500 bbl/dWTI less US$16.27/bblWCS
Basis SwapJan 2021 to Jun 20212,000 bbl/dWTI less US$13.75/bblWCS
Basis SwapJan 2021 to Dec 20214,000 bbl/dWTI less US$14.26/bblWCS
Basis Swap(6)
Jan 2021 to Dec 20212,000 bbl/dWTI less US$13.41/bblWCS
Basis SwapOct 2020 to Dec 20205,000 bbl/dWTI less US$6.15/bblMSW
Basis SwapJan 2021 to Dec 20212,000 bbl/dWTI less US$5.95/bblMSW
Basis Swap(6)
Jan 2021 to Dec 20214,000 bbl/dWTI less US$4.78/bblMSW
Fixed - SellOct 2020 to Dec 20208,000 bbl/dUS$42.78/bblWTI
3-way option(2)
Oct 2020 to Dec 20203,000 bbl/dUS$50.00/US$56.00/US$61.35WTI
3-way option(2)
Oct 2020 to Dec 20203,000 bbl/dUS$50.00/US$57.00/US$60.00WTI
3-way option(2)
Oct 2020 to Dec 20204,500 bbl/dUS$50.00/US$57.00/US$62.00WTI
3-way option(2)
Oct 2020 to Dec 20203,000 bbl/dUS$50.00/US$58.00/US$62.00WTI
3-way option(2)
Oct 2020 to Dec 20201,000 bbl/dUS$51.00/US$58.00/US$60.50WTI
3-way option(2)
Oct 2020 to Dec 20201,000 bbl/dUS$51.00/US$58.00/US$60.83WTI
3-way option(2)
Oct 2020 to Dec 20201,500 bbl/dUS$51.00/US$59.00/US$65.60WTI
3-way option(2)
Oct 2020 to Dec 20201,500 bbl/dUS$51.00/US$59.00/US$66.00WTI
3-way option(2)
Oct 2020 to Dec 20201,000 bbl/dUS$51.00/US$59.50/US$66.15WTI
3-way option(2)
Oct 2020 to Dec 20201,000 bbl/dUS$51.00/US$60.00/US$65.60WTI
3-way option(2)
Oct 2020 to Dec 20201,000 bbl/dUS$51.00/US$60.00/US$66.00WTI
3-way option(2)
Oct 2020 to Dec 20201,000 bbl/dUS$51.00/US$60.00/US$66.05WTI
3-way option(2)
Oct 2020 to Dec 20202,000 bbl/dUS$51.00/US$60.00/US$66.70WTI
3-way option(2)
Jan 2021 to Dec 20213,500 bbl/dUS$35.00/US$45.00/US$49.50WTI
3-way option(2)
Jan 2021 to Dec 202110,000 bbl/dUS$35.00/US$45.00/US$55.00WTI
Swaption(3)
Jan 2021 to Dec 20213,000 bbl/dUS$70.00/bblBrent
Swaption(3)
Jan 2021 to Dec 20213,000 bbl/dUS$60.75/bblWTI
Swaption(5)
Jan 2022 to Dec 20225,000 bbl/dUS$53.00/bblWTI
Swaption(5)
Jan 2022 to Dec 20225,000 bbl/dUS$54.00/bblWTI
Natural Gas
Fixed - SellOct 2020 to Dec 202010,500 GJ/d$2.01/GJAECO 7A
Fixed - SellJan 2021 to Jun 20213,000 GJ/d$2.71/GJAECO 7A
Fixed - SellJan 2021 to Dec 202116,000 GJ/d$2.36/GJAECO 7A
Fixed - SellOct 2020 to Dec 20202,500 GJ/d$2.29/GJAECO 5A
Fixed - SellJan 2021 to Dec 20212,500 GJ/d$2.40/GJAECO 5A
Fixed - SellOct 2020 to Dec 20205,500 mmbtu/dUS$2.64/mmbtuNYMEX
Fixed - SellJan 2021 to Dec 202112,000 mmbtu/dUS$2.70/mmbtuNYMEX
3-way option(2)
Oct 2020 to Dec 20205,000 mmbtu/dUS$2.25/US$2.60/US$2.85NYMEX
3-way option(2)(6)
Jan 2022 to Dec 20222,500 mmbtu/dUS$2.25/US$2.75/US$3.06NYMEX
Swaption(4)
Jan 2021 to Dec 20215,000 mmbtu/dUS$2.90/mmbtuNYMEX
(1)Based on the weighted average price per unit for the period.
17


(2)Producer 3-way option consists of a sold put, bought put, and a sold call. To illustrate, in a US$50.00/US$58.00/US$62.00 contract, Baytex receives WTI plus US$8.00/bbl when WTI is at or below US$50.00/bbl; Baytex receives US$58.00/bbl when WTI is between US$50.00/bbl and US$58.00/bbl; Baytex receives the market price when WTI is between US$58.00/bbl and US$62.00/bbl; and Baytex receives US$62.00/bbl when WTI is above US$62.00/bbl.
(3)For these contracts, the counterparty has the right, if exercised on December 31, 2020, to enter a swap transaction for the remaining term, notional volume and fixed price per unit indicated above.
(4)For these contracts, the counterparty has the right, if exercised on December 23, 2020, to enter a swap transaction for the remaining term, notional volume and fixed price per unit indicated above.
(5)For these contracts, the counterparty has the right, if exercised on December 31, 2021, to enter a swap transaction for the remaining term, notional volume and fixed price per unit indicated above.
(6)Contracts entered subsequent to September 30, 2020.

The following table sets forth the realized and unrealized gains and losses recorded on financial derivatives.
Three Months Ended September 30Nine Months Ended September 30
2020 2019 2020 2019 
Realized financial derivatives loss (gain)$9,743 $(20,857)$(30,731)$(52,664)
Unrealized financial derivatives loss (gain)7,284 (7,666)(19,425)30,922 
Financial derivatives loss (gain)$17,027 $(28,523)$(50,156)$(21,742)

Liquidity Risk

Liquidity risk is the risk that Baytex will encounter difficulty in meeting obligations associated with financial liabilities. Baytex manages its liquidity risk through cash and debt management. Such strategies include monitoring forecasted and actual cash flows from operating, financing and investing activities, available credit under existing banking arrangements, opportunities to issue additional common shares as well as reducing capital expenditures.

As at September 30, 2020, Baytex had unused capacity of $425.8 million on its Credit Facilities (December 31, 2019 - $523.8 million).

The timing of cash outflows relating to financial liabilities as at September 30, 2020 is outlined in the table below:
TotalLess than 1 year1-3 years3-5 yearsBeyond 5 years
Trade and other payables$179,482 $179,482 $— $— $— 
Credit facilities(1)(2)
624,826 — — 624,826 — 
Long-term notes(2)
1,199,160 — — 532,960 666,200 
Interest on long-term notes(3)
489,037 88,272 176,543 136,544 87,678 
Lease obligations11,132 6,086 4,449 597 — 
$2,503,637 $273,840 $180,992 $1,294,927 $753,878 
(1)At December 31, 2019, the credit facilities were set to mature on April 2, 2021. On March 3, 2020, Baytex amended the credit facilities to extend maturity to April 2, 2024 which will automatically be extended to June 4, 2024 providing the Company has either refinanced or has the ability to repay the outstanding 2024 long-term notes with existing credit capacity as of April 1, 2024.
(2)Principal amount of instruments. On February 5, 2020, Baytex issued US$500 million principal amount of 8.75% senior unsecured notes due 2027 and, on March 5, 2020, completed the redemption of $300 million principal amount of 6.625% senior unsecured notes due 2022 (note 8). On February 20, 2020 Baytex completed the redemption of the US$400 million principal amount of senior unsecured notes due 2021 (note 8).
(3)Excludes interest on credit facilities as interest payments on credit facilities fluctuate based on amounts outstanding and the prevailing interest rate at the time of borrowing.

Credit Risk

Credit risk is the risk that a counterparty to a financial asset will default resulting in Baytex incurring a loss. As at September 30, 2020, the Company is exposed to credit risk with respect to its trade and other receivables and financial derivatives. Baytex manages these risks through the selection and monitoring of credit-worthy counterparties.

Most of the Company's trade and other receivables relate to petroleum and natural gas sales. Baytex reviews its exposure to individual entities on a regular basis and manages its credit risk by entering into sales contracts after reviewing the creditworthiness of the entity. Letters of credit or parental guarantees may be obtained prior to the commencement of business with certain counterparties. Credit risk may also arise from financial derivative instruments. The maximum exposure to credit risk is equal to the carrying value of the financial assets. The Company considers all financial assets that are not impaired or past due to be of good credit quality.

18


The majority of the Company's credit exposure on trade and other receivables at September 30, 2020 relates to accrued revenues and our financial derivative contracts. Accounts receivable from purchasers of the Company's petroleum and natural gas sales are typically collected on the 25th day of the month following production. Joint interest receivables are typically collected within one to three months following production. Included in trade and other receivables at September 30, 2020 is $70.4 million (December 31, 2019 - $138.0 million) of accrued petroleum and natural gas sales related to delivered volumes.

Should the Company determine that the ultimate collection of a receivable is in doubt, the carrying amount of trade and other receivables is reduced by adjusting the allowance for doubtful accounts and a charge to net income or loss. If the Company subsequently determines the accounts receivable is uncollectible, the receivable and allowance for doubtful accounts are adjusted accordingly. As at September 30, 2020, allowance for doubtful accounts was $2.1 million (December 31, 2019 - $1.6 million).

In determining whether amounts past due are collectible, the Company will assess the nature of the past due amounts as well as the credit worthiness and past payment history of the counterparty. As at September 30, 2020, trade and other receivables that Baytex has deemed past due (more than 90 days) but not impaired was $1.4 million (December 31, 2019 - $2.7 million). Baytex has estimated the lifetime expected credit loss as at and for the quarter ended September 30, 2020 to be nominal.

The Company's trade and other receivables, net of the allowance for doubtful accounts, were aged as follows as at September 30, 2020.
September 30, 2020December 31, 2019
Current (less than 30 days)$95,226 $169,500 
31-60 days561 1,199 
61-90 days240 342 
Past due (more than 90 days)1,362 2,721 
$97,389 $173,762 

19