BAYTEX ENERGY CORP.

Liability Management Rating Programs

The Provinces of Alberta and Saskatchewan both have liability management programs in respect of conventional upstream oil and gas wells, facilities and pipelines. Both programs require a licensee whose deemed liabilities equal or exceed its deemed assets within the jurisdiction to provide a security deposit. In response to energy company insolvencies and the associated financial risk, Alberta and Saskatchewan have expanded their liability management programs to become more stringent in recent years. Additional measures of corporate health, beyond simple asset and liability ratios, are now utilized to determine whether a company can hold, transfer or acquire well licenses. These holistic assessments of companies have reduced the number of parties which can acquire assets. Alberta and Saskatchewan have also introduced mandatory asset retirement obligation spending programs. These programs require a licensee to spend a set percentage of its deemed inactive liability, each year, on abandonment, decommissioning and reclamation.