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Annual Information Form 2014 March 9, 2015

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Annual Information Form 2014 March 9, 2015 ANNUAL INFORMATION FORM 2014 MARCH 9, 2015 TABLE OF CONTENTS Page SELECTED TERMS ..................................................................................................................................................... 1 ABBREVIATIONS ....................................................................................................................................................... 4 CONVERSIONS ........................................................................................................................................................... 4 CONVENTIONS ........................................................................................................................................................... 5 SPECIAL NOTES TO READER .................................................................................................................................. 5 BAYTEX ENERGY CORP. ......................................................................................................................................... 9 GENERAL DEVELOPMENT OF OUR BUSINESS ................................................................................................. 10 RISK FACTORS ......................................................................................................................................................... 11 DESCRIPTION OF OUR BUSINESS AND OPERATIONS ..................................................................................... 11 DIRECTORS AND OFFICERS .................................................................................................................................. 54 AUDIT COMMITTEE INFORMATION ................................................................................................................... 60 DESCRIPTION OF CAPITAL STRUCTURE ........................................................................................................... 61 DIVIDENDS ............................................................................................................................................................... 64 MARKET FOR SECURITIES .................................................................................................................................... 67 RATINGS .................................................................................................................................................................... 68 LEGAL PROCEEDINGS AND REGULATORY ACTIONS .................................................................................... 69 INTEREST OF INSIDERS AND OTHERS IN MATERIAL TRANSACTIONS ..................................................... 69 AUDITORS, TRANSFER AGENT AND REGISTRAR ............................................................................................ 69 INTERESTS OF EXPERTS ........................................................................................................................................ 69 MATERIAL CONTRACTS ........................................................................................................................................ 70 INDUSTRY CONDITIONS ........................................................................................................................................ 70 ADDITIONAL INFORMATION................................................................................................................................ 70 APPENDICES: APPENDIX A REPORT OF MANAGEMENT AND DIRECTORS ON OIL AND GAS DISCLOSURE APPENDIX B REPORT ON RESERVES DATA BY INDEPENDENT QUALIFIED RESERVES EVALUATOR APPENDIX C AUDIT COMMITTEE MANDATE AND TERMS OF REFERENCE SELECTED TERMS Capitalized terms in this Annual Information Form have the meanings set forth below: Entities Baytex or the Corporation means Baytex Energy Corp., a corporation incorporated under the ABCA. Baytex Commercial Trusts mean, collectively, Baytex Commercial Trust 1, Baytex Commercial Trust 2, Baytex Commercial Trust 3, Baytex Commercial Trust 4, Baytex Commercial Trust 5, Baytex Commercial Trust 6 and Baytex Commercial Trust 7. Baytex Energy means Baytex Energy Ltd., a corporation amalgamated under the ABCA. Baytex Partnership means Baytex Energy Partnership, a general partnership, the partners of which are Baytex Energy and Baytex Holdings Limited Partnership. Baytex USA means Baytex Energy USA, Inc. Board of Directors means the board of directors of Baytex. NYMEX means the New York Mercantile Exchange, a commodity futures exchange. OPEC means the Organization of the Petroleum Exporting Countries. Operating Entities means our subsidiaries that are actively involved in the acquisition, production, processing, transportation and marketing of crude oil, natural gas liquids and natural gas, being Baytex Energy, Baytex Partnership and Baytex USA, each a direct or indirect wholly-owned subsidiary of us, and Operating Entity means any one of them, as applicable. SEC means the United States Securities and Exchange Commission. Shareholders mean the holders from time to time of Common Shares. subsidiary has the meaning ascribed thereto in the Securities Act (Ontario) and, for greater certainty, includes all corporations, partnerships and trusts owned, controlled or directed, directly or indirectly, by us. Trust means Baytex Energy Trust, a trust created under the laws of the Province of Alberta on July 24, 2003 pursuant to the Trust Indenture and which was dissolved into the Corporation on January 1, 2011 in connection with the Corporate Conversion. we, us and our means Baytex and all its subsidiaries on a consolidated basis unless the context requires otherwise. Independent Engineering Baytex Reserves Report means, collectively, (i) the report prepared by Sproule dated February 27, 2015 entitled "Consolidation of the P&NG Reserves of Baytex Energy Corp. Evaluated by Sproule Unconventional Limited and Ryder Scott Company L.P. (As of December 31, 2014)", which is a consolidation of (a) the report of Sproule dated February 17, 2015 entitled "Evaluation of the P&NG Reserves of Baytex Energy Corp. in Canada (As of December 31, 2014)" and (b) the report of Ryder Scott dated January 31, 2015 entitled "Baytex Energy Corp. Summary Report Estimated Future Reserves and Income Attributable to Certain Leasehold Interests NI 51-101 Forecast Economic Parameters Canadian Currency As of December 31, 2014" and (ii) the report prepared by Ryder Scott dated February 6, 2015 in respect of Ryder Scott's audit of the possible reserves associated with our Eagle Ford assets. - 2 - COGE Handbook means the Canadian Oil and Gas Evaluation Handbook. NI 51-101 means National Instrument 51-101 "Standards of Disclosure for Oil and Natural Gas Activities" of the Canadian Securities Administrators. Ryder Scott means Ryder Scott Company, L.P., independent petroleum consultants of Houston, Texas. Sproule means Sproule Unconventional Limited, independent petroleum consultants of Calgary, Alberta. Securities and Other Terms 2020 Aurora Notes means the 7.50% senior unsecured notes due April 1, 2020 issued by Baytex USA (formerly Aurora Oil & Gas, Inc.) pursuant to Debt Indenture #3 of which US$6.4 million was outstanding as at March 1, 2015. 2021 Debentures means the 6.75% series B senior unsecured debentures due February 17, 2021 issued by Baytex pursuant to Debt Indenture #1 of which US$150 million was outstanding as at March 1, 2015. 2021 Notes means the 5.125% senior unsecured notes due June 1, 2021 issued by Baytex pursuant to Debt Indenture #2 of which US$400 million was outstanding as at March 1, 2015. 2022 Debentures means the 6.625% series C senior unsecured debentures due July 19, 2022 issued by Baytex pursuant to Debt Indenture #1 of which $300 million was outstanding as at March 1, 2015. 2024 Notes means the 5.625% senior unsecured notes due June 1, 2024 issued by Baytex pursuant to Debt Indenture #2 of which US$400 million was outstanding as at March 1, 2015. ABCA means the Business Corporations Act (Alberta), R.S.A. 2000, c. B-9, as amended, including the regulations promulgated thereunder. Canadian GAAP means generally accepted accounting principles in Canada, which are consistent with International Financial Reporting Standards as issued by the International Accounting Standards Board. Common Shares means the common shares of Baytex. Corporate Conversion means the internal reorganization of the Trust and certain of its subsidiaries which resulted in the conversion of the legal structure of the Trust from a trust to a corporation effective December 31, 2010 pursuant to a plan of arrangement under the ABCA. Credit Facilities means the revolving extendible unsecured credit facilities that we have established with our bank lending syndicate consisting of (i) a $50 million operating loan and a $950 million syndicated loan for us and (ii) a US$200 million syndicated loan for Baytex USA, each of which constitute a revolving credit facility that is extendible annually for a 1, 2, 3 or 4 year period (subject to a maximum four-year term at any time). Unless extended by the lenders, the Credit Facilities will mature on June 4, 2018. Debt Indenture #1 means the amended and restated trust indenture among us, as issuer, certain of our subsidiaries, as guarantors, and Valiant Trust Company, as indenture trustee, dated January 1, 2011, as supplemented by supplemental indentures dated February 17, 2011, February 18, 2011, July 19, 2012, December 19, 2012, June 4, 2014, June 11, 2014 and July 25, 2014. Debt Indenture #2 means the indenture among
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