Baytex Energy Corp.

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- National Instrument 62-104 Take-Over Bids and Issuer Bids -- relief from the formal issuer bid requirements in NI 62-104 -- issuer conducting a normal course issuer bid through the facilities of the TSX and NYSE -- relief granted, provided that purchases are subject to a maximum aggregate limit mirroring the TSX NCIB rules.

Applicable Legislative Provisions

National Instrument 62-104 Take-Over Bids and Issuer Bids, Part 2 and s. 6.1.

Citation: Re Baytex Energy Corp., 2024 ABASC 67

April 22, 2024

IN THE MATTER OF THE SECURITIES LEGISLATION OF ALBERTA AND ONTARIO (the Jurisdictions) AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF BAYTEX ENERGY CORP. (the Filer)

DECISION

Background

The securities regulatory authority or regulator in each of the Jurisdictions (Decision Maker) has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation) that the requirements contained in the Legislation relating to issuer bids (the Issuer Bid Requirements) shall not apply to purchases of the Filer's common shares (Common Shares) made by the Filer through the facilities of the New York Stock Exchange (the NYSE) and other United States-based trading systems (together with the NYSE, U.S. Markets) in connection with the Current Bid (as defined below) and any issuer bid made in the normal course through the facilities of the Toronto Stock Exchange (the TSX) that the Filer commences shortly following the expiry of the Current Bid and that expires not later than August 1, 2025 (each such bid an Exempt Bid and together the Exempt Bids, and such exemption, the Exemption Sought).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):

(a) the Alberta Securities Commission is the principal regulator for this application;

(b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (the MI 11-102) is intended to be relied upon in British Columbia, Saskatchewan, Manitoba, Quebec, New Brunswick, Prince Edward Island, Nova Scotia, and Newfoundland and Labrador; and

(c) the decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.

Interpretation

Terms defined in National Instrument 14-101 Definitions or MI 11-102 have the same meaning if used in this decision, unless otherwise defined.

Representations

This decision is based on the following facts represented by the Filer:

1. The Filer is a corporation existing under the Business Corporations Act (Alberta) and the head office and registered office of the Filer are located in Calgary, Alberta.

2. The authorized share capital of the Filer consists of an unlimited number of Common Shares and up to 10,000,000 preferred shares. As at February 29, 2024, 821,680,619 Common Shares were issued and outstanding and there were no preferred shares issued and outstanding.

3. The Filer is a reporting issuer in each of the provinces of Canada. The Filer is not in default of its obligations as a reporting issuer under the applicable securities legislation in any of the jurisdictions in which it is a reporting issuer.

4. The Filer is a registrant with the SEC and is subject to the requirements of the 1934 Act. For the year ending December 31, 2023, the Filer qualified as a "foreign private issuer" pursuant to the 1934 Act. The Filer is not in default of any requirements under the 1934 Act.

5. The Common Shares are listed for trading on the TSX and the NYSE.

6. The Common Shares commenced trading on the NYSE on February 23, 2023 (the NYSE Listing Date).

7. On June 20, 2023 (the Ranger Acquisition Date), the Filer completed its acquisition of Ranger Oil Corporation (Ranger), a company incorporated under the laws of Virginia, pursuant to which holders of Ranger common stock were entitled to receive 7.49 Common Shares plus US$13.31 cash for each share of Ranger common stock, resulting in the issuance of an aggregate of 311,369,555 Common Shares to former holders of Ranger common stock (the Ranger Acquisition). The majority of the Common Shares issued in connection with the Ranger Acquisition were issued to U.S. residents.

8. On June 23, 2023, the Filer announced that the TSX had accepted its Notice of Intention to Make a Normal Course Issuer Bid (the Current Notice) during the 12-month period commencing June 29, 2023 and ending June 28, 2024 to purchase up to 68,417,028 Common Shares representing approximately 10% of the Filer's public float (as of the date specified in the Current Notice) (the Current Bid).

9. The Current Notice specifies that purchases under the Current Bid will be effected through the facilities of the TSX, the NYSE and/or alternative trading systems in Canada and the United States.

10. Issuer bid purchases made in the normal course through the facilities of the TSX are, and will be, conducted in reliance upon the exemption from the Issuer Bid Requirements set out in subsection 4.8(2) of National Instrument 62-104 Take-Over Bids and Issuer Bids (NI 62-104, and such exemption, the Designated Exchange Exemption). The Designated Exchange Exemption provides that an issuer bid made in the normal course through the facilities of a designated exchange is exempt from the Issuer Bid Requirements if the bid is made in accordance with the bylaws, rules, regulations and policies of that exchange. The TSX is a designated exchange for the purposes of the Designated Exchange Exemption.

11. The TSX's rules governing the conduct of normal course issuer bids (the TSX NCIB Rules) are set out, inter alia, in Sections 628 to 629.3 of Part VI of the TSX Company Manual. The TSX NCIB Rules permit a listed issuer to acquire, over a 12-month period commencing on the date specified in the Notice of Intention to Make a Normal Course Issuer Bid (a Notice), up to the greater of (a) 10% of the public float on the date specified in the Notice, or (b) 5% of such class of securities issued and outstanding on the date specified in the Notice.

12. Other than purchases made in reliance on this decision, purchases under issuer bids made in the normal course through the facilities of the U.S. Markets and alternative trading systems in Canada are, and will be, conducted in reliance upon the exemption from the Issuer Bid Requirements set out in subsection 4.8(3) of NI 62-104 (the Published Markets Exemption). The Published Markets Exemption provides that an issuer bid made in the normal course on a published market, other than a designated exchange, is exempt from the Issuer Bid Requirements if, among other things, the bid is for not more than 5% of the outstanding securities of a class of securities of the issuer and the aggregate number of securities acquired in reliance on the Published Markets Exemption by the issuer and any person acting jointly or in concert with the issuer within any 12-month period does not exceed 5% of the securities of that class outstanding at the beginning of the 12-month period.

13. As a result, normal course issuer bid purchases of Common Shares through the U.S. Markets in reliance on the Published Market Exemption, including pursuant to the Current Bid, cannot exceed 5% of the issued and outstanding Common Shares as the date of the Current Notice or any future Notice.

14. As of February 29, 2024, the Filer had purchased 40,511,792 Common Shares under the Current Bid, of which: (a) 39,311,492 Common Shares (or approximately 97%) were purchased through the facilities of the U.S. Markets; (b) 793,300 Common Shares (or approximately 2%) were purchased through the facilities of the TSX; and (c) 406,800 Common Shares (or approximately 1%) were purchased through Canadian published markets other than the TSX.

15. For the period ended February 29, 2024 and commencing on the NYSE Listing Date, an aggregate of 3,931,765,141 Common Shares were traded over published markets in Canada and the United States, with trading volumes having occurred as follows:

(a) 1,208,131,263 Common Shares (or approximately 31% of total aggregate trading) over the facilities of the TSX;

(b) 1,083,758,988 Common Shares (or approximately 28% of total aggregate trading) over published markets in Canada other than the TSX; and

(c) 1,639,874,890 Common Shares (or approximately 42% of total aggregate trading) over U.S. Markets.

16. For the period ended February 29, 2024 and commencing on the Ranger Acquisition Date, an aggregate of 3,030,765,842 Common Shares were traded over published markets in Canada and the United States, with trading volumes having occurred as follows:

(a) 842,452,230 Common Shares (or approximately 28% of total aggregate trading) over the facilities of the TSX;

(b) 759,849,956 Common Shares (or approximately 25% of total aggregate trading) over published markets in Canada other than the TSX; and

(c) 1,428,463,566 Common Shares (or approximately 47% of total aggregate trading) over U.S. Markets.

17. The Filer's daily trading volume of the Common Shares on the U.S. Markets was greater than the trading volume on the TSX for a significant majority of trading days. From the Ranger Acquisition date to February 29, 2024, the trading volume of the Common Shares on the U.S. Markets was greater than the trading volume on the TSX on approximately 92% of the dates on which both the TSX and NYSE were open for trading.

18. As a result of certain factors, including the Ranger Acquisition and a resulting increase in the number of Common Shares held by U.S. residents, the Filer expects that the trading volume of the Common Shares on the U.S. Markets will increase and that the trading volume of the Common Shares on the TSX will decrease going forward such that the future trading volume of the Common Shares on the U.S. Markets will be significantly greater than that on the TSX.

19. In addition, as a higher volume of Common Shares currently trades through the U.S. Markets, relative to the TSX, the Filer wishes to have the ability to make repurchases under the Exempt Bids over the U.S. Markets in excess of the maximum allowable in reliance on the Published Markets Exemption, up to the maximum authorized and approved by its board of directors and permissible by the TSX.

20. The Exempt Bids will be effected in accordance with all applicable securities laws, including the 1934 Act, the 1933 Act, and the rules of the SEC made pursuant thereto, and any applicable bylaws, rules, regulations or policies of the U.S. Markets on which the purchases are carried out (collectively, the Applicable U.S. Rules).

21. In connection with the Exempt Bids, the Filer will rely on the "safe harbour" provided by Rule 10b-18 under the 1934 Act (Rule 10b-18) in respect of the provisions of the 1934 Act precluding market manipulation. In order for the Filer to comply with Rule 10b-18, all purchases made by or on behalf of the Filer through the U.S. Markets are required:

(a) to be made through only one broker or dealer in any one day;

(b) not to be made at the opening of a trading session or during the 10 minutes before the scheduled close of a trading session;

(c) not to be made at prices higher than the highest published independent bid or last reported independent transaction price (whichever is higher) on the consolidated system for securities listed on the NYSE; and

(d) to be in an amount that does not exceed, in any one day, an aggregate amount equal to 25% of the average daily trading volume over the U.S. Markets (with certain limited exceptions for block purchases).

22. Under the Applicable U.S. Rules, there is no aggregate limit on the number of Common Shares that may be purchased by the Filer through the facilities of the U.S. Markets.

23. The Filer believes that the Exempt Bids are in the best interests of the Filer.

24. No other exemptions exist under applicable Canadian securities legislation that would permit the Filer to continue to make purchases under the Exempt Bids through the U.S. Markets on an exempt basis once the Filer has purchased, within a 12-month period, 5% of the outstanding Common Shares in reliance on the Published Markets Exemption.

25. The purchase of Common Shares pursuant to the Exempt Bids will not adversely affect the Filer or the rights of any of the Filer's security holders and such purchases will not materially affect control of the Filer.

Decision

Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.

The decision of the Decision Makers under the Legislation is that the Exemption Sought is granted provided that:

(a) the Exempt Bids are permitted under the Applicable U.S. Rules, and are established and conducted in accordance and compliance with the Applicable U.S. Rules;

(b) the Notice accepted by the TSX in respect of an Exempt Bid specifically contemplates that purchases under such bid will also be effected through U.S. Markets;

(c) purchases of Common Shares under an Exempt Bid in reliance on this decision shall only be made:

(i) in compliance with Part 6 (Order Protection) of National Instrument 23-101 Trading Rules;

(ii) at a price which complies with the requirements of paragraph 4.8(3)(c) of NI 62-104; and

(iii) in accordance with the TSX NCIB Rules.

(d) prior to purchasing Common Shares under any Exempt Bid in reliance on this decision, the Filer issues and files a press release setting out the terms of the Exemption Sought and the conditions applicable thereto;

(e) the Filer does not acquire Common Shares in reliance on the Published Markets Exemption if the aggregate number of Common Shares purchased by the Filer, and any person or company acting jointly or in concert with the Filer, in reliance on this decision and the Published Markets Exemption within any period of 12 months exceeds 5% of the outstanding Common Shares on the first day of such 12-month period; and

(f) the aggregate number of Common Shares purchased pursuant to an Exempt Bid in reliance on this decision, the Designated Exchange Exemption and the Published Markets Exemption does not exceed, over the 12-month period specified in the Notice in respect of the relevant Exempt Bid, 10% of the public float as specified in such Notice.

"Timothy Robson"
Manager, Legal
Corporate Finance
Alberta Securities Commission