form6kbaytex.htm
No
securities regulatory authority has expressed an opinion about these securities
and it is an offence to claim otherwise. This short form prospectus
constitutes a public offering of these securities only in those jurisdictions
where they may be lawfully offered for sale and therein only by persons
permitted to sell such securities.
These
securities have not been and will not be registered under the United States
Securities Act of 1933, as amended (the "1933 Act"), or any state
securities laws. Accordingly, except to the extent permitted by the
Underwriting Agreement (as defined herein), these securities may not be offered
or sold within the United States except in transactions exempt from the
registration requirements of the 1933 Act and applicable state securities
laws. This short form prospectus does not constitute an offer to sell
or a solicitation of an offer to buy any of these securities within the United
States. See "Plan of Distribution".
Information has been incorporated by
reference in this prospectus from documents filed with the securities
commissions or similar authorities in Canada. Copies of the documents
incorporated herein by reference may be obtained on request without charge from
the General Counsel of Baytex Energy Ltd., the administrator of Baytex Energy
Trust, at Suite 2200, Bow Valley Square II, 205 – 5th Avenue
S.W., Calgary, Alberta, T2P 2V7, telephone (403) 269-4282, and are
also available electronically at www.sedar.com.
SHORT
FORM PROSPECTUS
NEW ISSUE
April
3, 2009
$100,050,000
6,900,000 Trust
Units
Baytex
Energy Trust (the "Trust" or "Baytex" and, where the context
requires, also includes its subsidiaries and partnership) is hereby qualifying
for distribution 6,900,000 trust units ("Trust Units" or "Units") of the Trust at a
price of $14.50 per Trust Unit (the "Offering").
The Trust
Units are listed on the Toronto Stock Exchange (the "TSX") and the New York Stock
Exchange ("NYSE") under the trading
symbols "BTE.UN" and "BTE", respectively. On March 20, 2009, the last
trading day prior to the public announcement of the Offering, the closing price
of the Trust Units on the TSX was Cdn $15.60 and the closing price of the Trust
Units on the NYSE was US $12.67. On April 2, 2009, the closing price
of the Trust Units on the TSX was Cdn $16.37 and the closing price of the Trust
Units on the NYSE was US $13.02. The TSX has conditionally approved the listing
of the Trust Units (including the Trust Units issuable on exercise of the
Over-Allotment Option, as defined below) distributed under this short form
prospectus, subject to the Trust fulfilling all of the requirements of the TSX
contained in the TSX conditional listing approval letter on or before June 25,
2009. In addition, the Trust has applied to list the Trust
Units (including the Trust Units issuable on exercise of the
Over-Allotment Option) distributed under this short form prospectus on the NYSE.
The offering price of the Trust Units was determined by negotiation between
Baytex Energy Ltd. ("Baytex
Energy"), as administrator of, and on behalf of, the Trust, and TD
Securities Inc., on its own behalf and on behalf of CIBC World Markets Inc.,
National Bank Financial Inc., RBC Dominion Securities Inc., Scotia Capital
Inc., Canaccord Capital Corporation, FirstEnergy Capital Corp., Raymond James
Ltd., Peters & Co. Limited, Tristone Capital Inc., UBS Securities
Canada Inc., Cormark Securities Inc. and Dundee Securities Corporation
(collectively, the "Underwriters").
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Price:
$14.50 per Trust Unit
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Net Proceeds to the Trust (1)(2)
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Per
Trust Unit
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$14.50
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$0.725
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$13.775
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Total
(2)(3)
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$100,050,000
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$5,002,500
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$95,047,500
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Notes:
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(1)
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Upon
closing of the Offering, the Trust will pay the Underwriters a cash
commission equal to 5% of the gross proceeds of the
Offering. See "Plan of
Distribution".
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(2)
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Before
deducting expenses of the Offering, estimated to be $350,000, which will
be paid from the general funds of the
Trust.
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(3)
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The
Trust has also granted to the Underwriters an option (the "Over-Allotment Option")
to purchase up to an additional 1,035,000 Trust Units on the
same terms and conditions of the Offering, exercisable in whole or in
part, at the sole discretion of the Underwriters, at any time on or within
30 days following the closing of the Offering to cover
over-allotments, if any. In respect of the Over-Allotment
Option, the Trust will pay to the Underwriters a fee equal to 5% of the
proceeds realized on the exercise of the Over-Allotment Option, or $0.725
per Trust Unit. If the Over-Allotment Option is exercised in
full, the total Offering, Underwriters' fee and net proceeds to the Trust
(before deducting expenses of the Offering) will be $115,057,500,
$5,752,875 and $109,304,625, respectively. This short form
prospectus also qualifies both the grant of the Over-Allotment Option and
the distribution of the Trust Units issuable upon exercise of the
Over-Allotment Option. See "Plan of
Distribution". A purchaser who acquires Trust Units
forming any part of the Underwriters' over-allocation position, if
applicable, acquires those Trust Units under this short form prospectus
regardless of whether the Underwriters' over-allocation position is
ultimately filled through the exercise of the Over-Allotment Option or
secondary market purchases.
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The
following table sets forth the number of Trust Units that have been issued or
may be issued by the Trust pursuant to the Over-Allotment Option:
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Maximum
size or number of securities held
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Over-Allotment
Option
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Up
to 1,035,000 Trust Units, if exercised in full
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On
or within 30 days following the closing of the Offering
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$14.50
per Trust Unit
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The
Underwriters, as principals, conditionally offer the Trust Units for sale,
subject to prior sale, if, as and when issued by the Trust and accepted by the
Underwriters in accordance with the conditions contained in the Underwriting
Agreement referred to under "Plan of Distribution" and
subject to approval of certain legal matters relating to the Offering on behalf
of the Trust by Burnet, Duckworth & Palmer LLP and on behalf of the
Underwriters by McCarthy Tétrault LLP. The Trust has been advised by
the Underwriters that, in connection with the Offering, the Underwriters may
effect transactions that stabilize or maintain the market price of the Trust
Units at levels other than those that might otherwise prevail in the open
market. Such transactions, if commenced, may be discontinued at any
time. See "Plan of
Distribution".
The
Underwriters propose to offer the Trust Units initially at the offering price
specified above. After a reasonable effort has been made to sell all
of the Trust Units at the price specified, the Underwriters may subsequently
reduce the selling price to investors from time to time in order to sell any of
the Trust Units remaining unsold. Any such reduction will not affect
the proceeds received by the Trust. See "Plan of
Distribution".
TD
Securities Inc., CIBC World Markets Inc., National Bank Financial Inc., RBC
Dominion Securities Inc. and Scotia Capital Inc., five of the Underwriters, are
direct or indirect wholly owned subsidiaries of Canadian chartered banks that
are lenders to Baytex Energy. Consequently, the Trust may be
considered to be a "connected issuer" of these Underwriters for the purposes of
securities regulations in certain provinces. The net proceeds of the
Offering may be used to repay a portion of the Trust's indebtedness to such
banks. See "Relationship Among the Trust and
Certain Underwriters" and "Use of
Proceeds".
A return
on an investment in the Trust Units is not comparable to the return on an
investment in a fixed-income security. The recovery of an initial
investment in the Trust is at risk, and the anticipated return on such
investment is based on many performance assumptions. Cash distributions are not
guaranteed. Although the Trust intends to make distributions of its
available cash to holders of Trust Units ("Unitholders"), these cash
distributions may be reduced or suspended. The actual amount
distributed will depend on numerous factors, including profitability, debt
covenants and obligations, fluctuations in working capital, the timing and
amount of capital expenditures, applicable law and other factors beyond the
control of the Trust. In addition, the market value of the
Trust Units may decline if the Trust is unable to meet its cash distribution
targets in the future, and that decline may be significant. See
"Distributions to
Unitholders" and "Risk
Factors".
It is important for an investor to
consider the particular risk factors that may affect the industry in which it is
investing, and therefore the stability of the distributions that it
receives. See, for example, the risks described under "Risk Factors" herein and in
the AIF (as defined herein). These sections also describe the Trust's
assessment of certain risk factors, as well as the potential consequences to an
investor if a risk should occur.
The after
tax return from an investment in Trust Units to Unitholders subject to Canadian
income tax can be made up of both a return on capital and a return of
capital. That composition may change over time, thus affecting an
investor's after tax return. On October 31, 2006, the Department
of Finance (Canada) announced proposed changes to the taxation of certain
publicly-traded trusts and partnerships and their
unitholders. Bill C-52, which received Royal Assent on
June 22, 2007, contained legislation implementing these proposals
(collectively, the "SIFT
Rules"). Subject to the SIFT Rules, returns on capital are
generally taxed as ordinary income in the hands of a Unitholder who is resident
in Canada for purposes of the Income Tax Act (Canada) (the
"Tax
Act"). Pursuant to the SIFT Rules, commencing January 1,
2011 (provided the Trust only experiences "normal growth" and no "undue
expansion" before then) certain distributions from the Trust which would have
otherwise been taxed as ordinary income generally will be characterized as
dividends in addition to being subject to tax at corporate rates at the Trust
level. Returns of capital generally are (and under the SIFT Rules
will continue to be) tax-deferred for Unitholders who are resident in Canada for
purposes of the Tax Act (and reduce such Unitholder's adjusted cost base in the
Trust Unit for purposes of the Tax Act). Distributions, whether of
income or capital to a Unitholder who is not resident in Canada for purposes of
the Tax Act, or that is a partnership that is not a "Canadian partnership" for
purposes of the Tax Act, generally will be subject to Canadian withholding
tax. Prospective purchasers should consult their own tax advisors
with respect to the Canadian income tax considerations applicable in their own
circumstances. See "Certain Canadian Federal Income Tax
Considerations".
The head
office of the Trust and Baytex Energy are located at Suite 2200, Bow Valley
Square II, 205 – 5th Avenue
S.W., Calgary, Alberta, T2P 2V7 and the registered office of Baytex Energy
is located at 1400, 350 – 7th Avenue
S.W., Calgary, Alberta, T2P 3N9.
Subscriptions
for Trust Units will be received subject to rejection or allotment in whole or
in part and the right is reserved to close the subscription books at any time
without notice. It is expected that definitive Trust Unit
certificates will be available for delivery at closing which is expected to
occur on or about April 14, 2009 but in any event not later than April 30,
2009.
The
Trust Units are not "deposits" within the meaning of the Canada Deposit Insurance Corporation
Act (Canada) and are not insured under the provisions of that act or any
other legislation. Furthermore, the Trust is not a trust company and,
accordingly, it is not registered under any trust and loan company legislation
as it does not carry on, or intend to carry on, the business of a trust
company.
TABLE
OF CONTENTS
Page
GLOSSARY OF
TERMS .....................................................................................................................................................1
SPECIAL NOTES
TO READER ........................................................................................................................................2
BAYTEX ENERGY
TRUST ...............................................................................................................................................4
PRIOR
SALES .....................................................................................................................................................................5
DISTRIBUTIONS
TO UNITHOLDERS ...........................................................................................................................6
USE OF
PROCEEDS ...........................................................................................................................................................7
PLAN OF
DISTRIBUTION ...............................................................................................................................................8
INTEREST OF
EXPERTS ..................................................................................................................................................9
ELIGIBILITY
FOR INVESTMENT .................................................................................................................................14
RISK
FACTORS ...............................................................................................................................................................14
LEGAL
PROCEEDINGS ...................................................................................................................................................14
CONSENT OF
AUDITORS .............................................................................................................................................16
CERTIFICATE
OF THE
TRUST ....................................................................................................................................C-1
CERTIFICATE
OF THE
UNDERWRITERS .................................................................................................................C-2
GLOSSARY OF TERMS
In this
short form prospectus, the following terms shall have the meanings set forth
below, unless otherwise indicated:
"1933 Act" means the United States Securities Act of
1933, as amended;
"AIF" means the Annual
Information Form of the Trust dated March 26, 2009;
"Annual Financial Statements"
means the audited comparative consolidated financial statements of the Trust as
at and for the years ended December 31, 2008 and December 31, 2007,
together with the notes thereto and the report of the auditors
thereon;
"Baytex" or the "Trust" means Baytex Energy
Trust and, where the context requires, also includes its subsidiaries and
partnership;
"Baytex Energy" means Baytex
Energy Ltd.;
"Burmis" means Burmis Energy
Inc.;
"Canadian GAAP" or "GAAP" means generally accepted
accounting principles in Canada;
"Convertible Debentures" means
the 6.50% convertible unsecured subordinated debentures of the Trust issued on
June 6, 2005;
"Credit Facilities" means
Baytex Energy Trust's $485.0 million syndicated credit facilities as described
in note 6 to the Annual Financial Statements;
"Finance" means the Department
of Finance (Canada);
"Information Circular" means
the Trust's information circular and proxy statement dated April 3, 2008
relating to the annual and special meeting of the Unitholders held on May 20,
2008;
"MD&A" means management's
discussion and analysis of the financial condition and results of operation of
the Trust for the year ended December 31, 2008;
"NI 44-101" means National
Instrument 44-101 – Short
Form Prospectus Distributions;
"NI 51-102" means National
Instrument 51-102 – Continuous
Disclosure Obligations;
"Notes" means the 12% unsecured
subordinated promissory notes issued by Baytex Energy and held by the Trust
pursuant to the plan of arrangement completed on September 2, 2003 and
other promissory notes issued by Baytex Energy or any other subsidiaries or
affiliates of the Trust to the Trust from time to time;
"NPI" means the net profit
interest in the petroleum substances owned by Baytex Energy held by the
Trust;
"NPI Agreement" means the
amended and restated net profit interest agreement between the Trust and Baytex
Energy made as of September 2, 2003 providing for the creation of the
NPI;
"NYSE" means the New York Stock
Exchange;
"Offering" means the
distribution of 6,900,000 Trust Units of the Trust under this short form
prospectus;
"Over-Allotment Option" means
the option granted by the Trust to the Underwriters to purchase up to an
additional 1,035,000 Trust Units on the same terms and conditions of the
Offering, exercisable in whole or in part at the sole discretion of the
Underwriters, at any time on or within 30 days following the closing of the
Offering to cover over-allotments, if any;
"SIFT Rules" means the
legislation in Bill C-52, which received Royal Assent on June 22, 2007,
implementing the proposed changes to the taxation of certain publicly-traded
trusts and partnerships and their unitholders announced by Finance on
October 31, 2006;
"Sproule" means Sproule
Associates Limited, independent petroleum consultants of Calgary,
Alberta;
"Tax Act" means the Income Tax Act (Canada) and
the regulations thereunder;
"Trust Indenture" means the
third amended and restated trust indenture between the Trust and Baytex Energy
made as of May 20, 2008;
"Trust Units" or "Units" means the units of the
Trust, each unit representing an equal undivided beneficial interest
therein;
"TSX" means the Toronto Stock
Exchange;
"Underwriters" means
collectively, TD Securities Inc., CIBC World Markets Inc., National Bank
Financial Inc., RBC Dominion Securities Inc., Scotia Capital Inc., Canaccord
Capital Corporation, FirstEnergy Capital Corp., Raymond James Ltd., Peters &
Co. Limited, Tristone Capital Inc., UBS Securities Canada Inc., Cormark
Securities Inc. and Dundee Securities Corporation;
"Underwriting Agreement" means
the agreement dated effective March 23, 2009 among the Trust, Baytex Energy and
the Underwriters in respect of the Offering;
"United States" or "U.S." means the United States
of America; and
"Unitholders" means holders of
Trust Units.
Words
importing the singular number only include the plural, and vice versa, and words
importing any gender include all genders.
All
dollar amounts set forth in this short form prospectus are in Canadian dollars,
except where otherwise indicated.
SPECIAL NOTES TO READER
Forward-Looking
Statements
In the
interest of providing Unitholders and potential investors with information about
the Trust, including management's assessment of Baytex Energy's future plans and
operations, certain statements in this short form prospectus are
"forward-looking statements" within the meaning of the United States Private Securities
Litigation Reform Act of 1995 and "forward-looking information" within
the meaning of applicable Canadian securities legislation (collectively, "forward-looking
statements"). Specifically, this short form prospectus
contains forward-looking statements relating to the use of the net proceeds of
the Offering, the closing date of the Offering and the future payment of
distributions. In addition, certain documents incorporated by
reference into this short form prospectus contain forward-looking
statements. Such forward-looking statements speak only as of their
respective date and are expressly qualified by this cautionary
statement.
The
forward-looking statements contained in this short form prospectus are based on
certain key assumptions regarding, among other things, the timing of obtaining
regulatory approvals. Forward-looking statements contained in certain documents
incorporated by reference into this short form prospectus are based on the key
assumptions described in such documents. The reader is cautioned that
such assumptions, although considered reasonable by the Trust at the time of
preparation, may prove to be incorrect.
Actual
results achieved during the forecast period will vary from the information
provided in this short form prospectus and in the documents incorporated by
reference herein as a result of numerous known and unknown risks and
uncertainties and other factors which are discussed in the documents
incorporated herein by reference. Such factors include, but are not limited to:
fluctuations in market prices for oil and natural gas; fluctuations in foreign
exchange or interest rates; general economic, market and business conditions;
stock market volatility and market valuations; changes in income tax laws;
industry capacity; geological, technical, drilling and processing problems and
other difficulties in producing petroleum reserves; uncertainties associated
with estimating oil and natural gas reserves; liabilities inherent in oil and
natural gas operations; competition for, among other things, capital,
acquisitions of reserves, undeveloped lands and skilled personnel; risks
associated with oil and gas operations; changes in royalty rates and incentive
programs relating to the oil and gas industry; changes in environmental and
other regulations; incorrect assessments of the value of acquisitions; and other
factors, many of which are beyond the control of Baytex Energy.
Readers
are cautioned that the foregoing list of risk factors is not
exhaustive. New risk factors emerge from time to time, and it is not
possible for management to predict all of such factors and to assess in advance
the impact of each such factor on the business of the Trust or the extent to
which any factor, or combination of factors, may cause actual results to differ
materially from those contained in any forward-looking
statements. Readers should also carefully consider the matters
discussed under the heading "Risk Factors" in the
documents incorporated by reference into this short form
prospectus.
There is
no representation by the Trust that actual results achieved during the forecast
period will be the same in whole or in part as those forecast and the Trust does
not undertake any obligation to update publicly or to revise any of the included
forward-looking statements, whether as a result of new information, future
events or otherwise, except as may be required by applicable securities
law. The forward-looking statements contained in this short form
prospectus, and in certain documents incorporated by reference into this short
form prospectus, are expressly qualified by this cautionary
statement.
Description
of Cash Flow from Operations
This
short form prospectus, and certain documents incorporated by reference into this
short form prospectus, contains references to cash flow from operations derived
from cash provided by operating activities before changes in non-cash operating
working capital, asset retirement expenditures and decrease in deferred charges
and other assets. Cash flow from operations as presented does not have any
standardized meaning prescribed by Canadian GAAP, and therefore it may not be
comparable with the calculation of similar measures for other entities. Cash
flow from operations as presented is not intended to represent operating cash
flow or operating profits for the period nor should it be viewed as an
alternative to cash flow provided by operating activities, net income or other
measures of financial performance calculated in accordance with
GAAP. For more information, see the MD&A, which includes a
definition of "cash flow from operations" and reconciliation to cash provided by
operating activities.
DOCUMENTS INCORPORATED BY
REFERENCE
The
following documents of the Trust, filed with the various securities commissions
or similar authorities in the provinces of Canada, are specifically incorporated
by reference into, and form an integral part of, this short form
prospectus:
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(a)
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the
annual information form of the Trust for the year ended December 31,
2008 dated March 26, 2009;
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(b)
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the
audited comparative consolidated financial statements of the Trust as at
and for the years ended December 31, 2008 and December 31, 2007,
together with the notes thereto and the report of the auditors
thereon;
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(c)
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the
management's discussion and analysis of the financial condition and
results of operations of the Trust for the year ended December 31,
2008;
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(d)
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the
Trust's information circular and proxy statement dated April 3, 2008
relating to the annual and special meeting of the Unitholders held on
May 20, 2008; and
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(e)
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the
material change report of the Trust dated and filed March 26, 2009 with
respect to the Offering.
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Any
documents of the type required by NI 44-101 to be incorporated by reference in a
short form prospectus including any material change reports (excluding material
change reports filed on a confidential basis), comparative interim financial
statements, comparative annual financial statements and the auditors' report
thereon, management's discussion and analysis of financial condition and results
of operations, information circulars, annual information forms and business
acquisition reports filed by the Trust with the securities commissions or
similar authorities in the provinces of Canada subsequent to the date of this
short form prospectus and prior to the termination of this distribution shall be
deemed to be incorporated by reference in this short form
prospectus.
Any
statement contained in this short form prospectus or in a document incorporated
or deemed to be incorporated by reference herein shall be deemed to be modified
or superseded for the purposes of this short form prospectus to the extent that
a statement contained herein or in any other subsequently filed document which
also is, or is deemed to be, incorporated by reference herein modifies or
supersedes such statement. The modifying or superseding statement
need not state that it has modified or superseded a prior statement or include
any other information set forth in the document that it modifies or
supersedes. The making of a modifying or superseding statement shall
not be deemed an admission for any purposes that the modified or superseded
statement, when made, constituted a misrepresentation, an untrue statement of a
material fact or an omission to state a material fact that is required to be
stated or that is necessary to make a statement not misleading in light of the
circumstances in which it was made. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this short form prospectus.
BAYTEX ENERGY TRUST
General
The Trust
is an open-ended investment trust created on July 24, 2003 under the laws
of the Province of Alberta pursuant to the Trust Indenture. The
beneficiaries of the Trust are holders of the outstanding Trust
Units. The head office of the Trust and Baytex Energy are located at
Suite 2200, Bow Valley Square II, 205 – 5th Avenue
S.W., Calgary, Alberta, T2P 2V7 and the registered office of Baytex Energy is
located at 1400, 350 – 7th Avenue
S.W., Calgary, Alberta, T2P 3N9.
Organizational
Structure
[Missing Graphic Reference]
The
following diagram describes the inter-corporate relationships among the Trust
and its material subsidiaries as well as the flow of cash from the oil and gas
properties held by such subsidiaries to the Trust and from the Trust to
Unitholders.
Notes:
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(1)
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Unitholders
own 100 percent of the Trust Units.
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(2)
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Cash
distributions are made on a monthly basis to Unitholders based upon the
Trust's cash flow. The Trust's primary sources of cash flow are NPI
payments from Baytex Energy and interest on the principal amount of the
Notes and other inter-corporate notes. In addition to such amounts,
prepayments in respect of principal on the Notes and other inter-corporate
notes may be made from time to time to the Trust before the maturity of
such notes.
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For
further details on the subsidiaries and partnership of the Trust, see "Baytex Energy Trust –
General" in the AIF.
Business
of the Trust
The
principal undertaking of the Trust is to issue Trust Units and other securities
and to acquire and hold securities of subsidiaries, trusts and partnerships, net
profits interests, royalties, notes and other interests. Baytex
Energy, and the Trust's other operating subsidiaries, carry on the business of
acquiring, developing, exploiting and holding interests in petroleum and natural
gas properties and assets related thereto. Cash flow from the
business carried on by Baytex Energy is flowed from Baytex Energy to the Trust
by way of interest payments and principal repayments on the Notes and income
earned under the NPI Agreement.
For
further details on the general development of the business of the Trust and
Baytex Energy, see "General
Development of Our Business" and "Description of Our Business and
Operations" in the AIF.
CONSOLIDATED CAPITALIZATION OF THE
TRUST
There
have been no material changes in the share capitalization or in the indebtedness
of the Trust since December 31, 2008. After giving effect to the Offering and
the potential use of proceeds discussed herein, the Trust may reduce its
indebtedness under the Credit Facilities by $94,697,500 (after deducting
Underwriters' fees of $5,002,500 and expenses of the Offering estimated at
$350,000) which could be redrawn and applied as needed to fund the Trust's
capital expenditure program, for general working capital purposes or to retire
other indebtedness. If the Over-Allotment Option is exercised in full, the
aggregate gross proceeds, Underwriters' fees, estimated expenses of the Offering
and net proceeds will be $115,057,500, $5,752,875, $350,000 and $108,954,625,
respectively. See "Use of Proceeds" and note 6
to the Annual Financial Statements for a description of the Credit
Facilities.
The Trust
will have 105,381,861 Trust Units outstanding after giving effect to the
Offering (106,416,861 Trust Units if the Over-Allotment Option is exercised in
full). In addition, as at April 2, 2009, the Trust has an aggregate
of 8,516,242 rights
to acquire Trust Units outstanding, issued under the Trust's unit rights
incentive plan.
DESCRIPTION OF SECURITIES BEING
DISTRIBUTED
A
description of the Trust Units being distributed pursuant to this short form
prospectus is contained under the heading "Additional Information Respecting
Baytex Energy Trust – Trust Units" in the AIF.
For
additional information respecting Trust Units, including information respecting
Unitholders' limited liability, restrictions on non-resident Unitholders, the
redemption right attached to the Trust Units, meetings of Unitholders and
amendments to the Trust Indenture, see under the headings "Additional Information Respecting
Baytex Energy Trust – Trust Indenture" in the AIF.
PRIOR SALES
The Trust
has not sold or
issued any Trust Units or securities convertible into Trust Units during the
twelve month period prior to the date hereof other than as follows:
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1.
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An
aggregate of 6,383,416 Trust Units at a deemed issue price of $23.82 per
Trust Unit were issued to the former holders of shares of Burmis in
connection with the Trust's acquisition of Burmis on June 4,
2008. See "General Development of Our
Business – History and Development " in the
AIF.
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2.
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An
aggregate of 2,780,704 Trust Units at a deemed issue price of $31.20 per
Trust Unit were issued upon the conversion of 1,562,140 previously issued
exchangeable shares of Baytex Energy during this period. For a description
of the Exchangeable Shares, see "Baytex Share Capital –
Exchangeable Shares" in the
AIF.
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3.
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An
aggregate of 342,072 Trust Units at a deemed issue price of $15.06 per
Trust Unit were issued upon the conversion of $5,046,000 principal amount
of the Convertible Debentures during this period. For a description of the
Convertible Debentures, see "Additional Information
Respecting Baytex Energy Trust – Convertible Debentures"
in the AIF.
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4.
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An
aggregate of 2,273,490 Trust Units were issued during this period pursuant
to the Trust's distribution reinvestment plan at a weighted average issue
price of $20.37 per Trust Unit for aggregate consideration of
approximately $46,307,157. For a description of the Trust's distribution
reinvestment plan, see note 10 to the Annual Financial
Statements.
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5.
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An
aggregate of 897,337 Trust Units were issued during this period upon the
exercise of rights granted pursuant to the Trust's unit rights incentive
plan at a weighted average issue price $8.38 per Trust Unit for aggregate
consideration of approximately $7,518,690. See the Information
Circular for a description of the Trust's unit rights incentive plan that
has been approved by Unitholders.
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|
6.
|
An
aggregate of 3,031,950 rights to acquire an equal number of Trust Units
were issued pursuant to the Trust's unit rights incentive plan at a
weighted average exercise price of $18.60 per Trust Unit during this
period.
|
TRADING PRICE AND VOLUME OF
SECURITIES
Trust
Units
The
outstanding Trust Units are listed and posted for trading on the TSX and NYSE
under the trading symbols "BTE.UN" and "BTE", respectively. The
following tables set forth the price range and trading volume of the Trust Units
as reported by the TSX and the NYSE for the periods
indicated. Additional historical trading information in respect of
the Trust Units is contained in the AIF under the heading "Market For
Securities".
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
|
|
|
|
|
January
|
17.49
|
14.20
|
10,049,252
|
14.85
|
11.55
|
3,687,803
|
|
February
|
14.46
|
9.77
|
13,997,248
|
11.95
|
7.84
|
4,270,423
|
|
March
|
16.27
|
10.65
|
14,942,679
|
13.15
|
8.27
|
4,586,295
|
|
April
(1-2)
|
16.56
|
14.89
|
1,171,966
|
13.39
|
11.76
|
685,126
|
On
March 20, 2009, the last trading day prior to the public announcement of
the Offering, the closing price of the Trust Units on the TSX was Cdn $15.60 and
the closing price of the Trust Units on the NYSE was US $12.67. On
April 2, 2009, the closing price of the Trust Units on the TSX was Cdn $16.37
and the closing price of the Trust Units on the NYSE was US $13.02.
Convertible
Debentures
The
outstanding Convertible Debentures are listed and posted for trading on the TSX
under the trading symbol "BTE.DB". The following table sets forth the
price range and trading volume of the Convertible Debentures as reported by the
TSX for the periods indicated. Additional historical trading
information in respect of the Convertible Debentures is contained in the AIF
under the heading "Market For
Securities".
|
|
|
|
|
|
2009
|
|
|
|
|
January
|
104.32
|
100.00
|
12.0
|
|
February
|
100.00
|
93.03
|
155.0
|
|
March
|
107.77
|
101.77
|
46.0
|
|
April
(1-2)
|
n/a
|
n/a
|
nil
|
On
February 25, 2009, the last trading day prior to the public announcement of the
Offering, the closing price of the Convertible Debentures on the TSX was
$99.00. On March 27, 2009, the last day the Convertible Debentures
traded prior to the date of this short form prospectus, the closing price of the
Convertible Debentures on the TSX was $105.00.
DISTRIBUTIONS TO
UNITHOLDERS
The Trust
makes cash distributions on the 15th day of
each month (or the first business day thereafter) to holders of Trust Units of
record on the immediately preceding distribution record date.
The Board
of Directors of Baytex Energy, on behalf of the Trust, reviews the Trust's
distribution policy from time to time. The actual amount distributed is
dependent on the commodity price environment, can fluctuate depending on the
level of cash flow from operations and is at the discretion of the Board of
Directors of Baytex Energy. The Trust's current distribution practice targets
the use of between 50 to 60 percent of available cash flow from operations for
capital expenditures.
The
following per Trust Unit cash distributions have been paid or declared by the
Trust to its Unitholders in 2009 for the months indicated, each amount being
paid in the following month. Additional historical information in
respect of distributions paid by the Trust is contained in the AIF under the
heading "Additional
Information Respecting Baytex Energy Trust – Cash
Distributions".
|
|
Cash
Distribution Per Trust Unit
|
|
January
|
$0.18
|
|
|
February
|
$0.12
|
|
|
March
(1)
|
$0.12
|
|
Note:
|
(1)
|
This
distribution was declared on March 16, 2009 and will be paid on April 15,
2009 to Unitholders of record on March 31,
2009.
|
Pursuant
to the Credit Facilities, the Trust is restricted from making distributions to
Unitholders where the distribution would or could have a material adverse effect
on the Trust or the Trust's subsidiaries' ability to fulfill its obligations
under the Credit Facilities or upon a material borrowing base shortfall or
default.
The Notes
also contain certain limitations on maximum cumulative distributions. Restricted
payments include the declaration or payment of any dividend or distribution to
the Trust and the payment of interest or principal on subordinated debt owed to
the Trust. Baytex Energy is restricted from making any restricted payments,
including distributions to the Trust, if a default or event of default under the
note indenture governing the subordinated debt has occurred and is continuing.
If no such default or event of default has occurred and is continuing, Baytex
Energy may make a distribution to the Trust provided at the time either (A) (i)
its ratio of consolidated debt to consolidated cash flow from operations does
not exceed 3 to 1, (ii) its fixed charge coverage ratio for the preceding four
fiscal quarters is greater than 2.5 to 1 and (iii) the aggregate of all
restricted payments declared or made after July 9, 2003 does not exceed the
sum of 80 percent of the consolidated cash flow from operations accrued on a
cumulative basis since July 9, 2003 plus the net cash proceeds received by
Baytex Energy from the issuance of deeply subordinated intercompany debt or the
receipt of capital contributions from the Trust plus net proceeds received by
Baytex Energy from the issuance of and upon conversion of debt and other
securities or (B) the aggregate amount of all restricted payments declared or
made after July 9, 2003 does not exceed the sum of permitted restricted payments
not previously made plus US$30 million. Baytex Energy is in compliance with
these covenants.
Pursuant
to the provisions of the Trust Indenture all income earned by the Trust in a
fiscal year, not previously distributed in that fiscal year, must be distributed
to Unitholders of record on December 31. This excess income, if any, will be
allocated to Unitholders of record at December 31 but the right to receive this
income, if the amount if not determined and declared payable at December 31,
will trade with the Trust Units until determined and declared payable in
accordance with the rules of the TSX. To the extent that a Unitholder
trades Trust Units in this period they will be allocated such income but will
dispose of their right to receive such distribution.
Cash distributions are not
guaranteed. The Trust's historical cash distributions may not be reflective of
future cash distributions, which will be subject to review by the Board of
Directors of Baytex Energy taking into account its prevailing financial
circumstances at the relevant time. Although the Trust intends to make
distributions of its available cash to Unitholders, these cash distributions may
be reduced or suspended. The actual amount distributed will depend on numerous
factors, including profitability, debt covenants and obligations, fluctuations
in working capital, the timing and amount of capital expenditures, applicable
law and other factors beyond the control of the Trust. See "Risk
Factors" in the
AIF.
USE OF PROCEEDS
The net
proceeds to the Trust from the Offering are estimated to be $94,697,500 after
deducting the fees of $5,002,500 payable to the Underwriters and the estimated
expenses of the Offering of $350,000. If the Over-Allotment Option is exercised
in full, the net proceeds from the sale of the Trust Units hereunder are
estimated to be $108,954,625 after deducting the fees of $5,752,875 payable to
the Underwriters and the estimated expenses of the Offering of
$350,000. See "Plan
of Distribution".
The
proceeds of the Offering, will enhance the Trust's liquidity and financial
flexibility. The net proceeds of the Offering will initially be used by the
Trust for general working capital purposes, which may ultimately be used to fund
the Trust's capital expenditure program or to retire or repay outstanding
indebtedness of the Trust. See "Relationship Among the Trust and
Certain Underwriters". The Trust's indebtedness, which
totalled approximately $535 million as at March 26, 2009, is described under the
heading "Liquidity and Capital
Resources" in the MD&A and in the notes to the Annual Financial
Statements.
The
Trust's current indebtedness under the Credit Facilities has been incurred in
the normal course of business and operations in connection with previous capital
and other expenditures made by the Trust. For the year ended December 31, 2008,
the Trust incurred $450 million of capital expenditures, including $185 million
for exploration and development and $265 million on acquisitions (net of
dispositions). See "Description of Our Business and
Operations – Other Oil and Gas Information – Capital Expenditures" in the
AIF. The Trust funded the 2008 capital expenditures by the use of its
Credit Facilities and the cash generated by its operations.
While the
Trust intends to use the net proceeds as stated above, there may be
circumstances that are not known at this time where a reallocation of the net
proceeds may be advisable for business reasons that management believes are in
the Trust's best interests.
PLAN OF DISTRIBUTION
Pursuant
to the underwriting agreement dated effective March 23, 2009 among the Trust,
Baytex Energy and the Underwriters in respect of the Offering (the "Underwriting Agreement"), the
Trust has agreed, subject to the terms and conditions stated therein, to issue
and sell an aggregate of 6,900,000 Trust Units to the Underwriters and the
Underwriters have severally and not jointly agreed to purchase such Trust Units
at a price of $14.50 per Trust Unit on or about April 14, 2009, or such other
date not later than April 30, 2009 as may be agreed among the parties to the
Underwriting Agreement, payable in cash to the Trust against delivery of the
Trust Units. In consideration for their services in connection with
the Offering, the Underwriters will be paid a fee of $0.725 per Trust
Unit. The terms of the Offering, including the price of the Trust
Units, were determined by negotiation between Baytex Energy, on behalf of the
Trust, and TD Securities Inc., on behalf of the Underwriters.
The Trust
has granted to the Underwriters the Over-Allotment Option to purchase up to an
additional 1,035,000 Trust Units at a price of $14.50 per Trust Unit,
exercisable in whole or in part, at the sole discretion of the Underwriters, at
any time or within 30 days following the closing of the Offering for the
purposes of covering the Underwriters' over-allocation position. In
respect of the Over-Allotment Option, the Trust will pay to the Underwriters a
fee equal to 5% of the proceeds realized on the exercise of the Over-Allotment
Option or $0.725 per Trust Unit. If the Over-Allotment Option is
exercised in full, the total offering, Underwriters' fee and net proceeds to the
Trust (before deducting expenses of the Offering) will be $115,057,500,
$5,752,875 and $109,304,625, respectively. This short form prospectus
also qualifies for distribution the grant of the Over-Allotment Option and the
issuance of the Trust Units pursuant to the exercise of the Over-Allotment
Option. A purchaser who acquires Trust Units forming any part of the
Underwriters' over-allocation position, if applicable, acquires those Trust
Units under this short form prospectus regardless of whether the Underwriters'
over-allocation position is ultimately filled through the exercise of the
Over-Allotment Option or secondary market purchases.
The
obligations of the Underwriters under the Underwriting Agreement are several and
not joint, and may be terminated at their discretion upon the occurrence of
certain stated events. If any of the Underwriters fails to purchase
the Trust Units which such Underwriter(s) have agreed to purchase, the other
Underwriters who are willing and able to purchase their own applicable
percentages of Trust Units shall be relieved of their obligations under the
Underwriting Agreement, provided that any one or more of the Underwriters may,
but are not obligated to, purchase the Trust Units not purchased by the refusing
Underwriter(s); provided, however, that in the event that the percentage of the
total number of the Trust Units which one or more of the Underwriters has failed
or refused to purchase exceeds 6.12% of the total number of the Trust Units
which the Underwriters have agreed to purchase, the other Underwriters shall
have the right, but not the obligation, to purchase severally on a pro rata
basis (or such other basis as such other Underwriters may agree) all, but not
less than all, of the Trust Units which would otherwise have been purchased by
the one or more Underwriters which failed or refused to purchase. The
Underwriters are, however, obligated to take up and pay for all Trust Units if
any are purchased under the Underwriting Agreement. The Underwriting
Agreement also provides that the Trust and Baytex Energy will indemnify the
Underwriters and their directors, officers, agents, shareholders and employees
against certain liabilities and expenses.
The TSX
has conditionally approved the listing of the Trust Units (including the Trust
Units issuable on exercise of the Over-Allotment Option) distributed under this
short form prospectus, subject to the Trust fulfilling all of the requirements
of the TSX contained in the TSX conditional listing approval letter on or before
June 25, 2009. In addition, the Trust has applied to list the Trust
Units (including the Trust Units issuable on exercise of the
Over-Allotment Option) distributed under this short form prospectus on the
NYSE.
The Trust
has been advised by the Underwriters that, in connection with the Offering, the
Underwriters may effect transactions that stabilize or maintain the market price
of the Units at levels other than those that might otherwise prevail in the open
market. Such transactions, if commenced, may be discontinued at any
time.
The Trust
has agreed not to issue, agree to issue or announce an intention to issue any
additional Trust Units or any securities convertible into or exchangeable for
the Trust Units (except in connection with: (a) an acquisition made at "arms
length"; (b) the exchange, transfer, conversion or exercise of existing
outstanding securities or existing commitments to issue securities; or (c) the
issuance of Trust Units pursuant to the Trust's distribution reinvestment plan
or the issuance of rights or Trust Units upon the exercise of rights granted
pursuant to the Trust's unit rights incentive plan) for a period of 90 days from
the Closing Date, without the prior consent of TD Securities Inc. (upon
consultation with the Underwriters), such consent not to be unreasonably
withheld.
Certificates
for the Trust Units will be available for delivery at the closing of the
Offering, which is expected to take place on or about April 14, 2009 but in any
event not later than April 30, 2009.
The
Underwriters propose to offer the Trust Units initially at the offering price
specified herein. After a reasonable effort has been made to sell all
of the Trust Units at the price specified, the Underwriters may subsequently
reduce the selling prices to investors from time to time in order to sell any of
the Trust Units remaining unsold. In the event the offering price of
the Trust Units is reduced, the compensation received by the Underwriters will
be decreased by the amount of the aggregate price paid by the purchasers for the
Trust Units is less than the gross proceeds paid by the Underwriters to the
Trust for the Trust Units. Any such reduction will not affect the
proceeds received by the Trust.
The Trust
Indenture places certain restrictions with respect to non-resident ownership of
Trust Units. See "Additional
Information Respecting Baytex Energy Trust – Trust Indenture – Non-resident
Unitholders" and "Risk
Factors – Risks Associated with Government Regulation – We have non-resident
ownership restrictions of our Trust Units" in the AIF.
The Trust
Units have not been and will not be registered under the 1933 Act, or any state
securities laws, and, accordingly, may not be offered or sold within the United
States or to U.S. persons (as such term is defined in Regulation S under
the 1933 Act) except in transactions exempt from the registration
requirements of the 1933 Act and applicable state securities laws. The
Underwriting Agreement permits the Underwriters to offer and resell the Trust
Units that they have acquired pursuant to the Underwriting Agreement in a
private placement to purchasers in the United States that are institutional
accredited investors. Moreover, the Underwriting Agreement provides
that the Underwriters will offer and sell the Trust Units outside the United
States only in accordance with Regulation S under the 1933
Act.
In
addition, until 40 days after the commencement of the Offering, an offer or
sale of Trust Units offered hereby within the United States by any dealer
(whether or not participating in the Offering) may violate the registration
requirements of the 1933 Act if such offer or sale is made otherwise than
in accordance with an exemption from the registration requirement of the
1933 Act.
RELATIONSHIP BETWEEN THE TRUST AND
CERTAIN UNDERWRITERS
TD
Securities Inc., CIBC World Markets Inc., National Bank Financial Inc., RBC
Dominion Securities Inc. and Scotia Capital Inc., five of the Underwriters, are
direct or indirect wholly owned subsidiaries of Canadian chartered banks (the
"Lenders") that are
lenders to Baytex Energy and to which Baytex Energy is indebted pursuant to the
Credit Facilities. See note 6 to Annual Financial Statements for a
description of the Credit Facilities, including the total amount of indebtedness
thereunder as at December 31, 2008. Consequently, the Trust may be considered to
be a "connected issuer" of those Underwriters for the purposes of securities
regulations in certain provinces. The decision to distribute the
Trust Units hereby and the determination of the terms of distribution were made
through negotiations between Baytex Energy, on behalf of the Trust, and TD
Securities Inc., on behalf of the Underwriters. The Lenders did not
have any involvement in such decision or determination; however, the Lenders
have been advised of the issuance and terms thereof. As a consequence
of the Offering, TD Securities Inc., CIBC World Markets Inc., National Bank
Financial Inc., RBC Dominion Securities Inc. and Scotia Capital Inc. will
receive their respective share of the Underwriters' fee payable by the Trust to
the Underwriters. Some or all of the net proceeds of the Offering
could be used to repay a portion of the indebtedness of Baytex Energy to the
Lenders. See "Use
of Proceeds".
INTEREST OF EXPERTS
Certain
legal matters relating to the Offering will be passed upon by Burnet, Duckworth
& Palmer LLP on behalf of the Trust, and by McCarthy Tétrault LLP on behalf
of the Underwriters. As at the date hereof, the partners and
associates of Burnet, Duckworth & Palmer LLP and McCarthy Tétrault LLP, each
as a group, own, directly or indirectly, less than 1% of the outstanding
Units. Reserve estimates contained in the AIF and incorporated by
reference into this short form prospectus are based upon reports prepared by
Sproule, as independent consultants, with respect to the reserves of the
Trust. As of the date hereof, none of the designated "Professionals"
(as defined in NI 51-102) have any registered or beneficial interest, direct or
indirect, in any of our securities or other property or of our associates or
affiliates either at the time they prepared a report, evaluation, statement or
opinion prepared by it, at any time thereafter or to be received by
them.
In
addition, none of the aforementioned persons or companies, nor any director,
officer, or employee of any of the aforementioned persons or companies, is or is
expected to be elected, appointed or employed as a director, officer or employee
of Baytex Energy or of any associate or affiliate of Baytex Energy, except for
John Brussa, a director of Baytex Energy, and Shannon Gangl, the Corporate
Secretary of Baytex Energy, who are partners at Burnet, Duckworth & Palmer
LLP, a law firm that renders legal services to the Trust.
CERTAIN CANADIAN FEDERAL INCOME TAX
CONSIDERATIONS
In the
opinion of Burnet, Duckworth & Palmer LLP and McCarthy Tétrault LLP
(collectively "Counsel"), the following
summary fairly describes the principal Canadian federal income tax
considerations pursuant to the Tax Act generally applicable to a Unitholder who
acquires Trust Units pursuant to the Offering and who, for purposes of the Tax
Act, and at all relevant times, holds the Trust Units as capital property and
deals at arm's length with and is not affiliated with the Trust and the
Underwriters. Generally speaking, Trust Units will be considered to
be capital property to a Unitholder provided the Unitholder does not hold the
Trust Units in the course of carrying on a business of trading or dealing in
securities and has not acquired them in one or more transactions considered to
be an adventure in the nature of trade. Certain Unitholders who might
not otherwise be considered to hold their Trust Units as capital property may,
in certain circumstances, be entitled to have them treated as capital property
by making the irrevocable election permitted by subsection 39(4) of the
Tax Act. This summary is not applicable to: (i) a Unitholder
that is a "financial institution", as defined in the Tax Act for purposes of the
mark-to-market rules; (ii) a Unitholder an interest in which would be a "tax
shelter investment" as defined in the Tax Act; (iii) a Unitholder that is a
"specified financial institution" as defined in the Tax Act; or (iv) a
Unitholder to whom the "functional currency" rules apply, as defined in the Tax
Act. Any such Unitholder should consult its own tax advisor with
respect to an investment in the Trust Units.
This
summary is based upon the provisions of the Tax Act and the Income Tax
Regulations (the "Regulations") in force as of
the date hereof, all specific proposals to amend the Tax Act and the Regulations
that have been publicly announced prior to the date hereof (the "Proposed Amendments") and
Counsel's understanding of the current published administrative practices of the
Canada Revenue Agency. There is no assurance that the Proposed
Amendments will be enacted in the form proposed, if at all. Except as
otherwise indicated, this summary is based on the assumption that all
transactions described herein occur at fair market value.
This
summary is not exhaustive of all possible Canadian federal income tax
considerations and, except for the Proposed Amendments, does not take into
account or anticipate any changes in the law, whether by legislative, regulatory
or judicial action, nor does it take into account provincial, territorial or
foreign tax considerations, which may differ significantly from those discussed
herein.
This
summary is of a general nature only and is not intended to be, nor should it be
construed to be, legal or tax advice to any prospective purchaser or holder of
Trust Units and no representations with respect to income tax consequences to
any prospective purchaser or holder of Trust Units are made. Consequently,
prospective Unitholders should consult their own tax advisors with respect to
their particular circumstances.
Status
of the Trust
In the
opinion of Counsel, based on representations of Baytex Energy and the Trust, the
Trust qualifies as a "unit trust" and a "mutual fund trust" as defined by the
Tax Act, and this summary assumes that the Trust will continue to so qualify.
The qualification of the Trust as a mutual fund trust requires that certain
factual conditions generally be met throughout its existence. Counsel
is advised by the Trust and Baytex Energy that it is intended that the
requirements necessary for the Trust to qualify as a mutual fund trust will
continue to be satisfied such that the Trust will continue to qualify as a
mutual fund trust at all times. In the event the Trust were not to so
qualify, the income tax considerations would in some respects be materially
different from those described below.
SIFT
Rules
On
October 31, 2006, Finance announced proposed changes to the taxation of
certain publicly-traded trusts and partnerships and their
unitholders. Bill C-52, which received Royal Assent on
June 22, 2007, contained legislation implementing the SIFT
Rules.
The SIFT
Rules apply to trusts and partnerships that are resident in Canada for purposes
of the Tax Act (in the case of partnerships, pursuant to new residency rules for
this purpose), that hold one or more "non-portfolio properties", and the units
of which are listed on a stock exchange or other public market (a "specified investment flow-through
trust" or "SIFT
trust", and a "specified
investment flow-through partnership" or "SIFT
partnership"). In the case of a trust or partnership that was
a SIFT trust or SIFT partnership on October 31, 2006, the SIFT Rules
generally will not take effect until January 1, 2011, provided the trust or
partnership experiences only "normal growth" and no "undue expansion" before
then. On December 15, 2006 Finance issued guidelines with
respect to what would be considered "normal growth" for this purpose (the "Guidelines").
The Trust
would be a "SIFT trust" under the SIFT Rules but for the deferred implementation
described above. Pursuant to the SIFT Rules, a SIFT trust will be
subject to tax on its income from non-portfolio properties and taxable capital
gains from dispositions of non-portfolio properties at a rate comparable to the
combined federal and provincial corporate income tax rate and distributions of
such income to unitholders will be treated as eligible dividends paid by a
taxable Canadian corporation. The properties owned by the Trust would
constitute "non-portfolio properties" under the SIFT Rules, with the result that
all or substantially all of the Trust's income would be subject to the new
tax.
The SIFT
Rules provide that the tax rate will be the federal general corporate income tax
rate (which is anticipated to be 16.5% in 2011 and 15% in 2012) plus the
provincial SIFT tax rate. Based on representations of Baytex Energy
and the Trust, it is anticipated that the Trust would be considered to have a
permanent establishment only in Alberta, where the provincial tax rate in 2011
is expected to be 10%, which will result in an effective tax rate of 26.5% in
2011 and 25% in 2012.
Although
the SIFT Rules are not expected to effect the Trust until 2011, the Trust could
become subject to the SIFT Rules sooner if it experiences growth other than
"normal growth" before then. Under the Guidelines, a SIFT trust will
be considered to have experienced only "normal growth" if its issuances of new
equity, which includes trust units and debt or other securities that are
convertible into trust units, do not exceed certain thresholds measured by
reference to the SIFT trust's market capitalization as of the close of trading
on October 31, 2006, taking into account only the SIFT trust's
publicly-traded units and not any securities, whether or not listed, that are
convertible into or exchangeable for trust units. The permitted expansion
thresholds are the greater of $50 million and 40% of a SIFT trust's
October 31 market capitalization for the period from October 31, 2006
to the end of 2007, and the greater of $50 million and 20% of a SIFT trust's
October 31 market capitalization for each of 2008, 2009 and
2010. On December 4, 2008, Finance announced changes to the
Guidelines to allow a SIFT trust to accelerate the utilization of the SIFT
trust's annual safe harbour amount for each of 2009 and 2010 so that the safe
harbour amount is available on and after December 4, 2008. This
change does not alter the maximum permitted expansion threshold for a SIFT
trust, but it allows a SIFT trust to use its normal growth room remaining as of
December 4, 2008 in a single year, rather than staging a portion of the
normal growth room over the 2009 and 2010 years.
Management
of Baytex Energy has advised Counsel that the Trust's market capitalization,
determined in accordance with the Guidelines, as of October 31, 2006 was
approximately $1.825 billion. Management of Baytex Energy has further advised
Counsel that the offering of Trust Units pursuant to this short form prospectus
(including the Over-Allotment Option) will not, in and of itself, cause the
Trust to exceed its permitted normal growth threshold under the
Guidelines. It is therefore assumed, for the purposes of this
summary, that the Trust will not be subject to the SIFT Rules until
January 1, 2011. No assurance can be provided that the SIFT
Rules will not apply to the Trust prior to 2011.
Taxation
of the Trust
The Trust
will be required to include in its income for each taxation year: (i) income
from the NPI on an accrual basis; (ii) all interest on the Notes that
accrues to it to the end of the year, or becomes receivable or is received by it
before the end of the year, except to the extent that such interest was included
in computing its income for preceding year; and (iii) any other sources of
income. The Trust will generally be entitled to deduct on an annual basis,
reasonable administrative expenses incurred on its ongoing investment activities
provided such expenses are reasonable and are otherwise deductible, subject to
the relevant provisions of the Tax Act, including the Proposed Amendments, which
require that the Trust have a reasonable expectation of profit. The Trust will
also be entitled to deduct a portion of any costs incurred by it in connection
with the issuance of Units. The amount of such expenses deductible by the Trust
in a taxation year is 20% of such issue expenses, pro rated where the Trust's
taxation year is less than 365 days, to the extent such expenses were not
deductible in a previous taxation year. The taxation year of the Trust will end
on December 31 of each year.
Subject
to the application of the SIFT Rules, the Trust is subject to taxation in each
taxation year on its income for the year less the portion thereof that is paid
or payable in the year to Unitholders and which is deducted by the Trust in
computing its income for purposes of the Tax Act. An amount will be considered
to be payable to a Unitholder in a taxation year if it is paid in the year by
the Trust or the Unitholder is entitled in that year to enforce payment of the
amount. Counsel has been advised by the Trust that the Trust shall make
sufficient distributions in each year of its net income for tax purposes so that
the Trust generally will not be liable for any material amounts of income tax
under the Tax Act, subject to the SIFT Rules. Under the Trust Indenture, income
received by the Trust may be used to finance cash redemptions of Units. The
Trust Indenture also contemplates other situations in which the Trust may not
have sufficient available funds to distribute all of its income by way of cash
distributions. In such circumstances, such income will be payable to Unitholders
in the form of additional Units ("Reinvested
Units").
Once the
Trust becomes subject to the SIFT Rules (which is anticipated to be, subject to
the Trust exceeding any "normal growth", deferred until January I, 2011), the
Trust will no longer be able to deduct any part of the amounts payable to
Unitholders in respect of: (i) income from businesses it carries on in Canada or
from its non-portfolio properties (exceeding any losses for the taxation year
from businesses or non-portfolio properties), and (ii) taxable capital gains
from its dispositions of non-portfolio properties (exceeding its allowable
capital losses from the disposition of such properties). A deduction is
permitted for dividends received by a SIFT trust where the dividends could have
been deducted if the SIFT trust were a corporation. "Non-portfolio properties"
include: (i) Canadian real and resource properties if the total fair market
value of such properties is greater than 50% of the equity value of the SIFT
itself, (ii) a property that the SIFT (or a non-arm's length person or
partnership) uses in the course of carrying on a business in Canada, and (iii)
securities of a subject entity that have a fair market value greater than 10% of
the subject entity's equity value or a subject entity where the SIFT trust holds
securities of it or its affiliates that have a total fair market value greater
than 50% of the equity value of the SIFT trust. A subject entity includes
corporations resident in Canada, trusts resident in Canada, and Canadian
resident partnerships other than such entities that do not hold any
non-portfolio properties, and the investments by the Trust in its material
subsidiaries will be investments in subject entities for this purpose. Income
which a SIFT trust is unable to deduct will be taxed in the SIFT trust at rates
of tax similar to the combined federal and provincial corporate tax rate. The
SIFT Rules do not change the tax treatment of distributions that are paid as
returns of capital.
Taxation
of Unitholders Resident in Canada
This
portion of the summary is applicable to Unitholders who, for purposes of the Tax
Act, and at all relevant times, are resident or deemed to be resident in
Canada.
Subject
to the SIFT Rules, each Unitholder is required to include in computing income
for a particular taxation year the portion of the net income of the Trust,
including net taxable capital gains, that is paid or payable to the Unitholder
in that taxation year, whether or not the amount was actually paid to the
Unitholder in that year. Income of a Unitholder from the Trust Units
will generally be considered to be income from property and not resource income
(or "resource profits")
for purposes of the Tax Act. If appropriate designations are made by
the Trust, such portion of the net taxable gains of the Trust and any taxable
dividends received from taxable Canadian corporations as are paid or become
payable to a Unitholder will effectively retain their character and be treated
as such in the hands of the Unitholder for purposes of the Tax
Act. The non-taxable portion of net realized capital gains of the
Trust that is paid or payable to a Unitholder in a year will not be included in
computing the Unitholder's income for the year and will not reduce the adjusted
cost base of the Unitholder's Units. Any other amount in excess of
the net income of the Trust that is paid or payable by the Trust to a Unitholder
in a year will not generally be included in the Unitholder's income for the
year. However, where such an amount becomes payable to a Unitholder,
other than as proceeds of disposition of a Unit, the adjusted cost base of the
Units held by such Unitholder will generally be reduced by such
amount. Any loss of the Trust for purposes of the Tax Act cannot be
allocated to, or treated as a loss of a Unitholder.
Once the
Trust becomes subject to the SIFT Rules (which is anticipated to be, subject to
the Trust exceeding any "normal growth", deferred until January 1, 2011),
taxable distributions from the Trust received by Unitholders and paid from the
Trust's after tax income will generally be deemed to be received by the
Unitholder as a taxable dividend from a taxable Canadian
corporation. Such dividend will be subject to the gross-up and
dividend tax credit provisions in respect of Unitholders that are
individuals. Under the SIFT Rules, the dividends deemed to be paid by
the Trust will be deemed to be "eligible dividends" and individual Unitholders
would therefore benefit from the enhanced gross-up and dividend tax credit rules
of the Tax Act. Such dividends received by corporations resident in
Canada will generally be eligible for a deduction of the full amount of
dividends received and potentially subject to a 33⅓% refundable tax under
Part IV of the Tax Act.
A
Unitholder that throughout the relevant taxation year is a "Canadian-controlled
private corporation", as defined in the Tax Act, may be liable to pay an
additional refundable tax of 6⅔% on certain investment income, including taxable
capital gains and certain income from the Trust. Distributions which
are treated as dividends in the hands of "Canadian-controlled private
corporations" will generally be eligible for a deduction of the full amount of
dividends received, but will be subject to a 33⅓% refundable tax under Part IV
of the Tax Act.
Trust
Units issued to a Unitholder as a non-cash distribution of income will have a
cost equal to the amount of such income and will be averaged with the adjusted
cost base of all other Trust Units held by the Unitholder at that time as
capital property in order to determine the adjusted cost base of each Trust
Unit.
The cost
to a Unitholder of Trust Units acquired pursuant to the Offering will equal the
purchase price of the Trust Units plus the amount of any other reasonable costs
incurred in connection with such acquisition. Trust Units issued
pursuant to a reinvestment of distributions will be considered acquired at a
cost equal to the amount of the distribution. This cost will be
averaged with the adjusted cost base of all other Trust Units to determine the
adjusted cost base of each Trust Unit. Amounts distributed by the
Trust to a Unitholder in respect of a Trust Unit will reduce the Unitholder's
adjusted cost base of the Trust Unit to the extent that the amount distributed
is in excess of the Unitholder's share of the Trust's income for the purposes of
the Tax Act computed prior to any deduction for amounts distributed to
Unitholders. To the extent that the adjusted cost base to a
Unitholder would otherwise be less than nil, the negative amount will be deemed
to be a capital gain of the Unitholder from the disposition of such Trust Units
in the year in which the negative amount arises and the adjusted cost base will
be increased by the amount of the deemed capital gain. The
non-taxable portion of capital gains of the Trust that is paid or made payable
to the Unitholder in a year will not be included in computing the Unitholder's
income for the year and will not reduce the adjusted cost base to the Unitholder
of the Trust Units.
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Disposition
of Trust Units
|
An actual
or deemed disposition (other than a tax deferred transaction) of Trust Units by
a Unitholder, whether on redemption or otherwise, will give rise to a capital
gain (or capital loss) equal to the amount by which the proceeds of disposition
(excluding any amount payable by the Trust which represents an amount that must
otherwise be included in the Unitholder's income as described above) are greater
than (or less than) the aggregate of the adjusted cost base of the Trust Units
to the Unitholder plus reasonable costs associated with the
disposition.
Generally,
one-half of any capital gain (a "taxable capital gain")
realized by a Unitholder in a taxation year must be included in the Unitholder's
income under the Tax Act for the year, and one half of any capital loss (an
"allowable capital
loss") realized by a Unitholder in a taxation year may be deducted from
taxable capital gains realized by the Unitholder in that
year. Allowable capital losses for a taxation year in excess of
taxable capital gains for that year generally may be carried back and deducted
in any of the three preceding taxation years or carried forward and deducted in
any subsequent taxation year against net capital gains realized in such years,
to the extent and under the circumstances described in the Tax Act.
Taxable
capital gains realized by a Unitholder who is an individual may give rise to
minimum tax depending on such Unitholder's circumstances. A
Unitholder that throughout the relevant taxation year is a "Canadian-controlled
private corporation", as defined in the Tax Act, may be liable to pay an
additional refundable tax of 6 2/3% on certain investment income, including
taxable capital gains.
Under the
Trust Indenture, each Unitholder is entitled to require the Trust to redeem all
or any part of the Trust Units registered in the name of the
Unitholder. The redemption price payable in respect of Trust Units
tendered for redemption may be paid in cash or promissory notes. A
redemption of Trust Units in consideration for cash or promissory notes, as the
case may be, will be a disposition of such Trust Units for proceeds of
disposition equal to the amount of such cash or the fair market value of such
promissory notes, as the case may be, less any portion thereof that is
considered to be a distribution out of the income of the
Trust. Redeeming Unitholders will consequently recognize a capital
gain, or a capital loss, depending upon whether such proceeds exceed, or are
exceeded by, the adjusted cost base of the Trust Units so
redeemed. Holders of promissory notes generally will be required to
include in income interest that is received or receivable or that accrues
(depending on the status of the Unitholder as an individual, corporation or
trust) on the promissory notes. The cost to a Unitholder of any
property distributed to a Unitholder by the Trust will be deemed to be equal to
the fair market value of such property at the time of distribution less, in the
case of promissory notes, any accrued interest thereon. Unitholders
should consult with their own tax advisors as to the consequences of receiving
promissory notes on a redemption.
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Taxation
of Unitholders Not Resident in
Canada
|
This
portion of the summary applies to a Unitholder who, for the purposes of the Tax
Act and at all relevant times, is not resident in Canada and is not deemed to be
resident in Canada, does not use or hold, and is not deemed to use or hold,
Trust Units in, or in the course of, carrying on a business in Canada, and is
not an insurer who carries on an insurance business or is deemed to carry on an
insurance business in Canada and elsewhere (a "Non-Resident Unitholder").
Subject
to the SIFT Rules, any distribution of income of the Trust to a Non-Resident
Unitholder will generally be subject to Canadian withholding tax at the rate of
25%, unless such rate is reduced under the provisions of a tax treaty between
Canada and the Unitholder's jurisdiction of residence. A Unitholder
resident in the United States who is entitled to claim the benefit of the Canada-US Tax Convention
(1980) will be entitled to have the rate of withholding reduced to 15% of
the amount of any income distributed. The Trust is also obligated to
withhold on all capital distributions to Non-Resident Unitholders at the rate of
15% and such distribution will not reduce the adjusted cost base of the
Non-Resident Unitholder's Trust Units. Where a Non-Resident
Unitholder sustains a capital loss on a disposition of Trust Units, such loss
may be applied to reduce the Non-Resident Unitholder's tax liability in respect
of capital distributions, or to obtain a refund of such taxes, in limited
circumstances as provided in the Tax Act.
Pursuant
to the SIFT Rules, amounts in respect of the Trust's non-portfolio earnings
payable to Non-Resident Unitholders after 2010 that are not deductible to the
Trust will be treated as a taxable dividend from a taxable Canadian
corporation. Such dividends will be subject to Canadian withholding
tax at a rate of 25%, unless such rate is reduced under the provisions of a
convention between Canada and the Non-Resident Unitholder's jurisdiction of
residence. A Non-Resident Unitholder resident in the United States
who is entitled to claim the benefit of the Canada-US Tax Convention
generally will be entitled to have the rate of withholding reduced
to 15% of the amount of such dividend. Although the SIFT Rules
may not increase the tax payable by Non-Resident Unitholders in respect of
dividends deemed to be paid by the Trust, the Trust advises Counsel that the
imposition of tax at the Trust level under the SIFT Rules is expected to
materially reduce the amount of cash flow from operations available for
distributions to Unitholders.
A
disposition or deemed disposition of a Trust Unit, whether on redemption or
otherwise, will not give rise to any capital gains subject to tax under the Tax
Act to a Non-Resident Unitholder provided that the Trust Units are not "taxable
Canadian property" of the Non-Resident Unitholder for the purposes of the Tax
Act. Trust Units will not be considered taxable Canadian property to
such a Non-Resident Unitholder unless: (a) the Non-Resident Unitholder
holds or uses, or is deemed to hold or use, the Trust Units in the course of
carrying on business in Canada; (b) the Trust Units are "designated
insurance property" of the Non-Resident Unitholder for purposes of the Tax Act;
(c) at any time during the 60 month period immediately preceding the
disposition of the Trust Units, the Non-Resident Unitholder or persons with whom
the Non-Resident Unitholder did not deal at arm's length or any combination
thereof, held 25% or more of the issued Trust Units; or (d) the Trust is
not a mutual fund trust for the purposes of the Tax Act on the date of
disposition. Amounts paid to Non-Resident Unitholders on redemption
of their Trust Units would be subject to the 15% withholding tax applicable to
capital distributions discussed above.
Interest
paid or credited on promissory notes to a Non-Resident Unitholder who receives
promissory notes on a redemption of Trust Units generally will not be subject to
Canadian withholding tax.
ELIGIBILITY FOR INVESTMENT
Provided
the Units are listed on a designated stock exchange (which includes the TSX) on
the date of closing of the Offering, and subject to the provisions of any
particular registered plan, the Units will, on the date of closing of the
Offering, be qualified investments under the Tax Act for a trust governed by a
registered retirement savings plan, a registered retirement income fund, a
deferred profit sharing plan, a registered disability savings plan, a registered
education savings plan and a tax free savings account (collectively
the "Plans"). However,
the holder of a tax free savings account that governs a trust which holds Units
will be subject to a penalty tax if the holder does not deal at arms' length
with the Trust for the purposes of the Tax Act or if the holder, alone or
together with non-arms' length persons or partnerships, has a significant
interest (within the meaning of the Tax Act) in the Trust or a corporation,
partnership or trust with which the Trust does not deal at arms' length for the
purposes of the Tax Act.
Adverse
tax consequences may apply to a Plan, or an annuitant thereunder, if the Plan
acquires or holds property that is not a qualified investment for the
Plan.
RISK FACTORS
An
investment in the Trust Units is subject to certain risks. Investors
should carefully consider the risks described under "Risk Factors" in the
AIF.
LEGAL PROCEEDINGS
There are
no outstanding legal proceedings material to the Trust to which the Trust or
Baytex Energy is a party or in respect of which any of its respective properties
are subject, nor are any such proceedings known to the Trust or Baytex Energy to
be contemplated.
AUDITORS, TRANSFER AGENT AND
REGISTRAR
The
auditors of the Trust are Deloitte & Touche LLP, Chartered Accountants,
3000, 700 – 2nd Street
S.W., Calgary, Alberta, T2P 0S7. Deloitte & Touche LLP is independent
in accordance with the Rules of Professional Conduct as outlined by the
Institute of Chartered Accountants of Alberta.
The
transfer agent and registrar for the Trust Units and Convertible Debentures is
Valiant Trust Company, at its principal offices in Calgary, Alberta and Toronto,
Ontario.
STATUTORY RIGHTS OF WITHDRAWAL AND
RESCISSION
Securities
legislation in certain of the provinces of Canada provides purchasers with the
right to withdraw from an agreement to purchase securities. This
right may be exercised within two business days after receipt or deemed receipt
of a prospectus and any amendment. In several of the provinces,
securities legislation further provides a purchaser with remedies for rescission
or, in some jurisdictions, damages if the prospectus and any amendment contains
a misrepresentation or is not delivered to the purchaser, provided that the
remedies for rescission or damages are exercised by the purchaser within the
time limit prescribed by the securities legislation of the purchaser's
province. The purchaser should refer to any applicable provisions of
the securities legislation of the province in which the purchaser resides for
the particulars of these rights or consult with a legal advisor.
CONSENT OF AUDITORS
We have
read the short form prospectus of Baytex Energy Trust (the "Trust") dated April 3, 2009 qualifying
the distribution of 6,900,000 trust units of the Trust. We have
complied with Canadian generally accepted standards for an auditor's involvement
with offering documents.
We
consent to the incorporation by reference in the above-mentioned short form
prospectus of our report to the unitholders of the Trust on the consolidated
balance sheets of the Trust as at December 31, 2008 and 2007 and the
consolidated statements of income and comprehensive income, deficit and cash
flows for the years then ended. Our report is dated March 16,
2009.
Calgary,
Canada
(signed) "Deloitte Touche
LLP"
April 3,
2009 Chartered
Accountants
CERTIFICATE
OF THE TRUST
Dated:
April 3, 2009
This
short form prospectus, together with the documents incorporated by reference,
constitutes full, true and plain disclosure of all material facts relating to
the securities offered by this prospectus as required by the securities
legislation of each of the Provinces of Canada.
BAYTEX
ENERGY TRUST by
BAYTEX
ENERGY LTD. as Administrator
|
By: "Anthony W.
Marino"
Anthony W.
Marino
President
and Chief Executive Officer
|
By: "W. Derek
Aylesworth"
W. Derek Aylesworth
Chief Financial
Officer
|
ON
BEHALF OF THE BOARD OF DIRECTORS OF BAYTEX ENERGY LTD.
|
By: "John A.
Brussa"
John
A. Brussa
Director
|
By: "Gregory K.
Melchin"
Gregory
K. Melchin
Director
|
CERTIFICATE
OF THE UNDERWRITERS
Dated:
April 3, 2009
To the
best of our knowledge, information and belief, this short form prospectus,
together with the documents incorporated by reference, constitutes full, true
and plain disclosure of all material facts relating to the securities offered by
this prospectus as required by the securities legislation of each of the
Provinces of Canada.
|
TD
Securities Inc.
By:
"Scott W. Barron"
|
|
CIBC
World Markets Inc.
By:
"Denis R. Rajotte"
|
National
Bank Financial Inc.
By:
"Rob Wonnacott"
|
RBC
Dominion Securities Inc.
By:
"Rob King"
|
Scotia
Capital Inc.
By:
"Brett Undershute"
|
|
Canaccord
Capital Corporation
By:
"Bruce McDonald"
|
FirstEnergy
Capital Corp.
By:
"Jamie N. Ha"
|
|
Raymond
James Ltd.
By:
"Edward J.
Bereznicki"
|
|
Peters
& Co. Limited
By:
"Philip R. Krepela"
|
Tristone
Capital Inc.
By:
"Tom Ebbern"
|
UBS
Securities Canada Inc.
By:
"Ted Larkin"
|
|
Cormark
Securities Inc.
By:
"Ronald A.
MacMicken"
|
Dundee
Securities Corporation
By:
"Ali A. Bhojani"
|