CALGARY, Aug. 7 /PRNewswire-FirstCall/ -- PENN WEST ENERGY TRUST
(TSX - PWT.UN; NYSE - PWE) is pleased to announce record funds flow
for the second quarter ended June 30, 2008.
-------------------------------------------------------------------------
Business Strategy - In 2008, Penn West successfully continued its
strategy of acquiring high quality conventional assets weighted to
light oil with potential for future exploitation using new
completions technology and enhanced oil recovery. Including the
Petrofund acquisition in June 2006 and the Vault and Canetic
acquisitions in January 2008, Penn West acquired in excess of 424
million barrels of proved plus probable reserves weighted
approximately 60 percent to light oil for $9.6 billion, of which
over 70 percent was funded by the issue of equity. The economics of
these acquisitions were considered using benchmark average WTI oil
prices of approximately US$70.00 per barrel and average AECO
natural gas prices of approximately $6.50 per GJ. In part to
protect the economics associated with these transactions, hedges on
oil and natural gas prices were entered on a portion of production.
This strategy, coupled with the substantial increases in oil and
natural gas prices to date in 2008, has led to record funds flow(1)
and substantial increases to Penn West's net asset value(1).
Approximately 60 percent of our second half 2008 production, 75
percent of our 2009 production and 95 percent of our 2010
production remains unhedged. Business Environment - Crude oil
prices remained strong throughout the second quarter of 2008. NYMEX
WTI crude oil prices increased in the second quarter to average
US$124.00 per barrel compared to US$97.95 per barrel in the first
quarter of 2008 and US$65.02 per barrel in the second quarter of
2007. Energy demand in the Middle East, Russia and Asia remains
high and it is expected that the demand growth over the next few
years will be at rates higher than the growth in supply. - Natural
gas prices also increased significantly in the first six months of
2008. The AECO Monthly Index averaged $8.86 per GJ in the second
quarter compared to $6.75 per GJ in the first quarter of this year
and $6.99 per GJ in the second quarter of last year. Increases in
demand in both Europe and Asia resulted in reduced LNG exports to
the U.S. which reduced supply. Offsetting this was high drilling
activity in several large unconventional shale gas plays and new
production predominately from the U.S. Rockies. Financial - Record
funds flow of $753 million in the second quarter of 2008 was 131
percent higher than the $326 million realized in the second quarter
of 2007. On a per unit-basis(1) funds flow increased to $2.00 per
unit-basic in the second quarter of 2008, an increase of 46 percent
from $1.37 per unit-basic in the second quarter of 2007. - The net
loss in the second quarter of 2008 was $323 million ($0.86 per
unit-basic) compared to a net loss of $186 million ($0.77 per
unit-basic) in the second quarter of 2007 due to non-cash charges
related to risk management activities in the 2008 period of $837
million and the non-cash charge of $326 million related to the
enactment of the SIFT tax in the 2007 period. Penn West hedged a
portion of its production to protect our balance sheet as well as
planned distribution and capital programs. - The netback(1) of
$47.84 per boe(2) in the second quarter of 2008 was 52 percent
higher than the second quarter of 2007. (1) The terms "funds flow",
"funds flow per unit-basic", "net asset value" and "netbacks" are
non-GAAP measures. Please see "Non-GAAP Measures Advisory" and
"Calculation of Funds Flow" below. (2) Please see "Oil and Gas
Information Advisory" below for information regarding the term
"boe". Operations - Production averaged 190,515 boe per day in the
second quarter of 2008 compared to 126,599 boe per day reported in
the second quarter of 2007. Production in the quarter was
negatively impacted by approximately 8,000 boe per day due to the
Spectra McMahon turnaround, other processing facility turnarounds
and interruptions of a temporary nature. - Reported crude oil and
NGL production averaged 109,417 barrels per day and natural gas
production averaged approximately 487 mmcf per day in the second
quarter of 2008. - Capital expenditures were $247 million in the
second quarter of 2008 including $16 million of net asset
acquisitions. A total of 23 net wells were drilled with a success
rate of 91 percent. Distributions - Penn West's Board of Directors
recently resolved to keep the Trust's distribution level at $0.34
per unit per month for the months of August, September and October
subject to maintenance of current forecasts of commodity prices,
production levels and planned capital expenditures. Endev
Acquisition - On July 22, 2008, Penn West announced the closing of
the acquisition of Endev Energy Inc. ("Endev"). The acquisition is
expected to add approximately 3,500 boe per day weighted
approximately 78 percent to natural gas and 22 percent to liquids.
The assets acquired enhance existing Penn West operations, most
notably in southeast Alberta, and also add approximately 100,000
net undeveloped acres of land. Regulatory Update - The new royalty
framework continues to be under review with the objective of
avoiding "unintended consequences" of the plan. In June 2008, the
Government of Alberta discussed the possibility of further changes
to the royalty framework, however, no specific items were
identified and no timeframe for future changes was announced. - In
July 2008, the Alberta government announced that it will create a
$2 billion fund to advance carbon capture and storage (CCS)
projects in the province. Alberta has issued a request for
expressions of interest in CCS projects. The intent of the request
is to identify projects with the greatest potential of being built
quickly and capable of having a significant impact on reducing
greenhouse gas emissions. Financing - On May 29, 2008, Penn West
Petroleum Ltd. (the "Company") closed the issuance of US$480
million and CAD$30 million of senior unsecured notes on a private
placement basis, primarily in the United States, maturing in eight
to 12 years and bearing interest at 6.12 percent to 6.40 percent
with an average rate of approximately 6.25 percent. The Company
used the proceeds to repay advances on its bank facilities. - In
June 2008, the Company completed all requirements to enable the
sale of trust units by way of "at-the-market distributions" on both
the TSX and the NYSE. Penn West may issue and sell up to 20,000,000
trust units at its discretion during a period of up to 25 months.
The net proceeds from the sale of trust units issued under the
facility, if any, will be used to repay debt or fund future growth
opportunities. To date, no trust units have been issued under the
facility. - On July 31, 2008, the Company issued 57 million pounds
sterling of senior unsecured notes, through a private placement in
the United Kingdom, maturing in 2018 and bearing interest of 7.78
percent. In conjunction with the issue of the notes, the Company
entered into contracts to swap the principal of the placement to
approximately $114 million bearing interest in Canadian dollars at
6.95 percent. The Company used the proceeds to repay advances on
its bank facilities. Governance - At Penn West's Annual General
Meeting on June 2, 2008, our unitholders approved resolutions
including the addition of Jack Schanck as a director. Mr. Schanck,
a geologist, brings to Penn West's Board over 30 years of U.S. and
Canadian oil and gas experience including roles as President,
Executive VP of Worldwide Exploration and other executive positions
at Unocal and other companies. HIGHLIGHTS Three months ended Six
months ended June 30 June 30
-------------------------------------------------- % % 2008 2007
change 2008 2007 change
-------------------------------------------------------------------------
Financial (millions, except per unit amounts) Gross revenues(1) $
1,312 $ 608 116 $ 2,448 $ 1,190 106 Funds flow 753 326 131 1,385
637 117 Basic per unit 2.00 1.37 46 3.77 2.68 41 Diluted per unit
1.98 1.35 47 3.74 2.65 41 Net loss (323) (186) (74) (245) (90)
(172) Basic per unit (0.86) (0.77) (12) (0.67) (0.37) (81) Diluted
per unit (0.86) (0.77) (12) (0.67) (0.37) (81) Capital
expenditures, net(2) 247 484 (49) 525 700 (25) Long-term debt at
period-end 3,683 1,823 102 3,683 1,823 102 Convertible
debentures(3) 334 - 100 334 - 100 Distributions paid(4) $ 383 $ 243
58 $ 720 $ 485 48 Operations Daily production Natural gas (mmcf/d)
487 334 46 493 337 46 Light oil and NGL (bbls/d) 81,957 49,635 65
81,818 49,372 66 Heavy oil (bbls/d) 27,460 21,288 29 27,399 21,945
25
-------------------------------------------------------------------------
Total production (boe/d) 190,515 126,599 50 191,403 127,518 50
-------------------------------------------------------------------------
Average sales price Natural gas (per mcf) $ 10.20 $ 7.55 35 $ 9.08
$ 7.57 20 Light oil and NGL (per bbl) 111.88 65.24 71 100.34 62.39
61 Heavy oil (per bbl) 93.12 42.45 119 79.91 41.73 91 Netback per
boe Sales price $ 87.60 $ 52.63 66 $ 77.71 $ 51.35 51 Risk
management (loss) gain (12.01) 0.03 (100) (7.69) 0.16 (100)
-------------------------------------------------------------------------
Net sales price 75.59 52.66 44 70.02 51.51 36 Royalties 15.35 9.82
56 13.79 9.72 42 Operating expenses 11.91 10.94 9 11.77 10.82 9
Transportation 0.49 0.52 (6) 0.49 0.53 (8)
-------------------------------------------------------------------------
Netback $ 47.84 $ 31.38 52 $ 43.97 $ 30.44 44
-------------------------------------------------------------------------
(1) Gross revenues include realized gains and losses on commodity
contracts. (2) Excludes business combinations. (3) Assumed on the
Canetic and Vault acquisitions at period-end. (4) Includes
distributions paid prior to those reinvested in trust units under
the distribution reinvestment plan. DRILLING PROGRAM Three months
ended Six months ended June 30 June 30
-------------------------------------------------------- 2008 2007
2008 2007 --------------------------------------------------------
Gross Net Gross Net Gross Net Gross Net
-------------------------------------------------------------------------
Natural gas 24 10 5 3 105 52 54 25 Oil 26 10 24 8 104 56 77 44 Dry
2 2 1 1 6 6 5 4
-------------------------------------------------------------------------
52 22 30 12 215 114 136 73 Stratigraphic and service 3 1 4 1 26 24
19 15
-------------------------------------------------------------------------
Total 55 23 34 13 241 138 155 88
-------------------------------------------------------------------------
Success rate(1) 91% 92% 95% 95%
-------------------------------------------------------------------------
(1) Success rate is calculated excluding stratigraphic and service
wells. UNDEVELOPED LANDS As at June 30
----------------------------- 2008 2007 % change
-------------------------------------------------------------------------
Gross acres (000s) 4,466 3,969 13 Net acres (000s) 3,612 3,470 4
Average working interest 81% 87% (7)
-------------------------------------------------------------------------
FARM-OUT ACTIVITY Three months ended Six months ended June 30 June
30 ------------------------------------------ 2008 2007 2008 2007
------------------------------------------ Wells drilled on
farm-out lands(1) 46 16 79 106
-------------------------------------------------------------------------
(1) Wells drilled on Penn West lands, including re-completions and
re- entries, by independent operators pursuant to farm-out
agreements. CORE AREA ACTIVITY Net wells drilled for Undeveloped
land the six months ended as at June 30, 2008 Core Area June 30,
2008 (thousands of net acres)
-------------------------------------------------------------------------
Gas 42 1,682 Light oil 34 754 Heavy oil 62 1,176
-------------------------------------------------------------------------
138 3,612
-------------------------------------------------------------------------
TRUST UNIT DATA Three months ended Six months ended June 30 June 30
---------------------------------------------------- % % (millions
of units) 2008 2007 change 2008 2007 change
-------------------------------------------------------------------------
Weighted average Basic 376.2 239.0 57 367.9 238.0 55 Diluted 380.2
241.5 57 370.7 240.3 54 Outstanding as at June 30 377.6 239.2 58
-------------------------------------------------------------------------
On January 11, 2008, Penn West issued approximately 124.3 million
trust units on the closing of the Canetic acquisition and on
January 10, 2008, Penn West issued approximately 5.6 million trust
units on the closing of the Vault acquisition. Letter to our
Unitholders
-------------------------------------------------------------------------
During the second quarter of 2008, Penn West's efforts focused on
the successful execution of our 2008 capital exploration and
development program, the integration of the Canetic Resources
assets into Penn West, and the advancement of a number of our
resource plays and enhanced oil recovery projects. We believe that
Penn West has an excellent inventory of projects that will add
significant value in the future. Penn West recorded the highest
funds flow in its history in the second quarter of 2008 at $753
million (or $2.00 per unit-basic). Second quarter funds flow was up
131 percent over the second quarter of 2007 when funds flow totaled
$326 million ($1.37 per unit-basic). For the full-year, we forecast
funds flow between $2.8 billion and $3.0 billion ($7.40 to $7.90
per unit-basic) with forecasted pro forma production unchanged at
between 195,000 and 205,000 barrels of oil equivalent (boe) per
day. Subject to this forecast funds flow and capital expenditures,
our Board of Directors recently resolved to maintain our
distributions at $0.34 per unit per month for the next three
months. We believe that the current pricing environment presents
Penn West with the opportunity to reduce a portion of the debt
which was assumed in the Canetic and Petrofund acquisitions. This
strategy of prudent debt management will provide improved future
capability to expand our project inventory through timely and
selective strategic initiatives, including the development of new
play areas, acquisitions and the application of new technologies.
As part of our balance sheet maintenance, we've taken steps to
diversify our capital structure. This was achieved through the
issuance of the previously announced US$480 million and CAD$30
million unsecured notes with fixed terms ranging from eight to 12
years. Subsequent to the close of the quarter we successfully
closed an additional offering of CAD$114 million of privately
placed 10-year term unsecured notes in the United Kingdom. The
proceeds of these notes were used to repay a portion of Penn West's
outstanding bank debt under its credit facilities. Also during the
second quarter, Penn West completed all regulatory requirements to
enable the sale of trust units by way of "at-the-market
distributions" on both the TSX and the NYSE. This provides Penn
West additional financing flexibility for the next two years by
allowing us to raise limited amounts of equity in the markets at
timing favourable to the Trust. Our corporate netbacks rose in the
second quarter to $47.84 per boe, an increase of more than 52
percent over the second quarter of 2007 and 18 percent over
the first quarter of 2008. While realized hedging losses were
$12.01 per boe for the second quarter of 2008 compared to
a slight gain in the comparative 2007 period, we remain 60 percent
unhedged through the end of 2008. This provides us with significant
exposure to spot market pricing on an ongoing basis. We believe an
active hedging program plays an important role in the overall
financial management of Penn West and that these contracts provide
us greater certainty with respect to future distributions, capital
spending and acquisition economics. Accordingly, we will continue
to manage our exposure to downside commodity price risk through the
purchase of financial contracts while also positioning to retain
upside price potential on a majority of our production. Production
volumes during the second quarter averaged 190,515 boe per day
compared to 192,291 boe per day in the first quarter of 2008 and
126,599 boe per day in the second quarter of 2007. The difference
in production volumes from the first quarter of 2008 is due
primarily to maintenance and turnaround outages which normally peak
for our industry in the second quarter. Penn West remains on target
to achieve our full-year average pro forma production target of
between 195,000 and 205,000 boe per day. Penn West's capital
program is on track to invest approximately $1 billion in
2008. In the second quarter, we spent $247 million on a variety of
exploration, development and enhanced recovery projects. Through
the second quarter 23 net wells (138 net wells year-to-date 2008)
were drilled with approximately half of the wells being oil and
half natural gas with a drilling success rate of 91 percent. We
spent $98 million to date in 2008 acquiring select acreage as part
of our broader resource play strategy. Penn West had approximately
3.6 million net acres of undeveloped land at the end of the second
quarter. As part of being a responsible steward of the environment,
we spent $37 million on environmental clean-up and reclamation
initiatives in the first six months of 2008. We have successfully
executed on our development plans despite earlier wet weather
slowdowns and we are very encouraged by our results to date. We
maintain our strategy of selectively evaluating acquisitions which
we feel will add both near and long-term value for unitholders
while we continue to evaluate our portfolio of properties and look
to rationalize our extensive asset base. In July 2008, we closed
the acquisition of Endev Energy Inc. adding approximately 3,500 boe
per day of mostly natural gas-weighted assets and some 100,000 net
acres of undeveloped land to our portfolio of producing oil and
natural gas properties. The deal was valued at approximately $160
million and provides additional consolidation of assets for Penn
West in our Plains natural gas area. Recently the Government of
Alberta announced their commitment of $2 billion to assist in
the funding of carbon capture and storage (CCS) projects as part of
a broader mandate to address greenhouse gas emissions. The Alberta
Carbon Capture and Storage Development Council was formed earlier
this year and is a joint committee representing industry, academia
and government. The mandate of this council is to develop Alberta's
implementation plan to move ahead with CCS projects in Alberta by
the fall of 2008. Penn West is represented on this council by Penn
West's Chief Executive Officer, Bill Andrew. Penn West is an
industry leader in CO(2) enhanced oil recovery (EOR) technology
across Western Canada. Our industry-leading CO(2) EOR technology
combined with our dominant position in large legacy oil fields plus
our financial capacity to execute these projects makes us a natural
partner for emitters and the government to develop large-scale
commercial CCS projects. During the second quarter, we began
injecting CO(2) at our South Swan Hills CO (2) pilot;
additionally, we began production from our two horizontal wells at
our expanded Pembina CO(2) project. Discussions are ongoing with
several emitters and provincial governments in both Saskatchewan
and Alberta as we continue to seek a long-term CO(2) source for our
portfolio of proposed commercial EOR projects. In the volatile
North American capital markets, we continue to see a significant
disconnect between the inherent value represented in Penn West
units and the value of our units in the market. The markets
continue to experience weakness resulting from general cynicism
over the state of the U.S. economy, weak results in the financial
sector and continued fallout from the decline in the U.S. housing
market. The malaise has spread to a wider market presence evidenced
by weakness in sectors showing strong results, such as the oil and
gas industry. We are confident that our efforts both near and
long-term will be recognized by the markets. We believe Penn West
is well-positioned to reduce debt, push forward with an expanding
suite of conventional development, resource plays and enhanced oil
recovery projects. Our financial position remains strong and we are
well on our way to achieving another successful year in 2008. On a
final note, we wish to welcome Mr. Jeff Collins to the role of Vice
President, Corporate Development and Strategic Planning; Ms. Wendy
Henkelman, Vice President, Treasury and Compliance; and Mr. Jeff
Curran, Vice President, Accounting and Reporting. All these
individuals bring extensive senior management experience to Penn
West. We look forward to the positive impacts which Mr. Collins,
Ms. Henkelman, and Mr. Curran will bring to our Penn West team. On
behalf of the Board of Directors, (signed) "William E. Andrew"
(signed) "Murray R. Nunns" William E. Andrew Murray R. Nunns Chief
Executive Officer and President and Chief Operating Director
Officer Calgary, Alberta August 6, 2008 Outlook This outlook
section is included to provide unitholders with information as to
management's expectations as at August 6, 2008 for production,
funds flow and net capital expenditures for 2008 and readers are
cautioned that the information may not be appropriate for any other
purpose. This information constitutes forward-looking information.
Readers should note the assumptions, risks and disclaimers under
"Forward-Looking Statements". Oil prices reached record levels
during the second quarter of 2008 and the outlook for natural gas
prices remains positive resulting in high forecasted prices
throughout 2008 for both commodities. We continue to expect a
strong Canadian dollar compared to the U.S. dollar for the
remainder of 2008. Including the Canetic, Vault and Endev
acquisitions, Penn West continues to forecast pro forma production
between 195,000 boe per day and 205,000 boe per day for 2008. Based
on a 2008 average forecast WTI oil price of US$118.43 per barrel, a
2008 average natural gas price at AECO of $8.43 per GJ and an
average CAD/USD exchange rate of par for 2008, our funds flow
forecast for 2008, as at August 6, 2008, is between $2.8 billion
and $3.0 billion ($7.40 to $7.90 per unit-basic). Excluding
corporate acquisitions, our forecast 2008 capital expenditures are
unchanged at approximately $1.0 billion. In addition, other
components of funds flow have been modestly adjusted to reflect
experience gained to date in 2008. Our prior forecast, released on
May 6, 2008 with our first quarter 2008 results and filed on SEDAR
at http://www.sedar.com/, was also based on 2008 capital
expenditures (excluding corporate acquisitions) of approximately
$1.0 billion and pro forma production between 195,000 boe per day
and 205,000 boe per day. At that time, we forecasted a 2008 oil
price of WTI US$107.00 per barrel, an AECO natural gas price of
$8.50 per GJ and a CAD/USD exchange rate of par. Based on these
assumptions, we forecasted funds flow between $2.7 billion and $2.9
billion ($7.15 to $7.70 per unit-basic). Financial Exposure to
SemGroup, L.P. Creditor Protection Program Penn West had contracts
to deliver a small portion of its oil production to subsidiary
companies of SemGroup L.P. who recently announced (on July 22,
2008) they are seeking creditor protection in both Canada and the
U.S. Penn West estimates its maximum exposure to the financial
difficulties of these companies to be $16 million for the June 1,
2008 to July 22, 2008 period. The collectability of these amounts
is uncertain however the amount is not material to Penn West's
financial position. Deliveries in Canada subsequent to July 22,
2008 and in the U.S. subsequent to August 1, 2008 will be on
prepaid basis. Non-GAAP Measures Advisory The above information
includes non-GAAP measures not defined under generally accepted
accounting principles ("GAAP"), including funds flow, netback, net
asset value and payout ratio. Non-GAAP measures do not have any
standardized meaning prescribed by GAAP and are therefore unlikely
to be comparable to similar measures presented by other issuers.
Funds flow is cash flow from operating activities before changes in
non-cash working capital and asset retirement expenditures. Funds
flow is used to assess the ability to fund distributions and
planned capital programs. Netback or netbacks is a
per-unit-of-production measure of operating margin used in capital
allocation decisions. Operating margin is calculated as revenue
less royalties and operating costs. Net asset value is defined as
discounted future reserve value less any outstanding debt. Payout
ratio represents distributions divided by funds flow and is used to
assess the adequacy of funds flow remaining to fund capital
programs. Calculation of Funds Flow Three months ended Six months
ended June 30 June 30 -------------------------------------------
(millions, except per unit amounts) 2008 2007 2008 2007
-------------------------------------------------------------------------
Cash flow from operating activities $ 671 $ 318 $ 1,038 $ 614
Increase in non-cash working capital 59 - 310 5 Asset retirement
expenditures 23 8 37 18
-------------------------------------------------------------------------
Funds flow $ 753 $ 326 $ 1,385 $ 637
-------------------------------------------------------------------------
Basic per unit $ 2.00 $ 1.37 $ 3.77 $ 2.68 Diluted per unit $ 1.98
$ 1.35 $ 3.74 $ 2.65
-------------------------------------------------------------------------
Oil and Gas Information Advisory Barrels of oil equivalent (boe)
are based on six mcf of natural gas equalling one barrel of oil
(6:1). This could be misleading if used in isolation as it is based
on an energy equivalency conversion method primarily applied at the
burner tip and does not represent a value equivalency at the
wellhead. Forward-Looking Statements Certain statements contained
in this document constitute forward-looking statements or
information (collectively "forward-looking statements") within the
meaning of the "safe harbour" provisions of applicable securities
legislation. Forward-looking statements are typically identified by
words such as "anticipate", "continue", "estimate", "expect",
"forecast", "may", "will", "project", "could", "plan", "intend",
"should", "believe", "outlook", "potential", "target" and similar
words suggesting future events or future performance. In addition,
statements relating to "reserves" or "resources" are deemed to be
forward-looking statements as they involve the implied assessment,
based on certain estimates and assumptions, that the reserves and
resources described exist in the quantities predicted or estimated
and can be profitably produced in the future. In particular, this
document contains forward-looking statements pertaining to, without
limitation, the following: future distribution levels; the benefits
anticipated to be derived from the acquisition of Endev; the
quality of our project inventory and our ability to add value
exploiting that inventory; the information set forth under the
heading "Outlook" and elsewhere herein regarding management's
current expectations as to commodity prices, U.S./Canadian dollar
exchange rates, production volumes, funds flow and net capital
expenditures for 2008; our intention to reduce our debt levels and
the benefits anticipated to be derived therefrom; our commodity
hedging strategy and the benefits anticipated to be derived
therefrom; our business strategy as it relates to acquisitions and
the rationalization of our asset base; our intention to pursue CCS
projects; the recognition by the markets of our near and long-term
activities; the nature and quality of our assets and our ability to
successfully develop those assets; the long-term exploration,
development and enhanced oil recovery potential of our conventional
and unconventional projects; and the extent of our financial
exposure to losses as a result of SemGroup, L.P. entering into
creditor protection. With respect to forward-looking statements
contained in this document, we have made assumptions regarding,
among other things: future oil and natural gas prices and
differentials between light, medium and heavy oil prices; future
capital expenditure levels; future oil and natural gas production
levels; future exchange rates; the amount of future cash
distributions that we intend to pay; the cost of expanding our
property holdings; our ability to obtain equipment in a timely
manner to carry out development activities; our ability to market
our oil and natural gas successfully to current and new customers;
the impact of increasing competition; our ability to obtain
financing on acceptable terms; and our ability to maintain existing
production levels and add production and reserves through our
development and exploitation activities. Although Penn West
believes that the expectations reflected in the forward-looking
statements contained in this document, and the assumptions on which
such forward-looking statements are made, are reasonable, there can
be no assurance that such expectations will prove to be correct.
Readers are cautioned not to place undue reliance on
forward-looking statements included in this document, as there can
be no assurance that the plans, intentions or expectations upon
which the forward-looking statements are based will occur. By their
nature, forward-looking statements involve numerous assumptions,
known and unknown risks and uncertainties that contribute to the
possibility that the predictions, forecasts, projections and other
forward-looking statements will not occur, which may cause Penn
West's actual performance and financial results in future periods
to differ materially from any estimates or projections of future
performance or results expressed or implied by such forward-looking
statements. These risks and uncertainties include, among other
things: volatility in market prices for oil and natural gas; the
impact of weather conditions on seasonal demand and ability to
execute capital programs; risks inherent in oil and natural gas
operations; uncertainties associated with estimating reserves and
resources; competition for, among other things, capital,
acquisitions of reserves, resources, undeveloped lands and skilled
personnel; incorrect assessments of the value of acquisitions;
geological, technical, drilling and processing problems; general
economic conditions in Canada, the U.S. and globally; industry
conditions, including fluctuations in the price of oil and natural
gas; royalties payable in respect of our oil and natural gas
production; changes in government regulation of the oil and natural
gas industry, including environmental regulation; fluctuations in
foreign exchange or interest rates; unanticipated operating events
that can reduce production or cause production to be shut-in or
delayed; failure to obtain industry partner and other third-party
consents and approvals when required; stock market volatility and
market valuations; OPEC's ability to control production and balance
global supply and demand of crude oil at desired price levels;
political uncertainty, including the risks of hostilities, in the
petroleum producing regions of the world; the need to obtain
required approvals from regulatory authorities from time to time;
failure to realize the anticipated benefits of acquisitions,
including the acquisition of Vault Energy Trust, Canetic Resources
Trust and Endev Energy Inc.; changes in tax laws; changes in the
Alberta royalty framework; uncertainty of obtaining required
approvals for acquisitions and mergers; and the other factors
described in Penn West's public filings (including our Annual
Information Form) available in Canada at http://www.sedar.com/ and
in the United States at http://www.sec.gov/. Readers are cautioned
that this list of risk factors should not be construed as
exhaustive. The forward-looking statements contained in this
document speak only as of the date of this document. Except as
expressly required by applicable securities laws, Penn West does
not undertake any obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise. The forward-looking statements
contained in this document are expressly qualified by this
cautionary statement. Penn West Energy Trust Consolidated Balance
Sheets (CAD millions, unaudited) June 30, 2008 December 31, 2007
-------------------------------------------------------------------------
Assets Current Accounts receivable $ 686 $ 277 Future income taxes
238 45 Other 71 46
-------------------------------------------------------------------------
995 368
-------------------------------------------------------------------------
Property, plant and equipment 12,497 7,413 Goodwill 1,999 652
-------------------------------------------------------------------------
14,496 8,065
-------------------------------------------------------------------------
$ 15,491 $ 8,433
-------------------------------------------------------------------------
Liabilities and unitholders' equity Current Accounts payable and
accrued liabilities $ 707 $ 359 Distributions payable 128 82 Risk
management 930 148 Convertible debentures 5 -
-------------------------------------------------------------------------
1,770 589 Long-term debt 3,683 1,943 Convertible debentures 329 -
Risk management 308 - Asset retirement obligations 614 413 Future
income taxes 1,344 918
-------------------------------------------------------------------------
8,048 3,863
-------------------------------------------------------------------------
Unitholders' equity Unitholders' capital 7,743 3,877 Contributed
surplus 53 35 Retained earnings (deficit) (353) 658
-------------------------------------------------------------------------
7,443 4,570
-------------------------------------------------------------------------
$ 15,491 $ 8,433
-------------------------------------------------------------------------
Penn West Energy Trust Consolidated Statements of Operations and
Retained Earnings (Deficit) Three months ended Six months ended
June 30 June 30 ------------------------------------------ (CAD
millions, except per unit amounts, unaudited) 2008 2007 2008 2007
-------------------------------------------------------------------------
Revenues Oil and natural gas $ 1,520 $ 608 $ 2,716 $ 1,187
Royalties (267) (113) (481) (224)
-------------------------------------------------------------------------
1,253 495 2,235 963 Risk management (loss) gain Realized (208) -
(268) 3 Unrealized (837) 5 (1,030) (30)
-------------------------------------------------------------------------
208 500 937 936
-------------------------------------------------------------------------
Expenses Operating 210 127 415 252 Transportation 9 6 17 12 General
and administrative 36 16 71 34 Financing 48 25 100 41 Depletion,
depreciation and accretion 394 218 790 433 Risk management (gain)
loss - unrealized - (1) (7) 3 Unrealized foreign exchange loss
(gain) 10 (4) 27 (4)
-------------------------------------------------------------------------
707 387 1,413 771
-------------------------------------------------------------------------
Income (loss) before taxes (499) 113 (476) 165
-------------------------------------------------------------------------
Taxes Future income tax (reduction) expense (176) 299 (231) 255
-------------------------------------------------------------------------
(176) 299 (231) 255
-------------------------------------------------------------------------
Net loss and comprehensive loss $ (323) $ (186) $ (245) $ (90)
Retained earnings, beginning of period $ 354 $ 1,314 $ 658 $ 1,460
Distributions declared (384) (243) (766) (485)
-------------------------------------------------------------------------
Retained earnings (deficit), end of period $ (353) $ 885 $ (353) $
885
-------------------------------------------------------------------------
Net loss per unit Basic $ (0.86) $ (0.77) $ (0.67) $ (0.37) Diluted
$ (0.86) $ (0.77) $ (0.67) $ (0.37) Weighted average units
outstanding (millions) Basic 376.2 239.0 367.9 238.0 Diluted 376.2
239.0 367.9 238.0
-------------------------------------------------------------------------
Penn West Energy Trust Consolidated Statements of Cash Flows Three
months ended Six months ended June 30 June 30
----------------------------------------- (CAD millions, unaudited)
2008 2007 2008 2007
-------------------------------------------------------------------------
Operating activities Net loss $ (323) $ (186) $ (245) $ (90)
Depletion, depreciation and accretion 394 218 790 433 Future income
tax (reduction) expense (176) 299 (231) 255 Unit-based compensation
11 5 21 10 Risk management 837 (6) 1,023 33 Unrealized foreign
exchange loss (gain) 10 (4) 27 (4) Asset retirement expenditures
(23) (8) (37) (18) Change in non-cash working capital (59) - (310)
(5)
-------------------------------------------------------------------------
671 318 1,038 614
-------------------------------------------------------------------------
Investing activities Acquisition of property, plant and equipment
(16) (360) (17) (416) Disposition of property, plant and equipment
- 9 5 48 Additions to property, plant and equipment (231) (133)
(513) (332) Canetic and Vault acquisition costs - - (28) - Change
in non-cash working capital (147) (52) (27) (36)
-------------------------------------------------------------------------
(394) (536) (580) (736)
-------------------------------------------------------------------------
Financing activities Proceeds from issuance of notes 505 509 505
509 Redemption of convertible debentures - - (24) - Repayment of
Canetic and Vault credit facilities - - (1,557) - (Decrease)
increase in bank loan (471) (84) 1,208 33 Issue of equity 24 12 37
18 Distributions paid (335) (219) (627) (438)
-------------------------------------------------------------------------
(277) 218 (458) 122
-------------------------------------------------------------------------
Change in cash - - - - Cash, beginning of period - - - -
-------------------------------------------------------------------------
Cash, end of period $ - $ - $ - $ -
-------------------------------------------------------------------------
Interest paid $ 66 $ 25 $ 92 $ 38 Income taxes paid $ 5 $ 5 $ 6 $ 5
-------------------------------------------------------------------------
Investor Information
-------------------------------------------------------------------------
Penn West trust units and debentures are listed on the Toronto
Stock Exchange under the symbols PWT.UN, PWT.DB.A, PWT.DB.B,
PWT.DB.C, PWT.DB.D, PWT.DB.E and PWT.DB.F and Penn West trust units
are listed on the New York Stock Exchange under the symbol PWE. A
conference call will be held to discuss Penn West's results at
9:00 a.m. Mountain Daylight Time, 11:00 a.m. Eastern Daylight
Time, on August 8, 2008. The North American conference call
number is 800-731-5774 toll-free or 416-644-3419 in the Toronto
area. A taped recording will be available until August 15, 2008 by
dialing 877-289-8525 or 416-640-1917 and entering pass code
21276122 followed by the pound sign. This call will be broadcast
live on the Internet and may be accessed directly on the Penn West
website http://www.pennwest.com/ or at the following URL:
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2322540
Penn West expects to file its Management's Discussion and Analysis
and unaudited interim consolidated financial statements on SEDAR
and EDGAR shortly. DATASOURCE: Penn West Energy Trust CONTACT: PENN
WEST ENERGY TRUST, Suite 200, 207 - Ninth Avenue S.W., Calgary,
Alberta, T2P 1K3, Phone: (403) 777-2500, Fax: (403) 777-2699, Toll
Free: 1-866-693-2707, Website: http://www.pennwest.com/; Investor
Relations: Toll Free: 1-888-770-2633, E-mail: ; William Andrew,
CEO, Phone: (403) 777-2502, E-mail: ; Jason Fleury, Manager,
Investor Relations, Phone: (403) 539-6343, E-mail:
Copyright