February 16, 2012
PENN WEST PETROLEUM LTD. (TSX: PWT) (NYSE: PWE)("PENN WEST")
is pleased to announce its results for the fourth quarter ended
December 31, 2011
Penn West has the largest light-oil asset base in
with the greatest leverage to the application of horizontal multi-frac technology. After several years of significant appraisal activity, we have moved into large-scale development. We believe our recent results are reflecting the potential of our company.
- Production for the fourth quarter was 168,801 boe (1) per day, an increase of more than 7,000 boe per day over our third quarter production. We met the mid-point of both our 2011 annual and second half average production guidance. Exit production, before the impact of asset dispositions, was approximately 172,000 boe per day. Cardium production originally planned for exit 2011 is now on-stream.
- Reserve replacement (2) exceeded 230 percent, prior to the impact of economic natural gas price revisions and asset dispositions. Greater than 70 percent of added reserves were light oil and liquids contributing $2.70 per share to our net asset value (3), after the effect of downward revisions of future natural gas prices.
- Funds flow (4) was $437 million ( $0.93 per share-basic (4)) in the fourth quarter of 2011, a 43 percent increase from the $305 million ( $0.67 per share-basic) reported in the fourth quarter of 2010. Stronger funds flow was driven by greater oil and liquids weighting, an increase in production and strengthening crude oil prices.
- Our portfolio management program is on-track with net realized proceeds of approximately $440 million in 2011 and 2012 to-date from the sale of approximately 5,500 boe per day. These dispositions support our strategy of prudent balance sheet management while facilitating our shift from light-oil appraisal to development.
- Penn West entered 2012 with significant operating momentum launched by strong fourth quarter execution. We ramped up development activity across our light-oil projects with 108 net wells drilled in the fourth quarter of 2011. We advanced some of our 2012 drilling and facilities projects to the fourth quarter of 2011 to provide greater certainty of first quarter 2012 production additions.
- Average production increased to 168,801 boe per day for the fourth quarter of 2011 from 161,323 boe per day in the third quarter of 2011.
- Penn West's exit production was weighted approximately 65 percent to oil and liquids.
- Average oil and liquids production was approximately 108,000 barrels per day in the fourth quarter of 2011, an increase of seven percent over the third quarter of 2011.
- Our second half 2011 production averaged 165,062 boe per day, meeting our second-half guidance.
- Annual 2011 production averaged 163,094 boe per day, in line with guidance.
(1) Please refer to the "Oil and Gas Information Advisory" section below
for information regarding the term "boe".
(2) Reserve replacement is calculated by dividing reserve additions by
production on a proved plus probable reserve basis.
(3) Net asset value per share contribution is calculated as the change in
the net present value of future net revenue before income taxes
discounted at 10 percent on a proved plus probable reserves basis from
the prior year over the total outstanding shares at December 31, 2011.
(4) The terms "funds flow" and "funds flow per share-basic" are non-GAAP
measures. Please refer to the "Calculation of Funds Flow" and
"Non-GAAP Measures Advisory" sections below.
- In 2011, Penn West added approximately 138 million boe of reserves on a proved plus probable basis (2010 - 72 million boe), a reserve replacement ratio of 234 percent (2010 - 122 percent), excluding the effect of acquisitions and dispositions and economic factors, with approximately 73 percent of the additions being crude oil and liquids (2010 - 65 percent).
- Total working interest proved plus probable reserves were 719 mmboe at December 31, 2011 (2010 - 661 mmboe), weighted approximately 71 percent to crude oil and liquids (2010 - 69 percent).
- Proved plus probable oil and liquids reserves of approximately 513 million barrels represents a 13 percent increase over 2010.
- Adjusted finding and development costs ("F&D") (1) on a proved plus probable basis, including the change in future development capital were $22.64 per boe for 2011 (2010 - $21.97 per boe).
- The net present value of proved plus probable reserves at a 10 percent discount rate increased 12 percent over 2010, after the effect of downward revisions of future natural gas prices.
- Funds flow was $437 million in the fourth quarter of 2011, a 43 percent increase from the $305 million reported in the fourth quarter of 2010 and a 26 percent increase from the $348 million reported in the third quarter of 2011. The increase was attributed to stronger crude oil prices and our increased oil and liquids production. Funds flow was $0.93 per share-basicin the fourth quarter of 2011 compared to $0.67 per share-basic in the fourth quarter of 2010 and $0.74 per share-basic in the third quarter of 2011.
- Funds flow for 2011 totalled $1,537 million compared to $1,185 million in 2010 as a result of stronger commodity prices and a year-over-year increase in our light-oil production.
- Net income for 2011 totalled $638 million compared to $1,110 million in 2010. The prior period included significant gains on asset dispositions including a $572 million after-tax gain recorded on the formation of the Peace River Oil Partnership and a $368 million gain on the formation of our joint venture in the Cordova Embayment.
- Net loss for the fourth quarter of 2011 was $62 million ( $0.13 per share-basic) compared to a net loss of $37 million ( $0.08 per share-basic) in the fourth quarter of 2010 and net income of $138 million ( $0.29 per share-basic) in the third quarter of 2011. The net loss in the fourth quarter of 2011 was primarily due to unrealized risk management losses.
- Capital expenditures for the fourth quarter of 2011, including net property dispositions, totalled $583 million compared to $469 million for the fourth quarter of 2010.
- Our 2011 net capital expenditures of $1,580 million were substantially in line with our previous forecast of $1.4 billion - $1.5 billion, net of asset dispositions. We advanced certain projects in our 2012 capital program into late 2011.
- On December 31, 2011 the PWT.DB.F convertible debentures matured and were settled in cash totalling $224 million. We now have no convertible debentures outstanding.
- On February 15, 2012, our Board of Directors declared a first quarter 2012 dividend of $0.27 per share to be paid on April 13, 2012 to shareholders of record on March 30, 2012. Shareholders are advised that this dividend is designated as an "eligible dividend" for Canadian income tax purposes.
(1) Refer to "finding and development costs" table below for a discussion on Adjusted F&D.