February 14, 2013
PENN WEST PETROLEUM LTD. (TSX - PWT; NYSE - PWE)("PENN WEST")
is pleased to announce its results for the fourth quarter ended
December 31, 2012
and year-end reserve results. All figures are in Canadian dollars unless otherwise stated.
We are committed to maximizing the efficiency of our capital programs and the reliability of our production base while continuing to improve the company's balance sheet. We have actively changed the balance of our asset portfolio through the disposition of non-core properties and investment in our light-oil resources, a theme that will continue in 2013. These strategies achieve a balance that provides our shareholders with a meaningful dividend as we demonstrate the value inherent in Penn West.
- Driven primarily by oil and natural gas liquids, the company generated funds flow of $1.25 billion;
- Average production of 161,195 boe (1) per day was within the guidance range of 161,000 - 163,000 boe per day and weighted approximately 65 percent to oil and liquids;
- Completed net dispositions of approximately 16,500 boe per day for proceeds of approximately $1.6 billion;
- Total debt at year-end was approximately $2.7 billion and resulted in a debt-to-EBITDA (2) ratio of 2.1 times;
- On a proved plus probable basis, we replaced 190 percent (3)of 2012 production, excluding economic revisions and acquisition and disposition activity through the addition of approximiately 110 million boe of reserves of which approximately 80 percent were crude oil and liquids;
- Proved plus probable finding and development costs including future development capital improved approximately five percent year-over-year to $25.50 per boeor $23.12 per boe (4)excluding economic revisions.
FOURTH QUARTER FINANCIAL AND PRODUCTION RESULTS
- Funds flow (2) was $295 million ( $0.62 per share - basic (2)) in the fourth quarter of 2012 compared to $437 million ( $0.93 per share - basic) in the fourth quarter of 2011. Funds flow was lower in 2012 as a result of lower commodity price realizations and disposition activity;
- Exploration and development capital expenditures in the fourth quarter of 2012 totalled $348 million compared to $594 million in the fourth quarter in 2011. Capital activity late in 2012 included the drilling of 31 net oil wells;
- Average production in the fourth quarter of 2012 was 153,931 boe per day after the impact of net asset dispositions and weighted approximately 64 percent to oil and liquids;
- We closed non-core asset dispositions during the fourth quarter for proceeds of approximately $1.3 billion. The proceeds were applied to reduce bank debt which strengthened our balance sheet;
- During the fourth quarter of 2012, we recorded a net loss of $53 million ( $0.11 per share - basic) compared to a net loss of $62 million ( $0.13 per share - basic) in the fourth quarter of 2011.
(1) Please refer to the "Oil and Gas Information Advisory" section below
for information regarding the term "boe".
(2) The terms "funds flow", "funds flow per share-basic" and "debt to
EBITDA" are non-GAAP measures. Please refer to the "Calculation of
Funds Flow" and "Non-GAAP Measures Advisory" sections below.
(3) Reserve replacement ratio is calculated by dividing reserve additions
by production on a proved plus probable basis.
(4) Refer to "finding and development costs" table below for a discussion
on Adjusted F&D.
ANNUAL FINANCIAL AND PRODUCTION RESULTS
- Funds flow for 2012 was approximately $1.25 billion ( $2.62 per share - basic) compared to $1.54 billion ( $3.29 per share - basic) in 2011. The decline in funds flow was primarily attributed to lower commodity price realizations from wider Canadian crude oil differentials and lower natural gas prices;
- Total capital expenditures in 2012 of approximately $137 million compared to $1,866 million in 2011 and were within previous guidance of $1.3 to $1.4 billion net of divestments closed to the end of the third quarter;
- Average production for 2012 was 161,195 boe per day, compared to 163,094 boe per day for 2011, and was within our guidance of 161,000 to 163,000 boe per day, provided prior to the fourth quarter divestitures. Production in 2012 was weighted approximately 65 percent to oil and liquids compared to 63 percent in 2011;
- For 2012, we recorded net income of $174 million ( $0.37 per share - basic); a decrease from the $638 million ( $1.37 per share - basic) recorded in 2011. Net income was lower in 2012 primarily due to lower revenues related to lower commodity price realizations, an impairment charge on certain of our natural gas assets as a result of lower natural gas prices, partially offset by gains on asset dispositions, and gains from risk management items. Results for 2011 included a one-time income tax recovery of $304 million as a result of our conversion to a corporation.
- We increased bookings in all key resource plays in 2012 and added approximately 110 million boe of reserves on a proved plus probable basis (2011 - 138 million boe) of which approximately 80 percent were crude oil and liquids (2011 - 73 percent).
- Our 2012 reserve replacement ratio was 190 percent (2011 - 234 percent), excluding the effect of acquisitions and dispositions and economic factors.
- Total working interest proved plus probable reserves were 676 mmboe at December 31, 2012 (2011 - 719 mmboe), weighted approximately 71 percent to crude oil and liquids (2011 - 71 percent) after the effect of 87 mmboe of oil weighted base asset dispositions. In 2012, we recorded gains on these net asset dispositions of $384 million (2011 - $172 million).
- Adjusted finding and development ("F&D") (1) costs in 2012 of $23.12 per boe on a proved plus probable basis, excluding economic revisions, represents in excess of a two times initial recycle ratio (2) on new light-oil development.
- Including the impact of future development capital and after the effect of economic revisions, finding and development costs on a proved plus probable basis improved to $25.50 per boe in 2012 compared to $26.79 per boe in 2011. Economic revisions of approximately 10 mmboe were primarily related to base natural gas assets.
- Our three-year average finding and development cost performance continues to support in excess of a two times initial recycle ratio on new light-oil development.
- During 2012, contingent resource studies were completed by independent reserves evaluators on our interests in the Cardium and within the Peace River Oil Partnership which confirmed our internal estimates of significant recoverable resources in these areas.
(1) Refer to "finding and development costs" table below for a discussion
on Adjusted F&D.
(2) Recycle ratio is calculated by dividing the initial netback on
liquids production by finding and development costs.
- For 2013, we currently have 55,000 barrels per day of our crude oil production hedged between US$91.55 and US$104.42 per barrel and 125,000 mcf per day of our natural gas production hedged at $3.34 per mcf. Additionally, we have 50 MW of Alberta electricity consumption fixed at $55.20 per MWh.
- In 2012, WTI crude oil prices averaged US$94.17 per barrel compared to US$95.14 per barrel in 2011 and Brent averaged US$111.64 per barrel compared to US$111.11 per barrel in 2011. For 2012, Edmonton light sweet traded at an average discount of $7.97 per barrel compared to WTI (2011 - premium of $1.22 per barrel).
- In the fourth quarter of 2012, WTI crude oil prices averaged US$88.20 per barrel compared to US$92.19 per barrel in the third quarter of 2012 and US$94.02 per barrel for the fourth quarter of 2011. Edmonton light sweet oil traded at a discount of $3.46 per barrel compared to WTI during the fourth quarter of 2012 (2011 - premium of $1.44 per barrel) compared to a discount of $7.40 per barrel during the third quarter of 2012.
- In 2012, the AECO Monthly Index averaged $2.40 per mcf compared to $3.67 per mcf in 2011.
- In the fourth quarter of 2012, the AECO Monthly Index averaged $3.06 per mcf compared to $2.19 per mcf in the third quarter of 2012 and $3.47 per mcf for the fourth quarter of 2011.
- On February 13, 2013, our Board of Directors declared a first quarter 2013 dividend of $0.27 per share to be paid on April 15, 2013 to shareholders of record at the close of business on March 28, 2013. Shareholders are advised that this dividend is designated as an "eligible dividend" for Canadian income tax purposes.