Penn West Exploration Announces Its Financial Results For The Fourth Quarter Ended December 31, 2012 And 2012 Year-end Reserve Results

Our successful appraisal activities, our ongoing efforts to consolidate our asset base and infrastructure development during 2010 to 2012 support our shift to a capital efficient light-oil development program in 2013. Our 2013 capital program is focused on improving capital efficiencies by allocating capital to areas we have significantly de-risked from a development perspective, where we have, and expect to continue to successfully drive down costs, and where we have infrastructure capacity. We plan to reach our peak operating activity at lower levels than in 2012, enabling the utilization of optimal equipment allocations in all aspects of our development programs. This year, 150 to 210 development wells are planned primarily targeting light oil. We are also increasing focus on the reliability of base production and working to reduce our cash costs in 2013.

The incremental capital added in late 2012 provided momentum as we entered 2013, which should enable us to bring more production on-stream prior to reducing operations at break-up this coming spring. To date in 2013, development costs, production deliverables and base production reliability are all on or ahead of plan.

Oil Development

Spearfish 

• Over the past few years, we have increased the predictability from this play, successfully reduced cycle times to lower costs and increased our oil processing infrastructure. Our Waskada play is a key focus in 2013 due to its attractive economics, predictable type curve and short cycle times. We plan to drill 90 to 130 wells in the area in 2013.
• In 2013, drill times have been further reduced from eight to four days. We currently have five rigs operating in the area.
• Our natural gas liquids extraction plant remains on plan for start-up during the second quarter of 2013.

Carbonates

• We have a significant land position of approximately 500,000 net acres within the Carbonates. Our drilling inventory continues to expand, targeting the large and economic accumulations of light oil. Well results have been encouraging, particularly in the Sawn Lake area, where early results continue to exceed expectations.
• In 2013, we have a focused development program in the Slave Point, notably in the Sawn Lake and Swan Hills areas. During the first quarter of 2013, completion activity has continued on wells drilled and carried over from 2012.
• We continue improving efficiencies in these plays. Over the past few months reduced drilling times in the Sawn Lake area have resulted in significant cost savings of between $500,000 and $900,000 per well compared to 2012.
• The completion of our Sawn Lake battery expansion in late 2012, and the expansion of our gas handling capacity in the Slave Point area, should provide infrastructure capacity for several years of development activity.
• In addition, we continue to advance our Enhanced Oil Recovery ("EOR") strategy in the Slave Point in 2013 with the initiation of horizontal waterflood pilots at Sawn Lake and Otter.

Cardium

• We are the largest landholder in the Cardium with over 600,000 net acres and have a dominant infrastructure position across the play.
• The Cardium is a significant accumulation of light oil which will drive long-term growth and value creation for us due to the areal extent of the light-oil in place combined with the potential for significant recoveries using a combination of horizontal development and EOR techniques.
• In 2013, our capital budget includes selective drilling in the Alder Flats and West Pembina areas and further progression on our enhanced oil recovery strategy within the trend which includes plans for two horizontal waterflood pilots in Willesden Green.
• Results at our initial horizontal waterflood pilot in Pembina remain very promising, with production of 150 barrels of oil per day from three previously shut in legacy vertical wells.

Viking

• Over the past few years, we have consolidated our position in the area and have experienced repeatable and predictable well results. We plan to continue to high grade this asset going-forward.
• During 2013, we plan to drill 25 to 30 wells primarily in the Dodsland area and expand the infrastructure to support ongoing development programs into 2014 and beyond.

Exploration and Joint Ventures 

• We have a material Duvernay position in the liquids-rich fairway of the Willesden Green area. Our initial stratigraphic assessment well was consistent with our geological studies, and industry activities continue to support our assessment of the significant potential in this play. We plan a further stratigraphic test in 2013.
• In the Peace River Oil Partnership, 2013 capital plans include continued primary recovery and thermal appraisal, additional engineering work at our Seal Main thermal pilot and Seal Main commercial project and further assessment of our Harmon Valley South thermal pilot. Our industry leading steam oil ratios continue at our Seal Main thermal pilot as it approaches the end of its second steam cycle.
• In the Cordova Joint Venture, assessment and appraisal work will continue in 2013.

HIGHLIGHTS

                                      Three months ended
                                             December 31       Year ended December 31
                                                       %                            %
                                  2012       2011 change       2012       2011 change
    Financial
    (millions, except
    per share amounts)
    Gross revenues (1)       $     799  $     979   (18)  $   3,283  $   3,604    (9)
    Funds flow                     295        437   (33)      1,248      1,537   (19)
            Basic per
            share                 0.62       0.93   (33)       2.62       3.29   (20)
            Diluted per
            share                 0.62       0.93   (33)       2.62       3.29   (20)
    Net income (loss)             (53)       (62)   (15)        174        638   (73)
            Basic per
            share               (0.11)     (0.13)   (15)       0.37       1.37   (73)
            Diluted per
            share               (0.11)     (0.13)   (15)       0.37       1.36   (73)
    Capital expenditures,
    net (2)                      (916)        583  (100)        137      1,580   (91)
    Debt at period-end       $   2,690  $   3,219   (16)  $   2,690  $   3,219   (16)

    Dividends
    (millions)
    Dividends paid (3)       $     129  $     127      2  $     512  $     420     22
    DRIP                          (31)       (26)     19      (117)       (92)     27
    Dividends paid in
    cash                     $      98  $     101    (3)  $     395  $     328     20

    Operations
    Daily production
            Light oil and
            NGL (bbls/d)        82,224     90,185    (9)     86,783     85,316      2
            Heavy oil
            (bbls/d)            16,847     17,886    (6)     17,361     17,892    (3)
            Natural gas
            (mmcf/d)               329        364   (10)        342        359    (5)
    Total production
    (boe/d)                    153,931    168,801    (9)    161,195    163,094    (1)
    Average sales price
            Light oil and
            NGL (per bbl)    $   75.91  $   88.76   (15)  $   77.16  $   86.19   (10)
            Heavy oil (per
            bbl)                 59.85      76.88   (22)      63.67      69.07    (8)
            Natural gas
            (per mcf)        $    3.28  $    3.47    (5)  $    2.45  $    3.78   (35)
    Netback per boe
            Sales price      $   54.10  $   63.05   (14)  $   53.60  $   60.99   (12)
            Risk
            management
            gain (loss)           0.51     (0.84)    100       0.81     (1.06)    100
            Net sales
            price                54.61      62.21   (12)      54.41      59.93    (9)
            Royalties          (10.10)    (11.47)   (12)    (10.07)    (11.09)    (9)
            Operating
            expenses           (17.16)    (17.48)    (2)    (17.26)    (17.40)    (1)
            Transportation      (0.51)     (0.48)      6     (0.50)     (0.49)      2
            Netback          $   26.84  $   32.78   (18)  $   26.58  $   30.95   (14)

    (1) Gross revenues include realized gains and losses on commodity contracts.
    (2) Includes net asset acquisitions/dispositions and excludes business
        combinations. There are no business combinations in the 2012 period.
        Includes dividends paid prior to those reinvested in shares under the
        dividend reinvestment plan. In 2011, we began paying dividends on a
        quarterly basis. The last monthly distribution payment as a Trust was
        declared in December 2010 and paid in January 2011 ($0.09 per unit).
    (3) Our first quarterly dividend ($0.27 per share) as a corporation was
        paid in April 2011.

DRILLING STATISTICS

                                                                    Year ended
                          Three months ended December 31           December 31
                                  2012              2011       2012       2011
                        Gross      Net    Gross      Net Gross  Net Gross  Net
    Oil                    55       31      135      101   349  263   457  353
    Natural gas             -        -        7        4    23   19    53   36
                           55       31      142      105   372  282   510  389
    Stratigraphic
    and service             9        1       12        3    72   32    89   37
    Total                  64       32      154      108   444  314   599  426
    Success rate (1)              100%              100%       100%       100%

    (1) Success rate is calculated excluding stratigraphic and service wells.

CAPITAL EXPENDITURES

    (millions)         Three months ended December 31       Year ended December 31
                               2012              2011           2012          2011
    Land
    acquisition
    and retention        $        1        $        9      $      37      $    181
    Drilling and
    completions                 160               410          1,148         1,217
    Facilities
    and well
    equipping                   205               197            675           521
    Geological
    and
    geophysical                   3                 -             13             9
    Corporate                     3                 8             16            25
    Capital
    expenditures
    (1)                         372               624          1,889         1,953
    Joint
    venture,
    carried
    capital                    (24)              (30)          (137)         (107)
    Property
    dispositions,
    net                     (1,264)              (11)        (1,615)         (266)
    Business
    combinations                  -                 -              -           286
    Total
    expenditures         $    (916)        $      583      $     137      $  1,866

    (1) Capital expenditures include costs related to Property, Plant and
        Equipment and Exploration and Evaluation activities.

Our 2012 capital program continued to be directed towards our key light-oil projects, focusing on the Carbonates, Cardium, Spearfish and Viking. During 2012, we completed net property dispositions of non-core properties with combined production of approximately 16,500 barrels of oil equivalent per day.

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