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Penn West Exploration Announces Its Financial Results For The Second Quarter Ended June 30, 2013

Stocks in this article: PWEPWT

In the first half of 2013, we allocated significant capital to the Spearfish due to its strong capital efficiencies and the production infrastructure in place. During the second quarter of 2013, activity was concentrated on tie-ins and completions of the winter drilling program and our liquids extraction plant became operational, providing incremental natural gas liquids production.

While there are a significant number of further primary locations to pursue in the play, we are shifting our activities to the assessment of waterflood schemes and other pressure maintenance opportunities to increase recoveries from the current estimate of approximately two percent. Capital previously planned for the Spearfish is being directed to the Cardium and Viking as we continue to study the results of our recent aggressive three-year drilling program.


Our results in the first half of 2013 have met or exceeded our expectations for cost and cycle time reductions as well as production performance. Well costs have declined 30 percent with the 2013 program and, for the remainder of 2013; our focus is on the initiation of a waterflood pilot in the Otter area and preparation of integrated development programs across the Slave Point play for 2014 and beyond.

Secondary Recovery

We remain confident in the potential to increase recoveries and create incremental value from the application of waterflood and other enhanced oil recovery schemes. Significant reservoir simulation work across all of our major plays has been completed with encouraging results. Over the balance of 2013 and into 2014, we will be implementing or expanding waterfloods in the Cardium and Slave Point, and will be evaluating waterflood application to the Viking and Spearfish. As we focus on enhancing value and capital returns by increasing resource recoveries, we expect a higher portion of our future capital programs will include upfront waterflood investments.


                                  DRILLING STATISTICS

                          Three months ended June 30               Six months ended June 30
                           2013                 2012              2013                 2012
                Gross       Net      Gross       Net   Gross       Net      Gross       Net
    Oil            12         1         19        12     156       119        207       163
    Natural gas     -         -          -         -       1         1         20        17
                   12         1         19        12     157       120        227       180
    and service     -         -          2         1      33        16         52        28
    Total          12         1         21        13     190       136        279       208
    Success rate
    (1)                    100%                 100%              100%                 100%
    (1) Success rate is calculated excluding stratigraphic and service wells.


    (millions)            Three months ended June 30       Six months ended June 30
                           2013                 2012         2013              2012
    and retention      $      2             $     27      $     3           $    35
    Drilling and
    completions              70                  179          391               676
    and well
    equipping                65                  138          194               337
    geophysical               -                    2            9                10
    Corporate                 2                    3            5                11
    carried by
    partners               (27)                 (20)         (63)              (80)
    capital (1)             112                  329          539               989
    net                    (29)                 (19)         (38)             (341)
    expenditures       $     83             $    310      $   501           $   648

ome tax purposes.

            Exploration and development capital includes costs related to
             Property, Plant and Equipment and Exploration and Evaluation
    (1)                              activities.

                                                                 As at June 30
                               Producing                  Non-producing
                                               %                             %
                         2013     2012    change     2013      2012     change
    Gross acres
    (000s)              5,244    5,974      (12)    3,011     2,859          5
    Net acres (000s)    3,558    4,028      (12)    2,061     2,130        (3)
    Average working
    interest              68%      67%         1      69%       75%        (6)

from our winter drilling program in early 2013.

                            Three months ended June 30     Six months ended June 30
    (millions of                                     %                            %
    shares)           2013          2012        change    2013          2012 change
           Basic     484.6         474.3             2   483.2         473.5      2
           Diluted   484.6         474.4             2   483.2         473.6      2
    as at June 30                                        485.0         474.6      2


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