Penn West announces its results for the second quarter ended June 30, 2008
CALGARY, Aug. 7 /CNW/ - PENN WEST ENERGY TRUST (TSX - PWT.UN; NYSE - PWE)
is pleased to announce record funds flow for the second quarter ended June 30,
2008.
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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
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% %
2008 2007 change 2008 2007 change
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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
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Total production
(boe/d) 190,515 126,599 50 191,403 127,518 50
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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)
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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)
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Netback $ 47.84 $ 31.38 52 $ 43.97 $ 30.44 44
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(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
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2008 2007 2008 2007
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Gross Net Gross Net Gross Net Gross Net
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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
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52 22 30 12 215 114 136 73
Stratigraphic
and service 3 1 4 1 26 24 19 15
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Total 55 23 34 13 241 138 155 88
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Success rate(1) 91% 92% 95% 95%
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(1) Success rate is calculated excluding stratigraphic and service wells.
UNDEVELOPED LANDS
As at June 30
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2008 2007 % change
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Gross acres (000s) 4,466 3,969 13
Net acres (000s) 3,612 3,470 4
Average working interest 81% 87% (7)
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FARM-OUT ACTIVITY
Three months ended Six months ended
June 30 June 30
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2008 2007 2008 2007
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Wells drilled on farm-out
lands(1) 46 16 79 106
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(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)
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Gas 42 1,682
Light oil 34 754
Heavy oil 62 1,176
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138 3,612
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TRUST UNIT DATA
Three months ended Six months ended
June 30 June 30
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% %
(millions of units) 2008 2007 change 2008 2007 change
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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
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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
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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 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
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(millions, except per
unit amounts) 2008 2007 2008 2007
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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
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Funds flow $ 753 $ 326 $ 1,385 $ 637
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Basic per unit $ 2.00 $ 1.37 $ 3.77 $ 2.68
Diluted per unit $ 1.98 $ 1.35 $ 3.74 $ 2.65
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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 www.sedar.com and in the
United States at 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
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Assets
Current
Accounts receivable $ 686 $ 277
Future income taxes 238 45
Other 71 46
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995 368
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Property, plant and equipment 12,497 7,413
Goodwill 1,999 652
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14,496 8,065
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$ 15,491 $ 8,433
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Liabilities and unitholders' equity
Current
Accounts payable and accrued
liabilities $ 707 $ 359
Distributions payable 128 82
Risk management 930 148
Convertible debentures 5 -
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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
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8,048 3,863
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Unitholders' equity
Unitholders' capital 7,743 3,877
Contributed surplus 53 35
Retained earnings (deficit) (353) 658
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7,443 4,570
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$ 15,491 $ 8,433
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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 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.
%SEDAR: 00022266E
%CIK: 0001334388
For further information: 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: www.pennwest.com; Investor Relations: Toll
Free: 1-888-770-2633, E-mail: investor_relations@pennwest.com; William
Andrew, CEO, Phone: (403) 777-2502, E-mail: bill.andrew@pennwest.com; Jason
Fleury, Manager, Investor Relations, Phone: (403) 539-6343, E-mail:
jason.fleury@pennwest.com
.
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