CALGARY, Canada, May 6 /PRNewswire-FirstCall/ -- PENN WEST ENERGY
TRUST (TSX - PWT.UN; NYSE - PWE) is pleased to announce its results
for the first quarter ended March 31, 2009 > Now more than ever
Penn West is focusing on the fundamental building blocks of our
business. During the first quarter of 2009, Penn West concentrated
on base operations, costs associated with adding new volumes, and
broad financial/business strategies. Global market recalibration
persisted through the quarter with weak commodity prices and
lingering tightness in the credit markets. Production Penn West
exited the first quarter with daily production averaging
approximately 182,300 boe per day, which is ahead of our forecast.
This figure is net of dispositions in the quarter of approximately
4,900 boe per day. Guidance for the first six months of 2009
remains unchanged at 180,000 boe per day, before the impact of
asset dispositions. Throughout the first quarter of 2009, we
focused on reducing cost structures both internally as well as
through external service companies, while adding production volumes
through optimization. While operating costs trended higher in the
first quarter, we anticipate these costs to moderate in future
quarters. Operating costs were US$14.93 per boe in the first
quarter, abnormally high due to increased spending on repair and
maintenance projects aimed at restoring production volumes lost in
the previous quarter as a result of extremely cold and challenging
weather. Capital Spending Our 2009 capital program is partly
focused on further development of scalable and repeatable projects.
These projects have the potential to add significant production and
reserves to Penn West through the use of horizontal, multi-stage
completion technology. Particular emphasis is being placed on our
developing oil plays at Swift Current, Pembina, Dodsland and our
natural gas prospects at July Lake. Approximately 60 percent of
first quarter development drilling was in Saskatchewan. In southern
Saskatchewan, we continued our drilling program with an additional
15 wells (net). In the Swift Current area, Penn West will soon
commission the recently constructed central facility as part of our
ongoing initiatives to lower operating costs and streamline
production. In Dodsland, Penn West is planning to ramp up capital
programs targeting light oil in the Viking formation. With the
acquisition of Reece Energy in late April, Penn West strengthened
its position in this oil resource play. Penn West plans on drilling
four to five horizontal wells utilizing multi-stage fracture
technology to obtain primary recovery on the new lands. Industry
cost structures were initially slow to react to declining market
conditions, however we are beginning to experience lower vendor
rates and expect to realize lower costs in the second half of this
year. As we anticipated this, we weighted a majority of our US$600
million capital program to the second half of 2009. We focused much
of our capital to date this year on re-activations, re-entries, and
up-hole completion opportunities as these activities are highly
capital efficient and provide attractive returns at current
commodity prices. We believe a focus on reducing the absolute cost
of production additions to be appropriate given current market
conditions. Business Strategies We are actively high-grading our
extensive portfolio of producing assets and land base at Penn West.
This means the sale of approximately 4,900 boe per day not deemed
to be core and the pursuit of those properties in certain key areas
which add the kind of scalable and repeatable opportunities
necessary for sufficient scale, as demonstrated by the acquisition
of Reece Exploration. This process of selling non-core assets and
adding to core areas will allow us to further strengthen our
presence in plays that are suitable, at our size, to drive more
efficient and concentrated reserve additions in the future.
Financial Strategies Funds flow for the quarter was US$348 million
or US$0.87 per unit, down from the same period last year as a
result of continued weakness in commodity prices. Despite lower
commodity prices for natural gas and oil this quarter compared to
the prior quarter and the first quarter of 2008, risk management
activities still enabled a first quarter 2009 netback of US$25.66
per boe, after the effects of risk management. Through our issuance
of equity early in the first quarter, the proceeds from asset
dispositions and the private placement of notes, we have reduced
our reliance on bank financing both in absolute terms and through
debt diversification. This is consistent with our ongoing strategy
of limiting the portion of our debt capital structure that is
sourced from banks, both here in Canada and abroad. We believe that
prudent balance sheet management is a key to our continued success
in these difficult economic times. Commodity Prices Crude oil
prices averaged just over US$40.00 per barrel during the first
quarter, while natural gas prices were softer than anticipated and
have remained at persistently low levels. Penn West continues to
benefit from a risk management program with approximately 36
percent of 2009 crude oil production (net of royalties) hedged with
collars having floors of US$80.00 per barrel. Approximately 30
percent of 2009 natural gas production (net of royalties) is hedged
with collars having an average US$6.50 per GJ floor. While these
hedges are providing some relief from commodity price volatility in
2009, we are also looking at our risk management profile for 2010.
We have hedged approximately 20 percent of our 2010 crude oil
production (net of royalties) using collars with an average
US$51.93 per barrel floor price and a US$68.30 per barrel ceiling
price and 14 percent of our natural gas production with US$6.50 per
GJ floors and a US$9.50 per GJ ceiling. We continue to
opportunistically hedge future production as part of our ongoing
risk management program. While we believe that fundamentals
indicate commodity price volatility will persist in the short-term,
we remain optimistic longer-term. Summary We at Penn West believe
our actions throughout the first quarter have positioned us well
for the future. We are continuing our strategy of debt retirement
and diversification while balancing reinvestment into our assets
with the payment of our monthly distribution. We have adjusted our
monthly distribution to a level we believe to be appropriate given
current commodity prices. While we are likely to see continued
volatility in capital markets broadly and commodity prices
specifically, the fundamental drivers of these markets are
beginning to show positive signs. Given crude oil and natural gas
play a highly prominent role in the functioning of the global
economy, we believe the fundamental outlook for our business
remains sound. Penn West believes the best approach during
difficult economic times is to ensure effective performance of our
assets and staff while continuing to advance key long-term projects
and reducing cost structures to levels commensurate with current
commodity prices. We continue to do the work necessary to establish
the full potential of our opportunity-rich asset base. > Outlook
This outlook section is included to provide unitholders with
information as to our expectations as at May 5, 2009 for production
and net capital expenditures for 2009 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". Our forecast 2009 development capital
expenditures remain at the lower end of our US$600 million to
US$825 million range. Planned 2009 development expenditures were
also reduced by US$40 million, the amount of estimated debt assumed
from the Reece acquisition. The reduction of our planned capital
program in 2009 compared to 2008 reflects the current volatility in
financial and commodity markets. In the first half of 2009, we
anticipate spending between US$250 million and US$325 million based
on current commodity price levels and industry costs. Our capital
spending is limited in the first half of 2009 as we expect industry
service and other costs to decline and become more consistent with
the current commodity price environment as we move through 2009.
The 2009 capital program will be focused on low cost production
recovery and additions through production optimization and we
intend to continue the advancement of certain of our enhanced oil
recovery projects and resource plays. Based on this level of
capital expenditures, we forecast average production in the first
half of 2009 to be approximately 180,000 boe per day prior to the
effect of the 4,900 boe per day of property dispositions. Our prior
forecast, released on March 26, 2009 with our 2008 annual results
and filed on SEDAR at http://www.sedar.com/, was based on 2009
capital expenditures (excluding corporate acquisitions) between
US$600 million and US$825 million with the expectation that
spending will be near to the lower end of the range. Non-GAAP
Measures Advisory The above information includes non-GAAP measures
not defined under generally accepted accounting principles
("GAAP"), including funds flow, funds flow per unit-basic, netback,
payout ratio and net debt. 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 our ability to fund distributions and
planned capital programs. Netback is a per-unit-of-production
measure of operating margin used in capital allocation decisions.
Operating margin is calculated as revenue less royalties, operating
costs and transportation. Payout ratio is distributions paid
divided by funds flow and we use it to assess the adequacy of funds
flow to fund capital programs. Net debt is the total of long-term
debt and working capital and is used to assess the appropriateness
of our distribution level and capital program. > 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: our ability to complete one or more
accretive and strategic acquisitions in the future; future
distribution levels; the benefits that may accrue to us from the
recent acquisition of Reece; the impact that the EIP is anticipated
to have on the royalties that we pay in 2009; our ability to
restore production volumes lost in the previous quarter; the
nature, focus and timing of our 2009 capital program and our
expectations regarding the results of said program, including our
belief in its potential to add significant production and reserves;
our business strategies going forward, including to sell non-core
assets and add to our position in core areas, and the potential
benefits to be derived therefrom; our financial strategies going
forward; our outlook for the capital markets and commodity prices;
the opportunities presented by our asset base and our ability to
capitalize on them; our risk management strategy going forward;
and, the disclosure contained under the headings "Letter to our
Unitholders" and "Outlook", which sets forth management's
expectations as to our capital expenditures for 2009 and the timing
for making said expenditures and the intended focus of such
expenditures, our expectation that service costs will decrease as
2009 progresses, and our forecast average production in the first
half of 2009. 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 and interest rates; the amount of future cash
distributions that we intend to pay; 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.
In addition, many of the forward-looking statements contained in
this document are located proximate to assumptions that are
specific to those forward-looking statements, and such assumptions
should be taken into account when reading such forward-looking
statements: see in particular the assumptions identified under the
headings "Distributions" and "Outlook". 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: 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, including the completed acquisitions discussed
herein; 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 and changes thereto; 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
completed acquisitions discussed herein; changes in tax laws that
affect us and our securityholders; 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 http://www.sedar.com/ and in the United
States at http://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. A
taped recording will be available until May 13, 2009 by dialing
416-640-1917 (Toronto) or 877-289-8525 (North American toll-free)
and entering passcode 21303394 followed by the pound sign. This
call will be broadcast live on the Internet and may be accessed
directly on the Penn West website at http://www.pennwest.com/ or at
the following URL:
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID(equal
sign)2615360 Penn West expects to file its Management's Discussion
and Analysis and unaudited interim consolidated financial
statements on SEDAR and EDGAR shortly. For further information:
PENN WEST ENERGY TRUST, Suite 200, 207 - Ninth Avenue S.W.,
Calgary, Alberta, T2P 1K3, Phone: +1-403-777-2500, Fax:
+1-403-777-2699, Toll Free: 1-866-693-2707, Website:
http://www.pennwest.com/; Investor Relations: Toll Free:
1-888-770-2633, E-mail: ; William Andrew, CEO, Phone:
+1-403-777-2502, E-mail: ; Jason Fleury, Manager, Investor
Relations, Phone: +1-403-539-6343, E-mail: DATASOURCE: Penn West
Energy Trust CONTACT: For further information: PENN WEST ENERGY
TRUST, Suite 200, 207, Ninth Avenue S.W., Calgary, Alberta, T2P
1K3, Phone: +1-403-777-2500, Fax: +1-403-777-2699, Toll Free:
1-866-693-2707;Investor Relations: Toll Free: 1-888-770-2633,
E-mail: ; William Andrew, CEO, Phone: +1-403-777-2502,E-mail: ;
Jason Fleury, Manager, Investor Relations, Phone: +1-403-539-6343,
E-mail:
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