Stock Name: PWT
Amount: CAD 0.27
Announcement Date: 03/11/2011
Record Date: 29/12/2011
Dividend Detail:
CALGARY, Nov. 3, 2011 /CNW/ - PENN WEST PETROLEUM LTD. (TSX: PWT) (NYSE: PWE) ("PENN WEST") is pleased to announce its results for the third quarter ended
September 30, 2011
Over the last two years, Penn West has demonstrated the ability to add
value through the application of horizontal multi-stage technology to
our assets. From the beginning of 2010 to year end 2011, we anticipate
increasing our light-oil production to 51 percent of our production
from 39 percent and our total liquids production to 66 percent from 57
percent. For 2012, Penn West targets a seven to nine percent annual
average production growth rate and a further increase in its liquid
weighting prior to the disposition of non-core assets.
Strategy
Penn West has dominant and leading positions in four of Canada's five
largest light-oil producing regions. This provides us with unrivaled
leverage to low-risk, large-scale light-oil development. Since 2009,
our focus has been to appraise our significant oil resources with an
emphasis on optimizing the application of evolving drilling and
completions technology. These activities have provided Penn West with
an inventory of drilling locations to fuel light-oil growth well into
the future. In 2012, we will further shift our capital spending into
large-scale development in the Cardium, Carbonates, Spearfish and
Viking oil trends. To maximize efficiency, we will drill on a
continuous basis to the fullest extent possible. Resource appraisal
activities will be focused on Peace River oil sands, Cordova shale gas,
enhanced oil recovery and selected exploratory plays.
Financial Results
Funds flow (1) was $348 million in the third quarter of 2011, a 30 percent increase
from the $267 million reported in the third quarter of 2010 due to
stronger commodity prices and an increase in our weighting to light-oil
production and a 12 percent decrease from the $396 million reported in
the second quarter of 2011 due to lower commodity prices. Basic funds
flow was $0.74 per share (1) in the third quarter of 2011 compared to $0.59 per share in the third
quarter of 2010 and to $0.85 per share in the second quarter of 2011.
Net income for the third quarter of 2011 was $138 million ($0.29 per
share-basic) compared to $304 million ($0.67 per share-basic) in the
third quarter of 2010 and $271 million ($0.58 per share-basic) in the
second quarter of 2011. Net income in the prior periods included gains
on asset dispositions, including a $368 million gain on the formation
of our joint venture in the Cordova Embayment in the third quarter of
2010 and a $127 million gain on minor property dispositions recorded in
the second quarter of 2011.
Operational Results
Average production for the third quarter of 2011 was consistent with our
guidance at 161,323 boe (2) per day compared to 156,107 boe per day in the second quarter of 2011.
Third quarter activities were concentrated on restoring production and
on resuming full operations in areas affected by fires and floods in
the second quarter.
Our production was weighted 63 percent to oil and liquids in the third
quarter of 2011 compared to 60 percent in the third quarter of 2010.
Capital expenditures for the third quarter of 2011, including net
property acquisitions, totalled $481 million compared to $357 million
for the third quarter of 2010. For the first nine months of 2011,
capital expenditures, including net property dispositions, totalled
$1,157 million including land expenditures of $172 million and the
drilling of 318 net wells primarily focused on our suite of light-oil
resource plays.
(1) | The terms "funds flow" and "funds flow per share-basic" are non-GAAP measures. Please refer to the "Calculation of Funds Flow" and "Non-GAAP Measures Advisory" sections below. |
(2) | Please refer to the "Oil and Gas Information Advisory" section below for information regarding the term "boe". |
2011 Production and Capital
Production guidance remains unchanged with average production for the
second half of 2011 between 163,000 and 167,000 boe per day and exit
production for 2011 between 174,000 and 177,000 boe per day. Expected
annual production guidance for 2011 remains at an average of between
162,000 and 164,000 boe per day. Anticipated property dispositions may
impact the forecasted exit production rate depending on close dates.
Our full-year 2011 exploration and development program, including land
related expenditures to date, is expected to remain in the range of
$1.4 billion to $1.5 billion, net of asset dispositions.
In the fourth quarter of 2011, we will deploy an average of 20 to 25
drilling rigs through to break-up in the spring of 2012 to drive our
first quarter 2012 production additions and to enhance our
efficiencies.
Our continuing portfolio management program includes a recently marketed
disposition program which we believe could result in up to $400 million
of proceeds.
2012 Capital Budget
Our 2012 capital and operating plan shifts from appraisal activities to
development reflecting increased levels of predictability in our plays.
Substantially all of our capital programs are allocated to light-oil
plays to deliver both value and production increases.
We have set our 2012 exploration and development capital program to be
in the range of $1.6 billion to $1.7 billion. Based on this level of
capital expenditures, we forecast 2012 average production to be
approximately 174,000 to 178,000 boe per day prior to the effect of
asset dispositions. This represents year-over-year growth in annual
average production of between seven and nine percent driven largely by
light oil.
To support our planned 2012 capital program, we currently have 60,000
barrels per day of our 2012 liquids production hedged between US$85.58
per barrel and US$102.28 per barrel; 50,000 mcf per day of our 2012
natural gas production hedged at an average price of $4.30 per mcf and
foreign exchange contracts to swap US$90 million per month of US dollar
revenue for 2012 to Canadian dollars at an average rate of one US
dollar equals 1.01 Canadian dollars. These hedge positions protect
approximately 60 percent of our forecasted 2012 revenues, net of
royalties at current future strip commodity prices.
Dividend, Risk Management and Financing Activities
On November 2, 2011, our Board of Directors declared our fourth quarter
dividend of $0.27 per share to be paid on January 13, 2012 to
shareholders of record on December 31, 2011.
Crude oil prices averaged WTI US$89.81 per barrel in the third quarter
of 2011 compared to US$102.55 per barrel in the second quarter of 2011
and US$76.21 per barrel for the third quarter of 2010. In the third
quarter of 2011, the AECO Monthly Index averaged $3.72 per mcf compared
to $3.74 per mcf in the second quarter of 2011 and $3.72 per mcf in the
third quarter of 2010.
For the remainder of 2011, we have 41,000 barrels per day of our 2011
crude oil production hedged between US$79.98 per barrel and US$96.39
per barrel.
On October 27, 2011, we increased our bank facility capacity by $500
million using the "accordion" feature under our existing facility. The
rates, terms and maturity date of the additional capacity are the same
as the existing facility. The facility now has an aggregate borrowing
limit of $2.75 billion which expires on June 26, 2015 and is
extendible.
On October 31, 2011, we priced a proposed offering of senior unsecured
notes (the "2011 Notes") to be issued on a private placement basis with
principal amounts of approximately $135 million (the "Private
Placement"). The 2011 Notes have an average term of approximately 8.1
years and bear a weighted average fixed interest rate of approximately
4.49 percent. The Private Placement, subject to the completion of
customary closing conditions, is expected to close on or about November
30, 2011. We intend to use the proceeds to repay advances on our bank
facility.
Operational Highlights
Through the third quarter, Penn West re-established its operational
momentum after severe conditions during the second quarter and into the
first part of the third quarter significantly impaired access and
operations. By the middle of the third quarter we had 18-20 drilling
rigs across our four major light-oil projects as well as on other
select high-return targets. Activity levels have shifted to a
development focus on our key light-oil plays. Results year-to-date and
the completion results from the third quarter are consistent with the
information presented earlier this year at our Investor Day. We
completed the acquisition of significant complimentary lands based on
successful appraisal drilling.
Oil Development
In the Cardium, development is focused in the most promising areas
identified to date. Penn West rig released 35 wells in the third
quarter, with the majority in Alder Flats, Willesden Green and West
Pembina. Results are meeting or exceeding expectations, averaging 200 -
300 boe per day in the first month. Penn West will continue drilling
with five rigs for the balance of the year and into 2012.
The predictability of the Slave Point reservoir and our control of
infrastructure in the area allow us to pursue an aggressive development
plan. Initial production from the two single wells drilled at Sawn Lake
on the platform earlier in the year was 900 boe per day. Six months
later the wells are producing 700 boe per day. These results led us to
expand both infrastructure and our highly prospective Slave Point land
position at Sawn Lake, Otter and Senex, adding approximately 150,000
acres of land through Crown sales.
Full-scale development is underway in the Spearfish. Results are
repeatable and predictable in both productivity and costs. An expansion
of our facility to 14,000 boe per day is on schedule for completion in
the first quarter of 2012 and our development program is designed to
fill the facility by the end of 2012.
In the Saskatchewan portion of the Viking play, we are continuing with
full-scale oil development. Predictable production, operational
efficiencies and favourable royalties continue to drive strong
economics.
In the evolving Alberta Viking oil play, appraisal drilling in Esther,
Consort and Monitor has been very successful. Each of the seven wells
brought on-stream recently are producing over 100 boe per day
(approximately 65 percent oil) after the first month. Our land position
in this play trend exceeds 400,000 net acres.
Penn West is also selectively developing an inventory of other high
deliverability, high netback plays. These include light oil in the
Peace River Arch, the Hoadley liquids-rich gas trend and light oil in
southeast Saskatchewan.
Resource Appraisal
In the Peace River Oil Partnership, the performance of the first cycle
of our steam pilot appraisal at Seal Main continues to exceed
expectations. After being placed on production in late July, the well
produced peak rates in excess of 800 barrels of oil per day and has
produced at an average rate of just under 500 barrels of oil per day
over the last three months. The anticipated steam oil ratio will be at
or less than 2.0. The second cycle of steam injection will begin late
in the fourth quarter of 2011.
At Cordova, completions are underway on the first multi-well pad and
production from these six wells is expected to come on stream by the
end of 2011. Our drilling program is on schedule and we anticipate
drilling a total of 24 wells (12 net) by the end of 2011.
HIGHLIGHTS
| Three months ended September 30 | Nine months ended September 30 | ||||||||
| 2011 | 2010 | % change | 2011 | 2010 | % change | ||||
Financial (millions, except per share amounts) | | | | | | | | | ||
Gross revenues (1) | $ | 861 | $ | 728 | 18 | $ | 2,625 | $ | 2,252 | 17 |
Funds flow | | 348 | | 267 | 30 | | 1,100 | | 880 | 25 |
Basic per share | | 0.74 | | 0.59 | 25 | | 2.36 | | 2.02 | 17 |
Diluted per share (2) | | 0.74 | | 0.58 | 28 | | 2.36 | | 1.99 | 19 |
Net income (2) | | 138 | | 304 | (55) | | 700 | | 1,147 | (39) |
Basic per share (2) | | 0.29 | | 0.67 | (57) | | 1.50 | | 2.63 | (43) |
Diluted per share (2) | | 0.29 | | 0.66 | (56) | | 1.50 | | 2.59 | (42) |
Capital expenditures, net (3) | | 481 | | 357 | 35 | | 1,157 | | 555 | 100 |
Long-term debt at period-end | | 2,905 | | 2,260 | 29 | | 2,905 | | 2,260 | 29 |
Convertible debentures | | 224 | | 255 | (12) | | 224 | | 255 | (12) |
Dividends paid (4) | $ | 127 | $ | 203 | (37) | $ | 293 | $ | 585 | (50) |
Payout ratio (5) | | 36% | | 76% | (40) | | 27% | | 66% | (39) |
Operations | | | | | | | | | | |
Daily production | | | | | | | | | | |
Light oil and NGL (bbls/d) | | 83,287 | | 80,614 | 3 | | 83,675 | | 78,097 | 7 |
Heavy oil (bbls/d) | | 18,105 | | 17,766 | 2 | | 17,894 | | 18,735 | (4) |
Natural gas (mmcf/d) | | 360 | | 394 | (9) | | 358 | | 404 | (11) |
Total production (boe/d) | | 161,323 | | 164,087 | (2) | | 161,171 | | 164,123 | (2) |
Average sales price | | | | | | | | | | |
Light oil and NGL (per bbl) | $ | 82.23 | $ | 65.68 | 25 | $ | 85.25 | $ | 68.62 | 24 |
Heavy oil (per bbl) | | 63.38 | | 58.81 | 8 | | 66.43 | | 60.15 | 10 |
Natural gas (per mcf) | $ | 3.81 | $ | 3.68 | 4 | $ | 3.89 | $ | 4.33 | (10) |
Netback per boe | | | | | | | | | | |
Sales price | $ | 58.05 | $ | 47.48 | 22 | $ | 60.26 | $ | 50.16 | 20 |
Risk management gain (loss) | | (0.37) | | 0.58 | (100) | | (1.14) | | 0.06 | (100) |
Net sales price | | 57.68 | | 48.06 | 20 | | 59.12 | | 50.22 | 18 |
Royalties | | (10.87) | | (8.60) | 26 | | (10.96) | | (9.05) | 21 |
Operating expenses | | (17.49) | | (15.78) | 11 | | (17.38) | | (15.63) | 11 |
Transportation | | (0.49) | | (0.55) | (11) | | (0.50) | | (0.55) | (9) |
Netback | $ | 28.83 | $ | 23.13 | 25 | $ | 30.28 | $ | 24.99 | 21 |
(1) | Gross revenues include realized gains and losses on commodity contracts. |
(2) | Comparative figures have been restated to IFRS. |
(3) | Excludes business combinations. |
(4) | 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). Our first quarterly dividend ($0.27 per share) as a corporation was paid in April 2011. |
(5) | Payout ratio is calculated as dividends paid divided by funds flow. The term "payout ratio" is a non-GAAP measure. See "Non- GAAP Measures Advisory" section below. |
DRILLING PROGRAM
| Three months ended September 30 | Nine months ended September 30 | ||||||
2011 | 2010 | 2011 | 2010 | |||||
| Gross | Net | Gross | Net | Gross | Net | Gross | Net |
Oil | 119 | 88 | 118 | 86 | 322 | 252 | 217 | 152 |
Natural gas | 22 | 16 | 19 | 14 | 46 | 32 | 38 | 25 |
Dry | - | - | 2 | 2 | - | - | 2 | 2 |
| 141 | 104 | 139 | 102 | 368 | 284 | 257 | 179 |
Stratigraphic and service | 7 | 1 | 13 | 7 | 77 | 34 | 38 | 24 |
Total | 148 | 105 | 152 | 109 | 445 | 318 | 295 | 203 |
Success rate (1) | | 100% | | 98% | | 100% | | 99% |
(1) | Success rate is calculated excluding stratigraphic and service wells. |
Our activity levels have increased during 2011 as we focus on the
development of our light-oil resource plays in the Cardium, Carbonates,
Spearfish (Waskada) and the Colorado (Viking). Over the past three
years, we implemented horizontal multi-stage fracture technology for
substantially all production wells.
CAPITAL EXPENDITURES
(millions) | Three months ended September 30 | Nine months ended September 30 | ||||||
2011 | 2010 | 2011 | 2010 | |||||
Land acquisition and retention | $ | 66 | $ | (12) | $ | 172 | $ | 92 |
Drilling and completions | | 326 | | 247 | | 807 | | 537 |
Facilities and well equipping | | 105 | | 52 | | 324 | | 141 |
Geological and geophysical | | 2 | | 1 | | 9 | | 10 |
Corporate | | 8 | | 5 | | 17 | | 7 |
Capital expenditures | | 507 | | 293 | | 1,329 | | 787 |
Joint venture, carried capital | | (32) | | - | | (77) | | - |
Property acquisitions (dispositions), net | | 6 | | 64 | | (95) | | (232) |
Capital expenditures, net | | 481 | | 357 | | 1,157 | | 555 |
Business combinations | | - | | - | | 286 | | - |
Total expenditures | $ | 481 | $ | 357 | $ | 1,443 | $ | 555 |
We have increased our capital activity, notably in drilling, completions
and well equipping, as we move from the appraisal phase into full-scale
development at our key light-oil plays across western Canada. To date
in 2011, we have sold net production of approximately 1,300 boe per day
for net proceeds of $89 million, including the cash consideration paid
on business combinations.
LAND
| As at September 30 | |||||||||||||||
| Producing | Non-producing | ||||||||||||||
| 2011 | | | 2010 | | | % change | | | 2011 | | | 2010 | | | % change |
Gross acres (000s) | 6,195 | | | 6,214 | | | - | | | 2,997 | | | 2,996 | | | - |
Net acres (000s) | 4,159 | | | 4,104 | | | 1 | | | 2,126 | | | 2,085 | | | 2 |
Average working interest | 67% | | | 66% | | | 1 | | | 71% | | | 70% | | | 1 |
Acreage figures are comparable year-over-year as strategic land
acquisitions have offset land lease expiries in non-core areas.
COMMON SHARES DATA
| Three months ended September 30 | Nine months ended September 30 | |||||||||||||||
(millions of shares) | 2011 | | | 2010 | | | % change | | | 2011 | | | 2010 | | | % change | |
Weighted average | | | | | | | | | | | | | | | | | |
| Basic | 469.2 | | | 453.0 | | | 4 | | | 465.9 | | | 436.7 | | | 7 |
| Diluted | 469.4 | | | 462.3 | | | 2 | | | 466.1 | | | 446.1 | | | 4 |
Outstanding as at September 30 | | | | | | | | | | 469.5 | | | 454.7 | | | 3 | |
Letter to our Shareholders
In some respects the events of the last couple of months have felt like
dj vu. Markets are clouded by debt concerns and commodity prices have
fluctuated. We are in a world of financial uncertainty where
vacillation has been the order of the day for politicians. Although the
market behaviors are the same and some of the financial and monetary
circumstances bear similarities, there are distinctive differences from
the 2008 banking crisis. In the short term, we anticipate these issues
will continue to contribute to market uncertainty and cast a shadow
over the prospects for economic growth in Europe.
The impact to Penn West with respect to questions surrounding the plight
of the European economy boil down to one specific issue; will these
concerns drastically alter demand for oil in the world economy? Even
as the European economy has struggled for the past two years, Brent
crude pricing has remained above the $100 per barrel mark. Some believe
that Europe, even in recession, is unlikely to create a large enough
drop in demand to significantly move oil pricing from its current price
band. We believe that North America is likely to experience economic
growth, albeit moderate, for the next couple of years and that the
ultimate driver for a world oil price will continue to be demand growth
not only in Asia but in numerous other developing economies. As long as
those economic growth conditions prevail, we believe that oil pricing
should remain no worse than 'neutral' in the near to mid-term.
To provide certainty for both our dividend and capital programs, we have
actively hedged oil through 2012 with this scenario in mind. Just under
60 percent of our revenue for 2012 is secured using costless collars
with an average floor price in excess of US$85 per barrel. We have
increased our bank facility by $500 million, have expanded our
portfolio of private notes, and have a selection of non-core assets
currently in the disposition market.
This level of revenue certainty and financial flexibility combined with
the maturing of our light-oil prospect inventory allows us to move
ahead with our light-oil growth plans for 2012.
We will remain vigilant as the economic stories of 2012 unfold. We will
take appropriate action should conditions worsen or strengthen. We have
plans in place should those possible scenarios present themselves. Our
actions, however, will be driven by the performance of economies and
not by the hyperbole which situations like this tend to generate.
On behalf of the Board of Directors,
(signed)
Murray R. Nunns
President and Chief Executive Officer
Calgary, Alberta
November 2, 2011
Outlook
This outlook section is included to provide shareholders with
information about our expectations as at November 2, 2011 for
production and capital expenditures for 2011 and 2012 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 discussion under
"Forward-Looking Statements".
In 2011, our capital program remained focused on tight-oil development
and resource appraisal at our key light-oil plays in the Cardium,
Carbonates, Spearfish and Viking. As we move into 2012, we expect to
move to full-scale development at these key light-oil plays.
Annual production guidance for 2011 remains unchanged at an average of
between 162,000 and 164,000 boe per day. We continue to estimate
average production for the second half of 2011 at between 163,000 and
167,000 boe per day with exit production for 2011 between 174,000 and
177,000 boe per day prior to the effect of any asset dispositions.
Our estimated 2012 exploration and development capital program is
expected to be in the range of $1.6 to $1.7 billion prior to asset
dispositions. Based on this level of capital expenditures, we estimate
average production to be approximately 174,000 to 178,000 boe per day
for 2012, prior to the effect of asset dispositions.
Our prior production forecast and capital forecast, released on August
10, 2011 with our second quarter results and filed on SEDAR at www.sedar.com was for 2011 average production of 162,000 to 164,000 boe per day and
our exploration and development capital budget remains unchanged
between $1.4 billion - $1.5 billion, net of asset dispositions.
Private Note Placement
On October 31, 2011, Penn West priced a proposed offering of senior
unsecured notes (the "2011 Notes") to be issued on a private placement
basis in the United States and Canada with aggregate principal amounts
of approximately $135 million (the "Private Placement"). The 2011
Notesare subject to various terms with an average term of
approximately 8.1 years and an average fixed interest rate of
approximately 4.49 percent. The 2011 Notes will be unsecured and rank
equally with Penn West's bank facilities and Penn West's other
outstanding senior notes. Subject to the completion of customary
closing conditions, the Private Placement is expected to close on or
about November 30, 2011. Penn West intends to use the proceeds to repay
advances on its bank facility.The 2011 Notes have not been and will
not be registered under the United States Securities Act of 1933, as
amended (the "Securities Act"), and may not be offered or sold in the
United States absent registration or an applicable exemption from the
Securities Act.
Non-GAAP Measures Advisory
The above information includes non-GAAP measures not defined under IFRS
or previous generally accepted accounting principles ("GAAP"),
including funds flow, funds flow per share-basic, funds flow per
share-diluted, netback and payout ratio. Non-GAAP measures do not have
any standardized meaning prescribed by GAAP and therefore may not 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 decommissioning expenditures. Funds flow is used to
assess our ability to fund dividends and planned capital programs. See
"Calculation of Funds Flow" below. Netback is a per-unit-of-production
measure of operating margin used in capital allocation decisions and to
economically rank projects. Operating margin is calculated as revenue
less royalties, operating costs and transportation and is used for
similar purposes to netback. Payout ratio is calculated as dividends
paid divided by funds flow. We use payout ratio to assess the adequacy
of retained funds flow to finance capital programs.
Calculation of Funds Flow
| | Three months ended September 30 | Nine months ended September 30 | ||||||
(millions, except per share amounts) | 2011 | 2010 | 2011 | 2010 | ||||
Cash flow from operating activities | $ | 428 | $ | 333 | $ | 923 | $ | 914 |
Increase (decrease) in non-cash working capital | | (97) | | (77) | | 132 | | (72) |
Decommissioning expenditures | | 17 | | 11 | | 45 | | 38 |
Funds flow | $ | 348 | $ | 267 | $ | 1,100 | $ | 880 |
| | | | | | | | |
Basic per share | $ | 0.74 | $ | 0.59 | $ | 2.36 | $ | 2.02 |
Diluted per share | $ | 0.74 | $ | 0.58 | $ | 2.36 | $ | 1.99 |
Oil and Gas Information Advisory
Barrels of oil equivalent ("boe") may be misleading, particularly if
used in isolation. A boe conversion ratio of six thousand cubic feet of
natural gas to one barrel of crude oil is based on an energy
equivalency conversion method primarily applicable at the burner tip
and does not represent a value equivalency at the wellhead.
Forward-Looking Statements
In the interest of providing our securityholders and potential investors
with information regarding Penn West, including management's assessment
of our future plans and operations, 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", "objective", "aim", "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 anticipation that
from the beginning of 2010 to year end 2011, we will have increased our
light-oil production to 51 percent of our production from 39 percent
and our total liquids production to 66 percent from 57 percent; our
intention in 2012 to target a seven to nine percent annual average
production growth rate and a further increase in our liquid weighting
prior to the disposition of non-core assets; the disclosure contained
under the heading "Strategy", including our belief that we have
unrivaled leverage to low-risk, large-scale light-oil development, our
belief that our activities since 2009 have provided us with an
inventory of drilling locations to fuel light-oil growth well into the
future, our intention in 2012 to further shift our capital spending
into large scale development in the Cardium, Carbonates, Spearfish and
Viking oil trends, our intention (in order to maximize efficiency) to
drill on a continuous basis to the fullest extent possible, and our
expectation that our resource appraisal activities will be focused on
Peace River oil sands, Cordova shale gas, enhanced oil recovery and
selected exploratory plays; the disclosure contained under the heading
"2011 Production and Capital", including our expectation that our
average production for the second half of 2011 will be between 163,000
and 167,000 boe per day, that exit production for 2011 will be between
174,000 and 177,000 boe per day, that annual production for 2011 will
average between 162,000 and 164,000 boe per day, the possibility that
anticipated property dispositions may impact the forecasted exit
production rate depending on closing dates, our expectation that our
full-year 2011 exploration and development program, including land
related expenditures to date, will remain in the range of $1.4 billion
to $1.5 billion, net of asset dispositions, our expectation that in the
fourth quarter of 2011 we will deploy an average of 20 to 25 drilling
rigs through to break-up in the spring of 2012 to drive our first
quarter 2012 production additions and to enhance our efficiencies, and
our belief that our continuing portfolio management program, which
includes a recently marketed disposition program, could result in up to
$400 million of proceeds; the disclosure contained under the heading
"2012 Capital Budget", including our expectation that our 2012 capital
and operating plan will shift from appraisal activities to development
reflecting increased levels of predictability in our plays, our belief
that substantially all of our capital programs will be allocated to
light-oil plays to deliver both value and production increases, our
expectation that our 2012 exploration and development capital program
will be in the range of $1.6 to $1.7 billion, our expectation that
based on this level of capital expenditures our 2012 average production
will be approximately 174,000 to 178,000 boe per day prior to the
effect of asset dispositions (which would represent year-over-year
growth in annual average production of between seven to nine percent
driven largely by light-oil), and our belief that our 2012 hedge
positions protect approximately 60 percent of our forecasted 2012
revenues, net of royalties at current future strip commodity prices;
all disclosure regarding the details of our fourth quarter dividend;
all disclosure relating to our pricing and closing of the 2011 Notes
Private Placement, including the proposed aggregate principal amount
and terms of such 2011 Notes, the proposed use of the proceeds received
from the issuance of the 2011 Notes, and the expected closing date of
such Private Placement; our intention to maintain a fleet of 18 to 20
rigs operating through the balance of the year and into 2012; our
intention in the Cardium to continue drilling with five rigs for the
balance of the year and into 2012; our intention to pursue an
aggressive development plan in the Slave Point reservoir; our belief
that results in the Spearfish are repeatable and predictable in both
productivity and costs, our belief that the expansion of our facility
in the area to 14,000 boe per day is on schedule for completion in the
first quarter of 2012, and our belief that our development program will
be able to fill the facility by the end of 2012; in relation to the
Peace River Oil Partnership, our anticipation that the steam oil ratio
will be at or less than 2.0 and our plan that the second cycle of steam
injection will begin late in the fourth quarter of 2011; in relation to
our Cordova play, our expectation that production from the first six
wells will come on stream by the end of 2011, and our anticipation of
drilling a total of 24 wells (12 net) by the end of 2011; certain
disclosures contained in our "Letter to our Shareholders", including
our belief that the current economic climate has distinctive
differences from the 2008 banking crisis, our view that in the short
term, there will be market uncertainty that will cast a shadow over the
prospects for economic growth in Europe, our belief that North America
is likely to experience economic growth, albeit moderate, for the next
couple of years and that the ultimate driver for a world oil price will
continue to be demand growth not only in Asia but in numerous other
developing economies, our belief that as long as those economic growth
conditions prevail, that oil pricing should remain no worse than
'neutral' in the near to mid-term, our belief that our 2012 hedging
program provides certainty for both our dividend and capital programs,
our belief that just under 60 percent of our revenue for 2012 is
secured using costless collars with an average floor price in excess of
US$85 per barrel, and our belief that the level of revenue certainty
and financial flexibility that results from our hedging activities,
debt financing activities and disposition program combined with the
maturing of our light-oil prospect inventory will allow us to move
ahead with our light-oil growth plans for 2012; certain disclosures
contained under the heading "Outlook", including our expectation, as we
move into 2012, to move to full-scale development of our key light-oil
plays in the Cardium, Carbonates, Spearfish and Viking, our annual
production guidance for 2011 of an average of between 162,000 and
164,000 boe per day, our continued estimate that average production for
the second half of 2011 will be between 163,000 and 167,000 boe per day
with exit production for 2011 between 174,000 and 177,000 boe per day
prior to the effect of any asset dispositions, our estimate that our
2012 exploration and development capital program will be in the range
of $1.6 to $1.7 billion prior to asset dispositions, our estimate that,
based on this level of capital expenditures, our average production
will be approximately 174,000 to 178,000 boe per day for 2012, prior to
the effect of asset dispositions, and our expectation that our
exploration and development capital budget for 2011 will remain between
$1.4 billion to $1.5 billion, net of asset dispositions.
With respect to forward-looking statements contained in this document,
we have made assumptions regarding, among other things: future crude
oil, natural gas liquids and natural gas prices and differentials
between light, medium and heavy oil prices; future capital expenditure
levels; future crude oil, natural gas liquids and natural gas
production levels; drilling results; future exchange rates and interest
rates; the amount of future cash dividends that we intend to pay; our
ability to obtain equipment in a timely manner to carry out development
activities and the costs thereof; 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 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 heading "Outlook".
Although we believe 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 our 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
or environmental events that can reduce production or cause production
to be shut-in or delayed, including wild fires and flooding; 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
dispositions, acquisitions, joint ventures and partnerships, including
the completed dispositions, acquisitions, joint ventures and
partnerships discussed herein; changes in tax and other laws that
affect us and our securityholders; changes in government royalty
frameworks; uncertainty of obtaining required approvals for
acquisitions and mergers; the potential failure of counterparties to
honour their contractual obligations; and the other factors described
in our public filings (including under "Risk Factors" in our Annual
Information Form and in Note 10 to our 2011 third quarter unaudited
financial statements) 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, we do 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 Petroleum Ltd. Consolidated Balance Sheets | |||||
| |||||
(CAD millions, unaudited) | September 30, 2011 | December 31, 2010 | |||
| | | | | |
Assets | | | | | |
Current | | | | | |
Accounts receivable | | $ | 411 | $ | 386 |
Other | | | 101 | | 87 |
Risk management | | | 149 | | 23 |
| | | 661 | | 496 |
Non-current | | | | | |
Deferred funding assets | | | 627 | | 678 |
Exploration and evaluation assets | | | 275 | | 128 |
Property, plant and equipment | | | 11,715 | | 11,218 |
Goodwill | | | 2,020 | | 2,020 |
Risk management | | | 87 | | 3 |
| | | 14,724 | | 14,047 |
Total assets | | $ | 15,385 | $ | 14,543 |
| | | | | |
| | | | | |
Liabilities and Shareholders' Equity | | | | | |
Current | | | | | |
Accounts payable and accrued liabilities | | $ | 845 | $ | 910 |
Dividends payable | | | 127 | | 41 |
Convertible debentures | | | 224 | | 255 |
Risk management | | | 45 | | 85 |
| | | 1,241 | | 1,291 |
Non-current | | | | | |
Long-term debt | | | 2,905 | | 2,496 |
Decommissioning liability | | | 626 | | 648 |
Risk management | | | 54 | | 67 |
Deferred tax liability | | | 1,335 | | 1,452 |
Other non-current liabilities | | | 5 | | 29 |
| | | 6,166 | | 5,983 |
Shareholders' equity | | | | | |
Shareholders' capital | | | 8,808 | | - |
Unitholders' capital | | | - | | 9,170 |
Other reserves | | | 90 | | - |
Retained earnings (deficit) | | | 321 | | (610) |
| | | 9,219 | | 8,560 |
Total liabilities and shareholders' equity | | $ | 15,385 | $ | 14,543 |
Penn West Petroleum Ltd. Consolidated Statements of Income | ||||||||||||
| | | | | | | | | | |||
| Three months ended September 30 | Nine months ended September 30 | ||||||||||
(CAD millions, except per share amounts, unaudited) | 2011 | 2010 | 2011 | 2010 | ||||||||
| | | | | | | | | | |||
| Oil and natural gas sales | | $ | 866 | $ | 719 | $ | 2,675 | $ | 2,249 | ||
| Royalties | | | (161) | | (130) | | (482) | | (406) | ||
| | | 705 | | 589 | | 2,193 | | 1,843 | |||
| | | | | | | | | | |||
| Risk management gain (loss) | | | | | | | | | | ||
| Realized | | | (5) | | 9 | | (50) | | 3 | ||
| Unrealized | | | 249 | | (45) | | 261 | | 110 | ||
| | | 949 | | 553 | | 2,404 | | 1,956 | |||
| | | | | | | | | | |||
Expenses | | | | | | | | | | |||
| Operating | | | 260 | | 239 | | 765 | | 701 | ||
| Transportation | | | 7 | | 8 | | 22 | | 25 | ||
| General and administrative | | | 38 | | 36 | | 112 | | 104 | ||
| Share-based compensation expense (recovery) | | | (66) | | 23 | | 16 | | 77 | ||
| Depletion and depreciation | | | 292 | | 263 | | 850 | | 875 | ||
| Gain on dispositions | | | - | | (368) | | (151) | | (1,082) | ||
| Exploration and evaluation expense | | | 1 | | - | | 5 | | 1 | ||
| Unrealized risk management loss (gain) | | | 11 | | 13 | | (2) | | 10 | ||
| Unrealized foreign exchange loss (gain) | | | 136 | | (46) | | 91 | | (27) | ||
| Financing | | | 47 | | 46 | | 142 | | 131 | ||
| Accretion | | | 11 | | 10 | | 33 | | 30 | ||
| | | 737 | | 224 | | 1,883 | | 845 | |||
Income before taxes | | | 212 | | 329 | | 521 | | 1,111 | |||
| | | | | | | | | | |||
| Deferred tax expense (recovery) | | | 74 | | 25 | | (179) | | (36) | ||
| | | | | | | | | | |||
Net and comprehensive income | | $ | 138 | $ | 304 | $ | 700 | $ | 1,147 | |||
| | | | | | | | | | |||
Net income per share | | | | | | | | | | |||
| Basic | | $ | 0.29 | $ | 0.67 | $ | 1.50 | $ | 2.63 | ||
| Diluted | | $ | 0.29 | $ | 0.66 | $ | 1.50 | $ | 2.59 | ||
Weighted average shares outstanding (millions) | | | | | | | | | ||||
| Basic | | | 469.2 | | 453.0 | | 465.9 | | 436.7 | ||
| Diluted | | | 469.4 | | 462.3 | | 466.1 | | 446.1 | ||
Penn West Petroleum Ltd. Consolidated Statements of Cash Flows | ||||||||||
| | | ||||||||
| Three months ended September 30 | Nine months ended September 30 | ||||||||
(CAD millions, unaudited) | 2011 | 2010 | 2011 | 2010 | ||||||
| | | | | | | | | | |
| | | | | | | | | | |
Operating activities | | | | | | | | | | |
| Net income | | $ | 138 | $ | 304 | $ | 700 | $ | 1,147 |
| Depletion and depreciation | | | 292 | | 263 | | 850 | | 875 |
| Gain on dispositions | | | - | | (368) | | (151) | | (1,082) |
| Exploration and evaluation expense | | | 1 | | - | | 5 | | 1 |
| Accretion | | | 11 | | 10 | | 33 | | 30 |
| Deferred tax expense (recovery) | | | 74 | | 25 | | (179) | | (36) |
| Share-based compensation expense (recovery) | | | (66) | | 21 | | 14 | | 72 |
| Unrealized risk management loss (gain) | | | (238) | | 58 | | (263) | | (100) |
| Unrealized foreign exchange loss (gain) | | | 136 | | (46) | | 91 | | (27) |
| Decommissioning expenditures | | | (17) | | (11) | | (45) | | (38) |
| Change in non-cash working capital | | | 97 | | 77 | | (132) | | 72 |
| | | 428 | | 333 | | 923 | | 914 | |
Investing activities | | | | | | | | | | |
| Capital expenditures | | | (475) | | (293) | | (1,252) | | (787) |
| Acquisitions | | | (42) | | (151) | | (238) | | (479) |
| Proceeds from dispositions | | | 36 | | 278 | | 327 | | 1,144 |
| Change in non-cash working capital | | | 191 | | 152 | | 57 | | 146 |
| | | (290) | | (14) | | (1,106) | | 24 | |
Financing activities | | | | | | | | | | |
| Increase (decrease) in bank loan | | | (44) | | (169) | | 245 | | (1,235) |
| Proceeds from issuance of notes | | | - | | - | | 75 | | 304 |
| Repayment of acquired credit facilities | | | - | | - | | (39) | | - |
| Issue of equity | | | 1 | | 18 | | 160 | | 484 |
| Dividends and distributions paid | | | (95) | | (168) | | (227) | | (491) |
| Settlement of convertible debentures | | | - | | - | | (31) | | - |
| | | (138) | | (319) | | 183 | | (938) | |
| | | | | | | | | | |
Change in cash | | | - | | - | | - | | - | |
Cash, beginning of period | | | - | | - | | - | | - | |
Cash, end of period | | $ | - | $ | - | $ | - | $ | - | |
Penn West Petroleum Ltd. Statements of Changes in Shareholders' Equity | |||||||||
| | | | | | | | | |
(CAD millions, unaudited) | | | |||||||
| Shareholders' Capital | Other Reserves | Retained Earnings | Total | |||||
| | | | | | | | | |
Balance at January 1, 2011 | | $ | 9,170 | $ | - | $ | (610) | $ | 8,560 |
Elimination of deficit | | | (610) | | - | | 610 | | - |
Net and comprehensive income | | | - | | - | | 700 | | 700 |
Implementation of Option Plan and CSRIP | | | - | | 81 | | - | | 81 |
Share-based compensation expense | | | - | | 31 | | - | | 31 |
Issued on exercise of options and share rights | | | 182 | | (22) | | - | | 160 |
Issued to dividend reinvestment plan | | | 66 | | - | | - | | 66 |
Dividends declared | | | - | | - | | (379) | | (379) |
Balance at September 30, 2011 | | $ | 8,808 | $ | 90 | $ | 321 | $ | 9,219 |
| | | | | | | | | |
(CAD millions, unaudited) | | | |||||||
| Unitholders' Capital | Other Reserves | Deficit | Total | |||||
| | | | | | | | | |
Balance at January 1, 2010 | | $ | 8,451 | $ | - | $ | (1,034) | $ | 7,417 |
Net and comprehensive income | | | - | | - | | 1,147 | | 1,147 |
Issued on exercise of trust unit rights | | | 44 | | - | | - | | 44 |
Issued to employee trust unit savings plan | | | 29 | | - | | - | | 29 |
Issued to distribution reinvestment plan | | | 94 | | - | | - | | 94 |
Issued to settle convertible debentures | | | 18 | | - | | - | | 18 |
Issued on trust unit offering | | | 428 | | - | | - | | 428 |
Distributions declared | | | - | | - | | (563) | | (563) |
Balance at September 30, 2010 | | $ | 9,064 | $ | - | $ | (450) | $ | 8,614 |
Investor Information
Penn West shares and debentures are listed on the Toronto Stock Exchange
under the symbols PWT and PWT.DB.F and Penn West shares 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 10:00am
Mountain Time (12:00pm Eastern Time) on November 3, 2011.
To listen to the conference call, please call 416-695-6622 or
1-800-769-8320 (North America toll-free). This call will be broadcast
live on the Internet and may be accessed directly on the Penn West
website at www.pennwest.com or at the following URL: http://events.digitalmedia.telus.com/pennwest/110311/index.php
A taped recording will be available until November 10, 2011 by dialing
1-800-408-3053 (North America toll-free) and entering pass code
1440223.
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 EXPLORATION Suite 200, 207 - 9th Avenue SW Calgary, Alberta T2P 1K3 | Investor Relations: Toll Free: 1-888-770-2633 E-mail:investor_relations@pennwest.com |
| | |
| Phone: 403-777-2500 Fax: 403-777-2699 Toll Free: 1-866-693-2707 Website:www.pennwest.com | Murray Nunns, President & Chief Executive Officer Phone: 403-218-8939 E-mail:murray.nunns@pennwest.com |
| | |
| | Jason Fleury, Senior Manager, Investor Relations Phone: 403-539-6343 E-mail:jason.fleury@pennwest.com |
No comments:
Post a Comment