060810 Agm Calgary 000
- 1. Annual General Meeting Calgary, Alberta June 8, 2010
- 2. Advisory This presentation is for information purposes only and is not intended to, and should not be construed to, constitute an offer to sell or the solicitation of an offer to buy securities of Penn West. Discovered Petroleum Initially‐In‐Place (DPIIP) is equivalent to Original Oil In Place (OOIP). DPIIP, also known as a "discovered resource", is defined as that quantity of petroleum that is estimated, as of a given date, to be contained in known accumulations prior to production. The recoverable portion of discovered petroleum initially‐in‐place includes production, reserves and contingent resources; the remainder is unrecoverable. A recovery project cannot be defined for this volume of discovered petroleum initially‐in‐place at this time. There is no certainty that it will be commercially viable to produce any portion of the resources. Certain information regarding Penn West Energy Trust and the transactions reviewed in this presentation including management’s assessment of future plans and operations, may constitute forward‐looking statements under applicable securities law and necessarily involve risks, including, without limitation, risks associated with oil and gas exploration, development, exploitation, production, marketing and transportation, loss of markets, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition, incorrect assessment of the value of acquisitions, failure to realize the anticipated benefits of acquisitions and ability to access sufficient capital from internal and external sources; failure to obtain required regulatory approvals. As a consequence, actual results may differ materially from those anticipated in the forward‐looking statements. Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on these and other factors that could affect Penn West’s operations or financial results are included in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com), or at Penn West’s website (www.pennwest.com). This presentation and its contents should not be construed, under any circumstances, as investment, tax or legal advice. Any person accepting delivery of this presentation acknowledges the need to conduct their own thorough investigation into Penn West before considering any investment in its securities. Furthermore, the forward‐looking statements contained in this presentation are made as of the date of this presentation, Penn West does not undertake any obligation to update publicly or to revise any of the included forward‐looking statements, whether as a result of new information, future events or otherwise, except as may be expressly required by applicable securities law. Where reserves or production are stated on a barrel of oil equivalent (BOE) basis, natural gas volumes have been converted to a barrel of oil equivalent (BOE) at a ratio of six thousand cubic feet of natural gas to one barrel of oil. This conversion ratio is based upon an energy equivalent conversion method primarily applicable at the burner tip and does not represent value equivalence at the wellhead. BOEs may be misleading, particularly if used in isolation. This presentation may contain references to non‐GAAP terms. Penn West uses these measures to help evaluate their respective performance. These measures as presented do not have any standardized meaning prescribed by Canadian GAAP and therefore, they may not be comparable with calculations of similar measures for other companies or trusts. All references are to Canadian Dollars unless otherwise specified. 2
- 3. Setting the Course for the Future • Restoring financial strength • Empowering corporate responsibility • Building the right team • Focusing on prospects, innovation, and potential 3
- 4. Setting the Course for the Future Financial Strength • Strong Balance Sheet - June 2008 - $4.8 total debt - 77% short term - June 2010 - $2.5 total debt - 36% short term • Debt diversification - 64% of debt in long term notes • Credit capacity - 3 year, $2.25 billion syndicated credit facility - $1.75 billion undrawn 4
- 5. Setting the Course for the Future Credit Capacity $1.75 billion Total Debt undrawn** Bank Debt $0.5 billion Private Debt $500 $1.6 Convertible billion million Debentures*** drawn* $273 million * Pro Forma debt at March 31, 2010 net of equity private placement and funds received from the formation of the Peace River Oil Partnership announced May 13, 2010. ** On April 30, 2010 Penn West Petroleum Ltd. Closed the renewal of its unsecured revolving syndicated bank facility. *** All debentures expire prior to December 31, 2011 and can be settled with equity. 5
- 6. Setting the Course for the Future Corporate Responsibility • CAPP Stewardship Platinum level since 2002 • Strong and respectful working relationship with First Nations and Métis in western Canada • Leader in CO2 capture and storage in North America • Leader in Enhanced Oil Recovery in North America • Actively engaged in our communities 6
- 7. Setting the Course for the Future Management Team • Revitalized management team over the past three years: Murray Nunns Mark Fitzgerald President and Chief Operating Officer Senior Vice President, Production David Middleton Thane Jensen Executive Vice President, Peace River Senior Vice President, Operations Project, Managing Director Engineering Todd Takeyasu Keith Luft Executive Vice President & Chief General Counsel & Senior Vice President, Financial Officer Stakeholder Relations Hilary Foulkes Bob Shepherd Senior Vice President, Business Senior Vice President, Exploration & Development Development • Strengthened technical teams & assembled a visionary exploration group • Team has worked to ‘right-size’ portfolio after successive corporate acquisitions and are now focused on concentrated play areas 7
- 8. Setting the Course for the Future Conversion • Capital budget of $700 to $800 million necessary to maintain current production levels • Focus funds to increase pace of development in key play areas – anticipate $150 to $200 million for organic growth • Timing for conversion at year-end 2010 • Set dividend with objective to remain within funds flow for sustaining capital, growth capital and dividend • Fine tune model for 2011 and provide guidance for capital plans during Q4 2010 8
- 9. Focus on Prospects Calgary, Alberta June 8, 2010
- 10. # producer of light & medium oil in western Canada 10
- 11. million acres Significant Light Oil Potential 11
- 12. % 95 Vertically % Proved Oil Booked Reserves Oil Gas BOE Proved 341 mmbbls 938 bcf 497 mmboe Proved and Probable 472 mmbbls 1,292 bcf 687 mmboe 12
- 13. Horizontal Technology U.S. vs. Canadian Field Development Permian Basin Pembina Cardium Odessa, Texas Drayton Valley, Alberta 5 acre well spacing 80 acre well spacing 13
- 14. Infrastructure Advantage 14
- 15. Strategic Portfolio Management Wildboy North Central Carbonates Peace River Oil Sands Eastern Alberta Cardium Dodsland Waskada Penn West land position 15
- 16. Prospect Inventory Cumulative 1% Resource Incremental OOIP / OGIP Production Recovery Light Oil 8.5 B bbls 14% 85 million bbls Gas 18 Tcf 2% 180 Bcf Oil Sands 2.75 B bbls 0% 27.5 million bbls Discovered Petroleum Initially in Place (DPIIP), is defined in the COGEH handbook as the quantity of hydrocarbons that are estimated to be in place within a known accumulation. DPIIP is divided into recoverable and unrecoverable portions, with the estimated future recoverable portion classified as reserves and contingent resources. There is no certainty that it will be economically viable or technically feasible to produce any portion of this DPIIP except for those identified as proved or probable reserves. At this time all of the DPIIP not classified as reserves would be classified as Unrecoverable Resources. 16
- 17. Unlocking Oil in Place Cardium West Central Alberta 17
- 18. West Central AB - Cardium Program Summary 880 sections (net) Pembina Buck 2,400 wells (net) Lake West Ferrybank Pembina Willesden ~25,000 boe/d current production Green Leafland 10 billion bbls OOIP Strachan 30 kms 20 miles Garrington 1.6 billion bbls recovered to date Vertically defined bbls potential 2 – 5 billion pool boundary Cardium trend OOIP additions Penn West land 18
- 19. Cardium Land Holding – Existing + Halo Net 880 Sections 800 700 600 530 500 400 300 204 200 160 150150150 100 95 92 100 81 75 66 52 49 47 40 40 38 30 23 19 17 17 9 8 0 Penn 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 West Source: Company reports, Scotia Capital estimates. 19
- 20. Light Oil Resource Plays 2010 50 net wells net 880 sections well 2,000 + inventory Cardium Penn West land position 20
- 21. Light Oil Resource Plays 2010 60 net wells net 125 sections well 1,000 inventory Cardium Waskada Penn West land position 21
- 22. Light Oil Resource Plays 2010 70 net wells net 280 sections well 1,000 inventory Cardium Dodsland Waskada Penn West land position 22
- 23. Light Oil Resource Plays 2010 25 net wells Devonian net Carbonates 300 sections well 200 + inventory Cardium Dodsland Waskada Penn West land position 23
- 24. Gas Resource Plays Wildboy Eastern Alberta Penn West land position 24
- 25. Unlocking Oil in Place Peace River Central Alberta 25
- 26. Peace River Oil Partnership Program Summary 237,000 acres T86 10 kms Nampa 5 miles 70 stratigraphic wells Cadotte Seal Harmon North T84 Valley 84 hz wells Harmon Harmon Valley Valley West South T82 2,700 boe/d current production Seal Main T80 R22 R20 R18 R16 R14W5 Joint Venture Partnership land 26
- 27. Peace River Oil Partnership Key Points Penn West contributes: • 106,650 acres (45% of 237,000 acres) • 1,215 boe/d (45% of 2,700 boe/d) • $56 million go forward investment (10% of PWT’s 55% interest) Partner contributes: • $312 million cash (paid to PWT directly) • $505 million go forward investment (90% of PWT’s 55% interest) • $459 million capital (45% interest) 27
- 28. Peace River Oil Partnership Strategic Rationale • Establish key technical and financial relationship • Increase pace of development (primary and thermal) • Operate Peace River as a stand alone project reflecting its uniqueness in Penn West 28
- 29. Growth Yield 29
- 30. Total Shareholder Return Fairness To All Stakeholders 30
- 31. Penn West Total Return vs. Indices 2009 – 2010 (18 months) Penn West 100% S&P/TSX Capped Energy Trust S&P/TSX Capped Energy 80% S&P/TSX 60 S&P/TSX Composite 60% 40% 20% 0% -20% -40% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May 2009 2010 31
- 32. Stock Exchange Investor Relations Toronto: PWT.UN Jason Fleury, Manager, Investor Relations New York: PWE Telephone: (403) 539-6343 Email: jason.fleury@pennwest.com Legal Counsel Burnet, Duckworth & Palmer LLP Toll Free: 1-888-770-2633 Independent Reserves Evaluators Email: investor_relations@pennwest.com GLJ Petroleum Consultants Ltd. Website: www.pennwest.com Sproule Associates Limited Penn West Energy Transfer Agent Suite 200, 207 – 9th Avenue SW CIBC Mellon Trust Company Calgary, Alberta, Canada T2P 1K3 Toll Free: 1-800-387-0825 Telephone: (403) 777-2707 Email: inquiries@cibcmellon.ca Toll Free: 1-866-693-2707 Website: www.cibcmellon.ca Facsimile: (403) 777-2699 Website: www.pennwest.com