Financial Highlights

2016 Year-End Operational and Financial Highlights

Simplifying our Balance Sheet by Completing the Disposition Program

  • Last year, the Company closed asset dispositions for proceeds of $1.4 billion in a major restructuring and renovation effort. The Company is on track to complete its asset disposition program near the end of the first quarter, with $65 million in proceeds closed year-to-date and total proceeds expected to be $75 million. The marginal production impact of the first quarter dispositions is approximately 1,000 boe per day on an annualized basis
     
  • The Company reduced Senior Debt to $469 million at year-end 2016, down from $1.9 billion a year earlier, and finished 2016 with a Senior Debt to EBITDA of 2.0 times
     
  • The number of Company wellbores was 6,500 at year-end, down from 13,200 at the end of the previous year. The number of wellbores is expected to fall further to 4,900 at the end of the first quarter significantly reducing our environmental liabilities
     
  • Discounted Asset Retirement Obligations ("ARO"), excluding associated ARO from assets held for sale, fell to $182 million on December 31, 2016 from $397 million on December 31, 2015

Improving Efficiencies with a Focused Portfolio

  • 2016 Funds Flow from Operations of $182 million ($0.36 per share) reflected improving efficiencies throughout the portfolio. In 2016, the Company's per unit cash margins, inclusive of hedging, were up 12% from 2015 despite a 23% reduction in the blended commodity price. This was driven primarily through an improvement in operating costs to $13.18 per boe, down 29% from the previous year
     
  • After the renovation process, Penn West now holds a focused portfolio with industry leading positions in the Cardium, Peace River, and Alberta Viking areas, which produced a combined 28,655 boe per day in the fourth quarter. This portfolio is approximately two-thirds liquids and is underpinned by shallow corporate declines, creating a foundation for growth

2016 Year-End Reserves Highlights

Foothold Reserve Bookings for Cardium Waterfloods

  • The 2016 reserves book has started to recognize the success of our new Cardium waterflood development. On a proved developed producing ("PDP") basis, increased reservoir pressure from injection resulted in the recognition of increasing light crude oil and falling conventional gas volumes in our reserve book. We received an incremental 2.1 mmboe in probable undeveloped waterflood additions. Should these wells continue to see active natural gas suppression and increased production response as forecast, we believe there will be additional reserve recognition of our methodology at year-end 2017

Asset Dispositions Accretive to Net Asset Value

  • The largest changes to our reserves at the end of 2016, across all reserve categories, were driven by asset dispositions. In 2016, we closed asset transactions for total cash proceeds of approximately $1.4 billion, above both the associated PDP and proved ("1P") before-tax present values, discounted at 10 per cent, of $1.1 billion and $1.2 billion, respectively

Realigned Reserves in Peace River for Cold Flow Development

  • We realigned our reserve book in the Peace River to shift away from thermal to cold flow development to better align with our near-term development plans in the current price environment. The removed thermal undeveloped bookings of 27 mmboe would have contributed only $20 million in proved plus probable ("2P") before-tax present value, with associated future development capital of $389 million

Recognizing the Efficiency Improvements and Potential in the Portfolio

  • We chose to use a conservative booking methodology for the undeveloped potential in our renovated portfolio. Our 2P reserves account for only approximately 1.5 years of development in the Peace River and in the Alberta Viking, and no development in the Mannville. We feel that with successful execution in these areas in our 2017 program, we can begin to formally recognize the significant running room we have in these plays
     
  • We received positive technical revisions, acknowledging both lower operating costs and improved performance across our portfolio, which offset the economic revisions due to lower commodity price assumptions. The PDP before-tax present value, discounted at 10 per cent, received a positive technical revision of $486 million versus a negative economic revision of $223 million. The proved plus probable before-tax present value, discounted at 10 per cent, received a positive technical revision of $476 million versus a negative economic revision of $296 million
     
  • The 2016 2P operated development cost of $5.86 per boe (or $11.26 per boe excluding the impact of our partner capital in Peace River) reflects the capital efficiency of converting liquids resources into reserves and undeveloped reserves into developed reserves in our key development areas. We calculate 2P operated development cost as the sum of reserves added from all operated wells spud in the year divided by the drill, complete, equip, and tie-in costs incurred to bring these wells on production
     
  • The 2016 Finding and Development ("F&D") Cost, inclusive of changes to future development capital, on a 2P basis, was $16.45 per boe. These costs reflect our limited spending in the first half of the year which focused on base and facility maintenance and had a limited reserve impact. The Company's 2016 recycle ratio was approximately 1.1 times

Hitting the Ground Running in 2017

  • Last year, the Company extended its commodity risk program out six quarters and increased its hedged volumes for 2017. Penn West currently has approximately 50% of its net oil volumes and 25% of its net gas volumes hedged for 2017. As a result, the Company expects its capital program to be entirely self-funded even with a drop in oil prices down to US$40 per barrel WTI
     
  • In 2017, the Company plans to self-fund a $180 million capital program that is poised to deliver double-digit production growth from the fourth quarter of 2016 to the fourth quarter of 2017 in our key development areas