Penn West Energy Trust is pleased to announce its results for the third quarter ended September 30, 2010.
Business Strategy
Penn West's dominance in light-oil plays in Western Canada and its unequalled portfolio of land combined with the application of horizontal multi-stage fracture technology to these assets has generated over 8,000 drilling locations, including 3,800 specific locations and an additional 4,200 potential locations defined by geological mapping.
Penn West continues to focus its capital investments on resource plays in the Cardium trend in Alberta, the Colorado Viking trend in Alberta and Saskatchewan, the Amaranth trend in Manitoba and the Carbonates trend in northern
Penn West has accelerated the appraisal of its heavy oil assets through the Peace River Oil Partnership and its unconventional natural gas assets in the Cordova Embayment area of northeastern British Columbia through its joint venture with Mitsubishi Corporation ("Mitsubishi").
Due to strong drilling results thus far in 2010, $150 million was added to the capital program in the third quarter. Penn West's revised estimate of 2010 capital expenditures is approximately $1.0 billion.
Penn West's 2011 exploration and development capital program will be in the range of $1.0 - $1.2 billion. Approximately 85 percent of spending will be focused on light-oil projects.
Yesterday, the Board of Penn West approved management's plans for the conversion of Penn West to an exploration and production corporation ("E&P") on or about January 1, 2011. The expected date for the special meeting at which unitholders will be asked to approve the conversion is December 14, 2010. Penn West will circulate an information circular and proxy statement to unitholders on record in mid-November.
Operations
Year to date capital expenditures totalled $787 million and included $92 million of land acquisitions which further strengthened Penn West's positions in its resource plays. Exploration and development capital expenditures were $293 million in the third quarter of 2010.
Third quarter production averaged 164,087 (1) boe per day and was weighted 60 percent to liquids and 40 percent to natural gas. Production for the first nine months of 2010 averaged 164,123 boe per day.
Penn West will drill approximately 320 wells in 2010. At the end of the third quarter, 110 wells were on production with approximately 160 wells scheduled to be tied in during the fourth quarter of 2010. The remaining 50 wells will be tied in during the first quarter of 2011.
Cordova Joint Venture
On September 23, 2010, Penn West closed a joint venture agreement with a subsidiary of Mitsubishi to develop Penn West's unconventional natural gas assets located in the Cordova Embayment in northeastern British Columbia. Penn West sold a 50 percent interest in these assets including approximately 2,800 boe per day of production. In exchange, Penn West received approximately $250 million of cash and Mitsubishi's commitment to fund $600 million of the first $800 million of exploration and development expenditures.
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