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Penn West Exploration announces its 2013 capital budget

Thursday, Jan 10, 2013

CALGARY, Jan. 9, 2013 /PRNewswire/ - PENN WEST PETROLEUM LTD. (TSX - PWT) (NYSE - PWE) ("PENN WEST") is pleased to announce that the Board of Directors has approved its capital budget for 2013.

Penn West has a leading position in several emerging and established light-oil resource plays as well as numerous other large scale resource opportunities. Control of this quality asset base affords Penn West the ability to allocate capital to achieve a range of strategic goals. In the past several years, Penn West has balanced appraisal of its significant resource base with a meaningful dividend. In 2013, Penn West plans to remain committed to the dividend model and to improving capital efficiencies and production reliability. Over the long-term, Penn West remains focused on realizing the significant value inherent in our extensive light oil resource base. Consistent with this plan, the Board has approved a 2013 Base Capital Budget of $900 million with the possibility of an additional $300 million based on certain conditions, as described below.

Capital Budget

Penn West commenced lease preparation and drilling related activity through the latter half of the fourth quarter, with ten rigs operating by mid-December 2012, establishing momentum for the 2013 capital program.

The focus of the 2013 capital budget is to improve capital efficiencies by focusing capital on those projects that, on average, are expected to produce flowing barrel efficiencies in the $35,000 to $40,000 per boe per day range while also attaining a minimum 20 percent internal rate of return target. We adopted a more balanced pace of drilling, with the 2013 program peaking at approximately 20 rigs in the first quarter, versus 38 rigs in the first quarter of 2012. This strategy is expected to result in a more optimal level of activity from a capital efficiency perspective. Facilities expansion projects completed in 2011 and 2012 are expected to accommodate production volume additions in our key project areas in 2013.

The 2013 Base Capital Budget is $900 million and includes an option to layer in up to $300 million of incremental capital weighted in the second half of the year. This incremental capital is subject to commodity price and crude oil differential realizations, demonstrating expected capital efficiencies and ongoing strategic portfolio management. Penn West will announce in advance, if we plan to spend beyond the Base Capital Budget of $900 million.

SOURCE Penn West Exploration

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