Penn West Petroleum Ltd. explores for, develops and produces oil and natural gas throughout the Western Canadian Sedimentary Basin, which extends from southwest Manitoba up through Saskatchewan, Alberta and into northeast British Columbia. The company is a major light and medium oil producer in western Canada. Penn West is a publicly-traded corporation the common shares of which are listed on the Toronto Stock Exchange under the symbol PWT.

Production for the year ended December 31, 2010 averaged 98,966 barrels per day (bbl/d) of light oil and natural gas liquids and heavy oil (being 60% of 2010 production) and 394 million cubic feet per day (mmcf/d) of natural gas (being 40% of 2010 production) for a combined 164,633 barrels of oil equivalent per day (boe/d) (natural gas converted at 6000 cf = 1 bbl of oil). Proved plus probable gross reserves at December 31, 2010 were 455 million barrels (mmbbls) of oil and natural gas liquids (being 69% of 2010 total reserves) and 1,235 billion cubic feet (Bcf) of natural gas (being 31% of 2010 total reserves) for a total oil equivalent of 661 million barrels of oil equivalent (mmboe).

Penn West’s asset base consists of approximately 4.2 million acres of developed resource lands and approximately 2.1 million acres of undeveloped resource lands. Utilizing this land base, the company produces nearly every type of hydrocarbon and has exposure to most major resource plays in western Canada including the “Big Four” light oil plays: the Cardium light oil trend in west-central Alberta (670,000 net acres under lease, the largest of any Cardium producer), the Waskada play in southwest Manitoba (75,000 net acres), the Colorado group in southwest Saskatchewan (760,000 net acres), and the Carbonates trend in north-central Alberta (200,000 net acres). Associated with the company’s lands is extensive infrastructure including gathering systems, compressors, processing plants, oil batteries and field operating teams.

Production and reserves are derived from approximately 300 producing properties, which are primarily long-life properties with low decline rate reserves. The company’s properties include interests in several major oil and gas fields. The company holds high working interests in its properties and is the operator of a high proportion of its production.

In order to concentrate its capital in its core areas, the company arranges with other producers to swap its assets in less strategic areas for core area assets or sells less strategic assets for cash to be used in future acquisitions.

In the Peace River Area of northern Alberta, Penn West is partnering with a subsidiary of China Investment Corporation to develop 237,000 acres of land made up principally of in situ oil sands properties. Similarly, in northeast British Columbia the company is partnering with a subsidiary of Mitsubishi Corporation to develop the Cordova shale gas play, in which the partnership holds 120,000 acres. These partnership arrangements allow the company to commence work on more resource opportunities than it could possibly fund at one time by itself.

Through the application of enhanced recovery techniques such as the use of waterflood and hydrocarbon miscible flooding, Penn West is extracting hydrocarbons which would not have been obtainable using conventional primary production methods. Other techniques being evaluated or implemented include carbon dioxide miscible flood and cyclic steam stimulation. The use of enhanced recovery techniques allows the company to add reserves and production from the mature, conventional oil and gas properties which comprise a large part of its asset base.

Horizontal drilling and completion technologies, including the drilling of multiple wells from a single pad, have been utilized by the company at a number of projects covering a number of oil and gas plays. These technologies were utilized initially on an appraisal basis in 2010, and then deployed in full-scale development commencing in 2011. Cost reduction is a key factor in using these technologies due to their ability to access more reservoir rock per well, improve production rates, increase the speed at which oil and gas fields are developed, and reduce impacts on the surrounding land.

Predecessor company Penn West Petroleum Ltd. was formed in 1980 following the amalgamation of several small companies which had been established to operate within the oil and gas industry of Western Canada. Over the following years the company grew through the acquisition of producing and non-producing oil and gas properties. Many property acquisitions were realized through the acquisition of other oil and gas companies.

Corporate strategy evolved to centre on the acquisition of properties in which the company could obtain high working interests and operator status, and which would be compatible with the company’s existing operations and offer the potential for additional development.

By the end of 1998 proved plus probable gross reserves were 761 Bcf of natural gas and 52 mmbbls of oil and natural gas liquids. During that year production averaged 184 mmcf/d of natural gas and 13,998 bbl/d of oil and liquids. The company’s major producing assets, comprising light oil, natural gas and natural gas liquids, were located in the Minnehik-Buck Lake, Tangent and Heart River areas of central Alberta. Significant undeveloped land positions were also held in central Alberta. Large land positions were held for natural gas development in the Boyer area of northeast British Columbia and the Wildboy area of northern Alberta. These would be the subject of intense development activity over the following years. The Company also possessed natural gas and heavier grade oil operations and significant land positions in the Wainwright, Esther and Hoosier areas of eastern Alberta. Oil and gas production and undeveloped land in the Peace River Arch area of Alberta and in southeast Saskatchewan rounded out the company’s portfolio.

In August 1999 the company acquired essentially all of BP Amoco’s Canadian light oil production, more than doubling the company’s production base in central Alberta and increasing the production base in the Hoosier area by 175%.

During 2002 Penn West acquired a majority interest in the South Swan Hills light oil property in central Alberta. This acquisition and a number of smaller ones made in central Alberta during the first years of the new millennium bolstered the company’s dominant position in the region. Penn West also began to pursue coal bed methane development in the region.

Beginning in 2002, Penn West began acquiring oil sands leases in the Peace River region of Alberta, in particular in the Seal Main, Seal North and Cadotte areas. Initial production was achieved through the use of cold pumping, with thermal techniques slated for later stages.

In August 2004 Penn West’s board of directors recommended that the company convert itself into an income trust. This change would bring about significant changes to the business, including the redirection of the larger part of the cash flow of the business from investment activities to distributions made to income trust unitholders, and the reorientation of the business from higher risk exploration activities to lower risk development and production activities. A key attraction for investors in the business was the regular distributions to be paid to them as income trust unitholders. In May 2005 the company completed its conversion into Penn West Energy Trust.

The conversion occurred as improving economics in the oil and gas sector fuelled intense merger and acquisition activity. Penn West moved to become an industry consolidator. In June 2006 the trust acquired Petrofund Energy Trust, increasing Penn West’s production by more than forty percent and creating the largest conventional oil and gas trust in North America. The acquisition included interests in the Weyburn and Midale oil pools of southeast Saskatchewan and the Waskada oil pool of southwestern Manitoba.

In January 2008 Penn West acquired both Vault Energy Trust and Canetic Resources Trust, adding 130 mmbbls of light and medium oil and natural gas liquids, 17 mmbbls of heavy oil and 638 Bcf of natural gas on a proved plus probably reserve basis. These acquisitions were on top of a major acquisition of light and medium oil and natural gas liquids properties in the Peace River oil sands region and an adjoining area during 2007. As a result of this acquisition activity, Penn West consolidated properties in its core areas and added properties in other areas, developing what was likely the broadest asset base in the oil and gas industry in Western Canada.

In the Autumn of 2006 the Canadian federal government had announced changes which would remove the favourable income tax treatment enjoyed by income trusts vis-à-vis corporations. As a result, the many publicly-traded income trusts listed on the Toronto Stock Exchange, citing the greater opportunities for growth and enhanced access to capital enjoyed by corporations, began converting themselves back into corporations over the following years.

Penn West converted from an income trust to a corporate structure under the name Penn West Petroleum Ltd. at the beginning of 2011. This conversion brought with it a strategic shift from an organization dedicated to steady returns from a relatively unchanging asset base to an organization focused on growth and the development of new business opportunities within the oil and gas industry.

Penn West is an environmental leader in site reclamation and environmental spending. The company is committed to identifying, evaluating and minimizing the environmental impacts in the communities where it operates, meeting or exceeding statutory and regulatory provisions, and involving stakeholders throughout the exploration, development, production and abandonment/reclamation phases.

The company’s commitment encompasses many responsibilities, in particular conserving water and other resources, minimizing the production of waste, abandoning and reclaiming sites in a timely way, complying with environmental regulations, and improving environmental data tracking.

The company continues to maintain its Gold Level Status in the Canadian GHG Challenge Registry, an organization formed as a cooperative effort by industry, government and environmental organizations to identify and reduce greenhouse gases such as carbon dioxide. Penn West is a key contributor to the Responsible Canadian Energy™ program of the Canadian Association of Petroleum Producers (CAPP). This program is an association-wide performance reporting program to demonstrate progress in environmental, health, safety and social performance. In 2007 the company joined the Carbon Disclosure Project (CDP) and is one of the 15 listed issuers on the Toronto Stock Exchange which are recognized for the quality of their GHG emissions disclosure and goals.

Safety is an integral part of Penn West’s operating philosophy and safety compliance is a condition of employment. Workplace safety plays a vital role in Penn West’s operations and in the efforts to protect its employees, contractors’ employees, the public and the environment.

Through an emphasis on employee and contractor training, and the fostering of a proactive health and safety culture, Penn West meets its health and safety goals. Critical to this performance is a focus on front-line leadership which charges each manager and supervisor with the responsibility of leading by example. The company’s Safety Leadership training was taken by more than 200 managers and supervisors during both 2009 and 2010.

Penn West is committed to providing employees with the support to enhance physical health and mental well-being. The company’s Corporate Health program emphasizes taking care of employees, creating a positive work environment, and being cognizant of factors which keep employees healthy and satisfied at work and at home. One manifestation of this approach was the opening of a fitness centre and daycare at head office in Calgary in 2010.

Murray R. Nunns President & CEO

Murray is a Professional Geologist with 30 years of growth oriented oil and natural gas experience, and brings to Penn West a long history of consistent success as an exploration and operational executive. His broad geotechnical exposure includes international oil and natural gas portfolio management with Unocal. From 1993 to 2002, Murray held a series of management positions at Rio Alto Exploration Ltd. including Senior Vice President of Exploration and Development and Chief Operating Officer. Since 2003, he has been involved in the formation and direction of several successful public and private oil and gas companies. Murray was a member of the Board of Directors of Penn West from 2005 until January 2008 when he joined Penn West in his current capacity.

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