Penn West Reports Second Quarter Financial and Operational Results

Penn West Petroleum (TSX:PWT,NYSE:PWE) announced its second quarter financial and operational results, which showed a gross revenue of C$360 million. The company also provided its 2015 guidance update.
Financial and operational highlights:

• Production in the second quarter was within guidance and averaged 91,164 boe per day.  In the quarter, volumes were reduced by approximately 1,000 boe per day by the divestiture of certain non-core assets and by approximately 2,000 boe per day from the voluntarily shut-in of volumes for economic reasons.
• To increase the transparency and comparability of funds flow, Penn West has introduced funds flow from operations, which excludes certain non-recurring and non-operationally related funds flow items. For further details, please refer to the Calculation of Funds Flow/Funds Flow From Operations below.
• Funds flow from operations, which excludes foreign exchange hedge monetizations/settlements and realized debt foreign exchange losses, was $79 million($0.16 per share) compared to $299 million ($0.61 per share – basic) in the comparative period in 2014. The decrease is primarily attributed to lower revenues due to declines in commodity prices and lower production volumes as a result of non-core asset disposition activity.
• Funds flow for the second quarter was $47 million ($0.09 per share – basic) compared to $298 million ($0.61 per share – basic) in the comparative period in 2014. The decrease is consistent with the reasons noted in funds flow from operations above plus realized foreign exchange losses on debt prepayments and maturities in the quarter.
• Development capital expenditures were $64 million during the second quarter of 2015 compared to $65 million in the second quarter of 2014. The Company’s development program was focused on completion work within the Cardium and Viking plays as overall activity levels were lower than the first quarter of 2015 due to spring break-up.

Outlook and revised 2015 guidance:

In December 2014, when Penn West last updated its 2015 capital budget, the forward strip for crude oil was in the range of the Company’s Canadian per barrel pricing assumption of C$65.00. Since that time, crude oil prices have declined. Accordingly, the Company has reduced its Canadian crude oil pricing assumption for full year 2015 to C$60.00 per barrel, which is approximately equivalent toUS$50.00 per barrel WTI adjusting for foreign exchange and transportation differentials. Consequently, the Company is updating its funds flow from operations guidance range from $500 – $550 million to $350 – $400 million.  The decrease in funds flow from operations guidance is largely attributed to lower benchmark oil and natural gas prices, although continued weakness in NGL realizations in the second half of 2015 could have a further impact on reported funds flow from operations.  Additionally, the capital budget has been reduced from $625 million to $575 millionas a result of a deferral of certain projects and reduced cost estimates.

Click here to read the full Penn West Petroleum (TSX:PWT,NYSE:PWE) press release.