Corporate Strategy

- Penn West continued to focus on positioning the company to move from a trust to a corporate model prior to the end of 2011. In the future we will primarily use a combination of organic growth and dividends to provide a return on capital that will position us with the other senior independent North American oil and gas producers. Prior to the conversion to an exploration and production corporation, we will continue our focus on the advancement of our large scale resource plays within our existing suite of assets. As our results to date are promising, we will allocate a greater portion of our 2010 capital budget to drilling horizontal multi-stage frac wells within our oil resource plays. Our aim is to apply this technology to increase production and reserves from these large resources with a particular near-term emphasis on those plays that focus on crude oil, such as Waskada, Dodsland, Pembina and Leitchville. This will greatly expand our inventory of locations with a focus on reducing risk, while providing the type of scale necessary to move the company forward.

Operations

- Third quarter production averaged 178,124 (1) boe per day and was weighted 59 percent to oil and natural gas liquids.

- Production for the first nine months of 2009 averaged 179,600 boe per day which is at the higher end of our guidance of approximately 175,000 to 180,000 boe per day. During the first nine months of 2009, Penn West had net dispositions of approximately 3,000 boe per day.

- Crude oil and NGL production averaged 104,583 barrels per day and natural gas production averaged approximately 441 mmcf per day in the third quarter of 2009.

- Development capital expenditures were $171 million in the third quarter of 2009 or $142 million net of $29 million of net asset dispositions. In the quarter, we drilled a total of 36 net wells, including 29 horizontal multi-stage frac wells, with a success rate of 100 percent.

Financial Results

- Funds flow (2) of $349 million in the third quarter of 2009 was 19 percent lower than the $430 million in the second quarter of 2009 and 47 percent lower than the $662 million realized in the third quarter of 2008. On a per-unit-basis (2) basic funds flow was $0.84 per unit in the third quarter of 2009 compared to $1.05 per unit in the second quarter of 2009 and $1.73 per unit in the third quarter of 2008. The decline in funds flow from the second quarter of 2009 was due to $75 million of realized gains in the second quarter as a result of monetizing foreign exchange forward contracts.

- Net income was $7 million ($0.02 per unit-basic) in the third quarter of 2009 compared to a net loss of $41 million ($0.10 per unit-basic) in the second quarter of 2009 and net income of $1,062 million ($2.78 per unit-basic) in the third quarter of 2008. The significantly higher income in the prior year was primarily due to unrealized risk management gains on our oil and natural gas collars.

- The netback (2) of $25.91 per boe in the third quarter of 2009 was one percent higher than the second quarter of 2009 and 40 percent lower than the third quarter of 2008. The decline from 2008 was primarily due to lower commodity prices.

- In the first nine months of 2009, Penn West's net debt (2) was reduced by approximately $600 million (3).

(1) Please refer to the "Oil and Gas Information Advisory" section below for information regarding the term "boe".

(2) The terms "funds flow", "funds flow per unit-basic", "netback" and "net debt" are non-GAAP measures. Please refer to the "Calculation of Funds Flow" and "Non-GAAP Measures Advisory" sections below. Funds flow for the first nine months of 2009 includes $75 million of gains realized from foreign exchange contracts, including monetizing the remainder of the 2009 contracts entered to hedge the currency risk on US Dollar denominated oil prices, which occurred in June 2009.

(3) Consists of the change in long-term debt, convertible debentures and working capital (excluding future income taxes and risk management), per the Consolidated Balance Sheets.

Business Environment

- Oil prices in the third quarter of 2009 averaged WTI US$68.29 per barrel and appreciated from an average of WTI US$59.62 per barrel in the second quarter of 2009. The price of crude oil increased throughout 2009 due to optimism the economic recovery is continuing. In the third quarter of 2008, oil prices averaged WTI US$118.13 per barrel. The year over year decline in the benchmark WTI oil price was primarily due to decreased demand for distillate products.

- The AECO Monthly Index averaged $2.87 per GJ in the third quarter of 2009 compared to $8.78 per GJ for the same period in 2008 and $3.47 per GJ in the second quarter of 2009. The price for natural gas continues to be impacted by lower industrial demand and high inventory levels.

- Subsequent to September 30, 2009, spot crude oil prices have recovered to a year to date high above WTI US$81.00 per barrel and spot natural gas prices to approximately $5.00 per GJ at AECO.

Financing

- As at September 30, 2009, Penn West had $1.8 billion of unused credit capacity on our bank facility.

- On November 4, 2009, the Board of Directors approved the cancellation of tranche two of the bank facility. This revolving tranche totals $750 million and is non-extendible. Penn West's unused credit capacity after this cancellation will be approximately $1.0 billion.

- Subsequent to the end of the third quarter, Penn West entered into additional crude oil collars for 2010 on 5,000 barrels per day with an average floor of US$75.00 per barrel and an average ceiling of US$90.86 per barrel.

Distributions

- Penn West's Board of Directors resolved to maintain the Trust's distribution level at $0.15 per unit, per month, subject to maintenance of current forecasts of commodity prices, production levels and finalization of the 2010 capital budget.

Quarterly Financial Summary
(millions, except per unit and production amounts)
                                      Sep. 30,  June 30,  Mar. 31,  Dec. 31,
Three months ended                       2009      2009      2009      2008
----------------------------------------------------------------------------
Gross revenues (1)                   $    800  $    791  $    781  $    968
Funds flow                                349       430       348       490
 Basic per unit                          0.84      1.05      0.87      1.27
 Diluted per unit                        0.83      1.05      0.87      1.26
Net income (loss)                           7       (41)      (98)      404
 Basic per unit                          0.02     (0.10)    (0.25)     1.05
 Diluted per unit                        0.02     (0.10)    (0.25)     1.04
Distributions declared                    188       188       276       393
 Per unit                            $   0.45  $   0.45  $   0.69  $   1.02
Production
Liquids (bbls/d) (2)                  104,583   104,070   105,643   105,644
Natural gas (mmcf/d)                      441       459       447       476
----------------------------------------------------------------------------
Total (boe/d)                         178,124   180,601   180,096   184,908
----------------------------------------------------------------------------
(1) Gross revenues include realized gains and losses on commodity contracts.
(2) Includes crude oil and natural gas liquids.
HIGHLIGHTS
                             Three months ended           Nine months ended
                                   September 30                September 30
                            ------------------------------------------------
                                              %                           %
                         2009      2008  change      2009      2008  change
----------------------------------------------------------------------------
Financial
(millions, except
 per unit amounts)
Gross revenues (1)    $   800  $  1,235     (35) $  2,372  $  3,683     (36)
Funds flow                349       662     (47)    1,127     2,047     (45)
 Basic per unit          0.84      1.73     (51)     2.75      5.49     (50)
 Diluted per unit        0.83      1.71     (51)     2.74      5.41     (49)
Net income (loss)           7     1,062     (99)     (132)      817    (100)
 Basic per unit          0.02      2.78     (99)    (0.32)     2.19    (100)
 Diluted per unit        0.02      2.73     (99)    (0.32)     2.17    (100)
Capital expenditures,
 net (2)                  142       232     (39)      319       757     (58)
Long-term debt at
 period-end             3,559     3,679      (3)    3,559     3,679      (3)
Convertible debentures    273       328     (17)      273       328     (17)
Distributions paid(3) $   188  $    388     (52) $    721  $  1,108     (35)
Payout ratio (4)           54%       59%     (5)       64%       54%     10
Operations
Daily production
 Light oil and NGL
  (bbls/d)             77,513    78,762      (2)   78,141    80,792      (3)
 Heavy oil (bbls/d)    27,070    28,136      (4)   26,621    27,646      (4)
 Natural gas (mmcf/d)     441       500     (12)      449       495      (9)
----------------------------------------------------------------------------
Total production
 (boe/d)              178,124   190,177      (6)  179,600   190,991      (6)
----------------------------------------------------------------------------
Average sales price
 Light oil and NGL
  (per bbl)           $ 64.15  $ 110.45     (42) $  55.58  $ 103.65     (46)
 Heavy oil (per bbl)    58.72     98.07     (40)    50.94     86.12     (41)
 Natural gas
  (per mcf)              3.13      8.49     (63)     4.05      8.88     (54)Netback per boe
 Sales price          $ 44.58  $  83.23     (46) $  41.85  $  79.73     (48)
 Risk management
  gain (loss)            4.17    (11.69)    100      6.41     (9.03)    100
----------------------------------------------------------------------------
 Net sales price        48.75     71.54     (32)    48.26     70.70     (32)
 Royalties              (7.41)   (15.23)    (51)    (7.12)   (14.27)    (50)
 Operating expenses    (14.90)   (12.49)     19    (14.87)   (12.01)     24
 Transportation         (0.53)    (0.49)      8     (0.52)    (0.49)      6
----------------------------------------------------------------------------
 Netback              $ 25.91  $  43.33     (40) $  25.75  $  43.93     (41)
----------------------------------------------------------------------------
(1) Gross revenues include realized gains and losses on commodity contracts.
(2) Excludes business combinations and includes net proceeds on property
    acquisitions/dispositions.
(3) Includes distributions paid prior to those reinvested in trust units
    under the distribution reinvestment plan.
(4) Payout ratio is calculated as distributions paid divided by funds flow.
DRILLING PROGRAM
                              Three months ended          Nine months ended
                                    September 30               September 30
                        ----------------------------------------------------
                               2009         2008          2009         2008
                        ----------------------------------------------------
                         Gross  Net   Gross  Net    Gross  Net   Gross  Net
----------------------------------------------------------------------------
Oil                         33   27      85   46       69   49     189  102
Natural gas                 11    4      97   40       32   12     202   92
Dry                          -    -       2    2        1    1       8    8
----------------------------------------------------------------------------
                            44   31     184   88      102   62     399  202
Stratigraphic and service    5    5      10   10        8    7      36   34
----------------------------------------------------------------------------
Total                       49   36     194   98      110   69     435  236
----------------------------------------------------------------------------
Success rate (1)                100%          98%           99%          96%
----------------------------------------------------------------------------
(1) Success rate is calculated excluding stratigraphic and service wells.

In response to the decline in commodity prices due to financial market turmoil, Penn West reduced its 2009 development programs compared to 2008 and successfully focused its efforts on less capital intensive production restoration and optimization activities to maintain its production.