The combination will form the largest conventional oil & gas
trust in North America and create a world-class Canadian platform
to compete against global energy companies and deliver superior
unitholder returns. The Combined Trust will have a diverse and high
quality asset base, a large portfolio of development opportunities,
an experienced and strong organization, and a healthy balance sheet
with significant financial capacity. CALGARY, Oct. 31
/PRNewswire-FirstCall/ -- Penn West Energy Trust ("Penn West") (TSX
- PWT.UN; NYSE - PWE) and Canetic Resources Trust ("Canetic") (TSX
- CNE.UN; NYSE - CNE) are pleased to announce that they have
entered into a combination agreement (the "Combination Agreement")
that provides for the strategic combination of Penn West and
Canetic to form Canada's flagship energy trust (the "Combined
Trust"). The Combined Trust will be the largest conventional oil
and gas trust in North America with an enterprise value of over
C$15 billion and current production of over 200,000 barrels of oil
equivalent ("boe") per day. The combined asset portfolio will
include interests in a significant number of Western Canada's
highest quality conventional oil and natural gas pools and will
also include a number of non-conventional growth opportunities
including oil sands, coalbed methane, shale gas and enhanced oil
recovery. At closing, this strategic merger of assets and people
will operate under the Penn West name and will be led by a combined
management team and Board of Directors. Under the terms of the
Combination Agreement, Canetic unitholders will receive 0.515 of a
Penn West unit for each Canetic unit on a tax-deferred basis for
Canadian and U.S. tax purposes. Immediately prior to the closing of
the combination, a one-time special distribution of $0.09 per unit
will be paid to Canetic unitholders. The special distribution will
keep Canetic unitholders whole, in cash distributions, for a period
of six months. Canetic unitholders will receive an aggregate value
of C$15.84 per Canetic unit based on the closing price of Penn West
units on the Toronto Stock Exchange ("TSX") as at October 30, 2007
which represents a premium of 7.1 percent to the closing price of
Canetic units on the TSX as at October 30, 2007. On completion of
the combination, Penn West unitholders will own approximately 67
percent and Canetic unitholders will own approximately 33 percent
of the Combined Trust. Penn West units will continue to be listed
on both the TSX and the New York Stock Exchange ("NYSE"). The
combination is subject to stock exchange, court and regulatory
approval, and the approval of at least 66 2/3 percent of Canetic
unitholders. It is expected that the Canetic unitholder meeting to
vote on the combination and closing will occur in mid January 2008.
An Information Circular is expected to be mailed to unitholders of
Canetic in December 2007. Highlights of the Combined Trust -
Creates Canada's flagship energy trust and the dominant independent
light oil producer in Western Canada with production of
approximately 200,000 to 210,000 boe per day in 2008 and
conventional proven plus probable reserves in excess of 800 million
boe - A large inventory of unconventional opportunities including a
multi-billion barrel (discovered heavy oil resources in place)
Peace River Oil Sands Project, coalbed methane, shale gas and
enhanced recovery from Canada's largest legacy light oil pools -
The increased size will assist in the future development of both
its conventional and unconventional growth opportunities - Pro
forma asset base rivals senior North American exploration and
production companies providing added flexibility in positioning the
Combined Trust for 2011 and beyond - The combined assets exhibit a
compelling overlap and similarities in operating philosophies,
which improve operating efficiencies, field optimization and cost
reductions availed by economies of scale. The Combined Trust will
operate approximately 80 percent of its production - The larger
size of the Combined Trust is expected to enhance liquidity on the
Toronto Stock Exchange and New York Stock Exchange, increase its
weighting in major indices including the S&P/TSX 60 Index and
should receive increased attention from both equity and income
investors - Increased liquidity and enhanced financial flexibility
will allow expansion both domestically and internationally -
Estimated cash flow for 2008 of $2.0 to $2.2 billion and a capital
program of $900 million to $1 billion directed to further enhance
the combined asset portfolio - Combined tax pools of over $5.5
billion at the end of 2007, plus the ability to increase the tax
base using the trust model over the next three years, results in an
efficient tax position well beyond 2011 - Safe harbour capacity for
the issuance of new units under the Undue Expansion rules set out
for income trusts by the Canadian Government will expand to
approximately $8.7 billion on an equity basis in 2008, and
approximately $15 billion on an equity basis in total - Management
team and Board of Directors which combines the best and most
experienced personnel from each organization William E. Andrew,
President and Chief Executive Officer of Penn West, said, "We are
bringing together two great organizations with world-class assets
and people to create an aggressive Canadian player in the global
markets. The Combined Trust will be well positioned to compete in
North America and internationally." J. Paul Charron, President and
Chief Executive Officer of Canetic, commented, "As I have stated
many times in the past, sitting still in today's dynamic market is
not an option. This strategic combination brings together two
organizations with complementary strategies, asset bases and
management teams resulting in a strong shared future. I believe the
Combined Trust is more than the sum of its parts." Combined
Management The Combined Trust will be led by William E. Andrew as
Chief Executive Officer, J. Paul Charron as President and David W.
Middleton as Chief Operating Officer, and will include senior
management from both Penn West and Canetic including: Richard J.
Tiede, Senior Vice President, Business Development Thane A.E.
Jensen, Senior Vice President, Exploration & Development Todd
H. Takeyasu, Senior Vice President, Finance - Treasury David J.
Broshko, Senior Vice President, Finance - Financial Reporting Mark
P. Fitzgerald, Senior Vice President, Operations Eric J. Obreiter,
Senior Vice President, Production Brian D. Evans, Senior Vice
President, General Counsel & Corporate Secretary Keith Luft,
Senior Vice President, Stakeholder Relations Combined Board of
Directors The combined Board of Directors will be drawn from the
existing boards of Penn West and Canetic and will be led by John A.
Brussa from the Penn West board as Chairman and by Jack C. Lee from
the Canetic board as Vice Chairman. Pro Forma Distributions It is
anticipated that the Combined Trust's distribution will be set at
C$0.34 per unit per month beginning with the first distribution
payable following completion of the combination. It is expected
that this distribution level will result in a 2008 payout ratio of
approximately 67 percent to 72 percent. If the closing of the
combination proceeds as planned, Canetic unitholders will receive
their first $0.34 monthly distribution effective with the January
2008 Penn West distribution, payable on or about February 15, 2008.
Key Operating and Financial Information for the Combined Trust
Estimated 2008 Production (boe/d)(1) 200,000 to 210,000 boe/d 45%
light oil & NGLs 42% natural gas 13% heavy oil Pro Forma Market
Capitalization(2) $11.4 billion Pro Forma Debt(2) $3.9 billion Pro
Forma Enterprise Value $15.3 billion Pro Forma Reserve Estimates(3)
Proved (mmboe) 600 Proved plus Probable (mmboe) 800 Reserve Life
Index (P+P)(4) 11 years Estimated 2008 Cash Flow(5) $2.0 to $2.2
billion Estimated 2008 Capital Program $900 million to $1 billion
Proposed Initial Monthly Distributions per Unit $0.34 CDN Total
Debt to 2008E Cash Flow Ratio 1.8 to 1.9 times Total Debt to 2008E
EBITDA 1.6 to 1.7 times Trust Units Outstanding(6) 372 million
Undeveloped Land Base (net acres) 4.3 million Notes: (1) Includes
estimated production contribution from the pending acquisitions of
Vault Energy Trust ("Vault") and Titan Exploration Ltd. ("Titan").
(2) Forecast debt outstanding at December 31, 2007, pro forma the
Vault and Titan acquisitions and including the estimated
transaction costs and the special distribution payment to Canetic
unitholders. The market capitalization is calculated based on the
October 30, 2007 Penn West unit price of $30.59. (3) Represents the
sum of independent reserve reports for Canetic and Penn West,
adjusted for acquisitions and dispositions in 2007, as at December
31, 2006 (pro forma the pending Vault and Titan acquisitions). (4)
Based on reserves as at December 31, 2006 (pro forma the pending
Vault and Titan acquisitions) and estimated current production. (5)
Based on budgeted prices of US$75/bbl WTI for oil, $7.00/mcf at
AECO for natural gas and a par USD/CAD exchange rate. (6) Pro forma
the Vault and Titan acquisitions and reflecting the proposed
combination. About the Transaction The Boards of Directors of Penn
West and Canetic have unanimously approved the Combination
Agreement and have concluded that the transaction is in the best
interests of the Penn West and Canetic unitholders, respectively.
The Canetic Board of Directors and Officers have agreed to vote
their Canetic trust units in favour of the proposed combination and
also recommend that the unitholders of Canetic vote their units in
favour of the proposed combination. Penn West and Canetic have
agreed that they will not solicit or initiate any discussions
concerning the pursuit of any other business combination. Penn West
and Canetic have each agreed to pay a non-completion fee of $125
million to the other in certain circumstances. In addition, each
party has the right to match any competing proposal for the other,
in the event such a proposal is made. Alberta Government Royalty
Review Penn West and Canetic are currently reviewing the impact of
the proposed New Royalty Framework set out by the Province of
Alberta on October 25, 2007. Based upon preliminary analysis, Penn
West and Canetic believe the new royalty regime will impact both
trusts in a similar fashion. The Combined Trust has a strong suite
of projects for future exploration and development and will
strategically allocate capital to maximize returns to unitholders.
Previously Announced Transactions It is Penn West's intention to
complete the previously announced acquisition of Vault Energy Trust
("Vault") and it is Canetic's intention to complete the previously
announced acquisition of Titan Exploration Ltd. ("Titan"). The
Combination Agreement is not conditional on either of these
transactions proceeding. Advisors Scotia Waterous Inc. is acting as
financial advisor to Penn West with respect to the transaction.
Scotia Waterous Inc. has advised the Board of Directors of Penn
West that it is of the opinion, as of the date hereof, that the
consideration to be offered by Penn West pursuant to the proposed
combination is fair from a financial point of view to Penn West
unitholders. CIBC World Markets Inc. and RBC Capital Markets are
acting as strategic advisors to Penn West. BMO Capital Markets and
TD Securities Inc. are acting as financial advisors to Canetic with
respect to the transaction. BMO Capital Markets has advised the
Board of Directors of Canetic that it is of the opinion, as of the
date hereof, that the consideration to be received by Canetic
unitholders is fair from a financial point of view to Canetic
unitholders. Investor Conference Call and Webcast A joint
conference call has been scheduled for Wednesday, October 31st at
8:00am Calgary time/10:00am Toronto time to discuss the
combination. Members of the investment community may participate by
dialing 1-800-926-9801 within North America and +212-231-2904
outside of North America. A media conference will be conducted on
Wednesday, October 31st at 10:00 am Calgary Time in the Turner
Valley Room of the Palliser Hotel in Calgary. The presentation
slide show will be available in PDF format for download from the
Penn West and Canetic websites (http://www.pennwest.com/ and
http://www.canetictrust.com/) in advance of the call. A replay of
the joint conference call will be available approximately one hour
after completion of the conference call until Wednesday, November
7, 2007 by calling 1-800-558-5253 or 1-416-626-4100 and entering
the pass code 21354190 followed by the number sign. About Penn West
Penn West Energy Trust is Canada's largest oil and natural gas
energy trust based in Calgary, Alberta that trades on the TSX under
the symbol PWT.UN and on the New York Stock Exchange under the
symbol PWE. About Canetic Canetic is one of Canada's largest oil
and gas royalty trusts. Canetic units and debentures are listed on
the TSX under the symbols CNE.UN, CNE.DB.A, CNE.DB.B, CNE.DB.C,
CNE.DB.D, and CNE.DB.E. Canetic units are also listed on the New
York Stock Exchange under the symbol CNE. Advisory Regarding
Forward-Looking Statements This press release contains
forward-looking statements and forward-looking information within
the meaning of applicable securities laws. The use of any of the
words "expect", "anticipate", "continue", "estimate", "objective",
"ongoing", "may", "will", "project", "should", "believe", "plans",
"intends" and similar expressions are intended to identify
forward-looking information or statements. More particularly and
without limitation, this press release contains forward looking
statements and information concerning the Combined Trust's
petroleum and natural gas production, reserves and resources;
undeveloped land holdings; reserve life index; business strategy;
future development and growth opportunities; prospects; asset base;
anticipated benefits from the transaction including improved
operating efficiencies, field optimizations and cost reductions;
enhanced liquidity and increased investor attention; future cash
flows, distributions and payout ratios; value and debt levels;
capital programs; future tax pools and positions; treatment under
tax laws; oil and natural gas prices; the impact of the Province of
Alberta's new royalty regime; and the completion of
previously-announced acquisitions. The forward-looking statements
and information are based on certain key expectations and
assumptions made by Penn West and Canetic, including expectations
and assumptions concerning prevailing commodity prices and exchange
rates, applicable royalty rates and tax laws; future well
production rates and reserve and resource volumes; the timing of
receipt of regulatory and securityholder approvals, the performance
of existing wells; the success obtained in drilling new wells; and
the sufficiency of budgeted capital expenditures in carrying out
planned activities; and the availability and cost of labour and
services. Although Penn West and Canetic believe that the
expectations and assumptions on which such forward-looking
statements and information are based are reasonable, undue reliance
should not be placed on the forward-looking statements and
information because Penn West and Canetic can give no assurance
that they will prove to be correct. Since forward-looking
statements and information address future events and conditions, by
their very nature they involve inherent risks and uncertainties.
Actual results could differ materially from those currently
anticipated due to a number of factors and risks. These include,
but are not limited to, the risks associated with the oil and gas
industry in general such as operational risks in development,
exploration and production; delays or changes in plans with respect
to exploration or development projects or capital expenditures; the
uncertainty of reserve estimates; the uncertainty of estimates and
projections relating to reserves, production, costs and expenses;
health, safety and environmental risks; commodity price and
exchange rate fluctuations, marketing and transportation, loss of
markets, environmental risks, competition, incorrect assessment of
the value of acquisitions, failure to realize the anticipated
benefits of acquisitions, ability to access sufficient capital from
internal and external sources, failure to obtain required
regulatory and other approvals, and changes in legislation,
including but not limited to tax laws and environmental
regulations. There are risks also inherent in the nature of the
proposed transaction, including failure to realize anticipated
synergies or cost savings; risks regarding the integration of the
two entities; incorrect assessments of the values of the other
entity; and failure to obtain the required securityholder, court,
regulatory and other third party approvals. This press release also
contains forward-looking statements and information concerning the
anticipated completion of the proposed transaction and the
anticipated timing for completion of the transaction. Penn West and
Canetic have provided these anticipated times in reliance on
certain assumptions that they believe are reasonable at this time,
including assumptions as to the time required to prepare meeting
materials for mailing, the timing of receipt of the necessary
regulatory and court approvals and the time necessary to satisfy
the conditions to the closing of the transaction. These dates may
change for a number of reasons, including unforeseen delays in
preparing meeting materials, inability to secure necessary
regulatory or court approvals in the time assumed or the need for
additional time to satisfy the conditions to the completion of the
transaction. Accordingly, readers should not place undue reliance
on the forward-looking statements and information contained in this
press release concerning these times. Readers are cautioned that
the foregoing list of factors is not exhaustive. Additional
information on these and other factors that could affect Penn
West's, Canetic's or the Combined Trust's operations or financial
results are included in reports on file with applicable securities
regulatory authorities and may be accessed through the SEDAR
website (http://www.sedar.com/), the SEC's website
(http://www.sec.gov/) or, in the case of Penn West, at Penn West's
website (http://www.pennwest.com/), and in the case of Canetic, at
Canetic's website (http://www.canetictrust.com/). The
forward-looking statements and information contained in this press
release are made as of the date hereof and Penn West and Canetic
undertake no obligation to update publicly or revise any
forward-looking statements or information, whether as a result of
new information, future events or otherwise, unless so required by
applicable securities laws. Barrels of Oil Equivalent "Boe" means
barrel of oil equivalent on the basis of 1 boe to 6,000 cubic feet
of natural gas. Boe's may be misleading, particularly if used in
isolation. A boe conversion ratio of 1 boe for 6,000 cubic feet of
natural gas is based on an energy equivalency conversion method
primarily applicable at the burner tip and does not represent a
value equivalency at the wellhead. Non-GAAP Measures This press
release uses the terms "payout ratio" and "EBITDA" (earnings before
interest, taxes, depreciation and amortization), which as presented
do not have any standardized meanings under Canadian generally
accepted accounting principles ("GAAP") and therefore such measures
may not be comparable to similar measures for other entities.
"Payout ratio" is calculated as cash distributions divided by cash
flow from operating activities. "EBITDA" is used by management to
analyze operating performance but should not be viewed as an
alternative to cash flow from operating activities, net income or
other measures of financial performance calculated in accordance
with GAAP. Important Additional Information Will Be Filed With the
SEC In connection with the proposed transaction, Penn West intends
to, if required, file relevant materials with the Securities and
Exchange Commission (the "SEC") on a Registration Statement on Form
F-10 (the "Registration Statement") to register the Penn West Units
(the "Units") to be issued in connection with the proposed
transaction. Investors and unitholders are urged to read the
Registration Statement and any other relevant documents to be filed
with the SEC when available because they will contain important
information about Penn West and Canetic, the transaction and
related matters. Investors and unitholders will be able to obtain
free copies of the Registration Statement and other documents filed
with the SEC by Penn West through the website maintained by the SEC
at http://www.sec.gov/. In addition, investors and unitholders will
be able to obtain free copies of the Registration Statement and
such other documents when they become available from Penn West by
contacting Penn West Investor Relations at or by telephone at
1-888-770-2633. DATASOURCE: Canetic Resources Trust CONTACT: Shane
Silverberg, Manager, Investor Relations, Penn West Energy Trust,
Suite 2200, 425 - First Street SW, Calgary, Alberta, T2P 3L8, Tel:
(403) 777-2502, Toll Free in North America: 1-888-770-2633, Fax:
(403) 777-2699, E-mail: , Website: http://www.pennwest.com/; Dean
Morrison Director, Investor Relations & Communications, Canetic
Resources Trust, Suite 1900, 255 - 5th Avenue SW, Calgary, Alberta,
T2P 3G6, Tel: (403) 539-6300, Toll Free in North America:
1-877-539-6300, Fax: (403) 539-6499, E-mail: , Website:
http://www.canetictrust.com/
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