Penn West's corporate strategy is to provide shareholder return through a combination of oil production growth and a stable dividend. We have focused investment over the past several years on establishing the growth potential of the largest light-oil inventory in Western Canada. In three years, we have proven that we can execute on a large scale using horizontal multi-stage fracture technology. We have applied the technology from a standing start to producing over 35,000 boe per day from horizontal wells. We acquired complimentary land positions in our existing plays and emerging trends with a strong weighting to oil. Throughout this period, we maintained capital discipline, increased the term of our debt capital and disposed of non-core assets to partially fund our capital programs while conserving our balance sheet. The first quarter results are a product of our approach to the business.

• Average production in the first quarter of 2012 was 167,420 boe ⁽¹⁾ per day, after the effect of approximately 4,500 boe per day of asset dispositions in January, compared to 168,801 boe per day for the fourth quarter of 2011. 
• First quarter average liquids production was in excess of 107,000 boe per day, of which approximately 90 percent was oil.
• Capital expenditures for the first quarter of 2012, including net property dispositions, totalled $338 million compared to $436 million for the first quarter of 2011. Our capital guidance for 2012 remains $1.3 billion to $1.4 billion, net of acquisition and disposition activity in the first quarter of 2012.
• Funds flow ⁽²⁾ was $337 million ($0.71 per share - basic ⁽²⁾) in the first quarter of 2012 compared to $356 million ($0.77 per share - basic) reported in the first quarter of 2011 primarily due to lower natural gas prices and wider Canadian crude oil differentials offset by higher WTI oil prices.
• Net income for the first quarter of 2012 was $59 million ($0.12 per share - basic).
• Proceeds on net property dispositions in the first quarter of 2012 totalled $322 million.

⁽¹⁾ Gross revenues include realized gains and losses on commodity contracts.

⁽²⁾ Includes net asset acquisitions/dispositions and excludes business combinations.

⁽³⁾ Comparative debt at December 31, 2011 was $3,219 million.

⁽⁴⁾ Includes dividends paid prior to those reinvested in shares under the dividend reinvestment plan. In 2011,  we began paying dividends on a quarterly basis. The last monthly distribution payment as a Trust was declared in December 2010 and paid in January 2011 ($0.09 per unit). Our first quarterly dividend ($0.27 per share) as a corporation was paid in April 2011.

⁽⁵⁾ Payout ratio is calculated as dividends paid divided by funds flow. The term “payout ratio” is a non-GAAP measure. See “Non-GAAP Measures Advisory” section.