Hedging

Hedging
Penn West considers price hedging of oil and natural gas production to be a useful tool of risk management. Its uses include protecting planned capital budgets, safeguarding the economics of acquisitions and providing downside cash flow protection to support planned distributions.

During 2008, the Trust continues to employ derivative instruments on a portion of its production volumes spanning several quarters into the future. The Trust also secured hedges to fix the costs of electric power at its oilfield operations, improving its ability to project operating costs, netbacks and cash flows.

Penn West is careful and judicious in its hedging activities in order to preserve exposure to commodity price upside and avoid unreasonable opportunity costs.

Liquids Hedging
As of June 30, 2008

	2008
	First Quarter	Second Quarter	Third Quarter	Fourth Quarter	2009	2010
Hedged volumes (bbl/d)	44,000	44,000	43,500	43,500	30,500	10,000
% Liquids production	42%	42%	41%	40%	31%	10%
Swaps	2,000	2,000	1,500	1,500	500	0
Swap price (US$/bbl)	$73.23	$73.23	$72.47	$72.47	$72.62	0
Collars	42,000	42,000	42,000	42,000	30,000	10,000
Average price:
ceiling (US$/bbl)	$83.50	$83.50	$79.85	$79.85	$110.21	$129.87
floor (US$/bbl)	$64.76	$64.76	$66.43	$66.43	$85.00	$85.00

Natural Gas Hedging
As of June 30, 2008

	2008
	First Quarter	Second Quarter	Third Quarter	Fourth Quarter	2009	2010
Hedged volumes (Gj/d)	152,500	240,000	240,000	193,333	100,833	0
% Gas production	25%	41%	42%	35%	19%	0
Swaps	2,500	100,000	100,000	33,333	0	0
Swap price (CAD$/Gj)	$8.61	$6.75	$6.75	$6.75	0	0
Collars	150,000	140,000	140,000	160,000	100,833	0
Average price:
ceiling (CAD$/Gj)	$9.87	$6.94	$6.94	$8.94	$11.27	0
floor (CAD$/Gj)	$6.67	$6.09	$6.09	$7.01	$7.88	0

Power Hedging

As of June 30, 2008

	2008	2009	2010
Hedged volume (MWh)	43	50	50
% Hedged	46%	51%	50%
Fixed hedge price (CAD$MWh)	$74.13	$77.82	$77.82