Canadian Natural & Penn West Manpreet Chana Henry Liu Randy Yoon Jason Seo

1. Canadian Natural & Penn West Manpreet Chana Henry Liu Randy Yoon Jason Seo

2. Canadian Natural • One of the largest independent crude oil and natural gas producers in the world • Have one of the strongest and most diverse asset portfolios of any energy producer in the world • Diversified combination of assets in North America, the North Sea and Offshore West Africa

4. Business Approach • Drive to be the Low Cost Producer • Focus on Exploitation • Augment Exploitation with Strategic Acquisitions • Maintain Flexibility and Control Allocation in Capital • Strive for Balance • Maintain Financial Strength

5. Business Aspects • Maximize value through efficient capital allocation • Balance product mix with projects in both natural gas and crude oil while balancing project time horizons with near, mid and long-term projects • Take a cautious approach in developing assets and maintain large project inventories

6. Operations

7. What they Operate

8. 2008 2007 2006

9. Production • Crude oil volumes for 2008 averaging 315,667 bbl/d for the year

10. Geo-Science Strategy • Focus on geology, geophysics and reservoir engineering reduces exploration risk while enhancing capital efficiency • Invested $55 million during 2008 to acquire new seismic data and to purchase and reprocess existing seismic data.

11. Drilling • During 2008, Canadian Natural successfully drilled 682 net crude oil wells and 269 net natural gas wells.

13. Risk Management Principle • “We augment these plans with a disciplined hedge program which strives to provide cash flow certainty in the short term, such that the capital plans made by the Company are prudently financeable.”

14. Risk Management Summary • Downside price risk • Hedging policy: • Up to 60% of near 12 months budgeted production • Up to 30%-40% of 13-24 months estimated production

15. Risk Management Summary • Foreign exchange risk • Canadian dollar • US dollar • UK pound sterling • Benchmark to US dollar prices (WTI) • Revenue recorded in Canadian dollar • Cross currency swap hedges

16. Risk Management Summary • Interest rate risk • Repayments on outstanding loans

17. Hedging Results

18. Hedging Results

19. Hedging Results

20. Understanding Volatility • Crude oil pricing • Fluctuating demand • Geopolitical uncertainty • Fluctuation in Heavy Differential

21. Understanding Volatility • Natural gas pricing • Seasonal fluctuation • Inventory level • Fluctuation in imports • Increase in shale production

22. Understanding Volatility • Exchange rates • Interest rates

23. Hedge Portfolio

24. Sensitivity Analysis

25. Sensitivity Analysis

26. Penn West

27. Background • Based in Calgary, Alberta • The largest oil and natural gas trust in North America • Production for 2009 averaged 177,221 boe per day

28. Financial profile • Market Capitalization $8.6 billion • Current Units Outstanding 422.95M Shares • Long Term Debt $2.8 billion • Estimated 2010 Capital Development Budget $700 - $850 million. • Current Monthly Distribution $0.15 per unit

29. Operational Profile • Forecast 2010 production 165,000 – 173,000 boe/d • Production Balance: • Oil and Liquids 59% • Natural Gas 41% • Net Land base 7 million acres • Reserve Life Index 11.1 years

30. Reserves

31. Management William E. Andrew – CEO • Petroleum Engineer with 35 years of oil and natural gas industry experience, including 17 years with Penn West.   • Engineering diploma from the University of Prince Edward Island and a Bachelor of Engineering (Mining) degree from Nova Scotia Technical College • Joined Penn West in 1992, named President of Penn West in 1995 and President and Chief Executive Officer in June 2005. 

32. Management David Middleton • Executive Vice President,Engineering & Corporate Development • Professional Engineer with more than 29 years of oil and natural gas industry experience since graduating from the University of Toronto with a degree in Engineering.  • He has been with Penn West since 1999 holding the Vice President, then Senior Vice President, Production positions between 2001and 2005.  • In 2005, Mr. Middleton assumed overall day-to-day responsibility for Penn West’s oil and natural gas operations as its Chief Operating Officer.

33. Management Todd Takeyasu • Senior Vice President, and Chief Financial Officer • Chartered Accountant and a Certified Internal Auditor with more than 25 years of oil and natural gas industry and public accounting experience.  • He has been with Penn West since 1994 in various positions including Financial Controller, Treasurer from 2001 to 2005 and Vice President, Finance until 2006 when he was promoted to Chief Financial Officer.  • He is a 1983 business school graduate of the University of Lethbridge

34. Management Murray R. Nunns • President & Chief Operating Officer • Professional Geologist with 30 years of growth oriented oil and natural gas experience • Brings to Penn West a long history of consistent success as an exploration and operational executive. • From 1993 to 2002, Murray held a Senior Vice President of Exploration and Development and Chief Operating Officer. • Murray was a member of the Board of Directors of Penn West from 2005 until January 2008 when he joined Penn West in his current capacity.

35. Consolidated Balance Sheet

36. Consolidated Income Statement

37. Cash Flow Statement

38. Sensitivity Analysis

39. Risk analysis • Credit risk • Commodity price risk • Interest rate risk • Foreign exchange risk

40. Credit risk • Risk of loss if the counterparty do not fulfill their contract obligations • Right to recover unpaid receivables by receiving the partner’s share of production where Penn West is the operator • Reviews counterparties’ grading and assign its limits (usually counterparties are in investment grade)

41. Commodity price risk • Most significant risk for Penn West • Crude oil prices • influenced by world wide factors (OPEC actions, supply and demand, etc.) • Natural gas prices • Influenced by price of alternative fuel sources (such as oil, coal) and supply and demand (levels of industrial activity, weather, storage levels)

42. Interest rate risk • Maintain a portion of debt capital in floating-rate bank, which results in exposure to fluctuations in short-term interest rate, which remains lower levels than long-term rates • Increase the certainty of future rates by entering the swap floating interest rate to fixed rates or to collar interest rates

43. Foreign exchange risk • Crude oil prices are received in US dollars, thus the realized oil prices are impacted by exchange rate between CAD and USD

44. Other risks • Liquidity risk • Unable to meet its financial liabilities • Environmental and climate change risk • Regulations by all levels of government • Operational controls • Site restoration requirements • Restriction on emission in operating oil and natural gas

45. Hedging strategy summary • Commodity price hedging of oil and natural gas production • Protecting planned capital budgets, safeguarding the economics of acquisitions • providing downside cash flow protection to support planned distributions. • Hedging the currency and interest rate to increase the certainty of future cash flows

46. Commodity price hedging • Revenue is directly impacted by changes in commodity price • Collars ensure the commodity prices that will fall in to contracted range for a contracted sales volume

47. What is collar? • Selling a call option and buy a put option at lower strike price • If prices go down, the collar will protect the revenue • If prices go up, the underlying assets will raise its prices also protect the revenue • No cost needed

48. Commodity price hedging

49. Commodity price hedging

50. Commodity price hedging