Penn West Energy Trust has entered into an agreement (the "Agreement") with a wholly-owned subsidiary of the China Investment Corporation ("CIC") to form a joint venture (the "Joint Venture") that will develop Penn West's bitumen assets located in the Peace River area of northern Alberta (the "Assets"). CIC has also agreed to purchase trust units ("Units") of Penn West on a private placement basis (the "Financing").

Strategic Rationale Penn West is committed to an exploration and production strategy which will fully assess and realize the potential of its extensive resource play portfolio. The Joint Venture is an important element of our strategy as it provides for the development of the Assets from the current resource appraisal phase through to commercial scale development and production. The cash proceeds from the Joint Venture and the Financing provide Penn West with additional financial flexibility to strategically advance the development of its significant ownership of light-oil resources.

Penn West and CIC believe the Assets to be a 'world-class resource' and as such view the production and reserves potential of this project to be substantial. CIC's financial commitment, combined with Penn West's operational resources, will enable the Joint Venture to complete the resource appraisal of the area and accelerate development.

Peace River Joint Venture The Joint Venture will be organized as a general partnership under the laws of the Province of Alberta. Under the terms of the agreements to be executed at closing providing for the formation of the Joint Venture, Penn West will contribute the Assets valued at approximately $1.8 billion and will retain a 55% partnership interest. The Assets include approximately 237,000 net acres of oil sands leases that Penn West believes contain significant bitumen resources, and current production of approximately 2,700 barrels of oil equivalent per day of bitumen and associated gas. CIC will invest a total of $817 million to acquire a 45% interest in the partnership. Their investment consists of $312 million payable on closing, with the remaining $505 million applied to Penn West's future capital and operating expenses. A wholly-owned subsidiary of Penn West will serve as operator of the Assets.

Mr. David Middleton will be responsible for directing the operation of the Joint Venture through a joint management committee. Mr. Middleton is currently the Executive Vice President, Engineering & Corporate Development with Penn West. He is a Professional Engineer with more than 30 years of extensive oil industry experience and is particularly well-suited for leading a project of this scope and nature.

Financing Under the terms of the Financing, CIC has agreed to subscribe for 23,524,209 Units of Penn West, representing approximately 5% of Penn West's issued and outstanding Units, for total gross proceeds of approximately $435 million. The Units will be issued at a price of $18.48 per Unit, which is a 2% discount to the volume-weighted average price of the Units on the Toronto Stock exchange for the 5 trading days prior to May 13, 2010. CIC does not currently hold any securities of Penn West.

CIC will have certain rights to maintain its percentage ownership interest in Penn West through participation in additional private and public offerings of Units or securities convertible into Units.

Closing The closing of the Financing and the formation of the Joint Venture is expected to occur on or about June 1, 2010, subject to the receipt of regulatory approvals (including stock exchange approvals) and the satisfaction of closing conditions.

Mackie Research Capital Corporation acted as sole financial advisors to Penn West.

Tags: Penn West Energy Trust