Mr. Rick George reports

PENN WEST ANNOUNCES MANAGEMENT-INITIATED INTERNAL REVIEW OF ACCOUNTING PRACTICES AND DECISION TO RESTATE CERTAIN HISTORICAL FINANCIAL STATEMENTS; NO IMPACT ON PREVIOUSLY DISCLOSED CASH AND DEBT BALANCES; PENN WEST ANTICIPATES POSSIBLE DELAY IN REPORTING SECOND QUARTER FINANCIAL RESULTS

The audit committee of Penn West Petroleum Ltd.'s board of directors is conducting a voluntary, internal review of certain of the company's accounting practices.

While this review is not yet completed, the board of directors of Penn West has concluded that certain of the company's historical financial statements and related management's discussions and analyses (MD&As) must be restated, which may result in the release of second quarter 2014 financial results being delayed.

Review does not affect cash and debt balances, production guidance, or operations

Although the review is not yet complete, Penn West wishes to emphasize that the review does not affect previously disclosed cash and debt balances or previously released 2014 production guidance. Neither does the review affect operations, strategy and anticipated growth going forward.

Rick George, chairman of the board, commented: "We have acted quickly and effectively to review our accounting practices. We will take the steps necessary to correct our historical financial statements and we will take appropriate steps to ensure that we avoid a similar situation in the future."

Dave Roberts, president and chief executive officer, also commented: "We continue to build on the substantial operational and structural improvements we have made to the business in the past year, which we have communicated in a separate release today that speaks to our operating performance through the second quarter. If you read that release, you will find that our asset quality and execution capability remain strong, our long-term plan for the company remains intact, and importantly today, we are on target to deliver on our promises to our stakeholders. As a result of the improvements we have made to the business in the past year, we are a more resilient organization today."

Independent review

The audit committee's review arises from accounting practices that came to the attention of the company's new senior vice-president and chief financial officer, David Dyck, who assumed that position on May 1, 2014. The company's management then recommended to the board of directors that the audit committee conduct an independent review of these practices. The audit committee, comprising solely independent directors, retained independent Canadian and U.S. legal counsel, and an independent forensic accounting firm, to assist the audit committee in conducting its review.

The audit committee and its independent advisers are examining certain entries that appear to have been made to reduce operating costs and increase the company's reported capital expenditures and royalty expense, and that appear to have been made without adequate supporting documentation. The accounting practices under review involve the capitalization of certain operating costs as property, plant and equipment, the income statement classification of certain costs and credits, and the timing of certain accruals relating to production, operating costs and capital. The review currently covers 2014 and the four previous fiscal years.

The preliminary findings from the review to date are as follows:

1. For the fiscal year 2013, the audit committee and its independent advisers have identified approximately $70-million in operating expenses that were reclassified to property, plant and equipment as capital expenditures without adequate support. For the fiscal year 2012, operating expenses of approximately $111-million were reclassified to property, plant and equipment as capital expenditures without adequate support. As a result, the property, plant and equipment balances recorded on the company's balance sheets in those fiscal years appear to be overstated.
2. For each of the fiscal years 2012 and 2013, the audit committee and its independent advisers have identified operating expenses of approximately $100-million that were incorrectly reclassified as royalty expenses. This reclassification had no effect on net income or funds flow.

These numbers are necessarily preliminary, are unaudited and could change as the review continues. These accounting practices appear to have existed in prior years, with the amounts varying from year to year. The company currently believes that the remaining accounting practices under review are quantitatively less significant to the company's historical financial statements.

The senior finance and accounting employees believed responsible for the adoption and use of these practices have ceased to be employed by the company.

Restatement of historical financial statements

Based on the results of the review to date, the board of directors, acting on the recommendation of the audit committee, has made a decision to restate the company's audited annual financial statements for at least the years ended Dec. 31, 2012, and 2013 and its unaudited interim financial statements for the three months ended March 31, 2014, and 2013 and all related MD&As. As a result of this decision, the company's historical financial statements and related audit reports and MD&As should not be relied upon. Penn West intends to file the restated financials as soon as practicable. When the company files restated financials, it will also file with the U.S. Securities and Exchange Commission (SEC) one or more amended annual reports on Form 40-F and reports on Form 6-K for applicable annual and interim periods.

The company currently expects that the effect of the restatement will be to reduce historical reported capital expenditures, property, plant and equipment balances, royalty expenses, and depletion expense, and increase operating expenses. The review and restatement may also require Penn West to reduce its capital expenditure guidance and royalty expense assumptions and increase its operating cost assumptions for 2014 from those originally disclosed in November, 2013. These adjustments would in turn reduce the company's 2014 funds flow assumptions.

As a result of the identified accounting practices and the decision to restate certain historical financial results and/or the potential delay in reporting second quarter 2014 financial results, the company believes that it may not be, or may cease to be, in compliance with certain of its covenants under its unsecured, revolving syndicated bank facility and the terms of its senior unsecured notes, subject to any applicable cure periods. However, the company believes that at no time did it fail to comply with the financial covenants contained in its bank facility and its senior unsecured notes. The company has initiated discussions with lenders under its bank facility and will be initiating discussions with holders of its senior unsecured notes regarding the potential effect of these matters and the possible waivers of affected covenants.

Subject to satisfactory resolution of these matters, and consistent with historical practices, the company currently expects to declare its third quarter 2014 dividend when it approves and files its second quarter 2014 financial results.

The company has voluntarily informed the Alberta Securities Commission (ASC) and the SEC about its internal review.

As part of the process described above, the company is re-examining its internal controls over financial reporting and disclosure controls and procedures in order to identify any material weaknesses with such controls and procedures. As a result of the internal review, the company will take all appropriate steps necessary to remedy any material weaknesses and to ensure that a similar situation is avoided in the future.

Unless circumstances otherwise require, Penn West will provide further comment when the review is completed and the board receives and considers the audit committee's findings and recommendations. In accordance with the company's customary practice, the company will be hosting a conference call and webcast presentation to discuss its second quarter 2014 results following the filing of its second quarter financial statements and MD&A.

In the meantime, to provide as much information about the company's operations as is possible, the company is providing an operational update on its second quarter 2014 activities and preliminary third quarter 2014 activities in a separate news release on July 29.

Trading blackout

In conjunction with the preparation of its second quarter filings (defined below) and as a result of the internal review, Penn West established a blackout on trading by directors, officers and other insiders of Penn West, and intends to continue the blackout until the second quarter filings and the restated financials have been filed.

Filing requirements

Under National Instrument 51-102 of the Canadian Securities Administrators, the company's unaudited interim financial statements for the three- and six-month periods ended June 30, 2014, and the related MD&A and management certifications (the second quarter filings) are to be filed no later than Aug. 14, 2014.

As a result of the review and the decision to file the restated financials, the company anticipates that there could be a delay in filing the second quarter filings. As a precaution, the company will be applying to the ASC pursuant to part 4 of National Policy 12-203 for a management cease trade order (MCTO) in connection with the possible late filing of the second quarter filings. If an MCTO is issued, the company intends to satisfy the provisions of the "alternative information guidelines" as set out in NP 12-203, including the requirement to file biweekly status reports in the form of news releases containing prescribed updating information, until the second quarter filings are made. An MCTO would not generally affect the ability of persons who are not directors, officers or insiders of the company to trade in securities of the company. There can be no assurance that an MCTO will be issued.

We seek Safe Harbor.