6-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

OF THE SECURITIES EXCHANGE ACT OF 1934

For the month of May 2017

Commission File Number 1-32895

Penn West Petroleum Ltd.

(Translation of registrant’s name into English)

Suite 200, 207 – 9^th Avenue SW

Calgary, Alberta T2P 1K3

Canada

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.)

Form 20-F  ☐            Form 40-F  ☒

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1)  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7)  ☐

INCORPORATION BY REFERENCE

Exhibits 99.2 and 99.3 to this Form 6-K are hereby incorporated by reference into the registration statement on Form F-3 of Penn West Petroleum Ltd. (File No. 333-171675).

DOCUMENTS INCLUDED AS PART OF THIS FORM 6-K

See the Exhibit Index hereto.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on May 4, 2017.

PENN WEST PETROLEUM LTD.
By:	/s/ Mark Hawkins
Name:	Mark Hawkins
Title:	Corporate Secretary and Senior Counsel

2

EXHIBIT INDEX

Exhibit	Description
99.1	News Release, dated May 4, 2017
99.2	Management’s Discussion and Analysis for the three months ended March 31, 2017
99.3	Financial Statements for the three months ended March 31, 2017
99.4	Quarterly Certification of the Chief Executive Officer under Canadian law
99.5	Quarterly Certification of the Chief Financial Officer under Canadian law

EX-99.1

Exhibit 99.1

Penn West Announces Strong First Quarter 2017 Financial and Operational Results

CALGARY, May 4, 2017 /CNW/ - PENN WEST PETROLEUM LTD. (TSX – PWT; NYSE – PWE) (“Penn West”, the “Company”, “we”, “us” or “our”) is pleased to announce its financial and operational results for the three months ended March 31, 2017.

“Our first quarter results reflect a quality start for the new Penn West, with robust funds flow from operations, production growth in our key development areas, and a repositioned balance sheet from which to pursue our activities,” commented David French, President and Chief Executive Officer. “First quarter development has set the Company up well for annual double-digit growth and our restructuring sales program is complete, bringing us to long term debt below $400 million. Looking ahead, we will work as a normal course business to selectively consolidate in areas where it makes sense, such as our recent tuck-in land acquisition in Peace River that increased inventory in the area by at least 40 near-term locations.

We are positioned with the assets, people, and commercial approach to succeed in the current commodity price environment. To further showcase our potential, we will be hosting an analyst day event next month to deepen investor awareness of our assets and go forward plans. I look forward to building on our strong momentum from the first quarter over the coming months.”

Penn West Results for the Three Months Ended March 31, 2017

	Three months ended March 31
	2017			2016			% change
Financial
(millions, except per share amounts)
Gross revenues (1)	$	132		$	231			(43	)
Funds flow from operations (2)		57			47			21
Basic per share (2)		0.11			0.09			22
Diluted per share (2)		0.11			0.09			22
Net income (loss)		27			(100	)		>100
Basic per share		0.05			(0.20	)		>100
Diluted per share		0.05			(0.20	)		>100
Capital expenditures (3)		26			18			44
Long-term debt at period-end	$	384		$	1,858			(79	)
Operations
Daily production
Light oil and NGL (bbls/d)		15,962			40,572			(61	)
Heavy oil (bbls/d)		5,206			12,440			(58	)
Natural gas (mmcf/d)		82			144			(43	)
Total production (boe/d) (4)		34,900			77,010			(55	)
Average sales price
Light oil and NGL (per bbl)	$	57.00		$	34.49			65
Heavy oil (per bbl)		33.21			14.76			>100
Natural gas (per mcf)	$	3.22		$	1.96			64
Netback per boe (4)
Sales price	$	38.63		$	24.22			59
Risk management gain		3.52			5.75			(39	)
Net sales price		42.15			29.97			41
Royalties		(2.68	)		(1.07	)		>100
Operating expenses (5)		(14.48	)		(13.02	)		11
Transportation		(2.31	)		(1.63	)		42
Netback (2)	$	22.68		$	14.25			59

(1) Includes realized gains and losses on commodity contracts and excludes gains and losses on foreign exchange hedges.

(2) The terms “funds flow from operations” and their applicable per share amounts, and “netback” are non-GAAP measures. Please refer to the “Non-GAAP Measures” advisory section below for further details.

(3) Includes the effect of capital carried from its partner under the Peace River Oil Partnership.

(4) Please refer to the “Oil and Gas Information Advisory” section below for information regarding the term “boe”.

(5) Includes the effect of carried operating expenses from its partner under the Peace River Oil Partnership of $4 million or $1.30 per boe (2016 - $4 million or $0.52 per boe).

First Quarter Operational and Financial Highlights

Continued Strong Quarterly Performance

• Corporate production averaged 34,900 boe per day during the first quarter, including 30,334 boe per day in our key development areas. Production was higher in our key development areas, versus the fourth quarter, due to Alberta Viking and Cardium wells brought on production in late December 2016, as well as the first quarter drilling campaign.

• Funds flow from operations for the first quarter was $57 million ($0.11 per share) reflecting stronger sales prices across our product streams and lower corporate and financing costs due to reduced debt levels.

• First quarter operating costs of $14.48 per boe, net of carried expenses, were higher quarter-over-quarter, with the vast majority of the variance attributed to the timing and costs on assets sold or held for sale. We expect our operating costs to trend down through the year, and are targeting annual 2017 operating costs of approximately $13.00 to $13.50 per boe, net of carried expenses.

• Net income for the first quarter was $27 million ($0.05 per share) driven by improved commodity prices and gains on asset dispositions during the quarter.

First Quarter Operations Setting Up for Growth in the Fourth Quarter

• In the Cardium, we drilled 15 vertical injectors in the Willesden Green and Pembina to re-pressurize the reservoir around high performing wells drilled in late 2015 and early 2016. We plan to begin injection in mid-May, with all 15 wells expected to be injecting by the end of June. Our second half drilling program will focus on integrated development, with 10 producing wells and 30 vertical injection wells planned for the remainder of the year.

• In Peace River, we operated two rigs and drilled a total of 11 wells, including 5 delineation wells to help assess longer-term inventory. We brought 7 wells on production in the first quarter, including 1 well drilled late last year. Due to better than expected conditions of our lease access roads, we have been able to continue development into breakup, drilling an additional 4 wells in the second quarter that will be brought on production by the end of June. We plan to drill the remaining 14 wells of our 2017 program in the second half of the year.

• In the Alberta Viking, we brought 2 wells on production in the first quarter that were drilled in December. Production results in the area remain strong with cumulative volumes produced above neighboring industry wells. Encouraged by these robust results, we now anticipate drilling 11 operated wells in 2017, up from 7 wells in our original budget. The majority of this activity will take place in the third quarter to minimize rig movement and associated capital costs.

• We remain on track with our third quarter Mannville program, and plan to drill 3 operated wells targeting the Upper Mannville in the Willesden Green. The gas volumes will be processed at our nearby operated Crimson gas plant to minimize our processing costs. To support the attractive economics of this program, we increased our natural gas hedge volumes in the third quarter of 2017 and into 2018.

Dispositions Are Complete – Moving Towards Selective Consolidation

• In the first quarter, we closed previously announced dispositions for total proceeds of $70 million. The proceeds were used to further reduce the Company’s long term debt to $384 million by the end of the quarter, down from $469 million on December 31, 2016.

• We signed definitive agreements for a $10 million asset disposition with approximately 700 boe per day of associated production. The closing date is expected to be at the end of May.

• In April, we purchased undeveloped acreage in the Peace River area offsetting our key lands for $11 million. We expect this acreage to increase our drilling inventory in Peace River by approximately 40 near-term locations.

Operational Metrics

Penn West holds a focused portfolio with industry leading positions in the Cardium, Peace River, and Alberta Viking areas. The table below outlines select metrics in our key development areas for the three months ended March 31, 2017 and excludes the impact of hedging:

	Select Metrics – Three Months Ended March 31, 2017
Area	Production		Liquids Weighting			Operating Cost		Netback
Cardium		18,603 boe/d		64	%	$	13/boe	$	26/boe
Alberta Viking		2,638 boe/d		55	%	$	10/boe	$	27/boe
Peace River(1)		4,648 boe/d		99	%	$	1/boe	$	27/boe
Legacy Areas		4,445 boe/d		26	%	$	27/boe	($	1)/boe
Key Development Areas		30,334 boe/d		63	%	$	13/boe	$	22/boe

(1) Net of carried operating costs

The table below provides a summary of our operated activity during the first quarter:

	Number of Wells
	Drilled				Completed				On production
	Gross		Net		Gross		Net		Gross		Net
Cardium		15		15		14		14		3		3
Producer		0		0		0		0		3		3
Injector		15		15		14		14		0		0
Alberta Viking		0		0		0		0		2		2
Peace River		11		6		7		4		7		4
Total		26		21		21		18		12		9

On Track for Year-end Growth: Reiterating 2017 Production Guidance

The Company remains on track to generate double-digit organic production growth from the fourth quarter of 2016 to the fourth quarter of 2017. We anticipate this year’s $180 million capital program will be paid for fully with funds flow from operations.

2017 Annual Guidance
Production	30,500 to 31,500 boe per day
Operating Costs, net of carried expenses(1)	$13.00 to $13.50 per boe
E&D Capital Expenditures	$160 million
Decommissioning Expenditures	$20 million
Total Capital Expenditures	$180 million

(1) Net of carried operating expenses from the Company’s partner under the Peace River Oil Partnership.

Analyst Day 2017

Penn West plans to hold an Analyst Day event on June 7, 2017 to offer the investment community a comprehensive technical overview of our cost structure, operations, and sustainable growth strategy. The event will be held in Calgary for members of the financial analyst community and simultaneously webcast for the public and those unable to attend in person. The Company will release full details of the webcast closer to the event date.

Updated Hedging Position

Our hedging program helps reduce the volatility of our funds flow from operations, and thereby improves our ability to manage our ongoing capital programs. Recently, we expanded our hedging volumes in 2018 to support our internal 18-month forecast and planning cycle. We currently have approximately 40 to 50 percent of our crude oil exposure, net of royalties, and 25 to 30 percent of our natural gas exposure, net of royalties, hedged through the first quarter of 2018. Our hedging program increases our confidence to self-fund our entire 2017 capital program down to benchmark WTI prices of approximately US$40 per bbl.

Our positions as of May 3, 2017 are as follows:

	Q2 2017		Q3 2017		Q4 2017		Q1 2018		Q2 2018		Q3 2018		Q4 2018
Oil Volume (bbl/d)		7,800		7,400		7,900		7,000		3,000		1,000		—
US$ WTI Price (US$/bbl) (1)		US$50.70		US$50.70		US$50.91		US$51.39		US$53.30		US$53.50		—
Gas Volume (mcf/d)		19,000		19,000		20,900		19,000		13,300		7,600		5,700
AECO Price (C$/mcf)	$	2.81	$	2.84	$	3.00	$	2.97	$	2.83	$	2.80	$	2.84

(1) US$ price implied using foreign exchange rates as at March 31, 2017

Additional Reader Advisories

Oil and Gas Information Advisory

Barrels of oil equivalent (“boe”) may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet of natural gas to one barrel of crude oil is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency conversion ratio of 6:1, utilizing a conversion on a 6:1 basis is misleading as an indication of value.

Non-GAAP Measures

Certain financial measures including funds flow from operations, funds flow from operations per share-basic, funds flow from operations per share-diluted, netbackand gross revenues included in this press release do not have a standardized meaning prescribed by IFRS and therefore are considered non-GAAP measures; accordingly, they may not be comparable to similar measures provided by other issuers. Funds flow from Operations is cash flow from operating activities before changes in non-cash working capital, decommissioning expenditures and office lease settlements which a lso excludes the effects of financing related transactions from foreign exchange contracts and debt repayments/ pre-payments and is representative of cash related to continuing operations. Funds flow from operations is used to assess the Company’s ability to fund its planned capital programs. See “Calculation of Funds Flow from Operations” below for a reconciliation of funds flow from operations to its nearest measure prescribed by IFRS. Netback is the per unit of production amount of revenue less royalties, operating expenses, transportation and realized risk management gains and losses, and is used in capital allocation decisions and to economically rank projects. See “Results of Operations – Netbacks” above for a calculation of the Company’s netbacks. Gross revenue is total revenues including realized risk management gains and losses on commodity contracts and is used to assess the cash realizations on commodity sales.

Calculation of Funds Flow from Operations

	Three months ended March 31
(millions, except per share amounts)	2017		2016
Cash flow from operating activities	$	38	$	61
Change in non-cash working capital		2		26
Decommissioning expenditures		4		2
Office lease settlements		4		—
Realized foreign exchange loss – debt maturities		3		—
Carried operating expenses (1)		4		4
Restructuring charges		2		6
Monetization of foreign exchange contracts		—		(32	)
Monetization of transportation commitment		—		(20	)
Funds Flow from Operations	$	57	$	47
Per share
Basic per share	$	0.11	$	0.09
Diluted per share	$	0.11	$	0.09

(1) The effect of carried operating expenses from the Company’s partner under the Peace River Oil Partnership.

Forward-Looking Statements

Certain statements contained in this document constitute forward-looking statements or information (collectively “forward-looking statements”) within the meaning of the “safe harbour” provisions of applicable securities legislation. Forward-looking statements are typically identified by words such as “anticipate”, “continue”, “estimate”, “expect”, “forecast”, “budget”, “may”, “will”, “project”, “could”, “plan”, “intend”, “should”, “believe”, “outlook”, “objective”, “aim”, “potential”, “target” and similar words suggesting future events or future performance. In addition, statements relating to “reserves” or “resources” are deemed to be forward-looking statements as they involve the implied assessment, based on certain estimates and assumptions, that the reserves and resources described exist in the quantities predicted or estimated and can be profitably produced in the future. In particular, this document contains forward-looking statements pertaining to, without limitation, the following: our expected production growth rate; our expected approach to development including the area-specific asset development plans described herein; our potential near term inventory increase in the Peace River area; our expected ability to succeed in the current commodity price environment; the expected date of the analyst day; our expectations for operating costs during the year and the associated target range for those costs per boe (net of carried expenses); the timing of development activities; our expectation for our economics in the Mannville program and that the gas volumes produced in the Willesden Green area will be processed at our facility which will minimize our processing costs; the timing of pending and anticipated asset dispositions and the associated proceeds; our capital spending plans in 2017 and the associated funding of that spending; our hedging program and its ability to reduce the volatility of our funds flow from operations and self-fund our entire 2017 capital program at certain price levels.

With respect to forward-looking statements contained in this document, we have made assumptions regarding, among other things: 2017 prices of US$54.07 per barrel of West Texas Intermediate light sweet oil and C$3.32 per mcf AECO gas, and a C$/US$ foreign exchange rate of $1.32; the terms and timing of asset sales to be completed; that we do not dispose of any material producing properties; our ability to execute our long-term plan as described herein and in our other disclosure documents and the impact that the successful execution of such plan will have on our Company and our shareholders; that the current commodity price and foreign exchange environment will continue or improve; future capital expenditure levels; future crude oil, natural gas liquids and natural gas prices and differentials between light, medium and heavy oil prices and Canadian, WTI and world oil and natural gas prices; future crude oil, natural gas liquids and natural gas production levels; future exchange rates and interest rates; future debt levels; our ability to execute our capital programs as planned without significant adverse impacts from various factors beyond our control, including weather, infrastructure access and delays in obtaining regulatory approvals and third party consents; our ability to obtain equipment in a timely manner to carry out development activities and the costs thereof; our ability to market our oil and natural gas successfully to current and new customers; our ability to obtain financing on acceptable terms, including our ability to renew or replace our syndicated bank facility and our ability to finance the repayment of our senior unsecured notes on maturity; and our ability to add production and reserves through our development and exploitation activities.

Although we believe that the expectations reflected in the forward-looking statements contained in this document, and the assumptions on which such forward-looking statements are made, are reasonable, there can be no assurance that such expectations will prove to be correct. Readers are cautioned not to place undue reliance on forward-looking statements included in this document, as there can be no assurance that the plans, intentions or expectations upon which the forward-looking statements are based will occur. By their nature, forward-looking statements involve numerous assumptions, known and unknown risks and uncertainties that contribute to the possibility that the forward-looking statements contained herein will not be correct, which may cause our actual performance and financial results in future periods to differ materially from any estimates or projections of future performance or results expressed or implied by such forward-looking statements. These risks and uncertainties include, among other things: the possibility that we will not be able to continue to successfully execute our long-term plan in part or in full, and the possibility that some or all of the benefits that we anticipate will accrue to our Company and our securityholders as a result of the successful execution of such plans do not materialize; the possibility that we are unable to execute some or all of our ongoing asset disposition program on favourable terms or at all; general economic and political conditions in Canada, the U.S. and globally, and in particular, the effect that those conditions have on commodity prices and our access to capital; industry conditions, including fluctuations in the price of crude oil, natural gas liquids and natural gas, price differentials for crude oil and natural gas produced in Canada as compared to other markets, and transportation restrictions, including pipeline and railway capacity constraints; fluctuations in foreign exchange or interest rates; unanticipated operating events or environmental events that can reduce production or cause production to be shut-in or delayed (including extreme cold during winter months, wild fires and flooding); and the other factors described under “Risk Factors” in our Annual Information Form and described in our public filings, available in Canada at www.sedar.com and in the United States at www.sec.gov. Readers are cautioned that this list of risk factors should not be construed as exhaustive.

The forward-looking statements contained in this document speak only as of the date of this document. Except as expressly required by applicable securities laws, we do not undertake any obligation to publicly update any forward-looking statements. The forward-looking statements contained in this document are expressly qualified by this cautionary statement.

PENN WEST: Penn West Plaza, Suite 200, 207 - 9th Avenue SW, Calgary, Alberta T2P 1K3, Phone: 403-777-2500, Fax: 403-777-2699, Toll Free: 1-866-693-2707, Website: www.pennwest.com; Investor Relations: Toll Free: 1-888-770-2633, E-mail: investor_relations@pennwest.com

EX-99.2

Exhibit 99.2

MANAGEMENT’S DISCUSSION AND ANALYSIS

For the three months ended March 31, 2017

This management’s discussion and analysis of financial condition and results of operations (“MD&A”) of Penn West Petroleum Ltd. (“Penn West”, the “Company”, “we”, “us”, “our”) should be read in conjunction with the Company’s unaudited interim condensed consolidated financial statements for the three months ended March 31, 2017 and the Company’s audited consolidated financial statements and MD&A for the year ended December 31, 2016. The date of this MD&A is May 3, 2017. All dollar amounts contained in this MD&A are expressed in millions of Canadian dollars unless noted otherwise.

Certain financial measures such as funds flow from operations, funds flow from operations per share-basic, funds flow from operations per share-diluted, netback, gross revenues and earnings before interest, taxes, depreciation and amortization (“EBITDA”) included in this MD&A do not have a standardized meaning prescribed by International Financial Reporting Standards (“IFRS”) and therefore are considered non-GAAP measures; accordingly, they may not be comparable to similar measures provided by other issuers. This MD&A also contains oil and gas information and forward-looking statements. Please see the Company’s disclosure under the headings “Non-GAAP Measures”, “Oil and Gas Information”, and “Forward-Looking Statements” included at the end of this MD&A.

Quarterly Financial Summary

(millions, except per share and production amounts)(unaudited)

	Mar. 31		Dec. 31			Sep. 30			June 30			Mar. 31			Dec. 31			Sep. 30			June 30
Three months ended	2017		2016			2016			2016			2016			2015			2015			2015
Gross revenues (1)	$	132	$	133		$	136		$	209		$	231		$	273		$	295		$	360
Funds flow from operations		57		48			32			55			47			39			48			85
Basic per share		0.11		0.10			0.06			0.11			0.09			0.08			0.10			0.17
Diluted per share		0.11		0.10			0.06			0.11			0.09			0.08			0.10			0.17
Net income (loss)		27		(232	)		(232	)		(132	)		(100	)		(1,606	)		(764	)		(28	)
Basic per share		0.05		(0.46	)		(0.46	)		(0.26	)		(0.20	)		(3.20	)		(1.52	)		(0.06	)
Diluted per share	$	0.05	$	(0.46	)	$	(0.46	)	$	(0.26	)	$	(0.20	)	$	(3.20	)	$	(1.52	)	$	(0.06	)
Production
Liquids (bbls/d) (2)		21,169		21,295			23,355			41,848			53,012			53,339			55,323			63,222
Natural gas (mmcf/d)		82		103			107			130			144			144			161			168
Total (boe/d)		34,900		38,481			41,233			63,568			77,010			77,398			82,198			91,164

(1) Includes realized gains and losses on commodity contracts and excludes gains and losses on foreign exchange hedges.

(2) Includes crude oil and natural gas liquids.

PENN WEST FIRST QUARTER 2017 MANAGEMENT’S DISCUSSION AND ANALYSIS 1    

Calculation of Funds Flow from Operations

	Three months ended March 31
(millions, except per share amounts)	2017		2016
Cash flow from operating activities	$	38	$	61
Change in non-cash working capital		2		26
Decommissioning expenditures		4		2
Office lease settlements		4		—
Realized foreign exchange loss – debt maturities		3		—
Carried operating expenses (1)		4		4
Restructuring charges		2		6
Monetization of foreign exchange contracts		—		(32	)
Monetization of transportation commitment		—		(20	)
Funds flow from operations	$	57	$	47
Per share
Basic per share	$	0.11	$	0.09
Diluted per share	$	0.11	$	0.09

(1) The effect of carried operating expenses from the Company’s partner under the Peace River Oil Partnership.

In the first quarter of 2017, funds flow from operations increased from the comparable period as the improved commodity price environment and lower financing costs more than offset declines in production resulting from asset disposition activity.

In 2016, the Company monetized a total of US$115 million of foreign exchange forward contracts on senior notes and permanently disposed of a pipeline commitment and received $20 million of proceeds from the sale.

Business Strategy

In 2017, Penn West will take a balanced and disciplined approach to developing its asset portfolio with a focus on organic production growth and living within funds flow from operations.

The Company’s key focuses for 2017 will include:

• further development of the Company’s light-oil Cardium interests by focusing on integrated waterflood development to build a long-term, low-decline base;

• primary, “cold-flow”, development within the Peace River area with the support of the Company’s joint venture partner under the Peace River Oil Partnership;

• leveraging existing infrastructure within the Alberta Viking area to profit from the shorter cycle time and quick payout of wells in the area; and

• pursuing new ventures on Penn West’s existing land positions, with plans for development in the Mannville during the second half of 2017.

During the first quarter of 2017, the Company closed transactions to dispose of properties located in British Columbia and the Swan Hills area of Alberta and completed other minor asset dispositions to further focus its asset portfolio. The Company has completed its asset disposition program.

Penn West believes its 2017 plans will position the Company for double-digit production growth in future years which will in turn increase its profitability and long-term shareholder value.

PENN WEST FIRST QUARTER 2017 MANAGEMENT’S DISCUSSION AND ANALYSIS 2    

Business Environment

The following table outlines quarterly averages for benchmark prices and Penn West’s realized prices for the previous five quarters.

Benchmark prices	Q1 2017			Q4 2016			Q3 2016			Q2 2016			Q1 2016
WTI crude oil ($US/bbl)	$	51.91		$	49.29		$	44.95		$	45.59		$	33.45
Edm mixed sweet par price (CAD$/bbl)		63.87			61.58			54.68			54.70			40.67
NYMEX Henry Hub ($US/mcf)		3.32			2.98			2.81			1.95			2.09
AECO Index (CAD$/mcf)		2.82			2.95			2.26			1.32			1.97
Penn West average sales price (1)
Light oil (CAD$/bbl)		63.21			58.76			53.97			53.48			37.44
Heavy oil (CAD$/bbl)		33.21			27.09			21.67			25.18			14.76
NGL (CAD$/bbl)		27.79			25.09			17.91			18.05			12.75
Total liquids (CAD$/bbl)		51.15			45.82			40.81			42.98			29.86
Natural gas (CAD$/mcf)		3.22			2.98			2.46			1.42			1.96
Benchmark differentials
WTI - Edm Light Sweet ($US/bbl)		(3.54	)		(3.11	)		(2.96	)		(3.07	)		(3.69	)
WTI - WCS Heavy ($US/bbl)	$	(14.58	)	$	(14.32	)	$	(13.50	)	$	(13.30	)	$	(14.24	)

(1) Excludes the impact of realized hedging gains or losses.

Crude Oil

WTI oil prices traded between US$50 - US$55 per barrel for most of the first quarter of 2017 before falling to US$47 per barrel late in the quarter due to concern on OPEC compliance on production levels and increasing US shale oil production. In the first quarter of 2017, Canadian light oil differentials and heavy oil differentials widened to US$3.54 per barrel and US$14.58 per barrel less than WTI, respectively.

Currently, the Company has the following crude oil hedges in place:

Reference Price	Term	Price (US$/Barrel) (1)		Volume (Barrels/day)
WTI	Q2 2017	US$	50.70		7,800
WTI	Q3 2017	US$	50.70		7,400
WTI	Q4 2017	US$	50.91		7,900
WTI	Q1 2018	US$	51.39		7,000
WTI	Q2 2018	US$	53.30		3,000
WTI	Q3 2018	US$	53.50		1,000

(1) The Canadian dollar hedges were converted to US dollars at the March 31, 2017 foreign exchange rate.

Natural Gas

NYMEX Henry Hub natural gas prices weakened through the first part of the quarter as temperatures moderated in key demand areas in North America. Henry Hub declined to a low of US$2.55 per mcf before a return of colder weather increased the price to over US$3.00 per mcf before the end of the quarter.

AECO declined relative to Henry Hub during the first quarter as increasing Western Canadian supply and competition with other supply basins led to downward pressure on AECO, which averaged $2.82 per mcf for the quarter.

PENN WEST FIRST QUARTER 2017 MANAGEMENT’S DISCUSSION AND ANALYSIS 3    

Currently, the Company has the following natural gas hedges in place:

Reference Price	Term	Price ($/mcf)		Volume (mcf/day)
AECO	Q2 2017	$	2.81		19,000
AECO	Q3 2017	$	2.84		19,000
AECO	Q4 2017	$	3.00		20,900
AECO	Q1 2018	$	2.97		19,000
AECO	Q2 2018	$	2.83		13,300
AECO	Q3 2018	$	2.80		7,600
AECO	Q4 2018	$	2.84		5,700

Average Sales Prices

	Three months ended March 31
	2017		2016		% change
Light oil (per bbl)	$	63.21	$	37.44		69
Commodity gain (per bbl) (1)		8.88		11.25		(21	)
Light oil net (per bbl)		72.09		48.69		48
Heavy oil (per bbl)		33.21		14.76		>100
NGL (per bbl)		27.79		12.75		>100
Natural gas (per mcf)		3.22		1.96		64
Commodity gain (per mcf) (1)		0.07		0.28		(75	)
Natural gas net (per mcf)		3.29		2.24		47
Weighted average (per boe)		38.63		24.22		59
Commodity gain (per boe) (1)		3.52		5.75		(39	)
Weighted average net (per boe)	$	42.15	$	29.97		41

(1) Realized risk management gains and losses on commodity contracts are included in gross revenues.

RESULTS OF OPERATIONS

Production

	Three months ended March 31
Daily production	2017		2016		% change
Light oil (bbls/d)		13,167		35,717		(63	)
Heavy oil (bbls/d)		5,206		12,440		(58	)
NGL (bbls/d)		2,795		4,855		(42	)
Natural gas (mmcf/d)		82		144		(43	)
Total production (boe/d)		34,900		77,010		(55	)

In the first quarter of 2017, the Company continued to progress with its development program with operations on track to deliver double-digit growth from year-end. Additionally, during the first quarter of 2017, the Company closed several asset dispositions which included properties located in British Columbia and in the Swan Hills area of Alberta. Associated average production on these dispositions was 9,900 boe per day.

PENN WEST FIRST QUARTER 2017 MANAGEMENT’S DISCUSSION AND ANALYSIS 4    

In 2016, the Company closed several asset dispositions with associated average production of approximately 30,000 boe per day as it focused on reducing its debt levels. This resulted in a decline in production in the first quarter of 2017 from the comparative period. Significant dispositions in 2016 included:

• the Saskatchewan Viking disposition in June which had associated average production of approximately 13,700 boe per day;

• the Slave Point disposition in April which had associated average production of approximately 3,900 boe per day; and

• several non-core asset dispositions during the third quarter of 2016 with associated average production of approximately 6,000 boe per day.

During the first quarter of 2017, average production within the Company’s key development areas totalled 30,334 boe per day and was as follows:

• Cardium – 18,603 boe per day

• Peace River – 4,648 boe per day

• Alberta Viking – 2,638 boe per day

• Legacy – 4,445 boe per day

Netbacks

	Three months ended March 31
	2017									2016
	Liquids			Natural Gas			Combined			Combined
	(bbl)			(mcf)			(boe)			(boe)
Operating netback:
Sales price (1)	$	51.15		$	3.22		$	38.63		$	24.22
Commodity gain (2)		5.52			0.07			3.52			5.75
Royalties		(4.32	)		(0.03	)		(2.68	)		(1.07	)
Transportation		(2.20	)		(0.42	)		(2.31	)		(1.63	)
Operating costs		(14.45	)		(2.42	)		(14.48	)		(13.02	)
Netback	$	35.70		$	0.42		$	22.68		$	14.25
		(bbls/d	)		(mmcf/d	)		(boe/d	)		(boe/d	)
Production		21,169			82			34,900			77,010

(1) Excluded from the netback calculation for 2016 was $22 million of other income which was primarily related to proceeds received by the Company from disposing a pipeline commitment.

(2) Realized risk management gains and losses on commodity contracts.

In the first quarter of 2017, the Company’s netbacks improved mainly due to increases in the commodity price environment. The Company continues to have an active hedging program which further supported its strong results. Operating Costs include the effect of carried operating expenses from the Company’s partner under the Peace River Oil Partnership of $4 million or $1.30 per boe on a combined basis (2016 - $4 million or $0.52 per boe).

PENN WEST FIRST QUARTER 2017 MANAGEMENT’S DISCUSSION AND ANALYSIS 5    

Production Revenues

Revenues from the sale of liquids and natural gas consisted of the following:

	Three months ended March 31
(millions)	2017		2016		% change
Liquids	$	108	$	202		(47	)
Natural gas		24		29		(17	)
Gross revenues (1)	$	132	$	231		(43	)

(1) Includes realized risk management gain on commodity contracts which totaled $11 million for the three months ended March 31, 2017 (2016 - $40 million).

Gross revenues are lower than the prior year due to significant disposition activity in 2016 which led to a

decrease in production volumes. This was partially offset by increases in the commodity price environment, specifically crude oil prices.

Reconciliation of Change in Production Revenues

(millions)
Gross revenues – January 1 – March 31, 2016	$	231
Decrease in liquids production		(123	)
Increase in liquids prices (1)		51
Decrease in natural gas production		(13	)
Increase in natural gas prices (1)		8
Decrease in other income (2)		(22	)
Gross revenues – January 1 – March 31, 2017	$	132

(1) Includes realized risk management gains and losses on commodity contracts.

(2) Decrease in other income of $22 million relates to proceeds received from disposing of a pipeline commitment in the prior year.

Royalties

	Three months ended March 31
	2017			2016			% change
Royalties (millions)	$	8		$	7			14
Average royalty rate (1)		7	%		4	%		75
$/boe	$	2.68		$	1.07			>100

(1) Excludes effects of risk management activities.

In the first quarter of 2017, royalties were consistent with expectations. In the comparable period of 2016, the Company settled outstanding royalty audits and released a $6 million provision that was no longer required. Excluding these provisions, the royalty rate would have been seven percent, which is consistent year over year.

PENN WEST FIRST QUARTER 2017 MANAGEMENT’S DISCUSSION AND ANALYSIS 6    

Expenses

	Three months ended March 31
(millions)	2017		2016		% change
Operating	$	50	$	95		(47	)
Transportation		7		11		(36	)
Financing		5		40		(88	)
Share-based compensation	$	3	$	3		—
	Three months ended March 31
(per boe)	2017		2016		% change
Operating (1)	$	14.48	$	13.02		11
Transportation		2.31		1.63		42
Financing		1.55		5.70		(73	)
Share-based compensation	$	1.05	$	0.38		>100

(1) Includes the effect of carried operating expenses from its partner under the Peace River Oil Partnership of $4 million or $1.30 per boe (2016 - $4 million or $0.52 per boe).

Operating

In the first quarter of 2017, the timing of certain asset disposition activity and costs associated with assets sold or held for sale led to a higher per boe figure than the comparable period. The Company is targeting 2017 annual operating costs of $13.00 - $13.50 per boe, net of carried operating costs.

Financing

The Company has a $600 million secured, revolving syndicated bank facility maturing on May 6, 2019. The syndicated bank facility contains provisions for stamping fees on bankers’ acceptances and LIBOR loans and standby fees on unutilized credit lines that vary depending on certain consolidated financial ratios. At March 31, 2017, the Company had $328 million of unused credit capacity available.

At March 31, 2017, the value of the Company’s senior notes was $126 million (December 31, 2016 – $140 million). There were no senior note issuances in either 2017 or 2016.

Summary information on our senior notes outstanding as at March 31, 2017 is as follows:

	Issue date		Amount (millions)		Term		Average interest rate			Weighted average remaining term
2007 Notes		May 31, 2007	US$	10		8 – 15 years		5.85	%		1.2
2008 Notes		May 29, 2008	US$	28		8 – 12 years		6.31	%		1.5
2009 Notes		May 5, 2009	US$	8		5 – 10 years		9.32	%		2.1
2010 Q1 Notes		March 16, 2010	US$	10		5 – 15 years		5.85	%		3.0
2010 Q4 Notes		December 2, 2010, January 4, 2011	US$	27		5 – 15 years		4.78	%		3.9
2011 Notes		November 30, 2011	US$	12		5 – 10 years		4.78	%		4.6

Penn West’s debt structure includes short-term financings under its syndicated bank facility and long-term financing through its senior notes. Financing charges in the first quarter of 2017 decreased from the comparable period in 2016 as the Company applied asset disposition proceeds to re-pay outstanding indebtedness on its syndicated bank facility and to pre-pay outstanding senior notes.

In May 2015, the Company entered into amending agreements with the lenders under its syndicated bank facility and with the holders of its senior notes to, in part, have modified its financial covenants during a designated covenant relief period. The covenant relief period under those amending agreements ended on March 30, 2017.

PENN WEST FIRST QUARTER 2017 MANAGEMENT’S DISCUSSION AND ANALYSIS 7    

The interest rates on any non-hedged portion of the Company’s syndicated bank facility are subject to fluctuations in short-term money market rates as advances on the syndicated bank facility are generally made under short-term instruments. As at March 31, 2017, 67 percent (December 31, 2016 – 70 percent) of Penn West’s outstanding debt instruments were exposed to changes in short-term interest rates.

Share-Based Compensation

Share-based compensation expense relates to the Company’s Stock Option Plan (the “Option Plan”), Restricted Share Unit Plan (“RSU”), Deferred Share Unit Plan (“DSU”) and Performance Share Unit Plan (“PSU”).

Share-based compensation consisted of the following:

	Three months ended March 31
(millions)	2017		2016		% change
Options	$	—	$	1		(100	)
PSU		1		—		100
RSU – liability method		—		1		(100	)
RSU – equity method		2		1		100
Share-based compensation	$	3	$	3		—

The share price used in the fair value calculation of the RSU plan under the liability method, PSU and DSU obligations at March 31, 2017 was $2.27 (2016 – $1.20). Share-based compensation related to the DSU was insignificant in both periods.

General and Administrative Expenses

	Three months ended March 31
(millions, except per boe amounts)	2017		2016		% change
Gross	$	14	$	20		(30	)
Per boe		4.43		2.88		54
Net		8		14		(43	)
Per boe	$	2.64	$	1.97		34

In 2016 and into 2017, the Company continued to focus its operations and align its organizational structure to current activity levels which resulted in a reduction in its workforce and a lower cost structure.

In the comparable period in 2016, Penn West released its 2015 bonus provision totaling $2 million ($0.30 per boe).

Restructuring Expense

	Three months ended March 31
(millions, except per boe amounts)	2017		2016		% change
Restructuring	$	2	$	6		(67	)
Per boe	$	0.63	$	0.82		(23	)

During the first quarter of 2017, the Company continued to align its staffing levels to its current operations which led to a reduced workforce.

PENN WEST FIRST QUARTER 2017 MANAGEMENT’S DISCUSSION AND ANALYSIS 8    

Depletion, Depreciation, Impairment and Accretion

	Three months ended March 31
(millions, except per boe amounts)	2017			2016		% change
Depletion and depreciation (“D&D”)	$	72		$	132		(45	)
D&D expense per boe		22.84			18.78		22
PP&E Impairment		(1	)		132		>(100	)
PP&E Impairment per boe		(0.37	)		18.75		>(100	)
Accretion of decommissioning liability		3			7		(57	)
Accretion expense per boe	$	0.96		$	1.06		(9	)

The Company’s D&D expense decreased from the comparative period mainly due to asset dispositions that closed in 2016 and impairment charges recorded during 2016.

For the comparable period in 2016, Penn West announced it had entered into a definitive sale agreement to sell certain assets located in the Slave Point area of Northern Alberta. As the sale was not closed by March 31, 2016, these assets were classified as held for sale and an impairment test was required. As the book value of these assets exceeded the fair value received, a non-cash impairment charge of $96 million ($132 million before-tax) was recorded.

Taxes

	Three months ended March 31
(millions)	2017			2016		% change
Deferred tax recovery (expense)	$	(9	)	$	58		>(100	)

The deferred income tax expense during the first quarter of 2017 was primarily the result of gains recorded on asset dispositions and unrealized risk management gains.

Foreign Exchange

Penn West records unrealized foreign exchange gains or losses to translate U.S., UK and Euro denominated senior, secured notes and the related accrued interest to Canadian dollars using the exchange rates in effect on the balance sheet date. Realized foreign exchange gains or losses are recorded upon repayment of the senior notes.

The split between realized and unrealized foreign exchange losses is as follows:

	Three months ended March 31
(millions)	2017			2016		% change
Realized foreign exchange loss on debt maturities	$	(3	)	$	—		>(100	)
Unrealized foreign exchange gain		5			89		(94	)
Foreign exchange gain	$	2		$	89		(98	)

During the first quarter of 2017, the Company had debt maturities totaling US$10 million on its senior notes which led to the realized loss. The unrealized gain in the first quarter of 2017 is due to the strengthening of the Canadian dollar relative to the US dollar during the quarter.

PENN WEST FIRST QUARTER 2017 MANAGEMENT’S DISCUSSION AND ANALYSIS 9    

Net Income (loss)

	Three months ended March 31
(millions, except per share amounts)	2017		2016			% change
Net income (loss)	$	27	$	(100	)		>100
Basic per share		0.05		(0.20	)		>100
Diluted per share	$	0.05	$	(0.20	)		>100

Net income during the first quarter of 2017 was mainly due to strong revenue attributable to higher commodity prices, gains on asset dispositions and unrealized risk management gain on commodity contracts.

The net loss in 2016 was primarily due to a non-cash impairment charge as a result of classifying the Slave Point properties as assets held for sale.

Capital Expenditures

	Three months ended March 31
(millions)	2017			2016			% change
Drilling and completions	$	22		$	16			38
Facilities and well equipping		17			16			6
Geological and geophysical		1			2			(50	)
Carried capital by partners		(14	)		(16	)		(13	)
Exploration and development capital expenditures		26			18			44
Property dispositions, net		(70	)		(33	)		>100
Total capital expenditures	$	(44	)	$	(15	)		>100

During the first quarter of 2017, the Company drilled 15 injector wells primarily in the Crimson and Pembina areas of the Cardium to support its 2016 drilling program and its water flood platform. Primary development activity continued within Peace River with six net wells drilled during the quarter. Additionally, nine wells were brought on production in the first quarter of 2017 including three in Cardium, four in Peace River and two in the Viking.

As the Company’s disposition program came to a conclusion, a number of property dispositions were closed during the first quarter of 2017.

Gain on asset dispositions

	Three months ended March 31
(millions)	2017		2016		% change
Gain on asset dispositions	$	32	$	1		>100

During the first quarter of 2017, the Company closed several property dispositions as it continued to focus its asset portfolio.

Environmental and Climate Change

The oil and gas industry has a number of environmental risks and hazards and is subject to regulation by all levels of government. Environmental legislation includes, but is not limited to, operational controls, site restoration requirements and restrictions on emissions of various substances produced in association with oil and natural gas operations. Compliance with such legislation could require additional expenditures and a failure to comply may result in fines and penalties which could, in the aggregate and under certain assumptions, become material.

PENN WEST FIRST QUARTER 2017 MANAGEMENT’S DISCUSSION AND ANALYSIS 10    

Penn West is dedicated to managing the environmental impact from its operations through its environmental programs which include resource conservation, water management and site abandonment/reclamation/remediation. Operations are continuously monitored to minimize environmental impact and allocate sufficient capital to reclamation and other activities to mitigate the impact on the areas in which the Company operates.

Liquidity and Capital Resources

Capitalization

(millions)	March 31, 2017		December 31, 2016
Common shares issued, at market (1)	$	1,144	$	1,192
Bank loans and long-term notes		384		469
Cash		—		(11	)
Total enterprise value	$	1,528	$	1,650

(1) The share price at March 31, 2017 was $2.27 (December 31, 2016 - $2.37).

The Company’s working capital deficiency at March 31, 2017 was $21 million (December 31, 2016 – $29 million) which excludes the current portion of deferred funding asset, risk management, long-term debt and provisions. As at December 31, 2016, $4 million working capital surplus related to assets classified as held for sale.

Liquidity

The Company has a secured, revolving syndicated bank facility with an aggregate borrowing limit of $600 million and an extendible five-year term (May 6, 2019 maturity date). For further details on the Company’s debt instruments, please refer to the “Financing” section of this MD&A.

The Company actively manages its debt portfolio and considers opportunities to reduce or diversify its debt capital structure. Management contemplates both operating and financial risks and takes action as appropriate to limit the Company’s exposure to certain risks. Management maintains close relationships with the Company’s lenders and agents to monitor credit market developments. These actions and plans aim to increase the likelihood of maintaining the Company’s financial flexibility and capital program, supporting the Company’s ability to capture opportunities in the market and execute longer-term business strategies.

The Company has a number of covenants related to its syndicated bank facility and senior notes. On March 31, 2017, the Company was in compliance with all of these financial covenants which consisted of the following:

	Limit	March 31, 2017
Senior debt to EBITDA (1)	Less than 3:1		2.15
Total debt to EBITDA (1)	Less than 4:1		2.15
Senior debt to capitalization	Less than 50%		15	%
Total debt to capitalization	Less than 55%		15	%

(1) EBITDA is calculated in accordance with Penn West’s lending agreements wherein unrealized risk management gains and losses and impairment provisions are excluded.

PENN WEST FIRST QUARTER 2017 MANAGEMENT’S DISCUSSION AND ANALYSIS 11    

The table below outlines the Company’s senior debt to EBITDA calculation as at March 31, 2017:

	Three months ended											Trailing 12 months
	Mar. 31		Dec. 31			Sep. 30			June 30			Mar. 31
(millions, except ratios)	2017		2016			2016			2016			2017
Cash flow from operating activities	$	38	$	(44	)	$	(98	)	$	(56	)	$	(160	)
Change in non-cash working capital		2		(6	)		16			61			73
Decommissioning expenditures		4		6			1			2			13
Office lease settlements		4		4			—			—			8
Financing		5		11			22			41			79
Realized gain on foreign exchange hedges on prepayments		—		—			(9	)		—			(9	)
Realized foreign exchange loss – debt prepayments		—		78			113			—			191
Restructuring expenses – cash portion		2		5			5			3			15
EBITDA	$	55	$	54		$	50		$	51		$	210
EBITDA contribution from assets sold (1)													(29	)
EBITDA as defined by debt agreements												$	181
Long-term debt												$	384
Letters of credit – financial (2)													4
Total senior debt												$	388
Senior debt to EBITDA													2.15

(1) Consists of EBITDA contributions from assets that have been disposed in the prior 12 months.

(2) Letters of credit that are classified as financial are included in the senior debt calculation per the debt agreements.

In May 2015, the Company entered into amending agreements with the lenders under its syndicated bank facility and with the holders of its senior notes to, in part, have modified its financial covenants during a designated covenant relief period. The covenant relief period under those amending agreements ended on March 30, 2017. The Company also agreed to grant floating charge security over all of its property in favour of the lenders and the noteholders on a pari passu basis, which security will be fully released on such date when both (a) no default or event of default is continuing under the Company’s syndicated bank facility or senior notes and (b) the Company has achieved both (i) a Senior Debt to EBITDA ratio of 3:1 or less for four consecutive quarters, and (ii) an investment grade rating on its senior secured debt.

PENN WEST FIRST QUARTER 2017 MANAGEMENT’S DISCUSSION AND ANALYSIS 12    

Financial Instruments

Penn West had the following financial instruments outstanding as at March 31, 2017. Fair values are determined using external counterparty information, which is compared to observable market data. Penn West limits its credit risk by executing counterparty risk procedures which include transacting only with institutions within Penn West’s credit facility or companies with high credit ratings and by obtaining financial security in certain circumstances.

	Notional volume			Remaining Term		Pricing			Fair value (millions)
Natural gas
AECO Swaps		13,300 mcf/d			Apr/17 – Jun/17		$2.70/mcf		$	—
AECO Swaps		11,400 mcf/d			Jul/17 – Sep/17		$2.71/mcf			—
AECO Swaps		9,500 mcf/d			Oct/17 – Dec/17		$3.00/mcf			—
AECO Swaps		5,700 mcf/d			Apr/17 – Dec/17		$3.07/mcf			1
AECO Swaps		1,900 mcf/d			Jan/18 – Jun/18		$2.84/mcf			—
AECO Swaps		3,800 mcf/d			Jan/18 – Dec/18		$2.89/mcf			—
Crude Oil
WTI Swaps		800 bbl/d			Apr/17 – Jun/17		$68.48/bbl			—
WTI Swaps		400 bbl/d			Jul/17 – Sep/17		$69.50/bbl			—
WTI Swaps		900 bbl/d			Oct/17 – Dec/17		$70.81/bbl			—
WTI Swaps		1,800 bbl/d			Apr/17 – Dec/17		$68.73/bbl			—
WTI Swaps		5,200 bbl/d			Apr/17 – Dec/17		$66.81/bbl			(3	)
WTI Swaps		1,000 bbl/d			Jan/18 – Jun/18		$71.00/bbl			—
WTI Swaps		2,000 bbl/d			Jan/18 – Mar/18		US$50.29/bbl			—
Foreign exchange forwards on senior notes
3 to 15-year initial term		US$25			2017		1.000 CAD/USD			8
Cross currency swaps
10-year initial term		£57			2018		2.0075 CAD/GBP, 6.95	%		(20	)
18-month offset		(£28.5	)		2018		1.6911 CAD/GBP, 6.95	%		—
10-year initial term		£20			2019		1.8051 CAD/GBP, 9.15	%		(2	)
10-year initial term		€10			2019		1.5870 CAD/EUR, 9.22	%		(1	)
Total									$	(17	)

Subsequent to March 31, 2017, the Company entered into the following hedge contracts:

Reference Price	Term	Price (US$/Barrel)		Volume (Barrels/day)
WTI	Jan 2018 – Mar 2018	US$	51.46		4,000
WTI	Apr 2018 – June 2018	US$	53.25		2,000
WTI	Jul 2018 – Sept 2018	US$	53.50		1,000
Reference Price	Term	Price ($/mcf)		Volume (mcf/day)
AECO	Jul 2017 – Jun 2018	$	2.91		1,900
AECO	Oct 2017 – Sep 2018	$	2.69		1,900
AECO	Oct 2017 – Mar 2018	$	3.19		1,900
AECO	Jan 2018 – Mar 2018	$	3.33		3,800
AECO	Jan 2018 – Jun 2018	$	2.84		1,900
AECO	Jan 2018 – Dec 2018	$	2.74		1,900

Additionally, the Company entered into a £14.25 offsetting cross currency contract until July 2018 at a CAD/GBP rate of 1.7326.

PENN WEST FIRST QUARTER 2017 MANAGEMENT’S DISCUSSION AND ANALYSIS 13    

The components of risk management gain are as follows:

	Three months ended March 31
	2017		2016			% change
Realized
Settlement of commodity contracts/assignment	$	11	$	38			(71	)
Monetization of commodity contracts		—		2			(100	)
Monetization of foreign exchange contracts		—		32			(100	)
Total realized risk management gain		11		72			(85	)
Unrealized
Commodity contracts		25		(2	)		>100
Electricity swaps		—		1			(100	)
Crude oil assignment		—		(1	)		100
Foreign exchange contracts		—		(46	)		100
Cross-currency swaps		1		(16	)		>100
Total unrealized risk management gain (loss)		26		(64	)		>100
Risk management gain	$	37	$	8			>100

In the first quarter of 2016, the Company monetized a total of US$115 million of foreign exchange forward contracts on senior notes and unwound AECO swap contracts totalling 14,100 mcf per day.

During the first quarter of 2017, the Company had no outstanding electricity contracts. During the first three months of 2016, a $2 million realized loss was included in operating expenses.

Outlook

For 2017, Penn West’s capital program is expected to provide double-digit percentage production growth in its key development areas from the fourth quarter of 2016 to the fourth quarter of 2017. The Company expects to pay for the capital program using its funds flow from operations. There have been no changes to the Company’s production and capital guidance as previously disclosed in its March 15, 2017 year-end results release.

Metric		2017 Guidance Range
Average Production	boe per day		30,500 – 31,500
E&D Capital Expenditures	$ millions	$	160
Decommissioning Expenditures	$ millions	$	20
Operating costs (1)	$/boe	$	13.00 - $13.50

(1) Includes the effect of carried operating costs from the Company’s partner under the Peace River Oil Partnership.

This outlook section is included to provide shareholders with information about Penn West’s expectations as at May 3, 2017 for production, exploration and development capital expenditures, decommissioning expenditures and operating costs for 2017 and readers are cautioned that the information may not be appropriate for any other purpose. This information constitutes forward-looking information. Readers should note the assumptions, risks and discussion under “Forward-Looking Statements” and are cautioned that numerous factors could potentially impact Penn West’s capital expenditure levels, production and operating costs, including fluctuations in commodity prices.

All press releases are available on Penn West’s website at www.pennwest.com, on SEDAR at www.sedar.com, and on EDGAR at www.sec.gov.

PENN WEST FIRST QUARTER 2017 MANAGEMENT’S DISCUSSION AND ANALYSIS 14    

Sensitivity Analysis

Estimated sensitivities to selected key assumptions on funds flow from operations for the 12 months subsequent to the date of this MD&A, including risk management contracts entered to date, are based on forecasted results as discussed in the Outlook above.

				Impact on cash flow
Change of:	Change			$ millions		$/share
Price per barrel of liquids	$	1.00			4		0.01
Liquids production		1,000 bbls/day			19		0.04
Price per mcf of natural gas	$	0.10			2		—
Natural gas production		10 mmcf/day			2		—
Effective interest rate		1	%		3		0.01
Exchange rate ($US per $CAD)	$	0.01			4		0.01

Contractual Obligations and Commitments

Penn West is committed to certain payments over the next five calendar years and thereafter as follows:

	2017		2018		2019		2020		2021		Thereafter
Long-term debt	$	14	$	33	$	275	$	36	$	16	$	10
Transportation		6		11		8		6		5		7
Power infrastructure		10		3		—		—		—		—
Drilling rigs		5		—		—		—		—		—
Interest obligations		11		13		6		2		1		1
Office lease (1)		26		35		35		35		35		108
Decommissioning liability (2)	$	16	$	10	$	9	$	9	$	8	$	129

(1) The future office lease commitments above are to be reduced by contracted sublease recoveries totalling $112 million.

(2) These amounts represent the inflated, discounted future reclamation and abandonment costs that are expected to be incurred over the life of the Company’s properties.

The Company’s syndicated bank facility is due for renewal on May 6, 2019. In addition, the Company has an aggregate of US$95 million in senior notes maturing between 2017 and 2025. If the Company is unsuccessful in renewing or replacing the syndicated bank facility or obtaining alternate funding for some or all of the maturing amounts of the senior notes, it is possible that it could be required to obtain other facilities, including term bank loans.

The Company is involved in various litigation and claims in the normal course of business and records provisions for claims as required.

Equity Instruments

Common shares issued:
As at March 31, 2017	504,028,638
Stock option plan	272,250
As at May 3, 2017	504,300,888
Options outstanding:
As at March 31, 2017	5,506,725
Exercised	(272,250	)
Forfeited	(1,079,450	)
As at May 3, 2017	4,155,025

PENN WEST FIRST QUARTER 2017 MANAGEMENT’S DISCUSSION AND ANALYSIS 15    

Changes in Internal Control Over Financial Reporting (“ICFR”)

Penn West’s senior management has evaluated whether there were any changes in the Company’s ICFR that occurred during the period beginning on January 1, 2017 and ending on March 31, 2017 that have materially affected, or are reasonably likely to materially affect, the Company’s ICFR. No changes to Penn West’s ICFR were made during the quarter.

Penn West utilizes the original Internal Control - Integrated Framework (2013) issued by the Committee of the Sponsoring Organizations of the Treadway Commission (COSO) to design and evaluate its internal control over financial reporting.

Future Accounting Pronouncements

The IASB issued IFRS 15 “Revenue from Contracts with Customers” which replaces IAS 18 “Revenue”. IFRS 15 specifies revenue recognition criteria and expanded disclosures for revenue. The new standard is effective for annual periods beginning on or after January 1, 2018 and early adoption is permitted. Penn West is currently assessing the impact of the standard.

The IASB completed the final sections of IFRS 9 “Financial Instruments” which replaces IAS 39 “Financial Statement: Recognition and Measurement”. IFRS 9 provides guidance on the recognition and measurement, impairment and derecognition on financial instruments. The new standard is effective for annual periods beginning on or after January 1, 2018 and early adoption is permitted. Penn West is currently assessing the impact of the standard.

The IASB issued IFRS 16 “Leases” in January 2016 which replaces IAS 17 “Leases”. IFRS 16 outlines several new requirements in regards to the recognition, measurement and disclosure of leases. A key principle within the standard includes a single lessee accounting model which requires lessees to recognise assets and liabilities for all leases which have a term more than 12 months. The accounting for lessors, which classify leases as either operating or finance, remains substantially unchanged from the previous standard. The new standard is effective for annual reporting periods beginning on or after 1 January 2019. Penn West is currently assessing the impact of the standard.

Off-Balance-Sheet Financing

Penn West has off-balance-sheet financing arrangements consisting of operating leases. The operating lease payments are summarized in the Contractual Obligations and Commitments section.

Non-GAAP Measures

Certain financial measures including funds flow from operations, funds flow from operations per share-basic, funds flow from operations per share-diluted, netback, EBITDA and gross revenues included in this MD&A do not have a standardized meaning prescribed by IFRS and therefore are considered non-GAAP measures; accordingly, they may not be comparable to similar measures provided by other issuers. Funds flow from operations is cash flow from operating activities before changes in non-cash working capital, decommissioning expenditures and office lease settlements which also excludes the effects of financing related transactions from foreign exchange contracts and debt repayments/pre-payments and is representative of cash related to continuing operations. Funds flow from operations is used to assess the Company’s ability to fund its planned capital programs. See “Calculation of Funds Flow from Operations” above for a reconciliation of funds flow from operations to its nearest measure prescribed by IFRS. Netback is the per unit of production amount of revenue less royalties, operating expenses, transportation and realized risk management gains and losses, and is used in capital allocation decisions and to economically rank projects. See “Results of Operations – Netbacks” above for a calculation of the Company’s netbacks. EBITDA is cash flow from operations excluding the impact of changes in non-cash working capital, decommissioning expenditures, financing expenses, realized gains and losses on foreign exchange hedges on prepayments, realized foreign exchange gains and losses on debt prepayments and restructuring expenses. EBITDA as defined by Penn West’s debt agreements excludes the EBITDA contribution from assets sold in the prior 12 months and is used within Penn West’s covenant calculations related to its syndicated bank facility and senior notes. Gross revenue is total revenues including realized risk management gains and losses on commodity contracts and is used to assess the cash realizations on commodity sales.

PENN WEST FIRST QUARTER 2017 MANAGEMENT’S DISCUSSION AND ANALYSIS 16    

Oil and Gas Information

Barrels of oil equivalent (“boe”) may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet of natural gas to one barrel of crude oil is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency conversion ratio of 6:1, utilizing a conversion on a 6:1 basis is misleading as an indication of value.

Forward-Looking Statements

Certain statements contained in this document constitute forward-looking statements or information (collectively “forward-looking statements”) within the meaning of the “safe harbor” provisions of applicable securities legislation. In particular, this document contains forward-looking statements pertaining to, without limitation, the following: the Company’s intended approach to developing its asset portfolio, expected production growth while living within fund flow from operations; the intended development of the Company’s light-oil Cardium interests; the intended development of primary, “cold-flow” within the Peace River area; plans to leverage existing infrastructure within the Viking to profit from the shorter cycle time and quick payout of wells in the area; to pursue new ventures on Penn West’s existing land positions; that the 2017 plans will position the Company for double-digit production growth in future years which will in turn increase its profitability and long-term shareholder value; that the Company is committed to minimizing the environmental impacts of its operations; our belief that compliance with environmental legislation could require additional expenditures and a failure to comply with such legislation may result in fines and penalties which could, in the aggregate and under certain assumptions, become material, our intent to reduce the environmental impact from our operations through environmental programs; the managing of our debt portfolio and considering opportunities to reduce or diversity the debt capital structure; how the Company manages both operational and financial risk and how these increase the likelihood of maintaining the Company’s financial flexibility and capital programs and that these support the Company’s ability to capture opportunities in the market and execute longer-term business strategies; the Company’s intention to target capital expenditures within funds flow from operations; the intention to increase organic production by double-digit percentage in its key development areas from the fourth quarter of 2016 to the fourth quarter of 2017; the annual corporate production guidance range, expected exploration and development capital expenditures, decommissioning expenditures and operating costs range for 2017; the estimated sensitivities to selected key assumptions on funds flow from operations for the 12 months subsequent to this MD&A. In addition, statements relating to “reserves” or “resources” are deemed to be forward-looking statements as they involve the implied assessment, based on certain estimates and assumptions, that the reserves and resources described exist in the quantities predicted or estimated and can be profitably produced in the future.

With respect to forward-looking statements contained in this document, the Company has made assumptions regarding, among other things: that the Company does not dispose of additional material producing properties or royalties or other interests therein; that the current commodity price and foreign exchange environment will continue or improve; future capital expenditure levels; future crude oil, natural gas liquids and natural gas prices and differentials between light, medium and heavy oil prices and Canadian, WTI and world oil and natural gas prices; future crude oil, natural gas liquids and natural gas production levels; future exchange rates and interest rates; future debt levels; and the continued suspension of our dividend.

PENN WEST FIRST QUARTER 2017 MANAGEMENT’S DISCUSSION AND ANALYSIS 17    

Although the Company believes that the expectations reflected in the forward-looking statements contained in this document, and the assumptions on which such forward-looking statements are made, are reasonable, there can be no assurance that such expectations will prove to be correct. Readers are cautioned not to place undue reliance on forward-looking statements included in this document, as there can be no assurance that the plans, intentions or expectations upon which the forward-looking statements are based will occur. By their nature, forward-looking statements involve numerous assumptions, known and unknown risks and uncertainties that contribute to the possibility that the forward-looking statements contained herein will not be correct, which may cause our actual performance and financial results in future periods to differ materially from any estimates or projections of future performance or results expressed or implied by such forward-looking statements. These risks and uncertainties include, among other things: the possibility that the Company will not be able to continue to successfully execute our long-term plan in part or in full, and the possibility that some or all of the benefits that the Company anticipates will accrue to our Company and our security holders as a result of the successful execution of such plan do not materialize; the possibility that the Company is unable to execute some or all of our ongoing asset disposition program on favorable terms or at all; general economic and political conditions in Canada, the U.S. and globally, and in particular, the effect that those conditions have on commodity prices and our access to capital; industry conditions, including fluctuations in the price of crude oil, natural gas liquids and natural gas, price differentials for crude oil and natural gas produced in Canada as compared to other markets, and transportation restrictions, including pipeline and railway capacity constraints; fluctuations in foreign exchange or interest rates; unanticipated operating events or environmental events that can reduce production or cause production to be shut-in or delayed (including extreme cold during winter months, wild fires and flooding); and the other factors described under “Risk Factors” in our Annual Information Form and described in our public filings, available in Canada at www.sedar.com and in the United States at www.sec.gov. Readers are cautioned that this list of risk factors should not be construed as exhaustive.

The forward-looking statements contained in this document speak only as of the date of this document. Except as expressly required by applicable securities laws, the Company does not undertake any obligation to publicly update any forward-looking statements. The forward-looking statements contained in this document are expressly qualified by this cautionary statement.

Additional Information

Additional information relating to Penn West, including Penn West’s Annual Information Form, is available on the Company’s website at www.pennwest.com, on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.

PENN WEST FIRST QUARTER 2017 MANAGEMENT’S DISCUSSION AND ANALYSIS 18    

EX-99.3

Exhibit 99.3

Penn West Petroleum Ltd.

Consolidated Balance Sheets

(CAD millions, unaudited)	Note	March 31, 2017			December 31, 2016
Assets
Current
Cash		$	—		$	11
Accounts receivable			101			113
Other			16			18
Deferred funding asset	3		72			77
Risk management	8		9			8
Assets held for sale	4		9			114
			207			341
Non-current
Deferred funding asset	3		—			16
Property, plant and equipment	5		2,939			2,982
			2,939			2,998
Total assets		$	3,146		$	3,339
Liabilities and Shareholders’ Equity
Current
Accounts payable and accrued liabilities		$	138		$	175
Current portion of long-term debt	6		14			27
Provisions	7		34			35
Risk management	8		3			26
Liabilities related to assets held for sale	4		6			81
			195			344
Non-current
Long-term debt	6		370			442
Provisions	7		259			264
Risk management	8		23			25
Deferred tax liability			23			14
Other non-current liabilities			1			3
			871			1,092
Shareholders’ equity
Shareholders’ capital	9		8,999			8,997
Other reserves			96			97
Deficit			(6,820	)		(6,847	)
			2,275			2,247
Total liabilities and shareholders’ equity		$	3,146		$	3,339

See accompanying notes to the unaudited interim consolidated financial statements.

Subsequent events (Note 8 and 12)

Commitments and contingencies (Note 11)

PENN WEST FIRST QUARTER 2017 INTERIM CONSOLIDATED FINANCIAL STATEMENTS 1

Penn West Petroleum Ltd.

Consolidated Statements of Income (Loss)

	Three months ended March 31
(CAD millions, except per share amounts, unaudited)	Note		2017			2016
Oil and natural gas sales and other income			$	121		$	191
Royalties				(8	)		(7	)
				113			184
Risk management gain		8		37			8
				150			192
Expenses
Operating				50			95
Transportation				7			11
General and administrative				8			14
Restructuring				2			6
Share-based compensation		10		3			3
Depletion, depreciation, impairment and accretion		5,7		76			271
Gain on dispositions		5		(32	)		(1	)
Gain on provisions		7		(3	)		—
Foreign exchange gain		6		(2	)		(89	)
Financing		6		5			40
				114			350
Income (loss) before taxes				36			(158	)
Deferred tax expense (recovery)				9			(58	)
Net and comprehensive gain (loss)			$	27		$	(100	)
Net income (loss) per share
Basic			$	0.05		$	(0.20	)
Diluted			$	0.05		$	(0.20	)
Weighted average shares outstanding (millions)
Basic		9		502.8			502.2
Diluted		9		503.6			502.2

See accompanying notes to the unaudited interim consolidated financial statements.

PENN WEST FIRST QUARTER 2017 INTERIM CONSOLIDATED FINANCIAL STATEMENTS 2

Penn West Petroleum Ltd.

Consolidated Statements of Cash Flows

	Three months ended March 31
(CAD millions, unaudited)	Note		2017			2016
Operating activities
Net income (loss)			$	27		$	(100	)
Depletion, depreciation, impairment and accretion		5,7		76			271
Gain on dispositions		5		(32	)		(1	)
Gain on provisions		7		(3	)		—
Deferred tax expense (recovery)				9			(58	)
Share-based compensation		10		2			2
Unrealized risk management loss (gain)		8		(26	)		64
Unrealized foreign exchange gain		6		(5	)		(89	)
Decommissioning expenditures		7		(4	)		(2	)
Office lease settlements		7		(4	)		—
Change in non-cash working capital				(2	)		(26	)
				38			61
Investing activities
Capital expenditures		5		(26	)		(18	)
Property dispositions (acquisitions), net		5		70			33
Change in non-cash working capital				(11	)		(32	)
				33			(17	)
Financing activities
Increase (decrease) in long-term debt		6		(71	)		7
Repayments of senior notes		6		(13	)		—
Realized foreign exchange loss on repayments		6		3			—
Issue of equity compensation plans		10		(1	)		—
				(82	)		7
Change in cash				(11	)		51
Cash, beginning of period				11			2
Cash, end of period			$	—		$	53

See accompanying notes to the unaudited interim consolidated financial statements.

PENN WEST FIRST QUARTER 2017 INTERIM CONSOLIDATED FINANCIAL STATEMENTS 3

Penn West Petroleum Ltd.

Statements of Changes in Shareholders’ Equity

(CAD millions, unaudited)	Note		Shareholders’ Capital		Other Reserves			Deficit			Total
Balance at January 1, 2017			$	8,997	$	97		$	(6,847	)	$	2,247
Net and comprehensive income				—		—			27			27
Share-based compensation		10		—		2			—			2
Issued on exercised equity plans		10		2		(3	)		—			(1	)
Balance at March 31, 2017			$	8,999	$	96		$	(6,820	)	$	2,275
(CAD millions, unaudited)	Note		Shareholders’ Capital		Other Reserves			Deficit			Total
Balance at January 1, 2016			$	8,994	$	92		$	(6,151	)	$	2,935
Net and comprehensive loss				—		—			(100	)		(100	)
Share-based compensation		10		—		2			—			2
Balance at March 31, 2016			$	8,994	$	94		$	(6,251	)	$	2,837

See accompanying notes to the unaudited interim consolidated financial statements.

PENN WEST FIRST QUARTER 2017 INTERIM CONSOLIDATED FINANCIAL STATEMENTS 4

Notes to the Unaudited Consolidated Financial Statements

(All tabular amounts are in CAD millions except numbers of common shares, per share amounts,

percentages and various figures in Note 8)

1. Structure of Penn West

Penn West Petroleum Ltd. (“Penn West” or the “Company”) is an exploration and production company and is governed by the laws of the Province of Alberta, Canada. The Company operates in one segment, to explore for, develop and hold interests in oil and natural gas properties and related production infrastructure in the Western Canada Sedimentary Basin directly and through investments in securities of subsidiaries holding such interests. Penn West’s portfolio of assets is managed at an enterprise level, rather than by separate operating segments or business units. The Company assesses its financial performance at the enterprise level and resource allocation decisions are made on a project basis across Penn West’s portfolio of assets, without regard to the geographic location of projects. Penn West owns the petroleum and natural gas assets or 100 percent of the equity, directly or indirectly, of the entities that carry on the remainder of the oil and natural gas business of Penn West, except for an unincorporated joint arrangement (the “Peace River Oil Partnership”) in which Penn West’s wholly owned subsidiaries hold a 55 percent interest.

Penn West operates under the trade names of Penn West and Penn West Exploration.

2. Basis of presentation and statement of compliance

a) Basis of Presentation

The interim consolidated financial statements include the accounts of Penn West, its wholly owned subsidiaries and its proportionate interest in partnerships. Results from acquired properties are included in Penn West’s reported results subsequent to the closing date and results from properties sold are included until the closing date.

All intercompany balances, transactions, income and expenses are eliminated on consolidation.

b) Statement of Compliance

These unaudited condensed interim consolidated financial statements (“interim consolidated financial statements”) are prepared in compliance with IAS 34 “Interim Financial Reporting” and accordingly do not contain all of the disclosures included in Penn West’s annual audited consolidated financial statements.

The interim consolidated financial statements were prepared using the same accounting policies, critical accounting judgments and key estimates as in the annual consolidated financial statements as at and for the year ended December 31, 2016.

All tabular amounts are in millions of Canadian dollars, except numbers of common shares, per share amounts, percentages and other figures as noted.

The interim consolidated financial statements were approved for issuance by the Board of Directors on May 3, 2017.

PENN WEST FIRST QUARTER 2017 NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS 5

3. Deferred funding assets

Deferred funding amounts relate to Penn West’s share of capital and operating expenses to be funded by Penn West’s partner in the Peace River Oil Partnership. Amounts expected to be settled within the next 12 months are classified as current.

	March 31, 2017		December 31, 2016
Current portion	$	72	$	77
Long-term portion		—		16
Total	$	72	$	93

4. Assets and liabilities held for sale

Assets and liabilities classified as held for sale consisted of the following:

	March 31, 2017		December 31, 2016
Assets held for sale
Working capital	$	2	$	10
Property, plant and equipment		7		104
	$	9	$	114
Liabilities related to assets held for sale
Working capital	$	2	$	6
Decommissioning liability		4		75
	$	6	$	81

The Company has classified certain assets as held for sale as it plans to dispose of these properties within 12 months.

5. Property, plant and equipment (“PP&E”)

Cost	Three months ended March 31, 2017			Year ended December 31, 2016
Balance, beginning of period	$	10,648		$	16,210
Capital expenditures		26			82
Joint venture, carried capital		14			40
Acquisitions		—			3
Dispositions		(74	)		(4,995	)
Transfers from E&E		—			1
Transfer to assets held for sale		—			(537	)
Net decommissioning dispositions		—			(156	)
Balance, end of period	$	10,614		$	10,648
Accumulated depletion and depreciation	Three months ended March 31, 2017			Year ended December 31, 2016
Balance, beginning of period	$	7,666		$	11,065
Depletion and depreciation		72			368
Impairments		(1	)		288
Dispositions		(62	)		(3,622	)
Transfers to assets held for sale		—			(433	)
Balance, end of period	$	7,675		$	7,666
Net book value	March 31, 2017			December 31, 2016
Total	$	2,939		$	2,982

PENN WEST FIRST QUARTER 2017 NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS 6

In the first quarter of 2017, a number of property dispositions were closed and the Company recorded gains on dispositions of $32 million (2016 - $1 million).

6. Long-term debt

	March 31, 2017		December 31, 2016
Syndicated credit facility	$	258	$	329
U.S. Senior secured notes – 2007 Notes
5.80%, US$5 million, maturing May 31, 2017		6		6
5.90%, US$5 million, maturing May 31, 2019		6		6
Senior secured notes – 2008 Notes
6.30%, US$24 million, maturing May 29, 2018		33		33
6.40%, US$4 million, maturing May 29, 2020		5		5
Senior secured notes – 2009 Notes
9.32%, US$8 million, maturing May 5, 2019		11		11
Senior secured notes – 2010 Q1 Notes
5.29%, US$10 million, maturing March 16, 2017		—		13
5.85%, US$10 million, maturing March 16, 2020		13		13
Senior secured notes – 2010 Q4 Notes
4.17%, US$6 million, maturing December 2, 2017		8		8
4.88%, US$13 million, maturing December 2, 2020		17		17
4.98%, US$6 million, maturing December 2, 2022		8		8
5.23%, US$2 million, maturing December 2, 2025		3		3
Senior secured notes – 2011 Q4 Notes
4.79%, US$12 million, maturing November 30, 2021		16		17
Total long-term debt	$	384	$	469
Current portion	$	14	$	27
Long-term portion	$	370	$	442

There were no senior note issuances in either 2017 to date or 2016.

In the first quarter of 2017, Penn West repaid senior notes in the amount of $13 million (2016 – nil) as part of normal course maturities.

Additional information on Penn West’s senior secured notes was as follows:

	March 31, 2017			December 31, 2016
Weighted average remaining life (years)		2.7			2.7
Weighted average interest rate		5.8	%		6.3	%

At March 31, 2017, the Company had a secured, revolving syndicated bank facility with an aggregate borrowing limit of $600 million maturing on May 6, 2019. The syndicated bank facility contains provisions for stamping fees on bankers’ acceptances and LIBOR loans and standby fees on unutilized credit lines that vary depending on certain consolidated financial ratios. At March 31, 2017, the Company had $328 million of unused credit capacity available.

PENN WEST FIRST QUARTER 2017 NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS 7

Drawings on the Company’s bank facility are subject to fluctuations in short-term money market rates as they are generally held as short-term borrowings. As at March 31, 2017, 67 percent (December 31, 2016 – 70 percent) of Penn West’s long-term debt instruments were exposed to changes in short-term interest rates.

At March 31, 2017, letters of credit totalling $14 million were outstanding (December 31, 2016 – $16 million) that reduce the amount otherwise available to be drawn on the bank facility.

Penn West records unrealized foreign exchange gains or losses on its senior notes as amounts are translated into Canadian dollars at the rate of exchange in effect at the balance sheet date. The split between realized and unrealized foreign exchange is as follows:

	Three months ended March 31
	2017			2016
Realized foreign exchange loss on debt maturities	$	(3	)	$	—
Unrealized foreign exchange gain		5			89
Foreign exchange gain	$	2		$	89

The Company is subject to certain financial covenants under its syndicated bank facility and senior notes. These types of financial covenants are typical for senior lending arrangements and include senior debt and total debt to EBITDA and senior debt and total debt to capitalization, as more specifically defined in the applicable lending agreements. At March 31, 2017, the Company was in compliance with all of its financial covenants under such lending agreements.

In May 2015, the Company entered into amending agreements with the lenders under its syndicated bank facility and with the holders of its senior notes to, in part, have modified its financial covenants during a designated covenant relief period. The covenant relief period under those amending agreements ended on March 30, 2017. The Company also agreed to grant floating charge security over all of its property in favour of the lenders and the noteholders on a pari passu basis, which security will be fully released on such date when both (a) no default or event of default is continuing under the Company’s syndicated bank facility or senior notes and (b) the Company has achieved both (i) a Senior Debt to EBITDA ratio of 3:1 or less for four consecutive quarters, and (ii) an investment grade rating on its senior secured debt.

7. Provisions

	March 31, 2017		December 31, 2016
Decommissioning liability	$	181	$	182
Office lease provision		112		117
Total	$	293	$	299
Current portion	$	34	$	35
Long-term portion		259		264
Total	$	293	$	299

PENN WEST FIRST QUARTER 2017 NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS 8

Decommissioning liability

The decommissioning liability was determined by applying an inflation factor of 2.0 percent (December 31, 2016 – 2.0 percent) and the inflated amount was discounted using a credit-adjusted rate of 6.5 percent (December 31, 2016 – 6.5 percent) over the expected useful life of the underlying assets, currently extending over 50 years into the future.

Changes to the decommissioning liability were as follows:

	Three months ended March 31, 2017			Year ended December 31, 2016
Balance, beginning of period	$	182		$	397
Net liabilities acquired (disposed) (1)		—			(193	)
Acquisitions		—			5
Increase due to changes in estimates		—			37
Liabilities settled		(4	)		(11	)
Transfers to liabilities for assets held for sale		—			(75	)
Accretion charges		3			22
Balance, end of period	$	181		$	182
Current portion	$	19		$	20
Long-term portion	$	162		$	162

(1) Includes additions from drilling activity, facility capital spending and disposals related to net property dispositions.

Office lease provision

The office lease provision represents the net present value of the future lease payments that the Company is obligated to make under non-cancellable lease contracts less recoveries under current sub-lease agreements. The office lease provision was determined by applying a credit-adjusted discount rate of 6.5 percent (December 31, 2016 – 6.5 percent) over the remaining life of the lease contracts, extending into 2025.

Changes to the office lease provision were as follows:

	Three months ended March 31, 2017			Year ended December 31, 2016
Balance, beginning of period	$	117		$	—
Net additions (recoveries)		(4	)		107
Increase due to changes in estimates		1			12
Cash settlements		(4	)		(4	)
Accretion charges		2			2
Balance, end of period	$	112		$	117
Current portion	$	15		$	15
Long-term portion	$	97		$	102

PENN WEST FIRST QUARTER 2017 NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS 9

8. Risk management

Financial instruments consist of accounts receivable, fair values of derivative financial instruments, accounts payable and accrued liabilities and long-term debt. At March 31, 2017, except for the senior notes described in Note 6 with a carrying value of $126 million (December 31, 2016 – $140 million) and a fair value of $122 million (December 31, 2016 – $134 million), the fair values of these financial instruments approximate their carrying amounts due to the short-term maturity of the instruments, the mark to market values recorded for the financial instruments and the market rate of interest applicable to the syndicated bank facility.

The fair values of all outstanding financial, commodity, power, interest rate and foreign exchange contracts are reflected on the balance sheet with the changes during the period recorded in income as unrealized gains or losses.

At March 31, 2017 and December 31, 2016, the only asset or liability measured at fair value on a recurring basis was the risk management asset and liability, which was valued based on “Level 2 inputs” being quoted prices in markets that are not active or based on prices that are observable for the asset or liability.

The following table reconciles the changes in the fair value of financial instruments outstanding:

Risk management asset (liability)	Three months ended March 31, 2017			Year ended December 31, 2016
Balance, beginning of period	$	(43	)	$	104
Unrealized gain (loss) on financial instruments:
Commodity collars, swaps and assignments		25			(74	)
Electricity swaps		—			4
Foreign exchange forwards		—			(43	)
Cross currency swaps		1			(34	)
Total fair value, end of period	$	(17	)	$	(43	)

Penn West had the following financial instruments outstanding as at March 31, 2017. Fair values are determined using external counterparty information, which is compared to observable market data. Penn West limits its credit risk by executing counterparty risk procedures which include transacting only with institutions within Penn West’s credit facility or companies with high credit ratings and by obtaining financial security in certain circumstances.

PENN WEST FIRST QUARTER 2017 NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS 10

	Notional volume			Remaining Term	Pricing			Fair value (millions)
Natural gas
AECO Swaps		13,300 mcf/d		Apr/17 – Jun/17		$2.70/mcf			$—
AECO Swaps		11,400 mcf/d		Jul/17 – Sep/17		$2.71/mcf			—
AECO Swaps		9,500 mcf/d		Oct/17 – Dec/17		$3.00/mcf			—
AECO Swaps		5,700 mcf/d		Apr/17 – Dec/17		$3.07/mcf			1
AECO Swaps		1,900 mcf/d		Jan/18 – Jun/18		$2.84/mcf			—
AECO Swaps		3,800 mcf/d		Jan/18 – Dec/18		$2.89/mcf			—
Crude Oil
WTI Swaps		800 bbl/d		Apr/17 – Jun/17		$68.48/bbl			—
WTI Swaps		400 bbl/d		Jul/17 – Sep/17		$69.50/bbl			—
WTI Swaps		900 bbl/d		Oct/17 – Dec/17		$70.81/bbl			—
WTI Swaps		1,800 bbl/d		Apr/17 – Dec/17		$68.73/bbl			—
WTI Swaps		5,200 bbl/d		Apr/17 – Dec/17		$66.81/bbl			(3	)
WTI Swaps		1,000 bbl/d		Jan/18 – Jun/18		$71.00/bbl			—
WTI Swaps		2,000 bbl/d		Jan/18 – Mar/18		US$50.29/bbl			—
Foreign exchange forwards on senior notes
3 to 15-year initial term		US$25		2017		1.000 CAD/USD			8
Cross currency swaps
10-year initial term		£57		2018		2.0075 CAD/GBP, 6.95	%		(20	)
18-month offset		(£28.5	)	2018		1.6911 CAD/GBP, 6.95	%		—
10-year initial term		£20		2019		1.8051 CAD/GBP, 9.15	%		(2	)
10-year initial term		€10		2019		1.5870 CAD/EUR, 9.22	%		(1	)
Total									$(17	)

Based on March 31, 2017 pricing, a $1.00 change in the price per barrel of liquids would have changed pre-tax unrealized risk management by $3 million and a $0.10 change in the price per mcf of natural gas would change pre-tax unrealized risk management by $1 million.

Subsequent to March 31, 2017, the Company entered into the following hedge contracts:

Reference Price	Term	Price ($/Barrel)		Volume (Barrels/day)
WTI	Jan 2018 – Mar 2018	US$	51.46		4,000
WTI	Apr 2018 – June 2018	US$	53.25		2,000
WTI	Jul 2018 – Sept 2018	US$	53.50		1,000
Reference Price	Term	Price ($/mcf)		Volume (mcf/day)
AECO	Jul 2017 – Jun 2018	$	2.91		1,900
AECO	Oct 2017 – Sep 2018	$	2.69		1,900
AECO	Oct 2017 – Mar 2018	$	3.19		1,900
AECO	Jan 2018 – Mar 2018	$	3.33		3,800
AECO	Jan 2018 – Jun 2018	$	2.84		1,900
AECO	Jan 2018 – Dec 2018	$	2.74		1,900

Additionally, the Company entered into a £14.25 offsetting cross currency contract until July 2018 at a CAD/GBP rate of 1.7326.

PENN WEST FIRST QUARTER 2017 NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS 11

The components of risk management on the Statement of Income (Loss) are as follows:

	Three months ended March 31
	2017		2016
Realized
Settlement of commodity contracts/assignment	$	11	$	38
Monetization of commodity contracts		—		2
Monetization of foreign exchange contracts		—		32
Total realized risk management gain	$	11	$	72
Unrealized
Commodity contracts	$	25	$	(2	)
Electricity swaps		—		1
Crude oil assignment		—		(1	)
Foreign exchange contracts		—		(46	)
Cross-currency swaps		1		(16	)
Total unrealized risk management gain (loss)		26		(64	)
Risk management gain	$	37	$	8

To date in 2017, the Company had no outstanding electricity contracts. During the first three months of 2016, a $2 million loss was included in operating expenses.

Market risks

Penn West is exposed to normal market risks inherent in the oil and natural gas business, including, but not limited to, commodity price risk, foreign currency rate risk, credit risk, interest rate risk and liquidity risk. The Company seeks to mitigate these risks through various business processes and management controls and from time to time by using financial instruments.

There have been no significant changes to these risks from those discussed in Penn West’s annual audited consolidated financial statements.

Foreign currency rate risk

At March 31, 2017, the following foreign currency forward contracts were outstanding:

Nominal Amount	Settlement date		Exchange rate
Buy US$25		2017		1.000 CAD/USD

PENN WEST FIRST QUARTER 2017 NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS 12

9. Shareholders’ equity

i) Issued

Shareholders’ capital	Common Shares			Amount
Balance, December 31, 2015		502,163,163		$	8,994
Issued on exercise of equity compensation plans (1)		600,775			3
Cancellation of dividend reinvestment plan (2)		(175	)		—
Balance, December 31, 2016		502,763,763		$	8,997
Issued on exercise of equity compensation plans (1)		1,264,875			2
Balance, March 31, 2017		504,028,638		$	8,999

(1) Upon exercise of equity plans, the net benefit is recorded as a reduction of other reserves and an increase to shareholders’ capital.

(2) In March 2016, the Company cancelled its dividend reinvestment plan.

ii) Earnings per share - Basic and Diluted

The weighted average number of shares used to calculate per share amounts was as follows:

	Three months ended March 31
Average shares outstanding (millions)	2017		2016
Basic		502.8		502.2
Diluted		503.6		502.2

For the first quarter of 2017, 2.9 million shares (2016 – 12.5 million) that would be issued under the Option Plan were excluded in calculating the weighted average number of diluted shares outstanding as they were considered anti-dilutive.

10. Share-based compensation

Stock Option Plan

Penn West has an Option Plan that allows Penn West to issue options to acquire common shares to officers, employees and other service providers. In March 2017, the Board of Directors resolved to suspend all future grants of options under the Option plan.

	Three months ended March 31, 2017					Year ended December 31, 2016
Options	Number of Options			Weighted Average Exercise Price		Number of Options			Weighted Average Exercise Price
Outstanding, beginning of period		7,612,625		$	6.01		10,595,728		$	10.21
Granted		—			—		3,557,250			1.20
Exercised		(1,264,875	)		1.45		(600,775	)		1.53
Forfeited		(841,025	)		17.19		(5,939,578	)		11.08
Outstanding, end of period		5,506,725		$	5.35		7,612,625		$	6.01
Exercisable, end of period		3,485,589		$	6.98		2,804,426		$	11.10

PENN WEST FIRST QUARTER 2017 NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS 13

Restricted Share Unit (“RSU”) plan

Penn West has a RSU plan whereby Penn West employees receive consideration that fluctuates based on Penn West’s share price on the TSX. Since March 2016, pursuant to the amended plan, consideration can be in the form of cash or shares. As a result, all grants subsequent to that date will be accounted for based on the equity method.

RSU plan (number of shares equivalent)	Three months ended March 31, 2017			Year ended December 31, 2016
Outstanding, beginning of period		10,199,595			6,325,954
Granted		3,983,060			11,745,330
Vested		(3,671,431	)		(2,353,989	)
Forfeited		(571,509	)		(5,517,700	)
Outstanding, end of period		9,939,715			10,199,595
Outstanding units – liability method		966,599			2,314,805
Outstanding units – equity method		8,973,116			7,884,790
	As at
RSU obligation:	March 31, 2017			December 31, 2016
Current liability (1)	$	4		$	3
Non-current liability	$	—		$	1

(1) Included within Accounts payable and accrued liabilities.

The fair value of the RSU plan units granted under the equity method used the following weighted average assumptions:

	Three months ended March 31
	2017			2016
Average fair value of units granted (per unit)	$	2.13		$	1.20
Expected life of units (years)		3.0			3.0
Expected forfeiture rate		7.9	%		19.0	%

Deferred Share Unit (“DSU”) plan

The DSU plan allows Penn West to grant DSUs in lieu of cash fees to non-employee directors providing a right to receive, upon retirement, a cash payment based on the volume-weighted-average trading price of the common shares on the TSX. At March 31, 2017, 790,205 DSUs (December 31, 2016 – 745,851) were outstanding and $2 million was recorded as a current liability (December 31, 2016 – $2 million).

PENN WEST FIRST QUARTER 2017 NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS 14

Performance Share Unit (“PSU”) plan

The PSU plan allows Penn West to grant PSUs to employees of Penn West. Members of the Board of Directors are not eligible for the PSU Plan. The PSU obligation is classified as a liability due to the cash settlement feature.

PSU awards (number of shares equivalent)	Three months ended March 31, 2017			Year ended December 31, 2016
Outstanding, beginning of period		1,855,500			1,622,881
Granted		569,000			2,516,000
Vested		(638,750	)		(199,843	)
Forfeited		(246,750	)		(2,083,538	)
Outstanding, end of period		1,539,000			1,855,500
	As at
PSU obligation:	March 31, 2017			December 31, 2016
Non-current liability	$	1		$	2

Share-based compensation

Share-based compensation is based on the fair value of the options and units at the time of grant under the Option Plan and RSU plan (equity method), which is amortized over the remaining vesting period on a graded vesting schedule. Share-based compensation under the RSU plan (liability method), DSU and PSU is based on the fair value of the awards outstanding at the reporting date and is amortized based on a graded vesting schedule. Share-based compensation consisted of the following:

	Three months ended March 31
	2017		2016
Options	$	—	$	1
PSU plan		1		—
RSU plan – liability method		—		1
RSU plan – equity method		2		1
Share-based compensation	$	3	$	3

The share price used in the fair value calculation of the RSU plan (liability method), PSU and DSU obligations at March 31, 2017 was $2.27 (2016 – $1.20). Share-based compensation related to the DSU was insignificant in both periods.

Employee retirement savings plan

Penn West has an employee retirement savings plan (the “savings plan”) for the benefit of all employees. Under the savings plan, employees may elect to contribute up to 10 percent of their salary and Penn West matches these contributions at a rate of $1.50 for each $1.00 of employee contribution. Both the employee’s and Penn West’s contributions are used to acquire Penn West common shares or are placed in low-risk investments. Shares are purchased in the open market at prevailing market prices.

11. Commitments and contingencies

The Company is involved in various litigation and claims in the normal course of business and records provisions for claims as required.

12. Subsequent event

In April 2017, the Company closed a transaction to acquire certain undeveloped lands in the Peace River area of Alberta for total proceeds of $11 million. This acquisition further focuses the Company’s holdings within the area.

PENN WEST FIRST QUARTER 2017 NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS 15

EX-99.4

Exhibit 99.4

FORM 52-109F2

CERTIFICATION OF INTERIM FILINGS

FULL CERTIFICATE

I, David L. French, President and Chief Executive Officer of Penn West Petroleum Ltd., certify the following:

1. Review: I have reviewed the interim financial report and interim MD&A (together the “interim filings”) of Penn West Petroleum Ltd. (the “issuer”) for the interim period ended March 31, 2017.

2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.

3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.

4. Responsibility: The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer.

5. Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the end of the period covered by the interim filings

(a) designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that

(i) material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and

(ii) information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and

(b) designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP.

5.1 Control framework: The control framework the issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is the framework set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

5.2 N/A.

5.3 N/A.

6. Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on January 1, 2017 and ended on March 31, 2017 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.

Date:    May 4, 2017

(signed) “David L. French”

David L. French

President & Chief Executive Officer

EX-99.5

Exhibit 99.5

FORM 52-109F2

CERTIFICATION OF INTERIM FILINGS

FULL CERTIFICATE

I, David Hendry, Senior Vice President and Chief Financial Officer of Penn West Petroleum Ltd., certify the following:

1. Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of Penn West Petroleum Ltd. (the “issuer”) for the interim period ended March 31, 2017.

2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.

3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.

4. Responsibility: The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer.

5. Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the end of the period covered by the interim filings

(a) designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that

(i) material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and

(ii) information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and

(b) designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP.

5.1 Control framework: The control framework the issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is the framework set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

5.2 N/A.

5.3 N/A.

6. Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on January 1, 2017 and ended on March 31, 2017 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.

Date: May 4, 2017

(signed) “David Hendry”

David Hendry

Chief Financial Officer