Calgary-based Penn West Petroleum says it plans to sell up to $1.5 billion in assets and will cut capital spending by as much as 10 per cent after reporting a 13-per cent drop in second quarter net income Friday.

Penn West, one of Canada’s biggest conventional oil and gas producers, also cut its estimate of production for the year as Canadian prices for oil lag well behind U.S. and international benchmarks.

Pipeline constraints have limited how much Canadian crude can flow to the southern U.S. markets, and kept the Canadian price as much as $25 US a barrel below the American benchmark over the last three months.

It said it will chop its capital budget from an earlier forecast of from $1.3 to $1.4 billion to between $1.2 billion to $1.25 billion.

The firm lowered its production forecast outlook to between 165,000 barrels of oil equivalent per day and 168,500. Its previous outlook had been for between 168,500 and 172,500.

Net income fell to $235 million, or 50 cents a share, from $271 million, or 58 cents a share, in the same period in 2011.

Production was up five per cent from a year ago, averaging at 163,181 barrels a day. Funds flow fell 31 per cent to $272 million, or 57 cents per share.

Gross revenue fell 16 per cent to $774 million.

Penn West shares closed up 29 cents, or two per cent, at $14.83 on the Toronto Stock Exchange. They have dropped 22 per cent over the past year.