HEAT oven to 350 degrees F. Spray an 8 x 8-inch pan with no-stick cooking spray with flour.
COMBINE butter, water, peanut butter and oil in large saucepan; bring to a boil, stirring constantly. Remove from heat; cool. Add remaining cake ingredients. Mix until well blended; pour onto prepared pan. Bake 25 to 30 minutes or until toothpick inserted near center comes out clean. Cool.
HEAT butter, milk and peanut butter to a boil in a large saucepan. Add vanilla and powdered sugar. Stir until smooth. Frost cake. Sprinkle with chopped peanuts.