Pengrowth and Esprit Agree to Strategic Business Combination

Pengrowth Energy Trust and Esprit Energy Trust report that they have entered into an agreement providing for the combination of Pengrowth and Esprit. The combined trust will retain the Pengrowth name and will be supported by the strong combined team of technical, management, and operational personnel at Pengrowth and Esprit.

Under the terms of the Agreement, each Esprit unit will be exchanged for 0.53 of a Pengrowth unit (the new units from the consolidation of Pengrowth's Class A and Class B units effective on July 27, 2006). The Esprit Board of Directors has the authority to grant Esprit Unitholders a one time special distribution of up to $0.30 per Esprit unit, payable prior to closing the Combination. It is the intention of the Esprit Board of Directors to make that declaration. Including the special distribution of $0.30, the aggregate consideration to be received by Esprit Unitholders represents a market premium of approximately 26 percent based on the closing prices on July 21st for each of the Esprit units and Pengrowth units, using the Pengrowth Class A units, as traded on the Toronto Stock Exchange, as the proxy for value of the Pengrowth units. On completion of the Combination, existing Pengrowth and Esprit Unitholders will own approximately 82 percent and 18 percent, respectively of the combined trust.

As a result of the combination, Pengrowth will acquire approximately 18,350 barrels of oil equivalent (boe) per day of current production, 71.7 million boe of proved plus probable oil and natural gas reserves and 250,000 net acres of undeveloped land, including shallow gas and coalbed methane potential, at a cost of approximately $72,450 per boe per day and $18.50 per boe, favorable metrics in today's competitive acquisition environment. The Combination is accretive to distributable cash flow, reserves and production on a per trust unit basis reflecting the timely opportunity afforded by the current public capital market environment to acquire natural gas weighted reserves through corporate acquisition. Following completion of the Combination, the combined trust will have total production of approximately 75,000 boe per day, weighted 52 percent to natural gas and 48 percent to oil and liquids, proved plus probable reserves of approximately 291.1 million boe and an RLI of 10.6 years.

Offers will be made to substantially all of the employees of Esprit to join the Pengrowth team resulting in a high-quality operational, financial and management group in a highly competitive market for superior technical expertise. Also, as part of the transaction, Michael Stewart, presently Chairman of the Board of Trustees of Esprit, will join Pengrowth's Board, bringing over 30 years of experience in the Canadian energy industry.

“We believe that the combination of Pengrowth and Esprit presents an outstanding strategic fit in terms of assets, people, and ongoing business philosophies,” said Jim Kinnear, Chairman, President and Chief Executive Officer of Pengrowth, “The unitholders of both trusts will benefit. The combination will provide value accretion to Pengrowth Unitholders, a market premium to Esprit Unitholders and considerable upside to all unitholders in the combined trust. Additional development potential exists on Esprit's core properties in Crossfield East, Garrington, Blackstone and Richdale and in many of Esprit's smaller interests through effective coordination of geological, engineering and operational expertise. Pengrowth was attracted to the opportunity of acquiring long life natural gas assets in the current price environment. The shallow gas potential and coalbed methane acreage associated with Esprit is an excellent fit with Pengrowth's core areas of expertise. In addition, the combined trust will have approximately 660,000 net acres of undeveloped land and the expertise to develop that acreage within Pengrowth for the benefit of all unitholders.”

“Combining Pengrowth with Esprit will benefit unitholders and create a well-balanced trust with a very high-quality asset base,” said Paul Myers, Esprit's President and Chief Executive Officer. He also commented that “Esprit's high working interest and the 75 percent natural gas weighting adds product mix and new areas of focus to Pengrowth. Pengrowth has interest in five of the largest oil pools in Western Canada which are expected to continue to deliver incremental reserves through technological advances in enhanced recovery. Pengrowth has historically been an excellent performing trust and the addition of Esprit's people and long life asset base will further enhance the combined entity's competitiveness. Both trusts are operating with a similar organizational philosophy and approach which should provide for a seamless integration.”

The business combination with Esprit is consistent with Pengrowth's long term strategy of making acquisitions of long life assets. Esprit has a high concentration of interests with seven properties making up over 70 percent of the corporate total. The Olds Unit and Greater Olds area represent 44 percent of the trust's production. Esprit's assets are of high quality demonstrated by the Olds Unit with a proved plus probable reserve life index of 15.4 years. The Unit is 100 percent owned and operated and covered entirely by 3D seismic. Non unit lands are characterized by multizone potential (six producing horizons) with a strong inventory of development drilling locations. Esprit's net undeveloped acreage position adds approximately 60 percent to Pengrowth's existing undeveloped land providing a source of internally generated drilling opportunities supported by over 12,000 square kilometers of 2D seismic and 4,000 square kilometers of 3D seismic. Esprit's inventory of 46 net sections of coalbed methane potential in the Greater Olds area will augment Pengrowth's acreage.