Pengrowth Energy Trust Acquires Acreage in Carson Creek

Pengrowth Energy Trust

Pengrowth has entered into a definitive agreement to acquire all of ExxonMobil Canada Energy's average 89 percent operated working interest in properties in the Carson Creek area of Alberta and the adjacent Carson Creek Gas Plant for a total purchase price of $475,000,000 prior to adjustments. The Carson Creek acquisition, located in Pengrowth's Swan Hills and Judy Creek focus area, demonstrates Pengrowth's continued commitment to purchasing high quality, long-life, large original light crude oil-in-place assets.

Together with the previously announced acquisition of assets through the proposed merger with Esprit Energy Trust, Pengrowth will add per unit value to Pengrowth unitholders in terms of distributable cash flow, production and reserves, upside through exploration on undeveloped lands, infill development drilling locations and enhanced oil recovery potential and will hold a balanced portfolio of oil and natural gas properties. The acquisition is expected to close on September 28, 2006, with an adjustment date of September 1, 2006, and is subject to customary conditions and regulatory approvals. Pengrowth will fund the acquisition through a concurrently announced equity financing as well as through its existing credit facility.

Transaction Highlights

The acquisition provides the following financial and operational benefits to unitholders:

  • Ownership in one of the larger conventional original oil-in-place reservoirs in western Canada;
  • The addition of approximately 19 mmboe of proved plus probable reserves and approximately 5,100 boe per day of production, consisting primarily of high quality, light crude oil;
  • Producing reserves representing approximately 93 percent of total proved reserves;
  • Close proximity to Pengrowth's existing interests in the Judy Creek Units and Swan Hills Unit No. 1, expanding Pengrowth's key light oil focus area and providing for development and field operating synergies and improved overall efficiencies for the Judy Creek Facilities and Carson Creek Facilities;
  • Incremental recoverable reserves through up-hole zone development, infill drilling, continued optimization of the existing waterflood program and new enhanced oil recovery programs in the future;
  • Accretion to distributable cash flow per trust unit;
  • Production and reserve acquisition costs of approximately $93,000 per flowing boe and $25.15 per boe of proved plus probable reserves for long-life reserves (over 10 year reserve life index); and
  • Further enhances the quality of Pengrowth's asset base, which includes interests in many of Canada's largest oil and natural gas pools.

Acquisition Summary

Pengrowth will acquire the shares of a wholly owned subsidiary of Exxon Mobil Energy which owns and controls an 87.5 percent operated working interest in Carson Creek North Unit No. 1 (the "Carson Creek North Unit") and a 95.1 percent operated working interest in both Carson Creek Unit No. 1 and the Carson Creek Gas Plant. Carson Creek has production of approximately 5,100 boe per day, consisting of 3,450 boe per day of light crude oil and natural gas liquids and 10.0 million cubic feet (MMcf) of natural gas per day. When completed, the Carson Creek acquisition will increase Pengrowth's overall current production by about 9 percent to approximately 62,500 boe per day. Subject to the completion of the Carson Creek acquisition and the strategic business combination with Esprit Energy Trust (Esprit) announced July 24, 2006, Pengrowth's overall current production will increase by 41 percent to approximately 81,000 boe per day. The merger with Esprit is subject to the approval of Esprit unitholders at a meeting to be held on September 26, 2006.

When completed, the Carson Creek acquisition will also increase Pengrowth's total proved plus probable reserves by approximately 18.6 million barrels of oil equivalent (mmboe) consisting primarily of high quality 44 degree American Petroleum Institute light crude oil (on a company interest before royalties basis using GLJ Petroleum Consultants Ltd. July 1, 2006 constant pricing). Subject to the completion of the strategic business combination with Esprit and completion of the Carson Creek acquisition, Pengrowth's overall proved plus probable reserves will increase to approximately 300 mmboe (on a company interest before royalties basis using constant pricing).

Pengrowth believes Carson Creek is regarded as one of the larger conventional reservoirs in western Canada. Carson Creek is located just 20 km (12.5 miles) south of Pengrowth's existing interests in Judy Creek and Swan Hills Unit No. 1, and will significantly expand Pengrowth's key light oil focus area. The Carson Creek North Unit offers stable long term light crude oil production with potential reserve upside through prospective up-hole zone development, potential infill drilling and enhanced oil recovery opportunities similar to other Swan Hills pools in this area. Pengrowth is an experienced operator of enhanced oil recovery properties (as a result of a successful miscible flood program at Judy Creek and other innovations) and Carson Creek's proximity to Judy Creek, Pengrowth's largest operated property, offers the potential for operating synergies.

Pengrowth will also receive additional beneficial ownership of gross overriding royalties and working interests in non-unitized zones and lands in the area surrounding Carson Creek.

"The acquisition of Carson Creek in Pengrowth's Swan Hill/Judy Creek focus area is consistent with Pengrowth's long term strategy of acquiring working interests in large original oil-in-place reservoirs offering the potential for incremental recovery through the application of improved technology and recovery techniques," said President and Chief Executive Officer, James. S. Kinnear. "The Carson Creek acquisition and the strategic business combination with Esprit Energy Trust provide a continued balance in Pengrowth's portfolio of high quality oil and natural gas properties with upside potential through Pengrowth's expertise in optimizing the value of properties and in adding value to developed and undeveloped lands through effective development and exploration. The Carson Creek acquisition further demonstrates Pengrowth's ability to create value for unitholders through accretive acquisitions."