Pengrowth Energy Trust to Buy Canadian Properties from ConocoPhillips

Pengrowth Corporation, administrator of Pengrowth Energy Trust, has entered into a definitive agreement to acquire Canadian oil and natural gas producing properties and undeveloped lands (the "CP Properties") through the acquisition of the shares of four subsidiaries of Burlington Resources Limited, a subsidiary of ConocoPhillips, for a purchase price of $1.0375 billion, subject to customary adjustments.

The CP Properties are high working interest, largely operated interests, similar to those that Pengrowth has extensive experience in managing. These properties currently produce approximately 21,625 barrels of oil equivalent (boe) per day (before royalties), comprised of 42 percent crude oil, 52 percent natural gas and six percent natural gas liquids. The transaction is expected to be strongly accretive to the unitholders of Pengrowth on a per unit basis in terms of distributable cash flow, production and reserves.

Based upon an independent evaluation by GLJ Petroleum Consultants Ltd. (GLJ) dated November 1, 2006, the CP Properties have proved plus probable reserves of 65.8 million boe and proved reserves of 51.4 million boe (on a company interest before royalties basis using escalated prices). The purchase price of $1.0375 billion represents attractive transaction metrics of $47,975 per boe per day based on current levels of production, $15.77 per boe of proved plus probable reserves and $20.17 per boe of proved reserves.

The CP Properties are expected to provide Pengrowth with a wide range of opportunities to add value through effective deployment of capital, including opportunities identified by Pengrowth on developed lands and approximately 375,000 additional net acres of undeveloped land.

Following completion of the recent business combination with Esprit Energy Trust and the acquisition of the Carson Creek property from ExxonMobil Canada Energy, Pengrowth had unused credit capacity of over $500 million on a syndicated bank credit facility of $950 million. The material terms and conditions of Pengrowth's bank credit facility remain unchanged.

The acquisition will be supported by a committed senior bank facility fully underwritten by the Royal Bank of Canada in the full amount of the purchase price with a term of 12 months commencing on the scheduled closing of the transaction on or about January 18, 2007.

The acquisition is effective as of November 1, 2006, and is subject to customary conditions and regulatory approvals. Pengrowth was advised in respect to the transaction by RBC Capital Markets and Scotia Waterous.

The transaction also provides Pengrowth with an opportunity to optimize the value of its core holdings through selective property sales. Pengrowth expects to pursue a comprehensive asset rationalization program on its entire portfolio of oil and natural gas properties through independent industry agents. In total, Pengrowth expects to divest of assets producing approximately 7,700 boe per day (before royalties) with proved plus probable reserves of 25 million boe (on a company interest before royalties basis using escalated prices). This includes properties Pengrowth currently has listed for sale through a third party sales agent. The terms of reference in respect to this disposition process have been established and several initial expressions of interest have been received representing approximately 4,300 boe per day of production (before royalties) and 17 million boe of proven plus probable reserves (on a company interest before royalties basis using escalated prices). The assets marked for divestiture are located in non-core areas or tend to have higher operating costs or a shorter reserve life and total proceeds from asset divestments are expected to be approximately $300 to $400 million.

The purchase of the CP Properties is the largest property acquisition made to date by a Canadian energy royalty trust. The agreement followed a competitive bidding process and close cooperation with management of ConocoPhillips. Pengrowth has an established history of completing transactions with major oil and gas companies based upon its long-term relationships, financial strength and experience in effective negotiations.

On October 31, 2006, the Minister of Finance (Canada) announced New Federal Government fiscal considerations, (the October 31 Proposals) which, if enacted, would modify the taxation of certain flow-through entities (SIFT's), including royalty and income trusts such as Pengrowth Energy Trust. The October 31 Proposals would apply commencing on January 1, 2011, for all SIFT's that were publicly traded on or before October 31, 2006, and otherwise commencing on January 1, 2007. The October 31 Proposals permit "normal growth" for SIFT's throughout the transition period. However, "undue expansion" of a SIFT could cause the transition relief to be revisited and the October 31 Proposals to be effective at a date earlier than 2011. On November 10, 2006, Pengrowth received a "comfort letter" from the Department of Finance (Canada), subject to certain reasonable and customary qualifications, and based upon the advanced state of the ConocoPhillips acquisition at October 31, 2006, including the payment by Pengrowth of an "exclusivity fee", that the ConocoPhillips acquisition would not be considered outside the scope of normal growth. The comfort letter is subject to the ability of Pengrowth to complete the sale of certain of the acquired properties. The comfort letter also states that the recommendations in the letter are not binding on the Minister of Finance (Canada) or Parliament. Pengrowth, in consultation with its counsel, is of the view that it is reasonable to rely upon the comfort letter in proceeding with the purchase of the CP Properties.

Acquisition Summary

Pengrowth will acquire the shares of wholly owned subsidiaries of Burlington Resources Limited, a subsidiary of ConocoPhillips, holding legacy producing oil and natural gas fields in well established areas of western Canada. Following is a summary of the features of the CP properties:

- operatorship of two high working interest Swan Hills oil units, Goose River Unit #1 and Deer Mountain Unit #1 which are located in our Judy Creek/Swan Hills focus area;

- 39 degree gravity light crude oil production at Red Earth;

- sizable working interest in two Harmattan units;

- shallow gas at Lethbridge, Alberta, and Freefight, Saskatchewan;

- quality light crude oil and coal bed methane in Fenn Big Valley;

- major participant in the Jenner and Bantry areas of southeast Alberta;

- more than 375,000 net acres of undeveloped land; and

- approximately 9,300 kilometres of proprietary 2D seismic and interests in over 50 3D seismic surveys.

The CP Properties acquisition is expected to increase Pengrowth's overall current production by 27 percent (or 21,625 boe per day) to approximately 100,000 boe per day (before royalties) prior to future dispositions.

The CP Properties acquisition will also increase Pengrowth's total proved plus probable reserves by approximately 22 percent or 65.8 million boe (on a company interest before royalties basis using escalated pricing). Pengrowth's overall proved plus probable reserves will total approximately 360 million boe (on a company interest before royalties basis using escalated pricing).

Transaction Highlights

- The transaction is consistent with the quality of Pengrowth's asset base, which includes interests in many of Canada's larger, high quality oil and natural gas pools;

- The acquisition is expected to result in Pengrowth's total production increasing to approximately 100,000 boe per day (before royalties) and reserves on a proved plus probable basis to 360 million boe prior to asset rationalization (on a company interest before royalties basis, using escalated pricing);

- The acquisition provides favorable transaction metrics when compared to similar recent transactions, and is expected to be decidedly accretive for Pengrowth unitholders in terms of reserves, production and distributable cash flow on a per trust unit basis;

- There remains significant potential for further development of the assets through an increased commitment of capital for active development including potential production from new horizons, infill drilling, continued optimization of existing waterflood programs and new enhanced oil recovery programs;

- The transaction provides synergies in several of Pengrowth's focus areas;

- Proved producing reserves represent approximately 88 percent of total proved reserves and proved reserves are approximately 80 percent of proved plus probable reserves;

- The reserve life index (RLI) on the CP Properties is 8.4 years on a proved plus probable basis. The impact of shorter reserve life assets is expected to be partially offset through the asset rationalization program. Following dispositions, Pengrowth's RLI is expected to be approximately 10 years;

- The transaction demonstrates the ability of Pengrowth to add significant value through acquisitions, and when viewed together with the recent Esprit Energy Trust business combination and the Carson Creek acquisition adds 43,920 boe per day of production and 152.8 million boe of proved plus probable reserves;

- Pengrowth's total undeveloped land will be in excess of one million net acres prior to asset rationalization;

- Pengrowth's equity capitalization following the transaction is expected to be approximately $5 billion;

- The transaction represents the largest property acquisition made to date by a Canadian energy trust, and demonstrates an ability to negotiate, complete and finance larger transactions that are available in the marketplace.


GLJ has evaluated the assets being acquired in the acquisition as at November 1, 2006 in compliance with National Instrument 51-101. The following table summarizes GLJ's assessment of the before royalty Pengrowth interest reserves being acquired, using escalated pricing as at November 1, 2006.


                             CP Properties          Pro Forma Pengrowth(1)

                          Total    Total Proved      Total    Total Proved
                         Proved   Plus Probable     Proved   Plus Probable
Oil and natural gas
 liquids (mmbbl)(2)        24.5            32.1      144.2           186.2
Natural gas (bcf) (2)     161.5           201.8      784.1         1,024.6
Total (mmboe) (2)          51.4            65.8      274.8           360.0

(1) Pro forma reserves based on Pengrowth reserves at November 1, 2006. Based on reserves at December 31, 2005, mechanically adjusted for production and for the acquisitions of Esprit Energy Trust, Carson Creek and Conoco Phillips assets. (2) mmbbl - millions of barrels; bcf - billion cubic feet; mmboe - millions of barrels of oil equivalent. (3) Reserves are on a company interest before royalties basis using escalated prices and are prior to any asset rationalization.

Pengrowth uses commodity price hedges to limit the volatility in distributable cash and in turn provide stability to distributions. For 2007, Pengrowth has hedged 75,910 mmbtu (million British thermal units) of natural gas per day at an average price of CAD$8.46 per mmbtu and 12,000 bbl (barrels) of crude oil per day at an average price of CAD$76.67 per bbl, and the increased hedging activity was partially undertaken in anticipation of this transaction.

This transaction enhances Pengrowth's asset base with the addition of high quality assets and extends the inventory of development opportunities available for the future. It also adds significant value on a per unit basis for unitholders.

"The acquisition of the CP Properties demonstrates Pengrowth's ability to do accretive transactions, reflecting the strength of our balance sheet and our recognized reputation in the industry," said Chairman, President and Chief Executive Officer, James. S. Kinnear. "This transaction when viewed together with the recent business combination of Esprit Energy Trust and the acquisition of the Carson Creek assets positions Pengrowth as an industry leader in enhancing value for its unitholders".

Pengrowth Energy Trust is one of the larger energy royalty trusts in North America. Trust units trade on the Toronto Stock Exchange (PGF.UN) and the New York Stock Exchange (PGH). Through the purchase of trust units, unitholders participate in the ownership of a large portfolio of crude oil and natural gas properties, receiving the net cash flow (after expenses and other withholdings), paid monthly, as the oil and gas reserves are produced. Pengrowth's existing property portfolio is one of the strongest in the energy trust sector with a proved plus probable reserve life index of 10.6 years and a reserve base of 219.4 million boe at December 31, 2005. Pengrowth's assets are characterized by low decline rates and high development potential from a broad portfolio of reserves.