e6vk
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of the
Securities Exchange Act of 1934
For the period May 3, 2006 to May 11, 2006
PENGROWTH ENERGY TRUST
2900,
240 4th Avenue S.W.
Calgary, Alberta T2P 4H4 Canada
(address of principal executive offices)
[Indicate by check mark whether the registrant files or will file annual reports under cover
Form 20-F or Form 40-F.]
[Indicate by check mark whether the registrant by furnishing the information contained in this
Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under
the Security Exchange Act of 1934.
[If Yes is marked, indicate below the file number assigned to the registrant in connection
with Rule 12g3-2(b): ]
DOCUMENTS FURNISHED HEREUNDER:
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1. |
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First Quarter Report for the period ended March 31, 2006 |
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2. |
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Certification of Interim Filings CEO |
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3. |
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Certificate of Interim Filings CFO |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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PENGROWTH ENERGY TRUST
by its administrator PENGROWTH
CORPORATION
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May 11, 2006 |
By: |
/s/ Charles V. Selby
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Name: |
Charles V. Selby |
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Title: |
Vice President and Corporate Secretary |
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F I
R S T Q U A R T E R R E S U L T S
M A R C H 3 1 , 2 0 0 6
H I G H L I G H T S
During the first quarter of 2006, Pengrowth generated distributable cash of $144 million
versus $128 million in the first quarter of 2005, an increase of approximately 13 percent. Actual
cash distributions to unitholders in the first quarter of 2006 totaled $120 million or $0.75 per
trust unit reflecting a payout ratio of 85 percent of funds generated from operations compared to
91 percent for the same period in 2005.
Capital expenditures for the first quarter of 2006 totaled $75 million and focused on
increasing production and improving reserve recovery through infill drilling. Capital expenditures
were fully funded through a combination of undistributed cash from operations, proceeds from
property dispositions, cash provided by distribution reinvestment plans
and the exercise of rights and options.
Based on
quarter end market capitalization, Pengrowth was capitalized with 12 percent net debt (long
term debt plus working capital deficit) representing a net debt to annualized cash flow from
operations of 0.7 times.
Total production in the first quarter of 2006 was relatively unchanged from the same period of 2005
with additions from the Swan Hills Unit No.1 and Crispin Energy Inc. acquisitions, which closed on
February 28, 2005 and April 29, 2005, respectively, and development activities offsetting natural
production declines and divestitures.
The Board of Directors considers it appropriate to examine whether the Class A and Class B trust
unit structure continues to be in the best interests of Pengrowth Energy Trust and its unitholders
and the extent to which the structure may be hindering Pengrowths execution of its business plan.
To facilitate this initiative, a special committee was formed to make
recommendations to the Board of Directors.
Note regarding currency: All figures contained within this report are quoted in Canadian dollars unless otherwise indicated.
- 2 - PENGROWTH ENERGY TRUST
Summary of Financial and Operating Results
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Three Months ended |
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March 31 |
|
% |
(thousands, except per unit amounts) |
|
2006 |
|
2005 |
|
Change |
|
INCOME STATEMENT |
|
|
|
|
|
|
|
|
|
|
|
|
Oil and gas sales |
|
$ |
291,896 |
|
|
$ |
239,913 |
|
|
|
22 |
% |
Net income |
|
$ |
66,335 |
|
|
$ |
56,314 |
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|
|
18 |
% |
Net income per trust unit |
|
$ |
0.41 |
|
|
$ |
0.37 |
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|
|
11 |
% |
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CASH FLOW |
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|
|
|
|
|
|
|
|
|
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Funds generated from operations* |
|
$ |
141,260 |
|
|
$ |
126,407 |
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|
|
12 |
% |
Funds generated from operations per trust unit* |
|
$ |
0.88 |
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|
$ |
0.82 |
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|
|
7 |
% |
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|
|
|
|
|
|
|
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|
|
|
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Distributable cash * |
|
$ |
144,177 |
|
|
$ |
127,804 |
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|
|
13 |
% |
Distributable cash per trust unit * |
|
$ |
0.90 |
|
|
$ |
0.83 |
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|
|
8 |
% |
Distributions paid or declared |
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$ |
120,302 |
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|
$ |
115,022 |
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|
|
5 |
% |
Distributions paid or declared per trust unit |
|
$ |
0.75 |
|
|
$ |
0.69 |
|
|
|
9 |
% |
Payout ratio* |
|
|
85 |
% |
|
|
91 |
% |
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|
-6 |
% |
|
|
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|
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|
|
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Development capital |
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$ |
75,078 |
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$ |
45,736 |
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|
64 |
% |
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|
|
|
|
|
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Weighted average number of trust units outstanding |
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|
160,149 |
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|
|
153,388 |
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|
4 |
% |
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BALANCE SHEET |
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|
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|
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|
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Working capital |
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$ |
(139,121 |
) |
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$ |
(97,897 |
) |
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|
42 |
% |
Property, plant and equipment and other assets |
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$ |
2,100,158 |
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$ |
2,061,105 |
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|
|
2 |
% |
Long term debt |
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$ |
421,095 |
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$ |
441,920 |
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|
-5 |
% |
Unitholders equity |
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$ |
1,432,824 |
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|
$ |
1,414,203 |
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|
|
1 |
% |
Unitholders equity per trust unit |
|
$ |
8.93 |
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|
$ |
9.21 |
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|
-3 |
% |
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|
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|
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Number of trust units outstanding at period end |
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|
160,383 |
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|
|
153,621 |
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4 |
% |
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DAILY PRODUCTION |
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Crude oil (barrels) |
|
|
21,262 |
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|
|
20,443 |
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|
|
4 |
% |
Heavy oil (barrels) |
|
|
5,018 |
|
|
|
6,046 |
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|
|
-17 |
% |
Natural gas (mcf) |
|
|
157,876 |
|
|
|
157,491 |
|
|
|
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Natural gas liquids (barrels) |
|
|
6,252 |
|
|
|
6,345 |
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|
|
-1 |
% |
Total production (boe) |
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|
58,845 |
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|
|
59,082 |
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|
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TOTAL PRODUCTION (mboe) |
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|
5,296 |
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|
|
5,317 |
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PRODUCTION PROFILE |
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Crude oil |
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|
36 |
% |
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|
35 |
% |
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|
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Heavy oil |
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|
8 |
% |
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|
10 |
% |
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Natural gas |
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|
45 |
% |
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|
44 |
% |
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Natural gas liquids |
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|
11 |
% |
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|
11 |
% |
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AVERAGE REALIZED PRICES (after hedging) |
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Crude oil (per barrel) |
|
$ |
63.31 |
|
|
$ |
54.42 |
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|
|
16 |
% |
Heavy oil (per barrel) |
|
$ |
29.18 |
|
|
$ |
24.39 |
|
|
|
20 |
% |
Natural gas (per mcf) |
|
$ |
8.76 |
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|
$ |
6.84 |
|
|
|
28 |
% |
Natural gas liquids (per barrel) |
|
$ |
58.23 |
|
|
$ |
50.48 |
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|
|
15 |
% |
Average realized price per boe |
|
$ |
55.04 |
|
|
$ |
44.97 |
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|
|
22 |
% |
* |
|
See the section entitled Non-GAAP Financial Measures |
PENGROWTH ENERGY TRUST - 3 -
Summary of Trust Unit Trading Data
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Three Months ended |
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|
March 31 |
(thousands, except per trust unit amounts) |
|
2006 |
|
2005 |
TRUST UNIT TRADING (Class A)
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PGH (NYSE) |
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|
|
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High |
|
$ |
25.15 |
US |
|
$ |
22.94 |
US |
Low |
|
$ |
21.50 |
US |
|
$ |
18.11 |
US |
Close |
|
$ |
23.10 |
US |
|
$ |
20.00 |
US |
Value |
|
$ |
316,218 |
US |
|
$ |
515,131 |
US |
Volume (thousands of trust units) |
|
|
13,421 |
|
|
|
24,621 |
|
|
|
|
|
|
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PGF.A (TSX) |
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|
|
|
|
|
|
|
High |
|
$ |
28.96 |
|
|
$ |
28.29 |
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Low |
|
$ |
24.96 |
|
|
$ |
22.15 |
|
Close |
|
$ |
26.88 |
|
|
$ |
24.03 |
|
Value |
|
$ |
33,841 |
|
|
$ |
53,267 |
|
Volume (thousands of trust units) |
|
|
1,244 |
|
|
|
2,049 |
|
|
|
|
|
|
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TRUST UNIT TRADING (Class B)
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|
|
|
|
|
|
|
|
PGF.B (TSX) |
|
|
|
|
|
|
|
|
High |
|
$ |
24.50 |
|
|
$ |
19.90 |
|
Low |
|
$ |
20.71 |
|
|
$ |
16.10 |
|
Close |
|
$ |
23.32 |
|
|
$ |
17.05 |
|
Value |
|
$ |
420,062 |
|
|
$ |
543,701 |
|
Volume (thousands of trust units) |
|
|
18,338 |
|
|
|
29,219 |
|
- 4 - PENGROWTH ENERGY TRUST
Presidents Message
Pengrowth is pleased to announce the unaudited quarterly results for the three months ended
March 31, 2006. The first quarter of 2006 marked another strong performance for Pengrowth as
evidenced by our solid financial and operational results. Pengrowths increased focus on capital
and operational activities has been a key factor in the trusts continued success.
Production for the first quarter of 2006 remained relatively stable with average daily production
of 58,845 barrels of oil equivalent (boe) per day when compared to the first quarter of 2005 in
which average daily production totaled 59,082 boe per day. Production additions from development
activities as well as the Swan Hills Unit No. 1 and Crispin Energy Inc. acquisitions which closed
in the first half of 2005 served to offset natural production declines and divestitures. Based on
these results, Pengrowth has increased its outlook for average 2006 production to the range of
55,500 to 57,500 boe per day.
The oil and gas sector, including Pengrowth, continued to generally enjoy robust commodity prices.
Pengrowth realized an average price, after hedging, of $55.04 per boe in the first quarter of 2006,
an increase of 22 percent from the same period last year. However, this was a decrease of 12
percent when compared to the fourth quarter of 2005. The high crude oil prices combined with lower
hedging losses for the trust were offset by the continued appreciation of the Canadian dollar
against the U.S. dollar as well as the significant period over period decline in natural gas prices
in the first quarter of 2006.
The combination of stable production and higher pricing was reflected in distributable cash which
increased by 13 percent to $144 million for the first quarter of 2006 from $128 million during the
same period last year. Approximately one third of capital expenditures were funded through cash
withheld.
Pengrowths expected capital expenditure program in 2006 remains our largest to date at $236
million. During the first quarter, Pengrowth spent approximately $75 million on maintenance and
development activities including $3 million to acquire approximately 11,000 net acres of
undeveloped land. A further $48 million was invested to complete the Dunvegan area acquisition,
which included an additional 2.3 percent working interest in the Dunvegan Gas Unit. Pengrowth now
holds a 10.2 percent working interest in this high quality gas field.
While the current acquisitions market continues to be somewhat challenging, Pengrowth continues to
evaluate opportunities in both the Canadian and international markets for potential acquisition
opportunities. In conjunction with this strategy, we will continue to focus on enhancing
production, reserves and cash flow through the exploitation of our high quality suite of assets and
large undeveloped land base. A key component of our 2006 program will be the further development of
longer term projects in coalbed methane, heavy oil and enhanced oil recovery which are expected to
yield results further into the future.
During the quarter, Pengrowth achieved positive results from its enhanced development program, with
significant new potential production in the Fort St. John area of British Columbia and the Edson
and Quirk Creek areas of Alberta, which overall could total an additional 2,000 to 3,000 boe per
day. In addition, ongoing infill drilling and enhanced oil recovery programs continue at Judy Creek
and Weyburn.
Pengrowth continues to strive forward in its coalbed methane (CBM) program. During the first
quarter, 11 CBM wells were successfully drilled in the Horseshoe Canyon properties and in light of
the favourable results achieved, the program may well be accelerated this year. Infill drilling of
Pengrowths shallow gas properties will also continue. Looking forward, a team is currently being
formed to analyze the potential of Pengrowths Lindbergh, Alberta area holdings, estimated to
contain 1.3 billion barrels of heavy oil-in-place. A study will be conducted to ascertain whether
economic recovery of this heavy oil is technically and economically feasible.
PENGROWTH ENERGY TRUST - 5 -
Preparations for the compressor installation at SOEP continued at the Thebaud facilities
during the first quarter and Pengrowth currently anticipates that production at SOEP will be
somewhat reduced during the second quarter due to downtime required for installation.
Pengrowth also announced during the quarter that counsel to Pengrowth had recommended that in light
of recent developments, including the receipt of certain confirmations from the Department of
Finance and Canada Revenue Agency, it was no longer necessary to monitor or regulate the level of
ownership of trust units by non-residents of Canada in order to preserve the trusts status as a
mutual fund trust.
As such, the Board of Directors deemed it appropriate to appoint a special committee of the Board
of Directors to examine whether the dual trust unit structure continues to be in the best interests
of Pengrowth Energy Trust and its unitholders and to make recommendations on how the trust should
proceed. The Special Committee will examine possible alternatives to the Class A and Class B trust
unit structure and any impacts on Pengrowth and both Class A and Class B unitholders should some
course of action be taken. To facilitate the process of the Special Committee, the date of
Pengrowths annual general meeting has been delayed until Friday, June 23, 2006, with a record date
of May 5, 2006. I invite you to review further details on the special committee and its mandate in
the Managements Discussion and Analysis in the section entitled Class A and Class B Trust Unit
Structure.
The first quarter of 2006 marked another quarter of solid results and continual improvement for
Pengrowth. I am very pleased with our teams accomplishments during the period and I remain
confident Pengrowth is well positioned both operationally and financially for continued success in
2006.
James S. Kinnear
Chairman, President and Chief Executive Officer
May 1, 2006
For further information about Pengrowth, please visit our website www.pengrowth.com or contact:
Investor Relations, Calgary Telephone: (403) 233-0224 Toll Free: 1-800-223-4122 Facsimile: (403) 294-0051
Investor Relations, Toronto Telephone: (416) 362-1748 Toll Free: 1-888-744-1111 Facsimile: (416) 362-8191
- 6 - PENGROWTH ENERGY TRUST
Managements Discussion and Analysis
The following Managements Discussion and Analysis of financial results should be read in
conjunction with the audited consolidated financial statements for the year ended December 31, 2005
and the interim unaudited consolidated financial statements for the three months ended March 31,
2006 and is based on information available to May 1, 2006.
Frequently Recurring Terms
For the purposes of this Managements Discussion and Analysis, we use certain frequently
recurring terms as follows: the Trust refers to Pengrowth Energy Trust, the Corporation refers
to Pengrowth Corporation, Pengrowth refers to the Trust and the Corporation on a consolidated
basis and the Manager refers to Pengrowth Management Limited.
Pengrowth uses the following frequently recurring industry terms in this discussion: bbls refers
to barrels; boe refers to barrels of oil equivalent; mboe refers to a thousand barrels of oil
equivalent; mcf refers to thousand cubic feet; gj refers to gigajoule; and mmbtu refers to
million British thermal units.
Advisory Regarding Forward-Looking Statements
This Managements Discussion and Analysis contains forward-looking statements within the
meaning of securities laws, including the safe harbour provisions of the Ontario Securities Act
and the United States Private Securities Litigation Reform Act of 1995. Forward-looking information
is often, but not always, identified by the use of words such as anticipate, believe, expect,
plan, intend, forecast, target, project, may, will, should, could, estimate,
predict or similar words suggesting future outcomes or language suggesting an outlook.
Forward-looking statements in this Managements Discussion and Analysis include, but are not
limited to, statements with respect to: reserves, average 2006 production, production additions
from Pengrowths 2006 development program, the impact on production of divestitures in 2006, total
operating expenses for 2006, 2006 operating expenses per boe, capital expenditures for 2006 and the
breakdown of such capital expenditures for drilling, facilities and
maintenance, land and seismic acquisition and recompletions,
work-overs and CO2 pilots. Statements relating to
reserves are deemed to be forward-looking statements, as they involve the implied assessment,
based on certain estimates and assumptions that the reserves described exist in the quantities
predicted or estimated and can profitably be produced in the future.
Forward-looking statements and information are based on Pengrowths current beliefs as well as
assumptions made by and information currently available to Pengrowth concerning anticipated
financial performance, business prospects, strategies and regulatory developments. Although
management considers these assumptions to be reasonable based on information currently available to
it, they may prove to be incorrect.
By their very nature, forward-looking statements involve inherent risks and uncertainties, both
general and specific, and risks that predictions, forecasts, projections and other forward-looking
statements will not be achieved. We caution readers not to place undue reliance on these statements
as a number of important factors could cause the actual results to differ materially from the
beliefs, plans, objectives, expectations and anticipations, estimates and intentions expressed in
such forward-looking statements. These factors include, but are not limited to: the volatility of
oil and gas prices; production and development costs and capital expenditures; the imprecision of
reserve estimates and estimates of recoverable quantities of oil, natural gas and liquids;
Pengrowths ability to replace and expand oil and gas reserves; environmental claims and
liabilities; incorrect assessments of value when making acquisitions; increases in debt service
charges; the loss of key personnel; the marketability of production; defaults by third party
operators; unforeseen title defects; fluctuations in foreign currency and exchange rates;
inadequate insurance coverage; compliance with environmental laws and regulations; changes in tax
laws; the failure to qualify as a mutual fund trust; and Pengrowths ability to access external
sources of debt and equity capital. Further information regarding these factors may be found under
the heading Risk Factors in Pengrowths most recent Annual Information Form, its most recent
consolidated financial statements, managements discussion and analysis, managements information
circular, quarterly reports, material change reports and news releases. Copies of the Trusts
Canadian public filings are available on SEDAR at www.sedar.com . The Trusts U.S. public filings,
including the Trusts most recent annual report form 40-F as supplemented by its filings on form
6-K, are available at www.sec.gov.
Pengrowth cautions that the foregoing list of factors that may affect future results is not
exhaustive. When relying on our forward-looking statements to make decisions with respect to
Pengrowth, investors and others should carefully consider the foregoing factors and other
uncertainties and potential events. Furthermore, the forward-looking statements contained in this
Managements Discussion and Analysis are made as of the date of this Managements
Discussion and Analysis and Pengrowth does not undertake any obligation to update publicly or to
revise any of the included forward-looking statements, whether as a result of new information,
future events or otherwise, except as required by law. The forward-looking statements contained in
this Managements Discussion and Analysis are expressly qualified by this cautionary statement.
PENGROWTH ENERGY TRUST - 7 -
Critical Accounting Estimates
As discussed in Note 1 to the financial statements, the financial statements are prepared in
accordance with Canadian Generally Accepted Accounting Principles (GAAP). Management is required to
make estimates and assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and revenues and expenses for the period then ended.
The amounts recorded for depletion, depreciation and amortization of injectants and the provision
for asset retirement obligations are based on estimates. The ceiling test calculation is based on
estimates of proved reserves, production rates, oil and natural gas prices, future costs and other
relevant assumptions. As required by National Instrument 51-101 (NI 51-101), Pengrowth uses
independent qualified reserve evaluators in the preparation of reserve evaluations. By their
nature, these estimates are subject to measurement uncertainty and changes in these estimates may
impact the consolidated financial statements of future periods.
Non-GAAP Financial Measures
This discussion and analysis refers to certain financial measures that are not determined in
accordance with GAAP in Canada or the United States. These measures do not have standardized
meanings and may not be comparable to similar measures presented by other trusts or corporations.
Measures such as funds generated from operations, funds generated from operations per trust unit,
distributable cash, distributable cash per trust unit, payout ratio and operating netbacks do not
have standardized meanings prescribed by GAAP. We discuss these measures because we believe that
they facilitate the understanding of the results of our operations and financial position.
Conversion and Currency
When converting natural gas to equivalent barrels of oil within this discussion, Pengrowth uses
the international standard of six thousand cubic feet to one barrel of oil equivalent. Barrels of
oil equivalent may be misleading, particularly if used in isolation; a conversion ratio of six mcf
of natural gas to one boe is based on an energy equivalency conversion method primarily applicable
at the burner tip and does not represent a value equivalency at the wellhead. Production volumes,
revenues and reserves are reported on a company interest gross basis (before royalties) in
accordance with Canadian practice. All amounts are stated in Canadian dollars unless otherwise
specified.
RESULTS OF OPERATIONS
Production
Average daily production for the first quarter of 2006 decreased by four percent from the
fourth quarter of 2005. This decrease is attributable primarily to operational downtime at the
Sable Offshore Energy Project (SOEP) and the divestment of properties producing approximately 1,000
boe per day to Monterey Exploration Ltd. (Monterey) effective January 12, 2006. Production for the
first quarter of 2006 was relatively unchanged from the same period of 2005 with additions from the
Swan Hills Unit No. 1 (Swan Hills) and Crispin Energy Inc. (Crispin) acquisitions, which closed on
February 28, 2005 and April 29, 2005, respectively, and development activities offsetting natural
production declines and divestitures.
At this time, Pengrowth is increasing its forecast for average 2006 production to the range of
55,500 to 57,500 boe per day from our previous guidance of 54,000 to 56,000 boe per day. This
estimate incorporates anticipated production additions from planned 2006 development activities and
the Dunvegan area acquisition which closed on March 30, 2006. Offsetting these additions are
previously disclosed divestitures of approximately 1,300 boe per day impacting the first quarter of
2006 which have been excluded from the above estimate, including the Monterey divestment and
expected production declines from normal operations. The above estimate excludes the potential
impact of any other future acquisitions or divestitures.
Daily Production
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
Mar 31, 2006 |
|
|
Dec 31, 2005 |
|
|
Mar 31, 2005 |
|
|
Light crude oil (bbls) |
|
|
21,262 |
|
|
|
21,179 |
|
|
|
20,443 |
|
Heavy oil (bbls) |
|
|
5,018 |
|
|
|
5,410 |
|
|
|
6,046 |
|
Natural gas (mcf) |
|
|
157,876 |
|
|
|
168,862 |
|
|
|
157,491 |
|
Natural gas liquids (bbls) |
|
|
6,252 |
|
|
|
6,710 |
|
|
|
6,345 |
|
|
Total boe per day |
|
|
58,845 |
|
|
|
61,442 |
|
|
|
59,082 |
|
|
- 8 - PENGROWTH ENERGY TRUST
Light crude oil production volumes for the first quarter of 2006 remained relatively flat compared
to the fourth quarter of 2005. Improved miscible flood response at Judy Creek offset the natural
production decline. Production for the first quarter of 2006 compared to the first quarter of 2005
increased four percent mainly due to the positive impact of production related to the Swan Hills
acquisition.
Heavy oil production decreased seven percent in the first quarter of 2006 over the fourth quarter
of 2005 due to natural production declines. The 17 percent decrease in production for the first
quarter of 2006 compared to the first quarter of 2005 is attributable to natural production
declines.
Natural gas production for the first quarter of 2006 decreased almost seven percent from the fourth
quarter of 2005. This decrease is primarily due to the Monterey divestment, operational
curtailments at SOEP and natural production declines. Production for the first quarter of 2006
compared to the first quarter of 2005 remained relatively level. Additional production volumes from
ongoing development activities, particularly the Prespatou and Princess drilling programs completed
in the second half of 2005, increased gas sales at Judy Creek due to lower residue gas solvent
demand and the Crispin acquisition, combined to more than offset the Monterey divestment, the Sable
operational difficulties and natural production declines.
Natural gas liquids (NGLs) production for the first quarter of 2006 decreased by seven percent from
the fourth quarter of 2005 due to natural production decline. In comparing to the first quarter of
2005, production decreased just over one percent.
Pricing and Commodity Price Hedging
The increase in U.S. based prices for North American crude oil was partially offset by the
negative impact of the rising Canadian dollar. These factors combined with lower hedging losses
resulted in a higher overall crude oil price compared to both the first quarter and the fourth
quarter of 2005. Natural gas prices in North America declined significantly in the first quarter of
2006 from the fourth quarter of 2005, but remained higher than in the first quarter of 2005.
Average Realized Prices
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
(Cdn$) |
|
Mar 31, 2006 |
|
|
Dec 31, 2005 |
|
|
Mar 31, 2005 |
|
|
Light crude oil (per bbl) |
|
|
65.06 |
|
|
|
67.00 |
|
|
|
58.03 |
|
after hedging |
|
|
63.31 |
|
|
|
59.40 |
|
|
|
54.42 |
|
Heavy oil (per bbl) |
|
|
29.18 |
|
|
|
31.77 |
|
|
|
24.39 |
|
Natural gas (per mcf) |
|
|
8.74 |
|
|
|
12.80 |
|
|
|
6.85 |
|
after hedging |
|
|
8.76 |
|
|
|
11.97 |
|
|
|
6.84 |
|
Natural gas liquids (per bbl) |
|
|
58.23 |
|
|
|
58.46 |
|
|
|
50.48 |
|
|
Total per boe |
|
|
55.62 |
|
|
|
67.43 |
|
|
|
46.25 |
|
after hedging |
|
|
55.04 |
|
|
|
62.55 |
|
|
|
44.97 |
|
|
Benchmark prices
|
|
|
|
|
|
|
|
|
|
|
|
|
WTI oil (U.S. $ per bbl) |
|
|
63.48 |
|
|
|
60.05 |
|
|
|
50.03 |
|
AECO spot gas (Cdn $ per gj) |
|
|
8.79 |
|
|
|
11.08 |
|
|
|
6.34 |
|
NYMEX gas (U.S. $ per mmbtu) |
|
|
8.98 |
|
|
|
12.97 |
|
|
|
6.27 |
|
Currency (U.S.$/Cdn $) |
|
|
0.87 |
|
|
|
0.85 |
|
|
|
0.82 |
|
|
As part of our financial management strategy, Pengrowth uses forward price swap and option
contracts to manage its exposure to commodity price fluctuations, to provide a measure of stability
to monthly cash distributions and to partially secure returns on significant new acquisitions.
PENGROWTH ENERGY TRUST - 9 -
Hedging Losses (Gains)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
Mar 31, 2006 |
|
|
Dec 31, 2005 |
|
|
Mar 31, 2005 |
|
|
Light crude oil ($ million) |
|
|
3.3 |
|
|
|
14.8 |
|
|
|
6.6 |
|
Light crude oil ($ per bbl) |
|
|
1.75 |
|
|
|
7.60 |
|
|
|
3.61 |
|
|
Natural gas ($ million) |
|
|
(0.3 |
) |
|
|
12.9 |
|
|
|
0.1 |
|
Natural gas ($ per mcf) |
|
|
(0.02 |
) |
|
|
0.83 |
|
|
|
0.01 |
|
|
Combined ($ million) |
|
|
3.0 |
|
|
|
27.7 |
|
|
|
6.7 |
|
Combined ($ per boe) |
|
|
0.58 |
|
|
|
4.88 |
|
|
|
1.28 |
|
|
Commodity price hedges in place at March 31, 2006 are provided in Note 10 to the Financial
Statements. At March 31, 2006, the mark-to-market value of the fixed price financial sales
contracts represented a potential loss of $17.3 million.
In conjunction with the Murphy acquisition, which closed in 2004, Pengrowth assumed certain fixed
price natural gas sales contracts and firm pipeline demand charge contracts associated with the
Murphy reserves. Under these contracts, Pengrowth is obligated to sell 3,886 mmbtu per day, until
April 30, 2009 at an average remaining contract price of Cdn $2.31 per mmbtu. As required by GAAP,
the fair value of the natural gas sales contract was recognized as a liability based on the
mark-to-market value at May 31, 2004. The liability at March 31, 2006 of $16.9 million for the
contracts will continue to be drawn down and recognized in income as the contracts are settled. As
this is a non-cash component of income, it is not included in the calculation of distributable
cash. At March 31, 2006, the mark-to-market value of the fixed price physical sales contract
represented a potential loss of $26.9 million.
Oil and Gas Sales Contribution Analysis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ millions) |
|
|
Three months ended |
|
|
|
|
|
|
|
|
% of |
|
|
|
|
|
|
|
% of |
|
|
|
|
|
|
|
% of |
|
Sales Revenue |
|
|
Mar 31, 2006 |
|
|
total |
|
|
|
Dec 31, 2005 |
|
|
total |
|
|
|
Mar 31, 2005 |
|
|
total |
|
|
|
|
|
|
|
|
|
|
|
Natural gas |
|
|
|
124.4 |
|
|
|
43 |
% |
|
|
|
186.0 |
|
|
|
53 |
% |
|
|
|
96.9 |
|
|
|
40 |
% |
Light crude oil |
|
|
|
121.1 |
|
|
|
41 |
% |
|
|
|
115.7 |
|
|
|
33 |
% |
|
|
|
100.1 |
|
|
|
42 |
% |
Natural gas liquids |
|
|
|
32.8 |
|
|
|
11 |
% |
|
|
|
36.1 |
|
|
|
10 |
% |
|
|
|
28.8 |
|
|
|
12 |
% |
Heavy oil |
|
|
|
13.2 |
|
|
|
5 |
% |
|
|
|
15.8 |
|
|
|
4 |
% |
|
|
|
13.3 |
|
|
|
6 |
% |
Brokered sales/sulphur |
|
|
|
0.4 |
|
|
|
|
|
|
|
|
0.3 |
|
|
|
|
|
|
|
|
0.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total oil and gas sales |
|
|
|
291.9 |
|
|
|
|
|
|
|
|
353.9 |
|
|
|
|
|
|
|
|
239.9 |
|
|
|
|
|
Oil and Gas Sales Price and Volume Analysis
The following table illustrates the effect of changes in prices and volumes on the components
of oil and gas sales, including the impact of hedging for the first quarter of 2006 compared to the
fourth quarter of 2005.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ millions) |
|
Natural gas |
|
|
Light oil |
|
|
NGL |
|
|
Heavy oil |
|
|
Other |
|
|
Total |
|
|
Quarter ended December 31,
2005 |
|
|
186.0 |
|
|
|
115.7 |
|
|
|
36.1 |
|
|
|
15.8 |
|
|
|
0.3 |
|
|
|
353.9 |
|
Effect of change in product
prices |
|
|
(57.7 |
) |
|
|
(3.7 |
) |
|
|
(0.1 |
) |
|
|
(1.2 |
) |
|
|
|
|
|
|
(62.7 |
) |
Effect of change in sales
volumes |
|
|
(17.0 |
) |
|
|
(2.3 |
) |
|
|
(3.2 |
) |
|
|
(1.4 |
) |
|
|
|
|
|
|
(23.9 |
) |
Effect of change in hedging
losses |
|
|
13.1 |
|
|
|
11.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24.5 |
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.1 |
|
|
|
0.1 |
|
|
Quarter ended March 31, 2006 |
|
|
124.4 |
|
|
|
121.1 |
|
|
|
32.8 |
|
|
|
13.2 |
|
|
|
0.4 |
|
|
291.9 |
|
- 10 - PENGROWTH ENERGY TRUST
The following table illustrates the effect of changes in prices and volumes on the components of
oil and gas sales, including the impact of hedging for the first quarter of 2006 compared to the
same period of 2005.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ millions) |
|
Natural gas |
|
|
Light oil |
|
|
NGL |
|
|
Heavy oil |
|
|
Other |
|
|
Total |
|
|
Quarter ended March 31, 2005 |
|
|
96.9 |
|
|
|
100.1 |
|
|
|
28.8 |
|
|
|
13.3 |
|
|
|
0.8 |
|
|
|
239.9 |
|
Effect of change in product prices |
|
|
26.9 |
|
|
|
13.4 |
|
|
|
4.4 |
|
|
|
2.2 |
|
|
|
|
|
|
|
46.9 |
|
Effect of change in sales volumes |
|
|
0.2 |
|
|
|
4.3 |
|
|
|
(0.4 |
) |
|
|
(2.3 |
) |
|
|
|
|
|
|
1.8 |
|
Effect of change in hedging losses |
|
|
0.4 |
|
|
|
3.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.7 |
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.4 |
) |
|
|
(0.4 |
) |
|
Quarter ended March 31, 2006 |
|
|
124.4 |
|
|
|
121.1 |
|
|
|
32.8 |
|
|
|
13.2 |
|
|
|
0.4 |
|
|
|
291.9 |
|
|
Processing, Interest and Other Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
($ millions) |
|
Mar 31, 2006 |
|
|
Dec 31, 2005 |
|
|
Mar 31, 2005 |
|
|
Processing, interest & other income |
|
|
3.8 |
|
|
|
4.0 |
|
|
|
4.2 |
|
$ per boe |
|
|
0.71 |
|
|
|
0.71 |
|
|
|
0.79 |
|
|
Processing, interest and other income is primarily derived from fees charged for processing and
gathering third party gas, road use, and oil and water processing. This income represents the
partial recovery of operating expenses reported separately.
Royalties
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
($ millions) |
|
Mar 31, 2006 |
|
|
Dec 31, 2005 |
|
|
Mar 31, 2005 |
|
|
Royalty expense |
|
|
65.3 |
|
|
|
68.0 |
|
|
|
40.6 |
|
$ per boe |
|
|
12.34 |
|
|
|
12.03 |
|
|
|
7.63 |
|
|
Royalties as a percent of sales |
|
|
22.4 |
% |
|
|
19.2 |
% |
|
|
16.9 |
% |
Royalties include crown, freehold and overriding royalties as well as mineral taxes. The royalty
rate for the first quarter of 2006 compared to both the fourth quarter and the first quarter of
2005 increased primarily due to a higher royalty rate and a $1.8 million prior period adjustment at
SOEP recorded in the first quarter of 2006. SOEP has a five tier royalty regime based on gross
revenue for the first three tiers and net revenue for the final two tiers. During 2005, the royalty
obligation at SOEP was approximately two percent of gross revenue (Tier II) but progressed to five
percent of gross revenue (Tier III) starting with October 2005 production. This was recognized in
March 2006 when the annual royalty submission was filed. Based on Pengrowths forecast, the royalty
obligation is now in Tier IV which is 30 percent of net revenue (gross revenue less the costs
associated with getting the gas and liquids to the project boundary) commencing with February 2006
production.
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
($ millions) |
|
Mar 31, 2006 |
|
|
Dec 31, 2005 |
|
|
Mar 31, 2005 |
|
|
Operating expenses |
|
|
54.0 |
|
|
|
61.2 |
|
|
|
49.1 |
|
$ per boe |
|
|
10.20 |
|
|
|
10.83 |
|
|
|
9.23 |
|
|
Operating expenses decreased in the first quarter of 2006 in comparison to the fourth quarter of
2005 primarily due to a reduction in utility costs and lower maintenance activity at Judy Creek.
Increased utility costs were the most significant reason for the increase in expenses in comparing
the first quarter of 2006 versus the first quarter of 2005. Operating expenses include costs
incurred to earn processing and other income reported separately.
PENGROWTH ENERGY TRUST - 11 -
Transportation Costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
($ millions) |
|
Mar 31, 2006 |
|
|
Dec 31, 2005 |
|
|
Mar 31, 2005 |
|
|
Light oil transportation |
|
|
0.5 |
|
|
|
0.5 |
|
|
|
0.5 |
|
$ per bbl |
|
|
0.27 |
|
|
|
0.27 |
|
|
|
0.30 |
|
Natural gas transportation |
|
|
1.3 |
|
|
|
1.8 |
|
|
|
1.3 |
|
$ per mcf |
|
|
0.09 |
|
|
|
0.12 |
|
|
|
0.09 |
|
|
Pengrowth incurs transportation costs for its product once the product enters a feeder or main
pipeline to the title transfer point. The transportation cost is dependant upon industry rates and
the distance the product flows on the pipeline prior to changing ownership or custody. Pengrowth
has the option to sell some of its natural gas directly to premium markets outside of Alberta by
incurring additional transportation costs. Prior to March 31, 2006, Pengrowth sold most of its
natural gas without incurring significant additional transportation costs. Similarly, Pengrowth has
elected to sell approximately 75 percent of its crude oil at market points beyond the wellhead, but
at the first major trading point, requiring minimal transportation costs.
Amortization of Injectants for Miscible Floods
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
($ millions) |
|
Mar 31, 2006 |
|
|
Dec 31, 2005 |
|
|
Mar 31, 2005 |
|
|
Purchased and capitalized |
|
|
10.6 |
|
|
|
14.5 |
|
|
|
7.6 |
|
Amortization |
|
|
8.0 |
|
|
|
7.1 |
|
|
|
5.4 |
|
|
The cost of injectants (primarily natural gas and ethane) purchased for injection in miscible flood
programs is amortized over the period of expected future economic benefit. Prior to 2005, the
expected future economic benefit from injection was estimated at 30 months, based on the results of
previous flood patterns. Commencing in 2005 the response period for additional new patterns being
developed was expected to be somewhat shorter relative to the historical miscible patterns in the
project. Accordingly, the cost of injectants purchased in 2005 and 2006 will be amortized over a 24
month period while costs incurred for the purchase of injectants in prior periods will continue to
be amortized over 30 months. During the first quarter of 2006, the balance of unamortized injectant
costs increased by $2.6 million to $37.9 million.
The value of Pengrowths proprietary injectants is not recorded until reproduced from the flood and
sold, although the cost of producing these injectants is included in operating expenses. Purchased
injectants increased almost forty percent in the first quarter of 2006 compared to the same quarter
of 2005 due to the increased ownership in Swan Hills and increased injection volumes. There was a
27 percent decrease in the first quarter of 2006 from the fourth quarter of 2005 due to the
reduction in the price of injectants. Based on first quarter 2006, Pengrowth currently anticipates
similar injection volumes for Judy Creek and increased injection volumes for Swan Hills for the
remainder of 2006. This combined with higher forecast prices for natural gas and ethane is
anticipated to result in increased total injectant costs for 2006.
Operating Netbacks
There is no standardized measure of operating netbacks and therefore operating netbacks, as
presented below, may not be comparable to similar measures presented by other companies. Certain
assumptions have been made in allocating operating expenses, other production income, other income
and royalty injection credits between light crude, heavy oil, natural gas and natural gas liquids
production.
Pengrowth recorded an operating netback of $31.44 per boe (after hedging) in the first quarter of
2006 compared to $27.70 (after hedging) for the same period in 2005, mainly due to higher average
commodity prices in 2006 partially offset by higher operating expenses and royalties. The $7.37 per
boe decrease in operating netbacks from the fourth quarter of 2005 is primarily due to the decrease
in average commodity prices, particularly natural gas.
- 12 - PENGROWTH ENERGY TRUST
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined Netbacks ($ per boe) |
|
Three months ended |
|
|
|
Mar 31, 2006 |
|
|
Dec 31, 2005 |
|
|
Mar 31, 2005 |
|
|
|
|
Sales price |
|
$ |
55.04 |
|
|
$ |
62.55 |
|
|
$ |
44.97 |
|
Other production income |
|
|
0.07 |
|
|
|
0.06 |
|
|
|
0.15 |
|
|
|
|
|
|
|
55.11 |
|
|
|
62.61 |
|
|
|
45.12 |
|
Processing, interest and other income |
|
|
0.71 |
|
|
|
0.71 |
|
|
|
0.79 |
|
Royalties |
|
|
(12.34 |
) |
|
|
(12.02 |
) |
|
|
(7.63 |
) |
Operating expenses |
|
|
(10.20 |
) |
|
|
(10.83 |
) |
|
|
(9.23 |
) |
Transportation costs |
|
|
(0.33 |
) |
|
|
(0.41 |
) |
|
|
(0.34 |
) |
Amortization of injectants |
|
|
(1.51 |
) |
|
|
(1.25 |
) |
|
|
(1.01 |
) |
|
|
|
Operating netback |
|
$ |
31.44 |
|
|
$ |
38.81 |
|
|
$ |
27.70 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Light Crude Netbacks ($ per bbl) |
|
Three months ended |
|
|
|
Mar 31, 2006 |
|
|
Dec 31, 2005 |
|
|
Mar 31, 2005 |
|
|
|
|
Sales price |
|
$ |
63.31 |
|
|
$ |
59.40 |
|
|
$ |
54.42 |
|
Other production income |
|
|
0.06 |
|
|
|
0.17 |
|
|
|
0.42 |
|
|
|
|
|
|
|
63.37 |
|
|
|
59.57 |
|
|
|
54.84 |
|
Processing, interest and other income |
|
|
0.59 |
|
|
|
0.34 |
|
|
|
0.38 |
|
Royalties |
|
|
(7.23 |
) |
|
|
(6.47 |
) |
|
|
(7.11 |
) |
Operating expenses |
|
|
(10.90 |
) |
|
|
(14.32 |
) |
|
|
(10.74 |
) |
Transportation costs |
|
|
(0.27 |
) |
|
|
(0.27 |
) |
|
|
(0.30 |
) |
Amortization of injectants |
|
|
(4.17 |
) |
|
|
(3.63 |
) |
|
|
(2.93 |
) |
|
|
|
Operating netback |
|
$ |
41.39 |
|
|
$ |
35.22 |
|
|
$ |
34.14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Heavy Oil Netbacks ($ per bbl) |
|
Three months ended |
|
|
|
Mar 31, 2006 |
|
|
Dec 31, 2005 |
|
|
Mar 31, 2005 |
|
|
|
|
Sales price |
|
$ |
29.18 |
|
|
$ |
31.77 |
|
|
$ |
24.39 |
|
|
Processing, interest and other income |
|
|
0.38 |
|
|
|
0.74 |
|
|
|
0.99 |
|
Royalties |
|
|
(1.55 |
) |
|
|
(2.98 |
) |
|
|
(2.58 |
) |
Operating expenses |
|
|
(14.16 |
) |
|
|
(11.60 |
) |
|
|
(18.56 |
) |
|
|
|
Operating netback |
|
$ |
13.85 |
|
|
$ |
17.93 |
|
|
$ |
4.24 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural Gas Netbacks ($ per mcf) |
|
Three months ended |
|
|
|
Mar 31, 2006 |
|
|
Dec 31, 2005 |
|
|
Mar 31, 2005 |
|
|
|
|
Sales price |
|
$ |
8.76 |
|
|
$ |
11.97 |
|
|
$ |
6.84 |
|
Other production income |
|
|
0.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8.78 |
|
|
|
11.97 |
|
|
|
6.84 |
|
Processing, interest and other income |
|
|
0.18 |
|
|
|
0.19 |
|
|
|
0.21 |
|
Royalties |
|
|
(2.54 |
) |
|
|
(2.62 |
) |
|
|
(1.27 |
) |
Operating expenses |
|
|
(1.54 |
) |
|
|
(1.38 |
) |
|
|
(1.08 |
) |
Transportation costs |
|
|
(0.09 |
) |
|
|
(0.12 |
) |
|
|
(0.09 |
) |
|
|
|
Operating netback |
|
$ |
4.79 |
|
|
$ |
8.04 |
|
|
$ |
4.61 |
|
|
|
|
PENGROWTH ENERGY TRUST - 13 -
|
|
|
|
|
|
|
|
|
|
|
|
|
NGLs Netbacks ($ per bbl) |
|
Three months ended |
|
|
|
Mar 31, 2006 |
|
|
Dec 31, 2005 |
|
|
Mar 31, 2005 |
|
|
|
|
Sales price |
|
$ |
58.23 |
|
|
$ |
58.46 |
|
|
$ |
50.48 |
|
|
Royalties |
|
|
(26.10 |
) |
|
|
(21.29 |
) |
|
|
(14.07 |
) |
Operating expenses |
|
|
(8.65 |
) |
|
|
(10.05 |
) |
|
|
(6.88 |
) |
|
|
|
Operating netback |
|
$ |
23.48 |
|
|
$ |
27.12 |
|
|
$ |
29.53 |
|
|
|
|
Interest
Interest expense increased seven percent to $5.8 million for the first quarter of 2006 from
$5.4 million in the same period of 2005 primarily due to an increase in the average interest rate.
Interest expense increased by $0.9 million in the first quarter of 2006 compared to the fourth
quarter of 2005 due to higher average interest rates and increased long term debt.
General and Administrative (G&A)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
($ millions) |
|
Mar 31, 2006 |
|
|
Dec 31, 2005 |
|
|
Mar 31, 2005 |
|
|
Cash G&A expense |
|
|
7.5 |
|
|
|
7.7 |
|
|
|
6.3 |
|
$ per boe |
|
|
1.41 |
|
|
|
1.36 |
|
|
|
1.18 |
|
Non-cash G&A expense |
|
|
1.3 |
|
|
|
0.8 |
|
|
|
0.8 |
|
$ per boe |
|
|
0.26 |
|
|
|
0.14 |
|
|
|
0.15 |
|
|
Total G&A ($ million) |
|
|
8.8 |
|
|
|
8.5 |
|
|
|
7.1 |
|
Total G&A ($ per boe) |
|
|
1.67 |
|
|
|
1.50 |
|
|
|
1.33 |
|
|
The cash component of G&A for the first quarter of 2006 compared to the first quarter of 2005
increased largely due to higher salaries and a general increase in financial reporting and legal
costs related to increasing regulatory requirements including preparing for compliance with the
Sarbanes-Oxley Acts requirement to report on internal controls. The non-cash G&A expense is
related to the value of trust unit options and rights (see Note 5 to the financial statements for
details). The increase in non-cash G&A expense for the first quarter of 2006 relative to the fourth
quarter of 2005 is due to the increased cost of incentive programs to attract and retain high
quality employees.
Management Fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
($ millions) |
|
Mar 31, 2006 |
|
|
Dec 31, 2005 |
|
|
Mar 31, 2005 |
|
|
Management Fee |
|
|
3.2 |
|
|
|
2.2 |
|
|
|
3.1 |
|
Performance Fee |
|
|
1.0 |
|
|
|
2.2 |
|
|
|
0.6 |
|
|
Total ($ million) |
|
|
4.2 |
|
|
|
4.4 |
|
|
|
3.7 |
|
Total ($ per boe) |
|
|
0.80 |
|
|
|
0.77 |
|
|
|
0.70 |
|
|
Under the current management agreement, which came into effect July 1, 2003, the Manager will earn
a performance fee if the Trusts total returns exceed eight percent per annum on a three year
rolling average basis. The maximum fees payable, including the performance fee, is limited to 80
percent of the fees that would otherwise have been payable under the previous management agreement.
The Board of Directors elected to not exercise an option to terminate the agreement and hence the
agreement has been extended for a second term expiring on July 1, 2009 without a further right of
renewal. Starting July 1, 2006, the maximum fees payable will be reduced to 60 percent of the fees
otherwise payable under the previous management agreement.
- 14 - PENGROWTH ENERGY TRUST
Depletion, Depreciation and Accretion
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
($ millions) |
|
Mar 31, 2006 |
|
|
Dec 31, 2005 |
|
|
Mar 31, 2005 |
|
|
Depletion and
Depreciation |
|
|
71.1 |
|
|
|
71.4 |
|
|
|
69.1 |
|
$ per boe |
|
|
13.42 |
|
|
|
12.63 |
|
|
|
13.00 |
|
Accretion |
|
|
3.3 |
|
|
|
3.6 |
|
|
|
3.4 |
|
$ per boe |
|
|
0.63 |
|
|
|
0.64 |
|
|
|
0.64 |
|
|
Depletion and depreciation of property, plant and equipment and other assets is provided on the
unit of production method based on total proved reserves.
Taxes
In determining its taxable income, the Corporation deducts payments made to the Trust,
effectively transferring the income tax liability to unitholders thus reducing taxable income to
nil. Under the Corporations current distribution policy, funds are withheld from distributable
cash to fund future capital expenditures and repay debt. As a result of increased amounts being
withheld to fund capital spending, the Corporation could become subject to taxation on a portion of
its income in the future. This can be mitigated through various options including the issuance of
additional trust units, increased tax pools from additional capital spending, modifications to the
distribution policy or changes to the corporate structure. As a result, the Corporation does not
anticipate the payment of any cash income taxes in the foreseeable future.
Capital Expenditures
During the first quarter of 2006, Pengrowth spent $75.1 million on development and optimization
activities. The largest expenditures were in Judy Creek ($11.2 million), Quirk Creek ($9.5 million)
and SOEP ($6.3 million). Pengrowth engages in limited exploration activities and in the first
quarter of 2006 most of the capital spent on development was directed towards increasing production
and improving reserve recovery through infill drilling.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
($ millions) |
|
Mar 31, 2006 |
|
|
Dec 31, 2005 |
|
|
Mar 31, 2005 |
|
|
Geological and geophysical |
|
|
1.2 |
|
|
|
|
|
|
|
0.6 |
|
Drilling and completions |
|
|
57.8 |
|
|
|
41.1 |
|
|
|
34.3 |
|
Plant and facilities |
|
|
13.4 |
|
|
|
10.2 |
|
|
|
10.6 |
|
Land purchases |
|
|
2.7 |
|
|
|
8.8 |
|
|
|
0.2 |
|
|
Development capital |
|
|
75.1 |
|
|
|
60.1 |
|
|
|
45.7 |
|
|
Acquisitions |
|
|
49.8 |
|
|
|
|
|
|
|
89.8 |
|
|
Total
capital expenditures and acquisitions |
|
|
124.9 |
|
|
|
60.1 |
|
|
|
135.5 |
|
|
Pengrowths planned capital expenditures for maintenance and development opportunities at existing
properties are approximately $236 million for 2006 which comprises the largest capital program in
Pengrowths history. Approximately half of the 2006 spending will be on a 280 gross well (132 net
well) drilling program. The remainder of the budget will be spent on recompletions and
reactivations, development of coalbed methane resources, production enhancements and ongoing
maintenance. Pengrowths 2006 capital program targets the furtherance of Pengrowths short, medium
and long term objectives, reflecting Pengrowths focus on pursuing a balanced approach to the
development of its key assets. While the most significant portion of Pengrowths 2006 capital
program will involve the continued development and maintenance of existing production and
properties, a key element of the 2006 program will be further development of medium and longer term
plays or projects in coalbed methane, heavy oil and enhanced oil recovery which will not
necessarily result in production additions in 2006.
PENGROWTH ENERGY TRUST - 15 -
Acquisitions and Dispositions
On March 30, 2006, Pengrowth closed the acquisition of an additional working interest in the
Dunvegan area as well as some minor oil and gas properties in central Alberta for approximately $48
million.
On January 12, 2006, Pengrowth divested oil and gas properties for $22 million of cash, prior to
adjustments, and approximately eight million shares in Monterey. Pengrowth holds approximately 34
percent of the common shares of Monterey. Pengrowth utilizes the equity method of accounting for
the investment in Monterey. The investment is initially recorded at cost and adjusted thereafter to
include Pengrowths pro rata share of post-acquisition earnings of Monterey. Any dividends received
or receivable from Monterey would reduce the carrying value of the investment. Pengrowths reported
production does not include volume from the equity ownership.
Financial Resources and Liquidity
Pengrowths long term debt at March 31, 2006 was $421.1 million, compared to $368.1 million at
December 31, 2005 and $441.9 million at March 31, 2005. The $53 million increase in long term debt
is primarily due to capital expenditures and acquisitions exceeding cash withholdings and proceeds
from the Monterey transaction.
At March 31, 2006, Pengrowth maintained $370 million in committed credit facilities which were
reduced by drawings of $86 million and by $17 million in letters of credit outstanding at period
end. In addition, Pengrowth maintains a $35 million demand operating line of credit. Pengrowth
remains well positioned to fund its 2006 development program and to take advantage of acquisition
opportunities as they arise. At March 31, 2006, Pengrowth had $291 million available to draw from
its credit facilities.
Long term debt at March 31, 2006 included fixed rate term debt denominated in U.S. dollars which
translated to Cdn $233.6 million. Due to the appreciation of the Canadian dollar relative to the
U.S. dollar, an unrealized gain of Cdn $56.6 million has been recorded since the U.S. dollar
denominated debt was issued in April of 2003. Long term debt at March 31, 2006 also included fixed
rate term debt of £50 million which translated to Cdn $101.5 million. Through a series of hedging
transactions, Pengrowth fixed the foreign exchange rate for all future interest payments and
repayment at maturity on the U.K. pound sterling debt.
Pengrowth anticipates funding its 2006 capital expenditures through a combination of undistributed
cash from operations, unused credit facilities, any proceeds from property dispositions and cash
provided by distribution reinvestment plans and exercise of rights and options.
At the end of the first quarter of 2006, Pengrowth was capitalized with 12 percent net debt (long
term debt plus working capital deficit) and 88 percent equity, as compared with 15 percent debt and
85 percent equity at the end of the first quarter of 2005 (based on quarter-end market
capitalization). The Trusts net debt to annualized cash flow from operations was approximately 0.7
times at the end of the first quarter of 2006, as compared to 1.1 times at the end of the first
quarter of 2005.
Distributable Cash, Distributions and Taxability of Distributions
Pengrowth generated $144.2 million ($0.90 per average trust unit outstanding) of distributable
cash from first quarter 2006 operations, compared to $127.8 million ($0.83 per average trust unit
outstanding) in the first quarter of 2005. Distributions paid or declared were $120.3 million for
first quarter 2006 (2005 $115.0 million) and as a percentage of funds generated from operations
(payout ratio) represent approximately 85 percent (2005 91 percent).
- 16 - PENGROWTH ENERGY TRUST
The following is a summary of recent monthly distributions and future key dates:
|
|
|
|
|
|
|
|
|
|
|
|
|
Ex-Distribution |
|
|
|
Distribution |
|
Distribution Amount |
|
US $ |
Date * |
|
Record Date |
|
Payment Date |
|
per Trust Unit |
|
Amount** |
|
December 28, 2005
|
|
December 30, 2005
|
|
January 15, 2006
|
|
$ |
0.25 |
|
|
$ |
0.21 |
|
January 30, 2006
|
|
February 1, 2006
|
|
February 15, 2006
|
|
$ |
0.25 |
|
|
$ |
0.22 |
|
February 27, 2006
|
|
March 1, 2006
|
|
March 15, 2006
|
|
$ |
0.25 |
|
|
$ |
0.22 |
|
March 29, 2006
|
|
March 31, 2006
|
|
April 15, 2006
|
|
$ |
0.25 |
|
|
$ |
0.22 |
|
April 27, 2006
|
|
May 1, 2006
|
|
May 15, 2006
|
|
$ |
0.25 |
|
|
$ |
0.22 |
|
May 30, 2006
|
|
June 1, 2006
|
|
June 15, 2006 |
|
|
|
|
|
|
|
|
June 28, 2006
|
|
June 30, 2006
|
|
July 15, 2006 |
|
|
|
|
|
|
|
|
July 27, 2006
|
|
July 31, 2006
|
|
August 15, 2006 |
|
|
|
|
|
|
|
|
August 29, 2006
|
|
August 31, 2006
|
|
September 15, 2006 |
|
|
|
|
|
|
|
|
September 27, 2006
|
|
September 29, 2006
|
|
October 15, 2006 |
|
|
|
|
|
|
|
|
October 30, 2006
|
|
November 1, 2006
|
|
November 15, 2006 |
|
|
|
|
|
|
|
|
November 29, 2006
|
|
December 1, 2006
|
|
December 15, 2006 |
|
|
|
|
|
|
|
|
|
|
|
* |
|
To benefit from the monthly cash distribution, unitholders must purchase or hold trust
units prior to the ex-distribution date. |
|
** |
|
Before applicable withholding taxes. |
The Board of Directors may change the amount withheld in the future, depending on a number of
factors, including future commodity prices, capital expenditure requirements, and the availability
of debt and equity capital. Pursuant to the Royalty Indenture, the Board of Directors can establish
a reserve for certain items including up to 20 percent of Gross Revenue to fund future capital
expenditures or for the payment of royalty income in any future period.
The following discussion relates to the taxation of Canadian unitholders only. For detailed tax
information relating to non-residents, please refer to our website www.pengrowth.com. Cash
distributions are comprised of a return of capital portion, which is tax deferred, and return on
capital portion which is taxable income. The return of capital portion reduces the cost base of a
unitholders trust units for purposes of calculating a capital gain or loss upon ultimate
disposition.
Cash distributions are paid to unitholders on the 15th day of the second month following
the month of production. Pengrowth paid $0.75 per trust unit as cash distributions during the first
quarter of 2006.
There is no standardized measure of funds generated from operations, distributable cash and payout
ratio and therefore these financial measures, as reported by Pengrowth, may not be comparable to
similar measures presented by other trusts. The following table provides a reconciliation of
distributable cash:
PENGROWTH ENERGY TRUST - 17 -
|
|
|
|
|
|
|
|
|
|
|
|
|
($ thousands, except per trust unit amounts) |
|
Three months ended |
|
|
Mar 31, 2006 |
|
Dec 31, 2005 |
|
Mar 31, 2005 |
|
Cash generated from operations |
|
|
191,599 |
|
|
|
196,588 |
|
|
|
136,420 |
|
Change in non-cash operating working capital |
|
|
(50,339 |
) |
|
|
(7,993 |
) |
|
|
(10,013 |
) |
|
Funds generated from operations |
|
|
141,260 |
|
|
|
188,595 |
|
|
|
126,407 |
|
|
Change in deferred injectants |
|
|
2,643 |
|
|
|
7,411 |
|
|
|
2,179 |
|
Change in remediation trust funds |
|
|
(391 |
) |
|
|
784 |
|
|
|
(263 |
) |
Change in deferred charges |
|
|
788 |
|
|
|
(793 |
) |
|
|
(395 |
) |
Other |
|
|
(123 |
) |
|
|
(118 |
) |
|
|
(124 |
) |
|
Distributable cash |
|
|
144,177 |
|
|
|
195,879 |
|
|
|
127,804 |
|
|
Allocation of Distributable cash
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash withheld |
|
|
23,875 |
|
|
|
76,021 |
|
|
|
12,782 |
|
Distributions paid or declared |
|
|
120,302 |
|
|
|
119,858 |
|
|
|
115,022 |
|
|
Distributable cash |
|
|
144,177 |
|
|
|
195,879 |
|
|
|
127,804 |
|
|
Distributable cash per trust unit |
|
|
0.90 |
|
|
|
1.23 |
|
|
|
0.83 |
|
Distributions paid or declared per trust unit |
|
|
0.75 |
|
|
|
0.75 |
|
|
|
0.69 |
|
Payout ratio (1) |
|
|
85 |
% |
|
|
64 |
% |
|
|
91 |
% |
|
|
|
|
(1) |
|
Payout ratio is calculated as distributions paid or declared divided by funds
generated from operations |
At this time, Pengrowth anticipates that approximately 75 to 80 percent of 2006 distributions will
be taxable to Canadian residents; this estimate is subject to change depending on a number of
factors including, but not limited to, the level of commodity prices, acquisitions, dispositions,
and new equity offerings.
Class A and Class B Trust Unit Structure
Maintaining its status as a mutual fund trust under the Income Tax Act (Canada) is of
fundamental importance to Pengrowth Energy Trust. Generally speaking, in addition to several other
requirements, in order for a trust such as Pengrowth to be a mutual fund trust under the Income Tax
Act, either: (1) the trust must not be established or maintained primarily for the benefit of
non-residents of Canada (i.e. a majority of its trust units must be owned by residents of Canada)
(the Benefit Test) or (2) all or substantially all of the property of the trust must consist of
property other than taxable Canadian property (the Property Exception).
As a result of uncertainty as to whether or not Pengrowth satisfied the Property Exception, it was
necessary for Pengrowth to rely upon the Benefit Test and, as a result, on July 27, 2004 Pengrowth
implemented the Class A and Class B trust unit structure to ensure that, after the implementation
period, residents of Canada, through the ownership of Class B trust units, would own a majority of
the outstanding trust units.
On November 26, 2004, Pengrowth Energy Trust received a customary form of comfort letter from the
Department of Finance (Canada) (the November Finance Letter) stating that the Department of
Finance would recommend to the Minister of Finance that an amendment be made to the Income Tax Act
that would clarify Pengrowth Energy Trusts ability to rely upon the Property Exception.
However, various announcements by the Federal Government relating to the residency requirements for
mutual fund trusts during 2004 and 2005 resulted in considerable uncertainty regarding Pengrowths
long term ability to rely upon the Property Exception and Pengrowth considered it prudent to
maintain the Class A and Class B trust unit structure.
Pengrowth received a letter dated March 23, 2006 from the Department of Finance stating that it
remains the intention of the Department of Finance to recommend to the Minister of Finance the
changes to the Income Tax Act outlined in the November Finance Letter. Thereafter, counsel to
Pengrowth advised that as a result of a number of factors, including receipt by the Corporation of
confirmations from the Canada Revenue Agency and the Department of Finance, it is no longer
necessary to monitor or regulate the level of ownership of trust units by persons who are not
Canadian residents in order to preserve Pengrowths status as a mutual fund trust.
Within the last several months, the spread between the trading values of the Class A and Class B
trust units has narrowed to the lowest level since shortly after implementing the structure in
July, 2004. The Class A and Class B trust units have identical rights to voting, distributions and
assets of Pengrowth Energy Trust upon windup.
- 18 - PENGROWTH ENERGY TRUST
In light of these developments, the Board of Directors of Pengrowth Corporation considered it
appropriate to examine whether the Class A and Class B trust unit structure continues to be in the
best interests of Pengrowth Energy Trust and its unitholders and the extent to which the structure
may be hindering the execution by Pengrowth of its business plan. To facilitate this initiative, a
special committee of the Board of Directors was formed to make recommendations to the Board of
Directors. The special committee consists of A. Terence Poole, Thomas A. Cumming, Kirby L. Hedrick
and Michael S. Parrett, all of whom are independent directors. The special committee has retained
BMO Nesbitt Burns and Merrill Lynch as its financial advisors and Burnett Duckworth and Palmer LLP
as its legal advisor.
The Board of Directors has requested that the Special Committee examine alternatives to the Class A
and Class B trust unit structure, including amending the Trust Indenture with respect to the
removal of the ownership restriction from the Class B trust units, the merger of the Class A trust
units and the Class B trust units into a single class of trust units or any other alternatives the
committee considers appropriate, together with the impact of any course of action on Pengrowth and
both the Class A unitholders and Class B unitholders and the methods of implementation thereof.
To facilitate the process of the Special Committee, the date of Pengrowths annual general meeting
has been delayed until Friday, June 23, 2006, with a record date of May 5, 2006. The Trust
Indenture provides that the Class A and Class B trust units vote together and have one vote per
unit. An extraordinary resolution to amend the Trust Indenture requires the affirmative votes of
the holders of not less than 66 2/3 percent of the votes attaching to the trust units represented
at the meeting and voted on a poll on the resolution.
There can be no assurance regarding any changes the special committee will recommend to the Board
of Directors, the likelihood of the implementation of any such recommendations, the consequences of
such implementation, including the potential effect on the market price or value of the Class A
trust units or Class B trust units, which effect may be significantly different as between the
Class A trust units and Class B trust units, or the terms or timing thereof.
Summary of Quarterly Results
The following table is a summary of quarterly results for 2006, 2005 and 2004. As this table
illustrates, production and distributable cash were impacted positively by the Murphy acquisition
in the second quarter of 2004.
This table also shows the relatively high commodity prices sustained throughout all quarter
results, which have had a positive impact on net income and distributable cash.
|
|
|
|
|
2006 |
|
Q1 |
|
Oil and gas sales ($000s) |
|
|
291,896 |
|
Net income ($000s) |
|
|
66,335 |
|
Net income per trust unit ($) |
|
|
0.41 |
|
Net income per trust unit diluted ($) |
|
|
0.41 |
|
Distributable cash ($000s) |
|
|
144,177 |
|
Actual distributions paid or declared per trust unit ($) |
|
|
0.75 |
|
Daily production (boe) |
|
|
58,845 |
|
Total production (mboe) |
|
|
5,296 |
|
Average realized price ($ per boe) |
|
|
55.04 |
|
Operating netback ($ per boe) |
|
|
31.44 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 |
|
Q1 |
|
Q2 |
|
Q3 |
|
Q4 |
|
Oil and gas sales ($000s) |
|
|
239,913 |
|
|
|
253,189 |
|
|
|
304,484 |
|
|
|
353,923 |
|
Net income ($000s) |
|
|
56,314 |
|
|
|
53,106 |
|
|
|
100,243 |
|
|
|
116,663 |
|
Net income per trust unit ($) |
|
|
0.37 |
|
|
|
0.34 |
|
|
|
0.63 |
|
|
|
0.73 |
|
Net income per trust unit diluted ($) |
|
|
0.37 |
|
|
|
0.34 |
|
|
|
0.63 |
|
|
|
0.73 |
|
Distributable
cash ($000s) |
|
|
127,804 |
|
|
|
134,047 |
|
|
|
162,009 |
|
|
|
195,879 |
|
Actual distributions paid or declared per trust unit ($) |
|
|
0.69 |
|
|
|
0.69 |
|
|
|
0.69 |
|
|
|
0.75 |
|
Daily production (boe) |
|
|
59,082 |
|
|
|
57,988 |
|
|
|
58,894 |
|
|
|
61,442 |
|
Total production (mboe) |
|
|
5,317 |
|
|
|
5,277 |
|
|
|
5,418 |
|
|
|
5,653 |
|
Average realized price ($ per boe) |
|
|
44.97 |
|
|
|
47.79 |
|
|
|
56.07 |
|
|
|
62.55 |
|
Operating netback ($ per boe) |
|
|
27.70 |
|
|
|
29.26 |
|
|
|
33.94 |
|
|
|
38.81 |
|
PENGROWTH ENERGY TRUST - 19 -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004 |
|
Q1 |
|
Q2 |
|
Q3 |
|
Q4 |
|
Oil and gas sales ($000s)
|
|
|
168,771 |
|
|
|
197,284 |
|
|
|
226,514 |
|
|
|
223,183 |
|
Net income ($000s)
|
|
|
38,652 |
|
|
|
32,684 |
|
|
|
51,271 |
|
|
|
31,138 |
|
Net income per trust unit ($)
|
|
|
0.31 |
|
|
|
0.24 |
|
|
|
0.38 |
|
|
|
0.23 |
|
Net income per trust unit diluted ($)
|
|
|
0.31 |
|
|
|
0.24 |
|
|
|
0.38 |
|
|
|
0.23 |
|
Distributable cash ($000s)
|
|
|
92,895 |
|
|
|
99,021 |
|
|
|
104,304 |
|
|
|
104,958 |
|
Actual distributions paid or declared per trust unit ($)
|
|
|
0.63 |
|
|
|
0.64 |
|
|
|
0.67 |
|
|
|
0.69 |
|
Daily production (boe)
|
|
|
45,668 |
|
|
|
51,451 |
|
|
|
60,151 |
|
|
|
57,425 |
|
Total production (mboe)
|
|
|
4,156 |
|
|
|
4,682 |
|
|
|
5,534 |
|
|
|
5,283 |
|
Average realized price ($ per boe)
|
|
|
40.37 |
|
|
|
41.83 |
|
|
|
40.90 |
|
|
|
42.08 |
|
Operating netback ($ per boe)
|
|
|
25.71 |
|
|
|
25.71 |
|
|
|
22.77 |
|
|
24.31
|
|
Outlook
Based on first quarter 2006 production results, Pengrowth expects daily average production of
approximately 55,500 to 57,500 boe per day for the full year 2006, reflecting a positive revision
of 1,500 boe per day compared to our year end production guidance. The revised estimate
incorporates production additions from the Dunvegan area acquisition and Pengrowths 2006
development program, offset by the disposition of properties to Monterey and the impact of normal
production declines.
In line with Pengrowths previous guidance total operating expenses for 2006 are expected to remain
at approximately $220 million. Should natural gas prices remain at todays levels, it is expected
that full year operating expenses may be slightly below this forecast. Assuming Pengrowths average
production results for 2006 are as forecast above, Pengrowth now estimates 2006 operating expenses
per boe of between $10.50 and $10.85.
Pengrowth continues to anticipate capital expenditures for maintenance and development of
approximately $236 million for 2006. During the quarter Pengrowth achieved positive results from
its enhanced development program, with significant new potential production in the Fort St. John
area of British Columbia and the Edson and Quirk Creek areas of Alberta, which overall could total
an additional 2,000 to 3,000 boe per day. In addition, ongoing infill drilling and enhanced oil
recovery programs at Judy Creek and Weyburn have more than offset declines at these properties.
On the coalbed methane front, 11 wells were successfully drilled in the Horseshoe Canyon properties
during the first quarter and in light of the favourable results achieved, the CBM program may be
accelerated this year. Infill drilling of Pengrowths shallow gas program will also continue.
Looking forward, a team is currently being formed to analyze the potential of Pengrowths
Lindbergh, Alberta area holdings, estimated to contain 1.3 billion barrels of heavy oil-in-place. A
study will be conducted to ascertain whether economic recovery of this heavy oil is technically and
economically feasible.
Preparations for the compressor installation at SOEP continued at the Thebaud facilities during the
first quarter and Pengrowth currently anticipates that production at SOEP will be somewhat reduced
during the second quarter due to downtime required for installation.
In addition to the $75 million of maintenance and development expenditures in the first quarter, an
additional $48 million was invested to complete the Dunvegan area acquisition, which included an
additional 2.3 percent interest in the Dunvegan Gas Unit, bringing our total interest in this
quality gas field to 10.2 percent. While the acquisition market remains challenging with generally
fewer quality assets available in the marketplace, Pengrowth believes selected acquisition
opportunities remain available and we continue to analyze opportunities in domestic and
international markets for potential further acquisitions.
James S. Kinnear
Chairman, President and Chief Executive Officer
May 1, 2006
- 20 - PENGROWTH ENERGY TRUST
Operations Review
REVIEW OF DEVELOPMENT ACTIVITIES (All volumes stated below are net to Pengrowth unless
otherwise stated)
NORTHEAST BRITISH COLUMBIA
|
|
Two gas wells were drilled and cased at Rigel. An operated gas cap producer tested 2 mmcf per
day (gross) and a non- operated gas well is yet to be completed. The target zone (Bluesky) was
found to be present and an initial production rate of 450 mcf per day is anticipated. |
|
|
|
A successful oil well was drilled in the Oak C Pool capable of 70 bbls per day. |
|
|
|
Two standing operated gas wells at Gutah were tied-into a third party gathering system. |
|
|
|
Seven non-operated gas wells were drilled in the Gutah area, five were tied in before spring
breakup and two are still standing. |
|
|
|
Five gas wells were drilled and cased at Prespatou. Four
have been tied-in to the existing facility which is currently being expanded from 4 mmcf per day to
12 mmcf per day. Expansion is anticipated to be completed during the second quarter. |
|
|
Four Notikewin gas wells were drilled at Bulrush with two successes and two
abandonments. One successful recompletion was conducted and two recompletions did not
yield economic quantities of gas. One standing well was tied-in. |
|
|
|
A gas well recompletion from the Gething formation at Wildmint will be on stream in
the second quarter with an anticipated initial production rate of 450 mcf per day. |
|
|
|
A reactivation and recompletion of a North Pine waterflood producer at Squirrel were
concluded with an initial production rate of 90 bbls per day. |
|
|
|
A gas well recompletion at Weasel tested 162 mcf per day of incremental production. |
|
|
|
A Bluesky gas well recompletion at Beatton will yield 200 mcf per day for the remainder of the year. |
|
|
|
A new gathering line was installed from West Weasel to the Duke system that will
facilitate three gas wells to produce at capability. Compression will be installed in the
second quarter to bring this system on line. |
|
|
|
Drilling operations of a non-operated gas well at Karr were suspended at
intermediate casing. Drilling will restart again in December 2006. |
PENGROWTH ENERGY TRUST - 21 -
CENTRAL
Judy Creek
|
|
A new miscible flood pattern was initiated in the Judy Creek A Pool with two new injectors and
one oil well which tested 160 bbl per day during the first quarter. |
Weyburn
|
|
As part of a 40 well program, 11 wells are currently on stream. Initial rates net to Pengrowth
are approximately 100 barrels per day. |
Swan Hills Unit
|
|
One oil well was drilled and a second oil well will be spudded in the second quarter. |
West Pembina Area
|
|
Three successful gas wells were drilled with two completed during the first quarter. The third
well is standing and awaiting completion operations in the third quarter. |
SOUTHERN
Quirk Creek
|
|
One non-operated well was drilled, cased and tied-in to the Quirk Creek gas plant. Completion
and production testing of the well are expected in June 2006. |
Twining
|
|
Eleven Coal Bed Methane (CBM) wells were drilled, cased and logged. Completion operations will
commence in the second quarter. |
|
|
|
A Belly River well was drilled and is currently
awaiting tie in. |
Mikwan
|
|
Three new drills from fourth quarter 2005 were recompleted in the first quarter of 2006 along
with an additional three recompletions which yielded positive results from the Belly River and
Lower Mannville Ellerslie formations with an initial cumulative production rate of 1.2 mmcf per
day. Only one of these six wells remains to be tied in during the second quarter of 2006. |
Miscellaneous
|
|
At Elnora there is one standing Ellerslie gas well and at Huxley there is one well
completed and awaiting tie in. |
- 22 - PENGROWTH ENERGY TRUST
HEAVY OIL
|
|
One well and one recompletion were successful at Provost in the
first quarter. |
|
|
|
A 3D seismic program was completed at Bodo and will
lead to future locations. |
|
|
|
Polymer skid construction is completed and is forecast to start up at Bodo in the second
quarter. |
SABLE OFFSHORE ENERGY PROJECT
Production
|
|
|
First quarter gross raw gas production from the five SOEP fields, Thebaud, Venture,
North Triumph, Alma and South Venture averaged 379 mmcf per day (32 mmcf per day net). |
|
|
|
|
Monthly raw production for January, February and March was 398 mmcf per day (33 mmcf
per day net); 387 mmcf per day (32 mmcf per day net); and 352 mmcf per day (30 mmcf per
day net), respectively. |
|
|
|
|
Pengrowth shipped approximately 114,000 bbls of condensate in the first quarter. |
|
|
|
|
The Venture 7 (V7) development well spudded on August 5, 2005 started production on
December 28, 2005. V7 initial production was approximately 50 mmcf per day gross (4.2 mmcf
per day net to Pengrowth). |
|
|
|
|
In early January, the Alma mono ethylene glycol (MEG) line experienced a leak. A
temporary facility was installed and a permanent repair was completed in March. |
|
|
|
|
The drilling rig Galaxy II spudded the Alma 3 well on February 9, 2006. By March 31,
2006 Alma 3 was perforated and being tied-in for production. |
Tier II Status as of March 31, 2006
|
|
|
Fabrication of the compression topsides, jacket and piles was approximately 99
percent complete. |
|
|
|
|
Cut-in work in preparation for the compressor installation
continued at the Thebaud facilities. |
|
|
|
|
In-service for the compressor is scheduled
for late 2006. |
PENGROWTH ENERGY TRUST - 23 -
Consolidated Balance Sheets
(Stated in thousands of
dollars)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
As at |
|
As at |
|
|
March 31 |
|
December 31 |
|
|
2006 |
|
2005 |
|
ASSETS |
|
|
|
|
|
|
|
|
CURRENT ASSETS |
|
|
|
|
|
|
|
|
Accounts receivable |
|
$ |
94,672 |
|
|
$ |
127,394 |
|
|
|
|
|
|
|
|
|
|
REMEDIATION TRUST FUNDS |
|
|
8,720 |
|
|
|
8,329 |
|
|
|
|
|
|
|
|
|
|
DEFERRED CHARGES (Note 7) |
|
|
6,680 |
|
|
|
4,886 |
|
|
|
|
|
|
|
|
|
|
EQUITY INVESTMENT (Note 3) |
|
|
7,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GOODWILL |
|
|
182,835 |
|
|
|
182,835 |
|
|
|
|
|
|
|
|
|
|
PROPERTY, PLANT AND EQUIPMENT
AND OTHER ASSETS |
|
|
2,098,385 |
|
|
|
2,067,988 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
2,398,292 |
|
|
$ |
2,391,432 |
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND UNITHOLDERS EQUITY |
|
|
|
|
|
|
|
|
CURRENT LIABILITIES |
|
|
|
|
|
|
|
|
Bank indebtedness |
|
$ |
6,341 |
|
|
$ |
14,567 |
|
Accounts payable and accrued liabilities |
|
|
114,479 |
|
|
|
111,493 |
|
Distributions payable to unitholders |
|
|
80,240 |
|
|
|
79,983 |
|
Due to Pengrowth Management Limited |
|
|
7,689 |
|
|
|
8,277 |
|
Note payable |
|
|
20,000 |
|
|
|
20,000 |
|
Current portion of contract liabilities |
|
|
5,044 |
|
|
|
5,279 |
|
|
|
|
|
233,793 |
|
|
|
239,599 |
|
|
|
|
|
|
|
|
|
|
CONTRACT LIABILITIES |
|
|
11,852 |
|
|
|
12,937 |
|
|
|
|
|
|
|
|
|
|
LONG TERM DEBT (Note 2) |
|
|
421,095 |
|
|
|
368,089 |
|
|
|
|
|
|
|
|
|
|
ASSET RETIREMENT OBLIGATIONS (Note 6) |
|
|
186,069 |
|
|
|
184,699 |
|
|
|
|
|
|
|
|
|
|
FUTURE INCOME TAXES |
|
|
112,659 |
|
|
|
110,112 |
|
|
|
|
|
|
|
|
|
|
TRUST UNITHOLDERS EQUITY |
|
|
|
|
|
|
|
|
Trust Unitholders capital (Note 4) |
|
|
2,524,862 |
|
|
|
2,514,997 |
|
Contributed surplus (Note 4) |
|
|
4,576 |
|
|
|
3,646 |
|
Deficit (Note 4) |
|
|
(1,096,614 |
) |
|
|
(1,042,647 |
) |
|
|
|
|
1,432,824 |
|
|
|
1,475,996 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
2,398,292 |
|
|
$ |
2,391,432 |
|
|
See accompanying notes to the consolidated financial statements.
- 24 - PENGROWTH ENERGY TRUST
Consolidated Statements of Income and Deficit
(Stated in thousands of dollars)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
|
|
|
|
|
|
|
March 31 |
|
|
|
|
|
|
|
|
|
|
2006 |
|
2005 |
|
REVENUES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and gas sales |
|
|
|
|
|
|
|
|
|
$ |
291,896 |
|
|
$ |
239,913 |
|
Processing and other income |
|
|
|
|
|
|
|
|
|
|
3,219 |
|
|
|
4,118 |
|
Royalties, net of incentives |
|
|
|
|
|
|
|
|
|
|
(65,335 |
) |
|
|
(40,565 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
229,780 |
|
|
|
203,466 |
|
Interest and other income |
|
|
|
|
|
|
|
|
|
|
565 |
|
|
|
112 |
|
|
NET REVENUE |
|
|
|
|
|
|
|
|
|
|
230,345 |
|
|
|
203,578 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating |
|
|
|
|
|
|
|
|
|
|
54,018 |
|
|
|
49,079 |
|
Transportation |
|
|
|
|
|
|
|
|
|
|
1,758 |
|
|
|
1,807 |
|
Amortization of injectants for miscible
floods |
|
|
|
|
|
|
|
|
|
|
7,972 |
|
|
|
5,392 |
|
Interest |
|
|
|
|
|
|
|
|
|
|
5,778 |
|
|
|
5,433 |
|
General and administrative |
|
|
|
|
|
|
|
|
|
|
8,820 |
|
|
|
7,081 |
|
Management fee |
|
|
|
|
|
|
|
|
|
|
4,241 |
|
|
|
3,708 |
|
Foreign exchange loss (Note 8) |
|
|
|
|
|
|
|
|
|
|
1,239 |
|
|
|
1,360 |
|
Depletion and depreciation |
|
|
|
|
|
|
|
|
|
|
71,056 |
|
|
|
69,149 |
|
Accretion (Note 6) |
|
|
|
|
|
|
|
|
|
|
3,328 |
|
|
|
3,403 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
158,210 |
|
|
|
146,412 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME BEFORE TAXES |
|
|
|
|
|
|
|
|
|
|
72,135 |
|
|
|
57,166 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME TAX EXPENSE (REDUCTION) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital |
|
|
|
|
|
|
|
|
|
|
1,480 |
|
|
|
1,297 |
|
Future |
|
|
|
|
|
|
|
|
|
|
4,320 |
|
|
|
(445 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
5,800 |
|
|
|
852 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME |
|
|
|
|
|
|
|
|
|
$ |
66,335 |
|
|
$ |
56,314 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit, beginning of period |
|
|
|
|
|
|
|
|
|
|
(1,042,647 |
) |
|
|
(922,996 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions paid or declared |
|
|
|
|
|
|
|
|
|
|
(120,302 |
) |
|
|
(105,998 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DEFICIT, END OF PERIOD |
|
|
|
|
|
|
|
|
|
$ |
(1,096,614 |
) |
|
$ |
(972,680 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME PER TRUST UNIT (Note 4) |
|
Basic |
|
|
|
|
|
$ |
0.41 |
|
|
$ |
0.37 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
|
|
|
|
$ |
0.41 |
|
|
$ |
0.37 |
|
|
See accompanying notes to the consolidated financial statements.
PENGROWTH ENERGY TRUST - 25 -
Consolidated Statements of Cash Flow
(Stated in thousands of dollars)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
March 31 |
|
|
2006 |
|
2005 |
|
CASH PROVIDED BY (USED FOR): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING |
|
|
|
|
|
|
|
|
Net income |
|
$ |
66,335 |
|
|
$ |
56,314 |
|
Depletion, depreciation and accretion |
|
|
74,384 |
|
|
|
72,552 |
|
Future income taxes |
|
|
4,320 |
|
|
|
(445 |
) |
Contract liability amortization |
|
|
(1,320 |
) |
|
|
(1,449 |
) |
Amortization of injectants |
|
|
7,972 |
|
|
|
5,392 |
|
Purchase of injectants |
|
|
(10,615 |
) |
|
|
(7,571 |
) |
Expenditures on remediation |
|
|
(1,380 |
) |
|
|
(1,118 |
) |
Unrealized foreign exchange loss (Note 8) |
|
|
1,000 |
|
|
|
1,520 |
|
Trust unit based compensation (Note 5) |
|
|
1,352 |
|
|
|
817 |
|
Deferred charges |
|
|
(2,364 |
) |
|
|
|
|
Amortization of deferred charges |
|
|
1,576 |
|
|
|
395 |
|
Changes in non-cash operating working capital (Note 9) |
|
|
50,339 |
|
|
|
10,013 |
|
|
|
|
|
191,599 |
|
|
|
136,420 |
|
|
|
|
|
|
|
|
|
|
|
FINANCING |
|
|
|
|
|
|
|
|
Distributions |
|
|
(120,045 |
) |
|
|
(105,757 |
) |
Change in long term debt, net |
|
|
51,000 |
|
|
|
95,000 |
|
Proceeds from issue of trust units |
|
|
9,443 |
|
|
|
9,883 |
|
|
|
|
|
(59,602 |
) |
|
|
(874 |
) |
|
|
|
|
|
|
|
|
|
|
INVESTING |
|
|
|
|
|
|
|
|
Expenditures on property acquisitions |
|
|
(49,785 |
) |
|
|
(89,950 |
) |
Expenditures on property, plant and equipment |
|
|
(75,078 |
) |
|
|
(45,535 |
) |
Proceeds on property dispositions |
|
|
16,702 |
|
|
|
|
|
Change in remediation trust fund |
|
|
(391 |
) |
|
|
(263 |
) |
Change in non-cash investing working capital (Note 9) |
|
|
(15,219 |
) |
|
|
(3,192 |
) |
|
|
|
|
(123,771 |
) |
|
|
(138,940 |
) |
|
|
|
|
|
|
|
|
|
|
CHANGE IN CASH AND TERM DEPOSITS |
|
|
8,226 |
|
|
|
(3,394 |
) |
|
|
|
|
|
|
|
|
|
BANK INDEBTEDNESS AT BEGINNING OF PERIOD |
|
|
(14,567 |
) |
|
|
(4,214 |
) |
|
|
|
|
|
|
|
|
|
|
BANK INDEBTEDNESS AT END OF PERIOD |
|
$ |
(6,341 |
) |
|
$ |
(7,608 |
) |
|
See accompanying notes to the consolidated financial statements.
- 26 - PENGROWTH ENERGY TRUST
Notes To Consolidated Financial Statements
(Unaudited)
March 31, 2006
(Tabular dollar amounts are stated in thousands of dollars except per trust unit amounts)
1. |
|
SIGNIFICANT ACCOUNTING POLICIES |
|
|
|
The interim consolidated financial statements of Pengrowth Energy Trust include the
accounts of Pengrowth Energy Trust (the Trust), Pengrowth Corporation (the Corporation) and
its subsidiaries (collectively referred to as Pengrowth). The financial statements do not
contain the accounts of Pengrowth Management Limited (the Manager). |
|
|
|
The financial statements have been prepared by management in accordance with accounting
principles generally accepted in Canada. The interim consolidated financial statements have
been prepared following the same accounting policies and methods of computation as the
consolidated financial statements for the fiscal year ended December 31, 2005. The disclosures
provided below are incremental to those included with the annual consolidated financial
statements. The interim consolidated financial statements should be read in conjunction with
the consolidated financial statements and the notes thereto in Pengrowths annual report for
the year ended December 31, 2005. |
|
2. |
|
LONG TERM DEBT |
|
|
|
|
|
|
|
|
|
|
|
As at |
|
|
As at |
|
|
|
March 31, |
|
|
December 31, |
|
|
|
2006 |
|
|
2005 |
|
|
U.S. dollar denominated debt: |
|
|
|
|
|
|
|
|
U.S. $150 million senior unsecured notes at 4.93 percent due
April 2010 |
|
$ |
175,200 |
|
|
$ |
174,450 |
|
U.S. $50 million senior unsecured notes at 5.47 percent due
April 2013 |
|
|
58,400 |
|
|
|
58,150 |
|
|
|
|
|
233,600 |
|
|
|
232,600 |
|
|
|
|
|
|
|
|
|
|
Pounds sterling denominated £50 million unsecured notes at
5.46 percent due December 2015 |
|
|
101,495 |
|
|
|
100,489 |
|
Canadian dollar revolving credit borrowings |
|
|
86,000 |
|
|
|
35,000 |
|
|
|
|
$ |
421,095 |
|
|
$ |
368,089 |
|
|
|
|
Pengrowth has a $370 million revolving unsecured credit facility syndicated among eight financial
institutions with an extendible 364 day revolving period and a three year amortization term period.
The facilities were reduced by drawings of $86 million and by outstanding letters of credit in the
amount of approximately $17 million at March 31, 2006. In addition, Pengrowth has a $35 million
demand operating line of credit. Interest payable on amounts drawn is at the prevailing bankers
acceptance rates plus stamping fees, lenders prime lending rates, or U.S. LIBOR rates plus
applicable margins, depending on the form of borrowing by Pengrowth. The margins and stamping fees
vary from zero percent to 1.4 percent depending on financial statement ratios and the form of
borrowing. |
|
|
|
The revolving credit facility will revolve until June 16, 2006, whereupon it may be renewed for a
further 364 days, subject to satisfactory review by the lenders, or converted into a term facility.
If converted to a term facility, one third of the amount outstanding would be repaid in equal
quarterly instalments in each of the first two years with the final one third to be repaid upon
maturity of the term period. Pengrowth can post, at its option, security suitable to the banks in
lieu of the first years payments. In such an instance, no principal payment would be made to the
banks for one year following the date of non-renewal. |
PENGROWTH ENERGY TRUST- 27 -
3. |
|
EQUITY INVESTMENT |
|
|
|
On January 12, 2006 Pengrowth closed certain transactions with Monterey Exploration Ltd.
(Monterey) under which Pengrowth has sold certain oil and gas properties for $22 million in
cash, less closing adjustments, and 8,048,132 common shares of Monterey. As of March 31, 2006
Pengrowth holds approximately 34 percent of the common shares of Monterey. |
|
|
|
Pengrowth utilizes the equity method of accounting for the investment in Monterey. The
investment is initially recorded at cost and adjusted thereafter to include Pengrowths pro rata
share of post-acquisition earnings of Monterey. Any dividends received or receivable from Monterey would
reduce the carrying value of the investment. |
|
4. |
|
TRUST UNITHOLDERS EQUITY |
|
|
|
Trust Unitholders Capital |
|
|
|
The total authorized capital of Pengrowth is 500,000,000 trust units. |
|
|
|
Total Trust Units: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
Year ended |
|
|
March 31, 2006 |
|
December 31, 2005 |
|
|
|
Number |
|
|
|
|
|
Number |
|
|
Trust units issued |
|
of trust units |
|
Amount |
|
of trust units |
|
Amount |
|
Balance, beginning of period |
|
|
159,864,083 |
|
|
$ |
2,514,997 |
|
|
|
152,972,555 |
|
|
$ |
2,383,284 |
|
Issued for the Crispin acquisition (non-
cash) |
|
|
|
|
|
|
|
|
|
|
4,225,313 |
|
|
|
87,960 |
|
Issued for cash on exercise of trust unit
options and rights |
|
|
235,244 |
|
|
|
5,058 |
|
|
|
1,512,211 |
|
|
|
21,818 |
|
Issued for cash under Distribution
Reinvestment Plan (DRIP) |
|
|
284,076 |
|
|
|
4,385 |
|
|
|
1,154,004 |
|
|
|
20,726 |
|
Trust unit rights incentive plan (non-cash
exercised) |
|
|
|
|
|
|
422 |
|
|
|
|
|
|
|
1,209 |
|
|
Balance, end of year |
|
|
160,383,403 |
|
|
$ |
2,524,862 |
|
|
|
159,864,083 |
|
|
$ |
2,514,997 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
Year ended |
|
|
March 31, 2006 |
|
December 31, 2005 |
|
|
|
Number |
|
|
|
|
|
Number |
|
|
Trust units issued |
|
of trust units |
|
Amount |
|
of trust units |
|
Amount |
|
Balance, beginning of period |
|
|
77,524,673 |
|
|
$ |
1,196,121 |
|
|
|
76,792,759 |
|
|
$ |
1,176,427 |
|
Issued for the Crispin acquisition (non-
cash) |
|
|
|
|
|
|
|
|
|
|
686,732 |
|
|
|
19,002 |
|
Trust units converted |
|
|
200 |
|
|
|
3 |
|
|
|
45,182 |
|
|
|
692 |
|
|
Balance, end of period |
|
|
77,524,873 |
|
|
$ |
1,196,124 |
|
|
|
77,524,673 |
|
|
$ |
1,196,121 |
|
|
- 28 - PENGROWTH ENERGY TRUST
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Year ended |
|
|
|
March 31, 2006 |
|
|
December 31, 2005 |
|
|
|
|
Number |
|
|
|
|
|
|
Number |
|
|
|
|
Trust units issued |
|
of trust units |
|
|
Amount |
|
|
of trust units |
|
|
Amount |
|
|
Balance, beginning of period |
|
|
82,301,443 |
|
|
$ |
1,318,294 |
|
|
|
76,106,471 |
|
|
$ |
1,205,734 |
|
Trust units converted |
|
|
3,655 |
|
|
|
58 |
|
|
|
(9,824 |
) |
|
|
(151 |
) |
Issued for the Crispin acquisition (non-
cash) |
|
|
|
|
|
|
|
|
|
|
3,538,581 |
|
|
|
68,958 |
|
Issued for cash on exercise of trust unit
options and rights |
|
|
235,244 |
|
|
|
5,058 |
|
|
|
1,512,211 |
|
|
|
21,818 |
|
Issued for cash under Distribution
Reinvestment Plan (DRIP) |
|
|
284,076 |
|
|
|
4,385 |
|
|
|
1,154,004 |
|
|
|
20,726 |
|
Trust unit rights incentive plan (non-cash
exercised) |
|
|
|
|
|
|
422 |
|
|
|
|
|
|
|
1,209 |
|
|
Balance, end of period |
|
|
82,824,418 |
|
|
$ |
1,328,217 |
|
|
|
82,301,443 |
|
|
$ |
1,318,294 |
|
|
|
|
Unclassified Trust Units: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Year ended |
|
|
|
March 31, 2006 |
|
|
December 31, 2005 |
|
|
|
|
Number |
|
|
|
|
|
|
Number |
|
|
|
|
Trust Units Issued |
|
of trust units |
|
|
Amount |
|
|
of trust units |
|
|
Amount |
|
|
Balance, beginning of period |
|
|
37,967 |
|
|
$ |
582 |
|
|
|
73,325 |
|
|
$ |
1,123 |
|
Converted to Class A or Class B trust
units |
|
|
(3,855 |
) |
|
|
(61 |
) |
|
|
(35,358 |
) |
|
|
(541 |
) |
|
Balance, end of period |
|
|
34,112 |
|
|
$ |
521 |
|
|
|
37,967 |
|
|
$ |
582 |
|
|
|
|
Per Trust Unit Amounts |
|
|
|
The per trust unit amounts of net income are based on the following weighted average trust units
outstanding for the period. The weighted average trust units outstanding for the three months ended
March 31, 2006 were 160,148,880 trust units (March 31, 2005 153,387,514 trust units). In
computing diluted net income per trust unit, 545,536 trust units were added to the weighted average
number of trust units outstanding during the three months ended March 31, 2006 (March 31, 2005
574,190 trust units) for the dilutive effect of trust unit options, rights and deferred entitlement
trust units (DEUs). For the three months ended March 31, 2006, 595,707 options, rights and
deferred entitlement trust units (March 31, 2005 1,318,508 options and rights) were excluded from
the diluted net income per trust unit calculation as their effect is anti-dilutive. |
|
|
|
Contributed Surplus |
|
|
|
|
|
|
|
|
|
|
|
Three months |
|
Twelve months |
|
|
ended |
|
ended December |
|
|
March 31, 2006 |
|
31, 2005 |
|
Balance, beginning of period |
|
$ |
3,646 |
|
|
$ |
1,923 |
|
Trust unit rights incentive plan (non-cash expensed) |
|
|
789 |
|
|
|
1,740 |
|
Deferred entitlement trust units (non-cash expensed) |
|
|
563 |
|
|
|
1,192 |
|
Trust unit rights incentive plan (non-cash exercised) |
|
|
(422 |
) |
|
|
(1,209 |
) |
|
Balance, end of period |
|
$ |
4,576 |
|
|
$ |
3,646 |
|
|
|
|
|
|
|
|
|
|
|
|
|
As at |
|
As at |
|
|
March 31, |
|
December 31, |
|
|
2006 |
|
2005 |
|
Accumulated earnings |
|
$ |
1,119,718 |
|
|
$ |
1,053,383 |
|
Accumulated distributions paid or declared |
|
|
(2,216,332 |
) |
|
|
(2,096,030 |
) |
|
|
|
$ |
(1,096,614 |
) |
|
$ |
(1,042,647 |
) |
|
PENGROWTH ENERGY TRUST - 29 -
Pengrowth is obligated by virtue of its Royalty and Trust Indentures to distribute to
unitholders a significant portion of its cash flow from operations. Cash flow from operations
typically exceeds net income as a result of non cash expenses such as depletion, depreciation
and accretion. These non-cash expenses result in a deficit being recorded despite Pengrowth
distributing less than its cash flow from operations.
5. TRUST UNIT BASED COMPENSATION PLANS
Trust Unit Option Plan
As at March 31, 2006, options to purchase 174,033 Class B trust units were outstanding
(December 31, 2005 options to purchase 259,317 Class B trust units) that expire at various
dates to June 28, 2009. All outstanding trust unit options were fully expensed by December 31,
2004.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Twelve months ended |
|
|
|
March 31, 2006 |
|
|
December 31, 2005 |
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
Weighted |
|
Trust unit options |
|
Number |
|
|
average |
|
|
Number |
|
|
average |
|
|
|
of options |
|
|
exercise price |
|
|
of options |
|
|
exercise price |
|
|
Outstanding at beginning of period |
|
|
259,317 |
|
|
$ |
17.28 |
|
|
|
845,374 |
|
|
$ |
16.97 |
|
Exercised |
|
|
(85,284 |
) |
|
$ |
17.99 |
|
|
|
(558,307 |
) |
|
$ |
16.74 |
|
Expired |
|
|
|
|
|
|
|
|
|
|
(27,750 |
) |
|
$ |
18.63 |
|
|
Outstanding and exercisable at period-
end |
|
|
174,033 |
|
|
$ |
16.94 |
|
|
|
259,317 |
|
|
$ |
17.28 |
|
|
|
|
Trust Unit Rights Incentive Plan |
|
|
|
As at March 31, 2006, rights to purchase 1,670,407 Class B trust units were outstanding (December
31, 2005 1,441,737) that expire at various dates to February 27, 2011. |
|
|
|
Compensation expense is based on a fair value method. Compensation expense associated with the
trust unit rights granted during the first quarter of 2006 was based on the estimated fair value of
$1.86 per trust unit right. The fair value of trust unit rights granted during the three months
ended March 31, 2006 was estimated at 8 percent of the exercise price at the date of grant using a
binomial lattice option pricing model with the following assumptions: risk-free rate of 4.1
percent, volatility of 19 percent and reductions in the exercise price over the life of the trust
unit rights. For the three months ended March 31, 2006, compensation expense of $789,000 (March 31,
2005 $695,000) related to the trust unit rights was recorded.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Twelve months ended |
|
|
|
March 31, 2006 |
|
|
December 31, 2005 |
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
Weighted |
|
Trust unit rights |
|
Number |
|
|
average |
|
|
Number |
|
|
average |
|
|
|
of rights |
|
|
exercise price |
|
|
of rights |
|
|
exercise price |
|
|
Outstanding at beginning of period |
|
|
1,441,737 |
|
|
$ |
14.85 |
|
|
|
2,011,451 |
|
|
$ |
14.23 |
|
Granted(1) |
|
|
444,909 |
|
|
$ |
23.20 |
|
|
|
606,575 |
|
|
$ |
18.34 |
|
Exercised |
|
|
(198,792 |
) |
|
$ |
14.34 |
|
|
|
(953,904 |
) |
|
$ |
12.81 |
|
Cancelled |
|
|
(17,447 |
) |
|
$ |
15.98 |
|
|
|
(222,385 |
) |
|
$ |
16.19 |
|
|
Outstanding at period-end |
|
|
1,670,407 |
|
|
$ |
16.73 |
|
|
|
1,441,737 |
|
|
$ |
14.85 |
|
|
Exercisable at period-end |
|
|
610,506 |
|
|
$ |
15.48 |
|
|
|
668,473 |
|
|
$ |
13.73 |
|
|
|
|
|
(1) |
|
Weighted average exercise price of rights granted is based on the exercise price at the
date of grant. |
|
|
Long Term Incentive Program |
|
|
|
As at March 31, 2006, 339,563 deferred entitlement trust units (DEUs) were outstanding
(December 31, 2005 185,591), including accrued distributions re-invested to March 31, 2006. The
DEUs vest on various dates to February 27, 2009. For the three months ended March 31, 2006,
Pengrowth recorded compensation expense of $563,000 (March 31, 2005 $122,000) associated with the
DEUs based on the weighted average estimated fair value of $20.69 (2005 $18.14) per DEU. |
- 30 - PENGROWTH ENERGY TRUST
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
Twelve months ended |
Number of DEUs |
|
March 31, 2006 |
|
December 31, 2005 |
|
Outstanding, beginning of period |
|
|
185,591 |
|
|
|
|
|
Granted |
|
|
151,996 |
|
|
|
194,229 |
|
Cancelled |
|
|
(11,070 |
) |
|
|
(26,258 |
) |
Deemed DRIP |
|
|
13,046 |
|
|
|
17,620 |
|
|
Outstanding, end of period |
|
|
339,563 |
|
|
|
185,591 |
|
|
|
|
Trust Unit Award Plans |
|
|
|
Effective February 27, 2006, Pengrowth established a new incentive plan to reward and
retain employees whereby Class B trust units and cash will be awarded to eligible employees.
Employees will receive the trust units and cash on or about July 1, 2007. Pengrowth acquired
the Class B trust units to be awarded on the open market for $2.4 million and placed them in a
trust account established for the benefit of the eligible employees. The cost to acquire the
trust units has been recorded as deferred compensation expense and is being charged to net
income on a straight line basis over 16 months. In addition, the cash portion of the incentive
plan of approximately $1.1 million is being accrued over 16 months. |
|
|
|
During the three months ended March 31, 2006 $1.6 million has been charged to net income for
the February 27, 2006 plan and the previously disclosed July 13, 2005 plan. |
|
6. |
|
ASSET RETIREMENT OBLIGATIONS |
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Twelve months ended |
|
|
|
March 31, 2006 |
|
|
December 31, 2005 |
|
|
Asset retirement obligations, beginning of
period |
|
$ |
184,699 |
|
|
$ |
171,866 |
|
Increase (decrease) in liabilities related to: |
|
|
|
|
|
|
|
|
Acquisitions |
|
|
448 |
|
|
|
6,347 |
|
Additions |
|
|
474 |
|
|
|
1,972 |
|
Disposals |
|
|
(1,500 |
) |
|
|
(3,844 |
) |
Revisions |
|
|
|
|
|
|
1,549 |
|
Accretion expense |
|
|
3,328 |
|
|
|
14,162 |
|
Liabilities settled during the period |
|
|
(1,380 |
) |
|
|
(7,353 |
) |
|
Asset retirement obligations, end of period |
|
$ |
186,069 |
|
|
$ |
184,699 |
|
|
|
|
|
|
|
|
|
|
|
|
|
As at |
|
|
As at |
|
|
|
March 31, 2006 |
|
|
December 31,2006 |
|
|
Imputed interest on note payable net of
accumulated amortization of $3,047 (2005 $2,859) |
|
$ |
560 |
|
|
$ |
748 |
|
U.S. debt issue costs net of accumulated
amortization of $892 (2005 $816) |
|
|
1,249 |
|
|
|
1,325 |
|
Deferred compensation expense net of accumulated amortization of
$3,437 (2005 $2,143) |
|
|
3,207 |
|
|
|
2,141 |
|
U.K. debt issue costs net of accumulated amortization of $23
(2005 $5) |
|
|
658 |
|
|
|
672 |
|
Deferred foreign exchange loss on revaluation of U.K. debt hedge |
|
|
1,006 |
|
|
|
|
|
|
|
|
$ |
6,680 |
|
|
$ |
4,886 |
|
|
PENGROWTH ENERGY TRUST - 31 -
8. FOREIGN EXCHANGE LOSS (GAIN)
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
March 31, |
|
|
2006 |
|
2005 |
|
Unrealized foreign exchange loss on translation of
U.S. dollar denominated debt |
|
$ |
1,000 |
|
|
$ |
1,520 |
|
Realized foreign exchange loss (gain) |
|
|
239 |
|
|
|
(160 |
) |
|
|
|
$ |
1,239 |
|
|
$ |
1,360 |
|
|
|
|
The U.S. dollar and U.K. pound sterling denominated debt are translated into Canadian dollars
at the Bank of Canada exchange rate in effect at the close of business on the balance sheet
date. Foreign exchange gains and losses on the U.S. dollar denominated debt are included in
income. Foreign exchange gains and losses on translating the U.K pound sterling denominated
debt and the associated gains and losses on the U.K. pound sterling denominated exchange swap
are deferred and included in deferred charges. |
|
9. |
|
OTHER CASH FLOW DISCLOSURES |
|
|
|
Change in Non-Cash Operating Working Capital |
|
|
Cash provided by (used for): |
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
March 31, |
|
|
|
2006 |
|
|
2005 |
|
|
Accounts receivable |
|
$ |
32,722 |
|
|
$ |
(1,092 |
) |
Inventory |
|
|
|
|
|
|
439 |
|
Accounts payable and accrued liabilities |
|
|
18,205 |
|
|
|
12,565 |
|
Due to Pengrowth Management Limited |
|
|
(588 |
) |
|
|
(1,899 |
) |
|
|
|
$ |
50,339 |
|
|
$ |
10,013 |
|
|
|
|
Change in Non-Cash Investing Working Capital
Cash provided by (used for): |
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
March 31, |
|
|
2006 |
|
2005 |
|
Accounts payable for capital accruals |
|
$ |
(15,219 |
) |
|
$ |
(3,192 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
March 31, |
|
|
2006 |
|
2005 |
|
Cash payments made for taxes |
|
$ |
1,125 |
|
|
$ |
1,247 |
|
Cash payments made for interest |
|
$ |
1,092 |
|
|
$ |
1,875 |
|
|
10. |
|
FINANCIAL INSTRUMENTS |
|
|
|
Pengrowth has a price risk management program whereby the commodity price associated with a
portion of its future production is fixed. Pengrowth sells forward a portion of its future
production through a combination of fixed price sales contracts with customers and commodity
swap agreements with financial counterparties. The forward and futures contracts are subject to
market risk from fluctuating commodity prices and exchange rates. |
- 32 - PENGROWTH ENERGY TRUST
|
|
As at March 31, 2006, Pengrowth had fixed the price applicable to future production as
follows: |
|
|
|
Crude Oil: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Volume |
|
Reference |
|
Price |
|
|
|
|
Remaining Term |
|
(bbl/day) |
|
Point |
|
per bbl |
|
|
|
|
|
Financial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Apr 1, 2006 Dec 31, 2006 |
|
|
4,000 |
|
|
WTI (1) |
|
$64.08 Cdn |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Volume |
|
Reference |
|
Price |
|
|
|
|
Remaining Term |
|
(mmbtu/day) |
|
Point |
|
per mmbtu |
|
|
|
|
|
Financial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Apr 1, 2006 Dec 31, 2006 |
|
|
2,500 |
|
|
Transco Z6 (1) |
|
$10.63 Cdn |
|
|
|
|
Apr 1, 2006 Dec 31, 2006 |
|
|
2,370 |
|
|
AECO |
|
$8.03 Cdn |
|
|
|
|
|
|
|
|
(1) |
|
Associated Cdn$ / U.S.$ foreign exchange rate has been fixed. |
|
|
The estimated fair value of the financial crude oil and natural gas contracts has been
determined based on the amounts Pengrowth would receive or pay to terminate the contracts at
period-end. At March 31, 2006, the amount Pengrowth would pay (receive) to terminate the financial
crude oil and natural gas contracts would be $17.6 million and $(0.3) million, respectively. |
|
|
|
Natural Gas Fixed Price Sales Contract: |
|
|
|
Pengrowth also has a natural gas fixed price physical sales contract outstanding which was assumed
in the 2004 Murphy acquisition, the details of which are provided below: |
|
|
|
|
|
|
|
|
|
|
|
Volume |
|
Price |
Remaining Term |
|
(mmbtu/day) |
|
per mmbtu (2) |
|
2006 to 2009 |
|
|
|
|
|
|
|
|
Apr 1, 2006 Oct 31, 2006 |
|
|
3,886 |
|
|
$2.23 Cdn |
Nov 1, 2006 Oct 31, 2007 |
|
|
3,886 |
|
|
$2.29 Cdn |
Nov 1, 2007 Oct 31, 2008 |
|
|
3,886 |
|
|
$2.34 Cdn |
Nov 1, 2008 Apr 30, 2009 |
|
|
3,886 |
|
|
$2.40 Cdn |
|
|
|
|
(2) |
|
Reference price based on AECO |
|
|
As at March 31, 2006, the amount Pengrowth would pay to terminate the natural gas fixed price sales
contract would be $26.9 million. |
|
|
|
Fair Value of Financial Instruments |
|
|
|
The carrying value of financial instruments included in the balance sheet, other than long term
debt, the note payable and remediation trust funds approximate their fair value due to their short
maturity. The fair value of the other financial instruments is as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at March 31, 2006 |
|
As at December 31, 2005 |
|
|
|
|
|
|
Net Book |
|
|
|
|
|
Net Book |
|
|
Fair Value |
|
Value |
|
Fair Value |
|
Value |
|
Remediation Funds |
|
$ |
9,833 |
|
|
$ |
8,720 |
|
|
$ |
9,071 |
|
|
$ |
8,329 |
|
U.S. dollar denominated debt |
|
|
221,575 |
|
|
|
233,600 |
|
|
|
220,187 |
|
|
|
232,600 |
|
£ denominated debt |
|
|
98,189 |
|
|
|
101,495 |
|
|
|
101,257 |
|
|
|
100,489 |
|
|
PENGROWTH ENERGY TRUST - 33 -
Corporate Information
DIRECTORS OF PENGROWTH
CORPORATION
Thomas A. Cumming
Business Consultant
Kirby L. Hedrick
Business Consultant
James S. Kinnear; Chairman
President, Pengrowth Management
Limited
Michael S. Parrett
Business Consultant
A. Terence Poole
Executive Vice-President, Corporate
Strategy and Development, Nova
Chemicals Corporation
Stanley H. Wong
President, Carbine Resources Ltd.
John B. Zaozirny; Lead Director
Counsel, McCarthy Tetrault
Director Emeritus
Thomas S. Dobson
President, T.S. Dobson Consultant Ltd.
Francis G. Vetsch
President, Vetsch Resource
Management Ltd.
OFFICERS OF PENGROWTH
CORPORATION
James S. Kinnear
Chairman, President and Chief
Executive Officer
Christopher Webster
Chief Financial Officer
Gordon M. Anderson
Vice President, Finance
Doug C. Bowles
Vice President and Controller
James Causgrove
Vice President, Production and
Operations
Peter Cheung
Treasurer
William Christensen
Vice President, Strategic Planning and
Reservoir Exploitation
Charles V. Selby
Vice President and Corporate Secretary
Larry B. Strong
Vice President, Geosciences
TRUSTEE
Computershare Trust Company of
Canada
BANKERS
Bank Syndicate Agent: Royal Bank of
Canada
AUDITORS
KPMG LLP
ENGINEERING CONSULTANTS
GLJ Petroleum Consultants Ltd.
|
|
|
ABBREVIATIONS |
|
|
bbl
|
|
barrel |
bcf
|
|
billion cubic feet |
boe*
|
|
barrels of oil
equivalent |
gj
|
|
gigajoule |
mbbls
|
|
thousand barrels |
mmbbls
|
|
million barrels |
mboe*
|
|
thousand barrels
of oil equivalent |
mmboe*
|
|
million barrels of
oil equivalent |
mmbtu
|
|
million British thermal units |
mcf
|
|
thousand cubic feet |
mmcf
|
|
million cubic feet |
|
|
|
|
|
*6 mcf of gas = 1 barrel of oil |
PENGROWTH AND A STRONG
COMMUNITY
Pengrowth believes in enhancing the
community where our employees live
and work. Pengrowth and Pengrowth
Management Limited support causes
and institutions both financially and
through volunteer efforts and are
proud of these associations and
partnerships with many community-
building non-profit organizations.
Pengrowth has a substantial investment
in our community though many of the
costs are attributed to Pengrowth
Management, Pengrowth Energy Trust
unitholders benefit through the
visibility associated with these vital
partnerships.
STOCK EXCHANGE LISTINGS
The Toronto Stock Exchange:
Symbol: PGF.A / PGF.B
The New York Stock Exchange:
Symbol: PGH
PENGROWTH ENERGY TRUST
Head Office
Suite 2900, 240 4 Avenue S.W.
Calgary, Alberta T2P 4H4 Canada
Telephone: (403) 233-0224
Toll-Free: (800) 223-4122
Facsimile: (403) 265-6251
Email: investorrelations@pengrowth.com
Website: http://www.pengrowth.com
Toronto Office
Scotia Plaza,, 40 King Street West
Suite 3006 Box 106
Toronto, Ontario M5H 3Y2 Canada
Telephone: (416) 362-1748
Toll-Free: (888) 744-1111
Facsimile: (416) 362-8191
Halifax Office
Purdys Tower 1 Suite 1700
1959 Upper Water Street
Halifax, Nova Scotia B3J 2N2 Canada
Telephone: (902) 425-8778
Facsimile: (902) 425-7887
London Office
33 St. James Square
London, England SW1 Y4JS
Telephone: 011 (44) 207-661-9591
Facsimile: 011 (44) 207-661-9592
INVESTOR RELATIONS
For investor relations enquiries, please
contact:
Investor Relations, Calgary
Telephone: (403) 233-0224
Toll-Free: (888) 744-1111
Facsimile: (403) 294-0051
Email:
investorrelations@pengrowth.com
FORM 52-109F2
CERTIFICATION OF INTERIM FILINGS
I, JAMES S. KINNEAR, Chairman, President and Chief Executive Officer of Pengrowth Corporation,
certify that:
1. |
|
I have reviewed the interim filings (as this term is defined in Multilateral Instrument
52-109 Certification of Disclosure in Issuers Annual and Interim Filings) of Pengrowth Energy
Trust (the issuer) for the interim period ending March 31, 2006; |
2. |
|
Based on my knowledge, the interim filings do not contain any untrue statement of a material
fact or omit to state a material fact required to be stated or that is necessary to make a
statement not misleading in light of the circumstances under which it was made, with respect
to the period covered by the interim filings; |
3. |
|
Based on my knowledge, the interim financial statements together with the other financial
information included in the interim filings fairly present in all material respects the
financial condition, results of operations and cash flows of the issuer, as of the date and
for the periods presented in the interim filings; and |
4. |
|
The issuers other certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures for the issuer, and we have: |
|
(a) |
|
designed such disclosure controls and procedures, or caused them to be designed
under our supervision, to provide reasonable assurance that material information
relating to the issuer, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which the interim
filings are being prepared. |
DATED May 11, 2006.
/s/
James S. Kinnear
Signature
Chairman,
President and Chief Executive Officer
Title
FORM 52-109F2
CERTIFICATION OF INTERIM FILINGS
I, Christopher G. Webster, Chief Financial Officer of Pengrowth Corporation, certify that:
1. |
|
I have reviewed the interim filings (as this term is defined in Multilateral Instrument
52-109 Certification of Disclosure in Issuers Annual and Interim Filings) of Pengrowth Energy
Trust (the issuer) for the interim period ending March 31, 2006; |
2. |
|
Based on my knowledge, the interim filings do not contain any untrue statement of a material
fact or omit to state a material fact required to be stated or that is necessary to make a
statement not misleading in light of the circumstances under which it was made, with respect
to the period covered by the interim filings; |
3. |
|
Based on my knowledge, the interim financial statements together with the other financial
information included in the interim filings fairly present in all material respects the
financial condition, results of operations and cash flows of the issuer, as of the date and
for the periods presented in the interim filings; and |
4. |
|
The issuers other certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures for the issuer, and we have: |
|
(a) |
|
designed such disclosure controls and procedures, or caused them to be designed
under our supervision, to provide reasonable assurance that material information
relating to the issuer, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which the interim
filings are being prepared. |
DATED May 11, 2006.
/s/
Christopher G. Webster
Signature
Chief
Financial Officer
Title