fv10za
As filed with the Securities and Exchange Commission on December 6, 2007
Registration
No. 333-146928
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1 to
FORM F-10
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
PENGROWTH ENERGY TRUST
(Exact name of Registrant as specified in its charter)
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Alberta, Canada |
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1311 |
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98-0185056 |
(Province or other jurisdiction of |
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(Primary Standard Industrial |
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(I.R.S. Employer Identification No., |
incorporation or organization) |
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Classification Code Number) |
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if applicable) |
Suite 2900,
240 4th Avenue S.W.
Calgary, Alberta
T2P 4H4 Canada
(403) 233-0224
(Address and telephone number of Registrants principal executive offices)
CT Corporation System
111 Eighth Avenue, 13th Floor
New York, New York 10011
(212) 894-8940
(Name, address (including zip code) and telephone number (including area code) of agent for service in the United States)
Copies to:
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Brad D. Markel
Bennett Jones LLP
4500 Bankers Hall East
855 2nd Street S.W.
Calgary, Alberta
Canada T2P 4K7
(403) 298-3247
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Andrew J. Foley
Edwin S. Maynard
Paul, Weiss, Rifkind, Wharton &
Garrison LLP
1285 Avenue of the Americas
New York, New York 10019-6064
212-373-3000 |
Approximate date of commencement of proposed sale to public: From time to time after the effective date of this Registration Statement.
Province of Alberta, Canada
(Principal jurisdiction regulating this offering (if applicable))
It is proposed that this filing shall become effective (check appropriate box below):
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upon filing with the Commission, pursuant to Rule 467(a) (if in connection
with an offering being made contemporaneously in the United States and Canada). |
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at some future date (check appropriate box below) |
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pursuant to Rule 467(b) on (date) at (time) (designate a time not sooner
than 7 calendar days after filing). |
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pursuant to Rule 467(b) on (date) at (time) (designate a time 7 calendar
days or sooner after filing) because the securities regulatory authority in the review
jurisdiction has issued a receipt or notification of clearance on (date ). |
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pursuant to Rule 467(b) as soon as practicable after notification of the
Commission by the Registrant or the Canadian securities regulatory authority of the
review jurisdiction that a receipt or notification of clearance has been issued with
respect hereto. |
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after the filing of the next amendment to this Form (if preliminary material
is being filed). |
If any of the securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to the home jurisdictions shelf prospectus offering procedures, check
the following box. þ
The Registrant hereby amends this Registration Statement on such date or dates as may be
necessary to delay its effective date until the Registration Statement shall become effective as
provided in Rule 467 under the Securities Act of 1933 or such date as the Commission, acting
pursuant to Section 8(a) of the Act, may determine.
PART I
INFORMATION REQUIRED TO BE DELIVERED TO OFFEREES OR PURCHASERS
I-1
DATED
DECEMBER 5, 2007
AMENDED BASE SHELF PROSPECTUS
I-2
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New
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Amended
and Restated Short Form Base Shelf Prospectus |
December 5,
2007 |
PENGROWTH ENERGY
TRUST
$2,000,000,000
Trust Units
Subscription Receipts
We may, from time to time, offer
for sale under this short form prospectus, during the
25 month period that the receipt for our short form
prospectus dated September 15, 2006 remains effective, up
to $2,000,000,000 (or the equivalent in other currencies or
currency units at the time of issue) of: (i) trust units
(Trust Units); or (ii) subscription
receipts, each of which entitles the holder to receive, upon
satisfaction of certain release conditions and for no additional
consideration, one Trust Unit (the Subscription
Receipts, and together with the Trust Units, the
Securities). We may offer Securities in such amount
as we may determine in light of market conditions. The specific
variable terms of any offering of Securities will be set forth
in one or more shelf prospectus supplements (each, a
Prospectus Supplement) including: (i) in the
case of Trust Units, the number of Trust Units
offered, the issue price (in the event the offering is a fixed
price distribution) and any other terms specific to the
Trust Units being offered; and (ii) in the case of
Subscription Receipts, the number of Subscription Receipts
offered, the issue price, the terms, conditions and procedures
pursuant to which the holders thereof will become entitled to
receive Trust Units and any other terms specific to the
Subscription Receipts being offered.
Neither the SEC nor any state
securities commission has approved or disapproved of these
Securities nor passed upon the accuracy or adequacy of this
amended and restated short form base shelf prospectus (the
Prospectus). Any representation to the contrary is a
criminal offence.
All information permitted under
applicable laws to be omitted from this Prospectus will be
contained in one or more Prospectus Supplements that will be
delivered to purchasers together with this Prospectus, unless an
exemption from the prospectus delivery requirement has been
granted. Each Prospectus Supplement will be incorporated by
reference into this Prospectus for the purposes of securities
legislation as of the date of the Prospectus Supplement and only
for the purposes of the distribution of the Securities to which
the Prospectus Supplement pertains.
We are permitted, under the
multi-jurisdictional disclosure system adopted by the United
States, to prepare this Prospectus in accordance with Canadian
disclosure requirements. You should be aware that such
requirements are different from those of the United States. Our
financial statements incorporated herein by reference have been
prepared in accordance with Canadian generally accepted
accounting principles and are subject to Canadian auditing and
auditor independence standards. Thus, they may not be comparable
to the financial statements of United States companies or
trusts. Information regarding the impact upon our financial
statements of significant differences between Canadian and U.S.
generally accepted accounting principles is contained in the
notes to our annual consolidated financial statements and in the
reconciliation of our financial statements to United States
generally accepted accounting principles, both of which are
incorporated by reference in this Prospectus.
Your ability to enforce civil
liabilities under U.S. federal securities laws may be affected
adversely by the fact that we are formed under the laws of the
Province of Alberta, Canada, most of the Corporations
directors, all of the officers of the Corporation and most of
the experts named in this Prospectus are residents of Canada,
and a substantial portion of our assets and all or a significant
portion of the assets of those persons are located outside of
the United States.
(cover page continued)
The SEC permits United States oil and natural gas companies, in
their filings therewith, to disclose only proved reserves net of
royalties and interests of others that geological and
engineering data demonstrate with reasonable certainty to be
recoverable in future years from known reservoirs under existing
economic and operating conditions. Canadian securities laws
permit oil and natural gas companies, in their filings with
Canadian securities regulators, to disclose reserves prior to
the deduction of royalties and interests of others, and to
disclose probable reserves. Probable reserves are of a higher
risk and are generally believed to be less likely to be
recovered than proved reserves. Certain reserve information
included herein and in the documents incorporated by reference
herein to describe our reserves, such as probable
reserve information, is prohibited in filings with the SEC by
U.S. oil and natural gas companies.
If you are a United States holder of Trust Units, you
should be aware that the purchase, holding or disposition of the
Securities may subject you to tax consequences both in the
United States and Canada. This Prospectus or any applicable
Prospectus Supplement may not describe these tax consequences
fully. You should read the tax discussion in this Prospectus and
any applicable Prospectus Supplement fully, and obtain
independent tax advice as necessary.
The outstanding Trust Units are listed and posted for
trading on the New York Stock Exchange (NYSE) under
the symbol PGH and on the Toronto Stock Exchange
(TSX) under the symbol PGF.UN. Any
offering of Subscription Receipts will be a new issue of
Securities with no established trading market. Unless otherwise
specified in the applicable Prospectus Supplement, the
Subscription Receipts will not be listed on any securities
exchange. Certain dealers may make a market in the Subscription
Receipts, but will not be obligated to do so and may discontinue
any market making at any time without notice. No assurance can
be given that any dealer will make a market in the Subscription
Receipts or as to the liquidity of the trading market, if any,
for the Subscription Receipts.
We may sell Securities to, or through, underwriters or dealers
purchasing as principals or through agents designated by us from
time to time. Only those underwriters, dealers or agents named
in a Prospectus Supplement will be the underwriters, dealers or
agents in connection with the Securities offered thereby. The
Prospectus Supplement relating to a particular offering of
Securities will also set forth the terms of the offering of such
Securities, including, to the extent applicable, the name or
names of any underwriters, dealers or agents, any fees,
discounts or other remuneration payable to such underwriters,
dealers or agents in connection with the offering, the method of
distribution of the Securities, and, in the event the offering
is a fixed-price distribution, the initial offering price and
the proceeds that we will receive.
In connection with any offering of Securities, the underwriters
or dealers, as the case may be, may over-allot or effect
transactions intended to fix or stabilize the market price of
the Trust Units at a level above that which might otherwise
prevail in the open market. Such transactions, if commenced, may
be discontinued at any time. See Plan of
Distribution.
On October 31, 2006, the Minister of Finance (Canada)
announced proposed tax measures, which will materially and
adversely change the manner in which Pengrowth is taxed and will
also change the character of the distributions to you for
Canadian federal income tax purposes (the SIFT
Rules). On June 22, 2007, the SIFT Rules became law
when Bill C-52 received Royal Assent. It is expected that the
SIFT Rules will apply to Pengrowth and its Unitholders
commencing in 2011, provided that Pengrowth does not exceed the
limits on normal growth prior to that time. See
Recent Developments Changes to Tax
Legislation Affecting Pengrowth and its Unitholders
and Risk Factors The SIFT Rules are
expected to materially and adversely affect Pengrowth, our
Unitholders and the value of the Trust Units.
The return on your investment in Trust Units is not
comparable to the return on an investment in a fixed-income
security. The recovery of your initial investment is at risk,
and the anticipated return on your investment is based on many
performance assumptions. Although we intend to make
distributions of a portion of our available cash, these cash
distributions may be reduced or suspended. Cash distributions
are not guaranteed. Our ability to make cash distributions
and the actual amount distributed will depend on numerous
factors including, among other things: our financial
performance, debt obligations, restrictive debt covenants,
working capital requirements, future capital requirements and
the timing and application of the SIFT Rules, all of which are
susceptible to a number of risks. In addition, the market value
of the Trust Units may decline as a result of many factors,
including our inability to meet our cash distribution targets in
the future and the possibility that the SIFT Rules could apply
to Pengrowth and its Unitholders earlier than 2011, and that
decline may be significant. It is important for you to consider
the particular risk factors that may affect the industry in
which we operate, and therefore the stability of the
distributions you would receive. See Risk
Factors. This section also describes our assessment of
those risk factors, as well as potential consequences to you if
a risk should occur.
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(cover page continued)
The after-tax return to Unitholders, for Canadian income tax
purposes, from an investment in Trust Units can be made up
of both a return on, and a return of, capital. That composition
may change over time, thus affecting your after-tax return.
Subject to the SIFT Rules, returns on capital are generally
taxed as ordinary income in the hands of a Unitholder who is a
resident of Canada for purposes of the Tax Act and are subject
to Canadian withholding tax in the hands of a Unitholder who is
not a resident of Canada at the rate of 25%, unless such rate is
reduced under the provisions of a tax convention between Canada
and the jurisdiction of residence of the Unitholder. Pursuant to
the SIFT Rules, provided that the SIFT Rules do not apply to
Pengrowth and its Unitholders earlier, commencing in 2011
certain of our distributions which would otherwise have been
taxed, or subject to Canadian withholding tax, as ordinary
income to Unitholders will be characterized and taxed as
dividends to such Unitholders in addition to being subject to
tax at corporate rates at the trust level and, in the case of a
Unitholder who is not a resident of Canada, such deemed
dividends will be subject to Canadian withholding tax at the
rate of 25%, unless such rate is reduced under the provisions of
a tax convention between Canada and the jurisdiction of
residence of the Unitholder. Returns of capital are, and will be
under the SIFT Rules, generally tax-deferred for Unitholders who
are resident in Canada for purposes of the Tax Act (and reduce
such Unitholders adjusted cost base in the
Trust Units for purposes of the Tax Act). Returns of
capital to a Unitholder who is not a resident of Canada for
purposes of the Tax Act or is a partnership that is not a
Canadian partnership for purposes of the Tax Act
are, and will be under the SIFT Rules, subject to a 15% Canadian
withholding tax. Prospective Unitholders should consult their
own tax advisors with respect to the Canadian income tax
considerations in their own circumstances, including the effect
of the SIFT Rules on a prospective investment in
Trust Units. See Distributions.
The offering of Trust Units is subject to approval of
certain legal matters on our behalf by Bennett Jones LLP,
Calgary, Alberta and Paul, Weiss, Rifkind, Wharton &
Garrison LLP, New York, New York. No underwriter or dealer in
Canada or the United States has been involved in the preparation
of this Prospectus or performed any review of the contents of
this Prospectus.
The Trust Units are not deposits within the
meaning of the Canada Deposit Insurance Corporation Act
(Canada) and are not insured under the provisions of that
Act or any other legislation. Furthermore, we are not a trust
company and, accordingly, are not registered under any trust and
loan company legislation as we do not carry on, or intend to
carry on, the business of a trust company.
Our principal head office and registered office are each located
at 2900, 240 4th Avenue S.W., Calgary, Alberta T2P
4H4.
The date of this Prospectus is December 5, 2007.
iii
TABLE OF
CONTENTS
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DEFINITIONS
AND OTHER MATTERS
All dollar amounts in this Prospectus and in any Prospectus
Supplement are expressed in Canadian dollars, except where
otherwise indicated. References to $ or
Cdn.$ are to Canadian dollars and references to
U.S.$ are to United States dollars.
This Prospectus is part of a registration statement on
Form F-10,
relating to the Securities, that we filed with the SEC. Under
the registration statement, we may, from time to time, sell any
combination of the Securities described in this Prospectus in
one or more offerings up to an aggregate initial offering amount
of $2,000,000,000. This Prospectus provides you with a general
description of the Securities that we may offer. Each time we
sell Securities, we will provide a Prospectus Supplement that
will contain specific information about the terms of that
offering of Securities. The Prospectus Supplement may also add
to, update or change information contained in this Prospectus.
Before you invest, you should read both this Prospectus and any
applicable Prospectus Supplement. This Prospectus does not
contain all of the information contained in the registration
statement, certain parts of which are omitted in accordance with
the rules and regulations of the SEC. You should refer to the
registration statement and the exhibits to the registration
statement for further information with respect to us and the
Securities.
Unless otherwise indicated, all financial information included
and incorporated by reference in this Prospectus or included in
any Prospectus Supplement is determined using Canadian generally
accepted accounting principles, which we refer to as
Canadian GAAP. U.S. GAAP means generally
accepted accounting principles in the United States. The
financial statements incorporated by reference herein have been
prepared in accordance with Canadian GAAP, which differs from
U.S. GAAP. Therefore, the financial statements incorporated by
reference in this Prospectus may not be comparable to financial
statements prepared in accordance with U.S. GAAP. You should
refer to the respective notes to our comparative consolidated
financial statements or the related U.S. GAAP
reconciliation for a discussion of the principal differences
between financial results calculated under Canadian GAAP and
under U.S. GAAP.
In this Prospectus and in any Prospectus Supplement, the
following terms shall have the following meanings:
CP Acquisition refers to the acquisition by
Pengrowth of the CP Assets for a total purchase price of
$1.0375 billion, which occurred on January 22, 2007;
1
CP Assets refers to certain oil and gas
producing assets of ConocoPhillips Canada acquired pursuant to
the CP Acquisition;
Computershare refers to Computershare
Trust Company of Canada;
Corporation refers to Pengrowth Corporation,
a corporation existing under the laws of the Province of Alberta;
Manager refers to Pengrowth Management
Limited, a corporation existing under the laws of the Province
of Alberta;
SEC refers to the United States Securities
and Exchange Commission;
Tax Act refers to the Income Tax Act
(Canada), and the regulations promulgated thereunder, as amended
from time to time;
Trust refers to Pengrowth Energy Trust, an
oil and gas royalty trust existing under the laws of the
Province of Alberta pursuant to the Trust Indenture;
Trust Indenture refers to the
Trusts amended and restated trust indenture dated
June 11, 2007 between the Corporation and Computershare;
Trust Unit refers to a trust unit of the
Trust, but does not include the Class A trust units;
Unitholders refers to the holders of
Trust Units and, to the extent the context requires, the
Class A trust units; and
we, us,
our and Pengrowth refer to
the Trust and the Corporation on a consolidated basis as the
context requires.
DOCUMENTS
INCORPORATED BY REFERENCE
Information has been incorporated by reference in this
Prospectus from documents filed with securities commissions or
similar authorities in Canada and with the SEC in the United
States. Copies of the documents incorporated herein by
reference may be obtained on request without charge from the
secretary of the Corporation at 2900, 240 4th Avenue
S.W., Calgary, Alberta T2P 4H4 (telephone:
1-800-223-4122)
and are also available electronically at www.sedar.com. For the
purpose of the Province of Québec, this Prospectus contains
information to be completed by consulting the permanent
information record. A copy of the permanent information record
may be obtained from the secretary of the Corporation at the
above-mentioned address and telephone number and is also
available electronically at www.sedar.com.
The following documents of the Trust filed with securities
commissions or similar authorities in each of the provinces of
Canada and the SEC are incorporated by reference into this
Prospectus:
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(a)
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the annual information form of the Trust dated March 30,
2007 for the year ended December 31, 2006 (AIF);
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(b)
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the management information circular dated May 1, 2007 for
the annual and special meeting of Unitholders held on
June 11, 2007;
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(c)
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managements discussion and analysis for the year ended
December 31, 2006;
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(d)
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the comparative consolidated annual financial statements as at
and for the year ended December 31, 2006, together with the
notes thereto and the report of the auditors thereon, including
the auditors report on internal control over financial
reporting;
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(e)
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managements discussion and analysis for the period ended
September 30, 2007;
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the comparative consolidated interim financial statements as at
and for the nine months ended September 30, 2007, together
with the notes thereto;
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(g)
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the business acquisition report dated October 31, 2006
filed in connection with the Esprit Merger (as defined herein);
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(h)
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the business acquisition report dated March 16, 2007 filed
in connection with the CP Acquisition;
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(i)
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the disclosure of the Trusts oil and gas producing
activities prepared in accordance with
SFAS No. 69 Disclosure about Oil and
Gas Producing Activities, which was filed on SEDAR under
the category Other on October 12, 2007; and
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(j)
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the reconciliation of the comparative consolidated interim
financial statements of the Trust as at and for the six months
ended June 30, 2007 to United States generally accepted
accounting principles, which was filed on SEDAR under the
category Other on October 12, 2007 and, for the
sole purpose of the presentation of the foregoing
reconciliation, we also incorporate by reference in the
Prospectus the Trusts managements discussion and
analysis for the period ended June 30, 2007 and the
comparative consolidated interim financial statements as at end
for the six months ended June 30, 2007, together with the
notes thereto.
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Any annual information form, audited consolidated financial
statements (together with the auditors report thereon) and
related managements discussion and analysis, information
circular, material change reports, business acquisition reports
and any interim unaudited consolidated financial statements and
related managements discussion and analysis subsequently
filed by us with the securities commissions or similar
regulatory authorities in the relevant provinces and territories
of Canada after the date of this Prospectus and prior to the
termination of the offering of any Securities under any
Prospectus Supplement shall be deemed to be incorporated by
reference into this Prospectus. In addition, to the extent that
any document or information incorporated by reference into this
Prospectus is included in any report on
Form 6-K,
Form 40-F,
Form 20-F,
Form 10-K,
Form 10-Q
or
Form 8-K
(or any respective successor form) that is filed with or
furnished to the SEC after the date of this Prospectus, such
document or information shall be deemed to be incorporated by
reference as an exhibit to the registration statement of which
this Prospectus forms a part. In addition, we may incorporate by
reference into this Prospectus information from documents that
we file with or furnish to the SEC pursuant to
Section 13(a) or 15(d) of the United States Securities
Exchange Act of 1934, as amended.
Any statement contained in this Prospectus or in a document (or
part thereof) incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document
which also is, or is deemed to be, incorporated by reference
herein modifies or supersedes such statement. The modifying or
superseding statement need not state that it has modified or
superseded a prior statement or include any other information
set forth in the document that it modifies or supersedes. The
making of a modifying or superseding statement is not to be
deemed an admission for any purposes that the modified or
superseded statement, when made, constituted a
misrepresentation, an untrue statement of a material fact or an
omission to state a material fact that is required to be stated
or that is necessary to make a statement not misleading in light
of the circumstances in which it was made. Any statement so
modified or superseded shall not be deemed, except as so
modified or superseded, to be incorporated by reference herein
or to constitute a part of this Prospectus.
Upon a new annual information form and related annual financial
statements and the accompanying managements discussion and
analysis being filed by us with, and where required, accepted
by, the applicable securities regulatory authorities during the
currency of this Prospectus, the previous annual information
form and all annual financial statements, interim financial
statements and the accompanying managements discussion and
analysis, material change reports and information circulars
filed prior to the commencement of our financial year in which
the new annual information form is filed shall be deemed no
longer to be incorporated by reference into this Prospectus for
purposes of future offers and sales of Securities hereunder.
Upon interim consolidated financial statements and the
accompanying managements discussion and analysis being
filed by us with the applicable securities regulatory
authorities during the currency of this Prospectus, all interim
consolidated financial statements and the accompanying
managements discussion and analysis filed prior to the new
interim consolidated financial statements shall be deemed no
longer to be incorporated in this Prospectus for purposes of
future offers and sales of Securities under this Prospectus.
One or more Prospectus Supplements containing the specific
variable terms for an issue of Securities and other information
in relation to such Securities will be delivered to purchasers
of such Securities together with this Prospectus and will be
deemed to be incorporated by reference into this Prospectus as
of the date of the Prospectus Supplement solely for the purposes
of the offering of the Securities covered by any such Prospectus
Supplement.
You should rely only on the information contained in, or
incorporated by reference into, this Prospectus or any
Prospectus Supplement and on the other information included in
the registration statement of which this Prospectus forms a
part. We have not authorized anyone to provide you with
different or additional information. We are not making an offer
of these Securities in any jurisdiction where the offer is not
permitted by law.
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FORWARD-LOOKING
STATEMENTS
This Prospectus, including certain documents incorporated by
reference in this Prospectus, contains forward-looking
statements within the meaning of securities laws, including the
safe harbour provisions of Canadian securities
legislation 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, guidance,
may, will, should,
could, estimate, predict or
similar words suggesting future outcomes or language suggesting
an outlook. Forward-looking statements in this Prospectus,
including certain documents incorporated by reference in this
Prospectus, include, but are not limited to, statements with
respect to: the use of proceeds from any offering made under
this Prospectus or a Prospectus Supplement, benefits and
synergies resulting from Pengrowths corporate and asset
acquisitions, business strategy and strengths, goals, focus and
the effects thereof, acquisition criteria, capital expenditures,
reserves, reserve life indices, estimated production, production
additions from Pengrowths 2007 development program, the
impact on production of divestitures in 2007, remaining
producing reserves lives, operating expenses, royalty rates, net
present values of future net revenue from reserves, commodity
prices and costs, exchange rates, the impact of contracts for
commodities, development plans and programs, tax horizon, future
income taxes, taxability of distributions, the impact of
proposed changes to Canadian tax legislation or U.S. tax
legislation, abandonment and reclamation costs, government
royalty rates (including estimated increase in royalties paid
and estimated decline in net present value of reserves and 2009
cash flows) and expiring acreage. Statements relating to
reserves are 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, regulatory developments, future oil and natural gas
commodity prices and differentials between light, medium and
heavy oil prices, future oil and natural gas production levels,
future exchange rates, the proceeds of anticipated divestitures,
the amount of future cash distributions paid by Pengrowth, the
cost of expanding our property holdings, our ability to obtain
equipment in a timely manner to carry out development
activities, our ability to market our oil and gas successfully
to current and new customers, the impact of increasing
competition, our ability to obtain financing on acceptable
terms, and our ability to add production and reserves through
our development and exploration activities. 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 and royalty 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 this Prospectus
or in any Prospectus Supplement, under the heading Risk
Factors in the AIF, under the heading
Business Risks in our Managements
Discussion and Analysis for the year ended December 31,
2006, and in Pengrowths most recent consolidated financial
statements, management information circular, quarterly reports,
material change reports and news releases.
Readers are cautioned 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
Prospectus or any Prospectus Supplement, including any document
incorporated by reference herein or therein are made as of the
date of such document 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
applicable law. The forward-looking statements contained in this
Prospectus, including the documents incorporated by reference
herein, are expressly qualified by this cautionary statement.
4
WHERE
YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on
Form F-10
relating to the Securities. This Prospectus, which constitutes a
part of the registration statement, does not contain all of the
information contained in the registration statement, certain
items of which are contained in the exhibits to the registration
statement as permitted by the rules and regulations of the SEC.
For further information about Pengrowth and the Securities,
please refer to the registration statement.
We file annual and quarterly financial information and material
change reports and other material with the SEC and with the
securities commission or similar regulatory authority in each of
the provinces of Canada. Under the multi-jurisdictional
disclosure system adopted by the United States, documents and
other information that we file with the SEC may be prepared in
accordance with the disclosure requirements of Canada, which are
different from those of the United States. You may read and copy
any document that we have filed with the SEC from the SECs
public reference room at 100 F Street, N.E., Washington, D.C.
20549 by paying a fee. You should call the SEC at
1-800-SEC-0330
or access its website at www.sec.gov for further information
about the public reference room. You may read and download some
of the documents we have filed with the SECs Electronic
Data Gathering and Retrieval (EDGAR) system at www.sec.gov. You
may read and download any public document that we have filed
with the securities commissions or similar authorities in each
of the provinces of Canada at www.sedar.com.
ENFORCEABILITY
OF CIVIL LIABILITIES
The Trust is a trust formed under, and governed by, the laws of
the Province of Alberta. Most of the directors and officers of
the Corporation, and most of the experts named in this
Prospectus, are residents of Canada or otherwise reside outside
the United States, and all or a substantial portion of their
assets and our assets, are located outside the United States. We
have appointed an agent for service of process in the United
States, but it may be difficult for holders of Securities who
reside in the United States to effect service within the United
States upon those directors, officers and experts who are not
residents of the United States. It may also be difficult for
holders of Securities who reside in the United States to realize
in the United States upon judgments of courts of the United
States predicated upon our civil liability and the civil
liability of the directors and officers of the Corporation and
experts under the United States federal securities laws. We have
been advised by our Canadian counsel, Bennett Jones LLP, that a
judgment of a United States court predicated solely upon civil
liability under United States federal securities laws would
probably be enforceable in Canada if the United States court in
which the judgment was obtained has a basis for jurisdiction in
the matter that would be recognized by a Canadian court for the
same purposes. We have also been advised by Bennett Jones LLP,
however, that there is substantial doubt whether an action could
be brought in Canada in the first instance on the basis of
liability predicated solely upon United States federal
securities laws.
We filed with the SEC, concurrently with our registration
statement on
Form F-10,
an appointment of agent for service of process on
Form F-X.
Under the
Form F-X,
we appointed CT Corporation System as our agent for service of
process in the United States in connection with any
investigation or administrative proceeding conducted by the SEC,
and any civil suit or action brought against or involving us in
a United States court arising out of or related to or concerning
the offering of Securities under this Prospectus.
As of the date of this Prospectus, Pengrowth no longer uses
terms such as funds generated from operations,
funds generated from operations per trust unit,
distributable cash and distributable cash per
trust unit to analyze operating performance, leverage and
liquidity except where a reference is made to
Distributable Cash pursuant to the Trust Indenture.
Certain documents previously prepared by Pengrowth containing
these terms are incorporated by reference in this Prospectus.
These terms are not measures recognized by Canadian GAAP and do
not have standardized meanings prescribed by Canadian GAAP. As a
result, these measures may not be comparable to similar measures
presented by other issuers. Investors are cautioned that
funds generated from operations, funds
generated from operations per trust unit,
distributable cash and distributable cash per
trust unit should not be construed as an alternative to
net earnings, cash flow from operating activities or other
measures of financial performance calculated in accordance with
Canadian GAAP. These measures are intended to provide the reader
of the financial statements with a measure of the funds
available to be distributed under the Trust Indenture, to help
with comparisons within the oil and gas industry in relation to
the performance of oil and gas assets and to facilitate the
understanding of the results of our operations and financial
position.
5
Pengrowth has substituted the above non-GAAP terms with certain
Canadian GAAP measures such as distributions paid or
declared, cash flow from operating activities
and net income. Distributions paid or declared
include amounts paid or declared during a calendar year which
relates to the twelve month production period commencing January
through December wherein the related distributions are paid
March through February of the following year. Cash flow from
operating activities will be used instead of distributable cash
with the main difference being that cash flow from operating
activities is determined after non-cash working capital changes.
Pengrowth will continue to use the term operating
netbacks, and may continue to use the term payout
ratio, which terms do not have standardized meanings under
Canadian GAAP and therefore may not be comparable with the
calculation of a similar measure by other entities.
Historically, payout ratio was calculated as distributions paid
or declared divided by Distributable Cash; however,
Pengrowths payout ratio will now be calculated as
distributions paid or declared divided by cash flow from
operating activities. This reflects the proportion of cash flow
paid out to Unitholders and not re-invested in the business.
Where Pengrowth uses the term payout ratio in this context, it
will ensure that the basis on which it has been calculated is
clear, and that any historical ratios provided for comparative
purposes are presented on the same basis.
Introduction
The Trust is an energy investment trust that was created under
the laws of the Province of Alberta on December 2, 1988.
The purpose of the Trust is to purchase and hold royalty units
(Royalty Units) and other securities issued by the
Corporation, its majority-owned subsidiary, as well as other
investments and to issue Trust Units to members of the
public. The Corporation directly and indirectly acquires, owns
and manages working interests and royalty interests in oil and
natural gas properties. The Trust and the Corporation are
managed by the Manager.
The
Trust
The Trust is governed by the Trust Indenture. Under the
Trust Indenture, the Trust has issued Trust Units and
Class A trust units to Unitholders who are the
beneficiaries of the Trust. Each Trust Unit and
Class A trust unit represents a fractional undivided
beneficial interest in the Trust. Our Unitholders are entitled
to receive monthly distributions in respect of the royalty
(Royalty) the Corporation pays to the holders of the
Royalty Units it has issued, and in respect of investments that
are held by the Trust.
The Trust presently holds 90.9% of the outstanding common shares
(Common Shares) and all of the Royalty Units issued
by the Corporation. The Trust also holds all of the issued and
outstanding shares of, and a net profits interest granted by,
Esprit Exploration Ltd. The Trust holds other permitted
investments, including oil and gas processing facilities and
cash. The Trusts share of royalty income, together with
any lease, interest and other income of the Trust, less general
and administrative expenses, management fees, debt repayment,
taxes and other expenses (provided that there is no duplication
of expenses already deducted from royalty income), forms the
cash to be distributed by the Trust.
The
Corporation
The Corporation was created under the laws of the Province of
Alberta on December 30, 1987. The name of the Corporation
was changed from Pengrowth Gas Corporation to
Pengrowth Corporation in 1998. The Corporation has
1,100 Common Shares outstanding, 1,000 of which are owned by the
Trust and 100 of which are owned by the Manager.
The Corporation acquires, owns and operates working interests
and royalty interests in oil and natural gas properties. The
Corporation has issued Royalty Units which entitle the holders
thereof to receive a 99% share of the royalty income
related to the oil and natural gas interests of the Corporation.
The authorized capital of the Corporation includes exchangeable
shares which will have economic and voting rights substantially
equivalent to the Trust Units and which will be
exchangeable, on certain conditions, for Trust Units.
Holders of exchangeable shares will not receive dividends or
distributions from the Trust, but will receive additional
exchangeable shares in lieu of distributions. These additional
exchangeable shares would be distributed by way of a stock
split. To facilitate voting rights for the exchangeable shares,
a special voting unit of the Trust has been authorized which
will be entitled at any meeting of Unitholders to a number of
votes equal to the number of outstanding exchangeable shares
(not including exchangeable shares held by the Trust or its
subsidiaries). There are presently no issued or outstanding
exchangeable shares.
6
The
Trusts Subsidiaries
In addition to its interest in the Corporation, the Trust owns
all of the issued and outstanding shares of Esprit Exploration
Ltd. The Trust receives interest on the principal amount of
Esprit Exploration Ltd.s unsecured, subordinated
promissory notes and payments from the net profits interest of
Esprit Exploration Ltd. held by the Trust. The Corporation
entered into an agency agreement dated October 2, 2006 with
Esprit Energy Trust, Esprit Exploration Ltd. and all of its
subsidiaries whereby the Corporation would provide certain
services to Esprit Energy Trust, Esprit Exploration Ltd. and all
of its subsidiaries. Services generally include, but are not
limited to, the provision of all operating, financial,
strategic, legal, regulatory, human resource, technology, record
keeping, record management and general and administrative
services.
Esprit Exploration Ltd. was acquired in connection with the
strategic business combination with Esprit Energy Trust on
October 2, 2006 (the Esprit Merger). Esprit
Exploration Ltd. was created under the laws of Canada.
The
Corporations Subsidiaries
The Corporation owns all of the issued and outstanding shares of
Stellar Resources Limited, which holds a 0.01% partnership
interest in each of Pengrowth Heavy Oil Partnership, Pengrowth
Energy Partnership and Crispin Energy Partnership and acts as
the general partner of each of the partnerships. The remaining
99.99% partnership interests in each of the foregoing
partnerships are held by the Corporation. Pengrowth Heavy Oil
Partnership and Pengrowth Energy Partnership were acquired in
connection with the acquisition of certain properties from
Murphy Oil Calgary Ltd. in 2004. Crispin Energy Partnership was
acquired in connection with the acquisition of Crispin Energy
Inc. in 2005. Each of Stellar Resources Limited, Pengrowth Heavy
Oil Partnership, Pengrowth Energy Partnership and Crispin Energy
Partnership were created under the laws of the Province of
Alberta.
The Corporation owns all of the issued and outstanding shares of
1268071 Alberta Ltd., which in turn holds a 99.9% partnership
interest in the Carson Creek Operating Partnership. The
Corporation holds the remaining 0.1% partnership interest in the
Carson Creek Operating Partnership. The Carson Creek Operating
Partnership was acquired in connection with the acquisition of
certain properties from ExxonMobil Canada Energy on
September 28, 2006. Each of 1268071 Alberta Ltd. and the
Carson Creek Operating Partnership were created under the laws
of the Province of Alberta.
The Corporation owns all of the issued and outstanding shares of
1275708 Alberta Ltd., which in turn holds a 99.99% partnership
interest in 706-707 Partnership. The Corporation holds the
remaining 0.01% partnership interest in 706-707 Partnership. The
706-707 Partnership was acquired in connection with the
acquisition of certain properties from ConocoPhillips Canada on
January 22, 2007. 1275708 Alberta Ltd. also holds 100% of
the issued and outstanding shares of 1265702 Alberta ULC, which
in turn holds a 99.99% partnership interest in the 702
Partnership. 1265702 Alberta ULC holds 100% of the issued and
outstanding shares of 1301253 Alberta Ltd., which in turn holds
the remaining 0.01% partnership interest in the 702 Partnership.
Each of 1275708 Alberta Ltd., 1265702 Alberta ULC, 1301253
Alberta Ltd. and 702 Partnership were created under the laws of
the Province of Alberta.
The
Manager
The Manager was created under the laws of the Province of
Alberta on December 16, 1982. The principal business of the
Manager is that of a specialty fund manager. The Manager
currently provides advisory, management, and administrative
services to the Trust and the Corporation. The Manager also
attends to the acquisition, development, operation and
disposition of oil and natural gas properties and other related
assets on behalf of the Corporation.
James S. Kinnear, President and a director of the Manager and
Chairman, President, Chief Executive Officer and a director of
the Corporation, owns, directly or indirectly, all of the issued
and outstanding voting securities of the Manager.
7
Intercorporate
Relationships
The following diagram illustrates the organizational structure
of Pengrowth as at the date hereof:
Summary
Description of the Business
Pengrowths goal is to maximize cash distributions on a per
unit basis over time while enhancing the value of such units.
Pengrowths primary focus is on making accretive
acquisitions, adding reserves production through development
drilling and maximizing the value of Pengrowths mature
property base by effectively producing Pengrowths
properties, which includes the use of new development
technologies, such as tertiary recovery operations, and
implementing other operational efficiencies. The Corporation
engages in limited exploration for oil and natural gas.
The Corporation directly and indirectly acquires, owns and
operates its working interests and royalty interests in its
various oil and natural gas properties as well as oil and gas
processing facilities.
Pengrowth has grown throughout its history through an active
program of acquisitions and financings and through development
and exploration activities on its properties. Since 1988,
Pengrowth has completed more than 57 acquisitions and has
raised in excess of $3.7 billion through 21 public equity
offerings. During its
18-year
history, Pengrowth has distributed approximately
$3.2 billion to Unitholders.
8
Reduction
in Monthly Distribution
On October 15, 2007, Pengrowth reduced its monthly cash
distribution to Cdn.$0.225 per Trust Unit. This distribution
represented a reduction of 10% or $0.025 from Pengrowths
monthly distribution of $0.25 per Trust Unit for the first three
quarters of 2007. See Distributions
Historical Distributions.
Asset
Rationalization Program
Pengrowth completed asset sales for proceeds of approximately
$451 million ($437 million net of adjustments) for the
first nine months of 2007. The proceeds were used to partially
repay the $600 million bridge facility. Pengrowth expects
to realize additional proceeds of approximately $25 million
bringing the total for 2007 to approximately $476 million
from non-core property dispositions.
Changes
to Royalty Legislation Affecting Pengrowth and its
Unitholders
The Government of Alberta receives royalties on the production
of natural resources from lands in which it owns the mineral
rights. On October 25, 2007, the Government of Alberta
unveiled a new royalty regime. The new regime will introduce new
royalties for conventional oil, natural gas and bitumen
effective January 1, 2009 that are linked to price and
production levels and will apply to both new and existing
conventional oil and gas activities and oil sands projects.
Royalties payable pursuant to petroleum and natural gas leases
with the Government of Alberta are ad valorem royalties,
assessed on a sliding scale where the rate changes depending on
oil or natural gas prices and the level of production. Royalties
to the Crown in right of the Province of Alberta (the
Crown) currently are 30 and 35 percent in the
case of old and new conventional oil, respectively, 5 to
35 percent in the case of natural gas and from 15 to
50 percent in the case of natural gas liquids.
Under the new royalty regime, the royalty formula for
conventional oil will operate on a sliding rate formula
containing separate elements that account for oil price and well
production and specialty royalty programs will be eliminated
along with old and new tiers. Royalty
rates for conventional oil will range up to 50 percent,
with rate caps once the price of conventional oil reaches
Cdn.$120 per barrel. A significant portion of Pengrowths
production and reserves are derived from mature fields such as
Judy Creek Beaverhill where enhanced oil recovery (EOR)
techniques are employed. Currently, enhanced oil recovery (EOR)
receives an incentive in the form of a reduced royalty. The
Government of Alberta has indicated that these incentives are to
be maintained.
Under the new royalty regime, natural gas royalties will be set
by a sliding rate formula sensitive to price and well production
and vintages will be eliminated along with certain specialty
royalty programs, though a form of deep gas royalty holiday will
be retained and lower royalty rates will be applied over a wider
price range for wells with less productivity. Royalty rates for
natural gas will range from five percent to 50 percent with
rate caps once the price of natural gas reaches $16.59/GJ
(gigajoule). A shallow rights reversion program will also be
implemented that will result in the reversion to the Crown in
Alberta of mineral rights to undeveloped geological formations
above developed zones. Royalties for natural gas liquids will be
set at 40 percent for pentanes and 30 percent for
butanes and propane.
The implementation of the proposed changes to the royalty regime
in Alberta is subject to certain risks and uncertainties. The
significant changes to the royalty regime require new
legislation, changes to existing legislation and regulations and
development of proprietary software to support the calculation
and collection of royalties. Additionally, certain proposed
changes contemplate further public and/or industry consultation.
There may be modifications introduced to the proposed royalty
structure prior to the implementation thereof.
Approximately 79% of Pengrowths 2007 total royalties are
paid to the Crown in Alberta. Approximately 21% of
Pengrowths 2007 royalties are either paid to freehold
landowners, which are not impacted by the royalty changes, or
paid to other Provinces. It is anticipated that the new royalty
regime will result in a 7 to 19 percent increase in the
royalties paid by Pengrowth as compared to the current royalty
structure. This increase is expected to result in a decline in
the net present value, discounted at 10 percent, of the
future net revenues associated with (i) Pengrowths
proved reserves of 1 percent; and
(ii) Pengrowths proved plus probable reserves of
4 percent, in both cases using current commodity price
assumptions of GLJ Petroleum Consultants Ltd., independent
qualified reserves evaluators. The new royalty regime is not
expected to impact the quantity of Pengrowths reserves, as
compared to the current royalty structure. It is anticipated
that the new royalty regime will result in a 2 to 7 percent
decline in Pengrowths cash flow for 2009, the first year
in which the royalty changes take effect, as compared to the
current royalty structure. The higher end of the range reflects
the impact of the royalty on new higher rate wells. The lower
end of the range reflects the impact on the existing wells which
tend to
9
produce at a lower rate. The changes to the royalty regime may
impact Pengrowths future allocation of capital among
petroleum and natural gas projects within and outside of
Alberta. See Risk Factors Changes in
government regulations that affect the crude oil and natural gas
industry could adversely affect Pengrowth and reduce our
distributions to our Unitholders.
Credit
Facility
On June 17, 2007, the Trust entered into a new
$1.2 billion extendible revolving term credit facility
syndicated among eleven financial institutions. For details of
the credit facility, see Material Debt
Credit Facility.
Private
Placement of U.S. Unsecured Notes
On July 26, 2007, the Trust completed a
U.S.$400 million private placement of 6.35% senior
unsecured notes to a group of U.S. investors (the 2007
U.S. Senior Notes), which are due in 2017. Interest on
these notes is payable semi-annually. See Material
Debt Senior Unsecured Notes.
U.S.
DRIP
On July 25, 2007, Pengrowth filed a registration statement
with the SEC to expand its distribution reinvestment and trust
unit purchase plan (DRIP) to permit Unitholders
resident in the United States to participate in the DRIP. The
enhanced DRIP permits Unitholders to elect to reinvest their
cash distributions in additional Trust Units at a 5%
discount to the weighted average closing price of the
Trust Units on the TSX for the 20 trading days immediately
preceding the cash distribution date. In addition, pursuant to
the DRIP, Unitholders may purchase additional Trust Units
for cash of up to Cdn.$1,000 (U.S.$900) per month under the same
terms.
Changes
to Tax Legislation Affecting Pengrowth and its
Unitholders
On October 31, 2006, the Minister of Finance (Canada)
announced proposed tax measures which will materially and
adversely change the manner in which Pengrowth is taxed and will
also change the character of the distributions to you for
Canadian federal income tax purposes. On June 22, 2007, the
SIFT Rules became law when Bill C-52 received Royal Assent. It
is expected that the SIFT Rules will apply to Pengrowth and its
Unitholders commencing in 2011, provided that Pengrowth does not
exceed the limits on normal growth prior to that
time. The SIFT Rules will subject the Trust to trust level
taxation, which will materially reduce the amount of cash
available for distributions to the Unitholders. Based on the
proposed Canadian federal income tax rates and tax rate on
account of provincial taxes, the Trust estimates that the SIFT
Rules will, commencing on January 1, 2011, reduce the
amount of cash available to the Trust to distribute to its
Unitholders by an amount equal to 31.5% multiplied by the amount
of the pre-tax income distributed by the Trust. The Trusts
future net revenues associated with the reserves contained in
the AIF do not reflect the impact of the SIFT Rules thereon and,
after taking the SIFT Rules into account, such values will be
adversely affected. Pengrowths AIF in respect of the year
ended December 31, 2007 will include the impact of the SIFT
Rules on the future net revenues associated with
Pengrowths reserves.
Taxability
of Distribution of U.S. Residents
Distributions paid to U.S. residents are treated as
partnership distributions for U.S. federal tax purposes and are
currently subject to a 15 percent Canadian withholding tax
to the extent that such amounts represent a distribution of
Pengrowths income. On September 21, 2007, Canada and
the United States signed the fifth protocol of the Canada-United
States Tax Convention which proposes to increase the amount
withheld by the Canadian government from 15 percent to
25 percent on distributions of income. The increase will
become effective no earlier than January 1, 2010. Residents
of the U.S. should consult their individual tax advisors on the
impact of any additional withholding tax and changes to tax
laws. The fifth protocol must still be ratified in Canada and
the U.S. prior to becoming effective.
10
The net proceeds to be derived from the sale of Securities will
be the issue price less any commission paid in connection
therewith and the expenses relating to the particular offering
of Securities. Unless otherwise indicated in a Prospectus
Supplement relating to a particular offering of Securities, we
intend to use the net proceeds from the sale of Securities for
general business purposes, to repay indebtedness and/or to,
directly or indirectly, finance future growth opportunities and
capital expenditures. The amount of net proceeds to be used for
any such purposes will be set forth in a Prospectus Supplement.
We may invest funds which we do not immediately use. Such
investments may include short-term marketable investment grade
securities. We may, from time to time, issue securities
(including debt securities) other than pursuant to this
Prospectus.
We may sell Securities to, or through, underwriters or dealers
purchasing as principals or through agents designated by us from
time to time. Only those underwriters, dealers or agents named
in a Prospectus Supplement will be the underwriters, dealers or
agents in connection with the Securities offered thereby.
The Prospectus Supplement relating to a particular offering of
Securities will also set forth the terms of the offering of the
Securities including, to the extent applicable, the name or
names of any underwriters, dealers or agents, any fees,
discounts or other remuneration payable to such underwriters,
dealers or agents in connection with the offering, the method of
distribution of the Securities, and, in the event the offering
is a fixed price distribution, the initial offering price and
the proceeds that we will receive. The distribution of
Securities may be effected from time to time in one or more
transactions at fixed prices or at market prices prevailing at
the time of sale, which prices may vary between purchasers and
during the period of distribution of the Securities. Without
limiting the generality of the foregoing, we may also issue some
or all of the Securities offered by this Prospectus in exchange
for securities or assets of other entities which we may acquire
in the future.
Any offering of Subscription Receipts will be a new issue of
Securities with no established trading market. Unless otherwise
specified in the applicable Prospectus Supplement, the
Subscription Receipts will not be listed on any securities
exchange. Certain dealers may make a market in the Subscription
Receipts, but will not be obligated to do so and may discontinue
any market making at any time without notice. No assurance can
be given that any dealer will make a market in the Subscription
Receipts or as to the liquidity of the trading market, if any,
for the Subscription Receipts.
Underwriters, dealers or agents who participate in the
distribution of Securities under this Prospectus may be entitled
under agreements to be entered into with us to indemnification
by us against certain liabilities, including liabilities under
securities legislation, including liabilities under the United
States Securities Act of 1933, as amended, and applicable
securities legislation in Canada, or contribution with respect
to payments which the underwriters, dealers or agents may be
required to make in respect thereof. The underwriters, dealers
or agents may be customers of, engage in transactions with, or
perform services for, us in the ordinary course of business.
In connection with any offering of Trust Units under this
Prospectus and any Prospectus Supplement, the underwriters may
over-allot or effect transactions which stabilize or maintain
the market price of the Trust Units offered at a level
above that which might otherwise prevail in the open market.
These transactions, if commenced, may be discontinued at any
time.
DESCRIPTION
OF TRUST UNITS
The
Trust Indenture
The Trust Units, along with the Class A trust units,
are issued under the terms of the Trust Indenture. A
maximum of 500,000,000 Trust Units and Class A trust
units, in the aggregate, may be created and issued pursuant to
the Trust Indenture, of which 246,665,355 Trust Units
and 1,888 Class A trust units are issued and
outstanding as at November 30, 2007. Each Trust Unit
and Class A trust unit represents a fractional undivided
beneficial interest in the Trust.
The Trust Indenture, among other things, provides for the
establishment of the Trust, the issue of Trust Units and
Class A trust units, the permitted investments of the
Trust, the procedures respecting distributions to Unitholders,
the appointment and removal of Computershare as trustee,
Computershares authority and restrictions thereon, the
calling of meetings of Unitholders, the conduct of business at
such meetings, notice provisions, the form of trust unit
certificates and the termination of the Trust. The
Trust Indenture may be amended from time to time. Most
amendments to the Trust Indenture, including the early
termination of the Trust and the sale or transfer of the
property of the Trust as an
11
entirety or substantially as an entirety, require approval by an
extraordinary resolution of the Unitholders. An extraordinary
resolution of the Unitholders requires the approval of not less
than
662/3%
of the votes cast at a meeting of Unitholders held in accordance
with the Trust Indenture at which two or more holders of at
least five percent of the aggregate number of Trust Units
and Class A trust units then outstanding are represented.
Computershare, as trustee, is permitted to amend the
Trust Indenture without the consent or approval of the
Unitholders for certain purposes, including: (i) ensuring
that the Trust complies with applicable laws or government
requirements, including satisfaction of certain provisions of
the Tax Act; (ii) ensuring that additional protection is
provided for the interests of Unitholders as Computershare may
consider expedient; and (iii) making typographical or other
non-substantive changes that are not adverse to the interests of
Computershare and the Unitholders.
The Trust is an energy investment trust formed under the laws of
the Province of Alberta which offers and sells the
Trust Units to the public. The Trust Units are not
deposits within the meaning of the Canadian
Deposit Insurance Corporation Act (Canada) (CDIC
Act) and are not insured under the provisions of the CDIC
Act or any other legislation. Furthermore, the Trust is not a
trust company and, accordingly, is not registered under any
trust and loan company legislation as it does not carry on or
intend to carry on business of a trust company.
The
Trustee
Computershare, as trustee, is generally empowered by the
Trust Indenture to exercise any and all rights and powers
that could be exercised by the beneficial owner of the assets of
the Trust. Computershares specific responsibilities
include, but are not limited to, the following:
(i) reviewing and accepting subscriptions for
Trust Units and Class A trust units and issuing
Trust Units and Class A trust units subscribed for;
(ii) subscribing for Royalty Units; (iii) issuing
Trust Units in exchange for Royalty Units tendered to it
for exchange; and (iv) maintaining records and providing
timely reports to Unitholders. Computershare is authorized to
delegate its powers and duties as trustee except as prohibited
by law.
Computershare, as trustee, must exercise its powers and carry
out its functions under the Trust Indenture honestly, in
good faith and in the best interests of the Trust and the
Unitholders, and must exercise that degree of care, diligence
and skill that a reasonably prudent person would exercise in
comparable circumstances. Computershare is not required to
devote its entire time to the business and affairs of the Trust.
Computershare, as trustee, shall be reappointed or replaced
every two years as may be determined by a majority of the votes
cast at an annual meeting of the Unitholders. Computershare may
resign upon 60 days notice to the Corporation.
Computershare may be removed by extraordinary resolution of the
Unitholders or by the Corporation in certain specific
circumstances. Such resignation or removal shall become
effective upon the acceptance of appointment by a successor.
Stock
Exchange Listings
The outstanding Trust Units are listed and posted for
trading on the NYSE under the symbol PGH and on the
TSX under the symbol PGF.UN. The Class A trust
units are not listed or posted for trading on the facilities of
any stock exchange and are not transferable.
Ownership
Restrictions
There are no restrictions on the ownership of the
Trust Units. The Class A trust units may only be held
by individuals, corporations or other entities that are not
non-residents of Canada as that term is defined in
the Tax Act.
Redemption Right
The Trust Units and Class A trust units are redeemable
by Computershare, as trustee, on demand by a Unitholder, when
properly endorsed for transfer and when accompanied by a duly
completed and properly executed notice requesting redemption, at
a redemption price equal to the lesser of:
(i) 95 percent of the average closing price of the
Trust Units on the market designated by the board of
directors of the Corporation (the Board of
Directors) for the ten days after the Trust Units or
Class A trust units are surrendered for redemption and
(ii) the closing price of the Trust Units on such
market on the date the Trust Units or Class A trust
units are surrendered for redemption. The redemption right
permits Unitholders to redeem Trust Units and Class A
trust units for maximum proceeds of $25,000 in any calendar
month provided that such limitation may be waived at the
discretion of the Board of Directors. Redemptions in excess of
the cash limit must be satisfied by way of a distribution in
specie of a pro rata share of Royalty Units and other
assets, excluding facilities, pipelines or other assets
associated with oil and natural gas production, which are held
by the Trust at the time the Trust Units or Class A
trust units are to be redeemed. The price of Trust Units
and Class A trust units, as applicable, for
12
redemption purposes is based upon the closing trading price of
the Trust Units irrespective of whether the units being
redeemed are Trust Units or Class A trust units.
Conversion
Rights
There are no conversion rights attached to the Trust Units.
The Class A trust units may be converted into
Trust Units on a one for one basis at any time upon demand
by the holder thereof.
Voting at
Meetings of Unitholders
Meetings of Unitholders may be called on 21 days notice and
may be called at any time by Computershare, as trustee, or upon
written request of Unitholders holding in the aggregate not less
than five percent of the aggregate number of Trust Units
and Class A trust units then outstanding, and shall be
called by Computershare and held annually. All activities
necessary to organize any such meeting will be undertaken by the
Corporation on behalf of Computershare. At all meetings of the
Unitholders each holder is entitled to one vote in respect of
each Trust Unit or Class A trust unit held.
Unitholders may attend and vote at all meetings of the
Unitholders either in person or by proxy and a proxy holder need
not be a Unitholder. Two persons present in person either
holding personally or representing as proxies at least five
percent of the aggregate number of Trust Units and
Class A trust units then outstanding constitute a quorum
for the transaction of business at all such meetings. Except as
otherwise provided in the Trust Indenture, matters
requiring the approval of the Unitholders must be approved by
extraordinary resolution.
Unitholders are entitled to pass resolutions that will bind
Computershare, as trustee, with respect to a limited list of
matters, including but, not limited to, the following:
(i) the removal or appointment of Computershare as trustee;
(ii) the removal or appointment of the auditor of the
Trust; (iii) the amendment of the Trust Indenture;
(iv) the approval of subdivisions or consolidations of
Trust Units or Class A trust units; (v) the sale
of the assets of the Trust an entirety or substantially as an
entirety; and (vi) the termination of the Trust.
Unitholders can also consider the appointment of an inspector to
investigate whether Computershare has performed its duties
arising under the Trust Indenture. Such an inspector shall
be appointed if a resolution approving the appointment of such
inspector is passed by a majority of the votes duly cast at a
meeting held for that purpose.
Voting at
Meetings of Corporation
Since Unitholders do not directly hold Common Shares or Royalty
Units, they are not permitted to vote directly at meetings of
the holders of Common Shares and Royalty Units. However,
Computershare, as trustee, is required by the
Trust Indenture to vote such Common Shares or Royalty Units
in accordance with, and subject to, the direction provided by
Unitholders at meetings of Unitholders. Computershare is not
permitted to vote any Common Shares or Royalty Units without
first receiving such direction.
Termination
of the Trust
The Unitholders may vote to terminate the Trust at any meeting
of such holders, subject to the following:
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a vote may be held only if: (i) requested in writing by the
holders of not less than 25% of the Trust Units and
Class A trust units, in the aggregate; or (ii) if the
Trust Units and the Class A trust units have become
ineligible for investment by RRSPs, RRIFs, RESPs and DPSPs;
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the termination must be approved by extraordinary resolution of
the Unitholders; and
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a quorum representing five percent of the issued and outstanding
Trust Units and Class A trust units, in the aggregate,
must be present or represented by proxy at the meeting at which
the vote is taken.
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If the termination is approved, Computershare, as trustee, will
sell the assets of the Trust, discharge all known liabilities
and obligations, and distribute the remaining assets to the
Unitholders. Computershare will distribute directly to the
Unitholders any assets which Computershare is unable to sell by
the date set for termination.
Unitholder
Limited Liability
The Trust Indenture provides that no Unitholder will be
subject to any personal liability in connection with the Trust
or its obligations and affairs, and the satisfaction of claims
of any nature arising out of or in connection therewith is only
to be made out of the Trusts assets. Additionally, the
Trust Indenture states that no Unitholder is liable to
indemnify or reimburse Computershare for any liabilities
incurred by Computershare with respect to any taxes payable by
or liabilities incurred by the Trust or Computershare, and all
such liabilities will be enforceable only against, and will be
satisfied only
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out of the Trusts assets. It is intended that the
operations of the Trust will be conducted, upon the advice of
counsel, in such a way and in such jurisdictions as to avoid as
far as possible any material risk of liability on the
Unitholders for claims against the Trust. Legislation has been
enacted in Alberta which reduces the risk to Unitholders from
the legal uncertainties regarding the potential liability of
Unitholders.
DESCRIPTION
OF SUBSCRIPTION RECEIPTS
Subscription Receipts may be offered separately or together with
Trust Units. The Subscription Receipts will be issued under
a subscription receipt agreement.
A Subscription Receipt is a security of the Trust that will
entitle the holder to receive a Trust Unit upon the
completion of a transaction, typically an acquisition by the
Trust of the assets or securities of another entity. Subsequent
to the offering of Subscription Receipts, the subscription
proceeds for the Subscription Receipts are held in escrow by the
designated escrow agent, pending the completion of the
transaction. Holders of Subscription Receipts are not
Unitholders. Holders of Subscription Receipts are only entitled
to receive Trust Units upon the surrender of their
Subscription Receipts to the escrow agent or to a return of the
subscription price for the Subscription Receipts together with
any payments in lieu of interest or other income earned on the
subscription proceeds.
The particular terms and provisions of Subscriptions Receipts
offered by any Prospectus Supplement, and the extent to which
the general terms and provisions described below may apply
thereto, will be described in the Prospectus Supplement filed in
respect of such Subscription Receipts. This description will
include, where applicable: (i) the number of Subscription
Receipts: (ii) the price at which the Subscription Receipts
will be offered; (iii) the terms, conditions and procedures
pursuant to which the holders of Subscription Receipts will
become entitled to receive Trust Units; (iv) the
number of Trust Units or other securities that may be
obtained upon exercise of each Subscription Receipt;
(v) the designation and terms of any other securities with
which the Subscription Receipts will be offered, if any, and the
number of Subscription Receipts that will be offered with each
security; (vi) the terms applicable to the gross proceeds
from the sale of the Subscription Receipts plus any interest
earned thereon; (vii) the material income tax consequences
of owning, holding and disposing of the Subscription Receipts;
and (viii) any other material terms and conditions of the
Subscription Receipts.
Credit
Facility
On June 17, 2007, the Corporation entered into a new
$1.2 billion extendible revolving term credit facility
syndicated among eleven financial institutions (the Credit
Facility). The Credit Facility is unsecured, covenant
based and has a three year term. The Corporation has the option
to extend the Credit Facility each year, subject to the approval
of the lenders, or repay the entire balance at the end of the
three year term. Various borrowing options are available under
the Credit Facility, including prime rate based advances and
bankers acceptance loans. The Credit Facility carries
floating interest rates that are expected to range between
0.65 percent and 1.15 percent over bankers acceptance
rates, depending on Pengrowths consolidated ratio of
senior debt to earnings before interest, taxes and non-cash
items. In addition, Pengrowth has a $35 million demand
operating line of credit for working capital purposes. As at
November 30, 2007, availability under the Credit Facility
and the demand operating line of credit were reduced by drawings
of $526 million and by outstanding letters of credit in the
amount of approximately $16 million.
Under the credit agreement relating to the Credit Facility, the
Trust is restricted from making distributions under certain
circumstances. See Distributions
Restrictions on Distributions.
The terms of the credit agreement relating to the Credit
Facility ensure that the lenders have priority over the
Unitholders with respect to the assets and income of the Trust.
In the event that we default on our debts, amounts due and owing
to the lenders under the credit facility must be paid before any
distribution can be made to Unitholders. This could result in an
interruption of distributions. See Risk
Factors Our indebtedness may limit the amount of
distributions that we are able to pay our Unitholders, and if we
default on our debts, the net proceeds of any foreclosure sale
would be allocated to the repayment of our lenders, note holders
and other creditors and only the remainder, if any, would be
available for distribution to our Unitholders.
Senior
Unsecured Notes
On April 23, 2003, the Corporation completed a
U.S.$200 million private placement of senior unsecured
notes to a group of U.S. investors (the 2003 U.S. Senior
Notes). The 2003 U.S. Senior Notes were offered in two
tranches:
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U.S.$150 million at 4.93% due April 23, 2010 and
U.S.$50 million at 5.47% due April 23, 2013. Interest
on these notes is payable semi-annually.
On December 1, 2005, the Corporation completed a
£50 million private placement of senior unsecured ten
year notes to a group of U.K. based investors (the U.K.
Senior Notes). In a related transaction, Pengrowth entered
into a series of currency swaps to mitigate the foreign exchange
risk and fixed the effective coupon rate of the U.K. Senior
Notes at 5.49%. Interest on these notes is payable semi-annually.
On July 26, 2007, the Corporation completed a
U.S.$400 million private placement of 6.35% senior
unsecured ten year 2007 U.S. Senior Notes to a group of U.S.
investors. Interest on these notes is payable semi-annually.
Under the note agreements relating to the 2003 U.S. Senior
Notes, the 2007 U.S. Senior Notes and the U.K. Senior Notes, the
Trust is restricted from making distributions under certain
circumstances. See Distributions
Restrictions on Distributions.
The terms of the note agreements relating to the 2003 U.S.
Senior Notes, the 2007 U.S. Senior Notes and the U.K. Senior
Notes ensure that note holders have priority over the
Unitholders with respect to the assets and income of the Trust.
In the event that we default on our debts, amounts due and owing
to the note holders under the 2003 U.S. Senior Notes, the 2007
U.S. Senior Notes and the U.K. Senior Notes must be paid before
any distributions can be made to Unitholders. This could result
in an interruption of distributions. See Risk
Factors Our indebtedness may limit the amount of
distributions that we are able to pay our Unitholders, and if we
default on our debts, the net proceeds of any foreclosure sale
would be allocated to the repayment of our lenders, note holders
and other creditors and only the remainder, if any, would be
available for distribution to our Unitholders.
Convertible
Debentures
As a result of the Esprit Merger, Pengrowth assumed all of
Esprits 6.5 percent convertible unsecured subordinated
debentures (the Debentures). The Debentures are
subject to the terms and conditions of a trust indenture entered
into among Esprit Energy Trust, Esprit Exploration Ltd. and
Computershare Trust Company of Canada (as trustee) and
dated July 28, 2005 (the Debenture Indenture).
The Debentures were originally issued on July 28, 2005 for
a $100 million principal amount with interest paid
semi-annually in arrears on June 30 and December 31 of each
year. On closing of the Esprit Merger, $95.8 million
principal amount of Debentures was outstanding. Pengrowth
assumed all obligations under the Debenture Indenture pursuant
to the terms of the first supplemental trust indenture entered
into among Esprit Energy Trust, Esprit Exploration Ltd., the
Trust, the Corporation and Computershare Trust Company of
Canada (as trustee) and dated October 2, 2006 (the
First Supplemental Debenture Indenture).
Each $1,000 principal amount of Debentures is convertible at the
option of the holder at any time into Trust Units at a
conversion price of $25.54 per Trust Unit. The Debentures mature
on December 31, 2010. After December 31, 2008,
Pengrowth may elect to redeem all or a portion of the
outstanding Debentures at a price of $1,050 per Debenture or
$1,025 per Debenture after December 31, 2009.
Pursuant to a change of control provision in the Debenture
Indenture, as amended, Pengrowth was required to make an offer
to purchase all of the outstanding Debentures at a price equal
to 101 percent of the principal amount, plus any accrued
and unpaid interest. On December 12, 2006 Pengrowth
redeemed a portion of the Debentures, pursuant to the change of
control provision, for cash proceeds of $21.8 million
(including accrued interest of $0.6 million and offer
premium of $0.2 million). As at June 30, 2007,
$74 million principal amount of Debentures were outstanding.
Pursuant to the Debenture Indenture, as amended, the ability of
the Trust to pay distributions to Unitholders may be affected
under certain circumstances. See
Distributions Restrictions on
Distributions and Risk Factors
Our indebtedness may limit the amount of distributions that we
are able to pay our Unitholders, and if we default on our debts,
the net proceeds of any foreclosure sale would be allocated to
the repayment of our lenders, note holders and other creditors
and only the remainder, if any, would be available for
distribution to our Unitholders.
15
General
We currently make monthly payments to our Unitholders on the
15th day of each month or the first business day following the
15th day. The record date for any distribution is ten business
days prior to the distribution date or such other date as may be
determined by the Board of Directors. In accordance with stock
exchange rules, an ex-distribution date occurs two trading days
prior to the record date to permit time for settlement of trades
of securities and distributions must be declared a minimum of
seven trading days before the record date.
Historical
Distributions
Distributions to Unitholders for the three-month period ended
September 30, 2007 totaled $0.75 per Trust Unit. We
currently have set the level of monthly cash distributions at
$0.225 per Trust Unit. However, distributions can and may
fluctuate in the future. The availability of cash flow for the
payment of distributions is derived mainly from producing and
selling our oil, natural gas and related products and as such
will at all times be dependent upon a number of factors,
including resource prices, production rates and contributions to
the reserve fund. The Board of Directors will continue to
examine distributions on a monthly basis while considering
overall market conditions prior to setting the distribution
level each month. The Board of Directors cannot assure you that
cash flow will be available for distribution to Unitholders in
the amounts anticipated or at all. See Risk
Factors.
Distributions declared and paid to Unitholders in 2007 and
declared and paid for the preceding five fiscal years were as
follows:
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2007(1)
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2006
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2005
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2004
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2003
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2002
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First Quarter
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$
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0.75
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$
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0.75
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$
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0.69
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$
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0.63
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$
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0.75
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$
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0.41
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Second Quarter
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0.75
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0.75
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0.69
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0.64
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0.67
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0.54
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Third Quarter
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0.75
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0.75
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0.69
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0.67
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0.63
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0.52
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Fourth Quarter
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0.45
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(2)
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0.75
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0.75
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0.69
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0.63
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0.60
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Total
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$
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3.00
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$
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2.82
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$
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2.63
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$
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2.68
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$
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2.07
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Notes:
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(1)
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Numbers in this column reflect only distributions declared and
paid on or before November 15, 2007.
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(2)
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On October 15, 2007 and November 15, 2007, the monthly
distribution paid to Unitholders was $0.225 per Trust Unit,
representing a reduction of 10% from the monthly distribution of
$0.25 per Trust Unit for the first three quarters of 2007.
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(3)
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Based on actual distributions paid or declared.
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(4)
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All amounts distributed to Unitholders from the inception of the
Trust to December 31, 2006 have been treated as a return of
capital, except that in 1996, 1999, 2000, 2001, 2002, 2003,
2004, 2005 and 2006 respectively, the Trust had taxable income
per Trust Unit of $0.2044, $0.6742, $1.9831, $1.7951,
$0.4252, $1.4692, $1.4328, $2.2241 and $2.40 respectively,
which was allocated to Unitholders representing 12.2%, 30.4%,
55.8%, 51.4%, 22.0%, 55.2%, 55.3%, 80% and 80% of total cash
distributions for those years. For Canadian residents, amounts
which are treated as a return of capital generally are not
required to be included in a Unitholders income but such
amounts will reduce the adjusted cost base to the Unitholder of
the Trust Units.
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At the special meeting of the Royalty Unitholders held on
April 23, 2002, the Royalty Unitholders approved the
amendment of the royalty indenture between the Corporation and
Computershare, dated July 27, 2006 (the Royalty
Indenture) to permit the Board of Directors to establish a
holdback, within the Corporation, of up to 20% of its gross
revenue if the Board of Directors determines that it would be
advisable to do so in accordance with prudent business practices
to provide for the payment of future capital expenditures or for
the payment of royalty income in any future period. Accordingly,
the Corporation would be able to apply these amounts towards
capital should it be prudent to do so or keep the funds in
another form to be paid out in the future, potentially
stabilizing the profile of distributions paid by the Trust.
Subsequent to this Royalty Unitholder action, the Board of
Directors authorized the establishment of a holdback to fund
future capital obligations and future payments of royalty income
to the Trust comprised of funds retained within the Corporation.
The Board of Directors may change the distributions or 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.
The return on an investment in Trust Units is not
comparable to the return on an investment in a fixed-income
security. The recovery of the initial investment made by
Unitholders is at risk, and the anticipated return on the
Unitholders investment is based on many performance
assumptions. Although we intend to make distributions of a
16
portion of our available cash, these cash distributions may be
reduced or suspended. Cash distributions are not
guaranteed. Our ability to make cash distributions and the
actual amount distributed will depend on numerous factors
including, among other things: our financial performance, debt
obligations, working capital requirements and future capital
requirements, all of which are susceptible to a number of risks.
In addition, the market value of the Trust Units may
decline as a result of many factors, including our inability to
meet our cash distribution targets in the future, and that
decline may be significant. Prospective purchasers of
Trust Units also should consider the particular risk
factors that may affect the industry in which we operate, and
therefore the stability of the distributions they would receive.
See Risk Factors. This section also describes
our assessment of those risk factors, as well as potential
consequences to Unitholders if a risk should occur.
The after-tax return from an investment in Trust Units to
Unitholders, for Canadian income tax purposes, can be made up of
both a return on, and a return of, capital. That composition may
change over time, thus affecting an investors after-tax
return. Returns on capital are generally taxed as ordinary
income or as dividends in the hands of a Unitholder. Returns of
capital are generally tax-deferred for Unitholders who are
resident in Canada for purposes of the Tax Act (and reduce such
Unitholders adjusted cost base in the Trust Unit for
purposes of the Tax Act). Returns of capital to a Unitholder who
is not resident in Canada for purposes of the Tax Act or is a
partnership that is not a Canadian partnership for
purposes of the Tax Act will be subject to Canadian withholding
tax. Prospective Unitholders should consult their own tax
advisors with respect to the Canadian income tax considerations
in their own circumstances.
Restrictions
on Distributions
The ability of the Trust to make cash distributions or return
capital contributions to Unitholders may be directly or
indirectly affected in certain events as a result of certain
restrictions, including restrictions set forth in (i) the
credit agreement relating to the Credit Facility; (ii) the
note purchase agreements relating to the 2003 U.S. Senior Notes,
the 2007 U.S. Senior Notes and the U.K. Senior Notes; and
(iii) the Debentures. In particular, the funds required to
satisfy the interest payable on the foregoing obligations, as
well as the amounts payable upon the redemption or maturity of
such obligations, as applicable, or upon an Event of Default (as
defined below), will be deducted and withheld from the amounts
that would otherwise be payable as distributions
to Unitholders.
Revolving
Credit Facility
The credit agreement relating to the Credit Facility stipulates
that the Trust shall not make or agree to make cash or other
distributions or return capital contributions to Unitholders
when a Default (subject to certain exceptions) or an
Event of Default has occurred or is continuing or
would reasonably be expected to occur as a result of such
distribution or return of capital. Events of Default
are defined in the credit agreement to include those events of
default which are typically referred to in a loan agreement of
such type and include, among other things: (i) the failure
to repay amounts owing under the Credit Facility; (ii) the
voluntary or involuntary insolvency of the Trust or its
subsidiaries; (iii) the default of obligations owing under
other debt arrangements; (iv) the change of control of the
Trust; or (v) the Trusts divestiture of some or all
of its debt or equity interest in the Corporation.
Default is defined in the credit agreement to mean
any event or circumstance which, with the giving of notice or
lapse of time or otherwise, would constitute an Event of Default.
In addition to the standard representations, warranties and
covenants commonly contained in a credit facility of this
nature, the Credit Facility includes the following key financial
covenants:
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the ratio of Consolidated Senior Debt (as defined below) to
Consolidated EBIDTA (as defined below) at the end of any fiscal
quarter shall not exceed 3:1, except that upon the completion of
a Material Acquisition (as defined below), and for a period
extending to the end of the second full fiscal quarter
thereafter, this limit increases to 3.5:1;
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the ratio of Consolidated Total Debt (as defined below) to
Consolidated EBIDTA at the end of any fiscal quarter shall not
exceed 3.5:1; except that upon the completion of a Material
Acquisition, and for a period extending to the end of the second
full fiscal quarter thereafter, this limit increases to 4:1; and
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the ratio of Consolidated Senior Debt (as defined below) to
Total Capitalization (as defined below) shall not exceed 50%,
except that upon the completion of a Material Acquisition, and
for a period extending to the end of the second full fiscal
quarter thereafter, this limit increases to 55%.
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With respect to these financial covenants, the following
definitions apply to the Trust and its subsidiaries on a
consolidated basis:
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Consolidated Senior Debt: |
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All obligations, liabilities and indebtedness that would be
classified as debt on the consolidated balance sheet of the
Trust, including, without limitation, certain items including
all indebtedness for borrowed money, but excluding certain items. |
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Consolidated Total Debt: |
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The aggregate of Consolidated Senior Debt and Subordinated Debt. |
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Consolidated EBITDA: |
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The aggregate of the last four quarters net income from
operations plus the sum of: |
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income taxes;
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interest expense; |
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all provisions for federal, provincial or
other income and capital taxes; |
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depreciation, depletion and amortization
expense; and |
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other non-cash amounts. |
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Material Acquisition: |
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An acquisition or series of acquisitions which increases the
consolidated tangible assets of Pengrowth by more than 5%. |
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Subordinated Debt: |
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Debt which, by its terms, is subordinated to the obligations to
the lenders under the Credit Facility. |
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Total Capitalization: |
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The aggregate of Consolidated Total Debt and the
Unitholders equity (calculated in accordance with GAAP as
shown on the Trusts consolidated balance sheet) |
Senior
Unsecured Notes
The holders of the 2003 U.S. Senior Notes, the 2007 U.S. Senior
Notes and the U.K. Senior Notes are entitled to certain remedies
upon the occurrence of an Event of Default, which
remedies may restrict the ability of the Trust to make
distributions to Unitholders. The note agreements relating to
the 2003 U.S. Senior Notes, the 2007 U.S. Senior Notes and the
U.K. Senior Notes contain certain restrictions on the ability of
the Corporation to make payments to the Trust if, at the time
thereof or if after giving effect thereto, a Default
or Event of Default would exist. In addition, in
connection with the note agreements relating to the 2003 U.S.
Senior Notes, the 2007 U.S. Senior Notes and the U.K. Senior
Notes the Trust agreed that if it has actual knowledge that
Default or an Event of Default has occurred and is continuing,
it will not make any payment in respect of any distribution to
unitholders. An Event of Default is defined in the
note purchase agreements to include those events of default
which are typically referred to in a note purchase agreement of
a similar nature (including failure to pay principal and
interest when due, default in compliance with other covenants,
inaccuracy of representations and warranties, cross default to
other indebtedness, certain events of insolvency or the
rendering of judgments against the Trust of the notes in excess
of certain threshold amounts). Default is defined in
the note agreements to mean any event or circumstance which,
with the giving of notice or lapse of time or both, would
constitute an Event of Default.
In addition to standard representations, warranties and
covenants, the 2003 U.S. Senior Notes, the 2007 U.S. Senior
Notes and the U.K. Senior Notes also contain the following key
financial covenants:
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the ratio of Consolidated EBIDTA (as defined below) to interest
expense for the four immediately preceding fiscal quarters shall
be not less than 4:1;
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with respect to the 2003 U.S. Senior Notes and the U.K. Senior
Notes only, the Consolidated Total Debt (as defined below) is
limited to 60% of the Consolidated Total Established Reserves
(as defined below) determined and calculated not later than the
last day of the first fiscal quarter of the next succeeding
fiscal year of the Trust;
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with respect to the 2007 U.S. Senior Notes only, the
Consolidated Total Debt (as defined below) to Total
Capitalization (as defined below) shall not exceed 55% at the
end of each fiscal quarter; and
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the ratio of Consolidated Total Debt to Consolidated EBITDA for
each period of four consecutive fiscal quarters shall not exceed
3.5:1.
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With respect to these financial covenants, the following
definitions apply to the Trust and its subsidiaries on a
consolidated basis:
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Consolidated EBIDTA: |
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The sum of: (i) net income determined in accordance with
GAAP; (ii) all provisions for federal, provincial or other
income and capital taxes; (iii) all provisions for
depletion, depreciation, and amortization; (iv) interest
expense; and (v) non-cash items. |
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Consolidated Total Debt: |
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Has substantially the same meaning as Consolidated Senior
Debt in the definitions relating to the Credit Facility. |
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Consolidated Total Established Reserves: |
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The sum of: (i) 100% of the present value of
Pengrowths proved reserves; and (ii) 50% of the
present value of Pengrowths probable reserves. |
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Total Capitalization: |
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Consolidated Total Debt plus Unitholder equity in the Trust. |
Convertible
Debentures
The holders of the Debentures are entitled to certain remedies
upon an Event of Default, which remedies may
restrict the ability of the Trust to make distributions to
Unitholders. In particular, the Trust is prohibited from
declaring or making distributions to Unitholders upon the
occurrence of an Event of Default unless and until each such
default has been cured or waived or ceases to exist.
Furthermore, the Trust is prohibited from declaring any
distribution to Unitholders if, at the time the Corporation
resolves, as administrator of the Trust, to make the said
declaration, the Corporation has actual knowledge that the
paying of the said distribution would result in an Event of
Default. An Event of Default will occur if any one
or more of the following described events has occurred and is
continuing with respect to the Debentures: (a) failure for
10 days to pay interest on the Debentures when due;
(b) failure to pay principal or premium, if any, when due
on the Debentures, whether at maturity, upon redemption, by
declaration or otherwise; (c) certain events of bankruptcy,
insolvency or reorganization of the Trust under applicable
bankruptcy or insolvency laws; or (d) default in the
observance or performance of any material covenant or condition
of the Debenture Indenture and continuance of such default for a
period of 30 days after notice in writing has been given by
the trustee under the Debenture Indenture, as amended, to the
Trust specifying such default and requiring the Trust to rectify
the same.
The Debenture Indenture, as amended, includes, amongst others,
the following covenants:
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the Trust is required to punctually pay or cause to be paid all
principal, premium and interest amounts as prescribed by the
Debenture Indenture, as amended;
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the Trust is required to pay the trustee under the Debenture
Indenture reasonable remuneration for its services as trustee
and repay on demand all monies which have been paid by the
trustee in execution of its obligations thereunder;
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the Trust is required to provide the trustee under the Debenture
Indenture with notification immediately upon obtaining knowledge
of any Event of Default;
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the Trust is required to carry on its business in a proper,
efficient and business-like manner and in accordance with good
business practices;
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the Trust is required to deliver to the trustee under the
Debenture Indenture, within 120 days of the end of each
calendar year, an officers certificate as to compliance
with the terms and conditions of the Debenture
Indenture; and
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the Trust is prohibited from issuing additional debentures,
which are convertible at the option of the holder into
Trust Units of equal ranking to the Debentures if the
principal amount of all issued and outstanding convertible
debentures of the Trust would exceed 25% of the Trusts
total market capitalization after the issuance of such
additional debentures.
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An investment in the Securities is subject to various risks
including those risks inherent to our business. If any of these
risks occur, our production, revenues and financial condition
could be materially harmed, with a resulting decrease in
distributions on, and the market price of, our Trust Units.
As a result, the trading price of our Trust Units could
decline, and you could lose all or part of your investment.
Before deciding whether to invest in any Securities, investors
should consider carefully the risks set out below and in any
documents incorporated by reference in this Prospectus
(including subsequently filed documents incorporated herein by
reference) and those described in a Prospectus Supplement
relating to a specific offering of Securities.
The SIFT
Rules are expected to materially and adversely affect the Trust,
the Unitholders and the value of the Trust Units.
It is expected that the SIFT Rules will subject the Trust to
trust level taxation beginning on January 1, 2011, which
will materially reduce the amount of cash available for
distributions to the Unitholders. Based on the proposed Canadian
federal income tax rates and tax rate on account of provincial
taxes, the Trust estimates that the SIFT Rules will, commencing
on January 1, 2011, reduce the amount of cash available to
the Trust to distribute to its Unitholders by an amount equal to
31.5% multiplied by the amount of the pre-tax income distributed
by the Trust. A reduction in the value of the Trust Units
would be expected to increase the cost to the Trust of raising
capital in the public capital markets. In addition, the SIFT
Rules are expected to substantially eliminate the competitive
advantage the Trust currently enjoys compared to corporate
competitors in raising capital in a tax efficient manner, while
placing the Trust at a competitive disadvantage compared to
industry competitors, including U.S. master limited
partnerships, which will continue not to be subject to
entity-level taxation. The SIFT Rules are also expected to make
the Trust Units less attractive as an acquisition currency.
As a result, it may be more difficult for the Trust to compete
effectively for acquisition opportunities in the future. There
can be no assurance that the Trust will be able to reorganize
its legal and tax structure to reduce the expected impact of the
SIFT Rules.
In addition, there can be no assurance that the Trust will be
able to maintain its status as a grandfathered SIFT under the
SIFT Rules until 2011. If the Trust exceeds the limits on the
issuance of new Trust Units and convertible debt that
constitutes normal growth during the transitional period from
October 31, 2006 to December 31, 2010, the SIFT Rules
would become effective on a date earlier than January 1,
2011. The normal growth limits are calculated as a percentage of
Pengrowths market capitalization of $4.8 billion on
October 31, 2006 as follows: 40% for the period
November 1, 2006 to December 31, 2007, 20% for each of
2008, 2009 and 2010. Unused portions may be carried forward
until December 31, 2010. It is anticipated that the
issuance of 21,100,000 Trust Units on December 8, 2006
for proceeds of $461 million will constitute a portion of
the 40% normal growth limit for the period ending on
December 31, 2007.
The Trusts future net revenues associated with the
reserves disclosed in its AIF dated March 30, 2007 and the
corresponding Form 40-F do not reflect the impact of the
SIFT Rules thereon and, after taking the SIFT Rules into
account, such values will be adversely affected.
Volatility
in oil and natural gas prices could have a material adverse
effect on results of operations and financial condition, which,
in turn, could negatively affect the amount of distributions to
our Unitholders.
The monthly distributions we pay to our Unitholders depend, in
part, on the prices we receive for our oil and natural gas
production. Oil and natural gas prices can fluctuate widely on a
month-to-month
basis in response to a variety of factors that are beyond our
control. These factors include, among others:
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global energy policy, including the ability of OPEC to set and
maintain production levels for oil;
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political conditions in the Middle East;
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worldwide economic conditions;
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weather conditions including weather-related disruptions to the
North American natural gas supply;
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the supply and price of foreign oil and natural gas;
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the level of consumer demand;
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the price and availability of alternative fuels;
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the proximity to, and capacity of, transportation facilities;
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the effect of worldwide energy conservation measures; and
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government regulation.
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Declines in oil or natural gas prices could have an adverse
effect on our operations, financial condition and proved
reserves and ultimately on our ability to pay distributions to
our Unitholders.
Distributions
may be reduced during periods in which the Corporation makes
capital expenditures using cash flow, which could also
negatively affect the market price of the
Trust Units.
Production and development costs incurred with respect to
properties, including power costs and the costs of injection
fluids associated with tertiary recovery operations, reduce the
royalty income that the Trust receives and, consequently, the
amounts we can distribute to our Unitholders.
The timing and amount of capital expenditures will directly
affect the amount of income available for distribution to our
Unitholders. Distributions may be reduced, or even eliminated,
at times when significant capital or other expenditures are
made. To the extent that external sources of capital, including
the issuance of additional Trust Units, become limited or
unavailable, the Corporations ability to make the
necessary capital investments to maintain or expand oil and gas
reserves and to invest in assets, as the case may be, will be
impaired. To the extent that the Corporation is required to use
cash flow to finance capital expenditures or property
acquisitions, the cash we receive from the Corporation on the
Royalty Units will be reduced, resulting in reductions to the
amount of cash we are able to distribute to our Unitholders.
Actual
reserves will vary from reserve estimates, and those variations
could be material, and negatively affect the market price of the
Trust Units and distributions to our Unitholders.
The value of the Trust Units will depend upon, among other
things, the Corporations reserves. In making strategic
decisions, we generally rely upon reports prepared by our
independent reserve engineers. Estimating reserves is inherently
uncertain. Ultimately, actual production, revenues and
expenditures for the underlying properties will vary from
estimates and those variations could be material. Changes in the
prices of, and markets for, oil and natural gas from those
anticipated at the time of making such assessments will affect
the return on, and value of, our Trust Units. The reserve
and cash flow information contained in the documents
incorporated by reference represent estimates only. Petroleum
engineers consider many factors and make assumptions in
estimating reserves. Those factors and assumptions include:
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historical production from the area compared with production
rates from similar producing areas;
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the assumed effect of government regulation;
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assumptions about future commodity prices, exchange rates,
production and development costs, capital expenditures,
abandonment costs, environmental liabilities, and applicable
royalty regimes;
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initial production rates;
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production decline rates;
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ultimate recovery of reserves;
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marketability of production; and
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other government levies that may be imposed over the producing
life of reserves.
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If any of these factors and assumptions prove to be inaccurate,
our actual results may vary materially from our reserve
estimates. Many of these factors are subject to change and are
beyond our control. In particular, changes in the prices of, and
markets for, oil and natural gas from those anticipated at the
time of making such assessments will affect the return on, and
value of, our Trust Units. In addition, all such
assessments involve a measure of geological and engineering
uncertainty that could result in lower production and reserves
than anticipated. A significant portion of our reserves are
classified as undeveloped and are subject to greater
uncertainty than reserves classified as developed.
In accordance with normal industry practices, we engage
independent petroleum engineers to conduct a detailed
engineering evaluation of our oil and gas properties for the
purpose of estimating our reserves as part of our year-end
reporting process. As a result of that evaluation, we may
increase or decrease the estimates of our reserves. We do not
consider an increase or decrease in the estimates of our
reserves in the range of up to five percent to be material or
inconsistent with normal industry practice. Any significant
reduction to the estimates of our reserves resulting from any
such evaluation could have a material adverse effect on the
value of our Trust Units.
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If the
Corporation is unable to acquire additional reserves, the value
of the Trust Units and distributions to our Unitholders may
decline.
Our future oil and natural gas reserves and production, and
therefore the cash flows of the Trust, will depend upon our
success in acquiring additional reserves. If we fail to add
reserves by acquiring or developing them, our reserves and
production will decline over time as they are produced. When
reserves from our properties can no longer be economically
produced and marketed, our Trust Units will have no value
unless additional reserves have been acquired or developed. If
we are not able to raise capital on favourable terms, we may not
be able to add to or maintain our reserves. If we use our cash
flow to acquire or develop reserves, we will reduce our cash
available to be distributed. There is strong competition in all
aspects of the oil and gas industry, including reserve
acquisitions. We will actively compete for reserve acquisitions
and skilled industry personnel with other oil and gas companies
and energy trusts. However, many of our competitors have greater
resources than we do and we cannot assure you that we will be
successful in acquiring additional reserves on terms that meet
our objectives.
Our
operation of oil and natural gas wells could subject us to
environmental claims and liability which would be funded out of
our cash flow and could therefore reduce cash flow otherwise
payable to our Unitholders.
The oil and natural gas industry is subject to extensive
environmental regulation, which imposes restrictions and
prohibitions on releases or emissions of various substances
produced in association with certain oil and gas industry
operations. In addition, Canadian legislation requires that well
and facility sites be abandoned and reclaimed to the
satisfaction of provincial authorities. A breach of this or
other legislation may result in fines or the issuance of a
clean-up order. Ongoing environmental obligations will be funded
out of our cash flow and could therefore reduce the cash
available to be distributed to our Unitholders.
We may be
unable to successfully compete with other companies in our
industry, which could negatively affect the market price of the
Trust Units and distributions to our Unitholders.
There is strong competition in all aspects of the oil and gas
industry. Pengrowth will actively compete for capital, skilled
personnel, undeveloped lands, reserve acquisitions, access to
drilling rigs, service rigs and other equipment, access to
processing facilities and pipeline and refining capacity and in
all other aspects of its operations with a substantial number of
other organizations, many of which may have greater technical
and financial resources than Pengrowth. Some of those
organizations not only explore for, develop and produce oil and
natural gas but also carry on refining operations and market oil
and other products on a world-wide basis and, as such, have
greater and more diverse resources on which to draw.
Incorrect
assessments of value at the time of acquisitions could adversely
affect the value of our Trust Units and distributions to
our Unitholders.
Acquisitions of oil and gas properties or companies will be
based in large part on engineering and economic assessments made
by independent engineers. These assessments include a series of
assumptions regarding such factors as recoverability and
marketability of oil and gas, future prices of oil and gas and
operating costs, future capital expenditures and royalties and
other government levies which will be imposed over the producing
life of the reserves. Many of these factors are subject to
change and are beyond our control. All such assessments involve
a measure of geologic and engineering uncertainty which could
result in lower production and reserves than anticipated.
Our
indebtedness may limit the amount of distributions that we are
able to pay our Unitholders, and if we default on our debts, the
net proceeds of any foreclosure sale would be allocated to the
repayment of our lenders, note holders and other creditors and
only the remainder, if any, would be available for distribution
to our Unitholders.
We are indebted under the Credit Facility, the Debentures, the
2003 U.S. Senior Notes, the 2007 U.S. Senior Notes and the U.K.
Senior Notes. Certain covenants in the agreements with our
lenders may limit the amount of distributions paid to
Unitholders. See Distributions Restrictions
on Distributions. Variations in interest rates,
exchange rates and scheduled principal repayments could result
in significant changes in the amount we are required to apply to
the service of our outstanding indebtedness. If we become unable
to pay our debt service charges or otherwise cause an event of
default to occur, our lenders may foreclose on, or sell, our
properties. The net proceeds of any such sale will be allocated
firstly to the repayment of our lenders and other creditors and
only the remainder, if any, would be payable to the Trust by the
Corporation. In addition, we may not be able to refinance some
or all of these debt obligations through the issuance of new
debt obligations on the same terms, and we may be required to
refinance through the issuance of new debt obligations on
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less favorable terms or through the issuance of additional
securities or through other means. In any such event, the amount
of cash available for distribution may be diluted or adversely
impacted and such dilution or impact may be significant.
We intend to dispose of certain non-core properties and to use
the proceeds therefrom to repay outstanding indebtedness. There
can be no assurance that we will complete such dispositions or
as to the proceeds therefrom. See Recent
Developments Asset Rationalization Program.
We are
dependent on our management and the loss of our key management
and other personnel could negatively impact our
business.
Our Unitholders are entirely dependent on the management of the
Manager and the Corporation with respect to the acquisition of
oil and gas properties and assets, the development and
acquisition of additional reserves, the management and
administration of all matters relating to properties and the
administration of the Trust. The loss of the services of key
individuals who currently comprise the management team of the
Manager and the Corporation could have a detrimental effect on
the Trust. In addition, increased activity within the oil and
gas sector can increase the cost of goods and services and make
it more difficult to attract and retain qualified professional
staff.
A decline
in the Corporations ability to market its oil and natural
gas production could have a material adverse effect on
production levels or on the price received for production,
which, in turn, could reduce distributions to our Unitholders
and affect the market price of the Trust Units.
The marketability of our production depends in part upon the
availability, proximity and capacity of gas gathering systems,
pipelines and processing facilities. United States federal and
state and Canadian federal and provincial regulation of oil and
gas production and transportation, general economic conditions,
and changes in supply and demand could adversely affect our
ability to produce and market oil and natural gas. If market
factors dramatically change, the financial impact on us could be
substantial. The availability of markets is beyond our control.
The
operation of a significant portion of our properties is largely
dependent on the ability of third party operators, and harm to
their business could cause delays and additional expenses in our
receiving revenues, which could negatively affect the market
price of the Trust Units and distributions to our
Unitholders.
The continuing production from a property, and to some extent
the marketing of production, is dependent upon the ability of
the operators of our properties. Approximately 45 percent
of our properties are operated by third parties, based on daily
production. If, in situations where we are not the operator, the
operator fails to perform these functions properly or becomes
insolvent, then revenues may be reduced. Revenues from
production generally flow through the operator and, where we are
not the operator, there is a risk of delay and additional
expense in receiving such revenues.
The operation of the wells located on properties not operated by
us are generally governed by operating agreements which
typically require the operator to conduct operations in a good
and workman-like manner. Operating agreements generally provide,
however, that the operator will have no liability to the other
non-operating working interest owners for losses sustained or
liabilities incurred, except such as may result from gross
negligence or willful misconduct. In addition, third-party
operators are generally not fiduciaries with respect to the
Corporation, the Trust or the Unitholders. The Corporation, as
owner of working interests in properties not operated by it,
will generally have a cause of action for damages arising from a
breach of the operators duty. Although not established by
definitive legal precedent, it is unlikely that the Trust or our
Unitholders would be entitled to bring suit against third-party
operators to enforce the terms of the operating agreements.
Therefore, our Unitholders will be dependent upon the
Corporation, as owner of the working interest, to enforce such
rights.
Our
distributions could be adversely affected by unforeseen title
defects, which could reduce distributions to our
Unitholders.
Although title reviews are conducted prior to any purchase of
resource assets, such reviews cannot guarantee that an
unforeseen defect in the chain of title will not arise to defeat
our title to certain assets. Such defects could reduce the
amounts distributable to our Unitholders, and could result in a
reduction of capital.
Fluctuations
in foreign currency exchange rates could adversely affect our
business, and adversely affect the market price of the
Trust Units as well as distributions to our
Unitholders.
World oil prices are quoted in United States dollars and the
price received by Canadian producers is therefore affected by
the Canadian/United States dollar exchange rate which fluctuates
over time. A material increase in the value of
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the Canadian dollar may negatively impact our net production
revenue and cash flow. In 2007, the Canadian dollar generally
has increased significantly in value relative to the United
States dollar from historical levels, and no assurance can be
given that such trend will not continue. To the extent that we
have engaged, or in the future engage, in risk management
activities related to commodity prices and foreign exchange
rates, through entry into oil or natural gas price commodity
contracts and foreign exchange contracts or otherwise, we may be
subject to unfavourable price changes and credit risks
associated with the counterparties with which we contract.
A decline in the value of the Canadian dollar relative to the
United States dollar provides a competitive advantage to United
States companies in acquiring Canadian oil and gas properties
and may make it more difficult for us to replace reserves
through acquisitions.
Being a
limited purpose trust makes the Trust largely dependent upon the
operations and assets of the Corporation. If the oil and natural
gas reserves associated with the Corporations resource
properties are not supplemented through additional development
or the acquisition of oil and natural gas properties, the
ability of the Corporation to continue to generate cash flow for
distribution to Unitholders may be adversely affected.
The Trust is a limited purpose trust which is dependent upon the
operations and assets of the Corporation. The Corporations
income will be received from the production of crude oil and
natural gas from its properties and will be susceptible to the
risks and uncertainties associated with the oil and natural gas
industry generally. Since the primary focus is to pursue growth
opportunities through the development of existing reserves and
the acquisition of new properties, the Corporations
involvement in the exploration for oil and natural gas is
minimal. As a result, if the oil and natural gas reserves
associated with the Corporations resource properties are
not supplemented through additional development or the
acquisition of oil and natural gas properties, the ability of
the Corporation to continue to generate cash flow for
distribution to Unitholders may be adversely affected.
Management
may have conflicts of interest that may create incentives for
the Manager to act contrary to or in competition with the
interests of our Unitholders.
The Manager provides the advisory, management and administrative
needs of the Trust and the Corporation in consideration for a
management fee which is currently based in part on the earnings
of the Corporation. This arrangement may create an incentive for
the Manager to maximize the earnings of the Corporation, rather
than maximize its cash flow from operations, which is the
primary basis for calculating distributions available to
Unitholders.
The Manager may manage and administer such additional acquired
properties, as well as enter into other types of energy related
management and advisory activities and may not devote full time
and attention to the business of the Corporation and therefore
act contrary to or in competition with the interests of our
Unitholders.
General and administrative expenses which the Manager incurs in
relation to the business of the Corporation and the Trust are
required to be paid by the Corporation. These expenses are not
subject to a limit other than as may be provided under a
periodic review by the Board of Directors and, as a result,
there may not be an incentive for the Manager to minimize these
expenses.
We may
incur material costs as a result of compliance with health,
safety and environmental laws and regulations which could
negatively affect our financial condition and, therefore, reduce
distributions to our Unitholders and decrease the market price
of the Trust Units.
Compliance with environmental laws and regulations could
materially increase our costs. We may incur substantial capital
and operating costs to comply with increasingly complex laws and
regulations covering the protection of the environment and human
health and safety. In particular, we may be required to incur
significant costs to comply with the 1997 Kyoto Protocol to the
United Nations Framework Convention on Climate Change, known as
the Kyoto Protocol, that is intended to reduce emissions of
pollutants into the air.
Lower oil
and gas prices increase the risk of write-downs of our oil and
gas property investments which could be viewed unfavourably in
the market or could limit our ability to borrow funds or comply
with covenants contained in our current or future credit
agreements or other debt instruments.
Under Canadian accounting rules, the net capitalized cost of oil
and gas properties may not exceed a ceiling limit
which is based, in part, upon estimated future net cash flows
from reserves. If the net capitalized costs exceed this limit,
we must charge the amount of the excess against earnings. As oil
and gas prices decline, our net capitalized cost may approach
and, in
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certain circumstances, exceed this cost ceiling, resulting in a
charge against earnings. Under United States accounting rules,
the cost ceiling is generally lower than under Canadian rules
because the future net cash flows used in the United States
ceiling test are based on proven reserves only. Accordingly, we
would have more risk of a ceiling test write-down in a declining
price environment if we reported under United States generally
accepted accounting principles. While these write-downs would
not affect cash flow, the charge to earnings could be viewed
unfavourably in the market or could limit our ability to borrow
funds or comply with covenants contained in our current or
future credit agreements or other debt instruments.
Changes
in Canadian legislation could adversely affect the value of our
Trust Units.
The value of the Trust Units is largely related to our
income tax treatment. We cannot assure you that income tax laws
and government incentive programs relating to the oil and
natural gas industry generally and the status of royalty trusts
having our structure will not change in a manner that adversely
affects your investment.
If the
Trust ceases to qualify as a mutual fund trust it would
adversely affect the value of our Trust Units.
It is intended that the Trust will at all times qualify as a
mutual fund trust for the purposes of the Tax Act.
Notwithstanding the steps taken or to be taken by Pengrowth, no
assurance can be given that the status of the Trust as a mutual
fund trust will not be challenged by a relevant taxation
authority. If the Trusts status as a mutual fund trust is
determined to have been lost, certain negative tax consequences
will have resulted for the Trust and its Unitholders. These
negative tax consequences include the following:
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The Trust Units would cease to be a qualified investment
for trusts governed by RRSPs, RRIFs, RESPs and DPSPs, as defined
in the Tax Act. Where, at the end of a month, a RRSP, RRIF, RESP
or DPSP holds Trust Units that ceased to be a qualified
investment, the RRSP, RRIF, RESP or DPSP, as the case may be,
must, in respect of that month, pay a tax under Part XI.1
of the Tax Act equal to one percent of the fair market value of
the Trust Units at the time such Trust Units were
acquired by the RRSP, RRIF, RESP or DPSP. In addition, trusts
governed by a RRSP or a RRIF which hold Trust Units that
are not qualified investments will be subject to tax on the
income attributable to the Trust Units while they are
non-qualified investments, including the full capital gains, if
any, realized on the disposition of such Trust Units. Where
a trust governed by a RRSP or a RRIF acquires Trust Units
that are not qualified investments, the value of the investment
will be included in the income of the annuitant for the year of
the acquisition. Trusts governed by RESPs which hold
Trust Units that are not qualified investments can have
their registration revoked by the Canada Revenue Agency.
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The Trust would be required to pay a tax under Part XII.2 of the
Tax Act. The payment of Part XII.2 tax by the Trust may
have adverse income tax consequences for certain Unitholders,
including non-resident persons and residents of Canada who are
exempt from Part I tax.
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The Trust would not be entitled to use the capital gains refund
mechanism otherwise available for mutual fund trusts.
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The Trust Units would constitute taxable Canadian
property for the purposes of the Tax Act, potentially
subjecting non-residents of Canada to tax pursuant to the Tax
Act on the disposition (or deemed disposition) of such
Trust Units.
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The
ability of investors resident in the United States to enforce
civil remedies may be negatively affected for a number of
reasons.
The Trust is an Alberta trust and the Manager and the
Corporation are both Alberta corporations. All of these entities
have their principal places of business in Canada. All of the
directors and officers of the Manager and the majority of the
directors and officers of the Corporation are residents of
Canada and all or a substantial portion of the assets of such
persons and of the Trust are located outside of the United
States. Consequently, it may be difficult for United States
investors to effect service of process within the United States
upon the Trust or such persons or to realize in the United
States upon judgments of courts of the United States predicated
upon civil remedies under the United States Securities Act of
1933, as amended. Investors should not assume that Canadian
courts:
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will enforce judgments of United States courts obtained in
actions against the Trust or such persons predicated upon the
civil liability provisions of the United States federal
securities laws or the securities or blue sky laws
of any state within the United States; or
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will enforce, in original actions, liabilities against the Trust
or such persons predicated upon the United States federal
securities laws or any such state securities or blue sky laws.
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Your
rights as a Unitholder differ from the rights associated with
other types of investments and we cannot assure you that the
distributions you receive over the life of your investment will
meet or exceed your initial capital investment.
Trust Units should not be viewed by investors as shares in
the Corporation. Trust Units are also dissimilar to
conventional debt instruments in that there is no principal
amount owing to our Unitholders. Trust Units represent a
fractional interest in the Trust. Unitholders will not have the
statutory rights normally associated with ownership of shares of
a corporation including, for example, the right to bring
oppression or derivative actions. The
Trusts assets are royalty units of, net profits interests
in, and common shares of, the Corporation, Esprit Exploration
Ltd. and other subsidiaries of the Trust, as well as certain
facilities interests, and may also include certain other
investments permitted under the Trust Indenture. The price
per Trust Unit is a function of anticipated cash flow, the
oil and natural gas properties acquired by the Corporation and
the ability to effect long-term growth in the value of the
Corporation. The market price of the Trust Units is
sensitive to a variety of market conditions including, but not
limited to, interest rates and the ability of the Corporation to
acquire suitable oil and natural gas properties. Changes in
market conditions may adversely affect the trading price of our
Trust Units.
Trust Units will have no value when reserves from the
properties can no longer be economically produced or marketed
and, as a result, cash distributions do not represent a
yield in the traditional sense as they represent
both return of capital and return on investment. Unitholders
will have to obtain the return of capital invested out of cash
flow derived from their investments in the Trust Units
during the period when reserves can be economically recovered.
Accordingly, we give no assurances that the distributions you
receive over the life of your investment will meet or exceed
your initial capital investment.
Future
acquisitions may result in substantial future dilution of your
Trust Units.
One of our objectives is to continually add to our reserves
through acquisitions and through development. Our success is, in
part, dependent on our ability to raise capital from time to
time. Unitholders may also suffer dilution in connection with
future issuance of Trust Units.
Canadian
and United States practices differ in reporting reserves and
production and our estimates may not be comparable to those of
companies in the United States.
We report our production and reserve quantities in accordance
with Canadian practices and specifically in accordance with
National Instrument 51-101 Standards of Disclosure for Oil
and Gas Activities. These practices are different from the
practices used to report production and to estimate reserves in
reports and other materials filed with the SEC by companies in
the United States.
We incorporate additional information with respect to production
and reserves which is either not generally included or
prohibited under rules of the SEC and practices in the United
States. We follow the Canadian practice of reporting gross
production and reserve volumes; however, we also follow the
United States practice of separately reporting these volumes on
a net basis (after the deduction of royalties and similar
payments). We also follow the Canadian practice of using
forecast prices and costs when we estimate our reserves.
However, we separately estimate our reserves using prices and
costs held constant at the effective date of the reserve report
in accordance with the Canadian reserve reporting requirements.
These latter requirements are similar to the constant pricing
reserve methodology utilized in the United States.
We include in the documents incorporated herein by reference
estimates of proved and proved plus probable reserves. The SEC
generally prohibits the inclusion of estimates of probable
reserves in filings made with it by United States oil and gas
companies. This prohibition does not apply to the Trust because
it is a Canadian foreign private issuer.
You may
be required to pay taxes even if you do not receive any cash
distributions.
You may be required to pay federal income taxes and, in some
cases, state, provincial and local income taxes on your share of
our taxable income even if you do not receive any cash
distributions from us. You may not receive cash distributions
from us equal to your share of our taxable income or even equal
to the actual tax liability that results from your share of our
taxable income.
Unitholders
who are United States persons face certain income tax
risks.
The United States federal income tax risks related to owning and
disposing of our Trust Units include the following:
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We have elected under applicable United States Treasury
Regulations to be treated as a partnership for United States
federal income tax purposes. Section 7704 of the Internal
Revenue Code of 1986, as amended (the Code) provides
that publicly-traded partnerships such as the Trust will, as a
general rule, be taxed as corporations. We
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will not be treated as a corporation for U.S. federal income tax
purposes only if 90 percent or more of its gross income
consists of qualifying income. Although we expect to
satisfy the 90 percent requirement at all times, if we fail
to satisfy this requirement, we will be treated as a foreign
corporation. Such conversion will be taxable unless a certain
filing is made.
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If we were treated as a foreign corporation, we could be a
passive foreign investment company or PFIC. If we
were considered a PFIC, United States holders of
Trust Units could be subject to substantially increased
United States tax liability, including an interest charge upon
the sale or other disposition of the United States holders
Trust Units, or upon the receipt of excess
distributions from the Trust. Certain elections may be
available to a United States holder if we were classified as a
PFIC to alleviate these adverse tax consequences.
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We treat the Royalty between the Trust and the Corporation as a
royalty interest for all legal purposes, including United States
federal income tax purposes. The Royalty Indenture in some
respects differs from more conventional net profits
interests as to which the courts and the IRS have ruled
regarding the federal income tax treatment as a royalty, and as
a result the propriety of such treatment is not free from doubt.
It is possible that the IRS could contend, for example, that we
should be considered to have a working interest in the
properties of the Corporation. If the IRS were successful in
making such a contention, the United States federal income tax
consequences to United States holders could be different,
perhaps materially worse, than indicated in the discussion
herein, which generally assumes that the Royalty Indenture will
be respected as a royalty.
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Gain or loss will be recognized on a sale of Trust Units equal
to the difference between the amount realized and the United
States holders tax basis for the Trust Units sold.
Gain or loss recognized by a United States holder on the sale or
exchange of Trust Units will generally be taxable as capital
gain or loss, and will be long-term capital gain or loss if such
United States holders holding period of the
Trust Units exceeds one year. A portion of any amount
realized on a sale or exchange of Trust Units (which
portion could be substantial) will be separately computed and
taxed as ordinary income under Section 751 of the Code to the
extent attributable to the recapture of depletion or
depreciation deductions. Ordinary income attributable to
depletion deductions and depreciation recapture could exceed net
taxable gain realized upon the sale of the Trust Units and
may be recognized even if there is a net taxable loss realized
on the sale of the Trust Units. Thus, a United States
holder may recognize both ordinary income and a capital loss
upon a taxable disposition of Trust Units.
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We have registered as a tax shelter with the United
States Secretary of the Treasury because of the absence of
assurance that we will not be subject to tax shelter
registration and in light of the substantial penalties which
otherwise might be imposed if we failed to register and it were
subsequently determined that registration was required.
Registration as a tax shelter may increase the risk
of an IRS audit of us or a Unitholder. Any Unitholder owning
less than a one percent profits interest in us has very limited
rights to participate in the income tax audit process. Further,
any adjustments in our tax returns will lead to adjustments in
our Unitholders tax returns and may lead to audits of
Unitholders tax returns and adjustments of items unrelated
to us. You will bear the cost of any expense incurred in
connection with an examination of your personal tax return.
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Because we cannot match transferors and transferees of
Trust Units, we must maintain uniformity of the economic
and tax characteristics of the Trust Units to a purchaser
of these Trust Units. In the absence of such uniformity,
the Trust may be unable to comply completely with a number of
federal income tax requirements. A lack of uniformity, however,
can result from a literal application of some Treasury
regulations. If any non-uniformity was required by the IRS, it
could have a negative impact on the value of the
Trust Units.
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The Trust may not be an appropriate investment for certain types
of entities. For example, there is a risk that some of the
Trusts income could be unrelated business taxable income
with respect to tax-exempt organizations. Prospective purchasers
of Trust Units that are tax-exempt organizations are
encouraged to consult their tax advisors regarding investments
in Trust Units.
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The present U.S. federal income tax treatment of publicly traded
partnerships, including us, or an investment in our
Trust Units may be modified by administrative, legislative
or judicial interpretation at any time. For example, in response
to certain recent developments, members of Congress are
considering substantive changes to the existing U.S. tax laws
that would affect certain publicly traded partnerships. Any
modification to the U.S. federal income tax laws and
interpretations thereof may or may not be applied retroactively.
Although the currently proposed legislation would not appear to
affect our tax treatment, we are unable to predict whether any
of these changes, or other proposals, will ultimately be
enacted. Any such changes could negatively impact the value of
an investment in our Trust Units.
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We prorate our items of income, gain, loss and deduction between
transferors and transferees of our Trust Units each month
based upon the ownership of our Trust Units on the first
day of each month, instead of on the basis of the date a
particular Trust Unit is transferred. The use of the
proration method may not be permitted under existing Treasury
Regulations, and, accordingly, our counsel is unable to opine as
to the validity of this method. If the IRS were to challenge
this method or new Treasury Regulations were issued, we may be
required to change the allocation of items of income, gain, loss
and deduction among our Unitholders.
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On September 21, 2007, Canada and the United States signed
the fifth protocol (the Fifth Protocol) of the
Canada-U.S. Income Tax Convention, 1980 (the
Canada U.S. Convention). The Fifth
Protocol must still be ratified in Canada and the U.S. prior to
becoming effective. If ratification occurs in 2007, the Fifth
Protocol will, subject to some exceptions discussed below, come
into force on January 1, 2008. If ratification does not
occur in 2007, the Fifth Protocol will come into force when the
ratification procedures have been completed in Canada and the
U.S. The Fifth Protocol contains new Article IV(7)(b), a
treaty benefit denial rule, which would increase the Canadian
withholding tax on Pengrowths distributions (which for the
purposes of this paragraph includes deemed dividends pursuant to
the SIFT Rules) to Non-Resident Unitholders who are residents of
the U.S. for the purposes of the Canada-U.S. Convention.
Article IV(7)(b) will not come into force until the first
day of the third calendar year that ends after the Fifth
Protocol is in force. Article IV(7)(b) generally denies
benefits under the Canada-U.S. Convention in circumstances where
(i) a Unitholder who is a resident of the U.S. for the
purposes of the Canada-U.S. Convention receives an amount, such
as a distribution, from an entity that is a resident of Canada,
such as Pengrowth, (ii) Pengrowth is treated as a fiscally
transparent entity for U.S. federal income tax purposes, which
is the case inasmuch as Pengrowth is treated as a partnership
for U.S. federal income tax purposes, and (iii) the tax
treatment of the amount (or distribution) received by the U.S.
Resident Unitholder would, for U.S. federal income tax purposes,
be different if Pengrowth were not treated as fiscally
transparent for U.S. federal income tax purposes. The effect of
Article IV(7)(b) is that the Canadian withholding tax rate
on distributions of income would be 25% instead of 15%. Returns
of capital would still be subject to a 15% Canadian withholding
tax and such rate is not modified by the Fifth Protocol.
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Distributions
to our Unitholders may be reduced during periods in which
Pengrowth makes capital expenditures using cash flow.
To the extent that Pengrowth uses cash flow to finance
acquisitions, development costs and other significant capital
expenditures, the cash available to the Trust for the payment of
distributions will be reduced. To the extent that external
sources of capital, including the issuance of additional
Trust Units, becomes limited or unavailable,
Pengrowths ability to make the necessary capital
investments to maintain or expand its oil and gas reserves and
to invest in assets, as the case may be, will be impaired.
Changes
in government regulations that affect the crude oil and natural
gas industry could adversely affect Pengrowth and reduce our
distributions to our Unitholders.
The oil and gas industry in Canada is subject to federal,
provincial and municipal legislation and regulation governing
such matters as land tenure, prices, royalties, production
rates, environmental protection controls, the exportation of
crude oil, natural gas and other products, as well as other
matters. The industry is also subject to regulation by
governments in such matters as the awarding or acquisition of
exploration and production rights, oil sands or other interests,
the imposition of specific drilling obligations, environmental
protection controls, control over the development and
abandonment of fields and mine sites (including restrictions on
production) and possibly expropriation or cancellation of
contract rights.
Government regulations may change from time to time in response
to economic or political conditions. The exercise of discretion
by governmental authorities under existing regulations, the
implementation of new regulations or the modification of
existing regulations affecting the crude oil and natural gas
industry could reduce demand for crude oil and natural gas or
increase Pengrowths costs, either of which would have a
material adverse impact on Pengrowth.
On October 25, 2007, the Government of Alberta unveiled a
new royalty regime. The new regime will introduce new royalties
for conventional oil, natural gas and bitumen effective
January 1, 2009 that are linked to price and production
levels and will apply to both new and existing oil sands
projects and conventional oil and gas activities.
The Trusts reserves and resources and future net revenues
associated therewith as disclosed in its AIF dated
March 30, 2007 and the corresponding Form 40-F do not
reflect the increased royalties contemplated by the proposed new
royalty regime and, after taking the new royalty regime into
account, such values will be adversely affected. It is
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anticipated that the new royalty regime will result in a 7 to
19 percent increase in the royalties paid by Pengrowth as
compared to the current royalty structure. This increase is
expected to result in a decline in the net present value,
discounted at 10 percent, of the future net revenues
associated with (i) Pengrowths reserves of
1 percent; and (ii) Pengrowths proved plus
probable reserves of 4 percent, in both cases using current
commodity price assumptions of GLJ Petroleum Consultants
Ltd., independent qualified reserves evaluators. It is
anticipated that the new royalty regime will result in a 2 to
7 percent decline in Pengrowths cash flow for 2009,
the first year in which the royalty changes take effect, as
compared to the current royalty structure.
The implementation of the proposed changes to the royalty regime
in Alberta is subject to certain risks and uncertainties. The
significant changes to the royalty regime require new
legislation, changes to existing legislation and regulation and
development of proprietary software to support the calculation
and collection of royalties. Additionally, certain proposed
changes contemplate further public and/or industry consultation.
There may be modifications introduced to the proposed royalty
structure prior to the implementation thereof. See
Recent Developments Changes to Royalty
Legislation Affecting Pengrowth and its Unitholders.
If
Pengrowth expands operations beyond oil and natural gas
production in Canada, Pengrowth may face new challenges and
risks. If Pengrowth is unsuccessful in managing these challenges
and risks, its results of operations and financial condition
could be adversely affected, which could affect the market price
of the Trust Units and distributions to
Unitholders.
Pengrowths operations and expertise are currently focused
on conventional oil and gas production and development in the
Western Canadian Sedimentary Basin, together with its
participation in the Sable Offshore Energy Project. In the
future, Pengrowth may acquire oil and natural gas properties
outside these geographic areas. Expansion of Pengrowths
activities into new areas may present challenges and risks that
it has not faced in the past. If Pengrowth does not manage these
challenges and risks successfully, its results of operations and
financial condition could be adversely affected.
Delays in
business operations could adversely affect the Trusts
distributions to Unitholders and the market price of the
Trust Units.
In addition to the usual delays in payment by purchasers of oil
and natural gas to the operators of Pengrowths properties,
and the delays of those operators in remitting payment to
Pengrowth, payments between any of these parties may also be
delayed by:
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restrictions imposed by lenders;
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accounting delays;
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delays in the sale or delivery of products;
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delays in the connection of wells to a gathering system;
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blowouts or other accidents;
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adjustments for prior periods;
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recovery by the operator of expenses incurred in the operation
of the properties; or
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the establishment by the operator of reserves for these expenses.
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Any of these delays could reduce the amount of cash available
for distribution to Unitholders in a given period and expose
Pengrowth to additional third party credit risks.
Changes
in market-based factors may adversely affect the trading price
of the Trust Units.
The market price of our Trust Units is sensitive to a
variety of market based factors including, but not limited to,
interest rates, foreign exchange rates and the comparability of
the Trust Units to other yield-oriented securities. Any
changes in these market-based factors may adversely affect the
trading price of the Trust Units.
The
limited liability of Unitholders is uncertain.
Notwithstanding the fact that Alberta has adopted legislation
purporting to limit Unitholder liability, because of
uncertainties in the law relating to investment trusts, there is
a risk that a Unitholder could be held personally liable for
obligations of the Trust in respect of contracts or undertakings
which the Trust enters into and for certain liabilities arising
otherwise than out of contracts including claims in tort, claims
for taxes and possibly certain other statutory liabilities.
Pengrowth has structured itself and attempted to conduct its
business in a manner which mitigates the Trusts liability
exposure and where possible, limits its liability to Trust
property. However, such protective actions may not completely
29
avoid Unitholder liability. Notwithstanding Pengrowths
attempts to limit Unitholder liability, Unitholders may not be
protected from liabilities of the Trust to the same extent that
a shareholder is protected from the liabilities of a
corporation. Further, although the Trust has agreed to indemnify
and hold harmless each Unitholder from any costs, damages,
liabilities, expenses, charges and losses suffered by a
Unitholder resulting from or arising out of the Unitholder not
having limited liability, Pengrowth cannot assure prospective
investors that any assets would be available in these
circumstances to reimburse Unitholders for any such liability.
Legislation that purports to limit Unitholder liability has been
implemented in Alberta but there is no assurance that such
legislation will eliminate all risk of Unitholder liability.
Additionally, the legislation does not affect the liability of
Unitholders with respect to any act, default, obligation or
liability that arose prior to July 1, 2004.
The
redemption right of Unitholders is limited.
Unitholders have a limited right to require the Trust to
repurchase Trust Units, which is referred to as a
redemption right. See Description of
Trust Units Redemption Right. It
is anticipated that the redemption right will not be the primary
mechanism for Unitholders to liquidate their investment. The
Trusts ability to pay cash in connection with a redemption
is subject to limitations. Any securities which may be
distributed in specie to Unitholders in connection with a
redemption may not be listed on any stock exchange and a market
may not develop for such securities. In addition, there may be
resale restrictions imposed by law upon the recipients of the
securities pursuant to the redemption right.
The
industry in which Pengrowth operates exposes Pengrowth to
potential liabilities that may not be covered by
insurance.
Pengrowths operations are subject to all of the risks
normally associated with the operation and development of oil
and natural gas properties, including the drilling of oil and
natural gas wells and the production and transportation of oil
and natural gas. These risks and hazards include encountering
unexpected formations or pressures, blow-outs, craterings and
fires, all of which could result in personal injury, loss of
life or environmental and other damage to Pengrowths
property and the property of others. Pengrowth cannot fully
protect against all of these risks, nor are all of these risks
insurable. Pengrowth may become liable for damages arising from
these events against which it cannot insure or against which it
may elect not to insure because of high premium costs or other
reasons. While Pengrowth has both safety and environmental
policies in place to protect its operators and employees and to
meet regulatory requirements in areas where they operate, any
costs incurred to repair damages or pay liabilities would reduce
the funds available for distribution to the Unitholders.
CERTAIN
INCOME TAX CONSIDERATIONS
The applicable supplement to this Prospectus will describe
certain Canadian federal income tax consequences to an investor
who is resident of Canada or who is a non-resident of Canada of
acquiring, owning or disposing of any Trust Units offered
thereunder, including to the extent applicable, whether the
distributions relating to the Trust Units will be subject
to Canadian non-resident withholding tax.
The applicable supplement to this Prospectus will also describe
certain United States federal income tax consequences of the
ownership and disposition of any Trust Units offered
thereunder by an initial investor who is a United States person
(within the meaning of the United States Internal Revenue Code).
In addition to the material contracts set out in the AIF, the
following contracts may be material to an investor in Securities:
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the Trust Indenture;
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the Royalty Indenture;
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the amended and restated unanimous shareholder agreement among
the Manager, the Corporation, the Trust and Computershare dated
June 11, 2007;
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the Fifth Amended and Restated Credit Agreement dated
June 17, 2007 between Pengrowth and a syndicate of eleven
financial institutions concerning the Credit Facility;
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the Note Purchase Agreement dated July 26, 2007
concerning the 2007 U.S. Senior Notes;
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the Note Purchase Agreement dated April 23, 2003
concerning the 2003 U.S. Senior Notes;
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the Note Purchase Agreement dated December 1, 2005
concerning the U.K. Senior Notes;
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the Debenture Indenture; and
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the First Supplemental Debenture Indenture.
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Copies of each of the foregoing material contracts are available
through the Internet on SEDAR at www.sedar.com.
Unless otherwise specified in the Prospectus Supplement relating
to a series of Securities, certain legal matters relating to the
offering of each series of the Securities will be passed upon
for us by Bennett Jones LLP, Calgary, Alberta and certain United
States legal matters, to the extent they are addressed in any
Prospectus Supplement, will be passed upon for us by Paul,
Weiss, Rifkind, Wharton & Garrison LLP. In addition,
certain legal matters in connection with any offering of
Securities will be passed upon for any underwriters, dealers or
agents by counsel to be designated at the time of the offering
by such underwriters, dealers or agents with respect to matters
of Canadian and United States law.
The partners and associates of Bennett Jones LLP beneficially
own, directly or indirectly, less than 1% of our outstanding
Trust Units and Class A trust units, in the aggregate.
Our consolidated financial statements as at and for the years
ended December 31, 2006 and 2005 incorporated by reference
into this Prospectus have been audited by KPMG LLP, independent
auditors, as indicated in their report dated February 26,
2007 and are incorporated herein in reliance upon the authority
of said firm as experts in accounting and auditing in giving
said report.
The schedules of revenues, royalties and operating expenses and
notes thereto relating to the CP Assets for the years ended
December 31, 2005 and 2004 incorporated by reference into
this Prospectus have been audited by Ernst & Young
LLP, independent auditors, as indicated in their report dated
November 2, 2006 and are incorporated herein in reliance on
their report given on their authority as experts in accounting
and auditing.
Information relating to our reserves in our AIF was calculated
based on an evaluation of, and reports on, our crude oil and
natural gas reserves conducted and prepared by GLJ Petroleum
Consultants Ltd. (GLJ), independent qualified
reserves evaluators. Information relating to the reserves of the
CP Assets included in our business acquisition report dated
March 16, 2007 was calculated based on the evaluation of,
and reports on, Esprits crude oil and natural gas reserves
of the CP Assets conducted and prepared by GLJ. As of the date
hereof, the directors and officers of GLJ, as a group,
beneficially own, directly or indirectly, less than 1% of our
outstanding Trust Units and Class A trust units, in
the aggregate.
DOCUMENTS
FILED AS PART OF THE REGISTRATION STATEMENT
The following documents have been or will be filed with the SEC
as part of the registration statement of which this Prospectus
is a part insofar as required by the SECs
Form F-10:
(i) the documents listed under the heading
Documents Incorporated by Reference;
(ii) the consents of independent auditors, counsel and
engineers; (iii) powers of attorney pursuant to which the
amendments to the registration statement may be signed; and
(iv) the Trust Indenture.
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Consent
of KPMG LLP
The Board of Directors
Pengrowth Corporation, as Administrator of
Pengrowth Energy Trust
We have read the amended and restated short form base shelf
prospectus dated December 5, 2007 relating to the sale and
issue of trust units or subscription receipts of Pengrowth
Energy Trust (Pengrowth). We have complied with
Canadian generally accepted standards for an auditors
involvement with offering documents.
We consent to the incorporation by reference in the
above-mentioned amended and restated short form base shelf
prospectus of our report to the unitholders of Pengrowth on the
consolidated balance sheets of Pengrowth as at December 31,
2006 and 2005 and the consolidated statements of income and
deficit and cash flow for each of the years then ended. Our
report is dated February 26, 2007.
We consent to the incorporation by reference in the
above-mentioned amended and restated short form base shelf
prospectus of our audit report to the board of directors of
Pengrowth Corporation, as administrator of Pengrowth and the
unitholders of Pengrowth on managements assessment of the
effectiveness of the internal control over financial reporting
as of December 31, 2006 and the effectiveness of
Pengrowths internal control over financial reporting as of
December 31, 2006. Our report is dated February 26,
2007.
We consent to the use in the business acquisition report dated
October 31, 2006 incorporated by reference in the
above-mentioned amended and restated short form base shelf
prospectus of our report to the unitholders of Esprit Energy
Trust on the consolidated balance sheets of Esprit as at
December 31, 2005 and 2004 and the consolidated statements
of earnings and retained earnings (deficit) and cash flows for
each of the years then ended. Our report is dated
February 14, 2006.
We also consent to the use in the business acquisition report
dated October 31, 2006 incorporated by reference in the
above-mentioned amended and restated short form base shelf
prospectus of our report to the unitholders of Esprit Energy
Trust on the related supplemental note entitled
Differences between Canadian and United States Generally
Accepted Accounting Principles as at December 31,
2005 and 2004 and for each of the years then ended. Our report
is dated August 21, 2006.
(signed) KPMG LLP
Chartered Accountants
Calgary, Canada
December 5, 2007
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Consent
of Ernst & Young LLP
The Board of Directors
Pengrowth Corporation, as Administrator of
Pengrowth Energy Trust
We have read the amended and restated short form base shelf
prospectus dated December 5, 2007 (the
Prospectus) relating to the sale and issue of
Trust Units and Subscription Receipts of Pengrowth Energy
Trust (Pengrowth). We have complied with Canadian
generally accepted standards for an auditors involvement
with offering documents.
We consent to the incorporation by reference in the
above-mentioned Prospectus of our report to the board of
directors of ConocoPhillips Canada (ConocoPhillips)
on the schedules of revenue, royalties and operating expenses
for the years ended December 31, 2005 and 2004 relating to
the CP Assets (as that term is defined in the Prospectus). Our
report is dated November 2, 2006.
(signed) Ernst & Young LLP
Chartered Accountants
Calgary, Canada
December 5, 2007
33
PART II
INFORMATION NOT REQUIRED TO BE DELIVERED TO OFFEREES OR PURCHASERS
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 124 of the Business Corporations Act (Alberta) provides as follows:
124(1) Except in respect of an action by or on behalf of the corporation or body corporate to
procure a judgment in its favour, a corporation may indemnify a director or officer of the
corporation, a former director or officer of the corporation or a person who acts or acted at the
corporations request as a director or officer of a body corporate of which the corporation is or
was a shareholder or creditor, and the directors or officers heirs and legal representatives,
against all costs, charges and expenses, including an amount paid to settle an action or satisfy a
judgment, reasonably incurred by the director or officer in respect of any civil, criminal or
administrative action or proceeding to which the director or officer is made a party by reason of
being or having been a director or officer of that corporation or body corporate, if
(a) the director or officer acted honestly and in good faith with a view to the best interests
of the corporation, and
(b) in the case of a criminal or administrative action or proceeding that is enforced by a
monetary penalty, the director or officer had reasonable grounds for believing that the directors
or officers conduct was lawful.
(2) A corporation may with the approval of the Court indemnify a person referred to in subsection
(1) in respect of an action by or on behalf of the corporation or body corporate to procure a
judgment in its favour, to which the person is made a party by reason of being or having been a
director or an officer of the corporation or body corporate, against all costs, charges and
expenses reasonably incurred by the person in connection with the action if the person fulfills the
conditions set out in subsection (1)(a) and (b).
(3) Notwithstanding anything in this section, a person referred to in subsection (1) is entitled to
indemnity from the corporation in respect of all costs, charges and expenses reasonably incurred by
the person in connection with the defence of any civil, criminal or administrative action or
proceeding to which the person is made a party by reason of being or having been a director or
officer of the corporation or body corporate, if the person seeking indemnity
(a) was substantially successful on the merits in the persons defence of the action or
proceeding,
(b) fulfills the conditions set out in subsection (1)(a) and (b), and
(c) is fairly and reasonably entitled to indemnity.
(3.1) A corporation may advance funds to a person in order to defray the costs, charges and
expenses of a proceeding referred to in subsection (1) or (2), but if the person does not meet the
conditions of subsection (3) he or she shall repay the funds advanced.
(4) A corporation may purchase and maintain insurance for the benefit of any person referred to in
subsection (1) against any liability incurred by the person
(a) in the persons capacity as a director or officer of the corporation, except when the
liability relates to the persons failure to act honestly and in good faith with a view to the best
interests of the corporation, or
(b) in the persons capacity as a director or officer of another body corporate if the person
acts or acted in that capacity at the corporations request, except when the liability relates to
the persons failure to act honestly and in good faith with a view to the best interests of the
body corporate.
II-1
(5) A corporation or a person referred to in subsection (1) may apply to the Court for an order
approving an indemnity under this section and the Court may so order and make any further order it
thinks fit.
(6) On an application under subsection (5), the Court may order notice to be given to any
interested person and that person is entitled to appear and be heard in person or by counsel.
The by-laws of Pengrowth Corporation (the Corporation) and Pengrowth Management Limited (the
Manager), respectively, provide that they will indemnify the indemnified persons designated in
Section 124(1) of the Business Corporations Act (Alberta) of the Corporation and the Manager,
respectively, in the manner contemplated by the Business Corporations Act (Alberta).
As contemplated by Section 124(4) of the Business Corporations Act (Alberta), the Corporation has
purchased insurance against potential claims against the directors and officers of the Corporation
and against loss for which the Corporation may be required or permitted by law to indemnify such
directors and officers.
Pursuant to the Amended and Restated Management Agreement (the Management Agreement) dated as of
May 12, 2003 among the Corporation, Pengrowth Energy Trust (the Trust), Computershare Trust
Company of Canada and the Manager, the Manager and these persons having served as a director,
officer or employee thereof shall be indemnified by the Corporation (out of its assets and out of
the royalty provided for in the Amended and Restated Royalty Indenture dated as of July 27, 2006
between the Corporation and Computershare Trust Company of Canada, as trustee) for all liabilities
and expenses arising from or in any matter related to the Management Agreement, so long as the
party seeking such indemnification shall not be adjudged liable for or guilty of willful
misfeasance, bad faith, gross negligence or reckless disregard of duty to the Corporation or the
Trust, and shall not be adjudged to be in breach of any material covenants and duties of the
Manager under the Management Agreement.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers or persons controlling the Registrant pursuant to the foregoing
provisions, the Registrant has been informed that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Securities Act and is
therefore unenforceable.
EXHIBITS
See Exhibit Index beginning on page E-1.
II-2
PART III
UNDERTAKING AND CONSENT TO SERVICE OF PROCESS
Item 1. Undertaking
The Registrant undertakes to make available, in person or by telephone, representatives to
respond to inquiries made by the Commission staff, and to furnish promptly, when requested to do so
by the Commission staff, information relating to the securities registered pursuant to this
Amendment No. 1 to the Registration Statement on Form F-10 or to transactions in said securities.
Item 2. Consent to Service of Process
The Registrant and the trustee for the registered securities, Computershare Trust Company of
Canada, have each previously filed with the Commission a written irrevocable consent and power of
attorney on Form F-X.
Any change to the name or address of the agent for service of process of the Registrant shall
be communicated promptly to the Commission by an amendment to the Form F-X referencing the file
number of the relevant registration statement.
III-1
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it
has reasonable grounds to believe that it meets the requirements for filing on Form F-10 and has
duly caused this Amendment No. 1 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Calgary, Province of Alberta, Canada, on the
5th day of December, 2007.
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PENGROWTH ENERGY TRUST
By: Pengrowth Corporation, Administrator
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By: |
*
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Name: |
James S. Kinnear |
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Title: |
President, Chairman and Chief Executive Officer |
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Pursuant to the requirements of the Securities Act of 1933, this Amendment No. 1 to the
Registration Statement has been signed below by the following persons in the capacities indicated
on December 5, 2007.
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Signature |
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Title |
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*
James S. Kinnear |
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President, Chairman and Chief Executive Officer |
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/s/ Christopher G. Webster
Christopher G. Webster |
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Chief Financial Officer (Principal Financial Officer) |
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*
Douglas C. Bowles |
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Vice President and Controller (Principal Accounting
Officer) |
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*
John B. Zaozirny |
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Director |
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*
Stanley H. Wong |
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Director |
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*
Thomas A. Cumming |
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Director |
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*
Michael S. Parrett |
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Director |
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*
A. Terence Poole |
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Director |
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*
Kirby L. Hedrick |
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Director |
III-2
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*
Wayne K. Foo |
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Director |
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*
D. Michael G. Stewart |
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Director |
AUTHORIZED REPRESENTATIVE
Pursuant to the requirements of Section 6(a) of the Securities Act of 1933, the undersigned
has signed this Amendment No. 1 to the Registration Statement, solely in the capacity of the duly
authorized representative of the Registrant in the United States, on the 5th day of December,
2007.
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*
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Name: |
Kirby L. Hedrick |
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Title: |
Director |
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*By: |
/s/ Christopher G. Webster
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Christopher G. Webster |
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Attorney-in-Fact |
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EXHIBIT INDEX
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Exhibit |
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Number |
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Description |
4.1*
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The Registrants Annual Information Form, dated March 30,
2007, for the year ended December 31, 2006 (incorporated by
reference to the Registrants Annual Report on Form 40-F
filed with the Commission on April 2, 2007 (file no.
001-31253)). |
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4.2*
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The Registrants Management Information Circular, dated May
1, 2007, relating to the annual and special meeting of the
Registrants unitholders held on June 11, 2007
(incorporated by reference to the Registrants Current
Report on Form 6-K filed with the Commission on May 17,
2007 (file no. 001-31253)). |
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4.3*
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The Registrants Managements Discussion and Analysis for
the year ended December 31, 2006 (incorporated by reference
to the Registrants Annual Report on Form 40-F filed with
the Commission on April 2, 2007 (file no. 001-31253)). |
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4.4*
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The Registrants audited comparative consolidated annual
financial statements for the year ended December 31, 2006,
together with the notes thereto and the report of the
Registrants auditors thereon (incorporated by reference to
the Registrants Annual Report on Form 40-F filed with the
Commission on April 2, 2007 (file no. 001-31253)). |
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4.5*
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The Registrants Managements Discussion and Analysis for
the period ended September 30, 2007 (incorporated by
reference to the Registrants Current Report on Form 6-K
filed with the Commission on November 14, 2007 (file no.
001-31253)). |
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4.6*
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The Registrants unaudited comparative consolidated interim
financial statements for the period ended September 30,
2007 (incorporated by reference to the Registrants Current
Report on Form 6-K filed with the Commission on November
14, 2007 (file no. 001-31253)). |
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4.7*
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The Registrants business acquisition report dated October
31, 2006 (incorporated by reference to the Registrants
Current Report on Form 6-K filed with the Commission on
November 30, 2006 (file no. 001-31253)). |
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4.8*
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The Registrants business acquisition report dated March
16, 2007 (incorporated by reference to the Registrants
Current Report on Form 6-K filed with the Commission on
March 16, 2007 (file no. 001-31253)). |
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4.9*
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Oil and Gas Producing Activities Prepared in Accordance
with SFAS No. 69 Disclosure about Oil and Gas Producing
Activities (incorporated by reference from the
Registrants Annual Report on Form 40-F filed on April 2,
2007 (file no. 001-31253)). |
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4.10*
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Reconciliation of Financial Statements of the Registrant
for the years ended December 31, 2006 and 2005 to United
States generally accepted accounting principles
(incorporated by reference from the Registrants Annual
Report on Form 40-F filed with the Commission on April 2,
2007 (file no. 001-31253)). |
E-1
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Exhibit |
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Number |
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Description |
4.11*
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Reconciliation of Financial Statements of the Registrant
for the period ended June 30, 2007 to United States
generally accepted accounting principles (incorporated by
reference from the Registrants Current Report on Form 6-K
filed with the Commission on October 12, 2007 (file no.
001-31253)). |
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4.12*
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For the sole purpose of the presentation of the reconciliation incorporated by reference as Exhibit 4.11 hereto, the Registrants Managements Discussion and Analysis
for the period ended June 30, 2007 (incorporated by
reference to the Registrants Current Report on Form 6-K
filed with the Commission on August 14, 2007 (file no.
001-31253)). |
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4.13*
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For the sole purpose of the presentation of the reconciliation incorporated by reference as Exhibit 4.11 hereto, the Registrants unaudited comparative consolidated interim financial statements
for the period ended June 30, 2007 (incorporated by
reference to the Registrants Current Report on Form 6-K
filed with the Commission on August 14, 2007 (file no.
001-31253)). |
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5.1
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Consent of Bennett Jones LLP. |
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5.2
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Consent of KPMG LLP. |
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5.3
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Consent of Ernst & Young LLP. |
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5.4
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Consent of GLJ Petroleum Consultants Ltd. |
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6.1*
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Power of Attorney |
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7.1*
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Form of Amended and Restated Trust Indenture (incorporated
by reference from the Registrants Registration Statement
on Form 8-A/A filed with the Commission on June 15, 2007
(file no. 001-31253)). |
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* |
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Previously filed or incorporated by reference herein. |
E-2