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Pengrowth Energy Corporation (TSX:PGF) (NYSE:PGH) is
pleased to report its unaudited financial and operating results for the three
months ended June 30, 2012. All figures are in Canadian dollars unless otherwise
stated.
"The second quarter was an active quarter at Pengrowth. We advanced our
strategic plan with the completion of the NAL Energy Corporation
("NAL") acquisition, and achieved first production from our
Lindbergh pilot," said Derek Evans, Pengrowth's President and Chief
Executive Officer. "These two events are important steps as we seek to
become a niche SAGD producer, with NAL providing excellent light oil drilling
inventory as well as significant cash flow to fund the Lindbergh SAGD development."
Highlights
-- On May 31, 2012, Pengrowth completed the acquisition of NAL, adding over 27,000 barrels of oil equivalent per day ("boepd") of production and 104 million barrels of oil equivalent ("MMboe") of proved plus probable reserves (as at December 31, 2011). -- The NAL acquisition expanded Pengrowth's strategic focus on light oil plays with the addition of 730 locations in the central Alberta Cardium and southeast Saskatchewan Mississippian light oil plays. -- Mr. Kelvin Johnston and Mr. Barry Stewart joined Pengrowth's Board of Directors upon closing of the NAL acquisition. Both bring years of experience in the oil and gas industry and augment the depth of Pengrowth's Board. -- Second quarter Adjusted Net Income (Loss) was a loss of $89.6 million compared to a loss of $5.4 million in the first quarter of 2012. Included in the second quarter loss was an impairment charge of $78.3 million, relating to natural gas properties, as a consequence of lower commodity prices and approximately $17.0 million of one-time transaction costs in connection with the NAL acquisition. -- Average daily production during the second quarter was 78,870 boepd, including one month of NAL production contributing approximatel y 8,800 boepd to the quarterly average. This represents a four percent increase from first quarter 2012 production of 75,618 boepd. Approximately 54 percent of production was oil and liquids. -- Positive Lindbergh SAGD pilot results, with the two wells producing an average of 650 barrels of bitumen per day ("bbpd") each, with an Instantaneous Steam Oil Ratio ("ISOR") of less than 2.0. -- Lindbergh proved plus probable reserves increased by 88.7 MMboe or approximately 20 percent over the combined Pengrowth and NAL December 31, 2011 proved plus probable reserves.
Summary of Operating and Financial Results
Summary of Financial & Operating Results (1) (monetary amounts in millions, except per share and per boe Three months ended Six months ended amounts or as June 30, June 30, % June 30, June 30, % otherwise stated) 2012 2011 Change 2012 2011 Change ---------------------------------------------------------------------------- PRODUCTION Average daily production (boe) 78,870 70,958 11 77,243 72,288 7 ---------------------------------------------------------------------------- CASH FLOW Funds flow from operations $ 94.4 $ 151.7 (38) $ 208.0 $ 298.5 (31) Funds flow from operations per share $ 0.23 $ 0.46 (50) $ 0.54 $ 0.91 (41) Oil and gas sales (2) (3) $ 328.4 $ 356.7 (8) $ 656.8 $ 697.6 (6) Oil and gas sales per boe $ 45.75 $ 55.24 (17) $ 46.72 $ 53.32 (12) Operating expense $ 109.8 $ 91.3 20 $ 205.3 $ 182.8 12 Operating expense per boe $ 15.29 $ 14.14 8 $ 14.60 $ 13.97 5 Royalty expense $ 62.6 $ 72.2 (13) $ 140.5 $ 132.6 6 Royalty expense per boe $ 8.72 $ 11.18 (22) $ 9.99 $ 10.13 (1) Royalty expense as a percent of sales 19% 20% 21% 19% Cash G&A expense $ 16.3 $ 15.8 3 $ 32.7 $ 33.5 (2) Cash G&A expense per boe $ 2.27 $ 2.45 (7) $ 2.33 $ 2.56 (9) Capital expenditures(2) $ 109.2 $ 162.2 (33) $ 262.9 $ 302.9 (13) Capital expenditures per share 0.27 $ 0.49 (45) $ 0.68 $ 0.93 (27) Capital expenditures including net cash acquisitions $ 124.2 $ 158.3 (22) $ 303.0 $ 300.3 1 Capital expenditures including net cash acquisitions per share $ 0.30 $ 0.48 (36) $ 0.78 $ 0.92 (15) Dividends paid $ 76.8 $ 68.8 12 $ 152.7 $ 137.0 11 Dividends paid per share $ 0.21 $ 0.21 - $ 0.42 $ 0.42 - Number of shares outstanding at period end (000's) 500,447 328,500 52 500,447 328,500 52 Weighted average number of shares outstanding (000's) 411,408 327,754 26 386,687 327,067 18 ---------------------------------------------------------------------------- STATEMENT OF INCOME (LOSS) Adjusted Net (Loss) Income $ (89.6) $ 30.0 (399) $ (95.0) $ 65.9 (244) Net income $ 31.1 $ 88.5 (65) $ 31.8 $ 94.0 (66) Net income per share 0.08 0.27 (70) 0.08 0.29 (72) ---------------------------------------------------------------------------- LONG TERM DEBT Long term debt(4) $ 1,483.7 $ 1,113.4 33 $ 1,483.7 $ 1,113.4 33 Convertible debentures(4) $ 297.4 $ - 100 $ 297.4 $ - 100 Total Long term debt including convertible debentures $ 1,781.2 $ 1,113.4 60 $ 1,781.2 $ 1,113.4 60 ---------------------------------------------------------------------------- CONTRIBUTION BASED ON OPERATING NETBACKS Light oil 74% 52% 67% 50% Heavy oil 14% 10% 15% 11% Natural gas liquids 14% 15% 18% 17% Natural gas -2% 23% 0% 22% ----------------------------------------------------------------------------
(1) Three and six months ended June 30, 2012 include one
month of NAL results.
(2) Prior periods restated to conform to presentation in the current period.
(3) Includes the impact of realized commodity risk management contracts.
(4) Long term debt and convertible debentures include the current and long
term portion of each.
Pengrowth's unaudited financial statements for the three months ended June
30, 2012 and related Management's Discussion and Analysis can be viewed on
Pengrowth's website at www.pengrowth.com,
and have been filed on SEDAR at www.sedar.com and on EDGAR at www.sec.gov/edgar.shtml.
Production
Daily production for the second quarter averaged 78,870 boepd, an increase of
approximately four percent compared to an average of 75,618 boepd in the
first quarter of 2012 and 11 percent higher compared to 70,958 boepd in the
second quarter of 2011. Lindbergh pilot production in the quarter is not
included in these numbers.
Contributing approximately 8,800 boepd to second quarter average daily
production numbers was one month of production associated with the NAL
acquisition, which was completed on May 31, 2012. Offsetting second quarter
production was planned downtime associated with turnaround activities of
2,500 boepd at the Olds Gas Facility and the Sable Offshore Energy Project
("SOEP"). Approximately 1,000 boepd of natural gas volumes were
shut-in during the second quarter due to low natural gas prices.
Pengrowth's 2012 capital program is expected to generate full-year average
production of between 86,000 and 89,000 boepd, with fourth quarter, 2012
production anticipated to be between 96,000 and 100,000 boepd.
Realized Commodity Prices
Pengrowth's total average realized price, after risk management activities
during the second quarter was $45.75 per boe, a four percent decrease from
the first quarter 2012 average price of $47.73 per boe and a 17 percent
decrease from the second quarter 2011 average price of $55.24 per boe. The
decrease in realized prices from the first quarter is primarily a result of
lower benchmark prices for oil and natural gas. The lower realized prices
compared to the second quarter of 2011 are a result of lower crude oil
benchmark prices, the substantial discounting of Canadian crude oil versus
the West Texas Intermediate ("WTI") benchmark prices and decreased
natural gas prices, coupled with lower natural gas volumes being hedged.
As a Canadian producer, Pengrowth receives Canadian benchmark prices for the
oil and natural gas that it sells. Benchmark commodity prices declined in the
second quarter, with WTI falling nine percent and NYMEX natural gas falling
six percent from levels in the first quarter of 2012. Pengrowth's expectation
that the discounted price for Edmonton-based light sweet crude oil would
narrow in the second quarter did not materialize. Edmonton-based light sweet
crude oil continued to trade at a substantial discount versus WTI, averaging approximately
$10 per barrel less than WTI prices during the quarter.
Funds Flow from Operating Activities
Funds flow from operating activities during the second quarter was
approximately $94 million ($0.23 per share) compared to $114 million ($0.31
per share) in the first quarter of 2012 and $152 million ($0.46 per share)
during the second quarter 2011. The decline in funds flow in the second
quarter was due to lower realized commodity prices, higher operating costs
associated with turnaround activities and certain one-time expenses related
to the NAL acquisition. These one-time transaction expenses associated with
the NAL acquisition amounted to approximately $17 million. Absent these
one-time expenses, funds flow in the second quarter would have been approximately
$111 million ($0.27 per share).
Operating Expenses
Pengrowth incurred operating expenses of approximately $110 million or $15.29
per boe in the second quarter of 2012, including $12 million of additional
costs associated with the acquired NAL properties. On a per boe basis,
operating expenses were ten percent higher compared to first quarter 2012
expenses of $13.88 per boe and eight percent higher compared to second
quarter 2011 expenses of $14.14 per boe. The higher unit operating expenses during
the second quarter resulted from lower volumes and expenses related to the
planned maintenance activities at Olds and SOEP. Partially offsetting these
expenses were lower costs for power and reduced costs for lower subsurface
maintenance activities in the second quarter.
Full-year 2012 operating expenses are expected to be $440 million, or $13.75
per boe, which includes the increase in expenses associated with the acquired
NAL properties.
Development Activities
In the second quarter, Pengrowth's capital spending, excluding acquisitions,
totalled $109 million versus $154 million in the first quarter of 2012 and
$163 million in the second quarter of 2011. Approximately 79 percent of the
capital was spent on drilling, completions and facilities, with Pengrowth
participating in the drilling of 20 (13.1 net) wells. Spending in the second
quarter was primarily focused on the Swan Hills trend, with additional
capital allocated to development activities at Lindbergh and Olds. Also
during the second quarter, significant planned turnaround activities were
completed at the Olds and SOEP facilities, resulting in downtime in
production at these properties and limiting production during the quarter.
The turnaround activity was completed as scheduled and operations at these
facilities have returned to normal.
Swan Hills Trend
In the second quarter of 2012, Pengrowth invested $47 million at Swan Hills
to drill eight (7.9 net) operated wells. Three wells were completed, two of
which were tested and tied-in during the quarter, with an average five day
initial production ("IP") rates of over 275 boepd per well. In
addition, two (1.9 net) operated wells, drilled and completed in the first
quarter, 2012, were brought on stream with average five day IP rates of over
800 boepd per well.
At the end of the quarter, five wells await completion and tie-in.
Olds/Garrington/Lochend
Pengrowth spent $23 million in the Olds/Garrington/Lochend area during the
second quarter with three (2.2 net) wells being drilled. An Elkton well was
drilled, completed and tied-in during the quarter. An additional Elkton well,
which was drilled in the first quarter, was completed and tied-in. The two
wells had a combined five day average IP rate of 645 boepd.
Two (1.2 net) Cardium wells were drilled in the Garrington area and two (0.95
net) wells were brought on stream in the Lochend area with a combined 30 day
IP rate of 800 boepd.
Lindbergh SAGD Project
Progress continued at Lindbergh with initial production from the two well
pairs at the pilot achieved during the second quarter. Pengrowth has been
injecting steam into two well pairs since February 2012. The reservoir
responded more quickly than expected. In late May, both well pairs were
switched to SAGD production, when pumping equipment was installed in the
producer wells.
In June, the two well pairs produced an average of 650 bbpd each, with an
average ISOR of less than 2.0, which is meaningfully better than the planned
project design SOR of 3.5. Although this early performance is not necessarily
indicative of longer term performance, the production and ISOR data is
encouraging, with bitumen quality as expected and clean water being produced.
There are no issues with either emulsion or produced sand.
On August 2, 2012, Pengrowth reported an updated evaluation of the reserves
and contingent resources at Lindbergh, conducted by GLJ Petroleum Consultants
Ltd. The update included the assignment of 95.0 million barrels of proved
plus probable reserves, 13.0 million barrels of proved reserves and 218.2
million barrels of best estimate contingent resource to the project.
Subject to pilot performance and a declaration of commerciality, Lindbergh is
expected to provide Pengrowth with the potential to develop a first stage
commercial project of 12,500 bbpd and a final project with up to an
additional 17,500 bbpd, with the overall project anticipated to produce up to
30,000 bbpd. This is expected to be low cost, low decline, stable bitumen
production, with a 25 year reserve life.
NAL Acquisition
On May 31, 2012, Pengrowth completed the acquisition of NAL. The acquisition
bolsters Pengrowth's asset base of high quality, light oil production, with
over 730 light oil drilling locations across the central Alberta Cardium and
southeast Saskatchewan Mississippian light oil plays.
Financial Sustainability
Pengrowth remains committed to ensuring its financial sustainability in the
face of a declining commodity price environment and continued weakness in
Canadian commodity prices, coupled with the global macro-economic headwinds.
In conjunction with the NAL acquisition, Pengrowth announced a reduction in
2012 development capital spending of $200 million. Subsequent to the end of
the quarter, on July 6, 2012, Pengrowth took additional measures to maintain
its financial flexibility, with the announcement of a reduction in monthly
dividends from Cdn$0.07 per share to Cdn$0.04 per share, effective with the
August 15, 2012 payment. In addition, the company expects to divest of its
approximate ten percent, or 2,500 boepd interest in the Weyburn Unit in
Saskatchewan. These measures are intended to safeguard Pengrowth's financial
and balance sheet strength, provide additional flexibility and generate
additional funding to support the Lindbergh SAGD project.
Commodity Risk Management
As part of Pengrowth's continued focus on managing the company's exposure to
commodity price fluctuations and providing a measure of stability to cash
flow through the hedging program, additional hedges for 2012 and 2013 were
entered during the quarter. An updated summary of Pengrowth's swap risk
management contracts in place for the remainder of 2012 and 2013, as of June
30, 2012 is presented below. Additional details on Pengrowth's risk
management activities, including commodity options, are outlined in
Management's Discussion and Analysis in the second quarter report. We
continue to seek additional cash flow certainty through our hedging program
and have hedged additional oil and natural gas volumes for 2013 and 2014 as
opportunities in the forward markets have evolved.
Crude Oil Swaps:
---------------------------------------------------------------------------- Volume Price per Settlement Reference Point (bbl/d) Term bbl Currency ---------------------------------------------------------------------------- WTI 17,000 Jul 1, 2012 - Dec 31, 2012 $93.23 Cdn WTI 7,000 Jul 1, 2012 - Dec 31, 2012 $97.36 US WTI 7,000 Jan 1, 2013 - Dec 31, 2013 $96.73 Cdn WTI 500 Jan 1, 2013 - Dec 31, 2013 $100.95 US ----------------------------------------------------------------------------
Natural Gas Swaps:
---------------------------------------------------------------------------- Volume Price per Settlement Reference Point (MMbtu/d) Term MMbtu Currency ---------------------------------------------------------------------------- AECO 1,896 Jul 1, 2012 - Oct 30, 2012 $ 4.36 Cdn AECO 18,956 Jul 1, 2012 - Dec 31, 2012 $ 4.29 Cdn AECO 51,656 Jan 1, 2013 - Dec 31, 2013 $ 3.21 Cdn AECO 2,370 Apr 1, 2013 - Oct 1, 2013 $ 3.11 Cdn ---------------------------------------------------------------------------- Power Swaps: ---------------------------------------------------------------------------- Volume Price per Settlement Reference Point (MW) Term MWh Currency ---------------------------------------------------------------------------- AESO 15 Jul 1, 2012 - Dec 31, 2012 $ 72.83 Cdn AESO 5 Jan 1, 2013 - Dec 31, 2013 $ 74.50 Cdn
Outlook
Pengrowth remains on track to achieve its estimated full year average
production target of approximately 86,000 to 89,000 boepd and fourth quarter,
2012 production estimate of between 96,000 and 100,000 boepd.
Pengrowth's large inventory of high netback, light oil opportunities is
expected to enable Pengrowth to select the best investment opportunities,
create improved capital efficiencies and enhance cash flow.
Pengrowth has $547 million of available capacity on its $1.0 billion
(expandable to $1.25 billion) credit facilities, with a remaining term of 3.5
years, a planned asset disposition of its approximate ten percent Weyburn
interest and active dividend reinvestment and hedging programs, leaving the
company well positioned to maintain financial flexibility in a challenging
commodity price environment.
"We continue to identify new opportunities on our existing land base and
with the addition of the NAL assets, we have grown our light oil drilling
inventory to over 730 locations" said Derek Evans, Pengrowth's President
and Chief Executive Officer. "The addition of over 85 million barrels of
proved plus probable reserves at Lindbergh and the positive early performance
of the pilot wells are substantial achievements and milestones for this
project."
6.75% Convertible Debentures
Pengrowth's 6.75% convertible debentures, assumed with the NAL acquisition,
will mature on August 31, 2012. Today, approximately $60 million principal
amount of these debentures remain outstanding. Expiry of these debentures
will occur at 5:00 p.m. (Mountain Time) on August 31, 2012 and all
outstanding debentures which have not been converted at that time will expire
and be paid out in cash. Following the expiry, this series of debentures,
which trades under the symbol PGF.DB on the Toronto Stock Exchange, will be
de-listed.
About Pengrowth:
Pengrowth Energy Corporation is a dividend-paying, intermediate Canadian
producer of oil and natural gas, headquartered in Calgary, Alberta. Pengrowth's
focus is on the development of conventional and unconventional resource-style
plays in the Western Canadian Sedimentary Basin. Pengrowth's projects include
the Swan Hills (light oil) play in north-central Alberta, the Olds (light
oil/gas) play in south-central Alberta, the Lindbergh (Steam Assisted Gravity
Drainage) project in east-central Alberta and the Bodo (EOR polymer) play in
east-central Alberta. Pengrowth's shares trade on both the Toronto Stock
Exchange under the symbol "PGF" and on the New York Stock Exchange
under the symbol "PGH".
PENGROWTH ENERGY CORPORATION
Derek Evans, President and Chief Executive Officer
Advisory Regarding Reserves and Production Information
All amounts are stated in Canadian dollars unless otherwise specified. All
reserves, reserve life index, and production information herein is based upon
Pengrowth's company interest (Pengrowth's working interest share of reserves
or production plus Pengrowth's royalty interest, being Pengrowth's interest
in production and payment that is based on the gross production at the
wellhead), before royalties.
Caution Regarding Engineering Terms
When used herein, the term "boe" means barrels of oil equivalent on
the basis of one boe being equal to one barrel of oil or NGL or 6,000 cubic
feet of natural gas (6 Mcf: 1 bbl). Barrels of oil equivalent may be
misleading, particularly if used in isolation. A conversion ratio of six Mcf
of natural gas to one bbl is based on an energy equivalency conversion method
primarily applicable at the burner tip and does not represent a value
equivalency at the wellhead. In addition, given that the value ratio based on
the current price of crude oil as compared to the current price of natural
gas is significantly different from the energy equivalency of 6:1, utilizing
a conversion on a 6:1 basis may be misleading as an indication of value.
The estimates of reserves and future net revenue for individual properties
may not reflect the same confidence level as estimates of reserves and future
net revenue for all properties, due to the effects of aggregation.
In addition, Pengrowth uses the following frequently-recurring industry terms
in this press release: "bbls" refers to barrels, "Mbbls"
refers to a thousand barrels, "MMb bls" refers to a million
barrels, "Mboe" refers to a thousand barrels of oil equivalent,
"MMboe" refers to a million barrels of oil equivalent,
"Mcf" refers to thousand cubic feet, "MMcf" refers to
million cubic feet, and "Bcf" refers to billion cubic feet.
Caution Regarding Well Test Results, Initial Production (IP) Rates and
Steam/Oil Ratios
This news release makes references to well test results, IP rates and initial
steam/oil ratios for certain properties. These rates are not necessarily
representative of long-term well performance or ultimate recoveries and are
subject to various performance factors including geological formation,
duration of test, pressure and production declines. Some wells will
experience immediate and significant declines in production.
Contingent Resource Assessments
Contingent resources are those quantities of petroleum estimated to be
potentially recoverable from known accumulations using established technology
or technology under development, but which are not currently considered to be
commercially recoverable due to one or more contingencies. Contingencies may
include factors such as economic, legal, environmental, political and
regulatory matters or a lack of markets. Contingent resources are further
classified in accordance with the level of certainty associated with the
estimates. Contingent resources do not constitute, and should not be confused
with reserves. There is no certainty that it will be commercially viable to
produce any portion of the contingent resources.
The accuracy of resource estimates is, in part, a function of the quality and
quantity of available data and of engineering and geological interpretation
and judgment. These resource volumes are classified as a resource rather than
a reserve because they are contingent upon further reservoir studies,
delineation drilling and facility design, preparation of firm development
plans, regulatory application approval and company approvals. The size of the
resource estimate could be positively impacted, potentially in a material
amount, if additional delineation wells determine that the aerial extent,
reservoir quality and/or the thickness of the reservoir is larger than what
is currently estimated based on the interpretation of seismic and well
control. The size of the resource estimate could be negatively impacted,
potentially in a material amount, if additional delineation wells determine
that the aerial extent, reservoir quality and/or the thickness of the
reservoir are less than what is currently estimated based on the
interpretation of the seismic and well control.
A best estimate is the estimate of the quantity of resource that will be
recovered from the accumulation, which under probabilistic methodology
reflects a fifty percent confidence level. A low estimate is the estimate of
the quantity of resource that will be recovered from the accumulation, which
under probabilistic methodology reflects a ninety percent confidence level. A
high estimate is the estimate of the quantity of resource that will be
recovered from the accumulation, which under probabilistic methodology
reflects a ten percent confidence level.
For further information in respect of our Lindbergh oil sands reserves, in
particular the contingencies and risks associated therewith, please refer to
our Annual Information Form for the year ended December 31, 2011 dated
February 28, 2012, which is available on our website at www.pengrowth.com and on
SEDAR at www.sedar.com.
Caution Regarding Forward Looking Information
This press release 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. In particular, forward-looking statements in this
press release include, but are not limited to, statements with respect to:
average and exit 2012 production expectations, anticipated 2012 operating
expenses, pilot results and production volumes from the Lindbergh project,
disposition of the Company's Weyburn interest, available credit facilities,
drilling inventory and commodity risk management agreements. 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 contained in this press release
are based on Pengrowth's current beliefs as well as assumptions made by, and
information currently available to, Pengrowth concerning general economic and
financial market conditions; anticipated financial performance; business
prospects, strategies; regulatory developments; including in respect of
taxation; royalty rates and environmental protection; future capital
expenditures and the timing thereof; 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 and interest
rates; the proceeds of anticipated divestitures; the amount of future cash
dividends paid by Pengrowth; the cost of expanding our property holdings; our
ability to obtain labour and equipment in a timely manner to carry out
development activities; our ability to market our oil and natural 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, the forward-looking statements included in this press
release 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 and resource estimates and
estimates of recoverable quantities of oil, natural gas and liquids;
Pengrowth's 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; changes in environmental or other
legislation applicable to our operations, and our ability to comply with
current and future environmental and other laws and regulations; actions by
governmental or regulatory authorities including changes in royalty
structures and programs and income tax laws or changes in tax laws and
incentive programs relating to the oil and gas industry; our ability to
access external sources of debt and equity capital, various risks associated
with our Lindbergh SAGD project, and the implementation of greenhouse gas
emissions legislation. Further information regarding these factors may be
found under the heading "Risk Factors" in our most recent Annual
Information Form under the heading "Business Risks" in our most
recent year-end Management's Discussion and Analysis and in our most recent
consolidated financial statements, management information circular, quarterly
reports, material change reports and news releases. Copies of our Canadian
public filings are available on SEDAR at www.sedar.com. Our U.S. public filings, including our
most recent Form 40-F as supplemented by our filings on form 6-K, are
available at www.sec.gov.edgar.shtml.
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 press release are made as of the date of this press release and we do
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 press release are expressly
qualified by this cautionary statement.
Additional Information - Supplemental Non-IFRS Measures
In addition to providing measures prepared in accordance with International
Financial Reporting Standards (IFRS), Pengrowth presents supplemental
non-IFRS measures, Adjusted Net Income, operating netbacks and Funds Flow
from Operations. These measures do not have any standardized meaning
prescribed by IFRS and therefore are unlikely to be comparable to similar
measures presented by other companies. These supplemental non-IFRS measures
are provided to assist readers in determining Pengrowth's ability to generate
cash from operations. Pengrowth believes these measures are useful in
assessing operating performance and liquidity of Pengrowth's ongoing business
on an overall basis.
These measures should be considered in addition to, and not as a substitute
for, net income, funds flow from operating activities and other measures of
financial performance and liquidity reported in accordance with IFRS.
Note to US Readers
Current SEC reporting requirements permit oil and gas companies, in their
filings with the SEC, to disclose probable and possible reserves, in addition
to the required disclosure of proved reserves. Under current SEC
requirements, net quantities of reserves are required to be disclosed, which
requires disclosure on an after royalties basis and does not include reserves
relating to the interests of others. Because we are permitted to prepare our
reserves information in accordance with Canadian disclosure requirements, we
have included contingent resources, disclosed reserves before the deduction
of royalties and interests of others and determined and disclosed our
reserves and the estimated future net cash therefrom using forecast prices
and costs. See "Presentation of our Reserve Information" in our
most recent Annual Information Form or Form 40-F for more information.
We report our production and reserve quantities in accordance with Canadian
practices and specifically in accordance with NI 51-101. 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. The SEC permits, but does not require, the disclosure of reserves
based on forecast prices and costs.
We include herein estimates of proved, 2P and possible reserves, as well as
contingent resources. The SEC permits, but does not require the inclusion of
estimates of probable and possible reserves in filings made with it by United
States oil and gas companies. The SEC does not permit the inclusion of
estimates of contingent resources in reports filed with it by United States
companies.
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