Pengrowth Energy Trust announces third quarter results Stock
Symbol: PGF.UN, TSX; PGH, NYSE CALGARY, Oct. 31
/PRNewswire-FirstCall/ -- Pengrowth Corporation ("Pengrowth"),
administrator of Pengrowth Energy Trust, announced the unaudited
results for the three months and nine months ended September 30,
2003. - Distributable cash for the third quarter 2003 increased 58%
over the third quarter of 2002 to $73.0 million as a result of
higher commodity prices and increased production. For the nine
month period, distributable cash increased 90% to $241.9 million,
and a further $26.8 million was retained to fund capital
expenditures. At the end of the third quarter 2003, $6.5 million is
available for distribution in future months. - As a result of
sustained strength in commodity prices, Pengrowth realized netbacks
of $18.31 per boe for the quarter and $20.05 per boe on a year to
date basis. - Cash distributions increased to $0.63 per unit in the
third quarter 2003 from $0.52 per unit in the same quarter last
year. For the nine month period ended September 30, 2003, cash
distributions increased to $2.05 per unit compared to $1.47 per
unit for the same period in 2002. - Pengrowth's on-going
development program helped offset natural production declines
during the quarter. Production for the third quarter averaged
48,850 boepd, up slightly from the second quarter average
production rate of 48,839 boepd. - Capital expenditures during the
third quarter totaled $20.7 million. Total capital expenditures of
$56.2 million on a year to date basis have been made. - On July 23,
Pengrowth closed a public offering of 8.5 million trust units at
$16.95 per unit to raise total gross proceeds of $144.1 million
(net $136.3 million). A portion of the proceeds were used to repay
bank indebtedness and a cash balance of $78.0 million was on hand
at the end of the third quarter. - At the end of the third quarter,
Pengrowth had a net debt to net debt plus equity ratio of 15%,
which underscores the strong financial position at the end of the
quarter. In addition to the cash balance of $78.0 million,
unutilized borrowing capacity of approximately $226 million was
available at the end of the third quarter to fund future
acquisitions. - Subsequent to quarter end, Pengrowth announced it
had entered into an agreement to purchase Emera's 8.4% interest in
the Sable Offshore Energy Project (SOEP) platform facilities for a
purchase price of $65 million prior to adjustments. This
acquisition will eliminate the remainder of the SOEP processing
fees which currently average approximately $1.3 million per month.
Summary of Financial and Operating Results Three Months ended %
(thousands, except per unit September 30 Change amounts) 2003 2002
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INCOME STATEMENT Oil and gas sales $ 160,695 $ 111,205 45% Net
income $ 33,025 $ 12,497 164% Net income per unit $ 0.28 $ 0.14
100% Funds generated from operations $ 86,977 $ 52,703 65% Funds
generated from operations per unit $ 0.73 $ 0.58 26% Funds withheld
to fund capital expenditures $ 8,106 $ - 100% Distributable cash
before withholding(x) $ 81,057 $ 46,139 76% Distributable cash
before withholding per unit(x) $ 0.68 $ 0.51 33% Distributable
cash(x) $ 72,951 $ 46,139 58% Actual distributions paid or declared
per unit $ 0.63 $ 0.52 21% Weighted average number of units
outstanding 118,928 90,380 32% BALANCE SHEET Working capital $
24,852 $ (26,132) 195% Property, plant and equipment and other
assets $1,419,193 $1,123,863 26% Long-term debt $ 269,980 $ 259,024
4% Unitholders' equity $1,126,721 $ 834,309 35% Unitholders' equity
per unit $ 9.29 $ 9.23 1% Number of units outstanding at period end
121,286 90,398 34% TRUST UNIT TRADING (TSX) High $ 17.87 $ 15.63
Low $ 16.20 $ 13.01 Close $ 17.25 $ 14.90 Value $ 349,497 $ 140,784
148% Volume (thousands of units) 20,476 9,367 119% TRUST UNIT
TRADING (NYSE) - Listed on April 10, 2002 High $ 13.13 US $ 10.25
US Low $ 11.55 US $ 8.40 US Close $ 12.81 US $ 9.37 US Value $
230,205 US $ 11,027 US 1988% Volume (thousands of units) 18,614
1,141 1531% DAILY PRODUCTION Crude oil (barrels) 22,852 17,640 30%
Natural gas (thousands of cubic feet) 122,140 105,434 16% Natural
gas liquids (barrels) 5,641 4,991 13% Total production (BOE) 6:1
48,850 40,203 22% PRODUCTION INCREASE (year over year) 22% -7%
PRODUCTION PROFILE (6:1 conversion) Crude oil 47% 44% Natural gas
42% 44% Natural gas liquids 11% 12% AVERAGE PRICES Crude oil (per
barrel) $ 39.06 $ 40.40 -3% Natural gas (per mcf) $ 5.67 $ 3.38 68%
Natural gas liquids (per barrel) $ 32.44 $ 30.42 7% Average price
per BOE $ 35.76 $ 30.07 19% (x) See Note 2 to Financial Statements
Nine Months ended % (thousands, except per unit September 30 Change
amounts) 2003 2002
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INCOME STATEMENT Oil and gas sales $ 530,718 $ 314,383 69% Net
income $ 146,510 $ 26,543 452% Net income per unit $ 1.29 $ 0.31
316% Funds generated from operations $ 278,947 $ 150,182 86% Funds
generated from operations per unit $ 2.45 $ 1.75 40% Funds withheld
to fund capital expenditures $ 26,831 $ - 100% Distributable cash
before withholding(x) $ 268,777 $ 127,398 111% Distributable cash
before withholding per unit(x) $ 2.36 $ 1.49 58% Distributable
cash(x) $ 241,946 $ 127,398 90% Actual distributions paid or
declared per unit $ 2.05 $ 1.47 40% Weighted average number of
units outstanding 113,751 85,783 33% BALANCE SHEET Working capital
$ 24,852 $ (26,132) 195% Property, plant and equipment and other
assets $1,419,193 $1,123,863 26% Long-term debt $ 269,980 $ 259,024
4% Unitholders' equity $1,126,721 $ 834,309 35% Unitholders' equity
per unit $ 9.29 $ 9.23 1% Number of units outstanding at period end
121,286 90,398 34% TRUST UNIT TRADING (TSX) High $ 18.22 $ 17.00
Low $ 13.39 $ 13.01 Close $ 17.25 $ 14.90 Value $1,166,122 $
503,516 132% Volume (thousands of units) 73,172 33,350 119% TRUST
UNIT TRADING (NYSE) - Listed on April 10, 2002 High $ 13.80 US $
10.90 US Low $ 9.07 US $ 8.40 US Close $ 12.81 US $ 9.37 US Value $
582,065 US $ 29,135 US 1898% Volume (thousands of units) 49,282
2,925 1585% DAILY PRODUCTION Crude oil (barrels) 23,722 18,079 31%
Natural gas (thousands of cubic feet) 120,693 106,430 13% Natural
gas liquids (barrels) 5,660 5,114 11% Total production (BOE) 49,498
40,931 21% PRODUCTION INCREASE (year over year) 21% 5% PRODUCTION
PROFILE (6:1 conversion) Crude oil 48% 44% Natural gas 41% 43%
Natural gas liquids 11% 13% AVERAGE PRICES Crude oil (per barrel) $
41.45 $ 37.19 11% Natural gas (per mcf) $ 6.49 $ 3.32 95% Natural
gas liquids (per barrel) $ 35.47 $ 27.11 31% Average price per BOE
$ 39.27 $ 28.13 40% Note Regarding Forward-Looking Statements This
discussion and analysis contains forward-looking statements. These
statements relate to future events or our future performance. In
some cases, you can identify forward-looking statements by
terminology such as "may", "will", "should", "expect", "plan",
"anticipate", "believe", "estimate", "predict", "potential",
"continue", or the negative of these terms or other comparable
terminology. These statements are only predictions. A number of
factors, including the business risks discussed below, may cause
actual results to vary materially from these estimates. Actual
events or results may differ materially. In addition, this
discussion contains forward-looking statements attributed to third
party industry sources. Readers should not place undue reliance on
these forward-looking statements. When converting natural gas to
equivalent barrels of oil within this discussion, Pengrowth uses
the international standard of 6 thousand cubic feet (mcf) to one
barrel of oil equivalent (boe). Production volumes and revenues are
reported on a gross basis (before crown and freehold royalties) in
accordance with Canadian practice. All amounts are stated in
Canadian dollars unless otherwise specified. Distributable Cash
Distributable cash increased by 58% to $73.0 million in the third
quarter of 2003, from $46.1 million in the third quarter of 2002.
For the nine months ended September 30, 2003, Pengrowth recorded
$241.9 million in distributable cash, compared to $127.4 million in
the first nine months of 2002. An additional $26.8 million of
distributable cash from the first nine months of 2003 was withheld
to fund capital expenditures and a balance of $6.5 million remained
to be distributed to unitholders in future months. Actual
distributions were $0.63 per unit for the third quarter of 2003
compared to $0.52 per unit for the third quarter of 2002, and $2.05
per unit on a year to date basis in 2003 compared to $1.47 per unit
for the first nine months of 2002. The increase in distributable
cash is attributable mainly to higher commodity prices (Pengrowth's
average per boe selling price was 40% higher in the first nine
months of 2003 compared to the same period in the prior year), and
a 21% increase in production, offset in part by a reduced payout
ratio - commencing with the January 2003 distribution,
approximately 10% of cash available for distribution has been
withheld to repay debt or fund capital expenditures. Net Income Net
income for the third quarter of 2003 was $33.0 million compared to
$12.5 million for the previous year. The increase is due mainly to
higher production and commodity prices compared to the prior year.
For the first nine months of 2003, Pengrowth recorded net income of
$146.5 million, compared to $26.5 million for the previous year.
Net income for the nine month period ended September 30, 2003
includes a foreign exchange gain of $19.5 million. This relates
mainly to an unrealized gain on Pengrowth's U.S. dollar denominated
debt due to a rise in the Canadian dollar relative to the U.S.
dollar since the U.S. $200 million debt financing was completed in
April, 2003. Netbacks Netbacks per boe of Three months ended Nine
months ended Production (6:1) September 30 September 30 2003 2002
2003 2002
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Oil and gas sales $ 35.76 $ 30.07 $ 39.27 $ 28.13 Crown and
freehold royalties, net of incentives (6.17) (5.23) (7.01) (4.17)
Other income 0.62 0.65 0.58 0.44 Operating costs (7.98) (8.03)
(8.14) (7.86) Amortization of injectants (1.69) (2.89) (1.96)
(3.06)
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Operating Netback 20.54 14.57 22.74 13.48 Interest (0.98) (0.95)
(1.06) (0.84) General and administrative (0.86) (0.54) (0.87)
(0.65) Management fees (0.40) (0.36) (0.59) (0.40) Capital taxes
and Other 0.01 (0.05) (0.17) (0.06)
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Netback per boe $ 18.31 $ 12.67 $ 20.05 $ 11.53
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Production Total BOE production has increased 22% in the third
quarter of 2003, compared to the third quarter of 2002. For the
nine months ended September 30, 2003 total production is 21% higher
than the same period last year. The increase in production is
attributable mainly to the acquisition of properties in British
Columbia on October 1, 2002. Three months ended Nine months ended
September 30 September 30 2003 2002 %Change 2003 2002 %Change
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Daily Production Crude oil (bbls/d) 22,852 17,640 +30% 23,722
18,079 +31% Natural gas (mcf/d) 122,140 105,434 +16% 120,693
106,430 +13% Natural gas liquids (bbls/d) 5,641 4,991 +13% 5,660
5,114 +11%
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Total boe/d 48,850 40,203 +22% 49,498 40,931 +21%
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Total production (mboe) 4,494 3,698 +22% 13,513 11,174 +21%
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Production per trust unit (boe per unit) 0.04 0.04 - 0.12 0.13 -8%
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Oil production volumes increased 30% in the third quarter, and 31%
for the nine month period ended September 30, 2003, compared to the
same periods last year. Most of this increase is attributable to
the acquisition of oil producing properties in B.C. including
Rigel, Squirrel and Oak. Natural gas production increased 16% in
the third quarter of 2003 compared to the third quarter of 2002 and
increased 13% on a year to date basis. This increase is
attributable to the B.C. property acquisition on October 1, 2002 as
well as the acquisition of additional interests in the Quirk Creek
area in the second quarter of 2002, offset in part by natural
production declines. Natural gas liquids production increased 13%
in the third quarter of 2003 over the third quarter of 2002 and 11%
on a year to date basis. Assuming there are no further
acquisitions, dispositions or major production interruptions during
the fourth quarter, Pengrowth expects to meet the 2003 production
forecast of 48,500 boepd. Prices Average realized prices Cdn$ Three
months ended Nine months ended (after impact September 30 September
30 of hedging) 2003 2002 %Change 2003 2002 %Change
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Crude oil (per bbl) $ 39.06 $ 40.40 - 3% $ 41.45 $ 37.19 + 11%
Natural gas (per mcf) $ 5.67 $ 3.38 +68% $ 6.49 $ 3.32 + 95%
Natural gas liquids (per boe) $ 32.44 $ 30.42 +7% $ 35.47 $ 27.11 +
31%
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Total per boe $ 35.76 $ 30.07 +19% $ 39.27 $ 28.13 + 40%
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Pengrowth's average crude oil price declined 3% in the third
quarter of 2003 compared to the third quarter of 2002. During this
period, the West Texas Intermediate (WTI) oil price increased 7%
however the decrease in the U.S. dollar relative to the Canadian
dollar resulted in a 6% decline in the Canadian dollar equivalent
WTI benchmark oil price. A reduction in net hedging losses on crude
oil in the third quarter of 2003 compared to the third quarter of
2002 partially offset this decline. For the first nine months of
2003, Pengrowth's average crude oil price was 11% higher than the
same period last year. This increase is in line with the exchange
rate adjusted increase in WTI during the period - WTI increased by
22% offset by a 10% decrease in the Cdn $/ US $ exchange rate. An
increase in hedging losses in the first nine months of 2003 reduced
Pengrowth's average realized crude oil price, while lower
differentials on some streams of crude in 2003 increased the
average price relative to the prior year. Pengrowth's average
natural gas price for the third quarter of 2003 increased by 68%
over prices realized in the third quarter of 2002. For the first
nine months of 2003 prices increased by 95% to $6.49 per mcf
compared to $3.32 per mcf over the same period last year. By
comparison, the AECO and Nymex indices posted gains of 92% and 90%
respectively in the first nine months of 2003 as compared to the
same period last year. Hedging losses accounted for a reduction of
approximately $0.49 per mcf in Pengrowth's net realized gas price
for the nine month period. Price Risk Management Program Natural
Gas In the third quarter of 2003, Pengrowth realized a net hedging
loss of $1.3 million related to fixed price gas contracts (as
compared to monthly AECO average spot prices) and natural gas
financial swap contracts, compared to a net hedging gain of $0.1
million for the same period last year. On a year to date basis,
Pengrowth has realized a net hedging loss on natural gas of $16.3
million in the first nine months of 2003, compared to a net hedging
loss of $0.4 million for the same period last year. Crude Oil Net
hedging losses realized on crude oil price swap transactions were
$0.3 million in the third quarter of 2003, and $8.3 million on a
year to date basis, compared to a loss of $3.2 million in the third
quarter of 2002 and $3.6 million net loss in the first nine months
of 2002. Current Position Pengrowth currently has 11,000 barrels
per day of crude oil (approximately 48% of current oil production)
hedged for the remainder of 2003 at an average price of Cdn $41.48
per barrel, and 9,500 barrels per day of 2004 production at an
average price of Cdn $38.11. Pengrowth has fixed the exchange rate
on all of our current crude oil hedging contracts. Approximately
26% of current natural gas production is also hedged - 14,218 mcf
per day of Western gas production is hedged at an average plantgate
price of Cdn $6.07 per mcf, and 17,000 MMBTU of Eastern gas at an
average plantgate price of Cdn $5.11 per MMBTU for the remainder of
2003. Based on the closing forward market prices at September 30,
2003, the mark-to-market value of Pengrowth's financial swap
contracts was $1.0 million - negative $8.0 million on natural gas
contracts and positive $9.0 million for crude oil. The details of
Pengrowth's commodity hedges are provided in Note 8 to the
financial statements. Royalties Royalties, including crown and
freehold royalties, were 17.2% of oil and gas sales in the three
months ended September 30, 2003, compared to 17.4% in 2002. For the
nine month period, royalties were 17.9% and 14.9% in 2003 and 2002,
respectively. The increase in the year to date royalty percentage
in 2003 over 2002 is due in part to higher average commodity prices
in 2003, particularly natural gas, the addition of the B.C.
properties in October 2002 (which have a higher royalty rate than
the balance of Pengrowth's property portfolio), and lower injection
credits relative to total crown royalties. In addition, increased
hedging losses in 2003 result in a higher reported royalty rate,
since hedging losses on financial swaps do not impact royalty
calculations. Operating Costs Operating costs were $35.8 million
($7.98 per boe) for the third quarter of 2003, compared to $29.7
million ($8.03 per boe) for the third quarter of 2002. Third
quarter operating costs per boe are somewhat lower than the $8.22
per boe recorded in the first six months of 2003 due in part to the
acquisition of an 8.4% interest in the SOEP onshore facilities on
May 8, 2003, which has reduced processing fees at Sable by
approximately $1.2 million per month. For the nine months ended
September 30, 2003, operating costs were $110.0 million ($8.14 per
boe), compared to $87.8 million ($7.86 per boe) for the first nine
months of 2002. Injectants for miscible floods During the third
quarter of 2003, Pengrowth purchased $2.2 million of injectants and
amortized a related $7.6 million against third quarter income and
distributable cash. On a year to date basis, Pengrowth has
purchased $17.1 million of injectants and amortized $26.5 million.
At September 30, 2003, the balance of unamortized injectant costs
was $24.4 million. General and administrative General and
administrative expenses (G&A) were $3.9 million in the third
quarter of 2003 compared to $2.0 million for the third quarter of
2002. For the nine months ended September 30, 2003, G&A
expenses were $11.8 million compared to $7.2 million for the same
period last year. On a per boe basis, year to date G&A is $0.87
per boe, compared to $0.65 per boe for the first nine months of
2002. G&A costs have increased in 2003 due to a number of
factors including the move to larger office space and increased
staffing due to the purchase of the BC properties at the end of
2002, and increased legal and regulatory expenses associated with
being listed on the New York Stock Exchange since April 2002.
Management Fees Management fees were $1.8 million for the third
quarter of 2003 compared to $1.3 million for the third quarter of
2002. For the nine month period, management fees were $7.9 million
in 2003 compared to $4.5 million in 2002. On a per boe basis,
management fees for the first nine months of 2003 are $0.59 per
boe, compared to $0.40 per boe in 2002. Although the management fee
rate decreased effective July 1, 2003 there is an increase in total
management fees due to the higher fee base in 2003 - management
fees are calculated on a percentage of "net operating income" (oil
and gas sales and other income, less royalties, operating costs,
solvent amortization and reclamation funding). A new management
agreement, which was approved at the annual general meeting on June
17, 2003, is effective July 1, 2003. Under the terms of this
agreement, the base fee has been reduced from a sliding scale
between 3.5% and 2.5%, to 2% on the first $200 million of net
operating income and 1% on net operating income over $200 million;
acquisition fees have been eliminated, and the manager is eligible
to receive a 'performance fee' if certain performance criteria are
met; in particular returns that exceed 8% per annum on a three year
rolling average basis. The maximum fees, including the performance
fee, is limited to 80% of the fees that would otherwise have been
paid under the old management agreement (including acquisition
fees) for the first three years, and 60% for the second three
years. Interest Interest expense increased to $4.4 million in the
third quarter of 2003 compared to $3.5 million for the third
quarter of 2002. This increase is due to higher average long term
debt and higher interest rates paid in the third quarter of 2003.
All of Pengrowth's debt outstanding at the end of the third quarter
of 2003 is U.S. dollar denominated and is fixed rate term debt with
a higher effective interest rate than the floating rate bank debt
in 2002. The recent increase in the Canadian dollar relative to the
U.S. dollar has helped to offset the higher interest rate on the
term debt, since this interest is payable in U.S. dollars. For the
first nine months of 2003, interest expense was $14.4 million
compared to $9.3 million for the first nine months of 2002.
Included in 2003 interest is $2.2 million associated with
terminating interest rate swaps on $125 million of Canadian bank
debt. Depletion and Depreciation Depletion and depreciation
increased to $44.1 million in the third quarter of 2003 compared to
$31.5 million in the third quarter of 2002. For the nine month
period, depletion and depreciation was $130.9 million compared to
$93.6 million in the first nine months of 2002. On a per boe basis,
depletion and depreciation has increased to $9.69 per boe in the
first nine months of 2003 compared to $8.37 per boe in the first
nine months of 2002. The purchase of B.C. properties in the fourth
quarter of 2002 has increased depletion due to the shorter reserve
life of these properties relative to the balance of Pengrowth's
property portfolio. The May 2003 purchase of a working interest in
the SOEP onshore facilities, with no associated increase in
reserves, also increased the amount of depreciation per boe.
LIQUIDITY AND CAPITAL RESOURCES Pengrowth's long-term debt at
September 30, 2003 was fixed rate term debt all denominated in U.S.
dollars and translated to $270 million, compared to $317 million at
December 31, 2002. Due to the recent increase in the Canadian
dollar relative to the U.S. dollar, an unrealized gain of $20.3
million has been recorded since the debt issuance in April 2003. At
September 30, 2003 Pengrowth also had cash and term deposits of
$78.0 million, resulting in net debt (long term debt less cash and
term deposits) of $191.9 million. The ratio of net debt to trailing
12-month distributable cash at September 30, 2003 was 0.6 times,
compared to 1.6 times at December 31, 2002. The ratio of net debt
to net debt plus equity is 15% at September 30, 2003, compared to
23% at year-end 2002. Distributable cash covered interest expense
by 16 times in the first nine months of 2003. Capital Spending
Capital expenditures for the nine months ending September 30, 2003
totaled $56.2 million of which $48.2 million was spent on drilling,
completion and tie-ins, and $8.0 million was spent on facilities
and equipment. 2003 expenditures include $14.8 million at Judy
Creek, $11.3 million at Sable, $6.1 million at Weyburn, $4.6
million at McLeod River, $3.2 million at Oak, and $2.1 million at
Elm. Approximately one half of the first nine months capital
expenditures have been funded through the 10% holdback from
distributable cash, and proceeds from the DRIP and option programs
have funded the balance. Subsequent Event On October 31, 2003,
Pengrowth entered into an agreement with Emera Offshore
Incorporated ("Emera") to purchase Emera's 8.4% interest in the
Sable Offshore Energy Project platform facilities for a purchase
price of $65 million before adjustments. The acquisition is
scheduled to close on or about December 15, 2003. The acquisition
will provide the following significant benefits for Pengrowth
Energy Trust: - A material reduction in processing fees incurred by
Pengrowth. Gilbert Laustsen Jung & Associates ("GLJ"),
independent engineers, have estimated that the purchase price of
the platform interests under the proposed payment schedule is
equivalent to the net present value of the reduction in the
processing fees using a present value discount factor of
approximately 12% based on proven reserves (including anticipated
downward revisions of SOEP reserves). GLJ are currently in the
process of evaluating the reserves for year-end 2003. SOEP reserves
constitute approximately 15% of Pengrowth's reserves and
production. - For the nine months ended September 30, 2003, the
reduction in processing fees for the platforms would have lowered
Pengrowth's operating costs by approximately $10.9 million,
reducing our operating costs per boe, from $8.14 per boe to $7.33
per boe. - These transactions are expected to be accretive to
Unitholders of Pengrowth Energy Trust and are forecast to result in
an increase in distributions of approximately 5 cents per unit in
each of the next five years. - A significant reduction in letter of
credit requirements ("L/C's"). - The return by Emera of a $25
million L/C issued by Pengrowth. - The elimination of the
requirement to issue a further $45 million in L/C's to Emera in the
2004-2005 period. OPERATIONS REVIEW REVIEW OF DEVELOPMENT
ACTIVITIES (all volumes stated below are net to Pengrowth unless
otherwise stated) OPERATED PROPERTIES: Judy Creek: (Judy Creek "A"
Pool - 100% working interest; Judy Creek "B" Pool 98.4% working
interest) - Drilling activities during the third quarter included
two wells in the Judy Creek "A" Pool, a water injector in the
Northwest quadrant of the pool to improve oil recovery in a newly
formed waterflood pattern and an infill producer in the Southwest
quadrant of the pool with current production from this new producer
at 60 bopd (net). This was the third infill producer to be drilled
in this quadrant in 2003, with plans for additional drilling during
the fourth quarter of 2003 and 2004. - Water injection commenced at
injector 06-15-064-11W5 during the third quarter (drilled in the
second quarter). Current incremental oil production from this new
waterflood pattern is in excess of 60 bopd (net). - Workovers were
conducted on two "A" Pool horizontal miscible injectors with one
worked over to improve injection performance and the second
workover performed in preparation for a new miscible flood. McLeod
River: (47.5% average working interest) - One well was drilled and
is currently being completed. Another will spud in mid October. - A
total of 5 wells have been drilled to date in 2003 with two on
production, one under evaluation, one being completed and one
standing. - One wellsite compressor was installed increasing
production from 70 mcf/d to 210 mcf/d (net) and a field compressor
was downsized to increase efficiency. - 1 1/2 sections of crown
land was purchased with plans to drill a well in the first quarter
of 2004. Cessford: (82.5% working interest) - Commenced an 8 well
Milk River/Medicine Hat drilling program on one section of operated
land. Wells to be tied in by early November. (Additional details
regarding Cessford can be found in the Non- Operated Properties
Review). Oak: (88.9% working interest) - Oak "C" unitization is
complete and starting to see positive signs of waterflood response.
- Currently seeking Oil and Gas Corporation approval and working on
unitization issues with partners to form the Oak "B" Cecil Unit.
Laprise: (100% working interest) - A suspended Baldonnel gas well
was placed on production August 26 and is currently producing
approximately 1.6 mmcf/d (net). - Purchased one section of crown
land and have a location which will be drilled in early 2004.
Tupper: (50% working interest) - Drilled 3 wells in Tupper
resulting in two gas wells and one abandonment. - The first gas
well went on production September 15 at approximately 1.3 mmcf/d
(net) and the second should come on production in early November.
B.C. Undeveloped Lands: - Pengrowth owns approximately 247,000 net
acres of net undeveloped land in Northeastern B.C. On these lands,
Pengrowth has completed 14 farmout transactions with other
companies and our land department is actively pursuing other
transactions. Year to date, our farmout activities have resulted in
17 wells drilled, 8 wells reworked and 5 wells committed to but not
yet drilled. Approximately $13 million has been spent by others on
Pengrowth undeveloped B.C. lands so far this year. NON-OPERATED
PROPERTIES: Sable Offshore Energy Project: (8.4% royalty interest)
Tier 1 - Third quarter gross raw gas production from the SOEP Tier
1 fields, Thebaud, Venture and North Triumph was 458.0 mmcf/d for
July, 417.7 mmcf/d for August and 415.8 mmcf/d for September.
Production volumes in August and September were down from July
volumes due to mechanical problems with one of the gas compressors
at the Goldboro gas plant and flare tip replacements at Thebaud.
Tier 2 Project Status Review - The Alma jacket was successfully set
in April 2003 and two production wells were subsequently drilled.
In September 2003 the topsides were installed on the jacket. The
two Alma wells will be perforated and tested in late October with
sales gas expected to flow in early November. - Fabrication of the
jacket and topsides for South Venture (the second Tier 2 field) is
underway. South Venture is expected to start production in early
2005. Weyburn: (9.8% working interest) - CO2 injection continued to
average approximately 90 mmcf/d during the third quarter. Three
horizontal wells were drilled in July with another six wells
expected to be drilled and on production by mid November. The
operator, Encana, also continues to pursue low cost production
optimization strategies which resulted in an incremental 600 bopd
(59 bopd Pengrowth). Swan Hills: (10.5% working interest) - The
operator, Devon Canada, embarked on a three well drilling program
with two wells rig released in September. The third well was
spudded on September 27, 2003. It is anticipated that the wells
will be on- stream by November. Cessford: (60% working interest) -
Pengrowth is currently participating in a 73 well shallow gas
drilling program in the Cessford area of Alberta which is operated
by EOG Resources. The productive horizons are the Medicine Hat and
Milk River formations. The wells will be completed and tied in
during October and are expected to be on-stream by the end of
November. Pengrowth anticipates its share of incremental reserves
resulting from this program to be in the range of 6 bcf. 2003 Tax
Estimate Update Pengrowth forecasts that in the current commodity
price environment, approximately 55-60% of distributions paid in
2003 will be taxable to unitholders, with the remainder of
distributions treated as return of capital and thus tax deferred.
Conference Call and Webcast Pengrowth will be conducting a
conference call and webcast for analysts, brokers, investors and
media representatives regarding its third quarter results at 9:00
A.M. Mountain Daylight Time (11:00 A.M. Eastern Daylight Time) on
Friday, October 31, 2003. Callers may dial 1-800-796-7558 or
Toronto local (416) 640-4127 a few minutes prior to start and
request the Pengrowth conference call. The call will also be
available for replay by dialing 1-877-289-8525 or Toronto local
(416) 640-1917 and entering passcode number 21023716 followed by
the pound key. Interested users of the internet are invited to go
to: http://www.newswire.ca/webcast/viewEventCNW.html?eventID(equal
sign)674300 or http://www.pengrowth.com/ for replay. PENGROWTH
CORPORATION James S. Kinnear, President PENGROWTH ENERGY TRUST
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2003
PENGROWTH ENERGY TRUST CONSOLIDATED BALANCE SHEETS (Stated in
thousands of dollars)
-------------------------------------------------------------------------
As at As at September 30 December 31 2003 2002
-------------------------------------------------------------------------
ASSETS (unaudited) (audited) CURRENT ASSETS Cash and term deposits
$ 78,041 $ 8,292 Marketable securities - 1,906 Accounts receivable
39,613 41,426 Inventory 829 1,301
-------------------------------------------------------------------------
118,483 52,925 REMEDIATION TRUST FUND 7,136 6,679 DEFERRED CHARGES
(Note 3) 2,014 - PROPERTY, PLANT AND EQUIPMENT AND OTHER ASSETS
1,419,193 1,444,668
-------------------------------------------------------------------------
$ 1,546,826 $ 1,504,272
-------------------------------------------------------------------------
-------------------------------------------------------------------------
LIABILITIES AND UNITHOLDERS' EQUITY CURRENT LIABILITIES Accounts
payable and accrued liabilities $ 35,663 $ 43,092 Distributions
payable to unitholders 57,443 45,315 Due to Pengrowth Management
Limited 525 1,086
-------------------------------------------------------------------------
93,631 89,493 LONG-TERM DEBT (Note 3) 269,980 316,501 FUTURE SITE
RESTORATION COSTS 56,494 44,339 TRUST UNITHOLDERS' EQUITY (Note 4)
1,126,721 1,053,939
-------------------------------------------------------------------------
SUBSEQUENT EVENT (Note 9)
-------------------------------------------------------------------------
$ 1,546,826 $ 1,504,272
-------------------------------------------------------------------------
-------------------------------------------------------------------------
See accompanying notes to the consolidated financial statements.
PENGROWTH ENERGY TRUST CONSOLIDATED STATEMENTS OF INCOME (Stated in
thousands Three months ended Nine months ended of dollars)
September 30 September 30 (Unaudited) 2003 2002 2003 2002
-------------------------------------------------------------------------
REVENUES Oil and gas sales $ 160,695 $ 111,205 $ 530,718 $ 314,383
Processing and other income 2,408 2,030 7,387 5,066 Crown
royalties, net of incentives (26,114) (17,560) (88,890) (41,693)
Freehold royalties and mineral taxes (1,594) (1,736) (5,846)
(5,042)
-------------------------------------------------------------------------
135,395 93,939 443,369 272,714 Interest and other income 364 380
419 (145)
-------------------------------------------------------------------------
NET REVENUE 135,759 94,319 443,788 272,569 EXPENSES Operating
35,845 29,717 109,980 87,774 Amortization of injectants for
miscible floods 7,610 10,704 26,506 34,158 Interest 4,402 3,529
14,390 9,333 General and administrative 3,862 1,999 11,803 7,218
Management fee 1,817 1,343 7,912 4,483 Capital taxes 368 468 1,439
749 Foreign exchange loss (gain) (Note 6) 24 (292) (19,452) 69
Depletion and depreciation 44,149 31,464 130,892 93,577 Future site
restoration 4,646 2,881 13,770 8,640
-------------------------------------------------------------------------
102,723 81,813 297,240 246,001
-------------------------------------------------------------------------
INCOME BEFORE THE FOLLOWING 33,036 12,506 146,548 26,568 ROYALTY
INCOME ATTRIBUTABLE TO ROYALTY UNITS OTHER THAN THOSE HELD BY
PENGROWTH ENERGY TRUST 11 9 38 25
-------------------------------------------------------------------------
NET INCOME $ 33,025 $ 12,497 $ 146,510 $ 26,543
-------------------------------------------------------------------------
-------------------------------------------------------------------------
NET INCOME PER UNIT (Note 4) Basic $0.278 $0.138 $1.288 $0.309
Diluted $0.276 $0.138 $1.282 $0.309
-------------------------------------------------------------------------
See accompanying notes to the consolidated financial statements.
PENGROWTH ENERGY TRUST CONSOLIDATED STATEMENTS OF CASH FLOW (Stated
in thousands Three months ended Nine months ended of dollars)
September 30 September 30 (Unaudited) 2003 2002 2003 2002
-------------------------------------------------------------------------
CASH PROVIDED BY (USED FOR): OPERATING Net income $ 33,025 $ 12,497
$ 146,510 $ 26,543 Items not involving cash Depletion, depreciation
and future site restoration 48,795 34,345 144,662 102,217
Amortization of injectants 7,610 10,704 26,506 34,158 Purchase of
injectants (2,231) (4,298) (17,077) (11,744) Expenditures on
remediation (778) (370) (1,615) (817) Unrealized foreign exchange
loss (gain) (Note 6) 480 - (20,260) - Amortization of deferred
charges (Note 3) 76 - 127 - Loss (gain) on sale of marketable
securities - (175) 94 (175)
-------------------------------------------------------------------------
Funds generated from operations 86,977 52,703 278,947 150,182
Distributions (74,426) (43,378) (229,818) (115,798) Changes in
non-cash operating working capital (Note 7) 13,137 2,771 (5,053)
(6,127)
-------------------------------------------------------------------------
25,688 12,096 44,076 28,257
-------------------------------------------------------------------------
FINANCING Change in long-term debt (64,780) 39,901 (26,261)
(86,432) Proceeds from issue of trust units 143,850 738 168,218
117,961
-------------------------------------------------------------------------
79,070 40,639 141,957 31,529
-------------------------------------------------------------------------
INVESTING Deposit on acquisition - (29,063) - (29,063) Expenditures
on property acquisitions (146) (1,681) (61,488) (35,636)
Expenditures on property, plant and equipment (20,678) (14,783)
(56,193) (40,215) Proceeds on property dispositions 84 (72) 2,835
44,523 Deferred charges (3) - (2,141) - Change in Remediation Trust
Fund (277) (145) (457) (483) Purchase of marketable securities - -
- (2,780) Proceeds from sale of marketable securities - 959 1,812
1,050 Change in non-cash investing working capital (Note 7) (1,410)
(1,835) (652) 1,684
-------------------------------------------------------------------------
(22,430) (46,620) (116,284) (60,920)
-------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND TERM DEPOSITS 82,328 6,115 69,749
(1,134) CASH AND TERM DEPOSITS (BANK INDEBTEDNESS) AT BEGINNING OF
PERIOD (4,287) (3,452) 8,292 3,797
-------------------------------------------------------------------------
CASH AND TERM DEPOSITS AT END OF PERIOD $ 78,041 $ 2,663 $ 78,041 $
2,663
-------------------------------------------------------------------------
-------------------------------------------------------------------------
See accompanying notes to the consolidated financial statements.
PENGROWTH ENERGY TRUST CONSOLIDATED STATEMENTS OF TRUST
UNITHOLDERS' EQUITY (Stated in thousands Three months ended Nine
months ended of dollars) September 30 September 30 (Unaudited) 2003
2002 2003 2002
-------------------------------------------------------------------------
Unitholders' equity at beginning of period $ 1,022,797 $ 867,213 $
1,053,939 $ 817,203 Units issued, net of issue costs 143,850 738
168,218 117,961 Net income for period 33,025 12,497 146,510 26,543
Distributable cash (Note 2) (72,951) (46,139) (241,946) (127,398)
-------------------------------------------------------------------------
TRUST UNITHOLDERS' EQUITY AT END OF PERIOD $ 1,126,721 $ 834,309 $
1,126,721 $ 834,309
-------------------------------------------------------------------------
-------------------------------------------------------------------------
PENGROWTH ENERGY TRUST NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS SEPTEMBER 30, 2003 (Tabular amounts are stated in
thousands of dollars except per unit amounts)
-------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICY The interim consolidated financial
statements of Pengrowth Energy Trust include the accounts of
Pengrowth Energy Trust and Pengrowth Corporation (collectively
referred to as "Pengrowth"). The financial statements have been
prepared by management in accordance with accounting principles
generally accepted in Canada. The interim consolidated financial
statements have been prepared following the same accounting
policies and methods of computation as the consolidated financial
statements for the fiscal year ended December 31, 2002. The
disclosures provided below are incremental to those included with
the annual consolidated financial statements. The interim
consolidated financial statements should be read in conjunction
with the consolidated financial statements and the notes thereto in
Pengrowth's annual report for the year ended December 31, 2002. 2.
DISTRIBUTABLE CASH There is no standardized measure of
Distributable Cash and therefore Distributable Cash, as presented
below, may not be comparable to similar measures presented by other
energy trusts. Three months ended Nine months ended September 30
September 30 2003 2002 2003 2002
---------------------------------------------------------------------
Net income $ 33,025 $ 12,497 $ 146,510 $ 26,543 Add (Deduct):
Depletion, depreciation and future site restoration 48,795 34,345
144,662 102,217 Remediation expenses and trust fund contributions
(1,118) (578) (2,260) (1,487) Unrealized foreign exchange loss
(gain) (Note 6) 480 - (20,260) - Other (125) (125) 125 125
---------------------------------------------------------------------
Distributable cash before withholding 81,057 46,139 268,777 127,398
Cash withheld to fund capital expenditures (8,106) - (26,831) -
---------------------------------------------------------------------
Distributable cash $ 72,951 $ 46,139 $ 241,946 $ 127,398 Less:
Actual distributions paid or declared (66,493) (45,799) (235,488)
(127,058)
---------------------------------------------------------------------
Balance to be distributed $ 6,458 $ 340 $ 6,458 $ 340
---------------------------------------------------------------------
Actual distributions paid or declared per unit $ 0.630 $ 0.520 $
2.050 $ 1.470
---------------------------------------------------------------------
The per unit amount of distributions paid or declared reflect
actual distributions paid or declared based on units outstanding at
the time. 3. LONG TERM DEBT As at As at September 30, December 31,
2003 2002
---------------------------------------------------------------------
U.S. dollar denominated debt: U.S. $150 million senior unsecured
notes at 4.93% due April 2010 $ 217,680 $ - U.S. $50 million senior
unsecured notes at 5.47% due April 2013 72,560 - Unrealized foreign
exchange gain on translation (20,260) -
---------------------------------------------------------------------
269,980 - Canadian dollar revolving credit borrowings - 316,501
---------------------------------------------------------------------
$ 269,980 $ 316,501
---------------------------------------------------------------------
On April 23, 2003, Pengrowth closed a U.S.$200 million private
placement of senior unsecured notes to a group of U.S. investors.
The notes were offered in two tranches of U.S.$150 million at 4.93%
due April 2010 and U.S.$50 million at 5.47% due in April 2013. The
term notes contain certain financial maintenance covenants and
interest is paid semi-annually. The proceeds from the private
placement were used to repay a portion of Pengrowth's outstanding
bank debt. Costs incurred in connection with issuing the notes, in
the amount of $2,141,000, are being amortized straight line over
the term of the notes. In June 2003, the Corporation negotiated a
$225 million revolving credit facility syndicated among eight
financial institutions with an extendible 364 day revolving period
and a two year amortization term period. In addition, it has a $35
million demand operating line of credit. The borrowing capacity
under these facilities is currently reduced by outstanding letters
of credit in the amount of approximately $34 million. For 2004, the
borrowing capacity will be reduced by a further $25 million of
letters of credit. Interest payable on amounts drawn is at the
prevailing bankers' acceptance rates plus stamping fees, lenders'
prime lending rates, or U.S. libor rates plus applicable margins,
depending on the form of borrowing by the Corporation. The margins
and stamping fees vary from 0.25 percent to 1.50 percent depending
on financial statement ratios and the form of borrowing. The credit
facility will revolve until June 18, 2004, whereupon it may be
renewed for a further 364 days, subject to satisfactory review by
the lenders, or converted into a term facility with amounts
outstanding under the facility repayable in eight equal quarterly
installments. The Corporation can post, at its option, security
suitable to the banks in lieu of the first year's payments. 4.
TRUST UNITS The authorized capital of Pengrowth is 500,000,000
trust units. September 30, 2003 December 31, 2002
---------------------------------------------------------------------
Trust Units Number Number Issued of units Amount of units Amount
---------------------------------------------------------------------
Balance, beginning of period 110,562,327 $ 1,662,726 82,240,069 $
1,280,599 Issued for cash 8,500,000 144,075 28,125,000 404,350
Less: issue expenses - (7,776) - (24,989) Issued for cash on
exercise of stock options and rights 1,066,155 14,709 66,093 871
Issued for cash under Distribution Reinvestment ("DRIP") Plan
1,157,871 17,210 131,165 1,895
---------------------------------------------------------------------
Balance, end of period 121,286,353 $ 1,830,944 110,562,327 $
1,662,726
---------------------------------------------------------------------
The per unit amounts for net income are based on weighted average
units outstanding for the period. The weighted average units
outstanding for the three months ended September 30, 2003 were
118,928,247 units and for the nine months ended September 30, 2003
were 113,751,004 (three months ended September 30, 2002 -
90,379,792 units, nine months ended September 30, 2002 - 85,782,649
units). In computing diluted net income per unit, 621,952 units
were added to the weighted average number of units outstanding
during the quarter ended September 30, 2003 (September 30, 2002 -
89,929 units) and 487,391 units were added for the nine months
ended September 30, 2003 (nine months ended September 30, 2002 -
49,936 units) for the dilutive effect of employee stock options and
rights. Trust Unit Option Plan As at September 30, 2003, options to
purchase 3,706,805 trust units were outstanding (December 31, 2002
- 4,451,131) that expire at various dates to June 28, 2009.
September 30, 2003 December 31, 2002
---------------------------------------------------------------------
Weighted Weighted Average Average Trust Unit Number Exercise Number
Exercise Options of options Price of options Price
---------------------------------------------------------------------
Outstanding at beginning of period 4,451,131 $16.78 3,106,635
$17.78 Granted - - 1,895,603 15.14 Exercised (682,280) 13.93
(66,093) 13.17 Cancelled (62,046) 17.17 (485,014) 17.23
---------------------------------------------------------------------
Outstanding at period-end 3,706,805 $17.30 4,451,131 $16.78
Exercisable at period-end 3,264,289 $17.73 3,715,271 $17.04
---------------------------------------------------------------------
Rights Incentive Plan As at September 30, 2003, rights to purchase
1,648,325 trust units were outstanding (December 31, 2002 -
1,964,100) that expire at various dates to June 9, 2008. September
30, 2003 December 31, 2002
---------------------------------------------------------------------
Weighted Weighted Rights Average Average Incentive Number Exercise
Number Exercise Options of rights Price of rights Price
---------------------------------------------------------------------
Outstanding at beginning of period 1,964,100 $13.29 - $ - Granted
100,800 15.76 1,964,100 13.61 Exercised (383,875) 13.56 - -
Cancelled (32,700) 12.75 - -
---------------------------------------------------------------------
Outstanding at period-end 1,648,325 $12.30 1,964,100 $13.29
Exercisable at period-end 327,625 $12.43 654,700 $13.29
---------------------------------------------------------------------
Fair Value of Unit Based Compensation Had compensation cost for
options and rights granted to employees since January 1, 2002, been
calculated based on the fair value method, net income would be
reduced as follows: Three months ended Nine months ended September
30 September 30 2003 2002 2003 2002
---------------------------------------------------------------------
Net income $ 33,025 $ 12,497 $ 146,510 $ 26,543 Compensation cost
related to options (111) (128) (312) (803) Compensation cost
related to rights (1,404) - (6,000) -
---------------------------------------------------------------------
Pro forma net income $ 31,510 $ 12,369 $ 140,198 $ 25,740
---------------------------------------------------------------------
Pro forma net income per unit: Basic $0.265 $0.137 $1.232 $0.300
Diluted $0.264 $0.137 $1.227 $0.300
---------------------------------------------------------------------
5. GUARANTEE Pengrowth has adopted the provisions of Accounting
Guideline acG-14, Disclosure of Guarantees. As at September 30,
2003, the Corporation has provided a guarantee to an investment
dealer pursuant to the employee Trust Unit Margin Purchase Plan.
Under the terms of this plan, participants may purchase trust units
and finance up to 75% of the purchase price through the investment
dealer. Participants maintain personal margin loans with the
investment dealer and are responsible for all interest costs and
obligations with respect to their margin loans. The Corporation has
provided a $5 million letter of credit to the investment dealer in
relation to amounts owing under the plan. The Corporation acts as a
guarantor on all margin loans under the plan. As at September 30,
2003, 2,477,510 trust units were deposited under the plan with a
market value of $42,737,048 and a corresponding margin loan of
$6,358,248. The investment dealer has limited the total margin loan
available under the plan to the lesser of $15 million or 35% of the
market value of the units held under the plan. If the market value
of the trust units under the plan declines, the Corporation may be
required to make payments or post additional letters of credit to
the investment dealer. Any payments to be made by the Corporation
would be reduced by proceeds of liquidating the individual's trust
units held under the plan. 6. FOREIGN EXCHANGE LOSS (GAIN) Three
months ended Nine months ended September 30 September 30 2003 2002
2003 2002
---------------------------------------------------------------------
Unrealized foreign exchange loss (gain) on translation of U.S.
dollar denominated debt $ 480 $ - $ (20,260) $ - Realized foreign
exchange losses (gains) (456) (292) 808 69
---------------------------------------------------------------------
$ 24 $ (292) $ (19,452) $ 69
---------------------------------------------------------------------
The U.S. dollar denominated debt is translated into Canadian
dollars at the exchange rate in effect at the balance sheet date.
Foreign exchange gains and losses are included in income. 7. OTHER
CASH FLOW DISCLOSURES Change in Non-Cash Operating Working Capital
Three months ended Nine months ended September 30 September 30 2003
2002 2003 2002
---------------------------------------------------------------------
Accounts receivable $ 5,710 $ 156 $ 1,813 $ (4,727) Inventory (139)
282 472 1,711 Accounts payable and accrued liabilities 7,825 2,371
(6,777) (3,104) Due to Pengrowth Management Limited (259) (38)
(561) (7)
---------------------------------------------------------------------
$ 13,137 $ 2,771 $ (5,053) $ (6,127)
---------------------------------------------------------------------
Change in Non-Cash Investing Working Capital Three months ended
Nine months ended September 30 September 30 2003 2002 2003 2002
---------------------------------------------------------------------
Accounts payable for capital accruals $ (1,410) $ (1,835) $ (652) $
1,684
---------------------------------------------------------------------
Cash Payments Three months ended Nine months ended September 30
September 30 2003 2002 2003 2002
---------------------------------------------------------------------
Cash payments made for taxes $ 366 $ 500 $ 1,363 $ 1,290 Cash
payments made for interest $ 2,065 $ 3,265 $ 9,346 $ 9,803
---------------------------------------------------------------------
8. FINANCIAL INSTRUMENTS Interest Rate Risk On April 23, 2003,
Pengrowth completed a US$200 million private placement of fixed
rate seven and ten year term notes. Proceeds from the notes were
used to pay down existing floating rate bank debt. The interest and
principal payments on the term notes are payable in U.S. dollars.
Pengrowth had previously fixed the interest rates on $125 million
of Canadian bank debt using interest rate swaps. During the second
and third quarter, Pengrowth terminated these interest rate swaps
at a total cost including accrued interest of approximately
$2,229,000. Foreign Exchange Risk Pengrowth entered into a foreign
exchange swap which fixed the Canadian to U.S. dollar exchange rate
at Cdn$1.55 per U.S.$1 on U.S.$750,000 per month for 2003 and 2004.
This swap has mitigated a portion of the exchange risk on U.S.
dollar denominated gas sales. The estimated fair value of the
foreign exchange swap has been determined based on the amount
Pengrowth would receive or pay to terminate the contract at period
end. At September 30, 2003, the amount Pengrowth would receive to
terminate the foreign exchange swap would be Cdn$2,097,000. Forward
and Futures Contracts Pengrowth has a price risk management program
whereby the commodity price associated with a portion of its future
production is fixed. Pengrowth sells forward a portion of its
future production through a combination of fixed price sales
contracts with customers and commodity swap agreements with
financial counterparties. The forward and futures contracts are
subject to market risk from fluctuating commodity prices and
exchange rates. As at September 30, 2003, Pengrowth had fixed the
price applicable to future production as follows: Crude Oil: Volume
Reference Price Remaining Term (bbl/d) Point Per bbl
---------------------------------------------------------------------
2003 ---- Financial: ---------- Oct 1, 2003 - Dec 31, 2003 11,000
WTI(1) $41.48 Cdn
---------------------------------------------------------------------
2004 ---- Financial: ---------- Jan 1, 2004 - Dec 31, 2004 9,500
WTI(1) $38.11 Cdn
---------------------------------------------------------------------
Natural Gas: Volume Reference Price Remaining Term (mmbtu/d) Point
Per mmbtu
---------------------------------------------------------------------
2003 ---- Financial: ---------- Oct 1, 2003 - Dec 31, 2003 7,500
Tetco M3(1) $7.37 Cdn Oct 1, 2003 - Dec 31, 2003 7,000 Transco Z6
$3.90 U.S Oct 1, 2003 - Dec 31, 2003 2,500 Tetco M3(1) $8.42 Cdn
Oct 1, 2003 - Dec 31, 2003 2,370 AECO $6.96 Cdn Oct 1, 2003 - Dec
31, 2003 2,370 Sumas(1) $7.28 Cdn Physical: --------- Oct 1, 2003 -
Dec 31, 2003 9,478 AECO $5.73 Cdn
---------------------------------------------------------------------
2004 ---- Financial: ---------- Jan 1, 2004 - Dec 31, 2004 5,000
Tetco M3(1) $6.90 Cdn Jan 1, 2004 - Dec 31, 2004 7,000 Transco Z6
$3.90 U.S
---------------------------------------------------------------------
(1) Associated CDN$/US$ foreign exchange rate has been fixed. The
estimated fair value of the financial crude oil and natural gas
contracts has been determined based on the amounts Pengrowth would
receive or pay to terminate the contracts at period end. At
September 30, 2003, the amount Pengrowth would receive to terminate
the financial crude oil contracts is $9,011,000, and the amount
Pengrowth would pay to terminate the financial natural gas
contracts is $7,962,000. Fair Value of Financial Instruments The
carrying value of financial instruments included in the balance
sheet, other than long-term debt and remediation trust fund,
approximate their fair value due to their short maturity. The fair
value of the Remediation Trust Fund at September 30, 2003 was
$7,693,000 (December 31, 2002 - $7,193,000). The fair value of the
U.S. denominated debt approximates its carrying value as the rate
on the debt does not vary significantly from market rates. 9.
SUBSEQUENT EVENT On October 31, 2003, Pengrowth entered into an
agreement with Emera Offshore Incorporated ("Emera") to purchase
Emera's 8.4% interest in the Sable Offshore Energy Project ("SOEP")
platform facilities for a purchase price of $65 million before
adjustment. DATASOURCE: Pengrowth Energy Trust CONTACT: please
visit our website http://www.pengrowth.com/ or contact: Bob
Hodgins, Chief Financial Officer, Calgary E-mail: , Telephone:
(403) 233-0224, Toll Free: 1-800-223-4122, Facsimile: (403)
294-0051; Sally Elliott, Investor Relations, Toronto E-mail: ,
Telephone: (416) 362-1748, Toll Free: 1-888-744-1111, Facsimile:
(416) 362-8191
Copyright