DBRS Confirms Pengrowth Energy Trust at STA-5 (middle)p

Dominion Bond Rating Service (“DBRS”) has today confirmed the stability rating of Pengrowth Energy Trust (“Pengrowth” or the “Trust”) as indicated above.

Similar to its peers, Pengrowth’s production costs are rising and have increased significantly in 2005. At Cdn$12.24/boe (including transportation) for the first six months in 2005 (Cdn$10.56/boe in 2004), the Trust’s production costs are among the highest of its peers. Costs increased significantly due to the addition of the higher operating cost Murphy Oil Corporation assets and increased working interest in the Swan Hills Unit No. 1 oil field. Balance sheet leverage increased to 25% at June 30, 2005 (20% in 2004), remaining at the high end of the 20%-25% range within which most of Pengrowth’s peers operate. In addition, the Trust has at times used more aggressive leverage in the low 30% range, as reflected in the Trust’s “Weak” score for its financial profile. However, an annualized debt to-cash flow ratio at 0.95 times in the first six months of 2005 is in line with peer performance, and is supported by strong commodity prices. A payout ratio of 83% for the first six months of 2005 remains high relative to the peer average and is aggressive in the context of the strong commodity price environment. The Trust nonetheless continues to actively hedge its commodity exposure, providing some measure of cash flow stability. Approximately 50% and 13% of net light/medium crude oil and gas production volumes are hedged for 2005, respectively.

The Trust’s large asset base offers development opportunities in coalbed methane (CBM), water and miscible flood, shallow gas, and heavy oil. Good product diversification has been achieved through a balanced production mix of light/medium oil (35%), natural gas liquids (11%), natural gas (44%), and heavy oil (10%). Per unit reserves and production continued to decline in 2004. However, this decline of 3%-5% in 2004 compares well to that of Pengrowth’s peers, who generally experienced greater per unit dilution due to the high cost of acquisitions combined with natural field declines. Pengrowth has consistently replaced annual production since 1999 (excluding 2003) by an average of approximately 200%. However, production replaced internally remains relatively low at 29% in 2004, reflecting the Trust’s reliance on acquisitions to replace production and to support growth. Pengrowth’s proved reserve life index, at 8.6 years, provides an asset base to support production in the near term.

The Cdn$215 million planned capital program in 2005 is supported by the continued strength of commodity prices. Per unit distributions are expected to be maintained at current levels for the remainder of the year, resulting in a slightly lower payout ratio for 2005 at current price levels.

Note:
p – This rating is based on public information.