Pengrowth Sanctions Acceleration of the Lindbergh Project,

Pengrowth Sanctions Acceleration of the Lindbergh Project, Announces
2013 Capital Program and Production Guidance and Reaffirms Commitment
to Dividend 
CALGARY, ALBERTA -- (Marketwire) -- 01/11/13 -- Pengrowth Energy
Corporation (TSX:PGF) (NYSE:PGH) is pleased to announce that its
Board of Directors has sanctioned Phase 1 of its Lindbergh thermal
bitumen project and approved its 2013 capital budget and production
guidance.  
The Phase 1 Lindbergh project is expected to produce 12,500 barrels
of bitumen per day ("bbpd") when fully operational in Q2 2015, which
is approximately one year ahead of prior estimates. Capital
expenditures for Phase 1 are targeted at $590 million, of which $300
million is budgeted in 2013. This includes an additional $150 million
compared to earlier guidance to accelerate the ramp-up and expand oil
handling capacity of the plant, based on the excellent performance of
the Lindbergh pilot operations. 
Pengrowth plans to invest a total of $770 million in 2013 to develop
its focused set of oil and liquids-rich natural gas opportunities,
including Lindbergh. The 2013 capital program will focus on
maximizing cash flow to fund dividends, while investing significant
long-lead capital related to Phase 1 of the low decline Lindbergh
project. The 2013 program will be funded by operating cash flow and
proceeds from non-core asset dispositions, including the $315 million
Weyburn disposition announced in December.  
"We are excited to proceed with the first phase of Lindbergh, a
highly economic, low decline project that, once at full capacity,
will provide the backbone for a long term, dividend paying model,"
said Derek Evans, President and Chief Executive Officer. "We believe
the resource base at Lindbergh will ultimately support production of
50,000 barrels of bitumen per day for Pengrowth and will generate
significant long term cash flow in support of our dividend. Pengrowth
has a solid financial plan that allows us to fund our 2013 capital
program without issuing further debt or equity." 


 
Highlights:                                                                 
 
--  Pengrowth remains committed to a dividend of 4 cents per share per
    month. 
--  Pengrowth sanctions Phase 1 of the 26% IRR Lindbergh thermal bitumen
    project and corresponding $300 million in capital expenditures in 2013. 
--  Pengrowth will undertake a $470 million non-thermal capital expenditure
    program in 2013, with $332 million directed to light oil and natural gas
    liquids in the core areas of Greater Olds and Swan Hills. The company
    plans to divest up to $700 million in assets in 2013 to improve
    financial flexibility and funding capability for Lindbergh in 2013 and
    2014, as well as focusing our organizational expertise on our core
    areas. 
--  The company expects its operations to generate funds flow of $680
    million in 2013, about 14% more than forecast  2012 funds flow.

 
Capital Allocation 
The 2013 capital program includes $470 million for development
activities targeting light oil and liquids-rich natural gas
production, mainly in the Greater Olds/Garrington area, Swan Hills
and south east Saskatchewan. In 2013, Pengrowth will participate in
drilling 82 net wells over and above any Lindbergh drilling. An
additional $300 million will be spent at Lindbergh in 2013 as
Pengrowth positions itself for growth in thermal oil production in
2014 and beyond.  
The 2013 budget focuses on projects with the highest rates of return
and maximum cash flow, with recycle ratios in excess of 2 times.
Based on the mid-point of the 2013 production guidance, Pengrowth
expects to generate funds flow from operations of approximately $680
million, assuming a WTI oil price of USD$90/bbl (with a 9% discount
for light oil and 23% discount for heavy oil), AECO natural gas price
of Cdn$3.50/Mcf and a $1.00 Cdn/USD exchange rate. Pengrowth's
expected funds flow from operations of $680 million represents an
increase of approximately 14% over forecast 2012 funds flow. 


 
                                                                    Budgeted
Capital allocation by expenditure type                            $ Millions
----------------------------------------------------------------------------
Non-thermal Development                                                 $365
Facilities and Maintenance                                               $67
Corporate (Land, seismic, etc.)                                          $38
Thermal development                                                     $300
----------------------------------------------------------------------------
Total Capital                                                           $770
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Development Capital allocation by area                              Budgeted
Non-thermal Development                                           $ Millions
----------------------------------------------------------------------------
Greater Olds/Garrington                                                 $200
Swan Hills                                                              $132
SE Saskatchewan                                                          $17
Other                                                                    $16
----------------------------------------------------------------------------
Non-thermal Development Capital                                         $365
                                                                            
Thermal Bitumen Development                                                 
Lindbergh                                                               $300
----------------------------------------------------------------------------
Total Development Capital                                               $665
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
Financing the 2013 capital program  
Pengrowth intends to fund its 2013 capital program with a combination
of cash flow and proceeds from asset sales. Pengrowth's Board of
Directors and management are currently analyzing the company's
non-core and mature asset base with the intention of structuring a
2013 disposition program of up to $700 million. Pengrowth's strategy
will focus on maximizing the aggregate proceeds to support the
funding of Phase 1 of the Lindbergh thermal project in 2013 and 2014,
while protecting the sustainability of Pengrowth's cash flow and
dividend.  
Pengrowth does not anticipate funding any of its 2013 capital program
with incremental bank or capital markets debt. Any bank debt drawn
will be viewed as temporary and will be repaid with the proceeds from
the anticipated non-core divestitures. Additionally, at present,
Pengrowth's Board considers Pengrowth's share price to be undervalued
in the context of its underlying net asset value and as such, equity
is not being considered to fund the capital program.  
Dividends 
Pengrowth recognizes the importance of its dividend to shareholders
and remains committed to maintaining its monthly dividend of $0.04
per common share. In the event of an extraordinary, prolonged decline
in commodity prices, Pengrowth would look first to decrease capital
investment and/or sell assets bef
ore any reassessment of the
dividend. 
Dividends will continue to be declared monthly as per the 2013
dividend schedule on our website at www.pengrowth.com/dividends. 
Core Focus Areas 
Lindbergh 
The Lindbergh pilot results continue to outperform expectations. The
pilot, which consists of two well pairs, has been in operation for 10
months and is currently producing in excess of 1,600 bbpd with an
Instantaneous Steam Oil Ratio ("SOR") of 1.7. The well pairs have
each produced approximately 168,000 bbls of bitumen as of December
31, 2012.  
The pilot has demonstrated faster than expected reservoir response to
steam and lower than expected steam/oil and diluent blending ratios.
The net result is a 94% increase in the Phase 1 proved plus probable
NPV10 to $688 million (GLJ, June 2012) from Pengrowth's original
internal estimates.  
The excellent pilot results and associated reserve potential have
provided Pengrowth with the confidence needed to proceed with the
Phase 1 commercial development of 12,500 bbpd.  
As a result of the information provided by the pilot, the Phase 1
project design and timing have been improved and Phase 1 is now
expected to be at full capacity in Q2 2015, a full year earlier than
previously projected.  
Phase 1 design modifications to maximize NPV and IRR through
acceleration of the capacity ramp-up has resulted in Phase 1 total
development capital increasing from Pengrowth's 2010 estimate of $450
million to $590 million. $100 million of the cost increase is
associated with scope changes to capitalize on the low SOR and high
production rates exhibited by the pilot wells. This will result in
increased bitumen production capability at the well and facility
levels and will increase bitumen transportation, storage and
marketing flexibility.  


 
Specific scope changes to Phase 1 include:                                  
 
--  The addition of further well pairs and incorporating down hole pumps in
    the initial stages of start-up, as a result of faster than expected
    production ramp-up. This allows for increased production capability and
    production acceleration up to one year earlier than previously expected.
--  Expanded process piping and vessel capacity to allow for 15% excess
    production throughput. This is intended to ensure yearly average
    allowable volumes are achieved, by mitigating the effects of downtime
    and production ramp-up periods. It may also allow Pengrowth to produce
    at higher rates on approval of the EIA application for the 17,500 bbpd
    expansion, prior to construction. 
--  Expanded tankage and shipping/loading flexibility to take advantage of
    truck, pipeline and rail options in order to maximize netbacks, given
    uncertainty around the availability of export pipeline capacity. 
--  Increasing the size of the co-generation plant at Lindbergh to allow for
    future facility growth and potentially, in the interim, to be a net
    seller of power back to the grid. 

 
The remaining $40 million of cost expansion from the previous 2010
cost estimate is due to increases for in-field construction and
process packages. 
Pengrowth plans to spend $300 million at Lindbergh in 2013, inclusive
of $55 million announced in December 2012. This capital will be spent
on long lead items, starting construction of the central processing
facility in the second quarter and the drilling of the first eight of
23 well pairs which is expected to commence in the fourth quarter. 
Regulatory, environmental, landowner and First Nations discussions
surrounding Lindbergh are on track. Pengrowth anticipates regulatory
and environmental approvals to be granted in Q2 2013.  
Subject to Board and regulatory approvals, Pengrowth plans to follow
up with two subsequent phases of development at Lindbergh. Production
from Phase 2 is expected to commence in early 2017, with a ramp-up to
30,000 bbpd, to be followed by Phase 3, which is expected to increase
total production to approximately 50,000 bbpd by the end of 2018.  
Greater Olds/Garrington  
The NAL Energy acquisition significantly expanded Pengrowth's Cardium
exposure to 290 gross sections in this highly prospective area.
Capital expenditures in this area are expected to be approximately
$200 million, primarily targeting Cardium light oil ($163 million/40
net wells) in the Lochend and Garrington areas.  
At Lochend, Pengrowth recently acquired additional high working
interest Cardium lands which are included in our 2013 development
plans. These are prolific, light oil wells with approximate netbacks
of $64/bbl and recycle ratios in excess of 3.0 times.  
Additional capital has been allocated to the Elkton and Mannville
liquids-rich natural gas plays, which are characterized by a high
liquids content (approximately 100 to 130 bbls/MMcf) providing strong
economic returns and cash flows.  
Pengrowth expects to have six rigs drilling in Greater
Olds/Garrington during the first quarter, in anticipation of drilling
over 50 net wells in 2013.  
Swan Hills  
In 2013, Pengrowth plans to invest $132 million on light oil and
liquids-rich gas plays in the Swan Hills trend. The 2013 program
includes approximately 15 net operated and non-operated drills, as
well as significant optimization activities in Judy Creek, Virginia
Hills, Sawn Lake and Deer & House Mountain. This program reflects a
reduction in drilling compared to 2012, as the horizontal well
program is high graded, based on our increased knowledge of the play. 
At Judy Creek, the company will continue to exploit numerous
development opportunities in the Beaverhill Lake A and B pools with
new drills, re-entries, recompletions and workovers. The remainder of
Pengrowth's activity will focus on expanding its footprint within the
Swan Hills trend by developing opportunities identified at Deer &
House Mountain, Virginia Hills and Sawn Lake. Pengrowth also holds a
100% working interest in 47 sections of land on an undeveloped
platform margin play in the Devil area with significant upside
potential, which the company intends to exploit in 2013.  
Production Volumes  
Pengrowth's 2013 capital program is designed to deliver average daily
production volumes of between 85,000 and 87,000 boe/d, prior to the
impact of any asset dispositions other than Weyburn. 
The breakdown of 2013 expected production volumes, using the
mid-point of guidance, is set out below:  


 
2013 Production Volumes                                           Volume/day
----------------------------------------------------------------------------
Light oil (bbl/d)                                                     28,300
Heavy oil (bbl/d)                                                      7,400
NGLs (bbl/d)                                                           9,800
Natural Gas (Mcf/d)                                                  243,000
----------------------------------------------------------------------------
Boe/d equivalent(i)                                                   86,000
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(i) Assumes mid-point of average daily production guidance and includes the 
    Weyburn disposition                                                     

 
Liquids as a percentage of tot
al production are expected to remain at
2012 levels of approximately 53%, even after the sale of the Weyburn
asset, which represented approximately 5% of Pengrowth's 2012 liquids
production. 
Operating Costs 
Net operating costs for 2013 are forecast to be $451 million, a
decrease of two percent compared to our guidance for 2012 net
operating expenses of $460 million. The drop in operating costs is
primarily driven by the sale of Weyburn, the allocation of $21
million of overhead costs previously attributed to operations to G&A
and additional cost savings, offset by the addition of Lindbergh
operating costs being included, following commercial recognition of
the project. On a unit basis, 2013 net operating cost guidance is
$14.00 to $14.50 per boe. Power costs currently represent
approximately 18 percent of Pengrowth's operating costs and have been
budgeted at $90/MW (all inclusive) in 2013. 
General and Administrative  
Total general and administrative ("G&A") costs are expected to report
an increase of approximately $21 million in 2013 versus our latest
2012 guidance due to the allocation of G&A costs from operations, as
indicated above. Excluding the allocation of operating costs in 2013,
G&A costs are expected to remain flat as compared to 2012. On a per
boe basis, G&A costs are expected to be $3.30 per boe compared to
2012 guidance of $2.68 per boe. Included in our 2013 G&A forecast are
non-cash G&A costs of approximately $0.46 per boe and $0.66 per boe
of costs that were previously allocated to operations.  
2013 Full-Year Guidance Summary 


 
Average daily production volume (boe/d)                     85,000 to 87,000
Total capital expenditures ($millions)(1)                                770
Royalties (% of sales)                                                    17
Net operating costs ($ per boe)                                14.00 - 14.50
G & A expense (cash and non-cash) ($ per boe)(2)                        3.30
Transportation ($ per boe)                                              0.90
                                                                            
(1) Includes $300 million at Lindbergh                                      
(2) Includes $0.46/boe of non-cash G & A                                    

 
All guidance numbers in this release are prior to the impact of any
dispositions, other than the previously announced Weyburn
disposition. 
Investor Day  
An Investor Day presentation, discussing 2013 operating plans, will
be held on Friday, January 11, 2013 at 9:00 a.m. (Calgary time). An
audio version of this presentation will be webcast. To participate in
the webcast, participants may register by visiting
http://www.gowebcasting.com/4038. An archived version of the webcast
will be available until midnight eastern time, January 25, 2013 at
http://www.gowebcasting.com/4038. 
About Pengrowth:  
Pengrowth Energy Corporation is a dividend-paying, intermediate
Canadian producer of oil and natural gas, headquartered in Calgary,
Alberta. Pengrowth's assets include the Swan Hills light oil, Cardium
light oil and Lindbergh thermal bitumen projects. 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:  
All amounts are stated in Canadian dollars unless otherwise
specified. 
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 NGLs 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 boe is based on an
energy equivalency conversion method primarily applicable at the
burner tip and does not represent a value equivalency at the
wellhead. All production figures stated are based on Company Interest
before the deduction of royalties.  
Production and reserves, unless otherwise noted, are stated as
Company Interest. Company Interest, as used herein, means Pengrowth's
working interest share of production or reserves prior to the
deduction of royalties plus any royalty interest in production or
reserves at the wellhead. 
Contingent Resources are those quantities of petroleum estimated, as
of a given date, 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. The contingencies may
include factors such as economics, legal, environmental, political
and regulatory matters or lack of markets. Contingent Resources are
further classified in accordance with the level of certainty
associated with the estimates. Contingent Reserves do not constitute
and should not be confused with reserves.  
Caution Regarding Forward Looking Information:  
This press release contains forward-looking statements within the
meaning of securities laws, including the "safe harbour" provisions
of the Canadian securities legislation and the United States Private
Securities Litigation Reform Act of 1995. Forward-looking information
is often, but not always, identified by the use of words such as
"anticipate", "believe", "expect", "plan", "intend", "forecast",
"target", "project", "guidance", "may", "will", "should", "could",
"estimate", "predict" or similar words suggesting future outcomes or
language suggesting an outlook. Forward-looking statements in this
press release include, but are not limited to, statements with
respect to future dividends, 2013 capital expenditures and the
allocation thereof, anticipated Lindbergh production, IRR, net
present value, costs and timing, drilling plans, anticipated asset
dispositions, recycle ratios, the allocation of capital expenditures,
production, production volumes, initial production rates, projected
cash flow, funds flow, future borrowing, financing plans, operating
costs, G&A and royalties, Pengrowth's production profile, liquids to
gas ratio, reserves and the replacement thereof. Statements relating
to "reserves" are deemed to be forward-looking statements, as they
involve the implied assessment, based on certain estimates and
assumptions that the reserves described exist in the quantities
predicted or estimated and can profitably be produced in the future. 
Forward-looking statements and information are based on current
beliefs as well as assumptions made by and information currently
available to Pengrowth concerning anticipated financial performance,
business prospects, strategies and regulatory developments. Although
management considers these assumptions to be reasonable based on
information currently available to it, they may prove to be
incorrect.  
By their very nature, forward-looking statements involve inherent
risks and uncertainties, both general and specific, and risks that
predictions, forecasts, projections and other forward-looking
statements will not be achieved. We caution readers not to place
undue reliance on these statements as a number of important factors
could cause the actual results to differ materially from the beliefs,
plans, objectives, expectations and anticipations, estimates and
intentions expressed in such forward-looking statements. These
factors include, but are not limited to: changes in general economic,
market and business conditions; the volatility of oil and gas prices;
fluctuations in production and development costs and capital
expenditures; the imprecision of reserve estimates and estimates of
recoverable quantities of oil, natural gas and liquids; Pengrowth's
ability to replace and expand oil and gas reserves; geological,
technical, drilling and processing problems and other difficulties in
producing reserves; environmental claims and liabilities; incorrect
assessments of value when making acquisitions; increases in debt
service charg
es; the loss of key personnel; the marketability of
production; defaults by third party operators; unforeseen title
defects; fluctuations in foreign currency and exchange rates;
fluctuations in interest rates; inadequate insurance coverage;
compliance with environmental laws and regulations; actions by
governmental or regulatory agencies, including changes in tax laws;
the failure to qualify as a mutual fund trust; Pengrowth's ability to
access external sources of debt and equity capital; the impact of
foreign and domestic government programs and the occurrence of
unexpected events involved in the operation and development of oil
and gas properties. Further information regarding these factors may
be found under the heading "Business Risks" in our most recent
management's discussion and analysis and under "Risk Factors" in our
Annual Information Form dated February 28, 2012.  
The foregoing list of factors that may affect future results is not
exhaustive. When relying on our forward-looking statements to make
decisions, 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 Pengrowth
does not undertake any obligation to update publicly or to revise any
of the included forward-looking statements, whether as a result of
new information, future events or otherwise, except as required by
applicable laws.  
The forward-looking statements contained in this press release are
expressly qualified by this cautionary statement.
Contacts:
Pengrowth
Investor Relations
(403) 233-0224 or Toll Free: 1-888-744-1111
(403) 693-8889 (FAX)
investorrelations@pengrowth.com
www.pengrowth.com
 
 
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