Pengrowth Announces $715 Million 2014 Capital Program and Guidance

Pengrowth Announces $715 Million 2014 Capital Program and Guidance 
CALGARY, ALBERTA -- (Marketwired) -- 01/16/14 --   Pengrowth Energy
Corporation (TSX: PGF)(NYSE: PGH) is pleased to announce that its
Board of Directors has approved a $715 million capital budget for
2014, investing $365 million in its Lindbergh thermal oil project and
$350 million in its non-thermal assets.  
Pengrowth is in the final year of its transition to become a
sustainable, lower decline, higher cash flowing, oil producer. The
company's focus in 2014 will be to: 

--  Maintain Pengrowth's dividend at the current level of 4 cents per share
    per month 
--  Execute on its Lindbergh thermal oil project's commercial development.
    Lindbergh is on time, on budget and en route to first steam in the
    fourth quarter of 2014 with meaningful oil production in early 2015 
--  Invest in Pengrowth's best opportunities, maximizing funds flow from
    non-thermal businesses 
--  Continue to be prudent in managing Pengrowth's balance sheet 

Pengrowth expects $715 million of capital expenditures to generate
annual average production of between 71,000 and 73,000 barrels of oil
equivalent per day (boe/d) in 2014, fully funded by a combination of
operating funds flow and cash on hand from proceeds of the non-core
asset dispositions that were executed in 2013. As a result of these
asset sales, Pengrowth exited 2013 with approximately $430 million of
cash on hand. 
"We are proud of the milestones we've achieved in executing
Pengrowth's ongoing transformation to becoming a more sustainable,
dividend paying company. We have done exactly what we said we would
do," said Derek Evans, President and Chief Executive Officer. "Last
year, we received approval to develop our best in class Lindbergh
thermal oil project and funded it through dispositions of non-core
assets in a difficult disposition market. We will invest prudently in
2014 to continue to protect our balance sheet and we look forward to
bringing Lindbergh's 12,500 bbl/d first commercial phase of
production on stream in early 2015." 

--  Pengrowth remains committed to a dividend of 4 cents per share per month
--  The Lindbergh project is slated to receive $365 million of investment in
    2014 and remains on time and on budget 
--  Pengrowth plans a $350 million non-thermal capital expenditure program
    in 2014, with $270 million of capital directed to the development of
    light oil and natural gas liquids-rich assets, primarily in the core
    area of Greater Olds/Garrington 
--  Pengrowth expects annual average production of between 71,000 boe/d and
    73,000 boe/d in 2014 
--  Lindbergh is expected to provide Pengrowth with significant organic
    growth in cash flow and production in 2015 and beyond 
--  The company expects its operations to generate funds flow of between
    $500 million and $540 million in 2014 and EBITDA of between $575 million
    and $625 million.

Production Volumes  
The breakdown of 2014 expected production volumes, using the
mid-point of guidance, is set out below:  

2014 Production Volumes              Volume/day
Light oil (bbl/d)                        21,000
Heavy oil (bbl/d)                         8,900
NGLs (bbl/d)                              8,500
Natural Gas (Mcf/d)                     200,000
Boe/d equivalent(i)                      72,000
(i)Assumes mid-point of average daily production        

In 2013, Pengrowth undertook a disposition program with approximately
12,000 boe/d of production being sold for proceeds of approximately
$1 billion, resulting in a solid cash position at the end of 2013.
The company will continue to utilize this strong cash position to
fund our Lindbergh thermal oil project, which Pengrowth expects to
boost corporate production levels and funds flow in 2015 and beyond.
For further details, please refer to Pengrowth's 2014 Investor Day
presentation, which describes the company's five year financial model
and will be available at starting at 9:00 AM
Mountain Time (MT) on January 16, 2014. 
Capital Allocation 

Capital allocation by           Budgeted
 expenditure area             $ Millions
Thermal development                  365
Non-thermal Development              270
Facilities and                          
 Maintenance                          65
Corporate (Land, seismic,               
 etc.)                                15
Total Capital                        715
Development Capital allocation       Budgeted
 by area                           $ Millions
Greater Olds/Garrington                   200
Swan Hills                                 35
Jenner/Bodo/Tangleflags                    25
Other                                      10
Non-thermal Development                      
 Capital                                  270
Lindbergh                                 365
Total Development Capital                 635

Thermal development 
The $365 million budgeted for Lindbergh includes the completion of
construction at the central processing facility, drilling 23 well
pairs for the first 12,500 bbl/d commercial phase and investment to
facilitate incremental production growth over the next two to three
Non-thermal development 
Improved capital efficiency, driven by Pengrowth's disciplined
capital allocation process, has allowed the company to invest less
than expected in non-thermal businesses in 2013 while achieving a
production result consistent with original expectations, a trend that
is expected to continue in 2014. Pengrowth has budgeted $350 million
for non-thermal activities, mainly in the Greater Olds/Garrington
area and on heavy oil assets in the Jenner area, with reduced
spending in the Swan Hills area. The 2014 non-thermal budget will
once again focus on projects with the highest rates of return,
shortest payouts and maximum funds flow.  
Approximately $270 million (77%) of the non-thermal program will be
directed towards drilling and development activities targeting light
oil and liquids-rich natural gas production and reserves growth.
Pengrowth expects to have 11 rigs operating in the first quarter and
drill approximately 110 gross (65 net) wells for the full year,
excluding drilling at Lindbergh.  
Pengrowth expects to generate funds flow from operations of between
$500 and $540 million, assuming: a WTI oil price of USD$95/bbl, an 8%
discount for light oil and 21% discount for heavy oil, an AECO
natural gas price of Cdn$3.50/Mcf and a $0.95 USD/CAD exchange rate.  
Core Focus Areas 
With another strong year of pilot results that demonstrated better
than expected steam/oil and diluent blending ratios and faster than
expected production increases, the two well pair pilot surpassed
1,000,000 bbls of bitumen production by December 31, 2013. Drilling,
civil and mechanical construction activities on the first 12,500
bbl/d commercial phase of production commenced late in the third
quarter of 2013 and the project remains on budget and on schedule for
first steam in the fourth quarter of 2014 and first production in the
first quarter of 2015. To date, approximately 55% of the phase 1
project costs of $590 million have been committed.  
Late in 2013, Pengrowth filed its Environmental Impact Assessment
(EIA) Application for regulatory approval of an incremental 17,500
bbl/d second commercial phase at Lindbergh, supplementing the 12,500
bbl/d first commercial phase currently under construction. The phase
1 central processing facility will be expanded to accommodate the
additional 17,500 bbl/d to process combined production of 30,000
bbl/d by 2017. Planned phase 1 debottlenecking investments in the
intervening years may allow the project to exceed name plate
capacity, based on better than expected performance at the Lindbergh
Greater Olds/Garrington  
The Greater Olds/Garrington area will receive the largest non-thermal
development capital investment in 2014, where Pengrowth expects to
spend a total of $200 million. The bulk of this capital,
approximately $165 million, is being directed to drilling and
development opportunities in the Cardium, which offers a significant
portfolio of light oil opportunities with high netbacks in excess of
$60/bbl, high recycle ratios in excess of 3.0 times and total program
production efficiencies of approximately $30,000/boe/d. Pengrowth
currently has access to 160 net sections of land that are prospective
for Cardium drilling in the Greater Olds/Garrington area.  
An additional $35 million of capital has been allocated to the Elkton
and Mannville light oil and 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.  
Swan Hills  
The Swan Hills trend is, today, the largest cash flow generator
within Pengrowth's portfolio and offers low production declines and
significant free cash flow. In 2014, Pengrowth plans to invest $35
million of development capital at Swan Hills with an emphasis on
optimization of light oil and liquids-rich gas plays in the trend.
Pengrowth's efforts will be directed towards cost efficient
enhancement processes such as water flood optimization, miscible
flood, re-entries, recompletions and workovers.  
Financing the 2014 capital program  
Pengrowth's 2014 capital program has been designed with an emphasis
on maintaining financial health and sustainability, whereby cash
inflows plus cash on hand equal cash outflows for capital
expenditures and dividends. Pengrowth entered 2014 with approximately
$430 million of cash on hand from its 2013 disposition program and
expects to generate between $500 and $540 million in funds flow from
its operating activities. With the combination of cash on hand and
expected funds flow from operating activities, the company projects
to be fully funded in 2014, with cash inflows equal to cash outflows. 
Operating Costs 
Net operating costs for 2014 are forecast to be approximately $410
million, compared to expected 2013 net operating expenses of $440
million, adjusted for dispositions. The forecast drop in operating
costs is primarily driven by Pengrowth's efforts to mitigate power
price volatility through aggressive power hedging in 2014. Pengrowth
is also pursuing further power cost reduction opportunities through
third party construction of power generation facilities in key
consuming fields within Pengrowth's portfolio.  
In 2013, Alberta electric power prices were very volatile, resulting
in significantly higher than expected operating costs. To reduce the
impact of power price volatility, Pengrowth has hedged approximately
80 percent of 2014 expected power consumption at an Alberta pool
price of $55.70/MWh, compared to an average pool price of $80/MWh in
2013. Additional efforts to reduce maintenance costs, coupled with
operating optimization activities, are also expected to contribute to
lower operating costs. On a unit basis, 2014 net operating cost
guidance is between $15.20 and $15.80 per boe, compared to an outlook
of approximately $15.80 per boe in 2013, adjusted for dispositions. 
General and Administrative  
Cash general and administrative ("G&A") costs are also expected to
decline on an aggregate basis to $76 million in 2014, which is
approximately 13 percent below expected 2013 costs. Pengrowth's
successful 2013 disposition program led to a smaller asset base that
requires fewer people to manage. In addition, cost management efforts
throughout the company are expected to further contribute to lower
G&A costs. On a unit basis, G&A costs are expected to be between
$2.70 and $2.90 per boe, compared to approximately $2.85 per boe in

2014 Full-Year Guidance Summary                                       
Average daily production volume (boe/d)               71,000 to 73,000
Total capital expenditures ($millions)                      700 to 730
Royalties (% of sales)                                        16 to 18
Net operating costs ($ per boe)1                        15.20 to 15.80
Cash G & A expense ($ per boe)1                           2.70 to 2.90
Funds flow from operations ($ per share)2                 0.95 to 1.05
1.  Per boe estimates based on high and low ends of production guidance 
2.  Based on mid-point of production guidance using WTI USD$95/bbl, 8%
    discount for light oil and 21% discount for heavy oil, $3.50/Mcf AECO
    and $0.95 USD/CAD FX rate.

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 before any reassessment of the
Dividends will continue to be declared monthly, as per the 2014
dividend schedule, which is available on Pengrowth's website at 
Investor Day  
As previously announced, an Investor Day presentation, discussing
spending plans and projected results from operations for the 2014 to
2018 period, will be held on Thursday, January 16, 2014 at 9:00 AM.
MT. A live, listen-only webcast of the event will be available for
those unable to attend in person. To participate in the webcast,
participants may register by visiting  
An archive of the webcast and accompanying presentation will be
available following the conclusion of the live event on Pengrowth's
website at 
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 Cardium light oil, Lindbergh
thermal bitumen and Swan Hills light oil 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". 
Derek Evans, President and Chief Executive Officer 
For further information about Pengrowth, please visit our website or contact: Investor Relations, E-mail: 
All amounts are stated in Canadian dollars unless otherwise
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; 2014 anticipated capital expenditures
and the allocation thereof; Lindbergh development being on time and
on budget; maximizing funds flow from non-thermal businesses;
expected average annual production; expected first steam and
production from the first commercial phase of Lindbergh; expected
funds flow from operations; expected breakdown of production volumes
in 2014; breakdown of expenditures for Lindbergh capital investment;
improved capital efficiencies to be realized in 2014; targeting of
light oil and liquids rich natural gas production and reserves
growth; number of wells to be drilled in 2014; assumptions as to
future commodity prices, discounts and exchange rates; future
expansion of Lindbergh facility to accommodate additional commercial
production; recycle ratios; number of rigs operating; future
production declines and free cash flow; financing plans; adjusted
payout ratio; net operating costs for 2014; anticipated power cost
reductions; anticipated G&A expenses and savings; 2014 guidance
including average daily production, total capital expenditures,
royalties, net operating costs, cash G&A and funds flow from
operations per share . 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
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 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;
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. 
Supplemental and Additional Non-IFRS Measures  
In addition to providing measures prepared in accordance with
International Financial Reporting Standards (IFRS), Pengrowth
presents supplemental and additional non-IFRS measures, Adjusted Net
Income (Loss), operating netbacks, adjusted payout ratio 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, in part, 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 (loss), cash provided by operations and
other measures of financial performance and liquidity reported in
accordance with IFRS. Further information with respect to these
additional and non-IFRS measures can be found in Pengrowth's most
recent management's discussion and analysis. 
Pengrowth Energy Corporation
Fred Kerr
Vice President, Investor Relations
(403) 233-0224 or Toll free: 1-855-336-8814 
Pengrowth Energy Corporation
Wassem Khalil
Manager, Investor Relations
(403) 233-0224 or Toll free: 1-855-336-8814
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