Pengrowth Energy (PGH) Sets FY13 CapEx at $770M; Still Committed to Dividend

Pengrowth Energy Corporation (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.

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.

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 before any reassessment of the dividend.

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