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U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
 FORM 40-F o     REGISTRATION STATEMENT PURSUANT TO SECTION 12 OF THE
SECURITIES EXCHANGE ACT OF 1934. þ     ANNUAL REPORT PURSUANT TO SECTION 13(a) OF THESECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended: December 31, 2004          Commission File Number: 1-31253 PENGROWTH ENERGY TRUST  Alberta, Canada
(Province or other jurisdiction of incorporation or organization) 1311
(Primary Standard Industrial
Classification Code Number)
    
    None
(I.R.S. Employer
Identification Number)
 Suite 2900, 111  5thAvenue S.W.
Calgary, Alberta Canada T2P 3Y6
(403) 233-0224
(Address and telephone number of Registrants principal executive offices) Vinson & Elkins L.L.P.
2300 First City Tower, 1001 Fannin
Houston, Texas 77002-6760
(713) 758-2222 (Name, address (including zip code) and telephone number (including area code)
of agent for service in the United States) Securities registered or to be registered pursuant to Section 12(b) of the Act. Title of each class
    
    Name of each exchange on which registeredClass A Trust Units
    
    New York Stock Exchange
 Securities registered or to be registered pursuant to Section 12(g) of the Act. None(Title of Class)




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Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act. None(Title of Class)
 For Annual Reports indicate by check mark the information filed with this Form: þ     Annual information form
    

þ     Audited
annual financial         statements
 Indicate the number of outstanding shares of each of the issuers classes of capital or common
stock as of the close of the period covered by the annual report: There were 76,792,759 Class A Trust Units, of no par value, outstanding as of December 31,
2004. Indicate by check mark whether the Registrant filing the information contained in this Form is
also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the
Securities Exchange Act of 1934 (the Exchange Act). If Yes is marked, please indicate the
filing number assigned to the Registrant in connection with such Rule. Yes o          No þ Indicate by check mark whether the Registrant (1) has filed all reports to be filed by Section
13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to filing requirements for
the past 90 days. Yes þ          No o DOCUMENTS FILED AS PART OF THIS ANNUAL REPORT The following documents have been filed as part of this Annual Report on Form 40-F as
Appendices hereto: Appendix
    
    DocumentsA
    
    Pengrowth Energy Trust Annual Information Form for the year ended
December 31, 2004.B
    
    Managements Discussion and Analysis (included on pages 47
through 76 of the Pengrowth Energy Trust Annual Report 2004).
 - 2 -




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Appendix
    
    DocumentsC
    
    Consolidated Financial Statements of Pengrowth Energy Trust,
including note 20 thereof which includes a reconciliation of the
Consolidated Financial Statements to United States generally
accepted accounting principles.D
    
    Five Year Review  Pengrowth Energy Trust Consolidated Financial
Results (included on pages 106 through 107 of the Pengrowth
Energy Trust Annual Report 2004).E
    
    Corporate Governance (included on pages 41 through 46 of the
Pengrowth Energy Trust Annual Report 2004).F
    
    Part II  Corporate Governance (included on pages 17 through 27
of the Pengrowth Energy Trust Information Circular  Proxy
Statement dated March 14, 2005).G
    
    Oil and Gas Producing Activities Prepared in Accordance with SFAS
No. 69  Disclosures about Oil and Gas Producing Activities.
 CONTROLS AND PROCEDURES As of a date within 90 days of the date of filing this Annual Report, an evaluation was
carried out under the supervision, and with the participation, of the Registrants management,
including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the
Registrants disclosure controls and procedures, as that term is defined in Form 40-F. Based on
that evaluation, the Registrants Chief Executive Officer and Chief Financial Officer concluded
that the design and operation of these disclosure controls and procedures were effective to ensure
that material information required to be disclosed by the Registrant in the reports that it files
or submits under the Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the Commissions rules and forms. No significant changes were made in the Registrants internal controls or in other factors
that could significantly affect these controls subsequent to the date of their evaluation,
including any corrective actions with regard to significant deficiencies and material weaknesses. It should be noted that any system of controls, however well designed and operated, can
provide only reasonable, and not absolute, assurance that the objectives of the system are met. In
addition, the design of any control system is based in part upon certain assumptions about the
likelihood of future events. Because of these and other inherent limitations of control systems,
there can be no assurance that any design will succeed in achieving its stated goals under all
potential future conditions, regardless of how remote. NOTICES PURSUANT TO REGULATION BTR None - 3 -




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IDENTIFICATION OF THE AUDIT COMMITTEE The registrant has a separately-designated standing audit committee established in accordance with
section 3(a)(58)(A) of the Exchange Act. The members of the audit
committee are: Thomas A.
Cumming, Michael S. Parrett and William R. Stedman. AUDIT COMMITTEE FINANCIAL EXPERT The
board of directors of the Registrant has determined that Michael S. Parrett, a member of
the Registrants audit committee, qualifies as an audit committee financial expert for purposes of
paragraph (8) of General Instruction B to Form 40-F. The board of directors has further determined
that Mr. Parrett is also independent, as that term is defined in the Corporate Governance Listing
Standards of the New York Stock Exchange. The Commission has
indicated that the designation of Mr. Parrett as an audit committee financial expert does not make him an expert for any purpose,
impose any duties, obligations or liabilities on him that are greater than those imposed on members
of the audit committee and the board of directors who do not carry this designation or affect the
duties, obligations or liabilities of any other member of the audit committee or the board of
directors. GOVERNANCE DISCLOSURE INCORPORATED BY REFERENCE Certain disclosure regarding the corporate governance practices of the Registrant, including
disclosure of the Registrants code of ethics, principal accountant fees and services, pre-approval
policies and procedures, off-balance sheet arrangements and contractual obligations, is included on
pages 56 through 58 and 69 through 70 of the Annual Information Form contained in Appendix A and
incorporated herein. UNDERTAKING Registrant undertakes to make available, in person or by telephone, representatives to respond
to inquiries made by the Commission staff, and to furnish promptly, when requested to do so by the
Commission staff, information relating to: the securities registered
pursuant to Form 40-F; the
securities in relation to which the obligation to file an annual
report on Form 40-F arises; or
transactions in said securities. - 4 -




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SIGNATURES Pursuant to the requirements of the Exchange Act, the Registrant certifies that it meets all
of the requirements for filing on Form 40-F and has duly caused this Annual Report to be signed on
its behalf by the undersigned, thereunto duly authorized. Date: March 29, 2005
    PENGROWTH ENERGY TRUST
by its Administrator
PENGROWTH CORPORATIONBy:

/s/
James S. KinnearJames S. KinnearChairman, President and
Chief Executive Officer




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APPENDIX A PENGROWTH ENERGY TRUST ANNUAL INFORMATION FORM FOR THE YEAR ENDED DECEMBER 31, 2004




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PENGROWTH ENERGY TRUST ANNUAL INFORMATION FORM Pengrowth Energy Trust is an energy investment trust formed under
the laws of the Province of Alberta which offers and sells its trust
units to the public. The trust units are not deposits within the
meaning of the Canadian Deposit Insurance Corporation Act (Canada) and
are not insured under the provisions of that Act or any other
legislation. Furthermore, Pengrowth Energy Trust is not a trust
company and, accordingly, is not registered under any trust and loan
company legislation as it does not carry on or intend to carry on the
business of a trust company. March 29, 2005




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TABLE OF CONTENTS GLOSSARY OF TERMS AND ABBREVIATIONS
    
    
    1CONVERSION
    
    
    3PRESENTATION OF OUR FINANCIAL INFORMATION
    
    
    3PRESENTATION OF OUR RESERVE INFORMATION
    
    
    3FORWARD-LOOKING STATEMENTS
    
    
    4PENGROWTH ENERGY TRUST
    
    
    5GENERAL DEVELOPMENT OF PENGROWTH ENERGY TRUST
    
    
    5Organization and Structure
    
    
    5Business Strategy and Strengths
    
    
    7Historical Development
    
    
    8Recent Acquisitions, Financings and Developments
    
    
    9Trends
    
    
    12PENGROWTH MANAGEMENT LIMITED
    
    
    12Business
    
    
    12Management Agreement
    
    
    13PENGROWTH CORPORATION  OPERATIONAL INFORMATION
    
    
    15Principal Properties
    
    
    15SUMMARY OF PROPERTY INTERESTS HELD BY PENGROWTH CORPORATION AS AT DECEMBER 31, 2004
    
    
    15Reserves
    
    
    22Additional Information Relating to Reserves Data
    
    
    32Other Oil And Gas Information
    
    
    33Production
    
    
    36Replacement of Properties
    
    
    38Borrowing
    
    
    38TRUST UNITS
    
    
    38The Trust Indenture
    
    
    38The Trustee
    
    
    39Redemption Right
    
    
    39Voting at Meetings of Pengrowth Trust
    
    
    39Voting at Meetings of Pengrowth Corporation
    
    
    40Termination of Pengrowth Trust
    
    
    40Unitholder Limited Liability
    
    
    40Special Voting Unit
    
    
    41Trust Unit Reclassification
    
    
    41THE ROYALTY INDENTURE
    
    
    46Royalty Units
    
    
    46The Royalty
    
    
    46The Trustee
    
    
    47EXCHANGEABLE SHARES
    
    
    47DISTRIBUTIONS
    
    
    48INDUSTRY CONDITIONS
    
    
    49
 - i -




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Government Regulation
    
    
    49Pricing and Marketing  Oil
    
    
    49Pricing and Marketing  Natural Gas
    
    
    49The North American Free Trade Agreement
    
    
    50Provincial Royalties and Incentives
    
    
    50Environmental Regulation
    
    
    52MARKET FOR SECURITIES
    
    
    52DIRECTORS AND OFFICERS
    
    
    54Directors and Officers of Pengrowth Management
    
    
    54Principal Holders of Shares of Pengrowth Management
    
    
    54Directors and Officers of Pengrowth Corporation
    
    
    54Corporate Cease Trade Orders or Bankruptcies
    
    
    56Personal Bankruptcies
    
    
    56Penalties or Sanctions
    
    
    56AUDIT COMMITTEE
    
    
    56Principal Accountant Fees and Services
    
    
    57Pre-approval Policies and Procedures
    
    
    58RISK FACTORS
    
    
    58CONFLICTS OF INTEREST
    
    
    67LEGAL PROCEEDINGS
    
    
    68INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS
    
    
    68INTERESTS OF EXPERTS
    
    
    68AUDITORS, TRANSFER AGENT AND REGISTRAR
    
    
    68MATERIAL CONTRACTS
    
    
    69CODE OF ETHICS
    
    
    69OFF-BALANCE SHEET ARRANGEMENTS
    
    
    69TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS
    
    
    69DISCLOSURE PURSUANT TO THE REQUIREMENTS OF THE NEW YORK STOCK EXCHANGE
    
    
    69ADDITIONAL INFORMATION
    
    
    71APPENDIX A  REPORT ON RESERVES DATA BY INDEPENDENT QUALIFIED
RESERVES EVALUATORS ON
                         FORM 51-101F2
    
    
    A-1APPENDIX B  REPORT OF MANAGEMENT AND DIRECTORS ON OIL AND GAS DISCLOSURE
ON
                         FORM 51-101F3
    
    
    B-1APPENDIX C  AUDIT COMMITTEE CHARTER
    
    
    C-1Consent of Independent Chartered AccountantsConsent of Gilbert Laustsen Jung Associates Ltd.Certificate Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002Certificate of Chief Executive Officer Pursuant to Rule 13a-14(a) or 15d-14 of the Securities Exchange Act of 1934Certificate of Chief Financial Officer Pursuant to Rule 13a-14(a) or 15d-14 of the Securities Exchange Act of 1934
  Unless otherwise indicated, all of the information provided in this Annual Information Form is as
at December 31, 2004. - ii -




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GLOSSARY OF TERMS AND ABBREVIATIONS Capitalized terms in this Annual Information Form has the meanings set forth below: Corporate  

Board of Directorsrefers to the board of directors of Pengrowth Corporation;

Computersharerefers to Computershare Trust Company of Canada;

Pengrowth, we, us and ourrefers to Pengrowth Trust and Pengrowth Corporation on a consolidated basis;

Pengrowth Corporationrefers to Pengrowth Corporation, the administrator of Pengrowth Trust;

Pengrowth Managementrefers to Pengrowth Management Limited, the manager of
Pengrowth Trust and Pengrowth Corporation;

Pengrowth Trustrefers to Pengrowth Energy Trust;

Reclassificationmeans the reclassification of our outstanding trust units as Class
B trust units and the conversion of Class B trust units held by non-residents of Canada
to Class A trust units which occurred on July 27, 2004;

trust units, when used in reference to any time before 5:00 p.m. Eastern Daylight
Time on July 27, 2004, refers to the trust units of Pengrowth Trust as they existed
before the Reclassification, and when used in reference to any time after 5:00 p.m.
Eastern Daylight Time on July 27, 2004, refers to the Class A trust units and the Class
B trust units of Pengrowth Trust as well as the trust units of Pengrowth Trust that
remain as they existed before the Reclassification; and

unitholdersrefers to holders of trust units issued by Pengrowth Trust. Engineering  

APImeans American Petroleum Institute;

CBMrefers to coal bed methane;

Developed Non-Producing Reservesrefers to those reserves that either have not been
on production, or have previously been on production, but are shut-in, and the date of
resumption of production is unknown;

Developed Producing Reservesrefers to those reserves expected to be recovered from
completion intervals open at the time of the estimate. These reserves may be currently
producing or, if shut in, they must have previously been on production and the date of
resumption of production must be known with reasonable certainty;

Developed Reservesrefers to those reserves that are expected to be recovered from
existing wells and facilities or, if facilities have not been installed, that would
involve a low expenditure to put the reserves on production. The developed category may
be subdivided into producing and non-producing;

Emerarefers to Emera Inc. and its subsidiaries, associates and affiliates on a consolidated basis;

GLJrefers to Gilbert Laustsen Jung Associates Ltd., independent petroleum consultants, Calgary, Alberta;

GLJ Reportrefers to the report prepared by GLJ dated February 15, 2005, having an effective date of December 31, 2004;

Grosswith respect to production and reserves refers to the total production and
reserves attributable to a property before the deduction of royalties and with respect
to land and wells refers to the total number of acres or wells, as the case may be, in
which Pengrowth has a working interest or a royalty interest;

Netrefers to Pengrowths working interest share of production or reserves, as the
case may be, after the deduction of royalties, and, with respect to land and wells,
refers to Pengrowths working interest share therein;

Pengrowth Gross Reserves or Pengrowth Interestrefers to Pengrowths working
interest and royalty interest share of reserves before the deduction of royalties; - 1 -




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

Pengrowth Total Proved Plus Probable Reservesmeans Pengrowths working interest
share of Total Proved Plus Probable Reserves before the deduction of royalties;

Probable Reservesrefers to those additional reserves that are less likely to be
recovered than proved reserves. It is equally likely that the actual remaining
quantities recovered will be greater or less than the sum of the estimated proved plus
probable reserves;

Proved Reservesrefers to those reserves that can be estimated with a high degree of
certainty to be recoverable. It is likely that the actual remaining quantities
recovered will exceed the estimated proved reserves;

Reserve Life Indexrefers to the number of years determined by dividing the
aggregate of the reserves of a property by the estimated production per year from such
property using estimated production for the year 2005 as a reference;

Reservesrefers to estimated remaining quantities of oil and natural gas and related
substances anticipated to be recovered from known accumulations, from a given date
forward, based on: (i) analysis of drilling, geological, geophysical and engineering
data; (ii) the use of established technology; and specified economic conditions which
are generally accepted as being reasonable and shall be disclosed. Reserves are
classified according to the degree of certainty associated with the estimate;

royalty interestrefers to an interest in an oil and gas property consisting of a
royalty granted in respect of production from the property;

Total Proved Plus Probable Reservesmeans the aggregate of Proved Reserves and
Probable Reserves before the deduction of royalties;

Undeveloped Reservesrefers to those reserves expected to be produced from known
accumulation where a significant expenditure (e.g. when compared to the cost of
drilling a well) is required to render them capable of production. They must fully meet
the requirements of the reserve classification (proved, probable) to which they are
assigned;

Unitizationrefers to a process whereby owners of adjoining properties pool reserves
into a single unit operated by one of the owners, typically in order to conduct
secondary recovery projects in a manner that promotes improved recovery of reserves
from a pool or field; and

working interestrefers to the percentage of undivided interest held by Pengrowth in an oil and gas property. Abbreviations  

bbl, bbls, mbbls, and mmbblsrefers to barrel, barrels, thousands of barrels and millions of barrels, respectively;

bblpdrefers to barrels per day;

boe, mboe and mmboerefers to barrels of oil equivalent, thousands of barrels of oil
equivalent and millions of barrels of oil equivalent, respectively, on the basis of one
boe being equal to one barrel of oil or NGLs or six mcf of natural gas; barrels of oil
equivalent may be misleading, particularly if used in isolation; a conversion ratio of
6 mcf of natural gas to one boe is based on an energy equivalency conversation method
primarily applicable at the burner tip and does not represent a value equivalency at
the wellhead;

boepdrefers to barrels of oil equivalent per day;

$M and $MMrefers to thousands of dollars and millions of dollars, respectively;

mmbtu and mmbtupdrefers to a million British thermal units and million British thermal units per day respectively;

mcf, mmcf, bcf and tcfrefers to thousands of cubic feet, millions of cubic feet,
billions of cubic feet and trillions of cubic feet, respectively;

mcfpd and mmcfpdrefers to thousands of cubic feet per day and millions of cubic feet per day respectively; and

NGLsrefers to natural gas liquids. - 2 -




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CONVERSION In this Annual Information Form measurements are given in Standard Imperial or metric units only.
The following table sets forth certain standard conversions. To Convert From
    
    To
    
    Multiply Bymcf
    
    cubic metre
    
    28.174cubic metre
    
    cubic feet
    
    35.494bbls
    
    cubic metre
    
    0.159cubic metre
    
    bbls
    
    6.290feet
    
    metre
    
    0.305metre
    
    feet
    
    3.281miles
    
    kilometre
    
    1.609kilometre
    
    miles
    
    0.621acres
    
    hectares
    
    0.405hectares
    
    acres
    
    2.471
 Unless otherwise stated, all sums of money referred to in this Annual Information Form are
expressed in Canadian dollars. 
 PRESENTATION OF OUR FINANCIAL INFORMATION Financial information in this Annual Information Form has been prepared in accordance with
generally accepted accounting principles (GAAP) in Canada. Canadian GAAP differs in some
significant respects from U.S. GAAP and thus our financial statements may not be comparable to the
financial statements of U.S. companies. The principal differences as they apply to us are
summarized in note 20 to the audited annual consolidated financial statements of Pengrowth Trust
which are available on the SEDAR website at www.sedar.com and in our Form 40-F which is available
through EDGAR at the United States Securities and Exchange Commissions website at www.sec.gov. We present our financial information in Canadian dollars. 
 PRESENTATION OF OUR RESERVE INFORMATION The United States Securities and Exchange Commission (the SEC) generally permits oil and gas
companies, in their filings with the SEC, to disclose only proved reserves after the deduction of
royalties and interests of others which are those reserves that a company has demonstrated by
actual production or conclusive formation tests to be economically producible under existing
economic and operating conditions. In 2003, the securities regulatory authorities in Canada (other
than Québec) adopted National Instrument 51-101  Standards of Disclosure for Oil and Gas
Activities(NI 51-101), which imposes oil and gas disclosure standards for Canadian public
issuers engaged in oil and gas activities. NI 51-101 permits oil and gas issuers, in their filings
with Canadian securities regulators, to disclose not only proved reserves but also probable
reserves, and to disclose reserves and production on a gross basis before deducting royalties.
Probable reserves are of a higher risk and are less likely to be accurately estimated or recovered
than proved reserves. Because we are permitted to prepare this Annual Information Form in
accordance with Canadian disclosure requirements, we have disclosed in this Annual Information Form
and in the documents incorporated by reference reserves designated as probable. If this Annual
Information Form was required to be prepared in accordance with U.S. disclosure requirements, the
SECs guidelines would prohibit reserves in these categories from being included. Moreover, in
accordance with Canadian practice, we have determined and disclosed estimated future net cash flow
from our reserves using both escalated and constant prices and costs; for the constant prices and
costs case, prices and costs in effect as of December 31, 2004 were held constant for the economic
life of the reserves. The SEC does not permit the disclosure of estimated future net cash flow
from reserves based on escalating prices and costs and generally requires that prices and costs be
held constant at levels in effect at the date of the reserve report. For a description of these
and additional differences between Canadian and U.S. standards of reporting reserves, see Risk
Factors  Canadian and United States practices differ in reporting reserves
and production. Additional information prepared in accordance with United States Statement of
Financial Accounting - 3 -




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Standards No. 69 Disclosures About Oil and Gas Producing Activities relating
to our oil and gas reserves is set forth in our Form 40-F which is available through EDGAR at the
SECs website at www.sec.gov. 
 FORWARD-LOOKING STATEMENTS Certain statements contained in this Annual Information Form, including certain documents
incorporated by reference, constitute forward-looking statements. The use of any of the words
anticipate, continue, estimate, expect, may, will, project, should, believe and
similar expressions are intended to identify forward-looking statements. These statements involve
known and unknown risks, uncertainties and other factors that may cause actual results or events to
differ materially from those anticipated in our forward-looking statements. We believe the
expectations reflected in those forward-looking statements are reasonable. However, we cannot
assure you that these expectations will prove to be correct. You should not unduly rely on
forward-looking statements included, or incorporated by reference, in this Annual Information Form.
These statements speak only as of the date of this Annual Information Form or as of the date
specified in the documents incorporated by reference in this Annual Information Form, as the case
may be. We undertake no obligation to publicly update or revise any forward-looking statements. In particular, this Annual Information Form, including the documents incorporated by reference,
contains forward-looking statements pertaining to the following:  

the size of our reserves;

oil and natural gas production levels;

capital expenditures;

projections of market prices and costs and the related sensitivities of distributions;

supply and demand for oil and natural gas;

expectations regarding the ability to raise capital and to continually add to our
reserves through acquisitions and exploration and development; and

treatment under governmental regulatory regimes and tax laws. Our actual results could differ materially from those anticipated in these forward-looking
statements as a result of the risk factors set forth below and elsewhere in this Annual Information
Form, including under Risk Factors:  

volatility in market prices for oil and natural gas;

liabilities inherent in our oil and gas operations;

uncertainties associated with estimating reserves;

competition for, among other things, capital, reserves, undeveloped lands and skilled personnel;

incorrect assessments of the value of our acquisitions;

geological, technical, drilling and processing problems; and

changes in income tax laws or changes in tax laws and incentive programs relating to
the oil and gas industry and royalty trusts. These factors should not be construed as exhaustive. We undertake no obligation to publicly update
or revise any forward-looking statements. - 4 -




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PENGROWTH ENERGY TRUST Pengrowth Trust is an oil and gas royalty trust that was created under the laws of the Province of
Alberta on December 2, 1988. Pengrowth Trust is governed by a trust indenture dated July 27, 2004
(amending and restating the trust indenture dated June 17, 2003 and with further amendments
authorized by unitholders on April 22, 2004), between Pengrowth Corporation and Computershare, as
trustee. In 1996, Pengrowth Trusts original name, Pengrowth Gas Income Fund, was changed to
Pengrowth Energy Trust. The purpose of Pengrowth Trust is to purchase and hold royalty units
issued by Pengrowth Corporation, its majority owned subsidiary, and to issue trust units to members
of the public. Pengrowth Corporation acquires, owns and manages working interests and royalty
interests in oil and natural gas properties. The beneficiaries of Pengrowth Trust are the
unitholders. Pengrowth Corporation was created under the laws of the Province of Alberta on December 30, 1987.
In 1998, the name of Pengrowth Corporation was changed from Pengrowth Gas Corporation to
Pengrowth Corporation. Pengrowth Corporation has 1,100 common shares outstanding, 1,000 of which
are owned by Pengrowth Trust and 100 of which are owned by Pengrowth Management. Pengrowth Management was created under the laws of the Province of Alberta on December 16, 1982.
Pengrowth Management serves as the manager of Pengrowth Trust and as the manager of Pengrowth
Corporation. 
 GENERAL DEVELOPMENT OF PENGROWTH ENERGY TRUST 
 Organization and Structure Under the royalty indenture between Pengrowth Corporation and Computershare, as trustee, Pengrowth
Corporation has granted a royalty consisting of a 99% share of royalty income to the holders of
royalty units. The royalty units represent fractional undivided interests in the royalty. Under the trust indenture between Pengrowth Corporation and Computershare, as trustee, Pengrowth
Trust has issued trust units to the unitholders. Each trust unit represents a fractional undivided
beneficial interest in Pengrowth Trust. Our unitholders are entitled to receive monthly
distributions in respect of the royalty and in respect of investments that are held directly by us. Pengrowth Trust presently holds approximately 99.9% of the royalty units issued by Pengrowth
Corporation. In addition, Pengrowth Trust holds other permitted investments, such as oil and gas
processing facilities, debt obligations of Pengrowth Corporation and cash. Pengrowth Corporation acquires, owns and operates working interests and royalty interests in oil
and natural gas properties. Pengrowth Corporation has issued royalty units which entitle the
holders thereof to receive a 99% share of the royalty income related to the oil and natural gas
interests of Pengrowth Corporation. Pengrowth Corporation owns all of the issued and outstanding shares of Pengrowth Acquisition
Corporation, a corporation incorporated under the laws of Canada. Pengrowth Corporation also holds
a 0.01% partnership interest in two limited partnerships, Pengrowth Heavy Oil Partnership and
Pengrowth Energy Partnership, and acts as the general partner of the partnerships. The remaining
99.99% partnership interest in each of the partnerships is held by Pengrowth Acquisition
Corporation. Pengrowth Acquisition Corporation and the two limited partnerships were formed during
2004 to facilitate the acquisition of certain properties from Murphy Oil Corporation. Pursuant to the unanimous shareholder agreement dated June 17, 2003 (amending and restating the
unanimous shareholder agreement dated April 23, 2002), with further amendments authorized by
unitholders on April 22, 2004, among Pengrowth Management, Pengrowth Trust, Pengrowth Corporation
and Computershare, our unitholders and holders of royalty units (other than Computershare) are
entitled to notice of, and to attend, all meetings of shareholders of Pengrowth Corporation and
vote as shareholders at all meetings of the shareholders of Pengrowth Corporation to the same
extent as if they were holders of common shares of Pengrowth Corporation in respect of all matters
upon which the Business Corporations Act(Alberta) requires a shareholder vote including voting on
the election of the directors of Pengrowth Corporation (other than the two directors to be
appointed by Pengrowth - 5 -




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Management), appointing its auditors and appointing the auditor of Pengrowth Trust. The right of
holders of royalty units to vote as shareholders at all meetings of shareholders of Pengrowth
Corporation is subject to clarification pursuant to certain amendments to the unanimous shareholder
agreement proposed for consideration at the meeting of shareholders scheduled for April 26, 2005.
In addition, our unitholders are entitled to vote on any proposed amendment to the unanimous
shareholder agreement. The principal business of Pengrowth Management is that of a specialty fund manager. Pengrowth
Management currently provides advisory, management, and administrative services to Pengrowth Trust
and to Pengrowth Corporation. In particular, Pengrowth Management also manages and provides
services relating to the acquisition and disposition of oil and natural gas properties and other
related assets on behalf of Pengrowth Corporation. James S. Kinnear, President and a director of Pengrowth Management and Chairman, President, Chief
Executive Officer and a director of Pengrowth Corporation, owns, directly or indirectly, all of the
issued and outstanding voting securities of Pengrowth Management. The following chart illustrates the organization and structure of Pengrowth. (FLOW CHART)   Note:(1)
    
    These properties were acquired in an acquisition of a company which had interests in oil and
natural gas assets in Alberta and Saskatchewan. See Recent Acquisitions, Financings and
Developments  Murphy Oil Acquisition. - 6 -




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Business Strategy and Strengths Our goal is to maximize cash distributions on a per trust unit basis to our unitholders over time
while enhancing the value of our trust units. We generally do not explore for oil and natural gas.
Instead, we focus on making accretive acquisitions and maximizing the value of our mature property
base by reducing operating costs, implementing new development technologies, including three
dimensional seismic and tertiary recovery operations, and implementing other operational
efficiencies. Our ability to pay out distributions while enhancing unitholder value over time is dependent upon
effective operations and our ability to make acquisitions which yield returns that exceed our cost
of capital. We evaluate acquisition opportunities based upon the following acquisition criteria: Financial  

Acquisitions should increase future distributions on a per trust unit basis based
upon current economics.

The undiscounted aggregate projected future net cash flow from the properties should
exceed the aggregate purchase price of the properties and provide a reasonable rate of
return.

The oil and gas producing properties to be acquired should, in the context of the
market, have an attractive rate of return and a relatively low reserve cost. Operational  

Properties to be acquired should be high quality, relatively long life, proven
producing properties. Pengrowth Corporation gives priority to properties with:  ¡

low anticipated capital expenditures relative to the cash
generation potential of the properties;¡

relatively low operating costs or high netbacks;¡

experienced, well regarded industry operators or where
operatorship may be assumed by Pengrowth;¡

favourable production history;¡

upside potential through infill drilling, improved field
operations and other development activities;¡

relatively long reserve life; and¡

low environmental and site remediation risk. Independent Verification  

Each purchase of new properties will be based on an independent engineering report
except for properties where the purchase price is less than $5 million. Our structure, tax effectiveness and cost of capital allow us to bid competitively for oil and
natural gas properties relative to taxable corporations and other taxable entities. Opportunities
to acquire oil and gas properties generally arise from sellers looking to reduce indebtedness,
seeking funds for higher risk exploration and development activities, exiting the business, or
fulfilling other strategic objectives. - 7 -




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Historical Development Pengrowth Corporations first acquisition, in December of 1988, was the purchase of a 2.6507%
interest in the Dunvegan Gas Unit No. 1 located near Fairview, Alberta in the Peace River Arch.
Pengrowth Corporation financed the acquisition by issuing 1,250,000 royalty units at a price of
$10.00 per royalty unit, substantially all of which were issued to Pengrowth Trust. Pengrowth
Trust issued 1,243,500 trust units to the public at a price of $10.00 per trust unit for gross
proceeds of $12,435,000 which were used to pay for the royalty units. An additional 56,500 royalty
units were also issued in the public offering. Of these additional royalty units, 18,240 royalty
units were outstanding as of December 31, 2004. Commencing in 1991, Pengrowth Management adopted a plan, and established criteria, to build
unitholder value through accretive acquisitions and financings of those acquisitions. Thereafter
Pengrowth Corporation completed a series of acquisitions that were financed through periodic
issuances of trust units, rights offerings and bank indebtedness. Pengrowth Trust commenced a series of fully marketed equity offerings in 1994 to fund various
property acquisitions. Since that time Pengrowth Corporation has continued a course of targeted
asset acquisitions for cash. The most significant purchases and financings are described below. Effective July 1, 1997, Pengrowth Corporation acquired a 98.11% working interest in the Judy Creek
Beaverhill Lake Unit, a 94.58% working interest in the Judy Creek West Beaverhill Lake Unit, and a
9.58% working interest in the Swan Hills Unit No. 1 for a net purchase price of $496.1 million. In
November 1997, Pengrowth Corporation increased its working interest in the Judy Creek Beaverhill
Lake Unit to 100%. On October 15, 1997, Pengrowth Trust completed an offering of 23,928,572 trust
units on an installment receipt basis with $12.50 per trust unit paid on closing and the balance of
$8.75 per unit due on or before October 15, 1998. Gross proceeds raised amounted to $508 million
comprised of cash of $299 million and an installment receivable of $209 million. On April 15,
1998, Pengrowth Corporation assumed operatorship of the Judy Creek Units from Imperial Oil
Resources Ltd. Effective October 15, 1998, Pengrowth Trust acquired certain facilities interests
related to operations in the Judy Creek and Swan Hills areas from Pengrowth Corporation for
consideration of $106,000,000. Pengrowth Trust entered into an agreement to lease the facilities
back to Pengrowth Corporation. On November 10, 2000, Pengrowth Trust issued 8,165,000 trust units to raise gross proceeds of
$155,135,000 which were applied to acquire interests in Goose River, House Mountain, Minnehik Buck
Lake, Mitsue and Weyburn from Canadian Natural Resources Limited for cash consideration of
$128,000,000 and the transfer of certain properties. On May 31, 2001, Pengrowth Trust issued 10,895,000 trust units to raise gross proceeds of
$225,526,500. Effective June 15, 2001, Pengrowth Corporation acquired a royalty representing substantially all of
the beneficial interest in the natural gas and liquids production from an 8.4% working interest in
the Sable Offshore Energy Project (SOEP) from Nova Scotia Resources (Ventures) Limited (NSRVL),
for $265 million (net adjusted price of $228.4 million). On December 24, 2001, Pengrowth
Corporation acquired certain additional petroleum and natural gas rights and other assets from
NSRVL for a gross purchase price of $27.5 million. On May 7, 2003, Pengrowth Corporation acquired
an 8.4% working interest in the four SOEP production facilities downstream of Thebaud Central
Platform from SOEP co-venturers ExxonMobil Canada Properties, Shell Canada Resources Limited,
Imperial Oil Resources Ltd. and Mosbacher Operating Company Ltd. for net consideration of
approximately $57 million. In May of 2003 Pengrowth entered into an agreement with Nova Scotia
Resources Limited (NSRL) to purchase varying interests in eleven Significant Discovery Licenses
(SDLs) for $4.5 million plus a 10% Net Profit Interest to Nova Scotia Resources Limited. In
December 2003 Pengrowth acquired from Emera their 8.4% interest in the SOEP offshore production
platforms facilities for $65 million. As a result of the foregoing transactions, Pengrowth
Corporation holds an undivided 8.4% working interest in SOEP. On June 4, 2002, Pengrowth Trust issued 8,000,000 trust units at a price of $15.40 per trust unit
for total gross proceeds of $123.2 million. - 8 -




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On October 1, 2002, with an effective date of July 1, 2002, Pengrowth Corporation acquired certain
properties located in northern British Columbia from Calpine Natural Gas Partnership for net
consideration after adjustments of $352 million. In November, 2002, Pengrowth Trust completed a cross-border equity offering in Canada and the
United States of 20,125,000 trust units at $14.00 per trust unit (US$8.93 per unit) for gross
proceeds of approximately $281.8 million. In total, two public trust unit offerings completed
during 2002 raised $380 million in net equity proceeds. On April 23, 2003, Pengrowth completed a US$200 million private placement of senior unsecured notes
to a group of U.S. investors. The notes were offered in two tranches: US$150 million at 4.93% due
April 23, 2010 and US$50 million at 5.47% due April 23, 2013. Interest on the notes is payable
semi-annually. During 2004 and early 2005 Pengrowth Corporation and Pengrowth Trust completed the following
acquisitions and financings: On March 23, 2004, Pengrowth Trust completed an equity offering of 10,900,000 trust units,
including 2,700,000 trust units issued upon exercise of an underwriters option, at a price of
$18.40 per trust unit for gross proceeds of $200.5 million. On May 31, 2004 Pengrowth Corporation acquired certain properties from Murphy Oil Corporation (the
Murphy Properties) for $551 million. See 
Recent Acquisitions, Financings and Developments 
Murphy Oil Acquisition. On August 12, 2004 Pengrowth acquired an additional 34.35% working interest in the company operated
Kaybob Notikewan Gas Unit, adding approximately 2 mmboes of proved plus probable reserves for $20
million before adjustments. The acquisition increased Pengrowths working interest in the unit to
99%. On December 30, 2004, Pengrowth Trust completed an equity offering of 15,985,000 Class B trust
units, including 5,285,000 Class B trust units issued upon exercise of an underwriters option and
an over-allotment option, at a price of $18.70 per Class B trust unit for gross proceeds of $298.92
million. On February 17, 2005, Pengrowth entered into an Arrangement Agreement with Crispin Energy Inc.
(Crispin) under which Pengrowth will acquire all of the issued and outstanding shares of Crispin,
subject to certain restrictions, on the basis of 0.0725 Class B trust units for each share held by
Canadian resident shareholders of Crispin who file the required notice of residency prior to the
effective date of the arrangement and 0.0512 Class A trust units for each share held by
non-Canadian resident shareholders of Crispin or those who do not file the required notice of
residency prior to the effective date of the arrangement, provided that the number of Class A trust
units issued may not be more than 25% of the Class B trust units issued pursuant to a Plan of
Arrangement under the Business Corporations Act(Alberta) (the Crispin Arrangement). Completion
of the Crispin Arrangement is expected prior to the end of April 2005. Since the formation of Pengrowth in 1988, Pengrowth has completed a total of 18 public financings
of equity for gross proceeds approximately $2.3 billion. 
 Recent Acquisitions, Financings and Developments Reclassification of Trust Unit Capital At the annual general and special meeting of the shareholders of Pengrowth Corporation, the annual
and special meeting of unitholders and the special meeting of royalty unitholders, held on April
22, 2004, amendments were approved to the trust indenture, royalty indenture, unanimous shareholder
agreement and articles of Pengrowth Corporation by in excess of 95% of the votes cast at the
meetings to facilitate the reclassification of our trust unit capital. The reclassification of our
trust unit capital into two classes of units: Class A Trust Units and Class B Trust Units occurred
on July 27, 2004. The reclassification was recommended by the Board of Directors to provide a
mechanism to ensure that a majority of the outstanding trust units, after the implementation
period, would be held by - 9 -




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##### Table of Contents



residents of Canada, thereby preserving Pengrowths mutual fund trust status under the Income Tax
Act(Canada) (the Tax Act). See Trust Units  Trust Unit Reclassification. Conversion of Class B Trust Units into Class A Trust Units The Class B trust units are convertible into Class A trust units on a one-for-one basis, provided
that at the time of conversion the number of Class A trust units outstanding is not greater than
the Ownership Threshold of 49.75% and that the conversion will not result in the number of Class A
trust units outstanding immediately after giving effect to the conversion exceeding the Ownership
Threshold. See Trust Units  Trust Unit Reclassification. As of the date hereof, approximately 863,716 additional Class B trust units must be issued by
Pengrowth for the Class A trust units to be at or below the Ownership Threshold. It is anticipated
that approximately 462,098 additional Class A trust units and approximately 3,888,205 additional
Class B trust units will be issued pursuant to the Crispin Arrangement, which is expected to be
completed prior to the end of April, 2005. As a result, following the completion of the Crispin
Arrangement, the Class A trust units will be below the Ownership Threshold. In addition to public
offerings of Class B trust units, the number of Class B trust units will increase over time upon
the exercise of options and rights under our incentive plans and the conversion of phantom units
under the long term incentive plan all of which are exercisable for Class B trust units. Pengrowth
Trust also issues additional Class B trust units each month pursuant to our Distribution
Reinvestment and Trust Unit Purchase Plan (DRIP). In 2004, an aggregate of approximately
2,200,000 trust units were issued pursuant to our incentive plans and the DRIP. As a result of these on-going issuances of Class B trust units, the opportunity may exist for Class
B trust units to be converted into Class A trust units on a continuing basis. To provide all unitholders with an equal and orderly opportunity to convert Class B trust units
into Class A trust units, Pengrowth intends to implement a new form of reservation system. The
reservation system will be considered by the holders of trust units at the annual meeting of
holders of trust units to be held on April 26, 2005. If approved, all registered and beneficial
unitholders will have the opportunity to participate in the reservation system by providing an
appropriate form to Computershare. Computershare will at specified times select unitholders from
among all of the unitholders within the reservation system using a random selection process that
provides essentially an equal opportunity to all unitholders within the system. Each selection
will entitle a unitholder to convert up to 1,000 Class B trust units into Class A trust units.
Unitholders will remain in the reservation system until they receive reservation numbers in respect
of all of their Class B trust units within the system or until the reservation expires in
accordance with its terms. It is anticipated that selections will occur monthly, but they may
occur more or less frequently as determined by the Board of Directors of Pengrowth Corporation. At
each periodic selection, the number of unitholders that will be selected will be limited by the
number of Class B trust units that may be converted into Class A trust units without exceeding the
Ownership Threshold (subject to a safety margin of Class B trust units that will be maintained). Further details regarding the reservation system, including potential tax consequences of a
conversion of Class B trust units to Class A trust units, will be provided sufficiently in advance
of the first selection process so that all interested unitholders will have an equal opportunity to
participate. 2005 Capital Expenditure Program On November 29, 2004, the Board of Directors of Pengrowth Corporation approved Pengrowths 2005
Capital Expenditure Program of up to $171 million. Pengrowth will continue to develop the Judy
Creek miscible flood program through a combination of infill drilling and new horizontal injection
wells. In north east British Columbia, Pengrowth will focus on new gas wells and further
development of existing waterflood programs. Pengrowth also anticipates an additional well being
drilled and increased compression being installed at the Sable Offshore Energy Project. Several
drilling opportunities in both heavy oil and shallow gas in the Murphy Properties are anticipated
to be completed in 2005. The table below provides a breakdown of Pengrowths
2005 Capital Expenditure Program (A) between (i) operated and (ii) non-operated properties and (B)
between (i) maintenance and enhancement expenditures and (ii) development expenditures. - 10 -




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Maintenanceand
    
    
    
    
    
    
    TotalEnhancement
    
    
    Development
    
    
    Capital(in millions)Operated PropertiesAlberta
    
    $
    22
    
    
    $
    30
    
    
    $
    52Murphy Properties
    
    
    2
    
    
    
    25
    
    
    
    27Northeast British Columbia
    
    
    4
    
    
    
    17
    
    
    
    21Subtotal
    
    $
    28
    
    
    $
    72
    
    
    $
    100Non-operated Properties
    
    $
    40
    
    
    $
    31
    
    
    $
    71Total
    
    $
    68
    
    
    $
    103
    
    
    $
    171
 Murphy Oil Acquisition On May 31, 2004 Pengrowth Corporation acquired the Murphy Properties from Murphy Oil Corporation
for $550 million, subject to customary adjustments. The Murphy Properties represent a diverse
group of assets within western Canada, encompassing interests in the West Central Alberta and Peace
River Arch areas (including interests in the McLeod and Deep Basin areas); Southern Alberta
(including interests in the Countess, Princess and Twining/Three Hills areas); and heavy oil
(including interests in the Lindbergh, Tangleflags and Bodo/Cactus areas). The properties also
include 219,000 acres of undeveloped land. See the Business Acquisition Report dated August 13,
2004 filed on SEDAR on August 13, 2004 and the supplement thereto filed on December 22, 2004, each
of which is hereby incorporated by reference herein. Borrowing and Note Payable In December 2004, Pengrowth Corporation negotiated a $375 million revolving credit facility
syndicated among eight financial institutions. This credit facility is extendible on a 364 day
revolving basis which, if not extended, will result in a two year amortization term. Pengrowth
Corporation also has a $35 million demand operating line of credit. As of March 28, 2005, an
aggregate of $195 million was drawn on these facilities which are also reduced by outstanding
letters of credit in the amount of approximately $22 million. In addition, a note payable is due
to Emera in respect to the acquisition of the SOEP facilities. The note is secured by Pengrowths
working interest in SOEP. It is a non-interest bearing note with payments due as follows: $15
million on December 29, 2005 and $20 million on December 31, 2006. Unitholder Limited Liability Effective July 1, 2004 the Income Trusts Liability Act(Alberta) was proclaimed in force. The Act
creates a statutory limitation on the liability of unitholders of Alberta income trusts such as
Pengrowth Trust. The legislation provides that a unitholder will not be, as a beneficiary, liable
for any act, default, obligation or liability of the trustee that arises after the legislation
comes into effect. The legislation does not affect the liability of unitholders with respect to
any act, default, obligation or liability that arose before July 1, 2004. Crispin Acquisition On February 17, 2005, Pengrowth entered into an Arrangement Agreement with Crispin Energy Inc.
(Crispin) under which Pengrowth will acquire all of the issued and outstanding shares of Crispin,
subject to certain restrictions, on the basis of 0.0725 Class B trust units for each share held by
Canadian resident shareholders of Crispin who file the required notice of residency prior to the
effective date of the arrangement and 0.0512 Class A trust units for each share held by
non-Canadian resident shareholders of Crispin or those who do not file the required notice of
residency prior to the effective date of the arrangement, provided that the number of Class A trust
units issued may not be more than 25% of the Class B trust units issued pursuant to a Plan of
Arrangement under the - 11 -




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##### Table of Contents



Business Corporations Act(Alberta). Completion of the Crispin Arrangement is expected prior to
the end of April 2005. 2004 Equity Financings On March 23, 2004, Pengrowth Trust completed an equity offering of 10,900,000 trust units,
including 2,700,000 trust units issued upon exercise of an underwriters option, at a price of
$18.40 per trust unit for gross proceeds of $200.5 million and net proceeds of $190 million. On December 30, 2004, Pengrowth Trust completed an equity offering of 15,985,000 Class B trust
units, including 5,285,000 Class B trust units issued upon exercise of an underwriters option and
an over-allotment option, at a price of $18.70 per Class B trust unit for gross proceeds of $298.92
million and net proceeds of $283.3 million. 
 Trends There are a number of business and economic factors which underlie trends in the oil and gas
industry that influence the near term future of our business. The conversion of traditional oil and gas companies into income and royalty trusts has continued in
2004. The proliferation of income and royalty trusts, the efforts of these trusts to replace
annual production declines, robust oil and natural gas prices and low interest rates have resulted
in a very competitive market for the acquisition of oil and gas properties and related assets.
There has been a corresponding increase in the valuation parameters for corporate and asset
acquisitions, while at the same time income and royalty trusts, including Pengrowth Trust, have
enjoyed favourable access to equity and debt capital markets. Commodity prices, while volatile, are at high levels compared with historical averages. However,
the appreciation of the Canadian dollar in 2004 relative to the U.S. dollar has offset a portion of
the economic benefit to Canadian oil and gas producers, including trusts, of these higher prices.
Increases or decreases in the Canadian dollar relative to the U.S. dollar also result in decreases
or increases, respectively, in net revenue as oil and gas prices are demonstrated in US dollars and
operating costs are denominated in Canadian dollars. The Canadian dollar has continued its
strength into 2005. At the same time, interest rates have been at, or remain near, their lowest levels in 40 years,
providing a significant stimulative impact on the North American economy. For additional information regarding Pengrowth Trusts strategy in this business environment, see
Managements Discussion and Analysis  Outlook on page 76 of Pengrowth Trusts Annual Report for
the year ended December 31, 2004. 
 PENGROWTH MANAGEMENT LIMITED 
 Business The principal business of Pengrowth Management is that of a specialty fund manager. Pengrowth
Management currently provides advisory, management, and administrative services primarily to
Pengrowth Trust and Pengrowth Corporation. Pengrowth Management also previously provided
investment advisory and management services in relation to investments by several Canadian pension
funds in the energy sector. These investments were subsequently acquired by Pengrowth Corporation
for royalty units and cash. Pengrowth Management utilizes its extensive experience and employs
prudent oil and gas business practices to increase the value of the assets of Pengrowth Corporation
through effective acquisitions and dispositions and through effective operations. Pengrowth
Management has focused upon high quality, long life proven producing properties located in Canada.
Pengrowth Management will continue to focus upon acquisitions which are strategic and which add
value to Pengrowth Corporation and Pengrowth Trust on a per unit basis. - 12 -




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Management Agreement The unitholders and the holders of royalty units approved an amended and restated management
agreement among Pengrowth Trust, Pengrowth Corporation, Pengrowth Management and Computershare, as
trustee (the Management Agreement) at annual and special meetings held on June 17, 2003. The
Management Agreement governs both Pengrowth Trust and Pengrowth Corporation. The Board of
Directors negotiated the Management Agreement with Pengrowth Management, to incentivize future
performance and to avoid the upfront termination payments associated with internalizations. Key elements of the Management Agreement are:  

two distinct 3-year terms with a declining fee structure in the second 3-year term;

a base fee determined on a sliding scale:¡

in the first three-year contract term:  n

2% of the first $200 million of Income; andn

1% of the balance of Income over $200 million; and  ¡

in the second three-year contract term:  n

1.5% of the first $200 million of Income; andn

0.5% of the balance of Income over $200 million. (For these purposes, Income means the aggregate of net production revenue of Pengrowth
Corporation and any other income earned from permitted investments of Pengrowth Trust (excluding
interest on cash or near-cash deposits or similar investments).  

a performance based fee based on total returns received by unitholders which
essentially compensates Pengrowth Management for total annual returns which average in
excess of 8% per annum over a 3-year period;

a ceiling on total fees payable determined in reference to a percentage of the fees
paid under the previous management agreement: 80% each year in the first three-year
contract term and 60% each year in the second three-year contract term and subject to a
further ceiling essentially equivalent to $12 million annually during the second
three-year contract term;

requirement for Pengrowth Management to pay certain expenses of Pengrowth
Corporation and Pengrowth Trust of approximately $2 million per year;

an annual minimum management fee of $3.6 million comprised of $1.6 million of
management fees and $2.0 million of expenses;

key man provisions in respect of James S. Kinnear, the President of Pengrowth
Management;

an annual bonus pool based on 10% of Pengrowth Managements base fee and performance
fee for employees of, and special consultants to, Pengrowth Corporation; and

an optional buyout of the Management Agreement at the election of the Board of
Directors upon the expiry of the first three-year contract term with a termination
payment of essentially 2/3 of the management fee paid during the first three-year
contract term plus expenses of termination. - 13 -




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##### Table of Contents



The responsibilities of Pengrowth Management under the Management Agreement include:  

reviewing and negotiating acquisitions for Pengrowth Corporation and Pengrowth Trust;

providing written reports to the Board of Directors to keep Pengrowth Corporation
fully informed about the acquisition, exploration, development, operation and
disposition of properties, the marketing of petroleum substances, risk management
practices and forecasts as to market conditions;

supervising Pengrowth Corporation in connection with its acting as operator of
certain of its properties;

arranging for, and negotiating on behalf of, and in the name of, Pengrowth
Corporation all contracts with third parties for the proper management and operation of
the properties of Pengrowth Corporation;

supervising, training and providing leadership to the employees and consultants of
Pengrowth Corporation and assisting in recruitment of key employees of Pengrowth
Corporation;

arranging for professional services for Pengrowth Corporation and Pengrowth Trust;

arranging for borrowings by Pengrowth Corporation and equity issuances by Pengrowth
Trust; and

conducting general unitholder services, including investor relations, maintaining
regulatory compliance, providing information to unitholders in respect of material
changes in the business of Pengrowth Corporation or Pengrowth Trust and all other
reports required by law, and calling, holding and distributing material in respect of
meetings of unitholders and holders of royalty units. Despite the broad authority of Pengrowth Management, approval of the Board of Directors is required
on decisions relating to any offerings, including the issuance of additional trust units,
acquisitions in excess of $5 million, annual operating and capital expenditure budgets, the
establishment of credit facilities, the determination of cash distributions paid to unitholders,
the amendment of any of the constating documents of Pengrowth Corporation or Pengrowth Trust and
the amount of the assumed expenses of Pengrowth Management which are a portion of the compensation
of Pengrowth Management. Management Fee 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.) The
base fee has been reduced from a sliding scale between 3.5% and 2.5%, to the new rate of 2% on the
first $200 million of net operating income and 1% on net operating income over $200 million.
Acquisition fees have been eliminated (effective July 1, 2003), and Pengrowth Management is
eligible to receive a performance fee if certain performance criteria are met. The previous fee
arrangements remain relevant however as there is a cap imposed on the fees, including the
performance fee, limiting the aggregate of such fees to 80% of the fees that would otherwise have
been paid under the old management agreement (inclusive of acquisition fees) for the first three
years, and 60% for the second three years. Bonus Pool As an incentive to officers, employees and special consultants of Pengrowth Management (including
employees of Pengrowth Corporation but excluding the President, James S. Kinnear), an annual bonus
pool has been established which is carved out from the management fee paid to Pengrowth Management,
determined as 10% of the total fees received by Pengrowth Management (i.e. 10% of the management
fee and any performance fee earned). Bonuses are paid from time to time in accordance with
criteria to be set at the discretion of Pengrowth Management as a further incentive for
performance. - 14 -




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##### Table of Contents



PENGROWTH CORPORATION  OPERATIONAL INFORMATION As at December 31, 2004, Pengrowth Corporation had 289 permanent employees. Pengrowth Corporation
has invested more than $2.68 billion in the energy sector primarily to purchase mature, proven
producing oil and natural gas properties in Canada. 
 Principal Properties The portfolio of properties acquired and held by Pengrowth Corporation primarily includes
relatively long life, oil and gas producing properties with established production profiles. Pengrowth Corporation obtained the GLJ Report dated February 15, 2005 in respect to the oil and gas
properties of Pengrowth Corporation effective December 31, 2004. All reserve data presented under
this sub-heading is based on the GLJ Report. Pengrowth Corporations producing properties are summarized in the following table: 
 Summary of Property Interests Held by Pengrowth Corporation as at December 31, 2004 Pengrowth
    
    
    
    
    
    
    
    
    
    
    2005Total Proved
    
    
    
    
    
    
    2004 Actual Oil
    
    
    Estimated OilRemaining
    
    
    Reserve
    
    
    Plus Probable
    
    
    Value at 10%
    
    
    Equivalent
    
    
    EquivalentReserve Life
    
    
    Life Index
    
    
    Reserves(2)
    
    
    Discount
    
    
    Production(2)(3)
    
    
    Production(2)(Years)
    
    
    (Years)
    
    
    (mboe)
    
    
    ($M)
    
    
    (boepd)
    
    
    (boepd)Judy Creek BHL Unit
    
    
    50
    
    
    
    11.9
    
    
    
    39,691
    
    
    
    367,690
    
    
    
    10,103
    
    
    
    9,128Judy Creek West BHL Unit
    
    
    50
    
    
    
    17.8
    
    
    
    9,934
    
    
    
    51,129
    
    
    
    1,495
    
    
    
    1,529SOEP
    
    
    10
    
    
    
    7.5
    
    
    
    17,610
    
    
    
    251,446
    
    
    
    6,628
    
    
    
    6,468Weyburn Unit
    
    
    41
    
    
    
    19.3
    
    
    
    16,671
    
    
    
    105,348
    
    
    
    2,301
    
    
    
    2,371Swan Hills Unit No.1
    
    
    50
    
    
    
    21.8
    
    
    
    10,605
    
    
    
    64,151
    
    
    
    1,297
    
    
    
    1,331Monogram Gas Unit
    
    
    31
    
    
    
    8.2
    
    
    
    6,647
    
    
    
    86,550
    
    
    
    1,610
    
    
    
    2,222McLeod River
    
    
    33
    
    
    
    7.0
    
    
    
    5,951
    
    
    
    69,325
    
    
    
    1,700
    
    
    
    2,323Dunvegan Gas Unit No. 1
    
    
    39
    
    
    
    10.9
    
    
    
    5,643
    
    
    
    48,859
    
    
    
    1,150
    
    
    
    1,418Tangleflags
    
    
    20
    
    
    
    7.4
    
    
    
    5,633
    
    
    
    25,709
    
    
    
    1,308
    
    
    
    2,086East Bodo
    
    
    39
    
    
    
    32.6
    
    
    
    5,264
    
    
    
    21,352
    
    
    
    319
    
    
    
    442Oak
    
    
    42
    
    
    
    12.1
    
    
    
    4,952
    
    
    
    55,597
    
    
    
    1,283
    
    
    
    1,124Kaybob Notikewin Unit No. 1
    
    
    50
    
    
    
    13.1
    
    
    
    4,824
    
    
    
    41,111
    
    
    
    905
    
    
    
    1,008Princess
    
    
    50
    
    
    
    13.3
    
    
    
    4,104
    
    
    
    42,044
    
    
    
    360
    
    
    
    845Twining
    
    
    40
    
    
    
    9.2
    
    
    
    4,083
    
    
    
    44,834
    
    
    
    842
    
    
    
    1,217Rigel
    
    
    21
    
    
    
    6.1
    
    
    
    3,808
    
    
    
    67,181
    
    
    
    2,366
    
    
    
    1,713Enchant
    
    
    50
    
    
    
    12.8
    
    
    
    3,706
    
    
    
    30,046
    
    
    
    764
    
    
    
    790Quirk Creek
    
    
    31
    
    
    
    10.2
    
    
    
    3,361
    
    
    
    25,739
    
    
    
    849
    
    
    
    902Other (1)
    
    
    50
    
    
    
    8.8
    
    
    
    66,126
    
    
    
    768,971
    
    
    
    18,422
    
    
    
    20,703Total
    
    
    50
    
    
    
    10.4
    
    
    
    218,613
    
    
    
    2,167,082
    
    
    
    53,702
    
    
    
    57,620
   Notes:(1)
    
    Other includes Pengrowth Corporations working and royalty interest in 111 other
properties.(2)
    
    Natural gas has been converted to barrels of oil equivalent on the basis of six mcf of
natural gas being equal to one boe.(3)
    
    Murphy properties based on seven months of production averaged over the year. Judy Creek Beaverhill Lake Unit and Judy Creek West Beaverhill Lake Unit Pengrowth Corporation holds a 100% working interest in the Judy Creek Beaverhill Lake Unit (the
Judy Creek A Pool) and a 98.38% working interest in the Judy Creek West Beaverhill Lake Unit (the
Judy Creek B Pool), (together, Judy Creek). Judy Creek is located approximately 200 kilometres
northwest of Edmonton in North-Central Alberta and covers an area of approximately 155 square
kilometres (60 sections). Judy Creek was discovered in 1959, placed on waterflood (secondary
recovery) in 1962 and miscible flood (tertiary recovery) in 1985. Original oil in place totalled
815 mmbbls of oil in the Judy Creek A Pool, making it one of the largest oil pools discovered in
western Canada. To December 31, 2004, a total of 351 mmbbls have been produced from the Judy Creek
A Unit (before royalties). Remaining Total Proved Plus Probable Reserves at December 31, 2004 are
estimated at 31.6 mmboe. Original oil in place at the Judy Creek B Unit totalled 262 mmbbls and,
as at December - 15 -




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31, 2004, 114 mmbbls have been produced (before royalties). Original oil in place at the Judy
Creek A and B Pools combined totals 1,077 mmbbls, with an aggregate of 465 mmbbls produced as at
December 31, 2004. Pengrowths average production for Judy Creek in 2004 was 11,598 boepd (before
royalties). The remaining producing reserve life is 50 years and the Reserve Life Index is 11.9 and
17.8 years, respectively for the A and B pools. Development Activity Pengrowth Corporation operates both the Judy Creek A and B Pools. Pengrowth Corporation has
continued the enhanced oil recovery program that was initiated at Judy Creek in 1985. In the Judy
Creek hydrocarbon miscible flood program, oil production is increased by injecting a light,
hydrocarbon-based solvent (ethane and methane) into the reservoir. In 2004, solvent was injected
at 12 injection wells and Pengrowth Corporation is anticipating increased oil production from up to
34 offsetting production wells. Development activity in 2004 was largely focused within the A Pool and included five horizontal
solvent injection wells and five oil producers. Drilling and related activities such as well
workovers and conversions resulted in the development of nine new solvent patterns and three new
waterflood patterns in 2004. Six of the new solvent patterns were receiving solvent by year end
with response expected during the first quarter of 2005. The remaining patterns are scheduled to
begin injection by mid 2005 with response expected one to three months later. Other methods of enhancing future production in Judy Creek are being investigated including the use
of CO2 as a solvent, potentially increasing recovery and reducing solvent costs.
Natural gas production may also be possible through development of the coal bed methane potential
on Pengrowth Corporations acreage. Pengrowth has recently entered into an agreement with a
prominent coal bed methane company for the farmout of a portion of Pengrowths CBM potential lands
at Judy Creek pursuant to which a minimum of two horizontal wells will be drilled to test the
Mannville coal formations. During 2004 significant upgrades were completed on the Judy Creek A Pool produced water injection
system. These proactive upgrades improve the integrity of the system. Upgrades in the control
systems of five gas compression installations were also completed in 2004. These upgrades increase
the reliability and operating efficiency of the units and are expected to result in reduced
maintenance and fuel consumption costs. Development plans in 2005 include drilling up to seven new oil wells, two injection wells and three
gas wells targeting shallow natural gas reservoirs. Sable Offshore Energy Project (SOEP) 2004 represented the first full year that Pengrowth held a full 8.4% working interest in both the
production and facilities associated with the Sable Offshore Energy Project. Tier I was completed
over the course of 1999 to 2002 and consists of the North Triumph, Venture and Thebaud fields. Tier
II development began in late 2002 with gas brought on stream in late 2003 with the completion of
two wells at Alma. Both Alma wells continue to perform solidly. 2004 saw further development at
Tier II in the South Venture field. South Venture 1, a previously drilled development well, was
tied-in and placed on production in December 2004. A second South Venture well that started
drilling in 2004 is expected to be on stream in the first quarter of 2005 and will help offset
normal production decline. As of December 31, 2004, the total SOEP remaining Total Proved Plus Probable Reserves are estimated
by GLJ to be 985 bcf of natural gas and 45.5 mmbbls of NGLs and Pengrowth Total Proved Plus
Probable Reserves are estimated to be 83 bcf of natural gas and 3.8 mmbbls of NGLs. Pengrowths
working interest share of SOEP production averaged 33.9 mmcfpd of sales gas and 990 bblpd of NGLs
in 2004 (before royalties). Development Activity A significant portion of Pengrowths capital expenditures on non-operated properties will be
invested at SOEP in 2005. The capital will fund the drilling of a third well at South Venture and
a potential infill well at Venture. - 16 -




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Capital will also be spent on the construction of a 30,000 HP compression project which will be
installed at Thebaud in 2006. Compression will allow the SOEP fields to be drawn down to much
lower pressures allowing for a higher recovery of gas at higher production rates. Weyburn Unit Pengrowth owns a 9.75% working interest in the Encana operated Weyburn Unit in southeast
Saskatchewan. Medium gravity oil is produced from the Midale carbonate reservoir under waterflood
and, more recently, a CO2 miscible flood enhanced recovery scheme. The Weyburn Unit
averaged 23,400 bblpd during 2004 and exited the year at 25,800 bblpd, exceeding budget
expectations. At December 31, 2004, GLJ estimates remaining Total Proved Plus Probable company
interest reserves of 16.7 mmboes with a remaining producing life of 41 years and a Reserve Life
Index of 19.3 years. Development Activity 2004 was a very active year in the Weyburn Unit. Expansion of the CO2 miscible flood
continued with 12 new patterns being developed, adding to the 32 from previous years. Ultimately,
75 patterns are expected to be developed in the unit. In addition, there was ongoing development
and optimization in existing enhanced oil recovery and waterflood areas where a total of 24
horizontal infill/re-entry wells were drilled. Excluding CO2 purchases, $68 MM was spent
in the 2004 capital program. Only 4 of the 12 new enhanced oil recovery patterns started injection
in 2004. With the success of the infill program, resulting in the bulk of the production increase,
it was necessary for additional CO2 to be directed to the existing patterns to replace
voidage. In 2005, injection will commence in more of the new enhanced oil recovery patterns
depending on the availability of CO2. The 2005 capital program is focused on further development and optimization in existing enhanced
oil recovery and waterflood areas where opportunities exist to increase production and recovery.
There are no plans to roll out any new miscible flood patterns until 2006. Capital expenditures of
$43 MM are budgeted for 2005, excluding CO2 purchases, and will include 22 enhanced oil
recovery and 8 waterflood infill wells. It is anticipated the capital projects will result in
maintaining unit production at a level in excess of 25,000 bblpd during 2005. In addition, the
injection of CO2 provides for an ongoing real and measurable reduction in greenhouse gas
emissions. Swan Hills Unit No. 1 Pengrowth previously held a 10.45 percent working interest in the Devon operated Swan Hills Unit
No. 1. On February 28, 2005, Pengrowth completed the acquisition of an additional 11.89 percent
interest in the unit, bringing Pengrowths interest to 22.34 percent. In 2004, Pengrowths working interest share of production from the Swan Hills Unit No. 1 was 1,297
boepd (before royalties). GLJ estimates that the total remaining Total Proved Plus Probable
Reserves at December 31, 2004 are 88.4 mmbbls of oil, 58.7 bcf of natural gas and 3.3 mmbbls of
NGLs (Pengrowth Total Proved Plus Probable Reserves are estimated to be 9.2 mmbbls of oil, 6.1 bcf
of natural gas and 0.3 mmbbls of NGLs, exclusive of the recent acquisition) with a remaining
producing life of 50 years and a Reserve Life Index of 22 years. Development Activity In 2004, six new wells were drilled. This included a successful 3 well infill program in the North
Central Platform area and one well in the hillslide area. One producer and one injector were
drilled as part of a two pattern development in the hydrocarbon miscible flood expansion area. Six
hydrocarbon miscible flood patterns were active in 2004 including the two new patterns. A CO2 miscible flood pilot project started injection in the fourth quarter of 2004. The
project looks promising with the third injection cycle underway in January 2005 with no
breakthrough of the CO2. The aim of the CO2 pilot is to quantify the
incremental oil which may be recoverable beyond hydrocarbon miscible flooding. It is also expected
this tertiary recovery process will recover additional solvent that has been left behind in the
reservoir from the hydrocarbon miscible flood. A full scale project will qualify for Alberta
Royalty Relief. - 17 -




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A seven well infill drilling program has been approved by partners in the hillslide area for 2005.
These wells will be drilled directionally to access an area that is underdeveloped. Several solvent
injection cycles are planned in various hydrocarbon miscible flood patterns during 2005. Monogram Gas Unit Pengrowth Corporations working interest in the Monogram Gas Unit, located in southern Alberta, is
53.8%. The Monogram Gas Unit produces sweet, dry natural gas from the Medicine Hat, Milk River and
Second White Specks formations. Pengrowths working interest share of 2004 production averaged 9.7
mmcfpd from 520 wells (280 net). Pengrowth Total Proved Plus Probable Reserves are
estimated to be 39.9 bcf. Development Activity A successful 40-well infill drilling program was completed in 2001. The 2004 infill drilling
program was nearly four times as large and was completed on time and ahead of budget projections.
A total of 154 wells were drilled in 2004 and 149 were on stream by yearend. December production
levels increased to 30 mmcfpd gross (16 mmcfpd net to Pengrowth) which more than doubled
Pengrowths production of approximately 7.5 mmcfpd prior to commencing the infill program. New
field and central compression was added, along with main line looping to reduce back pressure on
the existing wells and to accommodate the new wells. The 2004 drilling program effectively
downspaced the unit to eight wells per section. McLeod River The McLeod River property is located approximately 110 kilometres west of Edmonton. Production is
obtained from the Rock Creek, Notikewin, Gething and Cardium formations. Pengrowth Corporation
drilled four gas wells during 2004, with working interests between 50% and 100%. All the wells
were tied-in and are on production. Lands and wells acquired from Murphy fit nicely with
Pengrowths ownership in the area. Pengrowths working interest share of production from McLeod
River averaged 1,700 boepd (before royalties) for 2004. Development Activity To date in 2005, one well is drilling with another to follow. Up to three additional wells are
planned to be drilled in the second half of 2005. Dunvegan Gas Unit No. 1 Pengrowth Corporation holds a 7.97% working interest in the Dunvegan Unit located near Fairview,
Alberta, in the Peace River Arch, approximately 430 kilometers northwest of Edmonton. The Dunvegan
natural gas field is operated by Devon Canada Corporation, has 155 (12 net) producing natural gas
wells and covers an area of approximately 213 square kilometers. Approximately 95% of the Dunvegan
Units identified natural gas reserves are contained in the Mississippian Debolt formation at a
depth of approximately 1,465 meters. A natural gas processing plant, gathering system and
satellite facilities were built in 1973. A deep cut facility was completed in 1987 for the purpose
of extracting propane, butane and heavier natural gas liquids from the raw natural gas stream.
Sour gas processing facilities were added in 1996. A natural gas storage project also exists in
the Dunvegan Unit. GLJ estimates gross Total Proved Plus Probable Reserves of 316.9 bcf of natural gas and 17.9 mmbbls
of NGLs (Pengrowth Total Proved Plus Probable Reserves of 25.3 bcf of natural gas and 1.4 mmbbls of
NGLs) remain to be produced from the Dunvegan Unit as at December 31, 2004. It has a remaining life
of 39 years and a Reserve Life Index of 10.9 years. Current production from the Dunvegan Unit is
obtained from five zones. In 2004, Pengrowth Corporations working interest share of production
averaged 1,150 boepd (before royalties). The majority of gas from the Dunvegan Unit is currently
being sold under contract to Progas Limited with the remainder going to Pan-Alberta Gas Ltd. and
other direct markets. - 18 -




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Development Activity A successful development program that commenced in the Dunvegan Unit in 2003 continued through 2004
with Pengrowth participating in the drilling of 26 infill wells. Despite adverse weather delaying
completions and tie-ins, results to date indicate an average production rate exceeding 1 mmcfpd and
1 bcf of gross reserves per well. Due to the success of both the 2003 and 2004 programs, the unit
operator has proposed a 36 well development program and 6 recompletions for 2005. Tangleflags Through the Murphy acquisition, Pengrowth acquired a 50% working interest in the Canadian Natural
Resources Limited operated Tangleflags North enhanced oil recovery project and various interests in
adjacent primary heavy oil production, also operated by Canadian Natural Resources Limited.
Located in west central Saskatchewan, approximately 40 kilometres northeast of Lloydminster, the
property produces 12° API oil mainly from the Lloydminster sands under a Steam Assisted Gravity
Drainage (SAGD) thermal recovery process. The enhanced oil recovery project area contains
horizontal producing wells along with both vertical and horizontal steam injection wells and
commenced operation in the late 1980s. As steam is injected into the reservoir and oil and water
is withdrawn, a stream chamber is created which expands vertically and laterally, heating the
reservoir allowing the oil to drain more easily to the horizontal producing wells located near the
base of the reservoir. Ultimately, it is expected that in excess of 70% of the original oil in
place of 35.6 mmbbls will be recovered in the enhanced oil recovery project area. Recovery to date
is approximately 50%. As of December 31, 2004, GLJ estimates gross remaining Total Proved Plus
Probable Reserves of 11.0 mmbbls. Development Activity Stratigraphic wells drilled in 2003 identified a new part of the reservoir to the southeast of the
main pool that was suitable for thermal development. Two SAGD wells pairs were subsequently drilled
in this area of the pool, steam injection began in early 2004 and the producers were put on stream
by mid year. As a result of this and other development and optimization activity during 2004,
Pengrowths production at Tangleflags increased from 1,800 bblpd at the time of the acquisition to
over 2,200 bblpd by year-end. Although there are no further plans for additional SAGD development,
optimization activities continue in an effort to maintain production and maximize recovery. Bodo/Cactus Lake The Bodo, Cactus and Plover heavy oil properties were purchased in the Murphy acquisition. The
properties produce mainly 12° API oil from the McLaren and 15° API oil from the Lloydminster
reservoirs. The fields have several batteries to treat oil to pipeline specification, as well as a
number of compressor stations to process solution and non-associated gas. An active waterflood is
underway in East Bodo Lloydminster sands. During 2004, Pengrowth drilled six horizontal infill
wells (4.5 net) in the South Bodo McLaren reservoir ranging up to 1,000 metres in horizontal
length. These wells were successfully drilled in an existing field with low reservoir pressure.
Production from these wells added approximately 400 boepd to the base production of 4,700 boepd. Pengrowth continues to review uphole gas potential on the acquired lands and has successfully added
processing volumes in existing facilities by aggressively pursuing third party opportunities. Development Activity The East Bodo waterflood will be expanded in the second quarter of 2005 by drilling three stepout
wells and converting four producers to injectors. The production rate is expected to double in
this particular pattern. Reservoir engineering work has begun on the Cosine portion of the same
pool in preparation to further apply waterflood technology in the near future. - 19 -




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Given the success of the 2004 infill horizontal drilling program in South Bodo, additional infill
locations are currently being identified in South Bodo and Cactus Lake. A well clean out and
reactivation program has resulted in incremental production of 120 boepd. Additional candidates
have been identified. The acquired lands continue to be reviewed for opportunities, as we populate a prospect inventory
for drilling or recompletion later this year. Other means of monetizing the land base are being
pursued for non-core properties, and farm out activities thus far have resulted in net incremental
gas production of 525 mcfpd. Oak The Oak area is located in north-eastern British Columbia and is approximately 20 kilometres north
of Fort St. John. The property consists of 43 operated oil and natural gas wells, six injection
wells and seven water source wells surrounding two batteries and three natural gas compressor
facilities. Pengrowth Corporation also holds a 20.6% working interest in the non-operated Oak
Cecil I Unit #1. Production is obtained from the Halfway, Cecil, Baldonnel, Cadomin and Bluesky
formations. Two vertical Baldonnel gas wells were drilled in 2004 with one tied in and the other
under evaluation. The Oak C simulation modeling is underway to optimize the waterflood performance and identify
potential infill locations. The Oak B waterflood scheme was approved in early 2004 and water
injection began in July, 2004 with response anticipated Q2 2005. Pengrowths working interest
share of production averaged 1,283 boepd (before royalties) in 2004. Development Activity An Oak area Baldonnel gas play is proceeding with two proposed drilling locations for 2005 and
potential follow-up locations based on the success in 2004. Kaybob Notikewin Unit No. 1 Pengrowth Corporations ownership in the Kaybob Notikewin Unit No. 1 is 98.88% after purchasing an
additional 34.35% working interest in an acquisition that closed in August 2004. The property
produces natural gas and natural gas liquids from 19 wells in the Unit. In 2004, Pengrowths
working interest share of production averaged 905 boepd (before royalties). GLJ estimates
Pengrowths Total Proved Plus Probable Reserves at December 31, 2004 to be 4.8 mmboe with a Reserve
Life Index of 13.1 years. Development Activity No further development is currently planned. Most of the long term inactive wells have now been
abandoned. Princess Pengrowth acquired the Princess Field as part of the Murphy acquisition. The field has two
compressor stations with dehydration equipment servicing over 200 shallow gas wells on 38 sections
of lands. These wells are typically low volume, long life producers. The company operated Princess property in southeast Alberta covers over 36 sections of land with
mostly 100% working interest ownership. It produces sweet dry gas from the Milk River, Medicine Hat
and Second White Specks sequence. Upon acquiring the property from Murphy, Pengrowth embarked on
an active development program in 2004. Preparations required regulatory approvals for downspacing,
negotiations with partners to swap working interests and consolidate land ownership as well as
coordination of field services for drilling, completions and tie-ins. The program which involved
the drilling of 23 infill wells resulted in the addition of approximately 300 boepd of long life
production to the existing base production of 616 boepd. Production from the new wells came on
stream in November. - 20 -




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##### Table of Contents



Development Activity Up to 80 additional locations have been identified with an approximate 50 well program planned for
Q3 2005 as well as certain infrastructure modifications to optimize production. Third party
volumes are also processed through the Princess facilities to maximize equipment utilization. Twining The Twining Field is located approximately 160 kilometres northeast of Calgary. The primary
producing zone is the Pekisko with additional production from the Ellerslie, Glauconite and Belly
River zones. Working interest production from the Twining Field is currently 1,439 boepd. Pengrowth operates over 100 wells and four main battery facilities in the Twining area. The company
also operates the Equity Gas Unit No. 1 and has working interests in four non-operated units. Development Activity Since acquiring Murphy Oils interests in the Twining area, Pengrowth has been evaluating potential
drilling locations. A 3-D seismic program in the first quarter of 2005 is intended to help
identify locations for drilling which is expected to start this summer. Pengrowth is also
monitoring CBM activity in the area including an existing program operated by MGV Energy Inc. on
Pengrowth lands under a farmout agreement initiated by Murphy. Rigel The Rigel area is located in north-eastern British Columbia, approximately 40 kilometres north of
Fort St. John. Pengrowth Corporation holds an average 60% working interest in the property. The
property consists of four Cecil oil pools containing 33 oil wells, 16 injection wells and a central
battery facility. Optimization of pumping equipment is ongoing and stimulations of selected injectors will continue
to optimize waterflood performance. The Rigel I and H pools are targeted for modeling and
simulation work to identify opportunities to optimize the existing waterfloods. Pengrowths
working interest share of production averaged 2,366 boepd (before royalties) in 2004. Development Activity One new well is currently budgeted. Enchant The Enchant property is located approximately 200 kilometres southeast of Calgary. The property
consists of four operated oil pools in which Pengrowth Corporation holds an average 88% working
interest. These pools produce 32° API oil from the Nisku formation. Pengrowths working interest
share of production from Enchant averaged 764 boepd (before royalties) in 2004. Pengrowth Corporation holds a 99% working interest in the largest pools (the J and VV pool) which
consists of 33 producing and 10 injection wells with treating, water handling and gas conservation
located at a central battery facility. Primary production commenced in 1992 and a waterflood
project was implemented in 1995. GLJ estimates that the Enchant property has a Reserve Life Index
of 12.8 years. In the Enchant Arcs Unit No. 2, where Pengrowth Corporation converted a well to injection in
mid-2000, pressure support is now apparent and water break through is being observed in our oil
producers. - 21 -




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##### Table of Contents



Development Activity Pengrowth Corporation is currently evaluating drilling up to three potential oil wells in the Arcs
Unit in 2005 to capture bypassed reserves due to water breakthrough. Quirk Creek Pengrowth Corporation holds a 68% working interest in three producing deep plate gas wells, a 31%
working interest in 10 producing shallow plate gas wells, a 25% working interest in 3 producing gas
wells in Millarville and a 30.5% working interest in the Quirk Creek natural gas plant located in
the Quirk Creek area of Southern Alberta, approximately 30 kilometres southwest of Calgary. Pengrowth working interest share of production for 2004 was approximately 4.0 mmcfpd of natural gas
and 178 bblpd of natural gas liquids (before royalties). GLJ estimates Pengrowth Total Proved Plus
Probable Reserves at December 31, 2004 to be 3.4 mmboe,
consisting of 15.9 bcf of natural gas and
0.7 mmbbls of NGLs. Pengrowth Corporation is currently evaluating the potential in development drilling and the
opportunity for additional third party gas processing revenue in the area. Third party processing
revenues in 2004 made up 22% of gross revenues for the property. 
 Reserves The effective date of the information in this section is December 31, 2004 and the preparation date
of the information is January 15, 2005. The information in this section is based upon an
evaluation by GLJ with an effective date of December 31, 2004 contained in the GLJ Report dated
February 15, 2005. The information in this section summarizes the oil, liquids and natural gas
reserves of Pengrowth Corporation and the net present values of future net revenue for these
reserves using GLJs constant prices and costs and forecast prices and costs and conforms with the
requirements of NI 51-101. Pengrowth Corporation engaged GLJ to provide an evaluation of Proved
Reserves and Total Proved Plus Probable Reserves and no attempt was made to evaluate possible
reserves. It is Pengrowths practice to obtain an engineering report evaluating all of its Proved
Reserves and Probable Reserves as at December 31 of each year. All of Pengrowth Corporations reserves are in Canada in the provinces of Alberta, British
Columbia, Saskatchewan and Nova Scotia (SOEP offshore). The following tables set forth certain information relating to the oil and natural gas reserves of
Pengrowth Corporation and the present value of the estimated future net cash flow associated with
such reserves as at December 31, 2004. The information set forth below is derived from the GLJ
Report which has been prepared in accordance with the standards contained in the Canadian Oil and
Gas Evaluation Handbook and the reserves definitions contained in NI 51-101 and the Canadian Oil
and Gas Evaluation Handbook. The GLJ Report incorporates estimates of future well abandonment
obligations but does not include estimates of remediation costs. All evaluations of future net
cash flow are stated prior to any provision for income taxes, interest costs or general and
administrative costs and after the deduction of estimated future capital expenditures for wells to
which reserves have been assigned. It should not be assumed that the estimated future net cash
flow shown below is representative of the fair market value of the properties. There is no
assurance that such price and cost assumptions will be attained and variances could be material.
The recovery and reserve estimates of crude oil, NGL and natural gas reserves provided herein are
estimates only and there is no guarantee that the estimated reserves will be recovered. Actual
crude oil, NGL and natural gas reserves may be greater than or less than the estimates provided
herein. In 2003, the securities regulatory authorities in Canada (other than Québec) adopted National
Instrument 51-101  Standards of Disclosure for Oil and Gas Activitieswhich imposes new oil and
gas disclosure standards for Canadian public issuers engaged in oil and gas activities. Under the
new reserve categories, reserves are estimated remaining quantities of oil and natural gas and
related substances anticipated to be recoverable from known accumulations, from a given date
forward based on: - 22 -




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##### Table of Contents



(a)

analysis of drilling, geological, geophysical and engineering data;(b)

the use of established technology; and(c)

specified economic conditions. Reserves are classified according to the degree of certainty associated with the estimates.  (d)

Proved Reservesare those reserves that can be estimated with a high degree of certainty to
be recoverable. It is likely that the actual remaining quantities recovered will exceed the
estimated proved reserves.(e)

Probable Reservesare those additional reserves that are less certain to be recovered than
proved reserves. It is equally likely that the actual remaining quantities recovered will be
greater or less than the sum of the estimated proved plus probable reserves. Reported reserves should target the following levels of certainty under a specific set of economic
conditions:  

at least a 90 percent probability that the quantities actually recovered will equal or
exceed the estimated proved reserves; and

at least a 50 percent probability that the quantities actually recovered will equal or
exceed the sum of the estimated proved plus probable reserves. A qualitative measure of the certainty levels pertaining to the estimates prepared for the various
reserve categories is desirable to provide an understanding of the associated risks and
uncertainties. However, the majority of reserve estimates will be prepared using deterministic
methods that do not provide a mathematically derived quantitative measure of probability. In
principle, there should be no difference between estimates prepared using probabilistic or
deterministic methods. Pengrowth Corporation is entitled to claim Alberta Royalty Credits. The Alberta Royalty Credits
program is based on a price-sensitive formula linked to crude oil prices. Credits vary from a high
of 75% of the eligible Alberta Crown Royalties for a taxation year to a maximum of $1,500,000 (75%
of $2,000,000) when the price of oil falls below U.S. $15 per barrel, to a low of 25% (maximum
$500,000) when the price of oil rises above U.S. $30 per barrel. In the GLJ Report, this program
is assumed to continue indefinitely. The net cash flows estimated in the GLJ Report represent estimates of the revenues from oil and gas
sales from the petroleum and natural gas properties of Pengrowth Corporation together with an
estimate of processing revenues less royalties (net of incentives), mineral taxes, field operating
expenses and capital obligations. These net cash flows are not the same as the distributable cash
reported by Pengrowth Trust. The computation of distributable cash is described under the heading
Distributions and Taxability of Distributions in the Managements Discussion and Analysis
appearing on page 62 of Pengrowth Trusts Annual Report 2004. Significant factors to consider
include:  (a)

the GLJ Report does not estimate general and administrative expenses, interest, management
fees and holdbacks;(b)

the GLJ Report does not estimate all abandonment or any reclamation liabilities;(c)

for purposes of calculating distributable income, Pengrowth Trust amortizes the cost of
miscible flood injection fluids purchased from third parties over the period of expected
future economic benefit arising from the injection of those fluids, which has been 30 months
and is being revised to 24 months for 2005 onward. The GLJ Report includes the full cost of
purchased injection fluids ($20.4 million in 2004) in operating costs in the year incurred;
and(d)

Pengrowth Corporation withholds an amount equivalent to approximately 10% of distributable
cash to fund capital. - 23 -




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In accordance with the requirements of NI 51-101, the Report on Reserves Data by Independent
Qualified Reserves Evaluator in Form 51-101F2 and the Report of Management and Directors on Oil and
Gas Disclosure in Form 51-101F3 are attached as Appendices A and B hereto, respectively. - 24 -




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##### Table of Contents



SUMMARY OF OIL AND GAS RESERVES
AND NET PRESENT VALUES OF FUTURE NET REVENUE
as of December 31, 2004 CONSTANT PRICES AND COSTS OIL AND GAS RESERVESLIGHT AND
    
    
    HEAVY
    
    
    NATURALMEDIUM OIL
    
    
    OIL
    
    
    GASPengrowth
    
    
    Working
    
    
    
    
    
    
    Pengrowth
    
    
    Working
    
    
    
    
    
    
    Pengrowth
    
    
    WorkingRESERVES
    
    Interest
    
    
    Interest(1)
    
    
    Net
    
    
    Interest
    
    
    Interest(1)
    
    
    Net
    
    
    Interest
    
    
    Interest(1)
    
    
    NetCATEGORY
    
    (mbbls)
    
    
    (mbbls)
    
    
    (mbbls)
    
    
    (mbbls)
    
    
    (mbbls)
    
    
    (mbbls)
    
    
    (bcf)
    
    
    (bcf)
    
    
    (bcf)Proved ReservesProved Developed Producing
    
    
    58,384
    
    
    
    58,179
    
    
    
    49,705
    
    
    
    12,069
    
    
    
    12,059
    
    
    
    10,834
    
    
    
    358.9
    
    
    
    351.8
    
    
    
    288.0Proved Developed
Non-Producing
    
    
    549
    
    
    
    547
    
    
    
    466
    
    
    
    72
    
    
    
    72
    
    
    
    62
    
    
    
    23.1
    
    
    
    22.5
    
    
    
    17.6Proved Undeveloped
    
    
    16,000
    
    
    
    15,987
    
    
    
    13,562
    
    
    
    1,922
    
    
    
    1,922
    
    
    
    1,632
    
    
    
    47.9
    
    
    
    46.1
    
    
    
    37.9Total Proved Reserves
    
    
    74,933
    
    
    
    74,713
    
    
    
    63,732
    
    
    
    14,063
    
    
    
    14,053
    
    
    
    12,528
    
    
    
    429.8
    
    
    
    420.4
    
    
    
    343.6Probable Reserves
    
    
    19,699
    
    
    
    19,655
    
    
    
    16,540
    
    
    
    3,704
    
    
    
    3,702
    
    
    
    3,241
    
    
    
    95.5
    
    
    
    92.4
    
    
    
    75.3Total Proved Plus Probable
Reserves
    
    
    94,632
    
    
    
    94,367
    
    
    
    80,273
    
    
    
    17,767
    
    
    
    17,755
    
    
    
    15,769
    
    
    
    525.3
    
    
    
    512.8
    
    
    
    418.9
 NATURAL GAS LIQUIDS
    
    
    TOTAL OIL EQUIVALENT BASIS(2)Pengrowth
    
    
    Working
    
    
    
    
    
    
    Pengrowth
    
    
    WorkingRESERVES
    
    Interest
    
    
    Interest(1)
    
    
    Net
    
    
    Interest
    
    
    Interest(1)
    
    
    NetCATEGORY
    
    (mbbls)
    
    
    (mbbls)
    
    
    (mbbls)
    
    
    (mboe)
    
    
    (mboe)
    
    
    (mboe)Proved ReservesProved Developed Producing
    
    
    12,943
    
    
    
    12,744
    
    
    
    9,093
    
    
    
    143,214
    
    
    
    141,615
    
    
    
    117,636Proved Developed Non-Producing
    
    
    376
    
    
    
    367
    
    
    
    292
    
    
    
    4,829
    
    
    
    4,742
    
    
    
    3,759Proved Undeveloped
    
    
    2,242
    
    
    
    2,190
    
    
    
    1,616
    
    
    
    28,151
    
    
    
    27,774
    
    
    
    23,129Total Proved Reserves
    
    
    15,560
    
    
    
    15,300
    
    
    
    11,002
    
    
    
    176,194
    
    
    
    174,132
    
    
    
    144,524Probable Reserves
    
    
    3,918
    
    
    
    3,837
    
    
    
    2,855
    
    
    
    43,240
    
    
    
    42,597
    
    
    
    35,192Total Proved Plus Probable Reserves
    
    
    19,479
    
    
    
    19,138
    
    
    
    13,856
    
    
    
    219,434
    
    
    
    216,729
    
    
    
    179,716
   Notes:(1)
    
    Excludes royalty interests held by Pengrowth Corporation.(2)
    
    Natural gas has been converted to barrels of oil equivalent on the basis of six mcf of
natural gas being equal to one boe. NET PRESENT VALUES OF FUTURE NET REVENUECONSTANT PRICES AND COSTSBEFORE INCOME TAXESDISCOUNTED AT (%/YEAR)RESERVES
    
    0%
    
    
    5%
    
    
    10%
    
    
    15%
    
    
    20%CATEGORY
    
    ($MM)
    
    
    ($MM)
    
    
    ($MM)
    
    
    ($MM)
    
    
    ($MM)Proved ReservesProved Developed Producing
    
    
    2,720.4
    
    
    
    2,055.6
    
    
    
    1,674.7
    
    
    
    1,427.1
    
    
    
    1,251.9Proved Developed Non-Producing
    
    
    120.7
    
    
    
    87.0
    
    
    
    68.1
    
    
    
    55.8
    
    
    
    47.1Proved Undeveloped
    
    
    534.0
    
    
    
    357.1
    
    
    
    249.6
    
    
    
    179.8
    
    
    
    132.2Total Proved Reserves
    
    
    3,375.1
    
    
    
    2,499.7
    
    
    
    1,992.4
    
    
    
    1,662.7
    
    
    
    1,431.2Probable Reserves
    
    
    970.3
    
    
    
    568.2
    
    
    
    387.5
    
    
    
    287.3
    
    
    
    224.1Total Proved Plus Probable Reserves
    
    
    4,345.3
    
    
    
    3,067.9
    
    
    
    2,379.9
    
    
    
    1,949.9
    
    
    
    1,655.4
 - 25 -




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##### Table of Contents



TOTAL FUTURE NET REVENUE
(UNDISCOUNTED)
as of December 31, 2004 CONSTANT PRICES AND COSTS FUTURE NETCAPITAL
    
    
    
    
    
    
    REVENUEOPERATING
    
    
    DEVELOPMENT
    
    
    ABANDONMENT
    
    
    BEFORERESERVES
    
    REVENUE
    
    
    ROYALTIES
    
    
    COSTS
    
    
    COSTS
    
    
    COSTS(1)
    
    
    INCOME TAXCATEGORY
    
    ($MM)
    
    
    ($MM)
    
    
    ($MM)
    
    
    $MM
    
    
    ($MM)
    
    
    ($MM)Proved Reserves
    
    
    7,012
    
    
    
    1,214
    
    
    
    1,979
    
    
    
    351
    
    
    
    93
    
    
    
    3,375Total Proved Plus
Probable Reserves
    
    
    8,714
    
    
    
    1,528
    
    
    
    2,343
    
    
    
    403
    
    
    
    95
    
    
    
    4,345
   Note:(1)
    
    Includes downhole abandonment cost but does not include surface reclamation costs. See
Abandonment and Reclamation Costs. FUTURE NET REVENUE
BY PRODUCTION GROUP
as of December 31, 2004 CONSTANT PRICES AND COSTS FUTURE NET REVENUEBEFORE INCOME TAXESRESERVES
    
    
    
    (discounted at 10%/yr)CATEGORY
    
    PRODUCTION GROUP
    
    ($M)Proved Reserves
    
    Light and Medium Crude Oil (including solution gas and other
by-products) (1)
    
    
    845,455Heavy Oil (including solution gas
and other by-products) (1)
    
    
    65,838Natural Gas (including by-products but excluding solution gas from oil wells) (2)
    
    
    1,023,319Total Proved Plus Probable Reserves
    
    Light and Medium Crude Oil (including solution gas and other
by-products) (1)
    
    
    1,025,927Heavy Oil (including solution gas and other by-products) (1)
    
    
    77,180Natural Gas (including by-products but excluding solution gas from oil wells) (2)
    
    
    1,211,191
   Notes:(1)
    
    NGLs associated with the production of solution gas are included as a by-product.(2)
    
    NGLs associated with the production of natural gas are included as a by-product. - 26 -




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##### Table of Contents



SUMMARY OF OIL AND GAS RESERVES
AND NET PRESENT VALUES OF FUTURE NET REVENUE
as of December 31, 2004 FORECAST PRICES AND COSTS OIL AND GAS RESERVESLIGHT AND
    
    
    HEAVY
    
    
    NATURALMEDIUM OIL
    
    
    OIL
    
    
    GASPengrowth
    
    
    Working
    
    
    
    
    
    
    Pengrowth
    
    
    Working
    
    
    
    
    
    
    Pengrowth
    
    
    WorkingRESERVES
    
    Interest
    
    
    Interest(1)
    
    
    Net
    
    
    Interest
    
    
    Interest(1)
    
    
    Net
    
    
    Interest
    
    
    Interest(1)
    
    
    NetCATEGORY
    
    (mbbls)
    
    
    (mbbls
    
    
    (mbbls)
    
    
    (mbbls)
    
    
    (mbbls
    
    
    (mbbls)
    
    
    (bcf)
    
    
    (bcf)
    
    
    (bcf)Proved ReservesProved Developed Producing
    
    
    57,654
    
    
    
    57,458
    
    
    
    49,212
    
    
    
    12,592
    
    
    
    12,581
    
    
    
    11,037
    
    
    
    355.6
    
    
    
    348.5
    
    
    
    285.1Proved Developed Non-Producing
    
    
    548
    
    
    
    546
    
    
    
    465
    
    
    
    72
    
    
    
    72
    
    
    
    62
    
    
    
    23.0
    
    
    
    22.5
    
    
    
    17.6Proved Undeveloped
    
    
    15,973
    
    
    
    15,960
    
    
    
    13,894
    
    
    
    1,958
    
    
    
    1,958
    
    
    
    1,633
    
    
    
    48.7
    
    
    
    46.9
    
    
    
    38.7Total Proved Reserves
    
    
    74,175
    
    
    
    73,965
    
    
    
    63,572
    
    
    
    14,622
    
    
    
    14,611
    
    
    
    12,733
    
    
    
    427.3
    
    
    
    417.9
    
    
    
    341.4Probable Reserves
    
    
    19,891
    
    
    
    19,847
    
    
    
    16,871
    
    
    
    3,623
    
    
    
    3,621
    
    
    
    3,065
    
    
    
    94.1
    
    
    
    91.0
    
    
    
    74.1Total Proved Plus Probable Reserves
    
    
    94,066
    
    
    
    93,812
    
    
    
    80,443
    
    
    
    18,245
    
    
    
    18,232
    
    
    
    15,798
    
    
    
    521.4
    
    
    
    508.9
    
    
    
    415.4
 OIL AND GAS RESERVESNATURAL GAS LIQUIDS
    
    
    TOTAL OIL EQUIVALENT BASIS(2)Pengrowth
    
    
    Working
    
    
    
    
    
    
    Pengrowth
    
    
    WorkingRESERVES
    
    Interest
    
    
    Interest(1)
    
    
    Net
    
    
    Interest
    
    
    Interest(1)
    
    
    NetCATEGORY
    
    (mbbls)
    
    
    (mbbls
    
    
    (mbbls)
    
    
    (mboe)
    
    
    (mboe)
    
    
    (mboe)Proved ReservesProved Developed Producing
    
    
    12,841
    
    
    
    12,643
    
    
    
    9,037
    
    
    
    142,353
    
    
    
    140,767
    
    
    
    116,798Proved Developed Non-Producing
    
    
    376
    
    
    
    366
    
    
    
    292
    
    
    
    4,825
    
    
    
    4,738
    
    
    
    3,757Proved Undeveloped
    
    
    2,271
    
    
    
    2,219
    
    
    
    1,644
    
    
    
    28,324
    
    
    
    27,949
    
    
    
    23,616Total Proved Reserves
    
    
    15,488
    
    
    
    15,229
    
    
    
    10,974
    
    
    
    175,502
    
    
    
    173,453
    
    
    
    144,171Probable Reserves
    
    
    3,907
    
    
    
    3,826
    
    
    
    2,846
    
    
    
    43,111
    
    
    
    42,468
    
    
    
    35,126Total Proved Plus Probable Reserves
    
    
    19,395
    
    
    
    19,055
    
    
    
    13,819
    
    
    
    218,613
    
    
    
    215,921
    
    
    
    179,298
   Notes:(1)
    
    Excludes royalty interests held by Pengrowth Corporation.(2)
    
    Natural gas has been converted to barrels of oil equivalent on the basis of six mcf of
natural gas being equal to one boe. NET PRESENT VALUES OF FUTURE NET REVENUEFORECAST PRICES AND COSTSBEFORE INCOME TAXESDISCOUNTED AT (%/YEAR)RESERVES
    
    0%
    
    
    5%
    
    
    10%
    
    
    15%
    
    
    20%CATEGORY
    
    ($MM)
    
    
    ($MM)
    
    
    ($MM)
    
    
    ($MM)
    
    
    ($MM)Proved ReservesProved Developed Producing
    
    
    2,364.6
    
    
    
    1,849.7
    
    
    
    1,544.6
    
    
    
    1,340.9
    
    
    
    1,193.8Proved Developed Non-Producing
    
    
    109.6
    
    
    
    78.0
    
    
    
    60.9
    
    
    
    50.0
    
    
    
    42.4Proved Undeveloped
    
    
    458.1
    
    
    
    302.1
    
    
    
    208.8
    
    
    
    148.8
    
    
    
    108.0Total Proved Reserves
    
    
    2,932.3
    
    
    
    2,229.8
    
    
    
    1,814.2
    
    
    
    1.539.7
    
    
    
    1,344.2Probable Reserves
    
    
    904.3
    
    
    
    520.6
    
    
    
    352.9
    
    
    
    261.7
    
    
    
    205.0Total Proved Plus Probable Reserves
    
    
    3,836.5
    
    
    
    2,750.4
    
    
    
    2,167.1
    
    
    
    1,801.4
    
    
    
    1,549.2
 - 27 -




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##### Table of Contents



TOTAL FUTURE NET REVENUE
(UNDISCOUNTED)
as of December 31, 2004 FORECAST PRICES AND COSTS CAPITAL
    
    
    
    
    
    FUTURE NETRESERVES
    
    REVENUE
    
    
    ROYALTIES
    
    
    OPERATINGCOSTS
    
    
    DEVELOPMENTCOSTS
    
    
    ABANDONMENTCOSTS(1)
    
    
    REVENUE BEFOREINCOME TAXCATEGORY
    
    ($MM)
    
    
    ($MM)
    
    
    ($MM)
    
    
    ($MM)
    
    
    ($MM)
    
    
    ($MM)Proved Reserves
    
    
    6,916
    
    
    
    1,153
    
    
    
    2,335
    
    
    
    372
    
    
    
    124
    
    
    
    2,932Total Proved Plus
Probable Reserves
    
    
    8,735
    
    
    
    1,465
    
    
    
    2,870
    
    
    
    428
    
    
    
    135
    
    
    
    3,837
   Note:(1)
    
    Includes downhole abandonment cost but does not include surface reclamation costs. See
Abandonment and Reclamation Costs. FUTURE NET REVENUE
BY PRODUCTION GROUP
as of December 31, 2004 FORECAST PRICES AND COSTS FUTURE NET REVENUEBEFOREINCOME TAXESRESERVES
    
    
    
    (discounted at 10%/yr)CATEGORY
    
    PRODUCTION GROUP
    
    ($M)Proved Reserves
    
    Light and Medium Crude Oil
(including solution gas and other by-products) (1)
    
    
    757,585Heavy Oil (including solution gas and other by-products) (1)
    
    
    116,634Natural Gas (including by-products but excluding solution gas from oil wells) (2)
    
    
    882,220Total Proved Plus Probable Reserves
    
    Light and Medium Crude Oil (including solution gas and other by-products) (1)
    
    
    920,863Heavy Oil (including solution gas and other by-products) (1)
    
    
    135,171Natural Gas (including by-products but excluding solution gas from oil wells) (2)
    
    
    1,045,424
   Notes:(1)
    
    NGLs associated with the production of solution gas are included as a by-product.(2)
    
    NGLs associated with the production of natural gas are included as a by-product. - 28 -




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##### Table of Contents



SUMMARY OF PRICING ASSUMPTIONS
as of December 31, 2004 CONSTANT PRICES AND COSTS NATURAL
    
    
    
    
    
    
    
    EXCHANGEOIL
    
    GAS
    
    NATURAL GAS LIQUIDS(1)
    
    RATE(2)WTI
    
    Edmonton
    
    Cromer
    
    LLB CrudeCushing
    
    Par Price
    
    Medium
    
    Oil at
    
    AECO Gas
    
    
    
    
    
    PentanesOklahoma
    
    400API
    
    29.30API
    
    Hardisty
    
    Price
    
    Propane
    
    Butane
    
    PlusYEAR(3)
    
    ($US/bbl)
    
    ($Cdn/bbl)
    
    ($Cdn/bbl)
    
    ($Cdn/bbl)
    
    ($Cdn/mmbtu)
    
    ($Cdn/bbl)
    
    ($Cdn/bbl)
    
    ($Cdn/bbl)
    
    ($US/Cdn)2004(4)
    
    43.45
    
    46.54
    
    32.12
    
    24.33
    
    6.79
    
    29.79
    
    34.44
    
    48.97
    
    0.8308
   Notes:(1)
    
    FOB Edmonton.(2)
    
    The exchange rate used to generate the benchmark reference prices in this table.(3)
    
    Information provided as at December 31, 2004.(4)
    
    This forecast represents the constant price
forecast used by GLJ and is a representation of posted prices as of
December 31, 2004. SUMMARY OF PRICING
AND INFLATION RATE ASSUMPTIONS
as of January 1, 2005 FORECAST PRICES AND COSTS NATURAL
    
    
    
    
    
    
    
    INFLATION
    
    EXCHANGEYEAR
    
    OIL
    
    GAS
    
    NATURAL GAS LIQUIDS(1)
    
    RATES(2)
    
    RATE(3)Edmonton
    
    Cromer
    
    Hardisty
    
    AECO GasWTI Cushing
    
    Par Price
    
    Medium
    
    Heavy
    
    PriceOklahoma
    
    400API
    
    29.30API
    
    120API
    
    ($Cdn/
    
    Propane
    
    Butane
    
    Pentanes Plus($US/bbl)
    
    ($Cdn/bbl)
    
    ($Cdn/bbl)
    
    ($Cdn/bbl)
    
    mmbtu)
    
    ($CDN/bbl)
    
    ($Cdn/bbl)
    
    ($Cdn/bbl)
    
    (%/Year)
    
    ($US/Cdn)2004(4)
    
    41.38
    
    52.96
    
    45.75
    
    29.11
    
    6.88
    
    35.09
    
    40.49
    
    54.07
    
    1.9%
    
    0.7692005
    
    42.00
    
    50.25
    
    43.75
    
    27.50
    
    6.60
    
    32.25
    
    37.25
    
    50.75
    
    2.0%
    
    0.822006
    
    40.00
    
    47.75
    
    41.50
    
    28.50
    
    6.35
    
    30.50
    
    35.25
    
    48.25
    
    2.0%
    
    0.822007
    
    38.00
    
    45.50
    
    39.50
    
    28.75
    
    6.15
    
    29.00
    
    33.75
    
    46.00
    
    2.0%
    
    0.822008
    
    36.00
    
    43.25
    
    37.75
    
    28.25
    
    6.00
    
    27.75
    
    32.00
    
    43.75
    
    2.0%
    
    0.822009
    
    34.00
    
    40.75
    
    35.50
    
    25.50
    
    6.00
    
    26.00
    
    30.25
    
    41.25
    
    2.0%
    
    0.822010
    
    33.00
    
    39.50
    
    34.25
    
    24.75
    
    6.00
    
    25.25
    
    29.25
    
    40.00
    
    2.0%
    
    0.822011
    
    33.00
    
    39.50
    
    34.25
    
    24.75
    
    6.00
    
    25.25
    
    29.25
    
    40.00
    
    2.0%
    
    0.822012
    
    33.00
    
    39.50
    
    34.25
    
    24.75
    
    6.00
    
    25.25
    
    29.25
    
    40.00
    
    2.0%
    
    0.822013
    
    33.50
    
    40.00
    
    34.75
    
    24.75
    
    6.10
    
    25.50
    
    29.50
    
    40.50
    
    2.0%
    
    0.822014
    
    34.00
    
    40.75
    
    35.50
    
    25.50
    
    6.20
    
    26.00
    
    30.25
    
    41.25
    
    2.0%
    
    0.822015
    
    34.50
    
    41.25
    
    36.00
    
    25.75
    
    6.30
    
    26.50
    
    30.50
    
    41.75
    
    2.0%
    
    0.82Thereafter
    
    +2.0%/yr
    
    +2.0%/yr
    
    +2.0%/yr
    
    +2.0%/yr
    
    +2.0%/yr
    
    +2.0%/yr
    
    +2.0%/yr
    
    +2.0%/yr
    
    +2.0%/yr
    
    0.82
   Notes:(1)
    
    FOB Edmonton.(2)
    
    Inflation rates for forecasting prices and costs.(3)
    
    The exchange rates used to generate the benchmark reference prices in this table.(4)
    
    Actual average prices, inflation rate and exchange rate estimated for 2004. - 29 -




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##### Table of Contents



RECONCILIATION OF
NET RESERVES BY PRINCIPAL PRODUCT TYPE FORECAST PRICES AND COSTS LIGHT AND
    
    
    NATURAL
    
    
    NATURALMEDIUM OIL
    
    
    GAS
    
    
    GAS LIQUIDSNet
    
    
    
    
    
    
    
    
    
    
    Net
    
    
    
    
    
    
    
    
    
    
    NetProved
    
    
    
    
    
    
    
    
    
    
    Proved
    
    
    
    
    
    
    
    
    
    
    ProvedNet
    
    
    Net
    
    
    Plus
    
    
    Net
    
    
    Net
    
    
    Plus
    
    
    Net
    
    
    Net
    
    
    PlusProved
    
    
    Probable
    
    
    Probable
    
    
    Proved
    
    
    Probable
    
    
    Probable
    
    
    Proved
    
    
    Probable
    
    
    ProbableFACTORS
    
    (mbbls)
    
    
    (mbbls)
    
    
    (mbbls)
    
    
    (mmcf)
    
    
    (mmcf)
    
    
    (mmcf)
    
    
    (mbbls)
    
    
    (mbbls)
    
    
    (mbbls)December 31, 2003
    
    
    66,667
    
    
    
    16,506
    
    
    
    83,173
    
    
    
    271,100
    
    
    
    57,400
    
    
    
    328,500
    
    
    
    10,509
    
    
    
    2,629
    
    
    
    13,138Extensions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    959
    
    
    
    396
    
    
    
    1,354
    
    
    
    
    
    
    
    
    
    
    
    Improved Recovery
    
    
    405
    
    
    
    (92
    )
    
    
    314
    
    
    
    8,628
    
    
    
    932
    
    
    
    9,560
    
    
    
    25
    
    
    
    1
    
    
    
    26Technical Revisions
    
    
    791
    
    
    
    117
    
    
    
    908
    
    
    
    5,390
    
    
    
    (1,281
    )
    
    
    4,109
    
    
    
    590
    
    
    
    (9
    )
    
    
    581Discoveries
    
    
    79
    
    
    
    69
    
    
    
    148
    
    
    
    879
    
    
    
    316
    
    
    
    1,195
    
    
    
    8
    
    
    
    4
    
    
    
    12Acquisitions
    
    
    1,733
    
    
    
    271
    
    
    
    2,004
    
    
    
    97,144
    
    
    
    16,305
    
    
    
    113,449
    
    
    
    1,392
    
    
    
    220
    
    
    
    1,612Dispositions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Economic Factors
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Production
    
    
    (6,104
    )
    
    
    
    
    
    
    (6,104
    )
    
    
    (42,739
    )
    
    
    
    
    
    
    (42,739
    )
    
    
    (1,550
    )
    
    
    
    
    
    
    (1,550
    )December 31, 2004
    
    
    63,572
    
    
    
    16,871
    
    
    
    80,443
    
    
    
    341,360
    
    
    
    74,068
    
    
    
    415,428
    
    
    
    10,974
    
    
    
    2,845
    
    
    
    13,819
 RECONCILIATION OF
NET RESERVES BY PRINCIPAL PRODUCT TYPE FORECAST PRICES AND COSTS HEAVY OIL
    
    
    TOTAL OIL EQUIVALENT BASIS(1)Net
    
    
    
    
    
    
    
    
    
    
    Net ProvedNet
    
    
    Proved
    
    
    
    
    
    
    
    
    
    
    PlusNet Proved
    
    
    Probable
    
    
    Plus Probable
    
    
    Net Proved
    
    
    Net Probable
    
    
    ProbableFACTORS
    
    (mbbls)
    
    
    (mbbls)
    
    
    (mbbls)
    
    
    (mboe)
    
    
    (mboe)
    
    
    (mboe)December 31, 2003
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    112,359
    
    
    
    28,702
    
    
    
    151,061Extensions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    160
    
    
    
    66
    
    
    
    226Improved Recovery
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,869
    
    
    
    64
    
    
    
    1,933Technical Revisions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,278
    
    
    
    (105
    )
    
    
    2,173Discoveries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    234
    
    
    
    126
    
    
    
    360Acquisitions
    
    
    13,863
    
    
    
    3,065
    
    
    
    16,928
    
    
    
    33,179
    
    
    
    6,273
    
    
    
    39,452Dispositions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Economic Factors
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Production
    
    
    (1,130
    )
    
    
    
    
    
    
    (1,130
    )
    
    
    (15,907
    )
    
    
    
    
    
    
    (15,907
    )December 31, 2004
    
    
    12,733
    
    
    
    3,065
    
    
    
    15,798
    
    
    
    144,172
    
    
    
    35,126
    
    
    
    179,298
   Note:(1)
    
    Natural gas has been converted to barrels of oil equivalent on the basis of six mcf of
natural gas being equal to one boe. At year end 2004, Pengrowth Corporations remaining recoverable Total Proved Plus Probable
Reserves were 218.6 mmboe as compared to 184.4 mmboe reported at year end 2003. The following additional GLJ reserves reconciliation is presented for year-end December 31, 2004. - 30 -




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##### Table of Contents



RECONCILIATION OF RESERVES
ON TOTAL EQUIVALENT BASIS FORECAST PRICES AND COSTS Proved
    
    
    
    
    
    
    Proved PlusProducing Reserves
    
    
    Proved Reserves
    
    
    Probable Reserves(mboe)(1)(2)
    
    
    (mboe)(1)(2)
    
    
    (mboe)(1)(2)December 31, 2003
    
    
    117,937
    
    
    
    149,060
    
    
    
    184,416Exploration and Development
    
    
    2,610
    
    
    
    487
    
    
    
    724Improved Recovery and
    
    
    5,810
    
    
    
    2,309
    
    
    
    2,404Infill Drilling Revisions
    
    
    1,290
    
    
    
    3,124
    
    
    
    2,838Acquisitions
    
    
    34,361
    
    
    
    40,177
    
    
    
    47,886Dispositions
    
    
    
    
    
    
    
    
    
    
    Production
    
    
    (19,655
    )
    
    
    (19,655
    )
    
    
    (19,655
    )December 31, 2004
    
    
    142,353
    
    
    
    175,502
    
    
    
    218,613
   Notes:(1)
    
    Pengrowths company interest share before royalties.(2)
    
    Natural gas has been converted to barrels of oil equivalent on the basis of six mcf of
natural gas being equal to one boe. Significant factors on the reserves reconciliation were as follows:  

Purchase of the Murphy properties accounted for 96% of the reserves added by
acquisitions in 2004. The balance is from an acquisition of an additional interest in
the Kaybob Notikewin Unit.

Reserve increases for Drilling and Improved Recovery in the Proved Producing
category are mainly due to reclassification of Proved Undeveloped reserves primarily
for Judy Creek and Weyburn miscible flood expansion, development drilling in the Sable
Island South Venture field and shallow gas infill drilling at Monogram.

New reserves were added for various drilling successes. The largest increases though
were Proved Undeveloped reserves for future shallow gas infill drilling programs in the
Tilley and Patricia/Dinosaur properties.

Various performance related revisions were made to previous estimates resulting in a
net positive change. The largest Proved Plus Probable revisions occurred at Weyburn
(+2379 mboe), Sable Island Energy Project (+1336 mboe), Goose River (-987 mboe) and
Squirrel (-749 mboe). - 31 -




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##### Table of Contents



RECONCILIATION OF CHANGES IN
NET PRESENT VALUES OF FUTURE NET REVENUE
DISCOUNTED AT 10% PER YEAR PROVED RESERVES CONSTANT PRICES AND COSTS Period and Factor
    
    Before Tax 2004 ($M)Estimated Net Present Value at Beginning of Year
    
    
    1,604,070Oil and Gas Sales During the Period Net of Production Costs and Royalties(1)
    
    
    (480,105
    )Net Change due to Prices and Royalties Related to Forecast Production (2)
    
    
    176,300Change in Development Costs During the Period (3)
    
    
    161,000Change in Forecast Development Costs (4)
    
    
    Change Resulting from Extensions and Improved Recovery (5)
    
    
    28,000Net Change Resulting from Discoveries (5)
    
    
    3,200Change Resulting from Acquisitions of Reserves (5)
    
    
    323,100Change Resulting from Dispositions of Reserves (5)
    
    
    Accretion of Discount (6)
    
    
    160,400Net Change in Income Taxes (7)
    
    
    Change Resulting from Technical Reserves Revisions(8)
    
    
    31,500All Other Changes
    
    
    (15,080
    )Estimated Net Present Value at End of Year
    
    
    1,992,385
   Notes:(1)
    
    Net of income taxes and excluding general and administrative expenses.(2)
    
    The impact of changes in prices and other economic factors on future net revenue.(3)
    
    Actual capital expenditures relating to the exploration, development and production of oil
and gas reserves.(4)
    
    The change in forecast development costs.(5)
    
    End of period net present value of the related reserves.(6)
    
    Estimated as 10% of the beginning of period net present value.(7)
    
    The difference between forecast income taxes at beginning of period and actual taxes for the
period plus forecast income taxes at the end of period.(8)
    
    Net positive revision of previous estimates, the largest being in Weyburn EOR and Sable
Island. 
 Additional Information Relating to Reserves Data Undeveloped Reserves Undeveloped reserves are those reserves expected to be recovered from known accumulations where a
significant expenditure is required to render them capable of production. Proved and probable undeveloped reserves have been estimated in accordance with procedures and
standards contained in the COGE Handbook. In general, undeveloped reserves are scheduled to be
developed within the next two years. Much of the remaining capital scheduled beyond two years is
related to the Sable Island Offshore, Weyburn EOR and Judy Creek EOR projects, which have staged
development plans. Proved Undeveloped Reserves Pengrowth Corporations Proved Undeveloped Reserves comprise roughly 16% of the Total Proved
Reserves on a barrel of oil equivalency basis. Proved Undeveloped Reserves (net of royalties) of
23.6 mmboe were assigned to Pengrowth Corporation by GLJ in accordance with National Instrument
51-101  Standards of Disclosure for Oil and Gas Activities. In general, Proved Undeveloped
Reserves were assigned to certain properties because capital commitments have been made to convert
the Undeveloped Reserves to Proved Producing Reserves. Proved Undeveloped Reserves have been
primarily assigned for future miscible flood expansion and development drilling. - 32 -




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##### Table of Contents



The Judy Creek Units comprise roughly 25% of the Proved Undeveloped Reserves. Miscible injection
has resulted in an overall incremental recovery of between five and seven percent of the original
oil in place in this area and has been in use since 1985. Miscible flood expansion is an on going
program which is limited by the availability of injectant materials and is budgeted to continue
through to 2008. Similarly, at Swan Hills, miscible flood expansion as well as some infill drilling
accounts for another 16% of Pengrowths Proved Undeveloped Reserves assignments. The Swan Hills
Unit reserves have a 50 year reserve life. The incremental recovery is reflected in the GLJ Report
and miscible flood expansion is forecasted to continue until 2015. In the Weyburn Unit, an
additional 16% of the Proved Undeveloped Reserves assignment reflects the capital allocated to the
CO2 miscible flood. Working interest partners are committed to a 15 year supply of
CO2 to further develop the flood area from the existing 44 patterns to full development
with 75 patterns. SOEP comprises 12% of the Pengrowths Proved Undeveloped Reserves. The 2005 budget has allocated
capital for drilling a third well at South Venture, a potential infill well at Venture and the
construction of compression facilities at Thebaud. Multi-well shallow gas infill programs are
scheduled for 2005 and beyond at Tilley, Princess and Patricia/Dinosaur. Roughly 10% of the total
Proved Undeveloped Reserves can be attributed to these projects. Ongoing development is scheduled
in heavy oil properties where approximately 8% of Pengrowths Proved Undeveloped Reserves are
assigned. These include waterflood expansion in East Bodo and infill drilling in South Bodo and
Southeast Bodo. The Dunvegan Unit has 4% of the Proved Undeveloped
Reserves reflecting an ongoing infill drilling and recompletion
program. Future Development Costs The following table outlines development costs deducted in the estimation of future net revenue for
each of the next five financial years and in total, undiscounted and using a discount rate of 10%
per annum. Total2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    Remainder
    
    
    Total
    
    
    (discounted(undiscounted)
    
    
    (undiscounted)
    
    
    (undiscounted)
    
    
    (undiscounted)
    
    
    (undiscounted)
    
    
    (undiscounted)
    
    
    (undiscounted)
    
    
    at 10%)RESERVE CATEGORY
    
    ($MM)
    
    
    ($MM)
    
    
    ($MM)
    
    
    ($MM)
    
    
    ($MM)
    
    
    ($MM)
    
    
    ($MM)
    
    
    ($MM)Proved Reserves
(Constant Prices and Costs)
    
    
    108.4
    
    
    
    94.7
    
    
    
    39.8
    
    
    
    19.6
    
    
    
    16.0
    
    
    
    72.7
    
    
    
    351.2
    
    
    
    272.7Proved Reserves
(Forecast Prices and Costs)
    
    
    108.4
    
    
    
    96.5
    
    
    
    41.4
    
    
    
    20.7
    
    
    
    17.3
    
    
    
    88.2
    
    
    
    372.5
    
    
    
    282.4Proved & Probable Reserves
(Forecast Prices and Costs)
    
    
    122.6
    
    
    
    101.9
    
    
    
    55.0
    
    
    
    25.5
    
    
    
    19.1
    
    
    
    103.9
    
    
    
    428.0
    
    
    
    322.2
 Commencing with the January 2003 distribution to unitholders, an amount equivalent to
approximately 10% of cash available for distribution has been withheld to fund capital
expenditures. See Distributions. 
 Other Oil And Gas Information Oil and Gas Wells As at December 31, 2004 Pengrowth had an interest in 5,417 gross (1,990 net) producing oil and
natural gas wells and 1,194 gross (679 net) inactive wells. - 33 -




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##### Table of Contents



PRODUCING
    
    
    NON-PRODUCINGGross
    
    
    Net
    
    
    Gross
    
    
    NetCrude Oil WellsAlberta
    
    
    1301
    
    
    
    563
    
    
    
    396
    
    
    
    235British Columbia
    
    
    150
    
    
    
    105
    
    
    
    43
    
    
    
    39Saskatchewan
    
    
    1037
    
    
    
    279
    
    
    
    181
    
    
    
    82Nova Scotia
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Natural Gas WellsAlberta
    
    
    2655
    
    
    
    874
    
    
    
    225
    
    
    
    72British Columbia
    
    
    146
    
    
    
    79
    
    
    
    60
    
    
    
    45Saskatchewan
    
    
    41
    
    
    
    32
    
    
    
    82
    
    
    
    42Nova Scotia
    
    
    16
    
    
    
    1
    
    
    
    0
    
    
    
    0OtherAlberta (1)
    
    
    50
    
    
    
    42
    
    
    
    138
    
    
    
    102British Columbia(1)
    
    
    0
    
    
    
    0
    
    
    
    48
    
    
    
    44Saskatchewan(1)
    
    
    21
    
    
    
    15
    
    
    
    21
    
    
    
    18Total
    
    
    5417
    
    
    
    1990
    
    
    
    1194
    
    
    
    679
   Note:(1)
    
    Pengrowth cannot classify these wells as either oil or gas. Properties with No Attributed Reserves The following table sets forth the gross and net acres of unproved properties held by Pengrowth and
the net area of unproved property for which Pengrowth expects its rights to explore, develop and
exploit to expire during the next year. UNPROVED PROPERTIES(acres)LOCATION
    
    Gross
    
    
    Net
    
    
    Net Area to ExpireAlberta
    
    
    318,826
    
    
    
    169,263
    
    
    
    32,952British Columbia
    
    
    540,106
    
    
    
    244,544
    
    
    
    89,507Saskatchewan
    
    
    63,536
    
    
    
    52,109
    
    
    
    4,566Nova Scotia
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    TOTAL
    
    
    922,468
    
    
    
    465,916
    
    
    
    127,025
 Unproved Properties The expiring acreage in Alberta is being evaluated and attempts will be made to continue acreage
based on current activity which is focused on exploitation of up-hole potential in existing wells. The British Columbia properties are primarily winter access only properties. Three wells were
drilled in December 2004 and six in January 2005. There is a concerted effort being made to farmout
or divest the remaining properties that are scheduled to expire. Forward Contracts The information in this
section is as of March 1, 2005. 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.
Pengrowth has hedged a total of 18,500 mmbtupd of natural gas for the first three months of 2005
and 16,000 mmbtupd of natural gas for the remainder of the year. In 2005 Pengrowth has hedged
8,000 bblpd of oil. Pengrowth is utilizing financial swap contracts for these hedges. In 2005, Pengrowth has hedged a total of 16,000 mmbtupd of SOEP production for the first Quarter of
2005 at an average price of $9.91/mmbtu. For the remainder of 2005 Pengrowth has hedged a total of
13,500 mmbtupd of - 34 -




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##### Table of Contents



SOEP production at an average price of $9.40/mmbtu. Additionally Pengrowth has hedged 2,500
mmbtupd of Chicago City Gate gas for 2005 at a price of $9.406/mmbtu. Pengrowth assumed a natural gas fixed price sales contract in conjunction with the acquisition of
the Murphy Properties. The contract is for 3,886 mmbtupd, at an average price of $2.188/mmbtu for
2005. It expires on April 30, 2009. Pengrowth has currently hedged 8,000 bblpd of crude oil at an average price of $51.659/bbl,
inclusive of foreign exchange conversion. Pengrowth currently has no commodity hedge transactions in place for 2006. Abandonment & Reclamation Costs The total future abandonment and reclamation costs are estimated by management based on Pengrowth
Corporations working interest in its wells and facilities, estimated costs to remediate, reclaim
and abandon the wells and facilities, and the estimated costs to be incurred in future periods.
GLJs estimate of downhole abandonment costs are included in their report and therefore in their
estimate of future net revenue. All other abandonment and reclamation costs are not reflected in
their estimate of future net revenue. Pengrowth anticipates incurring abandonment costs on a total
of 3,060 net wells. Pengrowth has estimated the net present value (discounted 10% per annum) of its total asset
retirement obligations to be $139 million as at December 31, 2004, based on a total future
liability (inflated at 1.5% per annum) of $551 million. These costs are anticipated to be paid over 50 years with the majority
of the costs incurred between 2014 and 2037. The following table summarizes Pengrowths total asset retirement obligation: Future Reclamation, Remediation, Dismantling & Abandonment Costs2005
    
    
    2006
    
    
    2007
    
    
    Remainder
    
    
    Total($M)
    
    
    ($M)
    
    
    ($M)
    
    
    ($M)
    
    
    ($M)Total Abandonment,
Reclamation,
Remediation &
Dismantling
    
    
    8,231
    
    
    
    9,831
    
    
    
    9,388
    
    
    
    523,377
    
    
    
    550,827Discounted at 10%
    
    
    7,848
    
    
    
    8,521
    
    
    
    7,397
    
    
    
    115,142
    
    
    
    138,908
 Tax Horizon In determining its taxable income, Pengrowth Corporation deducts royalty payments to unitholders,
interest expenses and other permitted deductions. Historically, this has been sufficient to reduce
taxable income to nil. The recent change to Pengrowths distribution approach, whereby an amount
equivalent to approximately 10 percent of funds available for distribution are withheld to fund
future capital expenditures, could result in taxable income in Pengrowth Corporation in the future.
However, there are at present sufficient tax pools and anticipated deductions available in
Pengrowth Corporation to offset the expected level of income to be retained. As a result, our
after tax future net revenues from our reserves are the same as our before tax future net revenues
from our reserves. Costs Incurred The following table outlines property acquisition, exploration and development costs incurred
during the financial year ended December 31, 2004. - 35 -




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##### Table of Contents



NATURE OF COST
    
    AMOUNT ($MM)Acquisition CostsProved
    
    
    512.3Unproved
    
    
    12.8Exploration Costs
    
    
    Development Costs
    
    
    161.1Total
    
    
    686.2
 Development Activities The following table summarizes the results of development activities during the financial year
ended December 31, 2004. GROSS
    
    
    NETDevelopment WellsGas
    
    
    351
    
    
    
    139.7Oil
    
    
    47
    
    
    
    18.8Service
    
    
    11
    
    
    
    5.7Dry
    
    
    6
    
    
    
    2.7Total Wells
    
    
    415
    
    
    
    166.9
 
 Production Production Estimates The following tables summarize the volume of production estimated for the year ended December 31,
2005 using constant and forecast prices and costs. ESTIMATED PRODUCTIONTotal Proved
    
    
    Proved Plus ProbableConstant Prices and Costs
    
    
    Forecast Prices and CostsLight and Medium Crude Oil (bblpd)
    
    
    19,258
    
    
    
    19,888Heavy Oil (bblpd)
    
    
    5,801
    
    
    
    5,981Natural Gas (mcfpd)
    
    
    151,581
    
    
    
    157,325Natural Gas Liquids (bblpd)
    
    
    5,316
    
    
    
    5,529
 Production History The following tables summarize certain information in respect of production, product prices
received, royalties paid, operating expenses and resulting operating netbacks of Pengrowth for the
periods indicated below: QUARTER ENDEDMarch 31, 2004(3)
    
    
    June 30, 2004(3)
    
    
    September 30, 2004(3)
    
    
    December 31, 2004Light Crude OilAverage Daily Oil Production(1) (bblpd)
    
    
    21,516
    
    
    
    20,906
    
    
    
    20,735
    
    
    
    20,118Sales Price (net of hedging gains/losses) ($/bbl)
    
    
    40.57
    
    
    
    42.46
    
    
    
    45.15
    
    
    
    44.76Processing and other income ($/bbl)
    
    
    0.97
    
    
    
    1.37
    
    
    
    0.31
    
    
    
    0.99Royalties ($/bbl)
    
    
    (4.08
    )
    
    
    (6.58
    )
    
    
    (10.29
    )
    
    
    (9.65
    )Amortization of injectants ($/bbl)
    
    
    (2.66
    )
    
    
    (2.54
    )
    
    
    (2.46
    )
    
    
    (2.67
    )Production Costs (2) ($/bbl)
    
    
    (8.82
    )
    
    
    (10.32
    )
    
    
    (9.61
    )
    
    
    (9.40
    )Operating Netback ($/bbl)
    
    
    25.99
    
    
    
    24.40
    
    
    
    23.10
    
    
    
    24.03Heavy OilAverage Daily Oil Production(1) (bblpd)
    
    
    
    
    
    
    1,848
    
    
    
    6,507
    
    
    
    5,819Sales Price (net of hedging gains/losses) ($/bbl)
    
    
    
    
    
    
    30.19
    
    
    
    37.96
    
    
    
    26.99Royalties ($/bbl)
    
    
    
    
    
    
    (4.65
    )
    
    
    (5.55
    )
    
    
    (4.19
    )Production Costs (2) ($/bbl)
    
    
    
    
    
    
    (6.36
    )
    
    
    (11.20
    )
    
    
    (9.44
    )Operating Netback ($/bbl)
    
    
    
    
    
    
    19.18
    
    
    
    21.21
    
    
    
    13.36
 - 36 -




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##### Table of Contents



QUARTER ENDEDMarch 31, 2004(3)
    
    
    June 30, 2004(3)
    
    
    September 30, 2004(3)
    
    
    December 31, 2004NGLsAverage Daily Oil Production(1) (bblpd)
    
    
    4,594
    
    
    
    6,007
    
    
    
    5,139
    
    
    
    5,385Sales Price (net of hedging gains/losses) ($/bbl)
    
    
    37.08
    
    
    
    40.75
    
    
    
    42.33
    
    
    
    48.04Royalties ($/bbl)
    
    
    (16.77
    )
    
    
    (11.90
    )
    
    
    (14.19
    )
    
    
    (19.37
    )Production Costs (2) ($/bbl)
    
    
    (7.56
    )
    
    
    (8.32
    )
    
    
    (8.17
    )
    
    
    (7.97
    )Operating Netback ($/bbl)
    
    
    12.76
    
    
    
    20.53
    
    
    
    19.97
    
    
    
    20.70Natural GasAverage Daily Natural Gas Production(1) (mcfpd)
    
    
    117,348
    
    
    
    136,142
    
    
    
    166,618
    
    
    
    156,621Sales Price (net of hedging gains/losses) ($/mcf)
    
    
    6.82
    
    
    
    7.08
    
    
    
    6.36
    
    
    
    7.02Processing and other income ($/mcf)
    
    
    0.23
    
    
    
    0.17
    
    
    
    0.16
    
    
    
    0.24Royalties ($/mcf)
    
    
    (1.16
    )
    
    
    (1.20
    )
    
    
    (1.27
    )
    
    
    (1.34
    )Production Costs (2) ($/mcf)
    
    
    (1.15
    )
    
    
    (1.25
    )
    
    
    (1.35
    )
    
    
    (1.30
    )Operating Netback ($/mcf)
    
    
    4.74
    
    
    
    4.81
    
    
    
    3.90
    
    
    
    4.62
   Notes:(1)
    
    Before the deduction of royalties.(2)
    
    Includes transportation costs.(3)
    
    Allocation of production costs to each product has been revised for January to September as
compared to quarterly disclosure. QUARTER ENDEDMarch 31, 2004
    
    
    June 30, 2004
    
    
    September 30, 2004
    
    
    December 31, 2004Barrels of Oil Equivalent(1)Average Daily Production(2) (boepd)
    
    
    45,668
    
    
    
    51,451
    
    
    
    60,151
    
    
    
    57,425Sales Price (net of hedging gains/losses) ($/boe)
    
    
    40.37
    
    
    
    41.83
    
    
    
    40.90
    
    
    
    42.08Processing and other income ($/boe)
    
    
    1.06
    
    
    
    1.01
    
    
    
    0.55
    
    
    
    1.00Royalties ($/boe)
    
    
    (6.60
    )
    
    
    (7.43
    )
    
    
    (8.88
    )
    
    
    (9.29
    )Amortization of injectants ($/boe)
    
    
    (1.25
    )
    
    
    (1.03
    )
    
    
    (0.85
    )
    
    
    (0.94
    )Production Costs (3) ($/boe)
    
    
    (7.87
    )
    
    
    (8.67
    )
    
    
    (8.97
    )
    
    
    (8.53
    )Operating Netback ($/boe)
    
    
    25.71
    
    
    
    25.71
    
    
    
    22.77
    
    
    
    24.31
   Notes:(1)
    
    Natural gas has been converted to barrels of oil equivalent on the basis of six mcf of
natural gas being equal to one boe.(2)
    
    Before the deduction of royalties.(3)
    
    Includes transportation costs. Production History The annual and average daily production of crude oil, natural gas and natural gas liquids of
Pengrowth Corporation, since December 31, 1997, is set out in the following table: Light/Medium Oil
    
    
    Heavy Oil
    
    
    Natural Gas
    
    
    Natural Gas LiquidsAverage
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    Average
    
    
    Average DailyAnnual
    
    
    Daily
    
    
    Annual
    
    
    Daily
    
    
    Annual
    
    
    Daily
    
    
    Annual
    
    
    Daily
    
    
    TotalYear
ended
    
    Production(2)
    
    
    Production(2)
    
    
    Production(2)
    
    
    Production(2)
    
    
    Production(2)
    
    
    Production(2)
    
    
    Production(2)
    
    
    Production(2)
    
    
    Production(1)(2)(mbbls)
    
    
    (bblpd)
    
    
    (mbbls)
    
    
    (bblpd)
    
    
    (mmcf)
    
    
    (mcfpd)
    
    
    (mbbls)
    
    
    (bblpd)
    
    
    (boepd)Dec 31, 1997
    
    
    2,792
    
    
    
    7,650
    
    
    
    
    
    
    
    
    
    
    
    18,744
    
    
    
    51,355
    
    
    
    677
    
    
    
    1,856
    
    
    
    18,140Dec 31, 1998
    
    
    6,094
    
    
    
    16,695
    
    
    
    
    
    
    
    
    
    
    
    21,063
    
    
    
    57,707
    
    
    
    1,220
    
    
    
    3,342
    
    
    
    29,741Dec 31, 1999
    
    
    6,413
    
    
    
    17,570
    
    
    
    
    
    
    
    
    
    
    
    22,445
    
    
    
    61,494
    
    
    
    1,433
    
    
    
    3,927
    
    
    
    31,821Dec 31, 2000
    
    
    6,441
    
    
    
    17,599
    
    
    
    
    
    
    
    
    
    
    
    25,656
    
    
    
    70,098
    
    
    
    1,539
    
    
    
    4,205
    
    
    
    33,581Dec 31, 2001
    
    
    7,200
    
    
    
    19,726
    
    
    
    
    
    
    
    
    
    
    
    33,494
    
    
    
    91,764
    
    
    
    1,919
    
    
    
    5,258
    
    
    
    40,320Dec 31, 2002
    
    
    7,269
    
    
    
    19,914
    
    
    
    
    
    
    
    
    
    
    
    40,775
    
    
    
    111,713
    
    
    
    1,917
    
    
    
    5,252
    
    
    
    43,785Dec 31, 2003
    
    
    8,518
    
    
    
    23,337
    
    
    
    
    
    
    
    
    
    
    
    43,742
    
    
    
    119,842
    
    
    
    2,089
    
    
    
    5,722
    
    
    
    49,033Dec 31, 2004
    
    
    7,619
    
    
    
    20,817
    
    
    
    1,302
    
    
    
    3,558
    
    
    
    52,806
    
    
    
    144,278
    
    
    
    1,933
    
    
    
    5,281
    
    
    
    53,702
 - 37 -




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Notes:(1)
    
    Natural gas has been converted to barrels of oil equivalent on the basis of six mcf of
natural gas being equal to one boe.(2)
    
    Before the deduction of royalties. 
 Replacement of Properties In the event that Pengrowth Corporation determines that the sale of any of its interests in
properties, and the release of the royalty therefrom, would be in the best interest of the
unitholders, the royalty indenture permits it to make sales without the requirement of approval of
the unitholders, provided that the aggregate properties sold in any given year total less than 25%
of the assets of Pengrowth Corporation, determined as at the date of disposition of the properties
based upon an independent engineering appraisal. Any sale exceeding this threshold must be
approved by an extraordinary resolution of the unitholders. In connection with any sale of properties, Pengrowth Corporation will also be required to consider
whether the net proceeds of the sale should be distributed or reinvested to purchase replacement
properties (the Replacement Properties). If the proceeds of disposition are not reinvested in
the purchase of Replacement Properties within the same calendar year then these proceeds are
allocated to the holders of royalty units, provided that such rights are subordinate to the rights
of the lenders to Pengrowth Corporation under its credit facility and operating time of credit. 
 Borrowing Pursuant to the royalty indenture, Pengrowth Corporation is permitted to borrow funds to finance
the purchase of properties or for capital expenditures, to incur take or pay obligations and other
burdens and encumbrances in respect of the properties, and to grant security on the properties in
priority to the royalty to secure the borrowing of such funds. Pengrowth Corporation is also
permitted to borrow funds to finance purchases of other classes of assets including partnership
units and shares of companies. Repayment of debt shall be scheduled so as to minimize, to the
extent possible, income tax payable by Pengrowth Corporation. Debt service charges (to the extent
that they exceed certain revenues of Pengrowth Corporation) and taxes payable by Pengrowth
Corporation are deducted in computing royalty income. At the special meeting of royalty
unitholders to be held on April 26, 2005, unitholders will consider an extraordinary resolution
clarifying the ability of Pengrowth Corporation to offset certain classes of income against debt
service changes in the computation of the royalty. In 2004, Pengrowth continued its policy of maintaining a conservative capital structure,
capitalizing on opportunities to issue new equity when appropriate while maintaining a high
distribution pay-out ratio to unit holders. At year end 2004, Pengrowth was in a strong financial
position, with a long term debt to debt plus equity ratio of 0.19. Pengrowth has $375 million in
committed credit facilities, which was reduced by $23 million in letters of credit outstanding at
year end. In addition, Pengrowth has a $35 million demand operating line of credit. Pengrowth is
well positioned to fund its 2005 development program and to take advantage of acquisition
opportunities as they arise. 
 TRUST UNITS 
 The Trust Indenture Trust units are issued under the terms of the trust indenture between Pengrowth Corporation and
Computershare, as trustee. A maximum of 500,000,000 trust units may be created and issued pursuant
to the trust indenture (including the Class A trust units, the Class B trust units and any trust
units in the form in existence before the Reclassification that have not yet been reclassified as
Class A trust units or Class B trust units), of which 153,607,000 trust units were outstanding on
March 22, 2005 (comprised of 76,793,639 Class A trust units, 76,757,819 Class B trust units and
55,542 unreclassified trust units). Each trust unit represents a fractional undivided beneficial
interest in Pengrowth Trust. The trust indenture, among other things, provides for the establishment
of Pengrowth Trust, the issue of trust units, the permitted investments of Pengrowth Trust, the
procedures respecting distributions to unitholders, the appointment and removal of Computershare as trustee, Computershares authority and restrictions
thereon, the calling of meetings of unitholders, the conduct of business at such meetings, notice
provisions, the form of trust unit - 38 -




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certificates and the termination of Pengrowth Trust. The trust
indenture may be amended from time to time. Most amendments to the trust indenture, including the
early termination of Pengrowth Trust and the sale or transfer of the property of Pengrowth Trust as
an entirety or substantially as an entirety, require approval by an extraordinary resolution of the
unitholders. An extraordinary resolution of the unitholders requires the approval of not less than
66 2/3% of the votes cast by unitholders at a meeting of unitholders held in accordance with the
trust indenture at which two or more holders of at least 5% of the aggregate number of trust units
then outstanding are represented. Computershare, as trustee, is permitted to amend the trust
indenture without the consent or approval of the unitholders for certain purposes, including: (i)
ensuring that Pengrowth Trust complies with applicable laws or government requirements, including
satisfaction of certain provisions of the Tax Act; (ii) ensuring that additional protection is
provided for the interests of unitholders as Computershare may consider expedient; and (iii) making
typographical or other non-substantive changes that are not adverse to the interests of
Computershare or unitholders. 
 The Trustee Computershare, as trustee, is generally empowered by the trust indenture to exercise any and all
rights and powers that could be exercised by the owner of the assets of Pengrowth Trust.
Computershares specific responsibilities include, but are not limited to, the following: (i)
reviewing and accepting subscriptions for trust units and issuing trust units subscribed for; (ii)
subscribing for royalty units; (iii) issuing trust units in exchange for royalty units tendered to
it for exchange; and (iv) maintaining records and providing timely reports to unitholders.
Computershare is authorized to delegate its powers and duties as trustee except as prohibited by
law. Computershare, as trustee, must exercise its powers and carry out its functions under the trust
indenture honestly, in good faith and in the best interests of Pengrowth Trust and the unitholders,
and must exercise that degree of care, diligence and skill that a reasonably prudent person would
exercise in comparable circumstances. Computershare is not required to devote its entire time to
the business and affairs of Pengrowth Trust. Computershare, as trustee, shall be reappointed or replaced every two years as may be determined by
a majority of the votes cast at an annual meeting of the trust unitholders. Computershare may
resign upon 60 days notice to Pengrowth Corporation. Computershare may be removed by extraordinary
resolution of the trust unitholders or by Pengrowth Corporation in certain specific circumstances.
Such resignation or removal shall become effective upon the acceptance of appointment by a
successor. The reappointment of Computershare as trustee will be considered at the annual and
special meeting of trust unitholders to be held on April 26, 2005. 
 Redemption Right Trust units are redeemable by Computershare, as trustee, at the request of a unitholder when
properly endorsed for transfer and when accompanied by a duly completed and properly executed
notice requesting redemption at a redemption price equal to the lesser of: (i) 95% of the average
closing price of the Class B trust units on the ten days after the trust units are surrendered for
redemption and (ii) the closing price of the Class B trust units on the date the trust units are
surrendered for redemption. The redemption right permits unitholders in the aggregate to redeem
trust units for maximum proceeds of $25,000 in any calendar month provided that such limitation may
be waived at the discretion of the board of directors of Pengrowth Corporation. Redemptions in
excess of the cash limit must be satisfied by way of a distribution in specie of a pro rata share
of royalty units and other assets, excluding facilities, pipelines or other assets associated with
oil and natural gas production, which are held by Pengrowth Trust at the time the trust units are
to be redeemed. Following the Reclassification, the price of trust units for redemption purposes
is based upon the closing trading price of the Class B trust units irrespective of whether the
trust units being redeemed are Class A trust units or Class B trust units. 
 Voting at Meetings of Pengrowth Trust Meetings of unitholders may be called on 21 days notice and may be called at any time by
Computershare, as trustee, or upon written request of unitholders holding in the aggregate not less
than 5% of the trust units, and shall be called by Computershare and held annually. All activities
necessary to organize any such meeting will be undertaken by Pengrowth Corporation on behalf of
Computershare. At all meetings of the unitholders, each holder
is entitled to one vote in respect of each trust unit held. Unitholders may attend and vote at all
meetings of the unitholders either in person or by proxy and a proxy holder need not be a
unitholder. Two persons present in person - 39 -




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either holding personally or representing as proxies at
least 5% of the outstanding trust units constitute a quorum for the transaction of business at all
such meetings. Except as otherwise provided in the trust indenture, matters requiring the approval
of the unitholders must be approved by extraordinary resolution. Unitholders are entitled to pass resolutions that will bind Computershare, as trustee, with respect
to a limited list of matters, including but, not limited to, the following: (i) the removal or
appointment of Computershare as trustee; (ii) the removal or appointment of the auditor of
Pengrowth Trust; (iii) the amendment of the trust indenture; (iv) the approval of subdivisions or
consolidations of trust units; (v) the sale of the assets of Pengrowth Trust as an entirety or
substantially as an entirety; and (vi) termination of Pengrowth Trust. Unitholders can also consider the appointment of an inspector to investigate whether Computershare
has performed its duties arising under the trust indenture. Such an inspector shall be appointed
if a resolution approving the appointment of such inspector is passed by a majority of the votes
duly cast at a meeting held for that purpose. 
 Voting at Meetings of Pengrowth Corporation The unitholders, along with holders of royalty units other than Computershare, as trustee, are
entitled to voting rights at meetings of shareholders of Pengrowth Corporation on the basis of one
vote for each trust unit (or royalty Unit) held in respect of all matters upon which the Business
Corporations Act(Alberta) requires a shareholder vote. At the annual and special meeting of
shareholders scheduled for April 26, 2005, the unitholders will consider an extraordinary
resolution approving amendments to the unanimous shareholders agreement clarifying the voting
rights of royalty unitholders. 
 Termination of Pengrowth Trust The unitholders may vote to terminate Pengrowth Trust at any meeting of the unitholders, subject to
the following:  (i)

a vote may be held only if requested in writing by the holders of not less than 25% of the
trust units, or if the trust units have become ineligible for investment by RRSPs, RRIFs,
RESPs and DPSPs;(ii)

the termination must be approved by extraordinary resolution of the unitholders; and(iii)

a quorum representing 5% of the issued and outstanding trust units must be present or
represented by proxy at the meeting at which the vote is taken. If the unitholders approve termination, Computershare, as trustee, will sell the assets of
Pengrowth Trust, discharge all known liabilities and obligations, and distribute the remaining
assets to the unitholders. Computershare will distribute directly to the unitholders any assets
which Computershare is unable to sell by the date set for termination. 
 Unitholder Limited Liability The trust indenture, provides that no unitholder will be subject to any personal liability in
connection with Pengrowth Trust or its obligations and affairs, and the satisfaction of claims of
any nature arising out of or in connection therewith is only to be made out of Pengrowth Trusts
assets. Additionally, the trust indenture states that no unitholder is liable to indemnify or
reimburse Computershare for any liabilities incurred by Computershare with respect to any taxes
payable by or liabilities incurred by Pengrowth Trust or Computershare, and all such liabilities
will be enforceable only against, and will be satisfied only out of, Pengrowth Trusts assets. It
is intended that the operations of Pengrowth Trust will be conducted, upon the advice of counsel,
in such a way and in such jurisdictions as to avoid as far as possible any material risk of
liability on the unitholders for claims against Pengrowth Trust. Legislation has recently been
enacted in Alberta which will protect unitholders from the legal uncertainties regarding the
potential liability of unitholders. See General Development of
Pengrowth Energy Trust  Recent
Acquisitions, Financings and Developments  Unitholder Limited Liability. - 40 -




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Special Voting Unit In addition to the trust units, Pengrowth Trust may issue the special voting trust unit which
entitles the holder thereof to a number of votes equal to the number of outstanding exchangeable
shares of Pengrowth Corporation at any meeting of the unitholders. The special voting trust unit
is not entitled to receive distributions from Pengrowth Trust. The special voting trust unit is
intended to provide voting rights to the holders of exchangeable shares of Pengrowth Corporation
equivalent to the voting rights attached to trust units. As of the date hereof, the special voting
trust unit has not been issued. 
 Trust Unit Reclassification On July 27, 2004 Pengrowth implemented the Reclassification whereby the existing outstanding trust
units were reclassified into Class B trust units and the Class B trust units held by non-residents
of Canada were converted into Class A trust units (with the exception of trust units held by
holders who did not provide a residency declaration to Computershare which remained unchanged
pending receipt of a suitable residency declaration). Background Maintaining its status as a mutual fund trust under the Tax Act is of fundamental importance to
Pengrowth Trust. The consequences of the loss of this status are described under Risk Factors.
If Pengrowth Trust ceases to qualify as a mutual fund trust it will adversely affect the value of
the trust units. Pengrowth implemented the Reclassification to enable Pengrowth Trust to manage
its level of ownership by non-residents of Canada in conjunction with the rules governing mutual
fund trusts. Early in the year it had become apparent that the level of non-resident ownership of
Pengrowth Trust had risen from approximately 8% at the time of listing on the New York Stock
Exchange in April 2002 to a level approaching 50%. The level of non-resident ownership rose
further to approximately 56% by the date of the implementation of the Reclassification. Generally speaking, the Tax Act provides that a Trust will permanently lose its mutual fund trust
status if it is established or maintained primarily for the benefit of non-residents of Canada
(which is generally interpreted to mean that the majority of Unitholders must be non-residents of
Canada) (the Benefit Test), unless at all times after February, 21, 1990, all or substantially
all of the Trusts property consisted of property other than taxable Canadian property (the TCP
Exception). For reasons that may be unique to Pengrowth Trust, it was not clear that Pengrowth
Trust could rely on the TCP Exception and the Board of Directors recommended that Reclassification
to enable Pengrowth Trust to manage the level of non-resident ownership on an ongoing basis. - 41 -




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The Federal Budget tabled by the Minister of Finance on March 23, 2004 proposed several changes to
Subsection 132(7) of the Tax Act to the effect that the TCP Exception would generally no longer be
available to royalty trusts after December 31, 2004. On April 22, 2004, Pengrowth Trust sought and
obtained the approval of its Unitholders for the Reclassification to enable Pengrowth Trust to
satisfy the Benefit Test by providing a mechanism to ensure that the majority of trust units,
distributions, votes and entitlements to the capital of Pengrowth Trust would be held by residents
of Canada. The Reclassification was implemented by Pengrowth Trust on July 27, 2004. On November 26, 2004, Pengrowth Trust received a customary form of comfort letter from the
Department of Finance (Canada) (the November Finance Letter) stating that the Department of
Finance will recommend to the Minister of Finance that an amendment be made to the TCP Exception
that would clarify Pengrowth Trusts ability to rely upon the TCP Exception and would effectively
remove any significant risk regarding the status of Pengrowth Trust as a mutual fund trust. The
November Finance Letter is subject to acceptance of the recommendations therein by the Minister of
Finance and Parliament, which Pengrowth Trust believes is reasonable to assume will occur. On December 6, 2004, the Minister of Finance tabled a Notice of Ways and Means Motion in the House
of Commons to implement measures proposed in the March 23, 2004 Federal Budget.
However, the changes to the mutual fund trust provisions proposed in the March 23, 2004 Federal
Budget to remove the TCP Exception were not included. The Minister of Finance indicated that
further discussions would be pursued with the private sector concerning the appropriate tax
treatment of non-residents investing in resource property through mutual funds. Therefore,
uncertainty remains as to whether or not the TCP Exception will be available to royalty trusts such
as Pengrowth Trust indefinitely. The February 23, 2005 Federal Budget contained no new provisions in respect of the residency
restrictions on mutual fund trusts. Legislative amendments may be
proposed by the Department of Finance following a period of
consultation with the private sector. The timing or impact of any
legislative amendments cannot be predicted. The Board of Directors
has recommended that Pengrowth Trust maintain maximum possible
flexibility to respond appropriately to legislative amendments as
they occur. In the interim, maintaining the Class A trust unit
and Class B trust unit structure;  

provides Pengrowth Trust with certainty as to its mutual fund
trust status provided that Pengrowth Trust achieves a non-resident
ownership level at or beneath 49.75% by June 1, 2005 in
accordance with an advantage tax ruling pertaining to Pengrowth Trust;

allows Pengrowth Trust to gain access to international capital
markets through the sale of Class A trust units. It is possible that the Federal Government may remove all
residency restrictions with respect to mutual fund trusts at some future time without imposing any
significant tax penalties related to non-resident ownership. If such event should occur, the Board
of Directors may determine, based upon market circumstances as they exist at that time or other
factors, that it is in the best interests of all Unitholders to: (a) remove the residency
restrictions pertaining to the holding of Class B trust units, (b) permit a free conversion of
Class B trust units to Class A trust units, (c) permit the consolidation of the trust unit capital
of Pengrowth Trust, or (d) take such other action as the Board of Directors may consider
appropriate. At the annual and special meeting of holders of trust units scheduled for April 26,
2005, the unitholders will be asked to consider an extraordinary resolution authorizing
the Board of Directors on behalf of Pengrowth Corporation as administrator of Pengrowth Trust, to
make amendments to the Trust Indenture at the discretion of the Board of Directors to change the
rights pertaining to Class A trust units and Class B trust units. The power and authority proposed
to be granted to the Board of Directors as described above provides broad and extraordinary powers
to the Board of Directors. While the Board of Directors intends to exercise such discretion, if at
all, in a manner it believes is in the best interests of Pengrowth Trust and the trust unitholders,
the consequences of any exercise of discretion may differ as between classes of Trust Unitholders
and may effect the market price or value of the Class A trust units and the Class B trust units,
and such effect may be significantly different as between the Class A trust units and the Class B
trust units. Any exercise by the Board of Directors of this discretion in a manner that amends the
provisions attending to the Trust Units, including the consolidation of the Trust Units into a
single class, would be subject to all required regulatory approvals. In respect of the
consolidation of the Trust Units into a single class, the exercise by the Board of Directors of
this discretion would also be subject to the receipt of comfort, in the form of an advance tax
ruling or advice from Pengrowths legal counsel satisfactory to the Board of Directors, that there
would be no adverse tax consequences to holder of Class A trust units or Class B trust units as a
result of the consolidation. The trust indenture currently defines the Ownership Threshold to mean a number of Class A trust
units issued and outstanding at any point of time equalling 99% of the number of Class B trust
units issues and outstanding at such time (equivalent to 49.75% of all outstanding trust units).
The Trust Indenture stipulates that the number of outstanding Class A trust units cannot exceed the
Ownership Threshold after an enforcement date, which is December 31, 2004, or such later date by
which Pengrowth Trust must comply with the Ownership Threshold as may be specified in any advance
ruling issued by Canada Revenue Agency in respect of the reclassification of the trust units. An
advance tax ruling was provided by the Canada Revenue Agency on July 26, 2004 that stipulated that
the Ownership Threshold should be achieved by December 31, 2004. On December 1, 2004, Pengrowth
Trust - 42 -




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received an amended tax ruling stipulating that the requirement to achieve the Ownership Threshold
had been extended to June 1, 2005 (the December Advance Tax Ruling). As of December 31, 2004, Pengrowth Trust had 152,972,555 outstanding trust units comprised of
76,792,759 Class A trust units, 76,106,471 Class B trust units and 73,325 unreclassified trust
units. As at March 22, 2005, there were 153,607,000 outstanding trust units comprised of
76,793,639 Class A trust units, 76,757,819 Class B trust units and 55,542 unreclassified trust
units. No additional Class A trust units are being issued by Pengrowth Trust at this time other
than as appropriate to correct errors made with respect to the allocation of Class A trust units
and Class B trust units as of the effective date of the Reclassification. Accordingly,
approximately 863,716 additional Class B trust units must be issued in order to achieve the
Ownership Threshold. Additional Class B trust units are being issued from time to time as a
result of the operation of the distribution reinvestment plan and Pengrowths other incentive
plans. It is anticipated that approximately 462,098 additional Class A trust units and
approximately 3,888,205 additional Class B trust units will be issued pursuant to the Crispin
Arrangement, which is expected to be completed prior to the end of April, 2005. As a result of
that transaction and the operation of the Pengrowth Plans, it is likely but cannot be assured, that
the Ownership Threshold will be achieved prior to June 1, 2005. It is desirable to achieve the Ownership Threshold by June 1, 2005 in order that Pengrowth Trust
can continue to rely upon the December Advance Tax Ruling. The December Advance Tax Ruling states,
in effect that Pengrowth Trust will continue to be a mutual fund trust it if meets the Ownership
Threshold prior to June 1, 2005 and was a mutual fund trust prior to that date. The December
Advance Tax Ruling also states, in effect, that there are no adverse tax consequences in Canada to
the Reclassification. Whether or not the Ownership Threshold is achieved representatives of the
Department of Finance have advised Pengrowth Trust that the November Finance Letter remains
effective and that the representations contained in the November Finance Letter will be introduced
in Parliament in 2005 in connection with technical amendments to the Tax Act. Key Features of the Trust Units The key features of the Class A trust units and the Class B trust units are as follows:  Class A Trust Units  

are not subject to any residency restriction;

are subject to a restriction on the number to be issued such that the total number
of issued and outstanding Class A trust units will not exceed 99% of the number of
issued and outstanding Class B trust units (after an initial implementation period)
(the Ownership Threshold);

may be converted by a holder at any time into Class B trust units provided that the
holder is a resident of Canada and provides a suitable residency declaration;

trade on both the TSX and NYSE; and

have identical rights to voting, distributions and assets of Pengrowth Trust on a
wind-up to the Class B trust units.  Class B Trust Units  

may not be owned or controlled, directly or indirectly, otherwise than by security
only, by non-residents of Canada;

trade only on the TSX;

may be converted by a holder into Class A trust units, provided that the Ownership
Threshold will not be exceeded (see General Development of
Pengrowth Energy Trust  Recent Acquisitions, - 43 -




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Financings and Developments  Conversion of Class B Trust Units into Class A Trust
Units); and  

have identical rights to voting, distributions and assets of Pengrowth Trust on a
wind-up to the Class A trust units. A resident of Canada for the purposes of the Tax Act generally includes a person who is resident,
for taxation purposes, in Canada based on such factors as physical location, personal and economic
ties, citizenship, place of domicile and place of incorporation or establishment. In general, a
person will be a resident of Canada if the person is required to file tax returns in Canada and is
subject to Canadian tax on worldwide income as a Canadian resident. If you are uncertain as to
your residency for the purposes of the Tax Act and any applicable income tax treaty or convention,
you should consult with your tax advisors. Ownership of Class B Trust Units Restricted The following procedures have been adopted to monitor and constrain the ownership of Class B trust
units by non-residents of Canada:  

The Canadian Depository for Securities Limited (CDS) has been advised that it is
prohibited from holding Class B trust units on behalf of non-residents. Pengrowth
Corporation will require participants in the book-based system to provide a participant
declaration on a periodic basis to ensure that no non-resident of Canada owns any Class
B trust units;

Depository Trust Company (DTC) is not be permitted to hold Class B trust units;

a residency declaration is required for any proposed registered transfer of Class B
trust units; and

a residency declaration is required for any proposed conversion of Class A trust
units into Class B trust units. These rules and procedures may be amended from time to time by Pengrowth Trust and Computershare. Violation of Ownership
Provisions At the annual and special meeting of holders of trust units Scheduled for April 26, 2005, it is
proposed that the trust unitholders pass an extraordinary resolution extending the date by which
the Ownership Threshold must be achieved to June 1, 2006 or such later date as determined by the
Board of Directors in its sole discretion. If the extraordinary resolution is passed and the
Ownership Threshold is not achieved by June 1, 2005, Pengrowth Trust will rely on the November
Finance Letter in respect to Pengrowth Trusts status as a
mutual fund trust and the enforcement actions set out below will not be necessary. If it appears from the securities registers, or
if the Board of Directors of Pengrowth Corporation determines that, the number of issued and
outstanding Class A trust units exceeds the Ownership Threshold,
from and after June 1, 2005, or such other enforcement date that may
be set in accordance with unitholder approval, Pengrowth Trust may make a public
announcement of the contravention and shall refuse to accept subscriptions for Class A trust units
or accept conversions of Class B trust units into Class A trust units. In addition, if the Board
of Directors of Pengrowth Corporation determines that it would not be unfairly prejudicial to, and
would not unfairly disregard the interests of, persons beneficially owning or controlling Class A
trust units, Pengrowth Trust shall send a notice to the registered holders of Class A trust units
chosen on the basis of inverse order of registration requiring such holders to dispose of their
Class A trust units and pending such disposition may - 44 -




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suspend all rights of ownership attached to such trust units (including the right to receive
distributions). Any such disposition notice will specify in reasonable detail: (i) the nature of
the contravention of the Ownership Threshold; (ii) the number of Class A trust units that are in
excess of the Ownership Threshold; (iii) a date, which shall not be less than 60 days after the
date of the notice, by which the Class A trust units are to be (A) sold or otherwise disposed of to
a person who is not a non-resident of Canada and who concurrently agrees to convert such units into
Class B trust units or (B) if the holder is not a non-resident of Canada, converted into Class B
trust units; and (iv) state that unless the holder complies, Pengrowth Trust may sell or redeem the
excess Class A trust units held by such holder. If a holder of Class A trust units fails to comply
with such notice, Pengrowth Trust may elect to sell, on behalf of the registered holder, the excess
Class A trust units on its principal stock exchange and pay to the holder the net proceeds of the
sale after deduction of any commission, tax or other costs of sale. In addition, if the holder
fails to comply with the notice, and Pengrowth Trust determines that a sale of the excess Class A
trust units would be impracticable or have a material adverse effect on the market value of the
Class A trust units, Pengrowth Trust shall elect to repurchase or redeem the excess Class A trust
units, without providing further notice. The repurchase or redemption price to be paid for such
excess Class A trust units will be the 10 day average closing price of the Class B trust units on
their principal stock exchange. If it appears from the securities registers, or if the Board of Directors of Pengrowth Corporation
determines that, a person that is a non-resident of Canada holds or beneficially owns any Class B
trust units, Pengrowth Trust shall send a notice to the registered holder(s) of the Class B trust
units requiring such holder(s) to dispose of the Class B trust units and pending such disposition
may suspend all rights of ownership attached to such trust units (including the right to receive
distributions). Any such disposition notice would specify in reasonable detail: (i) the number of
trust units held by such holder; (ii) a date, which shall not be less than 60 days after the date
of the notice, by which the Class B trust units are to be sold or otherwise disposed of to a person
who is not a non-resident of Canada (and does not hold on behalf of any person who is a
non-resident of Canada), or by which the holder must provide a declaration that they are not a
non-resident of Canada; and (iii) state that unless the holder complies, Pengrowth Trust may sell
or redeem the Class B trust units held by such holder. If the holder of Class B trust units fails
to comply with such notice, Pengrowth Trust may elect to sell, on behalf of the registered holder,
the Class B trust units on its principal stock exchange and pay to the holder the net proceeds of
the sale after deduction of any commission, tax or other costs of sale. In addition, if the holder
fails to comply with the notice, and Pengrowth Trust determines that a sale of the excess Class B
trust units would be impracticable or have a material adverse effect on the market value of the
Class B trust units, Pengrowth Trust may elect to repurchase or redeem the excess Class B trust
units, without providing further notice. The repurchase or redemption price to be paid for such
Class B trust units will be the 10 day average closing price of the Class B trust units on their
principal stock exchange. Exclusionary Offers If an offer is made to purchase Class A trust units that must, by reason of securities legislation
or stock exchange requirements, be made to all or substantially all of the owners of Class A trust
units and such offer is not made concurrently with an offer to purchase Class B trust units that is
identical to the offer to purchase Class A trust units in terms of price per trust unit and in all
other material respects, then each outstanding Class B trust unit shall be convertible into one
Class A trust unit at the option of the holder thereof from the day the offer is made until the
expiry date of the offer. In these circumstances, the Ownership Threshold would temporarily cease
to apply in respect of the Class A trust units. An election of the holder of Class B trust units
to exercise this conversion right shall also be deemed to also constitute the irrevocable election
by the holder to deposit such units pursuant to the offer and to exercise a right of the holder to
convert such units back into Class B trust units if such units are not taken up and paid for under
the offer. If an offer is made to purchase Class B trust units that must, by reason of securities legislation
or stock exchange requirements, be made to all or substantially all of the owners of Class B trust
units and such offer is not made concurrently with an offer to purchase Class A trust units that is
identical to the offer to purchase Class B trust units in terms of price per trust unit and in all
other material respects, then each outstanding Class A trust unit shall be convertible into one
Class B trust unit at the option of the holder thereof. In these circumstances, the restriction on
the ownership of Class B trust units by non-residents of Canada would temporarily cease to apply in
respect of such Class B trust units. An election of the holder of Class A trust units to exercise
this conversion right shall also be deemed to also constitute the irrevocable election by the
holder to deposit such units pursuant to the offer and to - 45 -




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exercise a right of the holder to convert such units back into Class A trust units if such units
are not taken up and paid for under the offer. In order to ensure that compliance with the coat-tail requirements of the TSX would not
jeopardize Pengrowths mutual fund trust status, the trust indenture restricts the operation of
these provisions to ensure that the Ownership Threshold cannot be violated by providing that in
respect of exclusionary offers made for only one class of trust units:  

holders of Class A trust units do not have the right to convert Class A trust units
to Class B trust units where an exclusionary offer is made for the Class B trust units
if the offeror is a non-resident of Canada (this would not be a valid offer because a
non-resident is not permitted to hold Class B trust units);

where Class B trust units are converted to Class A trust units upon an exclusionary
offer being made for the Class A trust units, those units will be immediately converted
back to Class B trust units upon being taken up and paid for to preserve the relative
number of Class A trust units and Class B trust units outstanding both before and after
the bid (even if the offeror is a non-resident of Canada and Pengrowth will have all of
the remedies described above against such offeror);

if a non-resident acquires 10% or more of the outstanding Class A trust units
(including Class A trust units issued on the conversion of Class B trust units) the
non-resident shall not be entitled to vote or receive distributions in respect to all
of such units. These sanctions provide a strong disincentive for a non-resident to
make an exclusionary offer for Class A trust units;

if Class A trust units or Class B trust units are tendered to an exclusionary offer
for the Class B trust units or the Class A trust units, respectively, the deemed
conversion of such units is delayed until the take-up of the units pursuant to the
offer and not before; and

if an exclusionary offer is withdrawn or expires, or trust units that are tendered
to an exclusionary offer are withdrawn, no conversion will occur. 
 THE ROYALTY INDENTURE 
 Royalty Units Royalty units are issued under the terms of the royalty indenture. A maximum of 500,000,000
royalty units can be created and issued pursuant to the royalty indenture. The royalty units
represent fractional undivided interests in the royalty, consisting of a 99% share of royalty
income. The royalty indenture, among other things, provides for the grant of the royalty, the issue of
royalty units, the imposition on and acceptance by Pengrowth Corporation of certain obligations and
business restrictions, the calling of meetings of unitholders, the conduct of business thereat,
notice provisions, the appointment and removal of the trustee, and the establishment and use of the
reserve as discussed below. The royalty indenture may be amended or varied only by extraordinary resolution of the unitholders
and the holders of royalty units, or by Pengrowth Corporation and Computershare, as trustee, for
certain specifically defined purposes so long as, in the opinion of Computershare, the unitholders
and the holders of royalty units are not prejudiced as a result. The holders of royalty units other than the trustee are currently entitled to vote at shareholder
meetings of Pengrowth Corporation on the basis of one vote for each royalty unit held, subject to
clarifications to those voting rights that will be considered at the annual and special meeting of
shareholders scheduled for April 26, 2005. - 46 -




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At the special meeting of royalty unitholders held on April 22, 2004, amendments to the royalty
indenture were approved by the unitholders to facilitate the issuance of exchangeable shares by
Pengrowth Corporation. See Exchangeable Shares. 
 The Royalty The royalty consists of a 99% share of royalty income. Under the terms of the Royalty Indenture,
Pengrowth Corporation is entitled to retain a 1 percent share of royalty income and all
miscellaneous income (the Residual Interest) to the extent this amount exceeds the aggregate of
debt service charges, general and administrative expenses, and management fees. In 2004 and 2003,
this Residual Interest, as computed, did not result in any income being retained by Pengrowth
Corporation. The royalty indenture provides that royalty income means the aggregate of any
special distributions and gross revenue less, without duplication, the aggregate of the following
amounts:  (a)

operating costs;(b)

general and administrative costs;(c)

management fees and debt service charges;(d)

taxes or other charges payable by Pengrowth Corporation; and(e)

any amounts paid into the reserve. Gross revenues essentially consist of cash proceeds from the sale of petroleum substances produced
from the properties of Pengrowth Corporation and all other money and things of value received by or
incurring to Pengrowth Corporation by virtue of its legal and beneficial ownership of the
properties, but not including processing or transportation revenues or proceeds from the sale of
properties. Special distributions essentially consist of proceeds from the sale of properties that
Pengrowth Corporation is unable to reinvest in suitable replacement properties. The reserve is established by Pengrowth Corporation with miscellaneous revenues (such as
processing and transportation revenues) and allowable portions of gross revenue, and must be used
to fund the payment of operating costs, future abandonments, environmental and reclamation costs,
general and administrative costs, management fees and debt service charges. Any amounts remaining
in the reserve when there are no longer any properties that are subject to the royalty, and all of
the above obligations have been satisfied, are to be paid to Pengrowth Trust and to the holders of
common shares and exchangeable shares of Pengrowth Corporation in proportion to their respective
interests. Pengrowth Corporation is required to pay to the holders of royalty units, on each cash distribution
date, 99% of royalty income received by Pengrowth Corporation from the properties for the period
ending on the last day of the second month immediately preceding that cash distribution date less
the percentage of distributable cash (currently 10%) that is retained by Pengrowth Corporation to
fund capital obligations. See Distributions. The holders of royalty units, including Pengrowth
Trust, will reimburse Pengrowth Corporation for 99% of the non-deductible Crown royalties and other
non-deductible Crown charges payable by Pengrowth Corporation in respect of production from, or
ownership of, the properties. Pengrowth Corporation will at all times be entitled to set off its
right to be so reimbursed against its obligation to pay the royalty. To date, Pengrowth Corporation has not incurred income taxes but is subject to the federal large
corporations tax and the Saskatchewan resource surcharge. Any taxes payable by Pengrowth
Corporation will reduce royalty income, and thus the distributions received by unitholders and
holders of royalty units. 
 The Trustee Computershare is the trustee for holders of royalty units under the royalty indenture and will
remain the trustee thereunder unless it resigns or is removed by unitholders. Computershare or its
successor may resign on 60 days - 47 -




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prior notice to the unitholders, and may be removed by extraordinary resolution of the unitholders.
Computershares successor must be approved in the same manner. Computershare, in accordance with its power to delegate under the trust indenture, has appointed
Pengrowth Corporation as the administrator of Pengrowth Trust to assume those functions of the
trustee which are largely discretionary pursuant to the royalty indenture, subject to the powers
and duties of Pengrowth Management pursuant to the management agreement. 
 EXCHANGEABLE SHARES At the shareholders meeting and royalty unitholders meeting conducted on April 22, 2004,
amendments to the Unanimous Shareholder Agreement were approved to facilitate the issuance of
exchangeable shares. The amendments approved will give the Board of Directors greater flexibility
to issue a series of exchangeable shares of Pengrowth Corporation which could meet Pengrowth
Corporations objectives of creating a security that is economically similar to trust units,
marketable in Canada, the United States and internationally, with favourable income tax
consequences in the offered jurisdictions and that can be issued by Pengrowth Trust without
exceeding the residency restrictions under the mutual fund trust requirements of the Tax Act.
Among other things, exchangeable shares may provide a valuable alternative source of equity to
Pengrowth Corporation to finance ongoing capital commitments of Pengrowth Corporation, new
acquisitions and for other general corporate purposes. The exchangeable shares will be securities
of Pengrowth Corporation that have rights upon a liquidation, wind-up or dissolution of Pengrowth
Corporation (a Liquidation Event) that are economically similar to the rights of trust
unitholders under the Trust Indenture and Royalty Indenture, except in relation to assets other
than royalty units that may be held by Pengrowth Trust and the impact of general claims against
Pengrowth Corporation. As a result of the amendments approved, exchangeable shares will have the
same rights as the rights of the holders of common shares of Pengrowth Corporation to vote, to
dividends or to share splits in lieu of dividends and to the assets of Pengrowth Corporation upon
the occurrence of a Liquidation Event. In addition to the foregoing objective, the exchangeable shares may be eligible for investment by
certain classes of investors for whom there are limitations with respect to holding trust units.
The exchangeable shares may also facilitate business combinations and acquisitions and may be
issued to Pengrowth Management should there be a wind-up or termination of the Management
Agreement. The creation of exchangeable shares was originally approved by unitholders at the annual and
special meetings held on June 17, 2003. It was contemplated at that time if a Liquidation Event
were to occur, that holders of exchangeable shares would exercise their exchange right for trust
units and would participate along with trust unitholders in accordance and provisions prescribed by
the Royalty Indenture and the Trust Indenture. However, a series of exchangeable shares may, from
time to time, be issued that would limit the right of exchange to holders of exchangeable shares
who are resident in Canada or the right of exchange may otherwise be prescribed in terms of Class B
Trust Units and the conditions of ownership thereof. In order not to disenfranchise any holders of exchangeable shares and to create clear rights with
respect to the assets of Pengrowth Corporation subject to claims against Pengrowth Corporation,
unitholder approval was obtained to make appropriate amendments to the Royalty Indenture to create
insolvency rights with respect to the assets of Pengrowth Corporation which are economically
similar to the rights of trust unitholders under the Trust Indenture and the Royalty Indenture.
Although economically similar, these rights are distinct from the rights of holders of trust units
in that the holders of exchangeable shares shall only have a claim against the assets of Pengrowth
Corporation if a Liquidation Event shall occur and shall have no claim against the cash or other
assets of Pengrowth Trust. The exchangeable shares, shall in the same manner as the common shares,
be subject to claims made against the Corporation generally. Upon a Liquidation Event, an amount will be withheld from the assets or monies available for
distribution to royalty unitholders under the Royalty Indenture to be paid to holders of the
exchangeable shares and common shares representing the proportion of the economic interests in
Pengrowth Corporation represented by the exchangeable shares and in the common shares compared with
the beneficial economic interest in Pengrowth Corporation held by the trust unitholders (through
the royalty units held by Pengrowth Trust). - 48 -




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DISTRIBUTIONS We make monthly payments to our unitholders on the 15th of each month or the first business day
following the 15th. The record date for any distribution is ten business days prior to the
distribution date. In accordance with stock exchange rules, an ex-distribution date occurs two
trading days prior to the record date to permit time for settlement of trades of securities and
distributions must be declared a minimum of seven trading days before the record date. Actual distributions paid or declared per trust unit for each quarter for the preceding five fiscal
years were as follows: Actual Distributions Paid or Declared Per Trust Unit2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2000First Quarter
    
    $
    0.63
    
    
    $
    0.75
    
    
    $
    0.41
    
    
    $
    1.14
    
    
    $
    0.89Second Quarter
    
    
    0.64
    
    
    
    0.67
    
    
    
    0.54
    
    
    
    0.83
    
    
    
    0.83Third Quarter
    
    
    0.67
    
    
    
    0.63
    
    
    
    0.52
    
    
    
    0.63
    
    
    
    0.96Fourth Quarter
    
    
    0.69
    
    
    
    0.63
    
    
    
    0.60
    
    
    
    0.41
    
    
    
    1.11Total
    
    $
    2.63
    
    
    $
    2.68
    
    
    $
    2.07
    
    
    $
    3.01
    
    
    $
    3.79
 All amounts distributed to unitholders from the inception of Pengrowth Trust to December 31,
2004 have been treated as a return of capital, except that in 1996, 1999, 2000, 2001, 2002, 2003
and 2004 respectively, Pengrowth Trust had taxable income per trust unit of $0.2044, $0.6742,
$1.9831, $1.7951, $0.4252, $1.4692 and $1.4328 respectively, which was allocated to unitholders
representing 12.2%, 30.4%, 55.8%, 51.4%, 22.0%, 55.2% and 55.3% of total cash distributions for
those years. For Canadian residents, amounts which are treated as a return of capital generally
are not required to be included in a unitholders income but such amounts will reduce the adjusted
cost base to the unitholder of the trust units. At the special meeting of the royalty unitholders of Pengrowth Corporation held on April 23, 2002,
the royalty unitholders approved the amendment of the royalty indenture to permit the board of
directors of Pengrowth Corporation to establish a holdback, within Pengrowth Corporation, of up to
20% of its gross revenue if the board of directors of Pengrowth Corporation determines that it
would be advisable to do so in accordance with prudent business practices to provide for the
payment of future capital expenditures or for the payment of royalty income in any future period.
Subsequent to this royalty unitholder action, the board of directors of Pengrowth Corporation
authorized the establishment of a holdback to fund future capital obligations and future payments
of royalty income to Pengrowth Trust comprised of funds retained within Pengrowth Corporation in an
amount equivalent to approximately 10% of the distributable cash of Pengrowth Trust calculated as
if the reserve had not been established. 
 INDUSTRY CONDITIONS 
 Government Regulation The oil and natural gas industry is subject to extensive controls and regulation imposed by various
levels of government. Although we do not expect that these controls and regulation will affect the
operations of Pengrowth in a manner materially different than they would affect other oil and gas
companies of similar size, the controls and regulations should be considered carefully by investors
in the oil and gas industry. All current legislation is a matter of public record and Pengrowth is
unable to predict what additional legislation or amendments may be enacted. 
 Pricing and Marketing  Oil In Canada, producers of oil negotiate sales contracts directly with oil purchasers, with the result
that the market determines the price of oil. Such price depends, in part, on oil type and quality,
prices of competing fuels, distance - 49 -




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to market, the value of refined products and the supply/demand balance, other contractual terms and
the world price of oil. Oil exports may be made pursuant to export contracts with terms not
exceeding one year, in the case of light crude, and not exceeding two years, in the case of heavy
crude, provided that an order approving any such export has been obtained from the National Energy
Board. Any oil export to be made pursuant to a contract of longer duration (to a maximum of 25
years) requires an exporter to obtain an export licence from the National Energy Board and the
issue of such a licence requires the approval of the Governor in Council. 
 Pricing and Marketing  Natural Gas In Canada, the price of natural gas sold in intraprovincial, interprovincial and international
trade is determined by negotiation between buyers and sellers. Such price depends, in part, on
natural gas quality, prices of competing natural gas and other fuels, distance to market, access to
downstream transportation, length of contract term, weather conditions, the supply/demand balance
and other contractual terms. Natural gas exported from Canada is subject to regulation by the
National Energy Board and the government of Canada. Exporters are free to negotiate prices and
other terms with purchasers, provided that the export contracts must continue to meet certain
criteria prescribed by the National Energy Board and the government of Canada. Natural gas exports
for a term of less than two years or for a term of 2 to 20 years (in quantities of not more than
30,000 m3/day), must be made pursuant to an order of the National Energy Board. Any natural gas
export to be made pursuant to a contract of longer duration (to a maximum of 25 years) or a larger
quantity, requires an exporter to obtain an export licence from the National Energy Board and the
issue of such a licence requires the approval of the Governor in Council. The governments of Alberta, British Columbia and Saskatchewan also regulate the volume of natural
gas which may be removed from those provinces for consumption elsewhere, based on such factors as
reserve availability, transportation arrangements and market considerations. 
 The North American Free Trade Agreement On January 1, 1994, the North American Free Trade Agreement among the governments of Canada, the
U.S. and Mexico became effective. The North American Free Trade Agreement carries forward most of
the material energy terms contained in the Canada-United States Free Trade Agreement. In the
context of energy resources, Canada continues to remain free to determine whether exports to the
United States or Mexico will be allowed, provided that any export restrictions do not: (i) reduce
the proportion of energy resource exported relative to domestic use (based upon the proportion
prevailing in the most recent 36 month period); (ii) impose an export price higher than the
domestic price; or (iii) disrupt normal channels of supply. All three countries are prohibited
from imposing minimum export or import price requirements and, except as permitted in enforcement
of countervailing and antidumping orders and undertakings, minimum or maximum import price
requirements. The North American Free Trade Agreement contemplates the reduction of Mexican restrictive trade
practices in the energy sector and prohibits discriminatory border restrictions and export taxes.
The North American Free Trade Agreement also contemplates clearer disciplines on regulators to
ensure fair implementation of any regulatory changes and to minimize disruption of contractual
arrangements, which is important for Canadian natural gas exports. 
 Provincial Royalties and Incentives The Federal and provincial governments in Canada have legislation and regulations which govern land
tenure, royalties, production rates, environmental protection and other matters. The royalty
regime is a significant factor in the profitability of oil and natural gas production. Royalties
payable on production from lands other than Crown lands are determined by negotiations between the
freehold mineral owner and the lessee, although production from such lands is also subject to
certain provincial taxes and royalties. Crown royalties are determined by governmental regulation
and are generally calculated as a percentage of the value of the gross production, and the rate of
royalties payable generally depends in part on prescribed reference prices, well productivity,
geographical location and field discovery date. - 50 -




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The Government of Albertas royalty structure includes incentives for exploring and developing oil
and natural gas reserves. The incentives include a modification of the royalty formula structure
through the implementation of a third tier royalty. For oil produced from wells drilled after
October 13, 1992, oil royalty reserved to the Crown has a base rate of 10% and a rate cap of 30%.
The oil royalty reserved to the Crown on older oil wells has a base rate of 10% and a rate cap of
35%. The royalty reserved to the Crown in respect of natural gas production, subject to various
incentives, is between 15% and 30%, in the case of new gas, and between 15% and 35%, in the case of
old gas, depending upon a prescribed or corporate average reference price. In Alberta, certain producers of oil or natural gas are also entitled to a credit against the
royalties payable to the Alberta Crown by virtue of the Alberta royalty tax credit program. The
Alberta royalty tax credit program is based on a price-sensitive formula, and the Alberta royalty
tax credit program rate varies between 75%, at prices for oil below $100 per cubic meter, and 25%,
at prices above $210 per cubic meter. The Alberta royalty tax credit program rate is applied to a
maximum of $2,000,000 of Alberta Crown royalties payable for each producer or associated group of
producers. Crown royalties on production from producing properties acquired from companies
claiming maximum entitlement to Alberta royalty tax credit program will generally not be eligible
for Alberta royalty tax credit program. The Alberta royalty tax credit program rate is established
quarterly based on the average par price, as determined by the Alberta Resource Development
Department for the previous quarterly period. In British Columbia, the amount payable as a royalty in respect of oil depends on the vintage of
the oil (whether it was produced from a pool discovered before or after October 31, 1975), the
quantity of oil produced in a month and the value of the oil. Oil produced from newly discovered
pools may be exempt from the payment of a royalty for the first 36 months of production. The
royalty payable on natural gas is determined by a sliding scale based on a reference price which is
the greater of the amount obtained by the producer and a prescribed minimum price. Natural gas
produced in association with oil has a minimum royalty of 8% while the royalty in respect of other
natural gas may not be less than 15%. On May 30, 2003, the Minister of Energy and Mines for British Columbia announced an Oil and Gas
Development Strategy for the Heartlands. The strategy, which was updated in November 2003, is a
comprehensive program to address road infrastructure, targeted royalties, and regulatory reduction
and service-sector opportunities. Some of the financial incentives include: i) royalty credits of
up to $30 million annually towards road infrastructure in support of resource development (Industry
must make an equal contribution); ii) royalty credits for deep gas exploration, re-entry and
horizontal drilling; and iii) royalty credits for unconventional and new basins. The new fiscal regime for the Saskatchewan oil and gas industry effective October 1, 2002, provides
an incentive to encourage exploration and development through a revised royalty/tax structure for
oil and natural gas wells with a finished drilling date on or after October 1, 2002 or incremental
oil production due to a new or expanded waterflood project with a commencement date on or after
October 1, 2002. This fourth tier Crown royalty rate, applicable to both oil and natural gas, is
price sensitive and ranges from a minimum 5% at a base price to a maximum of 30% at a price above
the base price. A fourth tier freehold tax structure, calculated by subtracting a production tax
factor of 12.5 percentage points from the corresponding Crown royalty rates, has also been created
which is applicable to conventional oil, incremental oil from new or expanded waterfloods and
natural gas. The fourth tier royalty/tax structure is also applicable in respect of associated
natural gas that is gathered for use or sale which is produced either from oil wells with a
finished drilling date on or after October 1, 2002 and oil wells with a finished drilling date
prior to October 1, 2002, where the individual oil well has a gas-oil production ratio in any month
of more than 3,500 m3 of natural gas per 1 m3 of oil. In addition, volume-based royalty/tax
reduction incentives have been changed such that a maximum royalty of 2.5% now applies to various
volumes of both oil and natural gas, depending on the depth and nature of the well (up to 16,000 m3
of oil in the case of deep exploratory wells and 25,000 m3 of natural gas produced from exploratory
wells). The royalty/tax category with respect to re-entry and short sectional horizontal oil wells
has been eliminated such that all horizontal oil wells with a finished drilling date on or after
October 1, 2002 will receive fourth tier royalty/tax rates and incentive volumes. Further changes
include the reduction of the corporation capital tax surcharge rate from 3.6% to 2.0% and the
expansion of the deep oil well definition to include oil wells producing from a zone deeper than
1,700 meters provided that the zone is within a geological system deposited during the
Mississippian Period or earlier or from a zone that was deposited before the Bakken zone regardless
of depth. - 51 -




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##### Table of Contents



The Government of Nova Scotia has established a generic royalty regime in respect of oil and gas
produced from offshore Nova Scotia. Such regime contemplates a multi-tier royalty in which the
royalty rate fluctuates when certain threshold levels of rates of return on capital have been
reached. Notwithstanding the generic royalty regime, royalties in respect of offshore Nova Scotia
oil and gas production may be determined contractually between the participant and the government
of Nova Scotia. Oil and natural gas royalty holidays and reductions for specific wells reduce the amount of Crown
royalties paid by Pengrowth to the provincial governments. The Alberta royalty tax credit program
provides a rebate on Alberta Crown royalties paid in respect of eligible producing properties.
These incentives result in increased net income and funds from the operations of Pengrowth. 
 Environmental Regulation The oil and natural gas industry is currently subject to environmental regulation pursuant to
provincial and federal legislation. Environmental legislation provides for restrictions and
prohibitions on releases or emissions of various substances produced or utilized in association
with certain oil and gas industry operations. In addition, legislation requires that well and
facility sites be abandoned and reclaimed to the satisfaction of provincial authorities.
Compliance with such legislation can require significant expenditures. A breach of such
legislation may result in the imposition of material fines and penalties, the revocation of
necessary licenses and authorizations and civil liability for pollution damage. In 1994, the United Nations Framework Convention on Climate Change came into force and three years
later led to the Kyoto Protocol which will require, upon ratification, nations to reduce their
emissions of carbon dioxide and other greenhouse gases. As a consequence of the Kyoto Protocol,
reductions in greenhouse gases from Pengrowths operations may be required which could result in
increased capital expenditures and reductions in production of oil and gas. Pengrowth may however
earn carbon credits offsetting liabilities which may be imposed under Kyoto due to Pengrowths
participation in the carbon dioxide miscible recovery scheme at Weyburn and other potential
tertiary recovery projects in the future. Pengrowth is committed to meeting its responsibilities to protect the environment wherever it
operates and anticipates making increased expenditures of both a capital and expense nature as a
result of increasingly stringent laws relating to the protection of the environment. Pengrowth
Corporation will be taking such steps as required to ensure compliance with the Alberta
Environmental Protection and Enhancement Act, the Environmental Assessment Act(British Columbia)
and similar legislation or requirements in other jurisdictions in which it operates. Pengrowth
believes that it is in material compliance with applicable environmental laws and regulations.
Pengrowth also believes that it is reasonably likely that the trend in environmental legislation
and regulation will continue toward stricter standards. 
 MARKET FOR SECURITIES Prior to the reclassification that occurred at 5:00 p.m. Eastern Daylight Time on July 27, 2004,
our outstanding trust units were listed and posted for trading on the Toronto Stock Exchange
(TSX) and the New York Stock Exchange (NYSE). After July 27, 2004, our Class A trust units are
listed on both the TSX and the NYSE under the symbols PGF.A and PGH, respectively, and our
Class B trust units are listed on the TSX under the symbol PGF.B. - 52 -




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##### Table of Contents



TRADING OF TRUST UNITS PRIOR TO THE RECLASSIFICATION Toronto Stock Exchange
    
    
    
    New York Stock ExchangeShare Price Range
    
    
    
    
    
    
    
    Share Price RangeHigh
    
    
    Low
    
    
    Close
    
    
    Volume
    
    
    
    High
    
    
    Low
    
    
    Close
    
    
    Volume(Canadian $ per trust unit)
    
    
    (thousands)
    
    
    
    (U.S. $ per trust unit)
    
    
    (thousands)2004January
    
    
    21.25
    
    
    
    18.00
    
    
    
    18.56
    
    
    
    10,154
    
    
    
    
    16.60
    
    
    
    13.75
    
    
    
    14.03
    
    
    
    15,248February
    
    
    19.20
    
    
    
    15.55
    
    
    
    19.00
    
    
    
    10,223
    
    
    
    
    14.31
    
    
    
    12.10
    
    
    
    14.22
    
    
    
    12,077March
    
    
    19.72
    
    
    
    17.01
    
    
    
    17.98
    
    
    
    10,242
    
    
    
    
    14.73
    
    
    
    12.76
    
    
    
    13.70
    
    
    
    9,574April
    
    
    18.51
    
    
    
    17.70
    
    
    
    18.10
    
    
    
    8,645
    
    
    
    
    13.92
    
    
    
    13.00
    
    
    
    13.18
    
    
    
    9,508May
    
    
    18.40
    
    
    
    16.15
    
    
    
    17.81
    
    
    
    5,128
    
    
    
    
    13.47
    
    
    
    11.62
    
    
    
    13.13
    
    
    
    7,071June
    
    
    19.15
    
    
    
    17.61
    
    
    
    18.67
    
    
    
    4,372
    
    
    
    
    14.24
    
    
    
    12.99
    
    
    
    13.98
    
    
    
    5,615July (to July 27)
    
    
    19.75
    
    
    
    18.52
    
    
    
    19.42
    
    
    
    3,554
    
    
    
    
    14.95
    
    
    
    13.84
    
    
    
    14.64
    
    
    
    5,797
 TRADING OF CLASS A TRUST UNITS AFTER THE RECLASSIFICATION Toronto Stock Exchange
    
    
    
    New York Stock ExchangeShare Price Range
    
    
    
    
    
    
    
    Share Price RangeHigh
    
    
    Low
    
    
    Close
    
    
    Volume
    
    
    
    High
    
    
    Low
    
    
    Close
    
    
    Volume(Canadian $ per trust unit)
    
    
    (thousands)
    
    
    
    (U.S. $ per trust unit)
    
    
    (thousands)2004July (from July 28)
    
    
    20.00
    
    
    
    19.26
    
    
    
    19.91
    
    
    
    99
    
    
    
    
    14.95
    
    
    
    14.40
    
    
    
    14.95
    
    
    
    843August
    
    
    20.50
    
    
    
    19.10
    
    
    
    20.50
    
    
    
    508
    
    
    
    
    15.81
    
    
    
    14.52
    
    
    
    15.70
    
    
    
    7,363September
    
    
    24.19
    
    
    
    20.19
    
    
    
    22.67
    
    
    
    1,065
    
    
    
    
    18.94
    
    
    
    15.51
    
    
    
    17.93
    
    
    
    12,995October
    
    
    23.90
    
    
    
    20.03
    
    
    
    21.23
    
    
    
    1,004
    
    
    
    
    18.99
    
    
    
    15.85
    
    
    
    17.44
    
    
    
    13,372November
    
    
    24.45
    
    
    
    20.22
    
    
    
    24.12
    
    
    
    725
    
    
    
    
    20.59
    
    
    
    16.65
    
    
    
    20.37
    
    
    
    8,306December
    
    
    26.33
    
    
    
    21.54
    
    
    
    24.93
    
    
    
    878
    
    
    
    
    21.24
    
    
    
    18.00
    
    
    
    20.82
    
    
    
    9,496
 TRADING OF CLASS B TRUST UNITS AFTER THE RECLASSIFICATION Toronto Stock ExchangeShare Price RangeHigh
    
    
    Low
    
    
    Close
    
    
    Volume(Canadian $ per trust unit)
    
    
    (thousands)2004July (from July 28)
    
    
    20.00
    
    
    
    18.52
    
    
    
    18.85
    
    
    
    410August
    
    
    19.06
    
    
    
    18.03
    
    
    
    18.20
    
    
    
    1,463September
    
    
    19.75
    
    
    
    18.17
    
    
    
    18.87
    
    
    
    3,715October
    
    
    20.04
    
    
    
    18.40
    
    
    
    18.89
    
    
    
    4,940November
    
    
    19.25
    
    
    
    17.51
    
    
    
    19.05
    
    
    
    3,557December
    
    
    19.60
    
    
    
    18.00
    
    
    
    18.50
    
    
    
    7,511
 - 53 -




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DIRECTORS AND OFFICERS Pengrowth Trust does not have any directors or officers. The following is a summary of information
relating to the directors and officers respectively of Pengrowth Management, Manager of Pengrowth
Corporation and Pengrowth Trust, and of Pengrowth Corporation, the administrator of Pengrowth
Trust. 
 Directors and Officers of Pengrowth Management The name, municipality of residence, position held and principal occupation of each director and
officer of Pengrowth Management are set out below: Name andMunicipality of Residence
    
    Position with Pengrowth Management
    
    Principal OccupationJames S. Kinnear
Calgary, Alberta
    
    President and Director
(since 1982)
    
    President,
Pengrowth Management LimitedGregory S. Fletcher
Calgary, Alberta
    
    Director
(since 1988)
    
    President,
Sierra Energy Inc.Gordon M. Anderson
Calgary, Alberta
    
    Vice President, Financial Services (since 2001)
Vice President, Treasurer (1998-2001)
Treasurer (1995-1998)
    
    Vice President, Financial Services
Pengrowth Management LimitedCharles V. Selby
Calgary, Alberta
    
    Corporate Secretary
(since 1993)
    
    Lawyer, Selby Professional Corporation
Principal, Ikon Strategies Inc.
 Each of the foregoing directors and officers has had the same principal occupation for the
previous five years except for Mr. Anderson who was Vice President, Treasurer (1998-2001). 
 Principal Holders of Shares of Pengrowth Management James S. Kinnear, President and a director of Pengrowth Management and Chairman, President, Chief
Executive Officer and a director of Pengrowth Corporation, owns, directly or indirectly, all of the
issued and outstanding voting securities of Pengrowth Management. 
 Directors and Officers of Pengrowth Corporation The name, municipality of residence, position held and principal occupation of each director and
officer of Pengrowth Corporation are set out below: Name andMunicipality of
    
    
    
    
    
    Trust Units of Controlled orResidence
    
    Position with Pengrowth Corporation
    
    Principal Occupation
    
    Beneficially Owned(1)(2)James S. Kinnear
Calgary, Alberta
    
    President, Chairman, Director and
Chief Executive Officer
(since 1988)
    
    President,
Pengrowth Management Limited
    
    
    3,700,229Stanley H. Wong(4)
Calgary, Alberta
    
    Director
(since 1988)
    
    President,
Carbine Resources Ltd. a private
oil and gas producing and
engineering consulting company
    
    
    46,576John B. Zaozirny(5)
Calgary, Alberta
    
    Director
(since 1988)
    
    Counsel,
McCarthy Tétrault, Barristers
and Solicitors
    
    
    36,362Thomas A. Cumming(3)(5)Calgary, Alberta
    
    Director
(since 2000)
    
    Business Consultant
    
    
    6,678Michael S. Parrett(3)(5)Aurora, Ontario
    
    Director
(since 2004)
    
    Business Consultant
    
    
    4,000
 - 54 -




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Name andMunicipality of
    
    
    
    
    
    Trust Units of Controlled orResidence
    
    Position with Pengrowth Corporation
    
    Principal Occupation
    
    Beneficially Owned(1)(2)William R. Stedman(3)(4)Calgary, Alberta
    
    Director
(since 2004)
    
    Chairman and
Chief Executive Officer,
ENTx Capital Corporation
    
    
    5,000Gordon M. Anderson
Calgary, Alberta
    
    Vice President (since 2001)
Vice President, Treasurer (1997-2001),
Treasurer (1995-1997)
Chief Financial Officer (1991-1998)
    
    Vice President,
Financial Services,
Pengrowth Management Limited
    
    
    37,626Henry D. McKinnon
Calgary, Alberta
    
    Vice President, Operations
(since 2000)
    
    Vice President, Operations
Pengrowth Corporation
    
    
    12,733Lynn Kis
Calgary, Alberta
    
    Vice President, Engineering
(since 2001)
    
    Vice President, Engineering
Pengrowth Corporation
    
    
    27,178Charles V. Selby
Calgary, Alberta
    
    Corporate Secretary
(since 1993)
    
    Lawyer, Selby Professional
Corporation
Principal,
Ikon Strategies Inc.
    
    
    125,622Chris Webster
Calgary, Alberta
    
    Chief Financial Officer
(since 2005)
    
    Chief Financial Officer
Pengrowth Corporation
    
    
    11,176Lianne Bigham
Calgary, Alberta
    
    Controller
(since 1996)
    
    Controller
Pengrowth Corporation
    
    
    100,019
   Notes:(1)
    
    Does not include trust units issuable upon the exercise of outstanding trust unit options or
trust unit rights.(2)
    
    As at March 9, 2004.(3)
    
    Member of Audit Committee.(4)
    
    Member of Reserves Committee.(5)
    
    Member of Corporate Governance/Compensation Committee.(6)
    
    In addition, Mr. Kinnear exercises control over 13,152 royalty units which are held by
Pengrowth Management Limited.(7)
    
    In addition, Mr. Wong exercises control over 3,288 royalty units held by Carbine Resources
Ltd. As at March 29, 2005, the foregoing directors and officers, as a group, beneficially, owned,
directly or indirectly, 4,113,199 trust units or approximately 2.7% of the issued and outstanding
trust units and held options and rights to acquire a further 1,014,035 trust units. Assuming
exercise of all options and rights, the foregoing directors and officers, as a group, would
beneficially own, directly and indirectly, 5,127,234 trust units or approximately 3.3% of the then
issued and outstanding trust units. The information as to shares beneficially owned, not being
within the knowledge of the Corporation, has been furnished by the respective individuals. The term of each director expires at the next annual meeting of unitholders. The next annual
meeting of unitholders is currently scheduled to be held on April 26, 2005. Each of the foregoing directors and officers has had the same principal occupation for the previous
five years except for Mr. Cumming who was President of the Alberta Stock Exchange from 1988 to
1999; Michael S. Parrett who was Vice-President and Chief Financial Officer of Rio Algom Limited
from 1991 to 2000, Vice-President, Strategic Development and Joint Ventures of Rio from 1999 to
2000, President of Rio from 2000 to 2001; William R. Stedman who was President and CEO of Pembina
Pipeline Corporation from 1997 to 1999; Lynn Kis who was General Manager, Engineering from 1998 to
2001; and Chris Webster who was Vice President, Treasurer from September 30, 2004 to 2005,
Treasurer from 2001 to September 30, 2004, Manager, Operations Accounting from 2000 to 2001 and
Team Leader, Marketing Accounting and Treasury, Union Pacific Resources Inc. from 1996 to 2000. Messrs. A. Terence Poole and Kirby L. Hedrick have been nominated for election as directors at the
annual meeting of unitholders on April 26, 2005. Mr. Poole is a Chartered Accountant who received
his Bachelor of Commerce degree from Dalhousie University in 1965. Mr. Poole would be considered
to be a financial expert for the purpose of the Sarbanes-Oxley Act of 2002 with extensive senior
financial management, accounting, capital and debt market experience. He is presently Executive
Vice President, Corporate Strategy and Development of Nova Chemicals Corporation. Mr. Hedrick is
an engineer who received his Bachelor of Science in Mechanical Engineering (summa cum laude) from
the University of Evansville, Indiana in 1975. He completed the Stanford Executive Program in 1997
and the Stanford Corporate Governance Program in 2003. Prior to retiring in 2000 as Executive Vice - 55 -




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President Upstream of Phillips Petroleum, Mr. Hedrick had a varied 25-year career with Phillips in
the United States and internationally. 
 Corporate Cease Trade Orders or Bankruptcies No current or proposed director, officer or controlling securityholder of Pengrowth or Pengrowth
Management is as at the date of this annual information form or has been, within the past 10 years
before the date hereof, a director or officer of any other issuer that, while that person was
acting in that capacity:  (i)

was the subject of a cease trade or similar order or an order that denied the issuer access
to any exemption under securities legislation for a period of more than 30 consecutive days;
or(ii)

was subject to an event that resulted, after the person ceased to be a director or executive
officer, in the issuer being the subject of a cease trade or similar order or an order that
denied the issuer access to any exemption under securities legislation for a period of more
than 30 consecutive days; or(iii)

within a year of that person ceasing to act in that capacity, became bankrupt, made a
proposal under any legislation relating to bankruptcy or insolvency or was subject to or
instituted any proceedings, arrangement or compromise with creditors or had a receiver,
receiver manager or trustee appointed to hold its assets. 
 Personal Bankruptcies No current or proposed director, officer or controlling securityholder of Pengrowth or Pengrowth
Management has, within the past 10 years before the date hereof, become bankrupt, made a proposal
under any legislation relating to bankruptcy or insolvency, or became subject to or instituted any
proceedings, arrangement or compromise with creditors, or had a receiver manager or trustee
appointed to hold such persons assets. 
 Penalties or Sanctions No current or proposed director, officer or controlling securityholder of Pengrowth or Pengrowth
Management has:  (i)

been subject to any penalties or sanctions imposed by a court relating to securities
legislation or by a securities regulatory authority or has entered into a settlement agreement
with a securities regulatory authority, other than: (i) penalties for
late filing of insider reports; and (ii) Mr. Selby, the Corporate
Secretary of the Corporation, and other directors of AltaCanada
Energy Corp. entered into a settlement agreement in 1998 with the
Alberta Securities Commission in regard to the application of rules
governing junior capital pool companies to drilling expenses assumed
by the directors on behalf of the Company; or(ii)

been subject to any other penalties or sanctions imposed by a court or regulatory body that
would likely be considered important to a reasonable investor in making an investment
decision. 
 AUDIT COMMITTEE The Audit Committee is appointed annually by the Board of Directors. The responsibilities and
duties of the Audit Committee are set forth in the Audit Committee Charter attached hereto as
Appendix C. The following table sets forth the name of each of the current members of the Audit Committee,
whether such member is independent, as defined in Multilateral Instrument 52-110  Audit
Committees, whether such member is financially literate, in that they are able to read and
understand a set of financial statements that represents the breadth and level of complexity of
accounting issues that can reasonably be expected to arise in Pengrowths financial statements, and
the relevant education and experience of such member: - 56 -




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Name
    
    Independent
    

FinanciallyLiterate
    
    Relevant Education and ExperienceThomas A. Cumming
    
    Yes
    
    Yes
    
    Mr. Cumming was President and
Chief Executive Officer of the
Alberta Stock Exchange from 1988
to 1999. His career also
includes 25 years with a major
Canadian bank both nationally
and internationally. He is
currently Chairman of Albertas
Electricity Balancing Pool, and
serves as a Director of the
Canadian Investor Protection
Fund, the Alberta Capital Market
Foundation and Western Lakota
Energy Services Inc. Mr.
Cumming is a professional
engineer and holds a Bachelor of
Applied Science degree in
Engineering and Business.Michael S. Parrett
    
    Yes
    
    Yes
    
    Mr. Parrett is currently an
independent consultant providing
advisory service to various
public companies in Canada and
the United States. Mr. Parrett
is a member of the Board of
Fording Inc. and is serving as a
Trustee for Fording Canadian
Coal Trust as well as a board
member of Gabriel Resources
Limited. He formerly was
President of Rio Algom Limited
and prior to that Chief
Financial Officer of Rio Algom
and Falconbridge Limited. Mr.
Parrett is a chartered
accountant and holds a Bachelor
of Arts in Economics from York
University.William R. Stedman
    
    Yes
    
    Yes
    
    Mr. Stedman has been the
Chairman and CEO of ENTx Capital
Corporation a private venture
capital firm, since its
inception in 2001. He currently
sits on the Board of Directors
of a number of private companies
and on four publicly traded
companies: Innicor Subsurface
Technologies, Keyspan Facilities
Income Fund, Masters Energy,
Inc., and most recently
Pengrowth Corporation. Prior to
co-founding ENTx, Mr. Stedman
was President and CEO of Pembina
Pipeline Corporation, and played
an important role in building
Pembina Corporation into a
substantial Canadian oil and gas
exploration and production and
liquids pipeline company. Mr.
Stedman holds a Masters of
Business Administration from
Harvard Business School (1982),
a Bachelor of Civil Engineering
(with Distinction) from McGill
University (1975), and a
Bachelor of Science from
Dalhousie University (1973).
 
 Principal Accountant Fees and Services The following table provides information about the aggregate fees billed to Pengrowth for
professional services rendered by KPMG LLP during fiscal 2004 and 2003: - 57 -




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2004
    
    
    2003Category
    
    $M
    
    
    $MAudit Fees
    
    $
    624
    
    
    $
    253Audit Related Fees
    
    
    nil
    
    
    
    nilTax Fees
    
    $
    102
    
    
    $
    84All Other Fees
    
    $
    6
    
    
    $
    26Total
    
    $
    732
    
    
    $
    363
 Audit Fees.Audit fees consist of fees for the audit of Pengrowths annual financial statements
and services that are normally provided in connection with statutory and regulatory filings or
engagements. Audit-Related Fees.Audit-related fees normally include due diligence reviews in connection with
acquisitions, research of accounting and audit-related issues and the completion of audits required
by contracts to which Pengrowth is a party. Tax Fees.During 2004 and 2003 the services provided in this category included assistance and
advice in relation to the preparation of income tax returns for Pengrowth and its subsidiaries, tax
advice and planning and commodity tax consultation. All Other Fees.During 2004 and 2003 the services provided in this category included consultation
regarding the US Sarbanes Oxley Actand internal controls. 
 Pre-approval Policies and Procedures Pengrowth has adopted the following policies and procedures with respect to the pre-approval of
audit and permitted non-audit services to be provided by KPMG LLP: The audit committee approves a
schedule which summarizes the services to be provided that the audit committee believes to be
typical, recurring or otherwise likely to be provided by KPMG LLP. The schedule generally covers
the period between the adoption of the schedule and the end of the year, but at the option of the
audit committee, may cover a shorter or longer period. The list of services is sufficiently
detailed as to the particular services to be provided to ensure that (i) the audit committee knows
precisely what services it is being asked to pre-approve and (ii) it is not necessary for any
member of Pengrowths management to make a judgment as to whether a proposed service fits within
the pre-approved services. Services that arise that were not contemplated in the schedule must be
pre-approved by the audit committee chairman or a delegate of the audit committee. The full audit
committee is informed of the services at its next meeting. Pengrowth has not approved any non-audit services on the basis of the de minimisexemptions. All
non-audit services are pre-approved by the Audit Committee in accordance with the pre-approval
policy referenced herein. 
 RISK FACTORS If any of the following risks occur, our production, revenues and financial condition could be
materially harmed, with a resulting decrease in distributions on, and the market price of, our
trust units. As a result, the trading price of our trust units could decline, and you could lose
all or part of your investment.Additional risks are described under the heading Business Risks
in the Managements Discussion Analysis appearing on page 73 of Pengrowth Trusts Annual Report
2004. Our distributions are sensitive to the volatility of crude oil and natural gas prices. The monthly distributions we pay to our unitholders depend, in part, on the prices we receive for
our oil and natural gas production. Oil and natural gas prices can fluctuate widely on a
month-to-month basis in response to a variety of factors that are beyond our control. These factors
include, among others:  

political conditions in the Middle East; - 58 -




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

worldwide economic conditions;

weather conditions;

the supply and price of foreign oil and natural gas;

the level of consumer demand;

the price and availability of alternative fuels;

the proximity to, and capacity of, transportation facilities;

the effect of worldwide energy conservation measures; and

government regulation. Declines in oil or natural gas prices could have an adverse effect on our operations, financial
condition and proved reserves and ultimately on our ability to pay distributions to our
unitholders. Our distributions are affected by production and development costs and capital expenditures. Production and development costs incurred with respect to properties, including power costs and the
costs of injection fluids associated with tertiary recovery operations, reduce the royalty income
that Pengrowth Trust receives and, consequently, the amounts we can distribute to our unitholders. The timing and amount of capital expenditures will directly affect the amount of income available
for distribution to our unitholders. Distributions may be reduced, or even eliminated, at times
when significant capital or other expenditures are made. To the extent that external sources of
capital, including the issuance of additional trust units, become limited or unavailable, Pengrowth
Corporations ability to make the necessary capital investments to maintain or expand oil and gas
reserves and to invest in assets, as the case may be, will be impaired. To the extent that
Pengrowth Corporation is required to use cash flow to finance capital expenditures or property
acquisitions, the cash we receive from Pengrowth Corporation on the royalty units will be reduced,
resulting in reductions to the amount of cash we are able to distribute to our unitholders. Our actual results will vary from our reserve estimates, and those variations could be material. The value of the trust units will depend upon, among other things, Pengrowth Corporations
reserves. In making strategic decisions, we generally rely upon reports prepared by our independent
reserve engineers. Estimating reserves is inherently uncertain. Ultimately, actual production,
revenues and expenditures for the underlying properties will vary from estimates and those
variations could be material. Changes in the prices of, and markets for, oil and natural gas from
those anticipated at the time of making such assessments will affect the return on, and value of,
our trust units. The reserve and cash flow information contained in this Annual Information Form or
contained in the documents incorporated by reference represent estimates only. Petroleum engineers
consider many factors and make assumptions in estimating reserves. Those factors and assumptions
include:  

historical production from the area compared with production rates from similar
producing areas;

the assumed effect of government regulation;

assumptions about future commodity prices, exchange rates, production and
development costs, capital expenditures, abandonment costs, environmental liabilities,
and applicable royalty regimes;

initial production rates; - 59 -




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

production decline rates;

ultimate recovery of reserves;

marketability of production; and

other government levies that may be imposed over the producing life of reserves. If these factors and assumptions prove to be inaccurate, our actual results may vary materially
from our reserve estimates. Many of these factors are subject to change and are beyond our control.
In particular, changes in the prices of, and markets for, oil and natural gas from those
anticipated at the time of making such assessments will affect the return on, and value of, our
trust units. In addition, all such assessments involve a measure of geological and engineering
uncertainty that could result in lower production and reserves than anticipated. A significant
portion of our reserves are classified as undeveloped and are subject to greater uncertainty than
reserves classified as developed. In accordance with normal industry practices, we engage independent petroleum engineers to conduct
a detailed engineering evaluation of our oil and gas properties for the purpose of estimating our
reserves as part of our year-end reporting process. As a result of that evaluation, we may increase
or decrease the estimates of our reserves. We do not consider an increase or decrease in the
estimates of our reserves in the range of one to five percent to be material or inconsistent with
normal industry practice. Any significant reduction to the estimates of our reserves resulting from
any such evaluation could have a material adverse effect on the value of our trust units. Our reserves will be depleted over time and our level of distributable cash and the value of our
trust units could be reduced if reserves are not replaced. Our future oil and natural gas reserves and production, and therefore the cash flows of Pengrowth
Trust, will depend upon our success in acquiring additional reserves. If we fail to add reserves by
acquiring or developing them, our reserves and production will decline over time as they are
produced. When reserves from our properties can no longer be economically produced and marketed,
our trust units will have no value unless additional reserves have been acquired or developed. If
we are not able to raise capital on favourable terms, we may not be able to add to or maintain our
reserves. If we use our cash flow to acquire or develop reserves, we will reduce our distributable
cash. There is strong competition in all aspects of the oil and gas industry including reserve
acquisitions. We will actively compete for reserve acquisitions and skilled industry personnel with
a substantial number of other oil and gas companies and energy trusts. However, many of our
competitors have greater resources than we do and we cannot assure you that we will be successful
in acquiring additional reserves on terms that meet our objectives. Our operation of oil and natural gas wells could subject us to environmental claims and liability. The oil and natural gas industry is subject to extensive environmental regulation, which imposes
restrictions and prohibitions on releases or emissions of various substances produced in
association with certain oil and gas industry operations. In addition, Canadian legislation
requires that well and facility sites be abandoned and reclaimed to the satisfaction of provincial
authorities. A breach of this or other legislation may result in fines or the issuance of a
clean-up order. Ongoing environmental obligations will be funded out of our cash flow and could
therefore reduce distributable cash payable to our unitholders. We may be unable to successfully compete with other companies in our industry. There is strong competition in all aspects of the oil and gas industry. Pengrowth will actively
compete for capital, skilled personnel, undeveloped lands, reserve acquisitions, access to drilling
rigs, service rigs and other equipment, access to processing facilities and pipeline and refining
capacity and in all other aspects of its operations with a substantial number of other
organizations, many of which may have greater technical and financial resources than Pengrowth.
Some of those organizations not only explore for, develop and produce oil and natural gas but also
carry on refining operations and market oil and other products on a world-wide basis and, as such,
have greater and more diverse resources on which to draw. - 60 -




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Incorrect assessments of value at the time of acquisitions could adversely affect the value of our
trust units and our distributions. Acquisitions of oil and gas properties or companies will be based in large part on engineering and
economic assessments made by independent engineers. These assessments include a series of
assumptions regarding such factors as recoverability and marketability of oil and gas, future
prices of oil and gas and operating costs, future capital expenditures and royalties and other
government levies which will be imposed over the producing life of the reserves. Many of these
factors are subject to change and are beyond our control. All such assessments involve a measure of
geologic and engineering uncertainty which could result in lower production and reserves than
anticipated. Our level of debt could have a material adverse effect on our ability to pay distributions to our
unitholders. Pengrowth Corporation has issued US$200 million in term debt due in two tranches, the first tranche
of US$150 million is due in April 2010 and the second tranche of US$50 million is due in April
2013. Pengrowth also has a $375 million revolving credit facility syndicated among eight financial
institutions in place until May 30, 2005. The $375 million facility has a 364 day revolving period
and should it not be renewed on May 30, 2005, it will be repayable over a two year period.
Pengrowth also has a $35 million demand operating line of credit. We draw upon these credit
facilities from time to time to make acquisitions of oil and natural gas properties and to fund
capital investments in our properties. We pay interest at fluctuating rates with respect to a
portion of our outstanding debt under our existing credit facilities. Variations in interest rates
and scheduled principal repayments could result in significant changes in the amount Pengrowth is
required to apply to service its debt. Certain covenants in the agreements with our lenders may
also limit the amount of the royalty paid by Pengrowth Corporation to Pengrowth Trust and the
distributions paid by us to our unitholders. We cannot assure you that the amount of our credit
facility will be adequate for our future financial obligations or that we will be able to obtain
additional funds. If we become unable to pay our debt service charges or otherwise cause an event
of default to occur, our lenders may foreclose on or sell the properties. The net proceeds of any
such sale will be allocated firstly, to the repayment of our lenders and other creditors and only
the remainder, if any, would be payable to Pengrowth Trust by Pengrowth Corporation in respect of
the royalty. Loss of our key management and other personnel could impact our business. Our unitholders are entirely dependent on the management of Pengrowth Management and Pengrowth
Corporation with respect to the acquisition of oil and gas properties and assets, the development
and acquisition of additional reserves, the management and administration of all matters relating
to properties and the administration of Pengrowth Trust. The loss of the services of key
individuals who currently comprise the management team of Pengrowth Management and Pengrowth
Corporation could have a detrimental effect on Pengrowth Trust. In addition, increased activity
within the oil and gas sector can increase the cost of goods and services and make it more
difficult to have and retain qualified professional staff. Trust distributions are affected by marketability of production. The marketability of our production depends in part upon the availability, proximity and capacity
of gas gathering systems, pipelines and processing facilities. United States federal and state and
Canadian federal and provincial regulation of oil and gas production and transportation, general
economic conditions, and changes in supply and demand could adversely affect our ability to produce
and market oil and natural gas. If market factors dramatically change, the financial impact on us
could be substantial. The availability of markets is beyond our control. The operation of a significant portion of our properties is largely dependent on the ability of
third party operators, and harm to their business could cause delays and additional expenses in our
receiving revenues. The continuing production from a property, and to some extent the marketing of production, is
dependent upon the ability of the operators of our properties. Currently 42% of our properties are
operated by third parties, based on daily production. If, in situations where we are not the
operator, the operator fails to perform these functions properly or becomes insolvent, then
revenues may be reduced. Revenues from production generally flow through the - 61 -




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operator and, where we are not the operator, there is a risk of delay and additional expense in
receiving such revenues. The operation of the wells located on properties not operated by us are generally governed by
operating agreements which typically require the operator to conduct operations in a good and
workmanlike manner. Operating agreements generally provide, however, that the operator will have no
liability to the other non-operating working interest owners for losses sustained or liabilities
incurred, except such as may result from gross negligence or wilful misconduct. In addition,
third-party operators are generally not fiduciaries with respect to Pengrowth Corporation,
Pengrowth Trust or the unitholders. Pengrowth Corporation, as owner of working interests in
properties not operated by it, will generally have a cause of action for damages arising from a
breach of the operators duty. Although not established by definitive legal precedent, it is
unlikely that the Pengrowth Trust or our unitholders would be entitled to bring suit against
third-party operators to enforce the terms of the operating agreements. Therefore, our unitholders
will be dependent upon Pengrowth Corporation, as owner of the working interest, to enforce such
rights. Our distributions could be adversely affected by unforeseen title defects. Although title reviews are conducted prior to any purchase of resource assets, such reviews cannot
guarantee that an unforeseen defect in the chain of title will not arise to defeat our title to
certain assets. Such defects could reduce the amounts distributable to our unitholders, and could
result in a reduction of capital. Fluctuations in foreign currency exchange rates could adversely affect our business. World oil prices are quoted in United States dollars and the price received by Canadian producers
is therefore affected by the Canadian/United States dollar exchange rate which fluctuates over
time. A material increase in the value of the Canadian dollar may negatively impact our net
production revenue and cash flow. To the extent that we have engaged, or in the future engage, in
risk management activities related to commodity prices and foreign exchange rates, through entry
into oil or natural gas price hedges and forward foreign exchange contracts or otherwise, we may be
subject to unfavourable price changes and credit risks associated with the counterparties with
which we contract. A decline in the value of the Canadian dollar relative to the United States dollar provides a
competitive advantage to United States companies in acquiring Canadian oil and gas properties and
may make it more difficult for us to replace reserves through acquisitions. Our insurance coverage could be inadequate. We are exposed to a number of risks and maintain liability insurance, where available, in amounts
consistent with industry standards. However, we may become liable for damages arising from events
against which we cannot insure, or against which we may elect not to insure because of high premium
costs or other reasons. The costs to repair such damage or pay such liabilities could reduce
distributable income. Our operations are subject to all of the risks normally associated with
drilling for, and the production and transportation of oil and natural gas. Such risks and hazards
include encountering unexpected formations or pressures, blow-outs, craterings and fires, all of
which could result in personal injury, loss of life, property damage and environmental damage.
Although we have safety and environmental policies in place to protect operators and employees, as
well as to meet regulatory requirements, and although we have liability insurance policies in
place, we cannot fully insure against all such risks. Costs incurred to repair such damage or pay
such liabilities will reduce payments made by Pengrowth Corporation to Pengrowth Trust. Being a limited purpose trust makes Pengrowth Trust largely dependent upon the operations and
assets of Pengrowth Corporation. Pengrowth Trust is a limited purpose trust which is dependent upon the operations and assets of
Pengrowth Corporation. Pengrowth Corporations income will be received from the production of crude
oil and natural gas from its properties and will be susceptible to the risks and uncertainties
associated with the oil and natural gas industry generally. Since the primary focus is to pursue
growth opportunities through the development of existing reserves - 62 -




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and the acquisition of new properties, Pengrowth Corporations involvement in the exploration for
oil and natural gas is minimal. As a result, if the oil and natural gas reserves associated with
Pengrowth Corporations resource properties are not supplemented through additional development or
the acquisition of oil and natural gas properties, the ability of Pengrowth Corporation to continue
to generate cash flow for distribution to unitholders may be adversely affected. The SOEP properties may present challenges and risks that we have not faced in the past. Some of the SOEP reservoirs have proved to be more complex than originally expected. Faulting at
Venture and other fields has caused compartmentalization and a reduction in gas recovery. Alma and
South Venture are in the early stages of recovery so future recovery could change materially
affecting our interests. No assurance can be given that capital obligations will not be greater
than forecast and that there will not be further negative revisions to reserves. Management may have conflicts of interest. Pengrowth Management provides advisory, management and administrative needs of Pengrowth Trust and
Pengrowth Corporation in consideration for a management fee which is currently based in part on net
production revenue of Pengrowth Corporation. This arrangement may create an incentive for Pengrowth
Management to maximize the net production revenue of Pengrowth Corporation, rather than maximizing
its distributable cash, which is the primary basis for calculating distributions available to
unitholders. Pengrowth Management may manage and administer such additional acquired properties, as well as
enter into other types of energy related management and advisory activities and may not devote full
time and attention to the business of Pengrowth Corporation and therefore act in contradiction to
or competition with the interests of our unitholders. General and administrative expenses which Pengrowth Management incurs in relation to the business
of Pengrowth Corporation and Pengrowth Trust are required to be paid by Pengrowth Corporation.
These expenses are not subject to a limit other than as may be provided under a periodic review by
the Board of Directors and, as a result, there may not be an incentive for Pengrowth Management to
minimize these expenses. We may incur material costs to comply with, or as a result of, health, safety and environmental
laws and regulations. Compliance with environmental laws and regulations could materially increase our costs. We may
incur substantial capital and operating costs to comply with increasingly complex laws and
regulations covering the protection of the environment and human health and safety. In particular,
we may be required to incur significant costs to comply with the 1997 Kyoto Protocol to the United
Nations Framework Convention on Climate Change, known as the Kyoto Protocol that is intended to
reduce emissions of pollutants into the air. Lower oil and gas prices increase the risk of write-downs of our oil and gas property investments. Under Canadian accounting rules, the net capitalized cost of oil and gas properties may not exceed
a ceiling limit which is based, in part, upon estimated future net cash flows from reserves. If
the net capitalized costs exceed this limit, we must charge the amount of the excess against
earnings. As oil and gas prices decline, our net capitalized cost may approach and, in certain
circumstances, exceed this cost ceiling, resulting in a charge against earnings. Under United
States accounting rules, the cost ceiling is generally lower than under Canadian rules because the
future net cash flows used in the United States ceiling test are discounted to a present value.
Accordingly, we would have more risk of a ceiling test write-down in a declining price environment
if we reported under United States generally accepted accounting principles. While these
write-downs would not affect cash flow, the charge to earnings could be viewed unfavourably in the
market or could limit our ability to borrow funds or comply with covenants contained in our current
or future credit agreements or other debt instruments. Changes in Canadian legislation could adversely affect the value of our trust units. - 63 -




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The value of the trust units is largely related to our income tax treatment. We cannot assure you
that income tax laws and government incentive programs relating to the oil and natural gas industry
generally, the status of royalty trusts having our structure, the Alberta royalty tax credit and
the resource allowance will remain favourable and not change in a manner that adversely affects
your investment. If Pengrowth Trust ceases to qualify as a mutual fund trust it would adversely affect the value of
our trust units. It is intended that Pengrowth Trust will at all times qualify as a mutual fund trust for the
purposes of the Tax Act. While Pengrowth Trust may have an alternative basis for qualifying as a
mutual fund trust, Pengrowth Trust intends to take measures to ensure that it qualifies as a mutual
fund trust on the basis that it is not reasonable, at any time, to consider that Pengrowth Trust
was established or is maintained primarily for the benefit of non-residents of Canada. Recent residency information received by Pengrowth regarding the beneficial ownership of trust
units indicates that a majority of trust units are owned by non-residents of Canada. However, it
is the view of Pengrowth Corporation that Pengrowth Trust is not being maintained primarily for the
benefit of non-residents as it is continuing to undertake measures to monitor, control and
ultimately reduce the level of non-resident ownership, including implementation of the
reclassification of the outstanding Trust Units as Class A and B Trust Units, where the Class B
Trust Units may not be owned by non-residents of Canada and will constitute greater than 50% of the
outstanding trust units. See General Development of Pengrowth Energy Trust  Recent Acquisitions,
Financings and Developments  Reclassification of Trust Unit Capital. Notwithstanding the steps taken or to be taken by Pengrowth, no assurance can be given that the
status of Pengrowth Trust as a mutual fund trust will not be challenged by a relevant taxation
authority. If Pengrowth Trusts status as a mutual fund trust is determined to have been lost,
certain negative tax consequences will have resulted for Pengrowth Trust and its unitholders.
These negative tax consequences include the following:  

The trust units would cease to be a qualified investment for trusts governed by
RRSPs, RRIFs, RESPs and DPSPs, as defined in the Tax Act. Where, at the end of a
month, a RRSP, RRIF, RESP or DPSP holds trust units that ceased to be a qualified
investment, the RRSP, RRIF, RESP or DPSP, as the case may be, must, in respect of that
month, pay a tax under Part XI.1 of the Tax Act equal to 1% of the fair market value of
the trust units at the time such trust units were acquired by the RRSP, RRIF, RESP or
DPSP. In addition, trusts governed by a RRSP or a RRIF which hold trust units that are
not qualified investments will be subject to tax on the income attributable to the
trust units while they are non-qualified investments, including the full capital gains,
if any, realized on the disposition of such trust units. Where a trust governed by a
RRSP or a RRIF acquires trust units that are not qualified investments, the value of
the investment will be included in the income of the annuitant for the year of the
acquisition. Trusts governed by RESPs which hold trust units that are not qualified
investments can have their registration revoked by the Canada Revenue Agency.

Pengrowth Trust would be required to pay a tax under Part XII.2 of the Tax Act. The
payment of Part XII.2 tax by Pengrowth Trust may have adverse income tax consequences
for certain unitholders, including non-resident persons and residents of Canada who are
exempt from Part I tax.

The trust units would be foreign property for RRSPs, RRIFs DPSPs and other persons
subject to tax under Part XI of the Tax Act.

Pengrowth Trust would not be entitled to use the capital gains refund mechanism
otherwise available for mutual fund trusts.

The trust units would constitute taxable Canadian property for the purposes of the
Tax Act, potentially subjecting non-residents of Canada to tax pursuant to the Tax Act
on the disposition (or deemed disposition) of such trust units. - 64 -




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The ability of investors resident in the United States to enforce civil remedies may be affected
for a number of reasons. Pengrowth Trust is an Alberta trust and Pengrowth Management and Pengrowth Corporation are both
Alberta corporations. All of these entities have their principal places of business in Canada. All
of the directors and officers of Pengrowth Management and Pengrowth Corporation are residents of
Canada and all or a substantial portion of the assets of such persons and of Pengrowth Trust are
located outside of the United States. Consequently, it may be difficult for United States investors
to effect service of process within the United States upon Pengrowth Trust or such persons or to
realize in the United States upon judgments of courts of the United States predicated upon civil
remedies under the Securities Act of 1933(United States), as amended. Investors should not assume
that Canadian courts:  (a)

will enforce judgments of United States courts obtained in actions against Pengrowth Trust or
such persons predicated upon the civil liability provisions of the United States federal
securities laws or the securities or blue sky laws of any state within the United States; or(b)

will enforce, in original actions, liabilities against Pengrowth Trust or such persons
predicated upon the United States federal securities laws or any such state securities or blue
sky laws. Our trust units are not equivalent to shares. Trust units should not be viewed by investors as shares in Pengrowth Corporation. Trust units are
also dissimilar to conventional debt instruments in that there is no principal amount owing to our
unitholders. Trust units represent a fractional interest in Pengrowth Trust. unitholders will not
have the statutory rights normally associated with ownership of shares of a corporation including,
for example, the right to bring oppression or derivative actions. Pengrowth Trusts assets are
royalty units and common shares of Pengrowth Corporation and certain facilities interests, and may
also include certain other investments permitted under the trust indenture. The price per trust
unit is a function of anticipated distributable cash, the oil and natural gas properties acquired
by Pengrowth Corporation and the ability to effect long-term growth in the value of Pengrowth
Corporation. The market price of the trust units will be sensitive to a variety of market
conditions including, but not limited to, interest rates and the ability of Pengrowth Corporation
to acquire suitable oil and natural gas properties. Changes in market conditions may adversely
affect the trading price of our trust units. Trust units will have no value when reserves from the properties can no longer be economically
produced or marketed and, as a result, cash distributions do not represent a yield in the
traditional sense as they represent both return of capital and return on investment. unitholders
will have to obtain the return of capital invested out of cash flow derived from their investments
in the trust units during the period when reserves can be economically recovered. Accordingly, we
give no assurances that the distributions you receive over the life of your investment will meet or
exceed your initial capital investment. You may experience substantial future dilution given that the success of Pengrowth Trust is
dependent upon raising capital. One of our objectives is to continually add to our reserves through acquisitions and through
development. Our success is, in part, dependent on our ability to raise capital from time to time.
Unitholders may also suffer dilution in connection with future issuance of trust units. Canadian and United States practices differ in reporting reserves and production. We report our production and reserve quantities in accordance with Canadian practices and
specifically in accordance with NI 51-101. These practices are different from the practices used to
report production and to estimate reserves in reports and other materials filed with the United
States Securities and Exchange Commission by companies in the United States. - 65 -




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We incorporate additional information with respect to production and reserves which is either not
generally included or prohibited under rules of the United States Securities and Exchange
Commission and practices in the United States. We follow the Canadian practice of reporting gross
production and reserve volumes; however, we also follow the United States practice of separately
reporting these volumes on a net basis (after the deduction of royalties and similar payments). We
also follow the Canadian practice of using forecast prices and costs when we estimate our reserves;
however, we separately estimate our reserves using prices and costs held constant at the effective
date of the reserve report in accordance with the Canadian reserve reporting requirements. These
requirements are similar to the constant pricing reserve methodology utilized in the United States. We include in this Annual Information Form estimates of proved and proved plus probable reserves.
The United States Securities and Exchange Commission generally prohibits the inclusion of estimates
of probable reserves in filings made with it. This prohibition does not apply to Pengrowth Trust
because it is a Canadian foreign private issuer. You may be required to pay taxes even if you do not receive any cash distributions. You may be required to pay federal income taxes and, in some cases, state, provincial and local
income taxes on your share of our taxable income even if you do not receive any cash distributions
from us. You may not receive cash distributions from us equal to your share of our taxable income
or even equal to the actual tax liability that results from your share of our taxable income. Unitholders who are United States persons face income tax risks. The United States federal income tax risks related to owning and disposing of our trust units,
include the following:  

Because the trust units will be publicly traded, Pengrowth Trust will not be treated
as a corporation for U.S. federal income tax purposes only if 90% or more of its gross
income consists of qualifying income. Although Pengrowth Trust expects to satisfy the
90% requirement at all times, if it fails to satisfy this requirement, it will be
treated as a foreign corporation. If Pengrowth Trust were treated as a corporation, it
could be a passive foreign investment company or PFIC. Treatment of Pengrowth Trust
as a PFIC could result in a material reduction in the after-tax return to the
unitholders, likely causing a substantial reduction in the value of the trust units.

A successful U.S. Internal Revenue Service (IRS) contest of the federal income tax
positions we take or have taken may adversely affect the market for our trust units.
For example, the IRS could challenge our position that the royalty from Pengrowth
Corporation should be treated as a non-operating, non-working interest. We have not
requested a ruling from the IRS with respect to this or any other matter affecting us
other than relating to the timeliness of our election to be treated as a partnership.
The IRS may adopt positions that differ from the conclusions of our counsel or from the
positions we take or have taken. It may be necessary to resort to administrative or
court proceedings to sustain our counsels conclusions or those positions. A court may
not concur with our counsels conclusions or the positions we take or have taken. Any
contest with the IRS may materially and adversely impact the U.S. federal income tax
consequences to unitholders and, therefore, the market for our trust units and the
price at which they trade. In addition, the costs of any contest with the IRS,
principally legal, accounting and related fees, will be borne by us and indirectly by
the unitholders.

Tax gain or loss on disposition of trust units could be different from expected. If
you sell your trust units, you will recognize gain or loss equal to the difference
between the amount realized and your tax basis in the trust units. Prior distributions
in excess of the total net taxable income you were allocated, which decreased your tax
basis in the trust units, will, in effect, become taxable income to you if the trust
units are sold at a price greater than your tax basis in those trust units, even if the
price you receive is less than your original cost. A substantial portion of the amount
realized, whether or not representing gain, may be ordinary income to you. Should the
IRS successfully contest some positions we take, you could recognize more gain on the
sale of trust - 66 -




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units than would be the case under those positions, without the benefit of decreased
income in prior years. Also, if you sell trust units, you may incur a tax liability
in excess of the amount of cash you receive from the sale.  

We have registered with the IRS as a tax shelter. This may increase the risk of an
IRS audit of us or a unitholder. The tax laws require that some types of entities
register as tax shelters in response to the perception that they claim tax benefits
that may be unwarranted. As a result, we may be audited by the IRS and tax adjustments
could be made. Any unitholder owning less than a 1% profits interest in us has very
limited rights to participate in the income tax audit process. Further, any adjustments
in our tax returns will lead to adjustments in our unitholders tax returns and may
lead to audits of unitholders tax returns and adjustments of items unrelated to us.
You will bear the cost of any expense incurred in connection with an examination of
your personal tax return.

We will treat each owner of trust units as having the same tax benefits without
regard to the specific trust units purchased. The IRS may challenge this treatment,
which could adversely affect the value of our trust units. Because we cannot match
transferors and transferees of our trust units, we will adopt depletion, depreciation
and amortization positions that do not conform with all aspects of final Treasury
regulations. A successful IRS challenge to those positions could adversely affect the
amount of tax benefits available to you. It also could affect the timing of these tax
benefits or the amount of gain from your sale of trust units and could have a negative
impact on the value of our trust units or result in audit adjustments to your tax
returns.

Pengrowth Trust may not be an appropriate investment for certain types of entities.
For example, there is a risk that some of Pengrowth Trusts income could be unrelated
business taxable income with respect to tax-exempt organizations. Furthermore, we
anticipate that substantially all of Pengrowth Trusts gross income will not be
qualifying income for purposes of the rules relating to regulated investment
companies. 
 CONFLICTS OF INTEREST There may be situations in which the interests of Pengrowth Management will conflict with those of
our unitholders. Pengrowth Management may acquire oil and natural gas properties on behalf of
persons other than the unitholders. Pengrowth Management may manage and administer such additional
properties, as well as enter into other types of energy-related management and advisory activities.
Accordingly, neither Pengrowth Management nor its management will carry on their full-time
activities on behalf of unitholders and, when acting on behalf of others, may at times act in
contradiction to or competition with the interests of unitholders. In the event that the interests
of Pengrowth Management are in conflict with those of our unitholders, Pengrowth Management is
obliged to make decisions acting in good faith, having regard to the best interests of unitholders
and in a manner that would not contravene its fiduciary obligations to unitholders. Although Pengrowth Management provides advisory and management services to Pengrowth Corporation
and Pengrowth Trust, the Board of Directors supervises the management of the business and affairs
of Pengrowth Corporation and Pengrowth Trust. As a practical matter, Pengrowth Management defers
to the Board of Directors on all matters of material significance to the unitholders. The Board of
Directors makes significant operational decisions and all decisions relating to:  (i)

the issuance of additional trust units;(ii)

material acquisitions and dispositions of properties;(iii)

material capital expenditures;(iv)

borrowing; and(v)

the payment of distributable cash. - 67 -




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Properties may not be acquired from officers or directors of Pengrowth Management or persons not at
arms length with such persons at prices which are greater than fair market value and properties
may not be sold to officers or directors of Pengrowth Management or persons not at arms length
with such persons at prices which are less than fair market value, in each case as established by
an opinion of an independent financial advisor and approved by the independent members of the Board
of Directors. There may be circumstances where certain transactions may also require the
preparation of a formal valuation and the affirmative vote of unitholders in accordance with the
requirements of Ontario Securities Commission Rule 61-501  Insider Bids, Issuer Bids, Going
Private Transactions and Related Party Transactions. Circumstances may arise where members of the Board of Directors serve as directors or officers of
corporations which are in competition to the interests of Pengrowth Corporation and Pengrowth
Trust. No assurances can be given that opportunities identified by such board members will be
provided to Pengrowth Corporation and Pengrowth Trust. 
 LEGAL PROCEEDINGS There are no outstanding legal proceedings material to Pengrowth to which Pengrowth is a party or
in respect of which any of its properties are subject, nor are there any such proceedings known to
Pengrowth to be contemplated. 
 INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS Other than as discussed herein, there are no material interests, direct or indirect, of directors,
executive officers, senior officers, any direct or indirect unitholder of Pengrowth who
beneficially owns, or who exercises control over, more than 10% of the outstanding trust units or
any known associate or affiliate of such persons, in any transaction within the three most recently
completed financial years or during the current financial year that has materially affected or will
materially affect Pengrowth. Mr. James S. Kinnear, President and a director of Pengrowth Management and Chairman, President,
Chief Executive Officer and a director of Pengrowth Corporation, is a shareholder (holding shares
that represent less than 1% of the outstanding shares) of Rockwater Capital Corporation, of which
First Associates Investments Inc. is a subsidiary. First Associates Investments Inc. participated
as a member of the syndicate of underwriters in connection with the December 30, 2004 equity
offering by Pengrowth Trust of 15,985,000 Class B Trust Units and received a portion of the
underwriters fee. Mr. John Zaozirny, the lead director of Pengrowth Corporation, is the Vice-Chairman of Canaccord
Capital Corporation. Canaccord Capital Corporation participated as a member of the syndicate of
underwriters in connection with the March 23, 2004 and December 30, 2004 equity offerings by
Pengrowth Trust of 10,900,000 and 15,985,000 trust units, respectively, and received a portion of
the underwriters fee from both offerings. 
 INTERESTS OF EXPERTS As of the date hereof, the partners and associates, as a group of Bennett Jones LLP beneficially
own, directly or indirectly, less than 1% of the outstanding trust units. As of the date hereof,
the directors and officers of Gilbert Laustsen Jung & Associates Ltd., as a group, beneficially
own, directly or indirectly, less than 1% of the outstanding trust units. 
 AUDITORS, TRANSFER AGENT AND REGISTRAR The transfer agent and registrar for the Class A trust units is Computershare Trust Company of
Canada at its principal offices in the cities of Montreal, Toronto, Calgary and Vancouver in Canada
and New York, New York and Denver, Colorado in the United States of America. The transfer agent
and registrar for the Class B trust units is Computershare Trust Company of Canada at its principal
offices in the cities of Montreal, Toronto, Calgary and Vancouver. The auditors of Pengrowth Trust
are KPMG LLP, Chartered Accountants, Calgary, Alberta. - 68 -




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MATERIAL CONTRACTS The only material contracts entered into by Pengrowth Corporation or Pengrowth Trust during the
most recently completed financial year, or before the most recently completed financial year that
is still in effect, other than during the ordinary course of business, are as follows:  1.

Trust Indenture;2.

Royalty Indenture;3.

Unanimous Shareholders Agreement, and4.

Management Agreement. Copies of these contracts have been filed by the Trust on SEDAR and are available through the SEDAR
website at www.sedar.com. 
 CODE OF ETHICS Pengrowth has adopted a code of ethics, as that term is defined in Form 40-F under the U.S.
Securities Exchange Act of 1934(the Code of Ethics) that applies to Pengrowths management,
including its Chief Executive Officer, Chief Financial Officer and principal accounting officer.
The Code of Ethics is available for viewing on our website (http://www.pengrowth.com). Since the adoption of its Code of Ethics, Pengrowth has not amended the code or granted any waivers
(including implicit waivers) from the terms thereof. 
 OFF-BALANCE SHEET ARRANGEMENTS Pengrowth has no off-balance sheet arrangements. 
 TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS The disclosure regarding the contractual obligations of Pengrowth under the heading Commitments
and Contractual Obligations in the Managements Discussion and Analysis appearing on page 69 of
Pengrowth Trusts Annual Report for the year ended December 31, 2004 is incorporated by reference
herein. 
 DISCLOSURE PURSUANT TO THE REQUIREMENTS OF THE NEW YORK STOCK EXCHANGE As a Canadian reporting issuer with securities listed on the TSX, Pengrowth has in place a system
of corporate governance practices which complies with the TSX corporate governance guidelines and
the corporate governance rules of the NYSE applicable to foreign private issuers. In the context
of its listing on the New York Stock Exchange, Pengrowth is classified as a foreign private issuer
and therefore only certain of the NYSE rules are applicable to Pengrowth. However, Pengrowth
benchmarks its policies and procedures against major north American entities, with a view to
adopting the best practices when appropriate to its circumstances. The Board of Directors of Pengrowth Corporation has formerly adopted and published a Corporate
Governance Policy which affirms Pengrowths commitment to maintaining a high standard of corporate
governance. This policy is published on Pengrowths website at www.pengrowth.com. In addition,
Pengrowths corporate governance practices are published in its Information Circular  Proxy
Statement dated March 14, 2005 under the heading Part II  Corporate Governance and on pages 41
through 46 of Pengrowths Annual Report 2004 under the headings Corporate Responsibility,
Corporate Governance Practices and Structure and Function. The Board of Directors of Pengrowth
Corporation has also adopted an Audit Committee Charter, Corporate Governance/Compensation
Committee Terms of Reference, a Code of Business Conduct, a Corporate Disclosure Policy, an Insider
Trading Policy and a Whistle Blower Policy each of which is published on Pengrowths website. The
Audit Committee Charter is also attached hereto as Appendix C. - 69 -




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The following is a summary of significant ways in which Pengrowths corporate governance practices
differ from those required to be followed by domestic United States issuers under the NYSE Listed
Company Manual:  

The NYSE Listed Company Manual requires that each member of the
audit committee be financially literate and that at least one
member of the audit committee have accounting or related financial
management expertise. Pengrowths Audit Committee Charter
requires that all members of the Audit Committee have a basic
understanding of finance and accounting and be able to read and
understand fundamental financial statements, but does not require
any member to satisfy a higher standard. However, as a matter of
practice, Pengrowths Audit Committee includes a financial expert
and thereby satisfies the NYSE requirement.

The NYSE Listed Company Manual requires that the
nominating/corporate governance committee and compensation
committee be comprised entirely of independent directors. The
terms of reference of Pengrowths Corporate
Governance/Compensation Committee provide that only a majority of
the members of the committee be unrelated directors. An
unrelated director is a director who is independent of
management and is free from any interest and any business or other
relationship which could, or could reasonably be perceived to,
materially interfere with the directors ability to act in the
best interests of Pengrowth other than interests arising from
securityholdings. However, all members of Pengrowths Corporate
Governance/Compensation Committee are currently unrelated,
therefore satisfying the NYSE requirement.

The NYSE Listed Company Manual requires the audit committee
charter to address the duties and responsibilities of the
committee which must include that the audit committee must discuss
the listed companys earnings press releases, as well as financial
information and earnings guidance provided to analysts and rating
agencies. Pengrowths audit committee charter does not require
that the audit committee discuss this type of information before
being released to the public or provided to analysts or rating
agencies; however, Pengrowth has a written Corporate Disclosure
Policy and has established a Disclosure Policy Committee
consisting of the CEO, CFO, Manager of Investor Relations, the
Lead Director and Corporate Secretary. Pursuant to the Corporate
Disclosure Policy, the Disclosure Policy Committee reviews, and
makes determinations in respect of, all new releases issued by
Pengrowth, and the release of information to analysts and
investors.

The NYSE Listed Company Manual requires the written charter of the
compensation committee to state that the committee has
responsibility to review and approve corporate goals and
objectives relevant to CEO compensation, evaluate the CEOs
performance in light of those goals and objectives and either as a
committee or together with the other independent directors (as
directed by the board) determine and approve the CEOs
compensation level based on this evaluation. In Pengrowths
structure, the CEO is compensated through the Management Agreement
with Pengrowth Management. The charter for Pengrowths Corporate
Governance/Compensation Committee recognizes this distinction and
requires the committee to review the performance of Pengrowth
Management and review and consider the terms of the Management
Agreement, where appropriate to enter into discussions with
Pengrowth Management as to amendments or changes to the Management
Agreement that are in the interests of unitholders and to set
annual performance targets and plans in connection therewith.

The NYSE Listed Company Manual provides that an issuer must adopt
and disclose corporate governance guidelines that include the
responsibilities of directors. Pengrowth has not adopted
guidelines that specify the responsibilities of directors as of
the date hereof, but allows the Corporate Governance/Compensation
Committee to ensure that individual directors satisfy the
expectations of the committee through the authority of that
committee to assess the effectiveness of the Board of Directors,
its committees and the contribution of individual directors.

The NYSE Listed Company Manual requires shareholder approval of
all equity compensation plans and any material revisions to such
plans, regardless of whether the security is to be delivered under
such plans are newly issued or purchased on the open market,
subject to a few limited exceptions. In contrast, the TSX rules
require shareholder approval of equity compensation plans only
when such plans involve newly - 70 -




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issued securities. If the plan provides a procedure for its amendment, the TSX
rules require shareholder approval of amendments only where the amendment
involves a reduction in the exercise price or an extension of the term of
options held by insiders. As a matter or practice, Pengrowth has obtained the
approval of its unitholders to all of its equity compensation plans, regardless
of whether the trust units to be delivered under such plans are newly issued or
purchased on the open market.  

The NYSE Listed Company Manual requires that the
charters of the nominating/corporate governance
committee, the audit committee and the compensation
committee require an annual performance evaluation of
the committee. While Pengrowths charters for these
committees does not require those committees to
perform an annual performance evaluation, the charter
of the Corporate Governance/Compensation Committee
includes the mandate to assess the effectiveness of
the board and its committees.

The NYSE Listed Company Manual requires the written
charter of the compensation committee to provide that
the committee must produce a compensation committee
report on executive officer compensation for
inclusion in the issuers annual information circular
or annual report. It is Pengrowths practice for
management of the Corporation to prepare a report on
executive compensation for inclusion in Pengrowths
annual Information Circular  Proxy Statement, which
is reviewed and approved by the Board of Directors.

The NYSE Listed Company Manual requires the written
charter of the audit committee to provide that the
audit committee must prepare a report to be included
in the issuers annual information circular. There
is no requirement under Canadian law to prepare such
a report, and it is not Pengrowths current practice
to prepare such a report. However, read together,
the disclosure contained in Pengrowths Information
Circular  Proxy Statement under the heading Part II
 Corporate Governance, Pengrowths Annual Report
under the headings Corporate Responsibility,
Corporate Governance Practices and Structure and
Function, and herein under the heading Audit
Committee provides the substance of the disclosure
mandated by the NYSE rule. 
 ADDITIONAL INFORMATION Additional information, including Pengrowth Managements remuneration and the principal holders of
trust units, is contained in the Information Circular  Proxy Statement of Pengrowth Corporation
and Pengrowth Trust dated March 14, 2005, which relates to the Annual and Special Meeting of
unitholders, and the Annual and Special Meeting of shareholders of Pengrowth Corporation and the
Special Meeting of holders of royalty units to be held on April 26, 2005. Additional financial
information is contained in Pengrowth Trusts comparative financial statements for the years ended
December 31, 2004 and 2003 which are included in Pengrowth Trusts Annual Report for the year ended
December 31, 2004. Additional information relating to Pengrowth Energy Trust may be found on SEDAR at www.sedar.com. For additional copies of the Annual Information Form and the materials listed in the preceding
paragraphs please contact: Calgary Head Office
    
    
    
    Toronto Investor RelationsSuite 2900, 111
 5th Avenue S.W.
    
    Suite 2315, 200 Bay StreetCalgary, Alberta
    
    T2P 3Y6
    
    
    
    Toronto, Ontario
    
    M5J 2J2Telephone:
    
    (403) 233-0224
    
    
    
    Telephone:
    
    (416) 362-17481-800-223-4122
    
    
    
    
    
    1-888-744-1111Fax:
    
    (403) 294-0051
    
    
    
    Fax:
    
    (403) 362-8191Website:
    
    www.pengrowth.comemail:
    
    pengrowth@pengrowth.com
 - 71 -




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APPENDIX A REPORT ON RESERVES DATA BY INDEPENDENT
QUALIFIED RESERVES EVALUATIONS ON FORM 51-101F2 A- 1




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FORM 51-101F2REPORT ON RESERVES DATA
BY
INDEPENDENT QUALIFIED RESERVES
EVALUATOR To the board of directors of Pengrowth Corporation (the Company):  1.

We have prepared an evaluation of the Companys reserves data as at December 31, 2004. The
reserves data consist of the following:  (a)
(i)
proved and proved plus probable oil and gas reserves estimated as at
January 1, 2005, using forecast prices and costs; and  (ii)
the related estimated future net revenue; and  (b)
(i)
proved oil and gas reserves estimated as at December 31, 2004 using
constant prices and costs; and(ii)
the related estimated future net revenue.  2.

The reserves data are the responsibility of the Companys management. Our responsibility is
to express an opinion on the reserves data based on our evaluation.We carried out our evaluation in accordance with standards set out in the Canadian Oil and
Gas Evaluation Handbook (the COGE Handbook) prepared jointly by the Society of Petroleum
Evaluation Engineers (Calgary Chapter) and the Canadian Institute of Mining, Metallurgy &
Petroleum (Petroleum Society).3.

Those standards require that we plan and perform an evaluation to obtain reasonable assurance
as to whether the reserves data are free of material misstatement. An evaluation also
includes assessing whether the reserves data are in accordance with principles and definitions
in the COGE Handbook.4.

The following table sets forth the estimated future net revenue (before deduction of income
taxes) attributed to proved plus probable reserves, estimated using forecast prices and costs
and calculated using a discount rate of 10 percent, included in the reserves data of the
Company evaluated by us for the year ended December 31, 2004, and identifies the respective
portions thereof that we have audited, evaluated and reviewed and reported on to the Companys
board of directors: Description andPreparation Date of
    
    Location of Reserves[Audit/Evaluation/Review]
    
    (Country or Foreign
    
    Net Present Value of Future Net RevenueReport
    
    Geographic Area)
    
    (before income taxes, 10% discount rate M$)Audited
    
    Evaluated
    
    Reviewed
    
    TotalJanuary 15, 2005
    
    Canada
    
    $0
    
    $2,167,082
    
    $0
    
    $2,167,082
  5.

In our opinion, the reserves data respectively evaluated by us have, in all material
respects, been determined and are in accordance with the COGE Handbook.6.

We have no responsibility to update this evaluation for events and circumstances occurring
after the preparation dates.7.

Because the reserves data are based on judgments regarding future events, actual results will
vary and the variations may be material. A- 2




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Executed as to our report referred to above:Gilbert, Laustsen Jung Associates Ltd., Calgary, Alberta, Canada. Dated January 19, 2005 (signed)Doug R. Sutton, P. Eng.
Vice-President
 A- 3




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APPENDIX B REPORT OF MANAGEMENT AND DIRECTORS ON
OIL AND GAS DISCLOSURE ON FORM 51-101F3 B- 1




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FORM 51-101F3
REPORT OF
MANAGEMENT AND DIRECTORS
ON OIL AND GAS DISCLOSURE Management of Pengrowth Corporation (the Company) are responsible for the preparation and
disclosure of information with respect to the oil and gas activities of Pengrowth Energy Trust (the
Pengrowth Trust) in accordance with securities regulatory requirements. This information includes
reserves data, which consist of the following:  (a)
(i)
proved and proved plus probable oil and gas reserves estimated as at December 31, 2004
using forecast prices and costs; and  (ii)

the related estimated future net revenue; and  (b)
(i)
proved oil and gas reserves estimated as at December 31, 2004 using constant prices and
costs; and  (ii)

the related estimated future net revenue. An independent qualified reserves evaluator has evaluated the Companys reserves data. The report
of the independent qualified reserves evaluator will be filed with securities regulatory
authorities concurrently with this report.  The Reserves Committee of the board of directors of the Company has(c)

reviewed the Companys procedures for providing information to the independent qualified
reserves evaluator;(d)

met with the independent qualified reserves evaluator to determine whether any restrictions
affected the ability of the independent qualified reserves evaluator to report without
reservation; and(e)

reviewed the reserves data with management and the independent qualified reserves evaluator. The Reserves Committee of the board of directors has reviewed the Companys procedures for
assembling and reporting other information associated with oil and gas activities and has reviewed
that information with management. The board of directors has, on the recommendation of the
Reserves Committee, approved  (f)

the content and filing with securities regulatory authorities of the reserves data and other
oil and gas information;(g)

the filing of the report of the independent qualified reserves evaluator on the reserves
data; and(h)

the content and filing of this report. Because the reserves data are based on judgements regarding future events, actual results will vary
and the variations may be material. B- 2




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James S. KinnearJames S. KinnearChairman, President and Chief Executive OfficerPengrowth Corporation
  Lynn KisLynn KisVice President, EngineeringPengrowth Corporation
  Stanley H. WongStanley H. WongDirectorPengrowth Corporation
  William R. StedmanWilliam R. StedmanDirectorPengrowth Corporation
 March 29, 2005 B- 3




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APPENDIX C AUDIT COMMITTEE CHARTER C- 1




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CHARTER OF THE AUDIT COMMITTEE OF THE
BOARD OF DIRECTORS OF PENGROWTH CORPORATION
JULY 30, 2001  I.

Audit Committee purpose:The Audit Committee is appointed by the Board of Directors to assist the Board in fulfilling
its oversight responsibilities. The Audit Committees primary duties and responsibilities
are to:  

Monitor the integrity of the Companys financial reporting process and systems of
internal controls regarding finance, accounting, and legal compliance.

Monitor the independence and performance of the Companys independent auditors.

Provide an avenue of communication among the independent auditors, management and
the Board of Directors. The Audit Committee has the authority to conduct any investigation appropriate to fulfilling
its responsibilities, and it has direct access to the independent auditors as well as anyone
in the organization. The Audit Committee has the ability to retain, at the Companys
expense, special legal, accounting, or other consultants or experts it deems necessary in
the performance of its duties.  II.

Audit Committee Composition and MeetingsAudit Committee members shall meet the requirements of the stock exchanges on which
Pengrowth Energy Trust trades. The Audit Committee shall be comprised of three or more
directors as determined by the Board, each of whom shall be independent non-executive
directors, free from any relationship that would interfere with the exercise of his or her
independent judgment. All members of the Committee shall have a basic understanding of
finance and accounting and be able to read and understand fundamental financial statements.
Audit Committee members shall be appointed by the Board. If an audit committee Chair is not
designated or present, the members of the Committee may designate a Chair by majority vote
of the Committee membership.The Committee shall meet at least four times annually, or more frequently as circumstances
dictate. The Audit Committee Chair shall prepare and/or approve an agenda in advance of
each meeting. The Committee should meet privately in executive session at least annually
with management and as a committee to discuss any matters that the Committee or management
believes should be discussed. In addition, the Committee, or at least its Chair, should
communicate with management quarterly to review the Companys financial statements and
significant findings based upon the auditors limited review procedures.III.

Audit Committee Responsibilities and Duties Review Procedures  1.

Review and reassess the adequacy of this Charter at least annually. Submit the charter to
the Board of Directors for approval and have the document published at least every three years
in accordance with SEC regulations.2.

Review the Companys annual audited financial statements prior to filing or distribution.
Review should include discussion with management and independent auditors of significant
issues regarding accounting principles, practices and judgments.3.

In consultation with management and the independent auditors, consider the integrity of the
Companys financial reporting processes and controls. Discuss significant financial risk
exposures and the steps




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- 2 -  management has taken to monitor, control and report such exposures. Review significant
findings prepared by the independent auditors together with managements responses.4.

Review with financial management and the independent auditors the companys quarterly
financial results prior to the release of earnings and/or the companys quarterly financial
statements prior to filing or distribution. Discuss any significant changes to the Companys
accounting principles and any items required to be communicated by the independent auditors in
accordance with Assurance and Related Services Guideline #11 (AuG-11) (see item 9). Independent Auditors  5.

The independent auditors are ultimately accountable to the Audit Committee and the Board of
Directors. The Audit Committee shall review the independence and performance of the auditors
and annually recommend to the Board of Directors the appointment of the independent auditors
or approve any discharge of auditors when circumstances warrant.6.

Approve the fees and other significant compensation to be paid to the independent auditors.7.

On an annual basis, the Committee should review and discuss with the independent auditors all
significant relationships they have with the Company that could impair the auditors
independence.8.

Review the independent auditors audit plan  discuss scope, staffing, locations, and reliance
upon management and general audit approach.9.

Prior to releasing the year-end earnings, discuss the results of the audit with the
independent auditors.10.

Consider the independent auditors judgments about the quality and appropriateness of the
Companys accounting principles as applied in its financial reporting. Other Audit Committee Responsibilities  11.

On at least an annual basis, review with the Companys counsel, any legal matters that could
have a significant impact on the organizations financial statements, the Companys compliance
with applicable laws and regulations, and inquiries received from regulators or governmental
agencies.12.

Annually prepare a report to shareholders as required by the Securities and Exchange
Commission. The report should be included in the Companys annual proxy statement.13.

Perform any other activities consistent with this Charter, the Companys by-laws, and
governing law as the Committee or the Board deems necessary or appropriate.14.

Maintain minutes of meetings and periodically report to the Board of Directors on significant
results of the foregoing activities.




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APPENDIX B MANAGEMENTS
DISCUSSION AND ANALYSIS (INCLUDED ON PAGES 47 THROUGH 76 OF THE
PENGROWTH ENERGY TRUST ANNUAL REPORT 2004)




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MANAGEMENTSS DISCUSSION & ANALYSIS (PICTURE) 
 Managements Discussion and Analysis The following discussion and analysis of financial results should be read in
conjunction with the audited consolidated financial statements for the year ended
December 31, 2004 and is based on information available to March 4, 2005.   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. Critical Accounting Estimates As discussed in Note 2 to the financial statements, the preparation of financial
statements in conformity with Canadian Generally Accepted Accounting Principles (GAAP)
requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and revenues and expenses
for the period then ended. The amounts recorded for depletion, depreciation and amortization of injectants and the
provision for asset retirement obligations are based on estimates. The ceiling test
calculation is based on estimates of proved reserves, production rates, oil and natural
gas prices, future costs and other relevant assumptions. As required by National
Instrument 51-101 (NI 51-101), Pengrowth uses independent qualified reserve evaluators
in the preparation of reserve evaluations. By their nature, these estimates are subject to
measurement uncertainty and changes in these estimates may
impact the consolidated financial statements of future periods. Non-GAAP Financial Measures This discussion and analysis refers to certain financial measures that are not determined in
accordance with GAAP in Canada or the United States. These measures do not have
standardized meanings and may not be comparable to similar measures presented by other trusts or
corporations. Although such measures as distributable cash, distributable cash before withholding,
and operating netbacks do not have standardized meanings prescribed by GAAP, distributable cash
is determined by reference to the Distributions and Taxability of Distributions
section of this report while the remaining measures are determined by reference to our financial statements. We
discuss these measures, which have been applied on a consistent basis, because we believe that
they facilitate the understanding of the results of our operations and financial position. PENGROWTH ENERGY TRUST 47 Annual Report 2004




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Conversion and Currency When converting natural gas to equivalent barrels of oil within this discussion,
Pengrowth has adopted the international standard of six thousand cubic feet (mcf) to one
barrel of oil equivalent (boe). 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 amounts
are stated in Canadian dollars
unless otherwise specified. YEAR 2004 OVERVIEW Robust commodity prices and
seven months of incremental
production from the Murphy
Assets combined for another
solid year of cash flow
generation for Pengrowth. Funds
generated from operations were
up 13 percent from 2003 leading
to an increase of 16 percent in
the level of Distributable cash
for the year ended December 31,
2004 compared to 2003.
Financial hedging losses of
$69.1 million on crude oil and
natural gas offset some of the
positive impact of the high
benchmark prices for the year
as did the seven percent
depreciation of the U.S. dollar
relative to the Canadian
dollar. (OPERATING COSTS BAR CHART) 
 
 PENGROWTH ENERGY TRUST 48 Annual Report 2004




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MANAGEMENTSS DISCUSSION & ANALYSIS (DEBT AS A PERCENT OF TOTAL CAPITALIZATION BASED ON BOOK VALUE BAR GRAPH) 
 
 Highlights  §
    Oil and gas sales increased 16 percent to $801.2 million in 2004 from $691.0 million in
2003.§
    Average production increased 10 percent to 53,702 boe per day for 2004 compared
to 49,033 boe per day for 2003.§
    Pengrowths average realized commodity price increased six percent to $40.76
per boe in 2004, from $38.61 in 2003.§
    On May 31, 2004 Pengrowth acquired certain oil and natural gas assets in
Alberta and Saskatchewan from Murphy Oil Corporation (the Murphy Assets) for $550.8
million. These properties increased Pengrowths proved plus probable reserves by 46.1 million boe and
increased daily production by approximately 14,600 boe per day, representing an increase
of 25 percent from Pengrowths opening reserve base and a contribution of approximately
31 percent to average daily production during the fourth quarter 2004.§
    Pengrowth raised a total of $509.8 million in new equity during 2004, including
a public offering of 10.9 million units on March 23, 2004 for gross proceeds of
$200.6 million ($189.9 million net proceeds) and a public offering of 16.0 million Class B trust units
for gross proceeds of $298.9 million ($283.3 million net proceeds) on December 30, 2004.
An additional $36.6 million in net proceeds was raised under the Distribution
Reinvestment Plan (DRIP) and the employee trust unit option and rights plans. PENGROWTH ENERGY TRUST 49 Annual Report 2004




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MANAGEMENTSS
DISCUSSION & ANALYSIS (THE UNIT CLOSING PRICE AND CASH DISTRIBUTIONS BAR GRAPH)  §
    Pengrowth issued $325 million of new debt to fund the acquisition of the Murphy
Assets. Of this amount, $220 million was comprised of an acquisition bridge facility
with a one year term ending
May 31, 2005 with the remaining $105 million drawn from a revolving credit facility with
a renewal date of May 30, 2005. A portion of the proceeds from the December 30, 2004
Class B unit offering were used to fully repay the drawing on the bridge facility.
Effective December 31, 2004, Pengrowth increased the amount available on its revolving
unsecured credit facility to $375 million from $275 million. Approximately $246 million
of the credit facility remained unutilized at December 31, 2004.§
    With the closing of the Class B unit offering at the end of 2004, Pengrowths
financial position remained strong with a long-term debt to debt-plus-equity ratio at
a conservative 19 percent of
total consolidated capitalization at book value, providing Pengrowth
with sufficient borrowing capacity to fully fund its 2005 capital requirements.§
    On July 27, 2004 Pengrowth Trust Units were reclassified into Class A and Class
B trust units. The reclassification was initiated in response to restrictions on
foreign ownership in mutual fund
trusts. On December 6, 2004, subsequent to the reclassification, the Minister of Finance
announced his intention to defer implementation of legislation proposed in the March 23,
2004 Federal Budget that would have further restricted foreign ownership to allow further
consultation with industry participants. The reclassification positions Pengrowth to
actively manage the level of foreign ownership in the Trust to comply with existing and
possible future legislative requirements, thereby ensuring the Trusts continued status
as a mutual fund trust. PENGROWTH ENERGY TRUST 50 Annual Report 2004




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MANAGEMENTSS DISCUSSION & ANALYSIS (TSX TRUST UNIT PRICE AND CASH DISTRIBUTIONS BAR GRAPH)  §
    Pengrowth ended the year with proved plus probable reserves of 218.6 mmboe
compared to 184.4 mmboe at year-end 2003. This represents an increase of 34.2 mmboe
or over 18 percent
resulting from acquisitions of 47.9 mmboe, largely attributable to the Murphy Assets, and 6.0
mmboe of positive reserve revisions and additions, offset by 19.7 mmboe of production.§
    During the year Pengrowth spent a combined total of $161.1 million on
maintenance and development projects with approximately $112.1 million of that amount
directed specifically
towards development activities which resulted in the addition of new proved plus probable
reserves of 1.4 mmboe and the reclassification of 6.6 mmboe of reserves from the proved
undeveloped to the proved developed category. Approximately 46 percent of expenditures
were funded through a combination of the 10 percent holdback from distributions and
equity proceeds received from the DRIP and the employee trust unit option and rights
incentive plans.§
    Operating costs decreased marginally to $8.13 per boe in 2004 from $8.33 per
boe in 2003. The decrease was due mainly to the purchase of the Sable Offshore Energy
Project (SOEP)
facilities in May and December of 2003 which reduced operating costs on a year-over-year
basis by approximately $19.4 million, offset in part by the impact of production declines
at a number of Pengrowths properties and general cost increases in the industry. PENGROWTH ENERGY TRUST 51 Annual Report 2004




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MANAGEMENTSS DISCUSSION & ANALYSIS  §
    Net income decreased to $153.7 million in 2004 from $189.3 million in 2003. The
reduction in income resulted largely from lower unrealized foreign exchange gains on
U.S. dollar debt
(2004  $18.9 million; 2003  $30.9 million) and a higher per boe depletion rate in
2004 versus 2003 (2004  $12.58 per boe; 2003  $10.35 per boe). The 22 percent increase
in the depletion rate per boe is reflective of relatively higher cost 2004 reserves
acquisitions compared to the lower cost older reserves. In 2004, Pengrowth recognized a
future income tax liability on the acquisition of the Murphy Assets. Net income in 2004
includes a $15.6 million future income tax expense which represents an increase in the
future income tax liability subsequent to the acquisition.§
    Distributable cash to unitholders increased to $363.1 million in 2004 from
$313.4 million in 2003. Actual distributions paid or declared in respect of the 2004
production year were $2.63
per trust unit, a marginal decrease of two percent from $2.68 per trust unit in 2003. PENGROWTH ENERGY TRUST 52 Annual Report 2004




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MANAGEMENTS DISCUSSION & ANALYSIS FINANCIAL AND OPERATING HIGHLIGHTS Three Months ended December 31
    
    
    Twelve Months ended December 31%
    
    
    
    
    
    
    
    
    
    
    %(thousands, except per unit amounts)
    
    2004
    
    
    2003
    
    
    Change
    
    
    2004
    
    
    2003
    
    
    ChangeIncome StatementOil and gas sales
    
    $
    218,835
    
    
    $
    154,139
    (1)
    
    
    42
    
    
    $
    801,200
    
    
    $
    691,020
    (1)
    
    
    16Net income
    
    $
    31,138
    
    
    $
    37,355
    
    
    
    (17
    )
    
    $
    153,745
    
    
    $
    189,297
    
    
    
    (19
    )Net income per unit
    
    $
    0.23
    
    
    $
    0.31
    
    
    
    (26
    )
    
    $
    1.15
    
    
    $
    1.63
    
    
    
    (29
    )Distributable cash
    
    $
    96,466
    
    
    $
    71,469
    
    
    
    35
    
    
    $
    363,061
    
    
    $
    313,415
    
    
    
    16Actual distributions paid or
declared per unit
    
    $
    0.69
    
    
    $
    0.63
    
    
    
    10
    
    
    $
    2.63
    
    
    $
    2.68
    
    
    
    (2
    )Weighted average number of trust
units outstanding
    
    
    136,916
    
    
    
    122,326
    
    
    
    12
    
    
    
    133,395
    
    
    
    115,912
    
    
    
    15Balance SheetWorking capital
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (78,546
    )
    
    $
    12,966
    
    
    
    (706
    )Property, plant and equipment
and other assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,989,288
    
    
    $
    1,530,359
    
    
    
    30Long-term debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    345,400
    
    
    $
    259,300
    
    
    
    33Unitholders equity
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,462,211
    
    
    $
    1,159,433
    
    
    
    26Unitholders equity per unit
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    9.56
    
    
    $
    9.36
    
    
    
    2Number of units outstanding at year
end
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    152,973
    
    
    
    123,874
    
    
    
    23Daily ProductionCrude oil (barrels)
    
    
    20,118
    
    
    
    22,193
    
    
    
    (9
    )
    
    
    20,817
    
    
    
    23,337
    
    
    
    (11
    )Heavy oil (barrels)
    
    
    5,819
    
    
    
    
    
    
    
    
    
    
    
    3,558
    
    
    
    
    
    
    
    Natural gas (thousands of cubic feet)
    
    
    156,621
    
    
    
    117,315
    
    
    
    34
    
    
    
    144,277
    
    
    
    119,842
    
    
    
    20Natural gas liquids (barrels)
    
    
    5,385
    
    
    
    5,907
    
    
    
    (9
    )
    
    
    5,281
    
    
    
    5,722
    
    
    
    (8
    )Total production (boe) 6:1
    
    
    57,425
    
    
    
    47,653
    
    
    
    21
    
    
    
    53,702
    
    
    
    49,033
    
    
    
    10Total production (mboe) 6:1
    
    
    5,283
    
    
    
    4,384
    
    
    
    21
    
    
    
    19,655
    
    
    
    17,897
    
    
    
    10Change in production
(year-over-year) (%)
    
    
    21
    %
    
    
    (9
    %)
    
    
    
    
    
    
    10
    %
    
    
    12
    %Production ProfileCrude oil
    
    
    35
    %
    
    
    47
    %
    
    
    
    
    
    
    39
    %
    
    
    47
    %Heavy oil
    
    
    10
    %
    
    
    0
    %
    
    
    
    
    
    
    6
    %
    
    
    0
    %Natural gas
    
    
    46
    %
    
    
    41
    %
    
    
    
    
    
    
    45
    %
    
    
    41
    %Natural gas liquids
    
    
    9
    %
    
    
    12
    %
    
    
    
    
    
    
    10
    %
    
    
    12
    %Average PricesCrude oil (per barrel)
    
    $
    44.76
    
    
    $
    38.29
    (1)
    
    
    17
    
    
    $
    43.21
    
    
    $
    40.85
    (1)
    
    
    6Heavy oil (per barrel)
    
    $
    26.99
    
    
    $
    
    
    
    
    
    
    
    $
    32.45
    
    
    $
    
    
    
    
    Natural gas (per mcf)
    
    $
    7.02
    
    
    $
    5.50
    (1)
    
    
    28
    
    
    $
    6.80
    
    
    $
    6.35
    (1)
    
    
    7Natural gas liquids (per barrel)
    
    $
    48.04
    
    
    $
    35.52
    (1)
    
    
    35
    
    
    $
    42.21
    
    
    $
    35.54
    (1)
    
    
    19Average price per boe 6:1
    
    $
    41.42
    
    
    $
    35.16
    (1)
    
    
    18
    
    
    $
    40.76
    
    
    $
    38.61
    (1)
    
    
    6Proved Plus Probable ReservesCrude oil (mbbls)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    94,066
    
    
    
    97,360
    
    
    
    (3
    )Heavy oil (mbbls)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,245
    
    
    
    
    
    
    
    Natural gas (bcf)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    521
    
    
    
    413
    
    
    
    26Natural gas liquids (mbbls)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,395
    
    
    
    18,250
    
    
    
    6Total oil equivalent (mboe)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    218,613
    
    
    
    184,416
    
    
    
    19
   (1)
    
    Restated to conform to presentation adopted in the current year. PENGROWTH ENERGY TRUST 53 Annual Report 2004




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MANAGEMENTS
DISCUSSION & ANALYSIS Results of Operations Production Average daily production increased 10 percent to 53,702 boe per day in 2004 compared
to 49,033 boe per day in 2003. This increase is attributable mainly to the acquisition of
the Murphy Assets on May 31, 2004 which added approximately 14,600 boe per day commencing
in June, comprised mainly of heavy oil and natural gas. At this time, Pengrowth is
forecasting average 2005 production of 55,000 to 57,000 boe per day from our existing
properties. This estimate incorporates anticipated production additions from the Swan
Hills acquisition, scheduled to close on February 28, 2005, as well as our 2005
development program, offset by the impact of expected production declines from normal
operations. The above estimate specifically excludes the acquisition of Crispin Energy
Inc. announced on February 17, 2005 and the potential impact of any future acquisitions or
divestitures.  DAILY PRODUCTION2004
    
    
    2003
    
    
    % ChangeLight crude oil (bbl)
    
    
    20,817
    
    
    
    23,337
    
    
    
    (11
    )Heavy oil (bbl)
    
    
    3,558
    
    
    
    
    
    
    
    Natural gas (mcf)
    
    
    144,277
    
    
    
    119,842
    
    
    
    20Natural gas liquids (bbl)
    
    
    5,281
    
    
    
    5,722
    
    
    
    (8
    )Total production (boe)
    
    
    53,702
    
    
    
    49,033
    
    
    
    10
 Pricing and Commodity Price Hedging The increase in U.S. based prices for North American crude oil and natural gas were partially
offset by the negative impact of the rising Canadian dollar relative to the U.S. dollar and hedging losses.  BENCHMARK PRICING2004
    
    
    2003
    
    
    % ChangeWTI crude oil (U.S.$/bbl)
    
    $
    41.40
    
    
    $
    30.99
    
    
    
    34AECO (monthly) natural gas ($/mcf)
    
    $
    6.79
    
    
    $
    6.70
    
    
    
    1NYMEX (Henry Hub close) natural
gas (U.S.$/MMbtu)
    
    $
    6.16
    
    
    $
    5.39
    
    
    
    14Currency (U.S.$/Cdn$)
    
    $
    0.77
    
    
    $
    0.71
    
    
    
    (7
    )
  PENGROWTHS AVERAGE REALIZED PRICES(Adjusted for Hedging)
    
    2004
    
    
    2003
    
    
    % ChangeCrude oil ($/bbl)
    
    $
    43.21
    
    
    $
    40.85
    
    
    
    6Heavy oil ($/bbl)
    
    $
    32.45
    
    
    
    
    
    
    
    Natural gas ($/mcf)
    
    $
    6.80
    
    
    $
    6.35
    
    
    
    7Natural gas liquids ($/bbl)
    
    $
    42.21
    
    
    $
    35.54
    
    
    
    19Average price ($/boe) 6:1
    
    $
    40.76
    
    
    $
    38.61
    
    
    
    6
 PENGROWTH ENERGY TRUST 54 Annual Report 2004




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MANAGEMENTS DISCUSSION & ANALYSIS  OIL AND GAS SALES($ millions)
    
    2004
    
    
    2003
    
    
    % ChangeCrude oil
    
    $
    329.2
    
    
    $
    348.0
    
    
    
    (5
    )Heavy oil
    
    
    42.3
    
    
    
    
    
    
    
    Natural gas
    
    
    359.3
    
    
    
    277.8
    
    
    
    29Natural gas liquids
    
    
    81.6
    
    
    
    74.2
    
    
    
    10Less: gross overriding royalties
    
    
    (14.6
    )
    
    
    (11.7
    )
    
    
    24Gas marketing, brokering income and sulphur
    
    
    3.4
    
    
    
    2.7
    
    
    
    27Total oil and gas sales
    
    $
    801.2
    
    
    $
    691.0
    
    
    
    16
 The following table illustrates the effect of changes in prices and volumes on the components
of oil and gas sales, including the impact of hedges which expired during the period.  OIL AND GAS SALES - PRICE AND VOLUME ANALYSIS($ millions)
    
    Light Oil
    
    
    Heavy Oil
    
    
    Natural Gas
    

    NGL
    

    GORR
    

    
    Other
    
    TotalYear ended December 31, 2003
    
    $
    348.0
    
    
    $
    
    
    
    $
    277.8
    
    
    $
    74.2
    
    
    $
    (11.7
    )
    
    $
    2.7
    
    
    $
    691.0Effect of changes in sales volumes
    
    
    (36.8
    )
    
    
    42.3
    
    
    
    57.6
    
    
    
    (5.5
    )
    
    
    
    
    
    
    
    
    
    
    57.6Effect of increase in product prices
    
    
    18.0
    
    
    
    
    
    
    
    23.9
    
    
    
    12.9
    
    
    
    
    
    
    
    
    
    
    
    54.8Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2.9
    )
    
    
    0.7
    
    
    
    (2.2
    )Year ended December 31, 2004
    
    $
    329.2
    
    
    $
    42.3
    
    
    $
    359.3
    
    
    $
    81.6
    
    
    $
    (14.6
    )
    
    $
    3.4
    
    
    $
    801.2
 Royalties Crown royalties (net of incentives), freehold royalties and mineral taxes increased to
$145.8 million in 2004 from $114.9 million in 2003. Royalties as a percentage of oil and
gas sales increased to 18.2 percent from 16.6 percent in 2003 as a result of higher
commodity prices. Also affecting royalties was an adjustment to the Enhanced Oil Recovery
Relief (EOR)as a result of solvent injection costs being $6.5 million lower than expected
at Judy Creek due to shutdowns and changes in injection strategy. Operating Expenses Operating expenses increased to $159.7 million in 2004 compared to $149.0 million in
2003. The increase is due mainly to the purchase of the Murphy Assets offset in part by a
decrease in operating costs at the Sable Offshore Energy Project (SOEP) due to the
elimination of processing fees as a result of the purchase of an interest in the
processing facilities in May and December of 2003. Operating costs per boe decreased to $8.13 per boe in 2004 from $8.33 per boe in 2003. The
decrease was due mainly to the elimination of SOEP processing fees, offset in part by the
impact of production declines at a number of Pengrowths properties and general cost
increases in the industry. PENGROWTH ENERGY TRUST 55 Annual Report 2004




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MANAGEMENTS DISCUSSION & ANALYSIS Amortization of Injectants for Miscible Floods The cost of injectants (primarily ethane and methane) purchased for injection in
miscible flood programs is amortized over the period of expected future economic benefit.
Prior to 2005, the expected future economic benefit from injection was estimated at 30
months, based on the results of previous flood patterns. Commencing in 2005 the response
period for additional new patterns being developed is expected to be somewhat shorter
relative to the historical miscible patterns in the project. Accordingly, the cost of
injectants purchased in 2005 will be amortized over a 24 month period while costs incurred
for the purchase of injectants in prior periods will continue to be amortized over 30
months. The total cost of purchased injectants decreased to $20.4 million in 2004 from
$23.0 million in 2003. In 2004, $19.7 million was amortized and deducted from
distributable cash (2003 - $32.5 million). As at December 31, 2004, Pengrowth had deferred
injectant costs of $25.0 million, which will be amortized and charged against
distributable cash of future periods. The value of Pengrowths proprietary injectants is not recorded until reproduced from the
flood and sold, although the cost of producing these injectants is included in operating
costs. Pengrowth currently anticipates lower injection volumes through 2005, however, this
is expected to be offset somewhat by higher forecast prices for natural gas and ethane and
the increase in Pengrowths working interest in Swan Hills resulting in anticipated total
injectant costs for 2005 relatively unchanged from those incurred in 2004. The amount of
injectants amortized against net income is expected to increase in 2005 as a result of a
shorter amortization period and the acquisition of the additional interest in Swan Hills
Unit No. 1. Interest Pengrowths average long-term debt balances increased by approximately 58.0 percent in
2004 compared to 2003. As a result, interest expense increased by 65.0 percent to $29.9
million in 2004 from $18.2 million in 2003, reflecting a higher average debt level and
higher standby fees and debt amortization costs. Standby fees related to the set-up of
bridge financing utilized for the Murphy acquisition amounted to $3.9 million (2003 -
nil). Interest expense also includes $0.3 million of fees related to the amortization of
U.S. debt issue costs (2003 - $0.2 million). Imputed interest on the note payable to Emera
was also recorded in the amount of $1.6 million (2003 - nil). The average interest rate on Pengrowths long-term debt outstanding at December 31, 2004
is 4.56 percent. Approximately 70.0 percent of Pengrowths outstanding debt as at December
31, 2004 incurs interest expense payable in U.S. dollars and therefore remains subject to
fluctuations in the exchange rate. The Note Payable is non-interest bearing. Foreign Currency Gains and Losses Pengrowth recorded a foreign exchange gain of $17.3 million in 2004, compared to a
foreign exchange gain of $29.9 million in 2003. Included in the 2004 gain of $17.3 million
is an $18.9 million unrealized foreign exchange gain related to the U.S. dollar
denominated debt. This gain PENGROWTH ENERGY TRUST 56 Annual Report 2004




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MANAGEMENTS DISCUSSION & ANALYSIS arises as a result of the increase in the Canadian to U.S. dollar exchange rate in
2004 from a rate of approximately $0.77 at December 31, 2003 to a rate of approximately
$0.83 at December 31, 2004. The balance, a foreign exchange loss of $1.6 million relates
mainly to U.S. dollar denominated natural gas sales from SOEP. Pengrowth had hedged the
exchange rate on a portion of these U.S. dollar denominated gas sales. Revenues are
recorded at the average exchange rate for the production month in which they accrue, with
payment being received on or about the 25th of the following month. As a result of the
increase in the Canadian dollar relative to the U.S. dollar over the course of the year, a
foreign exchange loss was recorded to the extent that there was a difference between the
average exchange rate for the month of production and the exchange rate at the date the
payments were received on that portion of production sales that were un-hedged. Pengrowth
has arranged a significant portion of its long-term debt in U.S. dollars as a natural
hedge against a stronger Canadian dollar, as the negative impact on oil and gas sales is
somewhat offset by a reduction in the U.S. dollar denominated interest cost. General and Administrative General and administrative expenses (G&A) increased to $24.4 million ($1.24 per boe)
from $16.0 million ($0.89 per boe) in 2003. Included in 2004 G&A is $2.3 million (2003 -
$0.2 million) in non-cash compensation expense related to the value of trust unit options
and rights (see Note 2 and Note 10 to the Financial Statements for details). Also included
in 2004 G&A is $0.8 million for estimated reimbursement of G&A expenses incurred by the
Manager, pursuant to the Management Agreement. Excluding the non-cash component of G&A,
and the reimbursement of Manager expenses, 2004 year-to-date G&A increased by $5.5 million
over 2003 levels. G&A costs increased due to a number of factors including the addition of
personnel and office space in conjunction with the purchase of the Murphy Assets and costs
incurred in conjunction with the restructuring of the Class A and B units. Other ongoing
factors contributing to a general increase in G&A costs include increasing financial
reporting, legal and regulatory costs from the growth in our unitholder base, and
increasing regulatory requirements including preparing for compliance with Section 404 of
the Sarbanes Oxley Act when it becomes applicable. Management Fees Management fees paid to Pengrowth Management Limited (the Manager) increased to
$12.9 million in 2004 from $10.2 million in 2003. The base fees paid to the Manager
totaled $6.8 million and are calculated as a fixed percentage of net operating income
(oil and gas sales and other income, less royalties, operating costs, solvent amortization
and reclamation funding). Although the fixed percentage rates at which base fees are
calculated decreased by 47 percent from an average rate of 2.7 percent to 1.4 percent
under the new Management Agreement effective July 1, 2003, there was an increase in total
Management fees due to the higher level of net operating income in 2004. PENGROWTH ENERGY TRUST 57 Annual Report 2004




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MANAGEMENTS DISCUSSION & ANALYSIS Management fees for 2004 also include a performance fee of $6.1 million, which
combined with the base fee for the year is equivalent to the cap of 80 percent of total
fees that would have been earned by the Manager for the year pursuant to the old
Management Agreement. The Manager earned the maximum performance fee by meeting or
exceeding the performance criteria for a rolling three year average total return in excess
of 8 percent. The Manager achieved a three year average return of 27 percent as at the end
of 2004. Related Party Transactions Details of related party transactions incurred in 2004 and 2003 are provided in Note
15 to the financial statements. These transactions include the Management fees paid to the
Manager, as discussed in the preceding paragraphs. The Manager is controlled by James S.
Kinnear, the Chairman, President and Chief Executive Officer of Pengrowth Corporation. As
discussed above, the management fees paid to the Manager are pursuant to a Management
Agreement which has been approved by the trust unitholders. Mr. Kinnear is not entitled to
receive any salary or bonus in his capacity as a director and officer of Pengrowth
Corporation. Related party transactions in 2004 also include $841,457 (2003  $ 675,692) paid to a firm
controlled by the Corporate Secretary of Pengrowth Corporation, Mr. Charles V. Selby.
These fees are paid in respect of legal and advisory services provided by the Corporate
Secretary. Taxes In determining its taxable income, Pengrowth Corporation deducts royalty payments to
unitholders, and historically, this has been sufficient to reduce taxable income to nil.
As a result of Pengrowths distribution approach, whereby approximately 10 percent of
funds available for distribution are withheld to repay debt or fund future capital
expenditures, the Corporation could become subject to taxation on a portion of its income
within the Corporation at some point in the future. However the Corporation believes there
are sufficient tax pools available in the Corporation at present to offset the expected
level of income to be retained. Capital taxes of $4.6 million in 2004 (2003  $1.8 million) include Federal Large
Corporations Tax (LCT) of $1.3 million (2003  $0.6 million) and Saskatchewan Capital Tax
and Resource Surcharge of $3.2 million (2003  $1.2 million). Depletion and Depreciation Depletion and depreciation of property, plant and equipment and other assets is
provided on the unit of production method based on total proved reserves. The provision
for depletion and depreciation increased 33 percent in 2004 to $247.3 million from $185.3
million in 2003 due to a larger depletable asset base and a higher depletion rate
(production as a percentage of total proved reserves). On a unit of production basis,
depletion increased 22 percent to $12.58 per boe in 2004 from $10.35 per boe in 2003. The
increase in the per boe depletion amount in 2004 reflects the acquisition of the Murphy
Assets. PENGROWTH ENERGY TRUST 58 Annual Report 2004




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MANAGEMENTS DISCUSSION & ANALYSIS Ceiling Test Under Canadian GAAP, a ceiling test is applied to the carrying value of the property,
plant and equipment and other assets. The carrying value is assessed to be recoverable
when the sum of the undiscounted cash flows expected from the production of proved
reserves, the lower of cost and market of unproved properties and the cost of major
development projects exceeds the carrying value. When the carrying value is not assessed
to be recoverable, an impairment loss is recognized to the extent that the carrying value
of assets exceeds the sum of the discounted cash flows expected from the production of
proved and probable reserves, the lower of cost and market of unproved properties and the
cost of major development projects. The cash flows are estimated using expected future
product prices and costs and are discounted using a risk-free interest rate. There was a
significant surplus in the ceiling test at year-end 2004. Asset Retirement Obligations In 2003, the CICA issued Section 3110, Asset Retirement Obligations (ARO) which
harmonizes Canadian GAAP requirements with the corresponding U.S. GAAP requirements under
SFAS 143. Under these standards, the fair value of a liability for ARO must be recognized
in the period in which it is incurred, and a corresponding asset retirement cost is to be
added to the carrying amount of the related asset. The capitalized amount is depleted on
the unit-of-production method based on proved reserves. The liability amount is increased
each reporting period due to the passage of time and the amount of accretion is expensed
to income in the period. Actual costs incurred upon the settlement of the ARO are charged
against the ARO. The new Canadian standard was effective for fiscal years beginning on or
after January 1, 2004 with earlier adoption encouraged. Pengrowth elected to early adopt
this standard in 2003. The total future ARO were estimated by management based on Pengrowths working interest in
wells and facilities, estimated costs to remediate, reclaim and abandon the wells and
facilities and the estimated timing of the costs to be incurred in future periods.
Pengrowth has estimated the net present value of its total ARO to be $172.0 million as at
December 31, 2004 (2003  $103 million), based on a total future liability of $551.0
million (2003  $352 million). These costs are expected to be incurred over 50 years with
the majority of the costs incurred between 2014 and 2037. Pengrowths credit adjusted risk
free rate of eight percent and an inflation rate of 1.5 percent were used to calculate the
net present value of the ARO. PENGROWTH ENERGY TRUST 59 Annual Report 2004




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MANAGEMENTS DISCUSSION & ANALYSIS Remediation Trust Funds & Remediation and Abandonment Expenses During 2004, Pengrowth contributed $1.5 million into trust funds established to fund
certain abandonment and reclamation costs associated with Judy Creek, Swan Hills and SOEP.
The balance in these remediation trust funds was $8.3 million at December 31, 2004. Pengrowth takes a proactive approach to managing our well abandonment and site restoration
obligations. We have an on-going program to abandon wells and reclaim well and facility

sites on the properties we operate. In 2004, Pengrowth spent $ 4.4 million on abandonment
and reclamation (2003  $3.2 million). Pengrowth expects to spend approximately $8.2
million per year, prior to inflation, over the next 10 years on remediation and
abandonment expenses at operated properties. Future Tax Liability As required by Canadian GAAP, Pengrowth recorded a $75.6 million future tax liability
related to the acquisition of the Murphy Assets. The tax liability arises due to the
deficiency in tax pools of the Murphy Assets acquired offset in part by excess tax pools
(compared to book value) from past acquisitions. The future tax liability represents the
income taxes that would arise, based on the enacted income tax rates, if the operating
companys assets and liabilities were disposed of or settled at book value. Because of the
tax structure of the Trust, Pengrowth does not expect to pay cash income taxes in the
operating companies in the foreseeable future. Goodwill In accordance with Canadian GAAP, Pengrowth was also required to record goodwill of
$170.6 million upon acquisition of the Murphy Assets. The goodwill value was determined
based on the excess of total consideration paid less the net value assigned to other
identifiable assets and liabilities, including the future income tax liability. Details of
the acquisition are provided in Note 5 of the financial statements. Netbacks There is no standardized measure of operating netbacks and therefore operating
netbacks, as presented below may not be comparable to similar measures presented by other
companies. Certain assumptions have been made in allocating operating expenses, other
production income, other income and royalty injection credits between light crude, heavy
oil, natural gas and natural gas liquids production. While light crude prices rose six percent for the year above 2003 levels, netbacks only
improved by four percent due to increasing effective royalty rates at the higher price levels and operating
cost increases of eight percent over the previous year. Heavy oil netbacks declined in the fourth quarter (relative to the 2004 year average) due
to an increased pricing differential below the level of light oil prices. This increasing
differential was due to a shortage of available heavy oil upgrading capacity in the fourth
quarter. PENGROWTH ENERGY TRUST 60 Annual Report 2004




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MANAGEMENTS DISCUSSION & ANALYSIS Natural gas prices improved by seven percent from 2003 levels while netbacks improved
even further with a 15 percent increase resulting from reduced operating costs. Most of
the decrease in operating costs was achieved at SOEP and was due to the elimination of
processing fees as a result of the purchase of an interest in the processing facilities in
May and December of 2003. This reduction at SOEP also reduced operating costs associated
with NGL netbacks which improved 43 percent over 2003 levels. On a combined basis, netbacks increased 11 percent or $2.34 per boe from $22.17 per boe in
2003 to $24.51 per boe in 2004. The principal contributing factor was higher average
commodity priced of $2.22 per boe  further complemented by declining operating costs of
$0.20 per boe. The amortization of solvent injection costs also decreased by $0.82 per boe
from 2003 levels due to a reduction in total injected volumes at Judy Creek and an
increase in the use of proprietary injectants. The tables below show the netbacks for each commodity and on a compound basis per boe.  LIGHT CRUDE NETBACKS 
 Three Months Ended
    
    
    Twelve Months Ended($ per bbl)
    
    Dec. 31, 2004
    
    
    Dec 31, 2003
    
    
    Dec 31, 2004
    
    
    Dec 31, 2003Sales price
    
    $
    44.76
    
    
    $
    38.29
    
    
    $
    43.21
    
    
    $
    40.85Other production income
    
    
    0.48
    
    
    
    0.25
    
    
    
    0.45
    
    
    
    0.31GORR royalties
    
    
    (0.90
    )
    
    
    (0.54
    )
    
    
    (0.76
    )
    
    
    (0.54
    )44.34
    
    
    
    38.00
    
    
    
    42.90
    
    
    
    40.62Other income
    
    
    0.51
    
    
    
    0.43
    
    
    
    0.46
    
    
    
    0.35Crown and Freehold royalties
    
    
    (8.75
    )
    
    
    (2.77
    )
    
    
    (6.86
    )
    
    
    (4.94
    )Operating costs
    
    
    (9.17
    )
    
    
    (9.65
    )
    
    
    (9.31
    )
    
    
    (8.60
    )Transportation costs
    
    
    (0.23
    )
    
    
    (0.21
    )
    
    
    (0.23
    )
    
    
    (0.21
    )Amortization of injectants
    
    
    (2.67
    )
    
    
    (2.96
    )
    
    
    (2.58
    )
    
    
    (3.82
    )Operating netback
    
    $
    24.03
    
    
    $
    22.84
    
    
    $
    24.38
    
    
    $
    23.40
  HEAVY OIL NETBACKS 
 Three Months Ended
    
    
    Twelve Months Ended($ per bbl)
    
    Dec. 31, 2004
    
    
    Dec 31, 2003
    
    
    Dec 31, 2004
    
    
    Dec 31, 2003Sales price
    
    $
    26.99
    
    
    $
    
    
    
    $
    32.45
    
    
    $
    GORR royalties
    
    
    (0.27
    )
    
    
    
    
    
    
    (0.21
    )
    
    
    26.72
    
    
    
    
    
    
    
    32.24
    
    
    
    Crown and Freehold royalties
    
    
    (3.92
    )
    
    
    
    
    
    
    (4.66
    )
    
    
    Operating costs
    
    
    (9.44
    )
    
    
    
    
    
    
    (9.85
    )
    
    
    Operating netback
    
    $
    13.36
    
    
    $
    
    
    
    $
    17.73
    
    
    $
    
 PENGROWTH ENERGY TRUST 61 Annual Report 2004




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MANAGEMENTSS DISCUSSION & ANALYSIS  NATURAL GAS NETBACKS 
 Three Months Ended
    
    
    Twelve Months Ended($ per mcf)
    
    Dec. 31, 2004
    
    
    Dec 31, 2003
    
    
    Dec 31, 2004
    
    
    Dec 31, 2003Sales price
    
    $
    7.02
    
    
    $
    5.50
    
    
    $
    6.80
    
    
    $
    6.35GORR royalties
    
    
    (0.14
    )
    
    
    (0.15
    )
    
    
    (0.13
    )
    
    
    (0.12
    )6.88
    
    
    
    5.35
    
    
    
    6.67
    
    
    
    6.23Other income
    
    
    0.24
    
    
    
    0.17
    
    
    
    0.20
    
    
    
    0.17Crown and Freehold royalties
    
    
    (1.20
    )
    
    
    (0.87
    )
    
    
    (1.13
    )
    
    
    (1.06
    )Operating costs
    
    
    (1.16
    )
    
    
    (1.32
    )
    
    
    (1.15
    )
    
    
    (1.31
    )Transportation costs
    
    
    (0.14
    )
    
    
    (0.15
    )
    
    
    (0.12
    )
    
    
    (0.14
    )Operating netback
    
    $
    4.62
    
    
    $
    3.18
    
    
    $
    4.47
    
    
    $
    3.89
  NGL NETBACKS 
 Three Months Ended
    
    
    Twelve Months Ended($ per bbl)
    
    Dec. 31, 2004
    
    
    Dec 31, 2003
    
    
    Dec 31, 2004
    
    
    Dec 31, 2003Sales price
    
    $
    48.04
    
    
    $
    35.52
    
    
    $
    42.21
    
    
    $
    35.54GORR royalties
    
    
    (1.02
    )
    
    
    (0.92
    )
    
    
    (0.92
    )
    
    
    (0.87
    )47.02
    
    
    
    34.60
    
    
    
    41.29
    
    
    
    34.67Crown and Freehold royalties
    
    
    (18.35
    )
    
    
    (9.38
    )
    
    
    (14.51
    )
    
    
    (12.56
    )Operating costs
    
    
    (7.87
    )
    
    
    (9.46
    )
    
    
    (7.94
    )
    
    
    (8.94
    )Transportation costs
    
    
    (0.10
    )
    
    
    (0.07
    )
    
    
    (0.10
    )
    
    
    (0.08
    )Operating netback
    
    $
    20.70
    
    
    $
    15.70
    
    
    $
    18.74
    
    
    $
    13.09
  COMBINED NETBACKS 
 Three Months Ended
    
    
    Twelve Months Ended($ per bbl)
    
    Dec. 31, 2004
    
    
    Dec 31, 2003
    
    
    Dec 31, 2004
    
    
    Dec 31, 2003Sales price
    
    $
    42.08
    
    
    $
    35.78
    
    
    $
    41.33
    
    
    $
    39.11Other production income
    
    
    0.17
    
    
    
    0.12
    
    
    
    0.17
    
    
    
    0.15GORR royalties
    
    
    (0.82
    )
    
    
    (0.73
    )
    
    
    (0.74
    )
    
    
    (0.65
    )41.42
    
    
    
    35.16
    
    
    
    40.76
    
    
    
    38.61Other income
    
    
    0.83
    
    
    
    0.63
    
    
    
    0.72
    
    
    
    0.59Crown and Freehold royalties
    
    
    (8.47
    )
    
    
    (4.60
    )
    
    
    (7.42
    )
    
    
    (6.42
    )Operating costs
    
    
    (8.06
    )
    
    
    (8.91
    )
    
    
    (8.13
    )
    
    
    (8.33
    )Transportation costs
    
    
    (0.47
    )
    
    
    (0.47
    )
    
    
    (0.42
    )
    
    
    (0.46
    )Amortization of injectants
    
    
    (0.94
    )
    
    
    (1.38
    )
    
    
    (1.00
    )
    
    
    (1.82
    )Operating netback
    
    $
    24.31
    
    
    $
    20.43
    
    
    $
    24.51
    
    
    $
    22.17
 Distributions and Taxability of Distributions Pengrowth generated $363.1 million ($2.63 per unit) of distributable cash related to
2004 operations, compared to $313.4 million ($2.68 per unit) in 2003. This equates to 90
percent of funds generated from operations, compared to 88 percent in 2003. PENGROWTH ENERGY TRUST 62 Annual Report 2004




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MANAGEMENTS DISCUSSION & ANALYSIS Pengrowth currently withholds approximately 10 percent of cash available for
distribution to repay debt and/or contribute to capital spending. The Board of Directors
may decide to increase (or decrease) the amount withheld in the future, depending on a
number of factors, including future commodity prices, capital expenditure requirements,
and the availability of debt and equity capital. Board discretion with respect to
withholding is subject to a maximum withholding amount of 20 percent of gross revenues, as
approved by unitholders at the 2003 annual general meeting. Cash distributions are paid to unitholders on the 15th day of the second month following
the month of production. Pengrowth paid $2.59 per unit as cash distributions during the
2004 calendar year. For Canadian tax purposes 55.32 percent of these distributions or
$1.4328 per unit is taxable income to unitholders for the 2004 tax year. The remaining
44.68 percent or $1.1572 per unit is a tax deferred return of capital which will reduce
the unitholders cost base of the trust unit for purposes of calculating a capital gain or
loss upon ultimate disposition of the trust units. There is no standardized measure of distributable cash and therefore distributable cash,
as reported by Pengrowth, may not be comparable to similar measures presented by other
trusts. The following table provides a reconciliation of distributable cash for fiscal
years 2004 and 2003.  ($ thousands, except per unit amounts)
    
    2004
    
    
    2003Funds generated from operations
    
    $
    402,994
    
    
    $
    356,414Change in deferred injectants
    
    
    746
    
    
    
    (9,504
    )Change in Remediation Trust Funds
    
    
    (917
    )
    
    
    (713
    )Amortization of deferred charges
    
    
    (1,893
    )
    
    
    (204
    )Gain (loss) on sale of marketable securities
    
    
    248
    
    
    
    (94
    )Distributable cash before withholding
    
    
    401,178
    
    
    
    345,899Cash withheld
    
    
    (38,117
    )
    
    
    (32,484
    )Distributable cash
    
    
    363,061
    
    
    
    313,415Less: Actual distributions paid or declared
    
    
    (363,001
    )
    
    
    (313,381
    )Balance to be distributed
    
    $
    60
    
    
    $
    34Actual distributions paid or declared per unit
    
    $
    2.63
    
    
    $
    2.68
 At December 31, 2004, the trust had unused tax deductions of $7.66 per unit (2003  $10.27
per unit). At this time, Pengrowth anticipates that approximately 70-75 percent of 2005
distributions will be taxable; this estimate is subject to change depending on a number of
factors including, but not limited to, the level of commodity prices, acquisitions,
dispositions, and new equity offerings. Acquisitions and Dispositions On May 31, 2004, Pengrowth acquired the Murphy Assets which consist of oil and natural
gas assets in Alberta and Saskatchewan from a subsidiary of Murphy Oil Corporation for a
purchase price of $550.8 million. The reserves associated with this acquisition include
total proved reserves of 38.6 million boe and proved plus probable reserves of 46.1
million boe. PENGROWTH ENERGY TRUST 63 Annual Report 2004




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MANAGEMENTS DISCUSSION & ANALYSIS As required by Canadian GAAP, Pengrowth recorded a future tax liability upon
acquisition of the Murphy Assets. The tax liability arises due to the deficiency in tax
pools of the Murphy Assets acquired, offset in part by excess tax pools (compared to book
value) from past acquisitions. The future tax liability represents the income taxes that
would arise, based on the enacted income tax rates, if the operating companys assets and
liabilities were disposed of or settled at book value. Because of the tax structure of the
Trust, Pengrowth does not expect to pay cash income taxes in the operating companies in
the foreseeable future. In accordance with Canadian GAAP, Pengrowth was required to record goodwill of $170.6
million upon acquisition of the Murphy Assets. The goodwill value was determined based on
the excess of total consideration paid less the net value assigned to other identifiable
assets and liabilities, including the future income tax liability. Details of the
acquisition are provided in Note 5 of the financial statements. On August 12, 2004, Pengrowth acquired an additional 34.34 percent interest in Kaybob
Notikewin Unit No. 1 for a gross purchase price of $20.0 million, bringing Pengrowths
total working interest in this unit to just under 99 percent. The acquisition added
approximately 415 boe per day of production and approximately 1.8 mmboe of proved plus
probable reserves. Capital Expenditures During 2004, Pengrowth spent $161.1 million on development and optimization
activities. The largest expenditures were in Judy Creek ($38.3 million), SOEP ($31.9
million), Monogram ($17.7 million), Weyburn ($5.4 million) and Squirrel ($5.3 million).
Pengrowth does not typically participate in exploration activities and in 2004 most of the
capital spent on development was directed towards arresting production declines and
improving recovery by infill drilling, rather than finding new reserves. Budgeted expenditures for 2005 total approximately $171 million on maintenance and
development opportunities at our existing properties. Approximately one-half of the
expected 2005 expenditures are planned for the SOEP and the Judy Creek properties. PENGROWTH ENERGY TRUST 64 Annual Report 2004




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MANAGEMENTS DISCUSSION & ANALYSIS The following table provides further detail regarding Pengrowths capital expenditures by major
property for 2004. Capital expenditures for 2003 are also provided for purposes of comparison.  CAPITAL EXPENDITURES 
 Year ended December 31
    
    2004
    
    
    2003($ million)
    
    Development
    
    
    Dec 31, 2003
    
    
    Total Capital
    
    
    Total CapitalProperty
    
    Drilling
    
    
    Facilities
    
    
    Expenditures
    
    
    ExpendituresJudy Creek
    
    
    35.2
    
    
    
    3.1
    
    
    
    38.3
    
    
    
    21.5SOEP
    
    
    8.1
    
    
    
    23.8
    
    
    
    31.9
    
    
    
    15.0Monogram
    
    
    12.4
    
    
    
    5.3
    
    
    
    17.7
    
    
    
    0.1Weyburn
    
    
    3.5
    
    
    
    1.9
    
    
    
    5.4
    
    
    
    8.7Squirrel
    
    
    4.8
    
    
    
    0.5
    
    
    
    5.3
    
    
    
    0.4Princess
    
    
    4.2
    
    
    
    0.3
    
    
    
    4.5
    
    
    
    Dunvegan
    
    
    3.3
    
    
    
    0.7
    
    
    
    4.0
    
    
    
    1.5McLeod River
    
    
    4.4
    
    
    
    0.1
    
    
    
    4.5
    
    
    
    6.0Swan Hills
    
    
    2.9
    
    
    
    1.0
    
    
    
    3.9
    
    
    
    1.1Bodo
    
    
    3.3
    
    
    
    
    
    
    
    3.3
    
    
    
    Oak
    
    
    2.0
    
    
    
    1.2
    
    
    
    3.2
    
    
    
    6.1Weasel
    
    
    2.6
    
    
    
    0.3
    
    
    
    2.9
    
    
    
    0.2Tilley
    
    
    2.2
    
    
    
    0.4
    
    
    
    2.6
    
    
    
    0.9Laprise
    
    
    2.4
    
    
    
    0.1
    
    
    
    2.5
    
    
    
    1.3Countess
    
    
    0.2
    
    
    
    2.2
    
    
    
    2.4
    
    
    
    Tangleflags
    
    
    1.9
    
    
    
    0.5
    
    
    
    2.4
    
    
    
    House Mountain
    
    
    2.2
    
    
    
    
    
    
    
    2.2
    
    
    
    2.8Tupper
    
    
    1.1
    
    
    
    0.9
    
    
    
    2.0
    
    
    
    1.8Elm
    
    
    1.5
    
    
    
    0.1
    
    
    
    1.6
    
    
    
    2.4Redeye
    
    
    0.6
    
    
    
    0.1
    
    
    
    0.7
    
    
    
    1.3Cessford
    
    
    0.1
    
    
    
    0.2
    
    
    
    0.3
    
    
    
    7.2Other
    
    
    13.2
    
    
    
    6.3
    
    
    
    19.5
    
    
    
    7.4112.1
    
    
    
    49.0
    
    
    
    161.1
    
    
    
    85.7
 Reserves Pengrowth reported year-end Proved plus Probable reserves of 218.6 mmboe compared to
184.4 mmboe at year-end 2003. Further details of Pengrowths 2004 year-end reserves are
provided on pages 34-38 of this annual report. Working Capital Working capital declined by $91.5 million from a positive balance of $13.0 million in
2003 to a working capital deficiency of $78.5 million as at December 31, 2004. Of the
decline of $91.5 million, $64.2 million is attributable to the cash and term deposits held
at the end of 2003. Most of the balance of the working capital decline is attributable to
an increase in the current portion of the note payable and contract liabilities, and a
higher level of distributions payable to unitholders as at December 31, 2004. PENGROWTH ENERGY TRUST 65 Annual Report 2004




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MANAGEMENTS DISCUSSION & ANALYSIS Pengrowth frequently operates with a working capital deficiency as a result of the
fact that distributions related to two production months of distributable cash are payable
to unitholders at the end of any month, but only one month of production is still
receivable. For example, at the end of December, distributions related to November and
December production months were payable on January 15 and February 15 respectively.
Novembers production revenue, received on December 25, is temporarily applied against
Pengrowths revolving credit facility until the distribution payment on January 15. Financial Resources and Liquidity At year-end 2004, Pengrowth had a long-term debt to debt-plus-equity at book value
ratio of 0.2 and maintained $375.0 million in committed credit facilities which were
reduced by drawings of $106.0 million and by $23.0 million in letters of credit
outstanding at year end. In addition, Pengrowth maintains a $35.0 million demand operating
line of credit. Pengrowth remains well positioned to fund its 2005 development program and
to take advantage of acquisition opportunities as they arise. Long-term debt at December 31, 2004 included fixed rate term debt denominated in U.S.
dollars and translated to Cdn $240.4 million. Due to the improvement in the Canadian to
U.S. dollar exchange rate, an unrealized gain of Cdn $49.8 million has been recorded since
the U.S. dollar denominated debt was issued in April of 2003. Pengrowths long-term debt increased by $86.1 million in fiscal 2004 to $345.4 million at
December 31, 2004. At the end of 2004 Pengrowth also had a $35.0 million
non-interest-bearing note payable to Emera Offshore Incorporated (Emera) related to the
purchase of the SOEP offshore facilities from Emera on December 31, 2003. The terms of
this note are provided in Note 8 to the financial statements. During the year Pengrowth incurred $325.0 million of new debt to fund the acquisition of
the Murphy Assets. Of this amount, $220.0 million was comprised of an acquisition bridge
facility with a one year-term ending May 31, 2005 with the remaining $105.0 million drawn
from a revolving credit facility with a renewal date of May 30, 2005. A portion of the
proceeds from the December 30, 2004 Class B trust unit offering was used to fully repay
the drawing on the bridge facility. At December 31, 2004 Pengrowth also had a $35.0 million non-interest-bearing note payable
to Emera Offshore Incorporated (Emera) related to installments due upon the purchase of
the SOEP offshore facilities from Emera on December 31, 2003. The terms of this note are
provided in Note 8 to the financial statements.  FINANCIAL LEVERAGE AND COVERAGE 
 2004
    
    
    2003Distributable cash to interest expense (times)
    
    
    12
    
    
    
    17Long-term debt to distributable cash (times)
    
    
    1.0
    
    
    
    0.8Long-term debt-to-debt plus-equity
    
    
    19
    %
    
    
    18
    %
 PENGROWTH ENERGY TRUST 66 Annual Report 2004




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MANAGEMENTS DISCUSSION & ANALYSIS Class A and Class B Trust Unit Reclassification Generally speaking, the Income Tax Act (Canada) provides that a trust will permanently
lose its mutual fund trust status if it is established or maintained primarily for the
benefit of non-residents of Canada (which is generally interpreted to mean that the
majority of unitholders must not be non-residents of Canada) (the Benefit Test), unless
at all times after February 21, 1990, all or substantially all of the Trusts property
consisted of property other than taxable Canadian property (the TCP Exception). The Federal Budget tabled by the Minister of Finance on March 23, 2004 proposed several
changes to Subsection 132 (7) of the Tax Act to the effect that the TCP Exception would
generally no longer be available to royalty trusts after December 31, 2004. On April 22, 2004, Pengrowth Energy Trust sought and obtained the approval of its
unitholders for the reclassification of its trust units as Class A trust units and Class B
trust units (the A/B Structure). The purpose of the A/B Structure was to enable
Pengrowth Energy Trust to satisfy the Benefit Test by providing a mechanism to ensure that
the majority of trust units, distributions, votes and entitlements to the capital of
Pengrowth Energy Trust would be held by residents of Canada. The A/B Structure was
implemented by Pengrowth Energy Trust on July 27, 2004, but the ownership threshold has
not yet been achieved. As of December 31, 2004, the outstanding Class A trust units of
Pengrowth Energy Trust represented approximately 50.2 percent of the total outstanding
trust units. The Trust Indenture of Pengrowth Energy Trust currently stipulates that an
ownership threshold of a maximum of 49.75 percent represented by Class A trust units must
be achieved by June 1, 2005. It is anticipated that the ownership threshold will be
achieved prior to June 1, 2005 due to the issuance of Class B trust units under the
Arrangement with Crispin and through the issuance of Class B trust units through the DRIP
and employee trust unit option and rights incentive plans.  2004
    
    
    2003Class A trust units
    
    
    50.20
    %
    
    
    0.00
    %Class B trust units
    
    
    49.75
    %
    
    
    0.00
    %Trust units prior to reclassification
    
    
    0.05
    %
    
    
    100.00
    %
 On November 26, 2004, Pengrowth Energy Trust received a customary form of comfort letter
from the Department of Finance (Canada) (the November Finance Letter) stating that the
Department of Finance will recommend to the Minister of Finance that an amendment be made
to the TCP Exception that would clarify Pengrowth Energy Trusts ability to rely upon that
exception and would effectively remove any significant risk regarding the status of
Pengrowth Energy Trust as a Mutual Fund Trust. The November Finance Letter is subject to
acceptance of the recommendations therein by the Minister of Finance and Parliament, which
Pengrowth Energy Trust believes is reasonable to assume will occur. PENGROWTH ENERGY TRUST 67 Annual Report 2004




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MANAGEMENTS DISCUSSION & ANALYSIS On December 6, 2004, the Minister of Finance tabled a Notice of Ways and Means Motion
in the House of Commons to implement measures proposed in the March 23, 2004 Federal
Budget. However, the changes to the Mutual Fund Trust provisions proposed in the March 23,
2004 Federal Budget to remove the TCP Exception were not included. The Minister of Finance
indicated that further discussions would be pursued with the private sector concerning the
appropriate tax treatment of non-residents investing in resource property through mutual
funds. Therefore, uncertainty remains as to whether or not the TCP Exception will be
available to royalty trusts such as Pengrowth Energy Trust indefinitely. To the extent that Class A trust units in the future represent less than the ownership
threshold of 49.75 percent, conversions of Class B trust units to Class A trust units will
be permissible under the Trust Indenture. Pengrowth intends to implement a new form of
reservation system in order to provide all unitholders with an equal and orderly
opportunity to convert Class B trust units into Class A trust units. All registered and
beneficial unitholders will have the opportunity to participate in the reservation system
by providing an appropriate form to Computershare Trust Company of Canada
(Computershare). Computershare will, at a specified time, select unitholders from within
the reservation system using a random selection process that essentially provides an equal
opportunity to all unitholders within the system. Each selection will entitle a unitholder
to convert up to 1,000 Class B trust units into Class A trust units on a one-for-one
basis. Unitholders will remain in the reservation system until they receive reservation
numbers in respect of all of their Class B trust units within the system or until the
reservation expires in accordance with its terms. It is anticipated that selections will
occur monthly, but they may occur more or less frequently as determined by the Board of
Directors of Pengrowth. At each periodic selection, the number of unitholders that will be
selected will be determined by the number of Class B trust units that may be converted
into Class A trust units without exceeding the ownership threshold. Further details
regarding the reservation system, including certain income tax consequences of exercising
the conversion option, will be provided sufficiently in advance of the first selection
process so that all interested unitholders will have an equal opportunity to participate. PENGROWTH ENERGY TRUST 68 Annual Report 2004




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MANAGEMENTS DISCUSSION & ANALYSIS  COMMITMENTS AND CONTRACTUAL OBLIGATIONS 
 ($ thousands)
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    thereafter
    
    
    TotalLong-term debt(1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    345,400
    
    
    
    345,400Interest payments on long-term debt(2)
    
    
    12,176
    
    
    
    12,176
    
    
    
    12,176
    
    
    
    12,176
    
    
    
    12,176
    
    
    
    13,632
    
    
    
    74,512Note payable
    
    
    15,000
    
    
    
    20,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35,000Operating leasesOffice rent
    
    
    1,235
    
    
    
    469
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,704Vehicle leases
    
    
    745
    
    
    
    700
    
    
    
    567
    
    
    
    342
    
    
    
    95
    
    
    
    
    
    
    
    2,4491,980
    
    
    
    1,169
    
    
    
    567
    
    
    
    342
    
    
    
    95
    
    
    
    
    
    
    
    4,153Purchase obligationsPipeline transportation
    
    
    41,475
    
    
    
    41,281
    
    
    
    40,192
    
    
    
    33,420
    
    
    
    29,728
    
    
    
    63,894
    
    
    
    249,990Capital expenditures
    
    
    36,900
    
    
    
    34,800
    
    
    
    6,600
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    78,300CO2 purchases
    
    
    5,976
    
    
    
    5,236
    
    
    
    4,418
    
    
    
    4,254
    
    
    
    4,289
    
    
    
    23,513
    
    
    
    47,68684,351
    
    
    
    81,317
    
    
    
    51,210
    
    
    
    37,674
    
    
    
    34,017
    
    
    
    87,407
    
    
    
    375,976Remediation trust fund payments
    
    
    250
    
    
    
    250
    
    
    
    250
    
    
    
    250
    
    
    
    250
    
    
    
    
    
    
    
    1,250113,757
    
    
    
    114,912
    
    
    
    64,203
    
    
    
    50,442
    
    
    
    46,538
    
    
    
    446,439
    
    
    
    836,291
   (1)  U.S. dollar denominated debt due as follows: $150M on April 2010 and $50M on
April 2013, translated at the Dec. 31, 2004 foreign exchange rate of 1.2020 Cdn/U.S.(2)  Interest payments on U.S. denominated debt, calculated based on Dec. 31, 2004
foreign exchange rate. Price Risk Management Pengrowth uses forward and futures contracts to manage its exposure to commodity price
fluctuations. Commodity price hedges in place at December 31, 2004 are provided in Note 17
to the Financial Statements. Pengrowth has not entered into any additional contracts
subsequent to year end. PENGROWTH ENERGY TRUST 69 Annual Report 2004




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MANAGEMENTS DISCUSSION & ANALYSIS Trust Unit Information  TRUST UNIT TRADING  AFTER RE-CLASSIFICATION (1)
 High
    
    
    Low
    
    
    Close
    
    
    Volume (000s)
    
    
    Value ($ millions)TSX - PGF.A ($Cdn)2004 1st quarter2nd quarter3rd quarter
    
    $
    24.19
    
    
    $
    19.10
    
    
    $
    22.67
    
    
    
    1,672
    
    
    $
    35.504th quarter
    
    
    26.33
    
    
    
    20.03
    
    
    
    24.93
    
    
    
    2,607
    
    
    
    58.90Year
    
    $
    26.33
    
    
    $
    19.10
    
    
    $
    24.93
    
    
    
    4,279
    
    
    $
    94.40TSX - PGF.B ($Cdn)2004 1st quarter2nd quarter3rd quarter
    
    $
    20.00
    
    
    $
    18.03
    
    
    $
    18.87
    
    
    
    5,588
    
    
    $
    105.604th quarter
    
    
    20.04
    
    
    
    17.51
    
    
    
    18.50
    
    
    
    16,007
    
    
    
    301.80Year
    
    $
    20.04
    
    
    $
    17.51
    
    
    $
    18.50
    
    
    
    21,595
    
    
    $
    407.40NYSE - PGH ($U.S.)2004 1st quarter2nd quarter3rd quarter
    
    $
    18.94
    
    
    $
    14.40
    
    
    $
    17.93
    
    
    
    21,200
    
    
    $
    350.404th quarter
    
    
    21.24
    
    
    
    15.85
    
    
    
    20.82
    
    
    
    31,174
    
    
    
    574.70Year
    
    $
    21.24
    
    
    $
    14.40
    
    
    $
    20.82
    
    
    
    52,374
    
    
    $
    925.10
 TRUST UNIT TRADING  BEFORE RE-CLASSIFICATION(1) High
    
    
    Low
    
    
    Close
    
    
    Volume (000s)
    
    
    Value ($ millions)TSX - PGF.UN ($Cdn)2004 1st quarter
    
    $
    21.25
    
    
    $
    15.55
    
    
    $
    17.98
    
    
    
    30,620
    
    
    $
    567.802nd quarter
    
    
    19.15
    
    
    
    16.15
    
    
    
    18.67
    
    
    
    18,145
    
    
    
    328.503rd quarter
    
    
    19.75
    
    
    
    18.52
    
    
    
    19.42
    
    
    
    3,554
    
    
    
    68.504th quarterYear
    
    $
    21.25
    
    
    $
    15.55
    
    
    $
    19.42
    
    
    
    52,319
    
    
    $
    964.802003 1st quarter
    
    $
    15.90
    
    
    $
    13.39
    
    
    $
    14.25
    
    
    
    20,122
    
    
    $
    297.602nd quarter
    
    
    18.22
    
    
    
    13.95
    
    
    
    17.25
    
    
    
    32,575
    
    
    
    519.003rd quarter
    
    
    17.87
    
    
    
    16.20
    
    
    
    17.25
    
    
    
    20,476
    
    
    
    349.504th quarter
    
    
    22.22
    
    
    
    16.75
    
    
    
    21.25
    
    
    
    24,220
    
    
    
    451.60Year
    
    $
    22.22
    
    
    $
    13.39
    
    
    $
    21.25
    
    
    
    97,393
    
    
    $
    1,617.70NYSE - PGH ($U.S.)2004 1st quarter
    
    $
    16.60
    
    
    $
    12.10
    
    
    $
    13.70
    
    
    
    36,899
    
    
    $
    525.602nd quarter
    
    
    14.24
    
    
    
    11.62
    
    
    
    13.98
    
    
    
    22,194
    
    
    
    295.903rd quarter
    
    
    14.95
    
    
    
    13.84
    
    
    
    14.64
    
    
    
    5,797
    
    
    
    84.504th quarterYear
    
    $
    14.95
    
    
    $
    11.62
    
    
    $
    14.64
    
    
    
    64,890
    
    
    $
    906.002003 1st quarter
    
    $
    10.67
    
    
    $
    9.07
    
    
    $
    9.71
    
    
    
    8,168
    
    
    $
    80.802nd quarter
    
    
    13.80
    
    
    
    9.40
    
    
    
    12.83
    
    
    
    22,500
    
    
    
    271.103rd quarter
    
    
    13.13
    
    
    
    11.55
    
    
    
    12.81
    
    
    
    18,614
    
    
    
    230.204th quarter
    
    
    17.00
    
    
    
    12.50
    
    
    
    16.40
    
    
    
    24,721
    
    
    
    340.80Year
    
    $
    17.00
    
    
    $
    9.07
    
    
    $
    16.40
    
    
    
    74,003
    
    
    $
    922.90
   (1)July 27, 2004, trust units were re-classified as Class A or Class B trust units. Class A trust units trade on the New York Stock Exchange (NYSE) under PGH and on
the Toronto Stock Exchange (TSX) under PGF.A. Class B trust units trade only on the
TSX under PGF.B. PENGROWTH ENERGY TRUST  70  Annual Report 2004




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##### Table of Contents



MANAGEMENTS DISCUSSION & ANALYSIS Pengrowth had 152,972,555 trust units outstanding at December 31, 2004, compared to
123,873,651 trust units at December 31, 2003. The weighted average number of units during
the year was 133,395,485 (2003  115,912,374). In 2004, Pengrowth raised a total of $509.8 million in new equity proceeds, issuing a
total of 29.1 million additional trust units. On March 23, 2004 Pengrowth completed a
public offering of 10.9 million units at $18.40 per trust unit to raise total gross
proceeds of $200.6 million, and net proceeds of $189.9 million, on December 30, 2004
Pengrowth completed a public offering of 16.0 million Class B trust units at $18.70 per
trust unit to raise total gross proceeds of $298.9 million, and net proceeds of $283.3
million. During 2004, 0.9 million trust units were issued under the DRIP plan at an
average price of $17.84 per unit, raising additional equity of $16.4 million, and 1.3
million trust units were issued under the employee trust unit option and rights plans, at
an average price of $15.63 per trust unit, to raise an additional $20.3 million in new
equity. Fourth Quarter Results Oil and gas sales increased 42 percent to $218.8 million in the fourth quarter of
2004, compared to $154.1 million recorded in the fourth quarter of 2003, as a result of a
21 percent increase in volumes and an 18 percent increase in Pengrowths average realized
price per boe. Volumes for the fourth quarter of 2004 averaged 57,425 boe per day compared
to 47,653 boe per day in the fourth quarter of 2003. The increase of 9,772 boe per day was
due mainly to the addition of production volumes from the Murphy Assets which averaged
approximately 14,400 boe per day in the fourth quarter of 2004, offset in part by an
overall production decline at other properties. Operating costs increased to $42.6 million
compared to $39.1 million in the fourth quarter of 2003 mainly due to the addition of the
Murphy properties, offset in part by a reduction of processing fees at SOEP. Funds
generated from operations increase 31 percent to $101.9 million in the fourth quarter of
2004 compared to $77.5 million in the fourth quarter of 2003, and distributable cash
increased 35 percent to $96.5 million. An increase in depletion and depreciation, interest
expense, general and administrative costs and income tax expense contributed to a 17
percent decrease in net income for the fourth quarter of 2004 compared to the same period
in the prior year. Future taxes of $14.9 million recorded in the fourth quarter of 2004
relate mainly to recently proposed tax changes to resource allowance and the deductibility
of crown charges. PENGROWTH ENERGY
TRUST  71  Annual Report 2004




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##### Table of Contents



MANAGEMENTS DISCUSSION & ANALYSIS Summary of Quarterly Results The following table is a summary of quarterly results for 2004 and 2003. As this table
illustrates, production and Distributable cash were impacted positively by the acquisition
of the Murphy Assets in the second quarter of 2004. This table also shows the relatively high commodity prices sustained throughout 2003 and 2004,
which have had a positive impact on net income and Distributable cash. Net income in the second quarter of 2004 decreased $6.0 million to $32.7 million ($0.24
per trust unit) from $38.7 million ($0.31 per trust unit) in the first quarter of 2004. An
increase in net revenue from the Murphy Assets for one month in the second quarter was
more than offset by incremental expenses, resulting in lower net income in the second
quarter. An increase of $3.6 million in interest costs associated with incremental debt
raised for the Murphy acquisition in May 2004, $3.5 million higher management fees accrued
in relation to the performance fee associated with the Murphy acquisition, future income
taxes recorded of $3.5  million in the second quarter and an increase in foreign exchange
losses of $1.5 million on translation of the U.S. dollar debt to Canadian dollars at
higher U.S. dollar exchange rates contributed to the decrease in net income. The partial
pre-funding of the Murphy acquisition, through the issuance of 10.9 million trust units on
March 23, 2004 also contributed to lower net income per unit in the second quarter. The decrease in net income in the third quarter of 2003 to $34.8 million ($0.29 per trust
unit) compared to $54.2 million ($0.49 per trust unit) in the second quarter of 2003 is
due mainly to an unrealized foreign exchange gain of $20.7 million recorded on the
translation of U.S. denominated debt issued on April 23, 2003. An increase in the average
units outstanding from 111.5 million in the second quarter to 118.9 million units
outstanding in the third quarter also contributed to the decline in net income per unit
amounts. This increase was due to the July 23, 2003 issue of a further 8.5 million trust
units and further impacted the per unit amounts in the fourth quarter of 2003.  SUMMARY OF QUARTERLY RESULTS( $ thousands)
    2004Q1
    
    
    Q2
    
    
    Q3
    
    
    Q4
    
    
    TotalOil and gas sales (1)
    
    $
    165,880
    
    
    $
    193,637
    
    
    $
    222,848
    
    
    $
    218,835
    
    
    $
    801,200Net income
    
    $
    38,652
    
    
    $
    32,684
    
    
    $
    51,271
    
    
    $
    31,138
    
    
    $
    153,745Net income per unit
    
    $
    0.31
    
    
    $
    0.24
    
    
    $
    0.38
    
    
    $
    0.23
    
    
    $
    1.15Net income per unit  diluted
    
    $
    0.31
    
    
    $
    0.24
    
    
    $
    0.38
    
    
    $
    0.23
    
    
    $
    1.15Distributable cash
    
    $
    83,606
    
    
    $
    89,119
    
    
    $
    93,870
    
    
    $
    96,466
    
    
    $
    363,061Actual distributions paid or declared per unit
    
    $
    0.63
    
    
    $
    0.64
    
    
    $
    0.67
    
    
    $
    0.69
    
    
    $
    2.63Daily production (boe)
    
    
    45,668
    
    
    
    51,451
    
    
    
    60,151
    
    
    
    57,425
    
    
    
    53,702Total production mboe (6:1)
    
    
    4,156
    
    
    
    4,682
    
    
    
    5,534
    
    
    
    5,283
    
    
    
    19,655Average price per boe
    
    $
    39.91
    
    
    $
    41.36
    
    
    $
    40.27
    
    
    $
    41.42
    
    
    $
    40.76Operating netback per boe
    
    $
    25.71
    
    
    $
    25.71
    
    
    $
    22.77
    
    
    $
    24.31
    
    
    $
    24.51
   (1)
    
    Restated to conform to presentation adopted in the current year. PENGROWTH ENERGY TRUST  72  Annual Report 2004




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##### Table of Contents



MANAGEMENTS DISCUSSION & ANALYSIS  SUMMARY OF QUARTERLY RESULTS( $ thousands)
    2003Q1
    
    
    Q2
    
    
    Q3
    
    
    Q4
    
    
    TotalOil and gas
sales (1)
    
    $
    204,824
    
    
    $
    169,238
    
    
    $
    162,819
    
    
    $
    154,140
    
    
    $
    691,021Net income
    
    $
    62,920
    
    
    $
    54,214
    
    
    $
    34,808
    
    
    $
    37,355
    
    
    $
    189,297Net income per unit
    
    $
    0.57
    
    
    $
    0.49
    
    
    $
    0.29
    
    
    $
    0.31
    
    
    $
    1.66Net income per unit  diluted
    
    $
    0.57
    
    
    $
    0.48
    
    
    $
    0.29
    
    
    $
    0.30
    
    
    $
    1.64Distributable cash
    
    $
    97,221
    
    
    $
    71,774
    
    
    $
    72,951
    
    
    $
    71,469
    
    
    $
    313,415Actual distributions paid or
declared per unit
    
    $
    0.75
    
    
    $
    0.67
    
    
    $
    0.63
    
    
    $
    0.63
    
    
    $
    2.68Daily production (boe)
    
    
    50,827
    
    
    
    48,839
    
    
    
    48,850
    
    
    
    47,653
    
    
    
    49,030Total production mboe (6:1)
    
    
    4,574
    
    
    
    4,444
    
    
    
    4,494
    
    
    
    4,384
    
    
    
    17,896Average price per boe
    
    $
    44.78
    
    
    $
    38.08
    
    
    $
    36.22
    
    
    $
    35.16
    
    
    $
    38.61Operating netback per boe
    
    $
    26.50
    
    
    $
    21.11
    
    
    $
    20.54
    
    
    $
    20.43
    
    
    $
    22.17
   (1)
    
    Restated to conform to presentation adopted in the current year.  FINANCIAL RESULTS($ thousands)2004
    
    
    2003
    
    
    2002Oil and gas sales
    
    $
    801,200
    
    
    $
    691,020
    
    
    $
    482,301Net income
    
    $
    153,745
    
    
    $
    189,297
    
    
    $
    56,955Net income per unit
    
    $
    1.15
    
    
    $
    1.63
    
    
    $
    0.63Distributable cash
    
    $
    363,061
    
    
    $
    313,415
    
    
    $
    194,458Actual distributions paid or declared per unit
    
    $
    2.63
    
    
    $
    2.68
    
    
    $
    2.07Total assets
    
    $
    2,276,534
    
    
    $
    1,673,718
    
    
    $
    1,552,651Long-term financial liabilities (1)
    
    $
    383,616
    
    
    $
    294,300
    
    
    $
    316,501Unitholders equity
    
    $
    1,462,211
    
    
    $
    1,159,433
    
    
    $
    1,073,164Number of units outstanding at year end (thousands)
    
    
    152,973
    
    
    
    123,874
    
    
    
    110,562
   (1)
    
    Long-term debt plus long-term portion of note payable and contract liabilities. Business Risks The amount of distributable cash available to unitholders and the value of Pengrowth
trust units are subject to numerous risk factors. As the trust units allow investors to
participate in the distributable cash from Pengrowths portfolio of producing oil and
natural gas properties, the principal risk factors that are associated with the oil and
gas business include, but are not limited to, the following influences:  §
    The prices of Pengrowths products (oil, natural gas, and NGLs) fluctuate due to
many factors including local and global market supply and demand, weather patterns,
pipeline transportation, and political stability.  §
    The marketability of our production depends in part upon the availability, proximity
and capacity of gathering systems, pipelines and processing facilities. Operational or
economic factors may result in the inability to deliver our products to market. PENGROWTH ENERGY TRUST  73  Annual Report 2004




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##### Table of Contents



MANAGEMENTS DISCUSSION & ANALYSIS  §
    Geological and operational risks affect the quantity and quality of reserves
and the costs of recovering those reserves. Our actual results will vary from our
reserve estimates, and those variations could be material.  §
    Government royalties, income taxes, commodity taxes, and other taxes, levies
and fees have a significant economic impact on Pengrowths financial results. Changes
to federal and provincial legislation governing such royalties, taxes and fees could have a material impact on Pengrowths
financial results and the value of Pengrowth trust units.  §
    Environmental laws and regulatory initiatives impact Pengrowth financially and
operationally. We may incur substantial capital and operating costs to comply with
increasingly complex laws and regulations covering the protection of the environment and human health and safety. In
particular, we may be required to incur significant costs to comply with the 1997 Kyoto
Protocol to the United Nations Framework Convention on Climate Change (the Kyoto
Protocol).  §
    Pengrowths oil and gas reserves will be depleted over time and our level of
distributable cash and the value of our trust units could be reduced if reserves and
production are not replaced. The ability to replace production depends on Pengrowths success in developing existing
reserves, acquiring new reserves and financing this development and acquisition activity
within the context of the capital markets.  §
    A significant portion of our properties are operated by third parties. If these
operators fail to perform their duties properly, or become insolvent, we may
experience interruptions in production and revenues from these properties or incur additional liabilities and expenses as a
result of the default of these third party operators.  §
    Increased activity within the oil and gas sector can increase the cost of goods
and services and make it more difficult to hire and retain professional staff.  §
    Changing interest rates influence borrowing costs and the availability of capital.  §
    Investors interest in the oil and gas sector may change over time which would
affect the availability of capital and the value of Pengrowth trust units.  §
    Inflation may result in escalating costs which could impact unitholder
distributions and the value of Pengrowth trust units.  §
    Canadian/U.S. exchange rates influence revenues and, to a lesser extent, operating and
capital costs.  §
    The value of Pengrowth trust units is impacted directly by the related tax
treatment of the trust units and the trust unit distributions, and indirectly by the
tax treatment of alternative equity investments. Changes in Canadian or U.S. tax legislation could adversely affect the value of our
trust units. PENGROWTH ENERGY TRUST  74  Annual Report 2004




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MANAGEMENTS DISCUSSION & ANALYSIS  Pengrowth mitigates some of these risks by:  §
    Fixing the price on a portion of its future crude oil and natural gas production.  §
    Fixing the Canadian/U.S. exchange rate through financial hedging contracts or
by fixing commodity prices in Canadian dollars.  §
    Offering competitive incentive-based compensation packages to attract and
retain highly qualified and motivated professional staff.  §
    Adhering to strict investment criteria for acquisitions.  §
    Acquiring mature production with long life reserves and proven production.  §
    Performing extensive geological, geophysical, engineering and environmental
analysis before committing to capital development projects.  §
    Geographically diversifying its portfolio.  §
    Controlling costs to maximize profitability.  §
    Developing and adhering to policies and practices that protect the environment
and meet or exceed the regulations imposed by the government.  §
    Developing and adhering to safety policies and practices that meet or exceed
regulatory standards.  §
    Ensuring strong third-party operators for non-operated properties.  §
    Carrying insurance to cover physical losses and business interruption. Subsequent Events On January 21, 2005, Pengrowth announced it had entered into an agreement to purchase
an additional 12.5 percent working interest in Swan Hills Unit No. 1 for a purchase price
of $90 million, before adjustments. The transaction, which is subject to Rights of First
Refusal, is effective October 1, 2004 and closed February 28, 2005. The acquisition
increases Pengrowths working interest in Swan Hills Unit No. 1 to 22.7 percent. On February 17, 2005, Pengrowth announced an Arrangement Agreement (the Arrangement)
with Crispin Energy Inc. (Crispin) under which Pengrowth will acquire all of the issued
and outstanding shares of Crispin on the basis of 0.0725 Class B trust units of
EnergyTrust for each share held by Canadian resident shareholders of Crispin and 0.0512
Class A trust units of EnergyTrust for each share held by non-Canadian resident
shareholders of Crispin. The Board of Directors of Crispin will call a Special Meeting of
Shareholders in mid to late April 2005 for approval of the Arrangement. The Arrangement will require the approval of 66
2/3 percent of the votes cast by shareholders and optionholders of Crispin voting as a single class, the
approval of the majority of shareholders excluding certain management personnel and the
approval of the majority of shareholders excluding certain management personnel and the
approval of the Court of Queens Bench of Alberta and certain regulatory agencies.
Completion of the Arrangement is expected to close prior to the end of April 2005. PENGROWTH ENERGY TRUST  75  Annual Report 2004




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MANAGEMENTS DISCUSSION & ANALYSIS Outlook Unitholders of Pengrowth Energy Trust saw Pengrowth complete one of its largest
acquisitions with the purchase of the Murphy Assets in May 2004. The Murphy Assets were
funded through two equity issues allowing Pengrowth to continue to maintain a prudent and
flexible financial structure. Pengrowth will strive to provide attractive long-term returns for unitholders. Our business
objectives include:  §
    Maintaining a balanced portfolio of oil and gas properties in our key focus areas;  §
    Growing production and reserves through accretive acquisitions and low risk
development drilling;  §
    Farming out undeveloped land with higher risk exploration potential;  §
    Continuing to optimize costs and maximize netbacks;  §
    The selective disposition of oil and gas properties that do not meet our return objectives;  §
    Operating our properties in a safe and prudent manner in order to protect our employees, the public, the environment and our investment; Continuing to maintain a stable distribution policy while withholding a portion of distributable
cash to fund future capital programs. At this time, Pengrowth is forecasting average 2005 production of 55,000 to 57,000 boe per
day from our existing properties. This estimate incorporates anticipated production
additions from the Swan Hills acquisition, which closed on February 28, 2005, as well as
our 2005 development program, offset by the impact of expected production declines from
normal operations. The above estimate excludes the potential impact of any future
acquisitions or divestitures, including the acquisition of Crispin. Total operating costs for 2005 are expected to increase to approximately $200.0 million.
This increase is due to the addition of a full year of operating expenses associated with
the Murphy Assets, Pengrowths increased working interest in Swan Hills Unit No. 1 and the
prospective addition of operating expenses associated with the recently announced
acquisition of Crispin. Assuming Pengrowths average production at the end of 2005
results largely as forecast above, Pengrowth currently estimates 2005 operating costs
between $9.61 and $9.96 and combined G&A and Management fees of approximately $1.81 per
boe. Budgeted capital expenditures for 2005 total approximately $171.0 million for maintenance
and development opportunities at existing properties. Approximately one-half of the
expected 2005 expenditures are planned for the SOEP and Judy Creek properties. The above
estimate does not take into account any incremental expenditures which may be incurred in
association with the recently announced acquisitions of Swan Hills Unit No. 1 and Crispin.
Pengrowth currently anticipates a successful completion of the acquisition of Crispin on
or before April 30, 2005. PENGROWTH ENERGY TRUST 76 Annual Report 2004




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APPENDIX C CONSOLIDATED FINANCIAL STATEMENTS OF PENGROWTH ENERGY TRUST INCLUDING NOTE 20 THEREOF WHICH
INCLUDES A RECONCILIATION OF THE CONSOLIDATED FINANCIAL STATEMENTS TO UNITED STATES GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES




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MANAGEMENTS REPORT TO UNITHOLDERS Managements Responsibility to the Unitholders The financial statements are the responsibility of the management of Pengrowth Energy Trust. They
have been prepared in accordance with generally accepted accounting principles, using managements
best estimates and judgements, where appropriate. Management is responsible for the reliability and integrity of the financial statements, the notes
to the financial statements, and other financial information contained in this report. In the
preparation of these statements, estimates are sometimes necessary because a precise determination
of certain assets and liabilities is dependent on future events. Management believes such
estimates have been based on careful judgements and have been properly reflected in the
accompanying financial statements. Management is also responsible for ensuring that management fulfills its responsibilities for
financial reporting and internal control. The Board is assisted in exercising its responsibilities
through the Audit Committee of the Board, which is composed of three non-management directors. The
Committee meets periodically with management and the auditors to satisfy itself that managements
responsibilities are properly discharged, to review the financial statements and to recommend
approval of the financial statements to the Board. KPMG LLP, the independent auditors appointed by the unitholders, have audited Pengrowth Energy
Trusts consolidated financial statements in accordance with generally accepted auditing standards
and provided an independent professional opinion. The auditors have full and unrestricted access
to the Audit Committee to discuss their audit and their related findings as to the integrity of the
financial reporting process. (Signed)
James S. Kinnear
Chairman, President and
Chief Executive Officer
March 4, 2005
    
    (Signed)
Chris Webster
Vice President, Treasurer
Interim Chief Financial Officer




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KPMGllpChartered Accountants
    
    Telephone
    
    (403) 691-80001200 205  5th Avenue SW
    
    Fax
    
    (403) 691-8008Calgary AB T2P4B9
    
    Internet
    
    www.kpmg.ca
 AUDITORS REPORT TO THE UNITHOLDERS To the Unitholders of Pengrowth Energy Trust We have audited the consolidated balance sheets of Pengrowth Energy Trust as at December 31, 2004
and 2003 and the consolidated statements of income and accumulated earnings and cash flow for the
years then ended. These financial statements are the responsibility of the Trusts management.
Our responsibility is to express an opinion on these consolidated financial statements based on our
audits. We conducted our audits in accordance with Canadian generally accepted auditing standards.
Those standards require that we plan and perform an audit to obtain reasonable assurance whether
the financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. In our opinion, these consolidated
financial statements present fairly, in all material respects, the financial position of the Trust
as at December 31, 2004 and 2003 and the results of its operations and its cash flow for the years
then ended in accordance with Canadian generally accepted accounting principles. (signed) KPMG LLP Chartered Accountants Calgary, Canada
March 4, 2005  KPMG llp, a Canadian limited liability partnership is the Canadian member firm of
KPMG International, a Swiss cooperative




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PENGROWTH ENERGY TRUST
CONSOLIDATED BALANCE SHEETS
AS AT DECEMBER 31
(Stated in thousands of dollars) 2004
    
    
    2003ASSETSCURRENT ASSETSCash and term deposits
    
    $
    
    
    
    $
    64,154Accounts receivable
    
    
    104,228
    
    
    
    65,570Inventory
    
    
    439
    
    
    
    699104,667
    
    
    
    130,423REMEDIATION TRUST FUNDS (Note 4)
    
    
    8,309
    
    
    
    7,392DEFERRED CHARGES (Note 11)
    
    
    3,651
    
    
    
    5,544GOODWILL (Note 5)
    
    
    170,619
    
    
    
    PROPERTY, PLANT AND EQUIPMENT
AND OTHER ASSETS (Note 6)
    
    
    1,989,288
    
    
    
    1,530,359$
    2,276,534
    
    
    $
    1,673,718LIABILITIES AND UNITHOLDERS EQUITYCURRENT LIABILITIESBank indebtedness
    
    $
    4,214
    
    
    $
    Accounts payable and accrued liabilities
    
    
    80,423
    
    
    
    54,196Distributions payable to unitholders
    
    
    70,456
    
    
    
    52,139Due to Pengrowth Management Limited
    
    
    7,325
    
    
    
    1,122Note payable (Note 8)
    
    
    15,000
    
    
    
    10,000Current portion of contract liabilities (Note 5)
    
    
    5,795
    
    
    
    183,213
    
    
    
    117,457NOTE PAYABLE (Note 8)
    
    
    20,000
    
    
    
    35,000CONTRACT LIABILITIES (Note 5)
    
    
    18,216
    
    
    
    LONG-TERM DEBT (Note 9)
    
    
    345,400
    
    
    
    259,300ASSET RETIREMENT OBLIGATIONS (Note 7)
    
    
    171,866
    
    
    
    102,528FUTURE INCOME TAXES (Note 14)
    
    
    75,628
    
    
    
    TRUST UNITHOLDERS EQUITYTrust Unitholders capital (Note 10)
    
    
    2,383,284
    
    
    
    1,872,924Contributed surplus (Note 10)
    
    
    1,923
    
    
    
    189Accumulated earnings
    
    
    727,057
    
    
    
    573,312Accumulated distributable cash
    
    
    (1,650,053
    )
    
    
    (1,286,992
    )1,462,211
    
    
    
    1,159,433COMMITMENTS (Note 18)SUBSEQUENT EVENTS (Note 19)$
    2,276,534
    
    
    $
    1,673,718
 See accompanying notes to the consolidated financial statements. Approved on behalf of Pengrowth Energy Trust by
Pengrowth Corporation, as Administrator: (Signed)
    
    Thomas A. Cumming DIRECTOR(Signed)
    
    William R. Stedman DIRECTOR




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PENGROWTH ENERGY TRUST
CONSOLIDATED STATEMENTS OF INCOME AND ACCUMULATED EARNINGS
YEARS ENDED DECEMBER 31
(Stated in thousands of dollars) 2004
    
    
    2003REVENUESOil and gas sales
    
    $
    801,200
    
    
    $
    691,020Processing and other income
    
    
    12,390
    
    
    
    9,726Crown royalties, net of incentives
    
    
    (133,952
    )
    
    
    (108,325
    )Freehold royalties and mineral taxes
    
    
    (11,848
    )
    
    
    (6,580
    )667,790
    
    
    
    585,841Interest and other income
    
    
    1,770
    
    
    
    840NET REVENUE
    
    
    669,560
    
    
    
    586,681EXPENSESOperating
    
    
    159,742
    
    
    
    149,032Transportation
    
    
    8,274
    
    
    
    8,225Amortization of injectants for miscible floods
    
    
    19,669
    
    
    
    32,541Interest
    
    
    29,924
    
    
    
    18,153General and administrative
    
    
    24,448
    
    
    
    15,997Management fee (Note 15)
    
    
    12,874
    
    
    
    10,181Foreign exchange gain (Note 12)
    
    
    (17,300
    )
    
    
    (29,911
    )Depletion and depreciation
    
    
    247,332
    
    
    
    185,270Accretion (Note 7)
    
    
    10,642
    
    
    
    6,039495,605
    
    
    
    395,527INCOME BEFORE TAXES
    
    
    173,955
    
    
    
    191,154Income tax expense (Note 14)Capital
    
    
    4,594
    
    
    
    1,857Future
    
    
    15,616
    
    
    
    20,210
    
    
    
    1,857NET INCOME
    
    $
    153,745
    
    
    $
    189,297Accumulated earnings, beginning of year
    
    
    573,312
    
    
    
    384,015ACCUMULATED EARNINGS, END OF YEAR
    
    $
    727,057
    
    
    $
    573,312NET INCOME PER UNIT (Note 16)     Basic
    
    $
    1.153
    
    
    $
    1.633Diluted
    
    $
    1.147
    
    
    $
    1.625
 See accompanying notes to the consolidated financial statements.




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PENGROWTH ENERGY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOW
YEARS ENDED DECEMBER 31
(Stated in thousands of dollars) 2004
    
    
    2003CASH PROVIDED BY (USED FOR):OPERATINGNet income
    
    $
    153,745
    
    
    $
    189,297Depletion, depreciation and accretion
    
    
    257,974
    
    
    
    191,309Future income taxes
    
    
    15,616
    
    
    
    Contract liability amortization
    
    
    (4,164
    )
    
    
    Amortization of injectants
    
    
    19,669
    
    
    
    32,541Purchase of injectants
    
    
    (20,415
    )
    
    
    (23,037
    )Expenditures on remediation
    
    
    (4,440
    )
    
    
    (3,243
    )Unrealized foreign exchange gain (Note 12)
    
    
    (18,900
    )
    
    
    (30,940
    )Trust unit based compensation (Note 10)
    
    
    2,264
    
    
    
    189Amortization of deferred charges (Note 11)
    
    
    1,893
    
    
    
    204(Gain) loss on sale of marketable securities
    
    
    (248
    )
    
    
    94Funds generated from operations
    
    
    402,994
    
    
    
    356,414Changes in non-cash operating working capital (Note 13)
    
    
    1,173
    
    
    
    (9,863
    )404,167
    
    
    
    346,551FINANCINGDistributions
    
    
    (344,744
    )
    
    
    (306,591
    )Change in long-term debt
    
    
    105,000
    
    
    
    (26,261
    )Note payable (Note 8)
    
    
    (10,000
    )
    
    
    41,393Proceeds from issue of trust units
    
    
    509,830
    
    
    
    210,198260,086
    
    
    
    (81,261
    )INVESTINGExpenditures on property acquisitions
    
    
    (572,980
    )
    
    
    (122,964
    )Expenditures on property, plant and equipment
    
    
    (161,141
    )
    
    
    (85,718
    )Proceeds on property dispositions
    
    
    
    
    
    
    2,835Deferred Charges
    
    
    
    
    
    
    (2,141
    )Change in Remediation Trust Fund
    
    
    (917
    )
    
    
    (713
    )Purchase of marketable securities
    
    
    (2,680
    )
    
    
    Proceeds from sale of marketable securities
    
    
    2,928
    
    
    
    1,812Change in non-cash investing working capital (Note 13)
    
    
    2,169
    
    
    
    (2,539
    )(732,621
    )
    
    
    (209,428
    )INCREASE (DECREASE) IN CASH AND TERM DEPOSITS
    
    
    (68,368
    )
    
    
    55,862CASH AND TERM DEPOSITS
AT BEGINNING OF YEAR
    
    
    64,154
    
    
    
    8,292CASH AND TERM DEPOSITS
(BANK INDEBTEDNESS) AT END OF YEAR
    
    $
    (4,214
    )
    
    $
    64,154
 See accompanying notes to the consolidated financial statements.




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PENGROWTH ENERGY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2004 AND 2003(Tabular amounts are stated in thousands of dollars except per unit amounts.)  1.

STRUCTURE OF THE TRUSTPengrowth Energy Trust (EnergyTrust) is a closed-end investment trust created under the laws
of the Province of Alberta pursuant to a Trust Indenture dated December 2, 1988 (as amended)
between Pengrowth Corporation (Corporation) and ComputerShare Investor Services Inc.
(Computershare). Operations commenced on December 30, 1988. The beneficiaries of
EnergyTrust are the holders of trust units (the unitholders).EnergyTrust acquires and holds royalty units and notes issued by the Corporation, which
entitles EnergyTrust to the net income generated by the Corporation and its subsidiaries
petroleum and natural gas properties less certain charges, as defined in the Royalty Indenture.
In addition, unitholders are entitled to receive the net income from other investments that
are held directly by EnergyTrust. EnergyTrust owns approximately 99.9 percent of the royalty
units issued by the Corporation.Pengrowth Management Limited (the Manager) is responsible for the management of the business
affairs of the Corporation and the administration of EnergyTrust. The Manager owns nine
percent of the common shares of Corporation, and the Manager is controlled by an officer and a
director of the Corporation. The remaining 91 percent of the common shares of the Corporation
are owned by EnergyTrust.Under the terms of the Royalty Indenture, the Corporation is entitled to retain a one percent
share of royalty income and all miscellaneous income (the Residual Interest) to the extent
this amount exceeds the aggregate of debt service charges, general and administrative expenses,
and management fees. In 2004 and 2003, this Residual Interest, as computed, did not result in
any income retained by Pengrowth Corporation.2.

SIGNIFICANT ACCOUNTING POLICIESBasis of Presentation
EnergyTrusts consolidated financial statements have been prepared in accordance with Generally
Accepted Accounting Principles (GAAP) in Canada and they include the accounts of EnergyTrust,
the Corporation and its subsidiaries (collectively referred to as Pengrowth). All
inter-entity transactions have been eliminated. These financial statements do not contain the
accounts of the Manager.EnergyTrust owns 91 percent of the shares of Corporation and, through the royalty, obtains
substantially all the economic benefits of Corporation. In addition, the unitholders of
EnergyTrust have the right to elect the majority of the board of directors of Corporation.




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Joint Interest Operations
A significant proportion of Pengrowths petroleum and natural gas development and production
activities are conducted with others and accordingly the accounts reflect only Pengrowths
proportionate interest in such activities.Property Plant and Equipment
Pengrowth follows the full cost method of accounting for oil and gas properties and facilities
whereby all costs of developing and acquiring oil and gas properties are capitalized and depleted
on the unit of production method based on proved reserves before royalties as estimated by
independent engineers. The fair value of future estimated asset retirement obligations associated
with properties and facilities are also capitalized and depleted on the unit of production method.
The associated asset retirement obligations on future development capital costs are also included
in the cost base subject to depletion. Natural gas production and reserves are converted to
equivalent units of crude oil using their relative energy content.General and administrative costs are not capitalized other than to the extent they are directly
related to a successful acquisition, or to the extent of Pengrowths working interest in capital
expenditure programs to which overhead fees can be recovered from partners. Overhead fees are not
charged on 100 percent owned projects.Proceeds from disposals of oil and gas properties and equipment are credited against capitalized
costs unless the disposal would alter the rate of depletion and depreciation by more than 20
percent, in which case a gain or loss on disposal is recorded.Pengrowth places a limit on the carrying value of property, plant and equipment and other assets,
which may be depleted against revenues of future periods (the ceiling test). The carrying value
is assessed to be recoverable when the sum of the undiscounted cash flows expected from the
production of proved reserves, the lower of cost and market of unproved properties and the cost of
major development projects exceeds the carrying value. When the carrying value is not assessed to
be recoverable, an impairment loss is recognized to the extent that the carrying value of assets
exceeds the sum of the discounted cash flows expected from the production of proved and probable
reserves, the lower of cost and market of unproved properties and the cost of major development
projects. The cash flows are estimated using expected future product prices and costs and are
discounted using a risk-free interest rate. The carrying value of property, plant and equipment
and other assets subject to the ceiling test includes asset retirement costs.Repairs and maintenance costs are expensed as incurred.Goodwill
Goodwill, which represents the excess of the total purchase price over the estimated fair value of
the net identifiable assets and liabilities acquired, is not amortized but instead is assessed for
impairment annually or as events occur that could result in impairment. Impairment is assessed by
determining the fair value of the reporting entity (consolidated EnergyTrust) and comparing this
fair value to the book value of the reporting entity. If the fair value of the reporting entity is
less than the book value, impairment is measured by allocating the fair value of the reporting
entity to the identifiable assets and liabilities of the reporting entity as if the reporting
entity had been acquired in a business combination for a purchase price equal to its fair value.
The excess of the fair value of the reporting entity over the assigned values of the identifiable
assets and liabilities is the fair value of the goodwill. Any excess of the book value of goodwill
over this implied fair value is the impairment amount. Impairment is charged to earnings in the
period in which it occurs.Goodwill is stated at cost less impairment.




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Injectant Costs
Injectants (mostly ethane and methane) are used in miscible flood programs to stimulate incremental
oil recovery. The cost of injectants purchased from third parties for miscible flood
projects is deferred and amortized over the period of expected future economic benefit which is
estimated as 24 to 30 months.Inventory
Inventories of crude oil, natural gas and natural gas liquids are stated at the lower of average
cost and net realizable value.Asset Retirement Obligations
Pengrowth recognizes the fair value of an Asset Retirement Obligation (ARO) in the period in
which it is incurred when a reasonable estimate of the fair value can be made. The fair value of
the estimated ARO is recorded as a liability, with a corresponding increase in the carrying amount
of the related asset. The capitalized amount is depleted on the unit of production method based on
proved reserves. The liability amount is increased each reporting period due to the passage of
time and the amount of accretion is expensed to income in the period. Actual costs incurred upon
the settlement of the ARO are charged against the ARO.Pengrowth has placed cash in segregated remediation trust accounts to fund certain ARO for the Judy
Creek and Swan Hills properties, and the Sable Offshore Energy Project (SOEP). Contributions to
these remediation trust accounts and expenditures on ARO not funded by the trust accounts are
charged against actual cash distributions in the period incurred.Income Taxes
EnergyTrust is a taxable trust under the Canadian Income Tax Act. As income taxes are the
responsibility of the individual unitholders and EnergyTrust distributes all of its taxable income
to its unitholders, no provision has been made for income taxes by EnergyTrust in these financial
statements.The Corporation follows the tax liability method of accounting for income taxes. Under this
method, income tax liabilities and assets are recognized for the estimated tax consequences
attributable to differences between the amounts reported in the financial statements of the
Corporation and its subsidiaries and their respective tax bases, using enacted income tax rates.
The effect of a change in income tax rates on future income tax liabilities and assets is
recognized in income in the period that the change occurs.Trust Unit Compensation Plans
Pengrowth has unit based compensation plans, which are described in Note 10. Compensation expense
associated with unit based compensation plans is recognized in income over the vesting period of
the plan with a corresponding increase in contributed surplus. The amount of compensation expense
and contributed surplus is reduced for options and rights that are cancelled prior to vesting. Any
consideration received upon the exercise of the unit based compensation together with the amount of
non-cash compensation expense recognized in contributed surplus is recorded as an increase in trust
unitholders capital. Compensation expense is based on the fair value of the unit based
compensation at the date of grant using a modified Black-Scholes option pricing model.Pengrowth does not have any outstanding unit compensation plans that call for settlement in cash or
other assets. Grants of such items, if any, will be recorded as expenses and liabilities based on
the intrinsic value.




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Risk Management
Financial instruments are utilized by Pengrowth to manage its exposure to commodity price
fluctuations, foreign currency and interest rate exposures. Pengrowths practice is not to utilize
financial instruments for trading or speculative purposes.Pengrowth formally documents relationships between hedging instruments and hedged items, as well as
its risk management objective and strategy for undertaking various hedge transactions. This
process includes linking derivatives to specific assets and liabilities on the balance sheet or to
specific firm commitments or forecasted transactions. Pengrowth also formally assesses, both at
the hedges inception and on an ongoing basis, whether the derivatives that are used in hedging
transactions are highly effective in offsetting changes in fair value or cash flows of hedged
items.Pengrowth uses forward, futures and swap contracts to manage its exposure to commodity price
fluctuations. The net receipts or payments arising from these contracts are recognized in income
as a component of oil and gas sales during the same period as the corresponding hedged position.Foreign exchange gains and losses on foreign currency exchange swaps used to hedge U.S. dollar
denominated gas sales are recognized in income as a component of natural gas sales during the same
period as the corresponding hedged position.Interest rate swap agreements are used as part of Pengrowths program to manage the fixed and
floating interest rate mix of Pengrowths total debt portfolio and related overall cost of
borrowing. The interest rate swap agreements involve the periodic exchange of payments without the
exchange of the notional principal amount upon which the payments are based, and are recorded as an
adjustment of interest expense on the hedged debt instrument.Measurement Uncertainty
The preparation of financial statements in conformity with Canadian GAAP requires management to
make estimates and assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and revenues and expenses for the period then ended.The amounts recorded for depletion, depreciation, amortization of injectants and ARO are based on
estimates. The ceiling test calculation is based on estimates of proved reserves, production
rates, oil and natural gas prices, future costs and other relevant assumptions. By their nature,
these estimates are subject to measurement uncertainty and may impact the consolidated financial
statements of future periods.Earnings per unit
In calculating diluted net income per unit, Pengrowth follows the treasury stock method to
determine the dilutive effect of trust unit options and other dilutive instruments. Under the
treasury stock method, only in the money dilutive instruments impact the diluted calculations.Cash and term deposits
Pengrowth considers term deposits with an original maturity of three months or less to be cash
equivalents.Revenue recognition
Revenue from the sale of oil and natural gas is recognized when the product is delivered. Revenue
from processing and other miscellaneous sources is recognized upon completion of the relevant
service.




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##### Table of Contents



Comparative figures
Certain comparative figures have been reclassified to conform to the presentation adopted in
the current year.3.

CHANGES IN ACCOUNTING POLICIESFull Cost Accounting Guideline
Effective January 1, 2003, Pengrowth adopted a new Canadian accounting standard relating to
full cost accounting for oil and gas entities, as outlined in Note 2. Prior to adopting the new
standard, the limit on the aggregate carrying value of the property, plant and equipment and other
assets that may be carried forward for depletion against future revenues was based on the sum of
the undiscounted cash flows expected from the production of proved reserves, the lower of cost or
market of unproved reserves and the cost of major development projects less the estimated future
costs for administration, financing, ARO and income taxes.Asset Retirement Obligations
Effective January 1, 2002, Pengrowth retroactively adopted, with restatement of prior periods,
a new accounting standard relating to ARO, as outlined in Note 2. Prior to adopting the
standard, Pengrowth recognized a provision for future site restoration costs over the life of
the oil and gas properties and facilities using a unit of production method.Trust Unit Based Compensation Plan
Effective January 1, 2003, Pengrowth prospectively adopted amendments to a Canadian accounting
standard relating to recognizing the compensation expense associated with unit based
compensation plans, as outlined in Note 2. Under the amended standards, Pengrowth must
recognize compensation expense based on the fair value of the trust unit options and rights
granted under Pengrowths unit based compensation plans. Pengrowth uses a modified
Black-Scholes option pricing model to determine the fair value of trust unit based compensation
plans at the date of grant. For trust unit options and rights granted in 2002, Pengrowth
elected not to recognize compensation expense but provide pro forma disclosure as if the
amended accounting standards were adopted retroactively.




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##### Table of Contents



4.

REMEDIATION TRUST FUNDSPengrowth is required to make contributions to a remediation trust fund that is used to cover
certain ARO of the Judy Creek properties. Pengrowth makes monthly contributions to the fund of
$0.10 per boe of production from the Judy Creek properties and an annual lump sum contribution of
$250,000.Every five years Pengrowth must evaluate the assets in the trust fund and the outstanding ARO,
and make recommendations to the former owner of the Judy Creek properties as to whether
contribution levels should be changed. In 2004 an evaluation was completed with the results of
the evaluation determining that current funding levels would remain unchanged until the next
evaluation in 2007. Pengrowth may be required to increase contributions to the Judy Creek
remediation trust fund based on future evaluations of the fund.Pengrowth is required, pursuant to various agreements with the SOEP partners, to make
contributions to a remediation trust fund that will be used to fund the ARO of the SOEP
properties and facilities. Pengrowth makes monthly contributions to the fund of $0.04 per mcf
of natural gas production and $0.08 per boe of natural gas liquids production from SOEP.The following summarizes Pengrowths trust fund contributions for 2004 and 2003 and
Pengrowths expenditures on ARO not covered by the trust funds:   2004
    
    
    2003Contributions to Judy Creek Remediation Trust Fund
    
    $
    906
    
    
    $
    910Contributions to Sable Environmental Restoration Fund
    
    
    548
    
    
    
    181Expenditures related to Judy Creek Remediation Trust Fund
    
    
    (537
    )
    
    
    (378
    )917
    
    
    
    713Expenditures on ARO not covered by the trust funds
    
    
    3,903
    
    
    
    2,865Expenditures on ARO covered by the trust funds
    
    
    537
    
    
    
    3784,440
    
    
    
    3,243Total trust fund contributions and ARO expenditures not
covered by the trust funds
    
    $
    5,357
    
    
    $
    3,956




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##### Table of Contents



5.

ACQUISITIONSCorporate AcquisitionOn May 31, 2004, Pengrowth acquired all of the issued and outstanding shares of a company
which had interests in oil and natural gas assets in Alberta and Saskatchewan (the Murphy
Assets). The transaction was accounted for using the purchase method of accounting with the
allocation of the purchase price and consideration paid as follows: Allocation of purchase price:Working capital
    
    $
    9,310Property, plant, and equipment
    
    
    502,924Goodwill (with no tax base)
    
    
    170,619Asset retirement obligations
    
    
    (43,876
    )Future income taxes
    
    
    (60,012
    )Contract liabilities
    
    
    (28,175
    )$
    550,790Cost of acquisition:Cash and term deposits
    
    $
    224,700Acquisition facility
    
    
    325,000Acquisition costs
    
    
    1,090$
    550,790
  Property, plant and equipment of $503 million represents the fair value of the assets acquired
determined in part by an independent reserve evaluation, net of purchase price adjustments.
Goodwill of $171 million was determined based on the excess of the total consideration paid less
the value assigned to the identifiable assets and liabilities including the future income tax
liability.The future income tax liability was determined based on the enacted income tax rate of
approximately 34 percent as at May 31, 2004.Contract liabilities include a natural gas fixed price sales contract (see Note 17) and firm
pipeline demand charge contracts. The fair value of these liabilities has been determined on the
date of acquisition and a liability of $21,824,000 has been recorded for the natural gas fixed
price sales contract and $6,351,000 has been recorded for the firm pipeline demand charge contracts. The
liabilities will be reduced as the contracts are settled.




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##### Table of Contents



Results from operations of the acquired Murphy Assets subsequent to May 31, 2004 are included in
the consolidated financial statements.The following unaudited pro forma information provides an indication of what Pengrowths results of
operations might have been had the acquisition of the Murphy Assets taken place on January 1 of
each of the following years: 2004
    
    
    2003(unaudited)
    
    
    (unaudited)Oil and gas sales
    
    $
    882,846
    
    
    $
    899,770Net income
    
    $
    180,101
    
    
    $
    236,500Net income per unit:Basic
    
    $
    1.206
    
    
    $
    1.793Diluted
    
    $
    1.201
    
    
    $
    1.785
  Property Acquisitions
In August 2004, Pengrowth acquired an additional 34.35 percent working interest in Kaybob Notikewin
Unit No.1 for a purchase price of $20.0 million before adjustments. The acquisition increased
Pengrowths working interest in the Kaybob Notikewin Unit No.1 to approximately 99 percent.In December 2003, Pengrowth acquired an 8.4 percent working interest in the SOEP offshore
production platforms and associated sub-sea field gathering lines from Emera Offshore Incorporated
(Emera) for $65 million. The consideration for this acquisition included cash of $20 million and
a $45 million note payable over three years (see Note 8).In conjunction with the December 2003 acquisition, Pengrowth exchanged its royalty interest in SOEP
for a direct working interest in SOEP.In May 2003, Pengrowth acquired an 8.4 percent working interest in the SOEP processing facilities,
downstream of the Thebaud central processing platform, for approximately $57 million.In June 2003, Pengrowth acquired interests in eleven significant discovery licenses from Nova
Scotia Resources (Ventures) Limited (NSRVL) for $4.5 million plus a ten percent Net Profits
Interest to NSRVL.




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##### Table of Contents



6.

PROPERTY, PLANT AND EQUIPMENT AND OTHER ASSETS 2004
    
    
    2003Property, Plant and EquipmentProperty, Plant and Equipment, at cost
    
    $
    2,986,681
    
    
    $
    2,281,166Accumulated depletion and depreciation
    
    
    (1,022,435
    )
    
    
    (775,103
    )Net book value of property, plant and equipment
    
    
    1,964,246
    
    
    
    1,506,063Other AssetsDeferred injectant costs
    
    
    25,042
    
    
    
    24,296Net book value of property, plant and equipment
and other assets
    
    $
    1,989,288
    
    
    $
    1,530,359
  Property, plant and equipment includes $81.1 million (2003  $69.5 million) related to ARO, net of
accumulated depletion.Pengrowth performed a ceiling test calculation at December 31, 2004 to assess the recoverable value
of the property, plant and equipment and other assets. The oil and gas future prices are based on
the January 1, 2005 commodity price forecast of our independent reserve evaluators. These prices
have been adjusted for commodity price differentials specific to Pengrowth. The following table
summarizes the benchmark prices used in the ceiling test calculation. Based on these assumptions,
the undiscounted value of future net revenues from Pengrowths proved reserves exceeded the
carrying value of property, plant and equipment and other assets at December 31, 2004. ForeignExchange
    
    
    Edmonton LightWTI Oil
    
    
    Rate
    
    
    Crude Oil
    
    
    AECO GasYear
    
    ($U.S./bbl)
    
    
    ($U.S./Cdn)
    
    
    ($Cdn/bbl)
    
    
    ($Cdn/mmbtu)2005
    
    
    42.00
    
    
    
    0.82
    
    
    
    50.25
    
    
    
    6.602006
    
    
    40.00
    
    
    
    0.82
    
    
    
    47.75
    
    
    
    6.352007
    
    
    38.00
    
    
    
    0.82
    
    
    
    45.50
    
    
    
    6.152008
    
    
    36.00
    
    
    
    0.82
    
    
    
    43.25
    
    
    
    6.002009
    
    
    34.00
    
    
    
    0.82
    
    
    
    40.75
    
    
    
    6.002010  2015
    
    
    33.50
    
    
    
    0.82
    
    
    
    40.08
    
    
    
    6.10Escalate thereafter
    
    2.0% per year
    
    
    
    
    
    2.0% per year
    
    2.0% per year




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##### Table of Contents



7.

ASSET RETIREMENT OBLIGATIONSThe total future ARO were estimated by management based on Pengrowths working interest in
wells and facilities, estimated costs to remediate, reclaim and abandon the wells and facilities
and the estimated timing of the costs to be incurred in future periods. Pengrowth has estimated
the net present value of its ARO to be $172 million as at
December 31, 2004 (2003  $103 million),
based on a total future liability of $551 million (2003  $352 million). These costs are expected
to be made over 50 years with the majority of the costs incurred between 2014 and 2037.
Pengrowths credit adjusted risk free rate of 8 percent
(2003  8 percent) and an inflation rate of
1.5 percent (2003  1.5 percent) were used to calculate the net present value of the ARO.The following reconciles Pengrowths ARO: 2004
    
    
    2003Asset retirement obligations, beginning of year
    
    $
    102,528
    
    
    $
    73,493Increase in liabilities during the year related to:Acquisitions
    
    
    44,368
    
    
    
    9,865Additions
    
    
    2,681
    
    
    
    1,221Revisions
    
    
    16,087
    
    
    
    15,153Accretion expense
    
    
    10,642
    
    
    
    6,039Liabilities settled during the year
    
    
    (4,440
    )
    
    
    (3,243
    )Asset retirement obligations, end of year
    
    $
    171,866
    
    
    $
    102,528
  8.

NOTE PAYABLEThe note payable is due to Emera, in respect of the acquisition of the SOEP facility (Note 5).
The note payable is secured by Pengrowths working interest in SOEP. The note payable is
non-interest bearing with payments due as follows: $15 million on December 29, 2005, and $20
million on December 31, 2006.At December 31, 2004, $2.0 million has been recorded as a deferred charge representing the
imputed interest on the non-interest bearing note. This amount will be recognized as interest
expense over the period outstanding for each individual instalment.




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##### Table of Contents



9.

LONG TERM DEBT 2004
    
    
    2003U.S. dollar denominated debt:U.S. dollar $150 million senior unsecured notes at 4.93
percent due April 2010
    
    $
    180,300
    
    
    $
    194,475U.S. dollar $50 million senior unsecured notes at 5.47
percent due April 2013
    
    
    60,100
    
    
    
    64,825240,400
    
    
    
    259,300Canadian dollar revolving credit borrowings
    
    
    105,000
    
    
    
    $
    345,400
    
    
    $
    259,300
  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
percent due April 2010 and U.S.$50 million at 5.47 percent due in April 2013. The notes contain
certain financial maintenance covenants and interest is paid semi-annually. 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 (see Note 11).The Corporation has a $375 million revolving unsecured credit facility syndicated among eight
financial institutions with an extendible 364 day revolving period and a two year amortization term
period. The facilities are currently reduced by outstanding letters of credit in the amount of
approximately $23 million. In addition, it has a $35 million demand operating line 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 revolving credit facility will revolve until May 30, 2005, whereupon it may be renewed for a
further 364 days, subject to satisfactory review by the lenders, or converted into a term facility.
One third of the amount outstanding would be repaid in equal quarterly instalments in each of the
first two years with the final one third to be repaid upon maturity of the term period. The
Corporation can post, at its option, security suitable to the banks in lieu of the first years
payments. In such an instance, no principal payment would be made to the banks for one year
following the date of non-renewal.




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##### Table of Contents



10.

TRUST UNITSThe total authorized capital of Pengrowth is 500,000,000 trust units. 2004
    
    
    2003Number
    
    
    
    
    
    
    NumberTrust Units Issued
    
    of units
    
    
    Amount
    
    
    of units
    
    
    AmountBalance, beginning of year
    
    
    123,873,651
    
    
    $
    1,872,924
    
    
    
    110,562,327
    
    
    $
    1,662,726Issued for cash
    
    
    10,900,000
    
    
    
    200,560
    
    
    
    8,500,000
    
    
    
    144,075Less: issue expenses
    
    
    
    
    
    
    (10,710
    )
    
    
    
    
    
    
    (7,820
    )Issued for cash on exercise of trust units
options and rights
    
    
    547,974
    
    
    
    8,735
    
    
    
    3,358,442
    
    
    
    51,701Issued for cash under Distribution
Reinvestment Plan (DRIP)
    
    
    543,888
    
    
    
    9,636
    
    
    
    1,452,882
    
    
    
    22,242Trust unit rights incentive plan (non-cash
exercised)
    
    
    
    
    
    
    259
    
    
    
    
    
    
    
    Royalty units exchanged for trust units
    
    
    700
    
    
    
    
    
    
    
    
    
    
    
    Balance, prior to conversion
    
    
    135,866,213
    
    
    $
    2,081,404
    
    
    
    123,873,651
    
    
    $
    1,872,924Converted to Class A or Class B trust units
    
    
    (135,792,888
    )
    
    
    ( 2,080,281
    )
    
    
    
    
    
    
    Balance, end of year
    
    
    73,325
    
    
    $
    1,123
    
    
    
    123,873,651
    
    
    $
    1,872,924
  For the period from July 27, 2004 to December 31, 2004: Class A Trust Units
    
    
    Class B Trust UnitsNumber
    
    
    
    
    
    
    NumberTrust Units Issued
    
    of units
    
    
    Amount
    
    
    of units
    
    
    AmountBalance, beginning of period
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    Trust units converted
    
    
    76,792,759
    
    
    
    1,176,427
    
    
    
    59,000,129
    
    
    
    903,854Issued for cash
    
    
    
    
    
    
    
    
    
    
    15,985,000
    
    
    
    298,920Less: issue expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,577
    )Issued for cash on exercise of trust units
options and rights
    
    
    
    
    
    
    
    
    
    
    746,864
    
    
    
    11,516Issued for cash under Distribution
Reinvestment Plan (DRIP)
    
    
    
    
    
    
    
    
    
    
    374,478
    
    
    
    6,750Trust unit rights incentive plan (non-cash
exercised)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    271Balance, end of period
    
    
    76,792,759
    
    
    $
    1,176,427
    
    
    
    76,106,471
    
    
    $
    1,205,734
  On July 27, 2004 Pengrowth implemented a reclassification of its trust units whereby the
existing outstanding trust units were reclassified into Class A or Class B trust units depending on
the residency of the unitholder. Of the original trust units, 73,325 are undeclared trust units
that have not been classified as Class A or Class B trust units as the unitholders of these trust
units have not submitted a declaration of residency certificate.




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##### Table of Contents



The Class A trust units and the Class B trust units have the same rights to vote, obtain
distributions upon wind-up or dissolution of EnergyTrust. The most significant distinction
between the two classes of units is in respect of residency of the persons entitled to hold and
trade the Class A trust units and Class B trust units.Class A trust units are not subject to any residency restriction but are subject to a restriction
on the number to be issued such that the total number of issued and outstanding Class A trust units
will not exceed 99 percent of the number issued and outstanding Class B trust units after an
initial implementation period (the Ownership Threshold). Class A trust units may be converted by
a holder at any time into Class B trust units provided that the holder is a resident of Canada and
provides a suitable residency declaration. Class A trust units trade on both the Toronto Stock
Exchange (TSX) and the New York Stock Exchange (NYSE).Class B trust units may not be held by non-residents of Canada and trade only on the TSX. Class B
trust units may be converted by a holder into Class A trust units, provided that the Ownership
Threshold will not be exceeded.If the number of issued and outstanding Class A trust units exceeds the Ownership Threshold,
EnergyTrust may make a public announcement of the contravention and enforce one or several
available options to reduce the number of Class A trust units to the Ownership Threshold, as
outlined in the Trust Indenture.If it appears from the securities registers, or if the Board of Directors of Corporation determines
that, a person that is a non-resident of Canada holds or beneficially owns any Class B trust units,
Pengrowth shall send a notice to the registered holder(s) of the Class B trust units requiring such
holder(s) to dispose of the Class B trust units and pending such disposition may suspend all rights
of ownership attached to such units, including the rights to receive distributions.Following the reclassification, the number of outstanding Class A trust units exceeded the
Ownership Threshold. The Trust Indenture provides that the provisions of the Ownership Threshold
will not apply until December 31, 2004 or such later date by which Pengrowth must comply with the
Ownership Threshold as may be specified in the Advance Tax Ruling; however, if the Board of
Directors of Pengrowth Corporation determines that the number of outstanding Class A trust units on
or after that date is likely to exceed the Ownership Threshold, Pengrowth Corporation may enforce
any or all of the available provisions. On December 1, 2004, Pengrowth received a letter from the
Canada Revenue Agency that amended the Advance Tax Ruling to extend the date by which Pengrowth
must comply with the Ownership Threshold in order to be able to rely on the ruling from December
31, 2004 to June 1, 2005. The number of Class A trust units exceeded the Ownership Threshold by
0.45 percent on December 31, 2004.Certain provisions exist that could prevent exclusionary offers being made for only one class of
trust units in existence at the time of the original offer. In the event that an offer is made for
only one class of trust units; in certain circumstances the Ownership Threshold would temporarily
cease to apply.Pursuant to the terms of the Royalty Indenture and the Trust Indenture, there is attached to each
royalty unit granted by the Corporation, to royalty unitholders other than EnergyTrust, the right
to exchange such royalty unit for an equivalent number of trust units. Accordingly ComputerShare,
as Trustee has reserved 18,240 trust units for such future conversion.




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##### Table of Contents



Distribution Reinvestment Plan
Class B unitholders are eligible to participate in the Distribution Re-investment Plan (DRIP).
DRIP entitles the unitholder to reinvest cash distributions in additional units of EnergyTrust.
The trust units under the plan are issued from treasury at a 5 percent discount to the weighted
average closing price of all Class B trust units traded on the TSX for the 20 trading days preceding a
distribution payment date. Class A unitholders are not eligible to participate in DRIP. Trust
units issued on the exercise of options and rights under Pengrowths unit based compensation plans
are Class B trust units.Contributed Surplus 2004
    
    
    2003Balance, beginning of year
    
    $
    189
    
    
    $
    Trust unit rights incentive plan (non-cash expensed)
    
    
    2,264
    
    
    
    189Trust unit rights incentive plan (non-cash exercised)
    
    
    (530
    )
    
    
    Balance, end of year
    
    $
    1,923
    
    
    $
    189
  Trust Unit Option Plan
Pengrowth has a trust unit option plan under which directors, officers, employees and special
consultants of the Corporation and the Manager are eligible to receive options to purchase Class B
trust units. Under the terms of the plan, up to 10 percent of the issued and outstanding trust
units to a maximum of 10 million units may be reserved for option and right grants. The options
expire seven years from the date of grant. One third of the options vest on the grant date, one
third on the first anniversary of the date of grant, and the remaining third on the second
anniversary.As at December 31, 2004, options to purchase 845,374 Class B trust units were outstanding (2003 
2,014,903) that expire at various dates to June 28, 2009. 2004
    
    
    2003Weighted
    
    
    
    
    
    
    WeightedNumber
    
    
    Average
    
    
    Number
    
    
    AverageTrust Unit Options
    
    Of options
    
    
    Exercise price
    
    
    of options
    
    
    Exercise priceOutstanding at beginning of year
    
    
    2,014,903
    
    
    $
    17.47
    
    
    
    4,451,131
    
    
    $
    16.78Exercised
    
    
    (838,789
    )
    
    $
    16.82
    
    
    
    (2,374,182
    )
    
    $
    16.19Expired
    
    
    (325,200
    )
    
    $
    20.44
    
    
    
    
    
    
    $
    Cancelled
    
    
    (5,540
    )
    
    $
    16.53
    
    
    
    (62,046
    )
    
    $
    17.17Outstanding at year-end
    
    
    845,374
    
    
    $
    16.97
    
    
    
    2,014,903
    
    
    $
    17.47Exercisable at year-end
    
    
    845,374
    
    
    $
    16.97
    
    
    
    1,999,436
    
    
    $
    17.48




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##### Table of Contents



The following table summarizes information about trust unit options outstanding and exercisable at
December 31, 2004: Options Outstanding and ExercisableWeighted AverageRange of
    
    Number Outstanding
    
    
    Remaining Contractual
    
    
    Weighted AverageExercise Prices
    
    and Exercisable
    
    
    Life (years)
    
    
    Exercise Price$12.00 to $14.99
    
    
    150,105
    
    
    
    3.6
    
    
    $
    13.05$15.00 to $16.99
    
    
    130,244
    
    
    
    3.7
    
    
    $
    15.04$17.00 to $17.99
    
    
    207,782
    
    
    
    3.5
    
    
    $
    17.48$18.00 to $20.50
    
    
    357,243
    
    
    
    2.9
    
    
    $
    19.02$12.00 to $20.50
    
    
    845,374
    
    
    
    3.3
    
    
    $
    16.97
  Employee Trust Unit Rights Incentive Plan
Pengrowth has an Employee Trust Unit Rights Incentive Plan (Rights Incentive Plan), pursuant to
which rights to acquire Class B trust units may be granted to the directors, officers, employees,
and special consultants of the Corporation and the Manager. Under the Rights Incentive Plan,
distributions per trust unit to trust unitholders in a calendar quarter which represent a return of
more than 2.5 percent of the net book value of property, plant and equipment at the beginning of
such calendar quarter result in a reduction in the exercise price. Total price reductions
calculated for 2004 were $1.30 per trust unit right (2003  $1.47 per trust unit right). One third
of the rights granted under the Rights Incentive Plan vest on the grant date, one third on the
first anniversary date of the grant and the remaining on the second anniversary. The rights have
an expiry date of five years from the date of grant.As at December 31, 2004, rights to purchase 2,011,451
Class B trust units were outstanding (2003  1,112,140) that expire at various dates to October 28, 2009. 2004
    
    
    2003Weighted
    
    
    
    
    
    
    WeightedRights Incentive Options
    
    Number
    
    
    Average
    
    
    Number
    
    
    Averageof rights
    
    
    Exercise price
    
    
    of rights
    
    
    Exercise priceOutstanding at beginning of year
    
    
    1,112,140
    
    
    $
    12.20
    
    
    
    1,964,100
    
    
    $
    13.29Granted (1)
    
    
    1,409,856
    
    
    $
    17.35
    
    
    
    165,000
    
    
    $
    16.35Exercised
    
    
    (456,049
    )
    
    $
    13.47
    
    
    
    (984,260
    )
    
    $
    13.49Cancelled
    
    
    (54,496
    )
    
    $
    14.19
    
    
    
    (32,700
    )
    
    $
    12.75Outstanding at year-end
    
    
    2,011,451
    
    
    $
    14.23
    
    
    
    1,112,140
    
    
    $
    12.20Exercisable at year-end
    
    
    1,037,078
    
    
    $
    12.48
    
    
    
    359,740
    
    
    $
    11.92
   (1)     Weighted average exercise price of rights granted are based on the exercise price at the
date of grant.The following table summarizes information about rights incentive options outstanding and
exercisable at December 31, 2004: Rights Outstanding
    
    
    
    Rights ExercisableWeighted AverageRemaining
    
    
    Weighted
    
    
    
    
    
    
    
    WeightedRange of
    
    Number
    
    
    Contractual Life
    
    
    Average
    
    
    
    Number
    
    
    AverageExercise Prices
    
    Outstanding
    
    
    (years)
    
    
    Exercise Price
    
    
    
    Exercisable
    
    
    Exercise Price$10.00 to $11.99
    
    
    685,500
    
    
    
    2.9
    
    
    $
    10.46
    
    
    
    
    685,500
    
    
    $
    10.46$12.00 to $13.99
    
    
    32,900
    
    
    
    3.3
    
    
    $
    13.08
    
    
    
    
    2,867
    
    
    $
    12.73$14.00 to $15.99
    
    
    994,773
    
    
    
    4.1
    
    
    $
    15.50
    
    
    
    
    249,285
    
    
    $
    15.51$17.00 to $18.99
    
    
    298,278
    
    
    
    4.6
    
    
    $
    18.78
    
    
    
    
    99,426
    
    
    $
    18.78$10.00 to $18.99
    
    
    2,011,451
    
    
    
    3.7
    
    
    $
    14.23
    
    
    
    
    1,037,078
    
    
    $
    12.48




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##### Table of Contents



Fair Value of Unit Based Compensation
Pengrowth records compensation expense on rights incentive options granted on or after January 1,
2003. For trust unit options and rights granted in 2002, Pengrowth has elected to disclose the pro
forma effect on net income had compensation expense been recorded using the fair value method. The
following is the pro forma effect on net income: 2004
    
    
    2003Net income
    
    $
    153,745
    
    
    $
    189,297Compensation expense related to trust
unit options granted in 2002
    
    
    
    
    
    
    (367
    )Compensation expense related to rights
incentive options granted in 2002
    
    
    (1,067
    )
    
    
    (1,279
    )Pro forma net income
    
    $
    152,678
    
    
    $
    187,651Pro forma net income per unit:Basic
    
    $
    1.145
    
    
    $
    1.619Diluted
    
    $
    1.139
    
    
    $
    1.611
  The fair value of rights incentive options granted in 2004 and 2003 was estimated at 15 percent of
the exercise price at the date of grant using a modified Black-Scholes option pricing model with
the following assumptions: risk-free rate of 3.9 percent, volatility of 22 percent, expected life
of five years and adjustments for the estimated distributions and reductions in the exercise price
over the life of the rights incentive option.Long Term Incentive Program
On November 29, 2004, the Board of Directors approved a new Long Term Incentive Program effective,
January 1, 2005. Under the new Long Term Incentive Program, Restricted Share Units (Phantom trust
units) will be allocated to employees, officers, directors and certain consultants of the
Corporation and the Manager. The number of Phantom trust units granted will be based on a grant
value as a percentage of an individuals base salary and an established weighting of Phantom trust
units and/or rights incentive options that is dependent on an individuals position. The Phantom
trust units will fully vest on the third anniversary year from the date of grant. The Phantom
trust units will receive distributions in the form of additional Phantom trust units. The number
of Phantom trust units, including any additional units from re-invested distributions at the end of
the three year vesting period will be subject to a relative performance test which compares
Pengrowths three year average total return on the Phantom trust units to the three year average
total return of a peer group of other energy trusts. Upon vesting, the number of trust units
issued from treasury may range from zero to one and one-half times the number of Phantom trust
units granted.Employee Savings Plans
Pengrowth has a trust unit savings plan whereby qualifying employees may contribute from one to ten
percent of their basic annual salary. Employee contributions are invested in trust units purchased
on the open market. Pengrowth matches the employees contribution, investing in additional trust
units purchased on the open market. Pengrowths share of contributions is recorded as an expense
and amounted to $1,301,314 in 2004 (2003  $1,037,063).In addition, Pengrowth has a plan whereby it will match zero to five percent of an employees
contribution to their Group Registered Retirement Savings Plan. Pengrowths share of contributions
under this plan is recorded as an expense and amounted to $425,371 in 2004 (2003  $358,245).
Pengrowths combined matching contributions under both Employee Savings Plans cannot exceed ten
percent of an employees basic annual salary.




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##### Table of Contents



Trust Unit Margin Purchase Plan
Pengrowth has a plan whereby the employees and certain consultants of Corporation and the
Manager can purchase trust units and finance up to 75 percent of the purchase price through an
investment dealer, subject to certain participation limits and restrictions. Certain officers
and directors hold trust units under the Trust Unit Margin Purchase Plan; however, they are
prohibited from increasing the number of trust units they can hold under the plan.
Participants maintain personal margin accounts 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 to
guarantee amounts owing with respect to the plan. The amount of the letter of credit may
fluctuate depending on the amounts financed pursuant to the plan. At December 31, 2004,
848,022 trust units were deposited under the plan (2003  2,471,120) with a market value of
$15.7 million (2003  $52.5 million) and a corresponding margin
loan of $3.1 million (2003  $4.8 million).The investment dealer has limited the total margin loan available under the plan to the lesser
of $15 million or 35 percent 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 are to be reduced by proceeds of liquidating the individuals trust
units held under the plan. The maximum amount of the guarantee at December 31, 2004 was $3.1
million (2003  $4.8 million), the fair value of which is estimated to be a nominal amount.Redemption Rights
Trust units are redeemable at the request of a unitholder. The redemption right permits
unitholders in the aggregate to redeem a maximum of $25,000 of trust units in a month.11.

DEFERRED CHARGES 2004
    
    
    2003Imputed interest on note payable (net of
accumulated amortization of $1,587, 2003  nil)
    
    $
    2,020
    
    
    $
    3,607U.S. debt issue costs (net of accumulated
amortization of $510, 2003  $204)
    
    
    1,631
    
    
    
    1,937$
    3,651
    
    
    $
    5,544
  12.

FOREIGN EXCHANGE LOSS (GAIN) 2004
    
    
    2003Unrealized foreign exchange gain on
translation of U.S. dollar denominated debt
    
    $
    (18,900
    )
    
    $
    (30,940
    )Realized foreign exchange losses
    
    
    1,600
    
    
    
    1,029$
    (17,300
    )
    
    $
    (29,911
    )
  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.




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##### Table of Contents



13.

OTHER CASH FLOW DISCLOSURES  Change in Non-Cash Operating Working Capital 2004
    
    
    2003Accounts receivable
    
    $
    (22,515
    )
    
    $
    (24,144
    )Inventory
    
    
    260
    
    
    
    602Accounts payable and accrued liabilities
    
    
    17,225
    
    
    
    13,643Due to Pengrowth Management Limited
    
    
    6,203
    
    
    
    36$
    1,173
    
    
    $
    (9,863
    )
  Change in Non-Cash Investing Working Capital 2004
    
    
    2003Accounts payable for capital accruals
    
    $
    2,169
    
    
    $
    (2,539
    )
  Cash payments 2004
    
    
    2003Cash payments made for taxes
    
    $
    4,729
    
    
    $
    1,834Cash payments made for interest
    
    $
    28,119
    
    
    $
    16,657
  14.

INCOME TAXESThe provision for income taxes in the financial statements differs from the result which
would have been obtained by applying the combined federal and provincial tax rate to
Pengrowths income before taxes. 2004
    
    
    2003Income before taxes
    
    $
    173,955
    
    
    $
    191,154Combined federal and provincial tax rate
    
    
    38.6
    %
    
    
    40.6
    %Expected income tax
    
    
    67,147
    
    
    
    77,609Net income of EnergyTrust
    
    
    (59,346
    )
    
    
    (78,893
    )Resource allowance
    
    
    (8,807
    )
    
    
    (462
    )Non-deductible crown charges
    
    
    16,476
    
    
    
    413Unrealized foreign exchange gain
    
    
    (3,648
    )
    
    
    (6,281
    )Attributed Canadian royalty income
    
    
    (3,113
    )
    
    
    (1,073
    )Effect of proposed tax changes
    
    
    3,850
    
    
    
    Rate reductions
    
    
    
    
    
    
    14,089Change in valuation allowance
    
    
    3,035
    
    
    
    (4,947
    )Other
    
    
    22
    
    
    
    (455
    )Future income taxes
    
    
    15,616
    
    
    
    Capital taxes
    
    
    4,594
    
    
    
    1,857$
    20,210
    
    
    $
    1,857




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##### Table of Contents



The net future income tax liability is comprised of: 2004
    
    
    2003Future income tax liabilities:Property, plant, equipment and other assets
    
    $
    79,774
    
    
    $
    Unrealized foreign exchange gain
    
    
    8,378
    
    
    
    5,356Other
    
    
    
    
    
    
    2788,152
    
    
    
    5,383Future income tax assets:Property, plant, equipment and other assets
    
    
    
    
    
    
    (60,628
    )Attributed Canadian royalty income
    
    
    (4,418
    )
    
    
    Contract liabilities
    
    
    (8,072
    )
    
    
    Other
    
    
    (34
    )
    
    
    75,628
    
    
    
    (55,245
    )Valuation allowance
    
    
    
    
    
    
    55,245$
    75,628
    
    
    $
    
  Non-Resident Ownership and Mutual Fund Trust Status
The Federal budget tabled on March 23, 2004 proposed several changes to subsection 132(7) of the
Income Tax Act (Canada) (the Act), that would have affected the mutual fund status of royalty
trusts.On December 5, 2004, the Minister of Finance tabled a Notice of Ways and Means Motion in the House
of Commons to implement the measures proposed in the March 23, 2004 Federal budget. However, the
changes to the mutual fund trust provisions proposed in both the March 23, 2004 Federal budget and
in the draft legislation published on September 16, 2004 were not included. The Minister of
Finance indicated that further discussions would be pursued with the private sector concerning the
appropriate Canadian tax treatment of non-residents investing in resource property through mutual
fund trusts. Therefore, the uncertainty remains as to whether or not the taxable Canadian property
exception will be available to royalty trusts, such as Pengrowth Energy Trust, indefinitely.




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##### Table of Contents



15.

RELATED PARTY TRANSACTIONSPengrowth Management Limited provides certain services pursuant to a management agreement for
which Pengrowth was charged $6,135,000 (2003  $520,000) for performance fees and $6,739,000
(2003  $9,660,749) for a management fee. In 2003, Pengrowth was charged $695,000 for
acquisition fees. In 2004, no acquisition fee was charged. In addition, Pengrowth was charged
$800,000 for estimated reimbursement of general and administrative expenses incurred by the
Manager pursuant to the management agreement. The law firm controlled by the corporate
secretary charged $841,457 (2003  $675,692) for legal and advisory services provided to
Pengrowth by the corporate secretary. The transactions have been recorded at the exchange
amount.  16.

AMOUNTS PER UNITThe per unit amounts for net income are based on the weighted average units outstanding for the
year. The weighted average units outstanding for 2004 were
133,395,485 units (2003 
115,912,374 units). In computing diluted net income per unit, 611,086 units were added to the
weighted average number of units outstanding during the year ended
December 31, 2004 (2003 
567,335) for the dilutive effect of trust unit options and rights. In
2004, 624,723 (2003 
14,820) trust unit options and rights were excluded from the diluted net income per unit
calculation as their effect is anti-dilutive.17.

FINANCIAL INSTRUMENTSInterest Rate Risk
On April 23, 2003, Pengrowth completed a U.S. $200 million private placement of fixed rate
seven and ten year term notes. 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. In 2003, Pengrowth terminated these interest
rate swaps at a total cost including accrued interest of approximately $2,229,000. There were
no interest rate swaps outstanding in 2004.Foreign Currency Exchange Risk
Pengrowth is exposed to foreign currency fluctuations as crude oil and natural gas prices received
are referenced to U.S. dollar denominated prices. Pengrowth has mitigated some of this exchange
risk by entering into fixed Canadian dollar crude oil and natural gas price swaps as outlined in
the forward and futures contracts section below.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 effective 2003 and 2004. At December 31,
2004, there were no foreign exchange swaps outstanding.Credit Risk
Pengrowth sells a significant portion of its oil and gas to commodity marketers, and the accounts
receivable are subject to normal industry credit risks. The use of financial swap agreements
involves a degree of credit risk that Pengrowth manages through its credit policies which are
designed to limit eligible counterparties to those with A credit ratings or better.




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##### Table of Contents



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 December 31, 2004, Pengrowth had fixed the price applicable to future production as follows:  Crude Oil: Volume
    
    
    Reference
    
    PriceRemaining Term
    
    (bbl/d)
    
    
    Point
    
    per bblFinancial:Jan 1, 2005
 Dec 31, 2005
    
    
    8,000
    
    
    WTI (1)
    
    $51.66 Cdn
  Natural Gas: Volume
    
    
    Reference
    
    PriceRemaining Term
    
    (mmbtu/d)
    
    
    Point
    
    per mmbtuFinancial:Jan 1, 2005
 Mar 31, 2005
    
    
    2,500
    
    
    Transco Z6 (1)
    
    $12.62 CdnJan 1, 2005
 Dec 31, 2005
    
    
    11,000
    
    
    Tetco M3 (1)
    
    $9.27 CdnJan 1, 2005
 Dec 31, 2005
    
    
    2,500
    
    
    Transco Z6 (1)
    
    $10.01 CdnJan 1, 2005
 Dec 31, 2005
    
    
    2,500
    
    
    NGI Chicago (1)
    
    $9.41 Cdn
  (1)

Associated Cdn$ / U.S.$ 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 year
end. At December 31, 2004, the amount Pengrowth would receive to terminate the financial crude oil
and natural gas contracts would be $1,360,000 and $5,957,000 respectively.




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##### Table of Contents



Natural Gas Fixed Price Sales Contract:Pengrowth assumed a natural gas fixed price sales contract in conjunction with the acquisition of
the Murphy Assets. The fair value of the liability associated with the natural gas contract at the
date of acquisition was estimated to be $21,824,000 in respect thereof. The liability will be
reduced as the contract is settled. Details of the physical fixed price sales contract are
provided below: Volume
    
    PriceRemaining Term
    
    (mcf/d)
    
    per mcf (1)2005 to 2009Jan 1, 2005
 Oct 31, 2005
    
    3,886
    
    $2.18 CdnNov 1, 2005
 Oct 31, 2006
    
    3,886
    
    $2.23 CdnNov 1, 2006
 Oct 31, 2007
    
    3,886
    
    $2.29 CdnNov 1, 2007
 Oct 31, 2008
    
    3,886
    
    $2.34 CdnNov 1, 2008
 April 30, 2009
    
    3,886
    
    $2.40 Cdn
  (1)

Reference price based on AECO  Fair value of financial instruments
The carrying value of financial instruments included in the balance sheet, other than long term
debt, the note payable and remediation trust funds approximate their fair value due to their short
maturity. The fair value of the remediation trust funds at December 31, 2004, was $8,366,000 (2003
 $7,479,000). The fair value of the U.S. dollar denominated debt at December 31, 2004 was
approximately $238,726,000 based on changes in the fair value of the underlying U.S. Treasury Bill
that was originally used as the basis for determining the coupon rate for each of the Corporations
notes. The fair value of the U.S. dollar denominated debt approximated its fair value at December
31, 2003, as the rate on the debt did not vary significantly from market rates. The fair value of
the note payable at December 31, 2004 and 2003 approximated its carrying value net of the imputed
interest included in deferred charges.  18.

COMMITMENTSPengrowth has future commitments under various agreements for oil and natural gas pipeline
transportation, the purchase of carbon dioxide and operating leases. The commitment to purchase
carbon dioxide arises as a result of Pengrowths working interest in the Weyburn CO2 miscible
flood project (1). 2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    Thereafter
    
    
    TotalPipeline
transportation
    
    $
    41,475
    
    
    $
    41,281
    
    
    $
    40,192
    
    
    $
    33,420
    
    
    $
    29,728
    
    
    $
    63,894
    
    
    $
    249,990Capital expenditures
    
    
    36,900
    
    
    
    34,800
    
    
    
    6,600
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    78,300CO2 purchases
    
    
    5,976
    
    
    
    5,236
    
    
    
    4,418
    
    
    
    4,254
    
    
    
    4,289
    
    
    
    23,513
    
    
    
    47,686Other commitments
    
    
    1,980
    
    
    
    1,169
    
    
    
    567
    
    
    
    342
    
    
    
    95
    
    
    
    
    
    
    
    4,153$
    86,331
    
    
    $
    82,486
    
    
    $
    51,777
    
    
    $
    38,016
    
    
    $
    34,112
    
    
    $
    87,407
    
    
    $
    380,129
  (1)

Contract prices for CO2 are denominated in U.S. dollars and have been translated at the year end foreign exchange
rate.




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##### Table of Contents



19.

SUBSEQUENT EVENTSOn February 28, 2005, Pengrowth closed an acquisition to purchase an additional 11.89 percent
working interest in Swan Hills Unit No.1 for a purchase price of $87 million. The acquisition is
effective October 1, 2004 and increases Pengrowths working interest in the Swan Hills Unit No.1 to
22.34 percent.On February 17, 2005, Pengrowth announced an Arrangement Agreement (the Arrangement) with
Crispin Energy Inc. (Crispin) under which Corporation will acquire all of the issued and
outstanding shares of Crispin on the basis of 0.0725 Class B trust units of EnergyTrust for each
share held by Canadian resident shareholders of Crispin and 0.0512 Class A trust units of
EnergyTrust for each share held by non-Canadian resident shareholders of Crispin. The Board of
Directors of Crispin will call a Special Meeting of Shareholders in mid to late April 2005 for
approval of the Arrangement. The Arrangement will require the approval of 66 2/3 percent of the
votes cast by shareholders and optionholders of Crispin voting as a single class, the approval of
the majority of shareholders excluding certain management personnel and the approval of the Court
of Queens Bench of Alberta and certain regulatory agencies. Completion of the Arrangement is
expected to close prior to the end of April 2005.




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##### Table of Contents



20.

RECONCILIATION OF FINANCIAL STATEMENTS TO UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLESThe significant differences between Canadian generally accepted accounting principles
(Canadian GAAP) which, in most respects, conforms to generally accepted accounting
principles in the United States (U.S. GAAP), as they apply to Pengrowth, are as follows:  (a)

As required annually under U.S. GAAP, the carrying value of petroleum and natural gas
properties and related facilities, net of future or deferred income taxes, is limited to the
present value of after tax future net revenue from proven reserves, discounted at 10 percent
(based on prices and costs at the balance sheet date), plus the lower of cost and fair value of
unproven properties. At December 31, 1998 and 1997 the application of the full cost
ceiling test under U.S. GAAP resulted in a write-down of capitalized costs of $328.6
million and $49.8 million, respectively. At December 31, 2004 and 2003, the application of
the full cost ceiling test under U.S. GAAP did not result in a write-down of capitalized
costs.Where the amount of a ceiling test writedown under Canadian GAAP differs from the
amount of the write-down under U.S. GAAP, the charge for depletion, depreciation, and
amortization will differ in subsequent years.(b)

Under U.S. GAAP, interest and other income would not be included as a component of Net
Revenue.(c)

Effective January 1, 2003, Pengrowth prospectively adopted U.S. standards relating to
recognizing the compensation expense associated with unit based compensation plans.
Under U.S. GAAP Pengrowth adopted the following:  (i)

For trust unit options granted on or after January 1, 2003, the estimated fair value
of the options is recognized as an expense over the vesting period. The
compensation expense associated with trust unit options granted prior to January 1,
2003 is disclosed on a pro forma basis;(ii)

For rights incentive options granted on or after January 1, 2003, the estimated fair
value of the rights, determined using a modified Black-Scholes option pricing
model, is recognized as an expense over the vesting period. The compensation
expense associated with the rights granted prior to January 1, 2003 is disclosed on a
pro forma basis.  The following is the pro forma effect of trust unit options and rights granted prior to
January 1, 2003, had the fair value method of accounting been used: Years ended December 31,
    
    2004
    
    
    2003Net income (loss)  U.S. GAAP, as reported
    
    $
    180,045
    
    
    $
    236,181Compensation expense related to trust unit options
granted prior to January 1, 2003
    
    
    
    
    
    
    (426
    )Compensation expense related to rights incentive
options granted prior to January 1, 2003
    
    
    (1,067
    )
    
    
    (1,279
    )Pro forma net income  U.S. GAAP
    
    
    178,978
    
    
    $
    234,476Pro forma net income  U.S. GAAP per unit:Basic
    
    $
    1.34
    
    
    $
    2.02Diluted
    
    $
    1.34
    
    
    $
    2.01




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##### Table of Contents



(d)
    Marketable securities held by Pengrowth are classified as available-for-sale in
accordance with the definitions of Statement of Financial Accounting Standards (SFAS) 115.
Under provisions of this Statement, available-for-sale securities are reported at fair value,
with unrealized holding gains and losses included in comprehensive income and reported as a
separate component of unitholders equity until realized.(e)
    SFAS 130 requires the reporting of comprehensive income in addition to net income.
Comprehensive income includes net income plus other comprehensive income; specifically, all
changes in equity of a company during a period arising from non-owner sources.(f)
    Effective January 1, 2002, Pengrowth retroactively adopted with restatement of prior periods,
a new Canadian accounting standard relating to asset retirement obligations, as outlined in
Note 2. Canadian standards are consistent with the requirements under SFAS 143,
Accounting for Asset Retirement Obligations, except under U.S. GAAP the change was
effective January 1, 2003. Under U.S. GAAP, prior periods are not restated for the change in
accounting policy and the effect of the change is charged to income, not unitholders equity.
The effect of the change in accounting policy of $19,225,000 or $0.17 per unit basic and
diluted was charged to income in 2003.(g)
    SFAS 133, Accounting for Derivative Instruments and Hedging Activities establishes
accounting and reporting standards for derivative instruments and for hedging activities. This
statement requires an entity to establish, at the inception of a hedge, the method it will use for
assessing the effectiveness of the hedging derivative and the measurement approach for
determining the ineffective aspect of the hedge. Those methods must be consistent with the
entitys approach to managing risk.At December 31, 2004, $7,317,000 has been recorded as a current asset in respect of the fair
value of the financial crude oil and natural gas hedges outstanding at year end with a
corresponding change in accumulated other comprehensive income. At December 31, 2003,
$13,869,000 has been recorded as a current liability in respect of the fair value of financial
crude oil and natural gas hedges outstanding at year end with a corresponding change in
accumulated other comprehensive income. These amounts will be recognized against crude
oil and natural gas sales over the remaining terms of the related hedges.At December 31, 2004, the ineffective portion of crude oil and natural gas hedges outstanding
at year end was not significant. At December 31, 2003, $300,000 has been recorded as a
current liability with respect to the ineffective portion of crude oil and natural gas hedges
outstanding at year end, with a corresponding change to net income.At December 31, 2004, there were no foreign exchange swaps outstanding. At December 31,
2003, a current asset of $2,169,000 has been recorded in respect of the fair value of a foreign
exchange swap outstanding at year end with a corresponding change in accumulated other
comprehensive income.In 2003, Pengrowth terminated interest rate swaps at a total cost including accrued interest of
$2,229,000. The cost has been recorded as an expense under Canadian GAAP. The
unrealized hedging loss recorded in other comprehensive income related to the interest rate
swaps, as at December 31, 2002 was $2,116,000.




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##### Table of Contents



(h)
    Under U.S. GAAP EnergyTrusts equity is classified as redeemable equity. Trust units are
redeemable at the option of the holder. The redemption price is equal to the lessor of 95
percent of the market trading price of the Class B trust units traded on the TSX for the 10
trading days after the units have been surrendered for redemption and the closing market
price of the Class B trust units quoted on the TSX on the date the units have been surrendered
for redemption. Prior to the reclassification of trust units into Class A or Class B trust units,
the units were redeemable as described above except the redemption price was based on the
market trading price of the original trust units. Trust units can be redeemed for cash to a
maximum of $25,000 per month. Redemptions in excess of the cash limit must be satisfied
by way of a distribution in Specie of a pro-rata share of royalty units and other assets,
excluding facilities, pipelines or other assets associated with oil and natural gas production,
which are held by EnergyTrust at the time the trust units are to be redeemed.(i)
    Under U.S. standards, an entity that is subject to income tax in multiple jurisdictions is
required to disclose income tax expense at each jurisdiction. Pengrowth is subject to tax at
the federal and provincial level. The portion of income tax expense taxed at the federal level
is $14,817,000 (2003  $610,000). The portion of income tax expense taxed at the
provincial level is $5,393,000 (2003  $1,247,000) respectively.(j)
    Under U.S. accounting principles, no subtotal for funds generated from operations before
changes in non-cash working capital balance is allowed.(k)
    In January 2003, the Financial Accounting Standards Board (FASB) issued Financial
Interpretation 46, Accounting for Variable Interest Entities (FIN 46) that requires the
consolidation of Variable Interest Entities (VIEs). VIEs are entities that have insufficient
equity or their equity investors lack one or more of the specified elements that a controlling
entity would have. The VIEs are controlled through financial interests that indicate control
(referred to as variable interests). Variable interests are the rights or obligations that
expose the holder of the variable interest to expected losses or expected residual gains of the
entity. The holder of the majority of an entitys variable interests is considered the primary
beneficiary of the VIE and is required to consolidate the VIE. In December 2003, the FASB
issued FIN 46R which superceded FIN 46 and restricts the scope of the definition of entities
that would be considered VIEs that require consolidation. Adopting the provisions of FIN
46R had no impact on the U.S. GAAP financial statements.In September 2004, the Securities and Exchange Commission issued Staff Accounting
Bulletin 106 (SAB 106) regarding the application of FAS 143 by oil and gas companies
that follow the full cost accounting method. SAB 106 states that after the adoption of FAS
143 the future cash flows associated with the settlement of asset retirement obligations that
have been accrued on the balance sheet should be excluded from the computation of the
present value of estimated future net revenues for purposes of the full cost ceiling test
calculation. Pengrowth excludes the future cash outflows associated with settling asset
retirement obligations from the present value of estimated future net cash flows and does not
reduce the capitalized oil and gas costs by the asset retirement obligation accrued on the
balance sheet. Costs subject to depletion and depreciation include estimated costs required
to develop proved undeveloped reserves and the associated addition to the asset retirement
obligations. The adoption of SAB 106 did not have a significant effect on the results of the
ceiling test or the depletion and depreciation calculation.




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In December 2004, the FASB issued FAS 153 which deals with the accounting for the exchanges of
non-monetary assets. FAS 153 is an amendment of APB Opinion 29. APB Opinion 29 requires that
exchanges of non-monetary assets should be measured based on the fair value of the assets
exchanged. FAS 153 amends APB Opinion 29 to eliminate the exception from using fair market value
for non-monetary exchanges of similar productive assets and introduce a broader exception for
exchanges of non-monetary assets that do not have commercial substance. FAS 153 is effective for
non-monetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. Adopting
the provisions of FAS 153 is not expected to impact the U.S. GAAP financial statements.




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##### Table of Contents



Consolidated Statements of Income The application of U.S. GAAP would have the following effect on net income as reported:
Stated in thousands of Canadian Dollars, except per unit amounts Years ended December 31,
    
    2004
    
    
    2003Net income for the year, as reported
    
    $
    153,745
    
    
    $
    189,297Adjustments:Depletion and depreciation (a)
    
    
    26,000
    
    
    
    26,999Unrealized gain (loss) on ineffective portion
of oil and natural gas hedges (g)
    
    
    300
    
    
    
    660Net income before cumulative effect of change in accounting
policy under U.S. GAAP
    
    $
    180,045
    
    
    $
    216,956Cumulative effect of change in accounting policy (f)
    
    
    
    
    
    
    19,225Net income  U.S. GAAP
    
    $
    180,045
    
    
    $
    236,181Other comprehensive income:Realized loss on available for-sale-securities (d)(e)
    
    
    
    
    
    
    (271
    )Realized gain on settlement of interest rate swaps (e)(g)
    
    
    
    
    
    
    2,116Realized gain on foreign exchange swap (e)(g)
    
    
    (2,169
    )Unrealized hedging gains (e)(g)
    
    
    21,186
    
    
    
    7,009Comprehensive income  U.S. GAAP
    
    $
    199,062
    
    
    $
    245,035Net income before cumulative effect of change in accounting
policy under U.S. GAAP:Basic
    
    $
    1.35
    
    
    $
    1.87Diluted
    
    $
    1.34
    
    
    $
    1.86Net income  U.S. GAAPBasic
    
    $
    1.35
    
    
    $
    2.04Diluted
    
    $
    1.34
    
    
    $
    2.03




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Consolidated Balance Sheets The application of U.S. GAAP would have the following effect on the Balance Sheets as reported: Stated in thousands of Canadian Dollars As
    
    
    IncreaseDecember 31, 2004
    
    Reported
    
    
    (Decrease)
    
    
    U.S. GAAPAssets:Current portion of unrealized hedging gain (g)
    
    $
    
    
    
    $
    7,317
    
    
    $
    7,317Capital assets (a)
    
    
    1,989,288
    
    
    
    (216,942
    )
    
    
    1,772,346$
    (209,625
    )Unitholders equity (h):Accumulated other comprehensive income (e)(g)
    
    $
    
    
    
    $
    7,317
    
    
    $
    7,317Trust Unitholders Equity (a)
    
    
    1,462,211
    
    
    
    (216,942
    )
    
    
    1,245,269$
    (209,625
    )
 As
    
    
    IncreaseDecember 31, 2003
    
    Reported
    
    
    (Decrease)
    
    
    U.S. GAAPAssets:Current portion of unrealized hedging gain (g)
    
    $
    
    
    
    $
    2,169
    
    
    $
    2,169Capital assets (a)
    
    
    1,530,359
    
    
    
    (242,942
    )
    
    
    1,287,417$
    (240,773
    )Liabilities:Accounts payable and accrued liabilities (g)
    
    $
    54,196
    
    
    $
    300
    
    
    $
    54,496Current portion of unrealized hedging loss (g)
    
    
    
    
    
    
    13,869
    
    
    
    13,869Unitholders equity (h):Accumulated other comprehensive income (e)(g)
    
    
    
    
    
    
    (11,700
    )
    
    
    (11,700
    )Trust Unitholders Equity (a)
    
    
    1,159,433
    
    
    
    (243,242
    )
    
    
    916,191$
    (240,773
    )




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Additional disclosures required under U.S. GAAP The components of accounts receivable are as follows: December 31,2004
    
    
    2003Trade
    
    $
    77,778
    
    
    $
    52,663Prepaids
    
    
    15,378
    
    
    
    9,759Other
    
    
    11,072
    
    
    
    3,148$
    104,228
    
    
    $
    65,570
 The components of accounts payable and accrued liabilities are as follows: December 31,2004
    
    
    2003Accounts payable
    
    $
    37,588
    
    
    $
    41,694Accrued liabilities
    
    
    42,835
    
    
    
    12,802$
    80,423
    
    
    $
    54,496




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APPENDIX D FIVE YEAR REVIEW  PENGROWTH ENERGY TRUST CONSOLIDATED FINANCIAL RESULTS(INCLUDED ON PAGES 106
THROUGH 107 OF THE PENGROWTH ENERGY TRUST ANNUAL REPORT 2004)




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##### Table of Contents



Five Year Review Consolidated Financial Results (Stated in $ thousands, except per unit amounts)Years ended December 31
    


    2004
    

    
    2003
    
    
    2002
    
    
    2001
    
    
    2000Gross oil and gas revenue
    


    $
    801,200
    

    
    
    691,020
    
    
    
    482,301
    
    
    
    469,929
    
    
    
    416,228Crown royalties, net of incentives
    


    $
    133,952
    

    
    
    108,325
    
    
    
    73,833
    
    
    
    65,203
    
    
    
    69,594Freehold royalties and mineral taxes
    


    $
    11,848
    

    
    
    6,580
    
    
    
    6,774
    
    
    
    6,757
    
    
    
    6,994Operating costs
    


    $
    159,742
    

    
    
    149,032
    
    
    
    129,802
    
    
    
    104,943
    
    
    
    65,195Amortized injectant costs
    


    $
    19,669
    

    
    
    32,541
    
    
    
    44,330
    
    
    
    47,448
    
    
    
    32,463General and administrative
    


    $
    24,448
    

    
    
    15,997
    
    
    
    10,992
    
    
    
    7,467
    
    
    
    7,081Management fee
    


    $
    12,874
    

    
    
    10,181
    
    
    
    6,567
    
    
    
    7,120
    
    
    
    6,873Interest expense
    


    $
    29,924
    

    
    
    18,153
    
    
    
    15,213
    
    
    
    18,806
    
    
    
    17,354Depletion, depreciation and accretion
    


    $
    257,974
    

    
    
    191,309
    
    
    
    144,341
    
    
    
    129,702
    
    
    
    94,244Net income
    


    $
    153,745
    

    
    
    189,297
    
    
    
    56,955
    
    
    
    88,185
    
    
    
    125,836Per unit
    


    $
    1.15
    

    
    
    1.63
    
    
    
    0.63
    
    
    
    1.24
    
    
    
    2.26Distributable cash
    


    $
    363,061
    

    
    
    313,415
    
    
    
    194,458
    
    
    
    215,787
    
    
    
    218,340Per unit
    


    $
    2.63
    

    
    
    2.68
    
    
    
    2.07
    
    
    
    3.01
    
    
    
    3.79Total assets
    


    $
    2,276,534
    

    
    
    1,673,718
    
    
    
    1,552,651
    
    
    
    1,270,208
    
    
    
    1,113,503Per unit
    


    $
    14.88
    

    
    
    13.51
    
    
    
    14.04
    
    
    
    15.45
    
    
    
    17.44Long-term debt
    


    $
    345,400
    

    
    
    259,300
    
    
    
    316,501
    
    
    
    345,456
    
    
    
    286,823Per unit
    


    $
    2.26
    

    
    
    2.09
    
    
    
    2.86
    
    
    
    4.20
    
    
    
    4.49Unitholders equity
    


    $
    1,462,211
    

    
    
    1,159,433
    
    
    
    1,073,164
    
    
    
    828,540
    
    
    
    650,267Per unit
    


    $
    9.56
    

    
    
    9.36
    
    
    
    9.71
    
    
    
    10.07
    
    
    
    10.18Net asset value at 10% (1)
    


    $
    1,708,012
    

    
    
    1,124,433
    
    
    
    1,239,322
    
    
    
    914,970
    
    
    
    926,899Per unit
    


    $
    11.17
    

    
    
    9.08
    
    
    
    11.21
    
    
    
    11.13
    
    
    
    14.52Return on average equity
    


    
    11.7
    %

    
    
    17.0
    %
    
    
    6.0
    %
    
    
    11.9
    %
    
    
    20.7
    %Cash flow return on average equity
    


    
    27.7
    %

    
    
    28.1
    %
    
    
    20.5
    %
    
    
    29.2
    %
    
    
    36.0
    %Average cost of debt capital
    


    
    4.6
    %

    
    
    5.1
    %
    
    
    4.6
    %
    
    
    5.2
    %
    
    
    6.8
    %
   (1)  Based on Proved plus Probable reserves discounted before income taxes. PENGROWTH ENERGY TRUST 106 Annual Report 2004




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Five Year Review Operating Results Natural gas has been converted to equivalent barrels of oil at 6:1 unless otherwise statedYears ended December 31
    

    2004
    
    

    2003
    
    
    2002
    
    
    2001
    
    
    2000Daily productionCrude oil (bbls)
    

    
    20,817
    
    

    
    23,337
    
    
    
    19,914
    
    
    
    19,726
    
    
    
    17,599Heavy oil (bbls)
    

    
    3,558
    
    

    
    
    
    
    
    
    
    
    
    
    
    
    
    Natural gas (mcf)
    

    
    144,277
    
    

    
    119,842
    
    
    
    111,713
    
    
    
    91,764
    
    
    
    70,098Natural gas liquids (bbls)
    

    
    5,281
    
    

    
    5,722
    
    
    
    5,252
    
    
    
    5,258
    
    
    
    4,205Oil equivalent (boe)
    

    
    53,702
    
    

    
    49,033
    
    
    
    43,785
    
    
    
    40,320
    
    
    
    33,581Total annual production (mboe)
    

    
    19,655
    
    

    
    17,897
    
    
    
    15,982
    
    
    
    14,717
    
    
    
    12,291Average priceCrude oil (per bbl)
    

    $
    43.21
    
    

    
    40.85
    
    
    
    38.06
    
    
    
    37.26
    
    
    
    40.37Heavy oil (per bbl)
    

    $
    32.45
    
    

    
    
    
    
    
    
    
    
    
    
    
    
    
    Natural gas (per mcf)
    

    $
    6.80
    
    

    
    6.35
    
    
    
    3.85
    
    
    
    4.48
    
    
    
    4.34Natural gas liquids (per bbl)
    

    $
    42.21
    
    

    
    35.54
    
    
    
    28.11
    
    
    
    30.68
    
    
    
    33.56Oil equivalent (per boe)
    

    $
    40.76
    
    

    
    38.61
    
    
    
    30.18
    
    
    
    31.93
    
    
    
    33.87Property acquisitions ($ millions)
    

    $
    560.2
    
    

    
    126.5
    
    
    
    389.3
    
    
    
    277.1
    
    
    
    179.6Capital expenditures ($ millions)
    

    $
    161.1
    
    

    
    85.7
    
    
    
    55.6
    
    
    
    74.0
    
    
    
    59.8Reserves (proved plus probable)Reserves acquired in the year
(mmboe)
    

    
    47.9
    
    

    NA
    
    
    
    37.7
    
    
    
    48.4
    
    
    
    21.5Reserves at year-end (mmboe)
    

    
    218.6
    
    

    
    184.4
    
    
    
    214.8
    
    
    
    210.5
    
    
    
    183.0Acquisition cost per boe
    

    $
    11.70
    
    

    NA
    
    
    
    10.33
    
    
    
    5.72
    
    
    
    8.34Cash on cash return:Yearly high
price (1)
    

    
    12.4
    %
    

    
    12.1
    %
    
    
    12.2
    %
    
    
    13.7
    %
    
    
    18.6
    %Yearly low price (1)
    

    
    16.9
    %
    

    
    20.0
    %
    
    
    15.9
    %
    
    
    23.5
    %
    
    
    25.2
    %
   (1)
    
    2004 Cash-on-cash return is calculated based on PGF.UN units prior to July 28, 2004 and PGF.B
units thereafter PENGROWTH ENERGY TRUST 107 Annual Report 2004




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APPENDIX E CORPORATE GOVERNANCE
(INCLUDED ON PAGES 41 THROUGH 46 OFTHE PENGROWTH ENERGY TRUST ANNUAL REPORT 2004)




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##### Table of Contents



Corporate Governance (PHOTO) ABOVE: Left to right standing: Michael S. Parrett, Stanley H. Wong, Thomas A. Cumming,Left to right sitting: John B. Zaozirny, James S. Kinnear, William R. Stedman. Pengrowth Energy Trust is committed to the highest
standards of corporate governance practices and procedures in
both Canada and the United States. PENGROWTH ENERGY
TRUST  41  Annual Report 2004




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(GRAPHIC) CORPORATE GOVERNANCE PENGROWTH CORPORATION 
 Board of Directors JAMES S. KINNEAR, CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER Mr. Kinnear graduated from the University of Toronto in 1969 with a B.Sc. degree and
received a C.F.A. designation in 1979. In 1982 he founded Pengrowth Management Limited and
in 1988 created Pengrowth Energy Trust. Prior to 1982 he worked in the securities sector
in Montreal, Toronto and London, England. Mr. Kinnear was awarded the Ernst and Young,
Prairies Region Entrepreneur of the Year award for 2001. He is currently a Director of the
Calgary Chamber of Commerce and as of 2004 a Director of the National Arts Centre
Foundation Board. Mr. Kinnear is Chairman of the Pengrowth Rockyview General Hospital
Invitational Golf Tournament, a member of the Calgary Health Trust Development Council and
a member of the Canadian Council of Chief Executives. JOHN B. ZAOZIRNY,q.c., b.comm., ll.b., ll.m. John Zaozirny is Counsel to McCarthy Tetrault and Vice Chairman of Canaccord Capital
Corporation. He was Minister of Energy and Natural Resources for the Province of Alberta
from 1982 to 1986. Mr. Zaozirny currently serves on the board of numerous Canadian and
international corporations. He is also a Governor of the Business Council of British
Columbia. THOMAS A. CUMMING, ba. sc., p. eng. Thomas Cumming joined Pengrowth Corporations Board of Directors in April 2000,
having held the position of President and CEO of the Alberta Stock Exchange from 1988 to
1999. His career also includes 25 years with a major Canadian bank both nationally and
internationally. He is currently Chairman of Albertas Electricity Balancing Pool, and
serves as a Director of the Canadian Investor Protection Fund, the Alberta Capital Market
Foundation and Western Lakota Energy Services Inc. He is also a past president of the
Calgary Chamber of Commerce. MICHAEL S. PARRETT, b.a. economics, ca Michael Parrett, appointed to the Board of Directors of Pengrowth Corporation in April
2004, is currently an independent consultant providing advisory service to various public
companies in Canada and the United States. Mr. Parrett is a member of the Board of Fording
Inc. and is serving as a Trustee for Fording Canadian Coal Trust as well as a board member
of Gabriel Resources Limited. He formerly was President of Rio Algom Limited and prior to
that Chief Financial Officer of Rio Algom and Falconbridge Limited. He has participated
as an instructor, panel member and guest speaker at various mining conferences, as
well as, the Law Society of Upper Canada, the Insurance Institute of Ontario and the
Canadian School of Management . WILLIAM R. STEDMAN, b.sc., b. eng, mba William Stedman has been the Chairman and CEO of ENTx Capital Corporation since its
inception in 2001. ENTx is a private venture capital firm which specializes in the
electric power industry. He currently sits on the Board of Directors of a number of
private companies and on four publicly traded companies: Innicor Subsurface Technologies,
Keyspan Facilities Income Fund, Masters Energy, Inc., and most recently Pengrowth
Corporation. Prior to co-founding ENTx, Mr. Stedman was President and CEO of Pembina
Pipeline Corporation, and played an important role in building Pembina Corporation into a
substantial Canadian oil and gas exploration and production and liquids pipeline company. STANLEY H. WONG,b.sc., p. eng. Stanley Wong is President of Carbine Resources Ltd., a private oil and gas producing
and engineering consulting company. He was Senior Engineer with Hudsons Bay Oil & Gas
for 10 years and employed by Total Petroleum for 15 years where he was Chief Engineer
and later became Manager of Special Projects. PENGROWTH ENERGY TRUST  42  Annual Report 2004




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(GRAPHIC) CORPORATE GOVERNANCE Corporate Responsibility Pengrowth Energy Trust is in business to provide returns to Pengrowth unitholders
through competitive acquisitions and effective management of our petroleum and natural gas
properties. As a good corporate citizen, we also recognize that economic performance is
only one criteria on which Pengrowth is evaluated. Pengrowth conducts its business and
operations in accordance with best corporate practices. Pengrowth also supports a broad
base of charitable organizations and is actively involved in the community. Corporate Governance Practices The Board of Directors of Pengrowth Corporation seeks to comply with prevailing
standards for Corporate Governance in both Canada and the United States. The trust units
of Pengrowth Energy Trust are listed on both the Toronto Stock Exchange (TSX) and the
New York Stock Exchange (NYSE). Pengrowth Energy Trust is a reporting issuer in all
provinces of Canada and a foreign private issuer in the United States. The Board of Directors of Pengrowth Corporation complies with the guidelines for
effective Corporate Governance of the TSX and Pengrowths Corporate Governance practices
in comparison with the TSX best practices are disclosed in Pengrowths annual proxy
materials. These guidelines address the constitution of boards of directors and board
committees as well as their functions, their independence from management and other
means to promote sound Corporate Governance practices. Pengrowth also considers the application of recent legislative changes and the recommendations
of influential organizations and
commentators on effective Corporate
Governance and, where appropriate,
modifies Corporate Governance rules
in accordance with prevailing rules
and best practices. On October 29,
2004, the Canadian Securities
Administrators (CSA) published for
comment proposed National Instrument
58-101 Disclosure of Corporate
Governance Practices and proposed
National Policy 58-201  Corporation
Guidelines. In the United States, the
two most significant recent
developments relate to the
Sarbanes-Oxley Act of 2002 (SOX)
and the Corporate Governance Listing
Standards of the NYSE. In general,
foreign private issuers such as
Pengrowth Energy Trust are subject to
the same CEO and CFO certifications
in (GRAPHIC) PENGROWTH ENERGY TRUST  43  Annual Report 2004




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(GRAPHIC) CORPORATE GOVERNANCE their Forms 20-F and 40-F as are U.S. companies in their Form 10-K. The same executive
loan prohibitions apply, as do the strong audit committee and auditor independence
requirements, the specific revised financial disclosures and the improved whistleblower
protections. The Corporate Governance Listings Standards establish mandatory Corporate
Governance practices for issuers listed on the NYSE addressing issues such as board and
committee independence and codes of conduct. Non-U.S. issuers listed on the NYSE are
required only to comply with the audit committee requirement by July 31, 2006 although
such issuers must disclose, either on their websites or in their annual reports, any
significant differences between their Corporate Governance practices and those required
for U.S. issuers. The following are important elements of our current corporate governance practice:  
    The Board of Directors of the Corporation, Pengrowth Management Limited
and senior management of the Corporation consider good corporate governance to
be central to the effective and efficient operation of Pengrowth Energy Trust and Pengrowth Corporation.
    Pengrowth Management Limited makes recommendations to the Board of Directors
as to the strategic direction of Pengrowth Corporation and Pengrowth Energy Trust
and as to acquisitions and divestitures. The Board of Directors considers these recommendations
and assumes overall responsibility for the strategic direction of Pengrowth
Corporation and Pengrowth Energy Trust.
    The Board of Directors of Pengrowth Corporation also considers management development
and succession programs, financing
proposals including the issuance of
trust units and other securities as
well as those matters which require
Board approval.
    Two members of the Board of
Directors are considered related
to the Corporation and/or Pengrowth Energy
Trust by virtue of their appointment
by Pengrowth Management Limited and
other factors. The remainder
(presently four, but up to six) of
the Directors are independent in
that they have not worked for
Pengrowth Corporation (or Pengrowth
Management Limited), nor have they
received remuneration from Pengrowth
Corporation (or Pengrowth Management
Limited), other than options or
rights to acquire trust units, in
excess of Directors fees payable by
Pengrowth Corporation. (GRAPHIC) PENGROWTH ENERGY TRUST  44  Annual Report 2004




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(GRAPHIC) CORPORATE GOVERNANCE  
    The Board of Directors has established a Corporate Governance and Compensation
committee. This committee is comprised of four independent directors and has
activities that include:  §
    adoption of a charter for corporate governance, which has been ratified by
the Board of Directors;§
    nominating new members to the Board of Directors;§
    development of procedures for assessing the effectiveness of the Board
of Directors, committees and individual directors;§
    undertaking responsibility for evaluating the performance of Pengrowth
Management Limited; and§
    adoption of a business code of ethics and policies on disclosure and insider trading.  
    The independent members of the Board of Directors meet separately at meetings
of the Board under the chairmanship of the Lead Director, John B. Zaozirny.
    The Audit Committee of the Board of Directors is comprised of three members
of the Board. Tom Cumming (Chairman), Michael Parrett and William Stedman are
considered independent and financially literate for the purpose of the specific SOX rules
governing the composition of audit committees. The committee includes at least one
person that would be considered an audit committee financial expert. The committee
communicates directly with the auditors of Pengrowth Corporation and Pengrowth Energy
Trust.
    The Reserves Committee of the Board, comprised of two professional engineers,
has been appointed to review Pengrowths standards for reporting reserves for its
portfolio of oil and natural gas properties. The Reserves Committee communicates directly with Gilbert Laustsen
Jung Associates Ltd., Pengrowth Corporations independent engineers.
    The Board of Directors has established a Disclosure Committee, comprised of
the Chief Executive Officer, Chief Financial Officer, Lead Director, Corporate
Secretary and Manager of Investor Relations that is charged with reviewing press releases and other public disclosure
documents prior to their release by Pengrowth Corporation.
    All stock options and stock rights plans have been approved by the unitholders
of Pengrowth Energy Trust. PENGROWTH ENERGY TRUST  45  Annual Report 2004




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(GRAPHIC) CORPORATE GOVERNANCE Structure and Function The Board of Directors has general corporate authority over the business and affairs
of Pengrowth Corporation and derives its authority with respect to Pengrowth Energy Trust
by virtue of the delegation of powers of the Trustee to Pengrowth Corporation as
administrator in accordance with the Trust Indenture. In accordance with the Royalty
Indenture, Trust Indenture and Unanimous Shareholders Agreement, the Trust unitholders
and Royalty unitholders empowered the Trustee and Pengrowth Corporation to delegate
authority to Pengrowth Management Limited under the Management Agreement. As a result,
neither Pengrowth Management Limited nor the Board of Directors has plenary authority
over the business and affairs of Pengrowth Energy Trust or Pengrowth Corporation.
Pengrowth Management Limited has broad discretion to administer and regulate the
day-to-day operations of Pengrowth Energy Trust and Pengrowth Corporation and initiates
acquisition and disposition activity. In practice, however, Pengrowth Management Limited
defers to the Board of Directors on all matters material to Pengrowth Corporation and
Pengrowth Energy Trust. The Board of Directors represents a cross-section of experience in matters of oil and
natural gas, finance and directors responsibilities. Three of the six current members of
the Board of Directors have been directors since the formation of Pengrowth Corporation
and Pengrowth Energy Trust. Thomas A. Cumming has been a Director since April 2000.
Michael Parrett and William Stedman were elected as directors at the April 26th, 2004
Annual and Special Meeting. Mandate of Computershare as Trustee Computershare, as Trustee, has broad power over the administration and management of
Pengrowth Energy Trust and the power to delegate those duties and
responsibilities. This power is governed by the terms of the Trust
Indenture between Pengrowth Corporation and Computershare, subject
to the voting rights of the unitholders. All Trust unitholders are
entitled to attend and vote upon all resolutions brought before meetings of
the unitholders of Pengrowth Energy Trust on the basis of one vote for
each trust unit. (GRAPHIC) PENGROWTH ENERGY TRUST  46  Annual Report 2004




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APPENDIX F

PART II  CORPORATE GOVERNANCE (INCLUDED ON PAGES 17 THROUGH 27
OF THE PENGROWTH ENERGY TRUST INFORMATION CIRCULAR  PROXY
STATEMENT (DATED MARCH 14, 2005)



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PART II  CORPORATE GOVERNANCE Mandates of the Trustee, the Manager and the Board of Directors The Corporation holds petroleum and natural gas rights and other assets. Under the Royalty
Indenture, a royalty was created representing 99% of the Royalty Income, which is payable to
Royalty Unitholders. - 1 -




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Pengrowth Trust was created for the purpose of issuing Trust Units to the public, facilitating an
indirect investment in Royalty Units and other permitted investments under the Trust Indenture.
Pengrowth Trust holds Royalty Units, interests in certain petroleum and natural gas facilities,
cash and other assets. The Class B trust units and the Class A trust units of Pengrowth Trust are
listed on the Toronto Stock Exchange (the TSX) and the Class A trust units of Pengrowth Trust are
also listed on the New York Stock Exchange (the NYSE). Pengrowth Trust is therefore subject to
the corporate governance listing requirements of both exchanges. Under the terms of the Trust Indenture, the Trustee is empowered to exercise those rights and
privileges that could be exercised by a beneficial owner of the assets of Pengrowth Trust in
respect of the administration and management of Pengrowth Trust. The Trustee is permitted to
delegate certain of the powers and duties of the Trustee to any one or more agents,
representatives, officers, employees, independent contractors or other persons. However, specific
powers are delegated to the Corporation as Administrator under the Trust Indenture and the
Trustee has granted broad discretion to the Manager to administer and regulate the day to day
operations of Pengrowth Trust. The powers of the Trustee are also limited through the voting rights
of Trust Unitholders. Under the Management Agreement, the Manager is empowered to act as agent for Pengrowth Trust in
respect of various matters, to execute documents on behalf of the Trustee and to make executive
decisions which conform to general policies and general principles previously established by the
Trustee. The Manager is empowered to undertake, on behalf of the Corporation and Pengrowth Trust,
subject to the Royalty Indenture, all matters pertaining to the properties of the Corporation. See
Management Agreement. Under the Royalty Indenture, the Corporation makes all operating decisions with respect to the
properties of the Corporation. Under the Trust Indenture, general powers have been delegated to the
Corporation as the Administrator of Pengrowth Trust to perform those functions of the Trustee
which are largely discretionary, subject to the powers and duties of the Manager. Additionally,
specific powers have been delegated to the Corporation in relation to the offering of securities,
the acquisition of facilities and other assets, the incurring of indebtedness, the granting of
security and the determination of distributable income. In accordance with the terms of the Unanimous Shareholder Agreement, all Royalty Unitholders other
than the Trustee, and all Trust Unitholders are entitled to attend at, and vote upon, all
resolutions brought before meetings of the Shareholders of the Corporation on the basis of one vote
for each Unit held. Currently, the Unanimous Shareholder Agreement also provides that the Board of
Directors shall consist of two nominees of the Manager and up to six directors who are elected by
the Trust Unitholders of Pengrowth Trust. The Board of Directors meets a minimum of four times each
year, once in each fiscal quarter. In addition, the Board of Directors meets at other times when
matters requiring its approval are raised and the timing is such that it is not prudent or possible
to await a regularly scheduled quarterly meeting. During 2004, 15 regularly
constituted Board of Directors meetings were held. Board Independence The NYSE Listed Company Manual states that a majority of directors must be independent. An
independent director is defined as one who has been determined by the Board of Directors to have no
material relationship with Pengrowth, other than relationships arising from shareholdings. In
addition, a director is not independent if: (i) the director or an immediate family member is, or
has been within the last three years, an employee or executive officer of Pengrowth; (ii) the
director or an immediate family member has received during any twelve month period within the last
three years, more than $100,000 in direct compensation from Pengrowth; (iii) the director or an
immediate family member, a partner or - 2 -




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employee of a firm that is Pengrowths internal or external auditor or the director or an immediate
family member has, within the last three years, been a partner or employee of such firm and worked
on Pengrowths audit; (iv) the director or an immediate family member is, or has been within the
last three years, employed as an executive officer of another company where any of Pengrowths
present officers at the same time serves or served on that companys compensation committee; and
(v) the director or an immediate family member is a current employee of a company that has made
payments to, or received payments from, Pengrowth for a property or services in an amount which, in
any of the last three fiscal years, exceeds the greater of $1,000,000, or 2% of such other
companys consolidated gross revenues. The TSX Company Manual recommends that the board of
directors of every issuer be constituted with a majority of individuals who qualify as unrelated
directors. An unrelated director is a director who is independent of the Manager and is free from
any interest and any business or other relationship which could, or could reasonably be perceived
to, materially interfere with the directors ability to act with a view to the best interest of
Pengrowth Trust. Six of eight directors recommended for election to the Board of Directors are independent directors
under the NYSE requirements and are also considered unrelated. Mr. James S. Kinnear, who is
Chairman, President and Chief Executive Officer of the Corporation as well as President and Chief
Executive Officer of the Manager, is not independent of either entity and is a related director.
Mr. Stanley H. Wong may be considered not to be independent and is a related director as he is the
Managers additional appointee to the Board of Directors pursuant to the terms of the Unanimous
Shareholder Agreement. However, Mr. Wong is neither engaged by the Manager nor by the Corporation
and receives remuneration solely in his capacity as a director of the Corporation. The remainder of
the directors are independent and unrelated in that they have not worked for the Corporation (or
the Manager) nor do they have material contracts with the Corporation (or the Manager) or receive
remuneration from the Corporation (or the Manager), other than Trust Unit Rights, in excess of
directors fees payable by the Corporation. Board Approvals and Structure The Manager makes recommendations to the Board of Directors as to the strategic direction of the
Corporation and Pengrowth Trust. The Board of Directors considers these recommendations and assumes
overall responsibility for the strategic direction of the Corporation and Pengrowth Trust through
the annual consideration of a strategic plan and budget. Criteria are approved by the Board of
Directors for the acquisition and disposition of oil and natural gas properties and other permitted
investments. The Manager has general power under the Management Agreement to conduct acquisitions and
dispositions and the operation of properties. Because of the structure created by the Trust
Indenture, the Royalty Indenture and the Unanimous Shareholder Agreement, neither the Manager nor
the Board of Directors has plenary authority over the businesses and affairs of Pengrowth Trust and
the Corporation. The Trustee responds to directions from the Manager and from the Board of
Directors (with respect to the Corporation as administrator of Pengrowth Trust) within the scope of
the authority of the Trustee and the Trustees power to delegate. The Board of Directors responds to recommendations brought forward by the Manager to the Board of
Directors on material matters impacting the Corporation and Pengrowth Trust. Practically, the
Manager defers to the Board of Directors in respect of all matters which may have a material impact
upon the business and undertaking of the Corporation, Pengrowth Trust, the Royalty Unitholders or
the Trust Unitholders. Reliance is placed upon independent engineering, legal and accounting
consultants where appropriate. - 3 -




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The Board of Directors represents a cross-section of experience in matters of oil and gas, finance
and directors responsibilities. Three of the eight nominated members of the Board of Directors
have been directors since the formation of the Corporation and Pengrowth Trust. Thomas A. Cumming
has been a director since April 2000. Michael S. Parrett and William R. Stedman have been directors
since April 22, 2004. Messrs. A. Terence Poole and Kirby L. Hedrick are nominated to the board for
the first time. Board Committees The Audit Committee of the Board of Directors is currently comprised of three of the independent,
unrelated directors. The Board of Directors has a Corporate Governance/Compensation Committee
which is also comprised of three independent, unrelated directors. The Board of Directors has also
formed a Reserves Committee comprised of two directors, one of whom is an independent, unrelated
director, to review the assumptions and practices and results in respect to the preparation of
independent reserve reports for the oil and gas assets of the Corporation and the reporting
thereof. There are no other committees of the Board of Directors. In respect of matters such as discussions concerning the Management Agreement or related party
transactions, representatives of the Manager disclose their conflict of interest and absent
themselves from discussions and voting. Statement of Corporate Governance Practices The Board of Directors and the Manager support the Guidelines for Corporate Governance (the TSX
Guidelines) adopted by the TSX. On November 4, 2003, the NYSE adopted a number of changes to the
standards for issuers listed on the NYSE, such as Pengrowth Trust. The changes to the NYSE listing
standards are not mandatory for Pengrowth Trust, but any differences in Pengrowth Trusts corporate
governance practices and the NYSE rules must be disclosed by Pengrowth Trust in its annual 40F
filing with the Securities and Exchange Commission in the United States. Certain provisions of SOX
and certain rules adopted and proposed by the United States Securities and Exchanges Commission
(SEC) pursuant to the requirements of SOX, which are applicable to Pengrowth Trust, also
influence Pengrowth Trusts approach to corporate governance. The Corporate Governance/Compensation
Committee of the Board of Directors continues to monitor proposed amendments to Canadian and United
States corporate governance practices and will take appropriate action in response to any new standards which are established. Pengrowth is also considering the application of recent legislative changes and the recommendations
of influential organizations and commentators on effective Corporate Governance. Multilateral
Instrument 58-201 on effective Corporate Governance was published for comment by the Canadian
Securities Administrators (the CSA) on October 24, 2004 and will likely be implemented during
2005. The Board of Directors, the Manager and senior management consider good corporate governance to be
central to the effective and efficient operation of Pengrowth Trust and the Corporation. The Board
of Directors has general corporate authority over the business and affairs of the Corporation and
derives its authority in respect to Pengrowth Trust by virtue of the delegation of powers by the
Trustee to the Corporation as Administrator in accordance with the Trust Indenture. In accordance
with the Royalty Indenture, Trust Indenture and Unanimous Shareholder Agreement the Trust
Unitholders and Royalty Unitholders empowered the Trustee and the Corporation to delegate authority
to the Manager. The Manager derives its authority from the Management Agreement with both the
Corporation and Pengrowth Trust. In practice, the Manager defers to the Board of Directors on all
matters material to the Corporation and Pengrowth Trust. - 4 -




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The following is a statement of the Corporations existing corporate governance practices with
specific reference to the TSX Guidelines.  1.

The board of directors of every corporation should explicitly assume responsibility for the
stewardship of the corporation and, as part of the overall stewardship responsibility, should
assume responsibility for the following matters:The Board of Directors is responsible for the overall stewardship of the Corporation and
Pengrowth Trust and in setting corporate strategy and direction. The Board of Directors has
overall responsibility for the management and supervision of the affairs of the Corporation
and Pengrowth Trust. The Board of Directors has established administrative procedures
which prescribe the rules governing the approval of transactions carried out in the course
of the Corporations operations, the delegation of authority and the execution of documents
on behalf of the Corporation. The Board of Directors reviews and approves various matters,
including the appointment of corporate officers, as well as the annual capital and
operating budgets and authorization of unbudgeted investments and divestitures above a
specified dollar threshold. The Board of Directors expectations of management of the
Corporation are communicated directly to management and through committees of the Board of
Directors. More specifically, the Board of Directors assumes the following principal
responsibilities:  (a)

adoption of a strategic planning process;  The Board of Directors considers management development and succession programs, strategic
business developments such as significant acquisitions, and financing proposals including
the issuance of Trust Units and other securities, as well as those matters requiring the
approval of the Board of Directors. The Board of Directors conducts an annual strategic
planning process.As part of the strategic planning process conducted in 2004, senior officers of the
Corporation and the general management of the Corporation held several meetings and put
forward their views. This input from senior members of management was used as part of the
background information reviewed by the Board of Directors to assist them in developing the
Corporations strategic plan.  (b)

the identification of the principal risks of the corporations business and ensuring
the implementation of appropriate systems to manage these risks;  The Board of Directors ensures that a system is in place to identify the principal risks to
the Corporation and to monitor the process to manage such risks. The Audit Committee
reviews and approves Managements identification of principal financial risks and monitors
the process to manage such risks.  (c)

succession planning, including appointing, training and monitoring senior management;  The Corporate Governance/Compensation Committee, in conjunction with the Manager, is
responsible for appointing officers and other key employees on behalf of the Corporation,
planning for the succession of the directors, officers and key employees; and reviewing the
performance of senior management.The Corporate Governance/Compensation Committee reviews the performance of senior members
of management and also the total compensation paid to those individuals, including salary,
bonus and options. The Committee also reviews the process and background information - 5 -




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used to determine overall compensation in reference to industry data, performance and
future objectives.  (d)

a communications policy for the corporation; and  The Board of Directors has approved a Corporate Disclosure Policy to ensure timely,
accurate, credible and balanced disclosure of material information in respect of Pengrowth
Trust and the Corporation. The policy in place outlines the procedures and practical
guidelines for the consistent, transparent, regular and timely public disclosure and
dissemination of material and non-material information about the Corporation and Pengrowth
Trust. Under the policy, a Disclosure Policy Committee has been established by the Board of
Directors and includes the Chief Executive Officer, Interim Chief Financial Officer, Lead
Director, Corporate Secretary and Manager of Investor Relations. It is this committees
responsibility to monitor the effectiveness of and compliance with the Corporate Disclosure
Policy and educate directors, officers and employees as to disclosure issues.The Corporate Disclosure Policy has been provided to all staff to ensure employees are
aware of the procedures in place regarding information being disclosed to the public.  (e)

the integrity of the corporations internal control and management information systems.  The Audit Committee: (a) monitors the integrity of the Corporations financial reporting
process and systems of internal controls regarding finance, accounting, and legal
compliance; (b) monitors the independence and performance of the Corporations independent
auditors; and (c) provides an avenue of communication among the independent auditors,
management and the Board of Directors.The Audit Committee has approved a process that will be used to review managements
internal controls and procedures.In order to comply with Section 404 of the SOX, which involves the Corporations internal
control over financial reporting, management is reviewing and testing the companys
internal controls over financial reporting. The Board of Directors is provided with regular
updates from management on this process. This process needs to be complete and in place for
year end 2006 reporting.2.

The board of directors of every corporation should be constituted with a majority of
individuals who qualify as unrelated directors. An unrelated director is a director who is
independent of management and is free from any interest and any business or other relationship
which could, or could reasonably be perceived to, materially interfere with the directors
ability to act with a view to the best interests of the Corporation, other than interests and
relationships arising from shareholding. A related director is a director who is not an
unrelated director. If the corporation has a significant shareholder, in addition to a
majority of unrelated directors, the board should include a number of directors who do not
have interests in or relationships with either the corporation or the significant shareholder
and which fairly reflects the investment in the corporation by Shareholders other than the
significant shareholder. A significant shareholder is a shareholder with the ability to
exercise a majority of the votes for the election of the board of directors. - 6 -




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The Board of Directors is presently comprised of six members, four of whom are independent
and unrelated and two are appointments of the Manager, one of whom is the President,
Chairman and Chief Executive Officer of the Corporation.The Manager is entitled to appoint two members to the Board of Directors in accordance with
the Management Agreement. The balance are to be appointed by the Trust Unitholders.The two new nominees to the Board of Directors would also be considered independent and
unrelated.3.

The application of the definition of unrelated director to the circumstances of each
individual director should be the responsibility of the board which will be required to
disclose on an annual basis whether the board has a majority of unrelated directors, in the
case of a corporation with a significant shareholder, whether the board is constituted with
the appropriate number of directors which are not related to either the corporation or the
significant shareholder. Management directors are related directors. The board will also be
required to disclose on an annual basis the analysis of the application of the principles
supporting this conclusion.The Board of Directors is presently composed of a majority of unrelated directors and will
be comprised of a majority of unrelated directors upon election of the directors
proposed at the Shareholder Meeting: Thomas A.
Cumming  unrelated director
James S. Kinnear  related director (Chairman, President and Chief Executive Officer)
Michael S. Parrett  unrelated director
William R. Stedman  unrelated director
Stanley H. Wong  related director (appointed by the Manager*)
John B. Zaozirny  unrelated director (Lead Director)
A. Terence Poole  unrelated director nominee
Kirby L. Hedrick  unrelated director nominee  * Although Mr. Wong is appointed by the Manager, he holds no position with the Manager and
has not had a financial connection to the Manager for more than 10 years.4.

The board of directors of every corporation should appoint a committee of directors composed
exclusively of outside, i.e., non-management, directors, a majority of whom are unrelated
directors, with the responsibility for proposing to the full board new nominees to the board
and for assessing directors on an ongoing basis.The Corporate Governance/Compensation Committee is presently composed of three directors,
all of whom are independent directors. This committees responsibilities include proposing
to the Board of Directors new nominees to the Board of Directors and assessing each
directors performance on an ongoing basis. In assessing new nominees, the Corporate
Governance/Compensation Committee seeks to ensure that there is a sufficient range of
skills, expertise and experience to ensure that the Board of Directors can carry out its
mandate and functions effectively. The Corporate Governance/Compensation Committee
receives and evaluates suggestions for candidates from individual directors, the President
and Chief Executive Officer and from professional search organizations. During 2004 the
Corporate Governance/Compensation Committee initiated a search process to seek two new
directors of the Corporation, one with financial expertise and the second with
technical/engineering expertise. - 7 -




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Many candidates were considered and ultimately Korn/Ferry International was retained,
resulting in the two nominees proposed for election at the Shareholders Meeting.  5.

Every board of directors should implement a process to be carried out by the nominating
committee or other appropriate committee for assessing the effectiveness of the board as a
whole, the committees of the board and the contribution of individual directors.The Corporate Governance/Compensation Committee is responsible for assessing the
effectiveness of the Board of Directors, its committees and individual directors. The
Corporate Governance/Compensation Committee is also responsible for evaluating the
performance of the Manager and, if necessary, negotiating the Management Agreement and
making recommendations to the Trust Unitholders as to the Manager and the terms of the
Management Agreement.The Corporate Governance/Compensation Committee has developed an Annual Effectiveness
Survey which includes evaluating board responsibility, board operations and board
effectiveness. The Survey is completed by each Director and submitted anonymously. The
collated results are then reviewed by the President and Lead Director.6.

Every corporation, as an integral element of the process for appointing new directors, should
provide an orientation and education program for new recruits to the board.The Corporate Governance/Compensation Committee is responsible for procedures for the
orientation and education of new board members concerning their role and responsibilities
and for the continued development of existing members of the Board of Directors. Materials
have been prepared for review by new directors in respect of the structure, business and
results of Pengrowth Trust.7.

Every board of directors should examine its size and, with a view to determining the impact
of the number upon effectiveness, undertake where appropriate, a program to reduce the number
of directors to a number which facilitates more effective decision making.A board of directors must have enough directors to carry out its duties efficiently while
presenting a diversity of views and experiences. The Board of Directors currently has six
members. The size of the Board of Directors and criteria for new directors are reviewed by
the Corporate Governance/Compensation Committee and suitable candidates are identified.Over the past year the Corporate Governance/Compensation Committee has reviewed the size of
the Board of Directors, the experience of existing members and the increasing time
commitments required of Directors. Once this review was complete criteria were set for new
directors including a requirement for additional financial expertise and for additional
technical expertise to replace the expertise of Mr. Michael A. Grandin who retired from the
Board of Directors during 2004. After an extensive search by the Committee and the
President and Chief Executive Officer suitable candidates were identified and brought
forward to the Board of Directors. The names of two new director nominees are being put
forward for approval at the Shareholders Meeting.8.

The board of directors should review the adequacy and form of the compensation of directors
and ensure the compensation realistically reflects the responsibilities and risk involved in
being an effective director. - 8 -




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The Corporate Governance/Compensation Committee reviews and makes recommendations to the
Board of Directors on the adequacy and form of the compensation of directors and the
compensation to be paid to committee members and to the lead director based upon comparable
available industry data.9.

Committees of the board of directors should generally be composed of outside directors, a
majority of whom are unrelated directors, although some board committees, such as the
executive committee, may include one or more inside directors.The Board of Directors annually appoints members to its committees. The committees
presently established by the Board of Directors are composed as follows: Audit Committee
    
    Thomas A. Cumming, Chairman
    
    unrelated directorMichael S. Parrett
    
    unrelated directorWilliam R. Stedman
    
    unrelated directorCorporate Governance/
    
    John B. Zaozirny, Chairman
    
    unrelated directorCompensation Committee
    
    Michael S. Parrett
    
    unrelated directorThomas A. Cumming
    
    unrelated directorReserves Committee
    
    William R. Stedman, Chairman
    
    unrelated directorStanley H. Wong
    
    related director
  In addition, the Board of Directors has established a Disclosure Policy Committee that
includes: the Chief Executive Officer  James S. Kinnear  related director, the lead
director  John B. Zaozirny  unrelated lead director,
Interim Chief Financial Officer 
Christopher G. Webster, Corporate Secretary  Charles V. Selby, and Manager of Investor
Relations  Dean Morrison.10.

Every board of directors should expressly assume responsibly for, or assign to a committee of
directors the general responsibility for, developing the corporations approach to governance
issues. This committee would, amongst other things, be responsible for the corporations response
to these governance guidelines.The Corporate Governance/Compensation Committee is responsible for corporate governance
issues and the implementation of the TSX Guidelines. The Corporate Governance/Compensation
Committee is responsible for reviewing and providing recommendations for improvement to the
Board of Directors with respect to all aspects of corporate governance. The Corporation has
in place a Code of Business Conduct and a Code of Ethics for all employees and agents of
the Corporation; Terms of Reference for the Corporate Governance/Compensation Committee; a
Corporate Governance Policy for the Board of Directors; Terms of Reference for the Chairman
of the Board of Directors and the lead director; and a Charter for the Audit Committee.The Corporate Governance/Compensation Committee reviews new corporate governance
information on an ongoing basis to ensure they are following best practices suggested in
this area.11.

The board of directors, together with the Chief Executive Officer, should develop position
descriptions for the board and for the Chief Executive Officer, involving the definition of the
limits to managements responsibilities. In addition, the board should approve or develop the
corporate objectives which the Chief Executive Officer is responsible for meeting. - 9 -




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The Board of Directors has adopted guidelines for the responsibilities of the Board of
Directors and has in place Terms of Reference for the positions of Lead Director and
Chairman of the Board of Directors. The responsibilities of the Manager are set out in the
Management Agreement. The Corporate Governance/Compensation Committee will set annual
performance objectives in discussions with the Manager in conjunction with the Board of
Directors strategic planning and budgeting processes.12.

Every board of directors should have in place appropriate structures and procedures to ensure
that the board can function independently of management. An appropriate structure would be to (i) appoint a chair of the board who is not a member of management with responsibility
to ensure the board discharges its responsibilities or (ii) adopt alternate means such as
assigning this responsibility to a committee of the board or to a director, sometimes
referred to as the lead director. Appropriate procedures may involve the board meeting on
a regular basis without management present or may involve expressly assigning the
responsibility for administering the boards relationship to management to a committee of
the board.The Board of Directors derives its authority with respect to Pengrowth Trust from the
duties delegated to the Corporation as Administrator by the Trustee in accordance with
the Trust Indenture. The Trustee also delegates certain powers to the Manager in
accordance with the terms of the Management Agreement. In practice, the Manager defers to
the Board of Directors on all material matters. The Board of Directors is composed of a
majority of independent directors. In matters that require independence of the Board of
Directors, only the independent directors participate in the decision making and
evaluation.The Board of Directors have appointed a Lead Director who is not a member of management.
The Board of Directors meets independently of management at all board and committee
meetings.13.

The audit committee of every board of directors should be composed only of outside directors.
The roles and responsibilities of the audit committee should be specifically defined so as to
provide appropriate guidance to audit committee members as to their duties. The audit committee
should have direct communication channels with the internal and external auditors to discuss and
review specific issues as appropriate. The audit committee duties should include oversight
responsibility for management reporting on internal control. While it is managements
responsibility to design and implement an effective system of internal control, it is the
responsibility of the audit committee to ensure that management has done so.The Audit Committee is composed of three independent, unrelated directors. The mandate of
the Audit Committee is set forth in the Audit Committee Charter, which the Board of
Directors adopted July 30, 2001. The charter directs the Audit Committee to: (a) monitor
the integrity of the companys financial reporting process and systems of internal controls
regarding finance, accounting, and legal compliance; (b) monitor the independence and
performance of the companys independent auditors; and (c) provide an avenue of
communication among the independent auditors, management and the Board of Directors.Certain disclosure regarding the charter and composition of the audit committee of the
Board of Directors and the fees paid to Pengrowths external auditor as required by Form
52-110F2 will be contained under the heading Audit Committee in Pengrowths AIF for the
year ended December 31, 2004.The Audit Committee meets independently with the external auditor of the Corporation on a
regular basis. - 10 -




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14.

The board of directors should implement a system which enables an individual director to engage
an outside adviser at the expense of the corporation in appropriate circumstances. The engagement
of the outside advisor should be subject to the approval of an appropriate committee of the board.The Corporate Governance Policy of the Board of Directors permits directors to engage
outside advisors at the Corporations expense with the approval of the Board of Directors. The Board of Directors has approved the following charters and policies in respect to corporate
governance: DATE OF APPROVAL BY THECHARTER/POLICY
    
    BOARD OF DIRECTORS1.
    
    Mandate and
Terms of Reference  Reserves Committee
    
    February 25, 20052.
    
    Whistleblower Policy (Audit Committee)
    
    May 17, 20043.
    
    Privacy Policy
    
    December 23, 20034.
    
    Policy on Trading in Securities by Directors, Officers and
Employees
    
    October 30, 20035.
    
    Corporate Disclosure Policy
    
    March 3, 20036.
    
    Code of Business Ethics
    
    November 19, 20027.
    
    Authority Levels
    
    November 19, 20028.
    
    Terms of Reference  Corporate Governance/Compensation
Committee
    
    July 30, 20029.
    
    Corporate Governance Policy
    
    July 30, 200210.
    
    Terms of Reference Chairman of the Board of Directors
Terms of Reference Lead Director
    
    July 30, 200211.
    
    Audit Committee Charter
    
    July 30, 200112.
    
    Internet Policy
    
    July 21, 1999
 Other Matters The Manager knows of no amendment, variation or other matter to come before the Meetings other than
the matters referred to in the Notices of Meetings. If any other matter properly comes before the
Meetings, however, the enclosed proxies will be voted on such matter in accordance with the best
judgment of the person or persons voting the proxies. - 11 -




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APPENDIX G OIL AND GAS PRODUCING
ACTIVITIES PREPARED IN ACCORDANCE WITH SFAS NO. 69  DISCLOSURES ABOUT OIL
AND GAS PRODUCING ACTIVITIES.




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SUPPLEMENTAL INFORMATION
 OIL AND GAS PRODUCING ACTIVITIES(unaudited) The following disclosures
have been prepared in accordance with SFAS No. 69  disclosures about
Oil and Gas Producing Activities.: OIL AND GAS RESERVES Users of this information should be aware that the process of estimating quantities of proved and
proved developed crude oil and natural gas reserves is very complex, requiring significant
subjective decisions in the evaluation of all available geological, engineering and economic data
for each reservoir. The data for a given reservoir may also change substantially over time as a
result of numerous factors including, but not limited to, additional development activity, evolving
production history, and continual reassessment of the viability of production under varying
economic conditions. Consequently, material revisions to existing reserve estimates occur from
time to time. Although every reasonable effort is made to ensure that reserve estimates reported
represent the most accurate assessments possible, the significance of the subjective decisions
required and variances in available data for various reservoirs make these estimates generally less
precise than other estimates presented in connection with financial statement disclosures. Proved oil and gas reserves are the estimated quantities of crude oil, natural gas and natural gas
liquids which geological and engineering data demonstrate with reasonable certainty to be
recoverable in future years from known reservoirs under existing economic and operating conditions. Proved developed oil and gas reserves are reserves that can be expected to be recovered through
existing wells with existing equipment and operating methods. Canadian provincial royalties are determined based on a graduated percentage scale which varies
with prices and production volumes. Canadian reserves, as presented on a net basis, assume prices
and royalty rates in existence at the time the estimates were made, and the Trusts estimate of
future production volumes. Future fluctuations in prices, production rates, or changes in
political or regulatory environments could cause the Trusts share of future production from
Canadian reserves to be materially different from that presented. Subsequent to December 31, 2004 no major discovery or other favorable or adverse event is believed
to have caused a material change in the estimates of proved or proved developed reserves as of that
date. RESULTS OF OPERATIONS FOR PRODUCING ACTIVITIES The following table sets forth revenue and direct cost information relating to the Trusts oil and
gas producing activities for the years ended December 31. (thousands of dollars)
    
    2004
    
    
    2003RevenueSales
    
    $
    667,790
    
    
    $
    585,841DeductProduction costs
    
    
    152,400
    
    
    
    143,453Transportation costs
    
    
    8,274
    
    
    
    8,225Amortization of injectant costs
    
    
    19,669
    
    
    
    32,541Technical support and other
    
    
    7,342
    
    
    
    5,579Depletion, depreciation and amortization
    
    
    221,332
    
    
    
    158,271Results of operations from producing activities
    
    $
    258,773
    
    
    $
    237,772




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##### Table of Contents



1.

The costs in this schedule exclude corporate overhead, interest expense and other operating
costs which are not directly related to producing activities. COSTS INCURRED IN OIL AND GAS PROPERTY ACQUISITION, EXPLORATION AND DEVELOPMENT ACTIVITIES Costs incurred in oil and gas producing activities for the years ended December 31 are as follows: 2004
    
    
    2003(thousands of dollars)Property Acquisition CostsProved
    
    $
    512,348
    
    
    $
    122,964Unproved
    
    
    12,766
    
    
    
    Development Costs
    
    
    161,141
    
    
    
    85,718Injectant Costs
    
    
    20,415
    
    
    
    23,037$
    706,670
    
    
    $
    231,719
 Acquisition costs include costs incurred to purchase, lease, or otherwise acquire oil and gas
properties. Development costs include the costs of drilling and equipping development wells and facilities to
extract, treat and gather and store oil and gas. Injectants (mostly ethane and methane) are used in miscible flood programs to stimulate incremental
oil recovery. The cost of injectants purchased from third parties for miscible flood projects is
deferred and amortized over the period of expected future economic benefit which is estimated as 24
to 30 months. General and administrative costs are not capitalized other than to the extent they are directly
related to a successful acquisition, or to the extent of the Trusts working interest in
exploration or development projects to which overhead fees can be recovered from partners.
Overhead fees are not charged on 100% owned projects. There were no oil and gas property costs not being amortized in any of the years presented. CAPITALIZED COSTS RELATING TO OIL AND GAS PRODUCING ACTIVITIES The capitalized costs and related accumulated depreciation, depletion and amortization, including
impairments, relating to the Trusts oil and gas exploration, development and producing activities
at December 31 consist of: (thousands of dollars)
    
    2004
    
    
    2003Oil and gas properties
    
    $
    3,011,723
    
    
    $
    2,305,462Less accumulated depletion, depreciation and amortization
    
    
    (1,239,377
    )
    
    
    (1,018,045
    )Net capitalized costs
    
    $
    1,772,346
    
    
    $
    1,287,417




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##### Table of Contents



OIL AND GAS RESERVE INFORMATION All of the Trusts proved oil, natural gas liquids, and natural gas reserves are located in Canada,
primarily in the provinces of Alberta, British Columbia, Saskatchewan and Nova Scotia. The Trusts
proved developed and undeveloped reserves after deductions of royalties are summarized below: Crude Oil andNatural Gas
    
    
    NaturalLiquids
    
    
    GasMMbbls
    
    
    BcfNET PROVED DEVELOPED AND
UNDEVELOPED RESERVES AFTER
ROYALTIESEnd of year 2002
    
    
    89.8
    
    
    
    336.0Revision of previous estimates
    
    
    (4.6
    )
    
    
    (33.8
    )Purchase of reserves in place
    
    
    0.3
    
    
    
    0.6Sales of reserves in place
    
    
    (0.2
    )
    
    
    (0.6
    )Discoveries and extensions
    
    
    0.1
    
    
    
    3.0Production
    
    
    (8.1
    )
    
    
    (33.8
    )End of year 2003
    
    
    77.3
    
    
    
    271.4Revision of previous estimates
    
    
    1.7
    
    
    
    16.0Purchase of reserves in place
    
    
    17.0
    
    
    
    97.1Sales of reserves in place
    
    
    
    
    
    
    Discoveries and extensions
    
    
    0.1
    
    
    
    1.8Production
    
    
    (8.8
    )
    
    
    (42.7
    )End of year 2004
    
    
    87.3
    
    
    
    343.6NET PROVED DEVELOPED
RESERVES AFTER ROYALTIESEnd of year 2002
    
    
    66.6
    
    
    
    233.2End of year 2003
    
    
    60.6
    
    
    
    219.9End of year 2004
    
    
    70.5
    
    
    
    305.7
  Notes:  1.

Net after royalty reserves are the Trusts lessor royalty, overriding royalty, and working
interest share of the gross remaining reserves, after deduction of any crown, freehold and
overriding royalties. Such royalties are subject to change by legislation or regulation and
can also vary depending on production rates, selling prices and timing of initial production.2.

Reserves are the estimated quantities of crude oil, natural gas and related substances
anticipated from geological and engineering data to be recoverable from known accumulations,
from a given date forward, by known technology, under existing operating conditions and prices
in effect at year end.3.

Proved oil and gas reserves are the estimated quantities of crude oil, natural gas and
natural gas liquids which geological and engineering data demonstrate with reasonable
certainty to be recoverable in future years from known reservoirs under existing economic and
operating conditions.




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##### Table of Contents



4.

Proved developed oil and gas reserves are reserves that can be expected to be recovered
through existing wells with existing equipment and operating methods. Proved undeveloped
reserves are reserves that are expected to be recovered from known accumulations where a
significant expenditure is required. STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS RELATING TO PROVED OIL AND GAS RESERVES The following information has been developed utilizing procedures described by SFAS No. 69 and
based on crude oil and natural gas reserve and production volumes estimated by the independent
engineering consultants of the Trust.It may be useful for certain comparison purposes, but should
not be solely relied upon in evaluating the Trust or its performance. Further, information
contained in the following table should not be considered as representative of realistic
assessments of future cash flows, nor should the Standardized Measure of Discounted Future Net Cash
Flows be viewed as representative of the current value of the Trusts reserves. The future cash flows presented below are based on sales prices, cost rates, and statutory income
tax rates in existence as of the date of the projections. It is expected that material revisions
to some estimates of crude oil and natural gas reserves may occur in the future, development and
production of the reserves may occur in periods other than those assumed, and actual prices
realized and costs incurred may vary significantly from those used. Management does not rely upon the following information in making investment and operating
decisions. Such decisions are based upon a wide range of factors, including estimates of probable
as well as proved reserves, and varying price and cost assumptions considered more representative
of a range of possible economic conditions that may be anticipated. The computation of the standardized measure of discounted future net cash flows relating to proved
oil and gas reserves at December 31, 2004 was based on the following benchmark prices; crude oil
price of $46.54/bbl and natural gas price of $6.79/mcf. The computation of the standardized
measure of discounted future net cash flows relating to proved oil and gas reserves at December 31,
2003 was based on the following benchmark prices; crude oil price of $40.81/bbl and natural gas
price of $6.09 /mcf. STANDARDIZED MEASURE OF DISCOUNTED FUTURE CASH FLOW RELATING TO PROVED OIL AND GAS RESERVES The following table sets forth the standardized measure of discounted future net cash flows from
projected production of the Trusts crude oil and natural gas reserves at December 31, for the
years presented. 2004
    
    
    2003(millions of dollars)Future cash inflows
    
    $
    5,869
    
    
    $
    4,797Future costsFuture production and development costs
    
    
    (2,494
    )
    
    
    (2,034
    )Future net cash flows
    
    
    3,375
    
    
    
    2,763Deduct: 10% annual discount factor
    
    
    (1,383
    )
    
    
    (1,159
    )Standardized measure of discounted future net cash flows
    
    $
    1,992
    
    
    $
    1,604




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CHANGES IN STANDARDIZED MEASURE OF DISCOUNTED FUTURE CASH FLOW RELATING TO PROVED OIL AND GAS
RESERVES The following table sets forth the changes in the standardized measure of discounted future net
cash flows at December 31, for the years presented. 2004
    
    
    2003(millions of dollars)Future discounted net cash flows at beginning of year
    
    $
    1,604
    
    
    $
    1,942Sales and transfer, net of production costs
    
    
    (480
    )
    
    
    (395
    )Net change in sales and transfer prices, net of
development and production costs
    
    
    176
    
    
    
    (115
    )Development costs during the year
    
    
    161
    
    
    
    86Extensions and discoveries, net of related costs
    
    
    5
    
    
    
    7Revisions of quantity estimates
    
    
    58
    
    
    
    (134
    )Accretion of discount
    
    
    160
    
    
    
    194Sales of reserves in place
    
    
    
    
    
    
    (4
    )Purchase of reserves in place
    
    
    323
    
    
    
    5Changes in timing of future net cash flows and other
    
    
    (15
    )
    
    
    18End of Year
    
    $
    1,992
    
    
    $
    1,604
  Note:  1.

The schedules above are calculated using year-end prices, costs, statutory tax rates and
existing proved oil and gas reserves. The value of exploration properties and probable
reserves, future exploration costs, future changes in oil and gas prices and in production and
development costs are excluded.