PENGROWTH ENERGY CORP. $11.31 - Toronto symbol PGF

PENGROWTH ENERGY CORP. $11.31 (Toronto symbol PGF; Shares outstanding: 329.3 million; Market cap: $3.7 billion; TSINetwork Rating: Average; Dividend yield: 7.4%; www.pengrowth.com) produces oil and natural gas from properties in Alberta, B.C. and Saskatchewan. It also owns 8.4% of the Sable Offshore Energy Project, which extracts natural gas from several fields south of Nova Scotia.

Pengrowth produced an average of 74,568 barrels of oil equivalent per day (including natural gas) in the three months ended September 30, 2011. That’s up 2.6% from 72,704 barrels a year earlier. Production was weighted 51% to oil and 49% to natural gas.

Cash flow rose 0.7%, to $150.4 million from $149.3 million. Cash flow per share fell 8.0%, to $0.46 from $0.50, on more shares outstanding.

Pengrowth continues to pay monthly dividends of $0.07 a share; the annual rate of $0.84 yields 7.4%. The company lets shareholders reinvest their dividends in new shares at 95% of the market price. This helps Pengrowth conserve cash for dividends.

Pengrowth has been expanding into riskier areas, like oil sands and shale gas. However, these projects have strong long-term potential, and their cash flows will also help Pengrowth maintain its dividend.

The company likely spent $610 million on exploration and development in 2011. It hasn’t yet announced its spending plans for 2012.

Pengrowth’s debt of $1.2 billion is a reasonable 32.4% of its market cap. It trades at 6.3 times its estimated 2012 cash flow of $1.80 per share.

Pengrowth Energy Corp. is still a buy.

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