The Successful Investor Hotline – Friday, July 16, 2010

Article Excerpt

PENGROWTH ENERGY TRUST, $9.76, Toronto symbol PGF.UN, has agreed to buy the 82% of Monterey Exploration Ltd. (Toronto symbol MXL) that it doesn’t already own. The deal should close in September 2010. Monterey produces oil and natural gas at properties in Alberta and British Columbia. Pengrowth is particularly interested in Monterey’s unconventional gas holdings in northeastern B.C. Monterey lacks the financial resources to develop these assets. That’s why it accepted Pengrowth’s offer. The trust will pay $366 million in units to take full control of Monterey. That includes $30 million of Monterey’s debt, which Pengrowth will assume. On top of the purchase price, Pengrowth will spend $65 million in 2010 to drill six new wells at Monterey’s Groundbirch unconventional gas field in northeastern B.C. Groundbirch accounts for 71% of Monterey’s reserves. To put these figures in context, Pengrowth’s cash flow was $146.7 million, or $0.51 a unit, in the three months ended March 31, 2010. Pengrowth’s units fell 5% on the news…

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