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Leslie LundquistPengrowth Energy Trust (B)PGF.B.TODON'T BUYMay 20, 2005

This one is a difficult situation for investors. A long term royalty trust, but hasn't kept up with its peers. A lttle bit late in moving to the newer model of holding back more of your cash and pay out less. Have had rising operating costs. Had some management changes. Better choices available.

Leslie Lundquist

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$17.06

Stock price when the opinion was issued

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PAST TOP PICK

(A Top Pick April 21/06. Sold at a loss of about $4.) Converted to Pengrowth (PGF.UN-T) and he would not buy this on.

HOLD

With the whole trust area collapse, we are getting back to fundamentals. Outlook for this company is quite strong. There is a good seasonal play in a lot of the oil/gas trusts. Fairly cheap.

BUY

This company has had a long, long history of managing and income trust, so you have to like management. His fair market value is about double what the stock is trading at.

HOLD

Starting to look at it a little bit closer now. Seems to be turning around. Debt and payout ratio is a little bit higher than he likes. As this gets corrected, it may be one that he would add.

BUY ON WEAKNESS

Recently sold his position. Payout ratio has come down to about 70% and hired a new management team that have strong technical skills. Recently acquired Esprit, which was good, but paid a full price for it. Will buy on weakness.

WEAK BUY

This is a company that knows how to deal with replacing reserves. Very good management. This is one of a few income trusts that he would consider holding through the next period.

BUY

In terms of some of the oil/gas trusts, it is timely to be looking at them right now. Check the yield and cash flows that are being generated.

PAST TOP PICK

(A Top Pick Mar 23/06. Up 17%.) Looking to consolidate the A and B shares to make it one class.

COMMENT

As other trusts were running down their payout ratios, this one continued to pay on a relatively high level and relied on acquisitions to replace production. That model doesn't work any more. They are now changing. From a fundamental basis, they are improving.

DON'T BUY

The class structure is being dissolved. They have done a pretty good job over the last year of cleaning up some of their problems. Owns some in an index fund, only because he has to. Prefers others. Reserve life of about 11 years. Payout ratio is a little high.

HOLD

Combining their A and B shares together. At these levels, this is a pretty good hold.

TOP PICK

About 55% natural gas. Very good yield at 13%. Represents reasonably good value. Has good properties to develop. Very good balance sheet.

TOP PICK

Relatively safe with a good balance between oil (55%0 and natural gas (45%). 13% yield. Good reserve life and they continue to replace them. Payout is in the 80/5% range.

WAIT

Pengrowth has a really good asset base. They have had a lot of turnover in senior management especially on the technical side. Before entering this trust he would like to see a credible technical team on board. He really likes the assets.

DON'T BUY

Sold 2% of their production on an odd lot arrangement. Allows the company to capitalise on the possible upside of others drilling on their land without committing capital. Outlook for natural gas is weaker now and they are at the upper end of operating costs.

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Leslie LundquistPengrowth Energy Trust (B)PGF.B.TODON'T BUYMay 20, 2005

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