Frequently Asked Questions about topics such as how to purchase our Common Shares, our monthly dividend policy, details on our operational and financial strategy as well as drilling and completions practices.
Should you have any additional questions, please feel free to contact us.
Where can I find your current trading prices?
What is your dividend policy?
As announced in our January 20, 2016 news release, Pengrowth has suspended its Dividend Program until further notice.
Can I reinvest the dividend to purchase more shares?
As announced in a September 1, 2015 news release, and following the dividend payable on September 15, 2015, Pengrowth’s Dividend Reinvestment and Optional Cash Payment Plan have been suspended until further notice.
Where can I find the amount paid out as dividends or distributions in previous years?
Who is your transfer agent and how do I contact them?
What is your hedging policy?
As part of our financial management strategy, we use forward price swap contracts to manage our exposure to commodity price fluctuations and to provide a measure of stability to monthly cash dividends. For more detailed information on our current hedges in place, please visit the Hedging and Marketing page of this website by clicking here.
When will you be required to pay corporate tax? How long can the tax pools shelter your taxable income?
With approximately $3.5 billion of tax pools available as of December 31, 2015, based upon current tax legislation, anticipated capital spending, and economic conditions, we currently expect that we will not be required to pay any corporate income tax until 2020.
What are the tax implications for a Canadian shareholder invested in Pengrowth?
Dividends paid on our Common Shares to Canadian residents are designated as “eligible dividends” for Canadian income tax purposes. This designation will apply until a notification of a change is posted on this website.
If you have any questions regarding the taxation of eligible dividends, please contact your tax advisor or your local office of the Canada Revenue Agency.
Historical Canadian taxation letters can be accessed in our Taxation section, by clicking here.
What are the tax implications for a U.S. shareholder invested in Pengrowth?
Dividends are taxed differently in jurisdictions outside of Canada. In the U.S., our dividends are classified as “Qualified Dividends” and are reported annually on form 1099-DIV, that are produced by your brokerages.
For additional information, please visit the Taxation section of this website, by clicking here.
What is withholding tax? Am I subject to it as a U.S. resident?
There is a 15 percent withholding tax rate as part of a reciprocal tax treaty between Canada and the U.S. and it is applied to payments made into taxable trading accounts in the United States. Please note that, to the best of our knowledge, withholding tax is not applied to dividends paid to U.S. shareholders of Pengrowth who hold their Common Shares in tax deferred retirement accounts such as IRAs, 401Ks or other non-taxable accounts.
For payments made into taxable accounts, a U.S. taxpayer may be eligible to use Form 1116 to claim a credit or deduction, subject to certain restrictions on their U.S. Federal Income Taxes.
Please discuss these options with your U.S. tax advisor.
Which analysts are following you?
A list of the analysts following our stock can be found on our Analyst Coverage page by clicking here.
How many years of reserves do you have?
On a proved plus probable basis, our reserve life index as of December 31, 2015 was 25.2 years.
What is your production mix?
As at Q1, 2016, our production mix is balanced approximately 61% oil and liquids and 39% natural gas.
Why is horizontal drilling an improvement on previous drilling technology?
Horizontal drilling allows a well to be drilled vertically until, at a predetermined depth, the drilling direction can be changed up to 90 degrees, to make the drill bit travel horizontally. Horizontal drilling is efficient because it exposes more surface area of the targeted formation to the well bore than does a vertical well.
Horizontal wells also reduce the environmental footprint by requiring fewer surface locations, roads and pipelines. Drilling one horizontal well can be equivalent to drilling between five to ten vertical wells, so our surface impact and footprint by using horizontal wells is much smaller. Multi-well pads, depending on the location and the underlying resource, helps us to further reduce the surface footprint of our operations. We are currently drilling two to four horizontal wells per pad in most areas.
Why is hydraulic fracturing (fracing) necessary?
Oil and gas will not flow naturally (or will flow at very low rates) from some underground rock formations due to what is considered very dense, low permeability or “tight” rocks in those formations. In order to recover the oil and gas found in these very tight formations, horizontal drilling and hydraulic fracturing are required. The hydraulic fracturing process creates small cracks, or fractures, in the target formations deep in the earth, allowing the natural gas and oil trapped within this rock to flow into the well bore and to the surface.
Fracing wells helps reduce the number of wells needed to be drilled to recover the oil and gas in these tight formations and can also economically extract oil and gas from rock formations that is not possible with conventional drilling.
How does a sand frac work?
During the hydraulic fracturing process, fluid is pumped under high pressure into the formation to create small fractures. For most wells, the fluid used is approximately 99 percent water, nitrogen and sand. A small amount of special-purpose chemical additives make up the remaining one percent. These additives in the fluid mixture can vary for different applications and are described in more detail below.
Fresh water, brackish or saline water, recycled water or water produced from our other oil and gas operations may be used, depending on local availability. Nitrogen, which makes up approximately 78 percent of the atmosphere, is used to energize the water in the fracturing process so it flows back to the surface more easily, not unlike opening a can of shaken pop. Sand is used to fill the small fractures and hold them open so the oil and gas can flow to the well.
How many times are your wells typically fraced?
Generally, one fracing operation is carried out on a well at the beginning of its life. During that initial fracing operation, the well may have multiple fracing stages in order to ensure sufficient stimulation to the entire horizontal well length. There can be as many as 10-20 stages per well.
How will you ensure that the groundwater is not contaminated by your surface activities?
Spills at the wellhead during hydraulic fracturing activities are extremely rare. We inspect and test the piping and hydraulic fracturing equipment used to transport fluids to the wellhead prior to the start of each hydraulic fracturing operations. The equipment is continually monitored during operations to ensure that pressures remain below safety-rated pressure levels. Any additives used are required to be maintained inside lined, secondary containment areas to ensure any unlikely releases are contained. The well sites are also specifically constructed to contain any releases from a well or associated operations.
In addition, we continually utilize preventative maintenance in order to ensure that our production equipment is functioning properly and performing as intended.
Should a spill ever occur from on-going operations at our well or facility sites, clean-up operations are conducted immediately and are over-seen by the regulators.
How is fracing fluid disposed of?
Frac fluids requiring disposal are treated and disposed of at regulated facilities.
Can hydraulic fracturing create/trigger seismic activity (earthquakes)?
Because of the depth at which they occur, our fracing activities are not noticeable on the surface. The industry sometimes uses a technology called micro-seismic to measure the height, length and orientation of the fractures created. Micro-seismic technology and surface measurements confirm that fracing done at great depth underground is not discernible at the surface.
Lochend Fracturing Practices
What additives are you using in your Lochend hydraulic sand fracturing process?
The additives used in fracing fluid vary from well-to-well. By volume, additives typically account for only about one percent of hydraulic fracturing fluids. Each additive performs a certain function and is selected specifically for each well, depending on the type of rock being fractured.
Most of the additives used in the greater Lochend area are found in common household products. Specific compounds used in a given fracturing operation will vary depending on company preference, source water quality and site-specific characteristics of the target formation. The diagram below represents the additives used in our typical water-based sand frac in the Lochend area.
The use of these additives is regulated to ensure safe work practices, proper site preparation, attentive handling and the protection of the public, employees, contractors and the environment. All hydraulic fracturing fluids for individual wells in Alberta and British Columbia are required to be disclosed and can be found by visiting www.fracfocus.ca.
How can I be sure that my water is protected?
It is important to note that in our Lochend deep natural gas and oil drilling operations, target hydraulic fracturing zones that are, on average, located over two kilometers below the earth’s surface, far below freshwater formations. These freshwater formations are separated from the frac target formation by thousands of feet of impermeable rock barriers.
Steel casing, pipe with surrounding layers of cement, is installed to isolate the well and protect the fresh water aquifers through which the wellbore penetrates. The minimum depth at which the surface casing must extend below these freshwater aquifers is regulated by the Alberta Energy Regulator ("AER"). The multiple layers of steel and cement that go into the construction of a well, when properly installed, virtually eliminate the possibility of contamination to these freshwater zones.
Water wells in the Lochend area typically produce from an average depth of 45 metres. In compliance with the AER Directive 8, type 2 – reduction for low-risk development wells, the minimum surface casing depth required for the horizontal wells in the Lochend area that drill to the Cardium formation is between 265 metres and 290 metres, offering protection far below the depth of most water wells. The industry average setting depth for this area is 283 metres. As shown in the diagram below, out of an abundance of caution and to ensure that our water resources are protected, we are currently setting surface casing at up to 600 metres. The average depth of the Cardium target formation, where the fracs actually occur, is 2,200 metres.
We offer landowners baseline testing for water wells within 400 metres from our operations and additional requests for water testing are evaluated on a case-by-case basis beyond this distance.
Will drilling and fracing deplete our water resources?
No. Drilling a typical horizontal well in Lochend utilizes approximately 4,500 barrels ("bbls") of water using water based drilling mud. Over an average 18 day drilling period, this amount is equivalent to two and a half truckloads of water per day (~100 bbls/load).
The amount of water used during a fracing operation varies from well-to-well. Water requirements are approximatley 14,000 - 21,000 bbls per well. Generally around 30 to 40 percent of this water is recylced water from previously fraced wells.
Do you flare or release gas when you drill and complete a Lochend well?
In our operations gas is not released when we drill a well. Once the well is completed, we need to flow the well to recover some of the frac fluid and nitrogen used in the fracturing operation. The fluid is captured and trucked to a waste-treatment facility for processing. Initially, more nitrogen flows back than can be put into the pipeline system; therefore, it needs to be flared or incinerated. Once nitrogen levels drop, the gas is delivered into the pipeline system and conserved. We have reduced the flowback period to as short as seven days in our Lochend operations.
Do you flare or incinerate gas in Lochend?
We only incinerate in the Lochend area. Flaring and incineration are two different approved methods used by industry to burn waste gases that are unable to be processed or sold.
- Flaring is the igniting of natural gas at the end of a flare stack. The stack acts as a chimney and this causes the characteristic flame associated with flaring.
- Incineration is the mixing and combusting of waste gas streams, air, and fuel in an enclosed chamber for added combustion efficiency. Air and gas are mixed at a controlled rate and ignited. Typically, no flame is visible from an incinerator.