Progress Energy Trust's Growing Production Profile



    Successful winter drilling program augmented by two strategic
    acquisitions

    CALGARY, April 25 /CNW/ - (TSX-PGX.UN) - Progress Energy Trust
("Progress" or "Trust") reported record quarterly production averaging
19,222 barrels of oil equivalent ("boe") per day, an increase of four percent
compared to 18,401 boe per day in the first quarter of 2006 and an increase of
six percent compared to 18,060 boe per day in the fourth quarter of 2006.
    First quarter production included 94 million cubic feet ("mmcf") per day
of natural gas and 3,497 barrels of light and medium oil and natural gas
liquids. The growth in production reflects the success of the Trust's focus on
its organic drilling opportunities in the Deep Basin and Foothills regions,
both of which reached record production levels in March of 2007.
    "Our drilling program has been augmented by the acquisition of producing
assets and lands in our back yard in the Deep Basin and the Foothills," said
Michael Culbert, President and CEO of Progress. "Since our conversion to a
trust three years ago we have remained disciplined and patient waiting for the
right opportunity which had operating and financial characteristics consistent
with our current asset base while providing material exposure to exploitation
and exploration upside."
    Progress generated strong financial results with cash flow from
operations of $53.0 million or $0.60 per unit, diluted, for the first quarter
of 2007, a nine percent increase compared to the first quarter of 2006. Cash
distributions declared totaled $24.8 million which includes the cash
distribution payable to subscription receipt holders of record at March 31,
2007. This results in a payout ratio of 47 percent excluding exchangeable
shares which do not receive cash distributions, or 54 percent including
exchangeable shares.

    Progress captures new opportunities

    In the first quarter, the Trust maintained its steady drilling pace
utilizing four rigs in its core areas in the Deep Basin and Foothills.
Progress participated in 29 gross wells (13.1 net) with an 89 percent
commercial success rate.
    In the Deep Basin of northwest Alberta, Progress drilled 14 gross wells
(9.7 net) resulting in 11 gas wells during the quarter. The drilling program
yielded six significant new gas and condensate discoveries across the area
with individual stabilized test rates as high as 600 boe per day. These new
discoveries have generated several follow-up locations. In addition to its
drilling activities, the Trust undertook substantial expansion in the Deep
Basin though a number of initiatives:

    
    -   Successfully closed the previously announced corporate acquisition,
        adding 3,600 boe per day and 176,000 net undeveloped acres of land;
    -   Completed a six section farm-in to a mid-sized Canadian producer;
    -   Acquired approximately 10,000 net acres at Crown land sales;
    -   Participated in a 37 square mile 3-dimensional ("3-D") seismic
        program that successfully details the Falher channel system;
    -   Entered into an agreement to acquire assets from a major producer in
        the Wapiti area adding approximately 800 boe per day of production
        and 1.54 million boe of proved plus probable reserves and 31,000 net
        undeveloped acres of land.

    In the Foothills of northeast British Columbia, 15 gross wells (3.4 net)
were drilled targeting the pervasive Halfway sand. Progress continued to build
on its asset position in the Foothills through the following initiatives:

    -   Successfully closed the previously announced corporate acquisition,
        adding 2,800 boe per day and 74,000 net undeveloped acres of land in
        the Foothills;
    -   Expanded the Dogrib gas pool by drilling two new gas tests and
        pushing production two miles to the south;
    -   Drilled new gas wells in West Beg, Sasquatch, Lily Lake and Julienne;
    -   At Julienne West, the Trust participated in a 140 square kilometer
        3-D program designed to image the marine Gething sands;
    -   Participated in a 25 section farm-in in the Lily Lake and Sasquatch
        areas and completed the earning phase with the drilling of five
        commitment wells to earn 19 gross sections of land
    -   Successfully negotiated a large farm-in agreement with its joint
        venture partner, ProEx Energy, on a major Canadian-based
        international oil and gas company. The farm-in provides exposure to
        approximately 40,000 gross acres of land in the Foothills. Progress
        will participate as to 20 percent in the farm-in land obligations
    

    Progress will proceed with an accelerated drilling program through the
third and fourth quarters drilling approximately 25 to 30 gross wells in the
Deep Basin and Foothills regions, evenly divided between the two quarters.

    Strong natural gas prices and low cost structure

    The Trust's average gas price in the quarter was $8.69 per thousand cubic
feet ("mcf") including gains on its commodity risk management positions.
Progress' natural gas production achieves a premium price to the prices quoted
at AECO because of its high heat content nature.
    Operating expenses averaged $6.38 per boe in the first quarter of 2007
compared to $5.81 per boe in the first quarter of 2006. Per boe operating
costs, transportation, general and administrative expenses and interest
expenses, key components of the Trust's cash costs where essentially unchanged
in the first quarter of 2007 compared to the same period in 2006 reflecting
the Trust's ability to maintain its low cost structure because of its
concentration and quality of assets.

    Additional detail on the acquisitions

    On March 5, 2007, Progress announced a major, natural gas focused
acquisition and concurrent financing which expanded its area dominance in the
Deep Basin of northwest Alberta and the Foothills of northeast British
Columbia. The transaction closed on April 2, 2007 with an effective date of
April 1, 2007.
    The acquisition price was $390.3 million before closing adjustments and
costs and included current production of approximately 6,400 boe per day
weighted 95 percent to natural gas. The acquisition included 250,000 net
undeveloped acres in large contiguous land blocks with high-working interests,
over 1,700 square kilometers of 3-D seismic coverage and more than
4,200 kilometers of 2-D data, all of which will assist the company in building
it's ongoing drilling inventory.
    "One of the unique aspects of the acquisition was the tax pools of
approximately $650 million," said Mr. Culbert. "Combined with our year-end
2006 tax pools of approximately $280 million, we have substantial coverage
which we anticipate will provide sheltering beyond 2011 when the taxation of
income trusts is expected to occur."
    Subsequent to the end of the first quarter, Progress entered into an
agreement to acquire assets from a major producer in the Wapiti area of the
Deep Basin for approximately $39.8 million, net of final closing adjustments.
The acquisition adds approximately 800 boe per day of production, 1.54 million
boe of proved plus probable reserves and 31,000 net undeveloped acres of land
with varying working interests which will create further opportunities to
consolidate working interests within the region. A map showing the acquired
lands is available on Progress' website at www.progressenergy.com. Progress
believes there is substantial upside opportunities on the acquired lands which
are contiguous with the Trust's Gold Creek property. The acquisition also adds
ownership in infrastructure which is strategic to the Trust's area expansion
plans. A portion of the lands and infrastructure being acquired are subject to
a right-of-first-refusal which could be exercised before closing of the
acquisition which is scheduled to close on May 31, 2007.

    Maintaining financial strength

    Capital investment in the first quarter was approximately $43.5 million
including $27.8 million for drilling and completions, $11.3 million for
facilities construction and $4.8 million for land and seismic data
acquisition. At the end of the first quarter, $109.6 million was outstanding
on total credit facilities of $215.0 million. Debt to trailing 12-month cash
flow was 1.3 times and includes $27.5 million of deferred acquisition costs.
Subsequent to the first quarter, the credit facilities were increased to
$375.0 million in conjunction with the April 2, 2007 acquisition.
    Progress maintains a consistent price risk management program to mitigate
price risk volatility and provide greater certainty of its revenue stream. For
the winter of 2006/2007, the Trust had hedges on 40,000 gigajoule ("GJ") per
day at a net floor price of $9.02 per GJ. For the period from April 1, 2007
through October 31, 2007, Progress has hedged 40,000 GJ per day at a net floor
price of $7.04 per GJ.

    New accounting treatment of financial instruments

    On January 1, 2007 the Trust adopted the new accounting standards
regarding the accounting for financial instruments. In addition to the
adoption of the new standards, Management has elected not to use hedge
accounting and therefore, records the fair value of its natural gas financial
contracts at each reporting period with the change in the fair value being
classified as unrealized gains or losses on the statement of earnings.
Progress reported an unrealized loss on financial instruments of $8.2 million
in the first quarter.

    Outlook

    Progress expects 2007 production to average between 22,000 and 24,000 boe
per day and to exit 2007 in the range of 24,000 to 26,000 boe per day. Capital
investment for 2007, before acquisitions, is forecast at approximately
$140 million and includes the drilling of 65 to 75 net wells.

    Annual and Special Meeting of Unitholders

    Progress Energy Trust will hold its Annual and Special Meeting of
Unitholders on Thursday, April 26, 2007 at 3:30 p.m. in the McMurray Room of
the Calgary Petroleum Club, 319-5th Avenue S.W., Calgary, Alberta.


    MANAGEMENT'S DISCUSSION AND ANALYSIS

    The following discussion and analysis ("MD&A") of financial results is
dated April 25, 2007 and is to be read in conjunction with the accompanying
unaudited consolidated interim financial statements and related notes for the
period ended March 31, 2007 and the audited consolidated financial statements
and related notes and MD&A of Progress Energy Trust ("Progress" or the
"Trust") for the year ended December 31, 2006. The financial data presented
has been prepared in accordance with Canadian generally accepted accounting
principles ("GAAP"). The reporting and the measurement currency is the
Canadian dollar.

    Non-GAAP Measurements
    Management uses cash flow from operations (before changes in non-cash
working capital) ("cash flow") to analyze operating performance and leverage.
Cash flow as presented does not have any standardized meaning prescribed by
Canadian GAAP and therefore it may not be comparable with the calculation of
similar measures for other entities. Cash flow as presented is not intended to
represent operating profit for the period nor should it be viewed as an
alternative to operating profit, net earnings or other measures of financial
performance calculated in accordance with Canadian GAAP. The reconciliation
between cash flow, as defined above, and cash flow from operations after
changes in working capital for the periods ended March 31, 2007 and 2006 is as
follows:

    
                                                          Three Months Ended
                                                                    March 31
    ($ thousands)                                          2007         2006
    -------------------------------------------------------------------------
    Cash flow (as defined above)                         53,080       47,637
    Changes in non-cash working capital                  (4,340)       2,698
    -------------------------------------------------------------------------
    Cash flow from operations after changes in
     working capital                                     48,740       50,335
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Management considers cash flow to be a key measure as it demonstrates the
Trust's ability to generate the cash necessary to pay distributions, repay
debt and to fund future capital investments. Cash flow is used by research
analysts to value and compare oil and gas trusts and is frequently included in
published research when providing investment recommendations. Cash flow per
unit is calculated using the diluted weighted average number of units for the
period. All references to cash flow throughout the MD&A are based on cash flow
before changes in non-cash working capital.
    Management uses certain industry benchmarks such as operating netback and
payout ratio to analyze financial and operating performance. These benchmarks
as presented do not have any standardized meaning prescribed by Canadian GAAP
and therefore may not be comparable with the calculation of similar measures
for other entities. Operating netback and payout ratio are used by research
analysts to compare operating performance and a trust's ability to maintain
current distributions. Operating netback is the net result of the Trust's
revenue net of realized gains and losses on financial instruments, and
royalty, operating and transportation expenses as found in the accompanying
interim financial statements. The payout ratio, excluding exchangeable shares,
is calculated as distributions for the period divided by the cash flow for the
period as defined above. The payout ratio, including exchangeable shares, is
calculated by adding the distributions that would have been paid on the
weighted average trust units represented by the exchangeable shares to actual
distributions paid divided by the cash flow as defined above.

    Forward-Looking Statements
    Certain information regarding Progress set forth in this document,
including Management's assessment of the Trust's future plans and operations,
contains forward-looking statements that involve substantial known and unknown
risks and uncertainties. These forward-looking statements are subject to
numerous risks and uncertainties, certain of which are beyond the Trust's
control, including the impact of general economic conditions, industry
conditions, volatility of commodity prices, currency fluctuations, imprecision
of reserve estimates, environmental risks, competition from other producers,
the lack of availability of qualified personnel or management, stock market
volatility and ability to access sufficient capital from internal and external
sources. Progress' actual results, performance or achievement could differ
materially from those expressed in, or implied by, these forward-looking
statements and, accordingly, no assurance can be given that any of the events
anticipated by the forward-looking statements will transpire or occur, or if
any of them do so, what benefits that the Trust will derive there from.

    Description of Business

    Progress is an open-ended, unincorporated investment trust governed by
the laws of the province of Alberta. The principal undertaking of the Trust is
to indirectly explore for, develop and hold interests in petroleum and natural
gas properties. Progress Energy Ltd., a wholly owned subsidiary of Progress,
carries on the business of the Trust and directly owns the petroleum and
natural gas properties and assets related thereto. The Trust's unitholders and
exchangeable shareholders are the sole beneficiaries of the Trust. Under the
Trust Indenture, the Trust may declare payable to unitholders all or any part
of the income of the Trust which is primarily comprised of interest earned on
debt notes issued to Progress Energy Ltd., as well as, amounts attributed to a
net profits interest agreement entered into with Progress Energy Ltd. The
aggregate amounts received by the Trust each period are based on the
consolidated cash flow each period, as adjusted on a discretionary basis, for
cash withheld to fund capital expenditures.
    Progress is a Calgary based, natural gas focused, trust targeting
sustainable production and reserves per trust unit through utilization of its
technical capability and capital investment efficiencies. Primary operating
regions include the Deep Basin of northwest Alberta and the northeast British
Columbia Foothills and Fort St. John Plains regions. Trust units of Progress
trade on the Toronto Stock Exchange ("TSX") under the symbol PGX.UN.
Exchangeable shares and the 6.75 percent and 6.25 percent convertible
unsecured subordinated debentures (the "Debentures") of Progress trade on the
TSX under the symbols PGE, PGX.DB and PGX.DB.A, respectively.


    Relationship with ProEx Energy Ltd.

    The Trust provides personnel and certain administrative and technical
services to ProEx Energy Ltd. ("ProEx") in connection with the management,
development, exploitation and operation of the assets of ProEx and the
marketing of its production. The Trust provides these services in accordance
with the technical services agreement ("Technical Services Agreement") entered
into with ProEx as described below.
    The Trust and ProEx have joint interest in certain properties and
undeveloped land in the northeast British Columbia Foothills and Fort St. John
Plains regions. These joint interest properties are governed by standard
industry agreements and in addition the Trust has entered into a protocol
arrangement ("Protocol Arrangement") with ProEx that specifies how each
company will manage the joint lands in specifically identified areas of
interest. To ensure good governance practices, both the Trust and ProEx have
each created independent committees of their Board of Directors to monitor
compliance with the Technical Services Agreement and the Protocol Arrangement.

    Technical Services Agreement
    The Technical Services Agreement has no set termination date and will
continue until terminated by either party with one year prior written notice
to the other party or some other date as mutually agreed. The Trust provides
services including management, development, exploitation, operations,
administrative, and marketing, as well as, information technology systems to
ProEx on an expense reimbursement basis, based on ProEx's monthly capital
activity and production levels relative to the combined capital activity and
production levels of both the Trust and ProEx.

    Protocol Arrangement
    The Protocol Arrangement identifies methods and processes to be followed
on both existing and new lands, joint facilities, marketing, seismic and
surface rights. The Protocol Arrangement also outlines the practices to be
followed in the event either party enters into areas outside of the identified
areas of interest.

    OPERATING SUMMARY

    In accordance with Canadian industry practice, production volumes,
reserve volumes and revenues are reported on a Trust interest basis (working
interest plus royalty interest), before deduction of Crown and other
royalties, unless otherwise indicated. The Trust's results of operations are
dependent on production volumes of natural gas, crude oil and natural gas
liquids and the prices received for this production. Prices for these
commodities have shown significant volatility during recent years and are
determined by supply and demand factors, including weather, general economic
conditions and changes in the Canadian/United States ("U.S.") currency
exchange rate.
    In this MD&A, production and reserves information may be presented on a
"barrel of oil equivalent" or "boe" basis with six thousand cubic feet ("mcf")
of natural gas being equivalent to one barrel ("bbl") of crude oil or natural
gas liquids. Boe's may be misleading, particularly if used in isolation. A boe
conversion ratio of 6 mcf:1 bbl is based on an energy equivalency conversion
method primarily applicable at the burner tip and does not represent a value
equivalency at the wellhead.

    
    Production
                                             Three Months Ended
                                                       March 31
                                              2007         2006       Change
    -------------------------------------------------------------------------
    Average Daily Production
    Natural gas (mcf/d)                     94,351       86,433           9%
    Crude oil (bbls/d)                       2,118        2,605        (19)%
    Natural gas liquids (bbls/d)             1,379        1,390         (1)%
    -------------------------------------------------------------------------
    Total daily production (boe/d)          19,222       18,401           4%
    -------------------------------------------------------------------------
    Natural gas as a % of total production     82%          78%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    For the three months ended March 31, 2007 (the "Quarter"), Progress'
production averaged 19,222 boe per day consisting of 94,351 mcf per day of
natural gas, 2,118 bbls per day of crude oil and 1,379 bbls per day of natural
gas liquids. Production during the Quarter was four percent higher than the
same period in 2006 of 18,401 boe per day as production additions offset
production decline. Production was also higher than Management's anticipated
production of between 18,000 and 18,500 boe per day as a result of strong
drilling results. The Trust's production portfolio for the Quarter was
weighted 82 percent to natural gas, 11 percent to crude oil and seven percent
to natural gas liquids.
    Natural gas production increased nine percent to 94,351 mcf per day for
the Quarter compared to 86,433 mcf per day for the same period in 2006 due to
successful drilling in the fourth quarter of 2006 and first quarter of 2007 in
the northeast British Columbia Foothills, the Deep Basin of northwest Alberta
and the Central Alberta regions. Crude oil and natural gas liquids production
for the Quarter decreased 12 percent to 3,497 bbls per day compared to
3,995 bbls per day produced during the same period in 2006. The decrease is
due to the natural gas focused drilling program, as well as, reduced
production due to water source and regulatory challenges with the waterflood
project in the Halfway 'C' oil pool at Gold Creek.
    Management anticipates production to average between 24,000 to 26,000 boe
per day for the remainder of 2007. This estimate includes the acquisitions
that were completed and scheduled to be completed subsequent to the Quarter as
described under Corporate Acquisition and Capital Expenditures below.

    
    Production by Region
                                             Three Months Ended
                                                       March 31
                                              2007         2006       Change
    -------------------------------------------------------------------------
    Average Daily Production (boe/d)
    Foothills                                4,149        3,712          12%
    Fort St. John Plains                     1,939        2,234        (13)%
    Milo                                       365          422        (14)%
    -------------------------------------------------------------------------
    Total British Columbia                   6,453        6,368           1%
    -------------------------------------------------------------------------
    Deep Basin                               9,836        9,037           9%
    Central Alberta                          1,994        1,704          17%
    Other                                      700          912        (23)%
    -------------------------------------------------------------------------
    Total Alberta                           12,530       11,653           8%
    -------------------------------------------------------------------------
    Saskatchewan                               239          380        (37)%
    -------------------------------------------------------------------------
    Total daily production                  19,222       18,401           4%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Pricing

    Natural Gas Markets

    Progress realized natural gas price for the Quarter was $7.87 per mcf
(2006 - $8.82 per mcf) compared to the AECO daily index average of $7.02 per
gigajoule ("gj") (2006 - $7.13 per gj). The higher realization reflects the
higher heat content of Progress' natural gas stream.
    Although the winter season in North America has turned out to be warmer
than normal, the arrival of the coldest February in 30 years helped to draw
down natural gas storage levels from persistently high levels earlier in the
winter. Natural gas storage levels remain high relative to historical levels,
however supply concerns are growing. In Western Canada, a pullback in gas
directed drilling activity has resulted in decreased natural gas production,
and along with the growth in demand for natural gas by oil sands producers,
will result in lower volumes of Canadian natural gas exported to the U.S. As
well, persistently high service industry costs across North America are
expected to lead to a slow down in natural gas directed drilling activity in
the U.S. On the demand side, normal summer weather expectations, potential
hurricane activity, growth in gas-fired electricity generation and growth in
oil sands demand are expected to keep the supply-demand balance very tight.
    There appears to be little on the immediate supply front to change the
supply situation as both Canada and the U.S. continue to face steadily growing
decline rates, smaller reserve sizes, lower productivity wells and a general
slowdown in natural gas-directed drilling activity.

    Oil Markets

    Progress' realized prices for its liquids streams for the Quarter were
$62.15 per bbl (2006 - $64.45 per bbl) for crude oil and $55.08 per bbl (2006
- $62.86 per bbl) for natural gas liquids.
    Crude oil prices were volatile through the Quarter. Demand growth remains
strong, supply remains tight and inventory levels have undergone some sharp
downward swings during the past two quarters. The U.S. has historically been
considered the bellwether for crude oil and product inventories but supply
concerns are assessed on a global basis given the relative growth of
under-developed countries such as China. Several above ground forces including
a shortage of oilfield equipment, personnel and political issues created by
rising nationalism (i.e. Venezuela) are expected to remain in place for some
time to come and will only add further volatility.
    The global crude oil demand picture is ever evolving with a steady
rotation toward transportation fuels and growth in under-developed economies.
These shifting tides are likely to underpin the demand for light sweet crude
streams like West Texas Intermediate and weigh upon heavier grades of crude.
Progress' crude oil production is made up predominately of light crude and
does not include any heavy oil.

    
    Commodity Prices
                                             Three Months Ended
                                                       March 31
                                              2007         2006       Change
    -------------------------------------------------------------------------
    Average Benchmark Prices
    Natural gas - AECO (daily) ($/gj)         7.02         7.13         (2)%
    Natural gas - AECO (monthly) ($/gj)       7.07         8.79        (20)%
    Crude oil - WTI (US$/bbl)                57.83        63.48         (9)%
    Crude oil - Edmonton par price
     (Cdn$/bbl)                              67.14        69.00         (3)%
    Exchange rate (US$/Cdn$)                1.1716       1.1545           1%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Average Realized Prices
    Natural gas ($/mcf)(1)                    7.87         8.82        (11)%
    Crude oil ($/bbl)                        62.15        64.45         (4)%
    Natural gas liquids ($/bbl)              55.08        62.86        (12)%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Includes $0.02 per mcf for the amortization of the physical natural
        gas sales contract acquired in conjunction with the acquisition of
        Campion Resources Ltd. on June 3, 2002. Contract expires in 2008.
    

    Risk Management - Financial Instruments

    The Trust has entered into several natural gas financial contracts for
the purpose of protecting its cash flow from the volatility of natural gas
prices. For the Quarter, the Trust's natural gas price risk management program
had a net realized gain of $7.0 million (2006 - $0.6 million net loss).
    On January 1, 2007 the Trust adopted the new accounting standards
regarding the accounting for financial instruments. In addition to the
adoption of the new standards, Management has elected not to use hedge
accounting and therefore, records the fair value of its natural gas financial
contracts at each reporting period with the change in the fair value being
classified as unrealized gains or losses on the statement of earnings. The
accounting for hedging relationships for prior fiscal periods are not
retroactively changed, therefore, there was no restatement of the financial
position or results of operation as at and for the three months ended
March 31, 2006.
    On adoption, the Trust recognized a current asset of $15.6 million for
the fair value of its natural gas derivative contracts with a corresponding
increase to the future income tax liability and accumulated other
comprehensive income of $5.1 million and $10.5 million, respectively. The
$10.5 million in accumulated other comprehensive income will be amortized
through other comprehensive income and unrealized gain or loss on the
statement of earnings over the term of the contracts.
    For the Quarter, $6.3 million, net of tax, was amortized through other
comprehensive income with a corresponding pre-tax unrealized gain of
$9.4 million and a charge to future income tax expense of $3.1 million.
    At March 31, 2007 the fair value of the natural gas financial contracts
was a liability of $2.0 million. The decrease in value from January 1, 2007 to
March 31, 2007 of $17.6 million was due to the increase in forward natural gas
prices from the date of adoption and the expiration of three months of its
current financial contracts. As a result, for the Quarter, the Trust had a net
unrealized loss on its natural gas derivative contracts of $17.6 million,
partially offset by the $9.4 million amortized gain from the adoption of the
standards on January 1, 2007, for a net unrealized loss of $8.2 million.
    The Trust's risk management activities are conducted pursuant to the
Trust's Risk Management Policy approved by the Board of Directors. Progress
uses financial derivative instruments designed to establish a minimum floor
price while retaining exposure to upside price movements. The Risk Management
Policy has the following objectives:

    
    -   To reduce risk exposure to budgeted annual cash flow projections
        resulting from uncertainty or changes in commodity prices, interest
        rates or foreign exchange.
    -   To provide greater certainty and stability to monthly distributions.
    -   To limit the permissible structures to ensure hedging effectiveness.
    -   To limit hedging up to a maximum of 50 percent of budgeted production
        before royalties.
    -   To limit hedging activity to counter-parties that provide sufficient
        collateral in support of payment or have investment grade credit
        ratings.

    Progress' commodity risk management positions are described in Note 10 in
the unaudited interim consolidated financial statements. The Trust currently
has natural gas instruments in place which consist of swap and call spread
contracts, for the following production volumes:

                                Contract Natural Gas      % of Estimated
                                 Volumes ('000 gj/d)  Natural Gas Production
    -------------------------------------------------------------------------
    Second quarter of 2007              40.0                   30(1)
    Third quarter of 2007               40.0                   30(1)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Reflects the added production from the acquisitions described in the
        Corporate Acquisition and Capital Expenditures sections below.

    Revenue

    For the Quarter, petroleum and natural gas revenue decreased seven percent
to $85.5 million from $91.6 million for the same period in 2006 due to lower
commodity prices, as well as lower crude oil and natural gas liquids
production. Production revenue for the Quarter consisted of $66.7 million from
natural gas sales, $11.8 million from crude oil sales and $6.8 million from
the sale of natural gas liquids.

                                             Three Months Ended
                                                       March 31
    ($ thousands)                             2007         2006       Change
    -------------------------------------------------------------------------
    Natural gas sales                       66,663       68,445         (3)%
    Crude oil sales                         11,847       15,112        (22)%
    Natural gas liquids sales                6,836        7,864        (13)%
    Amortization of commodity sales
     contract(1)                               131          147        (11)%
    -------------------------------------------------------------------------
    Petroleum and natural gas revenue       85,477       91,568         (7)%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Amortization of physical natural gas sales contract acquired in
        conjunction with the acquisition of Campion Resources Ltd. on June 3,
        2002. Contract expires in 2008.


                                           Natural    Crude Oil
    ($ thousands)                              Gas       & NGLs        Total
    -------------------------------------------------------------------------
    Three months ended March 31, 2006
     petroleum and natural gas revenue      68,592       22,976       91,568
    Price variance                          (8,082)      (1,429)      (9,511)
    Production variance                      6,284       (2,864)       3,420
    -------------------------------------------------------------------------
    Three months ended March 31, 2007
     petroleum and natural gas revenue      66,794       18,683       85,477
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Royalties

    Royalty expense consists of royalties paid to provincial governments,
freehold landowners and overriding royalty owners. Effective for 2007, the
Alberta government eliminated the Alberta royalty tax credit program. The
impact to Progress was an increase to royalty expense for the Quarter of
approximately $0.1 million.
    For the Quarter, royalties decreased 18 percent to $20.2 million from
$24.6 million for the same period in 2006 due to lower commodity prices and
lower production from wells with overriding royalties. The Trust's average
royalty rate for the Quarter was 23.6 percent compared to 26.9 percent in
2006.
    Management anticipates, based on current commodity prices, the average
royalty rate for the remainder of 2007 will be approximately 24.5 percent of
petroleum and natural gas revenue.

    Operating Expenses

    Operating expenses during the Quarter increased 15 percent to
$11.0 million from $9.6 million for the same period in 2006. The increase is
the result of higher production in the Quarter compared to the same period in
2006, as well as more repair, maintenance and downhole work performed and
higher costs related to the Gold Creek Halfway unit. On a boe basis, operating
expenses for the Quarter increased 10 percent to $6.38 from $5.81 in the same
period in 2006. Progress has experienced increased costs for well servicing,
insurance, workovers and well maintenance. Through increased operating
efficiencies, relationships with suppliers and the addition of low operating
cost per boe production, the Trust has been able to offset a large portion of
these increases and keep operating costs per boe low.
    Management anticipates operating expense for the remainder of 2007 will
be consistent with the Quarter and average between $6.00 to $6.50 per boe.

    Transportation Expenses

    Transportation expenses for the Quarter decreased 12 percent to
$2.8 million compared to $3.2 million for the same period in 2006. The
decrease is due to reduced tolls negotiated with Duke Energy in mid-2006, as
well as lower oil production in 2007 which incurs higher transportation costs.
On a boe basis, transportation expenses during the Quarter decreased 16
percent to $1.60 compared to $1.91 for the same period in 2006. In British
Columbia, there is an infrastructure owned by Duke Energy that enables gas
producers to avoid facility construction in exchange for regulated gathering,
processing and transmission fees. This all-in charge is included in
transportation expenses.

    Operating Netbacks

    Although many wells produce both crude oil and natural gas, a well is
categorized as a natural gas well or an oil well based upon the higher
proportion of natural gas or crude oil production. The following table
summarizes the operating netbacks for natural gas and oil properties for the
three months ended March 31, 2007 compared to the same period in 2006:

    
                                                          Three Months Ended
                                                                    March 31
                                                           2007         2006
    -------------------------------------------------------------------------
    Natural Gas Properties ($/mcf)
    Sales price                                            7.99         8.99
    Amortization of commodity sales contract               0.01         0.02
    Realized gain/(loss) on financial instruments          0.77        (0.07)
    Royalties                                             (1.91)       (2.51)
    Operating expenses                                    (0.97)       (0.87)
    Transportation expenses                               (0.26)       (0.31)
    -------------------------------------------------------------------------
    Operating netback - natural gas properties             5.63         5.25
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Oil Properties ($/bbl)
    Sales Price                                           59.23        62.41
    Royalties                                            (13.04)      (13.81)
    Operating expenses                                   (10.57)       (9.20)
    Transportation expenses                               (1.99)       (2.06)
    -------------------------------------------------------------------------
    Operating netback - oil properties                    33.63        37.34
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    All Properties ($/boe)
    Sales Price                                           49.33        55.20
    Amortization of commodity sales contract               0.08         0.09
    Realized gain/(loss) on financial instruments          4.04        (0.37)
    Royalties                                            (11.67)      (14.87)
    Operating expenses                                    (6.38)       (5.81)
    Transportation expenses                               (1.60)       (1.91)
    -------------------------------------------------------------------------
    Operating netback - all properties                    33.80        32.33
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    General and Administrative Expenses

    For the Quarter, general and administrative expenses net of overhead
recoveries, ("G&A") were $2.0 million ($1.14 per boe) compared to $1.8 million
for the same period in 2006 ($1.08 per boe). The increase in G&A for the
Quarter is due to lower overhead recoveries in the Quarter compared to the
same period in 2006.
    In accordance with the Technical Services Agreement with ProEx, the Trust
provides personnel and certain administrative and technical services in
connection with the management, development, exploitation and operation of the
assets of ProEx and the marketing of its production. The Trust provides these
services to ProEx on an expense reimbursement basis, based on ProEx's monthly
capital activity and production levels relative to the combined capital
activity and production levels of both the Trust and ProEx. Total expenses
reimbursed by ProEx for the Quarter were $1.4 million (2006 - $1.1 million).
    The Trust capitalized approximately $0.2 million of G&A during the
Quarter (2006 - $0.3 million). The majority of these costs represent
geological and geophysical salaries.
    Management anticipates G&A expenses to average in the range of $1.00 to
$1.10 per boe for the remainder of 2007.

    Unit Based Compensation Expenses

    For the Quarter, unit based compensation expenses relating to the
performance unit incentive plan increased 48 percent to $1.5 million ($0.86
per boe) compared to $1.0 million ($0.61 per boe) for the same period in 2006.
The increase is due to the performance units granted effective July 2, 2006.
The Progress performance unit plan provides for employees and directors to be
granted performance units which vest at the end of a three year performance
period at which time they will be converted to trust units, or the cash
equivalent, and include the accumulated distributions over the three year
period. The actual number of trust units paid is dependent upon a performance
factor that is determined based on the Trust's performance relative to its
peers and ranges from 0.5 to 1.5 times the initial grant. Payment may be in
the form of cash or trust units, at the Trust's option. Management
anticipates, at the end of the performance period, accumulated distributions
will be paid in cash and trust units will be paid from treasury. As at
March 31, 2007 the total performance units outstanding amounted to two percent
of the total outstanding trust units and units which may be issued on the
exchange of exchangeable shares.

    
                                                          Three Months Ended
                                                                    March 31
                                                           2007         2006
    -------------------------------------------------------------------------
    Performance Units
    Balance, beginning of period                      1,300,717      899,567
    Granted                                              11,350       10,500
    Forfeited                                            (4,750)      (2,400)
    -------------------------------------------------------------------------
    Balance, end of period                            1,307,317      907,667
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Vesting Date
    July 2, 2007                                        381,367      386,867
    July 2, 2008                                        510,700      520,800
    July 2, 2009                                        415,250            -
    -------------------------------------------------------------------------
    Total                                             1,307,317      907,667
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Management anticipates unit based compensation expenses for the remainder
of 2007 to average approximately $0.95 per boe.

    Interest and Financing Expenses

    Interest and financing expenses during the Quarter increased 58 percent to
$3.8 million compared to $2.4 million for the same period in 2006. The
decrease in Debenture interest in 2007 is due to Debenture conversions in
2006.

                                                          Three Months Ended
                                                                    March 31
    ($ thousands)                                          2007         2006
    -------------------------------------------------------------------------
    Interest on bank debt                                 1,060          922
    Interest on Debentures                                2,090        1,191
    Amortization of Debenture issue costs                   279          138
    Accretion on debt portion of Debentures(1)              357          145
    -------------------------------------------------------------------------
    Total interest and financing expense                  3,786        2,396
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Under Canadian GAAP, the fair value of the conversion feature of the
        Debentures is classified as equity and the remainder is classified as
        debt. Over the term of the Debentures, the debt portion will accrete
        up to the principal balance at maturity with the charge going to
        interest and financing expenses.
    

    As a result of the acquisitions described under the Corporate Acquisition
and Capital Expenditures sections below, Management anticipates interest on
bank debt to increase approximately $4.0 million per quarter for the remainder
of 2007.

    Depletion, Depreciation and Accretion

    For the Quarter, depletion and depreciation of property, plant and
equipment and the accretion of the asset retirement obligations ("DD&A")
increased nine percent to $25.8 million compared to $23.6 million for the same
period in 2006. The increase is due to a higher depletable base in the Quarter
compared to the same period in 2006. On a boe basis, DD&A for the Quarter was
$14.91 compared to $14.27 for the same period in 2006.

    Income and Capital Taxes

    Capital taxes for the Quarter decreased 87 percent to $0.1 million
compared to $0.3 million for the same period in 2006. The decrease is due to
the federal budget passed in June of 2006 which eliminated the large
corporation tax effective for the 2006 taxation year.
    The provision for future income taxes for the Quarter was a recovery of
$2.0 million compared to a recovery of $0.9 million in same period in 2006.
The higher recovery in the Quarter is due to lower earnings before taxes as a
result of the unrealized loss on financial instruments recognized in the
Quarter. The Trust is a taxable entity under the Income Tax Act (Canada) and
is taxable only on income that is not distributed or distributable to the
unitholders. As the Trust distributes all of its taxable income to
unitholders, no provision for income taxes has been made for the Trust. The
federal government has proposed new rules for the taxation of trusts as
outlined below. The future income tax liability on the consolidated balance
sheet represents the future income tax liability of the Trust's subsidiary.
    On October 31, 2006 the federal government announced its intention to
begin taxing distributions from trusts beginning January 1, 2011. The
government has also proposed to limit the growth of existing trusts by
limiting new equity issues to 40 percent of that trust's October 31, 2006
market capitalization ("benchmark") for 2007, and an additional 20 percent of
the benchmark for each of 2008, 2009 and 2010. For Progress, the growth limits
would be $476.8 million for 2007 (less $252.0 million as a result of the
equity offering described under Corporate Acquisition below) and
$238.4 million for each of 2008, 2009 and 2010 with any unused amount rolling
forward to the next year. The government also announced its intention to allow
trust to corporation conversions to be on a tax-deferred basis (no immediate
tax impact) for unitholders. Given these proposed rules have not been
substantially enacted into law, there has been no adjustment to future income
taxes in regards to this announcement. The Trust is currently monitoring the
status of this proposed legislation and assessing its options should it pass
into law.

    Non-Controlling Interest - Exchangeable Shares

    The exchangeable shares of the Trust's subsidiary trade on the TSX,
thereby allowing holders of the exchangeable shares to dispose of them without
having to exchange them for trust units and consequently, they must be
classified as non-controlling interest outside of unitholders' equity. The net
earnings attributable to the exchangeable shares is charged to the
consolidated statement of earnings as non-controlling interest expense with a
corresponding increase to non-controlling interest on the consolidated balance
sheet.

    
                                        Three Months Ended March 31
                                       2007                     2006
    -------------------------------------------------------------------------
    ($ thousands, except
     unit amounts)              Number      Amount       Number       Amount
    -------------------------------------------------------------------------
    Exchangeable Shares

    Balance, beginning of
     period                 9,642,540      122,592   11,388,751      127,205
    Exchanged for trust
     units                   (256,866)      (3,266)  (1,242,992)     (14,145)
    Non-controlling
     interest expense                        2,741                     3,921
    -------------------------------------------------------------------------
    Balance, end of period  9,385,674      122,067   10,145,759      116,981
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    The charge to net earnings of $2.7 million for 2007 and $3.9 million for
2006 represents the net earnings attributable to the exchangeable shares over
the period.

    Net Earnings, Comprehensive Income and Cash Flow

    Net earnings decreased 23 percent to $16.4 million for the Quarter
compared to $21.4 million during the same period in 2006 due primarily to the
unrealized loss on financial instruments recognized in 2007, as well as higher
expenses incurred in the Quarter. Basic and diluted net earnings for the
Quarter were $0.22 per unit compared to $0.29 per unit basic and diluted for
the same period in 2006.
    Other comprehensive income for the Quarter included a charge of
$6.3 million (2006 - nil) relating to the amortization of the amount
recognized in accumulated other comprehensive income on January 1, 2007 for
the fair value of financial instruments on adoption of the new accounting
standards for financial instruments (refer to Risk Management above). This
resulted in total comprehensive income of $10.1 million for the Quarter (2006
- $21.4 million).
    Cash flow for the Quarter increased 11 percent to $53.1 million compared
to the same period in 2006 of $47.6 million due to a higher realized gain on
financial instruments. Diluted cash flow for the Quarter was $0.60 per unit
compared to $0.55 per unit during the same period in 2006.

    
    Quarterly Financial Summary(1),(2)

                                            Three Months Ended
                              -----------------------------------------------
    ($ thousands, except       Mar 31       Dec 31      Sept 30      June 30
     per unit amounts)           2007         2006         2006         2006
    -------------------------------------------------------------------------
    Petroleum and natural
     gas revenue               85,477       75,182       72,328       71,439
    -------------------------------------------------------------------------
    Cash flow                  53,080       49,603       47,218       45,871
      Per unit diluted           0.60         0.56         0.54         0.52
    -------------------------------------------------------------------------
    Net earnings               16,425       21,538       20,252       28,425
      Per unit basic             0.22         0.29         0.27         0.38
      Per unit diluted           0.22         0.28         0.27         0.38
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                            Three Months Ended
                              -----------------------------------------------
    ($ thousands, except       Mar 31       Dec 31      Sept 30      June 30
     per unit amounts)           2006         2005         2005         2005
    -------------------------------------------------------------------------
    Petroleum and natural
     gas revenue               91,568      120,628       95,163       83,309
    -------------------------------------------------------------------------
    Cash flow                  47,637       65,785       53,215       44,466
      Per unit diluted           0.55         0.77         0.63         0.53
    -------------------------------------------------------------------------
    Net earnings               21,383       29,398       25,159       16,840
      Per unit basic             0.29         0.41         0.36         0.25
      Per unit diluted           0.29         0.40         0.36         0.24
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1)  Certain amounts above have been adjusted to conform to the
         presentation adopted in 2007 as a result of the adoption of the new
         accounting standards for financial instruments.

    (2)  Petroleum and natural gas revenue and cash flow increased in the
         third and fourth quarter of 2005 due to higher commodity prices.
         Petroleum and natural gas revenue and cash flow for the first,
         second and third quarters of 2006 decreased as a result of lower
         natural gas prices. Petroleum and natural gas revenue and cash flow
         for the fourth quarter of 2006 and the first quarter of 2007
         increased slightly due to strengthening natural gas prices. Net
         earnings for the first quarter of 2007 decreased due to an
         $8.2 million unrealized loss on financial instruments as a result of
         adopting the new accounting standards for financial instruments and
         electing not to use hedge accounting.
    

    Distributions

    Management monitors the Trust's distribution payout policy with respect
to forecasted net cash flow, debt levels and capital expenditures. Starting in
January 2007, the Trust reduced its monthly distributions from $0.14 per trust
unit to $0.10 per trust unit due to a reduction in forecasted 2007 cash flow
as a result of the then current weakness in natural gas prices. The
distribution reduction reinforces Progress' commitment to sustainability.
Progress defines sustainability as maintaining production and reserves per
trust unit over an extended period of time. Progress' sustainability objective
is to annually retain sufficient cash flow to replace reserves produced. As a
result, $24.8 million was distributed in the Quarter compared to $30.8 million
for the same period in 2006. Included in the distributions for the Quarter was
$2.1 million payable to subscription receipt holders of record at March 31,
2007 as described in the liquidity and capital resources section below. The
Trust distributed 47 percent of its cash flow to unitholders for the Quarter
(54 percent including exchangeable shares) compared to 65 percent (76 percent
including exchangeable shares) for the same period in 2006. Exchangeable
shares are convertible into trust units of the Trust based on the exchange
ratio, which is adjusted monthly to reflect that distributions are not paid on
the exchangeable shares and cash flow related to the exchangeable shares is
retained by the Trust for additional capital expenditures or debt repayment.
The key drivers of Progress' cash flow, as is generally the case with other
energy trusts, are commodity prices and production. Since the Trust's
production is heavily weighted to natural gas (82 percent in the Quarter),
natural gas prices have a significant effect on its cash flow.

    Corporate Acquisition

    On April 2, 2007, Progress acquired all of the issued and outstanding
shares of a private company for $526.0 million, prior to closing adjustments,
net of certain assets retained by the vendor. In conjunction with the
acquisition, on April 2, 2007, Progress disposed of certain assets of the
private company to ProEx for $134.3 million. The resulting net cash
consideration of $391.7 million was financed by the issuance of 21.0 million
trust units at a price of $12.00 per trust unit for proceeds of $252.0 million
($238.6 million net of issue costs) and through increased bank debt. Costs
incurred prior to March 31, 2007 of $27.5 million relating to the acquisition
and financing have been classified on the balance sheet as deferred
acquisition. On closing, the costs will be classified to property, plant and
equipment and unit issue costs.
    The acquisition includes 6,400 boe per day of production, 95 percent
natural gas and approximately 240,000 net acres of undeveloped land.

    Capital Expenditures

    During the Quarter, the Trust invested $43.6 million in capital
expenditures compared to $36.0 million in the same period in 2006.

    
                                                          Three Months Ended
                                                                    March 31
    ($ thousands)                                          2007         2006
    -------------------------------------------------------------------------
    Land acquisitions and retention                       2,875        2,840
    Geological and geophysical                            1,934        2,002
    Drilling and completions                             27,819       22,412
    Equipping and facilities                             10,714        8,397
    Net property acquisitions (dispositions)                217          298
    Corporate assets                                         42           36
    -------------------------------------------------------------------------
    Total capital expenditures                           43,601       35,985
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    During the Quarter, Progress drilled 29 gross wells (13.1 net) with an
89 percent success rate. The program yielded 25 natural gas wells (11.7 net),
including 11 gross wells (8.5 net) drilled in the Deep Basin region of
northwest Alberta and 14 gross (3.2 net) drilled in the northeast British
Columbia Foothills region.
    During the Quarter, Progress added over 12,000 net acres of land in
established fairways in the Foothills and Deep Basin regions. Land acquisition
will continue along mapped or seismically identified trends as Progress
strengthens its position as a dominant player in its operating regions. In
total, Progress controls approximately 356,000 net acres of undeveloped land.
    Subsequent to the Quarter, on April 12, 2007, Progress entered into an
agreement to acquire certain petroleum and natural gas assets from a major
producer in the Wapiti area for approximately $39.8 million, net of final to
closing adjustments. The acquisition adds approximately 800 boe per day of
production, 1.54 million boe of proved plus probable reserves and 31,000 net
undeveloped acres of land with varying working interests which will create
further opportunities to consolidate working interests within the region. A
map showing the acquired lands is available on Progress' website at
www.progressenergy.com. Progress believes there is substantial upside
opportunities on the acquired lands which are contiguous with the Trust's Gold
Creek property. The acquisition also adds ownership in infrastructure which is
strategic to Progress' area of expansion plans. A portion of the lands and
infrastructure being acquired are subject to a right-of-first-refusal which
could be exercised before closing of the acquisition that is scheduled to
close on May 31, 2007.
    The Trust's remaining 2007 capital investment program will continue to be
directed to the three focus regions of the Deep Basin in northwest Alberta and
the Fort St. John Plains and Foothills of northeast British Columbia. The
total 2007 capital program, before acquisitions, was increased to
$140.0 million in conjunction with the April 2, 2007 corporate acquisition
described above.

    
    Liquidity and Capital Resources

                                                       March 31  December 31
    ($ thousands, except per unit amounts)                 2007         2006
    -------------------------------------------------------------------------
    Working capital deficiency                           22,161       13,959
    Bank debt                                           109,598       75,000
    Convertible debentures                              120,241      119,605
    -------------------------------------------------------------------------
    Total debt                                          252,000      208,564
    -------------------------------------------------------------------------
    Units outstanding and issuable for exchangeable
     shares (thousands)                                  88,464       88,114
    Market price per unit at end of period                13.07        12.57
    -------------------------------------------------------------------------
    Market value of trust units and exchangeable
     shares                                           1,156,224    1,107,593
    -------------------------------------------------------------------------
    Cash flow (12 month trailing)                       195,772      190,329
    Total debt to cash flow ratio                          1.29         1.10
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    At March 31, 2007 the Trust had $109.6 million outstanding on its credit
facilities, $120.2 million for the debt portion of the 6.75 percent and
6.25 percent convertible unsecured subordinated debentures (the "Debentures")
and a working capital deficiency of $22.2 million, totaling $252.0 million of
total debt.
    At March 31, 2007 the Trust's credit facilities consisted of a
$200 million extendible revolving term credit facility and a $15 million
working capital credit facility with a syndicate of banks. Subsequent to March
31, 2007, in conjunction with the acquisition described in Corporate
Acquisition above, the Trust increased its extendible revolving term credit
facility to $340 million and increased its working capital facility to $35
million resulting in total credit facilities of $375 million. The facilities
are available on a revolving basis for a period of at least 364 days until May
27, 2008, and such initial term out date may be extended for further 364 day
periods at the request of the Trust, subject to approval by the banks.
Following the term out date, the facilities will be available on a
non-revolving basis for a one year term, at which time the facilities would be
due and payable. The credit facilities are secured by a $1 billion fixed and
floating charge debenture on the assets of the Trust and by a guarantee and
subordination provided by Progress in respect of the Trust's obligations. The
$375 million borrowing base is subject to semi-annual review by the banks.
    At March 31, 2007 the Trust had outstanding $55.7 million principal
amount of the 6.75 percent debentures and $75.0 million principal amount of
the 6.25 percent debentures for a combined total of $130.7 million. Both the
6.75 percent debentures and the 6.25 percent debentures pay interest
semi-annually and are convertible at the option of the holder at any time into
fully paid trust units at a conversion price of $15.00 per trust unit and
$19.50 per trust unit, respectively. The 6.75 percent debentures mature on
June 30, 2010 and the 6.25 percent debentures mature on September 30, 2011 at
which time they are due and payable.
    The Debentures have been classified as debt net of the fair value of the
conversion feature which has been classified as part of unitholders' equity
and net of issue costs. At March 31, 2007 the debt portion was $120.2 million
net of unamortized issue costs. Issue costs are amortized over the term of the
Debentures and the debt portion will accrete up to the principal balance at
maturity. The accretion, amortization of issue costs and the interest paid are
expensed with interest and financing expense on the consolidated statements of
earnings.
    Bank debt increased from $75.0 million as at December 31, 2006 to
$109.6 million as at March 31, 2007 due to deferred acquisition costs incurred
of $27.5 million, as well as higher capital spending in the Quarter. The
working capital deficiency of $22.2 million at March 31, 2007 is higher than
the December 31, 2006 deficiency of $14.0 million, primarily due to a lower
cash balance at the end of the Quarter.
    On April 2, 2007 Progress purchased all of the issued and outstanding
shares of a private company (refer to Corporate Acquisition above). The net
cash consideration of $391.7 million, prior to closing adjustments was
financed by the issuance of 21.0 million trust units at a price of $12.00 per
trust unit for proceeds of $252.0 million ($238.6 million net of issue costs)
and through increased bank debt.
    As at March 31, 2007 there were 21.0 million subscription receipts
outstanding related to the above equity issue. The subscription receipts
entitle the holder to one trust unit of Progress for each subscription receipt
upon closing of the corporate acquisition as well as the March 2007
distribution. The proceeds from the sale of subscription receipts were held
escrow pending completion of the corporate acquisition.
    Outstanding as at April 24, 2007 were 96,798,946 trust units, 9,385,674 
exchangeable shares and $130.7 million of Debentures convertible into
7,561,287 trust units.
    The Trust's investing activities in the Quarter primarily consisted of
expenditures on its capital program, as well as the deferred acquisition
described above. The corporate acquisition completed on April 2, 2007 was
funded by an equity offering and bank debt. Management anticipates that the
Trust will continue to have adequate liquidity to fund future working capital
and forecasted capital expenditures during 2007, including the asset purchase
in the Deep Basin region of northwest Alberta described above, through a
combination of cash flow and debt. Cash flow used to finance these commitments
may reduce the amount of cash distributions paid to unitholders.

    DISCLOSURE CONTROLS AND PROCEDURES

    Disclosure controls and procedures have been designed to ensure that
information required to be disclosed by the Trust is accumulated and
communicated to the Trust's Management, as appropriate, to allow timely
decisions regarding required disclosures. The Trust's Chief Executive Officer
and Chief Financial Officer have concluded, based on their evaluation as of
the end of the period covered by the interim filings that the Trust's
disclosure controls and procedures are effective to provide reasonable
assurance that material information related to the issuer, is made known to
them by others within the Trust. It should be noted that while the Trust's
Chief Executive Officer and Chief Financial Officer believe that the Trust's
disclosure controls and procedures provide a reasonable level of assurance
that they are effective, they do not expect that the disclosure controls and
procedures or internal control over financial reporting will prevent all
errors and fraud. A control system, no matter how well conceived or operated,
can provide only reasonable, not absolute, assurance that the objective of the
control system is met.

    Additional Information

    Additional information regarding the Trust and its business and
operations, including the annual information form ("AIF") is available on the
Trust's company profiles at www.sedar.com. Copies of the AIF can also be
obtained by contacting the Trust at Progress Energy Trust 1200, 205 - 5th
Avenue S.W., Calgary, Alberta, Canada T2P 2V7 or by e-mail at
ir@progressenergy.com. This information is also accessible on the Trust's web
site at www.progressenergy.com.

    OUTLOOK

    We remain firmly focused on our goal of maintaining or modestly growing
reserves and production on a per unit basis. Our sustainability strategy
to-date has been achieved entirely through the drill bit at industry leading
efficiencies while maintaining our financial strength. We have often stated
that we have investment choices and therefore could remain patient for the
right opportunity as it related to acquisitions. Our second quarter
acquisitions have further strengthened our sustainability strategy by
expanding our development inventory while providing an appropriate exposure to
exploration upside within our existing core regions.
    We are targeting 2007 average annual production in the range of 22,000 to
24,000 boe per day with exit production in the range of 24,000 to 26,000 boe
per day. Our exploration and development capital investment program has been
expanded by $30 million to $140 million and includes the drilling of
approximately 65 to 75 net wells.
    On the commodity front, natural gas prices have remained relatively
strong as summer weather, potential hurricane activity and potential natural
gas supply weakness have positively impacted market expectations. We continue
to use financial instruments to mitigate commodity price risk and are
currently examining opportunities to hedge a portion of winter 2007/2008
production.
    Our opportunity inventory is more visible than at any point in our
history and we are in the enviable position of having many investment choices.
Our tax pool coverage is expected to provide further sheltering beyond the
2011 time when the taxation of income trusts is anticipated to occur. We
remain aligned with our unitholders through an approximate 11 percent
ownership of the units and exchangeable shares of Progress by employees,
management and directors.

    On behalf of the Board of Directors,

    (Signed) "Michael R. Culbert"
    -----------------------------
    Michael R. Culbert
    President & CEO
    April 25, 2007



    
    PROGRESS ENERGY TRUST
    CONSOLIDATED BALANCE SHEETS

                                                       March 31  December 31
    ($ thousands)                                          2007         2006
    -------------------------------------------------------------------------
    ASSETS                                           (Unaudited)

    Current
      Cash and short-term investments                         -        8,265
      Accounts receivable                                36,704       35,555
      Prepaid expenses and deposits                       7,815        7,798
    -------------------------------------------------------------------------
                                                         44,519       51,618
    Deferred acquisition (Note 11)                       27,448            -
    Property, plant and equipment (Note 3)              764,406      744,431
    Goodwill                                            414,655      414,655
    -------------------------------------------------------------------------
                                                      1,251,028    1,210,704
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    LIABILITIES

    Current
      Accounts payable and accrued liabilities           51,787       49,820
      Cash distributions payable                          9,680       10,564
      Current income taxes payable                        5,213        5,193
      Fair value of financial instruments
       (Notes 2 and 10)                                   1,999            -
    -------------------------------------------------------------------------
                                                         68,679       65,577
    Bank debt (Note 4)                                  109,598       75,000
    Convertible debentures (Note 5)                     120,241      119,605
    Commodity sales contract (Note 10)                      745          876
    Asset retirement obligations (Note 6)                25,056       24,148
    Future income taxes                                 114,733      114,367
    -------------------------------------------------------------------------
                                                        439,052      399,573
    NON-CONTROLLING INTEREST
    Exchangeable shares (Note 7)                        122,067      122,592

    UNITHOLDERS' EQUITY

    Unitholders' capital (Note 8)                       743,841      739,998
    Convertible debentures (Note 5)                       7,702        7,702
    Contributed surplus (Note 8)                         10,934        9,210
    Accumulated other comprehensive income
     (Notes 2 and 8)                                      4,209            -
    Deficit                                             (76,777)     (68,371)
    -------------------------------------------------------------------------
                                                        689,909      688,539
    Subsequent events (Note 11)
    -------------------------------------------------------------------------
                                                      1,251,028    1,210,704
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the consolidated financial statements



    PROGRESS ENERGY TRUST
    CONSOLIDATED STATEMENTS OF EARNINGS, COMPREHENSIVE INCOME AND DEFICIT
    (Unaudited)

                                                          Three Months Ended
                                                                    March 31
    ($ thousands, except per unit amounts)                 2007         2006
    -------------------------------------------------------------------------
    REVENUE

      Petroleum and natural gas                          85,477       91,568
      Royalties                                         (20,189)     (24,619)
    -------------------------------------------------------------------------
                                                         65,288       66,949
      Realized gain/(loss) on financial instruments
       (Notes 2 and 10)                                   6,995         (609)
      Unrealized loss on financial instruments
       (Notes 2 and 10)                                  (8,232)           -
    -------------------------------------------------------------------------
                                                         64,051       66,340
    -------------------------------------------------------------------------
    EXPENSES

      Operating                                          11,041        9,628
      Transportation                                      2,770        3,161
      General and administrative                          1,967        1,788
      Unit based compensation                             1,486        1,007
      Interest and financing                              3,786        2,396
      Depletion, depreciation and accretion              25,793       23,643
    -------------------------------------------------------------------------
                                                         46,843       41,623
    -------------------------------------------------------------------------
    Earnings before taxes and non-controlling interest   17,208       24,717
    -------------------------------------------------------------------------
    TAXES

      Capital taxes                                          45          339
      Future income taxes                                (2,003)        (926)
    -------------------------------------------------------------------------
                                                         (1,958)        (587)
    -------------------------------------------------------------------------
    Net earnings before non-controlling interest         19,166       25,304
    Non-controlling interest - exchangeable shares
     (Note 7)                                            (2,741)      (3,921)
    -------------------------------------------------------------------------
    NET EARNINGS                                         16,425       21,383

    OTHER COMPREHENSIVE INCOME

      Amortization of fair value of financial
       instruments (Notes 2 and 8)                       (6,334)           -
    -------------------------------------------------------------------------
    COMPREHENSIVE INCOME                                 10,091       21,383
    -------------------------------------------------------------------------
    Deficit, beginning of period                        (68,371)     (34,406)
    Distributions                                       (24,831)     (30,836)
    -------------------------------------------------------------------------
    Deficit, end of period                              (76,777)     (43,859)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    NET EARNINGS PER UNIT (Note 8)

      Basic                                               $0.22        $0.29
      Diluted                                             $0.22        $0.29
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the consolidated financial statements



    PROGRESS ENERGY TRUST
    CONSOLIDATED STATEMENTS OF CASH FLOWS
    (Unaudited)

                                                          Three Months Ended
                                                                    March 31
    ($ thousands)                                          2007         2006
    -------------------------------------------------------------------------
    OPERATING ACTIVITIES

      Net earnings                                       16,425       21,383
      Unrealized loss on financial instruments
       (Notes 2 and 10)                                   8,232            -
      Depletion, depreciation and accretion              25,793       23,643
      Non-controlling interest - exchangeable shares
       (Note 7)                                           2,741        3,921
      Convertible debentures accretion (Note 5)             357          145
      Amortization of convertible debenture issue
       costs (Note 5)                                       279          138
      Amortization of commodity sales contract             (131)        (147)
      Unit based compensation expense (Note 8)            1,486        1,007
      Asset retirement expenditures (Note 6)                (99)      (1,527)
      Future income taxes                                (2,003)        (926)
    -------------------------------------------------------------------------
                                                         53,080       47,637
      Changes in non-cash working capital (Note 9)       (4,340)       2,698
    -------------------------------------------------------------------------
                                                         48,740       50,335
    -------------------------------------------------------------------------
    FINANCING ACTIVITIES

      Increase in bank debt                              34,598       23,674
      Cash distributions                                (25,715)     (30,414)
      Changes in non-cash working capital (Note 9)          850            -
    -------------------------------------------------------------------------
                                                          9,733       (6,740)
    -------------------------------------------------------------------------
    INVESTING ACTIVITIES

      Deferred acquisition (Note 11)                    (27,448)           -
      Capital expenditures                              (43,601)     (35,984)
      Changes in non-cash working capital (Note 9)        4,311       (4,057)
    -------------------------------------------------------------------------
                                                        (66,738)     (40,041)
    -------------------------------------------------------------------------
    CHANGE IN CASH AND SHORT-TERM INVESTMENTS            (8,265)       3,554

    Cash and short-term investments, beginning of
     period                                               8,265            -
    -------------------------------------------------------------------------
    CASH AND SHORT-TERM INVESTMENTS, END OF PERIOD            -        3,554
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the consolidated financial statements



    PROGRESS ENERGY TRUST
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    (Unaudited) (tabular amounts are in $ thousands except for trust units
    and per trust unit amounts)

    Progress Energy Trust ("Progress" or the "Trust") is an open-ended,
    unincorporated investment trust governed by the laws of the province of
    Alberta. The principal undertaking of the Trust is to indirectly explore
    for, develop and hold interests in petroleum and natural gas properties
    through investments in securities of subsidiaries and royalty interests
    in petroleum and natural gas properties. Progress Energy Ltd. carries on
    the business of the Trust and directly owns the petroleum and natural gas
    properties and assets related thereto. The Trust owns, directly and
    indirectly, 100 percent of the common shares (excluding the exchangeable
    shares - see note 7) of Progress Energy Ltd. The activities of Progress
    Energy Ltd. are financed through interest bearing notes from the Trust
    and third party debt. The convertible debentures are direct obligations
    of the Trust. Under the Trust Indenture, the Trust may declare payable to
    unitholders all or any part of the income of the Trust, which is
    primarily comprised of interest earned on debt notes issued to Progress
    Energy Ltd., as well as, amounts attributed to a net profits interest
    ("NPI") agreement entered into with Progress Energy Ltd. The aggregate
    amounts received by the Trust each period are based on the consolidated
    cash flow from operations before changes in non-cash working capital each
    period, as adjusted on a discretionary basis, for cash withheld to fund
    capital expenditures.

    Pursuant to the terms of the NPI agreement, the Trust is entitled to a
    payment from Progress Energy Ltd. each month equal to the amount by which
    99% of the gross proceeds from the sale of production exceed 99% of
    certain deductible expenditures (as defined). Under the terms of the NPI
    agreement, deductible expenditures may include amounts, determined on a
    discretionary basis, to fund capital expenditures, to repay third party
    debt and to provide for working capital required to carry out the
    operations of Progress Energy Ltd.

    Relationship with ProEx Energy Ltd.

    A technical services agreement ("Technical Service Agreement") is
    currently in place between the Trust and ProEx Energy Ltd. ("ProEx")
    whereby the Trust provides personnel and certain administrative and
    technical services in connection with the management, development,
    exploitation and operation of the assets of ProEx and the marketing of
    its production. ProEx has granted performance shares to the employees of
    Progress as service providers. The Trust provides these services to ProEx
    on an expense reimbursement basis, based on ProEx's monthly capital
    activity and production levels relative to the combined capital activity
    and production levels of both the Trust and ProEx. Total expense
    reimbursed by ProEx for the three months ended March 31, 2007 was
    $1.2 million (2006 - $1.1 million).

    As at March 31, 2007, accounts payable included $2.6 million (2006 -
    $0.2 million) payable to ProEx which includes standard joint venture
    amounts including revenue. These amounts were paid subsequent to
    March 31, 2007.

    On April 2, 2007, Progress disposed of certain assets to ProEx for
    $134.3 million, which is described in note 11.


    1.  SUMMARY OF ACCOUNTING POLICIES

        The interim consolidated financial statements of the Trust have been
        prepared following the same accounting policies and methods of
        computation as the consolidated financial statements of the Trust for
        the year ended December 31, 2006, except for the change described in
        note 2. The disclosures provided below are incremental to those
        included with the annual consolidated financial statements and
        certain disclosures, which are normally required to be included in
        the notes to the annual consolidated financial statements, have been
        condensed or omitted. These interim consolidated financial statements
        should be read in conjunction with the consolidated financial
        statements and notes thereto in the Trust's annual report for the
        year ended December 31, 2006.

        Progress is involved in the exploration, development and production
        of petroleum and natural gas in British Columbia, Alberta and
        Saskatchewan. The consolidated financial statements include the
        accounts of the Trust and its wholly owned subsidiary. The
        consolidated financial statements are stated in Canadian dollars and
        have been prepared in accordance with Canadian generally accepted
        accounting principles ("GAAP").

        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 and disclosure
        of contingent assets and liabilities at the date of the financial
        statements and reported amounts of revenues and expenses during the
        period. Actual results could differ from those estimates.

    2.  CHANGE IN ACCOUNTING POLICY

        On January 1, 2007 Progress adopted the new accounting standards
        regarding the recognition, measurement, disclosure and presentation
        of financial instruments. In conjunction with the adoption of these
        new standards, the Trust elected not to use hedge accounting for its
        natural gas derivative contracts under its risk management program.
        The fair value of the commodity contracts is recognized at each
        reporting period with the change in the fair value being classified
        as an unrealized gain or loss on the statement of earnings. In
        accordance with the transitional provisions of the standards, the
        accounting for hedging relationships for prior periods is not
        retroactively adjusted, therefore, there has been no restatement of
        the prior period. On adoption, the Trust recognized a current asset
        of $15.6 million for the fair value of its natural gas derivative
        contracts and an increase to the future income tax liability and
        accumulated other comprehensive income of $5.1 million and
        $10.5 million, respectively. The $10.5 million in accumulated other
        comprehensive income will be amortized through other comprehensive
        income and unrealized gain or loss on financial instruments on the
        statement of earnings over the term of the contracts. As a result,
        $6.3 million, net of tax, was charged to other comprehensive income
        with a corresponding unrealized gain on financial instruments of
        $9.4 million and a charge to future income tax expense of
        $3.1 million for the three months ended March 31, 2007.

        The impact of the change in fair value from January 1, 2007 to
        March 31, 2007 is disclosed in note 10. Certain comparative amounts
        have been reclassified to conform to the presentation adopted in
        2007.

    3.  PROPERTY, PLANT AND EQUIPMENT

                                                       March 31  December 31
                                                           2007         2006
        ---------------------------------------------------------------------
        Property, plant and equipment                 1,046,239    1,001,785
        Conversions of exchangeable shares               46,835       46,014
        Accumulated depletion and depreciation         (328,668)    (303,368)
        ---------------------------------------------------------------------
        Property, plant and equipment, net              764,406      744,431
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        The conversion of exchangeable shares held by previous Progress
        Energy Ltd. shareholders to Trust units is accounted for as a step-
        purchase. Consequently a charge of $0.8 million was made to property,
        plant and equipment for the three months ended March 31, 2007 (2006 -
        $9.8 million).

        The calculation of 2007 depletion and depreciation expense included
        an estimated $30.6 million for future development costs associated
        with proved undeveloped reserves and excluded $24.1 million for the
        estimated future net realizable value of production equipment and
        facilities and $58.7 million for the estimated value of unproven
        properties. Depletion and depreciation expense for the three months
        ended March 31, 2007 was $25.3 million (2006 - $23.2 million).

        Included in the Trust's property, plant and equipment balance is
        $14.7 million, net of accumulated depletion, related to asset
        retirement obligations ($23.4 million before accumulated depletion)
        (Refer to note 6).

        The Trust capitalized approximately $0.6 million of geological and
        geophysical compensation costs associated with the exploration and
        development of capital assets during the three months ended March 31,
        2007 (2006 - $0.6 million).

    4.  BANK DEBT

                                                       March 31  December 31
                                                           2007         2006
        ---------------------------------------------------------------------
        Direct advances                                  19,598            -
        Banker's acceptances                             90,000       75,000
        ---------------------------------------------------------------------
        Total bank debt                                 109,598       75,000
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        At March 31, 2007 the Trust's credit facilities consisted of a
        $200 million extendible revolving term credit facility and a
        $15 million working capital credit facility with a syndicate of
        banks. Subsequent to March 31, 2007, in conjunction with the
        acquisition described in note 11, the Trust increased its extendible
        revolving term credit facility to $340 million and increased its
        working capital facility to $35 million resulting in total credit
        facilities of $375 million. The facilities are available on a
        revolving basis for a period of at least 364 days until May 27, 2008,
        and such initial term out date may be extended for further 364 day
        periods at the request of the Trust, subject to approval by the
        banks. Following the term out date, the facilities will be available
        on a non-revolving basis for a one year term, at which time the
        facilities would be due and payable. Various borrowing options are
        available under the facilities including prime rate based advances
        and banker's acceptance loans. Average cost of borrowing under these
        facilities for the three months ended March 31, 2007 was 5.1 percent
        (2006 - 4.5 percent). The credit facilities are secured by a
        $1 billion fixed and floating charge debenture on the assets of the
        Trust and by a guarantee and subordination provided by Progress in
        respect of the Trust's obligations. The $375 million borrowing base
        is subject to semi-annual review by the banks.

    5.  CONVERTIBLE DEBENTURES

        The 6.75 percent debentures and the 6.25 percent debentures (the
        "Debentures") have been classified as debt, net of issue costs and
        net of the fair value of the conversion feature at the date of issue
        which has been classified as part of unitholders' equity. The issue
        costs will be amortized over the term of the Debentures and the debt
        portion will accrete up to the principal balance at maturity. The
        accretion, amortization of issue costs and the interest paid are
        expensed within interest and financing expense on the consolidated
        statements of earnings. If the Debentures are converted to units, a
        portion of the value of the conversion feature under unitholders'
        equity will be reclassified to unitholders' capital along with the
        conversion price paid.

        The 6.75 percent debentures and the 6.25 percent debentures pay
        interest semi-annually and are convertible at the option of the
        holder at any time into fully paid trust units at a conversion price
        of $15.00 per trust unit and $19.50 per trust unit, respectively. The
        6.75 percent debentures mature on June 30, 2010 and the 6.25 percent
        debentures mature on September 30, 2011, at which time they are due
        and payable. The Trust may elect to satisfy the interest and
        principal obligations by the issuance of trust units. The following
        table sets forth a reconciliation of the Debenture activity:

                                     Three Months Ended March 31
                       ------------------------------------------------------
                                   2007                       2006
                       ------------------------------------------------------
                          6.75%    6.25%    Total    6.75%    6.25%    Total
        ---------------------------------------------------------------------
        Debentures
        Principal,
         beginning of
         period(1)       55,727   75,000  130,727   86,182        -   86,182
        Converted to
         Trust Units          -        -        -  (22,726)       -  (22,726)
        ---------------------------------------------------------------------
        Principal, end
         of period       55,727   75,000  130,727   63,456        -   63,456
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Debt portion,
         beginning of
         period(1)       52,300   67,305  119,605   79,381        -   79,381
        Accretion           125      232      357      145        -      145
        Amortization
         of issue costs     117      162      279      138        -      138
        Conversions to
         Trust Units(2)       -        -        -  (20,940)       -  (20,940)
        ---------------------------------------------------------------------
        Debt portion,
         end of period   52,542   67,699  120,241   58,724        -   58,724
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Equity portion,
         beginning of
         period(1)        2,756    4,946    7,702    4,261        -    4,261
        Conversions to
         Trust Units          -        -        -   (1,124)       -   (1,124)
        ---------------------------------------------------------------------
        Equity portion,
         end of period    2,756    4,946    7,702    3,137        -    3,137
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        (1) The 6.75 percent debentures were issued February 2, 2005 and the
            6.25 percent debentures were issued August 22, 2006.
        (2) Net of unamortized issue costs.

        Total interest charged to earnings for the three months ended
        March 31, 2007 was $2.7 million (2006 - $1.5 million) which includes
        $0.4 million of debenture accretion (2006 - $0.1 million) and
        $0.3 million of amortized issue costs (2006 - $0.1 million).

    6.  ASSET RETIREMENT OBLIGATIONS

        Asset retirement obligations were estimated based on the Trust's net
        ownership interest in all wells and facilities, the estimated costs
        to abandon and reclaim the wells and facilities and the estimated
        timing of the costs to be incurred in future periods. The total
        undiscounted amount of the estimated cash flows required to settle
        the asset retirement obligations is approximately $58.1 million which
        will be incurred over the next 41 years with the majority of costs
        incurred between 2009 and 2020. A credit adjusted risk-free rate of
        eight percent was used to calculate the fair value of the asset
        retirement obligations. The following reconciles the Trust's asset
        retirement obligations:

                                                          Three Months Ended
                                                                    March 31
                                                           2007         2006
        ---------------------------------------------------------------------
        Balance, beginning of period                     24,148       20,906
        Liabilities incurred                                514        2,024
        Liabilities settled                                 (99)      (1,527)
        Accretion expense                                   493          421
        ---------------------------------------------------------------------
        Balance, end of period                           25,056       21,824
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    7.  NON-CONTROLLING INTEREST - EXCHANGEABLE SHARES

        The non-controlling interest on the consolidated balance sheet
        consists of the book value of exchangeable shares issued to Progress
        Energy Ltd. shareholders and the fair value of exchangeable shares
        issued to Cequel Energy Inc. shareholders as part of a Plan of
        Arrangement that became effective on July 2, 2004, plus net earnings
        attributable to the exchangeable shares, less exchangeable shares
        (and related cumulative earnings) redeemed. The non-controlling
        interest charge on the consolidated statement of earnings represents
        the share of net earnings attributable to the exchangeable shares
        based on the trust units issuable for exchangeable shares in
        proportion to total trust units issued and issuable each period end.

                                      Three months ended March 31
                          ---------------------------------------------------
                                     2007                      2006
                          ---------------------------------------------------
                               Number       Amount       Number       Amount
        ---------------------------------------------------------------------
        Exchangeable Shares
        Balance, beginning
         of period          9,642,540      122,592   11,388,751      127,205
        Exchanged for
         trust units         (256,866)      (3,266)  (1,242,992)     (14,145)
        Non-controlling
         interest expense                    2,741                     3,921
        ---------------------------------------------------------------------
        Balance, end
         of period          9,385,674      122,067   10,145,759      116,981
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        The exchangeable shares can be converted, at the option of the
        holder, into trust units at any time and are listed on the Toronto
        Stock Exchange under the symbol PGE. If the number of exchangeable
        shares outstanding is less than 1,600,000, the Trust can elect to
        redeem the exchangeable shares for trust units or an amount in cash
        equal to the amount determined by multiplying the exchange ratio on
        the last business day prior to the redemption date by the current
        market price of a trust unit on the last business day prior to such
        redemption date. The number of trust units issued upon conversion is
        based on the exchange ratio in effect on the date of conversion. The
        exchange ratio is calculated monthly based on the five day weighted
        average trust unit trading price preceding the monthly effective
        date. The exchangeable shares are not eligible for cash
        distributions.

        Retraction of Exchangeable Shares

        Exchangeable shareholders may redeem their shares at any time by
        delivering their share certificates to the Trustee, together with a
        properly completed retraction request. The retraction price will be
        satisfied with trust units equal to the amount determined by
        multiplying the exchange ratio on the last business day prior to the
        retraction date by the number of exchangeable shares redeemed.

        Redemption of Exchangeable Shares

        On July 2, 2009 the exchangeable shares will be redeemed by the Trust
        unless the Board of Directors of Progress Energy Ltd. elect to extend
        the redemption period. The exchangeable shares will be redeemed by
        either issuing units or payment in cash for an amount equivalent to
        the value of the exchangeable shares at the current exchange ratio.

    8.  UNITHOLDERS' EQUITY

        The Trust Indenture provides that an unlimited number of trust units
        may be authorized and issued. Each trust unit is transferable,
        carries the right to one vote and represents an equal undivided
        beneficial interest in any distributions from the Trust and in the
        assets in the event of termination or winding-up of the Trust. All
        trust units are of the same class with equal rights and privileges.

        Unitholders' Capital

                                      Three months ended March 31
                          ---------------------------------------------------
                                     2007                      2006
                          ---------------------------------------------------
                               Number       Amount       Number       Amount
        ---------------------------------------------------------------------
        Trust Units
        Balance, beginning
         of period         75,457,291      739,998   71,302,265      681,263
        Exchangeable
         shares converted     341,655        3,843    1,498,125       20,647
        Issued on
         conversion of
         convertible
         debentures                 -            -    1,515,059       22,064
        ---------------------------------------------------------------------
        Balance, end
         of period         75,798,946      743,841   74,315,449      723,974
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Redemption Right

        Unitholders may redeem their trust units for cash at any time, up to
        a maximum value of $250,000 in any calendar month, by delivering
        their unit certificates to the Trustee, together with a properly
        completed notice requesting redemption. The redemption amount per
        trust unit will be the lesser of 90 percent of the simple average
        closing price of the trust units on the principal market on which
        they are traded for the 10 day trading period after the trust units
        have been validly tendered for the redemption and the closing market
        price of the trust units on the principal market on which they are
        traded on the date on which they were validly tendered for
        redemption, or if there was no trade of the trust units on that date,
        the average of the last bid and ask prices of the trust units on that
        date.

        Net Earnings Per Unit

        The following table summarizes the weighted average trust units used
        in calculating net earnings per unit:

                                                          Three Months Ended
                                                                    March 31
                                                           2007         2006
        ---------------------------------------------------------------------
        Weighted average trust units - basic         75,683,891   72,803,846
        Trust units issuable on conversion of
         exchangeable shares(1)                      12,781,715   13,382,852
        Performance units                               573,777      391,814
        ---------------------------------------------------------------------
        Weighted average trust units - diluted       89,039,383   86,578,512
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        (1) Calculated based on the weighted average exchangeable shares
            outstanding during the period at the period end exchange ratio.

        An adjustment to the numerator of $2.7 million for the three months
        ended March 31, 2007 (2006 - $3.9 million) is required in the diluted
        earnings per unit calculation to provide for earnings attributable to
        non-controlling interest. Units potentially issuable on the
        conversion of the Debentures are anti-dilutive and are not included
        in the calculation of diluted weighted average units for the three
        months ended March 31, 2007.

        Performance Unit Incentive Plan

        The Trust has established a Performance Unit Incentive Plan (the
        "Plan") for employees and directors of the Trust or its subsidiary.
        The number of units reserved for issuance under the Plan shall not
        exceed 5 percent of the aggregate number of issued and outstanding
        units of the Trust and including the number of units which may be
        issued on the exchange of the outstanding exchangeable shares, which
        may be converted into trust units. Under the Plan, performance units
        shall be granted by the Board of Directors of Progress Energy Ltd.
        from time to time at its sole discretion. The performance units will
        vest on the third anniversary of the date of grant and actual payment
        will be determined based on the performance of the Trust relative to
        its peers. Performance factors range from 0.5 to 1.5 times the
        initial performance units granted. Over the three year term the
        performance units will attract distributions. The Trust expects to
        pay out the distribution portion in cash while the units earned will
        be issued from treasury.

        As at March 31, 2007 there are 381,367 performance units outstanding
        that were granted effective July 2, 2004. As a result, the fair value
        of the performance units granted, calculated using a performance
        factor of 1.0, was approximately $5.1 million of which $4.5 million
        will be amortized through unit based compensation expense and
        $0.6 million will be capitalized over the vesting period with a
        corresponding increase to contributed surplus.

        As at March 31, 2007 there are 510,700 performance units outstanding
        that were granted effective July 2, 2005. The fair value of the
        performance units using a performance factor of 1.0 was approximately
        $8.1 million of which $7.0 million will be amortized through unit
        based compensation expense and $1.1 million will be capitalized over
        the vesting period with a corresponding increase to contributed
        surplus.

        As at March 31, 2007, there are 415,250 performance units outstanding
        that were granted effective July 2, 2006, the fair value of which,
        using a performance factor of 1.0, was approximately $6.5 million.
        Over the three year vesting period, approximately $5.6 million will
        be amortized through unit based compensation expense and $0.9 million
        will be capitalized over the vesting period with a corresponding
        increase to contributed surplus.

        For the three months ended March 31, 2007 $1.5 million was charged to
        unit based compensation expense (2006 - $1.0 million) and
        $0.3 million was capitalized (2006 - $0.2 million) relating to the
        total performance units outstanding.

                                                          Three Months Ended
                                                                    March 31
                                                           2007         2006
        ---------------------------------------------------------------------
        Performance Units
        Balance, beginning of period                  1,300,717      899,567
        Granted                                          11,350       10,500
        Forfeited                                        (4,750)      (2,400)
        ---------------------------------------------------------------------
        Balance, end of period                        1,307,317      907,667
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Vesting Date
        July 2, 2007                                    381,367      386,867
        July 2, 2008                                    510,700      520,800
        July 2, 2009                                    415,250            -
        ---------------------------------------------------------------------
        Total                                         1,307,317      907,667
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        The following table reconciles the Trust's contributed surplus:

                                                          Three Months Ended
                                                                    March 31
                                                           2007         2006
        ---------------------------------------------------------------------
        Balance, beginning of period                      9,210        3,530
        Unit based compensation expense                   1,486        1,007
        Unit based compensation capitalized                 238          164
        ---------------------------------------------------------------------
        Balance, end of period                           10,934        4,701
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Accumulated other comprehensive income

        As described in note 2, the adoption of the new accounting policies
        regarding financial instruments resulted in an amount being
        recognized in accumulated other comprehensive income for the fair
        value of the Trust's natural gas derivative contracts at January 1,
        2007. The amount recognized in accumulated other comprehensive income
        was $10.5 million, representing the value of the asset of
        $15.6 million net of future income taxes of $5.1 million. This amount
        will be charged to the statement of earnings over the term of the
        contracts with a corresponding decrease to other comprehensive
        income.

                                                          Three Months Ended
                                                                    March 31
                                                           2007         2006
        ---------------------------------------------------------------------
        Balance, beginning of period                          -            -
        Change in accounting policy, net of tax
         of $5,072 (Note 2)                              10,543            -
        Amortization of fair value of financial
         instruments, net of tax of $3,047               (6,334)           -
        ---------------------------------------------------------------------
        Balance, end of period                            4,209            -
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    9.  SUPPLEMENTAL CASH FLOW INFORMATION

        Changes in non-cash working capital

                                                          Three Months Ended
                                                                    March 31
                                                           2007         2006
        ---------------------------------------------------------------------
        Accounts receivable                              (1,149)      11,463
        Prepaid expenses and deposits                       (17)         153
        Accounts payable                                  1,967      (12,909)
        Current income taxes payable                         20          (66)
        ---------------------------------------------------------------------
        Change in non-cash working capital                  821       (1,359)
        Relating to:
        Financing activities                                850            -
        Investing activities                              4,311       (4,057)
        ---------------------------------------------------------------------
        Operating activities                             (4,340)       2,698
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Interest and taxes paid

                                                          Three Months Ended
                                                                    March 31
                                                           2007         2006
        ---------------------------------------------------------------------
        Interest paid                                     3,908        4,012
        Income and other taxes paid                          25          405
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    10. FINANCIAL INSTRUMENTS

        Fair Value of Financial Instruments

        The Trust's financial instruments recognized on the balance sheet
        consist of accounts receivable, accounts payable and accrued
        liabilities, bank debt, convertible debentures and derivative natural
        gas contracts ("financial instruments"). The fair value of these
        instruments, excluding the convertible debentures and the derivative
        natural gas contracts, approximate their carrying amounts due to
        their short terms to maturity or the indexed rate of interest on the
        bank debt. The fair value of the convertible debentures outstanding
        as at March 31, 2007 was approximately $132.0 million (2006 -
        $72.8 million). The fair value of the natural gas contracts is
        recognized on the balance sheet as described below.

        Commodity Price Contracts

        The Trust has entered into several derivative natural gas financial
        instruments for the purpose of protecting its cash flow from
        operations before changes in non-cash working capital from the
        volatility of natural gas prices. For the three months ended
        March 31, 2007, the Trust's natural gas price risk management program
        had a net realized gain of $7.0 million (2006 - $0.6 million net
        loss).

        As described in note 2, the Trust recognizes the fair value of its
        commodity price contracts on the balance sheet each reporting period
        with the change in fair value being recognized as an unrealized gain
        or loss on the statement of earnings. On January 1, 2007 the fair
        value of the commodity price contracts was an asset of $15.6 million
        and resulted in an increase to accumulated other comprehensive income
        and the future income tax liability of $10.5 million and
        $5.1 million, respectively. The $10.5 million recognized in
        accumulated other comprehensive income will be amortized over the
        term of the contracts through other comprehensive income with a
        corresponding unrealized gain on financial instruments on the
        statement of earnings. As a result, $6.3 million, net of tax, was
        charged to other comprehensive income with a corresponding unrealized
        gain on financial instruments of $9.4 million and a charge to future
        income tax expense of $3.1 million for the three months ended
        March 31, 2007. At March 31, 2007 the fair value was a liability of
        $2.0 million, resulting in an unrealized loss for the three months
        ended March 31, 2007 of $8.2 million, net of the amortization of the
        accumulated other comprehensive income.

        Contracts outstanding in respect to financial instruments are as
        follows:

        Natural Gas              Pricing     Strike      Cost/
        Contracts(1)   Volume     Point    Price $/gj   Premium     Term
        ---------------------------------------------------------------------
        Swap -                                                    Apr 01/07 -
        call spread  10,000 gj/d   AECO   $7.45 -$8.45  $0.42/gj  Oct 31/07

        Swap -                                                    Apr 01/07 -
        call spread  10,000 gj/d   AECO   $7.41 -$8.41  $0.39/gj  Oct 31/07

        Swap -                                                    Apr 01/07 -
        call spread  10,000 gj/d   AECO   $7.42 -$8.42  $0.37/gj  Oct 31/07

        Swap -                                                    Apr 01/07 -
        call spread  10,000 gj/d   AECO   $7.43 -$8.43  $0.38/gj  Oct 31/07
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        (1) Call spread strike prices indicate minimum floor and maximum
            ceiling

        Commodity Sales Contract

        The following physical gas sales contract was outstanding at
        March 31, 2007. This contract was acquired in conjunction with the
        acquisition of Campion Resources Ltd. on June 3, 2002, at which time
        the fair value of the contracts was a liability of $4.1 million. This
        value was recorded as a liability on June 3, 2002, and is being
        amortized over the life of the contract. At March 31, 2007 the
        unamortized remaining liability was $0.7 million.

        Volume       Pricing Point   Progress Price                Term
        ---------------------------------------------------------------------
        1,000 gj/d   AECO            $2.16/gj in 2007 escalating   Jun 1/97 -
                                     at 2.5% annually              Oct 31/08
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    11. SUBSEQUENT EVENTS

        On April 2, 2007 Progress acquired all of the issued and outstanding
        shares of a private company for $526.0 million, prior to closing
        adjustments, net of certain assets retained by the vendor. In
        conjunction with the acquisition, on April 2, 2007, Progress disposed
        of certain assets of the private company to ProEx for $134.3 million,
        prior to closing adjustments. The resulting net cash consideration of
        $391.7 million was financed by the issuance of 21.0 million trust
        units at a price of $12.00 per trust unit for proceeds of
        $252.0 million ($238.6 million net of issue costs) and through
        increased bank debt. Costs incurred prior to March 31, 2007 of
        $27.5 million relating to the acquisition and financing have been
        classified on the balance sheet as deferred acquisition. On closing,
        the costs will be classified to property, plant and equipment or unit
        issue costs.

        On April 12, 2007 Progress entered into a purchase and sale agreement
        to acquire certain petroleum and natural gas assets in the Deep Basin
        region of northwest Alberta for approximately $39.8 million net of
        final closing adjustments. The purchase is expected to close on
        May 31, 2007. A portion of the lands and infrastructure being
        acquired are subject to a right-of-first-refusal which could be
        exercised before closing of the acquisition.


        SELECTED QUARTERLY INFORMATION

        FINANCIAL HIGHLIGHTS

                                          Three Months Ended
        ---------------------------------------------------------------------
                                                2006                  2007
        ---------------------------------------------------------------------
        ($ thousands except
         per unit amounts)      March 31  June 30  Sept 30  Dec 31  March 31
        ---------------------------------------------------------------------

        Income Statement
        Petroleum and natural
         gas revenue              91,568   71,439   72,328   75,182   85,477
        Cash flow(1)              47,637   45,871   47,218   49,603   53,080
          Per unit - diluted        0.55     0.52     0.54     0.56     0.60
        Cash distributions
         declared                 30,836   31,412   31,626   31,689   24,831
          Per unit                  0.42     0.42     0.42     0.42     0.30
        Net earnings              21,383   28,425   20,252   21,538   16,425
          Per unit - basic          0.29     0.38     0.27     0.29     0.22
          Per unit - diluted        0.29     0.38     0.27     0.28     0.22

        Payout Ratio
        Excluding exchangeable
         shares                      65%      68%      67%      64%      47%
        Including exchangeable
         shares                      76%      80%      78%      75%      54%

        Balance Sheet
        Capital expenditures      35,984   32,489   30,875   35,304   43,601
        Total debt               172,106  182,873  190,531  208,564  252,000
        Unitholders' equity      687,953  694,236  696,844  688,539  689,909

        Trust Units (thousands,
         except where otherwise
         stated)
        Units outstanding, end
         of period                74,315   74,901   75,448   75,457   75,799
        Units issuable for
         exchangeable shares      12,309   12,314   12,301   12,657   12,665
        ---------------------------------------------------------------------
        Total units outstanding
         and issuable for
         exchangeable shares,
         end of period            86,624   87,215   87,749   88,114   88,464
        Weighted average units
         - diluted(2)             86,579   87,557   88,190   88,623   89,039
        Exchange ratio, end
         of period               1.21322  1.24284  1.27469  1.31263  1.34944

        Trust Unit Trading
         Statistics ($)
        High                       18.20    18.33    17.50    16.21    13.29
        Low                        14.75    14.73    14.21    10.60    11.00
        Closing                    17.45    16.30    15.30    12.57    13.07
        Unit volume traded
         (thousands)              18,619   12,619   15,524   23,725   23,116

        Exchangeable Shares
         Trading Statistics ($)
        High                       21.29    21.76    22.48    20.40    17.50
        Low                        18.49    18.28    18.60    14.90    14.84
        Closing                    20.70    19.57    18.60    16.21    17.50
        Share volume traded
         (thousands)                  85       15       69       31       13
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        (1) Refer to discussion in the Management Discussion and Analysis
        (2) Includes exchangeable shares converted at the end of period
            exchange ratio.


        SELECTED QUARTERLY INFORMATION

        OPERATIONAL HIGHLIGHTS

                                          Three Months Ended
        ---------------------------------------------------------------------
                                                2006                  2007
        ---------------------------------------------------------------------
                                March 31  June 30  Sept 30  Dec 31  March 31
        ---------------------------------------------------------------------

        Daily Production
          Natural gas (mcf/d)     86,433   82,271   85,701   88,568   94,351
          Crude oil (bbls/d)       2,605    2,099    2,056    2,030    2,118
          Natural gas liquids
           (bbls/d)                1,390    1,478    1,327    1,269    1,379
          Total daily production
           (boe/d)                18,401   17,288   17,667   18,060   19,222

        Average Realized Prices
          Natural gas ($/mcf)       8.82     6.55     6.30     7.07     7.87
          Crude oil ($/bbl)        64.45    72.79    75.69    59.26    62.15
          Natural gas liquids
           ($/bbl)                 62.86    63.34    68.29    55.71    55.08

        Highlights ($/boe)
          Weighted average
           sales price             55.29    45.41    44.50    45.25    49.41
          Realized gain/(loss) on
            financial instruments  (0.37)    6.08     6.47     6.29     4.04
          Royalties               (14.87)  (11.94)  (11.24)  (10.29)  (11.67)
          Operating expenses       (5.81)   (6.15)   (6.18)   (6.63)   (6.38)
          Transportation expenses  (1.91)   (1.68)   (1.61)   (1.56)   (1.60)
        ---------------------------------------------------------------------
          Operating Netbacks       32.33    31.72    31.94    33.06    33.80
          General and
           administrative expense  (1.08)   (1.08)   (0.79)   (0.93)   (1.14)
          Unit based compensation  (0.61)   (0.64)   (0.84)   (0.90)   (0.86)
          Interest and financing
           expenses                (1.45)   (1.60)   (2.02)   (2.16)   (2.19)
          Unrealized loss on
           financial instruments       -        -        -        -    (4.76)
          Depletion, depreciation
           and accretion          (14.27)  (14.49)  (14.59)  (14.77)  (14.91)
        ---------------------------------------------------------------------
          Net earnings before
           taxes                   14.92    13.91    13.70    14.30     9.94
          Capital taxes            (0.20)    0.16    (0.03)   (0.03)   (0.03)
          Future income taxes
           (recovery)               0.56     6.98     0.83     0.85     1.16
          Non-controlling
           interest -
           exchangeable shares     (3.16)   (3.32)   (2.37)   (2.16)   (1.58)
        ---------------------------------------------------------------------
          Net earnings             12.91    18.07    12.46    12.96     9.49
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Drilling Results
          Gross                       39       15       22       30       29
          Net - natural gas         18.8     11.0      9.8     15.6     11.7
          Net - crude oil            0.8      0.4      1.6      2.0        -
          Success Rate (percent)      93      100       95      100       89
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    

    %SEDAR: 00020979E




For further information:

For further information: Mr. Michael Culbert, President & Chief
Executive Officer, Phone: (403) 539-1820; Mr. Greg Kist, Vice President,
Investor Relations & Marketing, Phone: (403) 539-1809; Progress Energy Ltd.,
1200, 205-5th Avenue S.W., Bow Valley Square II, Calgary, AB, T2P 2V7, Toll
Free: 1-866-216-2510, Fax: (403) 216-2514, Email ir@progressenergy.com, Web:
www.progressenergy.com


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