Paramount Energy Trust Releases Second Quarter 2008 Financial and Operating Results and Confirms August Distribution


    CALGARY, Aug. 7 /CNW/ - Paramount Energy Trust ("PET" or the "Trust")
(TSX:PMT.UN) is pleased to release its financial and operating results for the
three months and six months ended June 30, 2008. Strong production levels and
robust natural gas prices led to record quarterly cash flows for the Trust.
    PET is also pleased to confirm that its distribution to be paid on
September 15, 2008 in respect of income received by PET for the month of
August 2008, for Unitholders of record on August 29, 2008, will be $0.10 per
Trust Unit. The ex-distribution date is August 27, 2008. The August
distribution brings cumulative distributions paid in 2008 to $0.80 per Trust
Unit and distributions paid since the inception of the Trust to $12.724 per
Trust Unit.

    Second Quarter Summary

    -   Production increased 22 percent to 188.4 MMcfe/d from 155.0 MMcfe/d
        in the second quarter of 2007, due primarily to the acquisition of
        natural gas assets in central Alberta in June 2007 ("Birchwavy
        Assets") as well as production additions in the Northern district
        core areas from a successful winter capital program. Production
        increased three percent from 183.8 MMcfe/d in the first quarter of
        2008 as a result the full effect of production additions in the
        Northern district, partially offset by the disposition of several
        minor non-core assets in southern Alberta and Saskatchewan in the
        first quarter.

    -   Realized natural gas prices increased to $9.00 per Mcfe for the three
        months ended June 30, 2008 as compared to $8.80 per Mcfe for the
        comparative quarter in 2007, driven by a significant increase in AECO
        gas prices from quarter to quarter and despite realized hedging
        losses of $11.9 million for the current period. Realized gains on
        financial instruments for the three months ended June 30, 2007
        totaled $19.6 million which significantly improved PET's realized
        natural gas price for the prior period.

    -   Revenue increased 24 percent to $154.3 million for the second quarter
        of 2008 from $124.1 million for the comparative period in 2007 due
        primarily to increased production volumes.

    -   Funds flow increased to $81.4 million ($0.73 per Trust Unit) for the
        three months ended June 30, 2008 from $72.7 million ($0.81 per Trust
        Unit) for the second quarter of 2007. Increased revenues were
        partially offset by higher royalties which increased substantially in
        2008 as a percentage of revenue as royalties are calculated based on
        the Alberta Gas Reference Price. In the second quarter of 2007, PET's
        realized gas price significantly exceeded the Alberta Gas Reference
        Price; therefore, royalties as a percentage of revenue were
        approximately five percentage points lower in the second quarter of
        2007 relative to 2008.

    -   Distributions payable for the second quarter of 2008 totaled $0.30
        per Trust Unit, comprised of $0.10 per Trust Unit paid on May 15,
        June 16 and July 15, representing a payout ratio of 41.0 percent of
        funds flow. PET applied excess funds flows to outstanding bank debt
        during the quarter, resulting in a $35.5 million reduction in net
        bank debt from $346.3 million at March 31, 2008 to $310.8 million at
        June 30, 2008.

    -   The Trust recorded a net loss of $55.4 million for the second quarter
        due primarily to an unrealized loss on financial instruments of $70.4
        million, as a result of the significant increase in AECO and NYMEX
        forward prices from March 31, 2008 to June 30, 2008. PET's ability to
        pay distributions will not be impacted by these mark-to-market
        amounts. Natural gas market prices have declined more than 30 percent
        since June 30, 2008. The mark-to-market value of the financial
        instruments in place on June 30, as of August 6, 2008 is
        approximately $120 million lower than the actual financial instrument
        liability recorded as at June 30, 2008. The corresponding unrealized
        loss on financial instruments would have totaled approximately $30
        million for the six months ended June 30, 2008 instead of the $149.6
        million recorded and would have resulted in a gain of approximately
        $50 million for the second quarter of 2008 instead of a loss of $70.4

    -   Following a relatively long break-up period restricting access in the
        majority of PET's year-round access properties in the Southern
        district and East Side core areas, the Trust initiated its capital
        expenditure program for the remainder of 2008, drilling seven gross
        (2.7 net) wells with a 100 percent success rate in the quarter. PET
        has budgeted capital spending of an additional net $51.5 million over
        the final two quarters of 2008.

    Subsequent Events

    -   In July 2008 PET closed non-core asset dispositions comprising
        approximately 0.5 MMcf/d of production for proceeds of $9.9 million.
        To date in 2008, non-core dispositions total $16.9 million.

    -   PET's ongoing capital program continues to deliver good results with
        six (6.0 net) additional wells drilled and cased since the end of the
        second quarter. The Trust has two rigs scheduled to continue its 70
        well drilling program for the final half of the year. In addition,
        service rigs are operating to complete new wells and perform PET's
        extensive program of over 100 additional recompletions in existing

    -   In July 2008, SemGroup, L.P. ("SemGroup") filed a voluntary position
        for reorganization under Chapter 11 of the Bankruptcy Code in the
        United States Bankruptcy Court. PET sold gas production from certain
        of its Saskatchewan assets to CEG Energy Options Inc. ("CEG"), a
        Canadian subsidiary of SemGroup, and has determined its exposure to
        CEG to be approximately $0.2 million, related to natural gas sales
        for June and a portion of July 2008. Natural gas deliveries to CEG
        have been terminated and as such there is no additional potential
        financial exposure for the Trust.

    2008 Outlook and Sensitivities

    At current natural gas prices the Trust's monthly distribution is highly
sustainable. As at August 6, 2008, the current actual and forward market for
natural gas for July through December 2008 was $8.36 per GJ at AECO. The
following table reflects PET's projected realized gas price, monthly funds
flow and payout ratio at the current monthly distribution of $0.10 per Trust
Unit for the last six months of 2008 at certain AECO natural gas price levels
and incorporating the Trust's current financial hedges and physical forward
sales contracts.

                                        Average AECO Monthly Index Gas Price
                                                 July to December 2008 ($/GJ)
    Funds flow sensitivity analysis      $7.00     $8.00     $9.00    $10.00
    Oil and natural gas production
     (MMcfe/d)                             183       183       183       183
    Realized gas price (1) ($/Mcfe)       7.53      8.08      8.63      9.19
    Funds flow (2) ($million/month)       21.1      23.6      26.0      28.5
    Per Trust Unit ($/Unit/month)        0.189     0.211     0.233     0.255
    Payout ratio (2) (%)                    53        47        43        39
    Ending net bank debt ($million)        291       277       262       247
    Ending net total debt ($million)       527       513       498       483
    Ending net total debt to funds flow
     ratio (3) (times)                     2.0       1.8       1.7       1.6
    (1) PET's weighted average forward price on an average of 101,000 GJ/d
        for the period from July 1 to December 31, 2008 is $7.51 per GJ.
    (2) These are non-GAAP measures; see "Significant accounting policies and
        non-GAAP measures" in management's discussion and analysis.
    (3) Calculated as ending net total debt (including convertible
        debentures) divided by estimated 2008 annual funds flow.

    The Trust's outlook and sensitivities assume operating costs of $1.70 per
Mcfe, cash general and administrative expenses of $0.45 per Mcfe, capital
expenditures of $52 million and an interest rate on bank debt of 5.1 percent
for the second half of 2008.
    While PET's sensitivity to gas prices has changed since year end with
changes in its financial and forward physical hedging position, sensitivity of
PET's fund flows to changes in production volumes, operating and general and
administrative costs and interest rates has not changed significantly from the
sensitivity analysis presented in the Trust's management's discussion and
analysis for the year ended December 31, 2007.
    The Trust continues to focus on what we believe is a sustainable
distribution model that balances short term cash returns to our Unitholders
and long term value creation through capital reinvestment. PET reviews
distributions on a monthly basis. Future distributions are subject to change
as dictated by changes in commodity price markets, operations and future
business development opportunities.

    Additional Information

    A copy of PET's unaudited interim consolidated financial statements and
related notes and management's discussion and analysis for the three and six
months ended June 30, 2008 and 2007 can be obtained through the Trust's
website at and

    Forward-Looking Information

    Certain information regarding PET in this news release including
management's assessment of future plans and operations and the information
contained under the heading "2008 Outlook and Sensitivities" above may
constitute forward-looking statements under applicable securities laws and
necessarily involve risks including, without limitation, risks associated with
gas exploration, development, exploitation, production, marketing and
transportation, changes to the proposed royalty regime prior to implementation
and thereafter, loss of markets, volatility of commodity prices, currency
fluctuations, imprecision of reserve estimates, environmental risks,
competition from other producers, inability to retain drilling rigs and other
services, capital expenditure costs, including drilling, completion and
facilities costs, unexpected decline rates in wells, delays in projects and/or
operations resulting from surface conditions, wells not performing as
expected, delays resulting from or inability to obtain required regulatory
approvals and ability to access sufficient capital from internal and external
sources. As a consequence, actual results may differ materially from those
anticipated in the forward-looking statements. Readers are cautioned that the
forgoing list of factors is not exhaustive. Additional information on these
and other factors that could affect PET's operations and financial results are
included in reports on file with Canadian securities regulatory authorities
and may be accessed through the SEDAR website ( and at PET's
website ( Furthermore, the forward-looking statements
contained in this news release are made as at the date of this news release
and PET does not undertake any obligation to update publicly or to revise any
of the forward-looking statements, whether as a result of new information,
future events or otherwise, except as may be required by applicable securities

    Non-GAAP Measures

    This news release contains financial measures that may not be calculated
in accordance with generally accepted accounting principles in Canada
("GAAP"). Readers are referred to advisories and further discussion on
non-GAAP measures contained in the "Significant Accounting Policies and
non-GAAP Measures" section of management's discussion and analysis.

    Conference Call and Webcast

    PET will be hosting a conference call and webcast at 9:00 a.m., Mountain
Time, Friday August 8, 2008 to review this information. Interested parties are
invited to take part in the conference call by dialing one of the following
telephone numbers 10 minutes before the start time: Toronto and area -
1-416-695-6616; outside Toronto - 1-800-952-6845. For a replay of this call
please dial: Toronto and area - 1-416-695-5800; outside Toronto -
1-800-408-3053, passcode 3267888No. until Friday August 15, 2008. To
participate in the live webcast please visit or The webcast will
also be archived shortly following the presentation.

    PET is a natural gas-focused Canadian energy trust. PET's Trust Units and
convertible debentures are listed on the Toronto Stock Exchange under the
symbol "PMT.UN" and "PMT.DB", "PMT.DB.A", "PMT.DB.B" and "PMT.DB.C",
respectively. Further information with respect to PET can be found at its
website at

    HIGHLIGHTS                Three Months                  Six Months
    ($Cdn thousands          Ended June 30                Ended June 30
     except volume and
     per Trust Unit
     amounts)                                 %                            %
                        2008      2007   Change      2008      2007   Change
     including realized
     gains and losses on
     instruments     154,332   124,061      24    276,210   238,045       16
    Funds flow (1)    81,350    72,669      12    137,541   138,266       (1)
     Per Trust Unit(2)  0.73      0.81     (10)      1.24      1.58      (21)
    Net earnings
     (loss)          (55,365)    9,218    (701)  (141,025)  (30,043)     369
     Per Trust Unit(2) (0.50)     0.10    (600)     (1.27)    (0.34)     274
    Distributions     33,343    39,350     (15)    66,452    80,625      (18)
     Per Trust Unit(3)  0.30      0.42     (29)      0.60      0.90      (33)
    Payout ratio(%)(1)  41.0      54.1     (24)      48.3      58.3      (17)
    Total assets   1,148,245 1,301,516     (12) 1,148,245 1,301,516      (12)
    Net bank and
     other debt
     outstanding(4)  310,818   400,408     (22)   310,818   400,408      (22)
     debentures, at
     amount          236,034   236,109       -    236,034   236,109        -
    Total net debt
     (4)             546,852   636,517     (14)   546,852   636,517      (14)
     equity          139,253   383,600     (64)   139,253   383,600      (64)
     and development  16,339    22,303     (27)    62,783    85,587      (27)
     net of
     dispositions       (527)  449,857    (100)    (6,873)  452,697     (102)
     Other               235       219       7        661       590       12
     Net capital
     expenditures     16,047   472,379     (97)    56,571   538,874      (90)
    Trust Units
    End of period    111,350   107,568       4    111,350   107,568        4
    Weighted average 111,055    89,227      24    110,612    87,531       26
    Incentive Rights
     outstanding       7,144     4,038      77      7,144     4,038       77
    Trust Units
     outstanding at
     August 7, 2008  111,517
     Total natural
      gas (Bcfe) (7)    17.3      14.1      23       33.9      26.9       26
     Daily average
      natural gas
      (MMcfe/d) (7)    188.4     155.0      22      186.1     148.4       25
     Gas over
      bitumen deemed
      (MMcf/d) (5)      19.6      19.8      (1)      19.8      19.8        -
     Average daily
      (actual and
       MMcfe/d) (5)    208.0     174.8      19      205.9     168.2       22
     Per Trust Unit
      (cubic feet
      (2)               1.87      1.96      (4)      1.86      1.92       (3)
    Average natural
    gas prices
      financial hedging
      and physical
      forward sales(6)  9.82      7.27      35       8.45      7.30       16
      hedging and
      physical forward
      sales (6)         9.00      8.80       2       8.15      8.86       (8)
    Land (thousands
     of net acres)
     land holdings     1,996     1,338      49      1,996     1,338       49
    Drilling (wells
     drilled gross/net)
     Gas               7/2.7     5/5.0  40/(46)   42/31.3   82/65.4 (49)/(52)
     Dry                 -/-       -/-     -/-      2/1.6     7/6.2 (71)/(74)
     Total             7/2.7     5/5.0  40/(46)   44/32.9   89/71.6 (51)/(54)
     Success rate
      (%)            100/100   100/100     -/-      95/95     92/91      3/4
    (1) These are Non-GAAP measures. Please refer to "Significant Accounting
        Policies and Non-GAAP Measures" included in management's discussion
        and analysis.
    (2) Based on weighted average Trust Units outstanding for the period.
    (3) Based on Trust Units outstanding at each distribution date.
    (4) Net debt includes net working capital (deficiency) before short-term
        financial instrument assets and liabilities. Total net debt includes
        convertible debentures measured at principal amount. Please refer to
        "Significant Accounting Policies and Non-GAAP Measures" included in
        management's discussion and analysis.
    (5) The deemed production volume describes all gas shut-in or denied
        production pursuant to a decision report, corresponding order or
        general bulletin of the Alberta Energy and Utilities Board ("AEUB"),
        or through correspondence in relation to an AEUB ID 99-1 application.
        This deemed production volume is not actual gas sales but represents
        shut-in gas that is the basis of the gas over bitumen financial
        solution which is received monthly from the Alberta Crown as a
        reduction against other royalties payable.
    (6) PET's commodity hedging strategy employs both financial forward
        contracts and physical natural gas delivery contracts at fixed prices
        or price collars. In calculating the Trust's natural gas price before
        financial and physical hedging, PET assumes all natural gas sales
        based on physical delivery fixed-price or price collar contracts
        during the period were instead sold at AECO daily index.
    (7) Production amounts are based on the Trust's interest before

    The Toronto Stock Exchange has neither approved nor disapproved the
    information contained herein.

For further information:

For further information: Paramount Energy Trust, Sue Riddell Rose,
President and Chief Executive Officer, (403) 269-4400 or Paramount Energy
Trust, Cam Sebastian, Vice President, Finance and Chief Financial Officer,
(403) 269-4400 or Paramount Energy Trust, Sue Showers, Investor Relations and
Communications Advisor, (403) 269-4400, (403) 269-6336 (FAX) or Paramount
Energy Operating Corp., Administrator of Paramount Energy Trust, Suite 3200,
605 - 5 Avenue SW Calgary, Alberta T2P 3H5, Email:,

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