Peyto Energy Trust announces improved reserve replacement efficiency with 2007 year end reserve report


    CALGARY, Feb. 13 /CNW/ - Peyto Energy Trust ("Peyto" or "the Trust") is
pleased to present the results and analysis of the independent reserve report
effective December 31, 2007. The evaluation encompassed 100% of the Trust's
reserve assets and was conducted by Paddock Lindstrom and Associates Ltd.
("PLA") in compliance with National Instrument 51-101 and in accordance with
the COGE (Canadian Oil and Gas Evaluation) Handbook.


    -   For the eighth consecutive year, Peyto has grown its reserves, and
        associated net asset value, from which sustainable distributions are
        funded. Since inception, Peyto has invested a total of $1.4 billion
        to build, with the drill bit, total proved assets that have funded
        cumulative distributions of $622 million and have a remaining value
        of $2.5 billion (Before Tax, Net Present Value, discounted at 5%,
        "BT NPV(5)", debt adjusted).

    -   For 2007, Peyto invested $122 million, less than 45% of its cash
        flow, to replace over 125% of its annual production with new Proved
        Producing reserves at a Finding, Development and Acquisition ("FD&A")
        cost of $12.68/boe. As a result, the value (BT NPV(5), debt adjusted)
        of the remaining Proved Producing reserve assets was maintained at

    -   Peyto replaced 175% of production with new Total Proved reserves at a
        FD&A cost of $9.42/boe and 117% of production with new Proved plus
        Probable Additional reserves at a FD&A cost of $9.38/boe (including
        the changes in future development capital).

    -   The reserve life index ("RLI") increased by at least one year in all
        categories with Proved Producing RLI of 13 years, Total Proved RLI of
        16 years, and Proved plus Probable Additional RLI of 21 years.

    -   The distribution life index ("DLI", as defined below) of the
        Proved Producing assets increased from 23 years in 2006 to 24 years
        in 2007, indicating that distributions are more sustainable today
        than a year ago.

    -   The value of Peyto's proven assets, or the BT NPV(5), of the Total
        Proved reserves, grew 3% to $3.0 billion in 2007. Adjusting for
        changes in debt and the number of units outstanding, this NPV/unit
        grew 3% to $23.80/unit.

    -   The BT NPV(5), of the Proved plus Probable Additional reserves grew
        1% to $3.7 billion in 2007. Adjusting for changes in debt and the
        number of units outstanding, this NPV/unit remained effectively the
        same at $30.77/unit.

    The following table outlines the per unit change in production, reserves
and value for 2007.

                                 Dec. 31, Dec. 31,              %     Change
                                    2007     2006   Change   Change Per Unit
    Units Outstanding (000's)    105,712  105,537      175      Nil
    Capital Expenditures
     ($million)(1)                 121.6    311.9   (190.3)    (61%)
    Q4 Production (boe/d)(1)      21,134   22,550   (1,417)     (6%)     (6%)

    Reserves (mboes)
      Proved Producing            99,226   97,181    2,046       2%       2%
      Total Proved               124,328  118,681    5,647       5%       5%
      Proved + Probable          164,759  163,464    1,294       1%       1%

    Net Present Value Discounted
     at 5% ($million)
      Proved Producing            $2,515   $2,462      $53       2%       2%
      Total Proved                $2,966   $2,869      $98       3%       3%
      Proved + Probable           $3,703   $3,679      $27       1%       0%
    Debt ($million)(1)              $450     $433      $17       4%       4%
    (1) Capital Expenditures, Q4 Production and Debt are estimated and remain
        unaudited at this time.

    The following tables summarize Peyto's reserves and the discounted net
present value of future cash flows, before income tax, using variable pricing,
at December 31, 2007.

    Variable Dollar Economics
                                           Net Present Value ($million)
                                                   Discounted at
    Reserve     Gas    Oil & NGL  BOE 6:1
     Category  (mmcf)   (mstb)    (mboe)     0%       5%       8%      10%
     Producing 496,110   16,541   99,226   $4,694   $2,515   $1,963   $1,719
    Proved Non-
     producing  15,642      453    3,060     $140      $62      $43      $35
      loped    111,869    3,396   22,041     $848     $389     $270     $217
     Proved    623,621   20,391  124,328   $5,682   $2,966   $2,276   $1,971
      nal      203,010    6,596   40,431   $1,890     $737     $490     $390
    Proved +
      nal      826,631   26,987  164,759   $7,572   $3,703   $2,766   $2,361
    Note:  Based on the PLA report effective December 31, 2007

    The Paddock Lindstrom and Associates Ltd. price forecast used in the
variable dollar economics is available on their website at


    There are three fundamental questions that Peyto believes should be
answered from this annual evaluation.

    1.  Base Reserves  - How did the "base reserves" that were on production
                         at the time of the last reserve report perform
                         during the year?

    2.  Value Creation - How much value did the 2007 capital investments

    3. Sustainability  - Is the distribution sustainable going forward?

    Base Reserves

    Last year's Proved Producing reserves (base reserves) were evaluated and
adjusted for 2007 production as well as any technical revisions, both positive
and negative, resulting from the additional twelve months of data. Consistent
with years past, the base reserves were within 1% of previous estimates. Peyto
is again pleased to report that the base reserves continue to meet with
expectation and increase the confidence in the predictability of those future
    The forecast for natural gas price is approximately 5% lower today than a
year ago, while the forecast for natural gas liquids is approximately 25%
higher. Overall, the change in the forecast of future commodity prices had
little effect on the value change of the base reserves, given their liquid
rich nature, as the drop in gas price was offset by the rise in liquids price.
The debt adjusted NPV, discounted at 5%, of last year's Proved Producing
reserves decreased just 2% due to this change in commodity price forecasts.

    Value Creation

    In order to measure investment success, it is necessary to quantify the
amount of value created during the year and compare that to the amount of
capital invested. This exercise is undertaken to ensure the best use of the
unitholders' capital on a go forward basis. At Peyto's request, and for the
benefit of unitholders, the independent engineers have run last year's
evaluation with this year's price forecast to eliminate the change in value
attributable to the commodity prices. This approach isolates the value created
by the Peyto team from the value created by the change in commodity prices.
Since the capital investments in 2007 were funded from a combination of cash
flow, debt and equity, it is necessary to know the change in debt and the
change in units outstanding to see if the change in value is truly accretive.
    At year end 2007, the forecasted debt had increased by $17 million over
the past year while the number of units outstanding has remained essentially
the same at approximately 106 million. The change in debt includes all of the
capital expenditures and the total fixed and performance based compensation
paid out during the year. Although these forecasts are believed to be
accurate, they remain unaudited at this time.
    Based on this reconciliation of changes in BT NPV, the Peyto team was
able to create $569 million of Proved Producing, $675 million of Total Proven,
and $465 million of Proved plus Probable Additional undiscounted reserve
value, with $122 million of capital investment. The ratio of capital
expenditures to value creation is what Peyto refers to as the NPV recycle
ratio, which is simply the undiscounted value addition, resulting from the
capital program, divided by the capital investment. For 2007, the Proved
Producing NPV recycle ratio is 4.7, compared with 2.9 for 2006. By all
measures, the capital investments of 2007 were very successful in building
additional value for unitholders.
    The following table breaks out the value created by Peyto's capital
investments and reconciles the changes in debt adjusted NPV of future net
revenues using forecast prices and costs as at December 31, 2007.

    Value Reconciliation
                                                                Proven +
                               Proven           Total           Probable
                             Producing         Proven          Additional
             Discounted at  0%      5%       0%       5%       0%       5%
    Before Tax Net
     Present Value at
     Beginning of
     Year ($millions)    $4,066   $2,029   $4,961   $2,435   $7,059   $3,245
    Dec. 31, 2006
     Evaluation using
     PLA Jan. 1, 2007
     price forecast,
     less debt
      Per Unit Outstanding
       at Dec. 31, 2006
       ($/unit)          $38.53   $19.22   $47.01   $23.08   $66.88   $30.75

        2007 sales
         (revenue less
         royalties and
         operating costs) ($310)   ($310)   ($310)   ($310)   ($310)   ($310)
        Net Change due to
         price forecasts
         (using PLA
         Jan 1, 2008
         price forecast)   ($82)    ($50)    ($94)    ($64)    ($92)    ($86)
        Value Creation
         due to
         revisions)        $569     $395     $675     $454     $465     $403
    Before Tax Net
     Present Value at
     End of Year
     ($millions)         $4,243   $2,064   $5,232   $2,516   $7,122   $3,253
    Dec. 31, 2007
     Evaluation using
     PLA Jan. 1, 2008
     price forecast,
     less debt
      Per Unit Outstanding
       at Dec. 31, 2007
       ($/unit)          $40.14   $19.53   $49.49   $23.80   $67.37   $30.77

      Year over Year
       Change in Before
       Tax NPV/unit           4%       2%       5%       3%       1%       0%

    Year over Year
       Change in Before
       Tax NPV/unit
       Distribution           9%      10%       9%      10%       3%       6%


    As a growth oriented, sustainable trust, Peyto's primary objective is to
grow the resources which generate sustainable distributions for unitholders.
In order for distributions to be more sustainable and grow, Peyto must
profitably find and develop more reserves. Simply increasing production from
the existing reserves will not make distributions more sustainable. This year
the Trust was successful in increasing reserves and sustainability, despite a
slight decline in production levels. There are two key measures for
sustainability: Reserve Life and Distribution Life.
    Peyto's Reserve Life grew in all categories by approximately one year,
with Proved Producing Reserve Life Index ("PP RLI") increasing to 13 years and
Proved plus Probable Additional Reserve Life Index increasing to 21 years.
This growth in reserve life is in part due to the natural maturation of the
tight gas wells but also reflects Peyto's unique ability to internally
generate its own high quality investments. The Proved Producing Distribution
Life Index ("PP DLI") increased to 24 years in 2007, while Proved plus
Probable Additional Distribution Life Index was maintained at 40 years. Growth
in both of these measures, as highlighted in the following table, indicates
that distributions are more sustainable today than a year ago.

                                    2003     2004     2005     2006     2007

    PP RLI                            10        9       11       12       13
    PP DLI                            14       17       22       23       24

    The following table outlines the 2007 performance ratios for all three
reserve categories.

    Performance Ratios
                                                                   Proved +
                                Proved              Total          Probable
                               Producing           Proved         Additional
    FD&A Cost ($/boe)
    (including change in future
     development capital)         $12.68             $9.42             $9.38
    Reserve Life Index (years)
    Q4 2007 average production
     - 21,134 boe/d                   13                16                21
    Distribution Life Index
    Q4 2007 annualized -
     $44.4 million                    24                29                40
    Reserve Replacement Ratio
    2007 production -
     7.544 million boes              1.3               1.7               1.2

    -   FD&A (finding, development and acquisition) costs are used as a
        measure of capital efficiency and are calculated by dividing the
        capital costs for the period, including the change in undiscounted
        future development capital ("FDC"), by the change in the reserves,
        incorporating revisions and production, for the same period (eg.
        Total Proved ($121,600+$2,648)/(124,328-118,681+7,544)=

    -   The reserve life index is calculated by dividing the reserves (in
        boes) in each category by the annualized average production rate in
        boe/year (eg. Proved Producing 99,226/(21.134(*)365)=13).
        Peyto believes that the most accurate way to evaluate the current
        reserve life is by dividing the proved developed producing reserves
        by the actual fourth quarter average production. In our opinion, for
        comparative purposes, the proved developed producing reserve life
        provides the best measure of sustainability.

    -   The distribution life index is calculated by dividing the debt
        adjusted undiscounted NPV by the Q4 annualized distribution (eg.
        Proved Producing ($4,694-$450.4 million)/(44.4(*)4) million/year
        = 24 years).

    -   The reserve replacement ratio is determined by dividing the yearly
        change in reserves before production by the actual annual production
        for the year (eg. Total Proved ((124,291-118,681+7,544)/7,544)

    Reserves Committee

    Peyto has a reserves committee of independent board members which reviews
the qualifications and appointment of the independent reserve evaluators. The
committee also reviews the procedures for providing information to the
evaluators. All booked reserves are based upon annual evaluations by the
independent qualified reserve evaluators in accordance with the COGE (Canadian
Oil and Gas Evaluation) Handbook. The evaluations are conducted from the
fundamental geological and engineering data. The reserves committee, chaired
by US petroleum engineering consultant Brian Davis, has reviewed the reserves
information and approved the reserve report.

    Alberta's New Royalty Framework

    On October 25, 2007 the Alberta Government released a new Royalty
Framework pertaining to royalties on oil and gas resources including oil
sands, conventional oil and gas, and coalbed methane. This new framework was
scheduled to take effect on January 1, 2009 and was based on the Alberta
government's response to the recommendations put forth by the Alberta Royalty
Review Panel.
    On February 4, 2008, the Alberta Premier, Ed Stelmach, asked to dissolve
the provincial legislature and called for a provincial election for March 3,
2008. As the detailed legislation containing the new royalty framework was not
passed, the succeeding government will be responsible for implementing any
changes to the existing royalty scheme. Until that time, Peyto continues to
operate under the existing Alberta royalty guidelines. Also in the interim,
Alberta Energy continues to evaluate the "unintended consequences" of the
proposed new framework and may provide future recommendations for
modification. Should the succeeding government implement the royalty framework
that was announced in October 2007, the impact to Peyto's reserves and their
NPV is not expected to be material.
    The following table summarizes Peyto's reserves and discounted net
present value of future cash flows, before income tax, using variable pricing,
under the new proposed royalties, at December 31, 2007.

    Variable Dollar Economics, New Royalty Framework
                                             Net Present Value ($million)
                                                    Discounted at
    Reserve     Gas    Oil & NGL  BOE 6:1
     Category  (mmcf)   (mstb)    (mboe)     0%       5%       8%      10%
     Producing 495,896   16,533   99,182   $4,619   $2,499   $1,955   $1,713
    Proved Non-
     producing  15,650      453    3,061     $135      $61      $42      $35
      loped    111,870    3,396   22,041     $844     $391     $272     $219
     Proved    623,416   20,382  124,285   $5,599   $2,952   $2,269   $1,966
      nal      203,007    6,596   40,431   $1,819     $721     $482     $384
    Proved +
      nal      826,423   26,978  164,715   $7,417   $3,673   $2,751   $2,351


    For more in depth discussion of the 2007 reserve report, an interview
with the management will be available on Peyto's website by Friday
February 22, 2008. A complete filing of the Statement of Reserves (form
51-101F1), Report on Reserves (form 51-101F2), and Report of Management and
Directors on Oil and Gas Disclosure (form 51-101F3) will be available in the
Annual Information Form to be filed by the end of March 2008. Unitholders are
encouraged to actively visit Peyto's website located at

    Certain information set forth in this document, including management's
assessment of Peyto's future plans and operations, contains forward- looking
statements. By their nature, forward-looking statements are subject to
numerous risks and uncertainties, some of which are beyond these parties'
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 industry
participants, the lack of availability of qualified personnel or management,
stock market volatility and ability to access sufficient capital from internal
and external sources. Readers are cautioned that the assumptions used in the
preparation of such information, although considered reasonable at the time of
preparation, may prove to be imprecise and, as such, undue reliance should not
be placed on forward-looking statements. Peyto's 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 Peyto will
derive therefrom. Peyto disclaims any intention or obligation to update or
revise any forward-looking statements, whether as a result of new information,
future events or otherwise. BOEs 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. Some values set forth in
the tables above may not add due to rounding. It should not be assumed that
the estimates of future net revenues presented in the tables above represent
the fair market value of the reserves. There is no assurance that the forecast
prices and costs assumptions will be attained and variances could be material.
The aggregate of the exploration and development costs incurred in the most
recent financial year and the change during that year in estimated future
development costs generally will not reflect total finding and development
costs related to reserves additions for that year.

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

    %SEDAR: 00019597E

For further information:

For further information: Darren Gee, President and Chief Executive
Officer of Peyto at (403) 237-8911 or Jim Grant, Investor Awareness, at (403)

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