Mr. Derek Evans reports

PENGROWTH ENTERS INTO AGREEMENT FOR THE SALE OF ITS OLDS/GARRINGTON AREA ASSETS FOR $300 MILLION

Pengrowth Energy Corp. has entered into an agreement with a private company owned by a large Canadian life insurance company for the sale of its Olds/Garrington area assets in central Alberta for cash consideration of $300-million, before customary closing adjustments.

The Olds/Garrington area assets are expected to generate 2017 average daily production of 13,875 barrels of oil equivalent per day and had proved plus probable (2P) reserves of 78 million boe as at Dec. 31, 2016, as per the GLJ Petroleum Consultants independent reserve valuation dated Dec. 31, 2016. The assets include facilities and gathering systems related to the oil and gas properties being sold, as well as the Olds gas plant.

The effective date of the transaction is May 1, 2017, and closing is expected to occur on Aug. 1 2017, subject to the receipt of all necessary regulatory approvals and the satisfaction of other customary closing conditions. Following the closing of the sale, the company will continue to improve its net debt profile with no debt maturities until 2018.

Since the start of 2017, Pengrowth has closed or expects to close $827-million of asset sales, which when combined with the $287-million of cash on hand at year-end 2016 represent a net debt reduction of over $1.1-billion or approximately 66 per cent of Dec. 31, 2016, debt. This was accomplished while only reducing the company's 2P reserves as of Dec. 31, 2016, by approximately 16 per cent. Following the closing of the sale, the company's core focus areas will be its flagship 100-per-cent-owned Lindbergh thermal project and its 90-per-cent-owned Groundbirch Montney play. These two key assets, with their associated $9.0-billion of low-risk, high-netback development opportunities represent the bulk of the remaining 84 per cent of the company's 2P reserves as at Dec. 31, 2016, and are expected to position the company for long-term growth in reserves, production and cash flow.

Derek Evans, president and chief executive officer of Pengrowth, commented: "We are delighted by the significant progress that we have made on reducing our debt and strengthening our balance sheet. Our efforts and results to date have been transformational for Pengrowth, allowing us to retain our best assets with the most development opportunities and putting us on a path to either renegotiate or refinance our remaining term debt to allow us the flexibility to develop our Lindbergh and Groundbirch assets."

Swan Hills update

On July 5, 2017, Pengrowth announced the closing of the sale of one of its two previously announced Swan Hills sales packages for $185-million. At that time it also announced that it was continuing to work to close the second Swan Hills sales package with a separate purchaser. The purchaser of the second Swan Hills sales package has now indicated that it is unable to complete its financing for the acquisition and, as such, Pengrowth has given notice of termination of the sale agreement announced on March 20, 2017, and has requested that the $18-million deposit, currently being held in escrow, be released to Pengrowth. Pengrowth will recommence its efforts to sell these assets.

Updated guidance

In light of the company's announcements regarding the sale of its Olds/Garrington area assets and the termination of one of the Swan Hills sales described above, the company is updating its 2017 guidance as shown in the table.

                                                    Previous guidance          New guidance

Average daily production (boe per day)               43,500 to 45,500      41,500 to 43,500
Total capital expenditures ($ millions)                           125                   125
Royalties (% of sales) (1)                                        9.0                   9.0
Operating costs ($ per boe) (2)                        13.00 to 13.50        13.00 to 13.50
Cash G&A ($ per boe) (2)                                 3.50 to 4.00          3.50 to 4.00

(1) Royalties are before impacts of commodity risk management activities.
(2) Per-boe estimates based on high and low ends of production guidance.

Second quarter results

Pengrowth intends to release its second quarter results for the period ending June 30, 2017, on Monday, Aug. 14, 2017, following the close of equity markets.

About Pengrowth Energy Corp.

Pengrowth Energy is a Canadian intermediate energy company focused on the sustainable development and production of oil and natural gas in Western Canada from its Lindbergh thermal oil property and its Groundbirch Montney gas property.

We seek Safe Harbor.