Paramount Energy Trust Releases Second Quarter 2009 Financial and Operating Results and Confirms August Distribution

CALGARY, Aug. 6 /PRNewswire-FirstCall/ - (TSX - PMT.UN) - Paramount Energy Trust ("PET" or the "Trust") is pleased to release its financial and operating results for the three months and six months ended June 30, 2009. Natural gas pricing continues to experience significant pressure in 2009. Strong supply from shale gas plays in the United States and liquefied natural gas imports, coupled with weak industrial gas demand due to the North American economic recession, have contributed to very high gas storage levels compared to prior periods. Gains from the Trust's natural gas price hedging program have succeeded in fully mitigating the effects of sharply lower natural gas prices, leading to record funds flows for the second quarter of 2009.

PET is also pleased to confirm that its distribution to be paid on September 15, 2009 in respect of income received by PET for the month of August 2009, for Unitholders of record on August 31, 2009, will be $0.05 per Trust Unit. The ex-distribution date is August 27, 2009. The August distribution brings cumulative distributions paid since the inception of the Trust to $13.564 per Trust Unit.

    Second Quarter Summary

    -   PET has acquired approximately 68.4 percent of Profound Energy Inc.
        ("Profound") by way of its takeover bid, open market share purchases
        and conversion of the special warrants of Profound acquired by PET in
        April, 2009. The Profound acquisition is another step in the
        strategic expansion of PET's asset base, complementing the Trust's
        existing shallow gas prospect inventory with a significant number of
        higher impact, deep basin style resource play opportunities. The
        Profound assets are currently producing approximately 16 MMcfe/d
        weighted 75 percent to natural gas. As the Trust controlled Profound
        as of June 30, 2009, the last day of the second quarter, the assets
        and liabilities of Profound are included in the Trust' consolidated
        financial statements and management's discussion and analysis,
        however the results of operations of Profound are not included.

    -   Average production measured 165.5 MMcfe/d for the three months ended
        June 30, 2009 as compared to 188.4 MMcfe/d reported in the second
        quarter of 2008. PET has undertaken a detailed analysis of the
        economic attributes of all of its properties in order to identify
        opportunities to preserve value through voluntary production
        curtailments. As a result of this analysis, the Trust shut in
        approximately 20 MMcfe/d of natural gas production midway through the
        second quarter, and has shut in an additional 15 MMcfe/d for a total
        of 35 MMcfe/d as of August 5, 2009. Second quarter average production
        was reduced by approximately 8.2 MMcfe/d as a result of the
        curtailments. Including volumes attributed to the Profound assets,
        PET's current productive capacity is approximately 185 to 190
        MMcfe/d. The Trust intends to return shut-in volumes to production
        once natural gas prices show sustained improvement from current
        levels.

    -   PET's realized natural gas price increased to $9.10 per Mcfe for the
        three months ended June 30, 2009 as compared to $9.00 per Mcfe for
        the comparative quarter in 2008. The realized price for the current
        period was enhanced by $47.7 million in crystallized gains on
        financial instruments related to the early termination of PET's AECO-
        based financial fixed price natural gas contracts for June through
        October 2009. The crystallized positions were substantially all
        replaced by fixed price forward sale arrangements for the same June
        to October period at the then-current price of $4.22 per GJ. PET has
        in place significant gas price risk management transactions which
        have effectively eliminated any material variation in cash flow with
        variations in natural gas pricing of up to $2.00 per GJ for the
        remainder of 2009. Full details of the Trust's financial and physical
        forward sales arrangements are presented in the management's
        discussion and analysis ("MD&A").

    -   Funds flow increased to $91.2 million ($0.81 per Trust Unit) for the
        three months ended June 30, 2009 from $81.4 million ($0.73 per Trust
        Unit) for the second quarter of 2008. The increase is a result of
        realized gains on financial instruments totaling $75.2 million for
        the three months ended June 30, 2009.

    -   Distributions payable for the second quarter of 2009 totaled $17.2
        million or $0.15 per Trust Unit, comprised of $0.05 per Trust Unit
        paid on May 15, June 15 and July 15 representing a payout ratio of
        18.9 percent of funds flow in the current quarter compared to 41.0
        percent for the second quarter of 2008. Before the effect of $38.2
        million in proceeds from the crystallization of financial instruments
        related to periods after June 30, 2009, the Trust's payout ratio was
        32.5 percent. The Trust advised on July 22, 2009 that it has
        reinstated the availability of Trust Units under its Distribution
        Reinvestment and Optional Trust Unit Purchase Plan ("DRIP") for the
        July 2009 distribution payable on August 17, 2009 and until further
        notice.

    -   Bank debt on PET's credit facility at June 30, 2009 decreased to
        $265.4 million, including the $21.3 million cash component of the
        Profound acquisition, from $290.2 million at March 31, 2009 due to
        strong second quarter funds flows resulting from realized gains on
        financial instruments. PET has net bank debt of $318.5 million on a
        combined borrowing base of $422.0 million. All of the Trust's bank
        credit facilities are subject to lender review prior to October
        31, 2009.

    -   Capital spending in the current quarter was primarily directed
        towards facilities projects in the Northern district at the end of
        the Trust's winter capital program, as well as initial expenditures
        on PET's gas storage project in the Warwick area within the Southern
        district. Exploration and development expenditures totaled $7.7
        million for the second quarter of 2009, a 53 percent decrease from
        the same quarter in 2008. The decrease is consistent with a lower
        capital spending budget in 2009 as compared to the prior year.

    Outlook and Sensitivities

    PET has undertaken a number of measures to preserve its financial
    strength, including:

        -  Selected voluntary temporary production shut-ins;
        -  Operating and other cost reduction initiatives;
        -  Enhanced gas price management initiatives;
        -  A restricted capital spending program for the second half of 2009,
           focused on capital expenditures required for strategic or
           operational reasons; and
        -  Reinstatement of the DRIP plan for the July 2009 distribution and
           until further notice.

PET's financial hedging and physical forward sales portfolio continues to provide a level of stability to projected funds flows, despite a significant decrease in AECO natural gas prices during the first half of 2009. As at August 5, 2009, the current actual and forward market for natural gas for July through December 2009 is $3.73 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 $0.05 per Trust Unit for the second half of 2009 at certain AECO natural gas price levels, incorporating the Trust's current financial hedges and physical forward sales contracts and the acquisition of Profound.

                                        Average AECO Monthly Index Gas Price
                                                 July to December 2009 ($/GJ)
    Funds flow sensitivity analysis      $3.00     $4.00     $5.00     $6.00
    -------------------------------------------------------------------------
    Oil and natural gas production
     (MMcfe/d)                             153       153       153       153
    Realized gas price ($/Mcfe)(1)        5.07      5.33      5.59      5.85
    Funds flow, excluding 2009 hedging
     ($millions)(2)                          2        30        51        71
      Per Trust Unit ($/Unit/month)      0.003     0.041     0.068     0.096
    Funds flow, including 2009 hedging
     ($millions)(2)                         52        58        57        55
      Per Trust Unit ($/Unit/month)      0.071     0.079     0.077     0.075
    Payout ratio (%)(2)                     71        63        65        67
    Ending net bank debt ($millions)       316       310       311       313
    Ending net debt ($millions)            546       540       541       543
    Ending net debt, less post-2009
     financial instrument assets
     (millions)(5)                         470       464       465       467
    Ending net bank debt to funds
     flow ratio (times)(3)                 1.7       1.6       1.6       1.6
    Ending net debt to funds flow
     ratio (times)(4)                      3.0       2.9       2.9       2.9
    Ending net debt less post-2009
     financial instrument assets to
     funds flow (times)(5)                 2.5       2.4       2.4       2.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) PET's weighted average forward price on an average of 120,000 GJ/d
        for the period July 1 to December 31, 2009 is $5.25 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 bank debt divided by estimated annual funds
        flow
    (4) Calculated as ending net debt (including convertible debentures,
        whose maturity extends out to 2012) divided by estimated annual funds
        flow.
    (5) Calculated as ending net debt, less the Trust's current financial
        instrument assets with settlement dates occurring after December 31,
        2009, divided by estimated annual funds flow including realized gains
        on financial instruments settling in 2009. Financial instrument
        assets and liabilities are not included in the Trust's definition of
        working capital, but may be terminated by the Trust prior to the
        settlement dates in exchange for discounted cash payments from
        counterparties and used to reduce PET's outstanding bank debt. At
        June 30, 2009, the mark-to-market value of the Trust's post-2009
        financial instruments was $76.0 million. Post-2009 financial
        instruments have settlement dates ranging from January 2010 through
        March 2011 and can be settled without impacting funds flows from
        monthly hedging settlements in 2009. The current mark-to-market value
        of PET's post-2009 financial instruments is $111.4 million as of
        August 5, 2009.

The Trust's outlook and sensitivities assume operating costs of $1.70 per Mcfe, cash general and administrative expenses of $0.50 per Mcfe, minimal capital expenditures expected for the balance of the year and an interest rate on bank debt of 4.4 percent for the second half of 2009.

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, 2008. 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.

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, 2009 and 2008 can be obtained through the Trust's website at http://www.paramountenergy.com/unitholder/regulatory_filings/ or SEDAR at www.sedar.com.

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 "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 foregoing 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 (www.sedar.com) and at PET's website (www.paramountenergy.com). 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 laws.

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 10:00 a.m., Mountain Time, Friday August 7, 2009 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 - 1-416-646-3096; outside Toronto - 1-866-250-4665. For a replay of this call please dial: Toronto and area - 1-416-640-1917; outside Toronto - 1-877-289-8525, passcode 21312393# until Friday August 14, 2009. To participate in the live webcast please visit www.paramountenergy.com or http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2766280. 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 www.paramountenergy.com.

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



    FINANCIAL AND OPERATING
    HIGHLIGHTS                Three Months                  Six Months
    ($Cdn thousands          Ended June 30                Ended June 30
     except volume and
     per Trust Unit
     amounts)                                 %                            %
                        2009      2008   Change      2009      2008   Change
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Financial
    Revenue,
     including realized
     gains and losses on
     financial
     instruments and
     call option
     premiums        137,094   154,332     (11)   234,197   276,210      (15)
    Funds flow(1)     91,186    81,350      12    132,341   137,541       (4)
      Per Trust
      Unit(2)           0.81      0.73      11       1.17      1.24       (6)
    Net earnings
     (loss)           (8,728)  (55,365)    (84)    69,831  (141,025)     150
      Per Trust
      Unit(2)          (0.08)    (0.50)    (84)      0.62     (1.27)     149
    Distributions     17,240    33,343     (48)    38,704    66,452      (42)
      Per Trust
      Unit(3)           0.15      0.30     (50)      0.39      0.60      (35)
    Payout ratio (%)(1) 18.9      41.0     (54)      29.2      48.3      (40)
    -------------------------------------------------------------------------
    Total assets   1,208,605 1,148,245       5  1,208,605 1,148,245        5
    Net bank and
     other debt
     outstanding(2)  318,518   310,818       2    318,518   310,818        2
    Convertible
     debentures, at
     principal
     amount          236,034   236,034       -    236,034   236,034        -
    Total net debt
     (2)             554,552   546,852       1    554,552   546,852        1
    Unitholders'
     equity          310,626   139,253     123    310,626   139,253      123
    -------------------------------------------------------------------------
    Capital
     expenditures
      Exploration
      and development  7,749    16,339     (53)    47,398    62,783      (25)
      Acquisitions,
      net of
      dispositions    (2,147)     (527)    (75)     4,445    (6,873)     164
      Profound
      acquisition     91,834         -     100     91,834         -      100
      Other              105       235     (55)       244       661      (63)
      Net capital
      expenditures    97,541    16,047     508    143,921    56,571      154
    -------------------------------------------------------------------------
    Trust Units
     outstanding
     (thousands)
    End of period    118,877   111,350       7    118,877   111,350        7
    Weighted average 113,071   111,055       2    113,019   110,612        2
    Incentive Rights
     and Bonus Rights
     outstanding       9,722     7,144      36      9,722     7,144       36
    Trust Units
     outstanding at
     August 5, 2009  118,894                      118,894
    -------------------------------------------------------------------------
    Operating
    Production
      Total natural
       gas
       (Bcfe)(7)(8)     15.1      17.3     (13)      30.1      33.9      (11)
      Daily average
       natural gas
       (MMcfe/d)(7)(8) 165.5     188.4     (12)     166.3     186.1      (11)
      Gas over
       bitumen deemed
       production
       (MMcf/d)(5)      18.1      19.6      (8)      18.5      19.8       (7)
      Average daily
       (actual and
       deemed -
       MMcfe/d)(5)     183.6     208.0     (12)     184.8     205.9       (9)
      Per Trust Unit
       (cubic feet
       equivalent/
       d/Unit)
       (2)(3)           1.62      1.87     (13)      1.63      1.86      (12)
    Average natural
     gas prices
     ($/Mcfe)
       Before
       financial hedging
       and physical
       forward
       sales(6)         3.89      9.82     (60)      4.66      8.45      (45)
       Including
       financial
       hedging and
       physical forward
       sales(6)         9.10      9.00       1       7.78      8.15       (5)
    -------------------------------------------------------------------------
    Land (thousands
     of net acres)
    Undeveloped
     land holdings     1,984     1,996      (1)     1,984     1,996       (1)
    -------------------------------------------------------------------------
    Drilling (wells
     drilled gross/net)
      Gas                -/-     7/2.7  (100)/    38/31.4   42/31.3   (10)/1
                                         (100)
      Dry                -/-       -/-     -/-        -/-     2/1.6   (100)/
                                                                        (100)
      Total              -/-     7/2.7  (100)/
                                         (100)    38/31.4   44/32.9  (14)/(5)
      Success rate
       (%)               -/-   100/100  (100)/
                                         (100)    100/100     95/95      5/5
    -------------------------------------------------------------------------
    (1) Revenue includes realized gains (losses) on financial instruments and
        call option premiums received.
    (2) These are non-GAAP measures. Please refer to "Significant Accounting
        Policies and Non-GAAP Measures" included in management's discussion
        and analysis.
    (3) Based on weighted average Trust Units outstanding for the period.
    (4) Based on Trust Units outstanding at each distribution date.
    (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 monthly index.
    (7) Production amounts are based on the Trust's interest before
        royalties.
    (8) Including volumes attributed to the Profound assets, PET's current
        productive capacity is approximately 185 MMcfe/d.

SOURCE Paramount Energy Trust