The recommendations made by the Compensation Committee are the responsibility of the Compensation Committee and reflect factors and considerations in addition to the information and recommendations provided by Mercer and Hugessen. PEER GROUP REVIEW Pengrowth’s target compensation levels are determined in relation to the compensation level of Pengrowth’s competitors (“Peer Group”). The Peer Group consists of organizations in the same general business sector as Pengrowth and with which Pengrowth competes for senior management talent and for which compensation data is available through a combination of public disclosure or reliable surveys prepared by independent consulting firms, including Mercer. For 2009, the Peer Group consists of 21 Canadian-based oil & gas exploration and production organizations. In selecting the Peer Group, the Compensation Committee focused on senior Canadian Energy Trusts and other organizations with comparable production levels (between 30,000 boepd and 250,000 boepd) and with operations similar in size, scope and location to Pengrowth’s operations. •
Advantage Energy Income Fund
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Compton Petroleum Corporation
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Hunt Oil Company of Canada
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Apache Canada Ltd.
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Crescent Point Energy Trust
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Murphy Oil Company, Ltd.
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ARC Energy Trust
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Devon Canada Inc.
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NAL Oil & Gas Trust
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Baytex Energy Trust
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Enerplus Resources Fund
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Penn West Energy Trust
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Bonavista Energy Trust
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EOG Resources Canada Inc. •
Provident Energy Trust
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BP Canada Energy Company
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ExxonMobil Canada Ltd.
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TAQA NORTH Ltd.
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Chevron Canada Limited
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Harvest Energy Trust
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Vermillion Energy Trust
The Compensation Committee approved of the Peer Group information provided by Mercer and accepts that the Peer Group represents a strong comparable for Pengrowth, particularly with respect to market capitalization, oil and gas production and total number of Canadian employees. At the time of the Peer Group’s selection, Pengrowth ranked at the 70th percentile of the Peer Group based on annual sales revenue, the 72nd percentile of the Peer Group based on oil and gas production and the 73rd percentile of the Peer Group based on the total number of Canadian employees. COMPENSATION APPROVAL PROCESS In determining our executives’ annual compensation, the Compensation Committee considers, among other things, individual performance assessments, market data for similar positions within the Peer Group and prior year salary, performance bonus and long-term incentive values. Before approving compensation recommendations, the Compensation Committee holds an in camera discussion to ensure that the compensation decision pertaining to each executive is consistent with Pengrowth’s compensation philosophy and objectives, accurately reflects current industry circumstances, is consistent with the relative performance of Pengrowth as well as corporate and individual performance, and positions the executive appropriately relative to the external market and internal peers. COMPENSATION ELEMENTS The following discussion describes the elements of Pengrowth’s compensation program as they currently operate. Given the volatility in the Canadian upstream oil and gas sector caused by lower commodity prices and turbulent financial markets, it is anticipated that the Board may, on the recommendation of the Compensation Committee, revise these elements as it deems necessary or desirable. 22