October 2, 2009 / 1:50 AM / 9 years ago

UPDATE 1-Pengrowth cuts distribution 30 pct, will up capex

* Distribution cut starting in Nov

* Aims to convert to corporation by 2013 (Adds details on strategy)

TORONTO, Oct 1 (Reuters) - Pengrowth Energy Trust PGF_U.TO said on Thursday it would cut its cash distribution by 30 percent starting in November so it could expand its capital expenditures and cut debt.

The Toronto- and New York-listed trust said the shift in strategy would see it invest more of its cash flow on low cost, low risk, drilling opportunities in the Western Canadian Sedimentary Basin.

The strategy also involves reducing debt to levels more consistent with energy trust averages over the next 18 months.

“These changes resulted from Pengrowth’s strategic review of the best opportunities for value creation on its existing asset base and a broader review of unconventional value creation opportunities,” the trust said in a statement.

Pengrowth’s units dropped by more than 12 percent on Feb. 20 after the trust said it would cut its distribution by 41 percent.

The oil and gas trust said on Thursday it would cut the distribution from 10 Canadian cents (9 U.S. cents) to 7 Canadian cents per unit starting on Nov 16.

Pengrowth also said it anticipates converting to a dividend paying corporation no later than 2013. Canadian income trusts were designed to avoid paying taxes by distributing much of their cash flow to unitholders. But the Canadian government moved in 2006 to close this loophole and said it would begin taxing trusts by 2011.

$1=$1.09 Canadian Reporting by Jeffrey Hodgson; Editing Bernard Orr

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