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Harvest Energy Trust Announces Acquisition of Oil and Natural Gas Producing Assets and Financing

Jul 15, 2004 - 15:23 ET

CALGARY, ALBERTA--(CCNMatthews - Jul 15, 2004) - Harvest Energy 
Trust ("Harvest") is pleased to announce that it has entered into 
a definitive agreement to acquire conventional oil and natural 
gas producing properties (the "Acquisition") from a subsidiary of 
EnCana Corporation for Cdn$526 million. Harvest intends to fund 
the Acquisition with a bought deal financing and new credit 
facilities. The Acquisition is expected to close on or about 
September 1st, 2004, with an adjustment date of July 1st, 2004. 
National Bank Financial Inc. is acting as financial advisor to 
Harvest on the Acquisition. Management and Directors have 
committed to subscribe for approximately $25 million of trust 
units offered in the financing. 

Acquisition Highlights: 

- Current production of approximately 19,500 boe/d (before 
royalties), comprised of 14,900 bbl/d of oil and natural gas 
liquids and 27.4 mmcf/d of natural gas, concentrated primarily in 
East Central Alberta and Southern Alberta; 

- 57.8 mmboe of proven plus probable reserves (before royalties) 
as determined by independent reserve engineers; 

- Favorable acquisition parameters of $26,900 per boe/d on 
current production, $9.10 per BOE of proved plus probable 
reserves, and 3x EBITDA; 

- Reserve life index of 8.3; 

- Low royalties (2004 forecast average 13.6%) and low operating 
costs (2004 forecast less than $6.00/boe) resulting in high 
netbacks. Favorable recycle ratio of 2.6x based on the 
independent engineering assessment; 

- High quality properties with significant original oil in place 
which are complementary to Harvest's existing operations; 

- High working interest of 86% and operatorship in excess of 95%; 

- Inventory of property enhancement projects including infill 
drilling, fluid handling optimization, waterflood opportunities 
and natural gas development; and 

- Approximately 293,000 net acres of undeveloped land. 

Benefits to Harvest Unitholders: 

- Significant accretion to fully-diluted cash flow per trust unit 
of approximately 40% in the fourth quarter of 2004 and 
approximately 30% in 2005 assuming full subscription of the 
equity offering. The accretion figures are based on Harvest's 
estimates of current production and the independent engineering 
assessment of proved developed producing reserves of the 
Acquisition, at current forward commodity prices net of corporate 

- Financial flexibility with a proforma payout ratio less than 
45%, which is among the lowest of all Canadian public energy 

- Accretion to net asset value per unit, production per unit, and 
reserves per unit; 

- Increases Harvest's proved plus probable reserve life index 
from 6.7 to approximately 7.5; 

- Greater commodity diversification by increasing natural gas 
weighting to 13%; 

- Creation of a new core area in Southern Alberta, compatible 
with Harvest's proven operating competencies; and 

- Harvest will be the 6th largest energy trust in Canada, based 
on estimated Q4 2004 production of approximately 37,000 to 38,000 
BOE per day, and will also offer increased market size and 
liquidity for Unitholders. 


The table below is a summary of the acquired reserves (before 
royalties) as at July 1st, 2004. The reserves were evaluated by 
Gilbert Laustsen Jung Associates Ltd. ("GLJ") and McDaniel & 
Associates Consultants Ltd. ("McDaniel") in accordance with 
National Instrument 51-101. 


                     Crude Oil Natural Gas Natural Gas Oil Equivalent
                        (mbbl)      (mbbl)      (mmcf)         (mboe)
                        ------      ------      ------         ------

Proved Producing        25,608       1,541      55,557         36,409

Total Proved            28,776       1,586      61,414         40,598

Proved Plus Probable    42,906       1,953      77,656         57,802


Property Summary: 

The acquired properties provide a strategic fit with Harvest's 
existing East Central Alberta core area as well as create a new 
core area in Southern Alberta. 

East Central Alberta 

The East Central property package is situated directly adjacent 
to Harvest's current operation in the Provost area and is 
compatible with Harvest's proven operating capabilities in this 
area. Current production from the East Central Alberta properties 
is approximately 4,700 BOE/d comprised of 4,400 bbl/d of oil and 
natural gas liquids and 2.0 mmcf/d of natural gas with the 
majority of production operated. 

Southeast Alberta 

The Southeast Alberta properties are situated in Harvest's new 
Southern Alberta core area. Current production from the Southeast 
Alberta properties is approximately 11,500 BOE/d comprised of 
10,000 bbl/d of oil and natural gas liquids and 8.4 mmcf/d of 
natural gas with working interests over 90%. Harvest expects to 
operate 100% of the production. 


Crossfield is also located in Harvest's new Southern Alberta core 
area. Current production from the Crossfield area is 
approximately 3,300 BOE/d comprised of 500 bbl/d of natural gas 
liquids and 17.0 mmcf/d of natural gas with an average working 
interest of 71%. 


In conjunction with the transaction, Harvest has entered into an 
agreement to sell, on a bought deal basis, 8,000,000 subscription 
receipts ("Subscription Receipts") at a price of $14.40 each for 
gross proceeds of approximately $115.2 million and approximately 
$80 million of 8% convertible extendible unsecured subordinated 
debentures ("Debentures"), to a syndicate of underwriters led by 
National Bank Financial Inc. Harvest has also granted the 
underwriters an option to purchase up to an additional $80 
million of Subscription Receipts and Debentures in aggregate on 
the same terms as above. 

Each Subscription Receipt represents the right to receive one 
trust unit on the closing of the Acquisition. The proceeds from 
the offering of Subscription Receipts will be deposited in escrow 
pending closing of the Acquisition. If the Acquisition closes on 
or before September 30th, 2004, the net proceeds will be released 
to Harvest and used to pay part of the purchase price of the 
Acquisition. If the offering closes before the Acquisition 
closes, holders of Subscription Receipts will receive a payment 
equivalent to the amount of any cash distributions to Unitholders 
for which record dates occur between the closing of the offering 
and the closing of the Acquisition. If the Acquisition fails to 
close by September 30th, 2004, or the Acquisition is terminated 
at an earlier time, Harvest will return the issue proceeds and 
the pro rata entitlement to interest thereon to holders of 
Subscription Receipts. 

The Debentures will have a face value of $1,000 per Debenture, a 
coupon of 8%, a final maturity date, if extended, of September 
30th, 2009, and will be convertible into trust units of Harvest 
at a price of $16.25 per trust unit. The initial maturity date of 
the Debentures will be September 30, 2004, with an automatic 
extension to September 30th, 2009 upon the closing of the 
Acquisition. If the Acquisition does not close on or before 
September 30th, 2004, or if the Acquisition is terminated at any 
earlier time, holders of the Debentures will have the option to 
require Harvest to extend up to $40 million of Debentures to 
September 30th, 2009. The remaining Debentures will mature on the 
initial maturity date. The Debentures will pay interest 
semi-annually on March 31 and September 30th, with the initial 
interest payment on March 31st, 2005. 

Harvest has received from National Bank of Canada, as Sole Lead 
Arranger, a fully underwritten commitment for credit facilities 
totalling $480 million. The credit facilities will be used to 
finance the Acquisition, for general corporate purposes and to 
refinance Harvest's existing revolving credit facility. 

Harvest Energy Trust is a Calgary-based energy trust actively 
managed to deliver stable monthly cash distributions to its 
Unitholders through its strategy of acquiring, enhancing and 
producing crude oil, natural gas and natural gas liquids. Trust 
units of Harvest are traded on the Toronto Stock Exchange (TSX) 
under the symbol "HTE.UN". For further information on Harvest, 
please visit our website at 


Corporate Head Office:
Harvest Energy Trust
1900, 330 - 5th Avenue S.W.
Calgary, AB T2P 0L4 Canada
Phone: (403) 265-1178
Fax: (403) 265-3490


ADVISORY: Certain information regarding Harvest Energy Trust and 
Harvest Operations Corp. including management's assessment of 
future plans and operations, may constitute forward-looking 
statements under applicable securities law and necessarily 
involve risks associated with oil and gas exploration, 
production, marketing and transportation such as loss of market, 
volatility of prices, currency fluctuations, imprecision of 
reserve estimates, environmental risks, competition from other 
producers 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 




Investor & Media Contacts:
Jacob Roorda
(403) 265-1178


David M. Fisher
Vice President, Finance
(403) 265-1178


Cindy Gray
Communications Advis

(403) 265-1178