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Harvest Energy Trust Announces Third Quarter 2004 Results

Nov 12, 2004 - 09:00 ET

CALGARY, ALBERTA--(CCNMatthews - Nov. 12, 2004) - Harvest Energy Trust 
(TSX: HTE.UN) ("Harvest") today announced its unaudited operating and 
financial results for the three and nine month periods ended September 
30, 2004.

Highlights:

- Completed the EnCana property acquisition of $526.0 million on 
September 2, 2004 increasing production to approximately 37,500 BOE/d. 
Proved plus Probable (P+P) reserves and Reserve Life Index (RLI) 
increased to approximately 103.4 mmBOE and 7.5, respectively. As a 
result of this transaction, Harvest also diversified its product mix by 
increasing its natural gas production weighting to approximately 14%;

- Successfully integrated the Storm assets into Harvest's operations for 
the first full quarter contributing to 40% of the average production 
growth from the second quarter;

- Declared distributions of $0.60 per Trust Unit for the three months 
ended September 30, 2004, representing a third quarter payout ratio of 
41%. At a distribution rate of $0.20 per Trust Unit per month, Harvest 
anticipates a fourth quarter 2004 payout ratio of less than 40%;

- Cash flow from operations of $44.5 million or $1.50 per weighted 
average Trust Unit outstanding for the three month period ended 
September 30, 2004, compared to $17.2 million ($0.99 per Trust Unit) in 
the second quarter and $16.8 million ($1.35 per Trust Unit) during the 
same period in 2003;

- Net income of $5.2 million and $5.7 million in the three and nine 
month periods ended September 30, 2004, which are net of $19.7 million 
and $29.4 million, respectively, of non-cash mark-to-market losses on 
derivative contracts which do not qualify for hedge accounting;

- Sales volume averaged 24,759 BOE/d for the three month period ended 
September 30, 2004, a 62% increase over the previous quarter, and a 118% 
increase over the same period in the previous year. The exit rate for 
the third quarter was approximately 37,500 BOE/d;

- Development activities and cost reduction initiatives in core areas 
continued through the third quarter, reflected in capital expenditures 
of approximately $13.2 million ($0.44 per weighted average Trust Unit 
outstanding). The goal of the development program is to add cash flow, 
production and reserves, providing stability for future distributions;

- Closed an equity and a convertible debenture financing in August, for 
$175 million and $100 million, respectively to help fund the EnCana 
property acquisition;

- Subsequent to the end of the quarter, closed a US$250 million, 7-year 
senior note financing to create additional financial flexibility and 
used those proceeds to substantially repay bank and bridge credit 
facilities;

- Harvest will be conducting a conference call and Webcast about its 
third quarter 2004 results at 9:00 a.m. Mountain time (11:00 a.m. 
Eastern time) on November 12th, 2004.  Details regarding this call and 
Webcast are included later in this release and are also available on 
Harvest's website at www.harvestenergy.ca.  
/T/

Third Quarter Financial and Operational Summary

($000's, except per BOE and per Trust Unit amounts)

-----------------------------------------------------------------------
                       Three months ended             Nine months ended
                             September 30                  September 30
                                        %                             %
FINANCIAL          2004       2003 Change        2004       2003 Change
-----------------------------------------------------------------------
                         (Restated)                    (Restated)
Revenue,
 net of
 royalties     $ 85,424   $ 24,706    246%  $ 169,650   $ 69,362    145%
Hedging loss    (16,457)    (3,525)   367%    (37,761)   (15,821)   139%
Cash flow
 from
 operations(2)   44,459     16,758    165%     77,988     32,795    138%
 Per trust
  unit,
  basic
  (2)              1.50       1.35     11%       3.69       2.88     28%
  Per trust
  unit,
  diluted
  (2)              1.22       1.31     -7%       2.80       2.79      0%
Net income        5,166      5,488     -6%      5,696      9,813    -42%
 Per trust
 unit,
 basic             0.07       0.44    -84%        nil       0.86    100%
 Per trust
 unit,
 diluted           0.07       0.43    -84%        nil       0.84    100%


Distributions    18,434      7,403    149%     39,740     19,833    100%
Distributions
 per trust
 unit,
 declared          0.60       0.60      0%       1.80       1.80      0%

Payout
 ratio(2)            41%        44%               51%         60%   
Capital
 expenditures
 (excluding
 acquisitions)   13,182      9,041     40%     33,822     34,012     82%
Net debt
 (excluding
 commodity
 derivatives)
 (2)            403,372      9,740   4041%    403,372      9,740   4041%
Weighted
 average
 trust
 units
 outstanding,
 basic       29,669,282 12,385,722    140% 21,143,221 11,383,042     86%
Trust Units
 outstanding,
 end of
 period      36,874,829 12,522,889    194% 36,874,829 12,522,889    194%


OPERATING
-----------------------------------------------------------------------
-----------------------------------------------------------------------

Average daily
 sales volume
 Crude oil
  and natural
  gas liquids
  (bbl/d)        22,774     11,131    105%     17,475      9,560     83%
 Natural
  gas (mcf/d)    11,909      1,453    720%      5,049      1,165    333%
-----------------------------------------------------------------------
Total (BOE/d)    24,759     11,373    118%     18,317      9,754     88%
Production
 exit rate
 (BOE/d)         37,500     11,600    223%     37,500     11,600    223%
-----------------------------------------------------------------------

Note 1: Natural gas converted to barrel of oil equivalent (BOE) on a
        6:1 basis
Note 2: Each of these measures is considered a non-GAAP measure. The
        impact on readers should be reviewed in the "Certain Financial
        Reporting Measures" section of this MD&A.

/T/

Third Quarter Message to Unitholders

The highlight of the third quarter 2004 was Harvest's successful 
acquisition of $526 million of producing assets from EnCana. The 
acquisition was financed through the issuance of $175 million of Trust 
Units, $100 million of convertible debentures, $70 million under a bank 
bridge facility and the balance of the purchase price was funded by 
drawing down on the Trust's revolving credit facility.

Following the closing of the acquisition on September 2, Harvest's 
production and reserves essentially doubled, resulting in a third 
quarter exit rate of approximately 37,500 BOE/d, an increase of 95% from 
the June 30, 2004 exit rate. In addition to providing approximately 
19,000 BOE/d of production and 57.8 mmBOE of proved plus probable 
reserves, this transaction increased Harvest's Reserve Life Index (RLI) 
to 7.5. These assets also included Harvest's first significant natural 
gas property, at Crossfield, increasing our natural gas production 
weighting to approximately 14%. The addition of the EnCana properties is 
also expected to provide Harvest with stronger netbacks, reduced 
operating costs and reduced royalty rates going forward. This 
transaction is accretive to cash flow, net asset value, production per 
unit, and reserves per unit. The integration of the assets and personnel 
with Harvest's systems has been substantially completed, with technical 
reviews and priorities being established for fourth quarter and 2005 
capital projects. Readers should note that the Trust's third quarter 
2004 results only reflect operating results of the EnCana assets from 
the closing date of September 2, 2004 to the end of the period. The 
fourth quarter of 2004 will reflect the first full quarter of operating 
results from the EnCana assets.

The Trust completed the acquisition of Storm Energy Ltd. through a Plan 
of Arrangement on June 30, 2004. Harvest acquired Storm for 
approximately $189.2 million including assumed net debt of approximately 
$65.0 million (refer to Note 5 of the unaudited consolidated financial 
statements for September 30, 2004 for the purchase price allocation). 
The third quarter of 2004 was Harvest's first full operating quarter 
including the Storm Energy properties. The Storm assets have performed 
consistently with expectations and contributed approximately 40% of the 
Trust's average production growth from the second quarter. The Storm 
assets are primarily situated in Harvest's North Central Alberta core 
area and offer strong netbacks and primarily light gravity crude oil 
production. Integration of the Storm properties into Harvest's 
operations continued throughout the third quarter.  As part of this 
integration, technical reviews were conducted for fourth quarter 2004 
and 2005 development drilling and optimization projects in North Central 
Alberta.

Harvest expects its full year 2004 capital program to be approximately 
$50 million, with the focus on adding production and reserves as well as 
improving operating efficiencies. Development capital invested during 
the third quarter totaled $13.2 million and was focused on drilling in 
Southeast Saskatchewan and East Central Alberta. Seven oil wells were 
drilled in Saskatchewan and five oil wells in Alberta, with a success 
rate of 100%. Additional water disposal projects in Hayter were 
commissioned with the goal of further reducing operating costs in future 
quarters.

Based on Harvest's incremental production from 2004 acquisition 
activity, combined with its existing base of production, additional 
volumes from development, and natural production declines, Harvest 
anticipates the following:

/T/

                                       Fourth Quarter         Full Year
                                        2004 Estimate     2004 Estimate
-----------------------------------------------------------------------
Average Production Volumes (BOE/d)    37,000 - 38,000   22,500 - 23,500
Royalties (% of revenue,
 before hedging)                         16.0% - 16.5%    16.5 % - 17.0%
Operating costs ($/BOE)                 $7.50 - $8.00     $8.50 - $9.00
-----------------------------------------------------------------------

/T/

Harvest's expected low payout ratio of approximately 40% in the fourth 
quarter provides additional cash flow to help fund debt repayment, 
ongoing property enhancement programs, and possible future acquisitions.

The Board of Directors of Harvest Operations Corp. will continue to 
evaluate distributions on a regular basis.

All references are to Canadian dollars unless otherwise indicated. 
Natural gas volumes recorded in thousand cubic feet ("mcf") are 
converted to barrels of oil equivalent ("BOE") using the ratio of six 
(6) thousand cubic feet to one (1) barrel of oil ("bbl"). BOE's may be 
misleading, particularly if used in isolation. A BOE conversion ratio of 
6 mcf:1 bbl is based on an energy equivalent conversion method primarily 
applicable at the burner tip and does not represent a value equivalent 
at the wellhead.

Forward-Looking Information

This third quarter report contains forward-looking information and 
estimates with respect to Harvest. This information addresses future 
events and conditions, and as such involves risks and uncertainties that 
could cause actual results to differ materially from those contemplated 
by the information provided. These risks and uncertainties include but 
are not limited to, factors intrinsic in domestic and international 
politics and economics, general industry conditions including the impact 
of environmental laws and regulations, imprecision of reserve estimates, 
fluctuations in commodity prices, interest rates or foreign exchange 
rates and stock market volatility. The information and opinions 
concerning the Trust's future outlook are based on information available 
as at November 11, 2004.

Management's Discussion and Analysis

Management's discussion and analysis ("MD&A") of Harvest Energy Trust's 
("Harvest" or the "Trust") financial condition and results of operations 
should be read in conjunction with Harvest's audited consolidated 
financial statements and accompanying notes for the year ended December 
31, 2003 as well as our unaudited consolidated financial statements and 
notes for the nine months ended September 30, 2004.

Certain Financial Reporting Measures

The Trust has used certain measures of financial reporting that are 
commonly used as benchmarks within the oil and natural gas industry in 
the following MD&A discussion. These measures include: Cash flow from 
operations, Net Debt, Payout Ratio and Operating Netbacks per BOE. These 
measures are not defined under Canadian generally accepted accounting 
principles ("GAAP") and should not be considered in isolation or as an 
alternative to conventional GAAP measures. Certain of these measures are 
not necessarily comparable to a similarly titled measure of another 
company or trust. When these measures are used, they are defined as 
"non-GAAP" and should be given careful consideration by the reader. 
Specifically, management uses Cash flow from operations or cash flow 
(before changes in non-cash working capital) to analyze operating 
performance and leverage. Cash flow as presented is not intended to 
represent operating cash flow or operating profits for the period nor 
should it be viewed as an alternative to cash flow from operating 
activities, net earnings or other measures of financial performance 
calculated in accordance with Canadian GAAP. All references to cash flow 
throughout this report are based on cash flow before changes in non-cash 
working capital.

Trust Overview

Harvest Energy Trust is an oil and natural gas royalty trust, which 
focuses on the operation of high quality mature properties. The Trust 
employs a disciplined approach to the oil and natural gas production 
business, whereby it acquires high working interest, large 
resource-in-place, mature, producing properties and employs "best 
practice" technical and field operational practices to extract maximum 
value. These operational practices include: diligent hands-on management 
to maintain and maximize production rates, the application of technology 
and selective capital investment to maximize reservoir recovery, 
enhancing operational efficiencies to control and reduce expenses, and 
unique marketing arrangements complemented by corporate hedging 
strategies to effectively manage cash flow. The Trust has operations in 
four core areas: North Central Alberta, East Central Alberta, Southern 
Alberta and Southeast Saskatchewan.

/T/

Industry Overview

-----------------------------------------------------------------------
                       Three months ended             Nine months ended
                             September 30                  September 30
                -------------------------------------------------------
                                        %                             %
Prices             2004       2003 Change        2004       2003 Change
                -------------------------------------------------------

West Texas
 Intermediate
 crude oil
 (US$ per
 barrel)        $ 43.88    $ 30.20     45%    $ 39.11    $ 30.99     26%
Edmonton light
 crude ($ per
 barrel)          56.32      40.94     38%      50.83      44.33     15%
Lloyd blend
 crude oil
 ($ per
 barrel)          40.87      29.53     38%      36.74      32.90     12%
Bow river blend
 crude oil
 ($ per
 barrel)          41.55      30.50     36%      37.70      33.80     12%
AECO natural
 gas ($ per
 mcf)              6.15       5.96      3%       6.29       6.70     -6%

Alberta
 Power Pool
 electricity
 price ($ per
 MWh)             54.33      62.59    -13%      54.43      67.75    -20%

Canadian / U.S.
 dollar exchange
 rate (C$)        1.307      1.380     -5%      1.328      1.429      8%
Bank of Canada
 interest rate     2.31%      3.21%   -28%       2.44%      3.25%   -25%
-----------------------------------------------------------------------

/T/

The benchmark price of WTI crude oil has the greatest impact on 
Harvest's revenues because the majority of the Trust's production is 
crude oil. Foreign exchange also has an impact on Harvest's revenues as 
it affects the realized revenues in Canadian dollars for oil sales which 
are denominated in U.S. dollars. Following the EnCana acquisition, 
Harvest's natural gas weighting increased from 2% to approximately 14%, 
thus increasing the impact of fluctuations in AECO natural gas spot 
prices on revenues.

The strengthening of the Canadian versus the U.S. dollar and slightly 
wider differentials for Canadian crude tempered the effects of the 
generally higher worldwide price of crude oil on Harvest's revenues. The 
overall average increase in WTI prices of approximately 45% in the third 
quarter relative to the same period in 2003, was slightly offset by the 
5% increase in the value of the Canadian dollar relative to the U.S. 
dollar. The Edmonton light crude oil price, which is the posted price 
for light oil delivered to Edmonton, rose 38% during the third quarter 
of 2004 relative to the same period of 2003, and contributed to the 
increased revenues Harvest realized for the period.

The differential between heavy and light crude oil continued to widen in 
the third quarter, primarily due to a lack of refinery capacity in the 
US Midwest, which is the export destination point for the majority of 
Canadian heavy crude. In addition, increased competition from foreign 
heavy and sour production being delivered into the North American market 
also contributed to the softening of prices for heavy crude in general. 
The proportionally higher demand for light versus heavy oil products 
also negatively affected the differentials.

Given Harvest's historically higher production weighting to medium and 
heavy crude oil, the Trust has been exposed to swings in world oil 
prices (WTI) and light to medium/heavy differentials. However, the 
assets from the Storm acquisition increased our light oil component in 
the third quarter to approximately 37% of Harvest's total production 
which has lessened this impact. Exit production for the third quarter of 
2004 was 50% light and medium gravity crude oil, 34% heavy oil and 16% 
gas and NGL's. This compares to 44% light and medium gravity crude, 53% 
heavy crude and 3% natural gas and NGL's in the third quarter of 2003. 
This diversification reduces Harvest's exposure to WTI prices and heavy 
oil differentials and increases our exposure to North American natural 
gas prices.

The average Alberta Electricity System Operator (AESO) electricity price 
decreased in the third quarter of 2004 by approximately 13% over the 
same period in 2003. Events during the month of July 2003 versus 2004 
were the leading factors in this decrease. In 2003, July brought high 
temperatures and many days with multiple large generators off-line 
putting extreme strain on the province's ability to supply power leading 
to an average electricity spot market price of $87.91/MWh. By 
comparison, July 2004 saw milder temperatures and more generation 
capacity resulting in an average electricity spot market price of 
$56.55/MWh. Demand growth in the third quarter continued at its 2004 
pace of approximately 4% over 2003. Third quarter 2004 natural gas 
prices increased by 3% compared to 2003, however; this increase was not 
reflected in higher power prices due to higher availability of coal 
fired generators.

/T/

Summary of Quarterly Results
-----------------------------------------------------------------------
-----------------------------------------------------------------------
                                                         2004
               --------------------------------------------------------
Financial                                      Q3         Q2         Q1
-----------------------------------------------------------------------

Revenue, net of royalties                $ 85,424   $ 44,752   $ 39,473
Hedging loss                               16,457     12,249      9,055
Operating expense                          18,993     13,600     13,674
-----------------------------------------------------------------------
Net operating income                     $ 49,974   $ 18,903   $ 16,744

Net income (loss)                           5,166      1,594     (1,065)
 Per Trust Unit, basic                       0.07       0.02      (0.13)
 Per Trust Unit, diluted                     0.07       0.02      (0.13)
Cash flow from operations(1)               44,459     17,160     14,839
 Per Trust Unit, basic(1)                    1.50       0.99       0.87
 Per Trust Unit, diluted(1)                  1.22       0.78       0.68

Sales Volumes
-----------------------------------------------------------------------

Crude oil (bbl/d)                          22,397     14,775     14,626
Natural gas liquids (bbl/d)                   377        141         50
Natural gas (mcf/d)                        11,909      2,249        915
-----------------------------------------------------------------------
Total (BOE/d)                              24,759     15,291     14,829
-----------------------------------------------------------------------
-----------------------------------------------------------------------


Summary of Quarterly Results
-----------------------------------------------------------------------
-----------------------------------------------------------------------
   (Restated - Refer to note 3 of the consolidated financial statements)
                                                    2003
               --------------------------------------------------------
Financial                     Q4           Q3           Q2           Q1
-----------------------------------------------------------------------

Revenue, net of
 royalties              $ 33,577     $ 24,706     $ 21,352     $ 23,308
Hedging loss               3,103        3,525        3,727        8,570
Operating expense         12,984        9,661        6,596        6,804
-----------------------------------------------------------------------
Net operating income    $ 17,490     $ 11,520     $ 11,029     $  7,934

Net income                 6,134        5,673        1,063        3,468
 Per Trust Unit, basic      0.38         0.45         0.09         0.33
 Per Trust Unit, diluted    0.37         0.44         0.09         0.31
Cash flow from
 operations(1)            13,115       16,759        9,547        6,489
 Per Trust Unit,
  basic(1)                  0.81         1.35         0.84         0.62
 Per trust
  unit, diluted(1)          0.79         1.31         0.82         0.60

Sales Volumes
-----------------------------------------------------------------------

Crude oil (bbl/d)         14,497       11,054        9,371        8,034
Natural  gas
 liquids (bbl/d)              70           77           67           43
Natural gas (mcf/d)        1,744        1,453        1,161          875
-----------------------------------------------------------------------
Total (BOE/d)             14,858       11,373        9,632        8,223
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Note 1: This is a non-GAAP measure as referred to in the "Certain
        Financial Reporting Measures" section of this MD&A.

/T/

The above table highlights Harvest's performance for the third quarter 
of 2004, and the preceding quarters following the Trust's Initial Public 
Offering in December of 2002.

Financial

Net revenues have trended higher since the first quarter of 2003, 
attributable to increasing production volumes and a strengthening 
commodity price environment. Production related to the Storm assets is 
reflected for all of the third quarter of 2004, and production from the 
EnCana assets is reflected from September 2 until September 30, 2004.

Net income includes both cash and non-cash items. The non-cash items, 
including depletion, depreciation and accretion (DD&A), future income 
taxes, foreign exchange, and unrealized gain or loss on derivatives can 
cause the net income to vary significantly. As demonstrated in the 
Summary of Quarterly Results table, net income has not reflected the 
same trend as net revenues or cash flows due to the inclusion of 
unrealized mark-to-market gains and losses on the remaining future 
portion of derivative contracts.

Cash flow from operations has demonstrated a steady upward trend, with 
the exception of a substantial non-recurring foreign exchange gain 
realized in the third quarter of 2003.

Sales Volumes

Harvest's production consists of light, medium and heavy crude oil, 
natural gas liquids, and natural gas from properties located in North 
Central Alberta, East Central Alberta, Southern Alberta and Southeastern 
Saskatchewan. Sales volumes, on a barrel of oil equivalent (BOE) basis, 
averaged 24,759 BOE/d and 18,317 BOE/d for the three and nine and month 
periods ended September 30, 2004, respectively. This compares to average 
production of 15,291 BOE/d in the second quarter of 2004, and 11,373 
BOE/d and 9,754 BOE/d for the same periods in 2003. Higher 2004 average 
production in the third quarter compared to the second quarter is due to 
the increased volumes associated with the Storm and EnCana acquisitions, 
as well as successful development and optimization work centered in 
Southeast Saskatchewan and East Central Alberta.

Compared to the third quarter of 2003, higher production primarily 
reflects the impact of the items noted above. These acquisitions also 
resulted in the change to the production mix noted below.

/T/

The average daily sales volumes by product were as follows:

-----------------------------------------------------------------------
                              Three month period     Three month period
                                 ended September        ended September
                                        30, 2004               30, 2003
-----------------------------------------------------------------------
Light crude oil (Bbls/d)         9,087        37%           -         0%
Medium crude oil (Bbls/d)        5,416        22%       5,044        44%
Heavy crude oil (Bbls/d)         7,894        32%       6,010        53%
-----------------------------------------------------------------------
Total oil (Bbls/d)              22,397        90%      11,054        97%
Natural gas liquids (Bbls/d)       377         2%          77         1%
-----------------------------------------------------------------------
Total oil and natural gas
 liquids (Bbls/d)               22,774        92%      11,131        98%
Natural gas (mcf/d)             11,909         8%       1,453         2%

-----------------------------------------------------------------------
Total oil equivalent
 (6:1 BOE/d)                    24,759       100%      11,373       100%
-----------------------------------------------------------------------


-----------------------------------------------------------------------
                               Nine month period      Nine month period
                                 ended September        ended September
                                        30, 2004               30, 2003
-----------------------------------------------------------------------
Light crude oil (Bbls/d)         6,461        35%           -         0%
Medium crude oil (Bbls/d)        4,553        25%       4,300        44%
Heavy crude oil (Bbls/d)         6,271        34%       5,192        53%
-----------------------------------------------------------------------
Total oil (Bbls/d)              17,285        94%       9,492        97%
Natural gas liquids (Bbls/d)       190         1%          68         1%
-----------------------------------------------------------------------
Total oil and natural gas
 liquids (Bbls/d)               17,475        95%       9,560        98%
Natural gas (mcf/d)              5,049         5%       1,165         2%

-----------------------------------------------------------------------
Total oil equivalent
 (6:1 BOE/d)                    18,317       100%       9,754       100%
-----------------------------------------------------------------------

/T/

Harvest's September 30, 2004 exit rate was approximately 37,500 BOE/d, 
an increase of 95% over the second quarter exit rate of 19,200 BOE/d and 
a 223% increase over the third quarter 2003 exit rate of 11,600 BOE/d. 
The increase compared to the previous quarter can primarily be 
attributed to the production acquired in the EnCana acquisition, while 
the increase relative to the same quarter in 2003 is also attributable 
to the Storm and Carlyle acquisitions.

Revenues

Revenues net of hedging losses and before royalties were $85.7 million 
in the third quarter 2004; 110% higher than the second quarter 2004 
revenues of $40.8 million and 243% higher than the $25.0 million 
realized for the same period in 2003.

For the nine months ended September 30, 2004, revenues net of hedging 
losses and before royalties increased 159% to $164.9 million compared to 
$63.6 million in the same period in 2003. Higher net revenues in the 
first nine months of 2004 compared to the same period in the previous 
year are the result of Harvest's higher production volumes coupled with 
higher average commodity prices year-to-date in 2004 compared to 2003. 
The average market price of WTI in the three and nine month periods 
ended September 30, 2004 was U.S.$43.88/BOE and U.S.$39.11/BOE, 
respectively. Harvest's corporate realized prices for the three and nine 
months ended September 30, 2004 were $44.83/BOE and $40.38/BOE compared 
to $38.13/BOE realized in the previous quarter, and $27.27/BOE and 
$29.82/BOE for the same periods in 2003.

/T/

The following is a breakdown of Harvest's average prices before
hedging, by product, for the three and nine month periods ended
September 30, 2004 and 2003.

-----------------------------------------------------------------------
-----------------------------------------------------------------------
                  Three month   Three month    Nine month    Nine month
                 period ended  period ended  period ended  period ended
                    September     September     September     September
                     30, 2004      30, 2003      30, 2004      30, 2003
-----------------------------------------------------------------------
Product prices:
 Light oil ($/bbl)   $  53.46      $      -      $  46.52       $     -
 Medium oil ($/bbl)     43.54         30.45         39.89         32.05
 Heavy oil ($/bbl)      37.64         24.26         35.67         27.80
 Natural gas
  liquids ($/bbl)       45.69         23.80         37.37         29.93
 Natural gas ($/mcf)     6.22          6.17          5.83          6.71
-----------------------------------------------------------------------

BOE ($/BOE)          $  44.83      $  27.27      $  40.53       $ 29.82
-----------------------------------------------------------------------


Operating Netbacks

The following is a summary of Harvest's operating netbacks:

-----------------------------------------------------------------------
                             (Amounts expressed are $/BOE)
-----------------------------------------------------------------------
                  Three month   Three month    Nine month    Nine month
                 period ended  period ended  period ended  period ended
                    September     September     September     September
                     30, 2004      30, 2003      30, 2004      30, 2003
-----------------------------------------------------------------------
Sales price           $ 44.83       $ 27.27       $ 40.53       $ 29.82
Hedging loss             7.22          3.37          7.52          5.94
-----------------------------------------------------------------------
Realized price          37.61         23.90         33.01         23.88

Royalties, net           7.33          3.66          6.58          3.77
Royalties, percent
 of sales price          16.4%         13.4%         16.2%         12.6%
Operating costs          8.34          9.23          9.22          8.66

-----------------------------------------------------------------------
Operating Netback(1)  $ 21.94       $ 11.01       $ 17.21       $ 11.45
-----------------------------------------------------------------------

Note 1: Operating netbacks per BOE are a non-GAAP measure; please refer
        to the "Certain Financial Reporting Measures" section earlier
        in this MD&A

/T/

Third quarter netbacks in 2004 were 61% higher than the $13.59 realized 
in the second quarter, primarily due to higher netback production from 
the Storm assets in North Central Alberta and the recently purchased 
EnCana assets. Higher average commodity prices, and the effect of 
operating cost reduction projects at several of Harvest's properties 
also contributed to stronger netbacks in the third quarter of 2004. 
Operating netbacks of $21.94/BOE and $17.21/BOE realized in the three 
and nine month periods ended September 30, 2004 were 99% and 50% higher 
than the same periods in the previous year.

Harvest anticipates a slight reduction in average royalty rates and 
operating costs in the fourth quarter with the integration of a full 
three months of results associated with the EnCana properties.

Royalties

The higher net royalties, as a percent of revenues before hedging 
losses, in the third quarter compared to the second quarter (15.7%) of 
2004 are primarily attributable to the impact of the higher royalty 
rates on the Storm properties, which Harvest acquired on June 30, 2004. 
Higher net royalty percentages in the three and nine months ended 
September 30, 2004 compared to the same periods in 2003 are due to the 
change in Harvest's royalty structure as the result of the addition of 
the higher royalty burdened Carlyle properties acquired in the fourth 
quarter of 2003.

Royalties as a percentage of revenues are expected to decline in future 
quarters due to lower royalty rates associated with the properties 
acquired from EnCana.

Operating Expenses

The $0.89/BOE decrease in operating expenses during the third quarter of 
2004 compared to the third quarter of 2003 reflects the lower per BOE 
operating costs associated with the recent acquisitions and operating 
cost reduction projects completed in 2004.

During the third quarter of 2004, approximately 35% of Harvest's 
operating costs related to the consumption of electricity. Management 
has utilized fixed price electricity contracts to mitigate electricity 
price risk within Alberta. For the fourth quarter, Harvest anticipates 
realizing further benefits from its electricity hedges (with 
approximately 29 MWh of its estimated Alberta electricity usage hedged 
at an average price of $45.25 per MWh) and capital expenditures of 
approximately $4.9 million in fiscal 2004 being dedicated to power 
efficiency projects.

The third quarter 2004 operating cost figure of $8.34/BOE is in line 
with Harvest's performance goals set out in the December 31, 2003 MD&A. 
Further efficiencies realized from the Harvest capital program coupled 
with additional production volumes from the Storm and EnCana asset 
purchases are expected to reduce the overall 2004 average unit operating 
expenses to approximately $8.50 - $9.00/BOE. In addition, the impact of 
lower operating cost production associated with the EnCana assets will 
further reduce consolidated operating costs per BOE in the fourth 
quarter.

General and Administration Expenses

The portion of general and administration expenses ("G&A") charged 
against income in the third quarter 2004 totaled $2.5 million 
($1.10/BOE) compared to $2.0 million ($1.43/BOE) in the previous 
quarter, and $0.6 million ($0.54/BOE) for the same period in 2003. For 
the nine month period ended September 30, 2004, general and 
administrative expense totaled $6.0 million ($1.21/BOE) compared to $2.1 
million ($0.78/BOE) for the same period in 2003.

The 23% decrease in G&A on a per BOE basis quarter over quarter is the 
result of increased production volumes, somewhat offset by increased 
staff and system expenses and approximately $0.4 million related to unit 
appreciation right expenses as the result of adopting the new CICA 
recommendations on stock based compensation. Harvest's G&A/BOE charged 
against income is anticipated to decrease due to anticipated economies 
of scale following the Storm and EnCana acquisitions.

During the three and nine month periods ended September 30, 2004, $0.7 
million and $1.8 million of G&A were capitalized with regards to field 
enhancement and acquisition activities, while $0.2 million and $0.7 
million were capitalized for the respective periods in 2003.

Interest Expense and Amortization of Deferred Financing Charges

Interest expense and amortization of deferred financing charges in the 
third quarter of 2004 were $3.5 million compared to $1.0 million for the 
previous quarter and $1.2 million for the third quarter in 2003. For the 
nine month periods ended September 30, 2004 and 2003, interest expense 
and amortization of deferred financing charges were $5.8 million and 
$3.4 million, respectively. The increase in the third quarter of 2004 is 
due to interest costs associated with bank debt used to partially 
finance the Storm and EnCana acquisitions. Interest expense will 
increase further in the fourth quarter due to a full three months of 
costs associated with EnCana related debt and also the higher interest 
rate associated with the senior notes issued in October to repay 
outstanding bank debt (see Note 15 to the unaudited consolidated 
financial statements).

Depletion, Depreciation and Accretion

Harvest's depletion, depreciation, and accretion expense totaled $28 
million compared to $12.8 million for the previous quarter, and was $53 
million for the nine month period ended September 30, 2004. This 
compares to $9.7 million in the third quarter of 2003, and $24.3 million 
for the nine month period in 2003.

For the three and nine month periods ended September 30, 2004, the total 
depletion, depreciation and accretion expense primarily consists of: 
crude oil and natural gas properties depletion and depreciation of $24.4 
million and $44.1 million; depletion of capitalized asset retirement 
costs of $2.4 million and $6 million; and approximately $1.2 million and 
$2.9 million for accretion on the asset retirement obligation. The 
depletion rate for oil and natural gas properties was approximately 
$10.67/BOE and $8.76/BOE for the three and nine months ended September 
30, 2004, respectively, and is based on the costs of the oil and natural 
gas properties purchased, capital expenditures incurred, capitalization 
of general and administrative expenses and the long-lived asset 
retirement costs. For the three and nine month periods ended September 
30, 2004, Harvest's depletion rate is higher compared to the same 
periods in 2003. This increase in the depletion rate in 2004 is 
attributable to the Storm properties acquired in the second quarter of 
2004, the purchase price for which reflected both the higher value 
netback for those properties, as well as an increase for accounting 
purposes arising from the future income tax liability associated with 
that acquisition.

For the three and nine month periods ending September 30, 2003 
respectively, the total depletion, depreciation and accretion expense 
primarily consists of: crude oil and natural gas properties depletion 
and depreciation of $8.0 million and $20.1 million; depletion of 
capitalized asset retirement costs of $1.2 million and $1.8 million; and 
approximately $0.5 million and $1.2 million for accretion on the asset 
retirement obligation. The depletion rate for oil and natural gas 
properties was approximately $7.68/BOE and $7.58/BOE, respectively.

Future income taxes

Future income taxes for the three month period ended September 30, 2004 
and 2003 are comprised of approximately $9.8 million and $3.7 million in 
recoveries, respectively. Future income taxes for the nine month periods 
ended September 30, 2004 and 2003 are comprised of approximately $14 
million and $3.9 million in recoveries, respectively. The increase in 
future income tax recovery year over year is mainly due to the increase 
in non-cash derivative contract losses.  The assets purchased in the 
EnCana acquisition will not have an effect on future income tax balances.

Asset Retirement Obligation

Year-over-year the Trust's asset retirement obligation (ARO) has 
increased by $54.2 million mainly driven by the acquisitions of Storm 
and the EnCana assets. Quarter-over-quarter obligations increased by 
$46.2 million in 2004, driven entirely by the EnCana asset acquisition.

Liquidity and Capital Resources

The Trust's capital investment and operational enhancement programs, as 
well as current financial commitments are expected to be supported by 
cash flow from operations net of cash distributions.

For the three and nine month periods ended September 30, 2004, the 
Trust's cash flow from operations was $44.5 million and $78.0 million, 
compared to $16.8 million and $32.8 million for the same periods in 
2003. Net income for the three and nine month periods ended September 
30, 2004 was $5.2 million and $5.7 million, compared to net income of 
$5.5 million and $9.8 million for the same periods in 2003. In the 
previous quarter, cash flow from operations was $17.2 million and net 
income was $1.6 million.

The Trust's net debt (working capital plus demand loan) at September 30, 
2004 was $403 million not including the current portion of commodity 
derivative contracts, which is a substantial increase from net debt of 
$53.6 million as at December 31, 2003. The increase is primarily the 
result of the Plan of Arrangement with Storm and the $526 million 
acquisition of properties from EnCana. As described in Note 15 to the 
third quarter consolidated financial statements, a majority of the 
convertible debentures outstanding at September 30, 2004 have already 
converted to units and we anticipate there will not be a significant 
balance remaining outstanding at the end of 2004.

Harvest's plan is to utilize cash flows, net of cash distributions and 
capital expenditures, to repay the remaining outstanding bank debt. 
Following the issuance of the senior notes and partial repayment of 
outstanding bank debt, Harvest has net bank debt of approximately $100 
million currently outstanding. After payment of cash distributions and 
providing for an anticipated capital program of $70 to $90 million in 
2005, Harvest should have sufficient retained cash flow to settle its 
outstanding bank debt before the end of 2005. Should Harvest make a 
significant property acquisition during that period of time, and 
depending on how such an acquisition is financed, debt levels would 
likely increase; however, Harvest's intent is to maintain an average 
debt to cash flow ratio below 2 times on a go forward basis.

During the third quarter of 2004, the Trust declared $18.4 million in 
distributions payable to Unitholders; $0.20 per Trust Unit for each of 
July, August and September 2004. This compares to $11.0 million declared 
in the second quarter of 2004 and $7.4 million in the same period of the 
previous year. The higher amount reflects units issued in August to 
partially finance the EnCana acquisition as well as the conversion of 
convertible debentures throughout the period.

Of the distributions paid in the third quarter, $3.9 million were 
reinvested into the Trust by unitholders through the issue of 248,188 
Trust Units under the Distribution Reinvestment Plan ("DRIP"). This 
reflects 21% participation under the DRIP. The Trust will continue to 
declare its distributions monthly, and consistent with the preceding 23 
months, the Trust has declared a November distribution payable December 
15, 2004 of $0.20 per Trust Unit. Future distributions will continue to 
be financed with cash flow from operations. Harvest anticipates its 
payout ratio, which is the ratio of distributions to cash flow from 
operations, to be approximately 40% for the fourth quarter of 2004. This 
low payout ratio will provide Harvest significant flexibility in 
servicing its outstanding debt and financing capital and acquisition 
activities.

/T/

A breakdown of the Trust's outstanding Trust Units and potentially
dilutive elements are as follows:

-----------------------------------------------------------------------
                                       As at September       As at June
                                              30, 2004         30, 2004
-----------------------------------------------------------------------
Trust units outstanding                     36,874,829       20,228,860
Exchangeable shares outstanding(1)             552,972          600,587
Trust unit rights outstanding(2)             1,230,225        1,168,100
9% Convertible debentures(3)              $ 24,915,000     $ 57,795,000
8% Convertible debentures(4)              $ 71,219,000                -
-----------------------------------------------------------------------
(1) Exchangeable into Trust Units at the election of the holder at any
    time. Using the exchange ratio in effect on November 15, 2004 of
    1.05604, the exchangeable shares outstanding as at September 30,
    2004 would represent approximately 583,961 Trust Units
(2) Exercisable at an average price of $8.22 per Trust Unit as at
    September 30, 2004; $6.62 per Trust Unit as at June 30, 2004; and
    $6.39 per Trust Unit as at March 31, 2004
(3) Each debenture in this series has a face value of $1,000 and is
    convertible, at the option of the holder at any time, into Trust
    Units at a price of $14.00 per Trust Unit. If Debenture holders
    converted all outstanding debentures in this series at September
    30, 2004 an additional 1,779,643 Trust Units would be issuable.
(4) Each debenture in this series has a face value of $1,000 and is
    convertible, at the option of the holder at any time, into Trust
    Units at a price of $16.25 per Trust Unit. If Debenture holders
    converted all outstanding debentures in this series at September
    30, 2004 an additional 4,382,708 Trust Units would have been
    issuable.

/T/

Capital Expenditures

Development capital expenditures, excluding the Plan of Arrangement with 
Storm and the acquisition of the EnCana properties, totaled $13.2 
million for the three month period ended September 30, 2004, resulting 
in year to date development capital expenditures of $33.8 million. This 
compares to $8.6 million in the previous quarter, and $9.0 million in 
the third quarter of 2003. The capital expenditures were dedicated to 
ongoing optimization and development of existing assets.

Excluding acquisitions, Harvest continues to expect full year 2004 
development capital expenditures of approximately $50 million, and will 
be focused on production, reserve additions, and operating efficiency 
programs. Harvest continues to review capital for the fourth quarter and 
may reallocate funds to properties acquired in the EnCana acquisition, 
but does not anticipate a material increase to this figure.

Future Liquidity Requirements

From time to time the Trust may require external financing, through both 
debt and equity, to further its business plan of maintaining production, 
reserves and distributions through acquisitions and capital 
expenditures. Harvest's ability to obtain the necessary financing is 
subject to external factors including, but not limited to, fluctuations 
in equity and commodity markets, economic downturns and interest and 
foreign exchange rates. Adverse changes in these factors could require 
Harvest's Management to alter the current business plan of the Trust.

As a result of the EnCana asset acquisition, Harvest's bank credit 
facilities increased to a total of $440 million. The credit facilities 
were used to finance the EnCana acquisition, for general corporate 
purposes and to refinance Harvest's existing revolving credit facility. 
However, subsequent to the end of the quarter on October 7, 2004, 
Harvest announced an issuance of US$250 million in 7?% senior notes due 
2011. Proceeds from the issuance of the senior notes were used to repay 
the outstanding $70 million bank bridge facility and partially repay the 
revolving credit facility. The bank lending group has revised the amount 
of Harvest's credit facility to $325 million, leaving approximately $225 
million undrawn at present. Dependent upon market conditions, the Trust 
may draw under this facility, or complete additional financings in the 
form of convertible debentures or Trust Units to expand the capital 
program or to finance additional acquisitions. The Trust also has access 
to and may utilize bridge financing, similar to that used in 2003, if 
required.

The Trust anticipates that following the EnCana acquisition, cash flow 
generated from operating activities will be sufficient for the Trust to 
pay unitholder distributions, service debt, and carry out the 
anticipated optimization and development capital expenditures currently 
contemplated.

/T/

Contractual Obligations

The Trust has entered into the following contractual obligations:

                                                 Maturity
-----------------------------------------------------------------------
Annual Contractual            Less than      Years     Years      After
 Obligation ($ thousands)        1 year      1 - 3     4 - 5    5 Years
-----------------------------------------------------------------------

Product transportation
 agreements                          35         39        25          -
Operating and premise leases        325        755       755          -
-----------------------------------------------------------------------

/T/

As at September 30, 2004 Harvest Operations Corp. has entered into 
physical and financial contracts for production with average deliveries 
of approximately 10,575 barrels per day for the balance of 2004, 16,033 
barrels per day in 2005 and 3,750 barrels per day in 2006. Harvest has 
also entered into financial contracts to minimize its exposure to 
fluctuating electricity prices and the US / Canadian dollar exchange 
rate. Please see Note 12 to the consolidated financial statements for 
further details.

Critical Accounting Policies

The Management of the Trust is required to make estimates and 
assumptions that affect the reported amounts of assets and liabilities 
when applying Canadian generally accepted accounting principles. Certain 
accounting policies have been deemed critical by Management in the 
preparation of the financial results of the Trust. These critical 
accounting policies are described in the Trust's first quarter report 
MD&A and include accounting policies related to oil and natural gas 
operations, the asset retirement obligation and the Trust's unit 
incentive plan.

Changes in Accounting Policies

Note 2 to the consolidated financial statements describes changes to 
accounting policies in 2004, including the adoption of the CICA's 
recommendations related to oil and natural gas accounting, asset 
retirement obligations and financial instruments.

Transactions with Related Parties

See Note 14 to the consolidated financial statements for a description 
of related party transactions reflected during the period ended 
September 30, 2004.

Risk Management Activities

All of Harvest's risk management activities are carried out under 
policies approved by the Board of Directors. Harvest intends to execute 
its business plan to create value for unitholders by paying stable 
monthly distributions and views its risk management activities as a key 
component of achieving this objective.

Under Harvest's risk management policy, management enters into crude oil 
based financial and physical contracts to mitigate the risk of price 
volatility for its expected production. Management also enters into 
electricity price based swaps to assist in maintaining stable operating 
costs. Finally, as a further means to manage revenue risks, management 
has entered into foreign exchange contracts to minimize the effect of 
adverse foreign exchange fluctuations of the Canadian dollar against the 
U.S. dollar. Collectively these contracts had a mark to market 
unrealized loss of $47.1 million as at September 30, 2004. Please refer 
to Note 12 in the Consolidated Financial Statements for further 
information.

The following table summarizes the risk management activities undertaken 
by the Trust, the volumes hedged and the associated unrecognized mark to 
market gains and losses as at September 30, 2004:

/T/

-----------------------------------------------------------------------
                                                        Maturity
-----------------------------------------------------------------------
                                                2004      2005     2006
-----------------------------------------------------------------------

Volumes Hedged
West Texas intermediate crude oil price
 based swaps (bbls/d)                          3,825     1,033        -
West Texas intermediate crude oil price
 based collars (bbls/d)                        5,500     4,000        -
West Texas intermediate crude oil price
 based options (bbls/d)                        1,250    11,000    3,750
Lloyd blend crude oil price based
 swaps (bbls/d)                                4,500         -        -
Alberta electricity price based swaps (MW)        25        25       30
Electricity heat rate (GJ/M Wh)                    -         5        -
Canadian / U.S. dollar based swap
 (U.S. $ million)                                  3         -        -
-----------------------------------------------------------------------



-----------------------------------------------------------------------
                                                        Maturity
-----------------------------------------------------------------------
                                                2004      2005     2006
-----------------------------------------------------------------------

Mark to Market Gains (Losses)
 ($ thousands)
West Texas intermediate crude oil price
 based swaps                                  (9,075)  (10,759)       -
West Texas intermediate crude oil price
 based collars                                (8,328)  (12,027)       -
West Texas intermediate crude oil price
 based options                                  (415)  (11,326)  (1,294)
Lloyd blend crude oil price
 based swaps                                   2,933         -        -
Alberta electricity price based swaps            582     1,483      352
Electricity heat rate                              -       111        -
Canadian / U.S. dollar put option                679         -        -
-----------------------------------------------------------------------
                                             (13,624)  (32,518)    (942)
-----------------------------------------------------------------------

/T/

Taxability of Cash Distributions paid to Canadian Resident Unitholders

Harvest declared and paid distributions of $0.20 per Trust Unit for each 
month to date in 2004. Harvest anticipates that cash distributions will 
be highly taxable this year and in 2005.

Key Performance Indicators and 2004 Outlook

We have indicated guidance on fourth quarter 2004 and full year 2004 
numbers elsewhere in this MD&A.

Harvest plans to continue with its business plan of acquiring and 
operating high quality, mature crude oil and natural gas properties that 
can be enhanced through operational and exploitation techniques. Harvest 
also plans to continue to identify new areas in the Western Canadian 
sedimentary basin that can provide the required growth and stability for 
sustainable distributions and growth in net asset value per unit.

It is important to note that any future guidance provided are based upon 
management's current expectations. The ultimate results may vary, 
perhaps materially.

Sensitivities

The table below indicates the impact of changes in key variables on 
several financial measures of Harvest. The figures in this table are 
based on the units outstanding as at September 30, 2004 and our existing 
hedging program, and are provided for directional information only.

/T/

-----------------------------------------------------------------------
                                           Variable
-----------------------------------------------------------------------
                                  Heavy              Canadian   Foreign
                      WTI       Oil LLB         Crude    bank  exchange
                    price  differential           Oil   prime      Cdn.
                     /bbl          /bbl    production    rate     /U.S.
-----------------------------------------------------------------------

Assumption      $40.00 US     $15.00 US  36,000 bbl/d    4.25%     1.21
Change (plus
 or minus)      $ 1.00 US     $ 1.00 US   1,000 bbl/d    1.00%     0.01

Annualized
 impact on:
Cash flow
 from
 operations
 ($000's)       $   7,700     $   7,200       $ 8,100   $ 500    $2,600
Per trust
 unit, basic    $    0.18     $    0.17       $  0.19   $0.01    $ 0.06
Per trust
 unit, diluted  $    0.17     $    0.16       $  0.18   $0.01    $ 0.06

Payout ratio          1.6%          1.5%          1.3%    0.1%      0.5%

/T/

Third Quarter 2004 Conference Call and Webcast

Harvest will be conducting a conference call and Webcast for interested 
analysts, brokers, investors and media representatives about its third 
quarter 2004 results at 9:00 a.m. Mountain time (11:00 a.m. Eastern 
time) on November 12th, 2004.

Callers may dial 1-888-789-0089 (or in Toronto call 416-695-9753) a few 
minutes prior to start and request the Harvest conference call. The call 
also will be available for replay by dialing 1-866-518-1010 (or in 
Toronto at 416-695-5275). No passcode is required.

Webcast listeners are invited to go to the Financial Information - 
Quarterly Reports page of the Harvest Energy website at 
www.harvestenergy.ca for the live Webcast and/or a replay of the Webcast.

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. Harvest Trust Units are traded on the Toronto 
Stock Exchange (TSX) under the symbol "HTE.UN". Please visit Harvest's 
website at www.harvestenergy.ca for additional corporate information and 
recent corporate presentations.

ADVISORY: Certain information regarding Harvest Energy Trust and its 
subsidiaries 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 
natural 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 statements.

/T/

Harvest Energy Trust
Consolidated Balance Sheets
(thousands of dollars)

                                                             (Restated,
                                                                Note 3)
-----------------------------------------------------------------------
                                             September 30, December 31,
                                                     2004         2003
-----------------------------------------------------------------------
Assets                                         (Unaudited)    (Audited)

Current assets
 Accounts receivable                          $    56,024  $    19,168
 Prepaid expenses and deposits                     15,272       12,131
-----------------------------------------------------------------------
                                                   71,296       31,299
Deferred financing charges,
 net of amortization                                4,116        1,989
Future income taxes                                     -       12,609
Property, plant and equipment
 (Notes 3, 4 and 5)                               965,028      210,543
Goodwill (Note 5)                                  29,576            -
-----------------------------------------------------------------------
                                              $ 1,070,016  $   256,440
-----------------------------------------------------------------------
-----------------------------------------------------------------------

Liabilities and Unitholders' Equity

Current liabilities
 Accounts payable and accrued liabilities     $    65,741  $    18,083
 Cash distributions payable                         7,371        3,422
 Current portion of commodity derivative
  contracts (Note 12)                              23,333            -
 Bank debt (Notes 6 and 15)                       401,556       63,349
-----------------------------------------------------------------------
                                                  498,001       84,854
Long term portion of commodity
 derivative contracts (Note 12)                     6,063            -
Asset retirement obligation (Note 3)               96,200       42,009
Future income taxes (Note 5)                       19,129            -
-----------------------------------------------------------------------
                                                  619,393      126,863

Unitholders' equity
 Unitholders' capital (Notes 8 and 15)            392,356      117,407
 Exchangeable shares (Notes 9 and 15)               8,167            -
 Equity bridge notes (Notes 7 and 14)              10,000       25,000
 Convertible debentures (Notes 11 and 15)          91,821            -
 Accumulated income                                19,558       19,478
 Contributed surplus                                1,008          239
 Accumulated cash distributions                   (72,287)     (32,547)
-----------------------------------------------------------------------
                                                  450,623      129,577
-----------------------------------------------------------------------
                                              $ 1,070,016  $   256,440
-----------------------------------------------------------------------
-----------------------------------------------------------------------

Subsequent events (Note 15)
Commitments and contingencies (Note 16)
See accompanying notes to consolidated financial statements.



Harvest Energy Trust
Consolidated Statements of Income and Accumulated Income
(Unaudited)
(thousands of dollars, except per Trust Unit amounts)
-----------------------------------------------------------------------
                              Three Months Ended     Nine Months Ended
                                    September 30          September 30
                                 2004       2003       2004       2003
-----------------------------------------------------------------------
                                       (Restated,            (Restated,
                                          Note 3)               Note 3)

Revenue
 Oil and natural gas sales  $ 102,124  $  28,538  $ 202,681  $  79,407
 Royalty expense, net         (16,700)    (3,832)   (33,031)   (10,045)
 Hedging loss                 (16,457)    (3,525)   (37,761)   (15,821)
 Mark to market loss on
  commodity derivative
  contracts (Note 12)         (19,664)         -    (29,396)         -
-----------------------------------------------------------------------
                               49,303     21,181    102,493     53,541

Expenses
 Operating                     18,993      9,661     46,267     23,061
 General and administrative     2,504        567      6,049      2,087
 Interest                       3,037        430      3,919      1,807
 Amortization of deferred
  finance charges                 507        766      1,845      1,579
 Depletion, depreciation
  and accretion                28,062      9,744     53,002     24,275
 Foreign exchange
  gain (loss)                     724     (1,825)      (565)    (5,313)
-----------------------------------------------------------------------
                               53,827     19,343    110,517     47,496
-----------------------------------------------------------------------
Income (loss) before taxes     (4,524)     1,838     (8,024)     6,045


Taxes
 Large corporation tax            120         86        256        138
 Future income tax
  expense (recovery)           (9,810)    (3,736)   (13,976)    (3,906)
-----------------------------------------------------------------------

Net income for
 the period                     5,166      5,488      5,696      9,813
-----------------------------------------------------------------------

Interest on equity bridge
 notes (Notes 7 and 14)          (466)      (205)      (658)      (205)
Interest on convertible
 debentures (Note 11)          (2,726)         -     (4,958)         -

Accumulated income,
 beginning of period           17,584      9,157     19,478      4,832

Accumulated income,
 end of period             $   19,558  $  14,440  $  19,558  $  14,440
-----------------------------------------------------------------------
-----------------------------------------------------------------------

Net income per Trust
 Unit (Notes 8, 9 and 10)
Income per
 Trust Unit, basic         $     0.07  $    0.44  $   (0.52) $    0.86
Income per Trust
 Unit, diluted             $     0.07  $    0.43  $   (0.52) $    0.84
-----------------------------------------------------------------------

See accompanying notes to consolidated financial statements.



Harvest Energy Trust
Consolidated Statements of Cash Flows (Unaudited)
(thousands of dollars, except per Trust Unit amounts)
-----------------------------------------------------------------------
                              Three Months Ended     Nine Months Ended
                                    September 30          September 30
                                 2004       2003       2004       2003
-----------------------------------------------------------------------
                                       (Restated,            (Restated,
                                          Note 3)               Note 3)

Cash provided by (used in)
Operating Activities
 Net income for
  the period                $   5,166 $    5,488 $    5,696  $   9,813
 Items not requiring cash
   Depletion, depreciation
    and accretion              28,062      9,744     53,002     24,275
   Foreign exchange               492      4,484      1,256        997
   Amortization of deferred
    finance charges               507        766      1,845      1,579
   Mark to market loss on
    commodity derivative
    contracts (Note 12)        19,664          -     29,396          -
   Future income tax
    recovery                   (9,810)    (3,736)   (13,976)    (3,906)
   Unit based compensation        378         12        769         37
-----------------------------------------------------------------------
 Cash flow from operations     44,459     16,758     77,988     32,795
 Site restoration and
  reclamation expenditures       (154)         -       (307)         -
 Change in non-cash working
  capital (Note 13)            (9,093)     7,345    (12,405)     6,449
-----------------------------------------------------------------------
                               35,212     24,103     65,276     39,244

Financing Activities
 Issue of Trust Units,
  net of costs                166,063       (165)   165,932     13,631
 Issue of Trust Units under
  the distribution
  reinvestment plan, net
  of costs (Note 8)             3,883      2,986      7,063      7,385
 Issue of bridge
  note payable                      -     25,000          -     25,000
 Issue of equity bridge
  notes (Notes 7 and 14)        5,000     33,500     30,000     33,500
 Repayment of equity bridge
  notes (Notes 7 and 14)      (20,000)         -    (45,000)         -
 Interest on equity
  bridge notes                   (466)         -       (658)         -
 Issuance of convertible
  debentures, net
  of costs                     95,500          -    152,834          -
 Interest on convertible
  debentures                   (2,726)         -     (4,958)         -
 Increase in bank debt        350,800      8,485    624,065     41,864
 Repayment of bank debt       (93,763)   (57,127)  (344,294)   (86,684)
 Repayment of promissory
  note payable                      -       (850)         -       (850)
 Financing costs               (3,951)      (542)    (3,973)      (542)
 Cash distributions           (18,434)    (7,403)   (39,740)   (19,833)
 Change in non-cash working
  capital (Note 13)             5,451         57      5,841        642
-----------------------------------------------------------------------
                              487,357      3,941    547,112     14,113

Investing Activities
 Additions to property,
  plant and equipment         (13,182)    (9,041)   (33,822)   (34,012)
 Acquisitions                (513,815)         -   (588,815)    (3,000)
 Change in non-cash working
  capital (Note 13)             4,428     (2,781)    10,249     (3,444)
-----------------------------------------------------------------------
                             (522,569)   (11,822)  (612,388)   (40,456)

Increase in cash and
 short-term investments             -     16,223          -     12,901

Cash, beginning of period           -      1,181          -      4,503
-----------------------------------------------------------------------
Cash, end of period         $       -  $  17,404  $       -  $  17,404
-----------------------------------------------------------------------
-----------------------------------------------------------------------

Cash interest payments      $   1,654  $     742  $   4,375  $   1,687
Cash tax payments           $     461  $      91  $     527  $     138
Cash distributions
 declared per unit          $    0.60  $    0.60  $    1.80  $    1.80
-----------------------------------------------------------------------
-----------------------------------------------------------------------

See accompanying notes to consolidated financial statements.

Harvest Energy Trust
Notes to Consolidated Financial Statements
September 30, 2004
(tabular amounts in thousands of dollars, except Trust Unit and per
 Trust Unit amounts)

/T/

1. Significant accounting policies

These interim consolidated financial statements of Harvest Energy Trust 
(the "Trust") have been prepared by management in accordance with 
Canadian generally accepted accounting principles ("Canadian GAAP"). The 
preparation of financial statements requires management to make 
estimates and assumptions that affect the reported amounts of assets and 
liabilities and disclosures of contingencies, if any, as at the date of 
the financial statements and the reported amounts of revenues and 
expenses during the period. In the opinion of management, these 
financial statements have been prepared within reasonable limits of 
materiality. Except as noted below, these interim consolidated financial 
statements follow the same significant accounting policies as described 
and used in the consolidated financial statements of the Trust for the 
year ended December 31, 2003 and should be read in conjunction with that 
report. Certain comparative figures have been reclassified to conform to 
the current period's presentation.

These consolidated financial statements include the accounts of Harvest 
Energy Trust and its wholly owned subsidiaries.

2. Changes in accounting policy

a) Full cost accounting guideline

Effective January 1, 2004, the Trust has adopted the CICA Accounting 
Guideline 16 "Oil and Gas Accounting - Full Cost". The changes under the 
new guideline include modifications to the ceiling test and depletion 
and depreciation calculations. There were no changes to the net income, 
property plant and equipment or any other financial statement amounts as 
a result of the implementation of this guideline.

b) Asset retirement obligation

Effective January 1, 2004, the Trust has adopted the CICA Handbook 
standard for accounting for its asset retirement obligation. The new 
standard requires the Trust to record the fair value of an asset 
retirement obligation as a liability in the period in which it incurs a 
legal obligation associated with the retirement of tangible long-lived 
assets that result from the acquisition, construction, development, and 
normal use of the assets. The associated asset retirement costs are 
capitalized as part of the carrying amount of the long-lived asset and 
depleted and depreciated using the unit of production method over 
estimated gross proved reserves. Subsequent to the initial measurement 
of the asset retirement obligation, the obligation is adjusted at the 
end of each period to reflect the passage of time and changes in the 
estimated future cash flows underlying the obligation.

c) Financial instruments

Effective January 1, 2004, the Trust has implemented CICA Accounting 
Guideline 13 "Hedging Relationships". This guideline addresses the 
identification, designation and effectiveness of financial contracts for 
the purpose of application of hedge accounting. Under this guideline, 
financial derivative contracts must be designated to the underlying 
revenue or expense stream that they are intended to hedge, and tested to 
ensure they remain sufficiently effective. For transactions that do not 
qualify as designated hedges, the Trust applies a fair value method of 
accounting by initially recording an asset or liability, and recognizing 
changes in the fair value of the derivative instruments in income. (Note 
12)

d) Goodwill

Goodwill is the residual amount that results when the purchase price of 
an acquired business exceeds the fair value for accounting purposes of 
the net identifiable assets and liabilities of the acquired business 
(Note 5). The goodwill balance is assessed for impairment annually at 
year-end, or more frequently if events or changes in circumstances 
indicate that the asset might be impaired. The test for impairment is 
carried out by the comparison of the carrying amount to the fair value 
of the reporting entity. If the fair value of the consolidated Trust is 
less than the book value, impairment is measured by allocating the fair 
value of the consolidated Trust to the identifiable assets and 
liabilities at their fair values. The excess of this allocation is the 
fair value of goodwill. Any excess of the book value of goodwill over 
this implied fair value is the impairment amount. Impairment is charged 
to income in the period in which it occurs. Goodwill is stated at cost 
less impairment and is not amortized.

3. Asset retirement obligation

The Trust's asset retirement obligation results from net ownership 
interests in petroleum and natural gas assets including well sites, 
gathering systems and processing facilities. The Trust estimates the 
total undiscounted amount of cash flows required to settle its asset 
retirement obligation is approximately $182 million which will be 
incurred between 2004 and 2023. The majority of the costs will be 
incurred between 2015 and 2021. A credit-adjusted risk-free rate of 7.5 
percent was used to calculate the fair value of the asset retirement 
obligation.

/T/

A reconciliation of the asset retirement obligation is provided below:

-------------------------------------------------------
                                     Three months ended
                                           September 30
Asset retirement obligation            2004        2003
-------------------------------------------------------

Balance, beginning of period       $ 50,007    $ 27,655
Liabilities incurred in the period   45,134           -
Liabilities settled in the period      (154)          -
Accretion expense                     1,213         500
-------------------------------------------------------
Balance, end of period             $ 96,200    $ 28,155
-------------------------------------------------------

---------------------------------------------------------------------
                                      Nine months ended    Year ended
                                           September 30   December 31,
Asset retirement obligation             2004       2003          2003
---------------------------------------------------------------------

Balance, beginning of period       $ 42,009    $ 15,566      $ 15,566
Liabilities incurred in the period   51,611      11,406        25,175
Liabilities settled in the period      (307)          -          (577)
Accretion expense                     2,887       1,183         1,845
---------------------------------------------------------------------
Balance, end of period             $ 96,200    $ 28,155      $ 42,009
---------------------------------------------------------------------


The effect of the change in accounting policy (Note 2) has been
recorded retroactively with restatement of prior periods as follows:

                                                                As at
---------------------------------------------------------------------
Balance sheet                                       December 31, 2003
---------------------------------------------------------------------
Asset retirement costs, included in
 property, plant and equipment                              $  35,166
Asset retirement obligation                                    42,009
Site restoration provision                                     (4,321)
Future income taxes                                             1,024
Accumulated income                                             (1,498)
---------------------------------------------------------------------

                              Three months ended    Nine months ended
Income statement              September 30, 2003   September 30, 2003
---------------------------------------------------------------------
Accretion expense                         $  500              $ 1,183
Depletion and depreciation
 on asset retirement costs                 1,211                2,911
Site restoration and reclamation          (1,271)              (2,655)
Future income tax expense (recovery)        (179)                (585)
Net earnings change                         (261)                (854)
Basic net earnings change
 per Trust Unit                            (0.02)               (0.08)
Diluted net earnings change
 per Trust Unit                            (0.02)               (0.08)
---------------------------------------------------------------------

/T/

4. Acquisitions

On September 2, 2004, the Trust purchased oil and gas producing 
properties from EnCana Corporation for cash consideration of 
approximately $526 million. In conjunction with the acquisition of these 
properties, the Trust issued approximately $175.2 million in 
subscription receipts which were converted into 12,166,666 Trust Units 
upon completion of the purchase (Note 8), and $100 million in 8% 
convertible unsecured subordinated debentures (Note 11). The balance of 
the acquisition cost was funded with a new credit facility arrangement 
(Note 6). In association with the purchase, an asset retirement 
obligation in the amount of $45.1 million was recorded (Note 3). The 
Trust has not yet finalized the statements of adjustments and therefore, 
the acquisition cost may be subject to change.

5. Plan of Arrangement with Storm Energy Ltd.

On June 30, 2004, the Trust completed a Plan of Arrangement with Storm 
Energy Ltd. ("Storm"). Under this plan, the Trust acquired certain oil 
and natural gas producing properties for total consideration of 
approximately $189.2 million. This amount consisted of the issuance of 
2,720,837 Trust Units at a price of $14.77 per unit (Note 8), the 
issuance of 600,587 exchangeable shares (Note 9), $75 million in cash, 
the assumption of approximately $58.5 million in debt and a working 
capital deficit of $6.7 million. This transaction has been accounted for 
using the purchase price method.

The following summarizes the estimated fair value of the assets acquired 
and liabilities assumed at the date of acquisition. The Trust has not 
yet completed its final calculation of the assets acquired and 
liabilities assumed and therefore, the purchase method of accounting may 
be subject to change.

/T/

                                                               Amount
---------------------------------------------------------------------
Property, plant & equipment                                 $ 211,829
Goodwill                                                       29,576
Working capital, deficiency                                    (6,669)
Bank debt                                                     (58,472)
Asset retirement obligation                                    (6,477)
Future income taxes                                           (45,734)
---------------------------------------------------------------------
                                                            $ 124,053
---------------------------------------------------------------------
---------------------------------------------------------------------
Consideration for the acquisition:
Cash                                                        $  75,000
Issuance of Trust Units                                        40,183
Issuance of exchangeable shares                                 8,870
---------------------------------------------------------------------
                                                            $ 124,053
---------------------------------------------------------------------
---------------------------------------------------------------------

/T/

6. Bank debt

On September 1, 2004, Harvest Operations Corp. entered into an amended 
credit agreement with a syndicate of Canadian chartered banks and the 
Alberta Treasury Branches. This facility consists of a $355 million 
production loan, a $15 million operating loan, a $70 million equity 
bridge facility and a U.S. $18.8 million mark to market credit to be 
used for financial instrument hedging. The term of the facility is to 
June 29, 2005. The facility permits drawings in Canadian or U.S. 
dollars, and includes bankers acceptances, LIBOR and letters of credit. 
Outstanding balances bear interest at rates ranging from 0% to 2.25% 
above the applicable Canadian or U.S. prime rate depending upon the type 
of borrowing and the debt to annualized cash flow ratio. The debt is 
secured by a $750 million debenture with a floating charge over all of 
the assets of the Corporation, and a guarantee by the Trust and its 
subsidiaries. Under the terms of this credit agreement, the equity 
bridge facility was provided to assist in the closing of the EnCana 
asset acquisition (Note 4). This facility matures on June 1, 2005, and 
outstanding balances under this facility bear interest at progressive 
rates of 3% to 8% above the applicable Canadian prime rate. The equity 
bridge facility is to be repaid with the net proceeds of any debt or 
equity financing completed subsequent to its issuance. Distributions to 
the Trust's unitholders, and payments on the Equity Bridge notes (Note 
7), and the convertible debentures (Note 11) are subordinate to the bank 
debt. The credit facility agreement includes certain restrictive 
covenants, including a working capital ratio as defined under the 
agreement, of at least one to one and a requirement that Harvest not 
hedge more than 75% of its net after royalty production. See note 15.

7. Equity bridge notes

On January 26 and 29, 2004, the Trust repaid the two equity bridge notes 
outstanding in the amounts of $7.4 million and $17.6 million, 
respectively. During the nine months ended September 30, 2004, the Trust 
also paid the accrued and outstanding interest in the amount of 
$1,521,407.

On June 29 and July 9, 2004, the Trust drew $25 million and $5 million 
respectively, under the equity bridge note agreement. This agreement is 
with a corporation controlled by a director of Harvest Operations Corp, 
respectively. On August 11, 2004 the Trust repaid $20 million of this 
balance with proceeds from subscription receipts issued (Note 8). 
Interest in respect of the equity bridge notes accrues at 10% per annum 
and is a charge to unitholders' equity and is not included in income.

/T/

8. Unitholders' capital

(a) Authorized

The authorized capital consists of an unlimited number of Trust Units.

(b) Issued

---------------------------------------------------------------------
                                             Number of
                                                 units         Amount
---------------------------------------------------------------------

As at December 31, 2003                     17,109,006      $ 117,407

Unit appreciation rights exercise (i)            6,250             57
Storm Plan of Arrangement (ii)               2,720,837         40,183
Convertible debenture conversions (iv)         157,497          2,163
Distribution reinvestment plan
 issuance (vi)                                 235,270          3,180
Trust unit issue costs                               -           (131)
---------------------------------------------------------------------
As at June 30, 2004                         20,228,860      $ 162,859
---------------------------------------------------------------------

Unit appreciation rights exercise (i)           62,500            238
Conversion of subscription receipts (iii)   12,166,666        175,200
Convertible debenture conversions (iv)       4,119,719         61,703
Exchangeable share retraction (v)               48,896            703
Distribution reinvestment plan
 issuance (vi)                                 248,188          3,883
Trust unit issue costs                               -        (12,230)
---------------------------------------------------------------------
As at September 30, 2004                    36,874,829      $ 392,356
---------------------------------------------------------------------

/T/

(i) During the nine month period ended September 30, 2004, 68,750 Trust 
Unit appreciation rights were exercised, for proceeds of $294,500.

(ii) On June 30, 2004, 2,720,837 Trust Units were issued under the Plan 
of Arrangement with Storm Energy Ltd. (Note 5)

(iii) On September 2, 2004, the subscription receipts issued on August 
10, 2004 were converted into Trust Units in connection with the closing 
of the EnCana asset purchase. (Note 4)

(iv) During the nine month period ended September 30, 2004, 35,085 9% 
convertible debentures and 28,781 8% convertible debentures were 
converted at the option of the holders, into 4,277,216 Trust Units and 
$987,847 in accrued interest and fractional units. (Note 11)

(v) During the period ended September 30, 2004, 47,615 exchangeable 
shares were retracted at the option of the holder, and converted into 
48,896 Trust Units. (Note 9)

(vi) For the nine month period ended September 30, 2004, 483,458 Trust 
Units in the amount of $7.1 million were issued under the distribution 
reinvestment plan ("DRIP").

(c) Per Trust Unit information

/T/

The following table summarizes the Trust Units used in calculating
income per Trust Unit:

----------------------------------------------------------------------
                                       Three months ended September 30
                                                   2004           2003
----------------------------------------------------------------------
Weighted average Trust Units outstanding     29,058,490     12,385,722
Weighted average exchangeable shares
 outstanding                                    610,792              -
----------------------------------------------------------------------
Weighted average Trust Units
 outstanding, basic                          29,669,282     12,385,722
Effect of Trust Unit appreciation rights        641,893        391,972
----------------------------------------------------------------------
Weighted average Trust Units
 outstanding, diluted                        30,311,175     12,777,694
----------------------------------------------------------------------


----------------------------------------------------------------------
                                        Nine months ended September 30
                                                   2004           2003
----------------------------------------------------------------------
Weighted average Trust Units outstanding     20,938,137     11,383,042
Weighted average exchangeable shares
 outstanding                                    205,084              -
----------------------------------------------------------------------
Weighted average Trust Units
 outstanding, basic                          21,143,221     11,383,042
Effect of Trust Unit appreciation rights        570,771        360,157
----------------------------------------------------------------------
Weighted average Trust Units
 outstanding, diluted                        21,713,992     11,743,199
----------------------------------------------------------------------

The income (loss) per Trust Unit is calculated on the basis of net
income available to the Trust unitholder, and as such deducts the
interest on the equity bridge notes and convertible debentures in
the numerator of the calculation.

9. Exchangeable shares

(a) Authorized

Harvest Operations Corp. is authorized to issue an unlimited number
of exchangeable shares without nominal or par value.

(b) Issued

Exchangeable shares, series 1
----------------------------------------------------------------------
                                                  Number        Amount
----------------------------------------------------------------------
Storm Plan of Arrangement (i)                    600,587       $ 8,870
Shareholder retractions                          (47,615)      $  (703)
----------------------------------------------------------------------
As at September 30, 2004                         552,972       $ 8,167
----------------------------------------------------------------------

/T/

(i) On June 30, 2004, 600,587 exchangeable shares, series 1 were issued 
at $14.77 per exchangeable share as partial consideration for the Plan 
of Arrangement with Storm (Note 5). The exchangeable shares had an 
exchange ratio of 1:1.04703 as at October 15, 2004.

The exchangeable shares, series 1 can be converted at the option of the 
holder at any time into Trust Units. The number of Trust Units issued to 
the holder upon conversion is based upon the applicable exchange ratio 
at that time. The exchange ratio is calculated monthly and adjusts to 
account for distributions paid to unitholders during the period that the 
exchangeable shares are outstanding. The exchangeable shares are not 
eligible to receive distributions. The exchangeable shares that have not 
been converted by the holder, may be redeemed by Harvest Operations 
Corp. at any date subsequent to June 30, 2006 until June 30, 2009, at 
which time all remaining exchangeable shares in this series will be 
redeemed. Harvest Operations Corp. also has the option to convert up to 
20% of the initial amount of the exchangeable shares outstanding 
annually in the first 90 days of each calendar year, and may also redeem 
all of the exchangeable shares if the aggregate amount outstanding is 
less than 500,000.

10. Trust Unit incentive plan

A Trust Unit incentive plan has been established whereby the Trust is 
authorized to grant non-transferable rights to purchase Trust Units to 
directors, officers, consultants, employees and other service providers 
to an aggregate of 1,487,250 Trust Units. The initial exercise price of 
rights granted under the plan is equal to the closing market price on 
the date immediately prior to the date the rights are granted and the 
maximum term of each right is not to exceed five years. The exercise 
price of the rights is adjusted downwards from time to time based upon 
the cash distributions made on the Trust Units if the minimum 
distribution rate is met.

The following summarizes the Trust Units reserved for issuance under the 
Trust Unit incentive plan:

/T/

----------------------------------------------------------------------
                                                              Weighted
                                           Trust Unit          average
                                               rights   exercise price
----------------------------------------------------------------------
As at December 31, 2003                     1,065,150          $  6.86
Granted                                       370,700            15.66
Cancelled                                     (83,375)           (5.36)
Exercised for Trust Units                    (111,000)           (3.80)
Exercised for cash                            (11,250)           (6.81)
Average reduction in exercise price
 due to distributions                               -            (1.26)
----------------------------------------------------------------------
As at September 30, 2004                    1,230,225          $  8.22
----------------------------------------------------------------------
----------------------------------------------------------------------

All of the Trust Unit rights outstanding vest equally over four years
from their issuance date.

For purposes of estimating fair value disclosures below, the fair value
of each Trust Unit right has been estimated on the grant date using the
following weighted-average assumptions:

----------------------------------------------------------------------
                                                      September 30
                                                 2004             2003
----------------------------------------------------------------------
Expected volatility                              23.3%            23.3%
Risk free interest rate                           4.0%             3.5%
Expected life of the Trust Unit rights        4 years          4 years
Estimated annual distributions per unit         $2.40            $2.40

/T/

For the purposes of pro forma disclosures, the estimated fair value of 
all of the Trust Unit rights issued prior to December 31, 2002 is 
amortized to expense over the vesting periods. The Trust's pro forma net 
income and per Trust Unit amounts would have been accounted for as 
follows:

/T/

----------------------------------------------------------------------
                               (Restated, Note 3)    (Restated, Note 3)
----------------------------------------------------------------------
                              Three months ended    Nine months ended
                                    September 30         September 30
                                 2004       2003      2004       2003
----------------------------------------------------------------------
Net income
              As reported      $5,166     $5,488    $5,696     $9,813
                Pro forma      $4,738     $5,055    $4,548     $8,668
Income (loss)
 per unit
 - basic      As reported       $0.00     $ 0.44     $0.07     $ 0.86
                Pro forma     ($ 0.05)    $ 0.41     $0.05     $ 0.76
Income (loss)
 per unit
 - diluted    As reported     ($ 0.00)    $ 0.43     $0.07     $ 0.84
                Pro forma     ($ 0.05)    $ 0.40     $0.05     $ 0.74

/T/

During the three and nine month periods ended September 30, the Trust 
has recognized $0.4 million and $0.8 million in 2004 and $12,000 and 
$37,000 in 2003 respectively, in compensation expense related to Trust 
Unit rights and included it in general and administrative expense in the 
consolidated statement of income and accumulated income.

11. Convertible debentures

On January 29, 2004, the Trust closed an issue of 60,000 9% convertible 
unsecured subordinated debentures due May 31, 2009. Interest on the 
debentures is payable semi-annually in arrears in equal installments on 
May 31 and November 30 in each year, commencing May 31, 2004. The 
debentures are convertible into fully paid and non-assessable Trust 
Units at the option of the holder at any time prior to the close of 
business on the earlier of May 31, 2009 and the business day immediately 
preceding the date specified by the Trust for redemption of the 
Debentures, at a conversion price of $14.00 per Trust Unit plus a cash 
payment for accrued interest and in lieu of any fractional Trust Units 
resulting on the conversion. The debentures may be redeemed by the Trust 
at its option in whole or in part subsequent to May 31, 2007, at a price 
equal to $1,050 per debenture between June 1, 2007 and May 31, 2008 and 
at $1,025 per debenture between June 1, 2008 and May 31, 2009. Any 
redemption will include accrued and unpaid interest at such time when 
completed. The Trust may also elect to redeem the debentures upon 
maturity with the issue of Trust Units at a price equal to 95% of the 
weighted average trading price for the preceding 20 consecutive trading 
days, 5 days prior to settlement date. Under both redemption options, 
the Trust may elect to pay both the debenture and accrued interest in 
the form of Trust Units.

On August 10, 2004, the Trust closed an issue of 100,000 8% convertible 
unsecured subordinated debentures due September 30, 2009, for gross 
total proceeds of $100 million. Interest on the debentures is payable 
semi-annually in arrears in equal installments on March 31 and September 
30 in each year, commencing March 31, 2005. The debentures are 
convertible into fully paid and non-assessable Trust Units at the option 
of the holder at any time prior to the close of business on the earlier 
of September 30, 2009 and the business day immediately preceding the 
date specified by the Trust for redemption of the Debentures, at a 
conversion price of $16.25 per Trust Unit plus a cash payment for 
accrued interest and in lieu of any fractional Trust Units resulting on 
the conversion. The debentures may be redeemed by the Trust at its 
option in whole or in part subsequent to September 30, 2007, at a price 
equal to $1,050 per debenture between October 1, 2007 and September 30, 
2008 and at $1,025 per debenture between October 1, 2008 and September 
30, 2009. Any redemption will include accrued and unpaid interest at 
such time when completed. The Trust may also elect to redeem the 
debentures upon maturity with the issue of Trust Units at a price equal 
to 95% of the weighted average trading price for the preceding 20 
consecutive trading days, 5 days prior to settlement date. Under both 
redemption options, the Trust may elect to pay both the debenture and 
accrued interest in the form of Trust Units. This convertible debenture 
issuance ranks pari-passu with the outstanding debentures issued on 
January 29, 2004.

/T/

The following table summarizes the issuance and subsequent conversions
of the convertible debentures:

----------------------------------------------------------------------
                          9% Series          8% Series           Total
----------------------------------------------------------------------
                  Number of             Number of
                 debentures    Amount  debentures    Amount
----------------------------------------------------------------------
January
 29, 2004
 issuance            60,000 $  60,000                         $ 60,000
August
 10, 2004
 issuance                                 100,000 $ 100,000    100,000

Converted for
 Trust Units (i)    (35,085)  (35,085)    (28,781)  (28,781)   (63,866)
Convertible
 debenture
 issue costs              -    (1,108)          -    (3,205)    (4,313)
----------------------------------------------------------------------
As at
 September
 30, 2004            24,915  $ 23,807      71,219  $ 68,014   $ 91,821
----------------------------------------------------------------------

/T/

(i) During the nine month period ended September 30, 2004, 35,085 and 
28,781 convertible debentures were converted at the option of the 
holders, into 2,506,056 and 1,771,130 Trust Units and $766,904 and 
$220,943 in accrued interest and fractional units for the 9% and 8% 
series, respectively.

12. Financial instruments

The Trust uses oil sales contracts and derivative financial instruments 
to mitigate the effect of fluctuations in commodity prices. The 
following is a summary of the oil sales contracts with price swap or 
collar features as at September 30, 2004, that have fixed future sales 
prices:

/T/

  Commodity swap contracts based on West Texas Intermediate
-----------------------------------------------------------------------
                                           Price per            Mark to
                                              Barrel             Market
Daily Quantity                   Term        (Note 1)        Gain (Loss)
-----------------------------------------------------------------------

500 Bbls/d            October through    U.S. $24.12
                        December 2004        ($15.50)         $  (1,035)
3,325 Bbls/d          October through
                        December 2004    U.S. $25.24             (8,040)
500 Bbls/d            January through
                        December 2005    U.S. $24.00             (4,829)
1,100 Bbls/d          January through
                           March 2005    U.S. $22.38             (3,153)
1,030 Bbls/d            April through
                            June 2005    U.S. $22.18             (2,777)



Commodity swap contracts based on the Lloydminster Blend Crude
differential
-----------------------------------------------------------------------
4,500 Bbls/d          October through
                        December 2004    U.S. ($7.82)          $  2,933


Commodity collar contracts based on West Texas Intermediate
-----------------------------------------------------------------------

2,500 Bbls/d          October through    U.S. $22.00
                        December 2004        - 28.10           $ (3,994)

3,000 Bbls/d          October through    U.S. $25.19
                        December 2004        - 29.40
                                           ($  18.88)         (4,334)(i)

2,500 Bbls/d          January through    U.S. $28.40
                            June 2005        - 32.25
                                           ($  21.80)         (8,150)(i)

1,500 Bbls/d              July though    U.S. $28.17
                        December 2005        - 32.10
                                             ($22.33)         (3,877)(i)

2,000 Bbls/d           January though    U.S. $28.00
                        December 2005        - 42.00               - (i)

Note 1   Harvest has sold put options at the average price denoted in
         parenthesis, for the same volumes as the associated commodity
         contracts. The counterparty may exercise these options if the
         respective index falls below the specified price on a monthly
         settlement basis.



            Commodity option contracts based on West Texas Intermediate
-----------------------------------------------------------------------
-----------------------------------------------------------------------
                                                                Mark to
                                           Price per             Market
Daily Quantity                   Term         Barrel         Gain (Loss)
-----------------------------------------------------------------------

1,250 Bbls/d          October through
                        December 2004
                           - long put    U.S. $24.00       $    (415)(i)

11,000 Bbls/d         January through
                        December 2005
                           - long put    U.S. $33.18           3,135 (i)

4,352 Bbls/d          January through
                        December 2005
                         - short call    U.S. $32.73         (24,172)(i)

4,352 Bbls/d          January through
                        December 2005
                          - long call    U.S. $42.73           9,711 (i)

7,500 Bbls/d          January through
                            June 2006
                           - long put    U.S. $34.00           1,801 (i)

3,750 Bbls/d          January through
                            June 2006
                         - short call    U.S. $34.00         (6,591) (i)

3,750 Bbls/d          January through
                            June 2006
                          - long call    U.S. $44.00           3,496 (i)


The following is a summary of electricity price hedging physical and
financial swap contracts entered into by Harvest Operations Corp. to
fix the cost of future electricity usage as at September 30, 2004:

-----------------------------------------------------------------------
                   Commodity swap contracts based on electricity prices
-----------------------------------------------------------------------
                                             Price per   Mark to Market
Quantity                 Term                 Megawatt       Gain (Loss)
-----------------------------------------------------------------------
15MW        October through December 2004   Cdn $45.83            $ 350
5MW         January through December 2005   Cdn $43.00              453
9.75MW    October 2004 through March 2006   Cdn $44.50            1,393
10MW        January through December 2005   Cdn $52.20              101
10MW        January through December 2006   Cdn $48.50               22
10MW        January through December 2006   Cdn $48.00               66
10MW          April through December 2006   Cdn $46.50               32
-----------------------------------------------------------------------

                Commodity swap contracts based on electricity heat rate
-----------------------------------------------------------------------
                                                         Mark to Market
Swaps                        Term                Price       Gain (Loss)
-----------------------------------------------------------------------
5MW               January through
                    December 2005          8.40 GJ/MWh            $ 111
-----------------------------------------------------------------------

-----------------------------------------------------------------------
                                  Foreign Currency Contracts
-----------------------------------------------------------------------
Monthly                                                  Mark to Market
Contract Amount              Term        Contract Rate             Gain
-----------------------------------------------------------------------
U.S. $3 million   October through
                    December 2004     1.3333 Cdn / U.S.          $  679
-----------------------------------------------------------------------

/T/

At September 30, 2004 the net mark-to-market unrealized loss for all the 
financial derivative contracts entered into by Harvest Operations Corp. 
was approximately $47.1 million. Harvest Operations Corp. has provided 
deposits to some counterparties for a portion of its financial 
derivative contracts, based on the mark-to-market value of those 
contracts at the end of the trading day. As at September 30, 2004, the 
amounts deposited totaled $15.3 million and are recorded in the prepaid 
expenses and deposits balance.

Upon the implementation of the CICA Accounting Guideline 13, the Trust 
recorded a liability and a corresponding unrealized mark to market loss 
of $5.5 million. As at September 30, 2004, the mark to market loss is 
$29.4 million. The realized losses on all derivative contracts are 
included in the period in which they are incurred. All contracts not 
being accounted for as hedges are marked with an (i).

/T/

13. Change in non-cash working capital 

-----------------------------------------------------------------------
                              Three months ended      Nine months ended
                                    September 30           September 30
                                 2004       2003        2004       2003
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Changes in non-cash
 working capital items:
 Accounts receivable        $ (23,167)   $ 1,728   $ (36,856)  $    (82)
 Prepaid expenses and
  deposits                       (620)    (4,360)     (3,141)    (6,195)
 Accounts payable and
  accrued liabilities          21,740      7,196      47,658      9,282
 Cash distributions
  payable                       3,325         57       3,949        642

-----------------------------------------------------------------------
                            $   1,278    $ 4,621   $  11,610   $  3,647
-----------------------------------------------------------------------
-----------------------------------------------------------------------

Changes relating to
 operating activities       $  (9,093)   $ 7,345   $ (12,405)  $  6,449
Changes relating to
 financing activities           5,451         57       5,841        642
Changes relating to
 investing activities           4,428     (2,781)     10,249     (3,444)
Add: Non cash changes             492          -       7,925          -
-----------------------------------------------------------------------
                            $   1,278    $ 4,621   $  11,610   $  3,647
-----------------------------------------------------------------------
-----------------------------------------------------------------------

/T/

14. Related party transactions

A director and a corporation controlled by a director of Harvest 
Operations Corp. issued $30 million and were repaid $45 million under 
the equity bridge note during the nine month period ended September 30, 
2004. The Trust paid $1,521,407 of the total interest accrued and 
payable during the year. (Note 7)

A corporation controlled by a director of Harvest Operations Corp. 
sublets office space and is provided administrative services by Harvest 
Operations Corp. on a cost recovery basis.

15. Subsequent events

On October 14, 2004, Harvest Operations Corp. closed an agreement to 
sell, on a private placement basis in the United States, US$250 million 
of senior notes due October 15, 2011. The senior notes are unsecured and 
unsubordinated and bear interest at an annual rate of 7 7/8% and were 
sold at a price of 99.3392% of their principal amount. The senior notes 
are unconditionally guaranteed by the Trust and all of its wholly-owed 
subsidiaries. The Trust used the net proceeds of the offering to repay 
in full Harvest's bank bridge facility and partially repay outstanding 
balances under Harvest's revolving credit facility. Harvest's syndicate 
of lenders has reduced the amount of the production loan which may be 
drawn to $310 million, from $355 million, as a result of the issuance of 
the senior notes.

Subsequent to September 30, 2004, 12,436 and 53,915 convertible 
debentures were converted at the option of the holders, into 888,282 and 
3,317,840 Trust Units and $0.4 million and $0.8 million in accrued 
interest and fractional units for the 9% and 8% series respectively, 
leaving $29.8 million face value of convertible debentures outstanding 
as at November 5, 2004.

Subsequent to September 30, 2004, 5,697 exchangeable shares were 
converted into 5,965 Trust Units, leaving 547,275 exchangeable shares 
outstanding as at November 5, 2004.

Subsequent to September 30, 2004, 158,500 Trust Unit appreciation rights 
were exercised, for proceeds of $2,978,788.

The following is a summary of the Trust distributions announced and paid 
subsequent to September 30, 2004:

/T/

                                              Trust units          Total
Distribution                        Payment        issued      Amount of
 Month             Record Date         Date    under DRIP   Distribution
------------------------------------------------------------------------

September   September 30, 2004      October
                                   15, 2004        93,160        $ 7,375

October       October 31, 2004     November
                                   15, 2004                        8,163
------------------------------------------------------------------------

Note: The Trust Units to be distributed under the DRIP for the October
      distribution have not yet been determined.

/T/

16. Commitments and contingencies

From time to time, the Trust is involved in litigation or has claims 
sought against it in the normal course of business operations. 
Management of the Trust is not currently aware of any claims or actions 
that would materially affect the Trust's reported financial position or 
results from operations.

The Trust has letters of credit outstanding in the amount of 
approximately $5 million, related to electricity infrastructure usage. 
These letters are provided by the Trust's lenders under the availability 
of the demand loan. The letters expire throughout 2004 and 2005, and are 
expected to be renewed as required.


-30-


FOR FURTHER INFORMATION PLEASE CONTACT:

Harvest Energy Trust
Jacob Roorda
President
(403) 265-1178 or Toll Free: (866) 666-1178

or

Harvest Energy Trust
David J. Rain
Vice President & CFO
(403) 265-1178 or Toll Free: (866) 666-1178

or

Harvest Energy Trust
Cindy Gray
Investor Relations & Communications Advis
or

(403) 265-1178 or Toll Free: (866) 666-1178
Email: gray@harvestenergy.ca

or

Harvest Energy Trust
Corporate Head Office:
1900, 330 - 5th Avenue S.W.
Calgary, AB T2P 0L4 Canada
(403) 265-3490 (FAX)
Email: information@harvestenergy.ca
Website: www.harvestenergy.ca