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Harvest Energy Trust Announces Year End 2004 Reserves, 2004 Distribution Taxability, and 2005 Guidance

Feb 28, 2005 - 07:00 ET

CALGARY, ALBERTA--(CCNMatthews - Feb. 28, 2005) - Harvest Energy Trust
(TSX:HTE.UN) ("Harvest") today announces the following:

- Highlights from Harvest's 2004 year end reserves report indicating 
additions to all reserve categories, low reserve addition costs, an 
increase to RLI and significant increases to net present values;

- Details regarding the 2004 distribution taxability, and the additional 
distribution of income in the form of units to unitholders of record on 
March 31, 2005; and

- Discussion of Harvest's guidance for 2005 production volumes and other 
select operating information.

RESERVES REPORT

Harvest is pleased to report that its independent reserve evaluators 
have completed their evaluation report (the "Reserves Report") in 
accordance with National Instrument 51-101 for the year ended December 
31, 2004.

Highlights of the Reserves Report include:

- Total Proved reserves increased 176% from the prior year to 75.0 
million BOE (from 27.2 million BOE) and Proved plus Probable reserves 
increased 211% to 102.5 million BOE (from 33.0 million BOE);

- Total Proved reserve life index increased 15% from the prior year to 
6.2 (from 5.4) and Proved plus Probable reserve life index increased 25% 
to 8.0 years (from 6.4 years);

- Net present value (before taxes, discounted at 10%) of Total Proved 
reserves increased 481% to $900.1 million (from $154.9 million the prior 
year), and Proved plus Probable reserves increased 569% to $1,132.5 
million (from $169.2 million one year ago);

- Total Proved reserve replacement was approximately 560% and Proved 
plus Probable reserve replacement was approximately 813%, as a 
percentage of Harvest's estimated full year 2004 production;

- Finding, Development and Acquisition (FD&A) costs of Total Proved and 
Proved plus Probable reserves were approximately $14.50 per BOE and 
$11.10 per BOE, respectively; Finding and Development (F&D) costs of 
Total Proved and Proved plus Probable reserves were approximately $5.40 
per BOE and $2.70 per BOE, respectively;

- Natural gas reserves now account for approximately 14% of Total Proved 
and Proved plus Probable reserves compared to approximately 1% of each 
reserve category one year ago.

Following the issuance of senior notes in the U.S. in 2004, Harvest 
became an SEC registrant, and is required to follow U.S. reporting 
rules. SEC regulations stipulate that oil and natural gas producers must 
use year-end pricing (called the 'Constant Price Case') to establish the 
economic viability of reserves. Although the price differential for 
heavy oil was at a historically high level on December 31, 2004, Harvest 
does not anticipate a write-down of any of its heavy oil reserves under 
the Constant Price Case.

The following tables summarize certain information contained in the 
Reserves Report. Additional reserve disclosure tables, as required under 
NI 51-101, will be contained in the Annual Information Form that will be 
filed on SEDAR before March 31, 2005.

/T/

Reserves Summary - Forecast Prices & Costs as at December 31, 2004

                Light & Medium          Heavy            Natural
                   Crude Oil          Crude Oil        Gas Liquids
               ----------------   ----------------   ----------------
Reserves       Gross(1)  Net(2)   Gross(1)  Net(2)   Gross(1)  Net(2)
Category         (Mbbl)  (Mbbl)     (Mbbl)  (Mbbl)     (Mbbl)  (Mbbl)
-------------- -------- -------   -------- -------   -------- -------
Proved
 Developed
  Producing     26,386  23,679     29,355  26,636      1,980   1,755
 Developed
  Non-Producing    356     332          -       -         82      72
 Undeveloped     2,699   2,416      3,375   2,924         63      60
Total Proved    29,441  26,427     32,730  29,560      2,125   1,887
Probable         8,398   7,680     15,447  13,849        513     463
---------------------------------------------------------------------
Total Proved
 Plus Probable  37,839  34,107     48,177  43,409      2,638   2,350
---------------------------------------------------------------------
---------------------------------------------------------------------


                                                        Total Oil
                                   Natural Gas        Equivalent(3)
                               ------------------  ------------------
                               Gross(1)    Net(2)  Gross(1)    Net(2)
Reserves Category                (Mmcf)    (Mmcf)    (Mboe)    (Mboe)
------------------------       --------   -------  --------   -------
Proved
 Developed Producing            56,887    50,465    67,202    60,481
 Developed Non-Producing         5,650     5,429     1,380     1,309
 Undeveloped                     1,954     1,329     6,462     5,621
Total Proved                    64,491    57,223    75,045    67,411
Probable                        18,660    16,475    27,467    24,738
---------------------------------------------------------------------
Total Proved Plus Probable      83,151    73,698   102,512    92,150
---------------------------------------------------------------------
---------------------------------------------------------------------
Notes:
(1) "Gross" reserves means the total working and royalty interest
    share of Harvest's remaining recoverable reserves before
    deductions of royalties payable to others.

(2) "Net" reserves means Harvest's gross reserves less all royalties
    payable to others.

(3) Oil equivalent amounts have been calculated using a conversion
    rate of six thousand cubic feet of natural gas to one barrel of
    oil. BOEs may be misleading, particularly if used in isolation.
    This conversion ratio is based on an energy equivalency
    conversion method primarily applicable at the burner tip and does
    not represent a value equivalency at the wellhead.

(4) Columns may not add due to rounding.



Net Present Value of Reserves - Forecast Prices & Costs as at
December 31, 2004

                           0%         5%        10%      15%      20%
Reserves Category      ($000)     ($000)     ($000)   ($000)   ($000)
-----------------  ---------- ---------- ---------- -------- --------
Proved
 Developed
  Producing        1,145,402    948,487    820,001  728,641  659,768
 Developed
  Non-Producing       35,851     25,400     19,697   16,136   13,691
 Undeveloped         103,880     77,550     60,364   48,401   39,649
Total Proved       1,285,133  1,051,437    900,062  793,178  713,109
Probable             447,590    310,112    232,424  183,027  149,084
---------------------------------------------------------------------
Total Proved
 Plus Probable     1,732,723  1,361,549  1,132,486  976,205  862,193
---------------------------------------------------------------------
---------------------------------------------------------------------

/T/

A complete listing of the McDaniel & Associates Consultants Ltd. price 
forecast as at December 31, 2004 that was used in this reserves 
evaluation is available on McDaniel's website at the following link:  
http://www.mcdan.com/forecasts.html

/T/

2004 Reserves Reconciliation

                       ----------------------------------------------
                              TOTAL BARREL OF OIL EQUIVALENT (BOE)
                       ----------------------------------------------
                                                          Net Proved
                          Net Proved    Net Probable   Plus Probable
FACTORS                        (Mboe)          (Mboe)          (Mboe)
---------------------- --------------   -------------  --------------

December 31, 2003             24,204           5,296          29,501

Extensions/ Improved
 Recovery                        892             557           1,449
Technical Revisions            1,790             326           2,116
Discoveries                      326             109             435
Acquisitions                  45,171          17,803          62,974
Dispositions                       -               -               -
Economic Factors               2,292             647           2,939
Production                    (7,263)              -          (7,263)
                       --------------   -------------  --------------

December 31, 2004             67,412          24,738          92,150
---------------------------------------------------------------------
---------------------------------------------------------------------
Notes:
(1) Columns may not add due to rounding.

/T/

2004 TAXABILITY INFORMATION

Harvest's distributions paid to unitholders in 2004 totaled $0.20 per 
trust unit per month for a total of $2.40 for the year. However, the 
Trust earned more taxable income in 2004 than the amounts distributed to 
unitholders. As a result, all distributions paid in the year are 100% 
taxable. No amount of the distributions is a return of capital.

Harvest's trust indenture requires that any taxable income earned in the 
Trust that exceeds the amount paid in distributions automatically 
becomes payable to unitholders. As a result of the excess taxable income 
earned in 2004, Harvest unitholders will receive an additional 
allocation of taxable income of $0.252 per unit, which is also 100% 
taxable. This amount will be reported as a corresponding increase in 
taxable income shown on those unitholders' T3 slips.

In settlement of this additional income payable to unitholders, holders 
of record on March 31, 2005 will receive an additional payment of trust 
units equal to $0.252 per unit. Trust units will be valued as at 
December 31, 2004 for this purpose, in accordance with the trust 
indenture.  The closing price of the Trust units on December 31, 2004 
was $22.95 and therefore each unitholder of record on March 31, 2005 
will receive 0.01098 of a trust unit per trust unit held on that date in 
settlement of this incremental amount of taxable income.  This 
allocation of income will increase unitholders' adjusted cost base 
("ACB") in their units by the amount of the additional payment.  This 
payment, representing the excess income, will be made concurrently with 
the distribution payment to unitholders on April 15, 2005. Harvest trust 
units are expected to commence trading on an ex-distribution basis on 
March 29, 2005. A table showing the detailed breakdown of the 
distribution and taxability information is available on Harvest's 
website.

Canadian Unitholders

Unitholders holding their Trust units in a Registered Retirement Savings 
Plan, Registered Retirement Income Fund or Deferred Profit Sharing Plan 
should not report income from distributions on these units on their 
income tax returns. Unitholders holding their units outside such plans 
will receive a T3 Supplementary information slip ("T3 slip"), postmarked 
on or before March 31, 2005. Harvest's registered unitholders will 
receive T3 slips from Harvest's transfer agent, Valiant Trust Company 
("Valiant"). Unitholders that hold their units through a broker or other 
intermediary will receive T3 slips directly from their broker or 
intermediary. Unitholders are to report the taxable portion of 
distributions as "other income" on their 2004 income tax return.

Canadian unitholders are required to reduce the adjusted cost base 
("ACB") of their trust units by an amount equal to the return of capital 
portion of the distributions. The ACB is used to calculate capital gains 
or losses on the disposition of trust units. Since the distributions 
paid from January 2004 to December 2004 contain no return of capital 
portion, they do not reduce the ACB of units.  The additional 
distribution of $0.252 per unit should be added to the ACB of the units.

Harvest encourages all unitholders to seek independent legal or tax 
advice as it relates to distributions from the Trust.

U.S. and Non-resident Unitholders

The following information is provided for general information only. As 
such, Harvest recommends that all non-resident unitholders obtain 
independent legal or tax advice on the impact to them of holding Harvest 
units. Given that most non-resident unitholders reside in the U.S., the 
following discussion is intended to provide general guidance for U.S. 
unitholders only.

Because Harvest is considered a "corporation" for U.S. federal income 
tax purposes, distributions paid to U.S. unitholders, where the Harvest 
units are held outside of a qualified retirement plan, are treated as 
dividends. U.S. individuals must report the amount of such dividends on 
Internal Revenue Service ("IRS") Form 1040 "U.S. Individual Tax Return" 
("Form 1040"). Distributions paid by Harvest on units held by a 
qualified retirement plan are not required to be reported on Form 1040.

Registered unitholders will receive a T3 slip directly from Harvest's 
transfer agent, Valiant, that indicates the 2004 distributions 
denominated in Canadian dollars. Unitholders that hold their investment 
in Harvest through a broker or other intermediary will likely receive an 
IRS Form 1099-DIV "Dividends and Distributions" ("Form 1099-DIV") that 
contains information in respect of the 2004 distributions. Unitholders 
are encouraged to review the Form 1099-DIV carefully as it may contain 
incorrect information, as discussed below.

In consultation with its U.S. tax advisors, Harvest is of the view that 
2004 distributions are "qualified dividends" under the Jobs and Growth 
Tax Relief Reconciliation Act of 2003. These dividends are eligible for 
the reduced tax rate applicable to long-term capital gains and should be 
reported as such on Form 1040. Please note that the distributions may 
not be qualified dividends in certain circumstances, depending on the 
holder's personal situation (i.e. if an individual holder does not meet 
a holding period test). Where the distributions are not qualified 
dividends, they should be reported as ordinary dividends.

Please note that Harvest, along with many other foreign entities that do 
not issue common shares, may not be listed as a "qualified foreign 
corporation" on databases used by brokerage firms to prepare Form 
1099-DIV for their clients. Accordingly, U.S. brokerage firms may report 
all or a portion of the Trust distributions received in 2004 as ordinary 
dividends. These databases do not contain an exhaustive list of 
qualified foreign corporations, meaning that intermediaries may 
incorrectly report Harvest distributions as ordinary dividends on Form 
1099-DIV. Trust distributions that indeed qualify as "qualified 
dividends" should be reported as such, despite how they have been 
reported on Form 1099-DIV.

U.S. tax rules state that no portion of the distribution will be 
considered a tax deferred return of capital unless Harvest computes its 
current and accumulated earnings and profits in accordance with U.S. 
income tax principles. U.S. unitholders should note that Harvest has not 
prepared a current and accumulated earnings and profits calculation in 
accordance with U.S. income tax principles. Accordingly, the Harvest 
distributions are 100% taxable as a dividend to U.S. unitholders.

Generally, the distributions paid by Harvest to a non-resident are 
subject to Canadian withholding tax under the Canadian Income Tax Act at 
a rate of 25%. The withholding tax rate is generally reduced to 15% for 
payments to unitholders who reside in the United States, as per the 
Canada-United States Income Tax Convention. The amount of Canadian 
withholding tax deducted from the cash distributions may be reported by 
U.S. individual unitholders on IRS Form 1116 "Foreign Tax Credit" to 
offset a portion of the U.S. tax liability as a result of the 
distributions; alternatively, U.S. unitholders may elect to deduct the 
Canadian withholding tax in the determination of taxable income.

An NR4 tax slip ("Statement of Amounts Paid or Credited to Non-residents 
of Canada") indicating the amount of Canadian withholding tax deducted 
(in Canadian dollars) will be issued to U.S. and non-resident 
unitholders. Registered unitholders will receive an NR4 slip directly 
from Valiant. For unitholders that hold their units through a broker or 
other intermediary, the broker or intermediary will receive the NR4 
slip. Unitholders that hold their investment through a broker or other 
intermediary are likely to only receive a Form 1099-DIV (see above) that 
reflects the Canadian withholding tax deducted. Unitholders should note 
that Harvest does not nor is it obligated to prepare the Form 1099-DIV 
documents.

The information above is not an exhaustive list of all possible U.S. 
income tax considerations nor is it intended to provide legal or tax 
advice to any particular holder or potential holder of Harvest Trust 
Units. Holders or potential holders of Harvest units should consult 
their own legal and tax advisors as to their particular tax consequences 
of holding units and reporting income earned and tax withheld from 
distributions.

2005 OUTLOOK

Based on current operations, Harvest anticipates a 2005 full year 
capital budget of approximately $75 million, with 2005 production 
volumes targeted to average between 34,000 - 36,000 BOE/d. As a 
percentage of revenue, Harvest's 2005 average royalty rates are expected 
to be between 15-17%, and operating expenses are anticipated to average 
between $7.75 - $8.50 per BOE. Harvest has approximately 75% of its net 
crude oil production volumes hedged for 2005, with the majority of 
instruments in place structured to allow Harvest to participate in a 
strengthening price environment. At year end 2004, Harvest had 
approximately $400 million in net debt, 41.8 million trust units and 
456,000 exchangeable shares outstanding, and convertible debentures 
outstanding of approximately $26 million. Harvest anticipates taxability 
of distributions in 2005 to be similar to 2004.

Harvest anticipates releasing its Q4 and full year 2004 financial and 
operating results on March 14th, 2005.

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 
a recent corporate presentation.

-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 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
(403) 265-3490 (FAX)
Email: gray@harvestenergy.ca

or

Harvest Energy Trust
2100, 330 - 5th Avenue S.W.
Calgary, AB Canada T2P 0L4
(403) 265-1178 or Toll Free: (866) 666-1178
(403) 265-3490 (FAX)
Email: information@harvestenergy.ca
Website: www.harvestenergy.ca