Bonavista Energy Trust
TSX : BNP.UN

Bonavista Energy Trust

November 09, 2006 16:02 ET

Bonavista Energy Trust Announces Third Quarter Results

CALGARY, ALBERTA--(CCNMatthews - Nov. 9, 2006) - Bonavista Energy Trust (TSX:BNP.UN) is pleased to report to unitholders its interim consolidated financial and operating results for the three and nine months ended September 30, 2006.




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Highlights
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Three Months Nine months
ended ended
September 30, September 30,
2006 2005 2006 2005
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(unaudited)
Financial
($ thousands, except per unit)
Production revenue 223,139 241,084 679,426 623,742
Funds from operations (1) 123,477 140,249 375,133 351,935
Per unit (1) (2) 1.20 1.45 3.69 3.68
Cash distributions 83,650 64,683 247,720 191,615
Per unit 0.99 0.83 2.97 2.48
Percentage of funds from
operations distributed 68% 46% 66% 54%
Net income 70,800 79,242 233,635 199,183
Per unit (2) 0.69 0.82 2.30 2.08
Total assets 2,038,684 1,870,288
Long-term debt, net of working
capital 502,529 369,623
Unitholders' equity 1,135,155 1,060,407
Capital expenditures:
Exploitation and development 65,995 53,231 221,819 145,769
Acquisitions, net 4,519 46,656 36,135 58,097
Weighted average outstanding
equivalent trust units:
(thousands) (2)
Basic 102,764 96,783 101,692 95,640
Diluted 105,966 103,418 105,382 102,727
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Operating
(boe conversion - 6:1 basis)
Production:
Natural gas (mmcf/day) 176 176 178 175
Oil and liquids (bbls/day) 23,096 21,291 22,716 21,112
Total oil equivalent (boe/day) 52,494 50,579 52,420 50,211
Product prices:
Natural gas ($/mcf) 6.65 8.50 7.36 7.61
Oil and liquids ($/bbl) 54.27 52.91 51.81 45.29
Operating expenses ($/boe) 7.96 6.94 7.84 6.73
General and administrative
expenses ($/boe) 0.56 0.49 0.54 0.46
Cash costs ($/boe) (3) 10.06 8.85 9.73 8.67
Operating netback ($/boe) (4) 27.67 32.05 28.10 27.61
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NOTES:

(1) Management uses funds from operations to analyze operating performance
and leverage. Funds from operations as presented does not have any
standardized meaning prescribed by Canadian GAAP and therefore it may
not be comparable with the calculations of similar measures for other
entities. Funds from operations 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 income or other measures of financial performance
calculated in accordance with Canadian GAAP. All references to funds
from operations throughout this report are based on cash flow from
operating activities before changes in non-cash working capital and
asset retirement expenditures. Funds from operations per unit is
calculated based on the weighted average number of trust units
outstanding consistent with the calculation of net income per trust
unit.

(2) Basic per unit calculations include exchangeable shares which are
convertible into trust units on certain terms and conditions.

(3) Cash costs equal the total of operating, general and administrative,
interest expense and cash taxes.

(4) Operating netback equals total revenue less royalties, transportation
and operating expenses, calculated on a boe basis.



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Three Months ended
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Trust Unit Trading September 30, June 30, March 31, December 31,
Statistics 2006 2006 2006 2005
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($ per unit, except volume)

High 38.34 37.80 39.86 39.68
Low 31.81 31.51 33.45 29.83
Close 32.28 35.00 37.25 38.10
Average Daily Volume 262,161 252,280 265,472 321,089
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MESSAGE TO UNITHOLDERS

Bonavista Energy Trust ("Bonavista" or the "Trust") is pleased to report to its unitholders (the "Unitholders") the consolidated financial and operating results for the three and nine months ended September 30, 2006. The results for the third quarter of 2006 represent thirteen consecutive quarters of profitability for Bonavista since commencing operations as an energy trust in July 2003. The continued successful execution of Bonavista's proven strategies in the third quarter of 2006 is a testament to the validity and effectiveness of an operationally and technically focused energy trust. The third quarter and first nine months of 2006 are also highlighted by an increased selection of drilling and acquisition opportunities despite the recent decline in natural gas and crude oil prices. This environment creates the opportunity for Bonavista to continue recording strong and profitable results, both operationally and financially, for the remainder of 2006 and beyond.

Significant accomplishments for Bonavista include:

- Operationally, production volumes averaged 52,494 boe per day during the third quarter of 2006, up 4% as compared to 50,579 boe per day reported in the third quarter of 2005, which also represents a 52% increase over the 34,600 boe per day on commencement as an energy trust on July 2, 2003. Bonavista's current production rate is approximately 53,500 boe per day;

- Experienced an active and successful third quarter drilling program of 74 wells, with an overall 95% success rate;

- Continued to actively participate in the acquisition of undeveloped land by investing $2.1 million during the quarter, further enhancing our undeveloped land position and our future drilling prospect inventory to more than two years;

- Invested $70.5 million of capital during the third quarter of 2006, with $66.0 million in exploitation and development activities and $4.5 million in two synergistic acquisitions within our core regions;

- Continued to achieve a high capital reinvestment efficiency with production added at a rate of approximately $30,000 per boe per day despite increasing service costs;

- Generated funds from operations of $123.5 million ($1.20 per unit) and distributed 68% to Unitholders for the three months ended September 30, 2006, with the remaining funds from operations used to reinvest in the business to continue growing our production base;

- Continued to demonstrate strong profitability in the third quarter of 2006 with net income of $0.69 per unit, average annualized return on equity of 25% and a strong net income to funds from operations ratio of 57%; and

- Completed a new $800 million credit facility with a syndicate of chartered banks. This facility is unsecured, covenant-based which significantly enhances Bonavista's financial flexibility to take advantage of future investment opportunities in 2006 and beyond.

On October 31, 2006 the Government of Canada announced its "Tax Fairness Plan" which includes a proposed tax on distributions to unitholders of existing publicly traded income trusts commencing January 1, 2011. Although this plan is not yet legislated, it has created considerable consternation in the capital markets resulting in increased volatility and a significant negative impact on equity values of the entire Canadian Income Trust Sector. Bonavista is currently conducting an assessment of the implications of the Federal Government's announcement on its existing business, and along with its participation in the Coalition of Canadian Energy Trusts, intends to express our concerns on this proposed taxation of trusts to the Federal Government. . Bonavista also encourages all of its Unitholders to participate by writing or contacting the Federal Minister of Finance or their Member of Parliament.

Strengths of Bonavista Energy Trust

Since restructuring into an energy trust in July 2003, Bonavista has maintained a high level of investment activity on its asset base. This activity stems from the operational and technical focus of our trust and our ability to uncover value from our assets within the Western Canadian Sedimentary Basin. Our experienced technical teams have a solid understanding of our asset base and possess the necessary discipline and commitment to deliver profitable results to our Unitholders for the long-term. We actively participate in undeveloped land acquisitions through either Crown land sales, property purchases or farm-in opportunities, which have all continued to add to our already extensive low-risk drilling inventory. This has led to low cost reserve additions, lengthening of our reserve life index, and a growing production base. Our production base is weighted 55% towards natural gas and is geographically focused within select medium depth, multi-zone regions in Alberta, Saskatchewan and British Columbia. This base has one of the lowest operating cost structures in the oil and natural gas sector. In addition, these high working interest assets are predominantly operated by Bonavista, ensuring that operating and capital cost efficiencies are maintained. All of these attributes combined result in top quartile operating netbacks for Bonavista.

Our team brings a successful track record of executing low to medium risk development programs, including both asset and corporate acquisitions, along with sound financial management. Unitholders benefit from a fully internalized, industry leading cost structure, which results in one of the lowest per unit overhead cost structures in the energy trust industry. The management team, along with a strong Board of Directors, possesses extensive experience in oil and natural gas operations, corporate governance and financial management. Directors and management also own approximately 17% of the Trust, resulting in an alignment of interests with all Unitholders.

MANAGEMENT'S DISCUSSION AND ANALYSIS

Management's discussion and analysis ("MD&A") of the financial condition and results of operations should be read in conjunction with Bonavista Energy Trust's ("Bonavista" or the "Trust") consolidated interim financial statements for the three and nine months ended September 30, 2006 and the audited consolidated financial statements and MD&A for the year ended December 31, 2005. Our audited consolidated financial statements, Annual Report, and other disclosure documents for 2005 are available through our filings on SEDAR at www.sedar.com or can be obtained from Bonavista's website at www.bonavistaenergy.com.

Basis of Presentation - The financial data presented below has been prepared in accordance with Canadian Generally Accepted Accounting Principles ("GAAP"). The reporting and the measurement currency is the Canadian dollar. For the purpose of calculating unit costs, natural gas is converted to a barrel of oil equivalent ("boe") using six thousand cubic feet of natural gas equal to one barrel of oil unless otherwise stated.

Forward-Looking Statements - Certain information set forth in this document, including management's assessment of Bonavista's future plans and operations, contains forward-looking statements. By their nature, forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond Bonavista's control, including the impact of general economic conditions, industry conditions, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other industry participants, the lack of availability of qualified personnel or management, stock market volatility and ability to access sufficient capital from internal and external sources. Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward-looking statements. Bonavista's actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements or if any of them do so, what benefits that Bonavista will derive therefrom. Bonavista disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Investors are also cautioned that cash-on-cash yield represents a blend of return of investor's initial investment and a return on investors initial investment and is not comparable to traditional yield on debt instruments where investors are entitled to full return of the principal amount of debt on maturity in addition to a return on investment through interest payments.

Non-GAAP Measurements - Within Management's discussion and analysis, references are made to terms commonly used in the oil and gas industry. Management uses funds from operations and the ratio of debt to funds from operations to analyze operating performance and leverage. Funds from operations as presented does not have any standardized meaning prescribed by Canadian GAAP and therefore it may not be comparable with the calculation of similar measures for other entities. Funds from operations 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 income or other measures of financial performance calculated in accordance with Canadian GAAP. All references to funds from operations throughout this report are based on cash flow from operating activities before changes in non-cash working capital and abandonment expenditures. Funds from operations per unit is calculated based on the weighted average number of trust units outstanding consistent with the calculation of net income per unit. Netbacks equal total revenue less royalties, transportation and operating expenses calculated on a boe basis. Total boe is calculated by multiplying the daily production by the number of days in the period. Management uses these terms to analyze operating performance and leverage.

Operations - In the third quarter of 2006, Bonavista drilled 74 wells resulting in 40 natural gas wells, 30 oil wells and four dry holes. Additional emphasis was placed on drilling deeper, liquids-rich Cretaceous and Mississippian targets in our South Central Alberta core region where we have experienced excellent success. The results of this program has led to an increase in our natural gas liquids production to current levels of approximately 6,000 bbls per day. We also drilled 21 heavy oil targets in the Lloydminster area in the quarter resulting in 19 successful wells and heavy oil production climbing to the current level of 7,600 bbls per day. Our focus on light oil, heavy oil and liquids-rich natural gas during the quarter has elevated our current oil and liquids production to approximately 24,300 bbls per day, bringing additional commodity balance to Bonavista. For the first nine months of 2006, we have drilled 248 wells in our four core regions with an overall success rate of 95%. This program resulted in 170 natural gas wells, 65 oil wells and 13 dry holes. In addition to the exploitation and development programs, Bonavista executed 11 complementary acquisitions in its core regions during the first nine months of 2006.

Production - As a direct result of Bonavista's active and successful capital programs, production for the third quarter of 2006 increased 4% to 52,494 boe per day from 50,579 boe per day for the same period in 2005. Natural gas production of 176 mmcf per day in the third quarter of 2006 remains unchanged from the same period a year ago, while total oil and liquids production in the third quarter of 2006 increased 8% to 23,096 bbls per day (comprised of 16,072 bbls per day of light and medium oil and 7,024 bbls per day of heavy oil) from 21,291 bbls per day (comprised of 15,276 bbls per day of light and medium oil and 6,015 bbls per day of heavy oil) for the same period a year ago. Bonavista's third quarter production volumes were slightly affected by a force majeure notice from a third-party midstream processing facility which temporarily shut-in approximately 4,100 boe per day of Bonavista's production volumes for 10 days in the third week of September. Our current production is approximately 53,500 boe per day consisting of 55% natural gas, 31% light and medium oil and 14% heavy oil. Production for the nine months ended September 30, 2006 also increased 4% to 52,420 boe per day when compared to 50,211 boe per day for the same period a year ago. More specifically, average natural gas production increased 2% to 178 mmcf per day from 175 mmcf per day in the first nine months of 2005 while total oil and liquids production increased 8% to 22,716 bbls per day (comprised of 15,822 bbls per day of light and medium oil and 6,894 bbls per day of heavy oil) from 21,112 bbls per day (comprised of 15,007 bbls per day of light and medium oil and 6,105 bbls per day of heavy oil) in the first nine months of 2005. Bonavista's diversified commodity investment approach minimizes our dependence on any one product, notwithstanding our efforts during the third quarter to capitalize on higher oil prices.

Revenues - Revenues for the third quarter of 2006 decreased by 7% to $223.1 million from $241.1 million in the third quarter of 2005. This decrease is attributable to an 11% decrease in commodity prices offset by a 4% increase in production volumes on a boe basis. In the third quarter of 2006, our natural gas price averaged $6.65 per mcf, down 22% from $8.50 per mcf for the same period in 2005. The average oil and liquids price increased 3% to $54.27 per bbl (comprised of $56.61 per bbl for light and medium oil and $48.92 per bbl for heavy oil) in the third quarter of 2006 from $52.91 per bbl (comprised of $55.61 per bbl for light and medium oil and $46.03 per bbl for heavy oil) for the same period in 2005. Revenues for the nine months ended September 30, 2006 increased by 9% to $679.4 million when compared to $623.7 million for the same period a year ago, due to increased production volumes and the average oil and liquids price. For the nine month period ended September 30, 2006, natural gas prices averaged $7.36 per mcf, down 3% from $7.61 per mcf for the same period in 2005. The average oil and liquids price increased 14% to $51.81 per bbl (comprised of $55.55 per bbl for light and medium oil and $43.25 per bbl for heavy oil) for the nine month period ended September 30, 2006 from $45.29 per bbl (comprised of $49.66 per bbl for light and medium oil and $34.57 per bbl for heavy oil) for the same period in 2005.

Commodity hedging - As part of our financial management strategy, the Trust has adopted a disciplined commodity-hedging program. The purpose of the hedging program is to reduce volatility in the financial results, protect acquisition economics and stabilize cash flow and Unitholders distributions against the unpredictable commodity price environment. At any given period of time, our hedging strategy is restricted to a maximum hedge position of 60% of forecasted production, net of royalties, and primarily utilizes costless collars in our hedging portfolio. This strategy limits our exposure to downturns in commodity prices while allowing for more participation in commodity price increases. For the three and nine months ended September 30, 2006, our hedging program resulted in a net gain of $4.6 million and $4.7 million respectively.

For the three months ended September 30, 2006, the $4.6 million net gain consisted of a $9.5 million gain on natural gas contracts and a $4.9 million loss on crude oil contracts. For the nine months ended September 30, 2006, the $4.7 million net gain consisted of a $20.6 million gain on natural gas contracts and a $15.9 million loss on crude oil contracts. A summary of hedging contracts in place as at September 30, 2006 is outlined in note 6 of the Notes to the Interim Consolidated Financial Statements.

Royalties - For the three months ended September 30, 2006 royalties decreased 22% from $52.3 million to $40.9 million for the same period a year ago primarily as a result of the decrease in natural gas prices, the impact of commodity hedging gains included in revenue and favourable royalty adjustments from joint venture partners. For similar reasons, royalties as a percentage of revenue for the third quarter also decreased from 21.7% in 2005 to 18.3% in 2006. For the three months ended September 30, 2006 royalties, as a percentage of revenues by product, were 19.0% for natural gas, 18.4% for light and medium oil and 16.1% for heavy oil. For the nine months ended September 30, 2006, royalties increased 3% to $135.9 million from $131.7 million for the same period a year ago, primarily due to increases in production volumes and the average oil and liquids price. In addition, royalties as a percentage of revenue decreased from 21.1% for the nine month period in 2005 to 20.0% for the same period in 2006 primarily due to weaker natural gas prices, the impact of commodity hedging gains included in revenue and favourable royalty adjustments from joint venture partners. For the nine months ended September 30, 2006, royalties as a percentage of revenues by product were 21.9% for natural gas, 19.0% for light and medium oil and 14.7% for heavy oil.

Operating expenses - Operating expenses for the third quarter of 2006 were $38.4 million, an increase of 19% when compared to $32.3 million incurred for the same period a year ago, which was due to higher production volumes and higher per unit costs. The industry is continuing to experience significant pressure on all costs, primarily driven by commodity prices and high levels of industry activity. These factors resulted in average per unit operating costs for the three months ended September 30, 2006 increasing to $7.96 per boe from $6.94 per boe in the same quarter of 2005. The breakdown of the third quarter 2006 operating costs was $1.12 per mcf for natural gas, $8.79 per bbl for light and medium oil and $11.02 per bbl for heavy oil. Operating costs for the nine months ended September 30, 2006 also increased 22% to $112.1 million compared to $92.2 million for the same period a year ago, due to higher production volumes and higher per unit costs. For the nine months ended September 30, 2006, operating costs increased to $7.84 per boe from $6.73 per boe in the comparable period of 2005. Operating costs by product for the first nine months of 2006 were $1.12 per mcf for natural gas, $8.68 per bbl for light and medium oil and $10.68 per bbl for heavy oil. Notwithstanding recent increases, Bonavista continues to place significant emphasis on the control of operating costs and maintains one of the lowest cash cost structures in the industry.

Transportation expenses - For the three months ended September 30, 2006, transportation expenses increased 39% to $10.2 million ($2.11 per boe) as compared to $7.3 million ($1.57 per boe) for the same period last year. The increase in transportation costs was primarily due to increasing cost pressures and higher production volumes in the third quarter of 2006 versus the same period in 2005. For similar reasons, transportation costs for the nine months ended September 30, 2006 increased to $29.2 million ($2.04 per boe) compared to $21.4 million ($1.56 per boe) for the same period a year ago. Transportation costs by product for the third quarter of 2006 were $0.44 per mcf for natural gas, $0.85 per bbl for light and medium oil and $2.84 per bbl for heavy oil, and for the nine months ended September 30, 2006 were $0.42 per mcf for natural gas, $0.86 per bbl for light and medium oil and $2.78 per bbl for heavy oil.

General and administrative expenses - General and administrative expenses, after overhead recoveries, for the three months ended September 30, 2006 increased 20% to $2.7 million from $2.3 million in the same period in 2005 and increased 21% to $7.7 million for the nine months ended September 30, 2006 from $6.4 million in the same period in 2005. On a per boe basis, general and administrative expenses increased 14% for the three months ended September 30, 2006 to $0.56 per boe from $0.49 per boe in the third quarter of 2005 and increased 17% for the nine months ended September 30, 2006 to $0.54 per boe from $0.46 per boe in the same period in 2005. These increases are largely due to the higher staffing levels required to manage our operations and increasing cost pressures, primarily driven by high levels of industry activity.

Through the Technical Services Agreement with NuVista Energy Ltd., Bonavista provides administrative services and receives a fee, determined on a cost recovery basis. The fee charged under this agreement was $590,000 related to general and administrative activities rendered for the three months ended September 30, 2006 and $1.6 million for the nine months ended September 30, 2006. In connection with its Trust Unit Incentive Rights Plan, Bonavista also recorded a unit-based compensation charge of $1.8 million and $4.2 million for the three and nine months ended September 30, 2006 respectively, compared to $849,000 and $2.0 million for the same periods of 2005.

Financing expenses - Financing expenses, which include interest expense on bank debt and convertible debentures, increased 20% to $7.3 million for the three months ended September 30, 2006 from $6.1 million for the same period in 2005 and on a boe basis, increased to $1.52 per boe for the three months ending September 30, 2006 from $1.32 per boe in the same period in 2005. For the nine months ended September 30, 2006, financing expenses increased 5% to $19.3 million from $18.3 million for the same period in 2005 and on a boe basis increased to $1.35 per boe for the nine months ended September 30, 2006 from $1.33 per boe in the same period in 2005. These increases are due to slightly higher debt levels used to fund Bonavista's growth. Amortization and accretion expenses related to the Trust's convertible debentures were $202,000 for the three months ended September 30, 2006 as compared to $400,000 for the three months ended September 30, 2005. For the nine months ended September 30, 2006 amortization and accretion expenses decreased to $663,000 from $1.4 million for the same period in 2005. These decreases are largely attributable to the significant conversions of debentures into trust units since September 30, 2005. The amortization component reflects the charge to net income of the debenture issue costs over the term of the debenture. The fair value of the conversion option of the debentures is classified as equity. Over the term of the debentures, the carrying value will accrete to the principal balance at maturity, with the charge to accretion expense on convertible debentures. During the third quarter of 2006, Bonavista paid cash interest of $6.6 million compared to $5.2 million in 2005. For the nine months ended September 30, 2006 Bonavista paid cash interest of $18.9 million compared to $17.9 million for the same period in 2005.

Depreciation, depletion and accretion expenses - Depreciation, depletion and accretion expenses increased 8% to $54.3 million for the three months ended September 30, 2006 from $50.2 million in the same period of 2005. For the nine months ended September 30, 2006 depreciation, depletion and accretion expenses increased by 11% to $158.5 million from $143.4 million in the same period of 2005. Both increases were due to higher production levels and a larger asset base in 2006. For the three months ended September 30, 2006 the average per unit cost increased to $11.24 per boe from $10.80 per boe in the same period of 2005 and for the nine months ended September 30, 2006 the average cost increased to $11.08 per boe from $10.46 per boe for the same period a year ago. These increases are due to the overall higher cost of adding new reserves, which is a trend being experienced throughout the industry.

Income and other taxes - For the three months ended September 30, 2006, the provision for income and other taxes was a reduction of $3.6 million compared to an expense of $10.0 million for the same period of 2005. For the nine months ended September 30, 2006, the provision for income and other taxes was a reduction of $21.8 million compared to an expense of $7.9 million for the same period of 2005. The reduction in income and other taxes for the three and nine months ended September 30, 2006 compared to the same periods a year ago relate largely to the increased distributions to unitholders period over period, which are tax deductible to the Trust. In addition, the nine months ended September 30, 2006 includes a recovery of $14.3 million relating to a reduction in future federal and provincial income tax rates enacted during the second quarter of 2006 and a recovery of the Large Corporations Tax ("LCT") of $472,000 recorded in the first quarter of 2006 to reflect the elimination of LCT effective January 1, 2006. For each of the three and nine month periods ended September 30, 2006, Bonavista paid cash relating to capital taxes and installments of nil and $785,000 respectively, compared to $1.1 million and $2.2 million for the same periods a year ago.

Funds from operations and net income - For the three months ended September 30, 2006, Bonavista experienced a 12% decrease in funds from operations to $123.5 million ($1.20 per unit, basic) from $140.2 million ($1.45 per unit, basic) recorded in the same period in 2005. For the nine month period ended September 30, 2006, Bonavista experienced a 7% increase in funds from operations to $375.1 million ($3.69 per unit, basic) from $351.9 million ($3.68 per unit, basic) for the same period in 2005. Net income for the three months ended September 30, 2006, decreased to $70.8 million ($0.69 per unit, basic) and represents an 11% decrease from $79.2 million ($0.82 per unit, basic) in the third quarter of 2005. For the nine months ended September 30, 2006, net income increased 17% to $233.6 million ($2.30 per unit, basic) from $199.2 million ($2.08 per unit, basic) for the same period of 2005.

The decrease in funds from operations and net income for the three months ended September 30, 2006 was largely due to the decrease in natural gas prices offset somewhat by increased production volumes compared to the third quarter of 2005. The increase in funds from operations and net income for the nine months ended September 30, 2006 was largely due to increases in production and average commodity prices realized. Net income for the nine months ended September 30, 2006 also increased due to the recovery of income and other taxes of $14.8 million in the second quarter of 2006, relating to the reduction in federal and provincial corporate income tax rates and elimination of the LCT.

Capital expenditures - Capital expenditures for the three month period ended September 30, 2006 were $70.5 million, consisting of $66.0 million of exploitation and development spending and $4.5 million of net property acquisitions. For the same period in 2005 capital expenditures were $99.9 million, consisting of $53.2 million of exploitation and development spending and $46.7 million of net acquisitions. Capital expenditures for the nine month period ended September 30, 2006 were $258.0 million, consisting of $221.8 million on exploitation and development spending and $36.2 million on net acquisitions. For the same period in 2005 capital expenditures were $203.9 million, consisting of $145.8 million of exploitation and development spending and $58.1 million of net acquisitions.

Liquidity and capital resources - As at September 30, 2006, long-term debt, including working capital deficiency, was $503 million with an attractive debt to annualized funds from operations ratio of 1.0:1 (1.1:1 including convertible debentures). With our credit facility recently increased to $800 million, Bonavista now has $297 million of unused bank borrowing capability, leaving significant flexibility to finance future expansions in our capital programs or acquisition opportunities as they arise.

In 2006, Bonavista plans to invest approximately $305 million (of which $258 million has been spent for the nine months ended September 30, 2006) to expand its core regions, which will be financed through a combination of funds from operations and bank debt. The Trust is committed to the fundamental principle of maintaining financial flexibility and the prudent use of debt. As such, the 2006 capital expenditure program is based on using a conservative amount of debt in our financing structure.

Unitholders' equity - As at September 30, 2006, Bonavista had 102,923,019 equivalent trust units outstanding. This includes 12,375,450 exchangeable shares, which are exchangeable into 18,317,275 additional Trust units. The exchange ratio in effect at September 30, 2006 for exchangeable shares was 1.48013 to 1. As at November 9, 2006, Bonavista had 103,162,104 equivalent trust units outstanding. This includes 12,328,968 exchangeable shares which are exchangeable into 18,433,903 additional trust units. The exchange ratio in effect at November 9, 2006 for exchangeable shares was 1.49517 to 1. In addition, Bonavista has 3,804,325 trust unit incentive rights outstanding at November 9, 2006 with an average exercise price of $24.99 per trust unit.

As a result of minimal conversions in 2005 of exchangeable shares into trust units, Bonavista elected to redeem 10% of its exchangeable shares outstanding on March 16, 2006. This redemption allows the Trust to manage the dilution created by the compounding effect of the exchangeable shares, maintain an optimal capital and tax efficient trust structure while managing the reinvestment of capital without adverse tax consequences to the Trust and its Unitholders. In connection with this redemption, Bonavista exercised its overriding "redemption call right" to purchase such exchangeable shares from holders of record on March 16, 2006. Each redeemed Exchangeable Share was exchanged for trust units in accordance with the exchange ratio in effect at March 15, 2006, rounded to the nearest whole trust unit.

As at September 30, 2006, Unitholders' equity included $1.1 million for the ascribed value of the conversion feature of convertible debentures. This amount was determined at the time the debentures were issued and was subsequently reduced by the amounts attributed to debentures that have been converted into trust units. Of the 100,000, 7.5% convertible debentures issued on January 29, 2004 there have been 90,087 of these debentures converted into trust units, leaving 9,913 debentures with a principal amount of $9.9 million outstanding at September 30, 2006. On December 31, 2004, the Trust issued 135,000, 6.75% convertible debentures in conjunction with a property acquisition in British Columbia. These debentures have a principal amount of $135 million, and from the date of issuance to September 30, 2006 there have been 89,779 of these debentures converted into trust units, leaving 45,221 debentures outstanding with a principal amount of $45.2 million.

Distributions - For the three months ended September 30, 2006, the Trust distributed $83.7 million ($0.99 per unit), amounting to 68% of funds from operations generated during the period, while the remaining 32% of funds was reinvested in exploitation, development and acquisition programs. For the nine months ended September 30, 2006, the Trust distributed $247.7 million ($2.97 per unit), amounting to 66% of funds from operations generated during the period, while the remaining 34% of funds from operations was reinvested to fund exploitation, development and acquisition programs.

Bonavista announces its distribution policy on a quarterly basis. The amount of the cash distributions are determined by the Board of Directors and is dependent upon the commodity price environment, production levels, and the amount of capital expenditures to be financed from funds from operations. Bonavista's current monthly distribution rate is $0.30 per unit. This monthly distribution is comprised of the base distribution of $0.28 per unit plus a supplementary distribution of $0.02 per unit, due to the average realized commodity prices in excess of budget prices. The base distribution rate assumes realized commodity prices of CDN $8.00 per gj at AECO for natural gas and CDN $58.00 per bbl at Edmonton for light crude (this equates to approximately US $8.40 per mmbtu NYMEX natural gas and US $50.00 per barrel WTI crude oil). The combined base and supplementary distribution incorporate the withholding of sufficient cash flow to fund capital expenditures required to maintain or modestly grow the current production base and provide sustainable distributions in the long-term. Our long-term objective is to distribute between 50% and 60% of our cash flow. The $0.30 per unit per month distribution rate places us in the middle of this range for 2007, based on the future strip of commodity prices.

Quarterly financial information - The following table highlights Bonavista's performance for the eight quarterly periods ending on December 31, 2004 to September 30, 2006:



---------------------------------------------------------------------------
2006
--------------------------------------
September 30 June 30 March 31
-------------- ---------- ------------
($ thousands, except per unit amounts)
Production revenue 223,139 226,046 230,241
Net income 70,800 87,425 75,410
Net income per unit:
Basic 0.69 0.86 0.75
Diluted 0.68 0.84 0.74
---------------------------------------------------------------------------
---------------------------------------------------------------------------

2005 2004
---------------------------------------------- -------------
December 31 September 30 June 30 March 31 December 31
------------ ------------ -------- ---------- -------------
($ thousands, except per unit amounts) (restated)
Production revenue 288,680 241,084 194,961 187,697 155,077
Net income 103,759 79,242 62,461 57,480 41,780
Net income per unit:
Basic 1.05 0.82 0.65 0.61 0.62
Diluted 1.01 0.79 0.64 0.60 0.61
---------------------------------------------------------------------------
---------------------------------------------------------------------------


Since its reorganization into an energy trust on July 2, 2003, Bonavista has experienced growth in production volumes in each quarter. Production revenue has increased over the past eight quarters due to the impact of increased production levels and the trend of increasing oil and natural gas commodity prices. Over this period, production revenue has increased 44% and net income has increased 69%. In the first through third quarters of 2006, production revenue and net income were lower than the last quarter of 2005 primarily due to the decrease in the price of natural gas. Net income in the third quarter of 2006 decreased compared to the second quarter of 2006 primarily due to income tax reductions included in the second quarter results. For the quarterly period ending on December 31, 2004, net income has been restated and reduced by the adoption of changes in accounting policies.

Multilateral Instrument 52-109, Certification of Disclosure in Issuers' Annual and Interim Filings - Disclosure controls and procedures have been designed to ensure that information required to be reported by the Trust is accumulated and communicated to the management as appropriate to allow timely decisions regarding required disclosure. Bonavista's Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO") have concluded that the Trust's disclosure controls and procedures have been designed to provide reasonable assurance that material information related to the Trust, including its consolidated subsidiaries, is made known to them by others within those entities during the period in which the interim filings have been prepared. It should be noted that while the CEO and CFO believe that the Trust's disclosure controls and procedures provide a reasonable level of assurance that they are effective, they do not expect that the disclosure controls and procedures will prevent all errors and fraud. A control system, no matter how well conceived or operated, can provide only reasonable, not absolute assurance that the objectives of the control system are met.

Proposed Taxation of Income Trusts - On October 31, 2006 the Government of Canada announced its "Tax Fairness Plan" which includes a proposed tax on distributions to unitholders of existing publicly traded income trusts commencing January 1, 2011. Although this plan is not yet legislated, it has created considerable consternation in the capital markets resulting in increased volatility and a significant negative impact on equity values of the entire Canadian Income Trust sector. Bonavista is currently conducting an assessment of the implications of the Federal Government's announcement on its existing business, and along with its participation in the Coalition of Canadian Energy Trusts, intends to express our concerns on this proposed taxation of trusts to the Federal Government.

We encourage our Unitholders to read the full transcript of the government's plan atwww.fin.gc.ca/news06/06-061e.html and consult their personal financial and tax advisors regarding potential tax consequences based on their individual circumstances. Unitholders may also express their views directly to the Federal Minister of Finance, whose contact information is available at www.fin.gc.ca/admin/contact-e.html.

OUTLOOK

The Trust continues to benefit from all the same qualities that drove the success of Bonavista Petroleum Ltd. as a public corporation prior to its conversion to an energy trust. We continue to apply similar proven principles and execute our strategy in a disciplined and cost-effective manner. The foundation of this strategy is to actively pursue low to medium risk drilling opportunities on the extensive undeveloped land base within our geographically concentrated areas of operations. Despite spending a record amount on exploitation and development activities in 2005 and the first nine months of 2006 and drilling over 500 wells, our inventory of quality drilling opportunities continues to increase in 2006. This increase in inventory can be directly attributed to the detailed and tireless work of our talented Bonavista technical team, who possess a strong track record and a solid understanding of the Western Canadian Sedimentary Basin. We also continue to search for strategic acquisition opportunities where we can add value utilizing our own technical expertise. This prudent approach to our capital investment program has been very effective in the past and together with our steadfast commitment to adding Unitholder value and attention to detail will provide the foundation for the future success of the Trust. Today our activity, efficiency, productivity and profitability remain at the highest levels in our eight year history.

Bonavista's 2006 capital budget is $305 million and is anticipated to result in the drilling of approximately 320 wells. For 2007, Bonavista's preliminary capital budget includes drilling approximately 300 to 320 wells on existing lands in Bonavista's four core regions. Similar to 2006, these locations generally consist of low to medium risk prospects drilled within close proximity of company owned and operated infrastructures. The capital required to complete this drilling program and our complementary acquisition program is estimated to be in the $280 to $300 million range and should result in modest growth in average daily production levels between 53,500 and 54,500 boe per day in 2007.

We are proud of our achievements and are very excited about the growing opportunities that exist for Bonavista in the future. We would like to thank our employees for their significant effort and their continued enthusiasm and excitement as we pursue these opportunities. Despite the recent consternation in the Canadian Income Trust equity market resulting from the announcement of the Federal Government's proposed "Tax Fairness Plan", Bonavista's value creation process has not changed. Throughout many business cycles and changes in the business environment, Bonavista has thrived. Our success is based on the consistent application of our core philosophy and operating strategies. This practice will not change under the new government tax regime as our team remains dedicated to adding Unitholder value in the oil and gas business for many years to come.



Consolidated Balance Sheets September 30, December 31,
(thousands) 2006 2005
---------------------------------------------------------------------------
(unaudited)
Assets:
Accounts receivable $ 100,244 $ 105,173
Oil and natural gas properties and equipment 1,897,119 1,788,398
Goodwill 41,321 41,321
---------------------------------------------------------------------------
$ 2,038,684 $ 1,934,892
---------------------------------------------------------------------------

Liabilities and Unitholders' Equity:
---------------------------------------------------------------------------
Accounts payable and accrued liabilities $ 135,726 $ 133,080
Long-term debt 467,047 343,802
Other long-term obligations 2,609 4,896
Convertible debentures 51,815 87,866
Asset retirement obligations 89,273 82,819
Future income taxes 157,059 178,919
Unitholders' equity:
Unitholders' capital 831,336 769,629
Exchangeable shares 75,598 92,370
Contributed surplus 4,009 2,456
Convertible debentures 1,134 1,892
Accumulated earnings 223,078 237,163
---------------------------------------------------------------------------
1,135,155 1,103,510
---------------------------------------------------------------------------
$ 2,038,684 $ 1,934,892
---------------------------------------------------------------------------
---------------------------------------------------------------------------


Consolidated Statements of Operations and Retained Earnings

(thousands, Three Months Nine months
except per unit amounts) ended ended
September 30, September 30,
2006 2005 2006 2005
---------------------------------------------------------------------------
(unaudited)
Revenues:
Production $ 223,139 $ 241,084 $ 679,426 $ 623,742
Royalties (40,930) (52,347) (135,918) (131,661)
---------------------------------------------------------------------------
182,209 188,737 543,508 492,081
---------------------------------------------------------------------------
Expenses:
Operating 38,430 32,301 112,142 92,240
Transportation 10,172 7,312 29,191 21,363
General and administrative 2,723 2,270 7,697 6,362
Financing 7,338 6,123 19,276 18,291
Amortization and accretion
of convertible
debentures 202 400 663 1,359
Unit-based compensation 1,803 849 4,176 2,038
Depreciation, depletion and
accretion 54,301 50,234 158,519 143,372
---------------------------------------------------------------------------
114,969 99,489 331,664 285,025
---------------------------------------------------------------------------
Income before taxes 67,240 89,248 211,844 207,056
Income and other taxes
(reductions) (3,560) 10,006 (21,791) 7,873
---------------------------------------------------------------------------
Net income 70,800 79,242 233,635 199,183
Accumulated earnings,
beginning of period 235,928 198,057 237,163 205,048
Cash distributions (83,650) (64,683) (247,720) (191,615)
---------------------------------------------------------------------------
Accumulated earnings, end
of period $ 223,078 $ 212,616 $ 223,078 $ 212,616
---------------------------------------------------------------------------
Net income per unit - basic $ 0.69 $ 0.82 $ 2.30 $ 2.08
---------------------------------------------------------------------------
Net income per unit
- diluted $ 0.68 $ 0.79 $ 2.26 $ 2.03
---------------------------------------------------------------------------
---------------------------------------------------------------------------


See accompanying notes to consolidated financial statements.

Consolidated Statements of Cash Flows
(thousands) Three Months Nine months
ended ended
September 30, September 30,
2006 2005 2006 2005
---------------------------------------------------------------------------
(unaudited)

Cash provided by (used in):

Operating Activities:
Net income $ 70,800 $ 79,242 $ 233,635 $ 199,183
Items not requiring cash
from operations:
Depreciation, depletion
and accretion 54,301 50,234 158,519 143,372
Amortization and accretion
of convertible debentures 202 400 663 1,359
Unit-based compensation 1,803 849 4,176 2,038
Future income taxes
(reductions) (3,629) 9,524 (21,860) 5,983
Asset retirement
expenditures (625) (567) (2,832) (1,978)
Changes in non-cash working
capital items 2,361 (19,633) 8,595 (29,957)
---------------------------------------------------------------------------
125,213 120,049 380,896 320,000
---------------------------------------------------------------------------

Financing Activities:
Issuance of equity, net of
issue costs 1,795 1,396 4,840 3,615
Cash distributions (83,650) (64,683) (247,720) (191,615)
Change in long-term debt 31,866 39,691 123,245 64,822
Changes in non-cash
working capital items 712 1,470 1,514 4,053
---------------------------------------------------------------------------
(49,277) (22,126) (118,121) (119,125)
---------------------------------------------------------------------------

Investing Activities:
Business acquisition - (44,800) - (44,800)
Exploitation and development (65,995) (53,231) (221,819) (145,769)
Property acquisitions (4,619) (1,856) (36,242) (13,859)
Property dispositions 100 - 107 562
Changes in non-cash
working capital items (5,422) 1,964 (4,821) 2,991
---------------------------------------------------------------------------
(75,936) (97,923) (262,775) (200,875)
---------------------------------------------------------------------------
Change in cash - - - -
Cash, beginning of period - - - -
---------------------------------------------------------------------------
Cash, end of period $ - $ - $ - $ -
---------------------------------------------------------------------------
---------------------------------------------------------------------------

See accompanying notes to consolidated financial statements.


BONAVISTA ENERGY TRUST

Notes to Interim Consolidated Financial Statements

For the three and nine months ended September 30, 2006

Bonavista Energy Trust (the "Trust" or "Bonavista") is an open-ended unincorporated investment trust governed by the laws of the Province of Alberta. The Trust was established on July 2, 2003 under a Plan of Arrangement entered into by the Trust, Bonavista Petroleum Ltd. ("BPL") and its subsidiaries and partnerships and NuVista Energy Ltd. ("NuVista") Under the Plan of Arrangement, a wholly-owned subsidiary of the Trust amalgamated with BPL and became the successor company. The Trust has two significant subsidiaries in which it owns 100% of the common shares of BPL (excluding the exchangeable shares) and 100% of the units of Bonavista Trust (2003). The activities of these entities are financed through interest bearing notes from the Trust and third party debt as described in the notes to the financial statements. The business of the Trust is carried on through the entities owned by the subsidiaries of the Trust, Bonavista Petroleum ("BP") and Bonavista Energy Limited Partnership. The net income of the Trust is generated from interest on notes advanced to its subsidiaries, royalty payments on oil and natural gas properties owned by BP, as well as any dividends or distributions paid by its subsidiaries. The trustee must declare payable to the Trust's unitholders all of the taxable income of the Trust.

The unaudited consolidated financial statements include the accounts of the Trust and its wholly-owned subsidiaries and partnerships, and have been prepared by management in accordance with Canadian Generally Accepted Accounting Principles. The interim consolidated financial statements and notes should be read in conjunction with the consolidated financial statements for the years ended December 31, 2005 and 2004. Certain amounts have been reclassified to conform with the current period's presentation.

1. Business relationships:

Under the Plan of Arrangement, Bonavista entered into a Technical Services Agreement ("TSA") with NuVista. Under the TSA, Bonavista receives payment for certain technical and administrative services provided by it to NuVista on a cost recovery basis. Bonavista and NuVista are considered related as two directors of NuVista, one of whom is NuVista's chairman, are directors and officers of Bonavista and a director and an officer of NuVista are also officers of Bonavista. For the nine months ended September 30, 2006, fees of $1.6 million (2005 - $1.2 million) relating to general administrative activities were charged pursuant to the TSA.

On June 1, 2006, Bonavista acquired oil and natural gas properties through a partnership for cash consideration of $25.8 million and included the results of operations from the date of the acquisition. A director and an officer of Bonavista are related parties of the vendor. Bonavista purchased these oil and natural gas properties through a series of transactions, with the properties being acquired in an existing partnership owned approximately 24% by BP and 76% by NuVista Energy Ltd. In conjunction with the acquisition, Bonavista recognized $800,000 of asset retirement obligations.

2. Long-term debt:

On August 10, 2006, the Trust completed an $800 million credit facility with a syndicate of chartered banks. This facility is an unsecured, covenant-based, extendible revolving facility and includes a $50 million working capital facility. The loan facility provides that borrowings may be made by way of prime rate loans, bankers' acceptances and/or US dollar LIBOR advances. These advances bear interest at the banks' prime rate and/or at money market rates plus a stamping fee. The facility is subject to an annual review by the lenders, at which time a lender can request conversion to a term loan for three years. Under the term period, no principal payments would be required until August 10, 2010 or later, after the annual review.

3. Convertible debentures:

The debt component of the debentures has been classified in the Liabilities section of the Consolidated Balance Sheet, net of the fair value of the conversion feature and issue costs. The fair value of the conversion feature of the debentures at the date of issue was $4.7 million and has been included in Unitholders' equity. The issue costs are amortized to earnings over the term of the obligation and the debt component of the obligation is adjusted for the amortization and for the portion of issue costs relating to conversions. The debt portion is accreted over the term of the obligation to the principal value on maturity with a corresponding charge to net income. The following table sets out the convertible debenture activities to September 30, 2006:



---------------------------------------------------------------------------
Debt Equity
Component Component
---------------------------------------------------------------------------
(thousands)
Balance, December 31, 2005 $ 87,866 $ 1,892
Accretion 95 -
Issue expenses related to conversions to trust
units 619 -
Amortization of issue expenses 568 -
Conversion to trust units (37,333) (758)
---------------------------------------------------------------------------
Balance, September 30, 2006 $ 51,815 $ 1,134
---------------------------------------------------------------------------
---------------------------------------------------------------------------


4. Asset retirement obligations:

The Trust's asset retirement obligations result from net ownership interests in oil and natural gas assets including well sites, gathering systems and processing facilities. The Trust estimates that the total undiscounted amount of expenditures required to settle its asset retirement obligations is approximately $440.3 million which will be incurred over the next 51 years. The majority of the costs will be incurred between 2010 and 2036. A credit-adjusted risk-free rate of 7.5% and an inflation rate of 2% were used to calculate the fair value of the asset retirement obligations.

A reconciliation of the asset retirement obligations is provided below:



---------------------------------------------------------------------------
Nine months
ended
September 30,
2006 2005
---------------------------------------------------------------------------
(thousands)

Balance, beginning of period $ 82,819 $ 58,531
Accretion expense 4,598 3,205
Liabilities incurred 3,100 1,836
Liabilities acquired 1,588 1,337
Liabilities settled (2,832) (1,978)
---------------------------------------------------------------------------
Balance, end of period $ 89,273 $ 62,931
---------------------------------------------------------------------------
---------------------------------------------------------------------------

5. Unitholders' capital and exchangeable shares:

a) Authorized:

Unlimited number of voting trust units.

b) Issued and outstanding:

(i) Trust units:

---------------------------------------------------------------------------
Number Amount
---------------------------------------------------------------------------
(thousands)
Balance, December 31, 2005 80,288 $ 769,629
Issued on conversion of convertible debentures 1,458 37,333
Issued on conversion of exchangeable shares 2,408 16,772
Issued upon exercise of trust unit incentive rights 452 4,840
Issue costs, related to debenture conversions - (619)
Adjustment to equity component on conversion of
debentures - 758
Unit-based compensation - 2,623
---------------------------------------------------------------------------
Balance, September 30, 2006 84,606 $ 831,336
---------------------------------------------------------------------------
---------------------------------------------------------------------------


(ii) Exchangeable shares:
---------------------------------------------------------------------------
Number Amount
---------------------------------------------------------------------------
(thousands)
Balance, December 31, 2005 14,101 $ 92,370
Exchanged for trust units (1,726) (16,772)
---------------------------------------------------------------------------
Balance, September 30, 2006 12,375 $ 75,598
---------------------------------------------------------------------------
Exchange ratio, end of period 1.48013 -
---------------------------------------------------------------------------
Trust units issuable on exchange 18,317 $ 75,598
---------------------------------------------------------------------------

(iii) Contributed surplus:
---------------------------------------------------------------------------
Amount
---------------------------------------------------------------------------
(thousands)
Balance, December 31, 2005 $ 2,456
Unit-based compensation 4,176
Exercise of trust unit incentive rights (2,623)
---------------------------------------------------------------------------
Balance, September 30, 2006 $ 4,009
---------------------------------------------------------------------------
---------------------------------------------------------------------------


c) Trust unit incentive rights plan:

For the three months ended September 30, 2006 there were 1,348,500 trust unit incentive rights issued with an average exercise price of $33.63 per trust unit and an estimated fair value of $7.89 per trust unit. As at September 30, 2006 there were 3,803,375 trust unit rights outstanding with an average exercise price of $25.35 per trust unit. The Trust uses the fair value based method for the determination of the unit-based compensation costs. The fair value of each incentive right granted was estimated on the date of grant using the modified Black-Scholes option-pricing model. In the pricing model, the risk free interest was 3.5%, volatility of 25%, a forfeiture rate of 10% and an expected life of 4.5 years.

d) Per unit amounts:

The following table summarizes the weighted average trust units, exchangeable shares and convertible debentures used in calculating net income per trust unit:



Nine months
ended,
September 30, 2006
---------------------------------------------------------------------------
(thousands)
Trust units 83,160
Exchangeable shares converted at the exchange ratio 18,532
---------------------------------------------------------------------------
Basic equivalent trust units 101,692
Convertible debentures 2,528
Trust unit incentive rights 1,162
---------------------------------------------------------------------------
Diluted equivalent trust units 105,382
---------------------------------------------------------------------------
---------------------------------------------------------------------------


For the purposes of calculating net income per trust unit on a diluted basis, the net income has been increased by $4.3 million with respect to the accretion, amortization and interest expense on the convertible debentures.

6. Hedge instruments:

a) Financial instruments:

As at September 30, 2006, the Trust has hedged by way of costless collars to sell natural gas (gjs/d) and crude oil (bbls/d) as follows:



---------------------------------------------------------------------------
Volume Average Price Term
---------------------------------------------------------------------------
10,000 gjs/d CDN$ 8.50-CDN$ 12.25-AECO October 1, 2006-October 31, 2006
5,000 gjs/d CDN$ 8.50-CDN$ 11.25-AECO November 1, 2006-March 31, 2007
5,000 gjs/d CDN$ 7.00-CDN$ 9.50-AECO April 1, 2007-October 31, 2007
CDN$ 46.28-
1,000 bbls/d CDN$ 60.89-Bow River October 1, 2006-December 31, 2006
7,000 bbls/d US$ 55.29-US$ 70.94-WTI October 1, 2006-December 31, 2006
5,000 bbls/d US$ 60.70-US$ 82.33-WTI January 1, 2007-March 31, 2007
6,000 bbls/d US$ 63.67-US$ 83.05-WTI April 1, 2007-June 30, 2007
3,000 bbls/d US$ 63.75-US$ 83.67-WTI July 1, 2007-September 30, 2007
3,000 bbls/d US$ 63.42-US$ 83.42-WTI October 1, 2007-December 31, 2007
---------------------------------------------------------------------------


As at September 30, 2006, the market value of these financial instruments was approximately a gain of $3.4 million.

b) Physical purchase contracts:

As at September 30, 2006, the Trust has entered into direct sale costless collars to sell natural gas as follows:



---------------------------------------------------------------------------
Volume Average Price (CDN$/gj) Term
---------------------------------------------------------------------------
40,000 gjs/d $ 7.63-$ 11.16 October 1, 2006-October 31, 2006
35,000 gjs/d $ 8.18-$ 11.14 November 1, 2006-March 31, 2007
10,000 gjs/d $ 7.00-$ 9.25 April 1, 2007-October 31, 2007
---------------------------------------------------------------------------


7. Subsequent event:

On October 31, 2006, the Government of Canada announced a new tax proposal pertaining to taxation of distributions paid by income trusts. Currently, trusts do not pay tax on distributions, as the tax is paid by the unitholder. If enacted, the proposals would result in taxation of distributions at the trust level rate of 31.5%, effective January 1, 2011. As the proposals are not yet enacted, there was no impact on Bonavista's results for the nine months ended September 30, 2006. Bonavista is currently assessing this new proposal and the potential implications on its business plan.

INVESTOR INFORMATION

Bonavista Energy Trust is a natural gas weighted energy trust which is committed to maintaining its emphasis on operating high quality oil and natural gas properties, delivering consistent distributions to unitholders and ensuring financial strength and sustainability.

Corporate information provided herein contains forward-looking information. The reader is cautioned that assumptions used in the preparation of such information, particularly those pertaining to cash distributions, production volumes, commodity prices, operating costs and drilling results, which are considered reasonable by Bonavista at the time of preparation, may be proven to be incorrect. Actual results achieved during the forecast period will vary from the information provided herein and the variations may be material. There is no representation by Bonavista that actual results achieved during the forecast period will be the same in whole or in part as those forecast.

Contact Information

  • Bonavista Energy Trust
    Keith A. MacPhail
    President & CEO
    (403) 213-4315
    or
    Ronald J. Poelzer
    Executive Vice President & CFO
    (403) 213-4308
    or
    Bonavista Petroleum Ltd.
    700, 311 - 6th Avenue SW
    Calgary, AB T2P 3H2
    (403) 213-4300
    Website: www.bonavistaenergy.com