EnerVest Diversified Income Trust
TSX : EIT.UN

EnerVest Diversified Income Trust

August 16, 2005 09:30 ET

EnerVest Diversified Income Trust Announces Financial Results for June 30, 2005

CALGARY, ALBERTA--(CCNMatthews - Aug. 16, 2005) - EnerVest Diversified Income Trust (TSX:EIT.UN) ("EnerVest") is pleased to present the financial results for the three month period ended June 30, 2005.

The following excerpts are from EnerVest's quarterly report for June 30, 2005. This report, in its entirety, can be found on EnerVest's website at www.enervest.com, or on the SEDAR website at www.sedar.com.

MANAGEMENT'S DISCUSSION AND ANALYSIS

Portfolio

The portfolio remains well diversified comprising 116 investments in nine asset classes. As at June 30, 2005, the portfolio weightings were:



Oil and Gas 21.3% Energy Distribution 8.6%
Consumer Products 18.7% Industrials 6.3%
Real Estate 17.2% Metals and Minerals 2.3%
Pipeline and Utility 15.8% Paper and Forest Products 0.8%
Transportation and Environment 9.0%


Financial Performance

The second quarter saw a continuation of the weakness in the equity markets until about mid May This was followed by a general market strengthening which continued throughout the balance of the quarter and to the time of this writing. EnerVest took advantage of the market adjustment by selectively investing in high quality income and royalty trusts at lower prices.

EnerVest's return to Unitholders was 6.8% for the quarter based on the opening and closing TSX values of $7.94 and $8.27 per unit and distributions of $0.21 per unit. The return for the six month period was 5.7% based on the opening and closing TSX values of $8.40 and $8.27 per unit, distributions of $0.42 per unit and an average trading value of rights of $0.1869.

Revenues for the second quarter and for the six month period ended June 30, 2005 increased 48% and 50%, respectively, over the comparative periods in 2004, to $32.2 million and $61.3 million, respectively. This increase is due to the larger investment portfolio resulting primarily from equity issues and appreciation of investments.

General and administrative costs increased $206,000 (33%) and $270,000 (23%) for the three and six month periods ended June 30, 2005, respectively, as compared to the corresponding periods in 2004. As the weighted average number of units outstanding increased by 42% and 44% over the same periods in 2004, general and administrative costs, on a per unit basis, decreased 6% and 15% for the three and six month periods ended June 30, 2005, respectively, to $0.0046 and $0.0086 per unit.

Management fees increased by $1.5 million and $2.8 million for the three and six month periods ended June 30, 2005, respectively, as compared to the same periods in 2004. This is due to the larger net asset value of EnerVest which was primarily the result of the Exchange Offering in October 2004, the Rights Offering in February 2005 and the increase in net assets from operations.

Interest expense increased $414,000 and $957,000 for the three and six month periods ended June 30, 2005, respectively, compared to the same periods in 2004. This increase is attributable to a higher level of borrowing during 2005.

EnerVest's net investment income was $25.9 million and $49.2 million, respectively, for the three and six months ended June 30, 2005, as compared to $17.5 million and $32.7 million in 2004. This increase is primarily due to the larger portfolio.

Gain on sale of investments was $460,000 for the quarter and $10.6 million for the six months ended June 30, 2005, as compared to gains of $2.7 million and $10.1 million for the comparative 2004 periods. The portfolio had unrealized gains of $53.0 million during the second quarter and $54.8 million for the six month period, as compared to $52.5 million unrealized losses and $5.2 million unrealized gains for the same periods in 2004. Return of capital on distributions received during the second quarter and six months ended totaled $9.5 million and $17.9 million, respectively, an increase of $2.0 million and $3.4 million over the comparative 2004 periods.

The resulting increase in net assets from operations was $69.9 million ($0.39 per unit) for the quarter and $96.7 million ($0.57 per unit) for the six months ended June 30, 2005 as compared to a $39.8 million decrease and a $33.5 million increase for the three and six months ended June 30, 2004.

As at June 30, 2005, the net asset value of EnerVest was $1.425 billion ($7.99 per unit), after distributions of $72.8 million were paid to Unitholders during 2005, as compared to the December 31, 2004 net asset value of $1.188 billion ($8.01 per unit).

Cash Distributions

EnerVest distributed $0.21 and $0.42 per unit ($0.07 per unit per month) for the three and six month periods, respectively, to June 30th in both 2005 and 2004. It is estimated that approximately 55% of this year's distributions will not be included in taxable income. This equates the 10.0% yield on EnerVest units as at December 31, 2004 to an equivalent pre-tax interest rate of 13.3% (assuming a 50% tax rate and payment of capital gains tax on the return of capital upon disposition of EnerVest units).

Outlook

We are fairly optimistic for the outlook of EnerVest for the balance of 2005. We utilized the earlier period of lower valuations to selectively add quality investments with solid yields and the potential for capital appreciation to our portfolio. The sector has been very strong since about mid May and we have recently seen EnerVest's net asset value surpass $1.5 billion. We continue to see many initial public offerings, requiring extensive analysis of management, business plans, competition, access to capital, etc., prior to investment. Overall, we see the best potential for upside in the consumer products and industrial sectors.

Current positive trends affecting the income and royalty trust sector include continued increasing demand for income producing investments, more institutional investors entering the trust market, continued creation of new royalty and income trusts, a strong Canadian economy, the expectation of continued low interest rates, and strong balance sheets and commodity prices in the oil and gas sector.

Negative trends include potential interest rate increases, a strong Canadian dollar (negatively impacting several trusts including those in the oil and gas sector), high oil and gas prices (negatively affecting the available cash of trusts utilizing energy as an input and consumer spending) and uncertainty concerning the strength of the U.S. economy (our portfolio has very limited cross-border exposure).

Overall, we believe these factors bode reasonably well for the income and royalty trust sector and for the outlook of EnerVest for the balance of 2005.



ENERVEST DIVERSIFIED INCOME TRUST
STATEMENTS OF NET ASSETS
------------------------------------------------------------------------
------------------------------------------------------------------------

As at June 30, 2005 December 31, 2004
(Unaudited)
($ thousands except per unit amounts) $ $
------------------------------------------------------------------------
------------------------------------------------------------------------

CURRENT ASSETS
Cash 2,739 21,960
Investments, at market value 1,610,944 1,400,222
Accounts receivable 3 3
Distributions receivable 10,371 9,422
Current portion of promissory note
receivable 50 50
-------------------------------------

1,624,107 1,431,657

Promissory note receivable 185 210
-------------------------------------

1,624,292 1,431,867
-------------------------------------
-------------------------------------

CURRENT LIABILITIES
Accounts payable and accrued
liabilities 9,827 5,791
Distributions payable 12,483 10,381
Credit facility 177,250 228,000
-------------------------------------

199,560 244,172
-------------------------------------

NET ASSETS 1,424,732 1,187,695
-------------------------------------
-------------------------------------

UNITS ISSUED AND OUTSTANDING (000's) 178,326 148,300
-------------------------------------
-------------------------------------
NET ASSET VALUE PER UNIT $7.99 $8.01
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ENERVEST DIVERSIFIED INCOME TRUST
STATEMENTS OF OPERATIONS
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------------------------------------------------------------------------

Three Months Ended Six Months Ended
June 30 June 30
(Unaudited) -------------------------------------
($ thousands except per unit 2005 2004 2005 2004
amounts) $ $ $ $
------------------------------------------------------------------------
------------------------------------------------------------------------

INVESTMENT REVENUES 32,151 21,696 61,283 40,733

EXPENSES
General and administrative 825 619 1,463 1,193
Management fees 4,065 2,612 7,954 5,156
Interest on credit facility 1,386 972 2,684 1,727
-------------------------------------

6,276 4,203 12,101 8,076
-------------------------------------

NET INVESTMENT INCOME 25,875 17,493 49,182 32,657

GAIN ON INVESTMENTS
Net gain on sale of investments 460 2,703 10,599 10,074
Net change in unrealized gains
(losses) 53,042 (52,457) 54,788 5,194
Return of capital (9,504) (7,527) (17,873) (14,465)
-------------------------------------

43,998 (57,281) 47,514 803
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INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS 69,873 (39,788) 96,696 33,460
-------------------------------------
-------------------------------------

WEIGHTED AVERAGE UNITS OUTSTANDING
(000's) 178,234 125,414 170,767 118,615
-------------------------------------

PER UNIT
Net Investment Income $0.14 $0.14 $0.29 $0.27
Net Gain (Loss) on Investments $0.25 ($0.46) $0.28 $0.01
-------------------------------------

Increase (Decrease) in Net Assets
from Operations $0.39 ($0.32) $0.57 $0.28

Management expense ratio ("MER") 1.80% 1.98% 1.79% 1.94%
MER excluding interest 1.41% 1.53% 1.39% 1.52%
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ENERVEST DIVERSIFIED INCOME TRUST
STATEMENTS OF CHANGES IN NET ASSETS
------------------------------------------------------------------------
------------------------------------------------------------------------

Three Months Six Months Ended
Ended June 30 June 30
-------------------------------------
(Unaudited) 2005 2004 2005 2004
($ thousands) $ $ $ $
------------------------------------------------------------------------
------------------------------------------------------------------------

NET ASSETS, BEGINNING OF PERIOD 1,390,938 929,245 1,187,695 723,366

Increase (decrease) in net
assets from:

OPERATIONS 69,873 (39,788) 96,696 33,460

UNITHOLDER TRANSACTIONS
Net proceeds on issuance of
trust units (148) (324) 210,276 156,219
Distributions to unitholders (37,435) (26,341) (72,754) (50,905)
Proceeds from dividend
reinvestment plan 1,504 833 2,819 1,485
-------------------------------------

(36,079) (25,832) 140,341 106,799
-------------------------------------

NET ASSETS, END OF PERIOD 1,424,732 863,625 1,424,732 863,625
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EnerVest is an actively managed, closed-end trust which invests in a diversified portfolio of income, royalty and real estate investment trusts, and limited partnerships, all of which trade on the Toronto Stock Exchange. EnerVest's objectives are to maximize monthly distributions, reduce investment risk, and maximize net asset value over its life. EnerVest currently has 178,389,298 units outstanding, a net asset value of approximately $1.5 billion and an average trading volume of approximately 479,000 per day for the first seven months of 2005.

The Toronto Stock Exchange has neither approved nor disapproved the information contained herein.

Contact Information

  • EnerVest Diversified Management Inc.
    Michael L. Streukens
    President & Chief Executive Officer
    (403) 571-5550 or Toll Free: 1-800-459-3384
    or
    EnerVest Diversified Management Inc.
    David J. Fischer
    Chief Financial Officer
    (403) 571-5550 or Toll Free: 1-800-459-3384
    or
    EnerVest Diversified Management Inc.
    Linda Koroluk
    Investor Relations
    (403) 571-5550 or Toll Free: 1-800-459-3384
    or
    EnerVest Diversified Management Inc.
    Suite 2800, 700-9th Avenue S.W.
    Calgary, Alberta, T2P 3V4
    (403) 571-5550 or Toll Free: 1-800-459-3384
    (403) 571-5554 (FAX)
    Email: info@enervest.com
    Website: www.enervest.com