Harvest Energy Trust

Harvest Energy Trust

March 14, 2005 07:00 ET

Harvest Energy Trust Announces Fourth Quarter and Full Year 2004 Financial and Operating Results


NEWS RELEASE TRANSMITTED BY CCNMatthews

FOR: HARVEST ENERGY TRUST

TSX SYMBOL: HTE.UN

MARCH 14, 2005 - 07:00 ET

Harvest Energy Trust Announces Fourth Quarter and Full
Year 2004 Financial and Operating Results

CALGARY, ALBERTA--(CCNMatthews - March 14, 2005) - Harvest Energy Trust
(TSX:HTE.UN) ("Harvest" or the "Trust") announces the release of its
fourth quarter and year ended December 31, 2004 financial and operating
results.

Highlights

- Our fourth quarter and full year production increased by 149% and
109%, respectively, compared to the same periods in 2003. Average daily
production was 37,024 BOE/d in the fourth quarter, and 23,019 BOE/d for
the full year 2004. These increases reflect success from our internal
development projects as well as the two large acquisitions completed
during the year;

- We declared distributions of $2.40 per unit in 2004, resulting in a
payout ratio of 46% in the fourth quarter and 50% for the full year
2004. This compares to 75% and 66% for the same periods in 2003, and
reflects the continuation of Harvest's strategy to retain cash for
development purposes;

- Cash flow per unit (basic) in the fourth quarter 2004 totaled $1.31,
an increase of 54% relative to the same period in 2003. Full year 2004
cash flow per unit (basic) was $5.13, which represents a 39% increase
over 2003;

- Harvest has reduced operating costs per BOE to $7.37 in the fourth
quarter of 2004 from $9.50 in the fourth quarter of 2003;

- F&D costs per BOE of Total Proved reserves and Proved plus Probable
(P+P) reserves were $5.42 and $4.15, respectively, on $42.7 million in
development capital. FD&A costs per BOE on Total Proved and P+P reserves
were $14.51 and $11.08 per BOE, respectively, on total capital
expenditures of $748.7 million. Recycle ratios achieved for 2004 were
4.5 times on a Total Proved basis and 5.8 times on a P+P basis. Both F&D
and FD&A costs include future development capital. We have revised the
F&D costs for P+P reserves from that previously reported in our press
release dated February 28, 2005, following further review of our reserve
reconciliation and finalization of our financial statements;

- Total Proved and P+P reserves increased 176% and 211% from the prior
year to 75.0 MMBOE and 102.5 MMBOE, respectively, and natural gas
reserves increased to approximately 14% of total. These increases are
primarily the result of two successful acquisitions which Harvest
completed during the year;

- These reserve increases were accretive to unitholders. P+P reserves
per fully diluted Trust Unit increased by 25% to 2.27 in 2004 (2003 -
1.82) and 77% since inception (1.28), while increasing our reserve life
index to 8. We believe these are strong measures of value added for our
unitholders;

- Net present value (before taxes, discounted at 10%) per fully diluted
Trust Unit of our Total Proved and P+P reserves increased 134% and 170%,
respectively, to $19.96 per Unit on a Total Proved basis and $25.12 per
Unit on a P+P basis;

- We issued US$250 million, 7-year 7 7/8% senior notes on October 14,
2004. This transaction created longer term financial flexibility, and
will facilitate future access to U.S. financial markets if needed.

2004 Financial & Operating Highlights

The table below provides a summary of Harvest's financial and operating
results for both the three and twelve month periods ended December 31,
2004 and 2003. Our consolidated financial statements with accompanying
notes and our Management's Discussion and Analysis (MD&A) are available
on the "Financial Information - Annual Reports" section of Harvest's
website (www.harvestenergy.ca) and will be filed shortly on SEDAR
(www.sedar.com).



Three months ended Twelve months ended
December 31 December 31
($000s except per
Trust Unit and
per BOE(1) amounts)
% %
FINANCIAL 2004 2003 Change 2004 2003 Change
---------------------------------------------------------------------
(Restated) (Restated)
(6) (6)
Revenue, net of
royalties $107,446 $33,575 220% $277,095 $102,939 169%
Cash flow from
operations(5) 53,545 13,699 291% 130,003 46,492 180%
Per Trust Unit,
basic(5) 1.31 0.85 54% 5.13 3.69 39%
Per Trust Unit,
diluted(5) 1.27 0.82 55% 4.91 3.58 37%
Net income 12,536 5,495 128% 18,231 15,516 17%
Per Trust Unit,
basic 0.29 0.30 (3%) 0.47 1.16 (59%)
Per Trust Unit,
diluted 0.28 0.29 (3%) 0.45 1.13 (60%)

Distributions,
declared 24,823 10,209 143% 64,563 30,685 110%
Distributions
per Trust
Unit, declared(7) 0.60 0.60 0% 2.40 2.40 0%

Payout ratio(2)(5) 46% 75% (39%) 50% 66% (24%)
Capital asset additions
(excluding
acquisitions) 8,873 4,334 105% 42,662 27,209 57%

Acquisitions - 80,271 (100%) 706,000 108,700 549%
Net debt (excluding
Derivative
contracts)(3)(5) 429,671 78,555 447% 429,671 78,555 447%
Weighted average
Trust Units
outstanding,
basic (4) 40,937 16,175 153% 25,324 12,591 101%
Trust Units
outstanding,
end of period 41,788 17,109 144% 41,788 17,109 144%
Trust Units, fully
diluted(8),
end of period 45,088 18,174 148% 45,088 18,174 148%
---------------------------------------------------------------------
---------------------------------------------------------------------
OPERATING
---------------------------------------------------------------------
Daily Sales Volumes(10)
Light oil
(bbl/day) 12,228 4,079 200% 7,911 1,028 670%
Medium oil
(bbl/day) 3,644 4,662 (22%) 4,324 4,286 1%
Heavy oil
(bbl/day) 15,120 5,756 163% 8,495 5,444 56%
Natural gas
liquids (bbl/day) 1,309 70 1770% 471 64 636%
Natural gas (mcf/d) 28,338 1,744 1525% 10,903 1,311 732%
---------------------------------------------------------------------
Total (BOE/d) 37,024 14,858 149% 23,019 11,040 109%
---------------------------------------------------------------------
---------------------------------------------------------------------
REALIZED PRICES
---------------------------------------------------------------------
Average Selling Prices(10)
Light oil ($/bbl) $ 53.64 $ 35.56 51% $ 48.70 $ 35.56 37%
Medium oil ($/bbl) 35.55 30.13 18% 38.78 32.18 21%
Heavy oil ($/bbl) 28.73 24.92 15% 31.11 27.34 14%
Natural gas liquids
($/bbl) 33.19 29.18 14% 41.10 29.92 37%
Natural gas ($/mcf) 5.68 6.01 (5%) 6.30 6.70 (6%)
---------------------------------------------------------------------
Total ($/BOE) $ 37.77 $ 29.13 30% $ 39.33 $ 29.62 33%
---------------------------------------------------------------------
---------------------------------------------------------------------
OPERATING NETBACKS(5) ($/BOE)
---------------------------------------------------------------------
Revenues $ 37.77 $ 29.13 30% $ 39.33 $ 29.62 33%
Realized loss on
derivative contracts (4.91) (2.18) 125% (6.47) (4.67) 39%
Royalites (6.23) (4.66) 34% (6.44) (4.07) 58%
Operating expense (9) (7.37) (9.50) (22%) (8.48) (8.94) (5%)
---------------------------------------------------------------------
Operating netback(5) $ 19.26 $ 12.79 51% $ 17.94 $ 11.94 50%
---------------------------------------------------------------------
---------------------------------------------------------------------


(1) All calculations required to convert natural gas to a crude oil
equivalent (BOE) have been made using a ratio of 6 mcf of natural
gas to 1 barrel of crude oil. BOEs may be misleading,
particularly if used in isolation. The BOE 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.

(2) Ratio of distributions to cash flow from operations.

(3) Net debt is bank debt, senior notes, equity bridge notes,
convertible debentures and any working capital deficit excluding
the current portion of derivative contracts and the accounting
liability related to our Trust Unit incentive plan. Equity bridge
notes and convertible debentures are reflected as equity on our
consolidated balance sheet in accordance with Canadian GAAP. In
2005, GAAP will require these amounts to be reflected as debt.

(4) Reflects both Trust Units and exchangeable shares.

(5) These are non-GAAP measures; please refer to the "Certain
Financial Reporting Measures" section included in our MD&A.

(6) Restated to reflect the adoption of new CICA recommendations to
account for asset retirement obligations. See Note 3 to the 2004
Consolidated Financial Statements.

(7) As if the Trust Unit is held throughout the period.

(8) Fully diluted units differ from diluted units for accounting
purposes. Fully diluted includes Trust Units outstanding at
December 31 plus the impact of the conversion or exercise of
exchangeable shares, Trust Unit rights and convertible
debentures, if completed at December 31.

(9) Includes realized gain on electricity derivative contracts of
$0.18 and $0.24 for fourth quarter and full year 2004,
respectively, and $0.26 and $0.39 for the same periods in 2003.

(10) Harvest classifies its oil production as light, medium and heavy
according to NI 51-101 guidance.


Year ended December 31
--------------------------------------------------------------------
2004 2003 % Change
--------------------------------------------------------------------
Reserves Summary (MMBOE)
Proved Developed Producing 67.2 25.9 159%
Total Proved 75.0 27.2 176%
Probable 27.5 5.8 374%
Proved plus Probable 102.5 33.0 211%

Total Proved
F&D Costs ($/BOE) $ 5.42 $ 11.92 (55%)
Recycle Ratio 4.5 1.4 221%
FD&A Costs ($/BOE) $ 14.51 $ 7.23 101%
Recycle Ratio 1.7 2.2 (23%)

Proved plus Probable
F&D Costs ($/BOE) $ 4.15 $ 11.46 (64%)
Recycle Ratio 5.8 1.4 314%
FD&A Costs ($/BOE) $ 11.08 $ 6.62 67%
Recycle Ratio 2.2 2.5 (12%)

Total Proved Reserve Life Index 6 5 20%
Proved plus Probable Reserve Life Index 8 6 33%
---------------------------------------------------------------------
---------------------------------------------------------------------
Note: 2004 recycle ratios were calculated using the average annual
netback which does not fully reflect the higher netback
production acquired during the year.


Message to Unitholders

2004 was a year of continued growth and evolution for Harvest. After
closing two significant acquisitions in the year, we achieved record
levels of production and cash flow since Harvest was formed. More
importantly, this growth was achieved on an accretive basis, in the form
of cash flow per unit and reserves per unit, while increasing our
reserve life index (RLI). Our year end reserve report showed significant
growth in all categories, accretive reserve additions at low cost, an
increase to our RLI and substantial increases to net present values.

As we move forward into 2005, we anticipate Harvest's capital
development budget to be approximately $75 million, focused on our four
core areas of Southern Alberta, North Central Alberta, East Central
Alberta and Southeast Saskatchewan. We expect to drill up to 70 wells
and will continue to focus our efforts on production increases, reserve
recovery optimization and cost reduction initiatives.

Production volumes in 2005 are expected to average between 34,000 and
36,000 BOE/d, with royalty rates as a percentage of revenue expected to
average between 15 and 17%. As a result of ongoing cost reduction
activities and lower operating cost property acquisitions in 2004,
operating expenses are expected to average lower in 2005, between $7.75
and $8.50 per BOE. Approximately 75% of our net crude oil production
volumes are hedged for 2005, with approximately 80% of our hedge
contracts structured to allow participation in a strengthening commodity
price environment.

Harvest will be conducting a conference call and Webcast to discuss its
fourth quarter and full year 2004 results at 9:00 a.m. Mountain time
(11:00 a.m. Eastern time) on March 14th, 2005. Callers may dial
1-877-888-3490 (international callers or Toronto local dial
416-695-5261) a few minutes prior to start and request the Harvest
conference call. The call also will be available for replay by dialing
1-888-509-0082 (international callers or Toronto local dial
416-695-5275). No passcode is required.

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

Harvest Energy Trust is a Calgary-based energy trust actively managed to
deliver stable monthly cash distributions to its Unitholders through its
strategy of acquiring, enhancing and producing crude oil, natural gas
and natural gas liquids. Harvest Trust Units are traded on the Toronto
Stock Exchange (TSX) under the symbol "HTE.UN". Please visit Harvest's
website at www.harvestenergy.ca for additional corporate information and
a recent corporate presentation.

-30-

Contact Information

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