EXHIBIT 99.1
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N E W S R E L E A S E
[GRAPHIC OMITTED]
[LOGO HARVEST ENERGY TRUST]
HARVEST ENERGY TRUST - NEWS RELEASE
(HTE.UN - TSX)
HARVEST ENERGY TRUST ANNOUNCES YEAR END 2004 RESERVES,
2004 DISTRIBUTION TAXABILITY, AND 2005 GUIDANCE
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CALGARY, FEBRUARY 28, 2005 (TSX: HTE.UN) - Harvest Energy Trust ("Harvest")
today announces the following:
o 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;
o 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
o 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:
o 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);
o 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);
o 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);
o Total Proved reserve replacement was approximately 560% and Proved plus
Probable reserve replacement was 813%, as a percentage of Harvest's
estimated full year 2004 production;
o 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;
o 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.
HARVEST ENERGY TRUST
PRESS RELEASE Page 2 of 5 February 28, 2005
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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.
RESERVES SUMMARY - FORECAST PRICES & COSTS AS AT DECEMBER 31, 2004
Light & Medium Crude Oil Heavy Crude Oil Natural Gas Liquids
------------------------ ----------------------- -----------------------
Gross(1) Net(2) Gross(1) Net(2) Gross(1) Net(2)
Reserves 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
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Total Proved Plus Probable 37,839 34,107 48,177 43,409 2,638 2,350
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Natural Gas Total Oil Equivalent(3)
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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
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Total Proved Plus Probable 83,151 73,698 102,512 92,150
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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
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Total Proved Plus Probable 1,732,723 1,361,549 1,132,486 976,205 862,193
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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
HARVEST ENERGY TRUST
PRESS RELEASE Page 3 of 5 February 28, 2005
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2004 RESERVES RECONCILIATION
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TOTAL BARREL OF OIL EQUIVALENT (BOE)
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Net Proved Plus
Net Proved Net Probable 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)
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December 31, 2004 67,412 24,738 92,150
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Notes:
(1) Columns may not add due to rounding.
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 ENERGY TRUST
PRESS RELEASE Page 4 of 5 February 28, 2005
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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.
HARVEST ENERGY TRUST
PRESS RELEASE Page 5 of 5 February 28, 2005
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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.
INVESTOR & MEDIA CONTACTS:
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JACOB ROORDA |
President | CORPORATE HEAD OFFICE:
- ------------------------------------| Harvest Energy Trust
| 2100, 330 - 5th Avenue S.W.
DAVID RAIN | Calgary, AB Canada T2P 0L4
Vice President & CFO |
- ------------------------------------| PHONE: (403) 265-1178
| TOLL FREE: (866) 666-1178
CINDY GRAY | Fax: (403) 265-3490
Investor Relations & | Email: information@harvestenergy.ca
Communications Advisor | Website: www.harvestenergy.ca
gray@harvestenergy.ca |
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