Oil Exploitation

Crude oil and natural gas liquids production is averaging approximately 5,730 bbls per day in early April 2005, representing 36 percent of the Trust’s volumes. This includes a mix of natural gas liquids, premium-priced light crude and conventional heavy oil from a large, long-life reservoir acquired via the Flowing transaction on April 5, 2005.

Daylight’s oil properties provide a low-risk platform to apply our high-end technical teams, proven skills and expertise by utilizing waterflood programs and other established and repeatable practices. Daylight will reduce operating costs and extend the productive life of these large-scale assets. Daylight’s experience with these and similar pools creates a low technical risk that the Trust believes can add production and reserves and increase net asset value at much lower costs than other programs. Daylight’s Oil Exploitation properties include Freeman, Wildmere, and Sturgeon Lake (discussed on pp. 20 to 21). These are stable, low-risk producers with potential to add volumes through exploitation/optimization.

East Five ("E-5") is a non-traditional term describing the low-risk, generally shallow-depth oil and natural gas pools in Daylight’s eastern region, which generally lies east of Alberta’s West 5 Meridian. W-5 indicates the shift towards deeper, liquids-rich and sour natural gas and oil opportunities, incurring greater capital intensity and drilling risk. E-5 properties create a low-risk production base suitable to a income trust.

For 2005 Daylight has allocated $10.0 million in growth capital to E-5 properties. The Trust plans to drill 25 net wells and intends to add over 1,000 boe in daily production during the year. Current production for the area is approximately 5,070 boe per day.