Why Invest in Provident Energy
Tom Buchanan, CEO

Since inception in March 2001, Provident has delivered solid unitholder return in every year of operations.

Total Return Since Inception

While Provident’s financial track record is evidence of our ability to deliver unitholder return, why should an investor with an eye on the future invest in Provident Energy Trust today?

Provident’s Balanced Portfolio Strategy will deliver unitholders stable distributions and value over the long-term

Provident is the only energy trust with investments in oil and gas production and energy infrastructure. In 2003, we diversified our investments by acquiring the Redwater NGL System (Redwater). A world-class asset, Redwater is a long-life physical asset with long-term fee-for-service and fixed-margin contracts. The midstream investment complements our oil and gas production business and enhances the stability of Provident's cash flow and distributions. Further, the Redwater asset is a long life, stable asset that, unlike all oil and gas production investments, does not decline and only requires minimal annual capital investment (~$1 million) to sustain cash flow levels.

Combining the oil and gas production and midstream services businesses provides a more stable cash flow stream and enhances opportunity for growth as Provident now seeks accretive growth across the energy value chain – in oil and gas production, midstream and related energy infrastructure.

Provident operates a diverse portfolio of quality assets

Every year since inception, Provident has high-graded its asset portfolio to lend greater stability to the Trust.

Provident’s oil and gas production business unit, operates over 25,000 barrels of oil equivalent per day (boed) of production located in the more stable producing regions of Southern Alberta and Saskatchewan and Lloydminster. With an original focus on heavy oil, Provident today maintains a balanced production mix with approximately 50 percent natural gas, 25 percent light/med oil and 25 percent heavy oil. In 2004, the Trust will spend an estimated Cdn$46 million on low risk internal development activities. Of this amount, approximately Cdn$35 million will be spent on low risk shallow gas and heavy oil opportunities on properties acquired in late-2002.

Located in one of four main North American NGL hubs, Provident’s Redwater system accounts for approximately 25 percent of the NGL fractionation capacity in western Canada. The most modern and low cost facility of its kind, Redwater is one of two facilities in western Canada capable of processing ethane-plus. The Redwater facility can also process high-sulfur NGL streams. The Redwater system owned by Provident includes:

• 100 percent ownership of the Redwater Fractionation Facility, a 65,000 barrels per day (bbl/d) fractionation, storage and transportation facility located near Edmonton. The facility boasts, 12 pipeline receipt and delivery points, the largest rail rack in western Canada with direct access to both CN and CP rail; two propane truck loading facilities, and six million barrels of salt cavern storage.

• 43.3 percent ownership of the 38,500 bbl/d Younger NGL extraction plant located at Taylor in northeastern British Columbia, 16,700 bbl/d of net NGLs supplied to Provident; long-term dedicated supply contracts from McMahon and West Stoddart straddle plants.

• 100 percent ownership of the 565 kilometer proprietary Liquids Gathering System that runs along the Alberta-British Columbia border beginning just south of Fort St. John. The pipeline is connected to some of the more significant natural gas plants in Western Canada that produce liquids and accesses an area that is highly active for liquids-rich natural gas exploration.

Provident’s management team is experienced and innovative in its approach to finding value

Provident's management expertise spans the energy value chain and is unparalleled among energy trusts. Core competencies include:

• Heavy oil and natural gas exploitation and production

• Natural gas liquids gathering, processing, fractionation, marketing and transport

• Risk management and energy marketing

Leadership and innovation are hallmarks of Provident. In March 2001, Provident was the first royalty trust established from the conversion of a Canadian independent exploration and production company. Since then, more than 15 other companies have followed Provident’s lead and converted into an oil and gas royalty trust.

In 2003, Provident recognized the original arbitrage opportunity that existed between junior oil and gas companies and larger, more-liquidly traded energy trusts no longer existed. With junior E&P companies trading at all time premiums to net asset value, Provident felt it was becoming more difficult for unitholder value to be created through the acquisition of companies trading at multiples well above the value of the underlying assets.

Disciplined in its approach to acquiring assets that are accretive to cash flow and net asset value, Provident made the strategic decision to diversify its asset base by pursuing an energy infrastructure business, adding less volatile cash flow streams and long-life physical assets with the acquisition of the Redwater NGL System.

With the acquisition of the Redwater system, Provident is unique among income trusts. At Provident, we fully appreciate that in an increasingly competitive market, innovation is critical to long-term value creation and we will continue to find value enhancing opportunities along the energy value chain.

Other Provident industry firsts include:

• Issue convertible debenture

• Offer premium distribution reinvestment program

• Execute a balanced portfolio strategy

• Issue $275 million in a single bought deal financing

Provident is disciplined in its approach to financial management.

Since the very beginning of our operations in March 2001, Provident has maintained a high annual payout ratio. We believe cash flow remaining after interest expense and capital obligations should be distributed to unitholders.

Key elements of Provident’s disciplined approach to financial management include:

Distribution Reinvestment Programs

Traditionally, Provident has been able to fund its annual capital program through funds received from its distribution reinvestment program (DRIP). The DRIP program; and the Premium DRIP and Optional Unit Purchase Program, provide unitholders with the opportunity to invest directly in Provident Energy Trust. Through the DRIP program, unitholders can purchase units at a five percent discount to the monthly average price. The Premium DRIP program allows unitholders to receive up to an additional two percent of their monthly cash distribution. The Optional Unit Purchase plan gives registrants a method to make additional direct cash investments in Provident at the average monthly price. Please refer to the DRIP Plan for eligibility and complete details.

Integrated Risk Management

Provident’s risk management program is a key management tool employed by the Trust to deliver more stable distributions by identifying, monitoring, measuring and mitigating external and internal risks that could affect cash flow. Provident’s definition of risk is broad and so too are the policies and procedures the Trust employs to mitigate the affects certain risks have on cash flow and the stability of distributions. Current mitigation policies and procedures are listed below.

In 2004, we added new dimension to Provident with the adoption of a balanced portfolio strategy, the acquisition of infrastructure assets, the addition of new management expertise, and the expansion of our risk management program. As a result of these actions, Provident is better positioned than ever to deliver long-term value to unitholders – that’s why investors should invest in Provident Energy Trust today.

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