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U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 40-F

(Check One)

[   ] Registration statement pursuant to Section 12 of the Securities Exchange Act of 1934

or

[X] Annual report pursuant to section 13(a) or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2002

Commission file number 1-15196

PROVIDENT ENERGY TRUST

(Exact name of registrant as specified in its charter)

|                                                                                  |  |                                                                               |  |                                                                       
|--------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------- |  | ----------------------------------------------------------------------
|Alberta, Canada
(Province or other jurisdiction of
incorporation or organization) |  | 1311
(Primary Standard Industrial
Classification Code Number (if applicable)) |  | Not applicable
(I.R.S. Employer
Identification Number (if Applicable))

Suite 700, 112  4th Avenue S.W., Calgary, Alberta, Canada T2P 0H3
(403) 296-2233
(Address and Telephone Number of Registrants Principal Executive Offices)

Torys LLP, 237 Park Avenue, New York, NY 10017
(212) 880-6000
(Name, Address (Including Zip Code) and Telephone Number
(Including Area Code) of Agent For Service in the United States)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

|                    |  |                                          
|------------------- |  | -----------------------------------------
|Title of each class |  | Name of each exchange on which registered
|                    |  |                                          
|Trust Units         |  | American Stock Exchange                  

Securities registered or to be registered pursuant to Section 12(g) of the Act: None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

For annual reports, indicate by check mark the information filed with this Form:

|                            |  |                                        
|--------------------------- |  | ---------------------------------------
|[X] Annual Information Form |  | [X] Audited Annual Financial Statements

Indicate the number of outstanding shares of each of the issuers classes
of capital or common stock as of the close of the period covered by the annual
report.

Trust Units outstanding at December 31, 2002: 53,729,335

Indicate by check mark whether the registrant by filing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934
(the Exchange Act). If Yes is marked, indicate the file number assigned to
the registrant in connection with such rule.

|    |  |     
|--- |  | ----
|Yes |  | No X

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act during the
preceding 12 months (or for such shorter period that the registrant was
required to file such reports); and (2) has been subject to such filing
requirements for the past 90 days.

|      |  |   
|----- |  | --
|Yes X |  | No





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TABLE OF CONTENTS



|                                                                                              |                                                              |  |  |  |  |  |  | 
|--------------------------------------------------------------------------------------------- | ------------------------------------------------------------ |  |  |  |  |  |  | 
|GLOSSARY OF TERMS                                                                            
|ABBREVIATIONS, TERMS AND CONVERSIONS                                                         
|CONVERSION                                                                                   
|FORWARD LOOKING INFORMATION                                                                  
|INCORPORATION AND STRUCTURE                                                                  
|                                                                                              | The Trust                                                   
|                                                                                              | Provident                                                   
|                                                                                              | Provident Holdings Trust                                    
|                                                                                              | Provident Acquisitions L.P.                                 
|                                                                                              | Provident Acquisitions Inc.                                 
|INTERCORPORATE RELATIONSHIPS                                                                 
|INFORMATION CONCERNING PROVIDENT ENERGY TRUST, PROVIDENT ENERGY LTD. AND CERTAIN SUBSIDIARIES
|                                                                                              | Provident Energy Trust                                      
|                                                                                              | Provident Energy Ltd.                                       
|                                                                                              | Provident Holdings Trust and Provident Acquisitions L.P.    
|                                                                                              | Provident Acquisitions Inc.                                 
|                                                                                              | Exchangeable Share Provisions                               
|                                                                                              | Voting and Exchange Trust Agreement                         
|INFORMATION CONCERNING PROVIDENT MANAGEMENT CORPORATION                                      
|                                                                                              | The Manager                                                 
|                                                                                              | Management Agreement                                        
|                                                                                              | Compensation                                                
|                                                                                              | Acquisition of the Manager Shares                           
|                                                                                              | Escrow Agreements                                           
|                                                                                              | Executive Employment Agreements                             
|                                                                                              | Other Matters                                               
|                                                                                              | Timing of the Internalization Transaction                   
|GENERAL DEVELOPMENT OF THE BUSINESS OF THE TRUST AND PROVIDENT                               
|SIGNIFICANT ACQUISITIONS AND SIGNIFICANT DISPOSITIONS                                        
|                                                                                              | Founders Arrangement                                        
|                                                                                              | Richland Arrangement                                        
|                                                                                              | Southeast Alberta Property Acquisition                      
|                                                                                              | Meota Takeover                                              
|NARRATIVE DESCRIPTION OF THE BUSINESS                                                        
|                                                                                              | Corporate Strategy                                          
|                                                                                              | Commodity Price Risk Management Program                     
|                                                                                              | Principal Properties                                        
|                                                                                              | Lloydminster, Alberta/Saskatchewan                          
|                                                                                              | Southern Alberta (Taber)                                    
|                                                                                              | Southwest Saskatchewan                                      
|                                                                                              | Southeast Saskatchewan (Estevan)                            
|                                                                                              | West Central Alberta (Olds to Whitecourt)                   
|                                                                                              | Reserves                                                    
|                                                                                              | Drilling History                                            
|                                                                                              | Oil and Natural Gas Wells                                   
|                                                                                              | Production History                                          
|                                                                                              | Land Holdings                                               
|                                                                                              | Capital Expenditures                                        
|                                                                                              | Production History, Prices Received and Capital Expenditures
|SELECTED CONSOLIDATED FINANCIAL INFORMATION                                                  
|                                                                                              | Annual Information                                          
|                                                                                              | Quarterly Information (unaudited)                           
|MANAGEMENTS DISCUSSION AND ANALYSIS                                                         
|MARKET FOR SECURITIES                                                                        
|DIRECTORS AND OFFICERS                                                                       
|INFORMATION CONCERNING THE OIL AND GAS INDUSTRY                                              
|                                                                                              | Canadian Government egulation                               
|                                                                                              | Pricing and Marketing  Oil                                 
|                                                                                              | Pricing and Marketing  Natural Gas                         
|                                                                                              | The North American Free Trade Agreement                     
|                                                                                              | Provincial Royalties and Incentives                         
|                                                                                              | Alberta                                                     
|                                                                                              | Environmental Regulation                                    
|                                                                                              | Exports from Canada                                         
|RISK FACTORS                                                                                 
|                                                                                              | Exploitation and Development                                
|                                                                                              | Operations                                                  
|                                                                                              | Oil and Natural Gas Prices                                  
|                                                                                              | Marketing                                                   
|                                                                                              | Capital Investment                                          
|                                                                                              | Debt Service                                                
|                                                                                              | Reserves                                                    
|                                                                                              | Environmental Concerns                                      
|                                                                                              | Delay in Cash Distributions                                 
|                                                                                              | Reliance on Provident                                       
|                                                                                              | Depletion of Reserves                                       
|                                                                                              | Competition                                                 
|                                                                                              | Changes in Legislation                                      
|                                                                                              | Investment Eligibility                                      
|                                                                                              | Nature of Trust Units                                       
|                                                                                              | Redemption Right                                            
|                                                                                              | Unitholder Limited Liability                                
|                                                                                              | Dependence on Provident                                     
|                                                                                              | Regulatory Matters                                          
|                                                                                              | Conflicts of Interest                                       
|DOCUMENTS INCORPORATED BY REFERENCE                                                          
|ADDITIONAL INFORMATION                                                                       
|                                                                                              | Principal Holders Of Trust Units                            
|                                                                                              | Requests For Information                                    
|Managements Discussion and Analysis                                                         
|CONSOLIDATED BALANCE SHEETS                                                                  
|CONSOLIDATED STATEMENT OF OPERATIONS AND ACCUMULATED INCOME (LOSS)                           
|CONSOLIDATED STATEMENT OF CASH FLOWS                                                         
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                                   
|CONTROLS AND PROCEDURES                                                                      
|EXHIBITS                                                                                     
|SIGNATURES                                                                                   
|CERTIFICATIONS                                                                               
|EXHIBIT INDEX                                                                                
|Consent of PricewaterhouseCoopers LLP                                                        
|Consent of KPMG LLP                                                                          
|Consent of Collins Barrow LLP                                                                
|Consent of Petroleum Engineers                                                               
|Certification of Chief Executive Officer                                                     
|Certification of Chief Financial Officer                                                     



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Form 40-F Table of Contents

Document



|1. |  | Annual Information Form of Provident Energy Trust (the Company) for the
fiscal year ended December 31, 2002.                                                                                              
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Managements Discussion and Analysis of Financial Condition and Results
of Operations for the fiscal year ended December 31, 2002.                                                                          
|  
|3. |  | Consolidated Financial Statements for the fiscal year ended December 31,
2002 [(Note 18 to the Consolidated Financial Statements relates to United
States Accounting Principles and Reporting (U.S. GAAP)).]
|  
|4. |  | Controls and Procedures.                                                                                                                                                                                    
|  
|5. |  | Exhibits.                                                                                                                                                                                                   





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(PROVIDENT LOGO)

RENEWAL ANNUAL INFORMATION FORM

For the year ended December 31, 2002

May 20, 2003





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TABLE OF CONTENTS

|                                                                                              |                                                              |  |      |    | 
|--------------------------------------------------------------------------------------------- | ------------------------------------------------------------ |  | ---- | -- | 
|                                                                                              |                                                              |  | Page
|                                                                                              |                                                              |  |     
|GLOSSARY OF TERMS                                                                             |                                                              |  | 1    |   
|ABBREVIATIONS, TERMS AND CONVERSIONS                                                          |                                                              |  | 6    |   
|CONVERSION                                                                                    |                                                              |  | 7    |   
|FORWARD LOOKING INFORMATION                                                                   |                                                              |  | 7    |   
|INCORPORATION AND STRUCTURE                                                                   |                                                              |  | 8    |   
|                                                                                              | The Trust                                                    |  |      | 8  | 
|                                                                                              | Provident                                                    |  |      | 8  | 
|                                                                                              | Provident Holdings Trust                                     |  |      | 8  | 
|                                                                                              | Provident Acquisitions L.P.                                  |  |      | 8  | 
|                                                                                              | Provident Acquisitions Inc.                                  |  |      | 8  | 
|INTERCORPORATE RELATIONSHIPS                                                                  |                                                              |  | 9    |   
|INFORMATION CONCERNING PROVIDENT ENERGY TRUST, PROVIDENT ENERGY
LTD. AND CERTAIN SUBSIDIARIES |                                                              |  | 10   |   
|                                                                                              | Provident Energy Trust                                       |  |      | 10 | 
|                                                                                              | Provident Energy Ltd.                                        |  |      | 18 | 
|                                                                                              | Provident Holdings Trust and Provident Acquisitions L.P.     |  |      | 20 | 
|                                                                                              | Provident Acquisitions Inc.                                  |  |      | 20 | 
|                                                                                              | Exchangeable Share Provisions                                |  |      | 21 | 
|                                                                                              | Voting and Exchange Trust Agreement                          |  |      | 25 | 
|INFORMATION CONCERNING PROVIDENT MANAGEMENT CORPORATION                                       |                                                              |  | 27   |   
|                                                                                              | The Manager                                                  |  |      | 27 | 
|                                                                                              | Management Agreement                                         |  |      | 28 | 
|                                                                                              | Compensation                                                 |  |      | 28 | 
|                                                                                              | Acquisition of the Manager Shares                            |  |      | 29 | 
|                                                                                              | Escrow Agreements                                            |  |      | 29 | 
|                                                                                              | Executive Employment Agreements                              |  |      | 30 | 
|                                                                                              | Other Matters                                                |  |      | 30 | 
|                                                                                              | Timing of the Internalization Transaction                    |  |      | 30 | 
|GENERAL DEVELOPMENT OF THE BUSINESS OF THE TRUST AND PROVIDENT                                |                                                              |  | 30   |   
|SIGNIFICANT ACQUISITIONS AND SIGNIFICANT DISPOSITIONS                                         |                                                              |  | 32   |   
|                                                                                              | Founders Arrangement                                         |  |      | 32 | 
|                                                                                              | Maxx Arrangement                                             |  |      | 34 | 
|                                                                                              | Richland Arrangement                                         |  |      | 34 | 
|                                                                                              | Southeast Alberta Property Acquisition                       |  |      | 35 | 
|                                                                                              | Meota Takeover                                               |  |      | 35 | 
|NARRATIVE DESCRIPTION OF THE BUSINESS                                                         |                                                              |  | 36   |   
|                                                                                              | Corporate Strategy                                           |  |      | 36 | 
|                                                                                              | Commodity Price Risk Management Program                      |  |      | 36 | 
|                                                                                              | Principal Properties                                         |  |      | 38 | 
|                                                                                              | Lloydminster, Alberta/Saskatchewan                           |  |      | 38 | 
|                                                                                              | Southern Alberta (Taber)                                     |  |      | 38 | 
|                                                                                              | Southwest Saskatchewan                                       |  |      | 38 | 
|                                                                                              | Southeast Saskatchewan (Estevan)                             |  |      | 38 | 
|                                                                                              | West Central Alberta (Olds to Whitecourt)                    |  |      | 39 | 
|                                                                                              | Reserves                                                     |  |      | 39 | 
|                                                                                              | Drilling History                                             |  |      | 42 | 
|                                                                                              | Oil and Natural Gas Wells                                    |  |      | 42 | 
|                                                                                              | Production History                                           |  |      | 42 | 
|                                                                                              | Land Holdings                                                |  |      | 43 | 
|                                                                                              | Capital Expenditures                                         |  |      | 43 | 
|                                                                                              | Production History, Prices Received and Capital Expenditures |  |      | 44 | 
|SELECTED CONSOLIDATED FINANCIAL INFORMATION                                                   |                                                              |  | 44   |   

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|                                                |                                         |  |      |    | 
|----------------------------------------------- | --------------------------------------- |  | ---- | -- | 
|                                                |                                         |  | Page
|                                                |                                         |  |     
|                                                | Annual Information                      |  |      | 44 | 
|                                                | Quarterly Information (unaudited)       |  |      | 45 | 
|MANAGEMENTS DISCUSSION AND ANALYSIS            |                                         |  | 45   |   
|MARKET FOR SECURITIES                           |                                         |  | 45   |   
|                                                | Committees of the Board                 |  |      | 50 | 
|INFORMATION CONCERNING THE OIL AND GAS INDUSTRY |                                         |  | 52   |   
|                                                | Canadian Government Regulation          |  |      | 52 | 
|                                                | Pricing and Marketing  Oil             |  |      | 52 | 
|                                                | Pricing and Marketing  Natural Gas     |  |      | 52 | 
|                                                | The North American Free Trade Agreement |  |      | 52 | 
|                                                | Provincial Royalties and Incentives     |  |      | 53 | 
|                                                | Alberta                                 |  |      | 53 | 
|                                                | Environmental Regulation                |  |      | 53 | 
|                                                | Exports from Canada                     |  |      | 53 | 
|RISK FACTORS                                    |                                         |  | 54   |   
|                                                | Exploitation and Development            |  |      | 54 | 
|                                                | Operations                              |  |      | 54 | 
|                                                | Oil and Natural Gas Prices              |  |      | 54 | 
|                                                | Marketing                               |  |      | 55 | 
|                                                | Capital Investment                      |  |      | 55 | 
|                                                | Debt Service                            |  |      | 55 | 
|                                                | Reserves                                |  |      | 55 | 
|                                                | Environmental Concerns                  |  |      | 55 | 
|                                                | Delay in Cash Distributions             |  |      | 55 | 
|                                                | Reliance on Provident                   |  |      | 56 | 
|                                                | Depletion of Reserves                   |  |      | 56 | 
|                                                | Competition                             |  |      | 56 | 
|                                                | Changes in Legislation                  |  |      | 56 | 
|                                                | Investment Eligibility                  |  |      | 56 | 
|                                                | Nature of Trust Units                   |  |      | 56 | 
|                                                | Redemption Right                        |  |      | 57 | 
|                                                | Unitholder Limited Liability            |  |      | 57 | 
|                                                | Dependence on Provident                 |  |      | 57 | 
|                                                | Regulatory Matters                      |  |      | 57 | 
|                                                | Conflicts of Interest                   |  |      | 58 | 
|DOCUMENTS INCORPORATED BY REFERENCE             |                                         |  | 58   |   
|ADDITIONAL INFORMATION                          |                                         |  | 58   |   
|                                                | Principal Holders Of Trust Units        |  |      | 58 | 
|                                                | Requests For Information                |  |      | 58 | 

SCHEDULE A  FINANCIAL STATEMENTS OF RICHLAND PETROLEUM CORPORATION
SCHEDULE B  SCHEDULE OF REVENUES AND EXPENSES FOR SELECTED PROPERTIES
SCHEDULE C  FINANCIAL STATEMENTS OF MEOTA RESOURCES CORP.

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GLOSSARY OF TERMS

The following are defined terms used in this Annual Information Form:

ABCA means the Business Corporations Act(Alberta), S.A. 1981, c. B-15, as
amended, including the
regulations promulgated thereunder;

Acquired Properties means the oil and gas properties located in southeast
Alberta acquired by the
Trust effective May 1, 2002 from a U.S. based exploration and production
company pursuant to an
agreement of purchase and sale dated March 25, 2002;

Acquisition Notes means the unsecured, subordinated, demand notes issued by
Provident under the
Maxx Arrangement and issued pursuant to the Maxx Note Indenture;

affiliate or associate when used to indicate a relationship with a person
or company, means the same
as set forth in the Securities Act(Alberta);

AMEX means the American Stock Exchange;

ARTC means credits or rebates in respect of Crown royalties, which are paid
or credited by the Crown,
including those paid or credited under the Alberta Corporate Tax Act, which are
commonly known as
Alberta Royalty Tax Credits;

Board of Directors or Board means the board of directors of Provident;

Business Day or business day means a day, which is not a Saturday, Sunday
or statutory holiday,
when banks in the place at which any action is required to be taken hereunder
are generally open for the
transaction of commercial banking business;

Citicorp means Citicorp Capital Investors Ltd., a corporation formed under
the federal laws of Canada;

Court means the Court of Queens Bench of Alberta;

crude oil or oil means a mixture, consisting mainly of pentanes and heavier
hydrocarbons that may
contain sulphur compounds, that is liquid at the conditions under which its
volume is measured or
estimated, but excluding such liquids obtained from the processing of natural
gas;

DD&A means depletion, depreciation and amortization;

Debentures means the convertible unsecured subordinated debentures issued by
the Trust;

Distributable Cash means all amounts distributed or to be distributed during
any applicable period to
Trust Unitholders;

Distribution Record Date means the last day of each calendar month or such
other date as may be
determined from time to time by the Trustee;

Founders means Founders Energy Ltd., a predecessor of Provident;

Founders Amalgamation means the amalgamation of Founders and Provident pursuant to the
Founders Arrangement;

Founders Arrangement means the arrangement effective March 6, 2001 under Section 186 of the
ABCA involving, among other things, the exchange of Founders Shares for the Initial Notes, the
exchange of the Initial Notes for Trust Units and the Founders Amalgamation;

Founders Arrangement Agreement means the agreement dated January 25, 2001, as amended,
between Founders, Provident and the Trust pursuant to which such parties have implemented the
Founders Arrangement;

Founders Note Indenture means the note indenture providing for the issuance of the Initial Notes and
made between Provident and Computershare Trust Company of Canada, as trustee;

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Founders Shares means the common shares in the capital of Founders;

Initial Notes means the unsecured, $14.70 subordinated notes issued by
Provident under the Founders
Arrangement and issued pursuant to the Founders Note Indenture;

Initial Royalty means the royalty, commencing January 1, 2002, entitling the
Trust to 13.5% of
Providents working interest in Petroleum Substances within, upon or under the
oil and gas properties of
Provident as at March 6, 2001 to the extent such Petroleum Substances are
produced and saved (including
Petroleum Substances allocated to such properties in accordance with any
pooling or unitization scheme);

Internal Rate of Return means the discount rate (expressed as an annual
percentage rate, and adjusted
appropriately should the Return Period be less than a full calendar year, based
on monthly compounding)
which equates the distributions in respect of a Trust Unit during a Return
Period and the Unit Market
Price at the end of a Return Period with the Unit Market Price at the beginning
of such Return Period,
taking into account the dates on which distributions were made;

McDaniel means McDaniel & Associates Consultants Ltd., independent oil and
gas reservoir engineers
of Calgary, Alberta;

McDaniel Report means the independent engineering evaluations of Providents
oil, NGL and natural
gas interests prepared by McDaniel dated March 5, 2003 effective January 1,
2003;

Management Agreement means the management agreement dated as of March 6, 2001
among
Provident, ManagementCo and the Trustee on behalf of the Trust;

ManagementCo or the Manager means Provident Management
Corporation, a corporation
incorporated under the ABCA;

Manager Shares means the common shares in the capital of the Manager;

Market Capitalization means an amount equal to the weighted average number of
Trust Units
outstanding for the Return Period times the Unit Market Price at the beginning
of the Return Period;

Maxx means Maxx Petroleum Ltd.;

Maxx Amalgamation means the amalgamation of Maxx and Provident pursuant to
the Maxx
Arrangement;

Maxx Arrangement means the arrangement under Section 186 of the ABCA
involving, among other
things, the exchange of Maxx Shares for Acquisition Notes, the exchange of such
Acquisition Notes for
cash and/or Trust Units and the Maxx Amalgamation;

Maxx Arrangement Agreement means the agreement dated March 26, 2001 between
Maxx, Provident
and the Trust pursuant to which such parties have implemented the Maxx
Arrangement;

Maxx Note Indenture means the note indenture providing for the issuance of
the Acquisition Notes
and made between Provident and Computershare Trust Company of Canada, as
trustee;

Maxx Shares means the common shares in the capital of Maxx;

Meota means Meota Resources Corp.;

natural gas means the lighter hydrocarbons and associated non-hydrocarbon
substances occurring
naturally in an underground reservoir, which under atmospheric conditions is
essentially gas, but which
may contain liquids. The natural gas reserve estimates are reported on a
marketable basis, that is the gas
which is available to a transmission line after removal of certain hydrocarbons
and non-hydrocarbon
compounds present in the raw natural gas and which meets specifications for use
as a domestic,
commercial or industrial fuel;

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natural gas liquids or NGLs means those hydrocarbon components recovered
from raw natural gas
as liquids by processing through extraction plants or recovered from field
separators, scrubbers or other
gathering facilities. These liquids include the hydrocarbon components ethane,
propane, butanes and
pentanes plus, or a combination thereof;

Non-Resident means a non-resident of Canada within the meaning of the Tax
Act;

Note Trustee means Computershare Trust Company of Canada, or its successor as
trustee under the
Founders Note Indenture, the Maxx Note Indenture or the Richland Note
Indenture, as the case may be;

Opal means Opal Energy Inc.;

Operating Cash Flow means in respect of any period for which Operating Cash
Flow is calculated:
(i) the amount received or receivable by Provident, (on a consolidated basis),
in respect of its interest in
the sale of all Petroleum Substances collected from its oil and gas properties
and any oil and gas revenue
received in such period including any commodity hedging gains and ARTC but not
including proceeds of
the sale of its oil and gas properties; less (ii) expenditures paid or payable
by or on behalf of Provident,
(on a consolidated basis), in respect of operating its oil and gas properties
including, without limitation,
the costs of gathering, compressing, processing, transporting and marketing all
Petroleum Substances
produced therefrom, commodity hedging losses and all other amounts paid to
third parties which are
calculated with reference to production from Providents oil and gas properties
including, without
limitation, crown royalties, gross overriding royalties and lessors royalties,
but for certainty not including
the Initial Royalty or the Subsequent Royalty;

PAI means Provident Acquisitions Inc.;

Permitted Investments means: (i) obligations issued or guaranteed by the
government of Canada or
any province of Canada or any agency or instrumentality thereof; (ii) term
deposits, guaranteed
investment certificates, certificates of deposit or bankers acceptances of or
guaranteed by any Canadian
chartered bank or other financial institutions (including the Trustee and any
affiliate of the Trustee) the
short-term debt or deposits of which have been rated at least A or the
equivalent by Standard & Poors
Corporation, Moodys Investors Service, Inc., Canadian Bond Rating Service Inc.
or Dominion Bond
Rating Service Limited; and (iii) commercial paper rated at least A or the
equivalent by Canadian Bond
Rating Service Inc. or Dominion Bond Rating Service Limited, in each case
maturing within 180 days
after the date of acquisition;

Person means any individual, partnership, association, body corporate,
trustee, executor, administrator,
legal representative, government, regulatory authority or other entity;

Petroleum Substances means petroleum, natural gas and related hydrocarbons
(except coal) including,
without limitation, all liquid hydrocarbons, and all other substances,
including sulphur, whether gaseous,
liquid or solid and whether hydrocarbon or not, produced in association with
such petroleum, natural gas
or related hydrocarbons;

pro ratashare or Pro Rata Share of any particular amount in respect of a
holder of a Trust Unit at
any time shall be the product obtained by multiplying the number of Trust Units
that are owned by that
Trust Unitholder at that time by the quotient obtained when the particular
amount is divided by the total
number of all Trust Units that are issued and outstanding at that time;

Provident means Provident Energy Ltd., the corporation resulting from the
Founders Amalgamation
and which is wholly-owned by the Trust;

Provident Shares means the common shares in the capital of Provident;

Provident Royalties means the Initial Royalty and the Subsequent Royalty,
collectively;

Provident Special Resolution means a resolution proposed to be passed as a
special resolution at a
meeting of Trust Unitholders (including an adjourned meeting) duly convened for
the purpose and held in

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accordance with the provisions of the Trust Indenture at which two or more
holders of at least 5% of the
aggregate number of Trust Units then outstanding are present in person or by
proxy and passed by the
affirmative votes of the holders of not less than 66 2/3% of the Trust Units
represented at the meeting and
voted on a poll upon such resolution;

Provident USA means the unanimous shareholders agreement entered into as of
March 6, 2001
between Provident and the Trustee, as trustee for and on behalf of Provident
Energy Trust;

Registrar means the Registrar of Corporations duly appointed under the ABCA;

Return Period means the period for which the fee under the Management
Agreement is being
calculated; which period shall be a calendar year, except for the first year of
the term in which case the
Return Period shall commence on March 6, 2001 and terminate on December 31,
2001 and except for any
year in which the Management Agreement is terminated, in which case the return
period shall commence
at the start of such year and end on the date of such termination;

Richland means Richland Petroleum Corporation;

Richland Amalgamation means the amalgamation of Richland and Provident
pursuant to the Richland
Arrangement;

Richland Arrangement means the arrangement under Section 186 of the ABCA
involving, among
other things, the exchange of Richland Shares for Richland Notes, the exchange
of such Richland Notes
for Trust Units and the Richland Amalgamation;

Richland Arrangement Agreement means the agreement dated December
14, 2001 between
Richland, Provident and the Trust pursuant to which such parties have
implemented the Richland
Arrangement;

Richland Note Indenture means the note indenture providing for the issuance
of the Richland Notes
and made between Provident and Computershare Trust Company of Canada, as
trustee;

Richland Notes means the unsecured, subordinated, demand notes issued by
Provident under the plan
of arrangement involving the Trust, Provident and Richland effective January
16, 2002 and issued
pursuant to the Richland Note Indenture;

Richland Shares means the common shares in the capital of Richland;

Seaton Jordan means Seaton Jordan & Associates Ltd., independent land
appraisers of Calgary,
Alberta;

Seaton Jordan Report means the independent valuation of Providents
undeveloped land as prepared
by Seaton Jordan dated January 2, 2003 and effective December 31, 2002;

Special Voting Units means a special voting unit of Provident Energy Trust,
which shall be entitled to
such number of votes at meetings of Trust Unitholders equal to such number of
votes and any other rights
or limitations to be prescribed by the board of directors of Provident in the
resolution issuing any such
Special Voting Units;

Subsequent Investment means those investments which the Trust is permitted to
make pursuant to
Sections 4.1(c) and (d) of the Trust Indenture, namely royalties in respect of
Providents oil and gas
properties and securities of Provident or any other subsidiary of the Trust to
fund the acquisition,
development, exploitation and disposition of all types of petroleum and natural
gas and energy related
assets, including without limitation, facilities of any kind, oil sands
interests, electricity or power
generating assets, and pipeline, gathering, processing and transportation
assets and whether effected
through an acquisition of assets or an acquisition of shares or other form of
ownership interest in any
entity the substantial majority of the assets of which are comprised of like
assets;

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Subsequent Royalty means the royalty, commencing May 1, 2001, entitling the
Trust to approximately
99% of the net cash flow generated from the present and future oil and gas
interest and related tangibles
owned by Provident (including the properties subject to the Initial
Royalty) after certain costs,
expenditures and deductions;

Subsidiary means, when used to indicate a relationship with another body
corporate:



|(a) |  | body corporate which is controlled by (i) that other, or (ii) that other
and one or more bodies
corporate, each of which is controlled by that other, or (iii) two or more
bodies corporate each of
which is controlled by that other, or
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) |  | a subsidiary of a body corporate that is the others subsidiary;
and in the case of the Trust, includes Provident;                                                                                                                       

Tax Act means the Income Tax Act(Canada), R.S.C. 1985, c.1, 5th Supplement,
as amended;

Tax Regulations means the regulations enacted under the Tax Act;

Total Return Amount means in respect of any Return Period an amount equal to
the Total Return
Percentage minus 8.0% if the Return Period is a full calendar year and adjusted
appropriately should the
Return Period be less than a full calendar year, multiplied by the Market
Capitalization for that Return
Period;

Total Return Percentage means the Internal Rate of Return to a holder of a
Trust Unit for a particular
Return Period. For the purposes of the Total Return Percentage in the 2001
calendar year the Unit Market
Price at the beginning of the Return Period shall be deemed to be $9.90 per
Trust Unit;

Trust means Provident Energy Trust, a trust settled pursuant to the laws of
Alberta;

Trust Indenture means the trust indenture dated as of January 25, 2001 as
amended from time to time,
between Computershare Trust Company of Canada and Founders;

Trust Fund, at any time, shall mean such of the following monies, properties
and assets that are at such
time held by the Trustee for the purposes of Provident Energy Trust under the
Trust Indenture: (a) $100;
(b) all funds realized from the issuance of Trust Units; (c) any Permitted
Investments in which funds may
from time to time be invested; (d) the Initial Royalty; (e) any Subsequent
Investment; (f) any proceeds of
disposition of any of the foregoing property; (g) the Founders Shares and
Initial Notes; and (h) all
income, interest, profit, gains and accretions and additional assets, rights
and benefits of any kind or
nature whatsoever arising directly or indirectly from or in connection with or
accruing to such foregoing
property or such proceeds of disposition;

Trust Unit, Provident Unit or Unit means a unit of the Trust, each unit
representing an equal
undivided beneficial interest therein;

Trust Unitholders, Provident Unitholders or Unitholders means the holders
from time to time of
the Trust Units;

Unitholder Rights Plan means the trust unitholders rights plan adopted by the
Trust pursuant to a trust
unitholder rights plan agreement dated March 6, 2001 between the Trust and
Computershare Trust
Company of Canada;

Trustee means Computershare Trust Company of Canada, the initial trustee of
the Trust, and its
successor Computershare Trust Company of Canada, or such other trustee, from
time to time, of
Provident Energy Trust;

TSX means the Toronto Stock Exchange;

Unit Market Price of the Trust Units at any date means the weighted average
of the trading price per
Trust Unit for such Trust Units for the ten (10) consecutive trading days
immediately preceding such date

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and the ten (10) consecutive trading days from and including such date, on the
TSX or, if on such date the
Trust Units are not listed on the TSX, on the principal stock exchange upon
which such Trust Units are
listed, or, if such Trust Units are not listed on any stock exchange then on
such over-the-counter market as
may be selected for such purposes by the board of directors of Provident;

Unitholder Rights Plan Agreement means the agreement dated March 6, 2001
between the Trust and
Computershare Trust Company of Canada pursuant to which the Trust adopted the
Unitholder Rights
Plan; and

United States and U.S. mean the United States of America, it territories
and possessions, any state of
the United States, and the District of Columbia.
Words importing the singular number only include the plural and vice versa and
words importing any
gender include all genders. All dollar amounts set forth in this Information
Circular are in Canadian
dollars, except where otherwise indicated.




ABBREVIATIONS, TERMS AND CONVERSIONS

|                            |  |                                    |  |         |  |                              
|--------------------------- |  | ---------------------------------- |  | ------- |  | -----------------------------
|Oil and Natural Gas Liquids |  | Natural Gas                        |  |        
|                            |  |                                    |  |        
|bbls                        |  | barrels                            |  | mcf     |  | thousand cubic feet          
|mbbls                       |  | thousand barrels                   |  | mmcf    |  | million cubic feet           
|bpd                         |  | barrels of oil per day             |  | bcf     |  | billion cubic feet           
|mmbbls                      |  | million barrels                    |  | mcfd    |  | thousand cubic feet per day  
|NGLs                        |  | natural gas liquids                |  | mmcfd   |  | million cubic feet per day   
|STB                         |  | stock tank barrel of oil           |  | m3      |  | cubic metres                 
|mstb                        |  | thousand stock tank barrels of oil |  | mmbtu   |  | million British Thermal Units
|boed                        |  | barrels of oil equivalent per day  |  | gj
gjpd |  | gigajoule
gigajoule per day  

|      |  |                                                                                                                                                                                                                                                                                                       
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Other |  |                                                                                                                                                                                                                                                                                                       
|      |  |                                                                                                                                                                                                                                                                                                       
|boe   |  | means barrel of oil equivalent, using the conversion factor of 6 mcf of natural gas
being equivalent to one bbl of oil, unless otherwise specified. The conversion factor
used to convert natural gas to oil equivalent is not necessarily based upon either
energy or price equivalents at this time.
|mboe  |  | means thousand barrels of oil equivalent.                                                                                                                                                                                                                                                             
|WTI   |  | means West Texas Intermediate.                                                                                                                                                                                                                                                                        
|API   |  | means the measure of the density or gravity of liquid petroleum products derived from
a specific gravity.                                                                                                                                                                                             
|OPEC  |  | means Organization of the Petroleum Exporting Countries.                                                                                                                                                                                                                                              

6



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CONVERSION

The following table sets forth certain conversions between Standard Imperial
Units and the International System of Units (or metric units).

|                |  |              |  |             |        | 
|--------------- |  | ------------ |  | ----------- | ------ | 
|To Convert From |  | To           |  | Multiply By
|                |  |              |  |            
|mcf             |  | cubic metres |  |             | 0.0282 | 
|cubic metres    |  | cubic feet   |  |             | 35.494 | 
|Bbls            |  | cubic metres |  |             | 0.159  | 
|cubic metres    |  | bbls         |  |             | 6.289  | 
|feet            |  | metres       |  |             | 0.305  | 
|metres          |  | feet         |  |             | 3.281  | 
|miles           |  | kilometres   |  |             | 1.609  | 
|kilometres      |  | miles        |  |             | 0.621  | 
|acres           |  | hectares     |  |             | 0.405  | 
|hectares        |  | acres        |  |             | 2.471  | 
|gigajoules      |  | mmbtu        |  |             | 0.950  | 

For the purposes of this Annual Information Form all conversions of natural gas
to barrels of oil equivalent are on the basis of 6 mcf to 1 boe.




FORWARD LOOKING INFORMATION

This Annual Information Form may contain forward-looking statements. Such
statements involve known and unknown risks, uncertainties and other factors
outside of managements control that could cause actual results to differ
materially from those expressed in the forward-looking statements. A
discussion of such risk factors is included under Risk Factors. Neither the
Trust nor Provident undertakes any obligations to publicly revise these
forward-looking statements to reflect subsequent events or circumstances.

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INCORPORATION AND STRUCTURE




The Trust

Provident Energy Trust is an open-end unincorporated investment trust governed
by the laws of the Province of Alberta and created pursuant to the Trust
Indenture. The head and principal offices of Provident Energy Trust are
located at 700, 112  4th Street S.W., Calgary, Alberta T2P 0H3. The
registered office of the Trust is 3700, 400  3rd Avenue S.W., Calgary, Alberta
T2P 4H2.

The Trust was formed as of the 25th day of January, 2001 pursuant to the Trust
Indenture. In accordance with the Founders Arrangement involving the Trust,
Founders and Provident, all of the issued and outstanding Founders Shares were
exchanged for the Initial Notes of Provident on the basis of one Initial Note
for every three Founders Shares. Each Initial Note was immediately exchanged
with the Trust for one Trust Unit, resulting in the acquisition by the Trust of
all of the Initial Notes and the acquisition of Trust Units by the former
shareholders of Founders.




Provident

Provident Energy Ltd. is a corporation wholly-owned by Provident Energy Trust.
Provident was incorporated under the ABCA on January 19, 2001 and was
amalgamated with Founders pursuant to the Founders Arrangement. The head and
principal offices of Provident are located at 700, 112  4th Avenue S.W.,
Calgary, Alberta T2P 0H3. The registered office of Provident is 3700, 400  3rd
Avenue S.W., Calgary, Alberta T2P 4H2. Provident has five wholly-owned
subsidiaries: Provident Acquisitions Inc., 611335 Alberta Ltd., 873798 Alberta
Ltd., Terraquest Inc. and Coast Pacific RLP-97 Exploration Inc. Where the
information in this Annual Information Form is as of a date prior to March 6,
2001, the terms Provident or Provident Energy Ltd. shall refer to Founders
Energy Ltd.




Provident Holdings Trust

Provident Holdings Trust is an open-end unincorporated commercial trust.
Provident Holdings Trust was formed pursuant to a trust agreement dated April
25, 2002. This trust is wholly-owned by Provident Energy Trust. Provident
Holdings Trust currently holds a 99% interest in the limited partnership,
Provident Acquisitions L.P. The head and principal office of Provident
Holdings Trust is located at 700, 112  4th Street S.W. Calgary, Alberta T2P
0H3. The registered office of Provident Holdings Trust is 3700, 400  3rd
Avenue S.W. Calgary, Alberta T2P 4H2.




Provident Acquisitions L.P.

Provident Acquisitions L.P. is a limited partnership registered in the Province
of Alberta. Provident Acquisitions L.P. was formed pursuant to a trust
agreement dated April 25, 2002. Provident Energy Ltd. is the general partner
of Provident Acquisitions L.P. with a 1% interest in the partnership and
Provident Holdings Trust is the limited partner of Provident Acquisitions L.P.
with a 99% interest in the partnership. The head and principal office of
Provident Acquisitions L.P. is located at 700, 112  4th Street S.W. Calgary,
Alberta T2P 0H3. The registered office of Provident Acquisitions L.P. is 3700,
400  3rd Avenue S.W. Calgary, Alberta T2P 4H2.




Provident Acquisitions Inc.

Provident Acquisitions Inc. is a corporation wholly-owned by Provident Energy
Ltd. PAI was incorporated under the ABCA on August 19, 2002. PAI currently
holds a 67% interest in 101011500 Saskatchewan Ltd. and a 0.00001% interest in
the Meota (2000) Partnership. The head and principal offices of Provident
Acquisitions Inc. are located at 700, 112  4th Street S.W., Calgary, Alberta,
T2P 0H3. The registered office of PAI is 3700, 400  3rd Avenue S.W., Calgary,
Alberta, T2P 4H2.

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INTERCORPORATE RELATIONSHIPS

The following diagram describes the flow of cash from the oil and gas
properties to the Trust and from the Trust to the Unitholders. Reference
should be made to the appropriate sections of this Annual Information Form for
a complete description of the structure of the Trust.

(CHART)



---

|(1) |  | Portion of cash flow withheld to fund capital expenditures, Reclamation
Fund and debt repayment.
|--- |  | ------------------------------------------------------------------------------------------------

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INFORMATION CONCERNING PROVIDENT
ENERGY TRUST, PROVIDENT ENERGY LTD. AND CERTAIN SUBSIDIARIES




Provident Energy Trust

Provident Energy Trust was established to acquire and hold, directly and
indirectly, interests in petroleum and natural gas properties. Cash flow from
the properties flows from Provident and Provident Acquisitions L.P. to the
Trust by way of royalty payments on the Initial Royalty and Subsequent Royalty
and interest payments (if applicable) and principal repayments on the Initial
Notes, Acquisition Notes, Richland Notes and other notes issued by the Trust
from time to time. Distributable income generated by the royalties, interest
and principal repayments is then distributed monthly to the unitholders. Under
the terms of the Trust Indenture the Trust is also entitled to:



| |  | invest in securities of Provident from time to time;                                                                                                                                                                                                                                      
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | acquire the Initial Royalty and other royalties;                                                                                                                                                                                                                                          
| 
| |  | temporarily hold cash and Permitted Investments for the purposes of paying the expenses and
liabilities of Provident Energy Trust and paying amounts payable by Provident Energy Trust in
connection with the redemption of any Trust Units and making distributions to Trust Unitholders;
| 
| |  | acquire or invest in Subsequent Investments; and                                                                                                                                                                                                                                          
| 
| |  | pay the costs, fees and expenses associated with or incidental to the foregoing.                                                                                                                                                                                                          

Trust Units

An unlimited number of Trust Units may be created and issued pursuant to the
Trust Indenture. Each Provident Unit represents an equal fractional undivided
beneficial interest in any distribution from Provident Energy Trust (whether of
net income, net realized capital gains or other amounts) and in any net assets
of the Trust in the event of termination or winding-up of the Trust. All
Provident Units outstanding from time to time shall be entitled to an equal
share of any distributions from, and in any net assets of, Provident Energy
Trust in the event of the termination or winding-up of Provident Energy Trust.
All Provident Units of Provident Energy Trust shall rank among themselves
equally and rateably without discrimination, preference or priority. Each
Provident Unit is transferable, is not subject to any conversion or pre-emptive
rights and entitles the holder thereof to require Provident Energy Trust to
redeem any or all of the Provident Units held by such holder (see Redemption
Right) and to one vote at all meetings of holders of Provident Units for each
Provident Unit held. Holders of Provident Units shall not be subject to any
liability in contract or tort or of any other kind in connection with the
assets, obligations or affairs of Provident Energy Trust or with respect to any
acts performed by the Trustee or any other person pursuant to the Trust
Indenture.

Special Voting Units

An unlimited number of Special Voting Units may be created and issued pursuant
to the Trust Indenture. Holders of Special Voting Units, shall not be entitled
to any distributions of any nature whatsoever from Provident, shall be entitled
to such number of votes at meetings of holders of Provident Units as may be
prescribed by the board of directors of Provident in the resolution authorizing
the issuance of any Special Voting Units. Except for the right to vote at
meetings of the holders of Provident Units, the Special Voting Units shall not
confer upon the holders thereof any other rights. As of March 31, 2003, there
were two Special Voting Units issued and outstanding.

Convertible Debentures

The Trust has issued $64,410,000 aggregate principal amount of convertible
unsecured subordinated debentures (the Debentures). The Debentures mature on
May 15, 2007 and bear interest at a rate of

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10.5% per annum, payable semi-annually in arrears on May 15 and November 15 in
each year. The Debentures are convertible at the option of the holder into
Trust Units at any time prior to the earlier of May 15, 2007 and the business
day immediately preceding any date specified by the Trust for redemption at a
conversion price of $10.70 per Trust Unit, subject to adjustment in certain
circumstances. After May 15, 2005 and prior to maturity, the Trust may redeem
the Debentures in whole or in part from time to time at a price of $1,050 per
Debenture from May 15, 2005 until May 15, 2006 and at a price of $1,025 per
Debenture thereafter until maturity, in each case plus accrued and unpaid
interest. On redemption or maturity of the Debentures, the Trust may, subject
to regulatory approval, elect to satisfy the redemption price or principal
amount by issuing Trust Units to the Debenture holder. As of March 31, 2003,
there was $62,380,500 aggregate principal amount of Debentures outstanding.

Meetings of holders of Trust Units

The Trust Indenture provides that meetings of holders of Provident Units must
be called and held for, among other matters, the election or removal of the
Trustee, the appointment or removal of the auditors of the Trust, the approval
of certain amendments to the Trust Indenture, to assign, transfer or dispose of
the Initial Royalty as an entirety or substantially as an entirety, and the
commencement of winding-up the affairs of the Trust. Meetings of holders of
Provident Units will be called and held annually for, among other things, the
election of the directors of Provident and the appointment of the auditors of
the Trust.

Holders of Provident Units may attend and vote at all meetings of
holders of Provident Units either in person or by proxy and a proxy holder need
not be a holder of Provident Units. Two persons present in person or
represented by proxy and representing in the aggregate at least 5% of the votes
attaching to all outstanding Provident Units shall constitute a quorum for the
transaction of business at all such meetings. For the purposes of determining
such quorum, the holders of any issued Special Voting Units who are present at
the meeting shall be regarded as representing outstanding Provident Units
equivalent in number to the votes attaching to such Special Voting Units.

Termination of the Trust

The holders of Provident Units may vote to terminate Provident Energy Trust at
any meeting of the holders of Provident Units duly called for that purpose,
subject to the following: (a) a vote may only be held if requested in writing
by the holders of not less than 20% of the Provident Units; (b) a quorum of 50%
of the issued and outstanding Provident Units is present in person or by proxy;
and (c) the termination must be approved by Provident Special Resolution.

Unless Provident Energy Trust is terminated or extended by vote of the holders
of Provident Units earlier, the Trustee shall commence to wind-up the affairs
of Provident Energy Trust on December 31, 2099. In the event that Provident
Energy Trust is wound-up, the Trustee will sell and convert into money the
Initial Royalty and other assets in one transaction or in a series of
transactions at public or private sale and do all other acts as may be
appropriate to liquidate assets and shall in all respects act in accordance
with the directions, if any, of the holders of Provident Units in respect of
termination authorized pursuant to the Provident Special Resolution authorizing
the termination of Provident Energy Trust. In no event shall Provident Energy
Trust be wound up until the Initial Royalty shall have been disposed of, and
under no circumstances shall any holder of Provident Units come into possession
of any interest in the Initial Royalty. After paying, retiring or discharging
or making provision for the payment, retirement or discharge of all known
liabilities and obligations of the Trust and providing for indemnity against
any other outstanding liabilities and obligations, the Trustee shall distribute
the remaining part of the proceeds of the sale of the Initial Royalty and other
assets together with any cash remaining in the Trust among the holders of
Provident Units in accordance with their Pro Rata Share.

Cash Distributions

The Trustee intends to make cash distributions on or about the 15th day of each
month to holders of Provident Units of record on the immediately preceding
Distribution Record Date in amounts equal to all

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of the interest, royalty and dividend income of Provident Energy Trust, net of
the Trusts administrative expenses. In addition, holders of Provident Units
may, at the discretion of the Trustee, receive distributions in respect of
repayments of principal made by Provident to the Trust on the Initial Notes,
Acquisition Notes, Richland Notes and other notes issued by the Trust from time
to time, as the case may be. It is anticipated however, that Provident Energy
Trust will reinvest a portion of the repayments of principal on the Initial
Notes and Acquisition Notes to enable Provident to make capital expenditures to
develop or acquire additional oil and natural gas properties to enhance cash
flow from operations.

Provident Energy Trust seeks to provide a stable stream
of cash distributions, subject to fluctuations in the quantity of petroleum and
natural gas substances produced, prices received for that production, hedging
contract receipts and payments, taxes, management fees, direct expenses of
Provident Energy Trust, reclamation fund contributions, capital expenditures,
debt servicing, operating costs, debt service charges and general and
administrative expenses as determined necessary by Provident Energy Ltd. on
behalf of Provident Energy Trust.

Trust Unitholder Rights Plan

Pursuant to a Unitholder Rights Plan Agreement entered into between Provident
Energy Trust and Computershare Trust Company of Canada on March 6, 2001,
Provident Energy Trust has put in place a unitholder rights plan.



| |  | Purpose
| |  | -------

The Unitholder Rights Plan is intended to address deficiencies, which Provident
Energy Trust believes exist in current Canadian takeover bid legislation. The
purpose of the Unitholder Rights Plan is to afford both the holders of
Provident Units and Provident sufficient time to evaluate and respond to an
unsolicited offer made for the Trust Units. Further, the Unitholder Rights
Plan is intended to assist in ensuring that all holders of Provident Units have
an equal opportunity to participate in any takeover bid.



| |  | Summary of the Unitholder Rights Plan
| |  | -------------------------------------

The following is a summary of the principal terms of the Unitholder Rights
Plan, which is qualified in its entirety by the actual text of the Unitholder
Rights Plan Agreement.



| |  | Issue of Rights
| |  | ---------------

On the effective date of the Unitholder Rights Plan, one right (a Right)
shall be issued and attached to each of the outstanding Provident Units and
will attach to each Provident Unit that is subsequently issued. Initially,
certificates representing Units also represent the Rights.



| |  | Rights Exercise Privilege
| |  | -------------------------

The Rights will separate from the Provident Units and will be exercisable,
subject to action by Provident, 10 trading days (the Separation Time) after a
person has acquired, or commences a takeover bid to acquire, 20% or more of the
Provident Units, other than by an acquisition pursuant to a takeover bid
permitted by the Unitholder Rights Plan (a Permitted Bid). The acquisition
by any person (an Acquiring Person) of 20% or more of the Provident Units,
other than by way of a Permitted Bid, is referred to as a Flip-in Event. Any
Rights held by an Acquiring Person will become void upon the occurrence of a
Flip-in Event. In the absence of action by Provident and 10 days after the
occurrence of a Flip-in Event, each Right (other than those held by the
Acquiring Person), will permit the purchase of that number of Provident Units
having an aggregate market price (as defined in the Unitholder Rights Plan)
equal to twice the exercise price for an amount in cash equal to the exercise
price (which the Unitholder Rights Plan currently sets at $30).

The issue of the Rights is not initially dilutive. However, holders of Rights
not exercising their Rights upon the occurrence of a Flip-in Event may suffer
substantial dilution.

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| |  | Certificates and Transferability
| |  | --------------------------------

After the Separation Time, the Rights will be evidenced by Rights certificates,
which will be transferable and traded separately from the Provident Units.



| |  | Permitted Bid Requirements
| |  | --------------------------

The requirements for a Permitted Bid include the following:



|(a) |  | the take-over bid must be made to all holders of Provident Units, other
than the Acquiring
Person;                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) |  | the take-over bid must contain, and the take-up and payment for securities
tendered or
deposited is subject to, an irrevocable and unqualified provision that no
Provident Units
will be taken up or paid for pursuant to any take-over bid prior to the
close of business on
the date which is not less than 45 days following the date of the
take-over bid and only if
at such date more than 50% of the Provident Units held by independent
holders of
Provident Units shall have been deposited or tendered pursuant to the
take-over bid and
not withdrawn;
|   
|(c) |  | the take-over bid contains an irrevocable and unqualified provision that
unless the take-
over bid is withdrawn, Provident Units may be deposited pursuant to such
take-over bid
at any time during the period of time between the date of the take-over
bid and the date
on which Provident Units may be taken up and paid for and that any
Provident Units
deposited pursuant to the take-over bid may be withdrawn until taken up
and paid for;
and                                                                                                           
|   
|(d) |  | the take-over bid must contain an irrevocable and unqualified provision
that if, on the
date on which Provident Units may be taken up and paid for, more than 50%
of the
Provident Units held by independent holders of Provident Units shall have
been deposited
pursuant to the take-over bid and not withdrawn, the Acquiring Person will
make a public
announcement of that fact and the take-over bid will remain open for
deposits and tenders
of Provident Units for not less than 10 Business Days from the date of
such public
announcement.            

The Unitholder Rights Plan allows for a competing Permitted Bid (a Competing
Permitted Bid) to be made while a Permitted Bid is in existence. A Competing
Permitted Bid must satisfy all the requirements of a Permitted Bid (subject to
certain exceptions).



| |  | Waiver and Redemption
| |  | ---------------------

Provident may, prior to a Flip-in Event, waive the dilutive effects of the
Unitholder Rights Plan in respect of a particular Flip-in Event resulting from
a takeover bid made by way of a takeover bid circular to all holders of the
Provident Units, in which event such waiver would be deemed also to be a waiver
in respect of any other Flip-in Event occurring under a takeover bid made by
way of a takeover bid circular to all holders of the Provident Units prior to
the expiry of the takeover bid in respect of which the waiver is granted.
Provident may also waive the Unitholder Rights Plan in respect of a particular
Flip-in Event that has occurred through inadvertence, provided that the
Acquiring Person that inadvertently triggered such Flip-in Event reduces its
beneficial holdings to less than 20% of the outstanding Provident Units within
10 days or such other period as may be specified by Provident.

At any time prior to the occurrence of a Flip-in Event, Provident may at its
option redeem all, but not less than all, of the outstanding Rights at a price
of $0.00001 per Right.

Trust Unit Option Plan

Provident Energy Trust has implemented a trust unit option plan (the Trust
Option Plan). Under the Trust Option Plan, options to purchase a maximum of
5,000,000 Trust Units may be granted to

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employees, officers, directors and consultants to Provident Energy Trust and
its subsidiaries. The Trust Option Plan will be administered by Provident.
Subject to regulatory approval, the exercise price of an option will be
determined at the time of grant and is to be not less than the closing price of
the Trust Units on the TSX on the last day preceding the grant on which a trade
of Trust Units occurred on such exchange, subject to certain reductions in the
exercise price of an option in certain circumstances based upon the cash
distributions made on the Trust Units. The term of an option and vesting
provisions are to be determined at the time of grant and may vary as between
individual grants of options. However, the term of an option shall not be less
than one year and not more than ten years from the date of grant. Options are
exercisable only during the term of employment or service of an employee,
consultant or officer or during the period of service as a director or trustee.
Provident shall determine whether any or all of the options shall be
exercisable for a period following the date of termination of employment or
service at the time of granting the option, subject to regulatory approvals.

The number of Trust Units subject to options which may be granted from time to
time under the Trust Option Plan shall not exceed 5,000,000 Trust Units (which
number may be decreased at any time and may be increased from time to time,
subject to regulatory approval and the approval of the Trust Unitholders). The
number of Trust Units reserved for issuance pursuant to options granted to
insiders of Provident Energy Trust or Provident (or their advisors) shall not
exceed 10% of the total number of Trust Units then outstanding. Furthermore,
the issuance to insiders of Provident Energy Trust or Provident (or their
advisors) shall not exceed or result in the issuance to such insider during a
one year period of more than 10% of the total number of Trust Units
outstanding, nor may the issuance of Trust Units held by such insider of
Provident Energy Trust or Provident (or their advisors), and associates of such
insider, within a one-year period, exceed 5% of the total number of Trust Units
then outstanding. In addition, the number of Trust Units reserved for issuance
to any one person pursuant to options shall not exceed 5% of the total number
of Trust Units then outstanding. Options are not assignable or transferable.
No financial assistance will be provided to holders of options who wish to
exercise their options to acquire Trust Units. As of the date of this Annual
Information Form there are 2,980,319 options granted and outstanding under the
Trust Option Plan.

The Initial Royalty

As owner of the Initial Royalty, the Trust is entitled, commencing January 1,
2002, to cash distributions in respect of royalty production income, being
13.5% of Providents gross revenue from its working interest in oil and gas
properties owned as at March 6, 2001 less 13.5% of operating costs and facility
usage costs. Such cash distributions are to be paid on or about the 15th day of
the second month following the month to which the distribution relates.

Provident is entitled to make farmouts or other similar dispositions of
specific interests in any part of the properties subject to the Initial
Royalty, and upon the farmee or other participant earning its interest pursuant
to the farmout or other disposition, the Initial Royalty shall burden only the
working interest retained by or reserved to Provident. Any net proceeds from
the sale of properties subject to the Initial Royalty (to the extent allocable
to Canadian Resource Property, as defined in the Tax Act) are allocable as to
86.5% to Provident and as to 13.5% to the Trust.

The Initial Royalty does not constitute an interest in land, and the Trust is
not entitled to take its share of production in kind or to separately sell or
market its share of petroleum substances.

The Subsequent Royalty

As owner of the Subsequent Royalty, the Trust is entitled, commencing May 1,
2001, to cash distributions of approximately 99% of the cash flow from all
present and future oil and gas properties and related tangibles owned by
Provident (including the properties subject to the Initial Royalty) after
certain costs, expenditures and deductions which include 99% of: (i) all
amounts of interest and principal payable by Provident on account of or in
respect of its credit facilities and any indebtedness of Provident owing to the

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Trust; (ii) Providents share of operating costs and capital expenditures
including amounts payable in respect of the Initial Royalty and Crown
royalties; (iii) income taxes, capital taxes and other direct taxes of
Provident; (iv) amounts required to be paid to certain reserves; (v) general
and administrative expenses of Provident; (vi) acquisition costs of future oil
and gas properties and related tangibles; and (vii) amounts required to be paid
to the Trustee pursuant to the Trust Indenture. Such cash distributions are to
be paid on or about the 15th day of the second month following the month to
which the distribution relates.

From time to time upon notice from Provident,
the Trust has an obligation (the Deferred Purchase Price Obligation) to pay
Provident, as partial consideration for the Subsequent Royalty, such portion of
the acquisition cost of future oil and gas properties and capital expenditures
including amounts borrowed to fund such costs and expenditures as may be
designated by Provident.

Provident is entitled to make farmouts or other similar dispositions of
specific interests in any part of the properties subject to the Subsequent
Royalty, and upon the farmee or other participant earning its interest pursuant
to the farmout or other disposition, the Subsequent Royalty shall burden only
the working interest retained by or reserved to Provident. Any net proceeds
from the sale of properties subject to the Subsequent Royalty (to the extent
allocable to petroleum and natural gas rights) less any amount payable in
respect of the Initial Royalty shall be allocated to the Trust as to 99%. The
remaining 1% and all amounts allocated to tangibles and miscellaneous interests
shall be allocated to Provident.

Provident is required to establish a reserve to fund future well bore and
facility abandonment and environmental and reclamation obligations and
liabilities (the Reclamation Fund). Provident currently funds this reserve
at $0.25 per barrel of oil equivalent (converting gas to oil at 6:1) (in 2002
and prior -$0.20 per barrel of oil equivalent converting gas to oil at 10:1)
produced, less current year well bore and facility abandonment and
environmental and reclamation obligations and liabilities out of production
revenues and other revenues for a calendar year into the Reclamation Fund.

The Subsequent Royalty does not constitute an interest in land. Except upon the
insolvency of Provident, the Trust is not entitled to take its share of
production in kind or to separately sell or market its share of petroleum
substances.

Limitation on Non-Resident Trust Unitholders

Certain provisions of the Tax Act require that Provident Energy Trust not be
established nor maintained primarily for the benefit of Non-Residents.
Accordingly, in order to comply with such provisions, the Trust Indenture
contains restrictions on the ownership of Trust Units by Trust Unitholders who
are NonResidents. Trust Unitholders may be required to provide to the Trustee
a declaration (a Residence Declaration) specifying whether or not they are
Non-Residents and if the Trustee becomes aware, as a result of requiring
Residence Declarations or otherwise, that the beneficial owners of 25% of the
Trust Units then outstanding are or may be Non-Residents or such a situation is
imminent, the Trustee shall thereafter request Residence Declarations at least
annually in conjunction with the annual meetings of Trust Unitholders. If at
any time the Trustee becomes aware, as a result of requiring Residence
Declarations as to beneficial ownership or otherwise, that the beneficial
owners of 49% of the Trust Units then outstanding are or may be Non-Residents
or that such a situation is imminent, the Trustee may make a public
announcement thereof and shall not accept a subscription for Trust Units from
or issue or register a transfer of Trust Units to a person unless the person
provides a Residence Declaration that the person is not a Non-Resident. If
notwithstanding the foregoing, the Trustee determines that a majority of the
Trust Units are held by Non-Residents, the Trustee may send a notice to
Non-Resident holders of Trust Units, chosen in inverse order to the order of
acquisition or registration or in such other manner as the Trustee may consider
equitable and practicable requiring them to sell their Trust Units or a
specified portion thereof within a specified period of not less than 60 days.
If the Trust Unitholders receiving such notice have not sold the specified
number of Trust Units or provided the Trustee with satisfactory evidence that
they are not Non-Residents within such period, the Trustee may on behalf of
such Trust Unitholder sell such Trust Units and, in the interim, shall suspend
the voting and distribution rights attached to such Trust

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Units and shall make any distribution in respect of such Trust Units by
deposition such amount in separate bank account in a Canadian chartered bank
(net of any applicable taxes). Any sale shall be made on any stock exchange on
which the Trust Units are then listed and, upon such sale, the affected holders
shall cease to be holders of Trust Units and their rights shall be limited to
receiving the net proceeds of sale upon surrender of Provident Energy Trust
certificates representing such Trust Units.

Redemption Right

Provident Units are redeemable at any time on demand by the holders thereof
upon delivery to Provident Energy Trust of the certificate or certificates
representing such Provident Units, accompanied by a duly completed and properly
executed notice requesting redemption. Upon receipt of the redemption request
by Provident Energy Trust, the holder thereof shall only be entitled to receive
a price per Provident Unit (the Market Redemption Price) equal to the lesser
of: (i) 90% of the market price of the Provident Units on the principal
market on which the Provident Units are quoted for trading during the 10
trading day period commencing immediately after the date on which the Provident
Units are surrendered for redemption; and (ii) the closing market price on
the principal market on which the Provident Units are quoted for trading on the
date that the Provident Units are surrendered for redemption.

For the purposes of this calculation, market price will be an amount equal to
the simple average of the closing price of the Provident Units for each of the
trading days on which there was a closing price; provided that, if the
applicable exchange or market does not provide a closing price but only
provides the highest and lowest prices of the Provident Units traded on a
particular day, the market price shall be an amount equal to the simple average
of the average of the highest and lowest prices for each of the trading days on
which there was a trade; and provided further that if there was trading on the
applicable exchange or market for fewer than five of the 10 trading days, the
market price shall be the simple average of the following prices established
for each of the 10 trading days; the average of the last bid and last ask
prices for each day on which there was no trading; the closing price of the
Provident Units for each day that there was trading if the exchange or market
provides a closing price; and the average of the highest and lowest prices of
the Provident Units for each day that there was trading, if the market provides
only the highest and lowest prices of Provident Units traded on a particular
day. The closing market price shall be: an amount equal to the closing
price of the Provident Units if there was a trade on the date; an amount equal
to the average of the highest and lowest prices of the Provident Units if there
was trading and the exchange or other market provides only the highest and
lowest prices of Provident Units traded on a particular day, and the average of
the last bid and last ask prices if there was no trading on the date.

The
aggregate Market Redemption Price payable by Provident Energy Trust in respect
of any Provident Units surrendered for redemption during any calendar month
shall be satisfied by way of a cash payment on the last day of the following
month. The entitlement of holders of Provident Units to receive cash upon the
redemption of their Provident Units is subject to the limitation that the total
amount payable by Provident Energy Trust in respect of such Provident Units and
all other Provident Units tendered for redemption in the same calendar month
and in any preceding calendar month during the same year shall not exceed
$250,000; provided that Provident may, in its sole discretion, waive such
limitation in respect of any calendar month. If this limitation is not so
waived, the Market Redemption Price payable by Provident Energy Trust in
respect of Provident Units tendered for redemption in such calendar month shall
be paid on the last day of the following month by: (i) Provident Energy Trust
distributing Initial Notes having an aggregate principal amount equal to the
aggregate Market Redemption Price of the Provident Units tendered for
redemption; or (ii) if Provident does not hold Initial Notes having a
sufficient principal amount outstanding to effect such payment, by Provident
Energy Trust issuing its own promissory notes having an aggregate principal
amount equal to the aggregate Market Redemption Price of the Provident Units
tendered for redemption, which promissory notes (Redemption Notes) shall have
terms and conditions substantially identical to those of the Initial Notes.

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If at the time Provident Units are tendered for redemption by a holder of
Provident Units, the outstanding Provident Units are not listed for trading on
the TSX and are not traded or quoted on any other stock exchange or market
which Provident considers, in its sole discretion, provides representative fair
market value price for the Provident Units or trading of the outstanding
Provident Units is suspended or halted on any stock exchange on which the
Provident Units are listed for trading or, if not so listed, on any market on
which the Provident Units are quoted for trading, on the date such Provident
Units are tendered for redemption or for more than five trading days during the
10 trading day period, commencing immediately after the date such Provident
Units were tendered for redemption then such holder of Provident Units shall,
instead of the Market Redemption Price, be entitled to receive a price per
Provident Unit (the Appraised Redemption Price) equal to 90% of the fair
market value thereof as determined by Provident as at the date upon which such
Provident Units were tendered for redemption. The aggregate Appraised
Redemption Price payable by the Trust in respect of Provident Units tendered
for redemption in any calendar month shall be paid on the last day of the third
following month by, at the option of the Trust: (i) a cash payment; or (ii) a
distribution of Initial Notes or Redemption Notes, as described above.

It is
anticipated that this redemption right will not be the primary mechanism for
holders of Provident Units to dispose of their Provident Units. Initial Notes
or Redemption Notes which may be distributed in specie to holders of Provident
Units in connection with a redemption will not be listed on any stock exchange
and no market is expected to develop in such Initial Notes or Redemption Notes.
Initial Notes will not be qualified investments for trusts governed by
registered retirement savings plans, registered retirement income funds and
deferred profit sharing plans.

Provident Trustee

Computershare Trust Company of Canada is the initial trustee of Provident
Energy Trust. The Trustee is responsible for, among other things: (a)
accepting subscriptions for Provident Units and issuing Provident Units
pursuant thereto; (b) maintaining the books and records of Provident Energy
Trust and providing timely reports to holders of Provident Units; and (c)
paying cash distributions to holders of Provident Units. The Trust Indenture
provides that the Trustee shall exercise its powers and carry out its functions
thereunder as Trustee honestly, in good faith and in the best interests of
Provident Energy Trust and the holders of Provident Units and, in connection
therewith, shall exercise that degree of care, diligence and skill that a
reasonably prudent trustee would exercise in comparable circumstances.

The initial term of the Trustees appointment is until the first annual meeting
of holders of Provident Units. Thereafter, the Trustee shall be reappointed or
changed every year as may be determined by a majority of the votes cast at a
meeting of the holders of Provident Units. The Trustee may resign upon 60
days notice to Provident Energy Trust. The Trustee may also be removed by
Provident Special Resolution. Such resignation or removal becomes effective
upon the acceptance or appointment of a successor trustee.

Liability of the Trustee

The Trustee, its directors, officers, employees, shareholders and agents shall
not be liable to any Trust Unitholder or any other person, in tort, contract or
otherwise, in connection with any matter pertaining to Provident Energy Trust
or the Trust Fund, arising from the exercise by the Trustee of any powers,
authorities or discretion conferred under the Trust Indenture, including,
without limitation, any action taken or not taken in good faith in reliance on
any documents that are, prima facie, properly executed, any depreciation of, or
loss to, the Trust Fund incurred by reason of the sale of any asset, any
inaccuracy in any evaluation provided by Provident or any other appropriately
qualified person, any reliance on any such evaluation, any action or failure to
act of Provident, or any other person to whom the Trustee has, with the consent
of Provident, delegated any of its duties, or any other action or failure to
act (including failure to compel in any way any former trustee to redress any
breach of trust or any failure by Provident to perform its duties under or
delegated to it under the Trust Indenture or certain material contracts),
unless such liabilities arise out of the gross negligence, wilful default or
fraud of the Trustee or any of its

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directors, officers, employees, shareholders or agents. If the Trustee has
retained an appropriate expert, adviser or legal counsel with respect to any
matter connected with its duties under this Indenture or certain material
contracts, the Trustee may act or refuse to act based on the advice of such
expert, adviser or legal counsel, and the Trustee shall not be liable for and
shall be fully protected from any loss or liability occasioned by any action or
refusal to act based on the advice of any such expert, adviser or legal
counsel. In the exercise of the powers, authorities or discretion conferred
upon the Trustee under the Trust Indenture, the Trustee is and shall be
conclusively deemed to be acting as Trustee of the assets of Provident Energy
Trust and shall not be subject to any personal liability for any debts,
liabilities, obligations, claims, demands, judgments, costs, charges or
expenses against or with respect to Provident Energy Trust or the Trust Fund.
In addition, the Trust Indenture contains other customary provisions limiting
the liability of the Trustee.

Amendments to the Trust Indenture

The Trust Indenture may be amended or altered from time to time by Provident
Special Resolution. The Trustee may, without the approval of the Trust
Unitholders, make certain amendments to the Trust Indenture, including
amendments for the purpose of:



| |  | ensuring Provident Energy Trusts continuing compliance with applicable
laws or requirements of any
governmental agency or authority of Canada or of any province;                                                                                                                                                                                                                                                                                                                                                                          
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | ensuring that Provident Energy Trust will satisfy the provisions of each
of subsections 108(2) and
132(6) of the Tax Act as from time to time amended or replaced;                                                                                                                                                                                                                                                                                                                                                                          
| 
| |  | ensuring that such additional protection is provided for interests of
Trust Unitholders as the Trustee
may consider expedient;                                                                                                                                                                                                                                                                                                                                                                                                              
| 
| |  | removing or curing any conflicts or inconsistencies between the provisions
of the Trust Indenture or
any supplemental indenture or the Provident Royalties and any other
agreement of Provident Energy
Trust or any offering document pursuant to which securities of Provident
Energy Trust are issued
with respect to Provident Energy Trust, or any applicable law or
regulations of any jurisdiction,
provided that in the opinion of the Trustee the rights of the Trustee and
of the Trust Unitholders are
not prejudiced thereby; and
| 
| |  | curing, correcting or rectifying any ambiguities, defective or
inconsistent provisions, errors, mistakes
or omissions, provided that in the opinion of the Trustee the rights of
the Trustee and of the Trust
Unitholders are not prejudiced thereby.                                                                                                                                                                                                                                                                                       




Provident Energy Ltd.

The principal business of Provident is to manage and administer the operating
activities associated with the oil and gas properties. Provident is engaged in
the acquisition, exploitation, development and production of crude oil and
natural gas in the Western Canadian Sedimentary Basin.

Delegation of Authority, Administration and Trust Governance

The board of directors of Provident has generally been delegated the
significant management decisions of Provident Energy Trust. In particular, the
Trustee has delegated to Provident responsibility for any and all matters
relating to: (a) the redemption of Provident Units; (b) the acquisition of
Subsequent Investments by the Trust and the negotiation of management
agreements respecting Subsequent Investments; (c) any offering of securities of
the Trust including: (i) the listing and maintaining of the listing on the TSX
or AMEX of the Provident Units; (ii) the filing of documents or obtaining of
permission from any governmental or regulatory authority or the taking of any
other step under federal or provincial law to enable securities which a holder
of Provident Units is entitled to receive to be properly and legally delivered
and thereafter traded; (iii) ensuring compliance with all applicable laws; (iv)
all matters relating to the content of any prospectus, information memorandum,
private placement

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memorandum and similar public or private offering documents, and the
certification thereof; (v) all matters concerning the terms of the sale or
issuance of Provident Units or rights to Provident Units, including without
limitation all matters concerning the adoption of any Unitholder Rights Plan;
(d) the determination of any Distribution Record Date other than the last date
of each calendar month; and (e) the determination of any borrowing under the
Provident Trust Indenture. Holders of Provident Units are entitled to elect
the board of directors of Provident pursuant to the terms of the Unanimous
Shareholder Agreement.

Decision Making

The board of directors of Provident supervises the management of the business
and affairs of Provident Energy Trust, including the business and affairs of
Provident Energy Trust delegated to Provident. In particular, significant
operational decisions and all decisions relating to: (i) the acquisition and
disposition of properties for a purchase price or proceeds in excess of an
amount equal to 5% of the market capitalization of Provident Energy Trust; (ii)
the approval of annual operating and capital expenditure budgets; and (iii)
establishment of credit facilities, are made by the board of directors of
Provident. In addition, the Trustee has delegated certain matters to the board
of directors of Provident including all decisions relating to: (i) the issuance
of additional Provident Units; and (ii) the determination of the amount of
Distributable Cash. Any amendment to the Provident Royalties will require the
approval of the board of directors of Provident on behalf of Provident Energy
Trust. The board of directors of Provident generally holds regularly scheduled
meetings to review the business and affairs of Provident and make any necessary
decisions relating thereto.

Common Shares

All of the issued and outstanding common shares of Provident are held by the
Trust. Each Provident Share entitles its holder to receive notice of and to
attend all meetings of the shareholders of Provident and to one vote at such
meetings. The holders of Provident Shares are, at the discretion of the board
of directors of Provident and subject to applicable legal restrictions,
entitled to receive any dividends declared by the board of directors on the
common shares. The holders of Provident Shares are entitled to share equally
in any distribution of the assets of Provident upon the liquidation,
dissolution, bankruptcy or winding-up of Provident or other distribution of its
assets among its shareholders for the purpose of winding-up its affairs. Such
participation is subject to the rights, privileges, restrictions and conditions
attaching to any instruments having priority over the Provident Shares.

Exchangeable Shares

On January 17, 2003, Provident acquired all the issued and outstanding shares
of Provident Management Corporation, the manager of the Trust and Provident,
for consideration of $18.0 million payable by the issuance of 1,682,242
exchangeable shares of Provident. See Information Concerning Provident
Management Corporation in this Annual Information Form. The exchangeable
shares are held in escrow with a portion of such shares releasable each year
beginning on June 30, 2003, and are releasable or may be forfeited in certain
other limited circumstances. This management internalization transaction
eliminated external management fees effective January 1, 2003.

The exchangeable shares are generally intended to represent an economic
equivalent to the Trust Units that the Vendors would have received from the
sale of the common shares of the Manager had they elected to receive Trust
Units. Each exchangeable share is exchangeable for Trust Units on the basis of
an exchange ratio, initially equal to one, subject to certain adjustments to
reflect the cash distributions on the Trust Units. The exchangeable shares
have substantially similar attributes to the exchangeable shares issued by PAI
in connection with the acquisition of Meota.

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Notes

From time to time, Provident has issued notes to the Trust in connection with
certain acquisitions and other transactions undertaken by the Trust. Cash flow
from Providents producing properties distributed from Provident to the Trust
includes interest payments (if applicable) and principal repayments on the
various notes held by the Trust. The following summary of the material
attributes and characteristics of the various notes outstanding does not
purport to be complete and is qualified in its entirety by reference to the
provisions of the note indentures under which such notes have been issued,
which contain a complete statement of such attributes and characteristics.



| |  | Initial Notes
| |  | -------------

The Initial Notes were unsecured with interest from the date of issue at 12%
per annum. The Initial Notes represented unsecured debt obligations of
Provident and ranked pari passu with all other unsecured indebtedness of
Provident, but subordinate to all secured debt.

The Initial Notes were issued in connection with the Founders Arrangement
pursuant to the Founders Note Indenture and were repaid in full in 2002.



| |  | Acquisition Notes
| |  | -----------------

The Acquisition Notes are unsecured, bear no interest and are payable in whole
or in part upon demand. The Acquisition Notes represent unsecured debt
obligations of Provident and rank pari passu with all other unsecured
indebtedness of Provident, but subordinate to all secured debt. Provident may
prepay all or any part of the outstanding principal of the Acquisition Notes
without notice or bonus.

The Acquisition Notes were issued in connection with the Maxx Arrangement
pursuant to the Maxx Note Indenture.



| |  | Richland Notes
| |  | --------------

The Richland Notes are unsecured, bear no interest and are payable in whole or
in part upon demand. The Richland Notes represent unsecured debt obligations of
Provident and rank pari passu with all other unsecured indebtedness of
Provident, but subordinate to all secured debt. Provident may prepay all or
any part of the outstanding principal of the Richland Notes without notice or
bonus.

The Richland Notes were issued in connection with the Richland Arrangement
pursuant to the Richland Note Indenture.

Dividend Record And Policy

No dividends have been paid on the Provident Shares. Any decision to pay
dividends on the Provident Shares in the future will be made by the board of
directors of Provident on the basis of Providents earnings, financial
requirements and other conditions existing at the time.




Provident Holdings Trust and Provident Acquisitions L.P.

Provident Acquisitions L.P. holds certain southeast Alberta properties acquired
on May 1, 2002. See Significant Acquisitions and Significant Dispositions in
this Annual Information Form. Provident Holdings Trust is managed by
Provident. The general partner of Provident Acquisitions L.P. is Provident.
Provident Acquisitions L.P. has granted a royalty to the Trust entitling the
Trust to 99% of the cash flow from all present and future oil and gas
properties and related tangibles owned by Provident Acquisitions L.P. after
certain cost expenditures and deductions.




Provident Acquisitions Inc.

PAI holds certain southern Alberta and Southwest Saskatchewan properties that
were acquired through the purchase of Meota. PAI is managed by Provident and
has 67% interest in 10101150 Saskatchewan Ltd. and a 0.00001% interest in Meota
(2000) Partnership. PAI has granted a royalty to the Trust entitling

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the Trust to a 99% cash flow from all present and future oil and gas properties
and related tangibles owned by PAI after certain cost expenditures and
deductions.

On October 1, 2002, PAI issued 5,585,136 million exchangeable shares as partial
consideration for the acquisition of Meota. The exchange ratio for the
exchangeable shares for the period October 1 to November 14, 2002 was initially
equal to one Trust Unit for one exchangeable share and is increased on each
date a distribution is paid by the Trust between October 1, 2002 and the date
the exchangeable share is exchanged, at the option of the holder, into Trust
Units. On January 15, 2004, all remaining exchangeable shares will be
automatically exchanged for Trust Units, subject to extension at the option of
the Trust.






|Exchangeable Share Provisions
|-----------------------------

The following is a summary description of the material provisions of the PAI
exchangeable shares:

Ranking

The exchangeable shares rank prior to any common shares of PAI and any other
shares ranking junior to the exchangeable shares with respect to the payment of
dividends and the distribution of assets in the event of the liquidation,
dissolution or winding-up of PAI.

Dividends

Holders of exchangeable shares are entitled to receive dividends if, as and
when declared by the board of directors of PAI. PAI does not anticipate that
any dividends will be declared in respect of the exchangeable shares; however
the board of directors of PAI has the right in its sole discretion to do so.

Certain Restrictions

PAI will not, without obtaining the approval of the holders of the exchangeable
shares as set forth below under the sub-heading Amendment and Approval:



| | (a) |  | pay any dividend on the common shares of PAI or any other shares ranking
junior to the
exchangeable shares, other than stock dividends payable in common shares
of PAI or any
other shares ranking junior to the exchangeable shares;
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | redeem, purchase or make any capital distribution in respect of the common
shares of
PAI or any other shares ranking junior to the exchangeable shares;                                                                              
|
| | (c) |  | redeem or purchase any other shares of PAI ranking equally with the
exchangeable shares
with respect to the payment of dividends or on any liquidation
distribution; or                                                              
|
| | (d) |  | issue any shares other than exchangeable shares, common shares of PAI and
any other
shares ranking junior to the exchangeable shares with respect to the
payment of dividends
or on any liquidation distribution.                    

Liquidation of PAI

In the event of the liquidation, dissolution or winding-up of PAI or any other
proposed distribution of the assets of PAI among its shareholders for the
purpose of winding up its affairs, a holder of exchangeable shares will be
entitled to receive for each exchangeable Share on the effective date of such
liquidation, dissolution, winding-up or other distribution (the Liquidation
Date) an amount equal to the value of that number of Trust Units equal to the
Exchange ratio as at that Liquidation Date (the Liquidation Amount), to be
satisfied by the delivery of that number of Trust Units. Fractional Trust Units
will not be delivered. Any amount payable on account of the Liquidation Amount
that includes a fractional Trust Unit will be rounded down to the nearest whole
number of Trust Units.

On or after the Liquidation Date, a holder of exchangeable shares may surrender
certificates representing such exchangeable shares, together with such other
documents as may be reasonably required to effect a

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transfer of the exchangeable shares, to PAIs registered office or the office
of the exchangeable shares Transfer Agent. Upon receipt of the certificates and
other documents and subject to the exercise by the Trust, Provident or any
subsidiary of either the Trust or Provident of the Liquidation Call Right, PAI
will deliver the Liquidation Amount to such holder at the address recorded in
PAIs security register or will hold the Liquidation Amount for pick-up by the
holder at PAIs registered office or the office of the exchangeable shares
Transfer Agent, as specified by PAI in a notice to such holders.

Upon the occurrence of a liquidation, dissolution or winding-up of PAI, the
Trust, Provident or any subsidiary of either the Trust or Provident will have
the right to purchase all but not less than all of the exchangeable shares then
outstanding (other than exchangeable shares held by the Trust, Provident or any
subsidiary of either the Trust or Provident) at a purchase price per
exchangeable share equal to the Liquidation Amount (to be satisfied by the
issuance or delivery, as the case may be, of that number of Trust Units having
a value equal to the Liquidation Amount) and, upon the exercise of the
Liquidation Call Right, the holders thereof will be obligated to sell such
exchangeable shares to the Trust, Provident or any subsidiary of either the
Trust or Provident, as applicable. The purchase by the Trust, Provident or any
subsidiary of either the Trust or Provident of all of the outstanding
exchangeable shares upon the exercise of the Liquidation Call Right will occur
on the Liquidation Date.

The Liquidation Call Right may be exercised, at the election of Provident, by
either the Trust, Provident or any subsidiary of either the Trust or Provident.

Upon the occurrence of an Insolvency Event, the Trustee on behalf of the
holders of the exchangeable shares will have the right to require the Trust,
Provident or any subsidiary of either the Trust or Provident to purchase any or
all of the exchangeable shares then outstanding and held by such holders for
the Liquidation Amount as described under the sub-heading Voting and Exchange
Trust Agreement Optional Exchange Right.

Automatic Exchange Right on Liquidation of the Trust

In the event of a Provident Liquidation Event, the Trust, Provident or any
subsidiary of either the Trust or Provident will be required to purchase each
outstanding exchangeable share (other than exchangeable shares held by the
Trust, Provident or any subsidiary of either the Trust or Provident) and
holders of exchangeable shares will be required to sell the exchangeable shares
held by them at the fifth business day prior to the effective date of the
Provident Liquidation Event, by exchanging, for each exchangeable Share held by
such holder, that number of Trust Units equal to the Exchange ratio as at the
sixth business day prior to the effective date of the Provident Liquidation
Event. Fractional Trust Units will not be issued. Any amount payable in respect
of an exchangeable share in the event of a Provident Liquidation Event that
includes a fractional Trust Unit will be rounded down to the nearest whole
number of Trust Units.

Upon a holders request and surrender of exchangeable share certificates, duly
endorsed in blank and accompanied by such instrument of transfer as PAI may
reasonably require, the Trust will deliver to such holder certificates
representing the number of Trust Units to which that holder is entitled to
receive as at that date.

Retraction of exchangeable shares by Holders

Subject to the Retraction Call Right described below, a holder of exchangeable
shares is entitled at any time to require PAI to redeem any or all of the
exchangeable shares held by such holder for a retraction price per exchangeable
share equal to the value of that number of Trust Units equal to the Exchange
ratio as at the Retraction Date (the Retraction Price), to be satisfied by
the delivery of that number of Trust Units. Fractional Trust Units will not be
delivered. Any amount payable on account of the Retraction Price that includes
a fractional Trust Unit will be rounded down to the nearest whole number of
Trust Units.

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Holders of the exchangeable shares may request redemption by presenting to PAI
or the exchangeable shares Transfer Agent a certificate or certificates
representing the number of exchangeable shares the holder desires to have
redeemed, together with a duly executed Retraction Request and such other
documents as may be reasonably required to effect the redemption of the
exchangeable shares. The redemption will become effective five business days
after the date on which PAI or the exchangeable shares Transfer Agent receives
the Retraction Request from the holder.

When a holder requests PAI to redeem the exchangeable shares, the Trust,
Provident or any subsidiary of either the Trust or Provident will have an
overriding right (the Retraction Call Right) to purchase on the Retraction
Date all but not less than all of the exchangeable shares that the holder has
requested PAI to redeem at a purchase price per exchangeable share equal to the
Retraction Price, to be satisfied by the delivery of that number of Trust Units
having a value equal to the Retraction Price.

At the time of a Retraction Request by a holder of exchangeable shares, PAI
will immediately notify the Trust, Provident or a subsidiary of either the
Trust or Provident. The Trust, Provident or a subsidiary of either the Trust
or Provident must then advise PAI within two business days as to whether the
Retraction Call Right will be exercised. A holder may revoke his or her
Retraction Request at any time prior to the close of business on the last
business day immediately preceding the Retraction Date, in which case the
holders exchangeable shares will neither be purchased by the Trust, Provident
or a subsidiary of either the Trust or Provident, nor be redeemed by PAI. If
the holder does not revoke his or her Retraction Request, the exchangeable
shares that the holder has requested PAI to redeem will on the Retraction Date
be purchased by the Trust, Provident or a subsidiary of either the Trust or
Provident or redeemed by PAI, as the case may be, in each case at a purchase
price per exchangeable share equal to the Retraction Price.

The Retraction Call
Right may be exercised, at the election of Provident, by either the Trust,
Provident or a subsidiary of either the Trust or Provident.

If, as a result of solvency provisions of applicable law, PAI is not permitted
to redeem all exchangeable shares tendered by a retracting holder, PAI will
redeem only those exchangeable shares tendered by the holder as would not be
contrary to such provisions of applicable law. The holder of any exchangeable
shares not redeemed by PAI will be deemed to have required the Trust to
purchase such unretracted exchangeable shares in exchange for Trust Units on
the Retraction Date pursuant to the optional Exchange Right.

Redemption of exchangeable shares

Subject to applicable law and the Redemption Call Right, PAI:



| | (a) |  | will, on January 15, 2004 (the Automatic Redemption Date), redeem all but
not less
than all of the then outstanding exchangeable shares for a redemption
price per
exchangeable share equal to the value of that number of Trust Units equal
to the
Exchange ratio as at the last business day prior to that Redemption Date
(as that term is
defined below) (the Redemption Price), to be satisfied by the delivery
of that number of
Trust Units;                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | may, at any time when the aggregate number of issued and outstanding
exchangeable
shares is less than 10% of the number of exchangeable shares issued in
connection with
the Offer (as such number of shares may be adjusted as deemed appropriate
by the board
of directors of PAI to give effect to any subdivision or consolidation of
or stock dividend
on the exchangeable shares, any issuance or distribution of rights to
acquire exchangeable
shares or securities exchangeable for or convertible into or carrying
rights to acquire
exchangeable shares, any issue or distribution of other securities or
rights or evidences of
indebtedness or assets, or any other capital reorganization or other
transaction involving
or affecting the exchangeable shares) (the De Minimus
Redemption Date and,
collectively with an Automatic Redemption Date, a Redemption Date),
redeem all but

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| |     |  | not less than all of the then outstanding exchangeable shares for the
Redemption Price per
exchangeable share; and                                                                                                                                                                                                                                                                                      
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (c) |  | will be deemed to have redeemed all but not less than all of the then
outstanding
exchangeable shares for the Redemption Price per exchangeable share
immediately prior
to the time when the trust unit purchase rights issued pursuant to the
unitholder rights
plan of the Trust (or pursuant to any successor or replacement rights
plan) would separate
from the Trust Units and become exercisable.

Fractional Trust Units will not be delivered. Any amount payable on account of
the Redemption Price that includes a fractional Trust Unit will be rounded down
to the nearest whole number of Trust Units.

PAI will, at least 90 days prior to
any Redemption Date, provide the registered holders of the exchangeable shares
with written notice of the prospective redemption of the exchangeable shares by
PAI, including the number of exchangeable shares PAI intends to redeem. On or
after the date that such notice is provided, upon the holders presentation and
surrender of the certificates representing the exchangeable shares and such
other documents as may be required at the registered office of PAI or the
office of the exchangeable shares Transfer Agent, PAI will deliver the
Redemption Price to the holder at the address of the holder recorded in PAIs
security register or by holding the Redemption Price for pickup by the holder
at the registered office of PAI or the office of the exchangeable shares
Transfer Agent as specified in the written notice. The accidental failure or
omission to give any notice of redemption to less than 10% of the holders of
exchangeable shares (other than the Trust) will not affect the validity of any
redemption of exchangeable shares pursuant to such notice.

The Trust, Provident or a subsidiary of either the Trust or Provident have been
granted a right (the Redemption Call Right), notwithstanding a proposed
redemption of the exchangeable shares by PAI on the applicable Redemption Date,
pursuant to the exchangeable share provisions, to purchase on any Redemption
Date all but not less than all of the exchangeable shares then outstanding
(other than exchangeable shares held by the Trust, Provident or a subsidiary of
either the Trust or Provident) in exchange for the Redemption Price and, upon
the exercise of the Redemption Call Right, the holders of all of the then
outstanding exchangeable shares will be obliged to sell all such shares to the
Trust, Provident or a subsidiary of either the Trust or Provident, as
applicable. If either the Trust, Provident or a subsidiary of either the Trust
or Provident exercises the Redemption Call Right, PAIs right to redeem the
exchangeable shares on the applicable Redemption Date will terminate.

The Redemption Call Right may be exercised, at the election of Provident, by
either the Trust, Provident or a subsidiary of either the Trust or Provident.

Voting Rights

The holders of exchangeable shares shall not be entitled to vote exchangeable
shares in respect of any matters concerning PAI.

Anti-Dilution

The number of Trust Units for which the exchangeable shares are exchangeable
will, in addition to being adjusted from time to time to conform to the
exchange ratio, be subject to adjustment in the event of:



| | (a) |  | the subdivision, consolidation or reclassification of the Trust Units or
the declaration by
the Trust of a distribution payable in Trust Units (or securities
exchangeable for or
convertible into Trust Units) (other than in the ordinary course);                                                                                              
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | the issue of rights, options or warrants to all or substantially all of the
Trust Unitholders
entitling them to subscribe for Trust Units or securities convertible or
exchangeable, or
carrying rights to purchase, into Trust Units at a price per Trust Unit of
less than eighty-
five percent of the then market price of such Trust Units; or

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| | (c) |  | the issue, payment or distribution to all or substantially all of the Trust
Unitholders of any
assets (including evidence of indebtedness) or cash or other rights or
securities if such
issuance, payment or distribution does not constitute a distribution paid
in the ordinary
course or an event described in (a) or (b) above.
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Amendment and Approval

The rights, privileges, restrictions and conditions attaching to the
exchangeable shares may be changed only with the approval of the holders
thereof. Any such approval or any other approval or consent to be given by the
holders of the exchangeable shares will be sufficiently given if given in
accordance with applicable law and subject to a minimum requirement that such
approval or consent be evidenced by a resolution passed by not less than
two-thirds of the votes cast thereon (other than shares beneficially owned by
the Trust, Provident, or any of their subsidiaries and other affiliates) at a
meeting of the holders of the exchangeable shares duly called and held at which
holders of at least 20% of the then outstanding exchangeable shares are present
in person or represented by proxy. In the event that no such quorum is present
at such meeting within one-half hour after the time appointed therefor, then
the meeting will be adjourned to such place and time (not less than 10 days
later) as may be determined at the original meeting and the holders of
exchangeable shares present in person or represented by proxy at the adjourned
meeting will constitute a quorum thereat and may transact the business for
which the meeting was originally called. At the adjourned meeting, a resolution
passed by the affirmative vote of not less than two-thirds of the votes cast
thereon will constitute the approval or consent of the holders of the
exchangeable shares.

Actions by the Trust under the Support Agreement and the Voting and Exchange
Trust Agreement

Under the exchangeable share provisions, PAI has agreed to take all such
actions and do all such things as are necessary or advisable to perform and
comply with its obligations under, and to facilitate the performance and
compliance by the Trust with its obligations under, the Support Agreement and
the Voting and Exchange Trust Agreement.

Non-resident Holders

Exchangeable shares have not been and will not be issued to a resident of any
foreign country. Notwithstanding anything contained in the exchangeable share
provisions, or the previous sentence, the obligation of the Trust, Provident or
a subsidiary of either the Trust or Provident to pay the Retraction Price,
Liquidation Price or Redemption Price in respect of the exchangeable shares
which are held by a resident of any foreign country shall be satisfied by
delivering the Trust Units which would have been received by the affected
holder to the exchangeable shares Transfer Agent who shall sell such Trust
Units on the stock exchange on which the Trust Units are then listed and, upon
such sale, the rights of the affected holder shall be limited to receiving the
net proceeds of sale (net of applicable taxes) upon surrender of the
certificates representing such exchangeable shares.




Voting and Exchange Trust Agreement

Voting Rights

In accordance with the Voting and Exchange Trust Agreement, the Trust has
issued a Special Voting Unit to Computershare Trust Company of Canada, the
Trustee, for the benefit of the holders (other than the Trust, Provident or a
subsidiary of either the Trust or Provident) of the exchangeable shares. The
Special Voting Unit carries a number of votes, exercisable at any meeting at
which Trust Unitholders are entitled to vote equal to the number of Trust Units
(rounded down to the nearest whole number) into which the exchangeable shares
are then exchangeable. With respect to any written consent sought from the
Trust Unitholders, each vote attached to the Special Voting Unit will be
exercisable in the same manner as set forth above.

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Each holder of an exchangeable share on the record date for any meeting at
which Trust Unitholders are entitled to vote will be entitled to instruct the
Trustee to exercise that number of votes attached to the Special Voting Unit
equal to the number of Trust Units (rounded down to the nearest whole number)
into which such exchangeable share is then exchangeable. The Trustee will
exercise each vote attached to the special voting unit only as directed by the
relevant holder and, in the absence of instructions from a holder as to voting,
will not exercise such votes.

The Trustee will send to the holders of the exchangeable shares the notice of
each meeting at which the Trust Unitholders are entitled to vote, together with
the related meeting materials and a statement as to the manner in which the
holder may instruct the Trustee to exercise the votes attaching to the Special
Voting Unit, at the same time as the Trust sends such notice and materials to
the Trust Unitholders. The Trustee will also send to the holders copies of all
information statements, interim and annual financial statements, reports and
other materials sent by the Trust to the Trust Unitholders at the same time as
such materials are sent to the Trust Unitholders. To the extent such materials
are provided to the Trustee by the Trust, the Trustee will also send to the
holders all materials sent by third parties to Trust Unitholders, including
dissident proxy circulars and tender and exchange offer circulars, as soon as
possible after such materials are first sent to Trust Unitholders, and the
Trust will use its reasonable best efforts to obtain and deliver such materials
to the Trustee.

All rights of a holder of exchangeable shares to exercise votes attached to the
Special Voting Unit will cease upon the exchange of all such holders
exchangeable shares for Trust Units.

With the exception of administrative changes for the purpose of adding
covenants for the protection of the holders of the exchangeable shares, making
necessary amendments or curing ambiguities or clerical errors (in each case
provided that the board of directors of Provident and the Trustee are of the
opinion that such amendments are not prejudicial to the interests of the
holders of the exchangeable shares), the Voting and Exchange Trust Agreement
may not be amended without the approval of the holders of the exchangeable
shares.

Optional Exchange Right

Upon the occurrence and during the continuance of:



| | (a) |  | an Insolvency Event; or                                                                                                                                           
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | circumstances in which the Trust, Provident or a subsidiary of either the
Trust or
Provident may exercise a Call Right, but elect not to exercise such Call
Right;

a holder of exchangeable shares will be entitled to instruct the Trustee to
exercise the optional Exchange Right with respect to any or all of the
Exchangeable shares held by such holder, thereby requiring the Trust, Provident
or a subsidiary of either the Trust or Provident to purchase such exchangeable
shares from the holder. Immediately upon the occurrence of (i) an Insolvency
Event, (ii) any event which will, with the passage of time or the giving of
notice, become an Insolvency Event, or (iii) the election by the Trust,
Provident or a subsidiary of either the Trust or Provident not to exercise a
Call Right which is then exercisable by the Trust, Provident or a subsidiary of
either the Trust or Provident, PAI and the Trust will give notice thereof to
the Trustee. As soon as practicable thereafter, the Trustee will then notify
each affected holder of exchangeable shares of such event or potential event
and will advise the holder of its rights with respect to the optional Exchange
Right.

The purchase price payable by the Trust, Provident or a subsidiary of either
the Trust or Provident for each exchangeable share to be purchased under the
optional Exchange Right will be satisfied by the issuance of that number of
Trust Units equal to the exchange ratio as at the last business day prior to
the day of closing of the purchase and sale of such exchangeable share under
the Exchange Right (the Exchange Price). Fractional Trust Units will not be
issued. Any amount payable on account of the

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Exchange Price that includes a fractional Trust Unit will be rounded down to
the nearest whole number of Trust Units.

If, as a result of solvency provisions of applicable law, PAI is unable to
redeem all of a holders exchangeable shares which such holder is entitled to
have redeemed in accordance with the exchangeable share provisions, the holder
will be deemed to have exercised the optional Exchange Right with respect to
the unredeemed exchangeable shares and the Trust, Provident or a subsidiary of
either the Trust or Provident will be required to purchase such shares from the
holder in the manner set forth above.

Support Agreement



| |  | The Trust Support Obligation
| |  | ----------------------------

Under the Support Agreement, the Trust and Provident have agreed that:



| | (a) |  | the Trust and Provident will take all actions and do all things necessary
to ensure that PAI
is able to pay to the holders of the exchangeable shares the Liquidation
Amount in the
event of a liquidation, dissolution or winding-up of PAI, the Retraction
Price in the event
of the giving of a Retraction Request by a holder of exchangeable shares,
or the
Redemption Price in the event of a redemption of exchangeable shares by
PAI; and
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | Provident will not vote or otherwise take any action or omit to take any
action causing the
liquidation, dissolution or winding-up of PAI.                                                                                                                                                                                                                                                                                                       

The Support Agreement also provides that, without the prior approval of PAI and
the holders of the exchangeable shares, the Trust will not distribute
additional Trust Units or rights to subscribe therefor or other property or
assets to all or substantially all of the Trust Unitholders, nor change the
rights, privileges or other terms of the Trust Units, unless the same or an
equivalent distribution on, or change to the exchangeable shares (or in the
rights of the holders thereof) is made simultaneously. In the event of any
proposed take-over bid, issuer bid or similar transaction affecting the Trust
Units, the Trust will use reasonable efforts to take all actions necessary or
desirable to enable holders of exchangeable shares to participate in such
transaction to the same extent and on an economically equivalent basis as the
Trust Unitholders.

With the exception of administrative changes for the purpose of adding
covenants for the protection of the holders of the exchangeable shares, making
certain necessary amendments or curing ambiguities or clerical errors (in each
case provided that the board of directors of Provident is of the opinion that
such amendments are not prejudicial to the interests of the holders of the
exchangeable shares), the Support Agreement may not be amended without the
approval of the holders of the exchangeable shares.

Under the Support Agreement, the Trust and Provident have agreed to not
exercise any voting rights attached to the exchangeable shares owned by them or
any of its subsidiaries and other affiliates on any matter considered at
meetings of holders of exchangeable shares (including any approval sought from
such holders in respect of matters arising under the Support Agreement).

Delivery of Trust Units

The Trust will make such filings and seek such regulatory consents and
approvals as are necessary so that the Trust Units issuable upon the exchange
of exchangeable shares will be issued in compliance with applicable securities
laws in Canada.




INFORMATION CONCERNING PROVIDENT MANAGEMENT CORPORATION




The Manager

Prior to 2003, the principal business of the Manager was to provide
administrative and management services to the Trust including the acquisition,
exploitation, development and production of crude oil and natural gas from the
properties. Pursuant to the provisions of the Management Agreement, the Manager

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provided certain management, administrative and support services to Provident
Energy Trust and its affiliates, including those necessary: (a) to ensure
compliance by Provident Energy Trust with continuous disclosure obligations
under applicable securities legislation; (b) to provide investor relations
services; (c) to provide or cause to be provided to holders of Provident Units
all information to which holders of Provident Units are entitled under the
Trust Indenture; (d) to call, hold and distribute materials including notices
of meetings and information circulars in respect of all necessary meetings of
holders of Provident Units; (e) to determine the amounts payable from time to
time to holders of Provident Units including Distributable Cash; and (f) to
determine the timing and terms of future offerings of Provident Units, if any.

Provident Management Corporation is owned by Thomas W. Buchanan and Randall J.
Findlay and was incorporated solely for the purpose of providing management,
advisory and administration services to Provident and Provident Energy Trust.




Management Agreement

The Management Agreement had an initial term expiring on December 31, 2004.
Subject to the Management Agreement, and any directions or restrictions imposed
from time to time by the board of directors of Provident, Provident Management
Corporation provided all management services and arranged for administrative
and support services pertaining to Providents oil and natural gas properties,
Provident, the Trust and all related services incidental thereto.

Provident Management Corporation was paid fees for providing such services.




Compensation

In its role under the Management Agreement as manager and administrator of
Provident and Provident Energy Trust, Provident Management Corporation received
the following fees:



| | (a) |  | a fee in an amount equal to 2% of Operating Cash Flow, such amount to be
calculated as
at the end of each calendar month or portion thereof if applicable and
paid on the 15th
day following any such calendar month or if such day is not a Business
Day, on the next
Business Day; and                                                                                                                                                                                                                                                                      
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | a fee equal to 6% of the Total Return Amount (which means in respect of any
Return
Period an amount equal to the Total Return Percentage minus 8.0% if the
Return Period
is a full calendar year and adjusted appropriately should the Return
Period be less than a
full calendar year, multiplied by the Market Capitalization for that
Return Period), such
amount to be calculated as at the end of each Return Period and paid on
the 15th day
following the end of each such Return Period or if such day is not a
Business Day on the
next Business Day.

Provident Management Corporation was not entitled to a fee in respect of
acquisitions and dispositions. In addition, Provident Management Corporation
had the option (subject to any necessary regulatory approval) of receiving all
or part of the fee provided in (b) above in Provident Units at the Unit Market
Price calculated as at the end of the relevant period.

In addition, Provident Management Corporation was entitled to reimbursement of
general and administrative costs and expenses related to its performance under
the Management Agreement by Provident Energy Trust and Provident, other than
costs related solely to Provident Management Corporation. The salaries of
Thomas W. Buchanan and Randall J. Findlay were not reimbursable but the costs
of certain of the benefits and perquisites were reimbursable, subject to
certain limits. The Management Agreement also provided that in most instances
of termination, Provident Management Corporation was entitled to receive the
management fees described herein and the general and administrative costs owing
at the time of termination and (in certain instances) an amount equal to all
such management fees payable in respect of the two Return Periods immediately
preceding the

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termination (or if there have been less than two Return Periods an amount equal
to such management fees as would have been payable in respect of two complete
Return Periods).




Acquisition of the Manager Shares

General

On November 22, 2002 the Trust, Provident, the Manager, Scimitar Energy Limited
and Hastings Street Management Limited (the Vendors) entered into the Share
Purchase Agreement pursuant to which Provident agreed to purchase all of the
issued and outstanding Manager Shares in consideration of $18 million, payable
by the issuance of an aggregate of 1,682,242 exchangeable shares at an agreed
upon price of $10.70 per share, subject to certain adjustments. Each
exchangeable share issued to the Vendors is exchangeable for Trust Units on the
basis of an exchange ratio which takes into account the cash distributions on
the Trust Units. On the date of issuance of the exchangeable shares, the
exchange ratio was equal to one Trust Unit for each exchangeable share.

Share Purchase Agreement

In addition to providing for the purchase by Provident of all of the Manager
Shares, the Share Purchase Agreement contained representations and warranties
of each of Thomas Buchanan and Randall Findlay, the Vendors, Provident, the
Manager and the Trust relating to status, capacity and related matters and
where applicable, representations and warranties relating to the business,
operations, assets and liabilities of the Manager. Each of the Vendors as well
as Mr. Buchanan and Mr. Findlay gave representations as to the Vendors
ownership and capacity to enter into and perform its obligations under the
Share Purchase Agreement, the Managers financial statements and certain other
matters concerning the Manager, including certain operational and financial
representations and warranties. In most circumstances, the representations and
warranties survive for two years after the closing date of the internalization
transaction.

The Share Purchase Agreement provided, among other things, as a condition of
closing that all regulatory approvals shall have been obtained, all matters to
be completed by the parties must be completed and all necessary documentation
must be entered into, including the entering into of the Escrow Agreements and
such other documentation as may be reasonably required.




Escrow Agreements

The Share Purchase Agreement stated that it was a condition of proceeding with
the internalization transaction that the Vendors enter into the Escrow
Agreements. The escrow provisions resulted in all exchangeable shares issued
pursuant to the Share Purchase Agreement being held in escrow. The number of
Exchangeable shares held in escrow representing 25% of the initial underlying
Trust Units to be issued to the Vendors are releasable per year beginning on
June 30, 2003 and are also releasable in certain other limited circumstances.

The Escrow Agreements also provide for the monthly release from escrow of a
number of exchangeable shares to account for the adjustment to the exchange
ratio as a result of distributions paid on the Trust Units. The release of such
exchangeable shares effectively releases to the Vendors the distributions paid
on the Trust Units. The number of exchangeable shares to be released from
escrow to account for such distributions on the Trust Units shall be determined
by multiplying the number of exchangeable shares held by a Vendor on the last
day of the month in question which have not been released from escrow or are
not releasable from escrow by the difference between the exchange ratio in
effect on the last day of the month in question and the exchange ratio in
effect on the last day of the month immediately preceding the month in question
and dividing the product thereof by the exchange ratio in effect on the last
day of the month in question.

In the event of a change of control of the Trust or Provident, all exchangeable
shares held in escrow will be released to the underlying holders. In addition,
the Escrow Agreements provide for early release of the

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securities in the event of the death or disability of either Thomas Buchanan or
Randall Findlay, or if either is terminated from their employment with
Provident or any other subsidiary of the Trust without just cause. Securities
held in escrow may be charged, pledged or encumbered, provided that the
securities will remain in escrow pursuant to the terms of the Escrow
Agreements.

In addition, the exchangeable shares held in escrow which have not been
released or are not releasable from escrow at the applicable time will be
subject to cancellation and forfeiture by Provident if the relevant individual
voluntarily resigns from Provident or any other subsidiary of the Trust.

The escrow provisions and forfeiture provisions are intended to enhance
alignment between management and Unitholder interests and to retain management.




Executive Employment Agreements

The Share Purchase Agreement provided, as a condition of closing of the
internalization transaction, that Provident enter into Executive Employment
Agreements with each of Mr. Buchanan and Mr. Findlay. Under the terms of the
Executive Employment Agreements, each of Mr. Buchanan and Mr. Findlay receives
an annual salary of $250,000 for the first year of services and thereafter as
determined by the Board of Directors annually, provided that each annual
determination shall not be less than the previous years annual salary. Mr.
Buchanan and Mr. Findlay will also be entitled to a cash bonus of up to 50% of
his annual salary in an amount determined by the Board of Directors based on
certain established criteria. In addition, options to purchase 500,000 Trust
Units will be granted to each of Mr. Buchanan and Mr. Findlay effective January
1, 2003. Such options will vest as to 1/3 immediately and 1/3 on each
subsequent anniversary of the grant.

Each of Mr. Buchanan and Mr. Findlay will also receive and participate in any
and all fringe benefit plans, coverages and other perquisites made available
from time to time to Providents senior officers and executives.

In the event of a change of control or termination of employment for any reason
other than cause, each of Mr. Buchanan and Mr. Findlay will receive two times
the aggregate of his then current salary and the bonus paid to him in respect
of the most recently completed financial year.

It has been agreed that each of Mr. Buchanan and Mr. Findlay will be nominated
by the Board of Directors for a position as a director of Provident at each
meeting of Unitholders at which directors of Provident are elected.




Other Matters

The Provident USA provided that the Manager was entitled to select two of the
seven directors on the Board of Directors of Provident. The Provident USA was
amended in order to enable Unitholders to select all of the members of the
Board of Directors commencing at the annual meeting of Unitholders held in May
2003.

In order to provide long-term continuity of the services provided by the
Manager, the Executive Employment Agreements of each of Thomas Buchanan and
Randall Findlay provide that each will continue to be nominated by the Board of
Directors as directors of Provident for the term of his Executive Employment
Agreement.




Timing of the Internalization Transaction

The Internalization Transaction became effective on the closing date, January
17, 2003.




GENERAL DEVELOPMENT OF THE BUSINESS OF THE TRUST AND PROVIDENT

The business and history of Provident, and its predecessor Founders, are
detailed in the following discussion. This information provides relevant
background to the growth of Founders and the decision to convert Founders into
a cash distributing energy trust.

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In 1997, Founders achieved significant production growth through an aggressive
horizontal drilling program that focussed on exploiting certain southeast
Saskatchewan oil properties that were acquired in March 1996. The use of
three-dimensional seismic and horizontal drilling techniques resulted in nine
successful horizontal oil wells in the Founders operated areas of Hartaven and
Weir Hill. Exploration drilling during 1997 resulted in two successful deep
exploratory Ordovician oil wells in the Hartaven area of southeast
Saskatchewan. During 1997, Founders also increased its undeveloped land
position by 48,325 net acres to total 60,816 net acres. Production volumes for
1997 averaged 1,762 barrels of oil equivalent per day.

In 1998, Founders realized significant gains in crude oil and natural gas
production and reserves as a result of a significant multi-zone natural gas
discovery at Pouce Coupe in northwest Alberta and the December 22, 1998
acquisition of Opal. Production volumes averaged 2,489 barrels of oil
equivalent per day and undeveloped land holdings increased by 99,452 net acres
to total 160,268 net acres. The acquisition of Opal ranked as Founders
largest transaction at the time and provided Founders with a new Saskatchewan
heavy oil core area in close proximity to Lloydminster as well as a natural gas
prone core area in West Central Alberta. On a proven reserve basis the Opal
acquisition provided 8.2 million barrels of oil equivalent of which 46 percent
were natural gas and on a proven plus half probable basis, Founders acquired
10.2 million barrels of oil equivalent of which 48 percent were natural gas
reserves. Opal was a value-driven acquisition that significantly enhanced
Founders competitive position in the gas-prone area of West Central Alberta
and provided Founders with a new core growth area for heavy oil in close
proximity to Lloydminster.

In 1999, high debt levels, historically low crude oil prices and limited equity
markets significantly impaired Founders growth objectives for the year. Early
in 1999, management recognized the need to deal with Founders debt levels to
improve Founders financial flexibility. Accordingly, to repay bank debt, a $15
million subordinated convertible debenture financing was completed in June 1999
and Founders commenced a program of identifying and selling $28.8 million of
non-core assets throughout the year. These successful initiatives, coupled
with drilling success during the second half of 1999, significantly improved
the balance sheet and created a more flexible financial structure to allow
Founders to aggressively compete in its core growth areas. In addition, during
the third quarter of 1999, an extensive review was undertaken by management and
the board of directors to evaluate and recommend strategic alternatives to
maximize Founders potential. As a result of this process, Founders refocused
and simplified its business strategy to create consistent growth in shareholder
value through efficient use of capital and technical resources. Daily 1999
production volumes averaged 2,874 bpd of crude oil and natural gas liquids and
12.3 mmcfd of natural gas for a total oil equivalent production of 4,922 boed.

During 2000, Founders focused its activities in the two core areas of West
Central Alberta and Lloydminster. During the year, Founders participated in the
drilling of a total of 31 (27.3 net) wells, resulting in 22 (20.3 net) crude
oil wells, six (4.9 net) gas wells and three (2.1 net) dry holes for an overall
success rate of 90 percent. During 2000, a total of 18 wells were drilled in
the Lloydminster heavy oil area with a 100 percent success rate. In the gas
prone area of West Central Alberta, Founders drilled or participated in
drilling nine (7.0 net) wells for an overall success rate of 67 percent. During
2000, daily production volumes averaged 2,440 bpd of crude oil and natural gas
liquids and 10.6 mmcfd of natural gas for a total oil equivalent production of
4,208 boed compared to an average daily production rate of 4,922 boed in 1999.
The reduction in daily production volumes for 2000 compared to 1999 is
attributed to the sale of approximately 1,200 boed of annualized non-core
production throughout 1999. Founders exit production for the year was slightly
in excess of 4,300 boed.

During 2000, management believed that Founders, along with the vast majority of
other junior E & P companies, was significantly undervalued by the market. As a
result, Founders board of directors reviewed several options for the company
with a view to increasing shareholder value. At this time, it was the
collective view of the board of directors that the Western Canadian Sedimentary
Basin had become largely a mature basin with an operating emphasis on
exploitation. In reviewing appropriate structures for

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a maturing basin, management believed the trust structure was clearly the most
suited structure for acquiring mid-life to mature assets and for harvesting and
paying out the cash flow in a low risk, cost effective manner. The board of
directors believed that a trust structure would maximize the financial return
for the Founders shareholders through the creation of a yield-based investment
that could take maximum advantage of the strong commodity prices and market
fundamentals currently prevailing in the oil and gas sector.

On March 5, 2001, the shareholders of Founders approved the reorganization of
Founders into Provident Energy Trust. The transaction, accomplished by way of
a plan of arrangement resulted in the shareholders of Founders receiving one
(1) trust unit in Provident in exchange for each three (3) common shares of
Founders. As part of the transaction, Citicorp, the holder of the $15.0
million 7.5 percent subordinated secured convertible debenture due June 30,
2004, agreed to the early conversion and redemption of the debenture as part of
the Founders Arrangement. The conversion of the debenture significantly
improved Providents financial flexibility allowing the Trust to actively
pursue quality acquisition opportunities. See Significant Acquisitions and
Significant Dispositions in this Annual Information Form.

On May 25, 2001, the Trust and Provident completed the acquisition of the Maxx
Shares pursuant to the Maxx Arrangement. The acquisition of Maxx increased the
total number of Trust Units outstanding to 14,586,821 Trust Units. See
Significant Acquisitions and Significant Dispositions in this Annual
Information Form.

On August 29, 2001, the Trust completed a treasury and secondary offering of
2,435,500 trust units for gross proceeds of $26.425 million. On December 13,
2001, in conjunction with the acquisition of Richland, the Trust completed a
treasury offering of 4,000,000 Trust Units for gross proceeds of $35.0 million.

On January 15, 2002, the Trust and Provident completed the Richland
Arrangement. The acquisition of Richland increased the total number of Trust
Units outstanding as at that date, to 32,179,546 Trust Units. See Significant
Acquisitions and Significant Dispositions in this Annual Information Form.

On May 1, 2002, the Trust and Provident completed the acquisition of certain
oil and gas properties located in southeast Alberta for a purchase price of
approximately $72.0 million, payable in cash. See Significant Acquisitions
and Significant Dispositions in this Annual Information Form. In conjunction
with the acquisition of the oil and gas properties, the Trust completed a
concurrent treasury offering of 3,900,000 Trust units and $64.41 million
principal amount of 10.5% convertible unsecured subordinated debentures for
gross proceeds of $103.8 million.

On October 1, 2002, the Trust, Provident and PAI completed the acquisition of
all of the Meota common shares pursuant to a takeover bid circular. The
acquisition of Meota increased the total number of Trust Units outstanding as
at that date, to 51,851,921. See Significant Acquisitions and Significant
Dispositions in this Annual Information Form.




SIGNIFICANT ACQUISITIONS AND SIGNIFICANT DISPOSITIONS




Founders Arrangement

From the end of 1999 and throughout 2000, an extensive review was undertaken by
management and the Board of Directors to evaluate Founders asset base and
future growth prospects in relation to the current industry environment and to
consider various strategic alternatives. As part of this review, it was
determined that the Western Canadian Sedimentary Basin had become largely a
mature basin with limited new growth potential. Finding costs have
consistently trended upwards over the past few years indicating that large new
quantities of oil and gas are becoming more difficult to find. Despite
extremely strong commodity prices and fundamentals, the majority of junior
Canadian exploration and production (E&P)

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companies, including Founders, continued to trade at very low valuations making
it difficult to acquire properties or companies or access growth capital
without being extremely dilutive to shareholders. At the same time, the
Canadian oil and gas trust sector was trading at much stronger valuations than
the E&P sector and raised more than $700 million of new equity during 2000. In
addition, many Canadian oil and gas trusts used their trust units as currency
in completing more than $2 billion of corporate and property acquisitions in
2000 by the sector. After an extensive review of Founders asset base and
detailed production and cash flow modeling, the Board of Directors concluded
that the best alternative for maximizing shareholder value would be to convert
Founders into an oil and gas trust.

The purpose of the Founders Arrangement was to convert Founders from a
corporate entity concentrating on growth through the reinvestment of cash flow
to a trust entity which will distribute a substantial portion of cash flow to
Trust Unitholders. The Founders Arrangement resulted in Founders Shareholders
receiving Trust Units of Provident Energy Trust in exchange for their Founders
Shares. The Founders Arrangement involved the following steps which were
deemed to occur sequentially:



| | (a) |  | Founders existing shareholder rights plan was terminated and all rights
issued thereunder
were extinguished;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | each issued and outstanding Founders Share was exchanged for Initial Notes,
on the basis
of one Initial Note for every three Founders Shares. In lieu of
fractional Initial Notes,
each holder of Founders Shares who would otherwise have received such
fractional
Initial Notes was paid an amount of cash (rounded to the nearest whole
cent), without
interest, equal to the product of (a) such fraction multiplied by (b) the
product of (i) three
and (ii) the average closing sale price per share of the Founders Shares
on the TSX as
reported in The Financial Postover the ten consecutive trading days
ending on the third
trading day prior to the effective date, resulting in the acquisition by
Provident of all of
the issued and outstanding Founders and the acquisition by holders of
Founders Shares of
Initial Notes;
|
| | (c) |  | each Initial Note was exchanged for one Trust Unit, resulting in the
acquisition by
Provident Energy Trust of all of the issued and outstanding Initial Notes
and the
acquisition by the former holders of Founders Shares of Trust Units;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| | (d) |  | Founders and Provident were amalgamated to form Provident Energy Ltd.;
and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| | (e) |  | the Unitholder Rights Plan became effective.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

In connection with the Founders Arrangement, all stock options immediately
vested and became exercisable prior to the Founders Arrangement becoming
effective. Any stock options not exercised at such time were cancelled.
Founders has made a loan available to any employee, officer or director
exercising options (including Randall J. Findlay and Thomas W. Buchanan) for a
maximum term of three months from the date of the Founders Arrangement taking
effect at an interest rate equal to the average commercial bank lending rate
available to Provident. Any distributions on the Trust Units made to such
employee, officer or director during that period will be applied to the loan
amount due. Principal and accrued interest on the loans will be due and
payable in full on the earlier of the due date of the loans or at the time of
termination of employment.

Immediately following the Founders Arrangement, Provident granted the Initial
Royalty to the Trust for consideration of $13.6 million, in exchange for a
reduction of the principal amount owing by Provident under the Initial Notes.

The Founders Arrangement resulted in each shareholder ultimately receiving one
Trust Unit for every three Founders Shares held with a cash payment in respect
of any fractional interests. The Founders Arrangement also resulted in the
termination of the shareholder rights plan of Founders and the adoption of the
Unitholder Rights Plan containing substantially the same provisions as the
shareholder rights plan.

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The Board of Directors of Founders received an opinion dated January 29, 2001
from Scotia Capital Inc., its independent financial advisor, stating that, in
its opinion, as of the date of such opinion, the Founders Arrangement was fair
from a financial point of view, to the holders of Founders Shares.

Maxx Arrangement

On March 26, 2001, Provident, Maxx and the Trust entered into the Maxx
Arrangement Agreement, which provided for implementation of the Maxx
Arrangement pursuant to Section 186 of the ABCA. The Maxx Arrangement became
effective on May 25, 2001. On May 25, 2001, each of the events below were
deemed to occur in the following sequence without further act or formality:



| | (a) |  | each issued and outstanding Maxx Share was exchanged with Provident for
Acquisition
Notes on the basis of the Per Share Principal Amount of Acquisition Notes
for every one
Maxx Share;                                                                   
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | the Acquisition Notes were exchanged with the Trust for Trust Units and/or
cash,
resulting in the acquisition by the Trust of all of the Acquisition Notes
and the acquisition
by holders of Acquisition Notes of Trust Units and/or cash on the basis
of:



| | (i)  |  | $7.00 cash for each Maxx Share for those Maxx shareholders that
elected to
receive all cash;                                                                                                                                                                
| | ---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (ii) |  | $1.9745 cash and 0.4523 of a Trust Unit for those Maxx shareholders
that elected
to receive all Units.
This resulted in a total of $35.4 million in cash and 7,475,000 Trust Units
being issued to
acquire all of the issued and outstanding shares of Maxx;



| | (c) |  | Maxx and Provident were amalgamated and continued as one corporation, under
the
name Provident Energy Ltd.
| | --- |  | ------------------------------------------------------------------------------------------------------------

In addition, Provident issued 19,600 Units to directors of Maxx holding share
appreciation rights of Maxx pursuant to a letter agreement entered into between
Provident and each such director.

Upon completion of the Maxx Arrangement, the Trust became the holder of all of
the issued and outstanding Acquisition Notes.

Provident and Maxx each had three focused and matching core operating areas in
the Lloydminster area of Alberta and Saskatchewan, south-east Saskatchewan and
west central Alberta. The acquisition of Maxx resulted in financial and
operational synergies due to the similar nature of operations and proximity of
these properties. These synergies resulted in reduced general and
administration expenses, operational cost reduction opportunities and the
ability to access capital investment opportunities. As a result of the
acquisition of Maxx, Providents daily average production increased from 4,800
barrels of oil equivalent per day to 12,500 boed, including 6,300 barrels of
conventional heavy crude oil, 1,700 barrels per day of light crude oil, 800
barrels of natural gas liquids and 20.6 mmcfd of natural gas. Providents
proven reserves increased by 167 percent from 10.6 Mboe to 28.4 Mboe and
established reserves increased by 153 percent from 13.1 Mboe to 33.2 Mboe.




Richland Arrangement

On November 26, 2001, Provident, Richland, 961982 Alberta Ltd. (Terraquest)
and the Trust entered into the Richland Arrangement Agreement, which provided
for implementation of the Richland Arrangement pursuant to Section 186 of the
ABCA. The Richland Arrangement became effective on January 16, 2002. Under the
terms of the Richland Arrangement Agreement, Richland shareholders received 0.4
of a Trust Unit and one share of Terraquest for each issued and outstanding
common share of Richland. Pursuant to the plan of arrangement, each issued and
outstanding common share of Richland was exchanged by Richland shareholders for
one newly created Class A Share and one Class B Share of

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Richland. As part of the Richland Arrangement, upon completion of the sale of
certain assets of Richland (the Terraquest Assets) to Terraquest for common
shares of Terraquest (Terraquest Shares), Richland redeemed all of the issued
and outstanding Class B Shares held by Richland shareholders in consideration
for the transfer of the Terraquest Shares held by Richland for the Class B
Shares held by Richland shareholders. Each issued and outstanding Class A
Share held by Richland shareholders was then exchanged for a note, which was
immediately redeemed for 0.4 of a Trust Unit.

The Terraquest Assets sold by Richland to Terraquest as part of the Richland
Arrangement were comprised of certain producing properties of Richland located
in southern and northwest Alberta which represented production as at September
30, 2001 of approximately 200 boed, 426 mboe of proved reserves, 507 mboe of
established reserves (defined as proved reserves plus 50% probable reserves)
and 88,000 net acres of undeveloped lands and associated seismic data.
Pursuant to the Richland Arrangement Agreement, Provident received gross
overriding royalties on industry standard terms on certain of the Terraquest
properties.

The Richland Arrangement received the Final Order approving the Plan from the
Court of Queens Bench on January 16, 2002 following the approval of the
Richland shareholders at a special meeting held on January 15, 2002 and
Provident and Richland were then amalgamated, continuing as Provident Energy
Ltd.. A total of 11,157,225 Trust Units were issued by the Trust to acquire
all of the issued and outstanding shares of Richland. As part of the
acquisition of Richland, Provident assumed Richlands debt, net of working
capital, of approximately $83 million.

Upon completion of the Richland Arrangement, the Trust became the holder of all
of the issued and outstanding Richland Notes.

Following the Richland Arrangement, Providents daily average production
increased to approximately 17,000 barrels of oil equivalent per day comprising
of 40 percent natural gas, 33 percent cold conventional heavy oil and 27
percent light crude oil and natural gas liquids. The assets of Richland have
diversified Providents production mix, which, prior to the Richland
Arrangement, was weighted 55 percent to heavy oil. The Richland assets are
close to Providents existing operations in west central Alberta and southeast
Saskatchewan and provided a new core area in southern Alberta.




Southeast Alberta Property Acquisition

On March 26, 2002, Provident entered into an agreement of purchase and sale
with the Canadian subsidiaries of a U.S. based exploration and production
company providing for the acquisition by Provident of certain oil and gas
properties for a purchase price of $72.0 million (subject to adjustment),
payable in cash. The right to acquire the Acquired Properties was subsequently
assigned to Provident Acquisitions L.P. The acquisition of the Acquired
Properties was effective April 1, 2002 and closed on May 1, 2002.

The Acquired Properties consist primarily of mature light oil and natural gas
assets located in southeast Alberta producing approximately 3,600 boed. The
assets are comprised primarily of high working interest, operated properties
with year round operating access. The Acquired Properties met the Trusts
objectives of increasing cash available for distribution and net asset value on
a per unit basis.




Meota Takeover

On August 13, 2002 Provident announced that PAI had agreed to acquire all of
the issued and outstanding shares of Meota by way of a takeover bid. PAI
successfully completed the acquisition of all of the issued and outstanding
Meota shares on October 2, 2002. The offer for each share consisted of: (i)
Cdn$4.60 cash, or (ii) 0.415 Trust Units, or (iii) 0.415 exchangeable shares of
Provident Acquisitions Inc., or (iv) a combination thereof (subject to certain
limitations).

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The completion of the acquisition of Meota resulted in the payment of $27.1
million cash, the issuance of 14,517,184 Trust Units, and the issuance of
5,858,136 exchangeable shares of PAI.

The transaction added approximately 11,400 boe per day of natural gas weighted
production from assets that generally overlapped Providents existing core
areas, established a new core area in southwest Saskatchewan, increased the
Trusts proved developed producing, total proven and established reserves base
and helped continue to diversify production base and mix. The transaction was
15 percent accretive to cash flow and neutral to net asset value, on a per unit
basis. The Meota assets were comprised predominately of quality, operated,
high-netback natural gas producing properties in established areas of
operation.




NARRATIVE DESCRIPTION OF THE BUSINESS

The Trust acquires and holds, directly or indirectly, interests in crude oil
and natural gas properties in Western Canada. Cash flow from the properties is
flowed from Provident to the Trust by way of royalty payments on the Initial
Royalty and Subsequent Royalty, interest and principal repayments on the
Initial Notes and principal repayments on the Acquisition Notes, Richland Notes
and other notes which the Trust may issue from time to time. Distributable
Income generated by the royalties, interest and principal repayments is then
distributed monthly to Unitholders. The Trust has no employees, while
Provident currently has 106 employees and consultants at its head office
location and 69 employees and contract operators located in several field
offices within the core areas of Lloydminster, west central Alberta and
southeast Saskatchewan.




Corporate Strategy

Providents strategy is focused on achieving a consistent level of monthly cash
distributions to the Unitholders. To this end, Provident pursues a focused
program of acquisition, development, exploitation, production and marketing of
crude oil and natural gas in the Western Canadian Sedimentary Basin.
Providents operations are currently located in three core areas of activity in
west central Alberta, Lloydminster and southeast Saskatchewan. These areas
generally offer low to medium risk development potential, a well developed
operational infrastructure and year round access, all of which is ideally
suited to a trust.

Provident will focus its development activities primarily in the Lloydminster
heavy oil area where the company plans to develop low risk drilling
opportunities which can be used to partially offset production declines. A
consistent, disciplined commodity price risk management strategy will be
employed by Provident, focussing on stabilizing monthly cash distributions to
Unitholders. To this end, Provident plans to use both financial and physical
contracts to reduce the volatility of oil and gas prices.

Provident will also pursue an aggressive acquisition strategy targeting both
property and corporate acquisitions that are accretive to distributable cash
flow and net asset value per Trust Unit. The Trust will pursue acquisitions
which meet certain criteria including quality low-risk production with year
round access and good operating infrastructure. This will minimize the risk of
production downtime. Provident will pursue acquisitions that have a strong
production component and where minimal capital is required to bring incremental
production on stream. Where development potential exists, only those
opportunities which are considered low risk will be undertaken by Provident,
higher risk prospects or exploration opportunities will be either farmed out or
sold.




Commodity Price Risk Management Program

Providents cash flow available for distribution to Unitholders is affected by
fluctuations in commodity prices for both crude oil and natural gas, quality
differentials for both heavy and medium grade crude oil, the Canadian/U.S.
dollar exchange rate and interest rates. In order to manage the volatility
inherent in these variables, Providents Board of Directors has adopted a
Commodity Price Risk Management Program (the Program) that is administered by
a Risk Management Committee comprised of certain

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members of senior management of Provident in consultation with Providents
primary commodity
marketing advisors.
The Risk Management Committee is responsible for the following:



|1. |  | development and communication of the commodity price risk
management policies and
procedures;                                                                                                                              
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | development of strategic commodity price risk management guidelines under
which physical or
financial instruments are to be utilized and to strike a balance between
risk exposure and the
desired level of risk tolerance;
|  
|3. |  | development of parameters for market risk transaction volumes and other
limits;                                                                                                                                            
|  
|4. |  | authorization of specific financial and physical commodity and derivative
instruments to be
traded; and                                                                                                                    
|  
|5. |  | development of appropriate systems for recording, monitoring and reporting
the results of the
commodity risk management activity.                                                                                          

The Program is not intended to create incremental economic exposure to
Provident. Instead, the Program
serves to reduce the economic exposure of Provident to adverse market movements
thus providing more
stability of cash distributions to Unitholders.

Provident currently markets its crude oil production through various third
party marketers and in some
cases directly to refiners. There are numerous markets available to transact
competitively priced
commodity contracts for crude oil. Providents natural gas is generally sold on
both the spot market and to
aggregators. There are numerous markets available to transact competitively
priced commodity price
contracts for natural gas.

The following table summarizes the current Provident Commodity Price Risk
Program as at March 31,
2003:

|     |  |                |  |             |  |                                                 |  |                         
|---- |  | -------------- |  | ----------- |  | ----------------------------------------------- |  | ------------------------
|Year |  | Product        |  | Volume      |  | Terms                                           |  | Effective Period        
|     |  |                |  |             |  |                                                 |  |                         
|2003 |  | Light Oil      |  | 1,000 bpd   |  | Costless Collar WTI US$22.58  US$26.00 per bbl |  | January 1  December 31 
|     |  |                |  | 2,500 bpd   |  | WTI US$24.01 per bbl                            |  | January 1  December 31 
|     |  |                |  | 1,000 bpd   |  | WTI US$25.05 per bbl                            |  | April 1  June 30       
|     |  |                |  | 1,000 bpd   |  | WTI US$24.31 per bbl                            |  | July 1  September 30   
|     |  |                |  | 1,000 bpd   |  | WTI US$23.82 per bbl                            |  | October 1  December 31 
|     |  | Heavy Oil      |  | 3,000 bpd   |  | Cdn$18.90 per bbl
wellhead(1)(2)                |  | January 1  December 31 
|     |  |                |  | 200 bpd     |  | Cdn$22.50 per bbl wellhead                      |  | January 1  April 30    
|     |  |                |  | 500 bpd     |  | US$18.75 per bbl at Hardisty                    |  | April 1  December 31   
|     |  | Natural Gas(4) |  | 27,500 GJpd |  | Cdn$4.77 per GJ                                 |  | April 1  October 31    
|     |  |                |  | 5,000 GJpd  |  | Cdn$4.95 per GJ(3)                              |  | January 1  December 31 
|     |  |                |  | 6,000 GJpd  |  | Cdn$4.98 per GJ                                 |  | January 1  October 31  
|     |  |                |  | 10,000 GJpd |  | Costless collar Cdn$5.50  $8.75 per GJ         |  | November 1  December 31
|     |  |                |  | 10,000 GJpd |  | Costless collar Cdn$5.50  $7.85 per GJ         |  | November 1  December 31
|     |  |                |  | 5,000 GJpd  |  | Costless collar Cdn$5.00  $7.75 per GJ         |  | April 1  October 31    
|     |  |                |  | 5,000 GJpd  |  | Costless collar Cdn$5.50  $7.52 per GJ         |  | April 1  October 31    
|     |  |                |  | 10,000 GJpd |  | Costless collar Cdn$4.50  $5.72 per GJ         |  | April 1  October 31    
|2004 |  | Light Oil      |  | 2,000 bpd   |  | WTI US$24.05 per bbl                            |  | January 1  December 31 
|     |  |                |  | 500 bpd     |  | WTI US$25.08 per bbl                            |  | January 1  March 31    

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|     |  |                |  |             |  |                                  |  |                     
|---- |  | -------------- |  | ----------- |  | -------------------------------- |  | --------------------
|Year |  | Product        |  | Volume      |  | Terms                            |  | Effective Period    
|     |  |                |  |             |  |                                  |  |                     
|     |  | Natural Gas(4) |  | 10,000 GJpd |  | Costless collar Cdn$5.50  $8.75 |  | January 1  March 31
|     |  |                |  | 10,000 GJpd |  | Costless collar Cdn$5.50  $7.85 |  | January 1  March 31



---

|(1) |  | The heavy oil price of Cdn$18.90 per bbl has been fixed through a
combination of Canadian dollar wellhead contracts, US
dollar denominated WTI combined with US dollar differential and blending
contracts and Cdn/US dollar exchange rate
contracts.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Contracts which, if extended, would require Provident to deliver 1,500 bpd
at WTI US$22.70 per bbl and 1,000 bpd at WTI
US$23.70 for calendar 2004. The contracts are extendable at the option of the
counter party.                                 
|   
|(3) |  | Contract which, if extended, would require Provident to deliver 5,000 GJpd
at Cdn$4.95 per GJ for calendar 2004. The
contract is extendible at the option of the counter party.                                                                      
|   
|(4) |  | Natural gas contracts are settled against AECO monthly index.                                                                                                                                                                                        




Principal Properties

The following are descriptions of Providents principal producing areas. All
conversions of gas to oil are on a 6:1 basis.




Lloydminster, Alberta/Saskatchewan

Provident established the Lloydminster area of Saskatchewan as a core area
through Founders acquisition of Opal in 1998. With the acquisition of Maxx in
2001, this area was expanded to include heavy oil properties in Alberta. In
2002, production from Lloydminster was approximately 6,310 bpd of heavy oil and
788 mcfd of natural gas. Lloydminster is currently producing approximately
6,902 boed, net to Provident. Based on the McDaniel Report, Provident has been
assigned a total of 9,047 mbbls proved and 12,050 mbbls of established crude
oil reserves. Natural gas reserves of 3.2 bcf proved and 3.5 bcf established
have also been assigned to the area. At December 31, 2002 Provident had
undeveloped land holdings of 59,000 net acres in the area.




Southern Alberta (Taber)

Provident established Southern Alberta as a core area with the acquisition of
Richland in 2002, properties acquired from the Canadian subsidiaries of a U.S.
based exploration and production company in 2002 as well as properties acquired
with the Meota acquisition in 2002. In 2002, production from Southern Alberta
was approximately 1,685 bpd of oil and natural gas liquids and 17,107 mcfd of
natural gas. Southern Alberta is currently producing approximately 5,576 boed,
net to Provident. Based on the McDaniel Report, Provident has been assigned a
total of 48 bcf of proved and 57 bcf of established natural gas reserves.
Crude oil reserves of 3,816 mbbls proved and 4,352 mbbls established have also
been assigned to the area. At December 31, 2002 Provident had undeveloped land
holdings of 82,000 net acres in the area.




Southwest Saskatchewan

Through the acquisition of Meota in 2002, Southwest Saskatchewan has been
established as a core area. In 2002, production from Southwest Saskatchewan was
approximately 384 bpd of oil and 978 mcfd of natural gas. Southwest
Saskatchewan is currently producing approximately 1,817 boed , net to
Provident. Based on the McDaniel Report, Provident has been assigned a total of
2,333 mbbls of proved and 2,793 mbbls of established crude oil reserves.
Natural gas reserves of 6.0 bcf proved and 7.0 bcf of established have also
been assigned to the area. At December 31, 2002 Provident had undeveloped land
holdings of 109,000 net acres in the area.




Southeast Saskatchewan (Estevan)

The acquisitions of Maxx in 2001, Richland in 2002, combined with existing
Provident assets, established Southeast Saskatchewan as a core area. In 2002,
production from Southeast Saskatchewan was approximately 2,428 bpd of oil and
246 mcfd of natural gas. Southwest Saskatchewan is currently

38



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##### Table of Contents



producing approximately 2,119 boed, net to Provident. Based on the McDaniel
Report 5,559 mbbls of proved and 6,287 mbbls of established crude oil reserves
have been assigned to the area. Natural gas reserves of 0.6 bcf proved and 0.7
bcf established have also been assigned to the area. At December 31, 2002,
Provident had undeveloped land holdings of 6,000 net acres in the area.




West Central Alberta (Olds to Whitecourt)

The acquisition of Richland in 2002, combined with existing Provident assets
obtained through Founders acquisition of Opal in 1998, established West
Central Alberta as a core area. In 2002, production from West Central Alberta
was 1,620 bpd of oil and natural gas liquids and 36,893 mcfd of natural gas.
West Central Alberta is currently producing approximately 11,842 boed, net to
Provident. Based on the McDaniel Report 111 bcf of proved and 124 bcf of
established natural gas reserves have been assigned to the area. Crude oil
reserves of 6,141 mbbls proved and 6,979 mbbls established have also been
assigned to the area. At December 31, 2002, Provident had undeveloped land
holdings of 185,000 net acres in the area.




Reserves

The oil, natural gas and NGL reserves of Provident as of January 1, 2003 have
been evaluated by McDaniel & Associates Consultants Ltd. utilizing McDaniel
January 1, 2003 pricing as set forth in the report prepared by McDaniel dated
March 5, 2003 evaluating the oil, natural gas and NGL reserves relating to
Provident as at January 1, 2003. McDaniel conducted evaluations based on both
escalated and constant price assumptions of Providents oil, gas and NGL
reserves and present worth of future cash flows associated with such reserves.
The results of the evaluations of McDaniel, contained in the McDaniel Report,
are summarized in the tables below. The present worth of estimated future cash
flows contained in the following tables may not be representative of the fair
market values of the reserves. Assumptions relating to costs, prices for
future production and other matters are summarized in the notes following the
tables. There is no assurance that such prices and cost assumptions will be
attained and variances could be material. All estimated future cash flows set
forth in the following tables are stated prior to provision for income taxes,
indirect costs, and future site restoration costs, and after deduction of
operating costs, royalties and estimated future capital expenditures. The
McDaniel Report is based on certain factual data including operating costs,
property descriptions, details of interests held, well data, future development
plans and future capital estimates supplied by Provident and on McDaniels
opinion of reasonable practice in the industry. Probable Reserves and the
estimated present worth thereof set forth below have been risked by 50% to take
into account the risk factors associated with the recovery thereof.

Oil and Natural Gas Reserves and Present Value of Estimated Future Cash
Flows in Respect of Provident Based on Escalated Price Assumptions

|                      |               |        |                           |        |                         |        |                                   |        |         |        |         |        |     |          |        |       |         |  |       |     |     |  |         |        |  |  |         |        |  |  |         |        |  |  |         |        |  |  |         |        |  |  |         |        | 
|--------------------- | ------------- | ------ | ------------------------- | ------ | ----------------------- | ------ | --------------------------------- | ------ | ------- | ------ | ------- | ------ | --- | -------- | ------ | ----- | ------- |  | ----- | --- | --- |  | ------- | ------ |  |  | ------- | ------ |  |  | ------- | ------ |  |  | ------- | ------ |  |  | ------- | ------ |  |  | ------- | ------ | 
|                      |               |        | Company Gross Reserves(1) |        | Company Net Reserves(2) |        | Present Worth Value Discounted at
|                      |               |        |                           |        |                         |        |                                  
|                      |               |        |                           |        |                         |        | Natural                           |        |         |        |         |        |     |          |        |       | Natural |  |       |     |     |  |         |        |  |  |         |        |  |  |         |        |  |  |         |        |  |  |         |        | 
|                      |               |        |                           |        |                         |        | Gas                               |        | Natural |        |         |        |     |          | Gas    |       | Natural |  |       |     |     |  |         |        |  |  |         |        |  |  |         |        |  |  |         |        | 
|                      |               |        | Oil                       |        | Liquids                 |        | Gas                               |        | Oil     |        | Liquids |        | Gas |          | 0%     |       | 10%     |  | 12%   |     | 15% |  | 20%    
|                      |               |        |                           |        |                         |        |                                   |        |         |        |         |        |     |          |        |       |         |  |       |     |     |  |        
|Escalated Prices      |               | (Mbbl) |                           | (Mbbl) |                         | (MMcf) |                                   | (Mbbl) |         | (Mbbl) |         | (MMcf) |     | ($000's)
|                      |               |        |                           |        |                         |        |                                   |        |         |        |         |        |     |         
|Proved Reserves      
|                      | Producing     |        | 18,891                    |        |                         |        | 2,175                             |        |         |        | 146,042 |        |     |          | 16,249 |       |         |  | 1,541 |     |     |  | 112,848 |        |  |  | 642,669 |        |  |  | 484,865 |        |  |  | 463,581 |        |  |  | 435,664 |        |  |  | 397,402 |       
|                      | Non-Producing |        |                           | 835    |                         |        |                                   | 157    |         |        |         | 18,911 |     |          |        | 752   |         |  |       | 107 |     |  |         | 13,786 |  |  |         | 57,603 |  |  |         | 31,311 |  |  |         | 28,512 |  |  |         | 25,091 |  |  |         | 20,853 | 
|                      | Undeveloped   |        |                           | 4,785  |                         |        |                                   | 59     |         |        |         | 4,517  |     |          |        | 4,346 |         |  |       | 49  |     |  |         | 3,660  |  |  |         | 44,666 |  |  |         | 31,507 |  |  |         | 29,630 |  |  |         | 27,130 |  |  |         | 23,633 | 
|                      |               |        |                           |        |                         |        |                                   |        |         |        |         |        |     |          |        |       |         |  |       |     |     |  |         |        |  |  |         |        |  |  |         |        |  |  |         |        |  |  |         |        |  |  |         |       
|Total Proved          |               |        | 24,511                    |        |                         |        | 2,390                             |        |         |        | 169,470 |        |     |          | 21,347 |       |         |  | 1,696 |     |     |  | 130,295 |        |  |  | 744,938 |        |  |  | 547,682 |        |  |  | 521,723 |        |  |  | 487,885 |        |  |  | 441,888 |       
|Risked Probable       |               |        | 5,230                     |        |                         |        | 349                               |        |         |        | 22,660  |        |     |          | 4,569  |       |         |  | 248   |     |     |  | 17,751  |        |  |  | 122,072 |        |  |  | 67,960  |        |  |  | 62,141  |        |  |  | 54,973  |        |  |  | 45,960  |       
|Additional(3)         |               |        |                           |        |                         |        |                                   |        |         |        |         |        |     |          |        |       |         |  |       |     |     |  |         |        |  |  |         |        |  |  |         |        |  |  |         |        |  |  |         |        |  |  |         |       
|                      |               |        |                           |        |                         |        |                                   |        |         |        |         |        |     |          |        |       |         |  |       |     |     |  |         |        |  |  |         |        |  |  |         |        |  |  |         |        |  |  |         |        |  |  |         |       
|Total Proved plus     |               |        | 29,741                    |        |                         |        | 2,739                             |        |         |        | 192,130 |        |     |          | 25,916 |       |         |  | 1,944 |     |     |  | 148,046 |        |  |  | 867,010 |        |  |  | 615,642 |        |  |  | 583,864 |        |  |  | 542,858 |        |  |  | 487,848 |       
|Risked Probable(4)(5) |               |        |                           |        |                         |        |                                   |        |         |        |         |        |     |          |        |       |         |  |       |     |     |  |         |        |  |  |         |        |  |  |         |        |  |  |         |        |  |  |         |        |  |  |         |       



---

|    |  | Notes:                                                                                                                                            
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(1) |  | Gross Reserves are the aggregate of Providents working interest and
royalty interest reserves before deductions of royalties payable to
others.

39



---



##### Table of Contents





|(2) |  | Net Reserves are the Gross Reserves less all royalties payable to
others.                                                                                                                                                                                                                                                                                                                                  
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(3) |  | Probable Reserves and Present Worth Values reduced by 50% for risk.                                                                                                                                                                                                                                                                                                                                          
|   
|(4) |  | The estimated total capital expenditures necessary to achieve the
estimated future net production revenue from the total proved and probable
reserves in the escalated case is $51.7 million. The estimated capital
expenditures required to produce the estimated total proved plus
probable reserves in each of the first two years in the escalated case are
$3.3 million (2002) and $26.3 million (2003).
|   
|(5) |  | May not add due to rounding.                                                                                                                                                                                                                                                                                                                                                                                 

Oil and Natural Gas Reserves and Present Value of Estimated Future Cash
Flows in Respect of Provident Based on Constant Price Assumptions

|                                        |               |        |                           |        |                         |        |                                   |        |         |        |         |         |     |          |        |        |         |  |       |       |     |  |         |         |  |  |           |         |  |  |         |         |  |  |         |         |  |  |         |         |  |  |         |         | 
|--------------------------------------- | ------------- | ------ | ------------------------- | ------ | ----------------------- | ------ | --------------------------------- | ------ | ------- | ------ | ------- | ------- | --- | -------- | ------ | ------ | ------- |  | ----- | ----- | --- |  | ------- | ------- |  |  | --------- | ------- |  |  | ------- | ------- |  |  | ------- | ------- |  |  | ------- | ------- |  |  | ------- | ------- | 
|                                        |               |        | Company Gross Reserves(1) |        | Company Net Reserves(2) |        | Present Worth Value Discounted at
|                                        |               |        |                           |        |                         |        |                                  
|                                        |               |        |                           |        |                         |        | Natural                           |        |         |        |         |         |     |          |        |        | Natural |  |       |       |     |  |         |         |  |  |           |         |  |  |         |         |  |  |         |         |  |  |         |         | 
|                                        |               |        |                           |        |                         |        | Gas                               |        | Natural |        |         |         |     |          | Gas    |        | Natural |  |       |       |     |  |         |         |  |  |           |         |  |  |         |         |  |  |         |         | 
|                                        |               |        | Oil                       |        | Liquids                 |        | Gas                               |        | Oil     |        | Liquids |         | Gas |          | 0%     |        | 10%     |  | 12%   |       | 15% |  | 20%    
|                                        |               |        |                           |        |                         |        |                                   |        |         |        |         |         |     |          |        |        |         |  |       |       |     |  |        
|Constant Prices                         |               | (Mbbl) |                           | (Mbbl) |                         | (Mmcf) |                                   | (Mbbl) |         | (Mbbl) |         | (Mmcf)  |     | ($000s)
|                                        |               |        |                           |        |                         |        |                                   |        |         |        |         |         |     |         
|Proved Reserves                         |               |        |                           |        |                         |        |                                   |        |         |        |         |         |     |          |        |        |         |  |       |       |     |  |         |         |  |  |           |         |  |  |         |         |  |  |         |         |  |  |         |         |  |  |         |        
|                                        | Producing     |        |                           | 18,917 |                         |        |                                   | 2,174  |         |        |         | 146,044 |     |          |        | 16,072 |         |  |       | 1,533 |     |  |         | 112,820 |  |  |           | 946,842 |  |  |         | 684,337 |  |  |         | 650,356 |  |  |         | 606,235 |  |  |         | 546,580 | 
|                                        | Non-Producing |        |                           | 834    |                         |        |                                   | 156    |         |        |         | 18,887  |     |          |        | 735    |         |  |       | 106   |     |  |         | 13,774  |  |  |           | 80,326  |  |  |         | 44,668  |  |  |         | 40,747  |  |  |         | 35,912  |  |  |         | 29,852  | 
|                                        | Undeveloped   |        |                           | 4,797  |                         |        |                                   | 59     |         |        |         | 4,517   |     |          |        | 4,232  |         |  |       | 49    |     |  |         | 3,660   |  |  |           | 85,141  |  |  |         | 60,554  |  |  |         | 57,068  |  |  |         | 52,431  |  |  |         | 45,967  | 
|                                        |               |        |                           |        |                         |        |                                   |        |         |        |         |         |     |          |        |        |         |  |       |       |     |  |         |         |  |  |           |         |  |  |         |         |  |  |         |         |  |  |         |         |  |  |         |        
|Total Proved                            |               |        | 24,548                    |        |                         |        | 2,389                             |        |         |        | 169,448 |         |     |          | 21,039 |        |         |  | 1,688 |       |     |  | 130,254 |         |  |  | 1,112,310 |         |  |  | 789,559 |         |  |  | 748,171 |         |  |  | 694,578 |         |  |  | 622,400 |        
|Risked Probable
Additional(3)           |               |        | 5,228                     |        |                         |        | 349                               |        |         |        | 22,666  |         |     |          | 4,456  |        |         |  | 247   |       |     |  | 17,760  |         |  |  | 185,314   |         |  |  | 102,205 |         |  |  | 93,318  |         |  |  | 82,358  |         |  |  | 68,556  |        
|                                        |               |        |                           |        |                         |        |                                   |        |         |        |         |         |     |          |        |        |         |  |       |       |     |  |         |         |  |  |           |         |  |  |         |         |  |  |         |         |  |  |         |         |  |  |         |        
|Total Proved plus
Risked Probable(4)(5) |               |        | 29,776                    |        |                         |        | 2,738                             |        |         |        | 192,114 |         |     |          | 25,495 |        |         |  | 1,935 |       |     |  | 148,014 |         |  |  | 1,297,624 |         |  |  | 891,764 |         |  |  | 841,489 |         |  |  | 776,936 |         |  |  | 690,956 |        

Notes:



|(1) |  | Gross Reserves are the aggregate of Providents working interest and
royalty interest reserves before deductions of royalties payable to
others.                                                                                                                                                                                                                                                        
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Net Reserves are the Gross Reserves less all royalties payable to
others.                                                                                                                                                                                                                                                                                                                               
|   
|(3) |  | Probable Reserves and Present Worth Values reduced by 50% for risk.                                                                                                                                                                                                                                                                                                                                       
|   
|(4) |  | The estimated total capital expenditures necessary to achieve the
estimated future net production revenue from the total proved and probable
reserves in the constant case is $12.6 million. The estimated capital
expenditures required to produce the estimated total proved plus
probable reserves in each of the first two years in the constant case are
$3.2 million (2002) and $7.1 million (2003).
|   
|(5) |  | May not add due to rounding.                                                                                                                                                                                                                                                                                                                                                                              

McDaniel & Associates Consultants Ltd.
Summary of Price Forecasts (Escalated)
January 1, 2003

|         |      |            |           |           |           |              |           |             |             |        |           |        |         |        |         |           |         |     |           |        |      |  |          |       |  |  |  |       |  |  |  |       |  |  |        |     |  |  |  |       | 
|-------- | ---- | ---------- | --------- | --------- | --------- | ------------ | --------- | ----------- | ----------- | ------ | --------- | ------ | ------- | ------ | ------- | --------- | ------- | --- | --------- | ------ | ---- |  | -------- | ----- |  |  |  | ----- |  |  |  | ----- |  |  | ------ | --- |  |  |  | ----- | 
|         |      |            |           |           |           |              |           |             |             |        |           |        |         |        |         |           |         |     | Edm.      |        |      |  |          |       |  |  |  |       |  |  |  |       |  |  |        |     |  |  | 
|         |      |            |           |           |           |              | Edm.      |             |             |        |           |        |         |        |         |           | Cond. & |     |           |        |      |  |          |       |  |  |  |       |  |  |  |       |  |  | US/CAN
|         |      |            | WTI       |           | Light     |              | Heavy     |             | Alberta Ave |        | Natural   |        | Edm.    |        | Edm.    |           | Edm.    |     |           |        |      |  | Exchange
|         |      |            | Crude Oil |           | Crude Oil |              | Crude Oil |             | Natural Gas |        | Gasolines |        | Propane |        | Butanes |           | NGL Mix |     | Inflation |        | Rate
|Year     |      | $US/bbl(1) |           | $C/bbl(2) |           | $C/bbl(3)(6) |           | $C/mmbtu(4) |             | $C/bbl |           | $C/bbl |         | $C/bbl |         | $C/bbl(5) |         | (%) |           | $US/$C
|         |      |            |           |           |           |              |           |             |             |        |           |        |         |        |         |           |         |     |           |        |     
|Forecast |      |            |           |           |           |              |           |             |             |        |           |        |         |        |         |           |         |     |           |        |      |  |          |       |  |  |  |       |  |  |  |       |  |  |        |     |  |  |  |      
|         | 2003 |            |           | 26.00     |           |              |           | 39.60       |             |        |           | 27.60  |         |        |         | 5.15      |         |     |           | 39.60  |      |  |          | 24.10 |  |  |  | 26.10 |  |  |  | 27.90 |  |  |        | 2.0 |  |  |  | 0.640 | 
|         | 2004 |            |           | 24.00     |           |              |           | 35.90       |             |        |           | 25.19  |         |        |         | 4.85      |         |     |           | 35.90  |      |  |          | 23.20 |  |  |  | 23.70 |  |  |  | 25.90 |  |  |        | 2.0 |  |  |  | 0.650 | 
|         | 2005 |            |           | 22.90     |           |              |           | 33.70       |             |        |           | 22.78  |         |        |         | 4.65      |         |     |           | 33.70  |      |  |          | 22.00 |  |  |  | 22.20 |  |  |  | 24.40 |  |  |        | 2.0 |  |  |  | 0.660 | 
|         | 2006 |            |           | 22.80     |           |              |           | 33.00       |             |        |           | 21.86  |         |        |         | 4.65      |         |     |           | 33.00  |      |  |          | 21.80 |  |  |  | 21.80 |  |  |  | 24.00 |  |  |        | 2.0 |  |  |  | 0.670 | 
|         | 2007 |            |           | 23.30     |           |              |           | 33.20       |             |        |           | 21.83  |         |        |         | 4.65      |         |     |           | 33.20  |      |  |          | 21.80 |  |  |  | 21.90 |  |  |  | 24.10 |  |  |        | 2.0 |  |  |  | 0.680 | 
|         | 2008 |            |           | 23.80     |           |              |           | 33.90       |             |        |           | 22.31  |         |        |         | 4.70      |         |     |           | 33.90  |      |  |          | 22.20 |  |  |  | 22.40 |  |  |  | 24.60 |  |  |        | 2.0 |  |  |  | 0.680 | 
|         | 2009 |            |           | 24.30     |           |              |           | 34.60       |             |        |           | 22.78  |         |        |         | 4.80      |         |     |           | 34.60  |      |  |          | 22.70 |  |  |  | 22.80 |  |  |  | 25.10 |  |  |        | 2.0 |  |  |  | 0.680 | 
|         | 2010 |            |           | 24.80     |           |              |           | 35.30       |             |        |           | 23.24  |         |        |         | 4.90      |         |     |           | 35.30  |      |  |          | 23.10 |  |  |  | 23.30 |  |  |  | 25.60 |  |  |        | 2.0 |  |  |  | 0.680 | 
|         | 2011 |            |           | 25.30     |           |              |           | 36.00       |             |        |           | 23.70  |         |        |         | 5.00      |         |     |           | 36.00  |      |  |          | 23.60 |  |  |  | 23.70 |  |  |  | 26.10 |  |  |        | 2.0 |  |  |  | 0.680 | 
|         | 2012 |            |           | 25.80     |           |              |           | 36.70       |             |        |           | 24.15  |         |        |         | 5.10      |         |     |           | 36.70  |      |  |          | 24.10 |  |  |  | 24.20 |  |  |  | 26.70 |  |  |        | 2.0 |  |  |  | 0.680 | 
|         | 2013 |            |           | 26.30     |           |              |           | 37.50       |             |        |           | 24.70  |         |        |         | 5.20      |         |     |           | 37.50  |      |  |          | 24.60 |  |  |  | 24.70 |  |  |  | 27.20 |  |  |        | 2.0 |  |  |  | 0.680 | 
|         | 2014 |            |           | 26.80     |           |              |           | 38.20       |             |        |           | 25.14  |         |        |         | 5.30      |         |     |           | 38.20  |      |  |          | 25.00 |  |  |  | 25.20 |  |  |  | 27.70 |  |  |        | 2.0 |  |  |  | 0.680 | 
|         | 2015 |            |           | 27.30     |           |              |           | 38.90       |             |        |           | 25.58  |         |        |         | 5.40      |         |     |           | 38.90  |      |  |          | 25.50 |  |  |  | 25.60 |  |  |  | 28.20 |  |  |        | 2.0 |  |  |  | 0.680 | 
|         | 2016 |            |           | 27.80     |           |              |           | 39.60       |             |        |           | 26.02  |         |        |         | 5.50      |         |     |           | 39.60  |      |  |          | 25.90 |  |  |  | 26.10 |  |  |  | 28.70 |  |  |        | 2.0 |  |  |  | 0.680 | 
|         | 2017 |            |           | 28.40     |           |              |           | 40.40       |             |        |           | 26.55  |         |        |         | 5.60      |         |     |           | 40.40  |      |  |          | 26.40 |  |  |  | 26.60 |  |  |  | 29.30 |  |  |        | 2.0 |  |  |  | 0.680 | 

40



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##### Table of Contents



|           |      |            |           |           |           |              |           |             |             |        |           |        |         |        |         |           |         |     |           |        |      |  |          |       |  |  |       |       |  |  |       |       |  |  |        |     |  |  |       |       | 
|---------- | ---- | ---------- | --------- | --------- | --------- | ------------ | --------- | ----------- | ----------- | ------ | --------- | ------ | ------- | ------ | ------- | --------- | ------- | --- | --------- | ------ | ---- |  | -------- | ----- |  |  | ----- | ----- |  |  | ----- | ----- |  |  | ------ | --- |  |  | ----- | ----- | 
|           |      |            |           |           |           |              |           |             |             |        |           |        |         |        |         |           |         |     | Edm.      |        |      |  |          |       |  |  |       |       |  |  |       |       |  |  |        |     |  |  |      
|           |      |            |           |           |           |              | Edm.      |             |             |        |           |        |         |        |         |           | Cond. & |     |           |        |      |  |          |       |  |  |       |       |  |  |       |       |  |  | US/CAN
|           |      |            | WTI       |           | Light     |              | Heavy     |             | Alberta Ave |        | Natural   |        | Edm.    |        | Edm.    |           | Edm.    |     |           |        |      |  | Exchange
|           |      |            | Crude Oil |           | Crude Oil |              | Crude Oil |             | Natural Gas |        | Gasolines |        | Propane |        | Butanes |           | NGL Mix |     | Inflation |        | Rate
|Year       |      | $US/bbl(1) |           | $C/bbl(2) |           | $C/bbl(3)(6) |           | $C/mmbtu(4) |             | $C/bbl |           | $C/bbl |         | $C/bbl |         | $C/bbl(5) |         | (%) |           | $US/$C
|           |      |            |           |           |           |              |           |             |             |        |           |        |         |        |         |           |         |     |           |       
|           | 2018 |            |           | 29.00     |           |              |           | 41.30       |             |        |           | 27.17  |         |        |         | 5.70      |         |     |           | 41.30  |      |  |          | 27.00 |  |  |       | 27.20 |  |  |       | 29.90 |  |  |        | 2.0 |  |  |       | 0.680 | 
|           | 2019 |            |           | 29.60     |           |              |           | 42.20       |             |        |           | 27.79  |         |        |         | 5.85      |         |     |           | 42.20  |      |  |          | 27.60 |  |  |       | 27.80 |  |  |       | 30.60 |  |  |        | 2.0 |  |  |       | 0.680 | 
|           | 2020 |            |           | 30.20     |           |              |           | 43.00       |             |        |           | 28.30  |         |        |         | 5.95      |         |     |           | 43.00  |      |  |          | 28.10 |  |  |       | 28.40 |  |  |       | 31.20 |  |  |        | 2.0 |  |  |       | 0.680 | 
|           | 2021 |            |           | 30.80     |           |              |           | 43.90       |             |        |           | 28.90  |         |        |         | 6.10      |         |     |           | 43.90  |      |  |          | 28.80 |  |  |       | 28.90 |  |  |       | 31.90 |  |  |        | 2.0 |  |  |       | 0.680 | 
|           | 2022 |            |           | 31.40     |           |              |           | 44.70       |             |        |           | 29.40  |         |        |         | 6.20      |         |     |           | 44.70  |      |  |          | 29.30 |  |  |       | 29.50 |  |  |       | 32.50 |  |  |        | 2.0 |  |  |       | 0.680 | 
|Thereafter |      |            | 31.40     |           |           |              | 44.70     |             |             |        | 29.40     |        |         |        | 6.20    |           |         |     | 44.70     |        |      |  | 29.30    |       |  |  | 29.50 |       |  |  | 32.50 |       |  |  | 0      |     |  |  | 0.680 |      

Notes:



|(1) |  | West Texas Intermediate at Cushing Oklahoma                                            
|--- |  | ---------------------------------------------------------------------------------------
|   
|(2) |  | Edmonton price for 40 API, 0.5% sulphur crude                                          
|   
|(3) |  | Heavy crude oil 12 degrees at Hardisty Alberta                                         
|   
|(4) |  | Alberta Average field price                                                            
|   
|(5) |  | NGL Mix based on 45 percent propane, 35 percent butane and 20 percent
natural gasolines
|   
|(6) |  | 2002 and 2003 Heavy oil prices have been supplied by Provident                         

Constant Price Summary Schedule (at December 31, 2002)

|                                      |  |  |       | 
|------------------------------------- |  |  | ----- | 
|West Texas Intermediate ($US/bbl)(1)  |  |  | 31.20 | 
|Corporate Avg Light Oil ($CDN/bbl)(2) |  |  | 40.93 | 
|Corporate Avg Heavy Oil ($CDN/bbl)(2) |  |  | 32.00 | 
|Corporate Avg Gas ($CDN/Mcf)(2)       |  |  | 5.99  | 
|Corporate Avg NGL ($CDN/bbl)(2)       |  |  | 38.14 | 

Notes:



|(1) |  | December 31, 2002 NYMEX close.                                              
|--- |  | ----------------------------------------------------------------------------
|   
|(2) |  | Provident estimate of corporate average price received on December 31,
2002.

The extent and character of ownership and all information related to revenues
and expenses, forecast expenditures and other data were accepted by McDaniel as
provided by Provident. Only direct field expenditures and incomes have been
evaluated in the McDaniel Report. General and administrative expenses and
incomes are not reported. McDaniel did not consider it necessary to complete a
field inspection.

Reserve Reconciliation

|                           |  |            |        |             |  |        |         |         |  |             |        |        |  |  |        |                |  |  |         |   |  |  |        |  
|-------------------------- |  | ---------- | ------ | ----------- |  | ------ | ------- | ------- |  | ----------- | ------ | ------ |  |  | ------ | -------------- |  |  | ------- | - |  |  | ------ | -
|                           |  |            |        |             |  | Proved |         |         |  |             |        |        |  |  |        | Established(2) |  |  |         |  
|                           |  |            |        |            
|                           |  | Liquids(1) |        | Natural Gas |  | Boe    |         | Liquids |  | Natural Gas |        | Boe   
|                           |  | (mbbls)    |        | (mmcf)      |  | (mboe) |         | (mbbls) |  | (mmcf)      |        | (mboe)
|                           |  |            |        |             |  |        |         |         |  |             |        |       
|Balance at January 1, 2002 |  |            | 17,297 |             |  |        | 32,182  |         |  |             | 22,661 |        |  |  | 21,531 |                |  |  | 38,852  |   |  |  | 28,007 |  
|Drilling additions         |  |            | 1,456  |             |  |        | 2,050   |         |  |             | 1,798  |        |  |  | 1,876  |                |  |  | 2,521   |   |  |  | 2,296  |  
|Acquisitions               |  |            | 16,803 |             |  |        | 168,926 |         |  |             | 44,957 |        |  |  | 18,899 |                |  |  | 188,395 |   |  |  | 50,299 |  
|Revisions                  |  |            | (2,968 | )           |  |        | (5,609  | )       |  |             | (3,903 | )      |  |  | (4,015 | )              |  |  | (7,722  | ) |  |  | (5,302 | )
|Dispositions               |  |            | (1,149 | )           |  |        | (7,568  | )       |  |             | (2,411 | )      |  |  | (1,273 | )              |  |  | (9,406  | ) |  |  | (2,841 | )
|Production                 |  |            | (4,539 | )           |  |        | (20,510 | )       |  |             | (7,957 | )      |  |  | (4,539 | )              |  |  | (20,510 | ) |  |  | (7,957 | )
|                           |  |            |        |             |  |        |         |         |  |             |        |        |  |  |        |                |  |  |         |   |  |  |        |  
|Balance at January 1, 2003 |  |            | 26,901 |             |  |        | 169,470 |         |  |             | 55,146 |        |  |  | 32,480 |                |  |  | 192,130 |   |  |  | 64,501 |  
|                           |  |            |        |             |  |        |         |         |  |             |        |        |  |  |        |                |  |  |         |   |  |  |        |  

Notes:



|(1) |  | Includes oil and natural gas liquids.        
|--- |  | ---------------------------------------------
|   
|(2) |  | Established reserves reduced by 50% for risk.

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Drilling History

Provident drilled or participated in the drilling of the following wells for
the following periods:

|          |  |                    |    |                   |  |       |      |     |  |                |    |  |  |  |      | 
|--------- |  | ------------------ | -- | ----------------- |  | ----- | ---- | --- |  | -------------- | -- |  |  |  | ---- | 
|          |  |                    |    |                   |  |       |      |     |  | For the Period
|          |  | For the Year Ended |    | March 6, 2001 to 
|          |  | December 31, 2002  |    | December 31, 2001
|          |  |                    |    |                  
|          |  | Gross              |    | Net               |  | Gross |      | Net
|          |  |                    |    |                   |  |       |      |    
|Oil       |  |                    | 43 |                   |  |       | 36.5 |     |  |                | 19 |  |  |  | 18.1 | 
|Gas       |  |                    | 6  |                   |  |       | 1.8  |     |  |                | 4  |  |  |  | 0.7  | 
|Abandoned |  |                    |   |                   |  |       |     |     |  |                |   |  |  |  |     | 
|          |  |                    |    |                   |  |       |      |     |  |                |    |  |  |  |      | 
|Total     |  |                    | 49 |                   |  |       | 38.3 |     |  |                | 23 |  |  |  | 18.8 | 
|          |  |                    |    |                   |  |       |      |     |  |                |    |  |  |  |      | 




Oil and Natural Gas Wells

The following table summarizes, as at December 31, 2002, Providents interests
in producing wells and in non-producing wells, which Provident believes are
capable of commercial production of oil or natural gas. The stated interests
are subject to landowners and other royalties, where applicable, in addition to
usual Crown royalties and mineral taxes.

|                   |                        |  |                 |     |                     |  |          |       |             |  |          |       |        |  |          |       |        |  |       |     |  |  |       |       |  |  |     |     |  |  |       |       | 
|------------------ | ---------------------- |  | --------------- | --- | ------------------- |  | -------- | ----- | ----------- |  | -------- | ----- | ------ |  | -------- | ----- | ------ |  | ----- | --- |  |  | ----- | ----- |  |  | --- | --- |  |  | ----- | ----- | 
|                   |                        |  | Producing Wells |     | Non-Producing Wells
|                   |                        |  |                 |     |                    
|                   |                        |  | Oil             |     | Natural Gas         |  | Oil      |       | Natural Gas
|                   |                        |  |                 |     |                     |  |          |       |            
|                   |                        |  | Gross(1)        |     | Net(2)              |  | Gross(1) |       | Net(2)      |  | Gross(1) |       | Net(2) |  | Gross(1) |       | Net(2)
|Alberta            |                        |  |                 |     |                     |  |          |       |             |  |          |       |        |  |          |       |        |  |       |     |  |  |       |       |  |  |     |     |  |  |       |      
|                   | Lloydminster           |  |                 | 205 |                     |  |          | 197.9 |             |  |          |      |        |  |          |      |        |  |       | 107 |  |  |       | 101.4 |  |  |     | 2   |  |  |       | 1     | 
|                   | West Central Alberta   |  |                 | 37  |                     |  |          | 19.4  |             |  |          | 71    |        |  |          | 51.3  |        |  |       | 15  |  |  |       | 8.4   |  |  |     | 47  |  |  |       | 25.2  | 
|                   | Southern Alberta       |  |                 | 151 |                     |  |          | 109.9 |             |  |          | 208   |        |  |          | 178.1 |        |  |       | 99  |  |  |       | 60.9  |  |  |     | 171 |  |  |       | 134.8 | 
|                   | Other Alberta          |  |                 | 853 |                     |  |          | 114.4 |             |  |          | 1,291 |        |  |          | 186.6 |        |  |       | 487 |  |  |       | 68.4  |  |  |     | 282 |  |  |       | 48.1  | 
|                   |                        |  |                 |     |                     |  |          |       |             |  |          |       |        |  |          |       |        |  |       |     |  |  |       |       |  |  |     |     |  |  |       |       | 
|Total Alberta      |                        |  | 1,246           |     |                     |  | 441.6    |       |             |  | 1,570    |       |        |  | 416      |       |        |  | 708   |     |  |  | 239.1 |       |  |  | 502 |     |  |  | 209.1 |      
|                   |                        |  |                 |     |                     |  |          |       |             |  |          |       |        |  |          |       |        |  |       |     |  |  |       |       |  |  |     |     |  |  |       |       | 
|Saskatchewan       |                        |  |                 |     |                     |  |          |       |             |  |          |       |        |  |          |       |        |  |       |     |  |  |       |       |  |  |     |     |  |  |       |      
|                   | Lloydminster           |  |                 | 172 |                     |  |          | 163.2 |             |  |          | 8     |        |  |          | 8     |        |  |       | 49  |  |  |       | 38.8  |  |  |     |    |  |  |       |      | 
|                   | Southeast Saskatchewan |  |                 | 223 |                     |  |          | 177.4 |             |  |          | 1     |        |  |          | 0.3   |        |  |       | 64  |  |  |       | 34.5  |  |  |     |    |  |  |       |      | 
|                   | Southwest Saskatchewan |  |                 | 95  |                     |  |          | 67.2  |             |  |          | 78    |        |  |          | 64.4  |        |  |       | 16  |  |  |       | 6.9   |  |  |     | 32  |  |  |       | 7.5   | 
|                   | Other Saskatchewan     |  |                 | 979 |                     |  |          | 74.2  |             |  |          | 2     |        |  |          | 0.2   |        |  |       | 107 |  |  |       | 14.4  |  |  |     |    |  |  |       |      | 
|                   |                        |  |                 |     |                     |  |          |       |             |  |          |       |        |  |          |       |        |  |       |     |  |  |       |       |  |  |     |     |  |  |       |       | 
|Total Saskatchewan |                        |  | 1,469           |     |                     |  | 482      |       |             |  | 89       |       |        |  | 72.9     |       |        |  | 236   |     |  |  | 94.6  |       |  |  | 32  |     |  |  | 7.5   |      
|                   |                        |  |                 |     |                     |  |          |       |             |  |          |       |        |  |          |       |        |  |       |     |  |  |       |       |  |  |     |     |  |  |       |       | 
|British Columbia   |                        |  | 197             |     |                     |  | 7.9      |       |             |  | 157      |       |        |  | 0.6      |       |        |  | 94    |     |  |  | 4.7   |       |  |  | 19  |     |  |  | 0.3   |      
|                   |                        |  |                 |     |                     |  |          |       |             |  |          |       |        |  |          |       |        |  |       |     |  |  |       |       |  |  |     |     |  |  |       |       | 
|Total              |                        |  | 2,912           |     |                     |  | 931.5    |       |             |  | 1,816    |       |        |  | 489.5    |       |        |  | 1,038 |     |  |  | 338.4 |       |  |  | 553 |     |  |  | 216.9 |      
|                   |                        |  |                 |     |                     |  |          |       |             |  |          |       |        |  |          |       |        |  |       |     |  |  |       |       |  |  |     |     |  |  |       |       | 

Notes:



|(1) |  | Gross wells mean the number of wells in which Provident has an
interest and includes approximately 2,230 unitized wells.                                                 
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Net wells means the aggregate numbers obtained by multiplying each
gross well by Providents percentage interest therein and includes
approximately 211.9 unitized wells.




Production History

The following table sets forth Providents working interest production of oil
and natural gas, before deduction of royalties, for the following periods:

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|                  |                             |  |                    |            |                   |  |                    |           |  |  |  |           | 
|----------------- | --------------------------- |  | ------------------ | ---------- | ----------------- |  | ------------------ | --------- |  |  |  | --------- | 
|                  |                             |  |                    |            |                   |  | For the Period     |           |  |  | 
|                  |                             |  | For the Year Ended |            | March 6 to        |  | For the Year Ended
|                  |                             |  | December 31, 2002  |            | December 31, 2001 |  | December 31, 2000 
|                  |                             |  |                    |            |                   |  |                   
|Crude Oil and NGL |                             |  |                    |            |                   |  |                    |           |  |  |  |          
|                  | Total net production (bbls) |  |                    | 4,539,140  |                   |  |                    | 2,148,586 |  |  |  | 893,040   | 
|                  | Per day (bpd)               |  |                    | 12,436     |                   |  |                    | 7,139     |  |  |  | 2,440     | 
|Natural Gas       |                             |  |                    |            |                   |  |                    |           |  |  |  |          
|                  | Total net production (mcf)  |  |                    | 20,510,445 |                   |  |                    | 4,747,364 |  |  |  | 3,892,776 | 
|                  | Per day (mcfd)              |  |                    | 56,193     |                   |  |                    | 15,772    |  |  |  | 10,636    | 
|Oil equivalent    |                             |  |                    |            |                   |  |                    |           |  |  |  |          
|                  | Total net production (boe)  |  |                    | 7,957,365  |                   |  |                    | 2,939,813 |  |  |  | 1,541,836 | 
|                  | Per day (boed)              |  |                    | 21,801     |                   |  |                    | 9,767     |  |  |  | 4,212     | 




Land Holdings

The following table sets out Providents undeveloped land holdings(1) as at
December 31, 2002.

|                 |  |                |         |              |  |  |         | 
|---------------- |  | -------------- | ------- | ------------ |  |  | ------- | 
|                 |  | Gross Acres(2) |         | Net Acres(3)
|                 |  |                |         |             
|Alberta          |  |                | 534,351 |              |  |  | 277,807 | 
|Saskatchewan     |  |                | 175,565 |              |  |  | 160,772 | 
|British Columbia |  |                | 12,036  |              |  |  | 2,909   | 
|                 |  |                |         |              |  |  |         | 
|Total            |  |                | 721,952 |              |  |  | 441,488 | 
|                 |  |                |         |              |  |  |         | 

Notes:



|(1) |  | Undeveloped land holdings refers to those lands in which Provident has
an interest and which have not been assigned reserves.       
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Gross Acres refers to the number of acres in which Provident has an
interest.                                                       
|   
|(3) |  | Net Acres refers to the aggregate of the numbers obtained by
multiplying each gross acre by Providents percentage interest therein.

Seaton Jordan, independent land consultants, evaluated Providents existing
undeveloped land as at December 31, 2002 in the Seaton Jordan Report. The
Seaton Jordan Report estimated the market value of these land holdings at $30.2
million.

Market value is defined as the price which Seaton Jordan, as independent
consultants, given the conditions existing at December 31, 2002, believe could
reasonably be expected to be received for these properties in a sale. In order
to determine the market value, Seaton Jordan analyzed the most current prices
paid at land sales for properties in the immediate vicinity. In addition,
recognition was given to the remaining terms of the oil and gas leases as well
as any particular burdens such as overriding royalties.




Capital Expenditures

The following table summarizes Providents capital expenditures for the
following periods (in 000s):

|                                             |  |               |         |                  |  |               |         |   |  |   |        |  
|-------------------------------------------- |  | ------------- | ------- | ---------------- |  | ------------- | ------- | - |  | - | ------ | -
|                                             |  | For the Year  |         | For the Period   |  | For the Year 
|                                             |  | Ended         |         | March 6, 2001 to |  | Ended        
|                                             |  | Dec. 31, 2002 |         | Dec. 31, 2001    |  | Dec. 31, 2000
|                                             |  |               |         |                  |  |              
|Land Acquisitions                            |  | $             | 388     |                  |  | $             | 359     |   |  | $ | 4,799  |  
|Seismic                                      |  |               | (12     | )                |  |               | 327     |   |  |   | 1,377  |  
|Drilling and Completions                     |  |               | 12,288  |                  |  |               | 5,696   |   |  |   | 15,649 |  
|Production Facilities                        |  |               | 8,432   |                  |  |               | 4,471   |   |  |   | 1,383  |  
|Other                                        |  |               | 884     |                  |  |               | 126     |   |  |   | 295    |  
|                                             |  |               |         |                  |  |               |         |   |  |   |        |  
|Capital Expenditures, excluding
acquisitions |  |               | 21,980  |                  |  |               | 10,979  |   |  |   | 23,503 |  
|Acquisitions                                 |  |               | 607,077 |                  |  |               | 151,055 |   |  |   | 4,571  |  
|Dispositions                                 |  |               | (11,157 | )                |  |               | (1,421  | ) |  |   | (1,027 | )
|                                             |  |               |         |                  |  |               |         |   |  |   |        |  
|Total Capital Expenditures                   |  | $             | 617,900 |                  |  | $             | 160,613 |   |  | $ | 27,047 |  
|                                             |  |               |         |                  |  |               |         |   |  |   |        |  

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Production History, Prices Received and Capital Expenditures

The following table sets forth production data, production prices received and
expenditures made by Provident for each quarter for the years ended December
31, 2002 and 2001.

|                                              |                     |  |              |        |                |  |              |        |               |  |              |        |      |  |        |        |      |  |        |        |  |  |       |        |  |  |        |        |  |  |       |        | 
|--------------------------------------------- | ------------------- |  | ------------ | ------ | -------------- |  | ------------ | ------ | ------------- |  | ------------ | ------ | ---- |  | ------ | ------ | ---- |  | ------ | ------ |  |  | ----- | ------ |  |  | ------ | ------ |  |  | ----- | ------ | 
|                                              |                     |  | Three Months |        | For the Period |  | Three Months |        | Three Months  |  | Three Months |       
|                                              |                     |  | Ended        |        | March 6 to     |  | Ended        |        | Ended         |  | Ended        |       
|                                              |                     |  | March 31,    |        | March 31,      |  | June 30,     |        | September 30, |  | December 31, |       
|                                              |                     |  |              |        |                |  |              |        |               |  |              |        |      |  |        |       
|                                              |                     |  | 2002         |        | 2001           |  | 2002         |        | 2001          |  | 2002         |        | 2001 |  | 2002   |        | 2001
|                                              |                     |  |              |        |                |  |              |        |               |  |              |        |      |  |        |        |     
|Average Daily Production (before
deduction    |                     |  |              |        |                |  |              |        |               |  |              |        |      |  |        |        |      |  |        |        |  |  |       |        |  |  |        |        |  |  |       |       
|                                              | Crude oil (bpd)     |  |              | 8,859  |                |  |              | 2,937  |               |  |              | 11,044 |      |  |        | 4,769  |      |  |        | 11,723 |  |  |       | 8,399  |  |  |        | 13,937 |  |  |       | 7,744  | 
|                                              | Natural gas (mcfd)  |  |              | 36,111 |                |  |              | 11,155 |               |  |              | 48,648 |      |  |        | 14,914 |      |  |        | 47,728 |  |  |       | 18,324 |  |  |        | 91,766 |  |  |       | 15,373 | 
|                                              | NGLs (bpd)          |  |              | 850    |                |  |              | 235    |               |  |              | 800    |      |  |        | 479    |      |  |        | 903    |  |  |       | 639    |  |  |        | 1,558  |  |  |       | 485    | 
|                                              | Combined (boed)     |  |              | 15,728 |                |  |              | 5,031  |               |  |              | 19,952 |      |  |        | 7,733  |      |  |        | 20,581 |  |  |       | 12,093 |  |  |        | 30,789 |  |  |       | 10,792 | 
|Average Net Prices Received
Crude Oil ($/bbl) |                     |  | 23.06        |        |                |  | 25.36        |        |               |  | 26.87        |        |      |  | 26.18  |        |      |  | 27.61  |        |  |  | 26.89 |        |  |  | 27.57  |        |  |  | 19.79 |       
|                                              | Natural gas ($/mcf) |  |              | 4.35   |                |  |              | 9.45   |               |  |              | 4.52   |      |  |        | 6.07   |      |  |        | 4.29   |  |  |       | 4.61   |  |  |        | 5.06   |  |  |       | 4.65   | 
|                                              | NGLs ($/bbl)        |  |              | 21.17  |                |  |              | 44.12  |               |  |              | 27.06  |      |  |        | 38.24  |      |  |        | 29.78  |  |  |       | 31.24  |  |  |        | 33.82  |  |  |       | 23.18  | 
|                                              | Equivalent ($/boe)  |  |              | 24.12  |                |  |              | 37.81  |               |  |              | 26.98  |      |  |        | 30.23  |      |  |        | 26.98  |  |  |       | 27.32  |  |  |        | 29.25  |  |  |       | 26.64  | 
|Royalties ($/boe)(1)                          |                     |  | 4.79         |        |                |  | 6.20         |        |               |  | 5.23         |        |      |  | 5.34   |        |      |  | 5.76   |        |  |  | 4.84  |        |  |  | 6.04   |        |  |  | 3.10  |       
|Operating Expenses ($/boe)(2)                 |                     |  | 6.01         |        |                |  | 7.62         |        |               |  | 7.08         |        |      |  | 6.79   |        |      |  | 6.82   |        |  |  | 7.04  |        |  |  | 6.52   |        |  |  | 6.86  |       
|Cash Field Netback Received ($/boe)           |                     |  | 11.55        |        |                |  | 23.99        |        |               |  | 14.67        |        |      |  | 18.10  |        |      |  | 14.40  |        |  |  | 15.44 |        |  |  | 16.68  |        |  |  | 11.90 |       
|Capital Expenditures (thousands of            |                     |  | 5,675        |        |                |  | 2,206        |        |               |  | 79,684       |        |      |  | 42,423 |        |      |  | (1,437 | )      |  |  | 2,793 |        |  |  | 33,367 |        |  |  | 4,505 |       
|dollars)(3)                                   |                     |  |              |        |                |  |              |        |               |  |              |        |      |  |        |        |      |  |        |        |  |  |       |        |  |  |        |        |  |  |       |       

Notes:



|(1) |  | Royalties are net of ARTC.                                              
|--- |  | ------------------------------------------------------------------------
|   
|(2) |  | This figure includes all field operating expenses.                      
|   
|(3) |  | Capital expenditures include acquisitions, net of dispositions for cash.




SELECTED CONSOLIDATED FINANCIAL INFORMATION

The following selected consolidated financial information was prepared in
accordance with accounting principles generally accepted in Canada and
highlights trends in Providents financial condition and results of operations
for the year ended December 31, 2002, the period March 6, 2001 to December 31,
2001 and Founders financial condition and results of operations for the year
ended December 31, 2000. Reference is made to the consolidated financial
statements of the Trust contained in the Annual Report of the Trust, which
information is hereby incorporated into this Annual Information Form by
reference.




Annual Information

|                                         |                                                  |                 |         |                 |  |                 |         |       |   |   |        |      | 
|---------------------------------------- | ------------------------------------------------ | --------------- | ------- | --------------- |  | --------------- | ------- | ----- | - | - | ------ | ---- | 
|(000s except per unit or per share data) |                                                  | 2002 (365 days) |         | 2001 (301 days) |  | 2000 (365 days)
|                                         |                                                  |                 |         |                 |  |                
|Gross production revenue                 |                                                  | $               | 207,823 |                 |  | $               | 78,311  |       |   | $ | 49,226 |     
|Earnings (loss)                          |                                                  |                 | 9,932   |                 |  |                 | (46,855 | )     |   |   | 6,597  |     
|                                         | per trust unit or common share (1)               |                 |         | 0.25            |  |                 |         | (3.39 | ) |   |        | 0.44 | 
|                                         | per fully diluted trust unit or common share (1) |                 |         | 0.22            |  |                 |         | (3.39 | ) |   |        | 0.34 | 
|Cash flow from operations                |                                                  |                 | 96,896  |                 |  |                 | 36,228  |       |   |   | 23,564 |     
|                                         | per trust unit or common share (1)               |                 |         | 2.41            |  |                 |         | 2.62  |   |   |        | 1.56 | 
|Total assets                             |                                                  |                 | 855,225 |                 |  |                 | 185,893 |       |   |   | 99,841 |     
|Long-term debt (2)                       |                                                  |                 | 187,200 |                 |  |                 | 35,600  |       |   |   | 40,287 |     
|Working Capital (Deficiency)             |                                                  |                 | (15,681 | )               |  |                 | (1,862  | )     |   |   | (3,371 | )   
|Unitholders equity                      |                                                  |                 | 472,779 |                 |  |                 | 104,711 |       |   |   | 28,665 |     

Notes:

(1)  The Founders per common share numbers have been restated to reflect the
impact of the one for four share consolidation on January 27,
2000.

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##### Table of Contents



(2)  2000 includes a convertible debenture carried at $14,186,827. As part of
the Founders Arrangement, Citicorp agreed to the early
conversion and redemption of the debenture.




Quarterly Information (unaudited)

|                               |                              |       |        |        |  |       |        |        |  |   |        |      |  |   |        |      | 
|------------------------------ | ---------------------------- | ----- | ------ | ------ |  | ----- | ------ | ------ |  | - | ------ | ---- |  | - | ------ | ---- | 
|(in 000s except per unit data) |                              | First |        | Second |  | Third |        | Fourth
|                               |                              |       |        |        |  |       |        |       
|2002                           |                              |       |        |        |  |       |        |        |  |   |        |      |  |   |        |     
|Gross production revenue       |                              | $     | 31,641 |        |  | $     | 46,123 |        |  | $ | 48,191 |      |  | $ | 81,698 |     
|Earnings (loss)                |                              |       | 1,339  |        |  |       | 1,177  |        |  |   | 229    |      |  |   | 7,187  |     
|                               | per trust unit               |       |        | 0.04   |  |       |        | 0.03   |  |   |        | 0.01 |  |   |        | 0.12 | 
|                               | per fully diluted trust unit |       |        | 0.04   |  |       |        | 0.03   |  |   |        | 0.01 |  |   |        | 0.11 | 
|Cash flow from operations      |                              |       | 15,324 |        |  |       | 22,642 |        |  |   | 22,631 |      |  |   | 36,299 |     
|                               | per trust unit               |       |        | 0.51   |  |       |        | 0.63   |  |   |        | 0.61 |  |   |        | 0.63 | 

|                          |                              |  |           |      |        |  |        |      |        |  |         |       |   |  |         |       |  
|------------------------- | ---------------------------- |  | --------- | ---- | ------ |  | ------ | ---- | ------ |  | ------- | ----- | - |  | ------- | ----- | -
|                          |                              |  | First (1) |      | Second |  | Third  |      | Fourth
|                          |                              |  |           |      |        |  |        |      |       
|2001                      |                              |  |           |      |        |  |        |      |        |  |         |       |   |  |         |      
|Gross production revenue  |                              |  | 4,946     |      |        |  | 21,267 |      |        |  | 30,390  |       |   |  | 21,708  |      
|Earnings (loss)           |                              |  | 931       |      |        |  | 3,162  |      |        |  | (36,707 | )     |   |  | (14,241 | )    
|                          | per trust unit               |  |           | 0.13 |        |  |        | 0.31 |        |  |         | (2.38 | ) |  |         | (0.80 | )
|                          | per fully diluted trust unit |  |           | 0.13 |        |  |        | 0.31 |        |  |         | (2.38 | ) |  |         | (0.80 | )
|Cash flow from operations |                              |  | 2,680     |      |        |  | 10,597 |      |        |  | 13,601  |       |   |  | 9,350   |      
|                          | per trust unit               |  |           | 0.38 |        |  |        | 1.05 |        |  |         | 0.88  |   |  |         | 0.53  |  

Note:



|(1) |  | The first quarter was for the 26 day period from March 6, 2001 to March
31, 2001.
|--- |  | ---------------------------------------------------------------------------------

|                          |                                    |   |        |      |        |   |        |      |        |   |        |      |  |   |        |      | 
|------------------------- | ---------------------------------- | - | ------ | ---- | ------ | - | ------ | ---- | ------ | - | ------ | ---- |  | - | ------ | ---- | 
|                          |                                    |   | First  |      | Second |   | Third  |      | Fourth
|                          |                                    |   |        |      |        |   |        |      |       
|2000                      |                                    |   |        |      |        |   |        |      |        |   |        |      |  |   |        |     
|Gross production revenue  |                                    | $ | 10,797 |      |        | $ | 10,464 |      |        | $ | 13,644 |      |  | $ | 14,321 |     
|Earnings (loss)           |                                    |   | 1,167  |      |        |   | 1,408  |      |        |   | 2,110  |      |  |   | 1,912  |     
|                          | per trust common share (1)         |   |        | 0.24 |        |   |        | 0.27 |        |   |        | 0.42 |  |   |        | 0.39 | 
|                          | per fully diluted common share (1) |   |        | 0.18 |        |   |        | 0.21 |        |   |        | 0.33 |  |   |        | 0.30 | 
|Cash flow from operations |                                    |   | 4,788  |      |        |   | 4,972  |      |        |   | 6,960  |      |  |   | 6,844  |     
|                          | per common share, restated (1)     |   |        | 0.96 |        |   |        | 0.99 |        |   |        | 1.38 |  |   |        | 1.35 | 

Note:



|(1) |  | All per share numbers have been restated to reflect the impact of the
one for four share consolidation on January 27, 2000 and the three to
one share for unit consolidation on March 5, 2001.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




MANAGEMENTS DISCUSSION AND ANALYSIS

Reference is made to the information under the heading Managements Discussion
and Analysis in the Annual Report of the Trust, which information is hereby
incorporated into this Annual Information Form by reference.




MARKET FOR SECURITIES

The outstanding Trust Units of the Trust are listed and posted for trading on
the TSX under the symbol PVE.UN and the AMEX under the symbol PVX. The
Convertible Debentures of the Trust are listed and posted for trading on the
TSX under the symbol PVE.DB.

The following table summarizes the Trust Unit trading activity for the year
ended December 31, 2002 on both the Toronto Stock Exchange and the American
Stock Exchange:

|                    |  |    |       |    |  |    |       |    |  |     |       |  |  |  |       |  |  |  |       | 
|------------------- |  | -- | ----- | -- |  | -- | ----- | -- |  | --- | ----- |  |  |  | ----- |  |  |  | ----- | 
|                    |  | Q1 |       | Q2 |  | Q3 |       | Q4 |  | YTD
|                    |  |    |       |    |  |    |       |    |  |    
|TSE  PVE.UN (Cdn$) |  |    |       |    |  |    |       |    |  |     |       |  |  |  |       |  |  |  |       | 
|High                |  |    | 10.70 |    |  |    | 11.33 |    |  |     | 11.44 |  |  |  | 11.03 |  |  |  | 11.44 | 

45



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|                 |  |  |        |  |  |  |        |  |  |  |        |  |  |  |        |  |  |  |        | 
|---------------- |  |  | ------ |  |  |  | ------ |  |  |  | ------ |  |  |  | ------ |  |  |  | ------ | 
|Low              |  |  | 8.20   |  |  |  | 9.97   |  |  |  | 10.02  |  |  |  | 9.85   |  |  |  | 8.20   | 
|Close            |  |  | 10.55  |  |  |  | 11.05  |  |  |  | 10.80  |  |  |  | 10.75  |  |  |  | 10.75  | 
|Volume (000s)    |  |  | 16,563 |  |  |  | 11,330 |  |  |  | 11,546 |  |  |  | 12,524 |  |  |  | 51,963 | 
|AMEX  PVX (US$) |  |  |        |  |  |  |        |  |  |  |        |  |  |  |        |  |  |  |        | 
|High             |  |  | 6.83   |  |  |  | 7.48   |  |  |  | 7.41   |  |  |  | 6.97   |  |  |  | 7.48   | 
|Low              |  |  | 5.17   |  |  |  | 6.34   |  |  |  | 6.75   |  |  |  | 6.35   |  |  |  | 5.17   | 
|Close            |  |  | 6.52   |  |  |  | 7.07   |  |  |  | 6.82   |  |  |  | 6.86   |  |  |  | 6.86   | 
|Volume (000s)    |  |  | 2,224  |  |  |  | 4,590  |  |  |  | 4,445  |  |  |  | 6,597  |  |  |  | 17,856 | 




DIRECTORS AND OFFICERS

The following are the names and municipality of residence of the directors and
officers of Provident, their principal position with Provident and their
principal occupations. The Trust does not have any directors or officers. All
of the persons listed above have been engaged for more than five years in their
present principal occupation or executive position with the same or associated
companies except as indicated below:

|                                                           |  |                                                                                                                                                                                                                                                                                                                                                                                                   |  |                 |      |                     |  |                 |           |    
|---------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------- | ---- | ------------------- |  | --------------- | --------- | ---
|                                                           |  |                                                                                                                                                                                                                                                                                                                                                                                                   |  |                 |      |                     |  | Number of Trust
|Name and                                                   |  |                                                                                                                                                                                                                                                                                                                                                                                                   |  | Director of     |      | Units Beneficially 
|Municipality of Residence                                  |  | Principal Occupation                                                                                                                                                                                                                                                                                                                                                                              |  | Provident Since |      | Owned or Controlled
|                                                           |  |                                                                                                                                                                                                                                                                                                                                                                                                   |  |                 |      |                    
|G.D. Billing(2),(3)
Chairman of the Board
Calgary, Alberta |  | Chairman of the board of directors since
March 6, 2001, and prior thereto, Senior
Executive Officer of Founders Energy
Ltd. from October 1999 to March 2001
and Executive Chairman, Superior Plus
Inc., a propane marketing company, since
1998. Prior thereto, President and Chief
Executive Officer of Norcen Energy Ltd.,
an oil and gas exploration and production
company from 1994 to 1998. |  |                 | 2001 |                     |  |                 | 393,873   |    
|                                                          
|Thomas W. Buchanan
Calgary, Alberta                        |  | Chief Executive Officer of Provident and
of the Manager since March 2001. Prior
thereto, Executive Vice President
Corporate Development and Chief
Financial Officer of Founders Energy
Ltd. from October 1999 to March 2001.
Prior thereto, President and Chief
Executive Officer of Founders Energy
Ltd. and Director of Hawk Oil Inc. from
1996 to October 1999.                                |  |                 | 2001 |                     |  |                 | 1,229,720 | (4)

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|                                           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |                 |      |                     |  |                 |           |    
|------------------------------------------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------- | ---- | ------------------- |  | --------------- | --------- | ---
|                                           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |                 |      |                     |  | Number of Trust
|Name and                                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  | Director of     |      | Units Beneficially 
|Municipality of Residence                  |  | Principal Occupation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  | Provident Since |      | Owned or Controlled
|                                           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |                 |      |                    
|Randall J. Findlay
DeWinton, Alberta       |  | President of Provident and of the
Manager since March 2001. Prior
thereto, Executive Vice President and
Chief Operating Officer of Founders
Energy Ltd. from December 1999 to
March 2001 and director of TransAlta
Power L.P. from October 2000 to the
present. Prior thereto, Senior Vice
President of TransCanada Pipelines Ltd.
and President and Chief Executive
Officer of TransCanada Gas Processing
L.P. from June 1998 to August 1999.
From 1997 to 1998, President and Chief
Executive Officer of Novagas Canada
Ltd. and from 1995 to 1997, Executive
Vice President of Novagas
Clearinghouse. |  |                 | 2001 |                     |  |                 | 1,169,567 | (4)
|                                          
|Bruce R. Libin(1),(3)
Calgary, Alberta     |  | Chairman and Executive Chairman and
Chief Executive Officer of Destiny
Resource Services Corp., a resource
services company, since 1997 and
December 2000, respectively. President
of B.R. Libin Capital Corp., an
investment, merchant banking and
investment banking advisory services
company since 1995. Director of Maxx
Petroleum Ltd. from December 2000 to
May 25, 2001.                                                                                                                                                                                                                         |  |                 | 2001 |                     |  |                 | 35,192    |    
|                                          
|M.H. (Mike) Shaikh(2),(3)
Calgary, Alberta |  | President of M.H. Shaikh Professional
Corporation (Chartered Accountants).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |                 | 2001 |                     |  |                 | 40,048    |    
|                                          
|Byron J. Seaman(1),(3)
Calgary, Alberta    |  | Independent businessman and private
investor.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |                 | 2001 |                     |  |                 | 38,735    |    
|                                          
|Jeffrey T. Smith(2),(3)
Calgary, Alberta   |  | Independent businessman and private
investor. Prior to 1998, Chief Operating
Officer of Northstar Energy Ltd., an oil
and gas exploration company.                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                 | 2001 |                     |  |                 | 4,900     |    
|                                          
|John B. Zaozirny(2),(3)
Calgary, Alberta   |  | Counsel to the law firm of McCarthy
Tétrault LLP and Vice-Chairman of
Canaccord Capital Corporation. Director
and strategic advisor to a number of
public and private corporations, as well
as a Governor of the Business Council of
British Columbia. Minister of Energy
and Natural Resources for Alberta from
1982 to 1986, having been first elected as
a Member of the Alberta Legislature in
1979.                                                                                                                                                                                                 |  |                 | 2001 |                     |  |                 | 10,003    |    

Notes:



|(1) |  | Member of the Audit, Human Resources and Compensation Committee.                                                                      
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Member of the Governance, Environmental, Health and Safety Committee.                                                                 
|   
|(3) |  | Member of the Reserves Committee.                                                                                                     
|   
|(4) |  | Includes Trust Units issuable upon exchange of exchangeable shares of
Provident held by such director at an exchange ratio of
1.03508.

47



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##### Table of Contents



The following is a brief description of the directors, senior officers and key
management and consulting personnel of Provident.

Grant D. Billing

Chairman of the Board

Mr. Billing obtained a B. Sc. from the University of Calgary in 1971 and a
Chartered Accountant designation in 1976. Mr. Billing has more than 25 years
of senior management experience in the oil and gas industry. Since March 6,
2001, he has been Chairman of the Board of Provident and prior thereto, he was
Executive Chairman of Founders from October 1999 to March 6, 2001 and a
director since 1998. Mr. Billing is Chairman of the Board of Superior Plus and
from 1998 to September 2000, was Chairman and Chief Executive Officer of
Superior Plus. Prior to 1998, Mr. Billing was President and Chief Executive
Officer of Norcen Energy Resources Limited from 1994 to 1998 and from 1992 to
1994 was President and Chief Executive Officer of Sceptre Resources Limited.
Mr. Billing served as the Chairman of the Canadian Association of Petroleum
Producers (CAPP) from 1995 to 1996 and was a director of CAPP from 1993 to
1994.

Thomas W. Buchanan

Chief Executive Officer and Director

Mr. Buchanan obtained a B.Comm from the University of Calgary in 1979 and a
Chartered Accountant designation in 1981. He has over 19 years of senior
financial and management experience primarily in the oil and gas industry. Mr.
Buchanan has been Chief Executive Officer of Provident since March 6, 2001 and
prior thereto he was Executive Vice President and Chief Financial Officer of
Founders from October 1999 to March 6, 2001. Prior thereto, Mr. Buchanan was
President and Chief Executive Officer of Founders since November 1993. Mr.
Buchanan has been a director of Provident or its predecessor since 1993.

Randall J. Findlay

President and Director

Mr. Findlay obtained a B.Sc in Chemical Engineering from the University of
British Columbia in 1973. He has more than 27 years of senior management
experience in all aspects of the oil and gas industry. Mr. Findlay has been
President of Provident since March 6, 2001 and prior thereto he was Executive
Vice President, Chief Operating Officer and a director of Founders from
December 1999 to March 6, 2001. He has been a director of TransAlta Power L.P.
since October, 2000. Prior thereto he was Senior Vice President of TransCanada
PipeLines Limited, President of TransCanada Midstream and President and Chief
Executive Officer of TransCanada Gas Processing L.P. from 1998 to 1999. From
1995 to 1997 he held senior executive positions at Novagas Canada Ltd. as
President and Executive Vice President of Novagas Canada Ltd. and Novagas
Clearinghouse Ltd. Prior thereto, Mr. Findlay held several senior executive
positions at exploration and production companies in the oil and gas industry.

Bruce R. Libin

Director

Mr. Libin was a director of Maxx from December 20, 2000 to May 25, 2001. Mr.
Libin is also the President of B.R. Libin Capital Corp., an investment,
merchant banking and investment banking advisory services company. He has been
the Chairman and Managing Director of Destiny Resource Services Corp., a
resource services company, since 1997 and December 2000, respectively.

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Byron J. Seaman

Director

Mr. Seaman is a private investor and co-owner of the Calgary Flames Hockey
Club. Mr. Seaman holds a Bachelor of Science degree in Mechanical Engineering
and an Honorary Doctorate in Science from the University of Saskatchewan. He
has over 50 years of experience in the oil, gas and resource industries. Until
1990, he was Chairman of Bovar Inc., a public corporation that provides
environmental waste management services, and continues to serve as a director
of that company. Mr. Seaman has been a director of Provident or its
predecessor since November 1994.

M.H. (Mike) Shaikh

Director

Mr. Shaikh is President of M.H. Shaikh Professional Corporation. Prior
thereto, he was an associate of Shaikh & Shikaze, Chartered Accountants for 12
years. In the past five years, Mr. Shaikh has been an officer or director of
the following public companies: Hawk Oil Inc., SPS Industries Ltd., Lodestar
Energy Inc., Winstar Resources Ltd., Maramar Ventures Inc. and Spearhead
Resources Ltd. Mr. Shaikh has been a director of Provident or its predecessor
since September 1993.

Jeffrey Smith

Director

Mr. Smith was a director of Maxx from December 20, 2000 to May 25, 2001. Prior
thereto, he was Chief Operating Officer of Northstar Energy Ltd., an oil and
gas exploration and production company, since 1996.

Mark N. Walker

Vice President, Chief Financial Officer and Corporate Secretary

Mr. Walker obtained a Bachelor of Commerce degree from the University of
Calgary in 1984 and a Certified Management Accountant designation in 1988. He
has been Chief Financial Officer of Provident since March 2001, Vice President
and Chief Financial Officer since May 2002 and Vice President, Chief Financial
Officer and Corporate Secretary since June 2002. Prior thereto he held the
positions of Chief Financial Officer and/or Controller of Founders from
September 1996 to March 2001. From 1993 to August 1996 Mr. Walker held various
financial and accounting positions at Sceptre Resources Limited.

Cameron Vouri

Vice President, Production Operations and Chief Operating Officer

Mr. Vouri obtained a Bachelor of Science (Petroleum Engineering) degree from
New Mexico Institute of Mining and Technology in 1988. He as been Vice
President and Chief Operating Officer of Provident since January 2003. Prior
thereto he held the position of Vice President with Provident. Mr. Vouri held
various senior management positions with Koch Exploration Canada, Ltd. from
1989 to 2000.

John B. Zaozirny, Q.C.

Director

Mr. Zaozirny is counsel to the law firm of McCarthy Tétrault and Vice-Chairman
of Canaccord Capital Corporation. He is also a director and a strategic
advisor to a number of public and private corporations, as well as a Governor
of the Business Council of British Columbia. He served as Albertas Minister
of Energy and Natural Resources from 1982 to 1986, having first been elected as
a Member of the Alberta Legislature in 1979. Mr. Zaozirny has been a director
of Provident or its predecessor since April 1998.

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Committees of the Board

The Board presently has three standing committees, being an Audit, Human
Resources and Compensation Committee, a Governance, Environmental, Health and
Safety Committee and a Reserves Committee. All of the members of the Audit,
Human Resources and Compensation Committee, a Governance, Environmental, Health
and Safety Committee committees are independent directors. All directors are
members of the Reserves committee.

Audit, Environmental, Health and Safety Committee

The Audit, Environmental, Health and Safety Committee consisting of Mr. M.H.
(Mike) Shaikh (Chairman), Mr. Bruce Libin, and Mr. Byron Seaman. The functions
of the Audit, Environmental Health and Safety Committee include the review and
recommendation to the board of directors of the annual financial statements and
related managements discussion and analysis, and the review of the interim
financial statements. The Committee reviews and establishes, in conjunction
with the external auditors and management, audit plans and procedures. The
Committee also reviews and makes recommendations to the board of directors on
Providents internal control procedures and management information systems. The
Committee discusses with the external auditors its independence from management
and Provident, and it considers the compatibility of the external auditors
non-audit services to Provident, vis-à-vis its independence.

The Committee is responsible for ensuring that management has in place
effective programs relating to environment, health and safety matters,
including the identification of risks and the compliance with legal
requirements, and ensuring that management administers Providents policies and
procedures on these matters.

Governance, Human Resources and Compensation Committee

The Governance, Human Resources and Compensation Committee consists of Mr. John
Zaozirny (Chairman), Mr. Grant Billing and Mr. Jeffrey Smith. The Committee is
responsible for recommending to the board of directors suitable candidates for
director positions. The selection assessment factors include diversity, age,
skills, judgment, integrity, gender, experience, profile, business prospects,
and such other factors deemed appropriate, all in the context of an assessment
of the perceived needs of the board of directors and Provident at the time. In
addition, the Committee assists the board of directors on corporate governance
issues and in compiling the results of a directors questionnaire dealing with
the effectiveness of the board of directors, its members and its committees.

The Committees mandate also includes reviewing Providents human resources
policies and procedures and compensation and incentive programs. The Committee
is responsible for assessing senior managements performance and reviewing and
negotiating the Management Agreement. The Compensation Committee reviews the
adequacy and form of directors compensation and makes recommendations designed
to ensure that directors compensation adequately reflects the responsibilities
of the board of directors. The Committee also administers the Trust Option
Plan and makes recommendations to the board of directors respecting grants of
options there under.

Reserves Committee

The Reserves Committee is comprised of independent members of the board of
directors. All of the members of the Reserves Committee are unrelated
directors in that each is independent of management and free from any interest
and any business or other relationship which could, or could reasonably be
perceived to, materially interfere with the directors ability to act with a
view to the best interests of the company (other than interests and
relationships arising from shareholders). The Committee is responsible for
ensuring that management has designed and implemented effective reserve
programs, controls and reporting systems. The Committees mandate also
includes reviewing the independent reserves evaluation of Provident, reviewing
and approving any proposals to change the evaluating engineers and resolving

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##### Table of Contents



any disputes that may arise between the evaluating engineers and management.
The Reserves Committee communicates regularly with management to ensure that
all reserve evaluations and reports have been properly handled and reported.

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INFORMATION CONCERNING THE OIL AND GAS INDUSTRY




Canadian Government egulation

The oil and natural gas industry is subject to extensive controls and
regulations, imposed by various levels of government. Outlined below are some
of the more significant aspects of the relevant legislation and regulations.
It is not expected that any of such controls and regulations will affect the
operations of Provident in a manner materially different than they will affect
other oil and gas companies of similar size.




Pricing and Marketing  Oil

Producers of oil negotiate sales contracts directly with oil purchasers, with
the result that the market determines the price of oil. Such price depends in
part on oil quality, price of competing oils, distance to market and the value
of refined products. Oil exporters are also entitled to enter into export
contracts and export oil provided that, for contracts, which do not exceed one
year in the case of light crude oil and two years in the case of heavy crude
oil, an export order must be obtained from the National Energy Board prior to
the export. Any export pursuant to a contract of longer duration must be made
pursuant to a National Energy Board export licence and Governor in Council
approval.




Pricing and Marketing  Natural Gas

The price of natural gas sold in intra-provincial and inter-provincial trade is
determined by negotiation between buyers and sellers. Natural gas exported
from Canada is subject to regulation by the National Energy Board and the
government of Canada. The price received by Provident depends, in part, on the
prices of competing natural gas and other substitute fuels, access to
downstream transportation, distance to markets, length of the contract term,
weather conditions, the supply and demand balance and other contractual terms.
Exporters are free to negotiate prices with purchasers, provided that the
export contracts must continue to meet certain criteria prescribed by the
National Energy Board and the government of Canada. As in the case with oil,
natural gas exports for a term of less than two years must be made pursuant to
a National Energy Board order and in the case of exports for a longer duration,
pursuant to a National Energy Board licence and Governor in Council approval.

The government of Alberta also regulates the volume of natural gas which may be
removed from the Province for consumption elsewhere.




The North American Free Trade Agreement

On January 1, 1994 the North American Free Trade Agreement (NAFTA) among the
governments of Canada, the United States and Mexico became effective. NAFTA
carries forward most of the material energy terms contained in the Canada-U.S.
Free Trade Agreement. In the context of energy resources, Canada continues to
remain free to determine whether exports to the U.S. or Mexico will be allowed
provided that the restrictions are otherwise justified under certain provisions
of the General Agreement on Tariffs and Trade and then only if any export
restrictions do not: (i) reduce the proportion of the energy resource exported
relative to the total supply of energy resource (based upon the proportions
prevailing in the most recent 36 months); (ii) impose an export price higher
than the domestic price; or (iii) disrupt normal channels of supply. All three
countries are prohibited from imposing minimum export or import price
requirements.

NAFTA contemplates the reduction of Mexican restrictive trade practices in the
energy sector and prohibits discriminatory border restrictions and export
taxes. The agreement also contemplates clearer disciplines on regulators to
avoid discriminatory actions and to minimize disruption of contractual
arrangements.

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Provincial Royalties and Incentives

In addition to federal regulation, each province has legislation and
regulations, which govern land tenure, royalties, production rates,
environmental protection and other matters. The royalty regime is a
significant factor in the profitability of oil and natural gas production.
Royalties payable on production from lands other than Crown lands are
determined by negotiations between the mineral owner and the lessee. Crown
royalties are determined by governmental regulation and are generally
calculated as a percentage of the value of the gross production, and the rate
of royalties payable generally depends in part on well productivity,
geographical location, field discovery data and the type or quality of the
petroleum product produced.

From time to time the governments of Canada and Alberta have established
incentive programs, which have included royalty rate reductions, royalty
holidays and tax credits for the purpose of encouraging oil and natural gas
production and enhanced production projects.




Alberta

In Alberta, a producer of oil or natural gas is entitled to a credit against
the royalties payable to the Crown by virtue of the ARTC program. The ARTC
rate is based on a price-sensitive formula and varies between 75 percent for
prices at or below the royalty tax credit reference price of $100 per m3
decreasing to 25 percent for prices above the royalty tax credit reference
price of $210 per m3. The ARTC rate will be applied to a maximum annual amount
of $2,000,000 of Alberta Crown royalties payable for each producer or
associated group of producers. Crown royalties on production from producing
properties acquired from corporations claiming maximum entitlements to ARTC
will generally not be eligible for ARTC. The rate is established quarterly
based on the average par price, as determined by the Alberta Department of
Energy.

On October 13, 1992, the Alberta government announced major changes to its
royalty structure and permanent incentives for exploring and developing oil and
gas reserves. The significant changes announced which remain in force include
the following: (i) the first wells drilled in new oil pools discovered on or
after October 1, 1992 will have a permanent one year oil royalty holiday,
subject to a $1,000,000 cap and a reduced royalty rate thereafter; (ii)
reduction of royalties on pre-October 1, 1992 production of oil and gas; (iii)
incentives by way of royalty holidays and reduced royalties on reactivated, low
productivity and horizontal re-entry of vertical oil wells; (iv) introduction
of separate par pricing for light, medium and heavy oil; and (v) modification
of the royalty formula structure to provide for sensitivity to price
fluctuations.




Environmental Regulation

The oil and natural gas industry is currently subject to environmental
regulations pursuant to provincial and federal legislation. Environmental
legislation provides for restrictions and prohibitions on releases or emissions
of various substances produced in association with certain oil and gas industry
operations. In addition, legislation requires that well and facility sites be
abandoned and reclaimed to the satisfaction of provincial authorities. A
breach of such legislation may result in the imposition of fines and penalties,
the suspension or revocation of necessary licenses and civil liability.
Environmental legislation in Alberta has been consolidated into the
Environmental Protection and Enhancement Act(Alberta), which took effect on
September 1, 1993. The Environmental Protection and Enhancement Act(Alberta)
imposes stricter environmental standards, requires more stringent compliance
and reporting and significantly increases penalties for non-compliance.




Exports from Canada

In order to export oil or natural gas from Canada, certain approvals are
required from the National Energy Board and the Government of Canada. The
approval(s) required are dependent on the hydrocarbon substance being exported
and the length of the proposed export arrangement.

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RISK FACTORS

The Trust Units do not represent a traditional investment in the oil and
natural gas industry. Prospective purchasers of the Trust Units should
carefully consider the information set forth below and the other information
set forth herein before deciding to invest in the Trust Units.

The Trust is a limited purpose trust, which will be entirely dependent upon the
operations and assets of Provident through its ownership directly and
indirectly, of the Provident Shares, the Initial Notes, the Acquisition Notes,
the Richland Notes and other notes, which the Trust may issue from time to
time, the Initial Royalty and the Subsequent Royalty. Accordingly, the Trust
is dependent upon the ability of Provident to meet its interest and principal
repayment obligations under the Initial Notes and its principal repayment
obligations under the Acquisition Notes, the Richland Notes and other notes,
which the Trust may issue from time to time, and to pay the Initial Royalty and
the Subsequent Royalty. Providents income will be received from the
production of oil and natural gas from Providents existing Canadian resource
properties and will be susceptible to the risks and uncertainties associated
with the oil and natural gas industry generally. If the oil and natural gas
reserves associated with Providents Canadian resource properties are not
supplemented through additional development or the acquisition of additional
oil and natural gas properties, the ability of Provident to meet its
obligations to the Trust may be adversely affected. Unitholders should
consider carefully the information contained herein and, in particular, the
following risk factors:




Exploitation and Development

Exploitation and development risks are due to the uncertain results of
searching for and producing oil and natural gas using imperfect scientific
methods. These risks are mitigated by using experienced staff, focusing
exploitation efforts in areas in which Provident has existing knowledge and
expertise or access to such expertise, using up-to-date technology to enhance
methods and controlling costs to maximize returns. Advanced oil and natural
gas related technologies such as three dimensional seismography, reservoir
simulation studies and horizontal drilling have been used by Provident and will
be used by Provident to improve its ability to find, develop and produce oil
and natural gas.




Operations

Providents operations will be subject to all of the risks normally incident to
the operation and development of oil and natural gas properties and the
drilling of oil and natural gas wells, including encountering unexpected
formations or pressures, blowouts, craterings and fires, all of which could
result in personal injuries, loss of life and damage to property of Provident
and others. Provident will have both safety and environmental policies in
place to protect its operators and employees, as well as to meet the regulatory
requirements in those areas where it operates. In addition, Provident will
have liability insurance policies in place, in such amounts as it considers
adequate, however, it will not be fully insured against all of these risks, nor
are all such risks insurable.

Continuing production from a property, and to some extent the marketing of
production therefrom, are largely dependent upon the ability of the operator of
the property. To the extent the operator fails to perform these functions
properly, revenue may be reduced. Payments from production generally flow
through the operator and there is a risk of delay and additional expense in
receiving such revenues if the operator becomes insolvent. Although
satisfactory title reviews are generally conducted in accordance with industry
standards, such reviews do not guarantee or certify that a defect in the chain
of title may not arise to defeat the claim of Provident to certain of its oil
and gas properties. A reduction of the income from the Provident Royalties
could result in such circumstances.




Oil and Natural Gas Prices

The price of oil and natural gas will fluctuate throughout the life of
Provident and price and demand are factors largely beyond its control. Such
fluctuations will have a positive or negative effect on the revenue

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to be received by it. Such fluctuations will also have an effect on the
acquisition costs of any future oil and natural gas properties that Provident
may acquire. As well, cash distributions from the Trust will be highly
sensitive to the prevailing price of crude oil and natural gas.




Marketing

The marketability and price of oil and natural gas, which may be acquired or
discovered by Provident, will be affected by numerous factors beyond its
control. These factors include demand for oil and natural gas, market
fluctuations, the proximity and capacity of oil and natural gas pipelines and
processing equipment and government regulations, including regulations relating
to environmental protection, royalties, allowable production, pricing,
importing and exporting of oil and natural gas.




Capital Investment

The timing and amount of capital expenditures will directly affect the amount
of income for distribution to Trust Unitholders. Distributions may be reduced,
or even eliminated, at times when significant capital or other expenditures are
made.




Debt Service

Provident currently has a credit facility of $255 million. Variations in
interest rates and scheduled principal repayments could result in significant
changes in the amount required to be applied to debt service before payment of
any amounts to the Trust. Although it is believed that the bank line of credit
is sufficient, there can be no assurance that the amount will be adequate for
the financial obligations of Provident or that additional funds can be
obtained.

The lender has been provided with security over substantially all of the assets
of Provident. If Provident becomes unable to pay its debt service charges or
otherwise commits an event of default such as bankruptcy, the lender may
foreclose on or sell Providents oil and gas properties free from or together
with the Provident Royalties.




Reserves

Although McDaniel and Provident have carefully prepared the reserve figures
included herein such figures are estimates and no assurance can be given that
the indicated levels of reserves will be produced. Probable reserves estimated
for properties may require revision based on the actual development strategies
employed to prove such reserves. Declines in the reserves of Provident, which
are not offset by the acquisition, or development of additional reserves may
reduce the underlying value of Trust Units to Trust Unitholders. Trust Units
will have no value once all of the oil and natural gas reserves of Provident
have been produced. As a result, holders of Trust Units will have to obtain
the return of capital invested out of cash flow derived from their investment
in such Trust Units.




Environmental Concerns

The oil and natural gas industry is subject to environmental regulation
pursuant to local, provincial and federal legislation. A breach of such
legislation may result in the imposition of fines or issuance of clean up
orders in respect of Provident or its oil and gas properties. Such legislation
may be changed to impose higher standards and potentially more costly
obligations on Provident. Although Provident has established a reclamation
fund for the purpose of funding its currently estimated future environmental
and reclamation obligations based on its current knowledge, there can be no
assurance that the Trust will be able to satisfy its actual future
environmental and reclamation obligations.




Delay in Cash Distributions

In addition to the usual delays in payment by purchasers of oil and natural gas
to the operators of oil and gas properties, and by the operator to Provident,
payments between any of such parties may also be delayed by restrictions
imposed by lenders, delays in the sale or delivery of products, delays in the
connection of wells to a gathering system, blowouts or other accidents,
recovery by the operator of

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expenses incurred in the operation of oil and gas properties or the
establishment by the operator of reserves for such expenses.




Reliance on Provident

Unitholders will be dependent on the management of Provident in respect of the
administration and management of all matters relating to Providents oil and
gas properties, the Provident Royalties, the Trust and Trust Units. Investors
who are not willing to rely on the management of Provident should not invest in
the Trust Units.




Depletion of Reserves

The Trust has certain unique attributes, which differentiate it from other oil
and gas industry participants. Distributions of Distributable Cash in respect
of Providents oil and gas properties, absent commodity price increases or cost
effective acquisition and development activities, will decline over time in a
manner consistent with declining production from typical oil, natural gas and
natural gas liquids reserves. Provident will not be reinvesting cash flow in
the same manner as other industry participants. Accordingly, absent capital
injections, Providents initial production levels and reserves will decline.

Providents future oil and natural gas reserves and production, and therefore
its cash flows, will be highly dependent on Providents success in exploiting
its reserve base and acquiring additional reserves. Without reserve additions
through acquisition or development activities, Providents reserves and
production will decline over time as reserves are exploited.

To the extent that external sources of capital, including the issuance of
additional Trust Units (through public offerings, the Trusts premium
distribution, distribution reinvestment and optional unit purchase plan or
otherwise) become limited or unavailable, Providents ability to make the
necessary capital investments to maintain or expand its oil and natural gas
reserves will be impaired. To the extent that Provident is required to use
cash flow to finance capital expenditures or property acquisitions, the level
of Distributable Cash will be reduced.

There can be no assurance that Provident will be successful in developing or
acquiring additional reserves on terms that meet the Trusts investment
objectives.




Competition

The industry is highly competitive in the acquisition of exploration prospects
and the development of new sources of production and the sale of oil and
natural gas.




Changes in Legislation

There can be no assurance that the treatment of mutual fund trusts will not be
changed in a manner, which adversely affects Trust Unitholders. If the Trust
ceases to qualify as a mutual fund trust under the Tax Act, the Trust Units
will cease to be qualified investments for registered retirement savings plans,
deferred profit sharing plans and registered retirement income funds.




Investment Eligibility

The Trust will endeavour to ensure that the Trust Units continue to be
qualified investments for registered retirement savings plans, deferred profit
sharing plans and registered retirement income funds. The Tax Act imposes
penalties for the acquisition or holding of non-qualified or ineligible
investments and there is no assurance that the conditions prescribed for such
qualified or eligible investments will be adhered to at any particular time.




Nature of Trust Units

The Trust Units do not represent a traditional investment in the oil and
natural gas sector and should not be viewed by investors as shares in
Provident. The Trust Units represent a fractional interest in the Trust. The
Trust Units will not represent a direct investment in Providents business. As
holders of Trust Units,

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Trust Unitholders will not have the statutory rights normally associated with
ownership of shares of a corporation including, for example, the right to bring
oppression or derivative actions.

The Trusts primary assets will be the Initial Notes, the Acquisition Notes,
the Richland Notes (and any other notes, which Provident may issue to the Trust
from time to time), the Provident Royalties and the Provident Shares. The
price per Trust Unit is a function of the anticipated Distributable Cash, the
oil and gas properties of Provident and Providents ability to affect long-term
growth in the value of the Trust. The market price of the Trust Units will be
sensitive to a variety of market conditions including, but not limited to,
interest rates and the ability of the Trust to acquire suitable oil and natural
gas properties. Changes in market conditions may adversely affect the trading
price of the Trust Units.

The Trust Units are not"deposits within the meaning of theCanada Deposit
Insurance Corporation Act(Canada) and are not insured under the provisions of
that Act or any other legislation. Furthermore the Trust is not a trust company
and, accordingly, it is not registered under any trust and loan company
legislation as it does not carry on or intend to carry on the business of a
trust company.




Redemption Right

It is anticipated that the redemption right will not be the primary mechanism
for Trust Unitholders to liquidate their investments. Initial Notes or
Redemption Notes, which may be distributed in specie to Trust Unitholders in
connection with a redemption, will not be listed on any stock exchange and no
established market is expected to develop for such Initial Notes or Redemption
Notes. Cash redemptions are subject to limitations.




Unitholder Limited Liability

The Trust Indenture provides that no Trust Unitholder will be subject to any
liability in connection with the Trust or its assets or obligations and, in the
event that a court determines that Trust Unitholders are subject to any such
liabilities, the liabilities will be enforceable only against, and will be
satisfied only out of, the Unitholders share of the Trusts assets.

The Trust Indenture provides that all written instruments signed by or on
behalf of the Trust must contain a provision to the effect that such obligation
will not be binding upon Unitholders personally. Personal liability may also
arise in respect of claims against the Trust that do not arise under contracts,
including claims in tort, claims for taxes and possibly certain other statutory
liabilities. The possibility of any personal liability of this nature arising
is considered unlikely.

The operations of the Trust will be conducted, upon the advice of counsel, in
such a way and in such jurisdictions as to avoid as far as possible any
material risk of liability on the Trust Unitholders for claims against the
Trust.




Dependence on Provident

The Trust is an open-ended energy trust, which will be entirely dependent upon
the operations and assets of Provident through the ownership of the Provident
Shares, the Initial Notes, the Acquisition Notes, the Richland Notes and the
Provident Royalties. Accordingly, the cash distributions to the Trust
Unitholders will be dependent upon the ability of Provident to pay its interest
obligations under the Initial Notes, to declare and pay dividends on the
Provident Shares and to make payments under the Provident Royalties.




Regulatory Matters

Providents operations are subject to a variety of federal, provincial laws and
regulations, including laws and regulations relating to the protection of the
environment.

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Conflicts of Interest

The directors and officers of Provident are engaged in and will continue to
engage in other activities in the oil and natural gas industry and, as a result
of these and other activities, the directors and officers of Provident may
become subject to conflicts of interest. The ABCA provides that in the event
that a director has an interest in a contract or proposed contract or
agreement, the director shall disclose his interest in such contract or
agreement and shall refrain from voting on any matter in respect of such
contract or agreement unless otherwise provided under the ABCA. To the extent
that conflicts of interest arise, such conflicts will be resolved in accordance
with the provisions of the ABCA. The business of Provident is subject to other
risks and matters, which are outside of their control.




DOCUMENTS INCORPORATED BY REFERENCE

Any statement contained in a document incorporated or deemed to be incorporated
by reference herein shall be deemed to be modified or superseded for the
purposes of this Annual Information Form to the extent that a statement
contained herein, or any other subsequently filed document which also is or is
deemed to be incorporated by reference herein, modifies or supersedes that
statement. The modifying or superseding statement need not state that it has
modified or superseded a prior statement or include any other information set
forth in the document that is modified or superseded. The making of a
modifying or superseding statement shall not be deemed an admission for any
purposes that the modified or superseded statement, when made, constituted a
misrepresentation, an untrue statement of a material fact or an omission to
state a material fact that is required to be stated or that is necessary to
make a statement not misleading in light of the circumstances in which it was
made. Any statement so modified or superseded shall not be deemed, except as
so modified or superseded, to constitute a part of this Annual Information
Form.

The Trust will provide without charge to each person to whom this Annual
Information Form is delivered, upon the written or oral request of such person,
a copy of any or all of the documents incorporated herein by reference, other
than exhibits to such documents (unless such exhibits are specifically
incorporated by reference into such documents). Requests for such documents
should be directed to the office of the Chief Executive Officer, Provident
Energy Ltd., 700, 112  4th Street S.W., Calgary, Alberta T2P 0H3, telephone:
(403) 296-2233.




ADDITIONAL INFORMATION




Principal Holders Of Trust Units

As at the date hereof, to the knowledge of Provident, no person or company
owned of record or beneficially, directly or indirectly, more than 10% of the
issued and outstanding Trust Units. As at May 7, 2003, the directors and
senior officers of Provident, as a group, beneficially owned, directly or
indirectly, 1,239,796 Trust Units or approximately 2.1 percent of the issued
and outstanding Trust Units and 1,682,242 exchangeable shares of Provident
Energy Ltd. representing 100% of the issued and outstanding exchangeable shares
of Provident Energy Ltd. Each such exchangeable share of Provident held by
such director or senior officer is exchangeable into Trust Units at the current
exchange ratio of 1.03508. The directors and senior officers of Provident do
not beneficially own, directly or indirectly, or exercise control or direction
over any of the exchangeable shares of Provident Acquisitions Inc.




Requests For Information

Provident will provide to any person, upon request to the Corporate Secretary
of Provident:



|1. |  | when the securities of the Trust are in the course of a distribution
pursuant to a short form
prospectus or a preliminary short form prospectus has been filed in
respect of a proposed
distribution of its securities:
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| | (a) |  | one copy of the Annual Information Form of the Trust, together with
one copy of any
document, or the pertinent pages of any document, incorporated by
reference in the
Annual Information Form;                                                                                 
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | one copy of the Financial Statements of the Trust for the completed
financial year ended
December 31, 2002, together with the accompanying report of the auditors
thereon, as
well as one copy of any interim financial statements of the Trust
subsequent to
December 31, 2002;
|
| | (c) |  | one copy of the Management Proxy Statement and Information Circular of
the Trust
dated March 31, 2003; and                                                                                                                                                                      
|
| | (d) |  | one copy of any other documents that are incorporated by reference
into the preliminary
short form prospectus or the short form prospectus that are not required
under paragraphs
a, b, or c above; or                                                                          



|2. |  | at any time, one copy of any of the document referred to in paragraphs 1(a),
(b), and (c) above,
provided Provident may require the payment of a reasonable charge if the
request is made by a
person who is not a security holder of the Trust.
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Additional information related to the remuneration of the Manager for the year
ended December 31, 2002 and indebtedness of the directors and officers of the
Manager and Provident, and the principal holders of Trust Units of the Trust,
options to purchase Trust Units and interests of insiders in material
transactions, where applicable, is contained in the Management Proxy Statement
and Information Circular of the Trust dated March 31, 2003, which relates to
the Annual and Special Meeting of the unitholders of the Trust held on May 7,
2003. Additional financial information is provided in the Trusts audited
consolidated financial statements for the year ended December 31, 2002.

Additional copies of this Annual Information Form may be obtained from
Provident. Please contact:

| |                                                                                                                          |                              
| | ------------------------------------------------------------------------------------------------------------------------ | -----------------------------
| | Mr. Thomas W. Buchanan
Chief Executive Officer
Provident Energy Ltd.
700, 112  4th Street S.W.
Calgary, Alberta T2P 0H3
|
| | Telephone:
Fax:                                                                                                          | (403) 296-2233
(403) 261-6696

Copies of the Trusts continuous disclosure documents are available on
www.sedar.com.

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SCHEDULE A

FINANCIAL STATEMENTS OF RICHLAND PETROLEUM CORPORATION

AUDITORS REPORT

To the Shareholder
Richland Petroleum Corporation

We have audited the consolidated balance sheets of Richland Petroleum
Corporation as at December 31, 2001 and 2000 and the consolidated statements of
income and retained earnings and cash flows for each of the years in the three
year period ended December 31, 2001. These financial statements are the responsibility
of the Companys management. Our responsibility is to express an opinion on
these financial statements based on our audits.

We conducted our audits in accordance with Canadian generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation.

In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at December 31,
2001 and 2000 and the results of its operations and its cash flows for each of
the years in the three year period ended December 31, 2001 in accordance with
Canadian generally accepted accounting principles.

Collins Barrow Calgary LLP
Chartered Accountants

Calgary, Alberta
February 22, 2002

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RICHLAND PETROLEUM CORPORATION
CONSOLIDATED BALANCE SHEETS

Canadian Dollars (000s)

|                                       |                                          |      |         |        |  |   |         |        | 
|-------------------------------------- | ---------------------------------------- | ---- | ------- | ------ |  | - | ------- | ------ | 
|As at December 31,                     |                                          | 2001 |         | 2000  
|                                       |                                          |      |         |       
|Assets                                 |                                          |      |         |        |  |   |         |       
|Current assets                         |                                          |      |         |        |  |   |         |       
|                                       | Accounts receivable                      |      | $       | 14,327 |  |   | $       | 21,326 | 
|                                       | Marketable securities                    |      |         | 2      |  |   |         | 411    | 
|                                       |                                          |      |         |        |  |   |         |        | 
|                                       |                                          |      | 14,329  |        |  |   | 21,737  |       
|Long-term investment                   |                                          |      | 35      |        |  |   | 35      |       
|Property, plant and equipment (Note 3) |                                          |      | 178,131 |        |  |   | 128,899 |       
|                                       |                                          |      |         |        |  |   |         |        | 
|                                       |                                          |      | 192,495 |        |  |   | 150,671 |       
|                                       |                                          |      |         |        |  |   |         |        | 
|Liabilities                            |                                          |      |         |        |  |   |         |       
|Current liabilities                    |                                          |      |         |        |  |   |         |       
|                                       | Accounts payable and accrued liabilities |      |         | 22,060 |  |   |         | 18,555 | 
|Long-term debt (Note 4)                |                                          |      | 75,973  |        |  |   | 47,146  |       
|Provision for future site restoration  |                                          |      | 2,342   |        |  |   | 1,797   |       
|Future income taxes (Note 5)           |                                          |      | 25,875  |        |  |   | 20,193  |       
|Shareholders Equity                   |                                          |      |         |        |  |   |         |       
|Share capital (Note 6)                 |                                          |      | 58,968  |        |  |   | 59,690  |       
|Retained earnings                      |                                          |      | 7,277   |        |  |   | 3,290   |       
|                                       |                                          |      |         |        |  |   |         |        | 
|                                       |                                          |      | 66,245  |        |  |   | 62,980  |       
|                                       |                                          |      |         |        |  |   |         |        | 
|                                       |                                          | $    | 192,495 |        |  | $ | 150,671 |       
|                                       |                                          |      |         |        |  |   |         |        | 

See accompanying notes to the financial statements.

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RICHLAND PETROLEUM CORPORATION
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS (DEFICIT)

Canadian Dollars (000s) except per share amounts

|                                                   |                                       |      |        |        |  |      |        |        |  |   |        |        |  
|-------------------------------------------------- | ------------------------------------- | ---- | ------ | ------ |  | ---- | ------ | ------ |  | - | ------ | ------ | -
|Years Ended December 31,                           |                                       | 2001 |        | 2000   |  | 1999
|                                                   |                                       |      |        |        |  |     
|Revenue                                            |                                       |      |        |        |  |      |        |        |  |   |        |       
|                                                   | Net oil and gas sales                 |      | $      | 65,532 |  |      | $      | 54,806 |  |   | $      | 27,923 |  
|                                                   | Gain on sale of marketable securities |      |        | 301    |  |      |        |       |  |   |        |       |  
|                                                   |                                       |      |        |        |  |      |        |        |  |   |        |        |  
|                                                   |                                       |      | 65,833 |        |  |      | 54,806 |        |  |   | 27,923 |       
|Expenses                                           |                                       |      |        |        |  |      |        |        |  |   |        |       
|                                                   | Production                            |      |        | 13,159 |  |      |        | 11,243 |  |   |        | 6,396  |  
|                                                   | General and administrative            |      |        | 3,889  |  |      |        | 2,597  |  |   |        | 2,758  |  
|                                                   | Interest on long-term debt            |      |        | 4,343  |  |      |        | 3,079  |  |   |        | 1,936  |  
|                                                   | Other interest                        |      |        | 254    |  |      |        | 164    |  |   |        | 186    |  
|                                                   | Write-down of marketable securities   |      |        |       |  |      |        |       |  |   |        | 188    |  
|                                                   | Provision for future site restoration |      |        | 651    |  |      |        | 555    |  |   |        | 399    |  
|                                                   | Depletion and depreciation            |      |        | 32,524 |  |      |        | 20,799 |  |   |        | 13,902 |  
|                                                   |                                       |      |        |        |  |      |        |        |  |   |        |        |  
|                                                   |                                       |      | 54,820 |        |  |      | 38,437 |        |  |   | 25,765 |       
|                                                   |                                       |      |        |        |  |      |        |        |  |   |        |        |  
|Income before taxes                                |                                       |      | 11,013 |        |  |      | 16,369 |        |  |   | 2,158  |       
|                                                   |                                       |      |        |        |  |      |        |        |  |   |        |        |  
|Income and other taxes(Note 5)                     |                                       |      |        |        |  |      |        |        |  |   |        |       
|                                                   | Current taxes                         |      |        | 2,507  |  |      |        |       |  |   |        |       |  
|                                                   | Capital taxes                         |      |        | 964    |  |      |        | 1,185  |  |   |        | 784    |  
|                                                   | Future income tax (recovery)          |      |        | 3,555  |  |      |        | 8,119  |  |   |        | (2,328 | )
|                                                   |                                       |      |        |        |  |      |        |        |  |   |        |        |  
|                                                   |                                       |      | 7,026  |        |  |      | 9,304  |        |  |   | (1,544 | )     
|                                                   |                                       |      |        |        |  |      |        |        |  |   |        |        |  
|Net income for the period                          |                                       |      | 3,987  |        |  |      | 7,065  |        |  |   | 3,702  |       
|Retained earnings (deficit) at beginning of period |                                       |      | 3,290  |        |  |      | (3,635 | )      |  |   | (7,337 | )     
|Shares repurchased and cancelled (Note 6)          |                                       |      |       |        |  |      | (140   | )      |  |   |       |       
|                                                   |                                       |      |        |        |  |      |        |        |  |   |        |        |  
|Retained earnings (deficit) at end of period       |                                       | $    | 7,277  |        |  | $    | 3,290  |        |  | $ | (3,635 | )     
|                                                   |                                       |      |        |        |  |      |        |        |  |   |        |        |  
|Net income per share  basic and diluted (Note 8)  |                                       | $    | 0.15   |        |  | $    | 0.28   |        |  | $ | 0.17   |       
|                                                   |                                       |      |        |        |  |      |        |        |  |   |        |        |  

See accompanying notes to the financial statements.

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RICHLAND PETROLEUM CORPORATION CONSOLIDATED
STATEMENT OF CASH FLOWS

Canadian Dollars (000s) except per share amounts

|                                              |                                                  |                                       |         |         |        |      |         |         |        |   |         |         |        |  
|--------------------------------------------- | ------------------------------------------------ | ------------------------------------- | ------- | ------- | ------ | ---- | ------- | ------- | ------ | - | ------- | ------- | ------ | -
|Years Ended December 31,                      |                                                  | 2001                                  |         | 2000    |        | 1999
|                                              |                                                  |                                       |         |         |        |     
|Cash provided by operating activities         |                                                  |                                       |         |         |        |      |         |         |        |   |         |        
|                                              | Net income for the period                        |                                       | $       | 3,987   |        |      | $       | 7,065   |        |   | $       | 3,702   |       
|                                              | Add (deduct) non-cash items:                     |                                       |         |         |        |      |         |         |        |   |         |         |       
|                                              |                                                  | Write-down of marketable securities   |         |         |       |      |         |         |       |   |         |         | 188    |  
|                                              |                                                  | Provision for future site restoration |         |         | 651    |      |         |         | 555    |   |         |         | 399    |  
|                                              |                                                  | Depletion and depreciation            |         |         | 32,524 |      |         |         | 20,799 |   |         |         | 13,902 |  
|                                              |                                                  | Future income tax expense (recovery)  |         |         | 3,555  |      |         |         | 8,119  |   |         |         | (2,328 | )
|                                              |                                                  | Other non-cash items                  |         |         | 517    |      |         |         | 187    |   |         |         | 155    |  
|                                              |                                                  |                                       |         |         |        |      |         |         |        |   |         |         |       
|                                              | Cash flow from operations                        |                                       |         | 41,234  |        |      |         | 36,725  |        |   |         | 16,018  |       
|                                              | Change in non-cash working capital               |                                       |         | 985     |        |      |         | (439    | )      |   |         | (581    | )     
|                                              |                                                  |                                       |         |         |        |      |         |         |        |   |         |         |       
|                                              |                                                  |                                       | 42,219  |         |        |      | 36,286  |         |        |   | 15,437  |        
|                                              |                                                  |                                       |         |         |        |      |         |         |        |   |         |         |       
|Cash used in investing activities             |                                                  |                                       |         |         |        |      |         |         |        |   |         |        
|                                              | Acquisition of subsidiary (Note 2)               |                                       |         |        |        |      |         |        |        |   |         | (10,697 | )     
|                                              | Expenditures on property, plant and equipment    |                                       |         | (47,456 | )      |      |         | (38,143 | )      |   |         | (18,547 | )     
|                                              | Acquisition of oil and gas properties            |                                       |         | (34,666 | )      |      |         | (11,867 | )      |   |         | (1,588  | )     
|                                              | Disposition of oil and gas properties            |                                       |         | 1,265   |        |      |         | 1,520   |        |   |         | 10,841  |       
|                                              | Abandonment expenditures                         |                                       |         | (106    | )      |      |         | (200    | )      |   |         | (268    | )     
|                                              | Proceeds on disposal of marketable securities    |                                       |         | 710     |        |      |         | 203     |        |   |         |        |       
|                                              | Net change in non-cash investing working
capital |                                       |         | 8,847   |        |      |         | (6,383  | )      |   |         | (5,056  | )     
|                                              |                                                  |                                       |         |         |        |      |         |         |        |   |         |         |       
|                                              |                                                  |                                       | (71,406 | )       |        |      | (54,870 | )       |        |   | (25,315 | )      
|                                              |                                                  |                                       |         |         |        |      |         |         |        |   |         |         |       
|Cash provided by financing activities         |                                                  |                                       |         |         |        |      |         |         |        |   |         |        
|                                              | Increase in long term bank debt                  |                                       |         | 28,827  |        |      |         | 14,007  |        |   |         | 2,920   |       
|                                              | Issue of common shares, net of issue costs       |                                       |         | 360     |        |      |         | 4,577   |        |   |         | 6,958   |       
|                                              |                                                  |                                       |         |         |        |      |         |         |        |   |         |         |       
|                                              |                                                  |                                       | 29,187  |         |        |      | 18,584  |         |        |   | 9,878   |        
|                                              |                                                  |                                       |         |         |        |      |         |         |        |   |         |         |       
|Decrease in cash                              |                                                  |                                       |        |         |        |      |        |         |        |   |        |        
|Cash beginning of period                      |                                                  |                                       |        |         |        |      |        |         |        |   |        |        
|                                              |                                                  |                                       |         |         |        |      |         |         |        |   |         |         |       
|Cash end of period                            |                                                  | $                                     |        |         |        | $    |        |         |        | $ |        |        
|Cash flow from operations per share  basic   |                                                  | $                                     | 1.55    |         |        | $    | 1.45    |         |        | $ | 0.74    |        
|Cash flow from operations per share  diluted |                                                  | $                                     | 1.53    |         |        | $    | 1.44    |         |        | $ | 0.73    |        

See accompanying notes to the financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Canadian dollars, tabular amounts in 000s  except share and per share amounts)

December 31, 2001 and 2000



|1. |  | Significant accounting policies
|-- |  | -------------------------------



| | (a) |  | Consolidation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | These consolidated financial statements include the accounts of the
Company and its wholly-
owned subsidiaries, Terraquest Inc., a company incorporated in the United
States, and Coast
Pacific RLP-97 Exploration Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| | (b) |  | Petroleum and natural gas properties                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |     |  | The Company follows the full cost method of accounting for petroleum and
natural gas properties
whereby all costs related to the exploration and development of petroleum
and natural gas
properties, including applicable administrative expenses, are capitalized
to cost centres (Canada
and U.S.). The proceeds on disposition of petroleum and natural gas
properties are deducted from
capitalized costs, with no gain or loss calculated unless such disposal
would alter the annual
depletion rate by 20% or more.                                                                                                                                                                                                                                                                                                        
|
| | (c) |  | Depletion and depreciation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| |     |  | Costs related to petroleum and natural gas properties are depleted and
depreciated within cost
centres on the unit-of-production basis, based on the Companys share of
total proven petroleum
and natural gas reserves. Costs eligible for depletion and depreciation
include total capitalized
costs, less the cost of unproven properties, plus estimated future
development costs of proven
undeveloped reserves. Costs of acquiring and evaluating unproven
properties are excluded from
costs subject to depletion and depreciation until it is determined whether
proven reserves are
attributable to the properties or impairment occurs. Natural gas volumes
are converted to
equivalent barrels of crude oil on the basis of relative energy content,
where six thousand cubic
feet of gas equates to one barrel of oil.
|
| |     |  | The costs of corporate and other capital assets are depreciated at rates
approximating their useful
life on a declining balance basis of 20% per year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| | (d) |  | Ceiling test                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| |     |  | The Company applies a ceiling test to capitalized costs to ensure that
these costs, net of future
income taxes and estimated future site restoration costs, do not exceed
the estimated value of
future net reserves from the production of proven reserves plus the lower
of cost or estimated fair
market value of unproven properties, less estimated future administrative
costs, future site
restoration costs, financing costs and income taxes (cost ceiling).
Future net revenues are based
on prices in effect at year-end. Any required provisions are charged to
income as additional
depletion and depreciation expense.                                                                                                                                                                                            
|
| | (e) |  | Future site restoration costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |     |  | Estimated future site restoration and abandonment costs are charged
against income, using the
unit-of-production method. Costs are estimated by the Companys engineers
based on current
regulations, costs, technology and industry standards. At December 31,
2001, Company
engineers estimate this cost to be $6.4 million (2000  $4.9 million).                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| | (f) |  | Measurement uncertainty                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| |     |  | The amounts recorded for depletion and depreciation of oil and gas
properties, the provision for
site restoration and abandonment costs and the ceiling test are based on
estimates. These                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

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| |     |  | estimates include proved reserves, production rates, future oil and
natural gas prices, future costs
and other relevant assumptions. By their nature, these estimates are
subject to measurement
uncertainty and the effect of changes in such estimates on the financial
statements of future
periods could be significant.                                                                                                                                                                                                                                                                                                                                                                      
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (g) |  | Foreign currency translation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| |     |  | Foreign currency denominated assets and liabilities are translated at the
exchange rate prevailing
at the balance sheet date for monetary items and at the transaction date
for non-monetary items.
Revenues and expenses, except depletion and depreciation, are translated
at average exchange
rates for the year. Depletion and depreciation are translated at the same
rate as the related assets.
Gains or losses on translation are taken to income except for those
relating to long-term monetary
items, which are deferred and amortized over the remaining terms of the
related items.
The foreign subsidiary is integrated and translated using the temporal
method as described above.
|
| | (h) |  | Flow-through shares                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |     |  | The Company, from time to time, issues flow-through shares to finance a
portion of its capital
expenditure program. Pursuant to the terms of the flow-through share
agreements, the tax
deductions associated with the expenditures are renounced to the
subscribers. Accordingly, share
capital is reduced and a future tax liability is recorded equal to the
estimated amount of future
income taxes payable by the Company as a result of the renunciations, when
the expenditures are
made.                                                                                                                                                                                                  
|
| | (i) |  | Future income taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |     |  | Future income taxes are calculated using the liability method of tax
allocation accounting. Under
the liability method, income tax assets and liabilities are recorded to
recognize future income tax
inflows and outflows arising from the settlement or recovery of assets and
liabilities at carrying
values. Income tax assets are also recognized for the benefits from tax
losses and deductions that
cannot be identified with particular assets or liabilities, provided those
assets are more likely than
not to be realized. Future income tax assets and liabilities are
determined based on the tax laws
and rates that are anticipated to apply in the period of realization.        
|
| | (j) |  | Hedging activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |     |  | The financial effect of crude oil and natural gas and currency hedging
activities, which have been
arranged to reduce the Companys exposure to fluctuations in commodity
prices and currencies,
are reflected in net oil and gas sales when the related production is
sold.                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| | (k) |  | Joint ventures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |     |  | Certain of the Companys petroleum and natural gas exploration and
production activities are
conducted jointly with others. These financial statements
include only the Companys
proportionate interest in such activities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| | (l) |  | Marketable securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |     |  | Marketable securities are valued at the lower of cost and fair market
value.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| | (m) |  | Stock based compensation plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |     |  | The Company has a stock-based compensation plan, which includes stock
options, share
appreciation rights and an employee stock purchase plan as described in
Note 7.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              



| | (i) |  | No compensation expense is recognized when stock options are issued to
officers, directors
and employees. Any consideration received by the corporation on exercise
of stock options is
credited to share capital.
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| | (ii)  |  | The obligation created by the total number of share appreciation
rights outstanding is
amortized to income over the period the rights become vested. The cash
paid in respect of
exercised share appreciation rights reduces the obligation in the year the
rights are exercised.
| | ----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (iii) |  | Compensation expense is recognized when shares are issued under the
employee stock
purchase plan and an equal amount is charged to share capital. Shares are
issued to
employees at the market price of the Companys shares at the time of
purchase.                            



| | (n) |  | Long-term investment                                                                                                                                                                                    
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | The Company uses the cost method to account for its long-term investment,
whereby the
investment is recorded at its original cost and earnings are recognized
only to the extent received
or receivable.
|
| |     |  | Where there has been a permanent decline in value, the respective
investment is stated at net
realizable value.                                                                                         



|2. |  | Business combinations
|-- |  | ---------------------



| | (a) |  | Effective April 20, 2001, the Company acquired all of the issued and
outstanding
shares of Coast Pacific RLP-97 Exploration Inc. (Coast)
for $934,445
consisting of $35,000 cash and 180,000 common shares at $5.00 per share
for
total share consideration of $899,445.
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | The transaction has been accounted for using the purchase method with the
results of Coasts
operations being included in the consolidated financial statements from
April 20, 2001.                                                                                      
|
| |     |  | Consideration for the purchase consisted of:                                                                                                                                                                                                                              

|                     |  |   |     | 
|-------------------- |  | - | --- | 
|Share capital issued |  | $ | 899 | 
|Other costs          |  |   | 35  | 
|                     |  |   |     | 
|Total purchase price |  | $ | 934 | 
|                     |  |   |     | 



| |     |  | The purchase price was allocated entirely to property, plant and equipment.                                                                                                                                                                                                
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | Effective December 23, 1999, the Company acquired all of the issued and
outstanding shares of Moxie Petroleum Ltd. (Moxie), for
$15,942,343
consisting of $10,790,432 in cash and 1,595,019 common shares at $3.22 per
share for total share consideration of $5,151,911.
|
| |     |  | The transaction has been accounted for using the purchase method with the
results of Moxies operations being included in the consolidated financial
statements from December 23, 1999.                                                                                    
|
| |     |  | Consideration for the purchase consisted of:                                                                                                                                                                                                                               

|                     |  |   |        | 
|-------------------- |  | - | ------ | 
|Cash                 |  | $ | 10,590 | 
|Share capital issued |  |   | 5,152  | 
|Other costs          |  |   | 200    | 
|                     |  |   |        | 
|Total purchase price |  | $ | 15,942 | 
|                     |  |   |        | 

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| |  |  | The purchase price was allocated as follows:
| |  |  | --------------------------------------------

|                                     |  |   |         |  
|------------------------------------ |  | - | ------- | -
|Cash                                 |  | $ | 93      |  
|Investment in Moxie Exploration Ltd. |  |   | 35      |  
|Property, plant and equipment        |  |   | 29,397  |  
|Non-cash working capital deficiency  |  |   | (1,351  | )
|Future site restoration              |  |   | (47     | )
|Long-term debt                       |  |   | (1,950  | )
|Future income taxes                  |  |   | (10,235 | )
|                                     |  |   |         |  
|Total purchase price                 |  | $ | 15,942  |  
|                                     |  |   |         |  

| |  |  | Moxie was amalgamated with the Company effective January 1, 2000.
| |  |  | -----------------------------------------------------------------



|3. |  | Property, plant and equipment
|-- |  | -----------------------------

|                                     |          |      |         |              |  |       |               |         |          |   |         |         | 
|------------------------------------ | -------- | ---- | ------- | ------------ |  | ----- | ------------- | ------- | -------- | - | ------- | ------- | 
|                                     |          |      |         |              |  |       | Accumulated   |         |          |   |        
|                                     |          |      |         |              |  |       | Depletion and |         | Net Book
|December 31, 2001                    |          | Cost |         | Depreciation |  | Value
|                                     |          |      |         |              |  |      
|Petroleum and gas natural properties |          |      |         |              |  |       |               |         |          |   |         |        
|                                     | - Canada |      | $       | 308,214      |  |       | $             | 137,494 |          |   | $       | 170,720 | 
|                                     | - U.S    |      |         | 15,173       |  |       |               | 8,848   |          |   |         | 6,325   | 
|Corporate and other                  |          |      | 2,920   |              |  |       | 1,834         |         |          |   | 1,086   |        
|                                     |          |      |         |              |  |       |               |         |          |   |         |         | 
|Total                                |          | $    | 326,307 |              |  | $     | 148,176       |         |          | $ | 178,131 |        
|                                     |          |      |         |              |  |       |               |         |          |   |         |         | 

|                                     |          |      |         |              |  |       |               |         |          |   |         |         | 
|------------------------------------ | -------- | ---- | ------- | ------------ |  | ----- | ------------- | ------- | -------- | - | ------- | ------- | 
|                                     |          |      |         |              |  |       | Accumulated   |         |          |   |        
|                                     |          |      |         |              |  |       | Depletion and |         | Net Book
|December 31, 2000                    |          | Cost |         | Depreciation |  | Value
|                                     |          |      |         |              |  |      
|Petroleum and gas natural properties |          |      |         |              |  |       |               |         |          |   |         |        
|                                     | - Canada |      | $       | 230,694      |  |       | $             | 109,446 |          |   | $       | 121,248 | 
|                                     | - U.S    |      |         | 11,270       |  |       |               | 4,602   |          |   |         | 6,668   | 
|Corporate and other                  |          |      | 2,587   |              |  |       | 1,604         |         |          |   | 983     |        
|                                     |          |      |         |              |  |       |               |         |          |   |         |         | 
|Total                                |          | $    | 244,551 |              |  | $     | 115,652       |         |          | $ | 128,899 |        
|                                     |          |      |         |              |  |       |               |         |          |   |         |         | 



|   |  | Costs of unproven petroleum and natural gas properties amounting to $23.1
million at December 31, 2001 (2000  $17.4 million) have been excluded from
the depletion calculation. Included in the cost of unproven petroleum and
natural gas properties is $4.8 million (2000  $1.3 million) related to U.S.
properties.                                                                        
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | General and administrative expenses capitalized amounted to $1.5 million at
December 31, 2001 (2000  $1.5 million; 1999  $1.1 million) of a total of
$5.4 million (2000  $4.1 million; 1999  $3.9 million) in general and
administrative expenses. No interest has been capitalized.                                                                                                        
|  
|   |  | At December 31, 2001, the cost centre ceiling, based on prices in effect at
and calculated as described in note 1(d), of the U.S. petroleum and natural
gas properties were less than the capitalized cost of those assets by
$3,675,000. As a result, the Company wrote down petroleum and natural gas
properties by $3,675,000. This amount is included in depletion and
depreciation expense.
|  
|4. |  | Long-term debt                                                                                                                                                                                                                                                                                                                                                                                  

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|   |  | The Company has a demand revolving reducing credit facility with a Canadian
chartered bank in the amount of $95 million at December 31, 2001 (2000  $84
million). The facility may be drawn down or repaid at any time and bears
interest at prime per annum provided the Companys debt to annual cash flow
is less than 3:1. If debt to annual cash flow is between 3:1 and 3.5:1, the
facility will bear interest at prime plus 1% per annum, and if debt to annual
cash flow exceeds 3.5:1, the interest rate increases to prime plus 1.25% per
annum. Security pledged consists of a general security agreement and a
$150,000,000 first floating charge debenture charging all Company assets.
The bank also reserves the right to implement a fixed charge covering 60% of
the borrowing base at its discretion. The bank does not foresee requesting
repayment in the next fiscal year and consequently, the loan has been
classified as long term.
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|5. |  | Income and other taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      



| | (a) |  | Income tax expense differs from that which would be expected from applying
the
combined effective Canadian federal and provincial income tax rates of
42.62%
(2000  44.62%; 1999  44.62%) to income before income and other taxes as
follows:
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                    |                                                         |      |       |        |   |      |       |        |   |   |        |        |  
|--------------------------------------------------- | ------------------------------------------------------- | ---- | ----- | ------ | - | ---- | ----- | ------ | - | - | ------ | ------ | -
|For the years ended                                 |                                                         | 2001 |       | 2000   |   | 1999
|                                                    |                                                         |      |       |        |   |     
|Computed expected income taxes                      |                                                         | $    | 4,694 |        |   | $    | 7,304 |        |   | $ | 963    |       
|Increase (decrease) in income taxes resulting from: |                                                         |      |       |        |   |      |       |        |   |   |        |       
|                                                    | Royalties and other payments to provincial governments, |      |       | 8,609  |   |      |       | 7,637  |   |   |        | 2,759  |  
|                                                    | net
Resource allowance                                  |      |       | (7,336 | ) |      |       | (6,397 | ) |   |        | (2,469 | )
|                                                    | Capital taxes                                           |      |       | 964    |   |      |       | 1,185  |   |   |        | 784    |  
|                                                    | Reduction in tax rate                                   |      |       | (1,126 | ) |      |       |       |   |   |        |       |  
|                                                    | U.S. tax pools with no value                            |      |       | 1,566  |   |      |       |       |   |   |        |       |  
|                                                    | Adjustments due to federal tax assessments              |      |       |       |   |      |       | (411   | ) |   |        |        |  
|                                                    | Future tax recoveries                                   |      |       |       |   |      |       |       |   |   |        | (3,500 | )
|                                                    | Other                                                   |      |       | (345   | ) |      |       | (14    | ) |   |        | (81    | )
|                                                    |                                                         |      |       |        |   |      |       |        |   |   |        |       
|                                                    |                                                         | $    | 7,026 |        |   | $    | 9,304 |        |   | $ | (1,544 | )     
|                                                    |                                                         |      |       |        |   |      |       |        |   |   |        |       



| | (b) |  | The components of the future income tax liability are as follows:
| | --- |  | -----------------------------------------------------------------

|                                                |  |      |        |      |  |   |        |  
|----------------------------------------------- |  | ---- | ------ | ---- |  | - | ------ | -
|For the years ended                             |  | 2001 |        | 2000
|                                                |  |      |        |     
|Property, plant and equipment                   |  | $    | 27,398 |      |  | $ | 22,544 |  
|Future site restoration                         |  |      | (998   | )    |  |   | (802   | )
|Attributed Canadian Royalty Income carryforward |  |      | (455   | )    |  |   | (1,341 | )
|Other                                           |  |      | (70    | )    |  |   | (208   | )
|                                                |  |      |        |      |  |   |        |  
|                                                |  | $    | 25,875 |      |  | $ | 20,193 |  
|                                                |  |      |        |      |  |   |        |  



| |  | U.S. tax pools approximating $3.7 million (2000  $NIL) have not been
recognized for accounting purposes.
| |  | ---------------------------------------------------------------------------------------------------------



|6. |  | Share capital                                                                                  
|-- |  | -----------------------------------------------------------------------------------------------
|  
|   |  | Authorized                                                                                     
|  
|   |  | The Companys authorized share capital consists of an unlimited number of
voting Common Shares.
|  
|   |  | Issued                                                                                         

|                                               |  |        |        |        |  |        |        |        |  |  |        |  |  |   |        | 
|---------------------------------------------- |  | ------ | ------ | ------ |  | ------ | ------ | ------ |  |  | ------ |  |  | - | ------ | 
|                                               |  | 2001   |        | 2000  
|                                               |  |        |        |       
|                                               |  | Number |        | Amount |  | Number |        | Amount
|                                               |  |        |        |        |  |        |        |       
|Balance at beginning of the year               |  |        | 26,386 |        |  | $      | 62,533 |        |  |  | 25,347 |  |  | $ | 59,109 | 
|Issued to effect business combination (Note 2) |  |        | 180    |        |  |        | 899    |        |  |  |       |  |  |   |       | 

68



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|                                                                                  |  |  |        |   |  |   |        |   |  |  |        |   |  |   |        |  
|--------------------------------------------------------------------------------- |  |  | ------ | - |  | - | ------ | - |  |  | ------ | - |  | - | ------ | -
|Acquired and cancelled (Note 6[a])                                                |  |  | (32    | ) |  |   | (127   | ) |  |  | (106   | ) |  |   | (239   | )
|Flow-through shares issued, net of tax cost of
$2,131 (2000 - $1,785) (Note 6[b]) |  |  |       |   |  |   | (2,131 | ) |  |  | 1,000  |   |  |   | 3,215  |  
|Stock options exercised (Note 7[a])                                               |  |  | 206    |   |  |   | 497    |   |  |  | 108    |   |  |   | 324    |  
|Issued for services pursuant to employee share
purchase plan (Note 7[c])          |  |  | 37     |   |  |   | 145    |   |  |  | 37     |   |  |   | 124    |  
|Issue costs net of income taxes of $4 (2000 -
$1,427)                             |  |  |       |   |  |   | (2,848 | ) |  |  |       |   |  |   | (2,843 | )
|                                                                                  |  |  |        |   |  |   |        |   |  |  |        |   |  |   |        |  
|Balance at end of the year                                                        |  |  | 26,777 |   |  | $ | 58,968 |   |  |  | 26,386 |   |  | $ | 59,690 |  
|                                                                                  |  |  |        |   |  |   |        |   |  |  |        |   |  |   |        |  



| | (a) |  | Effective October 12, 2001, the company commenced a normal course issuer
bid under which
it can purchase up to 1,300,000 of its Common Shares. As of December 31,
2001, the
Company acquired 32,000 Common Shares at an average price of $3.97 per
share.
Effective September 6, 2000, the Company commenced a normal course issuer
bid under
which it can purchase up to 1,400,000 of its Common Shares until September
5, 2001. Under
this bid, the Company acquired 106,000 Common Shares at an average price
of $3.56 per
share.
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | During 2000, the Company entered into agreements to issue 1,000,000 Common
Shares as
flow-through shares. A total of 1,000,000 shares were issued at a price
of $5.00 per share.
The tax adjustment related to these expenditures was made in 2001 as this
is when the related
expenditures were incurred.                                                                                                                                                                                                                          



|7. |  | Stock-based compensation plans
|-- |  | ------------------------------



| |  | At December 31, 2001, the Company has the following stock-based compensation
plans, which are described below:
| |  | --------------------------------------------------------------------------------------------------------------



| | (a) |  | Employee fixed stock option plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | Under the employee fixed stock option plan, the Company may grant options
to its employees, officers and directors for up to 2,500,000 Common
Shares. Options granted under the plan have a term of seven years and
vest evenly over a four-year period. The exercise price of each option
equals the market price of the Companys shares at the date of grant. At
December 31, 2001, stock options were outstanding at prices ranging from
$1.65 to $4.95 per share, expiring at various dates until August 2008.
|
| |     |  | A summary of the status of the Companys fixed stock option plan as of
December 31, 2001 and 2000 and changes during the years then ended is as
follows:                                                                                                                                                                                                                                                                                                                                                           

|                                 |  |         |       |          |  |          |      |          |  |  |       |          |  |   |      | 
|-------------------------------- |  | ------- | ----- | -------- |  | -------- | ---- | -------- |  |  | ----- | -------- |  | - | ---- | 
|                                 |  | 2001    |       | 2000    
|                                 |  |         |       |         
|                                 |  |         |       |          |  | Weighted |      |          |  |  |       | Weighted
|                                 |  | Number  |       | Average  |  | Number   |      | Average 
|                                 |  | of      |       | Exercise |  | of       |      | Exercise
|                                 |  | Options |       | Price    |  | Options  |      | Price   
|                                 |  |         |       |          |  |          |      |         
|Outstanding at beginning of year |  |         | 2,035 |          |  | $        | 3.05 |          |  |  | 1,666 |          |  | $ | 2.96 | 
|Granted                          |  |         | 438   |          |  | $        | 3.70 |          |  |  | 665   |          |  | $ | 3.42 | 
|Exercised                        |  |         | (206  | )        |  | $        | 2.41 |          |  |  | (108  | )        |  | $ | 3.00 | 
|Cancelled                        |  |         | (60   | )        |  | $        | 3.06 |          |  |  | (188  | )        |  | $ | 3.56 | 
|                                 |  |         |       |          |  |          |      |          |  |  |       |          |  |   |      | 
|Outstanding at end of period     |  |         | 2,207 |          |  | $        | 3.24 |          |  |  | 2,035 |          |  | $ | 3.05 | 
|                                 |  |         |       |          |  |          |      |          |  |  |       |          |  |   |      | 
|Exercisable at end of period     |  |         | 860   |          |  | $        | 3.01 |          |  |  | 613   |          |  | $ | 2.75 | 
|                                 |  |         |       |          |  |          |      |          |  |  |       |          |  |   |      | 

69



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##### Table of Contents





| |     |  | Subsequent to December 31, 2001, all outstanding and unexercised options
at January 15, 2002 were cancelled or otherwise terminated pursuant to the
closing agreements between the Company and Provident Energy Trust (Note 13).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | Share appreciation rights                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |     |  | On October 10, 2001, the Company cancelled the share appreciation rights
plan and issued each right holder an equal number of stock options. The
options were granted at an exercise price of $3.50 per share with vesting
terms and conditions identical to the share appreciation rights. At the
time the plan was cancelled, the market value of the Companys shares was
less than the exercise price of the share appreciation rights and as a
result no amount was recorded as compensation expense.                                                                                                                                                                                                                                         
|
| |     |  | The share appreciation rights entitled the holder to cash compensation
equal to the difference between the value of the Common Shares at the date
of the share appreciation right agreement (the notional exercise price)
and the fair market value of the Companys Common Shares on the date of
exercise. The notional exercise price of each share appreciation right
was $3.20 per Common Share. At December 31, 2000, there were 616,400
share appreciation rights outstanding and the cumulative share
appreciation rights liability included in accounts payable was $277,000.
During 2001, 315,400 (2000  60,000) rights were exercised for amounts
totalling $438,000 (2000  $57,300) and the remaining 301,000 rights were
cancelled.
|
| | (c) |  | Employee share purchase plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |     |  | In accordance with the employee share purchase plan, the Company is
authorized to match employees purchases under the plan from a minimum of
2% to a maximum of 5% of the employees regular gross earnings, through
the issuance of Common Shares of the Company, for all full-time employees.                                                                                                                                                                                                                                                                                                                                                                                                                                                   



|8. |  | Income and cash flow from operations per share
|-- |  | ----------------------------------------------



| |  | Diluted income per share is calculated using the treasury stock method,
whereby it is assumed that proceeds on the exercise of stock options are used
by the Company to repurchase Company shares at the weighted average market
price during the year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | The Company has changed its policy for calculating diluted income per share
effective January 1, 2001, to comply with new standards approved by the
Canadian Institute of Chartered Accountants. The most significant change is
that when calculating diluted income per share, under the new treasury stock
method, it is assumed that proceeds received on the exercise of in the
money stock options and warrants are used to repurchase Company shares at
the weighted average market price during the year whereas under the old
standard; the imputed earnings method; it is assumed that proceeds received
on the exercise of stock options and warrants are invested to earn an assumed
rate of return. The Company, effective January 1, 2001, also commenced
calculating diluted cash flow from operations per share on a basis consistent
with that described above.
|
| |  | The new standard has been applied retroactively with restatement and the
effect of the change on current and prior years diluted income per share and
diluted cash flow from operations per share as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|

70



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|                  |  |                |      |                        |  |          |      |          |  |   |      |  |  |   |      | 
|----------------- |  | -------------- | ---- | ---------------------- |  | -------- | ---- | -------- |  | - | ---- |  |  | - | ---- | 
|                  |  | Diluted income |      | Diluted cash flow from
|                  |  | per share      |      | operations per share  
|                  |  |                |      |                       
|                  |  | Treasury       |      | Imputed                |  | Treasury |      | Imputed 
|                  |  | Stock          |      | Earnings               |  | Stock    |      | Earnings
|                  |  |                |      |                        |  |          |      |         
|December 31, 2001 |  | $              | 0.15 |                        |  | $        | 0.15 |          |  | $ | 1.53 |  |  | $ | 1.46 | 
|December 31, 2000 |  | $              | 0.28 |                        |  | $        | 0.28 |          |  | $ | 1.44 |  |  | $ | 1.37 | 
|December 31, 1999 |  | $              | 0.17 |                        |  | $        | 0.17 |          |  | $ | 0.73 |  |  | $ | 0.70 | 



| |  | A reconciliation of the denominators for the per share calculations using the
treasury stock method is outlined below:
| |  | ----------------------------------------------------------------------------------------------------------------------

|                                 |  |      |        |      |  |      |        |  |  |  |        | 
|-------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ |  |  |  | ------ | 
|                                 |  | 2001 |        | 2001 |  | 1999
|                                 |  |      |        |      |  |     
|Basic weighted average shares    |  |      | 26,676 |      |  |      | 25,399 |  |  |  | 21,536 | 
|Effect of dilutive stock options |  |      | 361    |      |  |      | 182    |  |  |  | 69     | 
|Effect of convertible warrants   |  |      |       |      |  |      |       |  |  |  | 459    | 
|                                 |  |      |        |      |  |      |        |  |  |  |        | 
|Diluted weighted average shares  |  |      | 27,037 |      |  |      | 25,581 |  |  |  | 22,064 | 



| |  | There is no change to the numerator in the calculation of diluted income per
share for any of the years.
| |  | --------------------------------------------------------------------------------------------------------



|9. |  | Supplementary cash flows disclosure
|-- |  | -----------------------------------

|                   |  |      |       |      |  |      |       |  |  |   |       | 
|------------------ |  | ---- | ----- | ---- |  | ---- | ----- |  |  | - | ----- | 
|                   |  | 2001 |       | 2000 |  | 1999
|                   |  |      |       |      |  |     
|Interest paid      |  | $    | 4,653 |      |  | $    | 3,243 |  |  | $ | 2,122 | 
|                   |  |      |       |      |  |      |       |  |  |   |       | 
|Capital taxes paid |  | $    | 985   |      |  | $    | 1,186 |  |  | $ | 784   | 
|                   |  |      |       |      |  |      |       |  |  |   |       | 



|10. |  | Risk management
|--- |  | ---------------



| | (a) |  | Hedging activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | The Company enters into hedge transactions on crude oil, natural gas and
exchange rates. The agreements entered into are forward financial
transactions providing the Company with a range of fixed prices on the
commodity sold. Net oil and gas sales for the year ended December 31,
2001 include losses of $1.8 million (2000  $9.7 million; 1999  $2.9
million) on these transactions. The fair market value of the hedge
contracts equals the unrecognized gain (loss) as described below.
|
| |     |  | The following hedge transaction is outstanding at December 31, 2001:                                                                                                                                                                                                                                                                                                                                                                                                                              

|            |  |              |  |          |  |                  |  |             |       |                    |  |  |  |  |  | 
|----------- |  | ------------ |  | -------- |  | ---------------- |  | ----------- | ----- | ------------------ |  |  |  |  |  | 
|            |  | Notional     |  | Strike   |  |                  |  |             |       | Unrecognized      
|Commodity   |  | Volume       |  | Price    |  | Term             |  | Gain (Loss)
|            |  |              |  |          |  |                  |  |            
|            |  |              |  |          |  |                  |  |             |       | January 1, 2002 -- |  |  |  | 
|Natural Gas |  | 3,000 GJ/day |  | $4.75/GJ |  | October 31, 2003 |  | $           | 2,038 |                   
|            |  |              |  |          |  |                  |  |             |       |                    |  |  |  |  |  | 



| |     |  | The Company is exposed to credit risk, at December 31, 2001, in the amount of
$2.0 million in the event of non-performance by counter parties to this
transaction.                                                                                                                                                                              
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | Physical commitments                                                                                                                                                                                                                                                                                                                            
|
| |     |  | The Company entered into fixed price contracts to deliver gas totalling 9,500
GJ/day at various prices. One of the contracts entered into is a commodity
collar, which provides a minimum and maximum price for gas delivered based on
the AECO-C one month spot. The following physical sales commitments are
outstanding at December 31, 2001:

71



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|            |  |              |  |                   |  |                                      |  |  |  |  |  | 
|----------- |  | ------------ |  | ----------------- |  | ------------------------------------ |  |  |  |  |  | 
|            |  | Physical     |  |                   |  |                                      |  |  |  | 
|Commodity   |  | Volume       |  | Price             |  | Term                                
|            |  |              |  |                   |  |                                     
|Natural Gas |  | 3,500 GJ/day |  | $6.22/GJ          |  | January 1, 2001 -- October 31, 2002 
|Natural Gas |  | 3,000 GJ/day |  | $5.20/GJ          |  | November 1, 2001 -- October 31, 2003
|Natural Gas |  | 3,000 GJ/day |  | $6.00 to $8.55/GJ |  | November 1, 2001 -- October 31, 2002



| |  |  | All physical contract prices are based on an Alberta delivery point.
| |  |  | --------------------------------------------------------------------



|11. |  | Financial instruments
|--- |  | ---------------------



| |  | The fair value of all financial instruments with the exception of hedge
transactions as disclosed in note 10(a), approximate their carrying values.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------



|12. |  | Termination benefits
|--- |  | --------------------



|12. |  | During 1999, the Company restructured its administrative operations.
Included in general and administrative expenses for 1999 are $480,000 of
severance and related costs.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|13. |  | Subsequent events
|--- |  | -----------------



| | (a) |  | On November 26, 2001, the Company entered into a Plan of Arrangement with
Provident Energy
Trust (Provident) which provided that:
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------



| |  |  |  | Provident will acquire all of the outstanding shares of the Company
in exchange for units of
Provident at a ratio of .4 Provident units for each Common Share of the
Company.                                                                                    
| |  |  | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  |  | Company shareholders will also receive, for each share of the Company
held, one new share
of a newly incorporated company (Terraquest Energy Corporation), which
will hold certain
Alberta exploratory and development properties previously held by the
Company.
|
| |  |  |   | The Plan of Arrangement received shareholder and regulatory approval
subsequent to December 31, 2001.                                                                                                                                                            



| | (b) |  | On January 15, 2002, the Company in conjunction with the sale to
Provident, activated
employment contract severance agreements with certain officers, directors and
employees of the
Company. Severance costs totalled $2.2 million and were paid out effective
January 15, 2002.
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (c) |  | Also in conjunction with the sale, the Company incurred approximately
$2.2 million in costs
related to shareholder information packages, professional fees, commissions
and distribution
costs.                                                                                  
|
| | (d) |  | On January 15, 2002, prior to the closing of the sale, certain officers
and employees exercised
1,112,507 stock options at an average strike price of $2.88 for total
proceeds to the Company of
$3,201,000.                                                                     

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SCHEDULE B

SCHEDULE OF REVENUE AND EXPENSES FOR SELECTED PROPERTIES

AUDITORS REPORT

To the Board of Directors of Provident Energy Ltd.

At the request of Provident Energy Ltd., we have audited the schedule of
revenue and expenses for selected properties referred to in the purchase and
sale agreement dated March 25, 2002 among Provident Energy Ltd., Provident
Energy Trust and the vendor of the selected properties for each of the years in
the two year period ended December 31, 2001. This financial information is the
responsibility of the vendor of the selected properties. Our responsibility is
to express an opinion on this financial information based on our audit.

We conducted our audit in accordance with Canadian generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial information is free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial information. An audit
also includes assessing the accounting principles used and significant
estimates made by management of the vendor, as well as evaluating the overall
presentation of the financial information.

In our opinion, this financial information presents fairly, in all material
respects, the revenue and expenses for selected properties referred to in the
purchase and sale agreement dated March 25, 2002 for each of the years in the
two year period ended December 31, 2001 in accordance with Canadian generally
accepted accounting principles.

KPMG LLP
Chartered Accountants

Calgary, Canada
March 25, 2002

73



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Schedule of Revenue and Expenses for Selected Properties

|                                 |  |      |            |      |  |   |            | 
|-------------------------------- |  | ---- | ---------- | ---- |  | - | ---------- | 
|For the Years Ended December 31, |  | 2001 |            | 2000
|                                 |  |      |            |     
|Revenue                          |  | $    | 45,970,908 |      |  | $ | 52,737,091 | 
|Royalties                        |  |      | 9,786,151  |      |  |   | 11,152,695 | 
|                                 |  |      |            |      |  |   |            | 
|                                 |  |      | 36,184,757 |      |  |   | 41,584,396 | 
|Operating expenses               |  |      | 10,137,890 |      |  |   | 10,410,730 | 
|                                 |  |      |            |      |  |   |            | 
|                                 |  | $    | 26,046,867 |      |  | $ | 31,173,666 | 
|                                 |  |      |            |      |  |   |            | 

See accompanying notes to schedule of revenue and expenses for selected properties.

Notes to Schedule of Revenue and Expenses for Selected Properties

Years ended December 31, 2001 and 2000



|1. |  | Basis of presentation                                                                                                                                                                                                                                                                                                                                                                                                 
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | On March 25, 2002, Provident Energy Trust and Provident Energy Ltd.
(collectively, the Purchaser) entered into a purchase and sale agreement to
acquire certain properties (the selected properties) from the Canadian
subsidiaries of a U.S. based exploration and production company
(collectively, the Vendor).                                                                                              
|  
|   |  | The schedule of revenue and expenses for selected properties includes
operations on the selected properties specified in the purchase and sale
agreement dated March 25, 2002 between the Vendor and the Purchaser.                                                                                                                                                                                                   
|  
|   |  | The schedule of revenue and expenses for selected properties includes only
amounts applicable to the working interest of the Vendor for the selected
properties.                                                                                                                                                                                                                                                      
|  
|   |  | The schedule of revenue and expenses for selected properties does not include
any provision for the depletion and depreciation, site restoration, future
capital costs, impairment of unevaluated properties, general and
administrative costs and income taxes for the selected properties as these
amounts are based on the consolidated operations of the Vendor of which the
selected properties form only a part.
|  
|2. |  | Significant accounting policies                                                                                                                                                                                                                                                                                                                                                                                       



| | (a) |  | Revenue                                                                                                                                                                                                                                                                               
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | Revenue from the sale of oil and natural gas is recorded at the time that
the product is produced
and sold.                                                                                                                                                                           
|
| | (b) |  | Royalties                                                                                                                                                                                                                                                                             
|
| |     |  | Royalties are recorded at the time the product is produced and sold.
Royalties are calculated in
accordance with Alberta Energy regulations and the terms of individual
royalty agreements.                                                                                           
|
| | (c) |  | Operating expenses                                                                                                                                                                                                                                                                    
|
| |     |  | Operating expenses include amounts incurred to bring the petroleum
substances to the surface,
gather, transport, field process, treat and store same. Operating
expenses are reflected net of
gathering, processing and transportation income associated with the
selected properties.

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SCHEDULE C

FINANCIAL STATEMENTS OF MEOTA RESOURCES CORP.

75



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kpmg





| | Consolidated Financial Statements of
| | ------------------------------------



| | MEOTA RESOURCES CORP.
| | ---------------------



| | Nine months ended September 30, 2002
(Unaudited)
| | ------------------------------------------------





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##### Table of Contents



MEOTA RESOURCES CORP.
Consolidated Balance Sheets

(in thousands of dollars)

|                                     |                     |   |               |        |              |   |         |        | 
|------------------------------------ | ------------------- | - | ------------- | ------ | ------------ | - | ------- | ------ | 
|                                     |                     |   | September 30, |        | December 31,
|                                     |                     |   | 2001          |        | 2000        
|                                     |                     |   |               |        |             
|                                     |                     |   | (Unaudited)   |        | (Audited)   
|Assets                               |                     |   |               |        |              |   |         |       
|Current assets:                      |                     |   |               |        |              |   |         |       
|                                     | Accounts receivable |   | $             | 14,120 |              |   | $       | 11,948 | 
|                                     | Prepaid expenses    |   |               | 2,770  |              |   |         | 2,415  | 
|                                     |                     |   |               |        |              |   |         |        | 
|                                     |                     |   | 16,890        |        |              |   | 14,363  |       
|Property, plant and equipment        |                     |   | 188,478       |        |              |   | 164,160 |       
|                                     |                     |   |               |        |              |   |         |        | 
|                                     |                     | $ | 205,368       |        |              | $ | 178,523 |       
|                                     |                     |   |               |        |              |   |         |        | 
|Liabilities and Shareholders Equity |                     |   |               |        |              |   |         |       
|Current liabilities:                 |                     |   |               |        |              |   |         |       
|                                     | Accounts payable    |   | $             | 4,478  |              |   | $       | 17,619 | 
|Bank debt                            |                     |   | 83,510        |        |              |   | 58,935  |       
|Site reclamation and abandonment     |                     |   | 1,114         |        |              |   | 897     |       
|Future taxes                         |                     |   | 12,359        |        |              |   | 1,570   |       
|                                     |                     |   |               |        |              |   |         |        | 
|                                     |                     |   | 101,461       |        |              |   | 79,021  |       
|                                     |                     |   |               |        |              |   |         |        | 
|Shareholders equity:                |                     |   |               |        |              |   |         |       
|                                     | Share capital       |   |               | 50,606 |              |   |         | 50,440 | 
|                                     | Retained earnings   |   |               | 53,301 |              |   |         | 49,062 | 
|                                     |                     |   |               |        |              |   |         |        | 
|                                     |                     |   | 103,907       |        |              |   | 99,502  |       
|                                     |                     |   |               |        |              |   |         |        | 
|                                     |                     | $ | 205,368       |        |              | $ | 178,523 |       
|                                     |                     |   |               |        |              |   |         |        | 

See accompanying notes to consolidated financial statements.





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MEOTA RESOURCES CORP.
Consolidated Statements of Operations and Retained Earnings

(in thousands of dollars, except per share amounts)
(Unaudited)

|                                       |                            |   |                   |         |      |   |        |         |  
|-------------------------------------- | -------------------------- | - | ----------------- | ------- | ---- | - | ------ | ------- | -
|                                       |                            |   | Nine months ended
|                                       |                            |   | September 30,    
|                                       |                            |   |                  
|                                       |                            |   | 2002              |         | 2001
|                                       |                            |   |                   |         |     
|Revenue:                               |                            |   |                   |         |      |   |        |        
|                                       | Oil and natural gas sales  |   | $                 | 74,042  |      |   | $      | 89,880  |  
|                                       | Royalties, net of ARTC     |   |                   | (18,043 | )    |   |        | (20,704 | )
|                                       |                            |   |                   |         |      |   |        |         |  
|                                       |                            |   | 55,999            |         |      |   | 69,176 |        
|Expenses:                              |                            |   |                   |         |      |   |        |        
|                                       | Production                 |   |                   | 18,498  |      |   |        | 14,976  |  
|                                       | Interest                   |   |                   | 2,134   |      |   |        | 2,648   |  
|                                       | General and administrative |   |                   | 2,624   |      |   |        | 1,826   |  
|                                       | Depletion and depreciation |   |                   | 18,778  |      |   |        | 12,871  |  
|                                       |                            |   |                   |         |      |   |        |         |  
|                                       |                            |   | 42,034            |         |      |   | 32,321 |        
|                                       |                            |   |                   |         |      |   |        |         |  
|Income before taxes                    |                            |   | 13,965            |         |      |   | 36,855 |        
|Taxes:                                 |                            |   |                   |         |      |   |        |        
|                                       | Capital                    |   |                   | 937     |      |   |        | 456     |  
|                                       | Future                     |   |                   | 8,789   |      |   |        | 15,387  |  
|                                       |                            |   |                   |         |      |   |        |         |  
|                                       |                            |   | 9,726             |         |      |   | 15,843 |        
|                                       |                            |   |                   |         |      |   |        |         |  
|Net income                             |                            |   | 4,239             |         |      |   | 21,012 |        
|Retained earnings, beginning of period |                            |   | 49,062            |         |      |   | 26,715 |        
|                                       |                            |   |                   |         |      |   |        |         |  
|Retained earnings, end of period       |                            | $ | 53,301            |         |      | $ | 47,727 |        
|                                       |                            |   |                   |         |      |   |        |         |  
|Net income per share (note 4):         |                            |   |                   |         |      |   |        |        
|                                       | Basic                      |   | $                 | 0.08    |      |   | $      | 0.39    |  
|                                       | Diluted                    |   | $                 | 0.08    |      |   | $      | 0.39    |  
|                                       |                            |   |                   |         |      |   |        |         |  

See accompanying notes to consolidated financial statements.





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MEOTA RESOURCES CORP.
Consolidated Statements of Cash Flows

(in thousands of dollars, except per share amounts)
(Unaudited)

|                           |                                               |   |                   |         |      |   |         |         |  
|-------------------------- | --------------------------------------------- | - | ----------------- | ------- | ---- | - | ------- | ------- | -
|                           |                                               |   | Nine months ended
|                           |                                               |   | September 30,    
|                           |                                               |   |                  
|                           |                                               |   | 2002              |         | 2001
|                           |                                               |   |                   |         |     
|Cash provided by (used in) |                                               |   |                   |         |      |   |         |        
|Operations:                |                                               |   |                   |         |      |   |         |        
|                           | Net income for the year                       |   | $                 | 3,075   |      |   | $       | 21,012  |  
|                           | Future income taxes                           |   |                   | 8,789   |      |   |         | 15,387  |  
|                           | Depletion and depreciation                    |   |                   | 18,778  |      |   |         | 12,871  |  
|                           |                                               |   |                   |         |      |   |         |         |  
|                           | Cash flow from operations                     |   |                   | 31,806  |      |   |         | 49,270  |  
|                           | Net change in non-cash working capital        |   |                   | (15,669 | )    |   |         | (471    | )
|                           |                                               |   |                   |         |      |   |         |         |  
|                           |                                               |   | 16,137            |         |      |   | 48,799  |        
|Financing:                 |                                               |   |                   |         |      |   |         |        
|                           | Bank debt                                     |   |                   | 24,575  |      |   |         | (6,041  | )
|                           | Issue of share capital                        |   |                   | 166     |      |   |         | 93      |  
|                           |                                               |   |                   |         |      |   |         |         |  
|                           |                                               |   | 24,741            |         |      |   | (5,948  | )      
|Investments:               |                                               |   |                   |         |      |   |         |        
|                           | Capital expenditures                          |   |                   | (40,265 | )    |   |         | (42,255 | )
|                           | Site reclamation and abandonment expenditures |   |                   | (613    | )    |   |         | (596    | )
|                           |                                               |   |                   |         |      |   |         |         |  
|                           |                                               |   | (40,878           | )       |      |   | (42,851 | )      
|                           |                                               |   |                   |         |      |   |         |         |  
|Change in cash position    |                                               |   |                  |         |      |   |        |        
|Cash, beginning of period  |                                               |   |                  |         |      |   |        |        
|                           |                                               |   |                   |         |      |   |         |         |  
|Cash, end of period        |                                               | $ |                  |         |      | $ |        |        
|                           |                                               |   |                   |         |      |   |         |         |  

See accompanying notes to consolidated financial statements.





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##### Table of Contents



MEOTA RESOURCES CORP.
Notes to Consolidated Financial Statements

Nine months ended September 30, 2002
(in thousands of dollars)
(Unaudited)



|1. |  | Accounting policies:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | The interim consolidated financial statements of Meota Resources Corp.( the
Corporation ) have been prepared following the same accounting policies and
methods of computation as the consolidated financial statements of the
Corporation as at December 31, 2001, except as described in note 2. The
interim consolidated financial statements contain disclosures which are
supplemental to the Corporations annual consolidated financial statements.
Certain disclosures, which are normally required to be included in the notes
to the annual consolidated financial statements, have been condensed or
omitted. The interim consolidated financial statements should be read in
conjunction with the Corporations consolidated financial statements and
notes thereto for the year ended December 31, 2001.
|  
|2. |  | Change in accounting policy:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|  
|   |  | Effective January 1, 2002, the Corporation adopted the Canadian Institute or
Chartered Accountants new accounting standard for stock-based compensation.
The Corporation has elected to continue to use the intrinsic value based
method of accounting for stock based compensation and to disclose the pro
forma results of using the fair value based method. Accordingly, had
compensation costs for the Corporations stock option plan been determined
based on the fair value method for stock options granted on or after January
1, 2002, the Corporations pro forma net income and net income per share
would be the same as those reported for the nine months September 30, 2002.                                                                                                                          
|  
|3. |  | Share capital:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         



| | (a) |  | Issued:
| | --- |  | -------

|                                    |  |         |        |         |  |        |        | 
|----------------------------------- |  | ------- | ------ | ------- |  | ------ | ------ | 
|                                    |  |         |        |         |  | Common
|                                    |  | Values  |        | shares 
|                                    |  | (000's) |        | (000's)
|                                    |  |         |        |        
|Balance, December 31, 2001          |  | $       | 50,440 |         |  |        | 55,471 | 
|Issued on exercise of stock options |  |         | 166    |         |  |        | 172    | 
|                                    |  |         |        |         |  |        |        | 
|Balance, September 30, 2002         |  | $       | 50,606 |         |  |        | 55,643 | 
|                                    |  |         |        |         |  |        |        | 





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MEOTA RESOURCES CORP.
Notes to Consolidated Financial Statements, page 2

Nine months ended September 30, 2002
(in thousands of dollars)
(Unaudited)



|4. |  | Subsequent event:
|-- |  | -----------------



| | (a) |  | Takeover by Provident Energy Trust (Provident):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | On October 1, 2002 Provident acquired the Corporation by way of a formal
takeover bid to the Corporation shareholders. The bid was announced in
August 2002 after both entities jointly agreed to execute an agreement
whereby Provident agreed to make an offer (the Offer) to acquire all of
the outstanding shares of the Corporation.                                                                                                                                                                                                             
|
| | (b) |  | Options:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |     |  | On October 1, 2002, the Corporation purchased outstanding share options
from the holders thereof for an amount equal to the difference between the
exercise price and the greater of: (i) $4.60 and (ii) the five day
weighted average trading price of the Corporations share on the TSX for
the five trading days immediately prior to the date that Provident first
takes up shares pursuant to the Offer. Accordingly, on October 1, 2002,
the Corporation paid directors, officers and employees $5.76 million to
purchase all outstanding options.





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##### Table of Contents



kpmg

Consolidated Financial Statements of

MEOTA RESOURCES CORP.

Years ended December 31, 2001 and 2000





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##### Table of Contents



MANAGEMENTS RESPONSIBILITY FOR FINANCIAL STATEMENTS

All of the information in this annual report is the responsibility of
management. The financial statements have been prepared by management in
accordance with Canadian generally accepted accounting principles. The
financial information elsewhere in the annual report has been reviewed to
ensure consistency in all material respects with that in the financial
statements.

The Company maintains appropriate systems of internal control to give
reasonable assurance that transactions are appropriately authorized, assets are
safeguard from loss or unauthorized use and financial records provide reliable
and accurate information for the preparation of financial statements.

KPMG LLP, an independent firm of chartered accountants, has been engaged to
examine the financial statements and provide their auditors report. Their
report is presented with the financial statements.

The directors are responsible for ensuring that management fulfills its
responsibilities for financial reporting and internal control. The directors
exercise this responsibility through the audit committee. This committee,
which is comprised of directors who are not employees of the Company, meets
with management and the external auditors to satisfy itself that management
responsibilities are properly discharged and to review the financial statements
before they are presented to the directors for approval. The financial
statements have been approved by the Board of Directors on the recommendation
of the audit committee.

|                                                                                 |  |                                                                                      
|-------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------
|(Signed Craig W. Stewart)
Craig W. Stewart
President and Chief Executive Officer |  | (Signed John W. Ferguson)
John W. Ferguson
Vice President and Chief Financial Officer
|                                                                                 |  |                                                                                      
|March 21, 2002                                                                   |  |                                                                                      

AUDITORS REPORT TO THE SHAREHOLDERS

We have audited the consolidated balance sheets of Meota Resources Corp. as at
December 31, 2001 and 2000 and the consolidated statements of operations and
retained earnings and cash flows for the years then ended. These financial
statements are the responsibility of the Corporations management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with Canadian generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.

In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Corporation as at December 31,
2001 and 2000 and the results of its operations and its cash flows for the
years then ended in accordance with Canadian generally accepted accounting
principles.

(Signed) KPMG LLP
Chartered Accountants
Calgary, Canada
March 21, 2002





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MEOTA RESOURCES CORP.
Consolidated Balance Sheets

December 31, 2001 and 2000
(in thousands of dollars)

|                                       |                                          |   |         |        |      |   |         |        | 
|-------------------------------------- | ---------------------------------------- | - | ------- | ------ | ---- | - | ------- | ------ | 
|                                       |                                          |   | 2001    |        | 2000
|                                       |                                          |   |         |        |     
|Assets                                 |                                          |   |         |        |      |   |         |       
|Current assets:                        |                                          |   |         |        |      |   |         |       
|                                       | Accounts receivable                      |   | $       | 11,948 |      |   | $       | 17,825 | 
|                                       | Prepaid expenses                         |   |         | 2,415  |      |   |         | 2,102  | 
|                                       |                                          |   |         |        |      |   |         |        | 
|                                       |                                          |   | 14,363  |        |      |   | 19,927  |       
|Future taxes (note 5)                  |                                          |   |        |        |      |   | 17,340  |       
|Property, plant and equipment (note 2) |                                          |   | 164,160 |        |      |   | 121,742 |       
|                                       |                                          |   |         |        |      |   |         |        | 
|                                       |                                          | $ | 178,523 |        |      | $ | 159,009 |       
|                                       |                                          |   |         |        |      |   |         |        | 
|Liabilities and Shareholders Equity   |                                          |   |         |        |      |   |         |       
|Current liabilities:                   |                                          |   |         |        |      |   |         |       
|                                       | Accounts payable and accrued liabilities |   | $       | 17,619 |      |   | $       | 19,752 | 
|Long-term debt (note 3)                |                                          |   | 58,935  |        |      |   | 64,621  |       
|Site reclamation and abandonment       |                                          |   | 897     |        |      |   | 516     |       
|Future taxes (note 5)                  |                                          |   | 1,570   |        |      |   |        |       
|                                       |                                          |   |         |        |      |   |         |        | 
|                                       |                                          |   | 79,021  |        |      |   | 84,889  |       
|                                       |                                          |   |         |        |      |   |         |        | 
|Shareholders equity:                  |                                          |   |         |        |      |   |         |       
|                                       | Share capital (note 4)                   |   |         | 50,440 |      |   |         | 47,405 | 
|                                       | Retained earnings                        |   |         | 49,062 |      |   |         | 26,715 | 
|                                       |                                          |   |         |        |      |   |         |        | 
|                                       |                                          |   | 99,502  |        |      |   | 74,120  |       
|                                       |                                          | $ | 178,523 |        |      | $ | 159,009 |       
|                                       |                                          |   |         |        |      |   |         |        | 

See accompanying notes to consolidated financial statements.

|                                     
|-------------------------------------
|On behalf of the Board:              
|                                     
|Director

(Signed Lyle F. Dunkely)   
|                                     
|Director

(Signed Robert G. McMorran)





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MEOTA RESOURCES CORP.
Consolidated Statements of Operations and Retained Earnings

Years ended December 31, 2001 and 2000
(in thousands of dollars, except per share amounts)

|                                               |                            |   |        |         |      |   |         |         |  
|---------------------------------------------- | -------------------------- | - | ------ | ------- | ---- | - | ------- | ------- | -
|                                               |                            |   | 2001   |         | 2000
|                                               |                            |   |        |         |     
|Revenue:                                       |                            |   |        |         |      |   |         |        
|                                               | Oil and natural gas sales  |   | $      | 107,653 |      |   |         | 79,561  |  
|                                               | Royalties, net of ARTC     |   |        | (24,207 | )    |   |         | (16,200 | )
|                                               |                            |   |        |         |      |   |         |         |  
|                                               |                            |   | 83,446 |         |      |   | 63,361  |        
|Expenses:                                      |                            |   |        |         |      |   |         |        
|                                               | Production                 |   |        | 20,293  |      |   |         | 11,887  |  
|                                               | Interest                   |   |        | 3,250   |      |   |         | 3,405   |  
|                                               | General and administrative |   |        | 2,321   |      |   |         | 2,020   |  
|                                               | Depletion and depreciation |   |        | 17,920  |      |   |         | 11,425  |  
|                                               |                            |   |        |         |      |   |         |         |  
|                                               |                            |   | 43,784 |         |      |   | 28,737  |        
|                                               |                            |   |        |         |      |   |         |         |  
|Net income, before tax                         |                            |   | 39,662 |         |      |   | 34,624  |        
|Taxes (note 5):                                |                            |   |        |         |      |   |         |        
|                                               | Future                     |   |        | 16,768  |      |   |         | 7,397   |  
|                                               | Capital                    |   |        | 547     |      |   |         | 512     |  
|                                               |                            |   |        |         |      |   |         |         |  
|                                               |                            |   | 17,315 |         |      |   | 7,909   |        
|                                               |                            |   |        |         |      |   |         |         |  
|Net income for the year                        |                            |   | 22,347 |         |      |   | 26,715  |        
|Retained earnings (deficit), beginning of year |                            |   | 26,715 |         |      |   | (56,019 | )      
|Reduction of contributed surplus               |                            |   |       |         |      |   | 56,019  |        
|                                               |                            |   |        |         |      |   |         |         |  
|Retained earnings                              |                            | $ | 49,062 |         |      | $ | 26,715  |        
|                                               |                            |   |        |         |      |   |         |         |  
|Net income per share (note 4)                  |                            |   |        |         |      |   |         |        
|                                               | Basic                      |   | $      | 0.41    |      |   | $       | 0.54    |  
|                                               | Diluted                    |   | $      | 0.40    |      |   | $       | 0.52    |  
|                                               |                            |   |        |         |      |   |         |         |  

See accompanying notes to consolidated financial statements.





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MEOTA RESOURCES CORP.
Consolidated Statements of Cash Flows

Years ended December 31, 2001 and 2000
(in thousands of dollars, except per share amounts)

|                                              |                                        |   |         |         |      |   |         |         |  
|--------------------------------------------- | -------------------------------------- | - | ------- | ------- | ---- | - | ------- | ------- | -
|                                              |                                        |   | 2001    |         | 2000
|                                              |                                        |   |         |         |     
|Cash provided by (used in)                    |                                        |   |         |         |      |   |         |        
|Operations:                                   |                                        |   |         |         |      |   |         |        
|                                              | Net income for the year                |   | $       | 22,347  |      |   | $       | 26,715  |  
|                                              | Future taxes                           |   |         | 16,768  |      |   |         | 7,397   |  
|                                              | Depletion and depreciation             |   |         | 17,920  |      |   |         | 11,425  |  
|                                              |                                        |   |         |         |      |   |         |         |  
|                                              | Cash flow from operations              |   |         | 57,035  |      |   |         | 45,537  |  
|                                              | Net change in non-cash working capital |   |         | 3,431   |      |   |         | (1,496  | )
|                                              |                                        |   |         |         |      |   |         |         |  
|                                              |                                        |   | 60,466  |         |      |   | 44,041  |        
|                                              |                                        |   |         |         |      |   |         |         |  
|Financing:                                    |                                        |   |         |         |      |   |         |        
|                                              | Issue of share capital                 |   |         | 5,177   |      |   |         | 22,522  |  
|                                              | Notes payable                          |   |         |        |      |   |         | (7,500  | )
|                                              | Bank debt                              |   |         | (5,686  | )    |   |         | 30,644  |  
|                                              |                                        |   |         |         |      |   |         |         |  
|                                              |                                        |   | (509    | )       |      |   | 45,666  |        
|                                              |                                        |   |         |         |      |   |         |         |  
|Investments:                                  |                                        |   |         |         |      |   |         |        
|                                              | Capital expenditures                   |   |         | (59,103 | )    |   |         | (63,440 | )
|                                              | Benefit of excess tax pools            |   |         |        |      |   |         | (28,177 | )
|                                              | Sale of investments                    |   |         |        |      |   |         | 2,240   |  
|                                              | Other                                  |   |         | (854    | )    |   |         | (330    | )
|                                              |                                        |   |         |         |      |   |         |         |  
|                                              |                                        |   | (59,957 | )       |      |   | (89,707 | )      
|                                              |                                        |   |         |         |      |   |         |         |  
|Change in cash position                       |                                        |   |        |         |      |   |        |        
|Cash, beginning of year                       |                                        |   |        |         |      |   |        |        
|                                              |                                        |   |         |         |      |   |         |         |  
|Cash, end of year                             |                                        | $ |        |         |      | $ |        |        
|                                              |                                        |   |         |         |      |   |         |         |  
|Cash flow from operations per share (note 4): |                                        |   |         |         |      |   |         |        
|                                              | Basic                                  |   | $       | 1.05    |      |   | $       | 0.91    |  
|                                              | Diluted                                |   | $       | 1.03    |      |   | $       | 0.88    |  
|                                              |                                        |   |         |         |      |   |         |         |  

See accompanying notes to consolidated financial statements.





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##### Table of Contents



MEOTA RESOURCES CORP.
Notes to Consolidated Financial Statements

Years ended December 31, 2001 and 2000
(Tabular amounts are stated in thousands of dollars)



|1. |  | Significant accounting policies:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | The preparation of consolidated financial statements in accordance with
Canadian generally
accepted accounting principles requires management to make estimates and
assumptions that
effect the reported amounts of assets and liabilities and disclosure of
contingent assets and
liabilities at the date of the financial statements and the reported
amount of revenues and
expenses during the reported period. Actual results could differ from
these estimates.
The consolidated financial statements include the accounts of the
Corporation and its subsidiary.



| | (a) |  | Property, plant and equipment:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | Substantially all of the exploration, development and production
activities of the Corporation
are conducted jointly with others. The consolidated
financial statements reflect the
Corporations proportionate interest in such activities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| |     |  | The Corporation follows the full cost method of accounting, whereby all
costs associated with
the exploration for and development of oil and natural
gas reserves are capitalized.
Capitalized costs include lease acquisition costs, the costs of geological
and geophysical
activities, the cost of drilling both productive and non-productive wells,
carrying charges of
non-producing properties and costs directly related to exploration and
development activities.
Proceeds from the disposal of properties are applied as a reduction of the
cost of the
remaining assets, except when such a disposal would alter the rate of
depletion and
depreciation by more than 20 percent, in which case a gain or loss on
disposal is recorded.
|
| |     |  | Depletion of oil and gas properties and depreciation of production
equipment are calculated
using the unit of production method which is based upon gross proven
reserve volumes. Gas
volumes are converted to equivalent oil volumes based upon the relative
energy content of six
thousand cubic feet of gas to one barrel of oil.                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |     |  | The costs of acquisition and evaluation of unproved properties are
initially excluded from the
depletion calculation. When proven reserves are assigned to the property
or the property is
considered to have an impairment in value, the cost of the property or
amount of the
impairment in value is added to the capitalized costs for the calculation
of depletion.                                                                                                                                                                                                                                                                                                                                                                           
|
| |     |  | The cost less accumulated depletion and depreciation, future
income taxes and the
accumulated provision for future site restoration costs is limited to the
sum of the following
(cost ceiling);                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                



| | (i)  |  | The estimated undiscounted future net revenue (based on prices and
costs at the balance
sheet date) derived from proved reserves net of financing costs,
production related
general and administrative costs and income taxes; and
| | ---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (ii) |  | The lower of cost or fair market value of unproved properties.                                                                                                                                                                    
|
| |      |  | Future net revenue is calculated using the Alberta Royalty
Tax Credit legislation
throughout the life of the reserves.                                                                                                            





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##### Table of Contents



MEOTA RESOURCES CORP.
Notes to Consolidated Financial Statements, page 2

Years ended December 31, 2001 and 2000
(Tabular amounts are stated in thousands of dollars)



| |     |  | The amounts recorded for depletion, depreciation and amortization of
property, plant and
equipment and the provision for future site restoration costs are based on
estimates. The
cost ceiling is based on such factors as estimated proven reserves,
production rates, oil and
natural gas prices and future costs. By their nature, these estimates are
subject to
measurement uncertainty and may impact the financial statements of future
periods.                                              
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | Site reclamation and abandonment:                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |     |  | Estimated site reclamation and abandonment costs are provided for using
the unit-of-
production method over the life of the remaining reserves. These costs
are based on year
end engineering estimates of the costs of reclamation and abandonments.
The annual
provision is included in depletion and depreciation expense.                                                                                                                                                                         
|
| | (c) |  | Net income and cash flow from operations per share:                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |     |  | Effective January 1, 2001 the Corporation adopted the Canadian Institute
of Chartered
Accountants new accounting standard with respect to the calculation and
disclosure of per
share amounts. Under the new standard, the treasury stock method of
calculating per share
amounts is used whereby any proceeds from the exercise of stock options or
dilutive
instruments are assumed to be used to purchase common shares of the
Corporation at the
weighted average market price during the period.
|
| |     |  | The new standard has been applied retroactively and prior periods have
been restated.                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| | (d) |  | Income taxes:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| |     |  | Future income taxes are calculated using the liability method of tax
allocation, which
determines future income taxes based on the temporary differences between
the carrying
amount of assets and liabilities reported for financial statement purposes
and the tax basis
reported for tax purposes. The tax benefit renounced to investors on the
issue of flow through
shares is recorded as a reduction of share capital.                                                                         
|
| | (e) |  | Stock-based compensation plans:                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |     |  | The Corporation has a stock option plan which is described in note 4. No
compensation
expense is recognized for this plan when options are issued. Any
consideration received on
exercise of stock options is credited to share capital.                                                                                                                                                                                                                                                              





---



##### Table of Contents



MEOTA RESOURCES CORP.
Notes to Consolidated Financial Statements, page 3

Years ended December 31, 2001 and 2000
(Tabular amounts are stated in thousands of dollars)

2. Property, plant and equipment:

|                               |  |      |         |              |  |             |        |          |  |   |         | 
|------------------------------ |  | ---- | ------- | ------------ |  | ----------- | ------ | -------- |  | - | ------- | 
|                               |  |      |         |              |  | Accumulated |        |          |  |  
|                               |  |      |         |              |  | depletion   |        |          |  |  
|                               |  |      |         |              |  | and         |        | Net book
|                               |  | Cost |         | depreciation |  | value      
|                               |  |      |         |              |  |            
|2001                           |  |      |         |              |  |             |        |          |  |   |         | 
|Oil and natural gas properties |  | $    | 203,532 |              |  | $           | 39,660 |          |  | $ | 163,872 | 
|Furniture, equipment and other |  |      | 700     |              |  |             | 412    |          |  |   | 288     | 
|                               |  |      |         |              |  |             |        |          |  |   |         | 
|                               |  | $    | 204,232 |              |  | $           | 40,072 |          |  | $ | 164,160 | 
|                               |  |      |         |              |  |             |        |          |  |   |         | 
|2000                           |  |      |         |              |  |             |        |          |  |   |         | 
|Oil and natural gas properties |  | $    | 144,609 |              |  | $           | 23,184 |          |  | $ | 121,425 | 
|Furniture, equipment and other |  |      | 520     |              |  |             | 203    |          |  |   | 317     | 
|                               |  |      |         |              |  |             |        |          |  |   |         | 
|                               |  | $    | 145,129 |              |  | $           | 23,387 |          |  | $ | 121,742 | 
|                               |  |      |         |              |  |             |        |          |  |   |         | 

On June 29, 2000 the Corporation entered into an agreement to purchase oil and
gas assets and income tax pools in excess of the purchase price for cash
consideration of $56.5 million. The acquisition was accounted for by the
purchase method of accounting with the results of operations of the acquired
properties included in these financial statements from July 1, 2000. Initially
the entire purchase price was allocated to property, plant and equipment.
During the fourth quarter of 2000 it was determined that it was more likely
than not that the excess tax pools would be ultimately utilized and, as a
result, the amount allocated to property, plant and equipment was reduced by
$28.2 million for the benefits associated with the excess tax pools.

The calculation of depletion and depreciation as at December 31, 2001 excludes
costs relating to unproved properties of $17,263,000 (2000  $17,528,000) and
includes estimated future development costs for proved undeveloped properties
of $9,042,000 (2000  $11,744,000).

Depletion and depreciation includes a
provision of $1,235,000 (2000  $594,000) for estimated future site restoration
and abandonment costs. The provision is based on estimated remaining costs of
$7,838,600 (2000  $7,222,000).





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##### Table of Contents



MEOTA RESOURCES CORP.
Notes to Consolidated Financial Statements, page 4

Years ended December 31, 2001 and 2000
(Tabular amounts are stated in thousands of dollars)



|3. |  | Long-term debt:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | The Corporation has credit facilities of $77 million with a Canadian
chartered bank consisting of (i)
a $75 million revolving term credit facility (the Revolving Facility)
and (ii) a $2 million operating
facility (the Operating Facility). Advances under the Revolving
Facility bear interest at between
0.125% and 1% over the banks prime lending rate and bankers acceptances
advanced on the
facility bear a stamping fee between 1.125% and 2% depending upon the
senior debt to EBITDA
ratio of the Corporation. The Revolving Facility revolves until July 31,
2002 and for a period of
four years thereafter at the request of the Corporation and the consent of
the bank. If the
Revolving Facility is not extended on July 31, 2002, amounts outstanding
at that time would be
repayable in sixteen quarterly instalments with the last instalment
payable on July 31, 2006. The
Operating Facility is due August 30, 2002 and amounts outstanding pursuant
to the Operating
Facility bear interest at between 0.125% and 1% over the banks prime
lending rate depending
upon the senior debt to EBITDA ratio of the Corporation. The credit
facilities are secured by a
$150 million debenture granted by the Corporation containing a floating charge
over the
undertaking, property and assets of the Corporation and a general
assignment of book debts by
the Corporation. No portion of outstanding debt has been included in
current liabilities as the
Corporation expects the facility will be extended and, if it is not, the
Corporation has the capacity
to draw sufficient additional amounts to satisfy any repayment
requirements in 2002.

Cash interest for the year December 31, 2001 was $3,145,000 (2000 -
$3,594,000).
|  
|4. |  | Share capital:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   



| | (a) |  | Authorized:                                                                         
| | --- |  | ------------------------------------------------------------------------------------
|
| |     |  | Unlimited number of common shares without par value                                 
|
| |     |  | Unlimited number of First Preferred shares without par value and issuable
in series 
|
| |     |  | Unlimited number of Second Preferred shares without par value and issuable
in series





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##### Table of Contents



MEOTA RESOURCES CORP.
Notes to Consolidated Financial Statements, page 5

Years ended December 31, 2001 and 2000
(Tabular amounts are stated in thousands of dollars)



|4. |  | Share capital (continued):
|-- |  | --------------------------



| | (b) |  | Issued:
| | --- |  | -------

|                           |                                                                         |   |        |        |              |  |            |           | 
|-------------------------- | ----------------------------------------------------------------------- | - | ------ | ------ | ------------ |  | ---------- | --------- | 
|                           |                                                                         |   |        |        |              |  | Common    
|                           |                                                                         |   | Value  |        | Shares (iii)
|                           |                                                                         |   |        |        |             
|Balance, December 31, 1999 |                                                                         | $ | 24,699 |        |              |  | 37,160,269 |          
|                           | Issued on exercise of stock option and warrants                         |   |        | 1,046  |              |  |            | 1,564,667 | 
|                           | Flow-through shares issued for cash pursuant
to private placement (i)   |   |        | 5,485  |              |  |            | 6,225,000 | 
|                           | Issued for cash and marketable securities
pursuant to private placement |   |        | 4,000  |              |  |            | 5,000,000 | 
|                           | Addition to stated capital (iii)                                        |   |        | 46     |              |  |            |          | 
|                           | Issued for cash pursuant to treasury issue (ii)                         |   |        | 14,231 |              |  |            | 4,000,000 | 
|                           | Tax effect of flow-through share and share issue costs                  |   |        | (2,102 | )            |  |            |          | 
|                           |                                                                         |   |        |        |              |  |            |          
|Balance, December 31, 2000 |                                                                         |   | 47,405 |        |              |  | 53,949,936 |          
|                           |                                                                         |   |        |        |              |  |            |          
|                           | Issued on exercise of stock options                                     |   |        | 148    |              |  |            | 183,600   | 
|                           | Share issue costs                                                       |   |        | (53    | )            |  |            |          | 
|                           | Flow-through shares issued for cash pursuant
to private placement (i)   |   |        | 5,082  |              |  |            | 1,337,500 | 
|                           | Tax effect of flow-through shares and share issue costs                 |   |        | (2,142 | )            |  |            |          | 
|                           |                                                                         |   |        |        |              |  |            |          
|Balance, December 31, 2001 |                                                                         | $ | 50,440 |        |              |  | 55,471,036 |          
|                           |                                                                         |   |        |        |              |  |            |          



---

|(i)  |  | Flow-through shares:                                                                                                                                                                                                                                                                                                                                                                        
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|     |  | On November 28, 2001, the Corporation issued 1,337,500 Common Shares on a flow-
through basis for net proceeds of $5,082,000 after costs of the issue of $268,000. On
January 20, 2000, the Corporation issued 4,625,000 Common Shares on a flow-through
basis for $3,885,000 and agreed to issue an additional 1,600,000 Common Shares for
$1,600,000 which were issued on August 29, 2000.
|    
|     |  | At December 31, 2001, the Corporation has an obligation to incur approximately
$4,000,000 of exploration expenses pursuant to the November 28, 2001 flow through
share issue                                                                                                                                                                                                                
|    
|(ii) |  | Treasury issue:                                                                                                                                                                                                                                                                                                                                                                             
|    
|     |  | On December 28, 2000, the Corporation issued 4,000,000 Common Shares at
$3.75 per
share for net proceeds of $14,231,000 after costs of the issue of
$769,000.                                                                                                                                                                                                                               





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##### Table of Contents



MEOTA RESOURCES CORP.
Notes to Consolidated Financial Statements, page 6

Years ended December 31, 2001 and 2000
(Tabular amounts are stated in thousands of dollars)



|4. |  | Share capital (continued):
|-- |  | --------------------------



| | (b) |  | Issued (continued):
| | --- |  | -------------------



| | (iii) |  | Reorganization:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |       |  | On May 23, 2000, the Class A and the Non-Voting shareholders of the
Corporation
approved a resolution reorganizing Class A and Non-Voting shares on a one
for one basis
into a new Common Share
 
On the same date the Class A shareholders approved a resolution reducing
the
contributed surplus by $56,065,000 which represented the entire
contributed surplus of
the Corporation. Concurrently, the Corporations deficit was reduced by
$56,019,000 and
$46,000 was added to the stated capital of the Class A shares.



| | (c) |  | Per share amounts:                                                                                                                                                                                                                                                                                                                                                                                                           
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | The per share amounts are calculated based on the weighted average number
of shares
outstanding of 54,213,021 for the year ended December 31, 2001 (2000 
49,849,168).
 
In computing dilutive per share amounts 1,060,715 common shares were added
to the
weighted average number of common shares for the year ended December 31,
2001 (2000 
1,745,656 common shares) for the dilutive effect of employee stock options.
|
| | (d) |  | Stock options:                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |     |  | The Corporation has granted stock options to directors, officers, certain
employees and
advisors to the Corporation. The terms of the outstanding options are:                                                                                                                                                                                                                                                               



| | (i)   |  | All of the outstanding stock options have a term of five years;                                                                
| | ----- |  | -------------------------------------------------------------------------------------------------------------------------------
|
| | (ii)  |  | 140,000 of the outstanding stock options vest equally over a three
year period; the
remainder vest equally over five years; and
|
| | (iii) |  | The stock options expire 30 days after termination of employment
with the Corporation
and after five years if not exercised.   

|                               |  |            |           |          |  |            |      |          |  |  |            |          |  |   |      | 
|------------------------------ |  | ---------- | --------- | -------- |  | ---------- | ---- | -------- |  |  | ---------- | -------- |  | - | ---- | 
|                               |  | 2001       |           | 2000    
|                               |  |            |           |         
|                               |  |            |           |          |  | Weighted   |      |          |  |  |            | Weighted
|                               |  |            |           |          |  | average    |      |          |  |  |            | average 
|                               |  | Number     |           | exercise |  | Number     |      | exercise
|                               |  | of options |           | price    |  | of options |      | price   
|                               |  |            |           |          |  |            |      |         
|Outstanding, beginning of year |  |            | 2,302,500 |          |  | $          | 1.79 |          |  |  | 2,191,667  |          |  | $ | 0.70 | 
|Granted                        |  |            | 645,000   |          |  | $          | 3.19 |          |  |  | 1,764,500  |          |  | $ | 2.09 | 
|Cancelled                      |  |            | (131,900  | )        |  | $          | 2.05 |          |  |  | (189,000   | )        |  | $ | 0.75 | 
|Exercised                      |  |            | (183,600  | )        |  | $          | 0.81 |          |  |  | (1,464,667 | )        |  | $ | 0.66 | 
|                               |  |            |           |          |  |            |      |          |  |  |            |          |  |   |      | 
|Outstanding, end of year       |  |            | 2,632,000 |          |  | $          | 2.18 |          |  |  | 2,302,500  |          |  | $ | 1.79 | 
|                               |  |            |           |          |  |            |      |          |  |  |            |          |  |   |      | 
|Exercisable, end of year       |  |            | 722,500   |          |  | $          | 1.43 |          |  |  | 349,000    |          |  | $ | 0.78 | 
|                               |  |            |           |          |  |            |      |          |  |  |            |          |  |   |      | 





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##### Table of Contents



MEOTA RESOURCES CORP.
Notes to Consolidated Financial Statements, page 7

Years ended December 31, 2001 and 2000
(Tabular amounts are stated in thousands of dollars)



|4. |  | Share capital (continued):
|-- |  | --------------------------



| | (d) |  | Stock options (continued):                                                                                   
| | --- |  | -------------------------------------------------------------------------------------------------------------
|
| |     |  | As at December 31, 2001 outstanding stock option have the following expiry
dates and
weighted average prices:

|                |  |                     |           |                     |  |          |      |             |  |          |      |  |  |  |         |          |  |   |      | 
|--------------- |  | ------------------- | --------- | ------------------- |  | -------- | ---- | ----------- |  | -------- | ---- |  |  |  | ------- | -------- |  | - | ---- | 
|                |  | Options Outstanding |           | Options Exercisable
|                |  |                     |           |                    
|                |  |                     |           |                     |  |          |      |             |  | Weighted |      |  |  |  |         | Weighted
|                |  |                     |           |                     |  |          |      |             |  | average  |      |  |  |  |         | average 
|Range of        |  | Number              |           | Year                |  | exercise |      | Number      |  | exercise
|Exercise prices |  | outstanding         |           | of expiry           |  | price    |      | exercisable |  | price   
|                |  |                     |           |                     |  |          |      |             |  |         
|$0.75           |  |                     | 140,000   |                     |  |          | 2002 |             |  | $        | 0.75 |  |  |  | 140,000 |          |  | $ | 0.75 | 
|$0.75 - $0.85   |  |                     | 149,000   |                     |  |          | 2004 |             |  | $        | 0.76 |  |  |  | 66,000  |          |  | $ | 0.76 | 
|$0.90           |  |                     | 800,000   |                     |  |          | 2005 |             |  | $        | 0.90 |  |  |  | 320,000 |          |  | $ | 0.90 | 
|$2.04 - $2.50   |  |                     | 220,500   |                     |  |          | 2005 |             |  | $        | 2.38 |  |  |  | 60,600  |          |  | $ | 2.41 | 
|$3.00 - $3.90   |  |                     | 679,500   |                     |  |          | 2005 |             |  | $        | 3.28 |  |  |  | 135,900 |          |  | $ | 3.28 | 
|$3.00 - $3.40   |  |                     | 643,000   |                     |  |          | 2006 |             |  | $        | 3.19 |  |  |  |        |          |  | $ |     | 
|                |  |                     |           |                     |  |          |      |             |  |          |      |  |  |  |         |          |  |   |      | 
|Total           |  |                     | 2,632,000 |                     |  |          |      |             |  | $        | 2.18 |  |  |  | 722,500 |          |  | $ | 1.43 | 
|                |  |                     |           |                     |  |          |      |             |  |          |      |  |  |  |         |          |  |   |      | 



| | (e) |  | Warrants:                                                                                                                                                                                                                    
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | On February 9, 1999, the Corporation issued 100,000 warrants which
entitled the holder to
acquire 100,000 Non-Voting shares of the Corporation at the price of $0.85
per share. The
warrants were exercised in January, 2000.



|5. |  | Taxes:
|-- |  | ------



| |  |  | The actual income tax provision differs from the expected amount
calculated by applying the
Canadian combined Federal and Provincial income tax rate of 42.6% (2000 -
44.6%) to income
before income taxes. The difference relates to the following items:
| |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                 |  |      |        |      |  |   |        |  
|------------------------------------------------ |  | ---- | ------ | ---- |  | - | ------ | -
|                                                 |  | 2001 |        | 2000
|                                                 |  |      |        |     
|Statutory tax rate                               |  |      | 42.6   | %    |  |   | 44.6   | %
|Expected income tax expense                      |  | $    | 16,896 |      |  | $ | 15,442 |  
|Non-deductible crown payments                    |  |      | 8,330  |      |  |   | 5,300  |  
|Resource allowance                               |  |      | (8,204 | )    |  |   | (7,759 | )
|Reduction in effective tax rate                  |  |      | 382    |      |  |   |       |  
|Tax benefit from tax pools and prior year losses |  |      | (636   | )    |  |   | (5,586 | )
|                                                 |  |      |        |      |  |   |        |  
|Future tax expense                               |  |      | 16,768 |      |  |   | 7,397  |  
|Capital tax expense                              |  |      | 547    |      |  |   | 512    |  
|                                                 |  |      |        |      |  |   |        |  
|                                                 |  | $    | 17,315 |      |  | $ | 7,909  |  
|                                                 |  |      |        |      |  |   |        |  





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##### Table of Contents



MEOTA RESOURCES CORP.
Notes to Consolidated Financial Statements, page 8

Years ended December 31, 2001 and 2000
(Tabular amounts are stated in thousands of dollars)



|5. |  | Taxes (continued):
|-- |  | ------------------

The components of the Corporations future income tax liability at
December 31, 2001 are as
follows:

|                                      |  |   |       |  
|------------------------------------- |  | - | ----- | -
|Property, plant and equipment         |  | $ | 2,163 |  
|Provision for future site restoration |  |   | (287  | )
|Share issue costs                     |  |   | (306  | )
|                                      |  |   |       |  
|Future tax liability                  |  | $ | 1,570 |  
|                                      |  |   |       |  

Cash taxes for the year ended December 31, 2001 were $696,000 (2000 -
$245,000).



|6. |  | Risk management:
|-- |  | ----------------



| | (a) |  | Interest rate:                                                                                                                                                                                                                                                                                                           
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | The long-term debt of $58,935,000 (December 31, 2000  $64,621,000) is
subject to
fluctuations in short-term Canadian interest rates.                                                                                                                                                                                    
|
| | (b) |  | Credit risk:                                                                                                                                                                                                                                                                                                             
|
| |     |  | A portion of the Corporations accounts receivable are with joint venture
partners in the oil and
gas industry and are subject to normal industry credit risks. Purchasers
of the Corporations
petroleum and natural gas products are subject to an internal credit
review designed to
mitigate the risk of non-payment.
|
| | (c) |  | Fair value of financial instruments:                                                                                                                                                                                                                                                                                     
|
| |     |  | The carrying value of accounts receivable, prepaids and deposits and
accounts payable
approximate their fair value because of their short term to maturity.                                                                                                                                                              
|
| | (d) |  | Foreign currency:                                                                                                                                                                                                                                                                                                        
|
| |     |  | While substantially all of the Corporations sales are denominated in
Canadian dollars, the
market prices in Canada for oil and natural gas are impacted by changes in
the exchange rate
between the Canadian and U.S. dollar.                                                                                           





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##### Table of Contents



MEOTA RESOURCES CORP.
Notes to Consolidated Financial Statements, page 9
Years ended December 31, 2001 and 2000
(Tabular amounts are stated in thousands of dollars)



|6. |  | Risk management (continued):
|-- |  | ----------------------------



| | (e) |  | Natural gas and crude oil contracts:                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | From time to time, the Corporation enters into contracts to hedge a
portion of its production at
fixed prices for specific periods. Gains or losses with respect to such
contracts are
recognized when the sale of the related production is recognized in the
financial statements.
At December 31, 2001, the following natural gas hedging contracts were in
place. Settlement
of these contracts would have resulted in a net receipt of $400,000 as at
December 31, 2001.

|            |  |           |  |           |      |             |  |      |  |                        |  |  |  |  |  | 
|----------- |  | --------- |  | --------- | ---- | ----------- |  | ---- |  | ---------------------- |  |  |  |  |  | 
|Commodity   |  | Daily     |  | Contract  |      |             |  |      |  |                        |  | 
|contracts   |  | quantity  |  | Prices/gj |      | Price Index |  | Term
|            |  |           |  |           |      |             |  |     
|Put options |  | 16,000 gj |  | $         | 2.50 |             |  | AECO |  | January -- March, 2002
|Fixed price |  | 13,000 gj |  | $         | 3.66 |             |  | AECO |  | January -- March, 2002

Subsequent to December 31, 2001, the Corporation entered into the following
natural gas hedging contracts.

|            |  |          |  |           |       |             |  |      |  |                        |  |  |  |  |  | 
|----------- |  | -------- |  | --------- | ----- | ----------- |  | ---- |  | ---------------------- |  |  |  |  |  | 
|Commodity   |  | Daily    |  | Contract  |       |             |  |      |  |                        |  | 
|contracts   |  | quantity |  | Prices/gj |       | Price Index |  | Term
|            |  |          |  |           |       |             |  |     
|Fixed price |  | 5,000 gj |  | $         | 2.91  |             |  | AECO |  | April -- October, 2002
|Fixed price |  | 5,000 gj |  | $         | 2.915 |             |  | AECO |  | April -- October, 2002
|Fixed price |  | 4,000 gj |  | $         | 2.975 |             |  | AECO |  | April -- October, 2002
|Fixed price |  | 4,000 gj |  | $         | 3.25  |             |  | AECO |  | April -- October, 2002





---



##### Table of Contents



Consolidated Financial Statements of

MEOTA RESOURCES CORP.

Years ended December 31, 2000 and 1999





---



##### Table of Contents



MANAGEMENTS RESPONSIBILITY FOR FINANCIAL STATEMENTS

All of the information in this annual report is the responsibility of
management. The financial statements have been prepared by management in
accordance with Canadian generally accepted accounting principles. The
financial information elsewhere in the annual report has been reviewed to
ensure consistency in all material respects with that in the financial
statements.

The Company maintains appropriate systems of internal control to give
reasonable assurance that transactions are appropriately authorized, assets are
safeguard from loss or unauthorized use and financial records provide reliable
and accurate information for the preparation of financial statements.

KPMG LLP, an independent firm of chartered accountants, has been engaged to
examine the financial statements and provide their auditors report. Their
report is presented with the financial statements.

The directors are responsible for ensuring that management fulfills its
responsibilities for financial reporting and internal control. The directors
exercise this responsibility through the audit committee. This committee,
which is comprised of directors who are not employees of the Company, meets
with management and the external auditors to satisfy itself that management
responsibilities are properly discharged and to review the financial statements
before they are presented to the directors for approval. The financial
statements have been approved by the Board of Directors on the recommendation
of the audit committee.

|                                                                                                |  |                                                                                      
|----------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------
|(Signed Craig W. Stewart)
Craig W. Stewart
President and Chief Executive Officer
March 23, 2001 |  | (Signed John W. Ferguson)
John W. Ferguson
Vice President and Chief Financial Officer

AUDITORS REPORT TO THE SHAREHOLDERS

We have audited the consolidated balance sheets of Meota Resources Corp. as at
December 31, 2000 and 1999 and the consolidated statements of operations and
retained earnings (deficit) and cash flows for the years then ended. These
financial statements are the responsibility of the Corporations management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our audits in accordance with Canadian generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.

In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Corporation as at December 31,
2000 and 1999 and the results of its operations and its cash flows for the
years then ended in accordance with Canadian generally accepted accounting
principles.

(Signed) KPMG LLP
Calgary, Canada 
March 23, 2001





---



##### Table of Contents



MEOTA RESOURCES CORP.
Consolidated Balance Sheets

December 31, 2000 and 1999
(in thousands of dollars)

|                                       |                                          |   |         |        |      |   |        |         |  
|-------------------------------------- | ---------------------------------------- | - | ------- | ------ | ---- | - | ------ | ------- | -
|                                       |                                          |   | 2000    |        | 1999
|                                       |                                          |   |         |        |     
|Assets                                 |                                          |   |         |        |      |   |        |        
|Current assets:                        |                                          |   |         |        |      |   |        |        
|                                       | Accounts receivable                      |   | $       | 17,825 |      |   | $      | 4,540   |  
|                                       | Prepaid expenses                         |   |         | 2,102  |      |   |        | 1,517   |  
|                                       |                                          |   |         |        |      |   |        |         |  
|                                       |                                          |   | 19,927  |        |      |   | 6,057  |        
|Future taxes (note 5)                  |                                          |   | 17,340  |        |      |   |       |        
|Property, plant and equipment (note 2) |                                          |   | 121,742 |        |      |   | 67,795 |        
|                                       |                                          |   |         |        |      |   |        |         |  
|                                       |                                          | $ | 159,009 |        |      | $ | 73,852 |        
|Liabilities and Shareholders Equity   |                                          |   |         |        |      |   |        |        
|                                       |                                          |   |         |        |      |   |        |         |  
|Current liabilities:                   |                                          |   |         |        |      |   |        |        
|                                       | Accounts payable and accrued liabilities |   | $       | 19,752 |      |   | $      | 7,378   |  
|Long-term debt (note 3):               |                                          |   |         |        |      |   |        |        
|                                       | Bank debt                                |   |         | 64,621 |      |   |        | 33,977  |  
|                                       | Notes payable                            |   |         |       |      |   |        | 7,500   |  
|Site reclamation and abandonment       |                                          |   | 516     |        |      |   | 252    |        
|                                       |                                          |   |         |        |      |   |        |         |  
|                                       |                                          |   | 84,889  |        |      |   | 49,107 |        
|                                       |                                          |   |         |        |      |   |        |         |  
|Shareholders equity:                  |                                          |   |         |        |      |   |        |        
|                                       | Share capital (note 4)                   |   |         | 47,405 |      |   |        | 24,699  |  
|                                       | Contributed surplus                      |   |         |       |      |   |        | 56,065  |  
|                                       | Retained earnings (deficit)              |   |         | 26,715 |      |   |        | (56,019 | )
|                                       |                                          |   |         |        |      |   |        |         |  
|                                       |                                          |   | 74,120  |        |      |   | 24,745 |        
|                                       |                                          |   |         |        |      |   |        |         |  
|                                       |                                          | $ | 159,009 |        |      | $ | 73,852 |        
|                                       |                                          |   |         |        |      |   |        |         |  

See accompanying notes to consolidated financial statements.
On behalf of the Board:

|                            |  |          | 
|--------------------------- |  | -------- | 
|(Signed Lyle F. Dunkely)    |  | Director | 
|(Signed Robert G. McMorran) |  | Director | 





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##### Table of Contents



MEOTA RESOURCES CORP.
Consolidated Statements of Operations and Retained Earnings (Deficit)

Years ended December 31, 2000 and 1999
(in thousands of dollars except per share amounts)

|                                 |                            |   |         |         |      |   |         |        |  
|-------------------------------- | -------------------------- | - | ------- | ------- | ---- | - | ------- | ------ | -
|                                 |                            |   | 2000    |         | 1999
|                                 |                            |   |         |         |     
|Revenue:                         |                            |   |         |         |      |   |         |       
|                                 | Oil and natural gas sales  |   | $       | 79,561  |      |   | $       | 27,774 |  
|                                 | Royalties, net of ARTC     |   |         | (16,200 | )    |   |         | (5,487 | )
|                                 |                            |   |         |         |      |   |         |        |  
|                                 |                            |   | 63,361  |         |      |   | 22,287  |       
|Expenses:                        |                            |   |         |         |      |   |         |       
|                                 | Depletion and depreciation |   |         | 11,425  |      |   |         | 7,028  |  
|                                 | Production                 |   |         | 11,887  |      |   |         | 5,619  |  
|                                 | Interest                   |   |         | 3,405   |      |   |         | 2,842  |  
|                                 | General and administrative |   |         | 2,020   |      |   |         | 1,255  |  
|                                 |                            |   |         |         |      |   |         |        |  
|                                 |                            |   | 28,737  |         |      |   | 16,744  |       
|                                 |                            |   |         |         |      |   |         |        |  
|Net income, before tax           |                            |   | 34,624  |         |      |   | 5,543   |       
|Taxes (note 5):                  |                            |   |         |         |      |   |         |       
|                                 | Future                     |   |         | 7,397   |      |   |         |       |  
|                                 | Capital                    |   |         | 512     |      |   |         | 319    |  
|                                 |                            |   |         |         |      |   |         |        |  
|                                 |                            |   | 7,909   |         |      |   | 319     |       
|                                 |                            |   |         |         |      |   |         |        |  
|Net income for the year          |                            |   | 26,715  |         |      |   | 5,224   |       
|Deficit, beginning of year       |                            |   | (56,019 | )       |      |   | (61,243 | )     
|Reduction of contributed surplus |                            |   | 56,019  |         |      |   |        |       
|                                 |                            |   |         |         |      |   |         |        |  
|Retained earnings (deficit)      |                            | $ | 26,715  |         |      | $ | (56,019 | )     
|                                 |                            |   |         |         |      |   |         |        |  
|Net income per share (note 4)   
|                                 | Basic                      |   | $       | 0.54    |      |   | $       | 0.14   |  
|                                 | Basic Fully diluted        |   | $       | 0.52    |      |   | $       | 0.13   |  
|                                 |                            |   |         |         |      |   |         |        |  

See accompanying notes to consolidated financial statements.





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##### Table of Contents



MEOTA RESOURCES CORP.
Consolidated Statements of Cash Flows

Years ended December 31, 2000 and 1999
(in thousands of dollars except per share amounts)

|                                              |                                        |   |         |         |      |   |         |         |  
|--------------------------------------------- | -------------------------------------- | - | ------- | ------- | ---- | - | ------- | ------- | -
|                                              |                                        |   | 2000    |         | 1999
|                                              |                                        |   |         |         |     
|Cash provided by (used in)                    |                                        |   |         |         |      |   |         |        
|Operations:                                   |                                        |   |         |         |      |   |         |        
|                                              | Net income for the year                |   | $       | 26,715  |      |   | $       | 5,224   |  
|                                              | Future taxes                           |   |         | 7,397   |      |   |         |        |  
|                                              | Depletion and depreciation             |   |         | 11,425  |      |   |         | 7,028   |  
|                                              |                                        |   |         |         |      |   |         |         |  
|                                              | Cash flow from operations              |   |         | 45,537  |      |   |         | 12,252  |  
|                                              | Net change in non-cash working capital |   |         | (1,496  | )    |   |         | (599    | )
|                                              |                                        |   |         |         |      |   |         |         |  
|                                              |                                        |   | 44,041  |         |      |   | 11,653  |        
|                                              |                                        |   |         |         |      |   |         |         |  
|Financing:                                    |                                        |   |         |         |      |   |         |        
|                                              | Issue of share capital                 |   |         | 22,522  |      |   |         | 118     |  
|                                              | Notes payable                          |   |         | (7,500  | )    |   |         |        |  
|                                              | Bank debt                              |   |         | 30,644  |      |   |         | (445    | )
|                                              |                                        |   |         |         |      |   |         |         |  
|                                              |                                        |   | 45,666  |         |      |   | (327    | )      
|                                              |                                        |   |         |         |      |   |         |         |  
|Investments:                                  |                                        |   |         |         |      |   |         |        
|                                              | Capital expenditures                   |   |         | (63,440 | )    |   |         | (11,108 | )
|                                              | Benefit of excess tax pools            |   |         | (28,177 | )    |   |         |        |  
|                                              | Sale of investments                    |   |         | 2,240   |      |   |         |        |  
|                                              | Other                                  |   |         | (330    | )    |   |         | (218    | )
|                                              |                                        |   |         |         |      |   |         |         |  
|                                              |                                        |   | (89,707 | )       |      |   | (11,326 | )      
|                                              |                                        |   |         |         |      |   |         |         |  
|Change in cash position                       |                                        |   |        |         |      |   |        |        
|Cash, beginning of year                       |                                        |   |        |         |      |   |        |        
|                                              |                                        |   |         |         |      |   |         |         |  
|Cash, end of year                             |                                        | $ |        |         |      | $ |        |        
|                                              |                                        |   |         |         |      |   |         |         |  
|Cash flow from operations per share (note 4): |                                        |   |         |         |      |   |         |        
|                                              | Basic                                  |   | $       | 0.91    |      |   | $       | 0.33    |  
|                                              | Fully diluted                          |   |         | 0.88    |      |   |         | 0.32    |  
|                                              |                                        |   |         |         |      |   |         |         |  

See accompanying notes to consolidated financial statements.





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##### Table of Contents



MEOTA RESOURCES CORP.
Notes to Consolidated Financial Statements

Years ended December 31, 2000 and 1999
(Tabular amounts are stated in thousands of dollars)



|1. |  | Significant accounting policies:                                                                                                                                                                                                                                                                                                                                                                                                                        
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | The preparation of financial statements in accordance with
Canadian generally accepted
accounting principles requires management to make estimates and
assumptions that effect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the
date of the financial statements and the reported amount of revenues and
expenses during the
reported period. Actual results could differ from these estimates.
|  
|   |  | The consolidated financial statements include the accounts of the
Corporation and its subsidiary.                                                                                                                                                                                                                                                                                                                                                       



| | (a) |  | Property, plant and equipment:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | Substantially all of the exploration, development and production
activities of the Corporation
are conducted jointly with others. The financial
statements reflect the Corporations
proportionate interest in such activities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |     |  | The Corporation follows the full cost method of accounting, whereby all
costs associated with
the exploration for and development of oil and natural
gas reserves are capitalized.
Capitalized costs include lease acquisition costs, the costs of geological
and geophysical
activities, the cost of drilling both productive and non-productive wells,
carrying charges of
non-producing properties and costs directly related to exploration and
development activities.
Proceeds from the disposal of properties are applied as a reduction of the
cost of the
remaining assets, except when such a disposal would alter the rate of
depletion and
depreciation by more than 20 percent, in which case a gain or loss on
disposal is recorded.
|
| |     |  | Depletion of oil and gas properties and depreciation of production
equipment are calculated
using the unit of production method which is based upon gross proven
reserve volumes. Gas
volumes are converted to equivalent oil volumes based upon the relative
energy content of six
thousand cubic feet of gas to one barrel of oil.                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |     |  | The costs of acquisition and evaluation of unproved properties are
initially excluded from the
depletion calculation. These properties are assessed to determine whether
an impairment in
value has occurred. When proven reserves are assigned to the property or
the property is
considered to have an impairment in value, the cost of the property or
amount of the
impairment in value is added to the capitalized costs for the calculation
of depletion.                                                                                                                                                                                                                                                                                   
|
| |     |  | The cost less accumulated depletion and depreciation, future
income taxes and the
accumulated provision for future site restoration costs (capitalized
cost) is limited to the sum
of the following (cost ceiling);                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           



| | (i)  |  | The estimated undiscounted future net revenue (based on prices and
costs at the balance
sheet date) derived from proved reserves net of financing costs,
production related
general and administrative costs and income taxes; and
| | ---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (ii) |  | The lower of cost or fair market value of unproved properties.                                                                                                                                                                    
|
| |      |  | Future net revenue is calculated using the Alberta Royalty
Tax Credit legislation
throughout the life of the reserves.                                                                                                            





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##### Table of Contents



MEOTA RESOURCES CORP.
Notes to Consolidated Financial Statements, page 2

Years ended December 31, 2000 and 1999
(Tabular amounts are stated in thousands of dollars)



| |  | The amounts recorded for depletion, depreciation and amortization of
property, plant and
equipment and the provision for future site restoration costs are based on
estimates. The cost
ceiling is based on such factors as estimated proven reserves, production
rates, oil and natural
gas prices and future costs. By their nature, these estimates are subject
to measurement
uncertainty and may impact the financial statements of future periods.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) |  | Site reclamation and abandonment:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | Estimated site reclamation and abandonment costs are provided for using
the unit-of-
production method over the life of the remaining reserves. These costs
are based on year
end engineering estimates of the costs of reclamation and abandonments.
The annual
provision is included in depletion and depreciation expense.                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| | (c) |  | Net income and cash flow from operations per share:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |     |  | Net income per share is computed by dividing net income by the weighted
average number of
shares outstanding. Cash flow from operations per share is computed by
dividing cash flow
from operations by the weighted average number of shares outstanding.
Fully diluted income
per share and cash flow from operations per share are determined using the
imputed
earnings method as if all potentially dilutive securities had been
converted or exercised at the
later of the beginning of the year or on the date of issue.                                                                                                                                                                                                                          
|
| | (d) |  | Comparative amounts:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |     |  | Certain comparative amounts have been reclassified to conform with the
presentation format
adopted in the current year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| | (e) |  | Income taxes:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| |     |  | Effective January 1, 2000, the Corporation adopted the recommendation of
the Canadian
Institute of Chartered Accountants with respect to accounting for income
taxes. Under these
recommendations, the liability method of tax allocation is used, which
determines future
income taxes based on the temporary differences between the carrying
amount of assets and
liabilities reported for financial statement purposes and the tax basis
reported for tax
purposes. The tax benefit renounced to investors on the issue of flow
through shares is
recorded as a reduction of share capital. Previously, the Corporation
followed the deferral
method. The new method was applied retroactively without restatement of
the 1999 financial
statements.





---



##### Table of Contents



MEOTA RESOURCES CORP.
Notes to Consolidated Financial Statements, page 3

Years ended December 31, 2000 and 1999
(Tabular amounts are stated in thousands of dollars)



|2. |  | Property, plant and equipment:
|-- |  | ------------------------------

|                               |  |      |         |              |  |             |        |          |  |   |         | 
|------------------------------ |  | ---- | ------- | ------------ |  | ----------- | ------ | -------- |  | - | ------- | 
|                               |  |      |         |              |  | Accumulated |        |          |  |  
|                               |  |      |         |              |  | depletion   |        |          |  |  
|                               |  |      |         |              |  | and         |        | Net book
|                               |  | Cost |         | depreciation |  | value      
|                               |  |      |         |              |  |            
|2000                           |  |      |         |              |  |             |        |          |  |   |         | 
|Oil and natural gas properties |  | $    | 144,609 |              |  | $           | 23,184 |          |  | $ | 121,425 | 
|Furniture, equipment and other |  |      | 520     |              |  |             | 203    |          |  |   | 317     | 
|                               |  |      |         |              |  |             |        |          |  |   |         | 
|                               |  | $    | 145,129 |              |  | $           | 23,387 |          |  | $ | 121,742 | 
|                               |  |      |         |              |  |             |        |          |  |   |         | 
|1999                           |  |      |         |              |  |             |        |          |  |   |         | 
|Oil and natural gas properties |  | $    | 80,210  |              |  | $           | 12,495 |          |  | $ | 67,715  | 
|Furniture, equipment and other |  |      | 142     |              |  |             | 62     |          |  |   | 80      | 
|                               |  |      |         |              |  |             |        |          |  |   |         | 
|                               |  | $    | 80,352  |              |  | $           | 12,557 |          |  | $ | 67,795  | 
|                               |  |      |         |              |  |             |        |          |  |   |         | 



| |  | On June 29, 2000 the Corporation entered into an agreement to purchase oil and
gas assets and income tax pools in excess of the purchase price for cash
consideration of $56.5 million. The acquisition was accounted for by the
purchase method of accounting with the results of operations of the acquired
properties included in these financial statements from July 1, 2000. Initially
the entire purchase price was allocated to property, plant and equipment.
During the fourth quarter of 2000 it was determined that it was more likely
than not that the excess tax pools would be ultimately utilized and, as a
result, the amount allocated to property, plant and equipment was reduced by
$28.2 million for the benefits associated with the excess tax pools.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | The calculation of depletion and depreciation as at December 31, 2000 excludes
costs relating to unproved properties of $17,528,000 (1999  $1,975,000) and
includes estimated future development costs for proved undeveloped properties
of $11,744,000 (1999  $3,779,000).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | Depletion and depreciation includes a
provision of $594,000 for estimated future site restoration costs. The
provision is based on estimated remaining costs of $7,222,000 (1999 -
$2,422,000).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               





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##### Table of Contents



MEOTA RESOURCES CORP.
Notes to Consolidated Financial Statements, page 4

Years ended December 31, 2000 and 1999
(Tabular amounts are stated in thousands of dollars)



|3. |  | Long-term debt:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | The Corporation has $77 million of authorized credit with a Canadian
chartered bank consisting of
(i) a $75 million revolving term credit facility (the Revolving
Facility) and (ii) a $2 million operating
facility (the Operating Facility). Advances under the Revolving
Facility bear interest at between
0.125% and 1% over the banks prime lending rate and bankers acceptances
advanced on the
facility bear a stamping fee between 1.125% and 2% depending upon the
senior debt to EBITDA
ratio of the Corporation. The Revolving Facility revolves until July 31,
2001 and for a period of
four years thereafter at the request of the Corporation and the consent of
the bank. If the
Revolving Facility is not extended on July 31, 2001, amounts outstanding
at that time would be
repayable in sixteen quarterly instalments with the last instalment
payable on July 31, 2005. The
Operating Facility is due August 30, 2001 and amounts outstanding pursuant
to the Operating
Facility bear interest at between 0.125% and 1% over the banks prime
lending rate depending
upon the senior debt to EBITDA ratio of the Corporation. The credit
facilities are secured by a
$150 million debenture granted by the Corporation containing a floating charge
over the
undertaking, property and assets of the Corporation and a general
assignment of book debts by
the Corporation. No portion of outstanding debt has been included in
current liabilities as the
Corporation expects the facility will be extended and, if it is not, the
Corporation has the capacity
to draw sufficient additional amounts to satisfy any repayment
requirements in 2001.
|  
|   |  | The notes payable were repaid in full including interest on December 28,
2000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|  
|   |  | Cash interest for the year December 31, 2000 was $3,594,000 (1999 -
$2,856,000).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|  
|4. |  | Share capital:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 



| | (a) |  | Authorized:                                                                                                                                                                                                                 
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | Unlimited number of common shares
without par value
Unlimited number of First Preferred shares without par value and issuable
in series
Unlimited number of Second Preferred shares without par value and issuable
in series





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##### Table of Contents



MEOTA RESOURCES CORP.
Notes to Consolidated Financial Statements, page 5

Years ended December 31, 2000 and 1999
(Tabular amounts are stated in thousands of dollars)



|4. |  | Share capital (continued):
|-- |  | --------------------------



| | (b) |  | Issued:
| | --- |  | -------

|                               |                                                                         |   |        |        |        |  |            |            |         |  |            |             |   |  |            |             |  
|------------------------------ | ----------------------------------------------------------------------- | - | ------ | ------ | ------ |  | ---------- | ---------- | ------- |  | ---------- | ----------- | - |  | ---------- | ----------- | -
|                               |                                                                         |   |        |        |        |  | Common     |            | Class A |  | Non-voting
|                               |                                                                         |   | Value  |        | shares |  | shares     |            | shares 
|                               |                                                                         |   |        |        |        |  |            |            |        
|Balance, December 31, 1998     |                                                                         | $ | 25,449 |        |        |  |           |            |         |  | 10,331,269 |             |   |  | 26,375,000 |            
|                               | Issued on exercise of
stock options                                     |   |        | 118    |        |  |            |           |         |  |            | 454,000     |   |  |            |            |  
|Flow-through shares tax
effect |                                                                         |   | (868   | )      |        |  |           |            |         |  |           |             |   |  |           |            
|                               |                                                                         |   |        |        |        |  |            |            |         |  |            |             |   |  |            |            
|Balance, December 31, 1999     |                                                                         |   | 24,699 |        |        |  |           |            |         |  | 10,785,269 |             |   |  | 26,375,000 |            
|                               | Issued on exercise of stock
options and warrants                        |   |        | 977    |        |  |            |           |         |  |            | 284,667     |   |  |            | 1,185,000   |  
|                               | Flow-through shares issued
for cash pursuant to private
placement (i)   |   |        | 3,885  |        |  |            |           |         |  |            |            |   |  |            | 4,625,000   |  
|                               | Issued for cash and marketable
securities pursuant to private
placement |   |        | 4,000  |        |  |            |           |         |  |            | 2,764,234   |   |  |            | 2,235,766   |  
|                               | Share reorganization (ii)                                               |   |        |       |        |  |            | 48,254,936 |         |  |            | (13,834,170 | ) |  |            | (34,420,766 | )
|                               | Flow-through shares issued for
cash pursuant to private
placement (i)   |   |        | 1,600  |        |  |            | 1,600,000  |         |  |            |            |   |  |            |            |  
|                               | Addition to stated capital (ii)                                         |   |        | 46     |        |  |            |           |         |  |            |            |   |  |            |            |  
|                               | Issued on exercise of stock
options                                     |   |        | 69     |        |  |            | 95,000     |         |  |            |            |   |  |            |            |  
|                               | Issued for cash pursuant to
treasury issue (iii)                        |   |        | 14,231 |        |  |            | 4,000,000  |         |  |            |            |   |  |            |            |  
|                               | Tax effect of flow-through share
and share issue costs                  |   |        | (2,102 | )      |  |            |           |         |  |            |            |   |  |            |            |  
|                               |                                                                         |   |        |        |        |  |            |            |         |  |            |             |   |  |            |            
|Balance, December 31, 2000     |                                                                         | $ | 47,405 |        |        |  | 53,949,936 |            |         |  |           |             |   |  |           |            
|                               |                                                                         |   |        |        |        |  |            |            |         |  |            |             |   |  |            |            



| | (i) |  | Flow-through shares:                                                                                                                                                                                                                                                                                                           
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | On January 20, 2000, the Corporation issued 4,625,000 Non-Voting Shares on
a flow-
through basis for $3,885,000 and agreed to issue an additional 1,600,000
Common
Shares for $1,600,000 which were issued on August 29, 2000. In 2000, the
Corporation
incurred approximately $2,240,000 of flow-through related expenditures.





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##### Table of Contents



MEOTA RESOURCES CORP.
Notes to Consolidated Financial Statements, page 6

Years ended December 31, 2000 and 1999
(Tabular amounts are stated in thousands of dollars)



|4. |  | Share capital (continued):
|-- |  | --------------------------



| | (b) |  | Issued (continued):
| | --- |  | -------------------



| | (ii)  |  | Reorganization:                                                                                                                                                                                                                                                                                                           
| | ----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |       |  | On May 23, 2000, the Class A and the Non-Voting shareholders of the
Corporation
approved a resolution reorganizing Class A and Non-Voting shares on a one
for one basis
into a new Common Share.                                                                                                                          
|
| |       |  | On the same date the Class A shareholders approved a resolution reducing
the
contributed surplus by $56,065,000 which represented the entire
contributed surplus of
the Corporation. Concurrently, the Corporations deficit was reduced by
$56,019,000 and
$46,000 was added to the stated capital of the Class A shares.
|
| | (iii) |  | Treasury issue:                                                                                                                                                                                                                                                                                                           
|
| |       |  | The Corporation issued 4,000,000 common shares at $3.75 per share for net
proceeds of
$14,231,000 after costs of the issue of $769,000.                                                                                                                                                                                   



| | (c) |  | Weighted average number of shares:                                                                                                                                                                                                                                                                                                                       
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | The net income and cash flow from operations per share amounts are
calculated based on
the weighted average number of shares outstanding of 49,849,168 (December
31, 1999 
36,768,148). Fully diluted net income per share is $0.52 (December 31, 1999 -
$0.13). Fully
diluted cash flow from operations per share is $0.88 (December 31, 1999 -
$0.32).
|
| | (d) |  | Stock options:                                                                                                                                                                                                                                                                                                                                           
|
| |     |  | The Corporation has granted stock options to directors, officers, certain
employees and
advisors to the Corporation. The terms of the outstanding options are:                                                                                                                                                                                           



| | (i)  |  | All of the outstanding stock options have a term of five years;                                                                  
| | ---- |  | ---------------------------------------------------------------------------------------------------------------------------------
|
| | (ii) |  | 265,000 stock options vest equally over a three year period, the
remainder of the stock
options vest equally over five years; and





---



##### Table of Contents



MEOTA RESOURCES CORP.
Notes to Consolidated Financial Statements, page 7

Years ended December 31, 2000 and 1999
(Tabular amounts are stated in thousands of dollars)



|4. |  | Share capital (continued):
|-- |  | --------------------------



| | (d) |  | Stock options (continued):
| | --- |  | --------------------------



| | (iii) |  | The options expire 30 days after termination of employment with the
Corporation and after
five years if not exercised.
| | ----- |  | ----------------------------------------------------------------------------------------------------------------------

|                               |  |            |            |          |  |            |      |          |  |  |           |          |  |   |      | 
|------------------------------ |  | ---------- | ---------- | -------- |  | ---------- | ---- | -------- |  |  | --------- | -------- |  | - | ---- | 
|                               |  | 2000       |            | 1999    
|                               |  |            |            |         
|                               |  |            |            |          |  | Weighted   |      |          |  |  |           | Weighted
|                               |  |            |            |          |  | average    |      |          |  |  |           | average 
|                               |  | Number     |            | exercise |  | Number     |      | exercise
|                               |  | of options |            | price    |  | of options |      | price   
|                               |  |            |            |          |  |            |      |         
|Outstanding, beginning of year |  |            | 2,191,667  |          |  | $          | 0.70 |          |  |  | 2,121,667 |          |  | $ | 0.59 | 
|Granted                        |  |            | 1,764,500  |          |  | $          | 2.09 |          |  |  | 680,000   |          |  | $ | 0.76 | 
|Cancelled                      |  |            | (189,000   | )        |  | $          | 0.75 |          |  |  | (156,000  | )        |  | $ | 0.75 | 
|Exercised                      |  |            | (1,464,667 | )        |  | $          | 0.66 |          |  |  | (454,000  | )        |  | $ | 0.26 | 
|                               |  |            |            |          |  |            |      |          |  |  |           |          |  |   |      | 
|Outstanding, end of year       |  |            | 2,302,500  |          |  | $          | 1.79 |          |  |  | 2,191,667 |          |  | $ | 0.70 | 
|                               |  |            |            |          |  |            |      |          |  |  |           |          |  |   |      | 
|Exercisable, end of year       |  |            | 349,000    |          |  | $          | 0.78 |          |  |  | 1,250,000 |          |  | $ | 0.65 | 
|                               |  |            |            |          |  |            |      |          |  |  |           |          |  |   |      | 

As at December 31, 2000 outstanding stock option have the following expiry
dates and weighted average prices:

|                |  |                     |           |                     |  |          |      |             |  |          |      |  |  |     |         |          |     |   |      | 
|--------------- |  | ------------------- | --------- | ------------------- |  | -------- | ---- | ----------- |  | -------- | ---- |  |  | --- | ------- | -------- | --- | - | ---- | 
|                |  | Options Outstanding |           | Options Exercisable
|                |  |                     |           |                    
|                |  |                     |           |                     |  |          |      |             |  | Weighted |      |  |  |     |         | Weighted
|                |  |                     |           |                     |  |          |      |             |  | average  |      |  |  |     |         | average 
|Range of        |  | Number              |           | Date                |  | exercise |      | Number      |  | exercise
|Exercise prices |  | outstanding         |           | of expiry           |  | price    |      | exercisable |  | price   
|                |  |                     |           |                     |  |          |      |             |  |         
|$0.75 - $1.00   |  |                     | 265,000   |                     |  |          | 2002 |             |  | $        | 0.78 |  |  |     | 265,000 |          |     | $ | 0.79 | 
|$0.75 - $0.85   |  |                     | 273,000   |                     |  |          | 2004 |             |  | $        | 0.77 |  |  |     | 84,000  |          |     | $ | 0.76 | 
|$0.90           |  |                     | 800,000   |                     |  |          | 2005 |             |  | $        | 0.90 |  |  | Nil |         |          | N/A |  
|$2.04 - $2.50   |  |                     | 223,500   |                     |  |          | 2005 |             |  | $        | 2.38 |  |  | Nil |         |          | N/A |  
|$3.25 - $3.90   |  |                     | 741,000   |                     |  |          | 2005 |             |  | $        | 3.28 |  |  | Nil |         |          | N/A |  
|                |  |                     |           |                     |  |          |      |             |  |          |      |  |  |     |         |          |     |   |      | 
|Total           |  |                     | 2,302,500 |                     |  |          |      |             |  | $        | 1.79 |  |  |     | 349,000 |          |     | $ | 0.78 | 
|                |  |                     |           |                     |  |          |      |             |  |          |      |  |  |     |         |          |     |   |      | 



| | (e) |  | Warrants:                                                                                                                                                                                                                    
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | On February 9, 1999, the Corporation issued 100,000 warrants which
entitled the holder to
acquire 100,000 Non-Voting shares of the Corporation at the price of $0.85
per share. The
warrants were exercised in January, 2000.





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##### Table of Contents



MEOTA RESOURCES CORP.
Notes to Consolidated Financial Statements, page 8

Years ended December 31, 2000 and 1999
(Tabular amounts are stated in thousands of dollars)



|5. |  | Taxes:                                                                                                                                                                                                                                     
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | The actual income tax provision differs from the expected amount
calculated by applying the
Canadian combined Federal and Provincial income tax rate of 44.6% to
income before income
taxes. The difference relates to the following items:

|                                                 |  |      |        |      |  |   |        |  
|------------------------------------------------ |  | ---- | ------ | ---- |  | - | ------ | -
|                                                 |  | 2000 |        | 1999
|                                                 |  |      |        |     
|Statutory tax rate                               |  |      | 44.6   | %    |  |   | 44.6   | %
|Expected income tax expense                      |  | $    | 15,442 |      |  | $ | 2,473  |  
|Non-deductible crown payments                    |  |      | 5,300  |      |  |   | 1,811  |  
|Resource allowance                               |  |      | (7,759 | )    |  |   | (2,174 | )
|Tax benefit from tax pools and prior year losses |  |      | (5,586 | )    |  |   | (2,110 | )
|                                                 |  |      |        |      |  |   |        |  
|Future tax expense                               |  |      | 7,397  |      |  |   |       |  
|Capital tax expense                              |  |      | 512    |      |  |   | 319    |  
|                                                 |  |      |        |      |  |   |        |  
|                                                 |  | $    | 7,909  |      |  | $ | 319    |  
|                                                 |  |      |        |      |  |   |        |  

The components of the Corporations future income tax asset at December 31,
2000 are as follows:

|                                      |  |   |        | 
|------------------------------------- |  | - | ------ | 
|Property, plant and equipment         |  | $ | 16,892 | 
|Provision for future site restoration |  |   | 173    | 
|Share issue costs                     |  |   | 275    | 
|                                      |  |   |        | 
|Future tax asset                      |  | $ | 17,340 | 
|                                      |  |   |        | 



| |  | Certain of the tax pools acquired as part of the property acquisition described
in note 2 are successored and are only available to be claimed against taxable
income arising from the acquired properties.                                                                                                                                                                                                                                                                                                                                                                                                
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | The Corporations tax pool balances as at December 31, 2000 and certain amounts
claimed in prior years are under audit by taxation authorities. Changes in the
balances available to the Corporation may increase the tax expense in future
periods.                                                                                                                                                                                                                                                                                                                                                       
|
| |  | If the change in income tax accounting policy described in note 1(e) had been
applied in prior years, there would be no impact on net income or loss in 1999.
If the change in income tax accounting policy had not been applied in the year
ended December 31, 2000, the provision for future income taxes would have been
reduced, by approximately $1,000,000 and net income increased by the same
amount. In addition, property, plant and equipment has been increased and the
future tax asset reduced by $1,338,000 for the cumulative effect of
flow-through shares issued in 1999 and prior years.
|
| |  | Cash taxes for the year ended December 31, 2000 were $245,000 (1999 -
$339,000).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           





---



##### Table of Contents



MEOTA RESOURCES CORP.
Notes to Consolidated Financial Statements, page 9

Years ended December 31, 2000 and 1999
(Tabular amounts are stated in thousands of dollars)



|6. |  | Risk management:
|-- |  | ----------------



| | (a) |  | Interest rate:                                                                                                                                                                     
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | The long-term debt, amounting to $64,621,000 (December 31, 1999 -
$33,977,000 net of
$7,500,000 of notes payable), is subject to fluctuation in short-term Canadian
interest rates.



| | (b) |  | Credit risk:                                                                                                                                                                                                                                                                                                             
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | A portion of the Corporations accounts receivable are with joint venture
partners in the oil and
gas industry and are subject to normal industry credit risks. Purchasers
of the Corporations
petroleum and natural gas products are subject to an internal credit
review designed to
mitigate the risk of non-payment.



| | (c) |  | Fair value of financial instruments:                                                                                                                       
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | The carrying value of accounts receivable, prepaids and deposits and
accounts payable
approximate their fair value because of their short-term to maturity.



| | (d) |  | Foreign currency:                                                                                                                                                                                                             
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | While substantially all of the Corporations sales are denominated in
Canadian dollars, the
market prices in Canada for oil and natural gas are impacted by changes in
the exchange rate
between the Canadian and U.S. dollar.



| | (e) |  | Natural gas and crude oil contracts:                                                                                                                                                                                                                                                                                                                                                              
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | From time to time, the Corporation enters into agreements to hedge a
portion of its production
at fixed prices for specific periods. Gains or losses with respect to
such contracts are
recognized when the sale of the related production is recognized in the
financial statements.
During 2000, the Corporation did not enter into any agreements to hedge
any of the
Corporations production.





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##### Table of Contents






Managements Discussion and Analysis

The following analysis provides a detailed explanation of Providents operating
results for the year ended December 31, 2002 compared to the period March 6,
2001 to December 31, 2001 and should be read in conjunction with the audited
consolidated financial statements of Provident.

This disclosure contains certain forward-looking estimates that involve
substantial known and unknown risks and uncertainties, certain of which are
beyond Providents control, including the impact of general economic conditions
in Canada and the United States; industry conditions; changes in laws and
regulations including the adoption of new environmental laws and regulations
and changes in how they are interpreted and enforced; increased competition;
the lack of availability of qualified personnel or management; fluctuations in
commodity prices; foreign exchange or interest rates; stock market volatility
and obtaining required approvals of regulatory authorities. Providents actual
results, performance or achievement could differ materially from those
expressed in, or implied by, these forward-looking estimates and, accordingly,
no assurances can be given that any of the events anticipated by the
forward-looking estimates will transpire or occur, or if any of them do so,
what benefits, including the amounts of proceeds, that Provident will derive
therefrom. All amounts are reported in Canadian dollars, unless otherwise
stated.

Inception of the Trust

Provident Energy Trust commenced operations on March 6, 2001 when Founders
Energy Ltd. (Founders) converted from an exploration and production company
into a cash distributing energy trust. This was accomplished through a Plan of
Arrangement approved by the shareholders of Founders. Consequently, the 2002
results are compared to operations since the conversion.

Production

|                          |                       |  |                    |       |             |  |            |    |                    |  |                |       |           |  |             |    |  |  |                   |     |  |  |        |       |  |  |     |    | 
|------------------------- | --------------------- |  | ------------------ | ----- | ----------- |  | ---------- | -- | ------------------ |  | -------------- | ----- | --------- |  | ----------- | -- |  |  | ----------------- | --- |  |  | ------ | ----- |  |  | --- | -- | 
|                          |                       |  | 2002 Average Daily |       |             |  |            |    | 2001 Average Daily |  |                |       |           |  |             |    |  |  | December 31, 2002 |     |  |  |       
|                          |                       |  | Production         |       | Boe Percent |  | Production |    | Boe Percent        |  | Percent Change |       | Exit Rate |  | Boe Percent
|                          |                       |  |                    |       |             |  |            |    |                    |  |                |       |           |  |            
|Crude Oil                 |                       |  |                    |       |             |  |            |    |                    |  |                |       |           |  |             |    |  |  |                   |     |  |  |        |       |  |  |     |   
|                          | Light/medium (bpd)    |  |                    | 5,096 |             |  |            | 23 |                    |  |                | 1,577 |           |  |             | 16 |  |  |                   | 223 |  |  |        | 7,000 |  |  |     | 25 | 
|                          | Heavy
(15o API) (bpd) |  |                    | 6,310 |             |  |            | 29 |                    |  |                | 5,053 |           |  |             | 52 |  |  |                   | 25  |  |  |        | 6,300 |  |  |     | 21 | 
|Natural gas liquids (bpd) |                       |  | 1,030              |       |             |  | 5          |    |                    |  | 509            |       |           |  | 5           |    |  |  | 102               |     |  |  | 1,200  |       |  |  | 4   |   
|Natural gas (mcfd)        |                       |  | 56,193             |       |             |  | 43         |    |                    |  | 15,772         |       |           |  | 27          |    |  |  | 256               |     |  |  | 86,500 |       |  |  | 50  |   
|                          |                       |  |                    |       |             |  |            |    |                    |  |                |       |           |  |             |    |  |  |                   |     |  |  |        |       |  |  |     |    | 
|Oil Equivalent (boed)     |                       |  | 21,801             |       |             |  | 100        |    |                    |  | 9,767          |       |           |  | 100         |    |  |  | 123               |     |  |  | 28,900 |       |  |  | 100 |   
|                          |                       |  |                    |       |             |  |            |    |                    |  |                |       |           |  |             |    |  |  |                   |     |  |  |        |       |  |  |     |    | 

The acquisition of Richland Petroleum Corporation (Richland) on January 16,
2002, the southern Alberta property acquisition effective April 1, 2002, and
the Meota Resources Corp. (Meota) acquisition on October 1, 2002 were the
main drivers for the





---



##### Table of Contents



growth in natural gas and light/medium oil production. Heavy oil production
increased by 25 percent to 6,310 barrels per day in 2002 versus 5,053 barrels
per day in the period March 6 to December 31, 2001. The increase in heavy oil
production volumes reflected the acquisition of the Maxx Petroleum Ltd.
(Maxx) heavy oil properties which produced for a full year compared to only
74 percent of the 2001 period, and the successful 34-well heavy oil drilling
program in 2002 and subsequent production from 34 net heavy oil wells.

The acquisitions have substantially changed the production profile of the Trust
over the comparable periods with natural gas now averaging 43 percent of 2002
production compared to 27 percent for the March 6 to December 31, 2001 period.
Light/medium oil has also increased as a percentage of the commodity mix, while
heavy oil has decreased significantly as a percentage of production.

Production in the fourth quarter incorporated the Meota acquisition and
averaged 30,790 boe per day. The exit rate at 28,900 boe per day, comprised of
50 percent natural gas and 50 percent oil, is indicative of the Trusts current
production mix for 2003. Current plans are to spend $30-$35 million on capital
expenditures in 2003, partially offsetting natural production declines.

Crude oil price

The West Texas Intermediate (WTI) oil price for 2002 averaged US$26.11 per
barrel compared to US$25.19 per barrel for the March 6 to December 31, 2001
period. For the Trust, the increase in WTI was partially offset by opportunity
costs related to the Commodity Price Risk Management Program. Improved heavy
oil differentials were also partially offset by opportunity costs related to
the Commodity Price Risk Management Program. Average 2002 prices reflect an
opportunity cost of $13.0 million or $3.13 per barrel in 2002 from the
Commodity Price Risk Management Program compared to an improvement in revenue
of $4.6 million or $2.23 per barrel in the 2001 period. The Trust received an
average all-in corporate price on its crude oil of $26.55 per barrel in 2002
compared to $24.14 per barrel in the 2001 period. The increase in the average
crude oil price reflects the change in the Trusts production profile to
include light/medium oil as a larger percentage of the Trusts total crude oil
production, combined with narrower 2002 differentials, partially offset by the
impact of the hedging program.

Natural gas price

The natural gas price at AECO averaged Cdn$4.04 per mcf in 2002 versus Cdn$4.40
per mcf for the period March 6, 2001 to December 31, 2001. The Trust received
an average all-in price of Cdn$4.67 per mcf for its natural gas, reflecting
both the heat content adjustment and the $6.6 million or $0.32 increase per mcf
as a result of the Commodity Price Risk Management Program. This compares to a
corporate price of Cdn$5.33 per mcf for the period March 6, 2001 to December
31, 2001, including an adjustment for the Commodity Price Risk Management
Program to increase natural gas revenue by $4.2 million or $0.89 per mcf. Gross
production revenue for 2002 has been adjusted to include a non-cash
amortization or reduction in revenue of $9.3 million related to hedge positions





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##### Table of Contents



recorded as an asset upon the acquisition of Richland. The non-cash
amortization related to these hedges will be recorded as a reduction to gross
production revenue over the remaining term of the Richland contracts. At
December 31, 2002, $0.8 million related to these contracts remained to be
amortized through to October 31, 2003.

Commodity Price Risk Management Program

Providents Commodity Price Risk Management Program has been in place since the
inception of the Trust to help manage the volatility in Providents oil and
natural gas prices and to assist with stabilizing cash flow and distributions
per unit. Provident uses a combination of forward sales contracts, physical
hedges on both wellhead prices and heavy oil differentials, financial hedging
on WTI crude oil and AECO natural gas prices and Cdn/US exchange rate hedges.
For 2002, the Program recorded an opportunity cost of $13.0 million on crude
oil ($3.13 per barrel) and a positive impact on natural gas revenue of $6.6
million ($0.32 per mcf), compared to positive impacts of $4.6 million for crude
oil ($2.23 per barrel) and $4.2 million for natural gas ($0.89 per mcf) for the
March 6 to December 31, 2001 period. The total impact in 2002 was an
opportunity cost of $6.5 million ($0.81 per boe) compared to the favourable
$8.8 million ($2.95 per boe) in the March 6 to December 31, 2001 period.

The estimated value of open contracts at December 31, 2002 was negative for
both crude oil and natural gas, totalling $13.3 million for crude oil and $12.4
million for natural gas based on commodity prices prevailing at December 31,
2002.

The contract positions for Provident as at December 31, 2002 are provided in
note 14 to the consolidated financial statements  financial instruments and
hedging.

(2002 REALIZED CRUDE OIL PRICE CHART)





---



##### Table of Contents



(2002 REALIZED NATURAL GAS PRICE CHART)

(2002 RELATIONSHIP OF DISTRIBUTIONS TO COMMODITY PRICES CHART)

Gross production revenue

Gross production revenue from oil, natural gas and natural gas liquids totalled
$207.8 million in 2002, 165 percent higher than the $78.3 million for the
period March 6 to December 31, 2001. The increase was mainly driven by higher
production volumes as a result of the acquisition of Richland, Meota and the
southern Alberta properties. To a lesser extent, the increase resulted from the
presence of the Maxx production for the full 2002 year compared to only 74
percent of the days in the 2001 period. Finally, 2002





---



##### Table of Contents



results reflect a full year to accumulate production and revenue compared to
301 days in the March 6 to December 31, 2001 period.

Gross production revenue for 2003 will increase significantly to reflect a full
year of the revenues associated with the 2002 acquisitions.

Royalties

In 2002, royalties net of ARTC were $44.3 million or 241 percent higher than
the $13.0 million for the period March 6 to December 31, 2001. The larger
dollar value correlates with the increased production volumes and revenues. As
a percentage of gross production revenue prior to the impact of the Commodity
Price Risk Management Program and amortization of hedges, the average royalty
percentage was 19.8 percent in 2002 compared to 18.7 percent in the March 6 to
December 31, 2001 period. The higher 2002 average royalty burden results from
the change in the commodity mix of products sold to include a larger proportion
of natural gas and light and medium oil and a smaller proportion of heavy oil
than the March 6 to December 31, 2001 period. Typically, royalties paid on
heavy oil production are lower than on conventional light/medium oil or natural
gas.

Royalties for 2003 incorporating the current production profile and prior to
the impact of the Commodity Price Risk Management Program are forecast in the
21-23 percent range. The royalty percentage is subject to fluctuation based on
the production profile and commodity prices.

Production expenses

Production expenses for the year were $52.7 million, an increase of 158 percent
over the $20.4 million recorded in the period March 6 to December 31, 2001.
This increase is almost entirely attributable to increases in production and
wells associated with the corporate acquisitions of Richland and Meota and the
southern Alberta property acquisition, and to a lesser extent to the full year
of Maxx production compared to Maxx being recorded for only 74 percent of the
days in the 2001 period. Finally, the 2002 results reflect production expenses
for a full year compared to the 301 days in the March 6 to December 31, 2001
period.

On a boe basis, production expenses were $6.63 per boe in 2002, $0.31 per boe
lower than the $6.94 per boe for the March 6, 2001 to December 31, 2001 period.
The lower boe production expenses are due mainly to the change in the
production profile of the Trust and managements continuing progress in
reducing field operating expenses. Field operations for natural gas and
conventional light and medium oil properties typically incur lower production
expenses than heavy oil operations, although a substantial volume of the
Trusts natural gas production incurs third-party processing fees which
increase current production costs, but reduce the need for future capital to
build and maintain processing facilities.

For 2003, production expenses are expected to range between $6.25-$6.75 per boe
based on the current production profile and existing operations.





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##### Table of Contents



Operating netback

The table below sets out the Trusts average field netbacks for 2002 compared
to the March 6 to December 31, 2001 period:

|                                                                        |                     |      |       |       |   |                |       |       |   |  |    |    |  
|----------------------------------------------------------------------- | ------------------- | ---- | ----- | ----- | - | -------------- | ----- | ----- | - |  | -- | -- | -
|(per boe)                                                               |                     | 2002 |       | 2001  |   | Percent Change
|                                                                        |                     |      |       |       |   |               
|Gross production revenue before
Commodity Price Risk Management Program |                     | $    | 28.10 |       |   | $              | 23.69 |       |   |  | 19 |   
|Commodity Price Risk Management Program                                 |                     |      | (0.81 | )     |   |                | 2.95  |       |   |  |   |   
|Less: Royalties                                                         |                     |      | (5.57 | )     |   |                | (4.43 | )     |   |  | 26 |   
|                                                                        | Production expenses |      |       | (6.63 | ) |                |       | (6.94 | ) |  |    | (4 | )
|                                                                        |                     |      |       |       |   |                |       |       |   |  |    |   
|Field netbacks  cash basis                                             |                     |      | 15.09 |       |   |                | 15.27 |       |   |  | (1 | ) 
|Non-cash amortization  Deferred hedges                                 |                     |      | (1.19 | )     |   |                |      |       |   |  |   |   
|                                                                        |                     |      |       |       |   |                |       |       |   |  |    |   
|Field netbacks  after deferred hedges                                  |                     | $    | 13.90 |       |   | $              | 15.27 |       |   |  | (9 | ) 
|                                                                        |                     |      |       |       |   |                |       |       |   |  |    |   

The Trusts operating netback on a boe basis was $13.90 per boe in 2002 after
the non-cash amortization of deferred hedging or $15.09 on a cash basis. This
compares to $15.27 per boe for the March 6 to December 31, 2001 period. The
change in the production profile to include a larger proportion of light/medium
oil and natural gas and a smaller proportion of heavy oil in 2002 is evident in
the comparable netbacks. For 2002, the unadjusted gross production revenue was
19 percent higher at $28.10 per boe compared to $23.69 per boe for the March 6
to December 31, 2001 period. Further, operating costs were four percent lower
at $6.63 per boe compared to $6.94 per boe, and royalties were 26 percent
higher at $5.57 per boe compared to $4.43 per boe in the March 6 to December
31, 2001 period. Prior to the impact of the Commodity Price Risk Management
Program, the 2002 operating cash netback increased by 29 percent to $15.90 per
boe compared to $12.32 per boe in the March 6 to December 31 2001 period.

In the future, given that the current production profile is more weighted to
natural gas and light/medium oil and less weighted to heavy oil, operating
netbacks are expected to increase on a boe basis.





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##### Table of Contents



General and administrative and management fees

|                                                     |                        |   |      |      |      |   |                |      |  |  |       |     | 
|---------------------------------------------------- | ---------------------- | - | ---- | ---- | ---- | - | -------------- | ---- |  |  | ----- | --- | 
|                                                     |                        |   | 2002 |      | 2001 |   | Percent Change
|                                                     |                        |   |      |      |      |   |               
|General and administrative expense                   |                        | $ | 1.00 |      |      | $ | 1.16           |      |  |  | (14   | )  
|Base management fee                                  |                        |   | 0.29 |      |      |   | 0.31           |      |  |  | (6    | )  
|                                                     |                        |   |      |      |      |   |                |      |  |  |       |    
|Total                                                |                        |   | 1.29 |      |      |   | 1.47           |      |  |  | (12   | )  
|                                                     |                        |   |      |      |      |   |                |      |  |  |       |    
|Total return fee:                                    |                        |   |      |      |      |   |                |      |  |  |       |    
|                                                     | - Cash component       |   |      | 0.50 |      |   |                |     |  |  |       |    | 
|                                                     | - Trust unit component |   |      | 0.63 |      |   |                | 0.09 |  |  |       | 600 | 
|                                                     |                        |   |      |      |      |   |                |      |  |  |       |    
|                                                     |                        |   | 1.13 |      |      |   | 0.09           |      |  |  | 1,156 |    
|                                                     |                        |   |      |      |      |   |                |      |  |  |       |    
|Total general and administrative and
management fees |                        | $ | 2.42 |      |      | $ | 1.56           |      |  |  | 55    |    
|                                                     |                        |   |      |      |      |   |                |      |  |  |       |    

General and administrative expenses in 2002 were $8.0 million compared to $3.4
million for the period March 6 to December 31, 2001. The higher expense was due
to increased costs associated with the much larger operations of the Trust in
2002. General and administrative expenses were $1.00 per boe compared to $1.16
per boe in the 2001 period. The lower per boe costs reflect the economies of
scale the Trust has achieved with the larger production base. The Trust does
not capitalize general and administrative expenses.

Management fees were paid to Provident Management Corporation (the Manager)
from inception until December 31, 2002 (see subsequent event  Note 16 to the
consolidated financial statements). For 2002, the Manager was paid a fee of
$2.3 million in respect of a base management fee of two percent of cash
operating income from January 1 to October 31, along with $0.25 million paid in
November and December. This compares to a base management fee of $0.9 million
for the period March 6 to December 31, 2001. The main driver for the higher
base fee in 2002 was the significant growth achieved by the Trust. The Manager
was also entitled to a total return fee based on distributions and unit price
performance during the year. On January 17, 2003 the unitholders of the Trust
approved a transaction that capped the 2002 total return fee at $9.0 million,
which was settled with $4.0 million of cash and $5.0 million in trust units
issued at a price of $10.70. This compared to a total return fee of $0.3
million for the March 6 to December 31, 2001 period. The increase in the 2002
total return fee reflects both a significant increase in the market
capitalization of the Trust and an increase in total return to unitholders for
2002 compared to the March 6 to December 31, 2001 period.

For 2003, it is expected that the general and administrative expense will be in
the range of $1.00-$1.10 per boe based on the current production and production
profile. This will be a decrease from the $2.42 per boe incurred for general
and administrative expenses and management fees in 2002.





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##### Table of Contents



Interest

Interest expense in the year was $5.3 million compared to $2.7 million for the
period March 6 to December 31, 2001. The additional interest expense resulted
from the increased capitalization of the Trust throughout the year. The
weighted average interest rate of the Trust was 5.0 percent for 2002 compared
to 5.5 percent for the 2001 period.

Current tax expense and future tax liability

Current tax expense for the year was $3.3 million compared to $1.2 million for
the period March 6 to December 31, 2001 and was comprised of Large Corporations
Tax (LCT) and the Saskatchewan resource surcharge.

In 2002, the future tax liability on the balance sheet increased by $110.3
million as a result of recording the Richland and Meota acquisitions using the
purchase accounting method. The liability was offset by the future tax recovery
of $17.5 million on 2002 operations.

Depletion, depreciation and amortization
(DD&A), the ceiling test and future tax
recovery

DD&A expense for 2002 was $90.5 million or $11.37 per boe, compared to $33.8
million or $11.48 per boe for the March 6 to December 31, 2001 period. The
increased DD&A correlates with the significant increase in production and the
depletable asset base in 2002. On a boe basis, the relatively high DD&A rate in
both periods was primarily the result of the method of accounting for corporate
acquisitions required under Canadian GAAP. More specifically, property, plant
and equipment are written up by the tax-affected difference between the
purchase price and the tax pools acquired. Over time, the increased DD&A rate
is offset by a future tax recovery amount. In 2002, the future tax recovery was
$17.5 million compared to a pre-writedown recovery of $8.8 million for the
March 6 to December 31, 2001 period.

The Provident ceiling test calculation at December 31, 2002 used the prices in
effect at December 31, 2002 of Cdn$32.00 per barrel for heavy oil, Cdn$40.93
per barrel for light/medium oil, Cdn$5.96 per mcf for natural gas and Cdn$38.02
per barrel for natural gas liquids. These prices resulted in a ceiling test
surplus. During the March 6 to December 31, 2001 period, the Trust recorded two
writedowns: the first at September 30, 2001 was primarily due to the low
natural gas price, and the second at December 31, 2001 was due to the low heavy
oil wellhead price. The combined writedowns were recorded on the balance sheet
as a reduction to property, plant and equipment of $101.3 million, and a
decrease in the future tax liability of $43.0 million. The net impact on the
statement of operations was a reduction in earnings of $58.3 million.





---



##### Table of Contents



Cash flow and earnings (loss)

|                                |  |              |         |              |  |         |       |        |  |     |       |         |  |     |         |     |  |   |        |   |  |   |       |  
|------------------------------- |  | ------------ | ------- | ------------ |  | ------- | ----- | ------ |  | --- | ----- | ------- |  | --- | ------- | --- |  | - | ------ | - |  | - | ----- | -
|                                |  | 2002 ($000s) |         | 2001 ($000s)
|                                |  |              |         |             
|                                |  |              |         |              |  | Per     |       | Per    |  |     |       |         |  | Per |         | Per
|                                |  | Amount       |         | Boe          |  | Unit(1) |       | Amount |  | boe |       | Unit(1)
|                                |  |              |         |              |  |         |       |        |  |     |       |        
|Netback (cash basis)            |  | $            | 120,054 |              |  | $       | 15.09 |        |  | $   | 2.98  |         |  | $   | 44,859  |     |  | $ | 15.27  |   |  | $ | 3.25  |  
|                                |  |              |         |              |  |         |       |        |  |     |       |         |  |     |         |     |  |   |        |   |  |   |       |  
|General and
administrative      |  |              | 7,987   |              |  |         | 1.00  |        |  |     | 0.20  |         |  |     | 3,418   |     |  |   | 1.16   |   |  |   | 0.25  |  
|Management fee                  |  |              | 2,296   |              |  |         | 0.29  |        |  |     | 0.06  |         |  |     | 1,153   |     |  |   | 0.40   |   |  |   | 0.08  |  
|Total return fee  cash         |  |              | 4,000   |              |  |         | 0.50  |        |  |     | 0.10  |         |  |     |        |     |  |   |       |   |  |   |      |  
|Interest expense                |  |              | 5,307   |              |  |         | 0.67  |        |  |     | 0.13  |         |  |     | 2,671   |     |  |   | 0.91   |   |  |   | 0.19  |  
|Current tax expense             |  |              | 3,264   |              |  |         | 0.41  |        |  |     | 0.07  |         |  |     | 1,178   |     |  |   | 0.40   |   |  |   | 0.09  |  
|Other                           |  |              | 304     |              |  |         | 0.04  |        |  |     | 0.01  |         |  |     | 211     |     |  |   | 0.07   |   |  |   | 0.02  |  
|                                |  |              |         |              |  |         |       |        |  |     |       |         |  |     |         |     |  |   |        |   |  |   |       |  
|                                |  |              | 23,158  |              |  |         | 2.91  |        |  |     | 0.57  |         |  |     | 8,631   |     |  |   | 2.94   |   |  |   | 0.63  |  
|                                |  |              |         |              |  |         |       |        |  |     |       |         |  |     |         |     |  |   |        |   |  |   |       |  
|Cash flow from operations       |  |              | 96,896  |              |  |         | 12.18 |        |  |     | 2.41  |         |  |     | 36,228  |     |  |   | 12.33  |   |  |   | 2.62  |  
|                                |  |              |         |              |  |         |       |        |  |     |       |         |  |     |         |     |  |   |        |   |  |   |       |  
|Amortization of deferred
hedges |  |              | 9,477   |              |  |         | 1.19  |        |  |     | 0.24  |         |  |     |        |     |  |   |       |   |  |   |      |  
|DD&A                            |  |              | 90,481  |              |  |         | 11.37 |        |  |     | 2.25  |         |  |     | 33,753  |     |  |   | 11.48  |   |  |   | 2.44  |  
|Additional DD&A(2)              |  |              |        |              |  |         |      |        |  |     |      |         |  |     | 101,300 |     |  |   | 34.46  |   |  |   | 7.34  |  
|Future income tax
recovery(2)   |  |              | (17,500 | )            |  |         | (2.20 | )      |  |     | (0.44 | )       |  |     | (51,759 | )   |  |   | (17.61 | ) |  |   | (3.75 | )
|Total return fee  units        |  |              | 5,000   |              |  |         | 0.63  |        |  |     | 0.12  |         |  |     | 256     |     |  |   | 0.07   |   |  |   | 0.02  |  
|Other                           |  |              | (494    | )            |  |         | (0.06 | )      |  |     | (0.01 | )       |  |     | (467    | )   |  |   | (0.14  | ) |  |   | (0.04 | )
|                                |  |              |         |              |  |         |       |        |  |     |       |         |  |     |         |     |  |   |        |   |  |   |       |  
|                                |  |              | 86,964  |              |  |         | 10.93 |        |  |     | 2.16  |         |  |     | 83,083  |     |  |   | 28.26  |   |  |   | 6.01  |  
|                                |  |              |         |              |  |         |       |        |  |     |       |         |  |     |         |     |  |   |        |   |  |   |       |  
|Net (loss) income               |  | $            | 9,932   |              |  | $       | 1.25  |        |  | $   | 0.25  |         |  | $   | (46,855 | )   |  | $ | (15.93 | ) |  | $ | (3.39 | )
|                                |  |              |         |              |  |         |       |        |  |     |       |         |  |     |         |     |  |   |        |   |  |   |       |  



|(1) |  | Based on weighted average units and exchangeable shares of 40.2 million (2001  138 million).                 
|--- |  | --------------------------------------------------------------------------------------------------------------
|   
|(2) |  | The amounts recorded in 2001 reflect a ceiling test writedowns recorded at
September 30 and December 31, 2001.

Cash flow from operations in 2002 was $96.9 million, an increase of 168 percent
from the $36.2 million recorded in the March 6, 2001 to December 31, 2001
period. The 2002 cash flow incorporates increased activity levels which
generated much higher cash revenues and expenses in 2002 than for the
comparative March 6 to December 31, 2001 period. Non-cash expenses increased
with the exception of the additional depletion, depreciation and amortization
and the associated future tax recovery booked as a result of writedowns
recorded in the March 6 to December 31, 2001 period. Net income in 2002 was
$9.9 million, compared to a $46.9 million loss in 2001, including writedowns.

Adjusted cash flow and cash distributions

|                               |  |      |        |      |  |   |        | 
|------------------------------ |  | ---- | ------ | ---- |  | - | ------ | 
|                               |  | 2002 |        | 2001
|                               |  |      |        |     
|Cash flow from operations      |  | $    | 96,896 |      |  | $ | 36,228 | 
|Deduct: interest on debentures |  |      | 4,901  |      |  |   |       | 
|                               |  |      |        |      |  |   |        | 
|Adjusted cash flow             |  | $    | 91,995 |      |  | $ | 36,228 | 





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##### Table of Contents



Adjusted cash flow is used to determine distributions to the Trusts
unitholders. The current policy is to pay out 90-100 percent of adjusted cash
flow. For 2002, the Trust declared distributions of $2.03 per trust unit to
total $81.5 million in distributions compared to $2.54 per trust unit ($36.9
million) in the March 6 to December 31, 2001 period. For Canadian residents, 48
percent of the cash distributions paid in calendar 2002 were taxable compared
to 40.7 percent of the amount paid in the March 6 to December 31, 2001 period.

Capital expenditures

Capital expenditures by the Trust totalled $82.7 million in 2002, comprised of
$0.4 million in land retention costs, $12.4 million in drilling, completion and
equipping costs, $8.4 million in facility costs, $0.7 million in office-related
equipment, and $72 million in property acquisitions. During the year, the Trust
also disposed of $11.2 million of non-core assets. In the period March 6 to
December 31, 2001 capital expenditures were $12.2 million. The larger asset
base during 2002 resulted in increased opportunities to drill and otherwise
optimize production.

For 2003, the Trust plans to spend a minimum of $30 million to reduce the
natural production decline on the Trusts core properties.

Debt

At December 31, 2002 the Trust had $187.2 million of bank debt drawn against a
$255 million revolving credit facility with a syndicate of chartered banks.The
credit facility is such that each year Provident requests the revolving period
be extended for a further 364-day period. If the syndicate does not agree to
extend the revolving period, at Providents option the credit facility is
converted, at the end of the 364-day term, to a one-year non-revolving
term-credit facility. Interest rates under the terms of the facility are
determined quarterly based on the ratio of quarter-end debt divided by the
previous quarters cash flow annualized. At December 31, 2002 the rate paid on
lines drawn against this facility were at bank prime of 4.5 percent plus 0.25
percent. The Trust can draw on this facility or, to lower its effective
borrowing rate, access the bankers acceptance market. Provident has no off
balance sheet debt.

For 2003, Provident does not plan to affect debt levels with the $30-$35
million capital program, as the strategy is to fund capital expenditures with
proceeds from the DRIP program.

Unitholders equity

On January 16, 2002 the Trust issued 11.2 million trust units as consideration
for the Richland acquisition. The units were ascribed a value of $98.9 million
or $8.86 per unit. On October 1, 2002 the Trust issued 14.5 million trust units
with an ascribed value of $158.3 million or $10.91 per unit as partial
settlement for the acquisition of Meota. In addition, Provident Acquisitions
Inc., an indirect wholly-owned subsidiary of the Trust, issued 5.9 million
exchangeable shares with an ascribed value of $63.9 million at $10.91 per share
as partial consideration for the acquisition of Meota. The conversion ratio for





---



##### Table of Contents



the exchangeable shares for the period October 1 to November 14, 2002 was equal
to one trust unit for one exchangeable share, and is increased on each date
that a distribution is paid by the Trust between October 1, 2002 and the date
the exchangeable share is converted, at the option of the holder, into trust
units. On January 15, 2004 all remaining exchangeable shares associated with
the Meota acquisition will be automatically exchanged for trust units, subject
to extension at the option of the Trust.

On April 11, 2002 Provident completed a bought-deal financing consisting of 3.9
million trust units at a price of $10.10 per unit for net proceeds of $37.4
million. The proceeds were used to fund the acquisition of the southern Alberta
property acquisition and for general corporate purposes.

Also, on April 11, 2002  in a first for the energy trust sector  the Trust
issued $64.4 million of subordinated convertible debentures with a 10.5 percent
coupon rate maturing May 15, 2007. Net proceeds of $61.4 million were used to
fund the southern Alberta property acquisition. The debentures can be converted
into units at the option of the holder at a conversion price of $10.70 per
trust unit prior to maturity. During the year, $0.125 million of debentures
were converted to trust units. The debentures and the related interest
obligations are classified as equity on the balance sheet as the Trust has the
option of satisfying these obligations through the issuance of trust units.

Premium Distribution, Distribution Reinvestment Plan (DRIP)

Effective with the May 2002 distribution, the Trust initiated a premium
distribution, distribution reinvestment plan (DRIP). The DRIP permits
eligible unitholders to direct their distributions to the purchase of
additional units at 95 percent of the average market price as defined in the
plan (Regular DRIP). The premium distribution component permits eligible
unitholders to elect to receive 102 percent of the cash the unitholder would
otherwise have received on the distribution date (Premium DRIP). Unitholders
who participate in either the Regular DRIP or the Premium DRIP are also
eligible to participate in the optional unit purchase plan as defined in the
plan. Participation levels are currently in excess of 30 percent and for 2003
Provident is planning to use the proceeds provided by this plan to fund a
substantial portion of its capital expenditure program.

Future site reclamation

Provident established a cash reserve effective May 1, 2001 for future site
reclamation expenditures. Provident funds the reserve by paying $0.20 per boe
produced on a 10:1 basis into a segregated cash account. Actual expenditures
incurred are then funded from the cash in this account. For the period ended
December 31, 2002 the cash amount contributed to the reserve totalled $1.7
million, funded by $1.3 million based on production plus a further $0.4 million
from deposits carried forward from Richland. Actual expenditures incurred for
the period, net of salvage values, totalled $0.6 million. Provident continues
to assess its contribution level to the fund to ensure adequate funds are
provided for future site reclamation projects.





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##### Table of Contents



Acquisitions

During 2002, Provident completed three major acquisitions: on January 16, 2002
Richland was acquired for $189 million; effective April 1, 2002 the southern
Alberta properties were acquired for $72 million; and on October 1, 2002 the
Trust took up and paid for the outstanding shares of Meota in a $344 million
takeover. The details of the net assets acquired, liabilities assumed, the
consideration paid and the form of the consideration are outlined in detail in
Note 4 to the consolidated financial statements. From an operational
perspective these acquisitions further diversified the Trusts asset base,
providing a majority of operated, high netback properties and a more balanced
commodity mix. The acquisitions also helped to establish new core areas in
southern Alberta and southwest Saskatchewan and provided a substantial
inventory of low-risk development prospects and optimization opportunities.
These transactions met our two key criteria of being accretive to cash flow and
neutral to accretive to net asset value on a per unit basis.

Unit trading activity

The following table summarizes the unit trading activity of the Provident units
for the year ended December 31, 2002 on both the Toronto Stock Exchange and the
American Stock Exchange:

|                    |  |    |        |    |  |    |        |    |  |     |        |  |  |  |        |  |  |  |        | 
|------------------- |  | -- | ------ | -- |  | -- | ------ | -- |  | --- | ------ |  |  |  | ------ |  |  |  | ------ | 
|                    |  | Q1 |        | Q2 |  | Q3 |        | Q4 |  | YTD
|                    |  |    |        |    |  |    |        |    |  |    
|TSE  PVE.UN (Cdn$) |  |    |        |    |  |    |        |    |  |     |        |  |  |  |        |  |  |  |        | 
|High                |  |    | 10.70  |    |  |    | 11.33  |    |  |     | 11.44  |  |  |  | 11.03  |  |  |  | 11.44  | 
|Low                 |  |    | 8.20   |    |  |    | 9.97   |    |  |     | 10.02  |  |  |  | 9.85   |  |  |  | 8.20   | 
|Close               |  |    | 10.55  |    |  |    | 11.05  |    |  |     | 10.80  |  |  |  | 10.75  |  |  |  | 10.75  | 
|Volume (000s)       |  |    | 16,563 |    |  |    | 11,330 |    |  |     | 11,546 |  |  |  | 12,524 |  |  |  | 51,963 | 
|AMEX  PVX (US$)    |  |    |        |    |  |    |        |    |  |     |        |  |  |  |        |  |  |  |        | 
|High                |  |    | 6.83   |    |  |    | 7.48   |    |  |     | 7.41   |  |  |  | 6.97   |  |  |  | 7.48   | 
|Low                 |  |    | 5.17   |    |  |    | 6.34   |    |  |     | 6.75   |  |  |  | 6.35   |  |  |  | 5.17   | 
|Close               |  |    | 6.52   |    |  |    | 7.07   |    |  |     | 6.82   |  |  |  | 6.86   |  |  |  | 6.86   | 
|Volume (000s)       |  |    | 2,224  |    |  |    | 4,590  |    |  |     | 4,445  |  |  |  | 6,597  |  |  |  | 17,856 | 

Subsequent event  internalization of the Management Contract

On January 17, 2003 Provident acquired all the issued and outstanding shares of
Provident Management Corporation, Manager of the Trust and Provident, for
consideration of $18.0 million paid with the issuance of 1,682,242 exchangeable
shares. The exchangeable shares are held in escrow and are releasable as to 25
percent per year beginning on June 30, 2003 and are releasable or may be
forfeited in certain other limited circumstances. This management
internalization transaction eliminates all external management fees. The share
purchase agreement as a condition of closing provides for executive employment
contracts for Thomas Buchanan and Randall Findlay, former shareholders of
Provident Management Corporation.





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##### Table of Contents



Business risks

The oil and natural gas trust industry is subject to numerous risks that can
affect the amount of cash flow available for distribution to unitholders and
the ability to grow. These risks include but are not limited to:



| |  | fluctuations in commodity price, exchange rates and interest rates;                          
|- |  | ---------------------------------------------------------------------------------------------
| 
| |  | government and regulatory risk in respect of royalty and income tax regimes;                 
| 
| |  | operational risks that may affect the quality and recoverability of reserves;                
| 
| |  | geological risk associated with accessing and recovering new quantities of reserves;         
| 
| |  | transportation risk in respect of the ability to transport oil and natural gas to market; and
| 
| |  | capital markets risk and the ability to finance future growth.                               

Provident strives to minimize these business risks by:



| |  | employing and empowering management and technical staff with extensive industry experience;                                                                                         
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | adhering to a strategy of acquiring, developing and optimizing quality, low-risk reserves in areas
where we have technical and operational expertise;                               
| 
| |  | developing a diversified, balanced asset portfolio that generally offers developed operational
infrastructure, year-round access and close proximity to markets;                    
| 
| |  | adhering to a consistent and disciplined Commodity Price Risk Management Program to mitigate the
impact that volatile commodity prices have on cash flow available for distribution.
| 
| |  | marketing crude oil and natural gas to a diverse group of customers, including aggregators,
industrial users, well-capitalized third-party marketers and spot market buyers;        
| 
| |  | maintaining a low cost structure to maximize cash flow and profitability;                                                                                                           
| 
| |  | maintaining prudent financial leverage and developing strong relationships with the investment
community and capital providers;                                                     
| 
| |  | adhering to strict guidelines and reporting requirements with respect to environmental, health and
safety practices; and                                                            
| 
| |  | maintaining an adequate level of property, casualty, comprehensive and directors and officers
insurance coverage.                                                                 





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##### Table of Contents



Business prospects

Providents strategy is to pursue growth opportunities that are accretive to
both net asset value and cash flow, on a per unit basis. Provident will
continue to adhere to a consistent and disciplined Commodity Price Risk
Management Program that is focused on minimizing the impact of volatile
commodity prices on cash flow and to help lock-in the economics of accretive
acquisitions. Provident will continue to manage its capital structure to ensure
debt is used prudently.

SUMMARY OF QUARTERLY RESULTS

|                                |                           |         |       |         |        |         |       |         |        |       |      |        |  |  |   |        |  |  |   |         | 
|------------------------------- | ------------------------- | ------- | ----- | ------- | ------ | ------- | ----- | ------- | ------ | ----- | ---- | ------ |  |  | - | ------ |  |  | - | ------- | 
|                                |                           |         | First |         | Second |         | Third |         | Fourth |       | 2002
|($000s except per unit amounts) |                           | Quarter |       | Quarter |        | Quarter |       | Quarter |        | Total
|                                |                           |         |       |         |        |         |       |         |        |      
|Financial                       |                           |         |       |         |        |         |       |         |        |       |      |        |  |  |   |        |  |  |   |        
|                                | Revenue                   |         | $     | 24,861  |        |         | $     | 36,800  |        |       | $    | 37,286 |  |  | $ | 64,561 |  |  | $ | 163,508 | 
|                                | Cash flow                 |         |       | 15,324  |        |         |       | 22,642  |        |       |      | 22,631 |  |  |   | 36,299 |  |  |   | 96,896  | 
|                                | Net income                |         |       | 1,339   |        |         |       | 1,177   |        |       |      | 229    |  |  |   | 7,187  |  |  |   | 9,932   | 
|                                | Unitholder distributions  |         |       | 14,813  |        |         |       | 17,794  |        |       |      | 18,839 |  |  |   | 30,080 |  |  |   | 81,526  | 
|                                | Distributions per unit    |         |       | 0.46    |        |         |       | 0.49    |        |       |      | 0.51   |  |  |   | 0.57   |  |  |   | 2.03    | 
|                                |                           |         |       |         |        |         |       |         |        |       |      |        |  |  |   |        |  |  |   |        
|Operating
Production            |                           |         |       |         |        |         |       |         |        |       |      |        |  |  |   |        |  |  |   |        
|                                | Light/medium oil (bpd)    |         |       | 3,147   |        |         |       | 5,025   |        |       |      | 4,691  |  |  |   | 7,478  |  |  |   | 5,096   | 
|                                | Heavy oil (bpd)           |         |       | 5,712   |        |         |       | 6,019   |        |       |      | 7,032  |  |  |   | 6,459  |  |  |   | 6,310   | 
|                                | Natural gas liquids (bpd) |         |       | 850     |        |         |       | 800     |        |       |      | 903    |  |  |   | 1,558  |  |  |   | 1,030   | 
|                                | Natural gas (mcfd)        |         |       | 36,111  |        |         |       | 48,648  |        |       |      | 47,728 |  |  |   | 91,766 |  |  |   | 56,193  | 
|                                |                           |         |       |         |        |         |       |         |        |       |      |        |  |  |   |        |  |  |   |        
|                                | Oil equivalent (boed)     |         |       | 15,728  |        |         |       | 19,952  |        |       |      | 20,581 |  |  |   | 30,789 |  |  |   | 21,801  | 
|                                |                           |         |       |         |        |         |       |         |        |       |      |        |  |  |   |        |  |  |   |        





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##### Table of Contents



|                      |                                             |         |       |         |        |         |       |         |        |       |      |       |  |  |   |       |  |  |   |       | 
|--------------------- | ------------------------------------------- | ------- | ----- | ------- | ------ | ------- | ----- | ------- | ------ | ----- | ---- | ----- |  |  | - | ----- |  |  | - | ----- | 
|                      |                                             |         | First |         | Second |         | Third |         | Fourth |       | 2002
|($ per boe)           |                                             | Quarter |       | Quarter |        | Quarter |       | Quarter |        | Total
|                      |                                             |         |       |         |        |         |       |         |        |      
|Average selling price |                                             |         |       |         |        |         |       |         |        |       |      |       |  |  |   |       |  |  |   |      
|                      | Light/medium oil per bbl
(before hedges)    |         | $     | 28.88   |        |         | $     | 35.14   |        |       | $    | 37.41 |  |  | $ | 35.65 |  |  | $ | 34.90 | 
|                      | Light/medium oil per bbl
(including hedges) |         |       | 28.88   |        |         |       | 34.91   |        |       |      | 37.07 |  |  |   | 35.26 |  |  |   | 34.62 | 
|                      | Heavy oil per bbl
(before hedges)           |         |       | 21.10   |        |         |       | 27.90   |        |       |      | 29.35 |  |  |   | 22.73 |  |  |   | 25.46 | 
|                      | Heavy oil per bbl
(including hedges)        |         |       | 19.84   |        |         |       | 20.15   |        |       |      | 21.31 |  |  |   | 18.66 |  |  |   | 20.02 | 
|                      | Natural gas liquids per barrel              |         |       | 21.17   |        |         |       | 27.01   |        |       |      | 29.78 |  |  |   | 33.82 |  |  |   | 29.04 | 
|                      | Natural gas per mcf
(before hedges)         |         |       | 3.52    |        |         |       | 4.2     |        |       |      | 3.44  |  |  |   | 5.21  |  |  |   | 4.35  | 
|                      | Natural gas per mcf
(including hedges)      |         |       | 4.35    |        |         |       | 4.52    |        |       |      | 4.29  |  |  |   | 5.06  |  |  |   | 4.67  | 





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##### Table of Contents



MANAGEMENTS RESPONSIBILITY FOR FINANCIAL REPORTING

The management of Provident is responsible for the information included in this
Annual Report. The financial statements have been prepared in accordance with
accounting principles generally accepted in Canada and in accordance with
accounting policies detailed in the notes to the financial statements. Where
necessary, the statements include amounts based on managements informed
judgements and estimates. Financial information in the Annual Report is
consistent with that presented in the financial statements.

Management maintains a system of internal controls to provide reasonable
assurance that all of the Trusts assets are safeguarded and to facilitate the
preparation of relevant, accurate and timely information.

PricewaterhouseCoopers LLP, Chartered Accountants, appointed by the
unitholders, have audited the financial statements and conducted a review of
internal accounting policies and procedures to the extent required by generally
accepted auditing standards, and performed such tests as they deemed necessary
to enable them to express an opinion on the financial statements.

The Board of Directors, through its Audit Committee, is responsible for
ensuring that management fulfills its responsibility for financial reporting
and internal control. The Audit Committee is composed of three independent
directors. The Audit Committee reviews the financial content of the Annual
Report and reports its findings to the Board of Directors for its consideration
in approving the financial statements.

|                        |  |                        
|----------------------- |  | -----------------------
|Thomas W. Buchanan    |  | Mark N. Walker       
|                        |  |                        
|Chief Executive Officer |  | Chief Financial Officer

Calgary, Alberta
March 10, 2003

AUDITORS REPORT

To the Unitholders of Provident Energy Trust

We have audited the consolidated balance sheets of Provident Energy Trust as at
December 31, 2002 and 2001, and the consolidated statements of operations and
accumulated income (loss) and cash flows for the year ended December 31, 2002
and for the period March 6, 2001 to December 31, 2001. These financial
statements are the responsibility of the management of the Trust. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with Canadian generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.

In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Trust as at December 31, 2002
and 2001, and the results of its operations and cash flows for the year ended
December 31, 2002 and for the period March 6, 2001 to December 31, 2001 in
accordance with Canadian generally accepted accounting principles.

PricewaterhouseCoopers LLP

Chartered Accountants


Calgary, Alberta
March 10, 2003





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##### Table of Contents






PROVIDENT ENERGY TRUST
CONSOLIDATED BALANCE SHEETS
As at December 31
Canadian dollars (000s)

|                                                   |                                          |   |          |        |      |   |         |        | 
|-------------------------------------------------- | ---------------------------------------- | - | -------- | ------ | ---- | - | ------- | ------ | 
|                                                   |                                          |   | 2002     |        | 2001
|                                                   |                                          |   |          |        |     
|Assets                                             |                                          |   |          |        |      |   |         |       
|Current assets                                     |                                          |   |          |        |      |   |         |       
|                                                   | Cash                                     |   | $        | 42     |      |   | $       | 35     | 
|                                                   | Accounts receivable                      |   |          | 47,463 |      |   |         | 12,009 | 
|                                                   | Assets held for sale                     |   |          | 1,145  |      |   |         | 1,500  | 
|                                                   | Prepaids                                 |   |          | 2,605  |      |   |         | 117    | 
|                                                   |                                          |   |          |        |      |   |         |       
|                                                   |                                          |   | 51,255   |        |      |   | 13,661  |       
|Cash reserve for future site reclamation (Note 15) |                                          |   | 1,490    |        |      |   | 424     |       
|Goodwill (Note 4)                                  |                                          |   | 102,443  |        |      |   |        |       
|Property, plant and equipment (Note 6)             |                                          |   | 700,037  |        |      |   | 171,808 |       
|                                                   |                                          |   |          |        |      |   |         |       
|                                                   |                                          | $ | 855,225  |        |      | $ | 185,893 |       
|                                                   |                                          |   |          |        |      |   |         |       
|Liabilities                                        |                                          |   |          |        |      |   |         |       
|Current liabilities                                |                                          |   |          |        |      |   |         |       
|                                                   | Accounts payable and accrued liabilities |   | $        | 54,783 |      |   | $       | 11,234 | 
|                                                   | Cash distributions payable               |   |          | 8,153  |      |   |         | 4,204  | 
|                                                   | Payable to the Manager (Notes 11 and 16) |   |          | 4,000  |      |   |         | 85     | 
|                                                   |                                          |   |          |        |      |   |         |       
|                                                   |                                          |   | 66,936   |        |      |   | 15,523  |       
|Long-term debt (Note 7)                            |                                          |   | 187,200  |        |      |   | 35,600  |       
|Future site reclamation (Note 15)                  |                                          |   | 12,245   |        |      |   | 6,807   |       
|Future income taxes (Note 12)                      |                                          |   | 116,065  |        |      |   | 23,252  |       
|Unitholders Equity                                |                                          |   |          |        |      |   |         |       
|Unitholders contributions (Note 8)                |                                          |   | 513,835  |        |      |   | 187,587 |       
|Exchangeable shares (Note 8)                       |                                          |   | 57,036   |        |      |   |        |       
|Convertible debentures (Note 9)                    |                                          |   | 61,279   |        |      |   |        |       
|Accumulated loss                                   |                                          |   | (36,064  | )      |      |   | (45,996 | )     
|Accumulated cash distributions (Note 5)            |                                          |   | (118,406 | )      |      |   | (36,880 | )     
|Accumulated interest on convertible debentures     |                                          |   | (4,901   | )      |      |   |        |       
|                                                   |                                          |   |          |        |      |   |         |       
|                                                   |                                          |   | 472,779  |        |      |   | 104,711 |       
|                                                   |                                          |   |          |        |      |   |         |       
|                                                   |                                          | $ | 855,225  |        |      | $ | 185,893 |       
|                                                   |                                          |   |          |        |      |   |         |       
|Commitments (Note 13)                              |                                          |   |          |        |      |   |         |       

The accompanying notes form an integral part of these consolidated
financial statements.





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##### Table of Contents






PROVIDENT ENERGY TRUST
CONSOLIDATED STATEMENT OF OPERATIONS AND ACCUMULATED INCOME (LOSS)
Canadian dollars (000s except per unit amounts)

|                                               |          |                                                              |           |   |                    |      |                   |   |                |       |  
|---------------------------------------------- | -------- | ------------------------------------------------------------ | --------- | - | ------------------ | ---- | ----------------- | - | -------------- | ----- | -
|                                               |          |                                                              |           |   |                    |      |                   |   | For the period
|                                               |          |                                                              |           |   | For the year ended |      | March 6, 2001 to 
|                                               |          |                                                              |           |   | December 31, 2002  |      | December 31, 2001
|                                               |          |                                                              |           |   |                    |      |                  
|Revenue                                        |          |                                                              |           |   |                    |      |                   |  
|                                               |          | Gross production revenue                                     |           | $ | 207,823            |      |                   | $ | 78,311         |      
|                                               |          | Royalties                                                    |           |   | (44,315            | )    |                   |   | (13,036        | )    
|                                               |          |                                                              |           |   |                    |      |                   |  
|                                               |          |                                                              | 163,508   |   |                    |      | 65,275            |  
|                                               | Expenses |                                                              |           |   |                    |      |                   |   |               
|                                               |          | Production                                                   |           |   | 52,741             |      |                   |   | 20,416         |      
|                                               |          | General and administrative                                   |           |   | 7,987              |      |                   |   | 3,418          |      
|                                               |          | Management fees (Notes 11 and 16)                            |           |   | 11,296             |      |                   |   | 1,153          |      
|                                               |          | Interest on long-term debt                                   |           |   | 5,307              |      |                   |   | 2,671          |      
|                                               |          | Depletion, depreciation and amortization                     |           |   | 90,481             |      |                   |   | 33,753         |      
|                                               |          | Additional depletion, depreciation and amortization (Note 6) |           |   |                   |      |                   |   | 101,300        |      
|                                               |          |                                                              |           |   |                    |      |                   |  
|                                               |          |                                                              | 167,812   |   |                    |      | 162,711           |  
|Loss before taxes                              |          |                                                              | (4,304    | ) |                    |      | (97,436           | )
|Capital taxes                                  |          |                                                              | 3,264     |   |                    |      | 1,178             |  
|Future income tax recovery (Note 12)           |          |                                                              | (17,500   | ) |                    |      | (51,759           | )
|                                               |          |                                                              |           |   |                    |      |                   |  
|                                               |          |                                                              | (14,236   | ) |                    |      | (50,581           | )
|Net income (loss) for the period               |          |                                                              | 9,932     |   |                    |      | (46,855           | )
|                                               |          |                                                              |           |   |                    |      |                   |  
|Accumulated income (loss), beginning of period |          |                                                              | (45,996   | ) |                    |      | 859               |  
|                                               |          |                                                              |           |   |                    |      |                   |  
|Accumulated loss, end of period                |          | $                                                            | (36,064   | ) |                    | $    | (45,996           | )
|                                               |          |                                                              |           |   |                    |      |                   |  
|Net income (loss) per unit  basic             |          | $                                                            | 0.25      |   |                    | $    | (3.39             | )
|                                               |          |                                                              |           |   |                    |      |                   |  
|                                               |          |                                                              |  diluted |   | $                  | 0.22 |                   |   | $              | (3.39 | )
|                                               |          |                                                              |           |   |                    |      |                   |  

The accompanying notes form an integral part of these consolidated financial statements.





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PROVIDENT ENERGY TRUST
CONSOLIDATED STATEMENT OF CASH FLOWS
Canadian dollars (000s except per unit amounts)

|                                                            |                         |                                                           |           |                                                |         |                    |         |                   |         |                |         |  
|----------------------------------------------------------- | ----------------------- | --------------------------------------------------------- | --------- | ---------------------------------------------- | ------- | ------------------ | ------- | ----------------- | ------- | -------------- | ------- | -
|                                                            |                         |                                                           |           |                                                |         |                    |         |                   |         | For the Period
|                                                            |                         |                                                           |           |                                                |         | For the year ended |         | March 6, 2001 to 
|                                                            |                         |                                                           |           |                                                |         | December 31, 2002  |         | December 31, 2001
|                                                            |                         |                                                           |           |                                                |         |                    |         |                  
|Cash provided by operating activities                       |                         |                                                           |           |                                                |         |                    |         |                  
|                                                            |                         | Net income (loss) for the period                          |           | $                                              | 9,932   |                    |         | $                 | (46,855 | )             
|                                                            |                         | Add non-cash items:                                       |           |                                                |         |                    |         |                   |         |               
|                                                            |                         |                                                           |           | Depletion, depreciation and amortization       |         |                    | 90,481  |                   |         |                | 33,753  |  
|                                                            |                         |                                                           |           | Additional depletion and depreciation (Note 6) |         |                    |        |                   |         |                | 101,300 |  
|                                                            |                         |                                                           |           | Amortization of deferred charges (Note 4)      |         |                    | 8,983   |                   |         |                | (467    | )
|                                                            |                         |                                                           |           | Future income tax recovery                     |         |                    | (17,500 | )                 |         |                | (51,759 | )
|                                                            |                         |                                                           |           | Management fee paid with trust units (Note 11) |         |                    | 5,000   |                   |         |                | 256     |  
|                                                            |                         |                                                           |           |                                                |         |                    |         |                  
|                                                            |                         | Cash flow from operations                                 |           |                                                | 96,896  |                    |         |                   | 36,228  |               
|                                                            |                         | Change in non-cash working capital                        |           |                                                | (7,090  | )                  |         |                   | (11,190 | )             
|                                                            |                         |                                                           |           |                                                |         |                    |         |                  
|                                                            |                         |                                                           | 89,806    |                                                |         |                    | 25,038  |                  
|                                                            |                         |                                                           |           |                                                |         |                    |         |                  
|Cash provided by financing activities                       |                         |                                                           |           |                                                |         |                    |         |                  
|                                                            |                         | (Decrease) increase in long-term debt                     |           |                                                | (10,325 | )                  |         |                   | 7,500   |               
|                                                            |                         | Settlement of financial instruments                       |           |                                                |        |                    |         |                   | (4,620  | )             
|                                                            |                         | Declared distributions to unitholders                     |           |                                                | (81,526 | )                  |         |                   | (36,880 | )             
|                                                            |                         | Issue of trust units, net of issue costs                  |           |                                                | 56,014  |                    |         |                   | 57,039  |               
|                                                            |                         | Issue of debentures, net of costs                         |           |                                                | 61,398  |                    |         |                   |        |               
|                                                            |                         | Declared distributions to debentureholders                |           |                                                | (4,901  | )                  |         |                   |        |               
|                                                            |                         | Change in non-cash financing working capital              |           |                                                | 3,949   |                    |         |                   | 4,205   |               
|                                                            |                         |                                                           |           |                                                |         |                    |         |                  
|                                                            |                         |                                                           | 24,609    |                                                |         |                    | 27,244  |                  
|                                                            |                         |                                                           |           |                                                |         |                    |         |                  
|Cash used in investing activities                           |                         |                                                           |           |                                                |         |                    |         |                  
|                                                            |                         | Expenditures on property, plant and equipment             |           |                                                | (21,980 | )                  |         |                   | (10,979 | )             
|                                                            |                         | Acquisition of Maxx Petroleum Ltd. (Note 4)               |           |                                                |        |                    |         |                   | (39,434 | )             
|                                                            |                         | Acquisition of Richland Energy Corporation (Note
4)       |           |                                                | (3,389  | )                  |         |                   | (331    | )             
|                                                            |                         | Acquisition of Meota Resources Corp. (Note 4)             |           |                                                | (32,141 | )                  |         |                   |        |               
|                                                            |                         | Acquisition of oil and natural gas properties             |           |                                                | (70,936 | )                  |         |                   | (2,604  | )             
|                                                            |                         | Proceeds on disposition of oil and natural gas
properties |           |                                                | 11,157  |                    |         |                   | 1,421   |               
|                                                            |                         | Reclamation fund contributions                            |           |                                                | (1,317  | )                  |         |                   | (479    | )             
|                                                            |                         | Change in non-cash investing working capital              |           |                                                | 4,198   |                    |         |                   | 86      |               
|                                                            |                         |                                                           |           |                                                |         |                    |         |                  
|                                                            |                         |                                                           | (114,408  | )                                              |         |                    | (52,320 | )                
|                                                            |                         |                                                           |           |                                                |         |                    |         |                  
|Increase (decrease) in cash                                 |                         |                                                           | 7         |                                                |         |                    | (38     | )                
|Cash beginning of period                                    |                         |                                                           | 35        |                                                |         |                    | 73      |                  
|                                                            |                         |                                                           |           |                                                |         |                    |         |                  
|Cash end of period                                          |                         | $                                                         | 42        |                                                |         | $                  | 35      |                  
|                                                            |                         |                                                           |           |                                                |         |                    |         |                  
|Cash flow from operations per weighted average unit
 basic |                         | $                                                         | 2.41      |                                                |         | $                  | 2.62    |                  
|                                                            |                         |                                                           |  diluted |                                                | $       | 2.17               |         |                   | $       | 2.62           |        
|                                                            |                         |                                                           |           |                                                |         |                    |         |                  
|Supplemental disclosure of cash flow information            |                         |                                                           |           |                                                |         |                    |         |                  
|                                                            | Cash interest paid      |                                                           | $         | 4,713                                          |         |                    | $       | 2,733             |        
|                                                            | Cash capital taxes paid |                                                           | $         | 3,264                                          |         |                    | $       | 1,212             |        

The accompanying notes form an integral part of these consolidated
financial statements.





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##### Table of Contents






NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in Cdn$ 000s, except unit and per unit amounts)December 31, 2002



|1. |  | Structure of the Trust                                                                                                                                                                                                                                                                                                                                                                                               
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | Provident Energy Trust (the Trust) is an open-end unincorporated
investment trust created under the laws of Alberta pursuant to a trust
indenture dated January 25, 2001, amended from time to time. The
beneficiaries of the Trust are the unitholders. The Trust was
established to hold, directly and indirectly, interests in petroleum and
natural gas properties and commenced operations March 6, 2001.     
|  
|   |  | Cash flow is provided to the Trust from the properties owned and operated
by Provident Energy Ltd. and directly and indirectly owned subsidiaries
and partnerships of the Trust (Provident). Cash flow is paid from
Provident to the Trust by way of royalty payments, interest payments and
principal repayments. The cash payments received by the Trust are
subsequently distributed to the unitholders monthly.
|  
|2. |  | Significant accounting policies                                                                                                                                                                                                                                                                                                                                                                                      



| | (a) |  | Basis of presentation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | These consolidated financial statements include the accounts of the
Trust and Provident.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| | (b) |  | Property, plant and equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| |     |  | The Trust follows the full cost method of accounting, whereby all
costs associated with the acquisition and development of oil and
natural gas reserves are capitalized. Such costs include lease
acquisition, lease rentals on non-producing properties, geological
and geophysical activities, drilling of productive and
non-productive wells, and tangible well equipment. Gains or losses
on the disposition of oil and gas properties are not recognized
unless the resulting change to the depletion and depreciation rate
is 20 percent or more.                                                                                                                             
|
| |     |  | Depletion, depreciation and amortization
The provision for depletion and depreciation is calculated using
the unit-of-production method based on current production divided
by the Trusts share of estimated total proved oil and natural gas
reserve volumes, before royalties. Production and reserves of
natural gas and associated liquids are converted at the energy
equivalent ratio of six thousand cubic feet of natural gas to one
barrel of oil. In determining its depletion base, the Trust
includes estimated future costs for developing proved reserves, and
excludes estimated salvage values of tangible equipment and the
unimpaired cost of unproved properties.
|
| |     |  | Ceiling test
The ceiling test limits the carrying value of the properties, net
of future income taxes and accumulated provision for site
restoration costs, to the estimated undiscounted future net
production revenue associated with the proved oil and natural gas
reserves, plus the unimpaired costs of unproved properties, less
estimated future general and administrative expenses, the
management fee, interest and income taxes. The test uses cost and
prices in effect at the balance sheet date. In the application of
the ceiling test, any excess carrying value of the assets on the
balance sheet is charged to income in the current period.                     





---



##### Table of Contents





| |     |  | Site reclamation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | The provision is calculated using the unit-of-production method
applied to estimated future site abandonment and reclamation costs.
The costs are estimated based on regulations and industry
standards currently in effect. Actual site reclamation costs
incurred are charged against the site reclamation liability.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| | (c) |  | Goodwill                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |     |  | Goodwill, which represents the excess of purchase price over fair
value of net assets received, is assessed at least annually for
impairment. To assess impairment, the fair value of the reporting
unit (the consolidated Trust) is determined and compared to the
book value of the reporting unit. If the fair value is less than
the book value, then a second test is performed to determine the
amount of the impairment. The amount of the impairment is
determined by deducting the fair value of the reporting units
assets and liabilities from the fair value of the reporting unit to
determine the implied fair value of goodwill and comparing that
amount to the book value of the reporting units goodwill. Any
excess of the book value of goodwill over the implied fair value of
goodwill is the impaired amount.
|
| | (d) |  | Unit option plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| |     |  | The consideration received from the option holder upon the exercise
of a unit option is credited to unitholders capital at the date of
exercise with no compensation expense recognized at the time the
option is issued or exercised.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| | (e) |  | Financial instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |     |  | Provident uses financial instruments and physical delivery
commodity contracts from time to time to reduce its exposure to
fluctuations in commodity prices, foreign exchange rates and
interest rates. Gains and losses relating to these transactions
are deferred and recognized in the financial statement category to
which the hedge relates at the time the underlying commodity is
sold or when the positions are settled.                                                                                                                                                                                                                                                                                                                                                                                                    
|
| | (f) |  | Future income taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |     |  | Provident follows the liability method for calculating income
taxes. Differences between the amounts reported in the financial
statements of the corporate subsidiaries and their respective tax
bases are applied to tax rates in effect to calculate the future
tax liability. The affect of any change in income tax rates is
recognized in the current period income.                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| | (g) |  | Use of estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| |     |  | The preparation of financial statements requires management to make
estimates based on currently available information. In particular,
estimates are made by management for amounts recorded for depletion
and depreciation of the property, plant and equipment, and for the
provision for future abandonment and reclamation costs. The
ceiling test uses factors such as estimated proved reserves,
production rates, petroleum and natural gas prices and future
costs. By their very nature, these estimates are subject to
measurement uncertainty and the effect on the financial statements
of future periods could be material.                                                                                                                                                                                              
|
| | (h) |  | Revenue recognition                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |     |  | Revenues associated with sales of crude oil, natural gas and
natural gas liquids are recognized when title passes to the
purchaser.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   



|3. |  | Change in accounting policy  unit based compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | The Trust accounts for its unit based compensation plans using the
intrinsic value method whereby no costs have been recognized in the
financial statements for unit options granted to employees and directors.
Effective January 1, 2002 a change in Canadian generally accepted
accounting principles requires the impact on compensation costs using the
fair value method be disclosed. If the fair value method had been used,
the impact on the Trusts pro forma net earnings would have been
negligible.





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##### Table of Contents





|4. |  | Acquisitions
|-- |  | ------------



| | (a) |  | Richland Energy Corporation (Richland)                                                                                                                                                                                                                          
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | Effective January 16, 2002 Provident acquired Richland for
consideration of 11,157,225 Trust units with an ascribed value of
$98.9 million. The transaction has been accounted for using the
purchase method with the allocation of the purchase price as
follows:

|                                            |                                                                                     |   |         |         |   |  |  |  | 
|------------------------------------------- | ----------------------------------------------------------------------------------- | - | ------- | ------- | - |  |  |  | 
|NET
ASSETS ACQUIRED AND LIABILITIES ASSUMED |                                                                                     |   |         |        
|                                            | Cash reserved for future site reclamation                                           |   | $       | 372     |  
|                                            | Goodwill                                                                            |   |         | 13,306  |  
|                                            | Fair market value of financial hedges and physical contracts for petroleum products |   |         | 10,133  |  
|                                            | Property, plant and equipment                                                       |   |         | 219,151 |  
|                                            | Working capital deficiency                                                          |   |         | (10,744 | )
|                                            | Long-term debt                                                                      |   |         | (75,425 | )
|                                            | Site reclamation liability                                                          |   |         | (1,559  | )
|                                            | Future income taxes                                                                 |   |         | (52,660 | )
|                                            |                                                                                     |   |         |        
|                                            |                                                                                     | $ | 102,574 |        
|                                            |                                                                                     |   |         |        
|CONSIDERATION                               |                                                                                     |   |         |        
|                                            | Acquisition costs incurred (includes $332 incurred in 2001)                         |   | $       | 3,721   |  
|                                            | Trust units issued                                                                  |   |         | 98,853  |  
|                                            |                                                                                     |   |         |        
|                                            |                                                                                     | $ | 102,574 |        
|                                            |                                                                                     |   |         |        



| | (b) |  | Meota Resources Corp. (Meota)                                                                                                                                                                                                                                                                                                                                   
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | Effective October 1, 2002 Provident acquired Meota for cash
consideration of $27.1 million and 14,517,184 trust units with an
ascribed value of $158.3 million, plus 5,858,136 exchangeable
shares with an ascribed value of $63.9 million. The transaction
has been accounted for using the purchase method with the
allocation of the purchase price as follows:

|                                            |                                         |   |         |         |   |  |  |  | 
|------------------------------------------- | --------------------------------------- | - | ------- | ------- | - |  |  |  | 
|NET
ASSETS ACQUIRED AND LIABILITIES ASSUMED |                                         |   |         |        
|                                            | Property, plant and equipment           |   | $       | 313,305 |  
|                                            | Goodwill                                |   |         | 89,137  |  
|                                            | Working capital deficiency, net of cash |   |         | (2,816  | )
|                                            | Long-term debt                          |   |         | (86,500 | )
|                                            | Site reclamation liability              |   |         | (1,084  | )
|                                            | Future income taxes                     |   |         | (57,653 | )
|                                            |                                         |   |         |        
|                                            |                                         | $ | 254,389 |        
|                                            |                                         |   |         |        
|CONSIDERATION                               |                                         |   |         |        
|                                            | Cash                                    |   | $       | 27,134  |  
|                                            | Acquisition costs incurred              |   |         | 5,007   |  
|                                            |                                         |   |         |        
|                                            | Total cash consideration                |   |         | 32,141  |  
|                                            | Trust units issued                      |   |         | 158,336 |  
|                                            | Exchangeable shares issued              |   |         | 63,912  |  
|                                            |                                         |   |         |        
|                                            |                                         | $ | 254,389 |        
|                                            |                                         |   |         |        





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##### Table of Contents





| | (c) |  | Maxx Petroleum Ltd. (Maxx)                                                                                                                                                                                                                                                          
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | Effective May 25, 2001 Provident acquired Maxx for cash
consideration of $35.4 million cash and issued 7,475,000 units with
an ascribed value of $87.0 million. The transaction has been
accounted for using the purchase method with the allocation of the
purchase price as follows:

|                                            |                                                                                     |   |         |         |   |  |  |  | 
|------------------------------------------- | ----------------------------------------------------------------------------------- | - | ------- | ------- | - |  |  |  | 
|NET
ASSETS ACQUIRED AND LIABILITIES ASSUMED |                                                                                     |   |         |        
|                                            | Property, plant and equipment                                                       |   | $       | 205,240 |  
|                                            | Working capital deficiency                                                          |   |         | (10,100 | )
|                                            | Long-term debt                                                                      |   |         | (2,300  | )
|                                            | Site reclamation liability                                                          |   |         | (3,686  | )
|                                            | Fair market value of financial hedges and physical contracts for petroleum products |   |         | (4,427  | )
|                                            | Future income taxes                                                                 |   |         | (57,120 | )
|                                            | Other                                                                               |   |         | (1,164  | )
|                                            |                                                                                     |   |         |        
|                                            |                                                                                     | $ | 126,443 |        
|                                            |                                                                                     |   |         |        
|CONSIDERATION                               |                                                                                     |   |         |        
|                                            | Cash                                                                                |   | $       | 35,408  |  
|                                            | Acquisition costs incurred                                                          |   |         | 4,026   |  
|                                            |                                                                                     |   |         |        
|                                            | Total cash consideration                                                            |   |         | 39,434  |  
|                                            | Trust units issued                                                                  |   |         | 87,009  |  
|                                            |                                                                                     |   |         |        
|                                            |                                                                                     | $ | 126,443 |        
|                                            |                                                                                     |   |         |        



|5. |  | Reconciliation of cash flow and distributions
|-- |  | ---------------------------------------------

|                                                            |  |                    |         |                   |  |                |        | 
|----------------------------------------------------------- |  | ------------------ | ------- | ----------------- |  | -------------- | ------ | 
|                                                            |  |                    |         |                   |  | For the Period
|                                                            |  | For the Year ended |         | March 6, 2001 to 
|                                                            |  | December 31, 2002  |         | December 31, 2001
|                                                            |  |                    |         |                  
|Cash flow from operations                                   |  | $                  | 96,896  |                   |  | $              | 36,228 | 
|Cash reserved for interest on convertible debentures        |  |                    | (4,901  | )                 |  |                |       | 
|Cash (reserved) used for financing and investing activities |  |                    | (10,469 | )                 |  |                | 652    | 
|Cash distributions to unitholders                           |  |                    | 81,526  |                   |  |                | 36,880 | 
|Accumulated cash distributions, beginning of period         |  |                    | 36,880  |                   |  |                |       | 
|                                                            |  |                    |         |                   |  |                |        | 
|Accumulated cash distributions, end of year                 |  | $                  | 118,406 |                   |  | $              | 36,880 | 
|                                                            |  |                    |         |                   |  |                |        | 
|Cash distributions per unit                                 |  | $                  | 2.03    |                   |  | $              | 2.54   | 



|6. |  | Property, plant and equipment
|-- |  | -----------------------------

|                               |  |      |         |                  |  |                       |         |  |  |   |         | 
|------------------------------ |  | ---- | ------- | ---------------- |  | --------------------- | ------- |  |  | - | ------- | 
|                               |  |      |         |                  |  | Accumulated depletion |         |  |  |  
|December 31, 2002              |  | Cost |         | and depreciation |  | Net book value       
|                               |  |      |         |                  |  |                      
|Oil and natural gas properties |  | $    | 949,504 |                  |  | $                     | 251,629 |  |  | $ | 697,875 | 
|Office equipment               |  | $    | 4,042   |                  |  |                       | 1,880   |  |  | $ | 2,162   | 
|                               |  |      |         |                  |  |                       |         |  |  |   |         | 
|Total                          |  | $    | 953,546 |                  |  | $                     | 253,509 |  |  | $ | 700,037 | 
|                               |  |      |         |                  |  |                       |         |  |  |   |         | 

|                               |  |      |         |                  |  |                       |         |  |  |   |         | 
|------------------------------ |  | ---- | ------- | ---------------- |  | --------------------- | ------- |  |  | - | ------- | 
|                               |  |      |         |                  |  | Accumulated depletion |         |  |  |  
|December 31, 2001              |  | Cost |         | and depreciation |  | Net book value       
|                               |  |      |         |                  |  |                      
|Oil and natural gas properties |  | $    | 336,230 |                  |  | $                     | 166,108 |  |  | $ | 170,122 | 
|Office equipment               |  | $    | 2,727   |                  |  | $                     | 1,041   |  |  | $ | 1,686   | 
|                               |  |      |         |                  |  |                       |         |  |  |   |         | 
|Total                          |  | $    | 338,957 |                  |  | $                     | 167,149 |  |  | $ | 171,808 | 
|                               |  |      |         |                  |  |                       |         |  |  |   |         | 





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##### Table of Contents





|   |  | The ceiling test calculation for the Trust in 2001 resulted in write
downs at September 30 of $64.2 million and a further $37.1 million at
December 31, prior to future tax recoveries of $43.0 million. Prices in
effect at September 30, 2001 were $16.77 per barrel for heavy oil, $29.72
per barrel for light to medium oil, and $2.19 per mcf for natural gas.
Prices in effect at December 31, 2001 were $13.69 per barrel of heavy
oil, $25.46 per barrel for light to medium oil, and $3.65 per mcf for
natural gas.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | Costs associated with unproved properties excluded from costs subject to
depletion as at December 31, 2002 totaled $30.2 million (December 31,
2001  $16.4 million).                                                                                                                                                                                                                                                                                                                                                       
|  
|7. |  | Long-term debt                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              



|                          |   |              |  |      |        | 
|------------------------- | - | ------------ |  | ---- | ------ | 
|                          |   | December 31,
|                          |   |             
|                          |   | 2002         |  | 2001
|                          |   |              |  |     
|Revolving credit facility | $ | 187,200      |  | $    | 35,600 | 
|                          |   |              |  |      |        | 



|   |  | Provident has a $255 million revolving credit facility with a syndicate
of Canadian chartered banks. Interest rates under the terms of the
credit facility are determined quarterly based on the ratio of quarter
end debt divided by the previous quarters cash flow annualized. At
December 31, 2002, the rate was bank prime of 4.5 percent plus 0.25
percent.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | Pursuant to the terms of the agreement, each year on or after May 24
Provident can request the revolving period be extended for a further 364
day period. If the lenders do not extend the revolving period, at
Providents option the credit facility is converted to a one year
non-revolving term credit facility at the end of the 364 day term, with
one-sixth of the loan balance due May 2004, one-twelfth due August 2004
and the remaining balance due at the end of the term period. As
collateral security, Provident has pledged a $500 million fixed and
floating charge debenture against all of its assets.                                                                                                                                                                                                                        
|  
|8. |  | Unitholders contributions and exchangeable shares                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|  
|   |  | The Trust has authorized capital of an unlimited number of common voting
trust units.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|  
|   |  | On January 16, 2002, the Trust issued 11.2 million trust units as
consideration for the Richland acquisition. On October 1, 2002, the
Trust issued 14.5 million trust units and Provident Acquisitions Inc., a
subsidiary, issued 5.9 million exchangeable shares as partial
consideration for the acquisition of Meota Resources Corp. The
conversion ratio for the exchangeable shares for the period October 1 to
November 14, 2002 was equal to one trust unit for one exchangeable share,
and is increased on each date a distribution is paid by the Trust between
October 1, 2002 and the date the exchangeable share is converted, at the
option of the holder, into trust units. On January 15, 2004, all
remaining exchangeable shares will be automatically exchanged for trust
units, subject to extension at the option of the Trust.
|  
|   |  | Effective with the May, 2002 distribution, the Trust initiated a premium
distribution, distribution reinvestment plan (DRIP). The DRIP permits
eligible unitholders to direct their distributions to the purchase of
additional units at 95 percent of the average market price as defined in
the plan (Regular DRIP). The premium distribution component permits
eligible unitholders to elect to receive 102 percent of the cash the
unitholder would otherwise have received on the distribution date
(Premium DRIP). Participation in the Regular and Premium DRIP is
subject to proration by the Trust. Unitholders who participate in either
the Regular DRIP or the Premium DRIP are also eligible to participate in
the optional unit purchase plan as defined in the DRIP.                                                         



---



##### Table of Contents



|                                                                  |  |                              |            |                                    |  |                 |         |        |  |  |            |  |  |   |         |  
|----------------------------------------------------------------- |  | ---------------------------- | ---------- | ---------------------------------- |  | --------------- | ------- | ------ |  |  | ---------- |  |  | - | ------- | -
|                                                                  |  | Year ended December 31, 2002 |            | March 6, 2001 to December 31, 2001
|                                                                  |  |                              |            |                                   
|TRUST UNITS                                                       |  | Number of units              |            | Amount                             |  | Number of Units |         | Amount
|                                                                  |  |                              |            |                                    |  |                 |         |       
|Balance at beginning of period                                    |  |                              | 21,054,119 |                                    |  | $               | 187,587 |        |  |  | 7,092,221  |  |  | $ | 43,649  |  
|Issued to acquire Maxx Petroleum
Ltd.                             |  |                              |           |                                    |  |                 |        |        |  |  | 7,475,000  |  |  |   | 87,009  |  
|Issued to acquire Richland
Petroleum Corp.                        |  |                              | 11,157,225 |                                    |  |                 | 98,853  |        |  |  |           |  |  |   |        |  
|Issued to acquire Meota Resources
Corp.                           |  |                              | 14,517,184 |                                    |  |                 | 158,336 |        |  |  |           |  |  |   |        |  
|Exchangeable share conversions                                    |  |                              | 644,150    |                                    |  |                 | 6,876   |        |  |  |           |  |  |   |        |  
|Issued for property acquisition                                   |  |                              | 100,000    |                                    |  |                 | 1,050   |        |  |  |           |  |  |   |        |  
|Issued for cash                                                   |  |                              | 3,900,000  |                                    |  |                 | 39,390  |        |  |  | 6,435,500  |  |  |   | 61,425  |  
|Issued pursuant to the
distribution reinvestment plan             |  |                              | 1,507,246  |                                    |  |                 | 15,244  |        |  |  |           |  |  |   |        |  
|Units to be issued pursuant to the
distribution reinvestment plan |  |                              | 244,406    |                                    |  |                 | 2,500   |        |  |  |           |  |  |   |        |  
|Issued pursuant to unit option plan                               |  |                              | 126,034    |                                    |  |                 | 1,103   |        |  |  |           |  |  |   |        |  
|Issued or to be issued to
Provident Management Corporation        |  |                              | 467,290    |                                    |  |                 | 5,000   |        |  |  | 31,798     |  |  |   | 256     |  
|Issued to directors of Provident                                  |  |                              |           |                                    |  |                 |        |        |  |  | 19,600     |  |  |   | 243     |  
|Debenture conversions                                             |  |                              | 11,681     |                                    |  |                 | 125     |        |  |  |           |  |  |   |        |  
|Trust unit issue costs                                            |  |                              |           |                                    |  |                 | (2,229  | )      |  |  |           |  |  |   | (4,995  | )
|                                                                  |  |                              |            |                                    |  |                 |         |        |  |  |            |  |  |   |         |  
|Balance, end of period                                            |  |                              | 53,729,335 |                                    |  | $               | 513,835 |        |  |  | 21,054,119 |  |  | $ | 187,587 |  
|                                                                  |  |                              |            |                                    |  |                 |         |        |  |  |            |  |  |   |         |  

|                                                    |  |                              |           |        |  |   |        |  
|--------------------------------------------------- |  | ---------------------------- | --------- | ------ |  | - | ------ | -
|                                                    |  | Year ended December 31, 2002
|                                                    |  |                             
|EXCHANGEABLE SHARES                                 |  |                              |           |        |  |   |        |  
|PROVIDENT ACQUISITIONS INC.                         |  | Number of Shares             |           | Amount
|                                                    |  |                              |           |       
|Balance, December 31, 2001                          |  |                              |          |        |  | $ |       |  
|Issued to acquire Meota Resources Corp.             |  |                              | 5,858,136 |        |  |   | 63,912 |  
|Converted to trust units                            |  |                              | (630,292  | )      |  |   | (6,876 | )
|                                                    |  |                              |           |        |  |   |        |  
|Balance, December 31, 2002                          |  |                              | 5,227,844 |        |  |   | 57,036 |  
|Exchange ratio, end of year                         |  |                              | 1.03597   |        |  |   |       |  
|Trust units issuable upon conversion, end of period |  |                              | 5,415,890 |        |  | $ | 57,036 |  
|                                                    |  |                              |           |        |  |   |        |  



| |  | The per trust unit amounts for 2002 were calculated based on the weighted
average number of units outstanding of 40,221,914, which includes the
shares exchangeable into trust units. The per trust unit amounts for the
period from March 6, 2001 to December 31, 2001 were calculated based on
the weighted average number of units outstanding of 13,812,533. The
diluted per trust unit amounts are calculated including an additional
4,429,627 trust units issuable upon conversion of the debentures (2001 
nil), plus 56,510 trust units (2001  29,000) for the dilutive effect of
the unit option plan.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





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##### Table of Contents





|9.  |  | Convertible debentures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | On April 11, 2002 the Trust issued $64.4 million of unsecured
subordinated convertible debentures ($61.4 million net of issue costs)
with a 10.5 percent coupon rate maturing May 15, 2007. The debentures
may be converted into trust units at the option of the holder at a
conversion price of $10.70 per trust unit prior to May 15, 2007, and may
be redeemed by the Trust under certain circumstances. The debentures and
related interest obligations have been classified as equity on the
consolidated balance sheet as the Trust may elect to satisfy interest and
principle obligations by the issuance of trust units. During the year
$0.125 million of debentures were converted to trust units.                                      
|   
|10. |  | Unit option plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   
|    |  | The Trust Option Plan (the Plan) is administered by the Board of
Directors of Provident. Under the Plan, all directors, officers,
employees and certain consultants of Provident, with the exception of the
officers of Provident Management Corporation, are eligible to participate
in the Plan. There are 3,600,000 trust units reserved for the Trust
Option Plan. Options are granted at a strike price which is not less
than the closing price of the units on The Toronto Stock Exchange on the
last trading day preceding the grant. In certain circumstances, based
upon the cash distributions made on the trust units, the strike price may
be reduced at the time of exercise of the option at the discretion of the
option holder.

|                                 |           |  |                   |          |                   |   |                   |       |                |  |         |         |                  |   |       |       | 
|-------------------------------- | --------- |  | ----------------- | -------- | ----------------- | - | ----------------- | ----- | -------------- |  | ------- | ------- | ---------------- | - | ----- | ----- | 
|                                 |           |  | Year ended        |          | March 6, 2001 to 
|                                 |           |  | December 31, 2002 |          | December 31, 2001
|                                 |           |  |                   |          |                  
|                                 |           |  |                   |          |                   |   | Weighted Average  |       |                |  |         |         | Weighted Average
|                                 |           |  | Number of Options |          | Exercise Price    |   | Number of Options |       | Exercise Price
|                                 |           |  |                   |          |                   |   |                   |       |               
|Outstanding, beginning of
period |           |  | 611,100           |          |                   | $ | 11.16             |       |                |  |        |         |                  | $ |      |      
|                                 | Granted   |  |                   | 345,013  |                   |   |                   | 10.32 |                |  |         | 645,900 |                  |   |       | 11.18 | 
|                                 | Exercised |  |                   | (126,034 | )                 |   |                   | 10.87 |                |  |         |        |                  |   |       |      | 
|                                 | Cancelled |  |                   | (33,269  | )                 |   |                   | 10.72 |                |  |         | (34,800 | )                |   |       | 11.42 | 
|                                 |           |  |                   |          |                   |   |                   |       |                |  |         |         |                  |  
|Outstanding, end of period       |           |  | 796,810           |          |                   |   | 10.86             |       |                |  | 611,100 |         |                  |   | 11.16 |      
|                                 |           |  |                   |          |                   |   |                   |       |                |  |         |         |                  |  
|Exercisable at end of period     |           |  | 330,149           |          |                   | $ | 11.09             |       |                |  | 223,700 |         |                  | $ | 11.14 |      
|                                 |           |  |                   |          |                   |   |                   |       |                |  |         |         |                  |  



|    |  | At December 31, 2002, the Trust had 796,810 options outstanding
with exercise prices ranging between $8.40 and $12.39 per unit, and a
weighted average remaining contractual life of 2.8 years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|11. |  | Related party transactions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   
|    |  | The Trust was actively managed by Provident Management Corporation (the
Manager), and in accordance with the terms of the management agreement,
the Manager was entitled to receive a base fee in the amount of 2 percent
of the operating cash flow of Provident, plus a total return fee based on
distributions and unit price performance during the period. Pursuant to
the management fee amending agreement approved in conjunction with the
management internalization transaction (note 16), the base fee paid for
the period January 1 to October 31, 2002 was $1.8 million and $0.5
million for the period November 1 to December 31, 2002, for a total base
fee of $2.3 million. The total return fee for 2002 was restricted to
$9.0 million, payable by way of $4.0 million in cash and 467,290 trust
units valued at $5.0 million. For the period March 6 to December 31,
2001, the Manager was paid a base fee of $0.9 million and a total return
fee of $0.25 million (paid with the issuance of 31,798 trust units). The
Manager was reimbursed for administration expenses which totaled $264,242
in 2002 ($46,123 for the period March 6 to December 31, 2001).





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##### Table of Contents





|12. |  | Future income taxes                                                                                                                                     
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | The difference between the accounting value and the income tax value of
assets and liabilities, which comprise the future tax liability, are as
follows:

|                                               |  |                   |         |                   |  |   |        | 
|---------------------------------------------- |  | ----------------- | ------- | ----------------- |  | - | ------ | 
|                                               |  | December 31, 2002 |         | December 31, 2001
|                                               |  |                   |         |                  
|Petroleum and natural gas properties and other |  | $                 | 101,341 |                   |  | $ | 19,691 | 
|Production facilities                          |  |                   | 14,724  |                   |  |   | 3,561  | 
|                                               |  |                   |         |                   |  |   |        | 
|                                               |  | $                 | 116,065 |                   |  | $ | 23,252 | 
|                                               |  |                   |         |                   |  |   |        | 



| |  | The future income tax provision differs from the expected amount
calculated by applying the Canadian combined federal and provincial
income tax rate of 42 percent as follows:
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                    |                                                                                               |   |                   |         |                   |   |         |        |  
|----------------------------------- | --------------------------------------------------------------------------------------------- | - | ----------------- | ------- | ----------------- | - | ------- | ------ | -
|                                    |                                                                                               |   | Year ended        |         | March 6, 2001 to 
|                                    |                                                                                               |   | December 31, 2002 |         | December 31, 2001
|                                    |                                                                                               |   |                   |         |                  
|Expected income tax recovery        |                                                                                               | $ | (1,808            | )       |                   | $ | (41,508 | )     
|Increase (decrease) resulting from: |                                                                                               |   |                   |         |                   |   |         |       
|                                    | Non-deductible Crown charges and other payments                                               |   |                   | 12,728  |                   |   |         | 4,320  |  
|                                    | Federal resource allowance                                                                    |   |                   | (7,382  | )                 |   |         | (4,799 | )
|                                    | Alberta Royalty Tax Credit                                                                    |   |                   | (260    | )                 |   |         | (175   | )
|                                    | Payments to the Trust                                                                         |   |                   | (16,808 | )                 |   |         | (6,470 | )
|                                    | Income less related depletion and depreciation
in a wholly owned partnership and in the Trust |   |                   | (2,630  | )                 |   |         |       |  
|                                    | Other                                                                                         |   |                   | (1,340  | )                 |   |         | (3,127 | )
|                                    |                                                                                               |   |                   |         |                   |   |         |       
|                                    |                                                                                               | $ | (17,500           | )       |                   | $ | (51,759 | )     
|                                    |                                                                                               |   |                   |         |                   |   |         |       



|13. |  | Commitments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | Provident has office lease commitments that extend through April 2013.
Future minimum lease payments for the following five years are: 2003 -
$2.0 million; 2004  $2.0 million; 2005  $2.1 million; 2006  $2.1
million and 2007  $2.2 million.                                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|14. |  | Financial instruments and hedging                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   
|    |  | Providents commodity price risk management program was initiated to
minimize the volatility of Providents crude oil and natural gas prices
and to assist with stabilizing cash flow and distributions. Provident
accomplishes this through the use of financial instruments and physical
delivery commodity contracts from time to time to reduce its exposure to
fluctuations in commodity prices, foreign exchange rates and interest
rates. Gains and losses relating to these transactions are deferred and
recognized in the financial statement category to which the hedge relates
at the time the underlying commodity is sold or when the positions are
settled.
|   
|    |  | The carrying amounts of current assets, the reclamation fund, current
liabilities and long-term debt as stated in the financial statements
approximate their estimated fair value. Substantially all of the Trusts
accounts receivable are with oil and gas marketers and joint venture
partners in the oil and natural gas industry and are subject to normal
industry credit risks.                                                                                                                                                                                                                                                                                     
|   
|    |  | With respect to financial instruments, Provident could be exposed to
losses if a counter party fails to perform in accordance with the terms
of the contract. This risk is managed by diversifying the derivative
portfolio among counter parties meeting certain financial criteria.                                                                                                                                                                                                                                                                                                                                                                                      





---



##### Table of Contents





| | (a) |     | Commodity price                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | --- | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     | (i) | Crude oil                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |     |     | For 2002, Provident paid out $13.0 million to settle various
oil market based contracts on an aggregate volume of 2,286,250
barrels. For the period March 6, 2001 to December 31, 2001,
Provident received $4.6 million to settle various oil market
based contracts on an aggregate volume of 1,293,000 barrels.
The estimated value of contracts in place if settled at market
prices at December 31, 2002 would have resulted in a loss of
$13.3 million (December 31, 2001  would have resulted in a
gain of $4.7 million). The contracts in place at December 31,
2002 are summarized in the following table:

|     |  |           |  |          |  |                                                 |  |                        
|---- |  | --------- |  | -------- |  | ----------------------------------------------- |  | -----------------------
|Year |  | Product   |  | Volume   |  | Terms                                           |  | Effective Period       
|     |  |           |  |          |  |                                                 |  |                        
|2003 |  | Light oil |  | 4,000bpd |  | WTI US$24.945 per bbl                           |  | January 1  December 31
|     |  |           |  | 1,000bpd |  | WTI US$25.045 per bbl                           |  | April 1  June 30      
|     |  |           |  | 1,000bpd |  | WTI US$24.31 per bbl                            |  | July 1  September 30  
|     |  |           |  | 1,000bpd |  | WTI US$23.82 per bbl                            |  | October 1  December 31
|     |  |           |  | 1,000bpd |  | Costless Collar WTI US$22.58  US$26.00
per bbl |  | January 1  December 31
|     |  |           |  | 500bpd   |  | Call at WTI US$30.95 per bbl                    |  | January 1  March 31   
|     |  | Heavy oil |  | 3,000bpd |  | Cdn$18.90 per bbl wellhead(1)(2)                |  | January 1  December 31
|     |  |           |  | 200bpd   |  | Cdn$22.50 per bbl wellhead                      |  | January 1  April 30   
|     |  |           |  | 1,000bpd |  | US$16.70 per bbl at Hardisty                    |  | January 1  March 31   
|     |  |           |  | 500bpd   |  | WTI US$24.40 per bbl                            |  | January 1  March 31   
|     |  |           |  | 500bpd   |  | US$8.50 per bbl differential at Hardisty        |  | January 1  March 31   
|     |  |           |  | 500bpd   |  | US$18.75 per bbl at Hardisty                    |  | July 1   December 31  
|2004 |  | Light oil |  | 2,000bpd |  | WTI US$24.045 per bbl                           |  | January 1  December 31
|     |  |           |  | 500bpd   |  | WTI US$25.08 per bbl                            |  | January 1  March 31   



|(1) |  | The heavy oil price of Cdn$18.90 per bbl has been fixed through
a combination of Canadian dollar wellhead contracts, US dollar
denominated WTI combined with US dollar differential (see (b) below)
and blending contracts and Cdn/US dollar exchange rate contracts.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Contracts which, if extended, would require Provident to deliver
1,500 bpd at WTI US$22.70 per bbl and 1,000 bpd at WTI US$23.70 for
calendar 2004. The contracts are extendible at the option of the
counterparty.                                                  



| | (ii) |  | Natural gas
| | ---- |  | -----------



| |  |  | For 2002, Provident received $6.6 million to settle various
natural gas market based contracts on an aggregate of
11,554,250 gigajoules (GJ). For the period March 6, 2001 to
December 31, 2001, Provident received $4.2 million to settle
various natural gas market based contracts on an aggregate of
2,328,000 GJ. As at December 31, 2002 the estimated value of
contracts in place settled at market prices at December 31
would have resulted in a loss of $12.4 million (December 31,
2001  would have resulted in a gain of $3.0 million). The
contracts in place at December 31, 2002 are summarized in the
following table:
| |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Table of Contents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

|     |  |                |  |             |  |                                            |  |                         
|---- |  | -------------- |  | ----------- |  | ------------------------------------------ |  | ------------------------
|Year |  | Product        |  | Volume      |  | Terms                                      |  | Effective Period        
|     |  |                |  |             |  |                                            |  |                         
|2003 |  | Natural gas(2) |  | 11,000 GJpd |  | Cdn$4.96 per GJ(1)                         |  | January 1  October 31  
|     |  |                |  | 20,000 GJpd |  | Cdn$5.48 per GJ                            |  | January 1  March 31    
|     |  |                |  | 10,000 GJpd |  | Cdn$6.55 per GJ                            |  | January 1  March 31    
|     |  |                |  | 12,500 GJpd |  | Cdn$4.82 per GJ                            |  | April 1  October 31    
|     |  |                |  | 15,000 GJpd |  | Cdn$4.72 per GJ                            |  | May 1  October 31      
|     |  |                |  | 15,000 GJpd |  | Costless Collar Cdn$4.00  Cdn$6.10 per GJ |  | January 1  April 30    
|     |  |                |  | 10,000 GJpd |  | Costless Collar Cdn$4.25  Cdn$5.22 per GJ |  | January 1  March 31    
|     |  |                |  | 10,000 GJpd |  | Costless Collar Cdn$4.50  Cdn$5.72 per GJ |  | April 1  October 31    
|     |  |                |  | 10,000 GJpd |  | Costless Collar Cdn$5.57  Cdn$8.81 per GJ |  | November 1  December 31
|     |  |                |  | 10,000 GJpd |  | Costless Collar Cdn$5.50  Cdn$7.85 per GJ |  | November 1  December 31
|     |  |                |  | 5,000 GJpd  |  | Costless Collar Cdn$5.00  Cdn$7.75 per GJ |  | April 1  October 31    
|     |  |                |  | 5,000 GJpd  |  | Costless Collar Cdn$5.50  Cdn$7.52 per GJ |  | April 1  October 31    
|2004 |  | Natural gas(2) |  | 10,000 GJpd |  | Costless Collar Cdn$5.57  Cdn$8.81 per GJ |  | January 1  March 31    
|     |  |                |  | 10,000 GJpd |  | Costless Collar Cdn$5.50  Cdn$7.85 per GJ |  | January 1  March 31    



|(1) |  | Contract which, if extended, would require Provident to deliver
5,000 GJpd at Cdn$4.95 per GJ for calendar 2004. The contract is
extendible at the option of the counterparty.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Natural gas contracts are settled against AECO monthly index                                                                                                                  



| | (b) |  | Foreign exchange contracts                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | No foreign exchange contracts were utilized in 2002. For the
period March 6, 2001 to December 31, 2001, Provident paid out $0.1
million to settle two U.S. dollar forward sales contracts on US$3.2
million at an average exchange rate of Cdn$1.49 per US$1. For
2003, Provident has two foreign exchange sell contracts in place
for a total of US$1.25 million per month at an average exchange
rate of Cdn$1.56 per US$1. Settlement of these contracts at market
prices at December 31, 2002 would have resulted in a loss of $0.1
million.



|15. |  | Cash reserve for future site reclamation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | Provident established a cash reserve effective May 1, 2001 for future
site reclamation expenditures. In accordance with the royalty agreement,
Provident funds the reserve by paying $0.20 per barrel of oil equivalent
produced on a 10:1 basis into a segregated cash account. Actual
expenditures incurred are then funded from the cash in this account. For
the year ended December 31, 2002, $1.3 million was contributed to the
reserve and actual expenditures totaled $0.6 million. In addition, $0.4
million of segregated reclamation funds obtained with the Richland
acquisition were added to the cash reserve. For the period March 6 to
December 31, 2001, $0.5 million was added to the cash reserve and $0.1
million was spent on reclamations.
|   
|16. |  | Subsequent event                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   
|    |  | On January 17, 2003, Provident acquired all the issued and outstanding
shares of Provident Management Corporation, Manager of the Trust and
Provident, for consideration of $18.0 million payable with the issuance
of 1,682,242 exchangeable shares. The exchangeable shares are held in
escrow and are releasable as to 25 percent per year beginning on June 30,
2003, and are releasable or may be forfeited in certain other limited
circumstances. This management internalization transaction eliminates
external management fees effective January 1, 2003. The share purchase
agreement as a condition of closing provides for executive employment
contracts for the former shareholders of Provident Management
Corporation.                          





---



##### Table of Contents





|17. |  | Comparative balances                                                                                                                                                                                                                                                                                                                                                                  
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | Certain comparative numbers have been restated to conform with the
current year presentation.                                                                                                                                                                                                                                                                                         
|   
|18. |  | Reconciliation of financial statements to United States generally
accepted accounting principles                                                                                                                                                                                                                                                                                      
|   
|    |  | The consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in Canada (Canadian
GAAP). Any differences in accounting principles as they pertain to the
accompanying financial statements are not material except as described
below. The application of US GAAP would have the following effects on
net income as reported:

|                                     |                                              |                   |            |                   |            |   |         |         |  
|------------------------------------ | -------------------------------------------- | ----------------- | ---------- | ----------------- | ---------- | - | ------- | ------- | -
|                                     |                                              |                   | Year ended |                   | March 6 to
|(Cdn$000s, except per unit numbers)  |                                              | December 31, 2002 |            | December 31, 2001
|                                     |                                              |                   |            |                  
|Net income as reported               |                                              | $                 | 9,932      |                   |            | $ | (46,855 | )      
|Adjustments                          |                                              |                   |            |                   |            |   |         |        
|                                     | Depletion, depreciation and amortization (a) |                   |            | 4,427             |            |   |         | (25,137 | )
|                                     | FAS 133 adjustment (c)                       |                   |            | (27,666           | )          |   |         | 3,242   |  
|                                     | Interest on convertible debentures (g)       |                   |            | (4,901            | )          |   |         |        |  
|                                     | Future income taxes (a) (c) (e)              |                   |            | 9,788             |            |   |         | 11,152  |  
|                                     |                                              |                   |            |                   |            |   |         |        
|Net income (loss)  U.S. GAAP        |                                              | $                 | (8,420     | )                 |            | $ | (57,598 | )      
|                                     |                                              |                   |            |                   |            |   |         |        
|Net income (loss) per unit  basic   |                                              | $                 | (0.21      | )                 |            | $ | (4.17   | )      
|Net income (loss) per unit  diluted |                                              | $                 | (0.21      | )                 |            | $ | (4.17   | )      



| |  | The application of US GAAP would have the following effects on the
balance sheet as reported:
| |  | ---------------------------------------------------------------------------------------------

|                                                            |  |          |         |      |  |          |         |      |  |   |         |   |  |   |         |  
|----------------------------------------------------------- |  | -------- | ------- | ---- |  | -------- | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|As at December 31                                           |  |          |         |      |  |          |         |      |  |   |         |   |  |   |         |  
|(Canadian dollars, 000's)                                   |  | 2002     |         | 2001
|                                                            |  |          |         |     
|                                                            |  | Canadian |         | U.S. |  | Canadian |         | U.S.
|                                                            |  | GAAP     |         | GAAO |  | GAAP     |         | GAAP
|                                                            |  |          |         |      |  |          |         |     
|Assets                                                      |  |          |         |      |  |          |         |      |  |   |         |   |  |   |         |  
|Property, plant and equipment (a)                           |  | $        | 700,037 |      |  | $        | 678,728 |      |  | $ | 171,808 |   |  | $ | 146,072 |  
|Other (liabilities) assets (c)                              |  |          |        |      |  |          | (24,424 | )    |  |   |        |   |  |   | 3,242   |  
|Liabilities and unitholders
equity                         |  |          |         |      |  |          |         |      |  |   |         |   |  |   |         |  
|Future income taxes (a) (c) (e)                             |  |          | 116,065 |      |  |          | 94,777  |      |  |   | 23,252  |   |  |   | 11,752  |  
|Demand loan (b)                                             |  |          |        |      |  |          |        |      |  |   |        |   |  |   | 35,600  |  
|Convertible debentures 
long-term liability (g)            |  |          |        |      |  |          | 61,279  |      |  |   |        |   |  |   |        |  
|Convertible debentures  equity
(g)                         |  |          | 61,279  |      |  |          |        |      |  |   |        |   |  |   |        |  
|Accumulated interest on
convertible debentures  equity
(g) |  |          | (4,901  | )    |  |          |        |      |  |   |        |   |  |   |        |  
|Long-term debt (b)                                          |  |          | 187,200 |      |  |          | 187,200 |      |  |   | 35,600  |   |  |   |        |  
|Capital contributions (d)                                   |  |          | 513,835 |      |  |          | 517,818 |      |  |   | 187,587 |   |  |   | 191,570 |  
|Accumulated (loss) income (d)                               |  | $        | (36,064 | )    |  | $        | (69,364 | )    |  | $ | (45,996 | ) |  | $ | (60,944 | )



| | (a) |  | The Canadian cost recovery ceiling test limits the
capitalized costs for each cost centre to the undiscounted future
net revenue from proved oil and natural gas reserves plus the cost
of unproved properties less impairment, using year end prices. In
addition, the aggregate value of
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





---



##### Table of Contents





| |     |  | all cost centres is further limited by including financing costs,
administrative expenses, future abandonment and reclamation costs and
income taxes. Under U.S. GAAP, companies utilizing the full cost
method of accounting for oil and natural gas activities perform a
ceiling test on each cost centre using discounted future net revenue
from proved oil and natural gas reserves discounted at 10 percent.
Prices used in the U.S. GAAP ceiling tests are those in effect at year
end and financing and administrative expenses are excluded from the
calculation. The amounts recorded for depletion and depreciation have
been adjusted in the periods as a result of differences in write down
amounts recorded pursuant to U.S. GAAP compared to Canadian GAAP.                                                                                                                                                                                                                                                                                                                                                                              
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | U.S. GAAP requires obligations that, by their terms, are due
on demand to be classified as current liabilities even though
payment is not anticipated within one year from the date of the
consolidated balance sheets. As such the revolving bank loan at
December 31, 2001 would be classified as a current liability under
U.S. GAAP. Effective January 1, 2002 Canadian GAAP was harmonized
with U.S. GAAP.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| | (c) |  | Since inception, Provident adopted the Statement of Financial
Accounting Standards (SFAS) No. 133, Accounting for Financial
Instruments and Hedging Activities, which requires that all
derivatives be recorded on the balance sheet at their fair value, as
either an asset or liability. Changes in the derivatives fair
value are recognized in the current period earnings, unless specific
hedge accounting criteria are met. If the derivative is designated
a fair value hedge, the changes in the fair value of the derivative
and the hedged item attributable to the hedged risk are recognized
in earnings. If the derivative is designated a cash flow hedge, the
effective portions of the changes in fair value of the derivative
are recorded in other comprehensive income and are recognized in
earnings when the hedge item is realized. Ineffective portions of
change in fair value are recognized in earnings immediately. The
mark to market at the balance sheet dates of financial contracts
have been reflected in these adjustments. Pursuant to Canadian
GAAP, no mark to market is recognized in the financial statements.
|
| | (d) |  | Under U.S. GAAP, costs associated with a plan of arrangement
would be expensed. Under Canadian GAAP, the costs are offset to
capital contributions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| | (e) |  | The Canadian liability method of accounting for income taxes
is similar to the United States Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes, which requires the
recognition of deferred tax assets and liabilities for the expected
future tax consequences of events that have been recognized in
Providents financial statements or tax returns. Pursuant to U.S.
GAAP, enacted tax rates are used to calculate future taxes, whereas
Canadian GAAP uses substantively enacted rates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| | (f) |  | The consolidated statements of cash flows prepared in
accordance with Canadian GAAP conform in all material respects with
U.S. GAAP except that Canadian GAAP allows for the presentation of
operating cash flow before changes in non-cash working capital items
in the consolidated statement of cash flows. This total cannot be
presented under U.S. GAAP. U.S. GAAP would require this statement
to be a note to the financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| | (g) |  | Under U.S. GAAP, convertible debentures are treated as debt
and any distributions paid on these debentures are treated as
interest expense. Under Canadian GAAP, convertible debentures are
classified as equity and any distributions are recorded as a direct
charge to unitholders equity.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           



| |  | Recent accounting pronouncements                                                                                                                                                                                                                                                                      
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | During 2002 the following new or amended guidelines and standards were
issued, but not implemented in these financial statements.                                                                                                                                                                     
|
| |  | Accounting for gains and losses on settlement of debt                                                                                                                                                                                                                                                 
|
| |  | In April 2002, Statement of Financial Accounting Standard No. 145 was
issued, which rescinded the requirement to include gains and losses on
the settlement of debt as extraordinary items. FAS 145 is applicable for
fiscal years beginning on or after May 15, 2002, and has no effect on the
Trust.
|
| |  | Accounting for costs associated with exit or disposal activities                                                                                                                                                                                                                                      
|
| |  | In June 2002, Statement of Financial Accounting Standard No. 146 was
issued. FAS 146 requires that liabilities for exit or disposal activity
costs be recognized and measured at fair value when the                                                                                                  





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| |  | liability is incurred. This is effective for disposal activities
initiated after December 31, 2002. The Trust is currently assessing the
impact of this standard on its financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Accounting for stock based compensation  transition and disclosure                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |  | In December 2002, Statement of Financial Accounting Standard No. 148 was
issued. FAS 148, Accounting for Stock Based Compensation  Transition
and Disclosure, is an amendment to the previously issued FAS 123,
Accounting for Stock Based Compensation, and provides alternative methods
of transition for a voluntary change to the fair value based method of
accounting for stock based compensation. FAS 148 applies to fiscal years
beginning after December 15, 2003, and is not expected to have a material
effect on the Trust financial statements.                                                                        
|
| |  | Hedging relationships                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | The Canadian Institute of Chartered Accountants issued Guideline 13,
Hedging Relationships, which addresses identification, designation,
documentation and effectiveness of hedging relationships for the purpose
of applying hedge accounting. The guideline establishes parameters for
applying hedge accounting, but does not address hedge accounting methods.
Guideline 13 applies for fiscal years beginning July 1, 2003. The Trust
is currently assessing the impact of this standard on its financial
statements.                                                                                                            
|
| |  | Accounting for guarantees                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  | In February 2003, the Canadian Institute of Chartered Accountants issued
an accounting guideline on the financial statement disclosures to be made
by a guarantor relative to its obligations under guarantees. Effective
for the fiscal year beginning January 1, 2003, the accounting guideline
requires the disclosure of the nature of the guarantee, how it arose, the
events or circumstances that would trigger performance under the
guarantee, the maximum potential amount of future payments, the current
carrying amount of the liability if any, the nature of any recourse
provision, and any assets held as collateral.
|
| |  | In November 2002, the Financial Accounting Standards Board issued an
interpretation FIN No. 45, Guarantors Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees and
Indebtedness of Others, which requires that a guarantor disclose and
recognize in its financial statements its obligations relating to
guarantees that it has issued. Liability recognition is required at the
inception of the guarantee, whether or not payment is probable. The Trust
is currently assessing the impact of this standard on its financial
statements.                                                       





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##### Table of Contents






CONTROLS AND PROCEDURES



|(a) |  | Evaluation of disclosure controls and procedures.  As of a date within
the 90-day period prior to the filing of this report, an evaluation of the
effectiveness of the Companys disclosure controls and procedures (as
such term is defined in Rules 13a-14(c) and 15d-14(c) of the United States
Securities Exchange Act of 1934 (the Exchange Act)) was carried out by
the Chief Executive Officer (CEO) and Chief Financial Officer (CFO) of
Provident Energy Ltd., who also perform such functions for the Company.
Based on that evaluation, the CEO and CFO have concluded that as of such
date the Companys disclosure controls and procedures are effective to
ensure that information required to be disclosed by the Company in reports
that it files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in United States
Securities and Exchange Commission rules and forms.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) |  | Changes in Internal Controls.  Subsequent to the completion of their
evaluation, there have been no significant changes in the Companys
internal controls or in other factors that could significantly affect the
internal controls, including any corrective actions with regard to
significant deficiencies and material weaknesses.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           



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EXHIBITS

See the Exhibit Index to this Form 40-F.



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##### Table of Contents



UNDERTAKING AND CONSENT TO SERVICE OF PROCESS



|A. |  | Undertaking.
|-- |  | ------------

The Company undertakes to make available, in person or by telephone,
representatives to respond to inquiries made by the Securities and Exchange
Commission (the Commission) staff, and to furnish promptly, when requested to
do so by the Commission staff, information relating to: the securities
registered pursuant to Form 40-F; the securities in relation to which the
obligation to file an annual report on Form 40-F arises; or transactions in
said securities.



|B. |  | Consent to Service of Process.
|-- |  | ------------------------------

The Company has concurrently filed a Form F-X in connection with the class
of securities in relation to which the obligation to file this report arises.

Any change to the name or address of the agent for service of process of
the registrant shall be communicated promptly to the Securities and Exchange
Commission by an amendment to the Form F-X referencing the file number of the
relevant registration statement.




SIGNATURES

Pursuant to the requirements of the Exchange Act, the registrant certifies
that it meets all of the requirements for filing on Form 40-F and has duly
caused this annual report to be signed on its behalf by the undersigned,
thereunto duly authorized, on May 21, 2003.

| |  |                                                        
| |  | -------------------------------------------------------
| |  | PROVIDENT ENERGY TRUST
By: Provident Energy Ltd.       
| |  |                                                        
| |  |                                                        
| |  | By:       /s/ Thomas W. Buchanan                       
| |  | Name: Thomas W. Buchanan
Title: Chief Executive Officer



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CERTIFICATIONS

I, Thomas W. Buchanan, certify that:

1.     I have reviewed this annual report on Form 40-F of Provident Energy Trust;

2.     Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this annual report is being prepared;

b) evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the Evaluation Date); and

c) presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5.     The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):

a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrants ability to record, process,
summarize and report financial data and have identified for the registrants
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and

6.     The registrants other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: May 21, 2003

| |  |                                                                                                                         
| |  | ------------------------------------------------------------------------------------------------------------------------
| |  |                                                                                                                         
| |  | /s/ Thomas W. Buchanan
Thomas W. Buchanan
Chief Executive Officer of
Provident Energy Ltd.
(Principal Executive Officer)



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##### Table of Contents



CERTIFICATIONS

I, Mark N. Walker, certify that:

1.     I have reviewed this annual report on Form 40-F of Provident Energy Trust;

2.     Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this annual report is being prepared;

b) evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the Evaluation Date); and

c) presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5.     The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):

a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrants ability to record, process,
summarize and report financial data and have identified for the registrants
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and

6.     The registrants other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: May 21, 2003

| |  |                                                                                                                                             
| |  | --------------------------------------------------------------------------------------------------------------------------------------------
| |  | /s/ Mark N. Walker
Mark N. Walker
Vice President, Finance and Chief
Financial Officer of Provident Energy Ltd.
(Principal Financial Officer)



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EXHIBIT INDEX

|        |  |                                                                                                    |  | 
|------- |  | -------------------------------------------------------------------------------------------------- |  | 
|Exhibit |  | Description                                                                                       
|        |  |                                                                                                   
|99.1    |  | Consent of PricewaterhouseCoopers LLP                                                             
|99.2    |  | Consent of KPMG LLP                                                                               
|99.3    |  | Consent of Collins Barrow LLP                                                                     
|99.4    |  | Consent of Petroleum Engineers                                                                    
|99.5    |  | Certification of
Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|99.6    |  | Certification of
Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002