EXHIBIT
99.2





**MANAGEMENT’S
RESPONSIBILITY FOR FINANCIAL STATEMENTS**
  In
management’s opinion, the accompanying consolidated financial statements of
Enerplus Resources Fund (the “Fund”) have been prepared within reasonable limits
of materiality and in accordance with Canadian generally accepted accounting
principles. Since a precise determination of many assets and liabilities is
dependent on future events, the preparation of financial statements necessarily
involves the use of estimates and approximations. These have been made using
careful judgement and with all information available up to February 24, 2005.
Management is responsible for all information in the annual report and for the
consistency, therewith, of all other financial and operating data presented in
this report.
  To meet
its responsibility for reliable and accurate financial statements, management
has established and monitors systems of internal control which are designed to
provide reasonable assurance that financial information is relevant, reliable
and accurate, and that assets are safeguarded and transactions are executed in
accordance with management’s authorization.
  The
consolidated financial statements have been examined by Deloitte & Touche
LLP, independent Chartered Accountants. Their responsibility is to express a
professional opinion on the fair presentation of the consolidated financial
statements in accordance with Canadian generally accepted accounting principles.
The Auditors’ Report outlines the scope of their examination and sets forth
their opinion.
  The
Audit Committee, consisting exclusively of independent directors, has reviewed
these statements with management and the external auditors and has recommended
their approval to the Board of Directors. The Board of Directors has approved
the consolidated financial statements of the Fund.
  Gordon
      J. Kerr
    /s/
      Gordon J. Kerr
    
    Robert
      J. Waters
    /s/
      Robert J. WatersPresident
      and
    
    
    Senior
      Vice President andChief
      Executive Officer
    
    
    Chief
      Financial OfficerCalgary,
      AlbertaFebruary
      24, 2005
 **AUDITORS’
REPORT**
 
 **To
the Unitholders of Enerplus Resources Fund:**
  We have
audited the consolidated balance sheets of Enerplus Resources Fund (the “Fund”)
as at December 31, 2004 and 2003 and the consolidated statements of income,
accumulated income, accumulated cash distributions and cash flows for the years
then ended. These financial statements are the responsibility of the Fund’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 Fund as at December 31, 2004 and 2003
and the results of its operations and its cash flows for the years then ended in
accordance with Canadian generally accepted accounting principles.
  The
Fund is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Fund's internal control over
financial reporting. Accordingly we express no such opinion.
 DELOITTE
      & TOUCHE LLP
    /s/
      DELOITTE & TOUCHE LLPChartered
      AccountantsCalgary,
      AlbertaFebruary
      24, 2005
 
 **ENERPLUS
      RESOURCES FUND 2004 ANNUAL REPORT**
    **71**
   
  
 **CONSOLIDATED
BALANCE SHEETS**
  As
      at December 31 (CDN$ thousands)
    
    **2004**
    
    2003(Restated,Note
      2)**Assets**Current
      assetsCash
    
    **$**
    **-**
    
    $
    80,416Accounts
      receivable
    
    
    **107,996**
    
    
    71,304Other
      current
    
    
    **9,602**
    
    
    13,412**117,598**
    
    
    165,132Property,
      plant and equipment (Note 5)
    
    
    **3,029,007**
    
    
    2,494,518Goodwill
      (Note 7)
    
    
    **29,082**
    
    
    -Deferred
      charges (Note 3)
    
    
    **5,061**
    
    
    2,115**$**
    **3,180,748**
    
    $
    2,661,765**Liabilities**Current
      liabilitiesAccounts
      payable
    
    **$**
    **179,568**
    
    $
    100,449Distributions
      payable to unitholders
    
    
    **36,443**
    
    
    33,022Deferred
      credits (Note 3)
    
    
    **42,303**
    
    
    1,942**258,314**
    
    
    135,413Long-term
      debt (Note 8)
    
    
    **584,991**
    
    
    338,117Future
      income taxes (Note 11)
    
    
    **235,551**
    
    
    283,292Asset
      retirement obligations (Notes 2 and 4)
    
    
    **105,978**
    
    
    63,936**926,520**
    
    
    685,345**Equity**Unitholders’
      capital (Note 10)
    
    
    **2,831,277**
    
    
    2,511,375Accumulated
      income
    
    
    **976,137**
    
    
    717,821Accumulated
      cash distributions
    
    
    **(1,811,500**
    **)**
    
    (1,388,189
    )**1,995,914**
    
    
    1,841,007**$**
    **3,180,748**
    
    $
    2,661,765
 
 Signed
on behalf of the Board of Directors:
  **/s/
      Douglas R. Martin**
    
    **/s/
      Robert L. Normand****Douglas
      R. Martin**
    
    **Robert
      L. Normand**Director
    
    Director
 **ENERPLUS
      RESOURCES FUND 2004 ANNUAL REPORT**
    **72**
 
  
  **CONSOLIDATED
STATEMENTS OF INCOME**
 
 
 For
      the year ended December 31 (CDN$ thousands except per trust unit
      amounts)
    
    **2004**
    
    2003(Restated,Note
      2)**Revenues**Oil
      and gas sales
    
    **$**
    **1,149,765**
    
    $
    958,931Royalties
    
    
    **(230,954**
    **)**
    
    (190,395
    )Derivative
      instruments (Notes 3 and 12)Financial
      contracts - qualified hedges
    
    
    **(18,167**
    **)**
    
    (45,808
    )Other
      financial contracts
    
    
    **(117,213**
    **)**
    
    -Interest and other income
    
    
    **2,095**
    
    
    913**785,526**
    
    
    723,641**Expenses**Operating
    
    
    **196,451**
    
    
    170,476General
      and administrative (Note 10)
    
    
    **33,863**
    
    
    25,369Transportation
    
    
    **25,119**
    
    
    23,112Management
      fees and internalization
    
    
    **-**
    
    
    58,142Interest
      on long-term debt (Note 8)
    
    
    **20,737**
    
    
    19,708Foreign
      exchange gain (Note 9)
    
    
    **(5,018**
    **)**
    
    (924
    )Depletion, depreciation, amortization and
      accretion
    
    
    **326,269**
    
    
    245,114**597,421**
    
    
    540,997Income
      before taxes
    
    
    **188,105**
    
    
    182,644Capital
      taxes
    
    
    **6,612**
    
    
    6,223Future
      income tax recovery (Note 11)
    
    
    **(76,823**
    **)**
    
    (71,625
    )**Net
      Income**
    
    **$**
    **258,316**
    
    $
    248,046Net
      income per trust unitBasic
    
    **$**
    **2.60**
    
    $
    2.88Diluted
    
    **$**
    **2.60**
    
    $
    2.87Weighted
      average number of trust units outstanding (thousands)Basic
    
    
    **99,273**
    
    
    86,202Diluted
    
    
    **99,416**
    
    
    86,402
 
 **CONSOLIDATED
STATEMENTS OF ACCUMULATED INCOME**
 
 For
      the year ended December 31 (CDN$ thousands)
    
    **2004**
    
    2003(Restated,Note
      2)Accumulated
      income, beginning of year as previously reported
    
    **$**
    **690,046**
    
    $
    440,446Adjustments
      due to change in accounting policy
    
    
    **27,775**
    
    
    29,329Accumulated
      income, beginning of year after adjustments
    
    
    **717,821**
    
    
    469,775Net
      income
    
    
    **258,316**
    
    
    248,046Accumulated
      income, end of year
    
    **$**
    **976,137**
    
    $
    717,821
 
 **ENERPLUS
      RESOURCES FUND 2004 ANNUAL REPORT**
    **73**
  
  **CONSOLIDATED
STATEMENTS OF CASH FLOWS**
  For
      the year ended December 31 (CDN$ thousands)
    
    **2004**
    
    2003(Restated,Note
      2)**Operating
      Activities**Net
      income
    
    **$**
    **258,316**
    
    $
    248,046Non-cash
      items add/(deduct):Depletion,
      depreciation, amortization and accretion
    
    
    **326,269**
    
    
    245,114Non-cash
      financial contracts
    
    
    **39,160**
    
    
    -Non-cash
      foreign exchange gain (Note 9)
    
    
    **(4,795**
    **)**
    
    (3,003
    )Unit
      based compensation (Note 10)
    
    
    **4,668**
    
    
    1,364Future
      income tax recovery (Note 11)
    
    
    **(76,823**
    **)**
    
    (71,625
    )Asset
      retirement costs incurred (Note 4)
    
    
    **(6,826**
    **)**
    
    (6,696
    )Funds
      flow from operations
    
    
    **539,969**
    
    
    413,200Decrease
      in non-cash working capital
    
    
    **15,091**
    
    
    14,234**555,060**
    
    
    427,434**Financing
      Activities**Issue
      of trust units, net of issue costs (Note 10)
    
    
    **314,309**
    
    
    331,595Cash
      distributions to unitholders
    
    
    **(423,311**
    **)**
    
    (372,576
    )Increase/(decrease)
      in bank credit facilities (Note 8)
    
    
    **251,669**
    
    
    (20,609
    )Payment
      to related party
    
    
    **-**
    
    
    (1,400
    )Debt
      issue costs (Note 8)
    
    
    **-**
    
    
    (475
    )Decrease
      in non-cash financing working capital
    
    
    **3,421**
    
    
    8,152**146,088**
    
    
    (55,313
    )**Investing
      Activities**Capital
      expenditures
    
    
    **(209,052**
    **)**
    
    (159,994
    )Property
      acquisitions
    
    
    **(504,857**
    **)**
    
    (36,954
    )Property
      dispositions
    
    
    **31,742**
    
    
    73,214Corporate
      acquisitions (Note 7)
    
    
    **(121,171**
    **)**
    
    (165,815
    )Decrease/(increase)
      in non-cash investing working capital
    
    
    **21,774**
    
    
    (2,874
    )**(781,564**
    **)**
    
    (292,423
    )Change
      in cash
    
    
    **(80,416**
    **)**
    
    79,698Cash,
      beginning of year
    
    
    **80,416**
    
    
    718Cash,
      end of year
    
    **$**
    **-**
    
    $
    80,416**Supplementary
      Cash Flow Information**Cash
      income taxes paid
    
    **$**
    **-**
    
    $
    -Cash
      interest paid
    
    **$**
    **19,196**
    
    $
    18,584
 
 **CONSOLIDATED
STATEMENTS OF ACCUMULATED CASH DISTRIBUTIONS**
  For
      the year ended December 31 (CDN$ thousands)
    
    **2004**
    
    2003Accumulated
      cash distributions, beginning of year
    
    **$**
    **1,388,189**
    
    $
    1,015,613Cash
      distributions
    
    
    **423,311**
    
    
    372,576Accumulated
      cash distributions, end of year
    
    **$**
    **1,811,500**
    
    $
    1,388,189
 **ENERPLUS
      RESOURCES FUND 2004 ANNUAL REPORT**
    **74**
 
  **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS**
 (Tabular
amounts in thousands of Canadian dollars and thousands of units except per unit
amounts)
  **1.**
    **Summary
      of Significant Accounting Policies**
 
 The
management of Enerplus Resources Fund (“Enerplus” or the “Fund”) prepares the
financial statements in accordance with Canadian generally accepted accounting
principles (“GAAP”). A reconciliation between Canadian GAAP and United States of
America GAAP is disclosed in Note 14. The preparation of financial statements
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingencies, if any, as
at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. The following significant accounting
policies are presented to assist the reader in evaluating these consolidated
financial statements and, together with the following notes, should be
considered an integral part of the consolidated financial
statements.
  **(a)**
    **Organization
      and Basis of Accounting**
 
 The
Fund is an open-end investment trust created under the laws of the Province of
Alberta operating pursuant to the Amended and Restated Trust Indenture between
EnerMark Inc., its wholly-owned subsidiary, Enerplus Resources Corporation
(“ERC”) and CIBC Mellon Trust Company as Trustee. The beneficiaries of the Fund
(the “unitholders”) are holders of the trust units issued by the Fund. As a
trust under the Income Tax Act (Canada), Enerplus is limited to holding and
administering permitted investments and making distributions to the
unitholders.
  The
Fund’s financial statements include the accounts of the Fund and its
subsidiaries on a consolidated basis. All inter-entity transactions have been
eliminated.
  **(b)**
    **Revenue
      Recognition**
 
 Revenue
associated with the sale of crude oil, natural gas and natural gas liquids is
recognized when title passes from the Fund to its customers. A portion of the
properties acquired through the acquisition of PCC Energy Inc. and PCC Energy
Corp. (collectively, “PCC”) are subject to a royalty arrangement with a private
company that is structured as a net profits interest. Results from the
operations of PCC, after reduction for this net profits interest, have been
included in the Fund's consolidated financial statements subsequent to March 5,
2003.
  **(c)**
    **Property,
      Plant and Equipment (“PP&E”)**
 
 The
Fund follows the full cost method of accounting for petroleum and natural gas
properties under which all acquisition and development costs are capitalized.
Such costs include land acquisition, geological, geophysical and drilling costs
for productive and non-productive wells and directly related overhead charges.
Repairs, maintenance and operational costs that do not extend or enhance the
recoverable reserves are charged to earnings. Proceeds from the sale of
petroleum and natural gas properties are applied against the capitalized costs.
Gains and losses are not recognized upon disposition of oil and natural gas
properties unless such a disposition would alter the rate of depletion by 20% or
more. Net costs related to operating and administrative activities during the
development of large capital projects are capitalized until commercial
production has commenced.
  **(d)**
    **Impairment
      Test**
 
 A limit
is placed on the aggregate carrying value of PP&E (the “impairment test”).
An impairment loss exists when the carrying amount of the Fund’s PP&E
exceeds the estimated undiscounted future net cash flows associated with the
Fund’s proved reserves. If an impairment loss is determined to exist, the costs
carried on the balance sheet in excess of the discounted future net cash flows
associated with the Fund’s proved and probable reserves are charged to income.
Reserves are determined pursuant to National Instrument 51-101 “Standards of
Disclosure for Oil and Gas Activities”.
  **(e)**
    **Depletion
      and Depreciation**
 
 The
provision for depletion and depreciation of oil and natural gas assets is
calculated using the unit-of-production method based on the Fund’s share of
estimated proved reserves before royalties. Reserves and production are
converted to equivalent units on the basis of 6 Mcf = 1 bbl, reflecting the
approximate relative energy content.
 
 **ENERPLUS
      RESOURCES FUND 2004 ANNUAL REPORT**
    **75**
 
  **(f)**
    **Goodwill**
 
 The
Fund, when appropriate, recognizes goodwill relating to corporate acquisitions
when the total purchase price exceeds the fair value of the net identifiable
assets and liabilities of the acquired companies. The goodwill balance is
assessed for impairment annually at year-end or as events occur that could
result in an impairment. To assess impairment, the fair value of the Fund is
compared to its book value. If the fair value is less than the book value, a
second test is performed to determine the amount of impairment. The amount of
impairment is measured by allocating the fair value to Enerplus’ identifiable
assets and liabilities as if it had been acquired in a business combination for
a purchase price equal to its fair value. If goodwill determined in this manner
is less than the carrying value of goodwill, an impairment loss is recognized in
the period in which it occurs. Goodwill is stated at cost less impairment and is
not amortized.
  **(g)**
    **Asset
      Retirement Obligations**
 
 The
Fund recognizes as a liability the estimated fair value of the future retirement
obligations associated with property, plant and equipment. The fair value is
capitalized and amortized over the same period as the underlying asset. The Fund
estimates the liability based on the estimated costs to abandon and reclaim its
net ownership interest in all wells and facilities and the estimated timing of
the costs to be incurred in future periods. This estimate is evaluated on a
periodic basis and any adjustment to the estimate is prospectively applied. As
time passes, the change in net present value of the future retirement obligation
is expensed through accretion. Retirement obligations settled during the period
reduce the future retirement liability. No gains or losses on retirement
activities were realized, due to settlements approximating the estimates.
  **(h)**
    **Income
      Taxes**
 
 The
Fund is a taxable entity under the Income Tax Act (Canada) and is taxable only
on income that is not distributed or distributable to the Fund’s unitholders. As
the Fund distributes all of its taxable income to the unitholders and meets the
requirements of the Income Tax Act (Canada) applicable to the Fund, no provision
for income tax has been made by the Fund, except for its subsidiaries as noted
below.
  The
Fund follows the liability method of accounting for income taxes. Under this
method, income tax liabilities and assets are recognized for the estimated tax
consequences attributable to differences between the amounts reported in the
financial statements of the Fund’s corporate subsidiaries and their respective
tax bases, using substantively enacted income tax rates. The effect of a change
in income tax rates on future income tax liabilities and assets is recognized in
income in the period that the change occurs.
  **(i)**
    **Financial
      Instruments**
 
 The
Fund is exposed to market risks resulting from fluctuations in commodity prices
and interest rates in the normal course of operations. The Fund uses various
types of financial instruments to manage these market risks. Proceeds and costs
realized from holding crude oil and natural gas contracts, and interest rate
swaps are recognized at the time each transaction under a contract is settled.
The Fund has designated instruments such as swaps, purchased puts and costless
collars as qualified hedges and evaluates these instruments quarterly to ensure
they effectively hedge the underlying commodity or interest rate. All other
financial contracts do not qualify as hedges. The gain or loss in fair value of
other financial contracts that do not qualify for hedge accounting are taken
into income during the period of change and charged to deferred credits or
deferred charges on the balance sheet.
  **(j)**
    **Foreign
      Currency Translation**
 
 Monetary
assets and liabilities denominated in a foreign currency are translated at the
rate of exchange in effect at the balance sheet date. Revenues and expenses are
translated at the monthly average rates of exchange. Translation gains and
losses are included in income in the period in which they arise.
  **(k)**
    **Accounting
      for Unit Based Compensation**
 
 The
Fund prospectively adopted CICA Handbook section 3870 “Stock based compensation”
on January 1, 2003, which applies to trust unit rights granted on or after that
date. It is not possible to determine a fair value for the unit rights using
traditional option pricing models as the exercise price of rights granted under
the plan may be reduced in future periods. The amount of the
 
 **ENERPLUS
      RESOURCES FUND 2004 ANNUAL REPORT**
    **76**
  
  reduction
cannot be reasonably estimated as it is dependent upon a number of factors
including, but not limited to, future commodity prices received, future
production levels, amounts to be withheld for acquisitions and development
activities and the effect of those activities. As a result, the Fund measures
unit compensation expense based on the intrinsic value of the rights and
recognizes the amount in income over the vesting period. After the rights have
vested, changes in the intrinsic value are recognized to income in the period of
change. The intrinsic value is determined to be the excess of the trust unit
price over the exercise price of the right at the date of exercise, or the date
of the financial statements for unexercised rights. The change in value is
reflected in general and administrative expenses (“G&A”) and contributed
surplus. The cash received upon exercise of the rights and the related amount of
contributed surplus is credited to unitholders’ capital. Rights granted during
2002 are not included in unit based compensation expense as the Fund discloses
the pro forma results based on the intrinsic value of these awards over their
vesting period.
  **2.**
    **Changes
      in Accounting Policies**
 
 **Hedging
Relationships**
  Effective
January 1, 2004, the Fund has adopted the Canadian Institute of Chartered
Accountants (“CICA”) Accounting Guideline 13, “Hedging Relationships”. The
guideline establishes conditions where hedge accounting may be applied. Where
hedge accounting does not apply, changes in the fair values of the financial
contracts are taken into income in the period of change and charged to deferred
credits or deferred charges on the balance sheet. This policy has been adopted
prospectively pursuant to the adoption provisions of Accounting Guideline 13,
and therefore there is no effect on prior periods.
  Previously,
hedge accounting had been applied to all of the Fund’s financial contracts, as
they all qualified as hedges for accounting purposes at that time.
  As a
result of this change, net income was $25,979,000 ($39,160,000 before a future
tax recovery of $13,181,000) less than would have otherwise been reported for
the year ended December 31, 2004. This reflects amortization of the deferred
financial asset realized upon adoption and unrealized costs on financial
contracts that do not qualify for hedge accounting. The future income tax
liability has also decreased by $13,181,000 as a result of this accounting
change. Both basic and diluted per trust unit calculations for the year ended
December 31, 2004 decreased by $0.26 as a result of adopting this new
policy.
  **Asset
Retirement Obligations**
  Effective
January 1, 2004, the Fund retroactively adopted CICA 3110, “Asset Retirement
Obligations”. The new standard requires the recognition of the liability
associated with the future site reclamation costs of tangible long-lived assets.
The Fund estimates this liability based on the estimated future costs to abandon
and reclaim its net ownership interest in all wells and facilities and the
estimated timing of the costs to be incurred in future periods. The liability
for future retirement obligations is recorded in the financial statements at the
time the liability is incurred.
  The
Fund had previously provided for future site reclamation and abandonment costs
on the unit-of-production method based on the remaining life of the proved
reserves and the estimated total future liability. This estimate was charged to
income with the corresponding offset to the accumulated site restoration
liability on the balance sheet.
  As a
result of this change, net income for the year ended December 31, 2004 decreased
by $210,000 (2003 - $1,554,000). This represents the difference between the
depletion and accretion recorded and the amortization of future site restoration
that would have been recorded under the unit-of-production method. As a result,
basic and diluted per trust unit calculations for the year ended December 31,
2004 were not affected, whereas for the year ended December 31, 2003, both
decreased by $0.02.
 
 **ENERPLUS
      RESOURCES FUND 2004 ANNUAL REPORT**
    **77**
  
  The
December 31, 2003 balance sheet has been restated to reflect the cumulative
effects of adopting CICA 3110, as shown in the following table:
  As
      reported in the
    
    Change
      upon
    
    As
      restatedDecember
      31, 2003
    
    adoption
      of
    
    upon
      adoption($
      thousands)
    
    Financial
      Statements
    
    CICA
      3110
    
    of
      CICA 3110Property,
      plant and equipment
    
    $
    3,384,572
    
    $
    63,554
    
    $
    3,448,126Accumulated
      depletion and depreciation
    
    
    (936,207
    )
    
    (17,401
    )
    
    (953,608
    )Net
      property, plant and equipment
    
    
    2,448,365
    
    
    46,153
    
    
    2,494,518Accumulated
      site restoration
    
    
    60,335
    
    
    (60,335
    )
    
    -Asset
      retirement obligations
    
    
    -
    
    
    63,936
    
    
    63,936Future
      income taxes
    
    
    268,515
    
    
    14,777
    
    
    283,292Accumulated
      income
    
    
    690,046
    
    
    27,775
    
    
    717,821
 
 **Oil
and Gas Transportation**
  Effective
for fiscal years beginning on or after October 1, 2003, the CICA issued Handbook
Section 1100, which defines the sources of GAAP that companies must use and
effectively eliminates industry practice as a source of GAAP. In prior years, it
had been industry practice for companies to net transportation charges against
revenue rather than showing transportation as a separate expense on the income
statement. Effective April 1, 2004, the Fund has recorded revenue before
transportation charges and a transportation expense on the income statement.
Prior periods have been reclassified for comparative purposes. This adjustment
has no impact on net income, net income per trust unit, funds flow or funds flow
per trust unit for the Fund.
  **3.**
    **Deferred
      Charges and Deferred Credits**
  Deferred
      Charges ($ thousands)Deferred
      charges as at December 31, 2003(1)
    
    $
    2,115Deferred
      financial asset recorded upon adoption of Accounting Guideline
      13(2)
    
    
    21,015Amortization
      of deferred financial assets
    
    
    (17,872
    )Amortization
      of debt issue costs
    
    
    (197
    )Deferred
      charges as at December 31, 2004
    
    **$**
    **5,061**
  (1)
    Represents
      the unamortized balance of the senior unsecured notes issue costs. These
      costs are being amortized over the life of the notes.(2)
    Represents the
      fair value of financial contracts on January 1, 2004 for which hedge
      accounting is no longer applied. This deferred financial asset is to be
      amortized over the remaining lives of the associated financial
      contracts.
  Deferred
      Credits ($ thousands)Deferred
      credits as at December 31, 2003(1)
    
    $
    1,942Deferred
      financial liability recorded upon adoption of Accounting Guideline
      13(2)
    
    
    21,015Change
      in fair value - other financial contracts(3)
    
    
    21,288Amortization
      of deferred credits
    
    
    (1,942
    )Deferred
      credits as at December 31, 2004
    
    **$**
    **42,303**
  (1)
    Represents
      the unamortized balance of deferred costs on financial contracts as of the
      date Enerplus Resources Fund was acquired by EnerMark Income
      Fund.These
      deferred costs were being amortized over the remaining life of the
      financial contracts to which they related, ending October 31,
      2004.(2)
    Represents
      the fair value of financial contracts on January 1, 2004 for which hedge
      accounting is no longer applied.(3)
    Changes
      in the fair value of financial contracts that do not qualify for hedge
      accounting are taken into income during the period as other financial
      contracts and reflected as an increase or decrease in the deferred
      financial liability.
 **ENERPLUS
      RESOURCES FUND 2004 ANNUAL REPORT**
    **78**
 
  The
following table summarizes the income statement effects of other financial
contracts:
  Other
      Financial Contracts ($ thousands)
    
    **2004**
    
    2003Change
      in fair value
    
    **$**
    **21,288**
    
    $
    -Amortization
      of deferred financial assets
    
    
    **17,872**
    
    
    -Realized
      cash costs, net
    
    
    **78,053**
    
    
    -Other
      financial contracts
    
    **$**
    **117,213**
    
    $
    -
 
 In
addition during the year ended December 31, 2004 we realized cash costs of
$18,167,000, net of gains and losses from financial contracts that qualified as
hedges compared to cash costs of $45,808,000 during 2003.
  **4.**
    **Asset
      Retirement Obligations**
 
 Total
future asset retirement obligations were estimated by management based on the
Fund's net ownership interest in wells and facilities, estimated costs to
abandon and reclaim the wells and facilities and the estimated timing of the
costs to be incurred in future periods. The Fund has estimated the net present
value of its total asset retirement obligations to be $105,978,000 at December
31, 2004 compared to $63,936,000 at December 31, 2003 based on a total liability
of $383,942,000 and $234,102,000 respectively. These payments are expected to be
made over the next 66 years with the majority of costs incurred between 2015 and
2030. The Fund’s credit-adjusted rate of 6.5% and an inflation rate of 2.0% were
used to calculate the present value of the asset retirement obligations for both
2004 and 2003. Settlements during the year approximated our estimates and as a
result, no gains or losses were recognized.
  Following
is a reconciliation of the asset retirement obligations:
  ($
      thousands)
    
    **2004**
    
    2003Asset
      retirement obligations, beginning of year
    
    **$**
    **63,936**
    
    $
    62,607Increase
      in estimated retirement obligations
    
    
    **23,100**
    
    
    -Acquisition
      and development activity
    
    
    **20,723**
    
    
    3,850Retirement
      obligations settled
    
    
    **(6,826**
    **)**
    
    (6,696
    )Accretion
      expense
    
    
    **5,045**
    
    
    4,175Asset
      retirement obligations, end of year
    
    **$**
    **105,978**
    
    $
    63,936
  **5.**
    **Property,
      Plant and Equipment**
  ($
      thousands)
    
    **2004**
    
    2003Property,
      plant and equipment
    
    **$**
    **4,305,584**
    
    $
    3,448,126Accumulated
      depletion, depreciation and accretion
    
    
    **(1,276,577**
    **)**
    
    (953,608
    )Net
      property, plant and equipment
    
    **$**
    **3,029,007**
    
    $
    2,494,518
 
 Capitalized
development G&A of $8,451,000 (2003 - $11,847,000) is included in PP&E
and the depletion and depreciation calculation includes future capital costs of
$279,700,000 (2003 - $180,700,000) identified in our reserve report. Excluded
from PP&E for the depletion and depreciation calculation is $28,574,000
(2003 - $nil) related to the Joslyn development project that has not commenced
commercial production.
  An
impairment test calculation was performed on the Fund’s PP&E at December 31,
2004 in which the estimated undiscounted future net cash flows associated with
the proved reserves exceeded the carrying amount of the Fund's
PP&E.
 
 **ENERPLUS
      RESOURCES FUND 2004 ANNUAL REPORT**
    **79**
  
  The
following table outlines benchmark prices used in the impairment test at
December 31, 2004:
  ****
    WTI
    ****
    ****
    ****
    Edmonton
    ****
    AECO
    ********
    ****
    Crude
      Oil(1)
    ****
    Exchange
      Rate
    ****
    Light
      Crude(1)
    ****
    Natural
      Gas(1)
    ****Year
    ****
    US$/bbl
    ****
    CDN$/US$
    
    CDN$/bbl
    
    CDN$/Mcf2005
    
    $
    44.29
    
    
    0.84
    
    $
    51.25
    
    $
    6.972006
    
    
    41.60
    
    
    0.84
    
    
    48.03
    
    
    6.662007
    
    
    37.09
    
    
    0.84
    
    
    42.64
    
    
    6.212008
    
    
    33.46
    
    
    0.84
    
    
    38.31
    
    
    5.732009
    
    
    31.84
    
    
    0.84
    
    
    36.36
    
    
    5.37Thereafter
      (inflation %)
    
    
    1.5
    %
    
    0
    %
    
    1.5
    %
    
    1.5
    %
  (1)
    Actual
      prices used in the impairment test were adjusted for commodity price
      differentials specific to the Fund.
  **6.**
    **Property
      Acquisitions**
 
 **Assets
of ChevronTexaco Corporation (“ChevronTexaco”)**
  On June
30, 2004, the Fund acquired certain oil and natural gas properties from
ChevronTexaco. Total consideration was $467,199,000 financed concurrently by
subscription receipts issued on June 15, 2004 and available lines of credit.
Results from operations of the ChevronTexaco assets have been included in
Enerplus’ financial results from June 30, 2004 forward.
  **7.**
    **Corporate
      Acquisitions**
 
 The
allocation to the fair value of the assets acquired and liabilities assumed,
plus the future income tax cost are summarized as follows:
  **2004**
    
    2003($
      thousands)
    
    **Ice
      Energy**
    
    PCCProperty,
      plant and equipment
    
    **$**
    **130,544**
    
    $
    168,123Goodwill
    
    
    **29,082**
    
    
    -Future
      income taxes
    
    
    **(29,082**
    **)**
    
    (1,201
    )**130,544**
    
    
    166,922Working
      capital deficiency
    
    
    **(9,373**
    **)**
    
    (1,107
    )Net
      assets acquired
    
    **$**
    **121,171**
    
    $
    165,815
 
 **(a)**
    **Ice
      Energy Limited (“Ice Energy”)**
 
 On
January 7, 2004, the Fund acquired all of the outstanding common shares of Ice
Energy for $130,544,000, which includes negative working capital assumed. The
excess of the consideration paid over the fair value of the identifiable assets
and liabilities resulted in the recording of goodwill. Available lines of credit
financed the acquisition, which has been accounted for using the purchase method
of accounting for business combinations. Results from operations of Ice Energy
subsequent to January 7, 2004 are included in the Fund’s consolidated financial
statements.
  **(b)**
    **PCC
      Energy Inc. and PCC Energy Corp.
(“PCC”)**
 
 On
March 5, 2003, the Fund acquired all of the outstanding common shares of PCC,
for total cash consideration of $165,815,000 including related costs. Available
lines of credit financed the acquisition, which has been accounted for using the
purchase method of accounting for business combinations. Results from operations
of PCC subsequent to March 5, 2003 are included in the Fund's consolidated
financial statements.
 
 **ENERPLUS
      RESOURCES FUND 2004 ANNUAL REPORT**
    **80**
  
  
 **8.**
    **Long-Term
      Debt**
  ($
      thousands)
    
    **2004**
    
    2003Bank
      credit facilities (a)
    
    **$**
    **251,669**
    
    $
    -Senior
      notes (b)US$175
      million (June 19, 2002)
    
    
    **268,328**
    
    
    268,328US$54
      million (October 1, 2003)
    
    
    **64,994**
    
    
    69,789Total
      long-term debt
    
    **$**
    **584,991**
    
    $
    338,117
  **(a)**
    **Unsecured
      Bank Credit Facilities**
 
 In
November 2004, the Fund negotiated an $850,000,000 unsecured, covenant based,
three-year term facility. At year-end, Enerplus had available credit of
$598,331,000 under this facility. It is extendible each year with a bullet
payment required at the end of three years if the facility is not renewed.
Various borrowing options are available under the facility including prime rate
based advances and banker’s acceptance loans.
  Prior
to November 2004, the Fund had bank facilities of $659,200,000, consisting of a
demand operating line of $31,700,000 and a $627,500,000 364-day revolving
committed facility with a two-year term.
  **(b)**
    **Senior
      Unsecured Notes**
 
 On
October 1, 2003, Enerplus issued US$54,000,000 senior unsecured notes that
mature October 1, 2015. The notes have a coupon rate of 5.46% priced at par with
interest paid semi-annually on April 1 and October 1 of each year. Principal
payments are required in five equal installments beginning October 1, 2011 and
ending October 1, 2015. Costs incurred in connection with issuing the notes in
the amount of $475,000 are classified as deferred charges on the balance sheet
and are being amortized to depletion, depreciation, amortization and accretion
(“DDA&A”) over the term of the notes. At December 31, 2004, the amount
remaining to be amortized associated with these costs was $425,000 (2003 -
$465,000). The notes are subject to fluctuations in foreign exchange rates.
  On June
19, 2002, Enerplus issued US$175,000,000 senior unsecured notes that mature June
19, 2014. The notes have a coupon rate of 6.62% priced at par, with interest
paid semi-annually on June 19 and December 19 of each year. Principal payments
are required in five equal installments beginning June 19, 2010 and ending June
19, 2014. Costs incurred in connection with issuing the notes in the amount of
$1,892,000 are classified as deferred charges on the balance sheet and are being
amortized to DDA&A over the term of the notes. At December 31, 2004, the
amount remaining to be amortized was $1,492,000 (2003 - $1,650,000). Concurrent
with the issuance of the notes on June 19, 2002, the Fund entered into a cross
currency swap with a syndicate of financial institutions. Under the terms of the
swap, the amount of the notes was fixed for purposes of interest and principal
repayments at a notional amount of CDN$268,328,000. Interest payments are made
on a floating rate basis, set at the rate for three-month Canadian banker’s
acceptances, plus 1.18%.
  The
bank credit facilities and the senior notes (the “Combined Facilities”) are the
legal obligation of EnerMark Inc. and are guaranteed by its subsidiaries.
Payments with respect to the Combined Facilities have priority over payments to
the Fund and over claims of and future distributions to the unitholders.
However, unitholders have no direct liability beyond their equity investment
should cash flow be insufficient to repay the Combined Facilities.
  **9.**
    **Foreign
      Exchange**
  ($
      thousands)
    
    **2004**
    
    2003Unrealized
      foreign exchange gain on translation of U.S. dollar denominated senior
      notes
    
    **$**
    **(4,795**
    **)**
    $
    (3,003
    )Realized
      foreign exchange (gain)/loss
    
    
    **(223**
    **)**
    
    2,079Foreign
      exchange gain
    
    **$**
    **(5,018**
    **)**
    $
    (924
    )
  **ENERPLUS
      RESOURCES FUND 2004 ANNUAL REPORT**
    **81**
 
  The
US$54,000,000 senior unsecured notes that are exposed to foreign currency
fluctuations are translated into Canadian dollars at the exchange rate in effect
at the balance sheet date. Foreign exchange gains and losses are included in the
determination of net income for the year.
  **10.**
    **Fund
      Capital**
  **(a)**
    **Unitholders’
      Capital**
 
 Trust
Units
  Authorized:
Unlimited number of trust units
 
 (thousands)
    
    **2004**
    
    2003Issued:
    
    **Units**
    
    **Amount**
    
    Units
    
    AmountBalance
      before Contributed Surplus, beginning of year
    
    
    **94,349**
    ****
    **$**
    **2,510,011**
    
    
    82,898
    
    $
    2,156,999Issued
      for cash:Pursuant
      to public offerings
    
    
    **8,800**
    ****
    ****
    **286,248**
    
    
    9,300
    
    
    291,791Pursuant
      to option and rights plans
    
    
    **648**
    ****
    ****
    **16,947**
    
    
    893
    
    
    21,438Trust
      unit rights incentive plan (non-cash) - exercised
    
    
    **-**
    ****
    ****
    **1,396**
    
    
    -
    
    
    -DRIP*,
      net of redemptions
    
    
    **302**
    ****
    ****
    **11,114**
    
    
    598
    
    
    18,366Issued
      for acquisition of corporate and property interests
    
    
    **25**
    ****
    ****
    **925**
    
    
    660
    
    
    21,417**104,124**
    ****
    ****
    **2,826,641**
    
    
    94,349
    
    
    2,510,011Contributed
      Surplus (Trust Unit Rights Plan)
    
    
    **-**
    ****
    ****
    **4,636**
    
    
    -
    
    
    1,364Balance,
      end of year
    
    
    **104,124**
    ****
    **$**
    **2,831,277**
    
    
    94,349
    
    $
    2,511,375
 
 *
    Distribution
      Reinvestment and Unit Purchase Plan
 
 Contributed
      Surplus ($ thousands)
    
    **2004**
    
    2003Balance,
      beginning of year
    
    **$**
    **1,364**
    
    $
    -Trust
      unit rights incentive plan (non-cash) - exercised
    
    
    **(1,396**
    **)**
    
    -Trust
      unit rights incentive plan (non-cash) - expensed
    
    
    **4,668**
    
    
    1,364Balance,
      end of year
    
    **$**
    **4,636**
    
    $
    1,364
 
 On June
15, 2004, Enerplus completed an equity offering of 8,800,000 subscription
receipts at a price of $34.30 per subscription receipt for gross proceeds of
$301,840,000 ($286,248,000 net of issuance costs). The subscription receipts
were exchanged for trust units on June 30, 2004 upon closing of the
ChevronTexaco asset acquisition. The holders of the subscription receipts
received the June 2004 cash distribution of $0.35 per trust unit and this amount
has been included in cash distributions to unitholders.
  On
December 17, 2003, Enerplus completed an equity offering of 4,400,000 trust
units at a price of $35.65 per trust unit for gross proceeds of $156,860,000
($148,717,000 net of issuance costs).
  On July
17, 2003, Enerplus completed an equity offering of 4,900,000 trust units at a
price of $30.80 per trust unit for gross proceeds of $150,920,000 ($143,074,000
net of issuance costs).
  Pursuant
to the monthly Distribution Reinvestment and Unit Purchase Plan (“DRIP”),
Canadian unitholders are entitled to reinvest cash distributions in additional
trust units of the Fund. Trust units are issued at 95% of the weighted average
market price on the Toronto Stock Exchange for the 20 trading days preceding a
distribution payment date without service charges or brokerage fees. Eligible
unitholders are also entitled to make optional cash payments to acquire
additional trust units, however the 5% discount does not apply.
 
 **ENERPLUS
      RESOURCES FUND 2004 ANNUAL REPORT**
    **82**
  
  Trust
units are redeemable by unitholders at approximately 85% of the current market
price. Redemptions are limited to $500,000 during any rolling two calendar
months. Redemption requests in excess of $500,000 can be paid using investments
of the Fund or a non-interest bearing instrument. During 2004, 7,000 units were
redeemed compared to 2003 when 24,000 were redeemed.
  **(b)**
    **Trust
      Unit Rights Incentive Plan**
 
 As at
December 31, 2004, a total of 2,401,000 rights pursuant to the Trust Unit Rights
Incentive Plan (“Rights Plan”) at an average exercise price of $34.33 were
outstanding. This represents 2.3% of the total trust units outstanding of which
551,000 rights with an average exercise price of $27.84 were exercisable. Under
the Rights Plan, distributions per trust unit to Enerplus unitholders in a
calendar quarter which represent a return of more than 2.5% of the net PP&E
of Enerplus at the end of such calendar quarter may result in a reduction in the
exercise price of the rights. Results for the year ended December 31, 2004,
reduced the exercise price of the outstanding rights by $1.44 per trust unit of
which a $0.35 reduction is effective January 2005 and a $0.32 reduction is
effective April 2005.
  Activity
for the rights issued pursuant to the Rights Plan is as follows:
  **2004**
    
    2003**Number**
    ****
    **Weighted**
    
    Number
    
    Weighted**of**
    ****
    **Average**
    
    of
    
    Average**Rights**
    ****
    **Exercise**
    
    Rights
    
    Exercise**(000’s)**
    ****
    **Price
      (1)**
    
    (000’s)
    
    Price(1)Trust
      unit rights outstandingBeginning
      of year
    
    
    **2,192**
    ****
    **$**
    **30.05**
    
    
    2,028
    
    $
    25.11Granted
    
    
    **1,002**
    ****
    ****
    **40.22**
    
    
    1,124
    
    
    35.56Exercised
    
    
    **(644**
    **)**
    ****
    **26.16**
    
    
    (776
    )
    
    24.30Cancelled
    
    
    **(149**
    **)**
    ****
    **30.94**
    
    
    (184
    )
    
    25.39End
      of year
    
    
    **2,401**
    ****
    ****
    **34.33**
    
    
    2,192
    
    
    30.05Rights
      exercisable at the end of the year
    
    
    **551**
    ****
    **$**
    **27.84**
    
    
    430
    
    $
    24.03
  (1)
    Exercise
      price reflects grant prices less reduction in strike price discussed
      above.
 
 The
following table summarizes information with respect to outstanding Unit Rights
as at December 31, 2004:
  Rights
      Outstanding at
    
    
    
    
    
    
    
    Rights
      Exercisable atDecember
      31, 2004
    
    Original
      Exercise
    
    Exercise
      Price after
    
    Expiry
      Date
    
    December
      31, 2004(000’s)
    
    Price
    
    Price
      Reductions
    
    December
      31
    
    (000's)151
    
    $
    24.50
    
    $
    21.73
    
    
    2007
    
    
    1515
    
    
    25.45
    
    
    22.80
    
    
    2008
    
    
    212
    
    
    26.40
    
    
    23.75
    
    
    2008
    
    
    512
    
    
    27.33
    
    
    24.75
    
    
    2008
    
    
    5377
    
    
    26.09
    
    
    23.65
    
    
    2008
    
    
    18170
    
    
    27.70
    
    
    25.46
    
    
    2009
    
    
    485
    
    
    33.00
    
    
    31.07
    
    
    2009
    
    
    267
    
    
    36.00
    
    
    34.45
    
    
    2009
    
    
    5634
    
    
    37.62
    
    
    36.46
    
    
    2009
    
    
    19654
    
    
    40.70
    
    
    39.93
    
    
    2010
    
    
    -82
    
    
    37.25
    
    
    36.85
    
    
    2010
    
    
    -133
    
    
    38.83
    
    
    38.83
    
    
    2010
    
    
    -719
    
    
    40.80
    
    
    40.80
    
    
    2010
    
    
    -2,401
    
    $
    35.43
    
    $
    34.33
    
    
    
    
    
    551
 
 Non-cash
compensation costs of $4,668,000 ($0.05 per unit) related to the rights issued
since January 1, 2003 have been charged to general and administrative expense
during 2004 compared to $1,364,000 ($0.02 per unit) during 2003.
 
 **ENERPLUS
      RESOURCES FUND 2004 ANNUAL REPORT**
    **83**
  
  The
following table outlines the estimated compensation cost associated with the
rights issued during 2002 and the pro forma effects on net income and net income
per unit, had CICA Handbook section 3870 been applied retroactive to
2002.
  ($
      thousands, except per unit amounts)
    
    **2004**
    
    2003Net
      income as reported
    
    **$**
    **258,316**
    
    $
    248,046Compensation
      expense for rights issued in 2002
    
    
    **(4,734**
    **)**
    
    (5,425
    )Pro
      forma net income
    
    **$**
    **253,582**
    
    $
    242,621Net
      income per trust unit - basicReported
    
    **$**
    **2.60**
    
    $
    2.88Pro
      forma
    
    **$**
    **2.55**
    
    $
    2.81Net
      income per trust unit - dilutedReported
    
    **$**
    **2.60**
    
    $
    2.87Pro
      forma
    
    **$**
    **2.55**
    
    $
    2.81
  **11.**
    **Income
      Taxes**
  **(a)**
    **Enerplus
      Resources Fund**
 
 The
Fund is an inter-vivos trust for income tax purposes. As such, the Fund’s income
that is not allocated to the Fund's unitholders is taxable. The Fund intends to
allocate all income to unitholders.
  For
2004, the Fund had taxable income of $381,000,000 (2003 - $307,000,000) or $3.77
per trust unit (2003 - $3.53 per trust unit). Taxable income of the Fund is
comprised of dividend, royalty, interest and partnership income, less deductions
for Canadian oil and gas property expense (“COGPE”) and issue costs.
  The
amounts of COGPE and issue costs remaining in the Fund at December 31, 2004 are
$506,985,000 and $32,297,000 respectively (2003 - $393,317,000 and
$29,381,000).
  **(b)**
    **Corporate
      Subsidiaries**
 
 The
future income tax liability on the balance sheet arises as a result of the
following temporary differences:
  ($
      thousands)
    
    **2004**
    
    2003Excess
      of net book value of property, plant and equipment over the underlying tax
      bases
    
    **$**
    **285,606**
    
    $
    289,496Asset
      retirement obligations
    
    
    **(35,945**
    **)**
    
    (6,204
    )Deferred
      hedging and other
    
    
    **(14,110**
    **)**
    
    -Future
      income tax liability
    
    **$**
    **235,551**
    
    $
    283,292
 
 **ENERPLUS
      RESOURCES FUND 2004 ANNUAL REPORT**
    **84**
  
  The
provision for income taxes varies from the amounts that would be computed by
applying the combined Canadian federal and provincial income tax rates for the
following reasons:
 
 ($
      thousands)
    
    **2004**
    
    2003Income
      before taxes
    
    **$**
    **188,105**
    
    $
    182,644Computed
      income tax expense at the enactedrate
      of 38.86% (40.75% for 2003)
    
    **$**
    **73,098**
    
    $
    74,427Increase
      (decrease) resulting from:Effect
      of change in tax rate
    
    
    **(5,700**
    **)**
    
    (35,800
    )Net
      income attributed to the Fund
    
    
    **(153,686**
    **)**
    
    (117,812
    )Non-deductible
      crown royalties and other payments
    
    
    **40,461**
    
    
    43,359Federal
      resource allowance
    
    
    **(35,966**
    **)**
    
    (42,682
    )Alberta
      royalty tax credit
    
    
    **(244**
    **)**
    
    (204
    )Management
      internalization
    
    
    **-**
    
    
    19,601Adjustment
      related to prior acquisitions
    
    
    **794**
    
    
    (12,863
    )Other
    
    
    **4,420**
    
    
    349Future
      income tax recovery
    
    **$**
    **(76,823**
    **)**
    $
    (71,625
    )
  **12.**
    **Financial
      Instruments**
 
 The
Fund’s financial instruments presented on the balance sheet consist of cash,
accounts receivable, other current assets, a portion of deferred charges,
current liabilities and long-term debt.
  The
carrying value of cash, accounts receivable, current liabilities and outstanding
bank credit facility balances approximate their fair value. Other current assets
are comprised of prepaid expenses and marketable securities. The marketable
securities are carried on the balance sheet at the lower of cost and fair value.
The fair value of the marketable securities at December 31, 2004 exceeded the
cost of these securities by $1,668,000. The Fund carried US$54,000,000 of fixed
rate debt. In addition, it carried US$175,000,000 of fixed rate debt that was
converted to CDN$268,328,000 floating rate debt through a cross-currency swap
with a syndicate of financial institutions. At December 31, 2004 the fair values
of the senior unsecured notes were $67,224,000 and $225,037,000 respectively.
See Note 8. In addition $3,143,000 (2003 - $nil) has been included in deferred
charges related to derivative instruments that no longer qualify for hedge
accounting treatment. These costs will be amortized over the next
year.
  The
estimated fair values have been determined based on available market information
and appropriate valuation methods. The actual amounts realized may differ from
these estimates.
  **(a)**
    **Credit
      Risk**
 
 Most of
the Fund’s accounts receivable relate to oil and natural gas sales and are
exposed to typical industry credit risks. The Fund manages this credit risk by
entering into sales contracts with only highly rated entities and reviewing its
exposure to individual entities on a regular basis. The Fund is also exposed to
certain losses in the event of non-performance by counterparties to derivative
financial instruments. This credit risk is managed by the Fund by selecting
financially sound counterparties.
  **(b)**
    **Interest
      Rate Risk**
 
 The
Fund is exposed to movements in interest rates. Long-term debt is comprised of
both variable rate bank facilities and fixed rate senior notes. The Fund
monitors the interest rate forward market and through the use of interest rate
swaps along with the fixed-rate notes has fixed the interest rate on
approximately 24% of its debt. See part (d) below.
  **(c)**
    **Currency
      Risk**
 
 The
Fund is exposed to fluctuations in foreign currency as a result of the issuance
of senior unsecured notes denominated in U.S. dollars. Through the use of a
financial swap, the exposure on our US$175,000,000 senior unsecured notes has
been converted to Canadian dollar debt. As well, the Fund has indirect exposure
to fluctuations in foreign currency as crude oil sales and a portion of natural
gas sales are based on U.S. dollar indices. We have not entered into any foreign
currency derivatives with respect to oil and natural gas sales.
 
 **ENERPLUS
      RESOURCES FUND 2004 ANNUAL REPORT**
    **85**
  
  
  **(d)**
    **Derivative
      Financial Instruments**
 
 The
Fund uses certain derivative financial instruments to manage its commodity
price, foreign currency and interest rate exposures. The fair values of these
instruments are based on an approximation of the amounts that would have been
paid to or received from counterparties to settle the instruments outstanding as
at December 31, 2004 with reference to forward prices and market valuations
provided by independent sources. The fair values of derivative financial
instruments are as follows:
  ***Interest
Rate and Cross Currency Swaps***
  The
Fund has entered into interest rate swaps on $75,000,000 of notional debt at
rates varying from 3.74% to 4.70% before banking fees that are expected to range
between 0.65% and 0.875%. These interest rate swaps mature between June 2006 and
January 2007. The fair value value of the $75,000,000 interest rate swaps as at
December 31, 2004 represents an unrealized cost of $1,412,000. These swaps have
been designated as hedges for accounting purposes.
  The
fair value of the cross currency swap related to the US$175,000,000 senior
unsecured notes as at December 31, 2004 represents an unrealized cost of
$45,378,000.
  ***Crude
Oil Instruments***
  Enerplus
has entered into the following financial option contracts to reduce the impact
of a downward movement in crude oil prices. The fair value of the financial
crude oil contracts that do not qualify for hedge accounting are described in
Note 3. The fair value of the financial crude oil contracts that qualify for
hedge accounting reflects an unrealized cost of $6,406,000 at December 31,
2004.
  The
following table summarizes the Fund’s crude oil risk management positions at
February 18, 2005.
 
 ****
    ****
    ****
    ****
    WTI
      US$/bbl
    ********
    ****
    ****
    Daily
      Volumes
    ****
    Sold
    
    Purchased
    
    Sold
    ********
    ****
    ****
    bbls/day
    
    Call
    
    Put
    
    PutTermJan.
      6, 2005 - Mar. 31, 2005Costless
      Collar *(2)
    
    
    1,500
    
    $
    50.30
    
    $
    40.00
    
    
    -Jan.
      1, 2005 - Jun. 30, 20053-way
      option
    
    
    1,500
    
    $
    28.00
    
    $
    24.00
    
    $
    21.00Apr.
      1, 2005 - Jun. 30, 2005Put
      *(1)
    
    
    1,500
    
    
    -
    
    $
    36.10
    
    
    -Jan.
      1, 2005 - Sep. 30, 20053-way
      option
    
    
    1,500
    
    $
    29.50
    
    $
    24.50
    
    $
    21.503-way
      option
    
    
    1,500
    
    $
    29.40
    
    $
    24.50
    
    $
    21.50Jul.
      1, 2005 - Sep. 30, 2005Put
      *(1)
    
    
    1,500
    
    
    -
    
    $
    35.10
    
    
    -Jan.
      1, 2005 - Dec. 31, 20053-way
      option
    
    
    1,500
    
    $
    30.00
    
    $
    27.23
    
    $
    23.003-way
      option
    
    
    1,500
    
    $
    30.00
    
    $
    25.35
    
    $
    22.00Costless
      Collar *
    
    
    1,500
    
    $
    40.10
    
    $
    31.00
    
    
    -Apr.
      1, 2005 - Dec. 31, 2005Put
      *(2)
    
    
    1,500
    
    
    -
    
    $
    41.50
    
    
    -Put(2)
    
    
    1,500
    
    
    -
    
    
    -
    
    $
    35.00Oct.
      1, 2005 - Dec. 31, 2005Put
      *(1)
    
    
    1,500
    
    
    -
    
    $
    34.25
    
    
    -Jul.
      1, 2005 - Jun. 30, 20063-way
      option
    
    
    1,500
    
    $
    45.80
    
    $
    31.50
    
    $
    27.50Jan.
      1, 2006 - Jun. 30, 2006Costless
      Collar *
    
    
    1,500
    
    $
    35.35
    
    $
    30.00
    
    
    -Costless
      Collar *
    
    
    1,500
    
    $
    37.00
    
    $
    30.00
    
    
    -
 
 *
    Financial
      contracts that qualify as hedges.(1)
    Financial
      contracts entered into during the fourth quarter of
  2004.(2)
    Financial
      contracts entered into subsequent to December 31, 2004 that are not
      included in the fair values.
 **ENERPLUS
      RESOURCES FUND 2004 ANNUAL REPORT**
    **86**
  
  ***Natural
Gas Instruments***
  Enerplus
has physical and financial contracts in place on its natural gas production as
described below. The fair value of the financial natural gas contracts that do
not qualify for hedge accounting at December 31, 2004 is described in Note 3.
The fair value of the financial natural gas contracts that qualify for hedge
accounting reflects an unrealized cost of $14,723,000 at December 31,
2004.
  The
following table summarizes the Fund’s natural gas risk management positions at
February 18, 2005.
  AECO
      CDN$/McfDaily
      Volumes
    
    Sold
    
    Purchased
    
    Sold
    
    Fixed
      PriceMMcf/day
    
    Call
    
    Put
    
    Put
    
    and
      SwapsTermJan.
      1, 2005 - Jan. 31, 2005Call(1)
    
    
    9.5
    
    $
    10.55
    
    
    -
    
    
    -
    
    
    -Put(1)
    
    
    9.5
    
    
    -
    
    
    -
    
    $
    6.86
    
    
    -Feb.
      1, 2005 - Feb. 28, 2005Put(1)
    
    
    9.5
    
    
    -
    
    
    -
    
    $
    6.33
    
    
    -Jan.
      1, 2005 - Mar. 31, 2005Put
      *(1)
    
    
    9.5
    
    
    -
    
    $
    8.35
    
    
    -
    
    
    -Costless
      Collar *
    
    
    9.5
    
    $
    10.86
    
    $
    7.38
    
    
    -
    
    
    -Costless
      Collar *
    
    
    9.5
    
    $
    12.13
    
    $
    6.85
    
    
    -
    
    
    -Mar.
      1, 2005 - Mar. 31, 2005Put(2)
    
    
    9.5
    
    
    -
    
    
    -
    
    $
    6.07
    
    
    -Jan.
      1, 2005 - Jun. 30, 20053-way
      option
    
    
    2.8
    
    $
    7.12
    
    $
    5.69
    
    $
    4.75
    
    
    -Apr.
      1, 2005 - Oct. 31, 20053-way
      option
    
    
    9.5
    
    $
    8.23
    
    $
    6.33
    
    $
    5.01
    
    
    -Costless
      Collar *(2)
    
    
    5.3
    
    $
    8.44
    
    $
    5.54
    
    
    -
    
    
    -Costless
      Collar *(2)
    
    
    5.3
    
    $
    8.44
    
    $
    5.80
    
    
    -
    
    
    -Jan.
      1, 2005 - Dec. 31, 20053-way
      option
    
    
    9.5
    
    $
    6.65
    
    $
    5.61
    
    $
    4.75
    
    
    -3-way
      option
    
    
    9.5
    
    $
    6.60
    
    $
    5.65
    
    $
    4.75
    
    
    -3-way
      option
    
    
    9.5
    
    $
    6.86
    
    $
    5.81
    
    $
    4.75
    
    
    -Apr.
      1, 2005 - Dec. 31, 2005Put
      *(1)
    
    
    9.5
    
    
    -
    
    $
    6.39
    
    
    -
    
    
    -Nov.
      1, 2005 - Mar. 31, 20063-way
      option
    
    
    9.5
    
    $
    9.92
    
    $
    7.12
    
    $
    5.80
    
    
    -Jan.
      1, 2005 - Oct. 31, 2006Swap
      *
    
    
    9.5
    
    
    -
    
    
    -
    
    
    -
    
    $
    5.47Swap
      *
    
    
    4.8
    
    
    -
    
    
    -
    
    
    -
    
    $
    5.25Swap
      *
    
    
    4.8
    
    
    -
    
    
    -
    
    
    -
    
    $
    5.24Swap
      *
    
    
    4.8
    
    
    -
    
    
    -
    
    
    -
    
    $
    5.282005 - 2010Physical
      (escalated pricing)
    
    
    2.0
    
    
    -
    
    
    -
    
    
    -
    
    $
    2.52
  *
    Financial
      contracts that qualify as hedges.(1)
    Financial
      contracts entered into during the fourth quarter of
  2004.(2)
    Financial
      contracts entered into subsequent to December 31, 2004 that are not
      included in the fair values.
 
 **ENERPLUS
      RESOURCES FUND 2004 ANNUAL REPORT**
    **87**
  
  ***Electricity
Instrument***
  During
the fourth quarter of 2004, the Fund entered into an electricity swap contract
that fixed the price of electricity on 5MWh of Alberta Power Pool electricity
consumption at $49.99/MWh from January 1, 2005 to December 31, 2006. This has
been designated as a hedge, and the fair value of this instrument as at December
31, 2004 reflects an unrealized gain of $20,000.
  **13.**
    **Commitments
      and Contingencies**
  **(a)**
    **Pipeline
      Transportation**
 
 Enerplus
has contracted to transport natural gas with various pipelines totaling 15 MMcf
per day until 2008 and a further 5 MMcf per day until 2015.
  **(b)**
    **Oil
      Sands Lease #24**
 
 During
2002, the Fund acquired a 16% working interest in the Oil Sands Lease #24
(Joslyn Creek Lease). The acquisition included the assumption of contingent
project debt that is comprised of principal up to $3,360,000 plus accrued
interest to December 31, 2004 up to $1,136,000. Interest is accrued at the Bank
of Canada prime business rate and is not compounded. The debt is contingent on
production hurdles with respect to development on the lease. As it is too early
in the development of this project to determine if these hurdles will be
satisfied, the contingent debt has not been accrued in the consolidated
financial statements.
  **(c)**
    **Office
      Lease**
 
 Enerplus
has an office lease commitment that extends to November 30, 2009. Annual costs
of this lease commitment, which include rent and operating fees, amount to
approximately $4,600,000.
  **(d)**
    **Guarantee**
 
 During
2004 Enerplus entered into a guarantee for a maximum of $1,000,000 in its
capacity as a partner in a limited partnership, which was established for the
purpose of marketing natural gas. At December 31, 2004 there were no obligations
associated with this guarantee.
  The
Fund may provide indemnifications in the normal course of business that are
often standard contractual terms to counterparties in certain transactions such
as purchase and sale agreements. The terms of these indemnifications will vary
based upon the contract, the nature of which prevents the Fund from making a
reasonable estimate of the maximum potential amounts that may be required to be
paid. Management believes the resolution of these matters would not have a
material adverse impact on the Fund’s liquidity, consolidated financial position
or results of operations.
  Enerplus
has the following minimum annual commitments including long-term
debt:
  TotalMinimum
      Annual Commitment Each Year
    
    Committed($
      thousands)
    
    **Total**
    
    2005,
      2006
    
    2007
    
    2008
    
    2009
    
    after
      2009Bank
      credit facility
    
    **$**
    **251,669**
    
    $
    -
    
    $
    251,669
    
    $
    -
    
    $
    -
    
    $
    -Senior
      unsecured notes
    
    
    **333,322**
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    333,322Pipeline
      commitments
    
    
    **37,876**
    
    
    5,590
    
    
    5,590
    
    
    5,050
    
    
    2,350
    
    
    13,706Office
      lease
    
    
    **22,462**
    
    
    4,638
    
    
    4,521
    
    
    4,521
    
    
    4,144
    
    
    -Total
      commitments
    
    **$**
    **645,329**
    
    $
    10,228
    
    $
    261,780
    
    $
    9,571
    
    $
    6,494
    
    $
    347,028
 
 In
addition the Fund is involved in claims and litigation arising in the normal
course of business. The result of these claims are uncertain and there can be no
assurance they will be resolved in favour of the Fund, however management
believes the resolution of these matters would not have a material adverse
impact on the Fund’s liquidity, consolidated financial position or results of
operations.
 
 **ENERPLUS
      RESOURCES FUND 2004 ANNUAL REPORT**
    **88**
  
  
  **14.**
    **Differences
      Between Canadian and United States Generally Accepted Accounting
      Principles**
 
 The
Fund’s consolidated financial statements have been prepared in accordance with
Canadian GAAP. These principles, as they pertain to the Fund’s consolidated
statements differ from United States GAAP ("U.S. GAAP") as follows:
  The
application of U.S. GAAP would have the following effects on net income as
reported:
  ($
      thousands)
    
    **2004**
    
    2003(Restated,Notes
      (a), (c), (e) and (f))Net
      income as reported in the Consolidated Statement of Income - Canadian
      GAAP
    
    **$**
    **258,316**
    
    $
    248,046AdjustmentsDepletion,
      depreciation, amortization and accretion (Note (a))
    
    
    **74,775**
    
    
    90,894Unrealized
      gain (loss) on financial derivatives (Note (b))
    
    
    **17,872**
    
    
    4,733Unrealized
      gain (loss) on cross-currency and interest rate swap (Note
      (c))
    
    
    **(2,549**
    **)**
    
    490Compensation
      expense (Note (d))
    
    
    **(6,920**
    **)**
    
    (12,400
    )Income
      tax expense of above adjustments, including expense due to change in tax
      rates of $10,543 for 2004 and $36,275 for 2003
    
    
    **40,897**
    
    
    69,796Net income before
      cumulative effect of change in accounting principle - U.S. GAAP
    
    
    **300,597**
    
    
    261,967Cumulative
      effect of change in asset retirement obligation accounting principle, net
      of income taxes of $13,305 (Note (a))
    
    
    **-**
    
    
    29,023Net income - U.S.
      GAAP
    
    
    **300,597**
    
    
    290,990Net
      change in fair value of hedging instruments and available for sale
      securities, net of tax recovery of $2,860 (2003 - expense of $2,268) and
      tax expense due to change in tax rates of $118 for 2004 (2003 - $1,515)
      (Note (e))
    
    
    **(5,709**
    **)**
    
    2,771Comprehensive
      income
    
    **$**
    **294,888**
    
    $
    293,761Net
      income per trust unit before cumulative effect of change in accounting
      principleBasic
    
    **$**
    **3.03**
    
    $
    3.04Diluted
    
    **$**
    **3.02**
    
    $
    3.03Cumulative
      effect of change in accounting principleBasic
    
    **$**
    **-**
    
    $
    0.34Diluted
    
    **$**
    **-**
    
    $
    0.34Net
      income per trust unitBasic
    
    **$**
    **3.03**
    
    $
    3.38Diluted
    
    **$**
    **3.02**
    
    $
    3.37Weighted
      average number of trust units outstandingBasic
    
    
    **99,273**
    
    
    86,202Diluted
    
    
    **99,416**
    
    
    86,402DeficitBalance,
      beginning of year - U.S. GAAP
    
    **$**
    **(1,879,779**
    **)**
    $
    (971,963
    )Net
      income - U.S. GAAP
    
    
    **300,597**
    
    
    290,990Change
      in redemption value (Note (f))
    
    
    **(377,617**
    **)**
    
    (826,230
    )Cash
      distributions
    
    
    **(423,311**
    **)**
    
    (372,576
    )Balance, end of year - U.S. GAAP
    
    **$**
    **(2,380,110**
    **)**
    $
    (1,879,779
    )Accumulated other
      comprehensive income (loss)Balance, beginning of
      year - U.S. GAAP
    
    **$**
    **(8,109**
    **)**
    $
    (10,880
    )Net
      change in fair value of hedging instruments and available for sale
      securities, net of tax
    
    
    **(5,709**
    **)**
    
    2,771Balance, end of year - U.S. GAAP
    
    **$**
    **(13,818**
    **)**
    $
    (8,109
    )
 
 **ENERPLUS
      RESOURCES FUND 2004 ANNUAL REPORT**
    **89**
  
  The
application of U.S. GAAP would have the following effects on the balance sheet
as reported:
 
 Canadian
    
    Increase
    
    U.S.($
      thousands)
    
    GAAP
    
    (decrease)
    
    GAAP**December
      31, 2004**Other
      current assets (Note (e))
    
    $
    9,602
    
    $
    1,668
    
    $
    11,270Deferred
      charges (Note (b))
    
    
    5,061
    
    
    (3,143
    )
    
    1,918Property,
      plant and equipment, net (Note (a))
    
    
    3,029,007
    
    
    (769,430
    )
    
    2,259,577Deferred
      credits/Financial derivative liabilities (Note (b))
    
    
    42,303
    
    
    67,899
    
    
    110,202Long-term
      debt
    
    
    584,991
    
    
    (43,291
    )
    
    541,700Future
      income taxes/Deferred income taxes
    
    
    235,551
    
    
    (283,018
    )
    
    (47,467
    )Unitholders’
      mezzanine equity (Note (f))
    
    
    -
    
    
    3,849,985
    
    
    3,849,985Unitholders’
      capital (Note (f))
    
    
    2,826,641
    
    
    (2,826,641
    )
    
    -Contributed
      surplus (Note (d))
    
    
    4,636
    
    
    22,726
    
    
    27,362Deficit
      (Note (f))
    
    
    -
    
    
    (2,380,110
    )
    
    (2,380,110
    )Accumulated
      income (Note (f))
    
    
    976,137
    
    
    (976,137
    )
    
    -Accumulated
      other comprehensive income (loss) (Note (c))
    
    
    -
    
    
    (13,818
    )
    
    (13,818
    )Accumulated
      cash distributions (Note (f))
    
    
    (1,811,500
    )
    
    1,811,500
    
    
    -**December
      31, 2003 (Restated, Notes (a), (c), (e) and (f))**Other
      current assets (Note (e))
    
    $
    13,412
    
    $
    2,957
    
    $
    16,369Property,
      plant and equipment, net (Note (a))
    
    
    2,494,518
    
    
    (844,205
    )
    
    1,650,313Financial
      derivative liabilities (Note (b))
    
    
    -
    
    
    61,427
    
    
    61,427Long-term
      debt
    
    
    338,117
    
    
    (25,515
    )
    
    312,602Future
      income taxes/Deferred income taxes
    
    
    283,292
    
    
    (321,173
    )
    
    (37,881
    )Unitholders’
      mezzanine equity (Note (f))
    
    
    -
    
    
    3,155,738
    
    
    3,155,738Unitholders’
      capital (Note (f))
    
    
    2,510,011
    
    
    (2,510,011
    )
    
    -Contributed
      surplus (Note (d))
    
    
    1,364
    
    
    15,806
    
    
    17,170Deficit
      (Note (f))
    
    
    -
    
    
    (1,879,779
    )
    
    (1,879,779
    )Accumulated
      income (Note (f))
    
    
    717,821
    
    
    (717,821
    )
    
    -Accumulated
      other comprehensive income (loss) (Note (c))
    
    
    -
    
    
    (8,109
    )
    
    (8,109
    )Accumulated cash distributions (Note
      (f))
    
    
    (1,388,189
    )
    
    1,388,189
    
    
    -
 **ENERPLUS
      RESOURCES FUND 2004 ANNUAL REPORT**
    **90**
  
  
  **(a)**
    **Property,
      Plant and Equipment and Depletion, Depreciation, Amortization and
      Accretion**
 
 Under
U.S. GAAP full cost accounting, the carrying value of petroleum and natural gas
properties and related facilities, net of deferred income taxes, is limited to
the present value of after tax future net revenue from proved reserves,
discounted at 10% (based on prices and costs at the balance sheet date), plus
the lower of cost and fair value of unproved properties. Under Canadian GAAP, an
impairment loss exists when the carrying amount of the Fund’s PP&E exceeds
the estimated undiscounted future net cash flows associated with the Fund’s
proved reserves. If an impairment loss is determined to exist, the costs carried
on the balance sheet in excess of the discounted future net cash flows
associated with the Fund’s proved and probable reserves are charged to income.
The application of the impairment test under U.S. GAAP did not result in a
write-down of capitalized costs in either 2004 or 2003.
 
 Where
the amount of an impairment test write-down under Canadian GAAP differs from the
amount of the write-down under U.S. GAAP, the charge for DDA&A will differ
in subsequent years. Historical write-downs for U.S. GAAP have resulted in
DDA&A being $74,775,000 ($49,606,000 net of tax) lower than Canadian GAAP
for the year ended December 31, 2004. The difference for the year ended December
31, 2003 was a $91,118,000 ($59,327,000 net of tax) reduction in the amount of
DDA&A recorded.
  In
2003, U.S. GAAP differences affecting DDA&A, PP&E and future income
taxes existed because the Fund adopted standards for asset retirement obligation
accounting for U.S. GAAP and not Canadian GAAP. On January 1, 2004, the Fund
retroactively adopted CICA 3110 “Asset Retirement Obligations”, which eliminated
these U.S. GAAP differences for 2004 and future years. Canadian GAAP net income
for 2003 decreased by $1,554,000 and 2003 U.S. GAAP differences in DDA&A and
future tax expense decreased by $224,000 and $78,000, respectively, as a result
of retroactively adopting CICA 3110. In 2003, there was a $29,023,000 net
cumulative effect of change in asset retirement accounting principle recognized,
reflecting the prospective application for U.S. GAAP.
  **(b)**
    **Derivative
      financial instruments (non-hedges)**
 
 Effective
January 1, 2004, the Fund prospectively adopted CICA Accounting Guideline - 13
“Hedging Relationships” (“AcG-13”) and Emerging Issues Committee Abstract 128
“Accounting for Trading, Speculative or Non-hedging Derivative Financial
Instruments”. As a result, most of the derivative financial instruments used by
the Fund as economic hedges of commodity, interest and foreign currency
transactions now receive the same accounting treatment under both Canadian and
U.S. GAAP. Derivative financial assets and liabilities are presented as deferred
charges and deferred credits.
  Upon
adoption of AcG-13, deferred credits and deferred charges of $21,015,000 were
recognized representing the fair value of derivative financial instruments in
place as of January 1, 2004 that do not qualify for hedge accounting. The
deferred charges are amortized over the life of the financial instruments for
Canadian GAAP and were equal to the aggregate of U.S. GAAP gains and losses
incurred on these instruments prior to January 1, 2004. During 2004, $17,872,000
($11,824,000 net of tax) of the deferred charges were amortized to income under
AcG-13. Because this amount was expensed prior to 2004 for U.S. GAAP, the amount
has been reversed in the current period.
  Deferred
charges of $3,143,000 remain after current period amortization for Canadian
GAAP. The deferred charges and deferred credits at January 1, 2004 represented
the recognition of fair values of financial derivative liabilities for Canadian
GAAP, which were previously recognized for U.S. GAAP. The deferred charges have
been reversed against deferred credits/financial derivative liabilities for U.S.
GAAP.
 
 **ENERPLUS
      RESOURCES FUND 2004 ANNUAL REPORT**
    **91**
  
  
  **(c)**
    **Cross-currency
      and interest rate swap**
 
 For
Canadian GAAP, the cross-currency and interest rate swap qualifies as a fair
value hedge for accounting purposes and therefore disclosure of the fair value
is required with no effect on assets, liabilities or net income. Under U.S.
GAAP, the fair value of the swap is recognized as a liability on the
consolidated balance sheet and the underlying long-term debt is carried at fair
value. Changes in the fair value of the cross-currency and interest rate swap
are offset by changes in the fair value of the underlying long-term debt and the
ineffective portion is taken into net income during the period.
  In 2003
and prior years, the Fund did not recognize the change in fair value of the
US$175,000,000 senior unsecured notes in net income. The Fund did recognize the
offsetting change in fair value of the related cross-currency and interest rate
swap, however, incorrectly recognized the change in comprehensive income rather
than net income. This has been corrected and the prior year amounts have been
restated. As a result, 2003 long-term debt decreased by $25,515,000 and income
before tax expense, net income and comprehensive income increased by $490,000,
$320,000 and $37,677,000, respectively. The restatements had no effect on 2003
net income per trust unit or diluted net income per trust unit.
  **(d)**
    **Unit-based
      compensation**
 
 In 2003
Enerplus adopted the Financial Accounting Standards Board’s (“FASB”) Statement
of Financial Accounting Standards (“SFAS”) 123, “Accounting for Stock-based
Compensation”. The Fund also adopted the Canadian Institute of Chartered
Accountants (“CICA”) Handbook Section 3870 “Stock Based Compensation and other
Stock Based Payments” in 2003. Because the exercise price of the Trust Unit
Rights decrease from time to time by unspecified amounts, it is not possible to
measure the compensation cost associated with the Trust Unit Rights Plan using
an option pricing model. Accordingly, for both Canadian GAAP and U.S. GAAP,
compensation expense is determined as the excess of the market price over the
exercise price at the end of each reporting period and is deferred and
recognized in income over the vesting period of the rights. After the rights
have vested, changes in the market price of the units or exercise price of the
rights are recognized in income in the period of change.
  A U.S.
GAAP difference exists, as under Canadian GAAP, no compensation expense is
recorded for rights issued prior to January 1, 2003. Unit based compensation for
the year ended December 31, 2004 on all rights issued was $11,588,000 (2003 -
$13,764,000). The charge to net income for Canadian GAAP was $4,668,000 for the
year ended December 31, 2004 (2003 - $1,364,000), resulting in a U.S. GAAP
difference of $6,920,000 (2003 - $12,400,000).
  **(e)**
    **Hedging
      instruments and available for sale
securities**
 
 Under
Canadian GAAP, disclosure of the fair value of derivative instruments that
qualify for hedge accounting is required with no effect on assets, liabilities
or net income. For U.S. GAAP, derivative instruments that qualify for hedge
accounting must be measured and presented at fair value with changes in fair
value of all cash flow hedges recognized in comprehensive income. Furthermore,
the ineffective portion of qualified hedges is recognized in net income.
  In
addition, a U.S. GAAP difference exists relating to available for sale
securities under SFAS 115 “Accounting for Certain Investments in Debt and
Equity”. Under Canadian GAAP the fair value of marketable securities is
disclosed, whereas under U.S. GAAP, available for sale securities are presented
on the balance sheet at fair value with changes in fair value recognized in
comprehensive income. In 2003, the unrealized gain on available for sale
securities was not recognized in comprehensive income. The Fund has corrected
this and prior period amounts have been restated. As a result, 2003
comprehensive income increased by $1,934,000.
 
 **ENERPLUS
      RESOURCES FUND 2004 ANNUAL REPORT**
    **92**
  
  The
Fund’s comprehensive income for the year ended December 31, 2004 includes a net
loss in fair value of $8,451,000 ($5,709,000 net of tax). Comprehensive income
for the year ended December 31, 2003 includes a net gain in fair value of
$6,554,000 ($2,771,000 net of tax). The Fund’s accumulated comprehensive income
is summarized below.
  ($
      thousands)
    
    **2004**
    
    2003Fair
      value of interest rate swaps
    
    
    **(1,412**
    **)**
    
    (1,812
    )Fair
      value of natural gas instruments
    
    
    **(14,723**
    **)**
    
    (13,712
    )Fair
      value of crude oil instruments
    
    
    **(6,406**
    **)**
    
    -Fair
      value of electricity swap
    
    
    **20**
    
    
    165Fair
      value of hedging instruments
    
    
    **(22,521**
    **)**
    
    (15,359
    )Unrealized
      gain on available for sale securities
    
    
    **1,668**
    
    
    2,957Deferred
      income taxes
    
    
    **7,035**
    
    
    4,293Accumulated
      other comprehensive income (loss)
    
    **$**
    **(13,818**
    **)**
    $
    (8,109
    )
 
 **(f)**
    **Unitholders’
      mezzanine equity**
 
 A U.S.
GAAP difference exists as a result of the redemption feature in the Fund’s trust
units, which is required for the Fund to retain its Canadian mutual fund trust
status. The trust units are redeemable at the option of the holder for
approximately 85% of the current trading price. The amount of trust units that
are redeemable for cash is limited to $500,000 in any two consecutive months.
Any redemption in excess of the limit may be honored with promissory notes or
other investments of the Fund.
  For
Canadian GAAP, the trust units are considered to be permanent equity and are
presented as unitholders' capital. Under U.S. GAAP, the redemption feature of
the trust units excludes them from classification as permanent equity. In prior
years, the Fund believed that there were sufficient restrictions on redemptions
that the trust units qualified as permanent equity. In 2004, an in-depth study
was undertaken after the Emerging Issues Task Force (“EITF”) discussed, in the
March 17-18, 2004 meeting, the effect of SFAS 150 “Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity” on
existing U.S. GAAP. In light of the EITF discussions and the in-depth study
undertaken, Enerplus has reclassified its trust units as mezzanine equity to
meet U.S. GAAP requirements. Prior year amounts have been restated.
 
 As a
result, 2003 unitholders’ capital, accumulated income and accumulated cash
distributions decreased by $2,539,637,000, $124,511,000 (after consideration of
other restatements) and $1,388,189,000, respectively. The restatement does not
impact 2003 net income. The Fund has recorded, for U.S. GAAP, unitholders’
mezzanine equity in the amount of $3,849,985,000 for 2004 and $3,155,738,000 for
2003, which represents the estimated redemption value of the trust units at 85%
of the year-end market price. The Fund has also recognized a deficit of
$2,380,110,000 for 2004 and $1,879,779,000 for 2003, resulting from eliminating
the unitholders’ capital, accumulated income and cash distributions of the Fund
and replacing them with unitholders' mezzanine equity at redemption value.
Changes in unitholders’ mezzanine equity in excess of trust units issued, net of
redemptions, net income and cash distributions in any period are recognized as
charges to the deficit.
 **ENERPLUS
      RESOURCES FUND 2004 ANNUAL REPORT**
    **93**
  
  
  **(g)**
    **Non-GAAP
      measure**
 
 The
Fund denotes cash flows from operating activities before changes in operating
working capital on the Consolidated Statement of Cash Flows as funds flow from
operations. This notation does not have any standardized meaning as prescribed
by GAAP, and would not be presented under U.S. GAAP.
 ****
 **Recent
Accounting Pronouncements**
 
 •
    Effective
      January 1, 2004 Enerplus has prospectively adopted FASB Interpretation No.
      (“FIN”) 46(R) “Consolidation of Variable Interest Entities” (“VIEs”). FIN
      46(R) clarifies the application of Accounting Research Bulletin No. 51
      “Consolidated Financial Statements” to those entities (defined as VIEs) in
      which the equity at risk is not sufficient to permit that entity to
      finance its activities without additional subordinated financial support
      from other parties. The VIE definition also extends to entities where
      equity investors lack voting control, an obligation to absorb expected
      losses or the right to receive expected residual returns. FIN 46(R)
      requires consolidation by a business of VIEs in which it is the primary
      beneficiary. The primary beneficiary is defined as the party that has
      exposure to the majority of the expected losses and/or expected residual
      returns of the VIE. Adoption of FIN 46(R) had no material impact on the
      financial results of the Fund.•
    In
      December 2004, FASB issued SFAS 123(R) which will eliminate the use of APB
      No. 25 for measuring and recognizing stock based compensation for annual
      reporting periods beginning after June 15, 2005. APB No. 25 was used to
      account for the Unit Option Plan, however adoption of SFAS 123 (R) will
      not affect the Fund’s measurement of compensation cast as the Unit Option
      Plan has been terminated as of December 31, 2004.•
    The
      Fund has previously adopted SFAS 123 for all Trust Unit Rights using the
      intrinsic value to measure compensation cost because complexities of the
      Trust Unit Rights prevent the fair value of the rights from being
      reasonably estimated. The affect of FAS 123 (R) on the Fund has not been
      assessed at this time.•
    In
      June 2004, FASB issued an exposure draft of a proposed Statement, “Fair
      Value Measurements” to provide guidance on how to measure the fair value
      of financial and non-financial assets and liabilities when required by
      other authoritative accounting pronouncements. The proposed statement
      attempts to address concerns about the ability to develop reliable
      estimates of fair value and inconsistencies in fair value guidance
      provided by current U.S. GAAP, by creating a framework that clarifies the
      fair value objective and its application in GAAP. In addition, the
      proposal expands disclosures required about the use of fair value to
      remeasure assets and liabilities. The standard would be effective for
      financial statements issued for fiscal years beginning after June 15,
      2005. We have not assessed the impact of this accounting pronouncement on
      the Fund at this time.•
    In
      December 2004, FASB issued SFAS 153 “Exchanges of Nonmonetary Assets - an
      amendment of APB Opinion No. 29” which eliminates the exception to fair
      value for exchanges of similar productive assets and replaces it with a
      general exception to fair value for exchanges that lack commercial
      substance. We have not assessed the impact of this accounting
      pronouncement on the Fund at this time.
 
 **ENERPLUS
      RESOURCES FUND 2004 ANNUAL REPORT**
    **94**