UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-QSB

> QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2002

OR

( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934



ENTERRA ENERGY CORP.

(Exact name of registrant as specified in its charter)

| | Alberta, Canada                                               | n/a                                     
| | ------------------------------------------------------------- | ----------------------------------------
| | (State or other jurisdiction ofincorporation or organization) | (I.R.S. Employer
    Identification No.)

| | Suite 2600, 500  4th Avenue S.W.
    Calgary, Alberta, Canada | T2P 2V6   
| | -------------------------------------------------------------- | ----------
| | (Address of principal
    executive offices)                   | (Zip Code)

403-263-0262

Registrants telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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____

There were 9,150,622 shares outstanding of the registrants Common Stock without
par value as of June 30, 2002.





ENTERRA ENERGY CORP.

|                                                                       | INDEX                                                                                                | Page No.
|---------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------- | --------
|                                                                       | PART I  FINANCIAL
    INFORMATION                                                                   |         
|Item l. Financial Statements
    (Unaudited):                          |                                                                                                     
|                                                                       | Consolidated Balance Sheets at
    June 30, 2002 and December 31, 2001                               | 3       
|                                                                       | Statements of Earnings and
    Retained Earnings - Three and six months ended June 30, 2002 and 2001 | 4       
|                                                                       | Statements of Cash Flows -
    Three and six months ended June 30, 2002 and 2001                     | 5       
|                                                                       | Notes to Consolidated Financial
    Statements                                                       | 6       
|Item 2. Managements
    Discussion and Analysis or Plan of Operations | **11**                                                                                              
|                                                                       | PART II  OTHER INFORMATION                                                                          |         
|Item 1. Legal Proceedings                                              | **21**                                                                                              
|Item 2. Changes in Securities
    and Use of Proceeds                  | **21**                                                                                              
|Item 3. Defaults Upon Senior
    Securities                            | **21**                                                                                              
|Item 4. Submission of Matters
    to a Vote of Security Holders        | **21**                                                                                              
|Item 5. Other Information                                              | **21**                                                                                              
|Item 6. Exhibits and Reports on
    Form 8-K                           | **21**                                                                                              
|Signatures                                                             | **22**                                                                                              

**- 2 -**



PART I  FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

|ENTERRA ENERGY CORP.                                                         
|-----------------------------------------------------------------------------
|Consolidated Balance Sheets                                                  
|(Expressed in Canadian dollars)                                              
|                                                                             
|                                                                             
|                                                                             
|Assets                                                                       
|Current assets                                                               
|Cash                                                                         
|Accounts receivable                                                          
|Prepaid expenses and deposits                                                
|                                                                             
|                                                                             
|Property and equipment                                                       
|Deferred financing charges                                                   
|                                                                             
|                                                                             
|Liabilities                                                                  
|Current liabilities                                                          
|Accounts payable and accrued
    liabilities                                 
|Income taxes payable                                                         
|Note payable (note 2)                                                        
|Bank indebtedness (note 3)                                                   
|                                                                             
|                                                                             
|Provision for future abandonment
    and site restoration costs              
|Future income tax liability                                                  
|Deferred gain                                                                
|Series 1 preferred shares (note 2)                                           
|                                                                             
|                                                                             
|Shareholders Equity                                                         
|Share capital (note 4)                                                       
|Retained earnings                                                            
|                                                                             
|                                                                             
|                                                                             
|Approved on behalf of the Board :                                            
|                                                                             
|Reg Greenslade                                                               
|Director                                                                     
|                                                                             
|See accompanying notes to
    consolidated financial statements
    **- 3 -**

|ENTERRA ENERGY CORP.                                           
|---------------------------------------------------------------
|Consolidated Statements of
    Earnings and Retained Earnings  
|Three and Six Months Ended June
    30                         
|(Expressed in Canadian dollars)                                
|(Unaudited)                                                    
|                                                               
|Revenue                                                        
|Oil and gas                                                    
|                                                               
|Expenses                                                       
|Royalties, net of ARTC                                         
|Production                                                     
|General and administrative                                     
|Interest on long-term debt                                     
|Depletion, depreciation and future site
    restoration        
|                                                               
|Earnings before the following                                  
|Restructuring charges                                          
|Gain on redemption of preferred shares                         
|Earnings before income taxes                                   
|Income taxes :                                                 
|Current                                                        
|Future (reduction)                                             
|                                                               
|Net earnings                                                   
|                                                               
|                                                               
|Retained earnings, beginning of period                         
|Retained earnings, end of period                               
|                                                               
|Earnings per share :                                           
|Basic                                                          
|Diluted                                                        
|                                                               
|See accompanying notes to consolidated
    financial statements



**- 4 -**



|ENTERRA ENERGY CORP.                                                                                                                                                       
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Consolidated Statements of Cash Flows                                                                                                                                      
|Three and Six Months Ended June 30                                                                                                                                         
|(Expressed in Canadian dollars)                                                                                                                                            
|(Unaudited)                                                                                                                                                                
|Cash provided by (used in) :                                                                                                                                               
|Operations                                                                                                                                                                 
|Net earnings                                                                                                                                                               
|Add non-cash items :                                                                                                                                                       
|Depletion and depreciation                                                                                                                                                 
|Future income taxes (reduction)                                                                                                                                            
|Deferred gain                                                                                                                                                              
|Amortization of deferred gain                                                                                                                                              
|Gain on redemption of preferred shares                                                                                                                                     
|Funds from operations                                                                                                                                                      
|Net change in non-cash working capital items :                                                                                                                             
|Accounts receivable                                                                                                                                                        
|Prepaid expenses                                                                                                                                                           
|Accounts payable and accrued liabilities                                                                                                                                   
|Income taxes payable                                                                                                                                                       
|                                                                                                                                                                           
|                                                                                                                                                                           
|Financing                                                                                                                                                                  
|Bank indebtedness                                                                                                                                                          
|Deferred financing charges                                                                                                                                                 
|Issue of common shares, net of issue costs                                                                                                                                 
|Issue of preferred shares                                                                                                                                                  
|                                                                                                                                                                           
|                                                                                                                                                                           
|Investing                                                                                                                                                                  
|Capital assets additions                                                                                                                                                   
|Investments                                                                                                                                                                
|Proceeds on disposal of property and equipment                                                                                                                             
|Redemption of preferred shares                                                                                                                                             
|Future abandonment and site restoration costs                                                                                                                              
|                                                                                                                                                                           
|                                                                                                                                                                           
|Increase in cash                                                                                                                                                           
|Cash, beginning of period                                                                                                                                                  
|Cash, end of period                                                                                                                                                        
|Funds from operations per share
    :                                                                                                                                      
|Basic                                                                                                                                                                      
|Future                                                                                                                                                                     
|                                                                                                                                                                           
|During the six and three months
    ended June 30, 2002 the Company paid respectively $436,656 and $228,533 (2001 -$143,064
    and $102,845) of interest on long-term debt
|                                                                                                                                                                           
|See accompanying notes to consolidated
    financial statements                                                                                                            



> 

Enterra energy corp.

Notes to Consolidated Financial Statements

For the Three and Six Months ended June 30, 2002 and 2001

(Unaudited)

The interim consolidated financial statements have been prepared by
management in accordance with Canadian generally accepted accounting principles. The
interim consolidated financial statements have been prepared following the same accounting
policies and methods used in preparing the consolidated financial statements for the
fiscal year ended December 31, 2001, except as described below, and should be read in
conjunction with those statements. The other disclosures below are incremental to those
reflected in the annual statements.

> 1. Changes in accounting policies :
>   (a) Capital assets :
>   As disclosed in the December 31, 2001 financial statements, the Company
>     has changed its method of accounting for petroleum and natural gas properties from the
>     "successful efforts" method to the "full cost" method. The full cost
>     method has been adopted retroactively and prior financial statements have been restated.
>     There was no impact of this change on the consolidated statements of earnings and retained
>     earnings for the three and six months ended June 30, 2002.
>     (b) Stock-based compensation :
>     Effective January 1, 2002 the Company prospectively adopted the new
>     recommendations of the CICA with respect to the accounting for stock-based compensation
>     and other stock-based payments. In accordance with the new standard, the Company elected
>     to continue its policy that no compensation is recorded on the granting of employee stock
>     options and consideration paid on the exercise of such options is recorded as share
>     capital. In addition, the new standard requires a fair value based method of accounting
>     for other stock-based payments. Had compensation expense for the Companys
>     stock-based compensation plan been determined based on the fair value at the grant dates
>     for awards under the plan after January 1, 2002, the Companys net earnings and
>     earnings per share would not have been materially different than those reported.

2. Series 1 preferred shares :

> On March 26, 2002 the Company purchased 6,123,870 of its Series 1
>     preferred shares for $2.3 million, resulting in a gain on redemption of $2,905,290. The
>     purchase was paid for with cash of $1,750,000 and a note payable of $550,000. The note
>     payable bears no interest and is due December 31, 2002. As at March 31, 2002 there were
>     1,294,466 Series 1 preferred shares outstanding. These shares are non-voting. They aretransferable. Holders of these shares are not entitled to receive any dividends
>     until the first anniversary of the date of issue. These shares are redeemable at any time
>     by the Company for $0.85 per share. Holders of these shares may require the Company to
>     redeem all or any of these shares, at $0.85 per share, at any time following the first
>     anniversary of the date of issue (August 16, 2001). There is no market for these shares
>     and none is expected to develop.
>     
>     **- 6 -**Subsequent to June 30, 2002 Enterra settled the $550,000
>     note payable for $325,000, resulting in a gain of $225,000.
>     
>     3. Bank indebtedness :
>     Bank indebtedness represents the outstanding balance under a line
>     of credit of $24,000,000 with the Alberta Treasury Branches. Drawings bear interest at
>     0.25% above the banks prime lending rate. Security is provided by a first charge
>     over all of the Companys assets. The balance is repayable on demand. While the loan
>     is due on demand, the Company is not subject to scheduled repayments.
>     This loan was classified as a long-term liability in the December 31,
>     2001 financial statements. However, effective for fiscal periods commencing January 1,
>     2002, the Company adopted the new CICA recommendation regarding Balance Sheet
>     Classification of Callable Debt Obligations and Debt Obligations Expected to be
>     Refinanced. All borrowings where the lender has a right to demand repayment within twelve
>     months are required to be classified as current liabilities. The impact of this change has
>     been to increase current liabilities by the amount of any such borrowings then in place.
>     At June 30, 2002 this change has increased current liabilities by $21,131,640 and reduced
>     long-term debt by a corresponding amount.
>     
>     4. Share Capital :
>     (a) Issued :

Number of
    common shares
    AmountBalance, December 31, 2001
    9,150,622
    $ 29,568,263Issued on exercise of options
    23,008
    85,115Shares repurchased
    (23,008)
    (74,315)Balance, June 30, 2002
    9,150,622
    $ 29,579,063




> 

(b)
  Options

Number of
    Options
    Weighted-average exercise
    priceOutstanding at December 31, 2001
    800,000
    $4.00Options granted
    154,000
    $4.60Options exercised
    (23,008)
    ($3.70)Options cancelled
    (108,786)
    ($4.00)Outstanding at June 30, 2002
    822,206
    $4.09






> 

(c) Warrants :

On March 28, 2002 the Company agreed to issue
  400,000 share purchase warrants to an arms length U.S.-based consulting firm in
  connection with a potential debt financing in the United States. The warrants are to have
  a two-year term and are subject to different pricing (100,000 warrants at US$2.60, 100,000
  at US$3.30 and 200,000 at US$4.00). The US$2.60 warrants are to vest upon the execution of
  a non-binding letter of intent relating to the proposed financing. The US$3.30 and US$4.00
  warrants are to vest only on the successful closing and funding of the proposed financing.



**- 8 -**

SUMMARY CONSOLIDATED FINANCIAL DATA

The following table presents a summary of our consolidated statement of
operations derived from our financial statements for the three and six months ended June
30, 2002 and 2001. The monetary amounts in the table are based on Canadian GAAP. All data
presented below should be read in conjunction with the "Managements Discussion
and Analysis of Financial Condition and Results of Operations" and our financial
statements and accompanying notes included elsewhere in this Form 10-QSB.

Consolidated statements of operations data:

|(In thousands, except per share
    data) |                                |                                |                              |                             
|------------------------------------------ | ------------------------------ | ------------------------------ | ---------------------------- | ----------------------------
|                                           | Three Months
    Ended June 30 | Three Months
    Ended June 30 | Six
    Months Ended June 30 | Six
    Months Ended June 30
|                                           | 2002                           | 2001                           | 2002                         | 2001                        
|                                           | C$                             | C$                             | C$                           | C$                          
|Net revenue                                | $ 5,052                        | $ 4,670                        | $ 10,650                     | $ 8,958                     
|                                           |                                |                                |                              |                             
|Royalties, net of ARTC                     | 804                            | 719                            | 1,613                        | 1,427                       
|Production expenses                        | 1,048                          | 1,030                          | 2,766                        | 2,400                       
|General and administrative expenses        | 550                            | 253                            | 797                          | 509                         
|Interest                                   | 229                            | 103                            | 437                          | 143                         
|Depreciation and depletion                 | 1,800                          | 1,069                          | 4,090                        | 2,018                       
|                                           | 4,431                          | 3,174                          | 2,923                        | 6,497                       
|Earnings from operations                   | $ 621                          | $ 1,496                        | $ 947                        | $ 2,461                     
|Net earnings for the year                  | $ 398                          | $ 470                          | $ 3,548                      | $ 1,081                     
|Basic earnings per share                   | $ 0.04                         | $ 0.08                         | $ 0.39                       | $ 0.19                      



> The following table indicates a summary of our
>   consolidated balance sheets as of June 30, 2002 and December 31, 2001. The monetary
>   amounts in the table are based on Canadian GAAP.

Consolidated balance sheet data:

(In thousands)June 30
    December 312002
    2001C$
    C$Cash and short term investments
    $ 78
    $ 43Accounts receivable and prepaids
    6,650
    6,880Capital assets
    68,706
    73,139Total assets
    76,057
    80,063Total shareholders equity
    37,083
    33,524








Exchange Rate Information



|                                   | June 30 | June 30 | December 31
|---------------------------------- | ------- | ------- | -----------
|                                   | 2002    | 2001    | 2001       
|End of period                      | 0.65867 | 0.66072 | 0.62869    
|Average for the three months ended | 0.64368 | 0.64893 | N/A        
|High during the three months ended | 0.66560 | 0.66230 | N/A        
|Low during the three months ended  | 0.62390 | 0.63160 | N/A        
|Average for the six months ended   | 0.63557 | 0.65202 | N/A        
|High during the six months ended   | 0.66560 | 0.67140 | N/A        
|Low during the six months ended    | 0.61750 | 0.63160 | N/A        



















**- 10 -**





ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.

The following discussion of our results of operations and financial
condition should be read in conjunction with the financial statements and other financial
information included in this annual report. The statements that relate to matters that are
not historical facts are "forward-looking statements". Words such as
"anticipate", "believe", "expect", "plan",
"intend", "estimate", "project", "will",
"should" "could", "may", "predict" and similar
expressions are intended to identify forward-looking statements. Future events and actual
results may differ materially from the results set forth in or implied in the
forward-looking statements. Factors that might cause such a difference such as those
discussed under "Risk factors" and elsewhere, include:

> fluctuations in worldwide prices of oil and natural gas and demand for oil and natural
>   gas;
>   fluctuations in levels of oil and gas exploration and development activities;
>   the existence of competitors, technological changes and developments in the industry;
>   the existence of operating risks and hazards inherent in the industry, such as
>   blowouts, oil spills, fires, adverse weather, natural disasters, injury to third parties,
>   oil spills and other environmental damages;
>   the existence of regulatory uncertainties;
>   possible insufficient liquidity to meet the Companys expansion plans; and
>   general economic conditions.

The following discussion is to inform you about our financial
conditions, liquidity and capital resources as of June 30, 2002 and December 31, 2001 and
the results of operations for the three and six months ended June 30, 2002 and 2001. The
information is expressed in Canadian dollars

Three and Six Months Ended June 30, 2002 Compared to Three and Six Months Ended June
30, 2001

Financial Condition, Liquidity and Capital Resources

At June 30, 2002 Enterras working capital was a deficit of $18.5
million (December 31, 2001 - $2.2 million). Included as part of current liabilities at
June 30, 2002 is bank debt of $21.1 million (December 31, 2001 - NIL). The Companys
bank debt now appears on our balance sheet as a current liability. This same bank debt was
classified as a long-term liability at December 31, 2001. Nothing has changed with the
nature or the terms of our banking arrangement with our lender. The reclassification of
our bank debt from long-term liability to current liability is the result of new Canadian
accounting rules which came into effect January 1, 2002. These rules specify that all
borrowings where, among other things, the lender has a right to demand repayment within 12
months (which is the case with our revolving production facility) are to be classified as
current liabilities. We are not subject to principal repayments under our banking
arrangement. Other than the in the event of a default or a breach of covenants, our lender
has advised us that no principal payments are required in 2002.

Since January 1, 2002 the Canadian GAAP rules mirror the U.S. GAAP
rules: the calculation and presentation of working capital is now consistent under both
Canadian and U.S. GAAP.



**- 11 -**

Cash flow from operations for the three months ended June 30, 2002 was
$2.2 million (2001 - $795,378) for a 182% increase. Cash flow from operations for the six
months ended June 30, 2002 was $4.7 million (2001 - $4.1 million) for a 14% increase. In
both cases, the increase is the result of the additional production gained with the Big
Horn acquisition which was effective August 1, 2001. Commodity prices were lower in 2002
than 2001 but the additional production volumes more than offset the decline in prices,
resulting in higher cash flow from operations in 2002. The Company also received
approximately $1.68 million in the first quarter of 2001 upon the settlement of a hedging
contract, which is why the cash flow increase is only 14% for the six months ended June
30, 2002 compared to 182% for the three months ended June 30, 2002.

Financing Activities

Enterras ability to maintain and grow its operating income and
cash flow is dependent upon continued capital spending to replace depleting assets.
Enterra believes its future cash flow from operations, borrowing capacity and future
equity issues should be sufficient to fund capital expenditures and to service debt.
However, our ability to raise additional funds at all, or to do so on acceptable terms,
depends largely on factors beyond our control, such as world prices for oil and gas,
prevailing interest rates and general economic conditions.

Enterras bank debt at June 30, 2002 was $21.1 million (December
31, 2001 - $18.4 million). Our bank debt is used to acquire capital assets and support
ongoing operations. At June 30, 2002 Enterras bank facility consisted of a line of
credit of $24 million (December 31, 2001 - $21.5 million) of which $21.1 million was drawn
(December 31, 2001 - $18.4 million). Interest on amounts drawn is based on the banks
prime rate plus 0.25%.

Security is provided by a first charge over all of the Companys
assets. While the loan is repayable on demand, Enterra is not subject to scheduled
repayments. The lender has advised the Company that, subject to annual review of the
borrowing base and the Company continuing to comply with the terms of the loan agreement,
no payments will be required in 2002.

The Company currently has 9,150,622 common shares outstanding.

In the second quarter of 2002, the Company sold its Grand Forks
property for $5.3 million. Proceeds from this sale were used to reduce our bank debt and
to repurchase some of the preferred shares. The preferred shares were redeemed for $2.3
million, paid for with cash of $1.75 million and a note of $550,000. Subsequent to June
30, 2002 the note was settled for $325,000, resulting in a gain of $225,000.

The Company has in excess of $45 million in tax pools available at June
30, 2002.

> 

Investing Activities

The timing of most of Enterras capital expenditures is
discretionary. Enterra has no material long-term commitments associated with its capital
expenditure plans or operating agreements. Consequently, the Company has a significant
degree of flexibility to adjust the level of such expenditures as circumstances warrant.
The level of capital expenditures will vary in future periods depending on the success we
experience on planned drilling activities, oil and gas price conditions and other related
economic factors.

Capital expenditures for the three months period ended June 30, 2002
were $2.8 million (June 30, 2001 - $2 million). Capital expenditures for the six months
end June 30, 2002 were $5.6 million (June 30, 2001 - $7.8 million). Drilling activity has
been minimal so far in 2002. Most of our capital expenditures have been for land ,
equipment upgrades and workovers. Less than 20% of the $5.6 million in capital
expenditures in 2002 was for drilling and completion activities.



**- 12 -**

Proceeds on disposal of oil and gas properties were $5.9 million for
the six months ended June 30, 2002 (June 30, 2001  NIL). These proceeds relate
almost exclusively to the sale of the Grand Forks properties, which occurred in the second
quarter of 2002 and which accounted for $5.3 million of the $5.9 million total proceeds
for the first half of the year.



Results of Operations

Gross revenue for the three months ended June 30, 2002 was $5 million
(2001 - $4.7 million) for a 8% increase. Revenue for the six months ended June 30, 2002
was $10.6 million (2001 - $8.9 million) for a 19% increase. In both cases the impact of
the higher production volumes was mitigated by the lower commodity prices in 2002.
Production volumes for the three months ended June 30, 2002 were 1,881 boe/day (2001
 1,465 boe/day) for a 28% increase. However, prices declined on average by 16% over
the same period, reducing the revenue increase to only 8%. Production volumes for the six
months ended June 30, 2002 were 2,150 boe/day (2001  1,349 boe/day) for a 59%
increase. Again, commodity prices during that period declined by 26%, resulting in a lower
revenue increase of only 19%.

Average oil prices declined by 12% during the first half of 2002 and
average gas prices declined by 55% over the same period compared to their respective 2001
levels. The Company received an average of $29.98 per barrel for its oil production during
the six months ended June 30, 2002, compared with $34.08 in 2001. The Company received an
average of $3.71 per mcf for its natural gas production during the six months ended June
30, 2002, compared with $8.17 in 2001. As a result, Enterras revenue per boe
declined by $9.32 (or 25%) per boe in the first half of 2002 compared to 2001.

Royalties for the three months ended June 30, 2002 were $803,889 (2001
- $719,384) and $1.6 million for the six months ended June 30, 2002 (2001 - $1.4 million).
As a percentage of oil and gas revenues, royalties were 16% for the three months ended
June 30, 2002 (2001  15%) and 15% for the six months ended June 30, 2002 (2001
 16%).

Operating expenses for the three months ended June 30, 2002 were $1.05
million (2001 - $1.03 million) and $2.8 million for the six months ended June 30, 2002
(2001 - $$2.4 million). This increase is the result of the increased production in 2002.
On a barrel of oil equivalent basis operating costs for the three months ended June 30,
2002 were $6.12 (2001 - $7.72) and $7.11 for the six months ended June 30, 2002 (2001 -
$9.83). The decrease is manly due to the Big Horn acquisition. Big Horns properties,
on average, experienced lower operating expenses than Enterras. By consolidating the
two groups, and with Big Horns management being the surviving management group, the
Company was able to reduce overall operating expenses.

General and administrative expenses for the three months ended June 30,
2002 were $550,169 (2001 - $252,666) and $796,629 for the six months ended June 30, 2002
(2001 - $509,394). On a barrel of oil equivalent basis administrative costs were $3.21 for
the three months ended June 30, 2002 (2001 - $1.89) and $2.05 for the six months ended
June 30, 2002 (2001 - $2.09). The increase in the second quarter of 2002 is due to
corporate expenditures (e.g. audit fees, reserve report, bank renewal fee financing costs)
and to a small increase in payroll costs from 2001.

**- 13 -**

Interest expense for the three months ended June 30, 2002 was $228,533
(2001 - $ 102,845) and $436,656 for the six months ended June 30, 2002 (2001 - $143,064).
The increase in interest expense is due to higher debt levels in 2002.

Depletion and depreciation for the three months ended June 30, 2002 was
$1.8 million (2001 - $1.07 million) and $4.09 million for the six months ended June 30,
2002 (2001 - $2.02 million). The increase reflects the higher cost base in our capital
assets in 2002.

Enterra incurred $721,650 of one-time restructuring charges (mainly
severance and termination payments) in the second quarter of 2001 as a result of the Big
Horn acquisition. There were no such costs in 2002.

Current and future income tax expense for the three months ended June
30, 2002 were $33,000 and $189,000 respectively (2001  $760,140 and ($455,456)) and
$66,000 and $238,000 respectively for the six months ended June 30, 2002 (2001 
$874,140 and ($215,456)). The higher level of income taxes in 2001 is due to the gain on
settlement of hedges (which occurred in the first quarter of 2001, thereby increasing the
income of Enterra for tax purposes) and to the fact that there were less tax pools
available to Enterra in 2001. The future income tax expenses are calculated based on the
timing of deductions for accounting purposes and tax on petroleum and gas assets.

The Companys earnings were $398,445 for the three months ended
June 30, 2002 (2001 - $470,427) for a decrease of 15%. The earnings for the six months
ended June 30, 2002 were $3.5 million (2001 - $1.08 million) for a 228% increase. This
large increase was caused by a $2.9 million gain on redemption of preferred shares which
occurred in the first quarter of 2002. Enterra redeemed 6,123,870 of its Series 1
preferred shares with a face redemption price of $5,205,290 for $2.3 million, resulting in
a gain of $2,905,290. Without this gain, earnings for the six months ended June 30, 2002
would have been $642,892, a decrease of 41%. The lower earnings in 2002 are due to lower
prices, higher depletion charges and higher general and administrative costs in the case
of the three months results.

Earnings per share for the three months ended June 30, 2002 were $0.04
(2001 - $0.08) and $0.39 for the six months ended June 30, 2002 (2001 - $0.19). The
weighted average number of shares outstanding for the three and six months ended June 30,
2002 was 9,150,622 (2001  5,678,321 for three months and 5,580,454 for six months).

The Company had 9,150,622 common shares outstanding at June 30, 2002
(December 31, 2001 - 9,150,622)



Stock based compensation

Effective January 1, 2002 the Company prospectively adopted the new
recommendations of the CICA with respect to the accounting for stock-based compensation
and other stock-based payments. In accordance with the new standard, the Company elected
to continue its policy that no compensation is recorded on the grant of employee stock
options and consideration paid on the exercise of such options is recorded as share
capital. In addition, the new standard requires a fair value based method of accounting
for other stock-based payments. Had compensation expense for the Companys
stock-based compensation plan been determined based on the fair value at the grant dates
for awards under the plan after January 1, 2002, the Companys net income and
earnings per share would not have been materially different than those reported.

**- 14 -**

Share Capital

|                              | Number of
    common shares | Amount      
|----------------------------- | --------------------------- | ------------
|                              |                             |             
|Balance, December 31, 2001    | 9,150,622                   | $ 29,568,263
|Issued on exercise of options | 23,008                      | 85,115      
|Shares repurchased            | (23,008)                    | (74,315)    
|Balance, June 30, 2002        | 9,150,622                   | $ 29,579,063



> Options:

|                                 | Number of
    Options | Weighted-average exercise
    price
|-------------------------------- | --------------------- | -----------------------------------
|Outstanding at December 31, 2001 | 800,000               | $4.00                              
|Options granted                  | 154,000               | $4.60                              
|Options exercised                | (23,008)              | ($3.70)                            
|Options cancelled                | (108,786)             | ($4.00)                            
|Outstanding at June 30, 2002     | 822,206               | $4.09                              





Subsequent Event  Settlement of Note Payable

Subsequent to June 30, 2002 Enterra settled a note payable of $550,000
for $325,000, resulting in a gain of $225,000.



Factors That May Affect Future Results

This report contains forward-looking statements and other
prospective information relating to future events. These forward-looking statements and
other information are subject to certain risks and uncertainties that could cause results
to differ materially from historical or anticipated results, including the following:

We have a working capital deficiency at June 30, 2002; our Credit facilities can be
called at any time.

At June 30, 2002, we had a working capital deficiency of $18.5 million,
which means our current liabilities exceeded our current assets by that amount. Our credit
facilities are all on a demand basis and could be called for repayment at any time.

Our assets are highly leveraged.

We have incurred a high amount of debt relative to our assets. A
decrease in the amount of our production or the price we receive for it could make it
difficult for us to service our loan or may cause the bank that issued our loan to
determine that our assets are insufficient security for our bank debt.

**- 15 -**

Our operations are subject to numerous risks of crude oil and natural
gas drilling and production activities.

Crude oil and natural gas drilling and production activities are
subject to numerous risks, many of which are beyond our control. These risks include the
following:

> that no commercially productive crude oil or natural gas reservoirs
>       will be found;
>     that crude oil and natural gas drilling and production activities may
>       be shortened, delayed or canceled; and
>     that our ability to develop, produce and market our reserves may be
>       limited by:title problems,
>         weather conditions,
>         compliance with governmental requirements, and
>         mechanical difficulties or shortages or delays in the delivery of
>           drilling rigs and other equipment.

In the past, we have had difficulty securing drilling equipment in
certain of our core areas. We cannot assure you that the new wells we drill will be
productive or that we will recover all or any portion of our investment. Drilling for
crude oil and natural gas may be unprofitable. Dry wells and wells that are productive but
do not produce sufficient net revenues after drilling, operating and other costs are
unprofitable. In addition, our properties may be susceptible to hydrocarbon draining from
production by other operations on adjacent properties.

Our industry also experiences numerous operating risks. These operating
risks include the risk of fire, explosions, blow-outs, pipe failure, abnormally pressured
formations and environmental hazards. Environmental hazards include oil spills, gas leaks,
ruptures or discharges of toxic gases. If any of these industry operating risks occur, we
could have substantial losses. Substantial losses also may result from injury or loss of
life, severe damage to or destruction of property, clean-up responsibilities, regulatory
investigation and penalties and suspension of operations. In accordance with industry
practice, we maintain insurance against some, but not all, of the risks described above.
We cannot assure you that our insurance will be adequate to cover losses or liabilities.
Also, we cannot predict the continued availability of insurance at premium levels that
justify its purchase.

We operate in a highly competitive industry which may adversely affect
our operations.

We operate in a highly competitive environment. Competition is
particularly intense with respect to the acquisition of desirable undeveloped crude oil
and natural gas properties. The principal competitive factors in the acquisition of such
undeveloped crude oil and natural gas properties include the staff and data necessary to
identify, investigate and purchase such properties, and the financial resources necessary
to acquire and develop such properties. We compete with major and independent crude oil
and natural gas companies for properties and the equipment and labor required to develop
and operate such properties. Many of these competitors have financial and other resources
substantially greater than ours.

The principal resources necessary for the exploration and
production of crude oil and natural gas are leasehold prospects under which crude oil and
natural gas reserves may be discovered, drilling rigs and related equipment to explore for
such reserves and knowledgeable personnel to conduct all phases of crude oil and natural
gas operations. We must compete for such resources with both major crude oil and natural
gas companies and independent operators. Although we believe our current operating and
financial resources are adequate to preclude any significant disruption of our operations
in the immediate future we cannot assure you that such materials and resources will be
available to us.

**- 16 -**

Our ability to replace production with new reserves is highly dependent
on acquisitions or successful development and exploration activities.

The rate of production from crude oil and natural gas properties
declines as reserves are depleted. Our proved reserves will decline as reserves are
produced unless we acquire additional properties containing proved reserves, conduct
successful exploration and development activities or, through engineering studies,
identify additional behind-pipe zones or secondary recovery reserves. Our future crude oil
and natural gas production is therefore highly dependent upon our level of success in
acquiring or finding additional reserves. We cannot assure you that our exploration and
development activities will result in increases in reserves. Our operations may be
curtailed, delayed or cancelled if we lack necessary capital and by other factors, such as
title problems, weather, compliance with governmental regulations, mechanical problems or
shortages or delays in the delivery of equipment. Our ability to continue to acquire
producing properties or companies that own such properties assumes that major integrated
oil companies and independent oil companies will continue to divest many of their crude
oil and natural gas properties. We cannot assure you that such divestitures will continue
or that we will be able to acquire such properties at acceptable prices or develop
additional reserves in the future.

Crude oil and natural gas price declines and volatility could adversely
affect our revenue, cash flows and profitability.



We may enter into hedge agreements and other financial arrangements at
various times to attempt to minimize the effect of crude oil and natural gas price
fluctuations. We cannot assure you that such transactions will reduce risk or minimize the
effect of any decline in crude oil or natural gas prices. Any substantial or extended
decline in crude oil or natural gas prices would have a material adverse effect on our
business and financial results. Hedging activities may limit the risk of declines in
prices, but such arrangements may also limit additional revenues from price increases.

Lower crude oil and natural gas prices increase the risk of ceiling
limitation write-downs.

The Company changed its method of accounting for petroleum and natural
gas properties from the "successful efforts" method to the "full cost"
method in 2001. All costs related to the exploration for and the development of oil and
gas reserves are capitalized into a single cost centre representing the Companys
activity which is undertaken exclusively in Canada. Costs capitalized include land
acquisition costs, geological and geophysical expenditures, lease rentals on undeveloped
properties and costs of drilling productive and non-productive wells. Proceeds from the
disposal of properties are applied as a reduction of cost without recognition of a gain or
loss except where such disposals would result in a major change in the depletion rate.
Capitalized costs are depleted and depreciated using the unit-of-production method based
on the estimated gross proven oil and natural gas reserves before royalties as determined
by independent engineers. Units of natural gas are converted into barrels of equivalents
on a relative energy content basis. Capitalized costs, net of accumulated depletion and
depreciation, are limited to estimated future net revenues from proven reserves, based on
year-end prices, undiscounted, less estimated future abandonment and site restoration
costs, general and administrative expenses, financing costs and income taxes. Estimated
future abandonment and site restoration costs are provided for over the life of proven
reserves on a unit-of-production basis. The annual charge is included in depletion and
depreciation expense and actual abandonment and site restoration costs are charged to the
provision as incurred. The amounts recorded for depletion and depreciation and the
provision for future abandonment and site restoration costs are based on estimates of
proven reserves and future costs. The recoverable value of capital assets is based on a
number of factors including the estimated proven reserves and future costs. By their
nature, these estimates are subject to measurement uncertainty and the impact on financial
statements of future periods could be material.

**- 17 -**

The Company performs a cost recovery ceiling test which limits net
capitalized costs to the undiscounted estimated future net revenue from proven oil and gas
reserves plus the cost of unproven properties less impairment, using year-end prices or
average prices in that year, if appropriate. In addition, the value is further limited by
including financing costs, administration expenses, future abandonment and site
restoration costs and income taxes. Under U.S. GAAP, companies using the "full
cost" method of accounting for oil and gas producing activities perform a ceiling
test using discounted estimated future net revenue from proven oil and gas reserves using
a discount factor of 10%. Prices used in the U.S. GAAP ceiling tests performed for this
reconciliation were those in effect at the applicable year-end. Financing and
administration costs are excluded from the calculation under U.S. GAAP. At December 31,
2001 the Company would have realized a U.S. GAAP ceiling test write-down of $17.5 million
(after tax).

The risk that the Company will be required to write down the carrying
value of crude oil and natural gas properties increases when crude oil and natural gas
prices are low or volatile. The Company may experience additional ceiling test write-downs
in the future.

Prior to 2001, the Company followed the "successful efforts"
method of accounting for our oil and gas exploration and development costs. The initial
acquisition costs of oil and gas properties and the costs of drilling and equipping
development wells and successful exploratory wells were capitalized. The costs of
exploration wells classified as unsuccessful were charged to expense. All other
exploration expenditures, including geological and geophysical costs and annual rentals on
exploratory acreage, were charged to expense as incurred. Under successful efforts
accounting rules, the net capitalized cost of oil and gas properties could not exceed a
"ceiling limit" which was based upon the present value of estimated future net
cash flows from proved reserves, discounted at 10%, plus the lower of cost or fair market
value of unproved properties. If net capitalized costs of crude oil and natural gas
properties exceeded the ceiling limit, the amount of the excess was charged to earnings.
This is called a "ceiling limitation write-down." This charge did not impact
cash flow from operating activities, but did reduce stockholders' equity. In 1997 and
2000, the Company recorded a write-down of $ 3.8 million and $0.5 million respectively, as
a result of a downward adjustment to our proved reserves in Canada.

**- 18 -**

We may undertake acquisitions that could limit our ability to manage
and maintain our business, result in adverse accounting treatment and are difficult to
integrate into our business.

A component of future growth will depend on the ability to identify,
negotiate, and acquire additional companies and assets that complement or expand existing
operations. However we may be unable to complete any acquisitions, or any acquisitions we
may complete may not enhance our business. Any acquisitions could subject us to a number
of risks, including:

> diversion of management's attention;
>     amortization of substantial goodwill, adversely affecting our
>       reported results of operations;
>     inability to retain the management, key personnel and other employees
>       of the acquired business;
>     inability to establish uniform standards, controls, procedures and
>       policies;
>     inability to retain the acquired company's customers;
>     exposure to legal claims for activities of the acquired business
>       prior to acquisition; and inability to integrate the acquired company and its employees
>       into our organization effectively.

We may be subject to environmental liability claims that could result
in significant costs to us.

We may be subject to claims for damages related to any impact that our
operations have on the environment. An environmental claim could materially adversely
affect our business because of the costs of defending against these types of lawsuits, the
impact on senior management's time and the potential damage to our reputation. Our oil and
gas operations are subject to government regulations and control. Failure to comply with
applicable government rules could restrict our ability to engage in further oil and gas
exploration and development opportunities.

Our revenue is subject to volatile oil and gas prices that could reduce
our revenue and profitability.

The price we receive for oil and gas production is subject to
significant volatility. Our revenue, cash flow and profitability are substantially
dependent on prevailing prices for oil and gas. Historically oil and gas prices and
markets have been volatile and they are likely to continue to be volatile in the future.
Some factors that contribute to volatility include:

> political conditions in the Middle East, the former Soviet Union and
>       other regions;
>     domestic and foreign supplies of oil and gas;
>     the level of consumer demand;
>     weather conditions;
>     domestic and foreign government regulations;
>     the availability and prices of alternative fuels; and
>     overall economic conditions.

To counter this volatility from time to time we may enter into
agreements to receive fixed prices on its oil and gas production to offset the risk of
revenue losses if commodity prices decline; however, if commodity prices increase beyond
the levels set in such agreements, We will not benefit from such increases.

**- 19 -**

As a Canadian oil and gas company, we may be adversely affected by
changes in the exchange rate between U.S. and Canadian dollars.

The price we receive for oil and gas production is expressed in U.S. dollars, which is
the standard for the oil and gas industry worldwide. However, we pay operating expenses,
drilling expenses and general overhead expenses in Canadian dollars. Changes to the
exchange rate between U.S. and Canadian dollars can adversely affect us. When the value of
the U.S. dollar increases, we receive higher revenue and when the value of the U.S. dollar
declines, we receive lower revenue on the same amount of production sold at the same
prices.

We depend on key personnel for critical management decisions and
industry contacts but have no employment contracts or key person insurance.

We are dependent upon the continued services of our management team. We
do not have employment contracts with any of these executives and do not carry key person
insurance on their lives. The loss of the services of our executive officers, through
incapacity or otherwise, could have a material adverse effect on our business and would
require us to seek and retain other qualified personnel.

We have not paid dividends, do not intend to pay dividends in the
foreseeable future and are currently restricted from paying dividends pursuant to the
terms of our credit facility and Alberta corporate law.

We have not paid any cash dividends on our common stock and do not
expect to pay any cash or other dividends in the foreseeable future. The terms of our
current banking credit facility prohibit us from declaring and paying dividends except
from assets that are in excess of the required amount of security under our credit
facility, and Alberta corporate law prohibits the payment of dividends unless stated
solvency tests are met.

Our stock is thinly traded and is subject to price volatility.

Trading volume in our common stock has historically been limited.
Accordingly, the trading price of our common stock could be subject to wide fluctuations
in response to quarterly variations in operating results, changes in financial estimates
by securities analysts, an imbalance of purchasers and sellers, or other factors.

**- 20 -**



ITEM 1. LEGAL PROCEEDINGS

Not Applicable.

ITEM 2. CHANGES IN SECURITIES.

Not Applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

Not Applicable.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

Not Applicable

ITEM 5. OTHER INFORMATION.

Not Applicable.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

> Exhibits

|99.1 | Certification of Chief
    Executive Officer pursuant to 18 U.S.C.ss.1350, as adopted pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002.
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------
|99.2 | Certification of Chief
    Financial Officer pursuant to 18 U.S.C.ss.1350, as adopted pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002.

> Reports on Form 8-K  None
>     **- 21 -**



SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.

Date: August 19, 2002 Enterra Energy Corp.

/s/Luc Chartrand



Chief Financial Officer

(Duly Authorized Officer and Principal

Financial and Accounting Officer)

**- 22 -**