**AUDITORS'
      REPORT TO THE UNITHOLDERS**




We
      have
      audited the consolidated balance sheets of Enterra Energy Trust as at December
      31, 2005 and 2004 and the consolidated statements of earnings and accumulated
      earnings and cash flow for the years then ended. These financial statements
      are
      the responsibility of the Trust’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 Trust as at December 31, 2005 and 2004
      and the results of its operations and its cash flow for the years then ended
      in
      accordance with Canadian generally accepted accounting principles.




(“signed
      KPMG LLP”)





Chartered
      Accountants


Calgary,
      Canada


March
      29,
      2006








**COMMENTS
      BY AUDITOR FOR US READERS ON CANADA-US REPORTING
      DIFFERENCES**




In
      the
      United States, reporting standards for auditors require the addition of an
      explanatory paragraph (following the opinion paragraph) when there is a change
      in accounting principle that has a material effect on the comparability of
      the
      Trust’s financial statements, such as the changes described in note 3 to the
      Trust’s consolidated financial statements as at and for the years ended December
      31, 2005 and 2004. Our report to the unitholders dated March 29, 2006, is
      expressed in accordance with Canadian reporting standards which do not required
      a reference to such changes in accounting principles in the auditors report
      when
      the changes
      are properly accounted for and adequately disclosed in the financial
      statements.




(“signed
      KPMG LLP”)





Chartered
      Accountants


Calgary,
      Canada


March
      29,
      2006







**ENTERRA
      ENERGY TRUST**


**CONSOLIDATED
      BALANCE SHEETS**


*(Thousands
      of Canadian dollars)*




**December
                31, 2005**
            
            December
                31, 2004**Assets**
            
            
            
            (restated
                note 3)Current
                assetsCash
            
            **$**
            **11,943**
            
            $
            4,779Accounts
                receivable
            
            
            **35,303**
            
            
            15,613Financial
                derivatives (note 15)
            
            
            **415**
            
            
            -Prepaid
                expenses, deposits and other
            
            
            **3,052**
            
            
            518**50,713**
            
            
            20,910Property,
                plant and equipment (note 6)
            
            
            **489,074**
            
            
            148,458Deposit
                on acquisition (note 4)
            
            
            **-**
            
            
            2,400Deferred
                financing charges
            
            
            **1,210**
            
            
            90Goodwill
                (note 7)
            
            
            **70,546**
            
            
            49,270**$**
            **611,543**
            
            $
            221,128**Liabilities**Current
                liabilitiesAccounts
                payable and accrued liabilities
            
            **$**
            **36,348**
            
            $
            8,570Due
                to JED Oil Inc. (note 1)
            
            
            **15,151**
            
            
            4,493Distribution
                payable to unitholders
            
            
            **7,699**
            
            
            4,398Income
                taxes payable
            
            
            **2,066**
            
            
            1,068Bank
                indebtedness (note 9)
            
            
            **95,450**
            
            
            43,930Note
                payable (note 10)
            
            
            **4,071**
            
            
            -Marketing
                contracts
            
            
            **1,447**
            
            
            -Current
                portion of capital lease (note 11)
            
            
            **878**
            
            
            805**163,110**
            
            
            63,264Asset
                retirement obligations (note 8)
            
            
            **24,323**
            
            
            14,836Future
                income tax liability (note 14)
            
            
            **100,297**
            
            
            22,128Capital
                lease (note 11)
            
            
            **1,702**
            
            
            2,580**289,432**
            
            
            102,808Non-controlling
                interest (note 12)
            
            
            **32,402**
            
            
            3,349**Unitholders’
                Equity (note 13)**Unitholders’
                capital
            
            
            **373,761**
            
            
            132,207Warrants
            
            
            **1,215**
            
            
            -Contributed
                surplus
            
            
            **573**
            
            
            78Accumulated
                earnings
            
            
            **28,468**
            
            
            27,498Accumulated
                distributions
            
            
            **(114,308**
            **)**
            
            (44,812
            )**289,709**
            
            
            114,971Subsequent
                    events (note 21)
                  Commitments
                    (note 17)
            
            **$**
            **611,543**
            
            $
            221,128*See
                accompanying notes to consolidated financial
                statements*


Approved
      on behalf of the Board:





/s/
              Keith
              Conrad
            
            /s/
              Bill SlineyKeith
                Conrad
            
            Bill
              SlineyDirector
            
            Director











**ENTERRA
                ENERGY TRUST****CONSOLIDATED
                STATEMENTS OF EARNINGS****AND
                ACCUMULATED EARNINGS***(Thousands
                of Canadian dollars, except per trust unit amounts)*




**Year
                ended**
            
            Year
                ended**December
                31, 2005**
            
            December
                31, 2004(restated
                note 3)**Revenues**Oil
                and natural gas
            
            **$**
            **157,743**
            
            $
            108,293Royalties
            
            
            **(36,079**
            **)**
            
            (24,527
            )**121,664**
            
            
            83,766**Expenses**Operating
            
            
            **32,620**
            
            
            23,492General
                and administrative
            
            
            **10,331**
            
            
            4,440Interest
            
            
            **4,715**
            
            
            2,222Amortization
                of deferred financing charges
            
            
            **33**
            
            
            33Depletion,
                depreciation and accretion
            
            
            **82,073**
            
            
            35,976Goodwill
                impairment loss (note 7)
            
            
            **9,253**
            
            
            -Financial
                derivative loss (gain) (note 15)
            
            
            **(354**
            **)**
            
            3,188Foreign
                exchange gain
            
            
            **(715**
            **)**
            
            -**137,956**
            
            
            69,351Earnings
                (loss) before taxes and non-controlling interest
            
            
            **(16,292**
            **)**
            
            14,415Income
                taxes (reduction) (note 14)Current
            
            
            **1,456**
            
            
            260Future
            
            
            **(18,689**
            **)**
            
            (280
            )Earnings
                before non-controlling interest
            
            
            **941**
            
            
            14,435Non-controlling
                interest (note 12)
            
            
            **29**
            
            
            (408
            )**Net
                earnings**
            
            
            **970**
            
            
            14,027Accumulated
                earnings, beginning of year
            
            
            **27,498**
            
            
            13,139Change
                in accounting policy related to EIC- 151 (note 3a)
            
            
            **-**
            
            
            332**Accumulated
                earnings, end of year**
            
            **$**
            **28,468**
            
            $
            27,498**Net
                earnings per trust unit (note 13)**Basic
            
            **$**
            **0.03**
            
            $
            0.62Diluted
            
            **$**
            **0.03**
            
            $
            0.62*See
                accompanying notes to consolidated financial
                statements*








**ENTERRA
                ENERGY TRUST****CONSOLIDATED
                STATEMENTS OF CASH FLOW***(Expressed
                in thousand Canadian dollars)*




**Year
                ended**
            
            Year
                ended**December
                31, 2005**
            
            December
                31, 2004(restated
                note 3)**Cash
                provided by (used in):****Operating**Net
                earnings
            
            **$**
            **970**
            
            $
            14,027Depletion,
                depreciation and accretion
            
            
            **82,073**
            
            
            35,976Goodwill
                impairment loss
            
            
            **9,253**
            
            
            -Future
                income tax reduction
            
            
            **(18,689**
            **)**
            
            (280
            )Amortization
                of deferred financing charges
            
            
            **33**
            
            
            33Financial
                derivatives
            
            
            **(415**
            **)**
            
            -Amortization
                of marketing contract
            
            
            **(2,667**
            **)**
            
            -Non-controlling
                interest
            
            
            **(29**
            **)**
            
            408Foreign
                exchange
            
            
            **(715**
            **)**
            
            -Unit-based
                compensation
            
            
            **731**
            
            
            78Changes
                in non-cash working capital items (note 16)
            
            
            **(2,425**
            **)**
            
            (7,897
            )**68,120**
            
            
            42,345**Financing**Distributions
                paid
            
            
            **(66,195**
            **)**
            
            (40,414
            )Bank
                indebtedness
            
            
            **(27,709**
            **)**
            
            2,305Notes
                payable
            
            
            **4,300**
            
            
            -Capital
                lease
            
            
            **(805**
            **)**
            
            (783
            )Deferred
                financing charges
            
            
            **(102**
            **)**
            
            -Due
                to JED Oil Inc.
            
            
            **10,658**
            
            
            2,400Issue
                of trust units, net of issue costs
            
            
            **37,353**
            
            
            36,838Exercise
                of trust unit options
            
            
            **7,975**
            
            
            -**(34,525**
            **)**
            
            346**Investing**Property,
                plant and equipment additions
            
            
            **(31,217**
            **)**
            
            (30,409
            )Deposit
                on acquisition
            
            
            **-**
            
            
            (385
            )Proceeds
                on disposal of property, plant and equipment
            
            
            **-**
            
            
            1,177Acquisition
                of Rocky Mountain Energy, net of cash (note 5)
            
            
            **-**
            
            
            (8,361
            )Acquisition
                of Rocky Mountain Gas, net of cash (note 5)
            
            
            **(229**
            **)**
            
            -Acquisition
                of High Point, net of cash (note 5)
            
            
            **1,282**
            
            
            -Changes
                in capital accounts payable (note 16)
            
            
            **3,733**
            
            
            -**(26,431**
            **)**
            
            (37,978
            )Change
                in cash
            
            
            **7,164**
            
            
            4,713Cash,
                beginning of period
            
            
            **4,779**
            
            
            66**Cash,
                end of period**
            
            **$**
            **11,943**
            
            $
            4,779During
                the year ended December 31, 2005 the Trust paid interest of $4,275,000
                (2004 - $2,222,000) and taxes of $944,000 (2004 -
                $nil).*See
                accompanying notes to consolidated financial
                statements*








**Enterra
        Energy Trust**
 **Notes
        to Consolidated Financial Statements**
 As
        at
        December 31, 2005 and 2004 and for the years there ended
 (Expressed
        in Canadian Dollars)
 (Tabular
        amounts are stated in thousands of dollars except unit and per unit
        information)





**1.**
            **Structure
                of the Trust and Basis of
                Presentation**





Enterra
                Energy Trust (“the Trust”) was established in November 2003 under a Plan
                of Arrangement. The Trust is an open-end unincorporated investment
                trust
                governed by the laws of the Province of Alberta and created pursuant
                to a
                trust indenture (the “Trust Indenture”). The purpose of the Trust is to
                indirectly hold interests in petroleum and natural gas properties,
                through
                notes from, and investments in securities of its subsidiaries. The
                beneficiaries of the Trust are the holders of the trust units (the
                “Unitholders”).





The
      Trust
      pays monthly cash distributions to its unitholders in amounts equal to the
      net
      earnings of the Trust earned from interest income on the notes and from any
      dividends or note redemptions by the Trust’s subsidiaries less any expenses of
      the Trust. The
      Board
      of Directors of Enterra Energy Corp. (“EEC”), as administrator of the Trust, has
      the discretion to determine the extent to which cash, in excess of the income
      on
      the notes, provided by operating activities will be distributed to the
      unitholders.




**Relationship
                with JED Oil Inc. and JMG Exploration,
                Inc.**




Under
                an Agreement of Business Principles, properties acquired by the Trust
                will
                be contract operated and drilled by JMG Exploration, Inc. (“JMG”), a
                publicly traded oil and gas exploration company, if they are exploration
                properties, and contract operated and drilled by JED Oil Inc. (“JED”), a
                publicly traded oil and gas development company, if they are development
                projects.  Exploration of the properties will be done by JMG, which
                will pay 100% of the exploration costs to earn a 70% working interest
                in
                the properties. If JMG discovers commercially viable reserves on
                the
                exploration properties, the Trust will have the right to purchase
                80% of
                JMG’s working interest in the properties at a fair value as determined
                by
                independent engineers.  Should the Trust elect to have JED develop
                the properties, development will be done by JED, which will pay 100%
                of
                the development costs to earn 70% of the interests of both JMG and
                the
                Trust.  The Trust will have a first right to purchase assets
                developed by JED.  The Trust does not own any shares in either JMG or
                JED.





Effective
      January 1, 2004, the Trust and JED entered into a Technical Services Agreement,
      which provides for services required to manage the Trust’s field operations and
      governs the allocation of general and administrative expenses between the two
      entities. Under the Technical Services Agreement, the Trust and JED allocate
      the
      costs of management, development, exploitation, operations and general and
      administrative activities on the basis of production and capital expenditures,
      or as otherwise agreed to between the Trust and JED. The Technical Services
      Agreement has no set termination date and can be cancelled with six months
      notice.





On
      January 1, 2006, the Trust terminated the Technical Services Agreement with
      JED.
      The Trust now manages its own management, development, exploitation, operations
      and general and administrative activities. In 2006, the Trust entered into
      a new
      agreement with JED where all services provide by JED to the Trust will be billed
      on an hourly rate basis.





On
      December 23, 2004, JED loaned $2,400,000 to the Trust. The terms of the loan
      called for interest to be calculated at a Canadian chartered bank prime lending
      rate plus 0.4% per annum. The loan, together with accrued interest, was repaid
      on March 18, 2005. At December 31, 2005, the Trust had $8,000,000 of unsecured
      notes payable to JED with an interest rate of 10% per annum. For
      the
      year ended December 31, 2005, $0.4 million (2004 - $nil) of interest was charged
      on the notes payable. In addition to the note, the Trust owed
      $7,151,000 (2004 - $2,093,000) to JED for general and administrative expenses
      and capital expenditures paid by JED on behalf of the Trust. For the year ended
      December 31, 2005, total general and administrative expenses charged by JED
      to
      the Trust on a cost recovery basis were approximately $3.9 million and field
      operating expenses charged by JED to the Trust on a cost recovery basis were
      approximately $3.0 million. On February 1, 2006, the Trust repaid the $8,000,000
      notes payable to JED.







**Enterra
          Energy Trust**
 **Notes
          to Consolidated Financial Statements**
 As
          at
          December 31, 2005 and 2004 and for the years there ended
 (Expressed
          in Canadian Dollars)
 (Tabular
          amounts are stated in thousands of dollars except unit and per unit
          information)


**2.**
            **Significant Accounting
              Policies**





Management
                of the Trust has prepared the consolidated financial statements in
                accordance with Canadian Generally Accepted Accounting Principles
                (“GAAP”). The significant differences between Canadian and United States
                GAAP are outlined in note 22. 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**





These
      consolidated financial statements include the accounts of the Trust and its
      subsidiaries and partnerships (collectively the “Trust” for purposes of the
      following notes to the consolidated financial statements). All inter-company
      accounts and transactions have been eliminated.





Substantially
                all exploration, development and production activities related to
                the
                Trust’s oil and gas business are conducted jointly with others and the
                accounts reflect only the Trust’s proportionate
                interest.





**(b)**
            **Cash**






Cash
                consists of cash on hand and balances invested in short-term securities
                with original maturities less than 90 days at the date of acquisition.





**(c)**
            **Revenue
                Recognition**





Revenue
      associated with the sale of crude oil, natural gas and natural gas liquids
      is
      recognized when title passes from the Trust to its customers based on contracts
      which establish the price of products sold.





**(d)**
            **Petroleum
                and Natural Gas Properties**





The
      Trust
      follows the “full cost” method of accounting for petroleum and natural gas
      properties. All costs related to the exploration for and the development of
      oil
      and gas reserves are capitalized into one of two cost centers, Canada and the
      United States. Costs capitalized include land acquisition costs, geological
      and
      geophysical expenditures, lease rentals on undeveloped properties and costs
      of
      drilling productive and non-productive wells and production equipment.





General
      and administrative costs are capitalized if they are directly related to
      development or exploration projects.





Proceeds
      from the disposal of oil and natural gas properties are applied as a reduction
      of cost without recognition of a gain or loss except where such disposals would
      result in a 20% change in the depletion rate.





Repair
      and maintenance costs are expensed as incurred.







**Enterra
          Energy Trust**
 **Notes
          to Consolidated Financial Statements**
 As
          at
          December 31, 2005 and 2004 and for the years there ended
 (Expressed
          in Canadian Dollars)
 (Tabular
          amounts are stated in thousands of dollars except unit and per unit
          information)


**(e)**
            **Impairment
                Test**





The
      Trust
      places a limit on the carrying value of property and equipment, which may be
      depleted against revenues of future periods (the “ceiling test”). The ceiling
      test is conducted separately for each cost center, Canada and the United States.
      The carrying value is assessed to be recoverable when the sum of the
      undiscounted cash flows expected from the production of proved reserves, the
      lower of cost and market of unproved properties and the cost of major
      development projects exceeds the carrying value of the cost center. When the
      carrying value is not assessed to be recoverable, an impairment loss is
      recognized to the extent that the carrying value of petroleum and natural gas
      properties exceeds the sum of the discounted cash flows expected from the
      production of proved and probable reserves, the lower of cost and market of
      unproved properties and the cost of major development projects. The cash flows
      are estimated using expected future product prices and costs and are discounted
      using a risk-free interest rate. The carrying value of property and equipment
      subject to the ceiling test includes asset retirement costs.


**(f)**
              **Per
                  Unit Amounts**





Per
      unit
      amounts are calculated using the weighted average number of units outstanding.
      The Trust follows the treasury stock method to determine dilutive effect of
      options, warrants and other dilutive instruments. Under the treasury stock
      method, only “in-the-money” dilutive instruments impact the diluted
      calculations. Exchangeable shares are included in the calculation of diluted
      earnings per unit based on the number of trust units that would be issued on
      conversion of the exchangeable shares at the end of the year as long as the
      conversion results in a decrease to earnings of the Trust.





**(g)**
            **Estimates
                and Assumptions**





The
      preparation of financial statements in conformity with generally accepted
      accounting principles requires management to make estimates and assumptions
      that
      affect the reported amounts of assets and liabilities, and the disclosure of
      contingent assets and liabilities at the dates of the financial statements
      and
      the reported amounts of revenue and expenses during the reporting
      periods.





The
      amounts recorded for depletion, depreciation and the asset retirement obligation
      are based on estimates. The ceiling test calculation is based on estimates
      of
      reserves, production rates, oil and natural gas prices, future costs and other
      relevant assumptions. By their nature, these estimates are subject to
      measurement uncertainty and may impact the consolidated financial statements
      of
      future periods.





The
      amounts recorded for financial derivatives are based on estimates of the price
      for oil and natural gas in future periods. These estimates are subject to
      fluctuations in market conditions and may impact the consolidated financial
      statements of future periods.





**(h)**
            **Depletion
                and Depreciation**





The
      provision for depletion of petroleum and natural gas properties is calculated,
      by cost center, using the unit-of-production method based on the Trust’s share
      of estimated proved reserves before royalties. Natural gas reserves and
      production are converted to equivalent units of crude oil using their
      approximate relative energy content.





Office
      furniture and equipment is depreciated on a 20% declining balance
      basis.







**Enterra
          Energy Trust**
 **Notes
          to Consolidated Financial Statements**
 As
          at
          December 31, 2005 and 2004 and for the years there ended
 (Expressed
          in Canadian Dollars)
 (Tabular
          amounts are stated in thousands of dollars except unit and per unit
          information)


**(i)**
            **Goodwill**





The
      Trust
      recognizes goodwill relating to acquisitions when the total purchase price
      exceeds the fair value of the net identifiable assets and liabilities acquired.
      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 reporting unit 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
      the reporting unit’s identifiable assets and liabilities as if it had been
      acquired in a business combination for a purchase price equal to its fair market
      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. Goodwill is tested for impairment
      separately for the Canadian and the United States reporting units.





**(j)**
            **Asset
                Retirement Obligations**





The
      Trust
      recognizes a liability for the estimated fair value of the future retirement
      obligations associated with property and equipment. The fair value of the
      estimated asset retirement obligations is recorded as a liability with a
      corresponding increase in the carrying amount of the related asset. The
      capitalized amount is depleted on the unit-of-production method based on proved
      reserves. The Trust 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.





**(k)**
            **Income
                Taxes**





The
      Trust
      is a taxable entity under the Canadian Income Tax Act and is taxable only on
      income that is not distributed or distributable to the Trust’s unitholders. As
      the Trust allocates all of its taxable income to the unitholders in accordance
      with the Trust Indenture, therefore no provision for income tax expense has
      been
      made in the Trust.





The
      Trust’s corporate subsidiaries follow the liability method of accounting for
      income taxes. Under this method, income tax liabilities and assets are
      recognized based on the differences between the amounts reported in the
      financial statements of the Trust’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.







**Enterra
          Energy Trust**
 **Notes
          to Consolidated Financial Statements**
 As
          at
          December 31, 2005 and 2004 and for the years there ended
 (Expressed
          in Canadian Dollars)
 (Tabular
          amounts are stated in thousands of dollars except unit and per unit
          information)


**(l)**
            **Non-controlling
                Interest (note 3)**





The
      Trust
      has, through its subsidiaries four types of exchangeable shares, Enterra Energy
      Corp. (“EEC”) exchangeable shares, Rocky Mountain Acquisition Corp. (“RMAC”)
      series A exchangeable shares, RMAC series B exchangeable shares and Rocky
      Mountain Gas (“RMG”) exchangeable shares. The Trust's exchangeable shares are
      classified as non-controlling interest on the consolidated balance sheets.
      Income after tax attributable to these exchangeable shares is deducted from
      net
      earnings of the Trust on the consolidated statement of earnings.





When
      the
      EEC exchangeable shares are exchanged for trust units, they are measured at
      the
      fair value of the trust units issued. The amounts in excess of the carrying
      value of exchangeable shares are allocated to property, plant and equipment,
      to
      the extent possible, with any excess amounts being allocated to goodwill. When
      the other exchangeable shares are exchanged for trust units, they are measured
      at their carrying value.





**(m)**
            **Derivative
                Financial Instruments**





The
      Trust
      uses derivative financial instruments such as collars and swaps to manage its
      exposure to commodity price fluctuations. Actual amounts received, or paid,
      on
      the settlement of the derivative financial instruments is recorded in oil and
      gas revenue. The Trust uses the fair value method for reporting derivative
      financial instruments whereby a derivative financial instrument is recorded
      as
      an asset or a liability on the balance sheet, and changes in the fair value
      relating to a financial period are charged to net earnings and net earnings
      per
      unit for the period.





**(n)**
            **Trust
                Unit Compensation Plans**




The
      Trust
      has a unit based compensation plan, which is described in note 12. Compensation
      expense associated with the unit based compensation plan is recognized in
      earnings over the vesting period of the plan with a corresponding increase
      in
      contributed surplus. Any consideration received upon the exercise of the
      unit-based compensation together with the amount of non-cash compensation
      expense recognized in contributed surplus is recorded as an increase in
      unitholders’ capital. Compensation expense is based on the fair value of the
      unit-based compensation at the date of grant using a Black-Scholes
      option-pricing model.





**(o)**
            **Deferred
                Financing Charges**





Deferred
      financing charges are amortized over the lives of their respective financing
      instruments.





**(p)**
            **Foreign
                Currency Transactions**





Transactions
      completed in United States dollars are reflected in Canadian dollars at the
      exchange rates prevailing at the time of the transactions. Current assets and
      liabilities denominated in United States dollars are reflected in the financial
      statements at the Canadian equivalent at the rate of exchange prevailing at
      the
      balance sheet date. Translation gains and losses are included in
      earnings.





The
      Trust’s U.S. subsidiaries are considered to be "integrated foreign operations",
      therefore the Trust is using the temporal method of foreign currency
      translation. Under the temporal method, monetary items are translated at the
      exchange rate in effect at the balance sheet date, while non-monetary items
      are
      translated at historical exchange rates. Revenue and expense items are
      translated at the exchange rate in effect on the dates they occur, while
      depreciation and depletion of assets translated at historical exchange rates
      are
      translated at the same exchange rates as the assets to which they
      relate.







**Enterra
          Energy Trust**
 **Notes
          to Consolidated Financial Statements**
 As
          at
          December 31, 2005 and 2004 and for the years there ended
 (Expressed
          in Canadian Dollars)
 (Tabular
          amounts are stated in thousands of dollars except unit and per unit
          information)


**(q)**
            **Comparative
                Figures**





Certain
      comparative figures have been reclassified to conform with the presentation
      adopted in the current year.





**3.**
            **Changes
                in Accounting Policies**





**a)**
            **Non-controlling
                Interest (“NCI”)**





On
      January 19, 2005, the CICA issued EIC-151 “Exchangeable Securities Issued by
      Subsidiaries of Income Trusts” that states that equity interests held by third
      parties in subsidiaries of an income trust should be reflected as either
      non-controlling interest or debt in the consolidated balance sheet unless they
      meet certain criteria. EIC-151 requires that the shares be nontransferable
      to be
      classified as equity. The Trust's exchangeable shares are transferable and,
      in
      accordance with EIC-151, have been reclassified to non-controlling interest
      on
      the consolidated balance sheets.





Prior
      to
      the adoption of EIC 151 trust units that would be issued upon conversion of
      exchangeable shares were included in the calculation of basic earnings per
      unit.
      As a result of the new standard exchangeable shares are excluded from the
      calculation of basic earnings per unit. However, they are included in the
      calculation of diluted earnings per unit.





Prior
      periods have been retroactively restated as required by the new accounting
      standard.





The
      following tables illustrate the impact of the new accounting policy as at and
      for the year ended December 31, 2004.


Balance
                Sheet as at
              December
                31, 2004
            
            Balance
                as reported prior to NCI restatement
            
            Adjustments
                for NCI
            
            Balance
                as restatedProperty,
                plant and equipment
            
            $
            146,910
            
            $
            1,548
            
            $
            148,458Goodwill
            
            
            29,991
            
            
            19,279
            
            
            49,270Future
                income tax liability
            
            
            21,526
            
            
            602
            
            
            22,128Non-controlling
                interest
            
            
            -
            
            
            3,349
            
            
            3,349Unitholders’
                capital
            
            
            111,653
            
            
            20,554
            
            
            132,207Exchangeable
                shares
            
            
            3,276
            
            
            (3,276
            )
            
            -Accumulated
                earnings, beginning of year
            
            
            13,139
            
            
            332
            
            
            13,471Accumulated
                earnings, end of year
            
            
            27,903
            
            
            (405
            )
            
            27,498Basic
                weighted average number of units outstanding
            
            
            23,327,728
            
            
            (809,355
            )
            
            22,518,373Diluted
                weighted average number of units outstanding
            
            
            23,560,785
            
            
            (318,825
            )
            
            23,241,960








**Enterra
          Energy Trust**
 **Notes
          to Consolidated Financial Statements**
 As
          at
          December 31, 2005 and 2004 and for the years there ended
 (Expressed
          in Canadian Dollars)
 (Tabular
          amounts are stated in thousands of dollars except unit and per unit
          information)


Statement
                of Earning for the year ended December 31, 2004
            
            Balance
                as reported prior to NCI restatement
            
            Adjustments
                for NCI
            
            Balance
                as restatedDepletion,
                depreciation and accretion
            
            $
            35,438
            
            $
            538
            
            $
            35,976Future
                income tax recovery
            
            
            (71
            )
            
            (209
            )
            
            (280
            )Net
                earnings before non-controlling interest
            
            
            14,764
            
            
            (329
            )
            
            14,435Non-controlling
                interest
            
            
            -
            
            
            408
            
            
            408Net
                earnings
            
            
            14,764
            
            
            (737
            )
            
            14,027Net
                earnings per unit - basic
            
            $
            0.63
            
            $
            (0.01
            )
            $
            0.62Net
                earnings per unit - diluted
            
            $
            0.63
            
            $
            (0.01
            )
            $
            0.62





**b)**
            **Full
                Cost Accounting**





Effective
      January 1, 2004, the Trust prospectively adopted new Canadian accounting
      standards relating to full cost accounting for oil and gas entities, as outlined
      in note 2. The new standard modifies the ceiling test to be performed in two
      stages. The first stage requires the carrying value to be tested for
      recoverability using undiscounted future cash flows from proved reserves using
      forward indexed prices. If the carrying value is not recoverable, the second
      stage, which is based on the calculation of discounted future cash flows from
      proved plus probable reserves, will determine the impairment to the fair value
      of the asset. There was no write down of the Trust’s property and equipment as
      at January 1, 2004, as a result of adopting this standard.





**c)**
            **Derivative
                Financial Instruments**





On
      January 1, 2004, the Trust prospectively adopted new Canadian accounting
      standards relating to accounting for derivative financial instruments. The
      new
      standards establish certain conditions for when hedge accounting may be applied
      and addresses the identification, designation, documentation and effectiveness
      of hedging transactions. Where
      hedge accounting does not apply, any changes in the mark to market values of
      the
      derivative financial instrument relating to a financial period can either reduce
      or increase net earnings and net earnings per trust unit for that period. The
      Trust has elected not to apply hedge accounting to any of its financial
      instruments.





**d)**
            **Asset
                Retirement Obligations**





Effective
      January 1, 2004, the Trust retroactively adopted with restatement of prior
      periods, new Canadian accounting standards relating to asset retirement
      obligations as outlined in note 2. Prior to adopting the new standard, the
      Trust
      recognized a provision for future site restoration costs over the life of the
      oil and natural gas properties using a unit-of-production method.





**e)**
            **Unit-based
                compensation**





Effective
      January 1, 2004, the Trust adopted the fair value method of accounting for
      options on a retroactive basis, without prior period adjustments. In the past,
      the Trust measured stock option compensation cost based on the intrinsic value
      of the award at the date of issuance. As the exercise price and the market
      price
      were the same at the date of grant, no compensation expense was recognized
      on
      any option issuance.





As
      a
      result of the adoption of this policy, the Trust recorded a charge to
      accumulated earnings of $646,000 as at January 1, 2004 to reflect the cost
      related to options granted in 2002 and 2003. In 2004, the earnings of the Trust
      were reduced by $78,000 as a result of this change in policy.







**Enterra
          Energy Trust**
 **Notes
          to Consolidated Financial Statements**
 As
          at
          December 31, 2005 and 2004 and for the years there ended
 (Expressed
          in Canadian Dollars)
 (Tabular
          amounts are stated in thousands of dollars except unit and per unit
          information)


**4.**
            **Property
                Acquisitions**





On
      January 26, 2005, the Trust acquired certain oil and natural gas properties
      in
      east central Alberta for consideration of $12,100,000. Results from operations
      of these acquired assets are included in the Trust’s consolidated financial
      statements for the period subsequent to January 26, 2005. At December 31, 2004,
      the Trust had made a refundable deposit on the properties in the amount of
      $2,400,000.





On
      January 30, 2004, the Trust acquired certain oil and natural gas properties
      in
      East Central Alberta for consideration of $19,609,000. Results from operations
      of the East Central Alberta assets are included in the Trust’s consolidated
      financial statements for the period subsequent to January 30, 2004.





**5.**
            **Corporate
                Acquisitions**





**Rocky
      Mountain Gas, Inc. (“RMG”)**





On
      June
      1, 2005, the Trust acquired 100% of the issued and outstanding shares of RMG,
      an
      entity with natural gas properties in Montana and Wyoming. As RMG's properties
      are in the United States, they constitute a second cost center. RMG provides
      the
      Trust with future cash potential through the exploitation of coal bed methane
      on
      its undeveloped land as well as its currently producing assets. Results from
      operations of RMG subsequent to June 1, 2005 are included in the Trust’s
      consolidated financial statements.





The
      acquisition was accounted for using the purchase method of accounting with
      the
      allocation of the purchase price and consideration paid as
      follows:


**Allocation
                of purchase price:**Current
                assets, including cash of $769
            
            $
            1,606Property,
                plant and equipment
            
            
            34,809Goodwill
                (with no tax base)
            
            
            9,253Marketing
                contract
            
            
            (480
            )Current
                liabilities
            
            
            (1,562
            )Debt
            
            
            (4,229
            )Asset
                retirement obligations
            
            
            (3,807
            )Future
                income tax liability
            
            
            (11,619
            )$
            23,971





**Cost
                of acquisition:**Cash
            
            $
            602Transaction
                costs
            
            
            396736,842
                RMG exchangeable shares
            
            
            16,722275,474
                Trust Units
            
            
            6,251$
            23,971





The
      purchase price allocation is preliminary and subject to change. The value
      assigned to each Enterra Trust Unit of $22.69 (US$18.35) was based on the
      weighted average trading price on the NASDAQ National Market System immediately
      prior to and after the measurement date.







**Enterra
          Energy Trust**
 **Notes
          to Consolidated Financial Statements**
 As
          at
          December 31, 2005 and 2004 and for the years there ended
 (Expressed
          in Canadian Dollars)
 (Tabular
          amounts are stated in thousands of dollars except unit and per unit
          information)


**High
      Point Resources Inc. (“High Point”)**





On
      August
      17, 2005 the Trust completed the acquisition of 100% of the common shares of
      High Point through its subsidiary Rocky Mountain Acquisition Corp. ("RMAC")
      in
      exchange for 7,490,898 trust units and 1,407,177 RMAC exchangeable shares.
      High
      Point owns oil and natural gas properties predominantly in Alberta and British
      Columbia. The acquisition was completed to increase the Trust’s natural gas
      portfolio. Results from operations of High Point subsequent to August 17, 2005
      are included in the Trust’s consolidated financial statements.





The
      acquisition was accounted for using the purchase method of accounting with
      the
      allocation of the purchase price and consideration paid as
      follows:


**Allocation
                of purchase price:**Current
                assets, including cash of $2,532
            
            $
            12,306Property,
                plant and equipment
            
            
            351,385Goodwill
                (with no tax base)
            
            
            19,070Current
                liabilities
            
            
            (14,779
            )Marketing
                contract
            
            
            (3,634
            )Debt
            
            
            (75,000
            )Asset
                retirement obligations
            
            
            (2,653
            )Future
                income tax liability
            
            
            (85,239
            )$
            201,456





**Cost
                of acquisition:**7,490,898
                Trust Units
            
            $
            168,5451,407,177
                Exchangeable Shares
            
            
            31,661Transaction
                costs
            
            
            1,250$
            201,456





The
      purchase price allocation is preliminary and subject to change. The value
      assigned to each Trust Unit and Exchangeable Share of $22.50 was based on the
      average trading price on the NASDAQ National Market System for the period prior
      to and after the measurement date.







**Enterra
          Energy Trust**
 **Notes
          to Consolidated Financial Statements**
 As
          at
          December 31, 2005 and 2004 and for the years there ended
 (Expressed
          in Canadian Dollars)
 (Tabular
          amounts are stated in thousands of dollars except unit and per unit
          information)


**Rocky
      Mountain Energy Corp. (“RMEC”)**





On
      September 29, 2004, the Trust acquired all of the issued and outstanding shares
      of RMEC through its subsidiary RMAC. RMEC owns oil and natural gas properties
      predominately in Alberta and British Columbia. Results from operations of RMEC
      subsequent to September 29, 2004 are included in the Trust’s consolidated
      financial statements. The acquisition was accounted for using the purchase
      method of accounting with the allocation of the purchase price and consideration
      paid as follows:


**Allocation
                of purchase price:**Current
                assets, including cash of $16,270
            
            $
            2,493Property,
                plant and equipment
            
            
            36,008Goodwill
                (with no tax base)
            
            
            30,761Current
                liabilities
            
            
            (2,849
            )Bank
                indebtedness
            
            
            (7,665
            )Assets
                retirement obligations
            
            
            (793
            )Future
                income tax liability
            
            
            (7,660
            )$
            50,295**Cost
                of acquisition:**Cash
            
            $
            7,234Trust
                Units (1,946,576 issued)
            
            
            34,999RMAC
                Exchangeable Units (341,882 issued)
            
            
            6,147Transaction
                costs (including 38,726 units valued at $771,000)
            
            
            1,915$
            50,295





For
      the
      initial transaction the value assigned to each Enterra trust unit of Cdn $17.98
      was based on the weighted average trading price on the NASDAQ National Market
      System immediately prior to and after the measurement date. On February 17,
      2005
      an additional 38,726 units were issued to advisors as part of the transaction
      at
      a value of $771,000.







**Enterra
          Energy Trust**
 **Notes
          to Consolidated Financial Statements**
 As
          at
          December 31, 2005 and 2004 and for the years there ended
 (Expressed
          in Canadian Dollars)
 (Tabular
          amounts are stated in thousands of dollars except unit and per unit
          information)


**6.**
            **Property,
                Plant and Equipment**


**2005**Accumulateddepletion
                andCost
            
            depreciation
            
            NetPetroleum
                and natural gas properties
            
            **$**
            **644,260**
            
            **$**
            **156,445**
            
            **$**
            **487,815**Office
                furniture and equipment
            
            
            **2,781**
            
            
            **1,522**
            
            
            **1,259****$**
            **647,041**
            
            **$**
            **157,967**
            
            **$**
            **489,074**2004Accumulateddepletion
                andCost
            
            
            depreciation
            
            
            NetPetroleum
                and natural gas properties
            
            $
            223,637
            
            $
            76,505
            
            $
            147,132Office
                furniture and equipment
            
            
            2,158
            
            
            832
            
            
            1,326$
            225,795
            
            $
            77,337
            
            $
            148,458





During
      2005, $49,000 of general and administrative expenses were capitalized and
      included in the cost of the petroleum and natural gas properties (2004 -
      $869,000).





At
      December 31, 2005, included in petroleum and natural gas properties are assets
      acquired and pledged under capital lease agreements with a cost base of
      $5,218,000 and net book value of $2,597,000 (2004 - $5,218,000 and
      $3,107,000).





At
      December 31, 2005 costs of undeveloped land and seismic of $58,353,000 (2004
      -
      $6,728,873) were excluded from the calculation of depletion expense for the
      Canadian cost centre. At December 31, 2005 costs of undeveloped land of
      $13,313,103 were excluded from the calculation of depletion expense for the
      United States cost centre.




Depletion
      and depreciation expense related to the Canadian and the US cost center in
      2005
      was $64,626,000 and $16,004 respectively (2004 - the Trust did not have a US
      cost center).





The
      Trust
      completed a ceiling test calculation for the Canadian cost centre at December
      31, 2005 to assess the recoverability of costs recorded in respect of the
      petroleum and natural gas properties. The petroleum and natural gas prices
      are
      based on the December 31, 2005 commodity price forecast of our independent
      reserve engineers. These prices have been adjusted for commodity price
      differentials specific to the Trust. The following table summarizes the
      benchmark prices used in the ceiling test calculation.







**Enterra
          Energy Trust**
 **Notes
          to Consolidated Financial Statements**
 As
          at
          December 31, 2005 and 2004 and for the years there ended
 (Expressed
          in Canadian Dollars)
 (Tabular
          amounts are stated in thousands of dollars except unit and per unit
          information)


Year
            
            WTI
                Oil
              ($U.S./bbl)
            
            Foreign
              Exchange
              Rate
            
            Edmonton
                Light
              Crude
                Oil
              ($Cdn/bbl)
            
            AECO
                Gas
              ($Cdn/GJ)2006
            
            
            57.50
            
            
            1.1765
            
            
            66.60
            
            
            10.052007
            
            
            55.40
            
            
            1.1765
            
            
            64.20
            
            
            9.052008
            
            
            52.40
            
            
            1.1765
            
            
            60.70
            
            
            8.052009
            
            
            49.50
            
            
            1.1765
            
            
            57.20
            
            
            7.002010
            
            
            46.90
            
            
            1.1765
            
            
            54.10
            
            
            6.552011
            
            
            48.10
            
            
            1.1765
            
            
            55.50
            
            
            6.75EscalateThereafter
            
            
            2.5%
                per year
            
            
            
            
            
            2.5%
                per year
            
            
            2.5%
                per year





A
      ceiling
      test write down in the Canadian cost center was not required at December 31,
      2005.





The
      Trust
      completed a ceiling test calculation for the United States cost centre at
      December 31, 2005 to assess the recoverability of costs recorded in respect
      of
      the petroleum and natural gas properties. The petroleum and natural gas prices
      are based on the December 31, 2005 commodity price forecast of our independent
      reserve engineers. These prices have been adjusted for commodity price
      differentials specific to the Trust. The following table summarizes the
      benchmark prices used in the ceiling test calculation.


Year
            
            WTI
                Oil
              ($U.S./bbl)
            
            Foreign
              Exchange
              Rate
            
            Henry
                Hub
              ($U.S./Mmbtu)2006
            
            
            57.50
            
            
            1.1765
            
            
            9.902007
            
            
            55.40
            
            
            1.1765
            
            
            9.052008
            
            
            52.40
            
            
            1.1765
            
            
            8.152009
            
            
            49.50
            
            
            1.1765
            
            
            7.252010
            
            
            46.90
            
            
            1.1765
            
            
            6.852011
            
            
            48.10
            
            
            1.1765
            
            
            7.05EscalateThereafter
            
            
            2.5%
                per year
            
            
            
            
            
            Average
                2.5% per year





The
      ceiling test in the U.S. cost center resulted in a write down of $13,844,000
      ($9,137,000 after tax and a $0.31 reduction of earnings per unit) to property
      plant and equipment at December 31, 2005. This write down is included within
      depletion, depreciation and accretion on the consolidated statement of
      earnings.





**7.**
            **Goodwill**





Due
      to
      the reduction in value of the U.S. cost center at December 31, 2005, as
      disclosed in note 6, goodwill in the United States reporting unit was deemed
      to
      be impaired. Accordingly, the Trust recorded a goodwill impairment loss of
      $9,253,000 in 2005.







**Enterra
          Energy Trust**
 **Notes
          to Consolidated Financial Statements**
 As
          at
          December 31, 2005 and 2004 and for the years there ended
 (Expressed
          in Canadian Dollars)
 (Tabular
          amounts are stated in thousands of dollars except unit and per unit
          information)


**8.**
            **Asset
                Retirement Obligations**





The
      asset
      retirement obligations were estimated by management based on the Trust’s working
      interest in its wells and facilities, estimated costs to remediate, reclaim
      and
      abandon the wells and facilities and the estimated timing of the costs to be
      incurred. At December 31, 2005, the Trust estimated the asset retirement
      obligation to be $24,323,000 (2004 - $14,836,000), based on a total future
      liability of $41,074,000 (2004 - $25,354,000). These obligations will be settled
      at the end of the useful lives of the underlying assets, which currently
      averages at 7 years, but extends up to 20 years into the future. This amount
      has
      been calculated using an inflation rate of 2% and discounted using a
      credit-adjusted risk-free interest rate of 8%.





The
                following table reconciles the asset retirement
                obligations:**2005**
            
            2004**Asset
                retirement obligation, beginning of year**
            
            **$**
            **14,836**
            
            $
            2,188Increases
                in liabilities during the year related to:Acquisitions
            
            
            **6,460**
            
            
            10,512Additions
            
            
            **1,911**
            
            
            262Revisions
            
            
            **(327**
            **)**
            
            1,128Accretion
                expense
            
            
            **1,443**
            
            
            867Dispositions
            
            
            **-**
            
            
            (121
            )**Asset
                retirement obligation, end of year**
            
            **$**
            **24,323**
            
            $
            14,836





**9.**
            **Bank
                indebtedness**





On
      November 10, 2005 the Trust entered into an arrangement with a group of lenders
      for new credit facilities in the form of two revolving lines of credit that
      total $100,000,000 ($95,000,000 revolving facility and $5,000,000 operating
      facility). Drawings on the revolving facilities bear interest at 0.25% above
      the
      bank’s prime lending rate or bankers’ acceptance rates plus margins which were
      initially set at 135 basis points and will be subject to adjustment up or down
      prospectively, on a three-month basis as determined by the Trust’s consolidated
      debt to cash flow ratio. Security is be provided by a first charge over all
      of
      the Trust’s assets. The amounts available under these credit facilities are
      subject to a semi-annual borrowing base determination. The revolving facilities
      mature on November 9, 2006 with a 1 year term out period. On November 28, 2005,
      the Trust drew on the facilities and repaid its previous facilities and the
      bridge credit facility. As at December 31, 2005, the Trust had $95,450,000
      drawn
      on the facilities at an interest rate of 5.25%. The new credit facilities
      require the Trust to comply with certain financial covenants including working
      capital and debt to equity ratios. Under the arrangement, the lenders can
      restrict the distributions of the Trust if the Trust is in default. At December
      31, 2005, the Trust was in compliance with these covenants. In March 2006,
      the
      new credit facilities were replaced by a senior secured bridge facility (see
      note 21).





The
      Trust’s previous facilities were two revolving lines of credit that had a total
      capacity of $41 million. Drawings on the revolving facilities bore interest
      at
      1.6% above the bank’s prime lending rate or bankers’ acceptance rates plus
      margins which were originally set at 165 basis points and were subject to
      adjustment up or down prospectively, on a three-month basis as determined by
      the
      Trust’s consolidated debt to cash flow ratio. At December 31, 2004 the Trust
      also had available a demand subordinated debt facility of $4,000,000 which
      bore
      interest at the lender's prime rate plus 2%, and this facility was reduced
      to
      nil on April 30, 2005. Security was provided by a first charge over all of
      the
      Trust’s assets excluding those acquired in the RMG and High Point acquisitions.
      Amounts drawn on these facilities were repaid on November 28, 2005.







**Enterra
          Energy Trust**
 **Notes
          to Consolidated Financial Statements**
 As
          at
          December 31, 2005 and 2004 and for the years there ended
 (Expressed
          in Canadian Dollars)
 (Tabular
          amounts are stated in thousands of dollars except unit and per unit
          information)


A
      bridge
      credit facility was put in place on August 17, 2005 to facilitate the
      acquisition of High Point. The bridge credit facility was a reducing
      non-revolving secured loan with a principal amount of $75,000,000. Security
      was
      provided by a first charge on all of the High Point assets that were acquired.
      The loan bore interest at bank prime rate plus 1% and was repayable from the
      proceeds of any debt or equity financing or proceeds from the disposal of
      assets. Amounts drawn on the bridge credit facility was repaid in full on
      November 28, 2005.





**10.**
            **Notes
                Payable**





Notes
      payable consists of an unsecured promissory note for US$3.5 million (Cdn $4.1
      million), which bears interest at 12%, and is repayable on July 1, 2006.





**11.**
            **Capital
                Lease Obligation**


Description
            
            **2005**
            
            2004Capital
                lease bearing interest at 8.605%, repayable monthly at $88,802, including
                interest. The lease term is for 60 months, due October 1, 2007, with
                a
                purchase option of $1,000,000 and secured by the related
                equipment
            
            **$**
            **2,580**
            
            $
            3,385Less
                current portion
            
            
            **(878**
            **)**
            
            (805
            )**$**
            **1,702**
            
            $
            2,580





Interest
      expense includes $260,000 (2004 - $327,000) related to the capital
      leases.





**12.**
            **Non-controlling
                Interest**


Number
                of exchangeable shares issued
            
            EEC
            
            RMAC
                series A
            
            RMG
            
            RMAC
                series B
            
            TotalBalance
                at December 31, 2003
            
            
            1,995,596
            
            
            -
            
            
            -
            
            
            -
            
            
            1,995,596Issued
                on acquisition of RMEC
            
            
            -
            
            
            341,882
            
            
            -
            
            
            -
            
            
            341,882Exchanged
                for trust units
            
            
            (1,584,826
            )
            
            (199,438
            )
            
            -
            
            
            -
            
            
            (1,784,264
            )Balance
                at December 31, 2004
            
            
            410,770
            
            
            142,444
            
            
            -
            
            
            -
            
            
            553,214Issued
                on acquisition of RMG
            
            
            **-**
            
            
            **-**
            
            
            **736,842**
            
            
            **-**
            
            
            **736,842**Issued
                on acquisition of High Point
            
            
            **-**
            
            
            **-**
            
            
            **-**
            
            
            **1,407,177**
            
            
            **1,407,177**Exchanged
                for trust units
            
            
            **(62,624**
            **)**
            
            **(142,444**
            **)**
            
            **-**
            
            
            **(748,061**
            **)**
            
            **(953,129**
            **)****Balance
                at December 31, 2005**
            
            
            **348,146**
            
            
            **-**
            
            
            **736,842**
            
            
            **659,116**
            
            
            **1,744,104**








**Enterra
          Energy Trust**
 **Notes
          to Consolidated Financial Statements**
 As
          at
          December 31, 2005 and 2004 and for the years there ended
 (Expressed
          in Canadian Dollars)
 (Tabular
          amounts are stated in thousands of dollars except unit and per unit
          information)





Non-controlling
                interest
            
            AmountBalance
                at December 31, 2003
            
            $
            3,125Issued
                on acquisition of RMEC
            
            
            6,410Exchanged
                for trust units
            
            
            (6,594
            )Non-controlling
                interest in net earnings
            
            
            408Balance
                at December 31, 2004
            
            $
            3,349Issued
                on acquisition of RMG
            
            
            **16,722**Issued
                on acquisition of High Point
            
            
            **31,661**Exchanged
                for trust units
            
            
            **(19,301**
            **)**Non-controlling
                interest in net earnings
            
            
            **(29**
            **)****Balance
                at December 31, 2005**
            
            **$**
            **32,402**








With
      the
      exception of the RMG exchangeable shares, the exchangeable shares are
      convertible at any time into trust units (at the option of the holder) based
      on
      the exchange ratio. The exchange ratio for RMAC series A exchangeable shares,
      RMAC series B exchangeable shares and Enterra Energy Corp. exchangeable shares
      are increased monthly based on the cash distribution paid on the trust units
      divided by the ten day weighted average unit price preceding the distribution
      payment date. Cash distributions are not paid on the exchangeable shares. On
      the
      third anniversary of the issuance of the exchangeable shares, subject to
      extension of such date by the Board of Directors of the Trust, or at the Trust’s
      option when the aggregate number of issued and outstanding exchangeable shares
      is less than 1,000,000, the exchangeable shares will be redeemed for Trust
      Units
      at a redemption price per Exchangeable Share equal to the value of that number
      of Trust Units equal to the exchange ratio as at that redemption date. RMG
      exchangeable shares do not have an exchange ratio and will be exchanged
      automatically for one trust unit on June 1, 2006. The exchangeable shares are
      not listed for trading on an exchange.





During
      2005, a total of 62,624 Enterra Energy Corp. exchangeable shares were converted
      into 73,432 trust units at an exchange ratio prevailing at the time of
      conversion (2004 - 1,584,826 exchangeable shares were converted into 1,622,780
      trust units). During 2005, a total of 142,444 RMAC series A exchangeable shares
      were converted into 147,636 trust units at an exchange ratio prevailing at
      the
      time of conversion (2004 - 199,438 exchangeable shares were converted into
      202,084 trust units). During 2005, a total of 748,061 RMAC series B exchangeable
      shares were converted into 758,109 trust units at an exchange ratio prevailing
      at the time of conversion. The exchange of the EEC exchangeable shares is
      treated as a step acquisition which increased goodwill by $1.4 million for
      the
      difference between the fair value of the trust unit issued and the carrying
      value of the EEC exchangeable share at the time of exchange.





At
      December 31, 2005, the exchange ratio for Enterra Energy Corp. exchangeable
      shares was 1.20694 and for RMAC series B exchangeable shares was
      1.03175.








**Enterra
          Energy Trust**
 **Notes
          to Consolidated Financial Statements**
 As
          at
          December 31, 2005 and 2004 and for the years there ended
 (Expressed
          in Canadian Dollars)
 (Tabular
          amounts are stated in thousands of dollars except unit and per unit
          information)





**13.**
            **Unitholders’
                Equity**





**Authorized
      trust units**





An
      unlimited number of trust units may be issued.





The
      trust
      units are redeemable at the option of the holder based on the lesser of 90%
      of
      the average market trading price of the trust units for the 10 trading days
      after the date of redemption or the closing market price of the trust units
      on
      the date of redemption. Trust units can be redeemed to a cash limit of $100,000
      per year or a greater limit at the discretion of the Trust. Redemptions in
      excess of the cash limit shall be satisfied first by the issuance of notes
      by a
      subsidiary of the Trust and second by issuance of promissory notes by the
      Trust.





**Issued
      trust units**


Number
                of
              Units
            
            AmountBalance
                at December 31, 2003
            
            
            18,955,960
            
            $
            32,879Adopt
                fair value method of unit based compensation (note 3(e))
            
            
            -
            
            
            646Issued
                pursuant to private placements
            
            
            2,699,400
            
            
            37,676Issued
                pursuant on acquisition of RMAC
            
            
            1,946,576
            
            
            34,999Issued
                for exchangeable shares
            
            
            1,824,864
            
            
            26,844Unit
                share issue costs
            
            
            -
            
            
            (837
            )Balance
                at December 31, 2004
            
            
            25,426,800
            
            $
            132,207Issued
                on exercise of options
            
            
            **536,762**
            
            
            **8,211**Issued
                pursuant to acquisition of RMAC
            
            
            **38,726**
            
            
            **771**Issued
                pursuant to acquisition of RMG
            
            
            **275,474**
            
            
            **6,251**Issued
                pursuant to acquisition of High Point
            
            
            **7,490,898**
            
            
            **168,545**Issued
                pursuant to private placements
            
            
            **1,756,579**
            
            
            **38,110**Issued
                for exchangeable shares
            
            
            **979,177**
            
            
            **20,587**Unit
                issue costs
            
            
            **-**
            
            
            **(921**
            **)****Balance
                at December 31, 2005**
            
            
            **36,504,416**
            
            **$**
            **373,761**








**Available
      equity offering**





In
      April
      2005, the Trust entered into an agreement with Kingsbridge Capital Limited
      (“Kingsbridge”) whereby they agreed to purchase up to US$100 million of trust
      units over a two-year period. The Trust has no obligation to access any of
      the
      available capital, but may do so at its option. The subscription price of the
      Trust Units on each drawdown will be 92% of the fifteen day volume weighted
      average trading price of the Trust Units on the NASDAQ provided that the price
      must be at least US$12.00 and not less than the minimum price permitted by
      the
      rules of the Toronto Stock Exchange. The first draw may be up to US$25 million,
      and each subsequent draw can be up to the lesser of 4% of the Trust’s market
      capitalization or US$25 million. As at December 31, 2005, the Trust has issued
      Cdn $15.8 million under the agreement.







**Enterra
          Energy Trust**
 **Notes
          to Consolidated Financial Statements**
 As
          at
          December 31, 2005 and 2004 and for the years there ended
 (Expressed
          in Canadian Dollars)
 (Tabular
          amounts are stated in thousands of dollars except unit and per unit
          information)





In
      April
      2005, the Trust granted warrants to Kingsbridge to purchase 301,000 trust units.
      The warrants have a three-year term. The exercise price of the warrants was
      initially US$25.77 per trust unit and is reduced each month by the amount of
      the
      Trust’s distribution for such month on the trust units, provided that the price
      shall not decrease below US$21.55 per trust unit. As at December 31, 2005 the
      exercise price of the warrants was US$24.45. The fair value of the warrants
      has
      been reflected as deferred financing costs to be transferred to trust unit
      issue
      costs as the Trust issues new trust units under the Kingsbridge
      agreement.





The
      fair
      value of the warrants was estimated using the Black-Scholes model under the
      following assumptions:


Weighted-average
                fair value of warrants granted ($/warrant)
            
            $
            4.04Risk-free
                interest rate (%)
            
            
            3.6Estimated
                hold period prior to exercise (years)
            
            
            3Weighted-average
                volatility (%)
            
            
            33Cash
                distribution yield (%)
            
            
            9




**Contributed
      surplus**


Balance
                at December 31, 2003
            
            $
            -Trust
                unit option based compensation
            
            
            78Balance
                at December 31, 2004
            
            $
            78Trust
                unit option based compensation
            
            
            **731**Transfer
                to trust units on option exercises
            
            
            **(236**
            **)****Balance
                at December 31, 2005**
            
            **$**
            **573**





**Trust
      unit options**





Enterra
      has granted trust unit options to directors, officers, employees and consultants
      of the Trust and JED. Each trust unit option permits the holder to purchase
      one
      trust unit at the stated exercise price. All options vest over a 3-year period
      and have a term of 5 years. At the time of grant, the exercise price is equal
      to
      the market price.





The
      following options have been granted:







**Enterra
          Energy Trust**
 **Notes
          to Consolidated Financial Statements**
 As
          at
          December 31, 2005 and 2004 and for the years there ended
 (Expressed
          in Canadian Dollars)
 (Tabular
          amounts are stated in thousands of dollars except unit and per unit
          information)





**2005**
            
            2004Number
                of
              options
            
            Weighted-
              average
                exercise
              price
            
            Number
                of
              options
            
            Weighted-
              average
                exercise
              priceOptions
                outstanding, beginning of year
            
            
            **950,000**
            
            **$**
            **14.22**
            
            
            -
            
            $
            -Options
                granted
            
            
            **1,461,500**
            
            
            **23.88**
            
            
            950,000
            
            
            14.22Options
                exercised
            
            
            **(536,762**
            **)**
            
            **14.86**
            
            
            -
            
            
            -Options
                cancelled
            
            
            **(443,333**
            **)**
            
            **17.15**
            
            
            -
            
            
            -Options
                outstanding, end of year
            
            
            **1,431,405**
            
            **$**
            **22.31**
            
            
            950,000
            
            $
            14.22Options
                exercisable at end of year
            
            
            **69,905**
            
            **$**
            **14.98**
            
            
            -
            
            $
            -




Unit
                options outstanding
            
            Unit
                options exercisableExercise
                price range
            
            Number
                of options
            
            Weighted
                average remaining contract life
            
            Number
                of options
            
            Weighted
                average remaining contract life$14.00
                to $20.85
            
            
            214,905
            
            
            4.05
            
            
            69,905
            
            
            3.15$23.15
                to $29.31
            
            
            1,216,500
            
            
            4.34
            
            
            -
            
            
            -1,431,405
            
            
            4.30
            
            
            69,905
            
            
            3.15





**Estimated
      fair value of stock options**








The
      estimated fair value of options was determined using the Black-Scholes model
      under the following assumptions:


**2005**
            
            2004Weighted-average
                fair value of options granted ($/option)
            
            **$**
            **2.35**
            
            $
            0.33Risk-free
                interest rate (%)
            
            
            **3.7**
            
            
            3.8Estimated
                hold period prior to exercise (years)
            
            
            **5**
            
            
            5Expected
                volatility (%)
            
            
            **36**
            
            
            21Expected
                cash distribution yield (%)
            
            
            **10**
            
            
            11








**Enterra
          Energy Trust**
 **Notes
          to Consolidated Financial Statements**
 As
          at
          December 31, 2005 and 2004 and for the years there ended
 (Expressed
          in Canadian Dollars)
 (Tabular
          amounts are stated in thousands of dollars except unit and per unit
          information)





**Reconciliation
      of earnings per unit calculations**


**For
                the year ended December 31, 2005**Net
                Earnings
            
            Weighted
                Average Units Outstanding
            
            Per
                UnitBasic
            
            **$**
            **970**
            
            
            **29,533,577**
            
            **$**
            **0.03**Options
                assumed exercised
            
            
            
            
            
            **1,277,405**Units
                assumed purchased
            
            
            
            
            
            **(1,122,153**
            **)**Diluted
            
            **$**
            **970**
            
            
            **29,688,829**
            
            **$**
            **0.03**





For
      the
      calculation of the weighted average number of diluted units outstanding for
      2005, 154,000 options, 301,000 warrants and 1,300,453 exchangeable shares were
      excluded, as they were antidilutive to the calculation.


For
                the year ended December 31, 2004Net
                Earnings
            
            Weighted
                Average Units Outstanding
            
            Per
                UnitBasic
            
            $
            14,027
            
            
            22,518,373
            
            $
            0.62Exchangeable
                shares / Non-controlling interest
            
            
            408
            
            
            490,530Options
                assumed exercised
            
            
            
            
            
            950,000Units
                assumed purchased
            
            
            
            
            
            (716,943
            )Diluted
            
            $
            14,435
            
            
            23,241,960
            
            $
            0.62





**Trust
      unit savings plan**





In
      2004,
      the Trust established a trust unit savings plan whereby the Trust will match
      an
      employee’s contributions to the plan to a maximum of 9.0% of their salary. Both
      the employee’s and the Trust’s contributions were used to purchase trust units
      on the NASDAQ National Markets system (commencing in 2006, on the New York
      Stock
      Exchange). During 2005 the Trust expensed approximately $25,000 (2004 - $23,000)
      relating to the Trust’s contributions to the plan.







**Enterra
          Energy Trust**
 **Notes
          to Consolidated Financial Statements**
 As
          at
          December 31, 2005 and 2004 and for the years there ended
 (Expressed
          in Canadian Dollars)
 (Tabular
          amounts are stated in thousands of dollars except unit and per unit
          information)





**14.**
            **Income
                Taxes**





The
      income tax provision is calculated by applying Canadian federal and provincial
      statutory tax rates to pre-tax earnings with adjustments as set out in the
      following table:


**2005**
            
            2004Earnings
                (loss) before income taxes and non-controlling interest
            
            **$**
            **(16,292**
            **)**
            $
            14,415Combined
                federal and provincial income tax rate
            
            
            **37.62**
            **%**
            
            38.87
            %Computed
                income tax provision
            
            
            **(6,129**
            **)**
            
            5,603Increase
                (decrease) resulting from:Interest
                component of trust distributions
            
            
            **(11,593**
            **)**
            
            (7,038
            )Non-deductible
                royalties, net of ARTC
            
            
            **5,538**
            
            
            (4,669
            )Resource
                allowance
            
            
            **(11,110**
            **)**
            
            5,239Non-deductible
                items including goodwill impairment loss
            
            
            **3,536**
            
            
            -Difference
                between U.S. and Canadian tax rates
            
            
            **(60**
            **)**
            
            -Change
                in estimates
            
            
            **1,201**
            
            
            -Capital
                tax
            
            
            **1,456**
            
            
            260Other
            
            
            **(72**
            **)**
            
            585**$**
            **(17,233**
            **)**
            $
            (20
            )





The
      components of the net future income tax liability at December 31 were as
      follows:


**2005**
            
            2004Future
                income tax assets:Non-capital
                loss carry-forwards
            
            **$**
            **21,573**
            
            $
            12,127Asset
                retirement obligations
            
            
            **8,177**
            
            
            4,988Deferred
                financing charges
            
            
            **1,219**
            
            
            179**$**
            **30,969**
            
            $
            17,294Future
                income tax liabilities:Property,
                plant and equipment
            
            
            **131,266**
            
            
            39,422Net
                future income tax liability
            
            **$**
            **100,297**
            
            $
            22,128





At
      December 31, 2005, the property, plant and equipment owned by the Trust’s
      corporate subsidiaries have an approximate tax basis of $179,001,000 (2004
      -
      $126,800,000) available for future use as deductions from taxable income.
      Non-capital loss carry-forwards expire from 2007 to 2015.





Tax
      rate
      applied to temporary difference is approximately 34% in 2005 (35% in 2004)
      compared to the federal and provincial statutory rate of 38% for the 2005
      year.







**Enterra
          Energy Trust**
 **Notes
          to Consolidated Financial Statements**
 As
          at
          December 31, 2005 and 2004 and for the years there ended
 (Expressed
          in Canadian Dollars)
 (Tabular
          amounts are stated in thousands of dollars except unit and per unit
          information)





**15.**
            **Financial
                Instruments**





The
      financial instruments recognized on the consolidated balance sheets include
      cash, accounts receivable, accounts payable and accrued liabilities,
      distributions payable to unitholders, income taxes payable, bank indebtedness,
      notes payable, due to JED Oil Inc., capital lease and financial derivatives.
      The
      fair values of financial instruments other than the capital lease and bank
      indebtedness approximate their carrying amounts due to the short-term nature
      of
      the instruments. The carrying value of bank indebtedness approximates its fair
      value due to floating interest terms; the fair value of the capital lease
      approximates its carrying value due to current rates for comparable terms of
      long-term debt. The financial derivative contracts are held at fair value with
      the gains and losses included within earnings for the period.





The
      Trust
      is exposed to fluctuations in commodity prices, foreign-currency exchange rates,
      interest rates and credit risk. The Trust manages its operations to minimize
      the
      exposure to these risks to the extent practical and, to a lesser extent, using
      derivative instruments and physical sales contracts. The Trust uses non-exchange
      traded forwards, swaps, options and physical deliver contracts to manage a
      portion of the Trust’s commodity price risk. Management monitors the Trust’s
      exposure to the above risks and regularly reviews its derivative activities
      and
      all outstanding positions.





**(a)**
            **Commodity
                price risks**





The
      Trust’s most significant market risk exposure relates to crude oil price
      fluctuations. To a lesser extent the Trust is also exposed to natural gas price
      movements.





The
      Trust
      has entered into derivative financial instruments and fixed price physical
      contracts to minimize the risk of exposure to fluctuations in the crude oil
      and
      natural gas prices. At December 31, 2005, the Trust had the following financial
      derivatives outstanding:


Derivative
                Instrument
            Commodity
            Price
            Volume
                (per day)
            PeriodFloors
            Gas
            9.65
                to 9.80
              (Cdn
                $/GJ)
            10,000
                GJ
            January
                1, 2006 - April 1, 2006Collars
            Gas
            8.50
                to 14.00
              (Cdn
                $/GJ)
            10,000
                GJ
            April
                1, 2006 - November 1, 2006Collars
            Oil
            55.00
                to 70.25
              (US
                $/bbl)
            1,000
                bbl
            January
                1, 2006 - January 1, 2007Collars
            Oil
            55.00
                to 80.00
              (US
                $/bbl)
            1,000
                bbl
            April
                1, 2006 - January 1, 2007





The
      fair
      market value of the financial derivatives at December 31, 2005 is estimated
      to
      be $415,000. Fees of $60,000 associated with these hedges were netted against
      the gain. At December 31, 2004 the Trust did not have any derivative financial
      instruments or fixed price physical sales contracts in place. At
      December 31, 2005, the Trust had the following fixed price physical delivery
      contracts outstanding:


Contract
                Period End
            Quantity
            Pricing
              (Cdn
                $/GJ)Natural
                Gas Contracts
            
            March
                31, 2006
            8,000
                GJ/day
            $8.01
                to $8.85








**Enterra
        Energy Trust**
 **Notes
        to Consolidated Financial Statements**
 As
        at
        December 31, 2005 and 2004 and for the years there ended
 (Expressed
        in Canadian Dollars)
 (Tabular
        amounts are stated in thousands of dollars except unit and per unit
        information)







**(b)**
            **Foreign
                currency exchange risk**





The
      Trust
      is exposed to foreign currency fluctuations as crude oil and natural gas prices
      received are referenced to U.S. dollar denominated prices. The Trust’s U.S.
      subsidiary operates in a foreign currency which is translated to Canadian
      dollars as described in note 2(p). These operations are exposed to currency
      fluctuations.





**(c)**
            **Credit
                risk**





A
      substantial portion of the Trust’s accounts receivable are with customers and
      joint venture partners in the oil and gas industry and are subject to normal
      industry credit risks. Purchasers of the Trust’s natural gas, crude oil and
      natural gas liquids are subject to an internal credit review to minimize the
      risk of non-payment. As at December 31, 2005 the Trust had recorded $1,504,000
      (2004 - $1,496,000) as an allowance for doubtful accounts.





**(d)**
            **Interest
                rate risk**





Interest
      rate risk exists principally with respect to our indebtedness that bears
      interest at floating rates. At December 31, 2005, the Trust had $95,450,000
      (2004 - $43,930,000) of indebtedness bearing interest at floating rates. The
      balance of the Trust’s indebtedness being the capital lease, due to Jed Oil Inc.
      and the note payable bear interest at fixed rates.





**16.**
            **Changes
                in Non-cash Working
                Capital**


**2005**
            
            2004Accounts
                receivable
            
            **$**
            **(9,684**
            **)**
            $
            (4,393
            )Prepaid
                expenses, deposits and other
            
            
            **(1,929**
            **)**
            
            (57
            )Accounts
                payable and accrued liabilities
            
            
            **8,356**
            
            
            (3,607
            )Income
                taxes payable
            
            
            **346**
            
            
            160Foreign
                exchange on working capital
            
            
            **486**
            
            
            -Changes
                in non-cash working capital
            
            **$**
            **(2,425**
            **)**
            $
            (7,897
            )Changes
                in capital accounts payable
            
            **$**
            **3,733**
            
            
            -





**17.**
            **Commitments**





The
      Trust
      has commitments for the following payments over the next six
      years:


2006
            
            2007
            
            2008
            
            2009
            
            2010
            
            2011Minimum
              capital lease
              payments
            
            $
            878
            
            $
            1,702
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            -Imputed
              Interest on
              capital lease
            
            
            187
            
            
            97
            
            
            -
            
            
            -
            
            
            -
            
            
            -Office
                leases
            
            
            1,160
            
            
            1,060
            
            
            1,080
            
            
            1,082
            
            
            1,175
            
            
            97$
            2,225
            
            $
            2,859
            
            $
            1,080
            
            $
            1,082
            
            $
            1,175
            
            $
            97





During
      2005 total rental expense was $423,000 (2004 - $81,339).







**Enterra
          Energy Trust**
 **Notes
          to Consolidated Financial Statements**
 As
          at
          December 31, 2005 and 2004 and for the years there ended
 (Expressed
          in Canadian Dollars)
 (Tabular
          amounts are stated in thousands of dollars except unit and per unit
          information)





**18.**
            **Guarantees**




The
      Trust
      has indemnified all of the directors and officers of the Trust and all the
      officers, directors, shareholders, employees and agents of JED. There is no
      pending litigation or proceeding for which a claim is being sought, nor is
      the
      Trust aware of any threatened litigation that may result in claims.





**19.**
            **Segmented
                Information**




The
      Trust
      has one operating segment that is divided amongst two geographical areas. The
      follow is select financial information from the two geographic areas for 2005.
      The Trust operated only in Canada for 2004.


Canada
            
            U.S.
            
            TotalFor
                the year ended and as at December 31, 2005Revenue
            
            **$**
            **154,412**
            
            **$**
            **3,331**
            
            **$**
            **157,743**Property,
                plant and equipment
            
            
            **469,503**
            
            
            **19,571**
            
            
            **489,074**Goodwill
            
            **$**
            **70,546**
            
            **$**
            **-**
            
            **$**
            **70,546**





**20.**
            **Related
                Parties**




During
      2005 the Trust paid $350,000 to Macon Resources Ltd. (“Macon”), a company 100%
      owned by the Chief Executive Officer of the Trust, for management services
      provided by the Chief Executive Officer and the Chief Financial Officer. During
      2005 the Trust issued 400,000 trust unit options to Macon at $23.96 per option.
      The options have a 5-year life and vest over a 3-year period. See note 13 for
      further discussion on the Trust’s unit option plan. At December 31,
      2005 $84,000 (2004 - $ nil) was payable by the Trust to Macon.





**21.**
            **Subsequent
                Events**




During
      the first quarter of 2006, the Trust acquired producing oil and gas assets
      located in Oklahoma. The Trust expects to complete a final closing for
      additional working interests in the first half of 2006. The current operating
      staff of the assets is being retained by the Trust.




The
      purchase price of US$221.0 million was paid for through the issuance of
      5,178,792 units of the Trust valued at USD $91.7 million, cash of US $102.3
      million and US $27.0 million of assumed debts. Certain post closing purchase
      price adjustment provisions remain in place, based on production rates achieved
      from the assets through September 19, 2006. The purchase price on the final
      closing of the additional working interests is expected to be paid with a
      combination of units and cash.




The
      Trust
      is in the process of entering into a farmout agreement with Petroflow Energy
      Inc. (“Petroflow”), an oil and gas development company, to fund 100% of the
      drilling and completion costs on the undeveloped lands. The Chief Executive
      Officer for the Trust owns, directly and indirectly, approximately 20% of the
      outstanding shares of Petroflow.




In
      January 2006, the Trust entered into an arrangement with a bank for a US$50.0
      million bridge credit facility. This credit facility was used to secure the
      acquisition of the Oklahoma assets. The facility was a reducing non-revolving
      loan secured by a first charge over the notes from the sellers of the Oklahoma
      assets, which were secured by the Oklahoma assets. The loan bore interest at
      U.S. dollar commercial loan rate plus 0.5% and was repaid on March 22,
      2006.







**Enterra
          Energy Trust**
 **Notes
          to Consolidated Financial Statements**
 As
          at
          December 31, 2005 and 2004 and for the years there ended
 (Expressed
          in Canadian Dollars)
 (Tabular
          amounts are stated in thousands of dollars except unit and per unit
          information)





In
      March
      2006, the Trust closed a US $200.0 million senior secured bridge credit facility
      to partially fund the acquisition of the Oklahoma assets, repay the USD $50.0
      million bridge credit facility noted above and provide additional working
      capital to the Trust. This non-revolving facility bears interest at 4.5% above
      London Interbank Offering Rate and matures September 20, 2006 with a one-time
      option to extend the facility for an additional three-month period. The facility
      is secured by a first charge over all US assets of the Trust and a second charge
      over all Canadian assets. The terms of the agreement restrict the Trust’s
      ability to distribute cash flow from the U.S. cost center to US $1.5 million
      per
      month. The
      credit facility also requires the Trust to maintain certain financial covenants.




In
      March
      2006, the Trust closed a $110.0 million senior secured bridge facility. This
      reducing non-revolving credit facility was used to retire the existing $100.0
      million credit facilities of the Trust. The facility bears interest at 2.5%
      above bank prime lending rates and matures on December 31, 2006. The facility
      is
      reduced to $100 million on June 30, 2006. The facility is secured by a first
      charge over all Canadian assets of the Trust and a second charge over all US
      assets. The
      credit facility also requires the Trust to maintain certain financial
      covenants.




The
      Trust
      does not expect to repay the two bridge facilities from internally generated
      cash and will need to seek additional financing through the issuance of debt
      or
      equity





**22.**
            **Differences
                Between Canadian and United States Generally Accepted Accounting
                Principles**




The
      Trust's consolidated financial statements have been prepared in Canadian Dollars
      and in accordance with generally accepted accounting principles in Canada
      ("Canadian GAAP"), which differ in certain respects from those in the United
      States of America ("U.S. GAAP"). Any differences in accounting principles as
      they pertain to the consolidated financial statements as at December 31, 2005
      and 2004 and for the years there ended were insignificant except as described
      below:





**(a)
      Property, plant and equipment**





Under
      Canadian GAAP, the impairment test limits the capitalized costs of oil and
      natural gas assets to the discounted estimated future net revenue from proved
      and probable oil and natural gas reserves using forecast prices plus the costs
      of unproved properties less impairment. The discount rate used is a risk free
      interest rate.





Under
      U.S. GAAP, the full cost method of accounting for oil and natural gas activities
      requires the Trust to perform an impairment test using after-tax future net
      revenue from proved oil and natural gas reserves discounted at 10% plus the
      cost
      of unproved properties less impairment. The prices and costs used in the U.S.
      GAAP ceiling test are those in effect at the period end. Where the amount of
      a
      ceiling test write-down under Canadian GAAP differs from the amount of the
      write-down under U.S. GAAP, the charge for depletion will differ in the year
      and
      subsequent years.





There
      were ceiling test impairments recognized under U.S. GAAP at December 31, 2005,
      2004 and 2001. At December 31, 2005, the Trust recognized a U.S. GAAP ceiling
      test write-down of $34.1 million ($22.5 million after tax) in its Canadian
      cost
      center and an additional $3.0 million ($2.0 million after tax) ceiling test
      write down in its US cost center. At December 31, 2004 the Trust recognized
      a
      U.S. GAAP ceiling test write-down of $10.0 million ($6.3 million after tax)
      and
      at December 31, 2001 the Trust recognized a write-down of $28.7 million ($17.5
      million after tax).





Under
      Canadian GAAP, pursuant to EIC 151, property, plant and equipment increased
      as a
      result of the conversion of one class of exchangeable shares into trust units.
      Under U.S. GAAP, all clases of exchangeable shares are classified as mezzanine
      equity, valued at the fair market value and conversion of exchangeable shares
      does not result in an increase in property, plant and equipment. This GAAP
      difference in the valuation of property, plant and equipment results in an
      increase in depletion expense during the periods presented for Canadian GAAP
      as
      compared with U.S. GAAP (see note f).







**Enterra
          Energy Trust**
 **Notes
          to Consolidated Financial Statements**
 As
          at
          December 31, 2005 and 2004 and for the years there ended
 (Expressed
          in Canadian Dollars)
 (Tabular
          amounts are stated in thousands of dollars except unit and per unit
          information)


These
      property, plant and equipment valuation differences result in depletion expense
      being different under U.S. GAAP as compared with Canadian GAAP. For the year
      ended December 31, 2005 depletion, including the ceiling test writedowns under
      U.S. GAAP was higher by $30.0 million ($19.8 million after tax) (2004 - $8.0
      million and $4.9 million after tax).





**(b)
      Financial instruments and Marketing Contracts**





Prior
      to
      the Trust adopting AcG-13 in 2004 for Canadian GAAP purposes, a US GAAP
      difference existed in that SFAS 133, "Accounting for Derivative Instruments
      and
      Hedging Activities" requires that all derivative instruments be recorded on
      the
      consolidated balance sheet as either an asset or liability measured at fair
      value, and requires that changes in fair value be recognized in income unless
      specific hedge accounting criteria are met. Hedge accounting requires that
      an
      entity formally document, designate and assess the effectiveness of derivative
      instruments to use this accounting treatment.





At
      December 31, 2005, Enterra had several physical delivery commodity contracts
      in
      place. Under Canadian GAAP, physical delivery contracts are not considered
      financial instruments and would normally not be measured at fair value on the
      balance sheet. For US GAAP, the Trust did not formally document and designate
      these outstanding contracts as physical sales contracts, therefore the contracts
      are re-valued each period end to market value (mark-to-market).





Under
      Canadian GAAP, the physical sales contracts are recorded on the balance sheet
      at
      the amortized cost of $1.4 million as a result of the contracts being acquired
      with High Point. At December 31, 2005, the fair value of the contracts is $1.3
      million resulting in a reduction to the marketing liability recorded on the
      balance sheet and an increase in earnings under US GAAP of $0.2 million ($0.1
      million after tax).





The
      Trust
      did not have any derivative instruments or hedging contracts outstanding at
      December 31, 2004.





**(c)
      Earnings**





Under
      U.S. GAAP, interest and amortization of deferred financing charges would be
      presented in the non-operating section of the statement of
      earnings.





**(d)
      Comprehensive Income**





There
      are
      no items that would be part of Comprehensive Income other than net
      earnings.





**(e)
      Unitholder's Mezzanine equity**





Under
      Canadian GAAP, the trust units are considered to be permanent equity and are
      classified as unitholders' capital. A U.S. GAAP difference exists due to the
      redemption feature attached to each trust unit. The trust units are redeemable
      at the option of the holder based on the lesser of 90% of the average market
      trading price of the trust units for the 10 trading days after the date of
      redemption or the closing market price of the trust units on the date of
      redemption. Trust units can be redeemed to a cash limit of $100,000 per year
      or
      a greater limit at the discretion of the Trust. Redemptions in excess of the
      cash limit shall be satisfied first by the issuance of notes by a subsidiary
      of
      the Trust and second by issuance of promissory notes by the Trust.







**Enterra
          Energy Trust**
 **Notes
          to Consolidated Financial Statements**
 As
          at
          December 31, 2005 and 2004 and for the years there ended
 (Expressed
          in Canadian Dollars)
 (Tabular
          amounts are stated in thousands of dollars except unit and per unit
          information)





The
      redemption feature causes the trust units to be classified as mezzanine equity
      under U.S. GAAP. Mezzanine equity is valued at an amount equal to the redemption
      value of the trust units at the balance sheet date. Included in the redemption
      value of the trust units is the redemption value of the exchangeable shares
      as
      if all exchangeable shares had previously been converted into trust units.
      Any
      increase or decrease in the redemption value during a period is charged to
      accumulated earnings and reflected in the calculation of net earnings per trust
      unit.





As
      at
      December 31, 2005, unitholders' capital was reduced by $373.8 million and
      non-controlling interest was reduced by $32.4 million (2004 - $132.2 million
      and
      $3.3 million respectively) and the redemption value of the trust units and
      exchangeable units of $684.0 million (2004 - $529.8 million) was recorded as
      mezzanine equity. The change in the redemption value of the trust units and
      exchangeable units is recorded as a reduction or credit to accumulated earnings.
      For the year ended December 31, 2005 accumulated earnings was credited by $115.1
      million (2004 -reduced
      by $190.0 million).





**(f)
      Exchangeable Securities Issued by Subsidiaries of Income Trusts pursuant to
      EIC-151**





On
      January 19, 2005, the CICA issued EIC-151 “Exchangeable Securities Issued by
      Subsidiaries of Income Trusts” that states that equity interests held by third
      parties in subsidiaries of an income trust should be reflected as either
      non-controlling interest or debt in the consolidated balance sheet unless they
      meet certain criteria. EIC-151 requires that the shares be nontransferable
      to be
      classified as equity. The Trust's exchangeable shares are transferable and,
      in
      accordance with EIC-151, have been reclassified to non-controlling interest
      on
      the Canadian GAAP consolidated balance sheets.





Since
      a
      portion of Enterra's exchangeable shares were not initially recorded at fair
      value, subsequent exchanges for Trust Units are measured at the fair value
      of
      the Trust Units issued. The excess of fair values over book values on the
      exchange are recorded as additions to property, plant and equipment and
      goodwill. In addition, non-controlling interest is reflected as a reduction
      of
      such earnings in the Trust’s consolidated statements of earnings.





The
      application of EIC-151 causes several differences with U.S. GAAP. As at December
      31, 2005, property, plant and equipment increased by $1.4 million (December
      31,
      2004 - $1.5 million), goodwill increased by $20.7 million (December 31, 2004
      -
      $19.3 million), future income tax liability increased by $0.6 million (December
      31, 2004 - $0.6 million), unitholder capital increased by $21.9 million
      (December 31, 2004 - $20.6 million), accumulated earnings decreased by $0.4
      million (December 31, 2004 - $0.4 million). In addition, depletion expense
      under
      Canadian GAAP is higher as a result of the increase in the property, plant
      and
      equipment value.







**Enterra
          Energy Trust**
 **Notes
          to Consolidated Financial Statements**
 As
          at
          December 31, 2005 and 2004 and for the years there ended
 (Expressed
          in Canadian Dollars)
 (Tabular
          amounts are stated in thousands of dollars except unit and per unit
          information)


**(g)
      Consolidated Balance Sheets**





The
      adjustments using U.S. GAAP would result in the following changes to the
      consolidated balance sheets of the Trust:




**December
                31, 2005**
            
            December
                31, 2004Canadian
            
            U.S.
            
            Canadian
            
            U.S.GAAP
            
            GAAP
            
            GAAP
            
            GAAPAssetsCurrent
                assets
            
            **$**
            **50,713**
            
            **$**
            **50,713**
            
            $
            20,910
            
            $
            20,910Deposit
                on acquisitions
            
            
            **-**
            
            
            **-**
            
            
            2,400
            
            
            2,400Property,
                plant and equipment (a) (f)
            
            
            **489,074**
            
            
            **428,678**
            
            
            148,458
            
            
            117,940Goodwill
                (f)
            
            
            **70,546**
            
            
            **49,832**
            
            
            49,270
            
            
            29,991Deferred
                financing charges
            
            
            **1,210**
            
            
            **1,210**
            
            
            90
            
            
            90**$**
            **611,543**
            
            **$**
            **530,433**
            
            $
            221,128
            
            $
            171,331LiabilitiesCurrent
                liabilities (b)
            
            **$**
            **163,110**
            
            **$**
            **162,956**
            
            $
            63,264
            
            $
            63,264Asset
                retirement obligations
            
            
            **24,323**
            
            
            **24,323**
            
            
            14,836
            
            
            14,836Future
                income tax liability (a) (b) (f)
            
            
            **100,297**
            
            
            **78,631**
            
            
            22,128
            
            
            10,614Capital
                lease
            
            
            **1,702**
            
            
            **1,702**
            
            
            2,580
            
            
            2,580**289,432**
            
            
            **267,612**
            
            
            102,808
            
            
            91,294Mezzanine
                equity (e)
            
            
            **-**
            
            
            **684,024**
            
            
            -
            
            
            529,764Non-controlling
                interest (e) (f)
            
            
            **32,402**
            
            
            **-**
            
            
            3,349
            
            
            -**32,402**
            
            
            **684,024**
            
            
            3,349
            
            
            529,764Unitholders'
                equityUnitholders'
                capital (e) (f)
            
            
            **373,761**
            
            
            **-**
            
            
            132,207
            
            
            -Warrants
            
            
            **1,215**
            
            
            **1,215**
            
            
            -
            
            
            -Contributed
                surplus
            
            
            **573**
            
            
            **573**
            
            
            78
            
            
            78Accumulated
                earnings (deficit)
            
            
            **28,468**
            
            
            **(308,683**
            **)**
            
            27,498
            
            
            (404,993
            )Accumulated
                distributions
            
            
            **(114,308**
            **)**
            
            **(114,308**
            **)**
            
            (44,812
            )
            
            (44,812
            )**289,709**
            
            
            **(421,203**
            **)**
            
            114,971
            
            
            (449,727
            )**$**
            **611,543**
            
            **$**
            **530,433**
            
            $
            221,128
            
            $
            171,331










**Enterra
          Energy Trust**
 **Notes
          to Consolidated Financial Statements**
 As
          at
          December 31, 2005 and 2004 and for the years there ended
 (Expressed
          in Canadian Dollars)
 (Tabular
          amounts are stated in thousands of dollars except unit and per unit
          information)





**(h)
      Consolidated Statements of Earnings**





The
      adjustments using U.S. GAAP would result in the following changes to the
      consolidated statements of earnings of the Trust:


Years
                EndedDecember
                31,**2005**
            
            2004Net
                earnings under Canadian GAAP
            
            **$**
            **970**
            
            $
            14,027Adjustments:Depletion
                expense (a)
            
            
            **(30,027**
            **)**
            
            (7,467
            )Related
                income taxes
            
            
            **10,209**
            
            
            2,802Unrealized
                loss on financial instruments (b)
            
            
            **154**
            
            
            958Related
                income taxes
            
            
            **(57**
            **)**
            
            (390
            )Non-controlling
                interest (f)
            
            
            **(29**
            **)**
            
            408Net
                earnings (loss) under U.S. GAAP before change in redemption value
                of trust
                units
            
            
            **(18,780**
            **)**
            
            10,338Change
                in redemption value of trust units (e)
            
            
            **115,090**
            
            
            (189,970
            )Net
                earnings (loss) under U.S. GAAP after change in redemption value
                of trust
                units
            
            **$**
            **96,310**
            
            $
            (179,632
            )Weighted
                average units for U.S. GAAP (000's)-
                Basic
            
            
            **30,834**
            
            
            23,328-
                Diluted
            
            
            **30,989**
            
            
            23,561Net
                earnings per unit under U.S. GAAP - before changes in redemption
                value of
                trust units-
                Basic
            
            **$**
            **(0.61**
            **)**
            $
            0.44-
                Diluted
            
            **$**
            **(0.61**
            **)**
            $
            0.44Net
                earnings (loss) per unit under U.S. GAAP-
                Basic
            
            **$**
            **3.12**
            
            $
            (7.70
            )-
                Diluted
            
            **$**
            **3.11**
            
            $
            (7.70
            )







**Enterra
          Energy Trust**
 **Notes
          to Consolidated Financial Statements**
 As
          at
          December 31, 2005 and 2004 and for the years there ended
 (Expressed
          in Canadian Dollars)
 (Tabular
          amounts are stated in thousands of dollars except unit and per unit
          information)





**(i)
      Additional disclosure under U.S. GAAP**





**December
                31, 2005**
            
            December
                31, 2004Components
                of accounts receivableTrade
            
            **$**
            **18,367**
            
            $
            8,095Accruals
            
            
            **18,440**
            
            
            9,014Allowance
                for doubtful accounts
            
            
            **(1,504**
            **)**
            
            (1,496
            )**$**
            **35,303**
            
            $
            15,613Components
                of prepaid expensesPrepaid
                expenses
            
            **$**
            **1,025**
            
            $
            278Funds
                on deposit
            
            
            **2,027**
            
            
            240**$**
            **3,052**
            
            $
            518Components
                of accounts payableAccounts
                payable
            
            **$**
            **28,306**
            
            $
            3,928Accrued
                liabilities
            
            
            **8,042**
            
            
            4,642**$**
            **36,348**
            
            $
            8,570





**(j)
      Select pro forma financial information for High Point acquisition
      (unaudited)**





As
      shown
      in note 5 of the Canadian GAAP financial statements, the Trust completed the
      acquisition of High Point. Under U.S. GAAP, select pro forma financial
      information is disclosed as if the acquisition had occurred on January 1, 2004
      and 2005 instead of the actual closing of August 17, 2005. The following table
      shows the pro forma U.S. GAAP select financial information for the acquisition
      of High Point.




**December
                31, 2005 (unaudited)**
            
            December
                31, 2004 (unaudited)Revenue
            
            **$**
            **191,247**
            
            $
            152,450Net
                loss before change in redemptionvalue
                of trust units
            
            **$**
            **(18,804**
            **)**
            $
            (2,553
            )Per
                unit - basic
            
            **$**
            **(0.52**
            **)**
            $
            (0.08
            )Per
                unit - diluted
            
            **$**
            **(0.52**
            **)**
            $
            (0.08
            )Net
                earnings (loss)
            
            **$**
            **97,977**
            
            $
            (241,640
            )Per
                unit - basic
            
            **$**
            **2.69**
            
            $
            (7.50
            )Per
                unit - diluted
            
            **$**
            **2.68**
            
            $
            (7.50
            )










**Enterra
          Energy Trust**
 **Notes
          to Consolidated Financial Statements**
 As
          at
          December 31, 2005 and 2004 and for the years there ended
 (Expressed
          in Canadian Dollars)
 (Tabular
          amounts are stated in thousands of dollars except unit and per unit
          information)





**(k)
      New accounting pronouncements**





i)
      On
      June 1, 2005 FASB issued Statement No. 154, Accounting Changes and Error
      Correction. The statement applies to all voluntary changes in accounting
      principles and changes the requirement for accounting for and reporting of
      a
      change in accounting principle. Statement 154 is effective for accounting
      changes and corrections of errors made in fiscal years beginning after December
      15, 2005.




Statement
      154 requires, whenever practical, the retroactive application to prior periods'
      financial statements of a voluntary change in accounting principles. If not
      practical then certain concessionary transition accounting standards are
      permitted. The previous rules in Opinion 20 required that voluntary changes
      in
      accounting principles be recognized in net income in the period when the change
      in the accounting principle is adopted.





The
      impact of this standard on the consolidated financial statements will be
      dependent on the nature and extent of subsequent new and revised accounting
      standards.





ii)
      In
      December 2004, the FASB issued FAS 153 which deals with the accounting for
      the
      exchanges of non-monetary assets. FAS 153 is an amendment of APB Opinion 29.
      APB
      Opinion 29 requires that exchanges of non-monetary assets should be measured
      based on the fair value of the assets exchanged. FAS 153 amends APB Opinion
      29
      to eliminate the exception from using fair market value for non-monetary
      exchanges of similar productive assets and introduce a broader exception fro
      exchanges of non-monetary assets that do not have commercial substance. FAS
      153
      is effective for non-monetary asset exchanges occurring in fiscal periods
      beginning after June 15, 2005 Adopting the provisions of FAS 153 is not expected
      to impact the U.S. GAAP financial statements.





iii)
      In
      December 2004, the FASB issued FAS 123R which deals with the accounting for
      transactions in which an entity exchanges its equity instruments for goods
      or
      services. FAS 123R also addresses transactions in which an entity incurs
      liabilities in exchange for goods or services that are based on the fair value
      of the entity’s equity instruments or that may be settled by the issuance of
      those equity instruments. FAS 123R focuses primarily on accounting for
      transactions in which an entity obtains employee services in unit (share)-based
      payment transactions. FAS 123R is a revision of FAS 123. FAS 123R requires
      a
      public entity to measure the cost of employee services received in exchange
      for
      an award of equity instruments based on the grant-date fair value of the award
      (with limited exceptions). That cost will be recognized over the period during
      which an employee is required to provide service in exchange for the award
      - the
      requisite service period (usually the vesting period). FAS
      123R
      is effective January 1, 2006.Since January 1, 2004, the Trust has
      recognized the costs of equity instruments issued in exchange for employee
      services based on the grand-date fair value of the award, in accordance with
      Canadian GAAP. The methodology for determining fair value of equity instruments
      issued in exchange for employee services prescribed by FAS 123R differs from
      that prescribed by Canadian GAAP. Adopting the provisions of FAS 123R is not
      expected to have a material impact on the U.S. GAAP financial
      statements.










**Enterra
          Energy Trust**
 **Notes
          to Consolidated Financial Statements**
 As
          at
          December 31, 2005 and 2004 and for the years there ended
 (Expressed
          in Canadian Dollars)
 (Tabular
          amounts are stated in thousands of dollars except unit and per unit
          information)


The
      following oil and gas information is provided in accordance with the U.S.
      Financial Accounting Standards Board Statement No. 69 “Disclosure About Oil and
      Gas Producing Activities”. The Trust follows the full cost method of accounting.
      The following information is unaudited.


**Unaudited
        Supplementary Information**





**(a)**  **Capitalized
      Costs**





The
      aggregate amounts of costs capitalized for gas and oil producing activities,
      and
      related aggregate amounts of accumulated depreciation, depletion and
      amortization at December 31, 2005 and 2004 as follows:


**2005**
            
            2004Capitalized
                costs of:Proved
                properties being amortized
            
            **$**
            **534,937**
            
            $
            181,778Undeveloped
                land not being amortized
            
            
            **71,666**
            
            
            3,430Total
                capitalized costs
            
            
            **606,603**
            
            
            185,208Less
                accumulated depletion, depreciation, andamortization
            
            
            **(177,925**
            **)**
            
            (67,268
            )Net
                Capitalized costs
            
            **$**
            **428,678**
            
            $
            117,940





The
      following costs were incurred in oil and gas-producing activities during the
      years ended December 31, 2005 and 2004:


**2005**
            
            2004Property
                acquisition costs:(1)Proved
                properties
            
            **$**
            **271,191**
            
            $
            45,265Unproved
                properties
            
            
            **127,103**
            
            
            8,062Exploration
                costs
            
            
            **-**
            
            
            4,289Development
                costs
            
            
            **23,101**
            
            
            8,800Total
                costs incurred
            
            **$**
            **421,395**
            
            $
            66,416


(1) Includes
      costs related to corporate acquisitions .










**Enterra
          Energy Trust**
 **Notes
          to Consolidated Financial Statements**
 As
          at
          December 31, 2005 and 2004 and for the years there ended
 (Expressed
          in Canadian Dollars)
 (Tabular
          amounts are stated in thousands of dollars except unit and per unit
          information)


**(b)**  **Reserve
      Quantity Information**





Estimated
      net quantities of proved gas and oil (including condensate) reserves at
      December 31,  2005
      and
      2004, and changes
      in the reserves during those years, are shown in the following two tables.
      Reserve volumes are reported on net of royalties basis.


**2005**
              **Net**
            
            2004
              NetProved
                developed and undeveloped reserves - Oil and NGL (mboe)At
                January 1
            
            
            **5,170**
            
            
            4,457Changes
                in reserves:Extensions,
                discoveries and other additions
            
            
            **26**
            
            
            139Revisions
                of previous estimates
            
            
            **729**
            
            
            (96
            )Production
            
            
            **(1,550**
            **)**
            
            (1,672
            )Purchases
                of oil and NGL’s in place
            
            
            **968**
            
            
            2,363Sales
                of oil in place
            
            
            **-**
            
            
            (21
            )At
                December 31
            
            
            **5,343**
            
            
            5,170Proved
                developed reserves - Oil and NGLAt
                January 1
            
            
            **5,069**
            
            
            4,457At
                December 31
            
            
            **5,197**
            
            
            5,069Proved
                developed and undeveloped reserves - Gas (mmcf)At
                January 1
            
            
            **5,502**
            
            
            4,464Changes
                in reserves:Extensions,
                discoveries and other additions
            
            
            **78**
            
            
            150Revisions
                of previous estimates
            
            
            **(3,324**
            **)**
            
            (1,002
            )Production
            
            
            **(3,738**
            **)**
            
            (1,933
            )Purchases
                of gas in place
            
            
            **36,180**
            
            
            3,822Sales
                of gas in place
            
            
            **-**
            
            
            -At
                December 31
            
            
            **34,698**
            
            
            5,502Proved
                developed reserves - GasAt
                January 1
            
            
            **5,454**
            
            
            4,464At
                December 31
            
            
            **31,266**
            
            
            5,454


Included
        in these proven reserves are gas volumes of 1,600 mmcf which are located
        in the
        U.S. cost center.





**Enterra
          Energy Trust**
 **Notes
          to Consolidated Financial Statements**
 As
          at
          December 31, 2005 and 2004 and for the years there ended
 (Expressed
          in Canadian Dollars)
 (Tabular
          amounts are stated in thousands of dollars except unit and per unit
          information)





**(c)**  **Standardized
      Measure of Discounted Future Net Cash Flows and Changes
      Therein**





The
      following tabulation has been prepared in accordance with the FASB’s rules for
      disclosure of a standardized measure of discounted future net cash flows
      relating to proved gas and oil reserve quantities owned by the
      Trust.


**2005**
            
            2004Future
                cash inflows(1)
            
            **$**
            **801,333**
            
            $
            260,750Less:Future
                development costs
            
            
            **(7,184**
            **)**
            
            (677
            )Future
                production, royalty and abandonment costs
            
            
            **(330,808**
            **)**
            
            (145,563
            )Future
                income tax expense
            
            
            **(80,056**
            **)**
            
            (18,272
            )Future
                cash flows
            
            
            **383,285**
            
            
            96,238Less
                annual discount (10% a year)
            
            
            **(96,508**
            **)**
            
            (15,118
            )Standardized
                measure of discounted future net cash flows
            
            **$**
            **286,777**
            
            $
            81,120


(1)  Amounts
      exclude the effect of derivative instruments designated as hedges of future
      sales of production at year end.





I n
      the
      foregoing determination of future cash inflows, sales prices for gas and oil
      were based on contractual arrangements or market prices at year-end. Future
      costs of developing and producing the proved gas and oil reserves reported
      at
      the end of each year shown were based on costs determined at each such year
      end,
      assuming the continuation of existing economic conditions. Future income taxes
      were computed by applying the appropriate year-end or future statutory tax
      rate
      to future pretax net cash flows, less the tax basis of the properties involved,
      and giving effect to tax deductions, permanent differences and tax
      credits.





It
      is not
      intended that the FASB’s standardized measure of discounted future net cash
      flows represent the fair market value of the Trust’s proved reserves. The Trust
      cautions that the disclosures shown are based on estimates of proved reserve
      quantities and future production schedules that are inherently imprecise and
      subject to revision, and the 10 percent discount rate is arbitrary. In addition,
      costs and prices as of the measurement date are used in the determinations,
      and
      no value may be assigned to probable or possible reserves.










**Enterra
          Energy Trust**
 **Notes
          to Consolidated Financial Statements**
 As
          at
          December 31, 2005 and 2004 and for the years there ended
 (Expressed
          in Canadian Dollars)
 (Tabular
          amounts are stated in thousands of dollars except unit and per unit
          information)


The
      following tabulation is a summary of changes between the total standardized
      measure of discounted future net cash flows at the beginning and end of each
      year.


**2005**
            
            2004Standardized
                measure of discounted future net cash flows at January 1
            
            **$**
            **81,120**
            
            $
            90,559Changes
                in the year resulting from:Sales
                and transfers of oil and gas produced during the year, net of production
                costs
            
            
            **(89,044**
            **)**
            
            (60,274
            )Net
                change in sales and transfer prices, net of production
                costs
            
            
            **107,194**
            
            
            7,140Extensions,
                discoveries and other additions, net of future production and development
                cost
            
            
            **1,024**
            
            
            4,244Change
                in estimated future development costs
            
            
            **(21,869**
            **)**
            
            488Development
                costs incurred during the year
            
            
            **23,101**Revisions
                of previous quantity estimates
            
            
            **5,576**
            
            
            314Accretion
                of discount
            
            
            **8,112**
            
            
            9,056Net
                change in income taxes
            
            
            **(39,068**
            **)**
            
            (2,174
            )Purchases
                of proved reserves in place (1)
            
            
            **210,631**
            
            
            32,179Sales
                of proved reserves in place
            
            
            **-**
            
            
            (412
            )Standardized
                measure of discounted future net cash flows at December 31
            
            **$**
            **286,777**
            
            $
            81,120


(1)
        Excludes the value associated with undeveloped properties and
        land.