EXHIBIT 1
                                                                       ---------



                                ARC ENERGY TRUST



                          2003 ANNUAL INFORMATION FORM



                                  APRIL 8, 2004



<PAGE>

                                TABLE OF CONTENTS

                                                                            PAGE

GLOSSARY OF TERMS..............................................................1
ARC ENERGY TRUST...............................................................5
   General.....................................................................5
   General Development of the Business.........................................5
   Trends......................................................................7
BUSINESS OF THE TRUST..........................................................8
   Overview....................................................................8
   Structure of the Trust......................................................8
   Management Policies and Acquisition Strategy................................9
   Cash Distributions of Distributable Income and Distribution Policy.........10
   Potential Acquisitions.....................................................10
STATEMENT OF RESERVES DATA AND OTHER OIL AND GAS INFORMATION..................11
   Disclosure of Reserves Data................................................11
   Reserves Data (Constant Prices and Costs)..................................12
   Reserves Data (Forecast Prices and Costs)..................................14
   Notes to Reserve Data Tables:..............................................16
   Reconciliations of Changes in Reserves and Future Net Revenue..............21
   Additional Information Relating to Reserves Data...........................24
   Other Oil and Gas Information..............................................25
   Marketing Arrangements.....................................................32
   Acquisitions and Dispositions..............................................32
RECENT DEVELOPMENTS...........................................................32
SHARE CAPITAL OF ARC RESOURCES................................................33
   Common Shares..............................................................33
   Exchangeable Shares........................................................33
   Second Preferred Shares....................................................34
OTHER INFORMATION RESPECTING ARC RESOURCES AND ARC SASK.......................35
   Additional Properties......................................................35
   Capital Expenditures.......................................................35
   Deferred Purchase Price Obligation.........................................35
   Borrowing..................................................................36
   Escrow Agreements..........................................................36
   Insurance..................................................................37
   Retention Bonuses and Executive Employment Agreements......................37
INFORMATION RELATING TO THE TRUST.............................................37
   Trust Units................................................................37
   Special Voting Unit........................................................37
   the Trust Indenture........................................................38
   Trustee....................................................................38
   Future Offerings...........................................................39
   Meetings and Voting........................................................39
   Management of the Trust....................................................39
   Arc Financial Advisory Agreement...........................................39
   Limitation On Non-resident Ownership.......................................40
   Right of Redemption........................................................40
   Termination of the Trust...................................................41

<PAGE>

                                       ii


   Reporting to Unitholders...................................................41
   Distribution Reinvestment and Optional Trust Unit Purchase Plan............41
   Unitholder Rights Protection Plan..........................................41
CORPORATE GOVERNANCE..........................................................42
   General....................................................................42
   Trust Indenture............................................................42
   Decision Making............................................................42
   Board of Directors of Arc Resources........................................43
CONFLICTS OF INTEREST.........................................................46
SELECTED CONSOLIDATED FINANCIAL INFORMATION...................................46
DISTRIBUTIONS TO UNITHOLDERS..................................................47
MANAGEMENT'S DISCUSSION AND ANALYSIS..........................................47
INDUSTRY REGULATIONS..........................................................47
   Pricing and Marketing Oil and Natural Gas..................................47
   the North American Free Trade Agreement....................................48
   Provincial Royalties and Incentives........................................48
   Land Tenure................................................................49
   Environmental Regulation...................................................49
QUARTERLY FINANCIAL INFORMATION...............................................50
MARKET FOR SECURITIES.........................................................50
RISK FACTORS..................................................................50
   Purchase of Properties.....................................................50
   Reserve Estimates..........................................................51
   Volatility of Oil and Natural Gas Prices...................................51
   Variations in Interest Rates and Foreign Exchange Rates....................51
   Changes in Legislation.....................................................52
   Maintenance of Distributions...............................................52
   Operational Matters........................................................53
   Expansion of Operations....................................................53
   Non-resident Ownership of Trust Units......................................53
   Accounting Write-downs as a Result of Gaap.................................54
   Environmental Concerns.....................................................54
   Debt Service...............................................................54
   Delay in Cash Distributions................................................55
   Reliance On Management.....................................................55
   Depletion of Reserves......................................................55
   Net Asset Value............................................................56
   Additional Financing.......................................................56
   Competition................................................................56
   Return of Capital..........................................................56
   Nature of Trust Units......................................................57
   Unitholder Limited Liability...............................................57
ADDITIONAL INFORMATION........................................................58

APPENDIX "A"  -  CONSOLIDATED FINANCIAL STATEMENTS OF STAR OIL & GAS LTD.
APPENDIX "B"  -  PRO FORMA FINANCIAL STATEMENTS OF THE TRUST
APPENDIX "C"  -  REPORT ON RESERVES DATA BY INDEPENDENT QUALIFIED RESERVES
                 EVALUATOR
APPENDIX "D"  -  REPORT OF MANAGEMENT AND DIRECTORS ON
                 RESERVES DATA AND OTHER INFORMATION

<PAGE>

                                      iii


ABBREVIATIONS AND CONVERSIONS

<TABLE>
<CAPTION>
<S>        <C>                                                     <C>         <C>
bbl        barrel                                                  mbbl        one thousand barrels
bbl/d      barrels per day                                         mboe        one thousand barrels of oil
                                                                               equivalent
bcf        billion cubic feet                                      mcf         one thousand cubic feet
boe        barrels of oil equivalent converting 6 mcf of           mcf/d       one thousand cubic feet per day
           natural gas or one barrel of natural gas liquids        MMBTU       one million British Thermal Units
           to one barrel of oil equivalent                         mmcf        one million cubic feet
boe/d      barrels of oil equivalent per day                       mmcf/d      one million cubic feet per day
                                                                   $MM         one million dollars
                                                                   mmbbl       one million barrels
</TABLE>

Boes may be misleading, particularly if used in isolation. A boe conversion
ratio of 6 mcf is based on an energy equivalency conversion method primarily
applicable at the burner tip and does not represent a value equivalency at the
wellhead.

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

    To Convert From            To                     Multiply By
    ---------------            --                     -----------
    cubic metres               cubic feet             35.315
    bbls                       cubic metres           0.159
    cubic metres               bbls                   6.290
    feet                       metres                 0.305
    metres                     feet                   3.281
    miles                      kilometres             1.609
    kilometers                 miles                  0.621
    acres                      hectares               0.4047
    hectares                   acres                  2.471

All dollar amounts set forth in this Annual Information Form are in Canadian
dollars, except where otherwise indicated.

ADVISORY

In the interest of providing the Unitholders and potential investors of ARC
Energy Trust (the "Trust") with information regarding the Trust and its
subsidiaries, including ARC Resources Ltd. ("ARC Resources"), including
management's assessment of the Trust's future plans and operations, this Annual
Information Form contains or incorporates by reference forward-looking
information that represents the Trust's internal projections, expectations,
estimates or beliefs concerning, among other things, future operating results
and various components thereof or the Trust's future economic performance. The
projections, expectations, estimates and beliefs contained in such
forward-looking statements necessarily involve known and unknown risks and
uncertainties which may cause the Trust's actual performance and financial
results in future periods to differ materially from any projections,
expectations, estimates and beliefs of future performance or results expressed
or implied by such forward-looking statements. These risks and uncertainties
include, among other things, such risk and uncertainties described in this
Annual Information Form and in documents incorporated by reference into this
Annual Information Form and the Trust's other reports and filings with the
Canadian securities authorities. Accordingly, Unitholders and potential
investors are cautioned that events or circumstances could cause actual results
to differ materially from those predicted.

NEITHER THE TRUST NOR ARC RESOURCES UNDERTAKES ANY OBLIGATIONS TO PUBLICLY
REVISE THESE FORWARD-LOOKING STATEMENTS TO REFLECT SUBSEQUENT EVENTS OR
CIRCUMSTANCES.

<PAGE>


                                GLOSSARY OF TERMS

In this Annual Information Form, the following terms shall have the meanings set
forth below, unless otherwise indicated:

"AFFILIATE" has the meaning ascribed thereto in the BUSINESS CORPORATIONS ACT
(Alberta);

"ANNUAL MEETING 2004 INFORMATION CIRCULAR" means the Information Circular -
Proxy Statement of the Trust dated March 31, 2004 for the annual meeting of the
Trust to be held on May 12, 2004;

"ARC RESOURCES EXCHANGE RATIO", at any time and in respect of each ARC Resources
Exchangeable Share, was initially equal to one and was 1.49013 as at December
31, 2003, and shall be increased on each Cash Distribution Date by an amount,
rounded to the nearest five decimal places, equal to a fraction having as its
numerator the Distribution, expressed as an amount per Trust Unit, paid on that
Cash Distribution Date, and having as its denominator the current market price
(10 day weighted average trading price) on the first business day following the
Record Date for such Distribution and shall be reduced on each Dividend Record
Date by an amount, rounded to the nearest five decimal places, equal to a
fraction having as its numerator the dividend declared on that Dividend Record
Date, expressed as an amount per ARC Resources Exchangeable Share, and having as
its denominator the current market price on the date that is seven business days
prior to that Dividend Record Date;

"ARC RESOURCES" means ARC Resources Ltd., a subsidiary of the Trust;

"ARC SASK." means ARC (Sask.) Energy Trust, a trust formed under the laws of
Alberta;

"ARC SUBCO" means 908563 Alberta Ltd., a wholly-owned subsidiary of the Trust;

"ARML" or the "MANAGER" means, as the context requires: (i) the corporation
named ARC Resources Management Ltd., all of whose shares were acquired by 980445
Alberta Ltd. on August 28, 2002 pursuant to the Internalization Transaction and
which was subsequently amalgamated with its then parent, 980445 Alberta Ltd., a
wholly-owned subsidiary of the Trust, on August 29, 2002; or (ii) the
corporation named ARC Resources Management Ltd., which corporation is the
continuing entity resulting from the amalgamation on August 29, 2002, of 980445
Alberta Ltd. and its then wholly-owned subsidiary, ARC Resources Management Ltd.
or (iii) following the Exchangeable Share reorganization on May 16, 2003, a
wholly-owned subsidiary of ARC Resources, which was subsequently wound up into
ARC Resources;

"ARML EXCHANGEABLE SHARES" means non-voting exchangeable shares in the capital
of ARML;

"ARML OFFICERS" means Doug J. Bonner, David P. Carey, John P. Dielwart, Susan D.
Healy, Steven W. Sinclair and Myron J. Stadnyk;

"ARRANGEMENT" means the business combination of ARC Resources and Startech as
described under "ARC Energy Trust - General Development of the Business";

"ARTC" means Alberta Royalty Tax Credit;

"CASH DISTRIBUTION DATE" means the date Distributable Income is paid to
Unitholders, being the 15th day following any Record Date (or if such day is not
a business day, on the next business day);

"COGE HANDBOOK" means the Canadian Oil and Gas Evaluation Handbook prepared
jointly by the Society of Petroleum Evaluation Engineers (Calgary chapter) and
the Canadian Institute of Mining, Metallurgy & Petroleum;

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                                       2


"COMPANY INTEREST" or "COMPANY INTEREST" means, in relation to ARC Resources'
interest in reserves and production, ARC Resources' interest (operating and
non-operating) share before deduction of royalty obligations, plus ARC
Resources' royalty interest in reserves and production;

"DEFERRED PURCHASE PRICE OBLIGATION" means the ongoing obligation of the Trust
to pay to ARC Resources and ARC Sask. an amount equal to 99% of the cost of, or
any amount borrowed to acquire, any additional "Canadian resource property" (as
defined in the Tax Act) acquired by ARC Resources and ARC Sask. and of the cost
of, or any amount borrowed to fund, "Canadian Development Expense" and "Canadian
Exploration Expense" (both as defined in the Tax Act);

"DISTRIBUTABLE INCOME" means, for any particular period, the Royalties, other
income from permitted investments (including the Long Term Notes) and ARTC, if
any, received by the Trust less the Trust's share of Crown royalties (other than
Crown royalties which are deducted in the computation of the Royalties) and
direct expenses of the Trust;

"DISTRIBUTION" means a distribution paid by the Trust in respect of the Trust
Units, expressed as an amount per Trust Unit;

"DIVIDEND RECORD DATE" has the meaning given to that term in the Exchangeable
Share Provisions;

"ESCROW AGREEMENTS" means the escrow agreements dated August 28, 2002, among
certain holders of Trust Units and Exchangeable Shares, 980445 Alberta Ltd., the
Trust and Computershare Trust Company of Canada providing for the escrow of
Trust Units and Exchangeable Shares on the terms described in "Other Information
Respecting ARC Resources and ARC Sask. - Escrow Agreements";

"EXCHANGEABLE SHARE PROVISIONS" means the rights, privileges, restrictions and
conditions attaching to the Exchangeable Shares as set forth in the Articles of
ARC Resources;

"EXCHANGEABLE SHARE SUPPORT AGREEMENT" means the amended and restated support
agreement dated May 16, 2003 among the Trust, ARC Resources, ARC Subco and
Computershare Trust Company of Canada;

"EXCHANGEABLE SHARE VOTING AND EXCHANGE TRUST AGREEMENT" means the amended and
restated agreement dated May 16, 2003 among the Trust, ARC Subco, ARC Resources
and Computershare Trust Company of Canada;

"EXCHANGEABLE SHARES" means the non-voting exchangeable shares in the capital of
ARC Resources;

"EXCHANGEABLE SHARES TRANSFER AGENT" means Computershare Trust Company of
Canada;

"GILBERT" means Gilbert Laustsen Jung Associates Ltd., independent petroleum
consultants of Calgary, Alberta;

"GILBERT REPORT" means the report prepared by Gilbert dated February 5, 2004
evaluating the crude oil, natural gas, natural gas liquids and sulphur reserves
attributable to the Properties at January 1, 2004;

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                                       3


"GROSS" or "GROSS" means:

         (a)      in relation to ARC Resources' interest in production and
                  reserves, its "Corporation gross reserves", which are ARC
                  Resources' interest (operating and non-operating) share before
                  deduction of royalties and without including any royalty
                  interest of ARC Resources;

         (b)      in relation to wells, the total number of wells in which ARC
                  Resources has an interest; and

         (c)      in relation to properties, the total area of properties in
                  which ARC Resources has an interest;

"INTERNALIZATION TRANSACTION" means the transaction encompassing the indirect
purchase by the Trust of all of the ARML shares and related transactions as
described under "ARC Energy Trust - General Development of the Business";

"LONG TERM NOTES" means the long term notes issued by ARC Resources to the Trust
from time to time. Interest on the notes is payable approximately 15 years after
the issuance of the long term notes;

"NET" or "NET" means:

         (a)      in relation to ARC Resources' interest in production and
                  reserves, its "Corporation net reserves", which are ARC
                  Resources' interest (operating and non-operating) share after
                  deduction of royalties obligations, plus ARC Resources'
                  royalty interest in production or reserves;

         (b)      in relation to wells, the number of wells obtained by
                  aggregating ARC Resources' working interest in each of its
                  gross wells; and

         (c)      in relation to ARC Resources' interest in a property, the
                  total area in which ARC Resources has an interest multiplied
                  by the working interest owned by ARC Resources;

"NI 51-101" means National Instrument 51-101 Standards of Disclosure for Oil and
Gas Activities;

"PROPERTIES" means the working, royalty or other interests of ARC Resources and
ARC Sask. from time to time in any petroleum and natural gas rights, tangibles
and miscellaneous interests, including additional properties which may be
acquired by ARC Resources or ARC Sask. at a future date;

"RECORD DATE" means the last business day of each month;

"RESERVE LIFE INDEX" is an index reflecting the theoretical production life of a
property if the remaining reserves were to be produced out at current production
rates. The index is calculated by dividing the reserves in the selected reserve
category at a certain date by the estimated production for the following 12
month period;

"RETENTION BONUSES" means bonuses in the aggregate amount of $5,000,000 declared
by the board of directors of ARML on August 28, 2002, to the former ARML
Officers;

"ROYALTIES" means, collectively, the royalties payable by ARC Resources and ARC
Sask. to the Trust pursuant to the Royalty Agreements which equal 99% of Royalty
Income;

<PAGE>

                                       4


"ROYALTY AGREEMENTS" means, collectively, the agreements regarding the grant of
the Royalties made as of July 1, 2002, between each of ARC Resources and ARC
Sask. and Computershare Trust Company of Canada, as trustee for and on behalf of
the Trust;

"ROYALTY INCOME" in respect of any period for which Royalty Income is calculated
for the Royalties means: (a) the amount received in such period in respect of
the sale of petroleum, natural gas and related hydrocarbons collected from the
Properties held by ARC Resources or ARC Sask. (including the share reserved to
the Crown) and any other revenue received in such period other than the proceeds
from the sale of the Properties; less (b) all costs and expenses (including both
operating costs, capital costs and debt service charges) in respect of the
Properties held by ARC Resources or ARC Sask. (except to the extent that such
costs or expenses are funded by borrowing and in the case of capital costs
except to the extent designated as Deferred Purchase Price Obligations);

"SHARE SALE AGREEMENT" means the agreement dated March 31, 2003, among United
Energy, LLC, ARC Resources and the Trust pursuant to which ARC Resources agreed
to purchase and United Energy, LLC agreed to sell all of the outstanding shares
of Star;

"SPECIAL DEBENTURE" means the special 8% special adjustable convertible
subordinated debenture dated April 16, 2003, in the principal amount of
$320,000,000 delivered by the Trust pursuant to the Share Sale Agreement in
partial payment of the purchase price payable thereunder;

"SPECIAL RESOLUTION" means a resolution passed by a majority of not less than 66
2/3 % of the votes cast, either in person or by proxy, at a meeting of
Unitholders, called for the purpose of approving such resolution, or approved in
writing by the holders of not less than 66 2/3% of the Trust Units entitled to
be voted on such resolution;

"STAR" means Star Oil & Gas Ltd.;

"TAX ACT" means the INCOME TAX ACT (Canada) and the regulations thereunder;

"TRUST INDENTURE" means the trust indenture dated May 7, 1996 as amended and
restated as of May 16, 2003 between the Trustee and ARC Resources;

"TRUST UNITS" means the units of the Trust, each unit representing an equal
undivided beneficial interest therein;

"TRUST" means ARC Energy Trust;

"TRUSTEE" means Computershare Trust Company of Canada, the trustee of the Trust;

"TSX" means the Toronto Stock Exchange;

"UNDERLYING DEBENTURES" means up to $320,000,000 principal amount of 8%
adjustable convertible unsecured subordinated debentures due June 30, 2008
issuable on the conversion or deemed exercise of the Special Debenture; and

"UNITHOLDERS" means holders of Trust Units of the Trust.

Certain other terms used in this Annual Information Form but not defined herein
are defined in NI 51-101 and, unless the context otherwise requires, shall have
the same meanings herein as in NI 51-101.

<PAGE>

                                       5


                                ARC ENERGY TRUST

GENERAL

The Trust is an open-end investment trust created on May 7, 1996 under the laws
of the Province of Alberta pursuant to the Trust Indenture. The Trust Indenture
has been amended from time to time, the latest material amendments being
approved at the annual and special meeting of Unitholders held April 17, 2003,
which included an amendment to eliminate the delegation of responsibilities and
powers of the Trustee to the Manager and to delegate to ARC Resources all of the
matters formerly delegated to the Manager. Computershare Trust Company of Canada
has been appointed as trustee under the Trust Indenture. The beneficiaries of
the Trust are holders of the Trust Units. The principal and head office of the
Trustee is located at Suite 600, 530 8th Avenue SW., Calgary, Alberta, T2P 3S8.

ARC Resources was incorporated under the BUSINESS CORPORATIONS ACT (Alberta) on
January 22, 1996 and was amalgamated with Orion Energy Holdings Inc. and Pencor
Petroleum Limited on March 31, 1999, and subsequently amalgamated with Startech
and ARC Resources Finance Ltd. on January 31, 2001. On December 31, 2002, ARC
Resources amalgamated with its wholly-owned subsidiaries, Erehwon Exploration
Ltd., Erex Inc. and Far Point Energy Corporation, and on April 16, 2003,
amalgamated with its wholly-owned subsidiary, Star. All of the issued and
outstanding shares of ARC Resources are held by the Trust except for the
Exchangeable Shares. The business of ARC Resources is the acquisition,
development, exploitation, and disposition of all types of petroleum and natural
gas and energy related assets, including conventional oil and gas assets, oil
sands interest, electricity or power generating assets and pipeline, gathering
and transportation assets. The head and principal office of ARC Resources is
located at Suite 2100, 440 - 2nd Avenue S.W., Calgary, Alberta T2P 5E9.

GENERAL DEVELOPMENT OF THE BUSINESS

The following is a description of the equity offerings of the Trust completed
over its last three completed financial years.

<TABLE>
<CAPTION>
                                   Trust Units
Closing Date    Prospectus Date       Issued       Issue Price  Gross Proceeds            Use of Proceeds
------------    ---------------    -----------     -----------  --------------   -----------------------------------
<S>             <C>                <C>             <C>          <C>              <C>
5-Nov-01         29-Oct-01         8,050,000        $11.00       $88,550,000     2001 Q4 and 2002 capital
                                                                                 expenditures

3-Jun-02         22-May-02         10,000,000       $12.05       $120,500,000    Fund a crude oil and natural gas
                                                                                 property acquisition and repay
                                                                                 outstanding indebtedness

25-Feb-03        13-Feb-03         12,500,000       $11.50       $143,750,000    Repay outstanding indebtedness and
                                                                                 partially fund 2003 capital program

17-Nov-03        10-Nov-03         14,500,000       $13.40       $194,300,000    Repay outstanding indebtedness and
                                                                                 partially fund 2004 capital program
</TABLE>

The following is a description of the general development of the business of the
Trust over its last three completed financial years.

The Trust, ARC Resources, Startech Energy Inc. and Impact Energy Inc. entered
into an agreement as of December 20, 2000 which provided for the acquisition by
ARC Resources of all of the issued and outstanding shares of Startech in
exchange for, at the option of each holder of Startech shares, either 0.96 Trust
Units or 0.96 Exchangeable Shares (to a maximum of 15,000,000 Exchangeable
Shares) plus one common share of Impact Energy Inc. for each Startech share. The
Arrangement was approved by the shareholders of Startech on January 25, 2001 and
was completed on January 31, 2001 on the basis that ARC Resources acquired all
of the issued and outstanding shares of Startech in consideration of the
issuance of approximately 22.6 million Trust Units and approximately 7.4 million
Exchangeable Shares to holders of Startech shares. ARC Resources also assumed
approximately $168 million of bank

<PAGE>

                                       6


indebtedness. Concurrently, ARC Resources amalgamated with Startech and ARC
Resources' wholly-owned subsidiary, ARC Resources Finance Ltd. In connection
with the Arrangement, ARC Resources issued the Long Term Notes in the principal
amount of approximately $352 million to the Trust. The reserves attributable to
the properties as at January 1, 2001 were 58.3 million boe on the basis of
proven reserves plus probable reserves risked at 50 per cent. The properties
acquired consisted of two major and 14 minor producing oil and gas properties
principally located in Alberta and Saskatchewan. The Reserve Life Index was 10.2
years for the proven reserves plus probable reserves risked at 50 per cent.

Effective February 1, 2001, a number of transactions involving the Trust, ARC
Resources and ARC Sask. were completed pursuant to which ARC Resources disposed
of the oil and gas properties located in the Province of Saskatchewan which were
formerly held by Startech to ARC Sask., ARC Sask. granted a 99% royalty to ARC
Resources, such royalty was assigned by ARC Resources to the Trust and the Long
Term Notes were reduced by the fair market value of such royalty.

On August 28, 2002, the Internalization Transaction was approved by the
Unitholders of the Trust at a special meeting, resulting in a wholly-owned
subsidiary of the Trust, 980445 Alberta Ltd., acquiring all of the common shares
of ARML in exchange for $4,247,658 in cash, the assumption of the obligation of
ARML to pay Retention Bonuses in the aggregate amount of $5,000,000 over a
period of five years, 298,648 Trust Units and 3,281,279 ARML Exchangeable
Shares. As part of the transaction, an aggregate 9,013 Trust Units and 2,008,699
ARML Exchangeable Shares were placed in escrow in accordance with the terms of
Escrow Agreements. In addition, ARC Financial Corporation agreed to provide
certain ongoing research and strategic services to the Trust for a five year
period without cost to the Trust. Thereafter, unitholders are entitled to select
all of the members of the Board of Directors. On August 29, 2002, 980445 Alberta
Ltd. amalgamated with its then wholly-owned subsidiary, ARML, and the
amalgamated company continued under the name "ARC Resources Management Ltd.".

On October 18, 2002 ARC Resources issued U.S. $30 million of 4.94% Senior
Secured Notes with principal payments due on October 19 in each of 2006, 2007,
2008, 2009 and 2010 to a U.S. Financial institution pursuant to an Uncommitted
Master Shelf Agreement dated November 16, 2000 which, as at October 18, 2002,
also provided for the issuance of up to an additional U.S. $35 million principal
amount of notes at rates and maturity dates to be agreed upon.

On March 31, 2003, the Trust and ARC Resources, as purchaser, entered into the
Share Sale Agreement with United Energy LLC, as vendor, under which the Trust
indirectly acquired all the shares of Star for $710,000,000 (before closing
adjustments) effective January 1, 2003, paid by issuance of the Special
Debenture in the principal amount of $320,000,000 and the repayment of an
aggregate of $187,372,000 of corporate and shareholder debt and $202,628,000 in
cash. ARC Resources concurrently agreed to sell its interest in certain
producing properties and undeveloped acreage to third parties for $78,200,000.
ARC Resources and ARC Sask. increased their aggregate credit facilities to
$650,000,000 to finance the transaction, which closed on April 16, 2003. Star
operated approximately 75% of its production, its six largest properties
comprised approximately 72% of its production, and approximately 78% of its
proven reserves were gas reserves. Star's primary producing areas were the
Dawson, Pouce Coupe and Hatton gas fields located in British Columbia, Alberta
and Saskatchewan, respectively. In 2002, production from the properties acquired
was approximately 20,151 boe/d, comprised of 6,634 boe/d of oil and natural gas
liquids and 81.1 mmcf/d of natural gas. The reserves attributed to the Star
properties as at January 1, 2003 were 67.1 million of barrels of oil equivalent
and 80.5 million of barrels of oil equivalent for total proved reserves and for
total established reserves (proved reserves plus probable reserves risked at
50%), respectively. Consolidated financial statements of Star for the years
ended December 31, 2002, 2001 and 2000 are contained in this Annual Information
Form. A pro forma income statement of the Trust for the year ended December 31,
2003 is also contained in this Annual Information Form.

<PAGE>

                                       7


On May 16, 2003, the Trust completed a merger of two of its wholly-owned
subsidiaries, ARC Resources and ARML. ARC Resources acquired all of the
outstanding ARML Exchangeable Shares in exchange for Exchangeable Shares.
Pursuant to the share exchange, holders of ARML Exchangeable Shares received
0.80676 Exchangeable Shares, which number of Exchangeable Shares, on the
effective date of the share exchange, entitled the former holders of ARML
Exchangeable Shares to receive the same number of Trust Units that such holders
would have received if they had exercised their right, immediately prior to the
share exchange, to receive Trust Units of the Trust. Then ARC Resources acquired
all of the outstanding common shares of ARML in exchange for the issuance to the
Trust of common shares of ARC Resources. ARML was subsequently dissolved. Each
of the Exchangeable Share Support Agreement and the Exchangeable Share Voting
and Exchange Trust Agreement were amended so as to apply to all Exchangeable
Shares, including the Exchangeable Shares which were issued to former holders of
ARML Exchangeable Shares pursuant to the share exchange.

On May 30, 2003, United ARC L.P. converted $200,000,000 principal amount of the
Special Debenture into an equal principal amount of Underlying Debentures and
then converted on such date all such Underlying Debentures into 16,891,891 Trust
Units at a conversion price of $11.84 per Trust Unit. On June 10, 2003, United
ARC L.P. converted the remaining portion ($120,000,000 principal amount) of the
Special Debenture into $120,000,000 principal amount of Underlying Debentures.
On June 10, 2003 United ARC L.P. then sold the 16,891,891 Trust Units and the
$120,000,000 principal amount of Underlying Debentures held by it pursuant to
underwritten secondary offerings, both of which were qualified by short form
prospectuses dated June 3, 2003. Upon the completion of the secondary offerings,
United ARC L.P. did not own any securities of the Trust. The Trust did not
receive any proceeds from either of the secondary offerings. On August 1, 2003,
the Trust announced that the remaining $120,000,000 principal amount of
Underlying Debentures had been converted into 10,135,131 Trust Units.

On August 15, 2003, ARC Resources completed dispositions of non core assets to
third parties for approximately $77,000,000. Net production to ARC Resources
from these properties was approximately 3,700 boe/d and established reserves at
January 1, 2003 were 9.3 million boe of which 40% were crude oil and natural gas
liquids. Concurrent with the disposition, the Trust's borrowing base was lowered
from $650,000,000 to $620,000,000. Proceeds from the disposition were used to
reduce the Trust's outstanding indebtedness.

For information in respect of material developments in the business of ARC
Resources and the Trust since December 31, 2003, see "Recent Developments".

TRENDS

There are a number of trends in the oil and gas industry that are shaping the
near term future of the business. The first trend has been the continuation of
oil and gas companies converting to royalty trusts. These conversions occur
because the equity markets generally value trusts at higher multiples than
exploration and development firms. The conversion announcement often results in
the appreciation of its share price to premiums equivalent to other trusts.
Including recent conversions approximately half of the top 30 publicly listed
oil and gas issuers on the TSX are now trusts.

Efforts of trusts to replace annual production declines have resulted in
continued high levels of competition for the acquisition of oil and gas
properties and related assets. This increased competition has raised valuation
parameters for corporate and asset acquisitions. Those trusts with opportunities
to economically replace production through internal development drilling should
be in a favourable position relative to those more exposed to replacing
production through acquisitions.

<PAGE>

                                       8


Another trend is the continuing volatility of commodity prices. Oil inventories
experienced a significant drawdown in 2003 and the rate of recovery will largely
be dependent on weather, Iraq's export recovery and OPEC's discipline. As long
as inventories remain low the high crude oil prices the industry experienced
over the past year could continue. Natural gas inventories are at more normal
levels; however, natural gas prices tend to be more volatile than oil prices due
to supply and demand changes. As weather is a key factor in determining gas
demand, future gas prices are highly unpredictable.

Although commodity prices are higher than historical levels, the appreciation of
the Canadian dollar in 2003 relative to its US counterpart has offset a portion
of the economic benefit of higher prices on Canadian oil and gas producers
including trusts. The stronger Canadian dollar may result in decreased revenues
in 2004 for oil and gas producers on a per barrel basis increasing pressure on
the royalty trusts' ability to maintain current distribution levels.

                              BUSINESS OF THE TRUST

OVERVIEW

The principal investments of the Trust are the Royalties granted by ARC
Resources and by ARC Sask. pursuant to the Royalty Agreements, the common shares
of ARC Resources, the Long Term Notes and the common shares of ARC Canadian Oil
& Gas Ltd. The Trust's investments in Royalties and Long Term Notes are made in
order to finance oil and gas acquisitions made by ARC Resources and ARC Sask.
The Royalties consist of a 99% share of Royalty Income on all of the Properties
held by ARC Resources and Arc Sask. Any income derived from the Properties held
by ARC Resources or ARC Sask. which are not working interests in "Canadian
resource properties" (as defined in the Tax Act) or which do not relate to
production from working interests in "Canadian resource properties" or ARTC
received by ARC Resources with respect to payment of Crown Royalties, will not
be included as Royalty Income and will be used to defray other expenses and
capital expenditures of ARC Resources or ARC Sask. On each Cash Distribution
Date, ARC Resources and ARC Sask. pay the Trust 99% of royalty income and ARC
Resources pays interest on the Long Term Notes. The Trust will make cash
distributions of such funds, subject only to the required deductions and
expenses of the Trust. Such cash distributions may be wholly or in part taxable.
See "Distributions to Unitholders".

STRUCTURE OF THE TRUST

The Trust is structured with the objective of having income tax incurred only in
the hands of the Unitholders. Distributable Income received by Unitholders
consists essentially of the operating cash flow generated by the oil and natural
gas properties of ARC Resources and ARC Sask. More specifically, internally
generated cash flow, with the exception of cash flow used for capital
expenditures, reclamation fund contributions and debt repayments, is effectively
returned to the Unitholders.

The scope of the business of the Trust includes the acquisition and holding of
royalties on petroleum and natural gas properties and related assets and the
investment in securities of a company or other subsidiaries of the Trust to fund
the acquisition, development, exploitation and disposition of all types of
energy business related assets, including petroleum and natural gas related
assets, oil sands interests, electricity or power generating assets and
pipeline, gathering, processing and transportation assets. The Trust Indenture
also contemplates the issuance of securities of ARC Resources or an affiliate of
ARC Resources which are exchangeable for Trust Units and to confer upon such
securities voting rights in the Trust. The Trust will not directly carry on the
oil and gas business or any other business.

The Trust is an open-ended investment trust. The Trust Indenture contains rights
attached to Trust Units entitling a Unitholder to require the Trust at any time
on the demand of the Unitholder to redeem his or her Trust Units. As with most
other open-end funds, it is anticipated that trading on the TSX and not the

<PAGE>

                                       9


right of retraction would continue as the primary mechanism for Unitholders to
dispose of their Trust Units. For more detailed information regarding the right
of redemption, see "Information Relating to the Trust - Right of Redemption".

The structure of the Trust and the cash flows to the Trust and from the Trust to
Unitholders are set forth below:

                                  -------------
                                   Unitholders
                                  -------------
                        Trust Units |       ^ Cash Distribution
                                    |       |
                                    V       |
                              -------------------
             ---------------->  ARC Energy Trust
            |                 -------------------
            |                  |          ^   |
            |                  |          |   | Direct Interest
            |                  |          |   |     (100%)
            |                  |          |   V
            |                  |          |  -----------------
            |                  |          |  ARC Candian Oil &
            |                  |          |  Gas Ltd. (1)
            |                  |          |  -----------------
            |                  |  Direct  |     |
            |                  | Interest |     |
            |                  |  (100%)  |     |
            |                  |          |     | Direct Interest
            |                  |          |     |     (100%)
            |                  |          |     V
            |                  |          |  ------------------
            |    Royalty and   |          |  Orion Energy Trust
            |    Interest      |          |  ------------------
            |    Income        |          |            |
            V                  V          |            |
         ------------------------         |            |
         ARC Resources Ltd.(1)(2)         | Royalty    | Direct Interest
         ------------------------         | Income     |     (100%)
                                          |            V
                                       ------------------------------
                                        ARC (Sask.) Energy Trust (2)
                                       ------------------------------

Notes:

(1)      Owned by the Trust.

(2)      ARC Resources is the holder of substantially all Properties and assets
         other than the Properties and assets located in Saskatchewan which are
         held by ARC (Sask.). Properties in British Columbia are held by ARC
         Petroleum Inc. as trustee and agent of ARC Resources.

MANAGEMENT POLICIES AND ACQUISITION STRATEGY

ARC Resources manages the Trust, Orion, ARC Sask. and ARC Resources pursuant to
the delegation of responsibilities and powers by the Trustee under the Trust
Indenture

All activities undertaken by management are directed towards maximizing
Distributable Income to the Unitholders while at the same time striving for
long-term growth in the value of the assets of ARC Resources and ARC Sask. These
two objectives are fundamental to the operation of the Trust and are balanced to
maximize benefit to the Unitholders. Management directs its efforts to increase
the value of the assets of ARC Resources and ARC Sask. through the acquisition
of producing oil and gas properties. ARC Resources and ARC Sask. acquire
producing properties and participate in development activities that are
generally considered to be of a low risk nature in the oil and gas industry.
Also, a small percentage of each year's capital budget will be devoted to
moderate risk development and low risk exploration opportunities on the
Properties of ARC Resources or ARC Sask.

<PAGE>

                                       10


Management's acquisition strategy targets individual properties or groups of
properties, having regard to various factors, including the forecast internal
rate associated with such property or properties commodity price and exchange
rate expectations, the size of the interest in any single property, and the
Reserve Life Index of a property or group of properties. Management will
recommend acquisitions to the Board of Directors of ARC Resources for approval
based on the above factors in addition to management's view of the qualitative
aspects of the subject properties including risk profile, technical upside and
asset quality.

CASH DISTRIBUTIONS OF DISTRIBUTABLE INCOME AND DISTRIBUTION POLICY

Cash distributions of Distributable Income are made on the 15th day (or if such
date is not a business day, on the next business day) following the end of each
calendar month to Unitholders of record on the last business day of each such
calendar month. Royalty Income, which comprises in part Distributable Income, is
determined on a cash basis.

The Board of Directors of ARC Resources on behalf of the Trust reviews the
distribution policy from time to time. The current distribution policy allows
the use of up to 20% of cash available for distribution for capital
expenditures. Depending upon commodity prices and the size of the capital
budget, ARC Resources estimates that 20% of the cash available for distribution
will fund a significant portion of the Trust's annual capital expenditure
program, including both exploitation expenditures and minor property
acquisitions, but excluding major acquisitions. The Trust's distribution policy
includes withholding approximately $6 million per annum to contribute to the
Trust's reclamation fund to provide a cash reserve for the eventual abandonment
of oil and gas properties. The actual amount withheld is dependent on the
commodity price environment and is at the discretion of the Board of Directors.
This holdback is designed to focus on production replacement activities
partially funded by cash flow in order to enhance long-term Unitholder returns.

Distributions are normally announced on a quarterly basis in the context of
prevailing and anticipated commodity prices. During periods of volatile
commodity prices, the Trust may vary the distribution rate monthly.

POTENTIAL ACQUISITIONS

The Trust continues to evaluate potential acquisitions of all types of petroleum
and natural gas and other energy-related assets as part of its ongoing
acquisition program. The Trust is normally in the process of evaluating several
potential acquisitions at any one time which individually or together could be
material. As of the date hereof, the Trust has not reached agreement on the
price or terms of any material potential acquisition that has not been
disclosed. The Trust cannot predict whether any current or future opportunities
will result in one or more acquisitions for the Trust.

<PAGE>

                                       11


          STATEMENT OF RESERVES DATA AND OTHER OIL AND GAS INFORMATION

The statement of reserves data and other oil and gas information set forth below
(the "Statement"). The effective date of the Statement is January 1, 2004 and
the preparation date of the Statement is February 5, 2004.

DISCLOSURE OF RESERVES DATA

The reserves data set forth below (the "Reserves Data") is based upon an
evaluation by Gilbert with an effective date of January 1, 2004 contained in the
Gilbert Report dated February 5, 2004. The Reserves Data summarizes the oil,
liquids and natural gas reserves of ARC Resources and ARC Sask. (references to
ARC Resources hereafter include the aggregate of the interests of ARC Sask. and
ARC Resources) and the net present values of future net revenue for these
reserves using constant prices and costs and forecast prices and costs. The
Reserves Data conforms with the requirements of NI 51-101. Additional
information not required by NI 51-101 has been presented to provide continuity
and additional information which we believe is important to the readers of this
information. ARC Resources engaged Gilbert to provide an evaluation of proved
and proved plus probable reserves and no attempt was made to evaluate possible
reserves.

All of ARC Resources' reserves are in Canada and, specifically, in the provinces
of Alberta, British Columbia and Saskatchewan.

IT SHOULD NOT BE ASSUMED THAT THE ESTIMATES OF FUTURE NET REVENUES PRESENTED IN
THE TABLES BELOW REPRESENT THE FAIR MARKET VALUE OF THE RESERVES. THERE IS NO
ASSURANCE THAT THE CONSTANT PRICES AND COSTS ASSUMPTIONS AND FORECAST PRICES AND
COSTS ASSUMPTIONS WILL BE ATTAINED AND VARIANCES COULD BE MATERIAL. THE RECOVERY
AND RESERVE ESTIMATES OF CRUDE OIL, NATURAL GAS LIQUIDS AND NATURAL GAS RESERVES
PROVIDED HEREIN ARE ESTIMATES ONLY AND THERE IS NO GUARANTEE THAT THE ESTIMATED
RESERVES WILL BE RECOVERED. ACTUAL CRUDE OIL, NATURAL GAS AND NATURAL GAS LIQUID
RESERVES MAY BE GREATER THAN OR LESS THAN THE ESTIMATES PROVIDED HEREIN. FOR
MORE INFORMATION AS TO THE RISKS INVOLVED, SEE "RISK FACTORS - RESERVE
ESTIMATE"; AND "RISK FACTORS - VOLATILITY OF OIL AND NATURAL GAS PRICES".

Prior to 2004, reserve reports were prepared in accordance with National Policy
Statement 2-B ("NP 2B"). Reserve reports for the year ended December 31, 2003
are required to be prepared in accordance with NI 51-101. The following matters
are critical to an understanding of the oil and gas disclosure in this Annual
Information Form:

o        NI 51-101 establishes levels of certainty for proved reserves (at least
         a 90% probability that the quantities actually recovered will equal or
         exceed the estimated proved reserves) and probable reserves (at least a
         50% probability that the quantities actually recovered will equal or
         exceed the sum of the estimated proved plus probable reserves).

o        Proved plus probable reserves (under NI 51-101) replace the
         historically used description, "Established" reserves, which was proved
         plus one-half of probable reserves (under NP 2B) and which represented
         the "best estimate" of reserves at the time and accordingly
         "Established" reserves are used for all periods prior to December 31,
         2003 in this Annual Information Form for comparative purposes.

o        Prior to the implementation of NI 51-101, reporting companies reported
         and reconciled reserves on a "Company Interest" basis which included
         working interest reserves plus royalties receivable (with no deduction
         for royalties payable).

o        NI 51-101 provides for:

<PAGE>

                                       12


o        Gross Reserves -working interest reserves with no adjustment for
         royalties payable or royalties receivable

o        Net Reserves - working interest reserves plus royalties receivable and
         less royalties payable

In the result there are references to proved and probable reserves and gross
reserves and net reserves (all under NI 51-101) and to Company Interest reserves
or Company Interest Established reserves which either relate to historical
numbers prior to December 31, 2003 or have been included in relation to proven
reserves and probable reserves determined under NI 51-101 for continuity and
comparison purposes.

RESERVES DATA (CONSTANT PRICES AND COSTS)

                         SUMMARY OF OIL AND GAS RESERVES
                  AND NET PRESENT VALUES OF FUTURE NET REVENUE
                              as of January 1, 2004
                            CONSTANT PRICES AND COSTS
<TABLE>
<CAPTION>
                                                                       RESERVES
                              -----------------------------------------------------------------------------------
                                           LIGHT AND MEDIUM OIL                             HEAVY OIL
                              -----------------------------------------         ---------------------------------
                                                       NI 51-101                              NI 51-101
                                  Company        ----------------------         Company       -------------------
                                  Interest        Gross           Net           Interest      Gross         Net
RESERVES CATEGORY                  (mbbl)         (mbbl)         (mbbl)          (mbbl)       (mbbl)       (mbbl)
--------------------------       -------         -------         ------          -----        -----        ------
<S>                              <C>             <C>             <C>             <C>          <C>           <C>
PROVED
     Developed Producing          72,391          72,295         63,451          4,550        4,185         3,902
     Developed Non-Producing         913             912            771              0            0             0
     Undeveloped                  14,866          14,858         12,890            151          151           143
                                 -------         -------        -------          ------       ------       ------
TOTAL PROVED                      88,170          88,064         77,111          4,702        4,337         4,045

PROBABLE                          24,362          24,336         21,104          1,007          954           888
                                 -------         -------        -------          ------       ------       ------
TOTAL PROVED PLUS PROBABLE       112,532         112,401         98,216          5,708        5,290         4,933
                                 =======         =======         ======          =====        =====         =====

<CAPTION>
                                                                      RESERVES
                              -----------------------------------------------------------------------------------
                                               NATURAL GAS                             NATURAL GAS LIQUIDS
                              -----------------------------------------         ---------------------------------
                                                       NI 51-101                              NI 51-101
                                  Company        ----------------------         Company       -------------------
                                  Interest        Gross           Net           Interest      Gross         Net
RESERVES CATEGORY                  (mbbl)         (mbbl)         (mbbl)          (mbbl)       (mbbl)       (mbbl)
--------------------------       -------         -------         ------          -----        -----        ------
<S>                              <C>             <C>            <C>              <C>          <C>           <C>
PROVED
     Developed Producing         459,295         446,134        375,441          10,539       10,328        7,691
     Developed Non-Producing      19,763          19,740         15,309             223          222          165
     Undeveloped                 137,429         137,311        112,134           1,574        1,573        1,156
                                 -------         -------        -------          ------       ------       ------
TOTAL PROVED                     616,487         603,185        502,885          12,336       12,124        9,013

PROBABLE                         125,043         123,384        101,361           2,522        2,488        1,888
                                 -------         -------        -------          ------       ------       ------
TOTAL PROVED PLUS PROBABLE       741,530         726,569        604,245          14,858       14,612       10,902
                                 =======         =======        =======          ======       ======       ======
</TABLE>

<PAGE>

                                       13


                                                 RESERVES
                                 --------------------------------------
                                                  TOTAL
                                 --------------------------------------
                                                       NI 51-101
                                  Company        ----------------------
                                  Interest        Gross           Net
RESERVES CATEGORY                  (mbbl)         (mbbl)         (mbbl)
--------------------------       -------         -------         ------
PROVED
     Developed Producing         164,030         161,164       137,618
     Developed Non-Producing       4,429           4,424         3,488
     Undeveloped                  39,496          39,468        32,879
TOTAL PROVED                     207,956         205,056       173,984

PROBABLE                          48,731          48,341        40,774

TOTAL PROVED PLUS PROBABLE       256,687         253,397       214,758

Notes:
(1)      Company Interest reserves have been determined by Gilbert as described
         in the Gilbert Report under N1 51-101. The only difference between
         Company Interest reserves and gross reserves is that Company Interest
         reserves include royalties receivable whereas gross reserves do not
         include royalties receivable.

(2)      Company Interest reserves are included for continuity and comparison
         purposes.

                                             NET PRESENT VALUES OF
                                               FUTURE NET REVENUE
                                           ----------------------------
                                              BEFORE INCOME TAXES
                                             DISCOUNTED AT (%/year)
                                           ----------------------------
                                                0%                10%
RESERVES CATEGORY                             (MM$)              (MM$)
--------------------------                  -------           -------
PROVED
   Developed Producing                      3,069.9           1,731.4
   Developed Non-Producing                     83.0              40.4
   Undeveloped                                620.8             248.7
TOTAL PROVED                                3,773.7           2,020.5
                                            -------           -------
PROBABLE                                      922.8             293.9
                                            -------           -------
TOTAL PROVED PLUS PROBABLE                  4,696.7           2,314.4
                                            =======           =======

<TABLE>
<CAPTION>
                                                            TOTAL FUTURE NET REVENUE
                                                                 (UNDISCOUNTED)
                                                              as of January 1, 2004
                                                            CONSTANT PRICES AND COSTS
                                                                                               FUTURE NET               FUTURE NET
                                                                                  WELL            REVENUE                  REVENUE
                                               OPERATING   DEVELOPMENT      ABANDONMENT            BEFORE  INCOME            AFTER
    RESERVES         REVENUE    ROYALTIES          COSTS         COSTS            COSTS      INCOME TAXES   TAXES     INCOME TAXES
    CATEGORY           (MM$)        (MM$)           (MM$)        (MM$)            (MM$)             (MM$)   (MM$)             (MM$)
---------------      -------      -------         -------        -----             ----           -------  ------           -------
<S>                  <C>          <C>             <C>            <C>               <C>            <C>         <C>           <C>
Proved Reserves      7,421.5      1,205.2         2,056.1        315.8             70.6           3,773.7       0           3,773.7

Proved Plus          9,174.7      1,500.1         2,490.8        413.0             74.2           4,696.6       0           4,696.6
Probable
Reserves
</TABLE>

<PAGE>

                                       14


                                                 FUTURE NET REVENUE
                                                 BY PRODUCTION GROUP
                                                as of January 1, 2004
                                              CONSTANT PRICES AND COSTS
<TABLE>
<CAPTION>
                                                                                          FUTURE NET REVENUE BEFORE
                                                                                         INCOME TAXES (discounted at
                                                                                                  10%/year)
    RESERVES CATEGORY                           PRODUCTION GROUP                                      (MM$)
-----------------------------  ------------------------------------------------------    ---------------------------
<S>                            <C>                                                                  <C>
Proved Reserves                Light and Medium Crude Oil (including solution gas and               1,043.8
                               other by-products)
                               Heavy Oil (including solution gas and other                             37.9
                               by-products)
                               Natural Gas (including by-products but excluding                       974.5
                               solution gas from oil wells)

Proved Plus Probable Reserves  Light and Medium Crude Oil (including solution gas and               1,225.8
                               other by-products)
                               Heavy Oil (including solution gas and other                             43.0
                               by-products)
                               Natural Gas (including by-products but excluding                     1,081.1
                               solution gas from oil wells)
</TABLE>

Notes:
(1)      The total amounts for the future net reserves from the proved reserves
         and the probable reserves do not correspond to the totals set forth in
         previous tables because of the difficulties of allocation among the
         production groups.

(2)      The  unallocated  portion  for proved  reserves  is $(35.7 MM) and for
         proved  plus  probable  reserves is $(35.6) MM.

RESERVES DATA (FORECAST PRICES AND COSTS)

<TABLE>
<CAPTION>
                                                            SUMMARY OF OIL AND GAS RESERVES
                                                     AND NET PRESENT VALUES OF FUTURE NET REVENUE
                                                                 as of January 1, 2004
                                                              FORECAST PRICES AND COSTS

                                                                       RESERVES
                              -----------------------------------------------------------------------------------
                                           LIGHT AND MEDIUM OIL                             HEAVY OIL
                              -----------------------------------------         ---------------------------------
                                                       NI 51-101                              NI 51-101
                                  Company        ----------------------         Company       -------------------
                                  Interest        Gross           Net           Interest      Gross         Net
RESERVES CATEGORY                  (mbbl)         (mbbl)         (mbbl)          (mbbl)       (mbbl)       (mbbl)
--------------------------       -------         -------         ------          -----        -----        ------
<S>                              <C>             <C>             <C>             <C>          <C>           <C>
PROVED
     Developed Producing          69,884          69,790         61,507          4,264        3,899         3,661
     Developed Non-Producing       1,015           1,014            879              0            0             0
     Undeveloped                  14,787          14,779         13,118            151          151           144
                                 -------         -------         ------          -----        -----         -----
TOTAL PROVED                      85,686          85,583         75,504          4,415        4,050         3,805

PROBABLE                          23,943          23,919         20,976          1,032          978           916
                                 -------         -------         ------          -----        -----         -----
TOTAL PROVED PLUS PROBABLE       109,629         109,502         96,479          5,447        5,028         4,721
                                 =======         =======         ======          =====        =====         =====
</TABLE>

<PAGE>

                                       15


<TABLE>
<CAPTION>
                                                                      RESERVES
                              -----------------------------------------------------------------------------------
                                               NATURAL GAS                             NATURAL GAS LIQUIDS
                              -----------------------------------------         ---------------------------------
                                                       NI 51-101                              NI 51-101
                                  Company        ----------------------         Company       -------------------
                                  Interest        Gross           Net           Interest      Gross         Net
RESERVES CATEGORY                  (mbbl)         (mbbl)         (mbbl)          (mbbl)       (mbbl)       (mbbl)
--------------------------       -------         -------         ------          -----        -----        ------
<S>                              <C>             <C>            <C>              <C>          <C>           <C>
PROVED
     Developed Producing         446,901         434,039        364,534         10,359       10,148         7,581
     Developed Non-Producing      19,630          19,605         15,160            227          227           169
     Undeveloped                 133,491         133,372        108,545          1,539        1,538         1,132
                                 -------         -------        -------         ------       ------        ------
TOTAL PROVED                     600,022         587,016        488,240         12,125       11,913         8,882

PROBABLE                         120,222         118,564         97,004          2,462        2,428         1,851
                                 -------         -------        -------         ------       ------        ------
TOTAL PROVED PLUS PROBABLE       720,244         705,580        585,244         14,587       14,341        10,733
                                 -------         -------        -------         ------       ------        ------
</TABLE>


                                                 RESERVES
                                 --------------------------------------
                                                  TOTAL
                                 --------------------------------------
                                                       NI 51-101
                                  Company        ----------------------
                                  Interest        Gross           Net
RESERVES CATEGORY                  (mbbl)         (mbbl)         (mbbl)
--------------------------       -------         -------         ------
PROVED
     Developed Producing         158,990         156,177        133,505
     Developed Non-Producing       4,514           4,508          3,575
     Undeveloped                  38,725          38,697         32,484
TOTAL PROVED                     202,229         199,382        169,564

PROBABLE                          47,475          47,086         39,910

TOTAL PROVED PLUS PROBABLE       249,704         246,468        209,474

Notes:
(1)      Company Interest reserves have been determined by Gilbert as described
         in the Gilbert Report under N1 51-101. The only difference between
         Company Interest reserves and gross reserves is that Company Interest
         reserves include royalties receivable whereas gross reserves do not
         include royalties receivable.

(2)      Company Interest reserves are included for continuity and comparison
         purposes.

<TABLE>
<CAPTION>
                                                     NET PRESENT VALUES OF FUTURE NET REVENUE
                                                    BEFORE INCOME TAXES DISCOUNTED AT (%/year)
                                      ---------------------------------------------------------------------
                                         0%              5%             10%            15%             20%
RESERVES CATEGORY                       (MM$)          (MM$)           (MM$)          (MM$)           (MM$)
--------------------------            -------        -------         -------        -------         -------
<S>                                   <C>            <C>             <C>            <C>             <C>
PROVED
   Developed Producing                2,164.2        1,613.0         1,307.6        1,112.7           976.7
   Developed Non-Producing               64.4           42.5            31.5           24.9            20.5
   Undeveloped                          399.3          233.8           142.0           86.1            49.8
                                      -------        -------         -------        -------         -------
TOTAL PROVED                          2,627.9        1,889.3         1,481.1        1,223.8         1,047.0

PROBABLE                                674.2          341.2           207.6          140.3           101.2
                                      -------        -------         -------        -------         -------
TOTAL PROVED PLUS PROBABLE            3,302.1        2,230.5         1,688.7        1,364.1         1,148.2
                                      =======        =======         =======        =======         =======
</TABLE>

<PAGE>

                                       16

<TABLE>
<CAPTION>
                                                            TOTAL FUTURE NET REVENUE
                                                                 (UNDISCOUNTED)
                                                              as of January 1, 2004
                                                            FORECAST PRICES AND COSTS
                                                                                               FUTURE NET               FUTURE NET
                                                                                  WELL            REVENUE                  REVENUE
                                               OPERATING   DEVELOPMENT      ABANDONMENT            BEFORE  INCOME            AFTER
    RESERVES         REVENUE    ROYALTIES          COSTS         COSTS            COSTS      INCOME TAXES   TAXES     INCOME TAXES
    CATEGORY           (MM$)        (MM$)           (MM$)        (MM$)            (MM$)             (MM$)   (MM$)             (MM$)
---------------      -------      -------         -------        -----             ----           -------  ------           -------
<S>                  <C>          <C>             <C>            <C>               <C>            <C>         <C>           <C>
Proved Reserves      6,262.9          967.4       2,245.1       324.8              97.6           2,627.9       0           2,627.9

Proved Plus          7,839.6        1,210.7       2,796.8       426.4             103.5           3,302.1       0           3,302.1
Probable
Reserves
</TABLE>

                                                FUTURE NET REVENUE
                                                BY PRODUCTION GROUP
                                              as of January 1, 2004
                                            FORECAST PRICES AND COSTS
<TABLE>
<CAPTION>
                                                                                          FUTURE NET REVENUE BEFORE
                                                                                         INCOME TAXES (discounted at
                                                                                                  10%/year)
    RESERVES CATEGORY                           PRODUCTION GROUP                                      (MM$)
-----------------------------  ------------------------------------------------------    ---------------------------
<S>                            <C>                                                                  <C>
Proved Reserves                Light and Medium Crude Oil (including solution gas and               717.6
                               other by-products)
                               Heavy Oil (including solution gas and other                           27.7
                               by-products)
                               Natural Gas (including by-products but excluding                     756.9
                               solution gas from oil wells)

Proved Plus Probable Reserves  Light and Medium Crude Oil (including solution gas and               845.8
                               other by-products)
                               Heavy Oil (including solution gas and other                           31.5
                               by-products)
                               Natural Gas (including by-products but excluding                     832.5
                               solution gas from oil wells)
</TABLE>

Notes:
(1)      The total amounts for the future net reserves from the proved reserves
         do not correspond to the totals set forth in previous tables because of
         the difficulties of allocation among the production groups.

(2)      The unallocated portion for proved reserves and for proved plus
         probable reserves is $(21.1 MM).


NOTES TO RESERVE DATA TABLES:

1.       Columns may not add due to rounding.

2.       The crude oil, natural gas liquids and natural gas reserve estimates
         presented in the Gilbert Report are based on the definitions and
         guidelines contained in the COGE Handbook. A summary of those
         definitions are set forth below:

         RESERVE CATEGORIES

         Reserves are estimated remaining quantities of oil and natural gas and
         related substances anticipated to be recoverable from known
         accumulations, from a given date forward, based on

         (a)      analysis of drilling, geological, geophysical and engineering
                  data;

         (b)      the use of established technology; and

<PAGE>

                                       17


         (c)      specified economic conditions.

         Reserves are classified according to the degree of certainty associated
         with the estimates.

         (d)      PROVED RESERVES are those reserves that can be estimated with
                  a high degree of certainty to be recoverable. It is likely
                  that the actual remaining quantities recovered will exceed the
                  estimated proved reserves.

         (e)      PROBABLE RESERVES are those additional reserves that are less
                  certain to be recovered than proved reserves. It is equally
                  likely that the actual remaining quantities recovered will be
                  greater or less than the sum of the estimated proved plus
                  probable reserves.

         Other criteria that must also be met for the categorization of reserves
         are provided in the COGE Handbook.

         Each of the reserve categories (proved and probable) may be divided
         into developed and undeveloped categories:

         (f)      DEVELOPED RESERVES are those reserves that are expected to be
                  recovered from existing wells and installed facilities or, if
                  facilities have not been installed, that would involve a low
                  expenditure (for example, when compared to the cost of
                  drilling a well) to put the reserves on production. The
                  developed category may be subdivided into producing and
                  non-producing.

                  (i)      DEVELOPED PRODUCING RESERVES are those reserves that
                           are expected to be recovered from completion
                           intervals open at the time of the estimate. These
                           reserves may be currently producing or, if shut-in,
                           they must have previously been on production, and the
                           date of resumption of production must be known with
                           reasonable certainty.

                  (ii)     DEVELOPED NON-PRODUCING RESERVES are those reserves
                           that either have not been on production, or have
                           previously been on production, but are shut-in, and
                           the date of resumption of production is unknown.

         (g)      UNDEVELOPED RESERVES are those reserves expected to be
                  recovered from known accumulations where a significant
                  expenditure (for example, when compared to the cost of
                  drilling a well) is required to render them capable of
                  production. They must fully meet the requirements of the
                  reserves classification (proved, probable) to which they are
                  assigned.

         In multi-well pools it may be appropriate to allocate total pool
         reserves between the developed and undeveloped categories or to
         subdivide the developed reserves for the pool between developed
         producing and developed non-producing. This allocation should be based
         on the estimator's assessment as to the reserves that will be recovered
         from specific wells, facilities and completion intervals in the pool
         and their respective development and production status.

         LEVELS OF CERTAINTY FOR REPORTED RESERVES

         The qualitative certainty levels referred to in the definitions above
         are applicable to individual reserve entities (which refers to the
         lowest level at which reserves calculations are performed) and to
         reported reserves (which refers to the highest level sum of individual
         entity estimates for which

<PAGE>

                                       18


         reserves are presented). Reported reserves should target the following
         levels of certainty under a specific set of economic conditions:

         (a)      at least a 90 percent probability that the quantities actually
                  recovered will equal or exceed the estimated proved reserves;
                  and

         (b)      at least a 50 percent probability that the quantities actually
                  recovered will equal or exceed the sum of the estimated proved
                  plus probable reserves.

         A qualitative measure of the certainty levels pertaining to estimates
         prepared for the various reserves categories is desirable to provide a
         clearer understanding of the associated risks and uncertainties.
         However, the majority of reserves estimates will be prepared using
         deterministic methods that do not provide a mathematically derived
         quantitative measure of probability. In principle, there should be no
         difference between estimates prepared using probabilistic or
         deterministic methods.

         Additional clarification of certainty levels associated with reserves
         estimates and the effect of aggregation is provided in the COGE
         Handbook.

3.       FORECAST PRICES AND COSTS

         These are prices and costs that are:

         (a)      generally acceptable as being a reasonable outlook of the
                  future; and

         (b)      if and only to the extent that, there are fixed or presently
                  determinable future prices or costs to which ARC Resources is
                  legally bound by a contractual or other obligation to supply a
                  physical product, including those for an extension period of a
                  contract that is likely to be extended, those prices or costs
                  rather than the prices and costs referred to in paragraph (a).

         The forecast cost and price assumptions include increases in wellhead
         selling prices and take into account inflation with respect to future
         operating and capital costs. Crude oil, natural gas and natural gas
         liquids benchmark reference pricing, as at January 1, 2004, inflation
         and exchange rates utilized in the Gilbert Report were as follows:

<PAGE>

                                       19


<TABLE>
<CAPTION>
                SUMMARY OF PRICING AND INFLATION RATE ASSUMPTIONS
                              as of January 1, 2004
                            FORECAST PRICES AND COSTS

                                OIL                                         EDMONTON LIQUIDS PRICES
            -----------------------------------------------                 -----------------------
                        Edmonton      Hardisty      Cromer      NATURAL
               WTI     Par Price       Heavy        Medium        GAS
             Cushing   40 degree     12 degree   29.3 degree    AECO Gas                             Pentanes  INFLATION   EXCHANGE
            Oklahoma      API           API         API           Price      Propane      Butane       Plus     RATES(1)    RATE(2)
   Year     ($US/bbl)  ($Cdn/bbl)   ($Cdn/bbl)   ($Cdn/bbl)   ($Cdn/MMBtu)  ($Cdn/bbl)  ($Cdn/bbl)  ($Cdn/bbl)   %/Year   ($US/$Cdn)
----------  ---------  ----------   ----------   ----------   ------------  ----------  ----------  ---------- ---------   ---------
<S>         <C>        <C>          <C>          <C>          <C>           <C>          <C>        <C>        <C>          <C>
Forecast
2004           29.00      37.75        20.25        31.75          5.85       26.75      28.75        38.25       1.5%       0.75
2005           26.00      33.75        20.25        28.75          5.15       21.75      23.75        34.25       1.5%       0.75
2006           25.00      32.50        21.00        28.50          5.00       20.50      22.50        33.00       1.5%       0.75
2007           25.00      32.50        21.00        28.50          5.00       20.50      22.50        33.00       1.5%       0.75
2008           25.00      32.50        21.00        28.50          5.00       20.50      22.50        33.00       1.5%       0.75
2009           25.00      32.50        21.00        28.50          5.00       20.50      22.50        33.00       1.5%       0.75
2010           25.00      32.50        21.00        28.50          5.00       20.50      22.50        33.00       1.5%       0.75
2011           25.00      32.50        21.00        28.50          5.00       20.50      22.50        33.00       1.5%       0.75
2012           25.00      32.50        21.00        28.50          5.00       20.50      22.50        33.00       1.5%       0.75
2013           25.00      32.50        21.00        28.50          5.00       20.50      22.50        33.00       1.5%       0.75
2014           25.00      32.50        21.00        28.50          5.00       20.50      22.50        33.00       1.5%       0.75
Thereafter    +1.5%       +1.5%        +1.5%        +1.5%        +1.5%        +1.5%     +1.5%        +1.5%        +1.5%      +1.5%
</TABLE>

Notes:
(1)      Inflation rates for forecasting prices and costs.

(2)      Exchange rates used to generate the benchmark reference prices in this
         table.

         Weighted average historical prices realized by ARC Resources for the
         year ended December 31, 2003, were $6.21/mcf for natural gas,
         $34.48/bbl for crude oil and $32.19/bbl for natural gas liquids. Only a
         minor amount of ARC Resources' production comes from heavy oil.
         Weighted average historical prices for heavy oil for the year ended
         December 31, 2003, has been included in the weighted average historical
         prices for crude oil noted above for this same period.

4.       CONSTANT PRICES AND COSTS

         These are prices and costs that are:

         (a)      ARC Resources' prices and costs as at the effective date of
                  the estimation, held constant throughout the estimated lives
                  of the properties to which the estimate applies; and

         (b)      if, and only to the extent that, there are fixed or presently
                  determinable future prices or costs to which ARC Resources is
                  legally bound by a contractual or other obligation to supply a
                  physical product, including those for an extension period of a
                  contract that is likely to be extended, those prices or costs
                  rather than the prices and costs referred to in paragraph (a).

         The constant crude oil and natural gas benchmark reference pricing and
         the exchange rate utilized in the Gilbert Report were as follows:

<PAGE>

                                       20


<TABLE>
<CAPTION>
                         SUMMARY OF PRICING ASSUMPTIONS
                              as of January 1, 2004
                            CONSTANT PRICES AND COSTS

                                    OIL                                         EDMONTON LIQUIDS PRICES
                -----------------------------------------------                 -----------------------
                            Edmonton      Hardisty      Cromer      NATURAL
                   WTI     Par Price       Heavy        Medium        GAS
                 Cushing   40 degree     12 degree   29.3 degree    AECO Gas                             Pentanes     EXCHANGE
                Oklahoma      API           API         API           Price      Propane      Butane       Plus        RATE(1)
   Year         ($US/bbl)  ($Cdn/bbl)   ($Cdn/bbl)   ($Cdn/bbl)   ($Cdn/MMBtu)  ($Cdn/bbl)  ($Cdn/bbl)  ($Cdn/bbl)    ($US/$Cdn)
----------      ---------  ----------   ----------   ----------   ------------  ----------  ----------  ----------    ---------
<S>             <C>        <C>          <C>          <C>          <C>           <C>          <C>        <C>           <C>
Historical (2)
2003              32.52      40.81        23.31         34.81         6.09         29.81       31.81       41.31        0.7738
</TABLE>

Notes:
(1)      The exchange rate used to generate the benchmark reference prices in
         this table.

(2)      As at December 31.

5.       FUTURE DEVELOPMENT COSTS

The following table sets forth development costs deducted in the estimation of
ARC Resources' future net revenue attributable to the reserve categories noted
below.

<TABLE>
<CAPTION>
                                              Forecast Prices and Costs                Constant Prices and Costs
                                     ------------------------------------------        -------------------------
                                     Proved Reserves       Proved Plus Probable
              Year                         (MM$)                Reserves (MM$)           Proved Reserves (MM$)
------------------------------       ---------------       --------------------        -------------------------
<S>                                  <C>                   <C>                         <C>
2004                                       99.0                   112.3                           99.0
2005                                       93.1                   119.6                           91.8
2006                                       66.1                    77.4                           64.1
2007                                       25.8                    47.2                           24.6
2008                                        8.1                    24.1                            7.6
Total: Undiscounted                       324.8                   426.5                          315.8
Total:  Discounted at 10%/year            264.5                   340.1                          259.3
</TABLE>

ARC expects to fund the development costs of the reserves through a combination
of internally generated cash flow, debt and sale of Trust Units. The Trust
withholds approximately 20% of cash flow to assist in funding development
activities.

There can be no guarantee that funds will be available or that the Board of
Directors of ARC Resources will allocate funding to develop all of the reserves
attributed in the Gilbert Report. Failure to develop those reserves would have a
negative impact on future cash flow.

The interest or other costs of external funding are not included in the reserves
and future net revenue estimates and would reduce reserves and future net
revenue to some degree depending upon the funding sources utilized. ARC
Resources does not anticipate that interest or other funding costs would make
development of any Property uneconomic.

6.       The Alberta royalty tax credit ("ARTC") is included in the cumulative
         cash flow amounts. ARTC is based on the program announced November 1989
         by the Alberta government with modifications effective January 1, 1995.
         ARC qualifies for two ARTC deductions.

7.       Estimated future well abandonment costs related to a property have been
         taken into account by Gilbert in determining reserves that should be
         attributed to a property and in determining the aggregate future net
         revenue therefrom, there was deducted the reasonable estimated future
         well abandonment costs.

<PAGE>

                                       21


8.       Both the constant and forecast price and cost assumptions assumed the
         continuance of current laws and regulations.

9.       The extended character of all factual data supplied to Gilbert were
         accepted by Gilbert as represented. No field inspection was conducted.

10.      THE ESTIMATES OF FUTURE NET REVENUE PRESENTED IN THE TABLES ABOVE DO
         NOT REPRESENT FAIR MARKET VALUE.

RECONCILIATIONS OF CHANGES IN RESERVES AND FUTURE NET REVENUE

The following table sets forth the reconciliation of ARC Resources' net reserves
as at January 1, 2004, using forecast price and cost estimates derived from the
Gilbert Report as required under NI 51-101 reconciled to ARC Resources' net
proved reserves plus risk adjusted (50%) probable reserves as at January 1, 2003
prepared under NP 2B (net Established reserves). Net reserves as at January 1,
2004 and as at January 1, 2003 include working interest reserves plus royalties
receivable less royalties payable.

                                RECONCILIATION OF
                                  NET RESERVES
                            BY PRINCIPAL PRODUCT TYPE
                            FORECAST PRICES AND COSTS

<TABLE>
<CAPTION>
                                                                                                      ASSOCIATED AND NON-ASSOCIATED
                                    LIGHT AND MEDIUM OIL                      HEAVY OIL                          GAS
                              -------------------------------     -------------------------------    ------------------------------
                                                        Net                                Net                               Net
                                                      Proved                              Proved                            Proved
                                Net        Net         Plus        Net          Net        Plus        Net        Net        Plus
                              Proved     Probable    Probable     Proved      Probable   Probable    Proved    Probable    Probable
       FACTORS                (mbbl)      (mbbl)      (mbbl)      (mbbl)       (mbbl)     (mbbl)     (mmcf)     (mmcf)      (mmcf)
--------------------          ------     --------    --------     ------      --------   --------    ------    --------    --------
<S>                           <C>        <C>         <C>          <C>         <C>        <C>        <C>        <C>         <C>
January 1, 2003(1)            71,095      16,154      87,249       4,040         669      4,709     281,820      41,440     323,260

 Extensions                    1,856      (1,286)        570           0           0          0       3,534      (1,202)      2,332
 Improved Recovery               449        (436)         13           0           0          0       1,203        (165)      1,038
 Technical                     3,210       3,791       7,001         295         241        536      29,778      12,863      42,641
Revisions(2)
 Discoveries                       0           0           0           0           0          0         878         218       1,096
 Acquisitions                 14,931       4,527      19,458           0           0          0     249,619      47,502     297,121
 Dispositions                 (8,631)     (1,773)    (10,404)          0           0          0     (30,710)     (3,670)    (34,380)
 Economic Factors               (866)         (2)       (868)        (18)          6        (12)       (680)         18        (662)
 Production                   (6,540)          0      (6,540)       (512)          0       (512)    (47,202)          0     (47,202)

January 1, 2004               75,504      20,975      96,479       3,805         916      4,721     488,240      97,004     585,244
</TABLE>


<PAGE>

                                       22


<TABLE>
<CAPTION>
                                      NATURAL GAS LIQUIDS                        TOTAL
                              --------------------------------     ---------------------------------
                                                         Net                                   Net
                                                       Proved                                 Proved
                                 Net        Net         Plus         Net          Net          Plus
                               Proved     Probable    Probable      Proved      Probable     Probable
       FACTORS                 (mbbl)      (mbbl)      (mbbl)       (mbbl)       (mbbl)       (mbbl)
------------------------      -------     --------    --------     -------      --------    --------
<S>                           <C>         <C>         <C>          <C>          <C>         <C>
January 1, 2003(1)             7,567       1,176        8,743      129,672       24,906     154,578

 Extensions                       75         (20)          55        2,520       (1,506)      1,014
 Improved Recovery                45         (13)          32          695         (477)        218
 Technical                       325         272          597        8,792        6,448      15,240
Revisions(2)
 Discoveries                       1           0            1          147           37         184
 Acquisitions                  2,625         507        3,132       59,159       12,951      72,110
 Dispositions                   (630)        (72)        (702)     (14,379)      (2,457)    (16,836)
 Economic Factors                (29)          1          (28)      (1,026)           8      (1,018)
 Production                   (1,097)          0       (1,097)     (16,017)           0     (16,017)

January 1, 2004                8,882       1,851       10,733      169,564       39,910     209,474
</TABLE>

Note:
(1)      The evaluation of reserves as at January 1, 2003 was prepared under NP
         2B. Under NP 2B, probable reserves were adjusted by a factor to account
         for the risk associated with their recovery. ARC Resources previously
         applied a risk factor of 50% in reporting probable reserves. Under NI
         51-101, estimates are prepared such that the full proved plus probable
         reserves are estimated to be recoverable (proved plus probable reserves
         are effectively a "best estimate"). The above reconciliation reflects
         current probable reserves versus previous risk adjusted (50%) probable
         reserves reported by ARC Resources.

(2)      Technical revisions include infill drilling additions of 5,182 mboe
         total proved, 697 mboe total probable, and 5,879 mboe proved plus
         probable.

The following table sets forth a reconciliation of ARC Resources' Company
Interest reserves as at January 1, 2004, using forecast price and cost estimates
derived from the Gilbert Report, reconciled to ARC Resources' proved plus risk
adjusted (50%) of probable reserves as at January 1, 2003 (Company Interest
Established reserves). The January 1, 2003 reserves were prepared under NP 2B.
Company Interest reserves include working interest reserves plus royalties
receivable but before deduction of royalties payable. This definition is
consistent with the basis on which reserves were reported in prior years. The
reconciliation set forth below is not required disclosure under NI 51-101;
however, such information is included to assist the reader in comparing
historical results to the current results during the period of transition from
historical reporting requirements and practises and the new reporting regime
under NI 51-101.

<PAGE>

                                       23


                                RECONCILIATION OF
                            COMPANY INTEREST RESERVES
                            BY PRINCIPAL PRODUCT TYPE
                            FORECAST PRICES AND COSTS

<TABLE>
<CAPTION>
                                                                                                      ASSOCIATED AND NON-ASSOCIATED
                                    LIGHT AND MEDIUM OIL                      HEAVY OIL                            GAS
                              -------------------------------     -------------------------------    ------------------------------

                                      Company Interest                    Company Interest                  Company Interest
                              -------------------------------     -------------------------------    ------------------------------
                                                      Proved                              Proved                            Proved
                                                       Plus                                Plus                              Plus
                              Proved     Probable    Probable     Proved      Probable   Probable    Proved    Probable    Probable
       FACTORS                (mbbl)      (mbbl)      (mbbl)      (mbbl)       (mbbl)     (mbbl)     (mmcf)     (mmcf)      (mmcf)
--------------------          ------     --------    --------     ------      --------   --------    ------    --------    --------
<S>                           <C>        <C>         <C>          <C>         <C>        <C>        <C>        <C>         <C>
January 1, 2003(1)            80,836      18,586      99,422       4,928         791      5,719     356,235      52,546     408,781

 Extensions                    2,108      (1,460)        648           0           0          0       4,343      (1,473)      2,870
 Improved Recovery               510        (495)         15           0           0          0       1,478        (201)      1,277
 Technical
Revisions(2)                   3,020       3,638       6,658         116         234        350      29,201      13,988      43,189
 Discoveries                       0           0           0           0           0          0       1,079         270       1,349
 Acquisitions                 17,642       5,720      23,362           0           0          0     307,553      59,746     367,299
 Dispositions                 (9,852)     (2,043)    (11,895)          0           0          0     (38,819)     (4,657)    (43,476)
 Economic Factors               (835)         (3)       (838)        (19)          7        (12)     (1,122)          3      (1,119)
 Production                   (7,743)          0      (7,743)       (610)          0       (610)    (59,926)          0     (59,926)

January 1, 2004               85,686      23,943     109,629       4,415       1,032      5,447     600,022     120,222     720,244

<CAPTION>

                                  NATURAL GAS LIQUIDS                          TOTAL
                              -------------------------------     -------------------------------

                                      Company Interest                    Company Interest
                              -------------------------------     -------------------------------
                                                      Proved                              Proved
                                                       Plus                                Plus
                              Proved     Probable    Probable     Proved      Probable   Probable
       FACTORS                (mbbl)      (mbbl)      (mbbl)      (mbbl)       (mbbl)     (mbbl)
--------------------          ------     --------    --------     ------      --------   --------
<S>                          <C>         <C>         <C>         <C>          <C>        <C>
January 1, 2003(1)           10,503       1,597       12,100     155,640       29,731    185,371

 Extensions                     103         (28)          75       2,935       (1,734)     1,201
 Improved Recovery               61         (18)          43         817         (546)       271
 Technical
Revisions(2)                    143         306          449       8,145        6,511     14,656
 Discoveries                      2           0            2         182           45        227
 Acquisitions                 3,713         702        4,415      72,614       16,380     88,994
 Dispositions                  (874)        (98)        (972)    (17,196)      (2,917)   (20,113)
 Economic Factors               (35)          1          (34)     (1,076)           5     (1,071)
 Production                  (1,491)          0       (1,491)    (19,832)           0    (19,832)

January 1, 2004              12,125       2,462       14,587     202,229       47,475    249,704
</TABLE>

Note:
(1)      The evaluation of reserves as at January 1, 2003 was prepared under NP
         2B. Under NP 2B, probable reserves were adjusted by a factor to account
         for the risk associated with their recovery. ARC Resources previously
         applied a risk factor of 50% in reporting probable reserves. Under NI
         51-101, estimates are prepared such that the full proved plus probable
         reserves are estimated to be recoverable (proved plus probable reserves
         are effectively a "best estimate"). The above reconciliation reflects
         current probable reserves versus previous risk adjusted (50%) probable
         reserves reported by ARC Resources.

(2)      Technical revisions include infill drilling additions of 6,288 mboe
         total proved, 837 mboe total probable and 7,125 mboe proved plus
         probable.

<PAGE>

                                       24


                          RECONCILIATION OF CHANGES IN
                    NET PRESENT VALUES OF FUTURE NET REVENUE
                           DISCOUNTED AT 10% PER YEAR
                                 PROVED RESERVES
                            CONSTANT PRICES AND COSTS

<TABLE>
<CAPTION>
                                                                                                           2003
PERIOD AND FACTOR                                                                                          (MM$)
----------------------------------------------------------------------------------------------          ----------
<S>                                                                                                      <C>
Estimated Future Net Revenue at Beginning of Year                                                        1,941.9

         Sales and Transfers of Oil and Gas Produced, Net of Production Costs and Royalties(1)            (439.5)
         Net Change in Prices, Production Costs and Royalties Related to Future Production(2)             (350.8)
         Development Costs Incurred During the Period(3)                                                  148.6
         Changes in Estimated Future Development Costs(4)                                                 (77.2)
         Extensions and Improved Recovery(5)                                                               30.5
         Discoveries(5)                                                                                    2.3
         Acquisitions(5)                                                                                  686.6
         Dispositions(5)                                                                                 (167.7)
         Net Change Resulting from Revisions in Quantity Estimates & Economic Factors(5)(6)                66.7
         Accretion of Discount(7)                                                                         194.2
         Net Change in Income Taxes(8)                                                                      -
         Miscellaneous Differences                                                                        (15.1)

Estimated Future Net Revenue at End of Year                                                              2,020.5
</TABLE>

Notes:
(1)      Company actual before income taxes, excluding general and
         administrative expenses (revenue less royalties less operating costs)

(2)      The impact of changes in prices and other economic factors on future
         net revenue

(3)      Actual capital expenditures relating to the exploration, development
         and production of oil and gas reserves

(4)      The change in forecast development costs for the properties evaluated
         at the beginning of the period

(5)      End of period net present value of related reserves.

(6)      Revisions in quantity estimates include infill drilling values of $53.0
         MM total proved reserves.

(7)      Estimated as 10% of the beginning of period net present value

(8)      The difference between forecast income taxes at beginning of the period
         and the actual taxes for the period plus forecast income taxes at the
         end of the period


ADDITIONAL INFORMATION RELATING TO RESERVES DATA

PROVED AND PROBABLE UNDEVELOPED RESERVES

Undeveloped reserves are attributed by Gilbert in accordance with standards and
procedures contained in the COGE Handbook. Proved undeveloped reserves are those
reserves that can be estimated with a high degree of certainty and are expected
to be recovered from known accumulations where a significant expenditure is
required to render them capable of production. Probable undeveloped reserves are
those reserves that are less certain to be recovered than proved reserves and
are expected to be recovered from known accumulations where a significant
expenditure is required to render them capable of production.

In some cases it will take longer than 2 years to develop these reserves. ARC
Resources plans to develop the majority of the proved undeveloped reserves in
the reserves evaluation over the next four years and plans to develop the
probable undeveloped reserves over the next five years.

ARC Resources manages development activities to ensure facilities and gathering
systems are properly utilized over the facility life which means scheduling
capital over a longer period. ARC Resources develops assets in a methodical
fashion to reduce risk by technically assessing the results of one annual
drilling program before embarking on another drilling program.

<PAGE>

                                       25


SIGNIFICANT FACTORS OR UNCERTAINTIES

ARC Resources has a significant amount of proved undeveloped reserves assigned
to the Dawson gas field in northeast British Columbia and the Hatton/Horsham gas
fields in southwest Saskatchewan. Sophisticated and expensive technology is
required for the Dawson wells to produce. At the current prices, these wells are
economic; however, should gas prices fall materially, the wells would not be
economic to drill. Similarly, the low rate gas wells in southwest Saskatchewan
would also be uneconomic in a low price environment.

OTHER OIL AND GAS INFORMATION

ARC Resources' and ARC Sask.'s portfolio of Properties as at December 31, 2003
includes both unitized and non-unitized oil and natural gas production, all of
which are subject to the Royalties. In general, the Properties contain long
life, low decline rate reserves and include interests in several major oil and
gas fields.

The information provided below relates to all of the Properties and operations
of ARC Resources and ARC Sask. and various references to ARC Resources in this
section of the Annual Information Form should be read as including ARC Sask.

PRINCIPAL PROPERTIES

The following is a description of the principal oil and natural gas properties
of ARC Resources and ARC Sask. as at December 31, 2003. Reserve amounts are
stated at January 1, 2004, based on escalated cost and price assumptions as
evaluated in the Gilbert Report prepared by Gilbert (see "Statement of Reserves
Data and Other Oil and Gas Information"). Information in respect of gross and
net acres and well counts are as at December 31, 2003, and information in
respect of production is for the year ended December 31, 2003 except where
indicated otherwise. Due to the fact that ARC Resources and ARC Sask. have been
active at acquiring additional interests in their principal properties, the
working interest share and interest in gross and net acres and wells as at
December 31, 2003 may not directly correspond to the stated production for the
year which only includes production since the date the interests were acquired
by ARC Resources or ARC Sask. The estimates of reserves and future net revenue
for individual properties may not reflect the same confidence level as estimates
of reserves and future net revenue for all properties, due to the effects of
aggregation.

All of the properties described below are located in the Western Canadian
Sedimentary Basin and within the Canadian provinces of British Columbia, Alberta
or Saskatchewan. The Company Interest reserves and production are comprised of
reserves and production attributable to the working interests and royalties
receivable (without reduction for royalties payable). The production data in the
descriptions of the properties in the specific areas following the table are
also Company Interest production. The Properties represent 46% of the total
proved plus probable reserves as assigned by Gilbert in the Gilbert Report.
There are no material properties to which reserves have been attributed which
are capable of producing but which are not producing and there are no material
statutory or mandatory relinquishments, surrenders, back-ins or changes in
ownership provisions.

<PAGE>

                                       26


<TABLE>
<CAPTION>
                                  Company Interest              Net Reserves and Production (NI-51-101)
                     ---------------------------------------    ---------------------------------------
                                                 Proved plus                               Proved plus
                                     Proved       probable                     Proved       Probable
                     Production     Reserves      Reserves      Production    Reserves      Reserves
                       (boe/d)       (mboe)         (mboe)       (boe/d)        (mboe)       (mboe)
                     ----------     --------     -----------    ----------    --------     ------------
<S>                  <C>            <C>          <C>            <C>           <C>          <C>
Ante Creek              3,727        15,121        18,805         2,953        12,270        15,487
Pouce Coupe             2,050         4,737         5,525         1,491         3,487         4,070
Jenner                  2,105        12,985        15,260         1,905        11,753        13,769
Hatton                  1,998        11,463        12,892         1,790        10,711        12,060
Lougheed                2,921         8,290        10,677         2,128         6,572         8,497
Dawson                  1,616        18,724        24,794         1,181        14,512        19,267
Weyburn Unit            1,380         7,114         9,855         1,141         6,269         8,625
Sundre                  1,146         6,140         7,156           936         5,282         6,159
Caroline Swan           1,336         2,032         2,190         1,066         1,617         1,743
Hills Unit
Prestville                143         4,749         7,165           143         3,722         5,578
</TABLE>

ANTE CREEK

The Ante Creek property is located in northwest Alberta. ARC Resources is the
operator and owns an average working interest of 89%. During 2003, company
interest production from the area averaged 3,727 boe/d of oil, gas and natural
gas liquids from 89 net wells. During 2003, 16 new wells were drilled. Gilbert
assigned company interest proved reserves of 15,121 mboe and company interest
proved plus probable reserves of 18,805 mboe of oil, gas and natural gas liquids
to this area, or 7.5% of total proved plus probable reserves.

POUCE COUPE

The Pouce Coupe property is located in northwest Alberta. ARC Resources is the
operator and owns an average working interest of 66%. During 2003, company
interest production from the area averaged 2,050 boe/d of oil, gas and natural
gas liquids from 34 net wells. Gilbert assigned company interest proved reserves
of 4,737 mboe and company interest proved plus probable reserves of 5,525 mboe
of oil, gas and natural gas liquids to this area, or 2.2% of total proved plus
probable reserves.

JENNER

The Jenner property is located in southeast Alberta. ARC Resources is the
operator and owns an average working interest of 78%. During 2003, company
interest production from the area averaged 2,105 boe/d of oil and natural gas
from 567 net wells. During 2003, 43 new wells were drilled. Gilbert assigned
company interest proved reserves of 12,985 mboe and company interest proved plus
probable reserves of 15,260 mboe of oil and natural gas to this area, or 6.1% of
total proved plus probable reserves.

HATTON

The Hatton property is located in southwest Saskatchewan. ARC Resources is the
operator and owns an average working interest of 50%. During 2003, company
interest production from the area averaged 1,998 boe/d of natural gas from 356
net wells. During 2003, 42 new wells were drilled. Gilbert assigned company
interest proved reserves of 11,463 mboe and company interest proved plus
probable reserves of 12,892 mboe of natural gas to this area, or 5.2% of total
proved plus probable reserves.

LOUGHEED

The Lougheed property is located in southeast Saskatchewan. ARC Resources is the
operator and owns an average working interest of 83%. During 2003, company
interest production from the area averaged 2,921 boe/d of oil and natural gas
liquids from 103 net wells. During 2003, 13 new wells were drilled.

<PAGE>

                                       27


Gilbert assigned company interest proved reserves of 8,290 mboe and company
interest proved plus probable reserves of 10,677 mboe of oil and natural gas
liquids to this area, or 4.3% of total proved plus probable reserves.

DAWSON

The Dawson property is located in northeast British Columbia. ARC Resources is
the operator and owns an average working interest of 98%. During 2003, company
interest production from the area averaged 1,616 boe/d of gas and natural gas
liquids net to ARC Resources from 37 net wells. During 2003, 13 new wells were
drilled. Gilbert assigned company interest proved reserves of 18,724 mboe and
company interest proved plus probable reserves of 24,794 mboe of gas and natural
gas liquids to this area, or 9.9% of total proved plus probable reserves.

WEYBURN UNIT

The Weyburn Unit is located in southeast Saskatchewan. EnCana Energy is the
operator and ARC Resources owns working interest of 6.5% in the unit. During
2003, company interest production from the area averaged 1,380 boe/d of oil and
natural gas liquids from 44 net wells. During 2003, 8 new wells were drilled.
Gilbert assigned company interest proved reserves of 7,114 mboe and company
interest proved plus probable reserves of 9,855 mboe of oil and natural gas
liquids to this area, or 3.9% of total proved plus probable reserves.

SUNDRE

The Sundre property is located in central Alberta. ARC Resources is the operator
and owns an average working interest of 89%. During 2003, company interest
production from the area averaged 1,146 boe/d of oil, gas and natural gas
liquids from 36 net wells. Gilbert assigned company interest proved reserves of
6,140 mboe and company interest proved plus probable reserves of 7,156 mboe of
oil, gas and natural gas liquids to this area, or 2.9% of total proved plus
probable reserves. ARC Resources is currently reviewing swaps, sales and other
disposition alternatives for this property with a view to redeploying the
proceeds in areas more strategic to ARC Resources.

CAROLINE SWAN HILLS UNIT

The Caroline Swan Hills Unit is located in central Alberta. Shell Canada is the
operator and ARC Resources owns working interest of 2.2% in the unit. During
2003, company interest production from the area averaged 1,336 boe/d of gas and
natural gas liquids from 0.3 net wells. Gilbert assigned company interest proved
reserves of 2,032 mboe and company interest proved plus probable reserves of
2,190 mboe of gas and natural gas liquids to this area, or 0.9% of total proved
plus probable reserves.

PRESTVILLE

The Prestville property is located in northwest Alberta. ARC Resources is the
operator and owns an average working interest of 78%. During 2003, company
interest production from the area averaged 143 boe/d of oil from 4 net wells.
During 2003, 3 new wells were drilled. Gilbert assigned company interest proved
reserves of 4,749 mboe and company interest proved plus probable reserves of
7,165 mboe of oil and natural gas to this area, or 2.9% of total proved plus
probable reserves. ARC Resources intends to spend approximately 10% of its 2004
capital budget developing this property.

<PAGE>

                                       28


OIL AND GAS WELLS

The following table sets forth the number and status of wells in which ARC
Resources has a working interest as at December 31, 2003.

<TABLE>
<CAPTION>
                                              Oil Wells                               Natural Gas Wells
                             -----------------------------------------    -----------------------------------------
                                Producing            Non-Producing            Producing             Non-Producing
                             -----------------     -------------------    ------------------       ----------------
                              Gross       Net       Gross         Net      Gross       Net         Gross       Net
                             -------   -------     -------       -----    -------    -------       -----       ----
<S>                          <C>       <C>         <C>           <C>      <C>        <C>           <C>         <C>
Alberta                      3,718.0     930.4       741.0       120.1    3,116.0    1,386.0       269.0       53.4
British Columbia               131.0       1.6        31.0         1.6      220.0       44.9        41.0       13.3
Saskatchewan                 1,816.0     653.8       253.0        82.6    3,633.0      615.6        68.0       22.1
Total                        5,665.0   1,585.8     1,025.0       204.3    6,969.0    2,046.5       378.0       88.8
</TABLE>

PROPERTIES WITH NO ATTRIBUTABLE RESERVES

The following table sets out ARC Resources' undeveloped land holdings as at
December 31, 2003.

                                           Undeveloped Acres
                                        ----------------------
                                          Gross           Net
                                        ---------      -------
          Alberta                         692,858      334,089
          British Columbia                 77,891       62,994
          Saskatchewan                    217,950       82,528
          Northwest Territories           276,262       27,880
          Total                         1,264,961      507,493

ARC Resources presently has no material work commitments on these lands. ARC
Resources expects that rights to explore, develop and exploit 67,340 net acres
of its undeveloped land holdings will expire by December 31, 2004.

FORWARD CONTRACTS

ARC Resources is exposed to market risks resulting from fluctuations in
commodity prices, foreign exchange rates and interest rates in the normal course
of operations. A variety of derivative instruments are used to reduce its
exposure to fluctuations in commodity prices and foreign exchange rates. ARC
Resources is exposed to losses in the event of default by the counterparties to
these derivative instruments. ARC Resources manages this risk by diversifying
its derivative portfolio amongst a number of financially sound counterparties.
For information in relation to marketing arrangements, see "Other Oil and Gas
Information - Marketing Arrangements".

ARC Resources' Board of Directors has approved a hedging program under which
financial and physical hedges can be entered into in respect of commodity prices
and foreign currency exchange rates. The Board has approved the hedging of up to
70% of the Trust's oil and natural gas liquids production for up to 12 months
and up to 35% of oil and natural gas liquids production for the period
commencing one year in the future for a maximum of 12 months. With respect to
natural gas hedging, the Board has approved the hedging of up to 70% of the
Trust's natural gas production for up to 24 months and up to 35% of natural gas
production for the 36 month period thereafter (years three to five in the
future). The above limits are restricted to a maximum of 50% on a boe basis for
up to 12 months, up to 25% on a boe basis for the 12 month period thereafter
(year two in the future) and up to 15% on a boe basis for the 36 month period
thereafter (years three to five in the future).

A summary of financial and physical contracts in respect of hedging activities
can be found in Note 9 to the Trust's audited consolidated financial statements
for the year ended December 31, 2003 and under the

<PAGE>

                                       29


heading "Hedging" in the Trust's management discussion and analysis and results
of operations for the year ended December 31, 2003 and which is contained on
pages 31 to 57, inclusive, of the Trust's 2003 Annual Report, both of which are
incorporated herein by reference.

ADDITIONAL INFORMATION CONCERNING ABANDONMENT AND RECLAMATION COSTS

The following table sets forth information respecting future abandonment and
reclamation costs for surface leases, wells, facilities and pipelines which are
expected to be incurred by ARC Resources for the periods indicated.

<TABLE>
<CAPTION>
                                        Abandonment and Reclamation            Abandonment and Reclamation
                                        Costs escalated at 1.5%                Costs Escalated at 1.5%
                                        Undiscounted                           Discounted at 10%
                                        ($MM)                                  ($MM)
                                        ---------------------------            ---------------------------
<S>                                     <C>                                    <C>
Total as at December 31, 2003           218                                    48.0
Anticipated to be paid in 2004          4.4                                    4.0
Anticipated to be paid in 2005          2.8                                    2.3
Anticipated to be paid in 2006          2.8                                    2.1
</TABLE>

ARC Resources and ARC Sask. will each be liable for its share of ongoing
environmental obligations and for the ultimate reclamation of the Properties
held by it upon abandonment. Ongoing environmental obligations are expected to
be funded out of cash flow.

A reclamation fund was established to fund future asset retirement obligations
costs. ARC Resources and ARC Sask. currently estimate that the future
environmental and reclamation obligations in respect of the Properties held by
them will aggregate approximately $218 million escalated at 1.5% per year
(reflected in the 2003 financials statements as an asset retirement obligation
of $66.7 million calculated by escalating costs at 1.5% per year and discounted
at 7%). The Board of Directors of ARC Resources has approved contributions over
a 20 year period which results in minimum annual contributions of $6.0 million
($4.0 million in 2002) based upon properties owned as at December 31, 2003 (less
current year site reclamation and abandonment costs). During 2003, $1.9 million
($2.0 million for 2002) of actual expenditures were charged against the
reclamation fund resulting in net contributions for the year of $3.6 million
($2.0 million in 2002).

ARC Resources estimates the costs to abandon and reclaim all its shut in and
producing wells, facilities, gas plants, pipelines, batteries and satellites. No
estimate of salvage value is netted against the estimated cost. ARC Resources'
model for estimating the amount and timing of future abandonment and reclamation
expenditures was done on an operating area level. Estimated expenditures for
each operating area are based on the Alberta Energy Utilities Board methodology
which details the cost of abandonment and reclamation in 8 specific geographic
regions. Each region was assigned an average cost per well to abandon and
reclaim the wells in that area.

The number of net wells for which Gilbert estimated ARC Resources will incur
reclamation and abandonment costs is 695 non-producing wells and 3,418 producing
wells.

Abandonment and reclamation costs have been estimated over a 50 year period.
Facility reclamation costs are scheduled to be incurred in the year following
the end of the reserve life of its associated reserves.

Only the abandonment costs associated with wells were deducted by Gilbert in
estimating future net revenue in the Gilbert Report. The additional liability
associated with well, pipelines and facilities reclamation costs, which were
estimated to be $114 million ($26.3 million discounted at 10%), were not
deducted in estimating future net revenue.

<PAGE>

                                       30


TAX HORIZON

As a result of the Trust's tax efficient structure, annual taxable income is
transferred from its operating entities to the Trust and from the Trust to its
Unitholders. This is primarily accomplished through the deduction of the
royalties on underlying oil and gas properties and the deduction of interest on
the Long Term Notes held by its operating subsidiaries. Therefore, it can be
expected that no income tax liability would be incurred by the Trust for as long
as the organization maintains this corporate tax structure.

CAPITAL EXPENDITURES

The following tables summarize capital expenditures (net of incentives and net
of certain proceeds and including capitalized general and administrative
expenses) related to ARC Resources' activities for the year ended December 31,
2003:

                                           $MM
                                         --------
Property acquisition costs(1)
     Proved properties                   $536,218
     Undeveloped properties                23,763
Exploration costs(2)                       13,442
Development costs(3)                      138,963
Corporate costs                             3,359
Total                                    $715,745

Notes:
(1)      Acquisitions net of dispositions of properties including the corporate
         acquisition of Star Oil & Gas Ltd.

(2)      Cost of land acquired, geological and geophysical capital expenditures
         and drilling costs for 2003 exploration wells drilled.

(3)      Development and facilities capital expenditures.

EXPLORATION AND DEVELOPMENT ACTIVITIES

The following table sets forth the gross and net exploratory and development
wells in which ARC Resources participated during the year ended December 31,
2003:

                             Exploratory Wells          Development Wells
                         -----------------------      --------------------
                          Gross           Net          Gross         Net
                         -------        --------      --------    --------
Light and Medium Oil        13             6.1          114         35.0
Natural Gas                 54            21.0          453        146.0
Service                     --              --           13          4.1
Dry                          2             0.0           10          1.5
Total:                      69            27.1          590        186.6

ARC Resources has an extensive capital program planned for the Prestville area
of northern Alberta for 2004. The $20 million program includes the shooting of a
200 square kilometre 3D seismic program, drilling farm in wells, constructing a
20km oil sales pipeline and drilling up to 4 development wells.

Other areas where significant development activities are planned for 2004
include: Ante Creek where ARC Resources expects to drill 8 development wells and
recomplete 4 wells; Dawson with 5 wells planned and an additional 3
recompletions; and the Jenner area of southeastern Alberta where ARC Resources
plans to drill approximately 50 shallow gas wells.

PRODUCTION ESTIMATES

The following table sets out the volume of ARC Resources' production estimated
for the year ended December 31, 2004 which is reflected in the estimate of
future net revenue disclosed in the tables

<PAGE>

                                       31


contained under "Statement of Reserves Data and Other Oil and Gas Information -
Disclosure of Reserves Data".

<TABLE>
<CAPTION>
                                        Light and                                                  Natural Gas
                                        Medium Oil           Heavy Oil         Natural Gas            Liquids              BOE
                                         (bbls/d)             (bbls/d)            (mcf/d)             (bbls/d)            (BOE/d)
                                    ----------------     ---------------   -----------------     ---------------    ----------------
                                    Gross       Net      Gross       Net     Gross      Net       Gross      Net     Gross      Net
                                    ------    ------     -----     -----   -------   -------     -----     -----    ------    ------
<S>                                 <C>       <C>        <C>       <C>     <C>       <C>         <C>       <C>      <C>       <C>
Proved Producing                    19,990    16,841     1,280     1,251   158,555   126,865     3,915     2,882    51,611    42,118
Proved Developed Non-
Producing                              140       118         0         0     4,702     3,509        58        43       981       746
Proved Undeveloped                   1,141     1,007        11        11     6,400     4,959        36        28     2,255     1,872
Total Proved                        21,271    17,965     1,291     1,262   169,657   135,333     4,009     2,954    54,848    44,736
Total Probable                         643       536        26        22     2,966     2,252        43        35     1,207       968
Total Proved Plus
Probable                            21,914    18,502     1,317     1,284   172,623   137,585     4,053     2,988    56,054    45,705
</TABLE>

PRODUCTION HISTORY

The following tables summarize certain information in respect of production,
product prices received, royalties paid, operating expenses and resulting
netback for the periods indicated below:

<TABLE>
<CAPTION>
                                                               Quarter Ended 2003                  -------------
                                              -------------------------------------------------      Year Ended
(6:1)                                         Mar. 31         2003       Sept. 30       Dec. 31         2003
                                              -------       -------      --------       -------     -----------
<S>                                           <C>           <C>          <C>            <C>         <C>
Average Daily Production(1)
  Light and Medium Crude Oil (bbl/d)           21,065        24,078       23,522         22,851         22,886
  Gas (mmcf/d)                                117,310       175,706      182,039        180,773        164,180
  NGLs (bbl/d)                                  3,696         4,397        4,105          4,140          4,086
  Combined (BOE/d)                             44,313        57,759       57,968         57,120         54,335

Average Net Production Prices Received
  Light and Medium Crude Oil ($/bbl)         40.41           33.71        32.76          31.69          34.48
  Gas ($/mcf)                                 8.04            6.39         5.44           5.65           6.21
  NGLs ($/bbl)                               39.99           28.83        30.92          30.14          32.19
  Combined ($/BOE)                           44.29           37.12        33.86          34.05          36.87

Royalties Paid
  Light and Medium Crude Oil ($/bbl)          8.96            6.50         6.82           6.31           7.09
  Gas ($/mcf)                                 1.54            1.51         1.12           1.18           1.32
  NGLs ($/bbl)                                9.45            7.31         8.55           9.05           8.55
  Combined ($/BOE)                            9.14            7.86         6.90           6.93           7.61

Operating Expenses (2)(3)
  Light and Medium Crude Oil ($/bbl)          8.41            7.71         9.43           7.95           8.38
  Gas ($/mcf)                                 1.00            0.95         0.98           1.13           1.02
  NGLs ($/bbl)                                7.27            6.29         6.10           6.49           6.51
  Combined ($/BOE)                            7.26            6.57         7.35           7.24           7.10

Netback Received(5)
  Light and Medium Crude Oil ($/bbl)         23.04           19.50        16.51          17.43          19.01
  Gas ($/mcf)                                 5.50            3.93         3.54           3.34           3.87
  NGLs ($/bbl)                               23.27           15.23        16.27          14.60          17.13
  Combined ($/BOE)                           27.89           22.69        19.61          19.88          22.16
</TABLE>

Notes:
(1)      Before deduction of royalties.

(2)      Operating expenses are composed of direct costs incurred to operate
         both oil and gas wells. A number of assumptions have been made in
         allocating these costs between oil, natural gas and natural gas liquids
         production.

(3)      Operating recoveries associated with operated properties were excluded
         from operating costs and accounted for as a reduction to general and
         administrative costs.

<PAGE>

                                       32


(4)      Netbacks are calculated by subtracting royalties and operating costs
         from revenues.

(5)      A minor amount of production comes from heavy oil, resulting in
         insignificant netbacks. As a result, heavy oil net backs have been
         included in light/medium oil netbacks.

No property accounts for 8% or more of production disclosed above. For more
information, see "Other Oil and Gas Information - Principal Properties".

MARKETING ARRANGEMENTS

NATURAL GAS

During 2003, ARC Resources continued its marketing strategy of increasing its
level of direct control and diversification of marketing and transportation
arrangements for its natural gas production.

The average natural gas price received during 2003 was $6.21 per mcf as compared
to $4.41 for 2002. This price was achieved with a portfolio mix that on average
through the year received fixed pricing for 23% of total production, AECO
pricing for 57%, NYMEX pricing for 6%, Chicago Index Pricing for 7% and BC
Station 2 pricing for 7%

To manage natural gas price volatility and to stabilize the revenue stream, the
natural gas portfolio is directed towards maintaining:

1.       a balanced exposure to both U.S. and Canadian spot and fixed price
         markets and aggregator netback arrangements;

2.       market-sensitive and hedgeable pricing terms and contract flexibility;
         and

3.       a high utilization of contracted pipeline and processing capacity.

CRUDE OIL AND NATURAL GAS LIQUIDS

Liquids production in 2003 was comprised of approximately 38% light quality
crude oil (greater than 35(degree) API), 41% medium quality crude oil
(25(degree) to 35(degree) API), 6% heavy quality crude (less than 25(degree)
API), 5% condensate and 10% natural gas liquids. Heavier quality crude oil (less
than 25(degree) API) accounted for only 9% of production.

During 2003, average sales prices were $34.48 per bbl for oil and $32.19 per bbl
for natural gas liquids; these prices compare to 2002 prices of $31.63 per bbl
for oil and $24.01 per bbl for natural gas liquids. Crude oil is sold under
short term contracts (30-180 days) while natural gas liquids are sold under
annual arrangements. Industry pricing benchmarks for crude oil and natural gas
liquids are continuously monitored to ensure optimal netbacks.

         ACQUISITIONS AND DISPOSITIONS

ARC Resources made numerous property acquisitions and dispositions during 2003.
In aggregate, net of dispositions, ARC Resources made $560 million of net
property and corporate acquisitions in the year. The largest acquisition was the
April 2003 corporate acquisition of Star for $721.6 million prior to the related
third party disposition of $78.2 million.

                               RECENT DEVELOPMENTS

On April 5, 2004 the Trust reorganized its five revolving bilateral credit
facilities into one syndicated facility comprised of 8 lenders in aggregate with
RBC Royal Bank as the Administrative Agent and the

<PAGE>

                                       33


Bank of Nova Scotia as the Syndication Agent. For more information in relation
to the credit facilities, see "Other Information Respecting ARC Resources and
ARC Sask. - Borrowing".

ARC Resources intends to issue US $125 million of senior secured fixed rate
notes in two equal tranches. The first tranche has a term to maturity of ten
years and a weighted average life of 7.5 years. The second tranche was issued
with a term to maturity of 12 years. Both tranches are intended to be issued
pursuant to a note purchase agreement with certain U.S. institutional investors.

With the issuance of the senior secured notes, the Trust's total credit
facilities remain unchanged at approximately $620 million.

                         SHARE CAPITAL OF ARC RESOURCES

COMMON SHARES

ARC Resources has authorized for issuance an unlimited number of common shares
of which 100 common shares are issued and outstanding and held by the Trust. The
voting of such shares is delegated to ARC Resources under the Trust Indenture.
The holders of common shares are entitled to notice of, to attend and to one
vote per share held at any meeting of the shareholders of ARC Resources; to
receive dividends as and when declared by Board of Directors of ARC Resources on
the common shares as a class, and subject to prior satisfaction of all
preferential rights to dividends attached to all shares of other classes; and in
the event of any liquidation, dissolution or winding-up of ARC Resources,
whether voluntary or involuntary, or any other distribution of the assets of ARC
Resources among its shareholders for the purpose of winding-up its affairs, and
subject to prior satisfaction of all preferential rights to return of capital on
dissolution attached to all shares of other classes of shares of ARC Resources
ranking in priority to the common shares in respect of return of capital on
dissolution, to share rateably, together with the shares of any other class of
shares of ARC Resources ranking equally with the common shares in respect of
return of capital on dissolution, in such assets of ARC Resources as are
available for distribution.

EXCHANGEABLE SHARES

ARC Resources is authorized to issue an unlimited number of Exchangeable Shares
of which, as at December 31, 2003, 2,011,779 Exchangeable Shares are
outstanding. The Exchangeable Shares rank prior to the common shares of ARC
Resources, the second preferred shares of ARC Resources and any other shares
ranking junior to the Exchangeable Shares with respect to the payment of
dividends and the distribution of assets in the event of the liquidation,
dissolution or winding-up of ARC Resources; provided that notwithstanding such
ranking ARC Resources shall not be restricted in any way from repaying
indebtedness of ARC Resources to the Trust from time to time.

Holders of Exchangeable Shares are entitled to receive, as and when declared by
the Board of Directors in its sole discretion, from time to time, cumulative
preferential cash dividends in an amount per share equal to the ARC Resources
Exchange Ratio on the preceding business day multiplied by the fair market value
of a Trust Unit as at the preceding business day (determined on the basis of the
weighted average price of the Trust Unit on the TSX for the 10 trading days
preceding that date). It is not anticipated that dividends will be declared or
paid on the Exchangeable Shares, however the Board of Directors has the right in
its sole discretion to do so.

ARC Resources will not, without obtaining the approval of the holders of the
Exchangeable Shares:

         (a)      pay any dividend on the common shares of ARC Resources, second
                  preferred shares of ARC Resources or any other shares ranking
                  junior to the Exchangeable Shares, other than

<PAGE>

                                       34


                  the stock dividends payable in common shares of ARC Resources
                  or any such other shares ranking junior to the Exchangeable
                  Shares;

         (b)      redeem, purchase or make any capital distribution in respect
                  of the common shares of ARC Resources, second preferred shares
                  of ARC Resources or any other shares ranking junior to the
                  Exchangeable Shares;

         (c)      redeem or purchase any other shares of ARC Resources ranking
                  equally with respect to the payment of dividends or on any
                  liquidation distribution; or

         (d)      issue any shares, other than Exchangeable Shares, second
                  preferred shares of ARC Resources or common shares of ARC
                  Resources, which rank superior to the Exchangeable Shares with
                  respect to the payment of dividends or on any liquidation
                  distribution.

Notwithstanding the foregoing, the restrictions in paragraphs (a), (b) and (c)
above shall only be applicable if dividends which have been declared on the
outstanding Exchangeable Shares have not been paid in full.

The Exchangeable Share Provisions entitle the holder to exchange each
Exchangeable Share at any time into the number of Trust Units equal to the ARC
Resources Exchange Ratio then in effect. The ARC Resources Exchange Ratio is
determined by reference to the distributions paid on Trust Units in a given
month and the current market price of the Trust Units.

The Exchangeable Shares provide holders with a security having economic,
ownership and voting rights which are substantially equivalent to those of Trust
Units. The Exchangeable Shares are maintained economically equivalent to the
Trust Units by the progressive increase in the ARC Resources Exchange Ratio to
reflect distributions paid by the Trust to Unitholders. The Exchangeable Shares
are provided equivalent voting rights as Unitholders through the ARC Resources
Exchangeable Share Voting and Exchange Trust Agreement pursuant to which the
holders of Exchangeable Shares can direct the Trustee to vote at meetings of
Unitholders.

Computershare Trust Company of Canada acts as the transfer agent for the
Exchangeable Shares.

SECOND PREFERRED SHARES

ARC Resources also has authorized an unlimited number of Second Preferred Shares
which may at any time or from time to time be issued in one or more series.
Before any shares of a particular series are issued, the Board of Directors of
ARC Resources shall, by resolution, fix the number of shares that will form such
series and shall, subject to the limitations set out herein, by resolution fix
the designation, rights, privileges, restrictions and conditions to be attached
to the Second Preferred Shares of such series. The Second Preferred Shares of
each series shall rank behind the Exchangeable Shares and on a parity with the
Second Preferred Shares of every other series with respect to accumulated
dividends and return of capital. The Second Preferred Shares are entitled to a
preference over the Common Shares and over any other shares of ARC Resources
ranking junior to the Second Preferred Shares with respect to priority in the
payment of dividends and in the distribution of assets in the event of the
liquidation, dissolution or winding-up of ARC Resources, whether voluntary or
involuntary, or any other distribution of the assets of ARC Resources among its
shareholders for the purpose of winding-up its affairs. As at the date hereof,
no Second Preferred Shares have been issued or are outstanding.

<PAGE>

                                       35


            OTHER INFORMATION RESPECTING ARC RESOURCES AND ARC SASK.

ADDITIONAL PROPERTIES

ARC Resources or ARC Sask. may acquire additional Properties and related
tangible equipment and fund such acquisitions from production revenues, the
proceeds of the Deferred Purchase Price Obligation (which, at the option of the
Trust, may be financed from the net proceeds of any issue by the Trust of
additional Trust Units or from the proceeds of disposition of the Royalties in
respect of Properties which are disposed of unless ARC Resources or ARC Sask.
determines not to reinvest such proceeds to pay down all or any portion of the
Deferred Purchase Price Obligation), borrowings, farmouts or with working
capital of ARC Resources or ARC Sask. Under the terms of the Royalty Agreements,
capital expenditures and the cost of acquiring additional properties in any
calendar year will not exceed 25% of the aggregate of all amounts received by
the Trust, directly or indirectly, from ARC Resources and ARC Sask. for such
year in royalty, interest distributions and other payments unless financed with
borrowings, additional issuances of Trust Units or Properties disposition
proceeds. See "Capital Expenditures".

ARC Resources or ARC Sask. may sell any of its interests in Properties and
release the Royalties there from provided that the sale is approved by a Special
Resolution of the Unitholders in the event the interests in the Properties being
sold constitute greater than 25% of the Asset Value of all Properties. Sales of
Properties for proceeds in excess of $10,000,000 are required to be approved by
the Board of Directors of ARC Resources. The proceeds of a disposition of an
interest in the Properties to the extent related to Canadian resource
properties, as defined in the Tax Act, will be allocated 99% to the Trust after
retiring any borrowing which relates to the Canadian resource property component
of such interest in consideration for the release of the Royalties from such
Properties.

In connection with the sale of any interests in the Properties, ARC Resources
will determine whether the net proceeds of the sale should be reinvested on
behalf of the Trust pursuant to the Deferred Purchase Price Obligation.
Otherwise such proceeds will be distributed to Unitholders by the Trust.

CAPITAL EXPENDITURES

ARC Resources may approve future capital expenditures or farmouts under the
terms of the Royalty Agreements. Future capital expenditures on the Properties
will generally be of the type which are intended to maintain or improve
production from the Properties. ARC Resources and ARC Sask. may finance capital
expenditures from production revenues, the proceeds of the Deferred Purchase
Price Obligation (which will be financed by the Trust issuing additional Trust
Units or from the proceeds of disposition of the Royalties in respect of
Properties which are disposed of), borrowings, farmouts or with working capital
of ARC Resources or ARC Sask. Under the terms of the Royalty Agreements, capital
expenditures and the cost of acquiring additional properties in any calendar
year, will not exceed 25% of the aggregate of all amounts received by the Trust,
directly or indirectly, from ARC Resources and ARC Sask. for such year in
royalty, interest distributions and other payments unless financed with
borrowings, additional issuances of Trust Units or Property disposition
proceeds.

DEFERRED PURCHASE PRICE OBLIGATION

Under the terms of the Royalty Agreements, the purchase price of the Royalties
includes the Deferred Purchase Price Obligation which recognizes that cash flows
from any after-acquired property and certain capital expenditures will be
subject to the Royalty for the benefit of Unitholders. The Deferred Purchase
Price Obligation consists of an amount equal to 99% of the cost of, or any
amount borrowed to acquire, a Canadian resource property (as defined under the
Tax Act) acquired by ARC Resources or ARC Sask. subsequent to the grant of the
Royalties and an amount equal to 99% of the cost of, or any amount borrowed to
fund, certain designated capital expenditures incurred on the Properties. The
Trust intends to

<PAGE>
                                       36


finance the Deferred Purchase Price Obligations through additional issues of
Trust Units or the application of the Royalty disposition proceeds.

BORROWING

ARC Resources and ARC Sask. borrow funds from time to time to finance the
purchase of Properties, for capital expenditures or for other financial
obligations or expenditures in respect of the Properties held by them or for
working capital purposes. Borrowings to fund the purchase of Canadian resource
properties, as defined in the Tax Act, may be repaid with funds received from
the Trust pursuant to the Deferred Purchase Price Obligation. The Board of
Directors of ARC Resources has approved a policy relating to borrowing which
requires a quarterly assessment by management, subject to review by the Board of
Directors of ARC Resources, of the appropriateness of borrowing levels. ARC
Resources and ARC Sask. have granted security in priority to the Royalties to
secure the loan of such funds.

Debt service charges on borrowed funds attributable to the Properties, including
funds borrowed from the Trust, will be deducted in computing Royalty Income. The
debt repayment will be scheduled to minimize any income tax payable by ARC
Resources.

At December 31, 2003, the Trust had revolving credit facilities to a combined
maximum of $620 million including US$65 million of Senior Secured Notes (the
"Notes") at December 31, 2003. The revolving credit facilities each have a 364
day extendable period and a two year term. Borrowings under the facilities bear
interest at bank prime or, at the Trust's option, bankers' acceptance plus a
stamping fees. The first Notes were issued for an aggregate of US$35 million
during 2000 pursuant to an Uncommitted Master Shelf Agreement. The first Notes
bear interest at 8.05% and require equal principal payments of US$7 million over
a five year period commencing in 2004. On October 18, 2002, ARC Resources issued
a further US$30 million pursuant to the Master Shelf Agreement. These Notes bear
interest at 4.94% and require equal principal payments of US$6 million over a 5
year period commencing 2006.

For further information in relation to the credit facilities of ARC Resources
and ARC Sask., see "Recent Developments".

        ESCROW AGREEMENTS

As a condition of preceding with the Internalization Transaction certain holders
of ARML shares entered into the Escrow Agreements, which are intended to enhance
alignment between management and Unitholder interests. As a result of the escrow
provision 9,013 Trust Units and 2,008,699 ARML Exchangeable Shares were placed
in escrow at such time.

All the distributions received on the Trust Units (or attributable to
Exchangeable Shares) held in escrow flow through to the underlying holders of
the Trust Units or Exchangeable Shares. Distributions on the Trust Units are
made directly to the holder of the escrowed Trust Units. Distributions
attributable to Exchangeable Shares are, on the request of a holder of
Exchangeable Shares, released periodically, by release of such number of
Exchangeable Shares which reflect the increase in the number of Trust Units as a
result of the Distributions on Trust Units to which such escrowed holder is
entitled at the time. In the event of a change in control, ARC Resources or the
Trust other than among affiliates, all Trust Units and Exchangeable Shares held
in escrow are to be released. Securities held in escrow may be charged, pledged
or encumbered, provided that the securities remain in escrow pursuant to the
terms of the Escrow Agreements.

As at December 31, 2003, there are 245,982 Trust Units and 940,620 Exchangeable
Shares received pursuant to the Internalization Transaction being held in escrow
and released as to one-quarter on each August 28 for the immediately following
four years.

<PAGE>

                                       37


In addition, 288,738 of the Exchangeable Shares currently held in escrow for
holders of ARML Shares who were, at the date of the Internalization Transaction,
officers of ARC Resources or directors of ARC Financial Corporation will be
forfeited if the individual ceases to be an employee, director, of officer of
ARC Resources, any other affiliate of the Trust, ARC Financial Corporation or
any other member of the ARC Financial group of companies in the first year after
the closing date of the Internalization Transaction, such percentage declines
evenly on August 28 over the following four year period. Any such Trust Units or
ARML Exchangeable Shares will be redistributed among the remaining members of
this group. In the event of a change in control of the Trust, the forfeiture
provisions will be cancelled.

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

INSURANCE

ARC Resources and ARC Sask. carry insurance policies to provide protection for
their working interests in the Properties at or above industry standards.
Insurance policies covers property damage, general liability and, for certain
properties, business interruption. The ongoing level, type and maintenance of
insurance are determined by ARC Resources based upon the availability and cost
of such insurance and ARC Resources' perception of the risk of loss.

RETENTION BONUSES AND EXECUTIVE EMPLOYMENT AGREEMENTS

As a condition of the Internalization Transaction, ARML declared the Retention
Bonuses to the ARML Officers, compromised of the Chief Executive Officer and the
five Vice-Presidents of ARC Resources on August 28, 2002. This payment is to be
made in equal increments of an aggregate of $1,000,000 per year for five years
but only if the individual remains employed by ARC Resources or another
affiliate of the Trust. The Retention Bonuses were funded by an effective
reduction in the purchase price resulting in the existing holders of ARML shares
paying for this management retention program. The relevant portion of the unpaid
Retention Bonus will not be paid to any departing officer.

                        INFORMATION RELATING TO THE TRUST

TRUST UNITS

A maximum of 650,000,000 Trust Units have been created and may be issued
pursuant to the Trust Indenture. The Trust Units represent equal undivided
beneficial interests in the Trust. All Trust Units share equally in all
distributions from the Trust and all Trust Units carry equal voting rights at
meetings of Unitholders. No Unitholder will be liable to pay any further calls
or assessments in respect of the Trust Units. No conversion, retraction,
redemption or pre-emptive rights attach to the Trust Units.

SPECIAL VOTING UNIT

The Trust Indenture also provides for the issuance of special voting units which
are to be issued to a trustee and which are entitled to such number of votes at
meetings of Unitholders equal to the number of Trust Units reserved for issuance
that such special voting units represent, such number of votes and any other
rights or limitations prescribed by the Board of Directors of ARC Resources when
the Board authorizes issuing such special voting units.

A Special Voting Unit has been designated by the Board of Directors of ARC
Resources as the "Special Voting Unit, Exchangeable Shares ("Special Voting
Unit"). The Special Voting Unit possesses a number of votes for the election of
directors of ARC Resources and on all other matters submitted to a vote of
Unitholders equal to the number of outstanding Exchangeable Shares from time to
time not owned by

<PAGE>

                                       38


Trust or ARC Subco. The holders of Trust Units and the holder of the Special
Voting Unit vote together as a single class on all matters.

In the event of any liquidation, dissolution or winding-up of Trust, the holder
of the Special Voting Unit will not be entitled to receive any assets of Trust
available for distribution to its holders of Trust Units. The holder of the
Special Voting Unit will not be entitled to receive dividends. The Special
Voting Unit has been issued to Computershare Trust Company of Canada, as
trustee, under the Voting and Exchange Trust Agreement. At such time as the
Special Voting Unit has no votes attached to it because there are no
Exchangeable Share outstanding not owned by Trust or ARC Subco, the Special
Voting Unit will be cancelled.

THE TRUST INDENTURE

The Trust Indenture, among other things, provides for the calling of meetings of
Unitholders, the conduct of business thereof, notice provisions, the appointment
and removal of the Trustee and the form of Trust Unit certificates. The Trust
Indenture may be amended from time to time. Substantive amendments to the Trust
Indenture, including early termination of the Trust and the sale or transfer of
the property of the Trust as an entirety or substantially as an entirety
requires approval by Special Resolution of the Unitholders. Any approval or
consent of Unitholders in relation to any matter required by any regulatory body
will require a majority of, or such other level of approval of Unitholders as
may be stipulated by such regulatory authority, including as to the exclusion of
interested or other Unitholders in the calculation of such level of approval.
See "Meetings and Voting".

The following is a summary of certain provisions of the Trust Indenture. For a
complete description of such indenture, reference should be made to the Trust
Indenture, copies of which may be viewed at the offices of, or obtained from,
the Trustee.

TRUSTEE

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

The term of the Trustee's appointment is until the next annual meeting of
Unitholders. At each annual meeting the Trustee may be reappointed or changed as
determined by a majority of the votes cast at such meeting of the Unitholders.
The Trustee may resign upon 60 days' notice to the Trust. The Trustee may also
be removed by Special Resolution of the Unitholders. Such resignation or removal
becomes effective upon the acceptance or appointment of a successor trustee.

ARC Resources presently administers the Trust on behalf of the Trustee. ARC
Resources, on behalf of the Trustee, keeps such books and records as are
necessary for the proper recording of the business transactions of the Trust.

The Trust Indenture provides that the Trustee shall be under no liability for
any action or failure to act unless such liabilities arise out of the Trustee's
gross negligence, wilful default or fraud. The Trustee, where it has met its
standard of care, shall be indemnified out of the assets of the Trust for any
taxes or other government charges imposed upon the Trustee in consequence of its
performance of its duties but


<PAGE>

                                      39


shall have no additional recourse against Unitholders. In addition, the Trust
Indenture contains other customary provisions limiting the liability of the
Trustee.

FUTURE OFFERINGS

Under the Trust Indenture, the Trust may offer additional Trust Units or rights
to acquire additional Trust Units at such times and on such terms as the Board
of Directors of ARC Resources may determine. Pursuant to the Deferred Purchase
Price Obligation, the Royalties will attach to the interests of ARC Resources or
ARC Sask. in any additional Properties they may acquire from time to time. At
the option of the Trust, the net proceeds from any offerings may be used to
finance the acquisition of additional Properties should such interests be
available on terms and conditions acceptable to ARC Resources on behalf of
Unitholders or to repay indebtedness incurred by ARC Resources in connection
with such acquisitions.

MEETINGS AND VOTING

Annual meetings of the Unitholders will be held annually. Special meetings of
Unitholders may be called at any time by the Trustee and shall be called by the
Trustee upon the written request of Unitholders holding in aggregate not less
than 20% of the Trust Units. Notice of all meetings of Unitholders shall be
given to Unitholders at least 21 days prior to the meeting.

Unitholders will be entitled at each annual meeting to appoint the Trustee, to
appoint the auditors of the Trust and to elect all the members of the Board of
Directors of ARC Resources.

MANAGEMENT OF THE TRUST

The Trust Indenture provides for delegation to ARC Resources by the Trustee of
broad discretion to administer and manage the day to day operations of the Trust
Fund, which includes responsibility and authority to make executive decisions on
behalf of all of the direct or indirect subsidiaries of the Trust and to
exercise the powers of the Trustee. Without limitation of the foregoing, ARC
Resources has been specifically delegated to provide certain administrative and
support services to the Trust, including those necessary: (i) to ensure
compliance by the Trust with continuous disclosure obligations under applicable
securities legislation; (ii) to provide investor relations services; (iii) to
provide or cause to be provided to Unitholders all information to which
Unitholders are entitled under the Trust Indenture; (iv) to call, hold and
distribute materials including notices of meetings and information circulars in
respect of all necessary meetings of Unitholders; (v) to determine the amounts
payable from time to time to Unitholders and to arrange for distributions to
Unitholders of Distributable Income; and (vi) to determine the timing and terms
of future offerings of Trust Units, if any.

ARC Resources has accepted all such delegation and has agreed that, in respect
of such matters, it shall carry out its functions honestly, in good faith and in
the best interests of the Trust and the Unitholders and, in connection
therewith, shall exercise that degree of care, diligence and skill that a
reasonably production person would exercise in comparable circumstances.

ARC FINANCIAL ADVISORY AGREEMENT
ARC Resources, the Trust, ARML and ARC Financial Corporation entered into the
ARC Financial Advisory Agreement dated August 28, 2002 whereby ARC Financial
Corporation agreed to provide certain ongoing research and strategic services to
the Trust for a five year period without cost to the Trust. This ensures the
continuing availability of research and strategic advice in the energy sector,
which has been beneficial to the Trust in the past. ARC Financial Corporation
has also agreed not to, and will use reasonable commercial efforts, to cause any
of the ARC Financial group of companies, not to act as

<PAGE>

                                       40


manager or promoter of another publicly listed energy related trust for a period
of five years, with certain exceptions relating to the ARC venture capital
activities carried out by any member of the ARC Financial group of companies.

LIMITATION ON NON-RESIDENT OWNERSHIP

In order for the Trust to maintain its status as a mutual fund trust under the
Tax Act, the Trust must not be established or maintained primarily for the
benefit of non-residents of Canada ("non-residents") within the meaning of the
Tax Act. Accordingly, the Trust Indenture provides that the Trust, by or through
ARC Resources on the Trust's behalf, shall, among other things, take all
necessary steps to monitor the ownership of the Trust Units in order that the
Trust complies with the requirements under the Tax Act for "unit trusts" and
"mutual fund trusts" at all relevant times such that the Trust maintains the
status of a unit trust and a mutual fund trust for the purposes of the Tax Act.
The Trust Indenture also provides that if at any time the Trust or ARC Resources
becomes aware that the beneficial owners of 50% or more of the Trust Units then
outstanding are or may be non-residents or that such a situation is imminent,
the Trust, by or through ARC Resources on the Trust's behalf, shall take such
action as may be necessary to carry out the foregoing intentions.

RIGHT OF REDEMPTION

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

The aggregate cash Market Redemption Price payable by the Trust in respect of
any Trust Units surrendered for redemption during any calendar month shall be
satisfied by way of a cash payment on the last day of the following month;
provided that the entitlement of Unitholders to receive cash upon the redemption
of their Trust Units is subject to a number of conditions, including the
condition that the total amount payable by the Trust in respect of such Trust
Units and all other Trust Units tendered for retraction in the same calendar
month must not exceed $100,000 provided that such condition may be waived at the
discretion of the Board of Directors of ARC Resources in respect of any calendar
month.

If a Unitholder is not entitled to receive cash upon the redemption of Trust
Units then the Market Redemption Price for such Trust Units shall be paid on the
last day of the following month by the Trust distributing unsecured promissory
notes of ARC Resources ("ARC Resources Notes") having an aggregate principal
amount equal to the aggregate Market Redemption Price of the Trust Units
tendered for redemption, which notes will bear interest at the rate of 6% per
annum and will mature on the 15th anniversary of the date of issuance.

It is anticipated that the foregoing retraction right will not be the primary
mechanism for holders of Trust Units to dispose of their Trust Units. ARC
Resources Notes which may be distributed IN SPECIE to Unitholders in connection
with a redemption will not be listed on any stock exchange and no market is
expected to develop in the ARC Resources Notes. ARC Resources Notes may be
subject to resale restrictions under applicable securities laws. ARC Resources
Notes so distributed may be qualified

<PAGE>

                                       41


investments for trusts governed by registered retirement savings plans,
registered retirement income trusts and deferred profit sharing plans.

TERMINATION OF THE TRUST

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

Unless the Trust is terminated or extended by vote of the Unitholders earlier,
the Trustee shall commence to wind-up the affairs of the Trust on December 31,
2095. In the event that the Trust is wound-up, the Trustee will liquidate all
the assets of the Trust, pay, retire, discharge or make provision for some or
all obligations of the Trust and then distribute the remaining proceeds of sale
to Unitholders.

REPORTING TO UNITHOLDERS

The financial statements of the Trust will be audited annually by an independent
recognized firm of chartered accountants. The audited financial statements of
the Trust, together with the report of such chartered accountants, will be
mailed by the Trustee to Unitholders and the unaudited interim financial
statements of the Trust will be mailed to Unitholders within the periods
prescribed by securities legislation. The year end of the Trust is December 31.
The Trust will be subject to the continuous disclosure obligations under all
applicable securities legislation.

Unitholders are entitled to inspect, during normal business hours, at the
offices of the Trustee, and, upon payment of reasonable reproduction costs, to
receive photocopies of the Royalty Agreement, the Trust Indenture and a listing
of the registered holders of Trust Units.

DISTRIBUTION REINVESTMENT AND OPTIONAL TRUST UNIT PURCHASE PLAN

A Distribution Reinvestment and Optional Trust Unit Purchase Plan has been
established for the Trust to provide Unitholders who are residents of Canada
(within the meaning of the Tax Act) with a method of reinvesting cash
distributions by purchasing additional Trust Units.

UNITHOLDER RIGHTS PROTECTION PLAN

On June 7, 1999, the Unitholders approved a Unitholder Rights Protection Plan
(the "Rights Plan"), which was implemented pursuant to an agreement (the "Rights
Plan Agreement") between ARC Resources and Montreal Trust Company (as of April
10, 2002, Computershare Trust Company of Canada), as rights agent immediately
following approval by Unitholders at the meeting held on such date. The purposes
of the Rights Plan, are, firstly, to afford both Unitholders and the Board of
Directors of ARC Resources adequate time to assess an offer made for shares of
the Trust and to pursue, explore and develop alternative courses of action in an
attempt to maximize unitholder value. Secondly, the purpose of the Rights Plan
is to protect Unitholders from unfair, abusive or coercive takeover strategies,
including the acquisition of control of the Trust by a bidder in a transaction
or series of transactions that does not treat all Unitholders equally or fairly
or that does not afford all Unitholders an equal opportunity to share in any
premium paid upon an acquisition of control. The Board of Directors of ARC
Resources has determined to allow the Rights Plan to terminate on the close of
business on the first business day following the annual general meeting of
Unitholders to be held on May 12, 2004.

<PAGE>
                                       42


                              CORPORATE GOVERNANCE

GENERAL

In general, ARC Resources has been delegated substantially all of the management
decisions of the Trust. The Unitholders are entitled to elect all of the Board
of Directors of ARC Resources pursuant to the terms of the Trust Indenture. The
Articles of ARC Resources provides that the Board of Directors of ARC Resources
shall consist of a minimum of three and a maximum of nine directors.

TRUST INDENTURE

Pursuant to the Trust Indenture, Unitholders are entitled to direct the manner
in which the Trust will vote its shares in ARC Resources at all meetings in
respect of matters, relating to the election of the directors of ARC Resources,
approving its financial statements and appointing auditors of ARC Resources who
shall be the same as the auditors of the Trust. Prior to the Trust voting its
shares in ARC Resources, in respect of such matters, each Unitholder is entitled
to vote in respect of the matter on the basis of one vote per Trust Unit held,
and the Trust is required to vote its shares in ARC Resources in accordance with
the result of the vote of Unitholders.

DECISION MAKING

The Board of Directors of ARC Resources has a mandate to supervise the
management of the business and affairs of the Trust, ARC Resources and the other
direct or indirect subsidiaries of the Trust and to act with a view to the best
interests of the Trust and ARC Resources. The Board of Directors of ARC
Resources supervises the management of the business and affairs of the
subsidiaries of the Trust. The Board of Directors' mandate includes: (a) the
responsibility for managing its own affairs; (b) monitoring of management of and
activities of the Trust; (c) reviewing strategic operating, capital and
financial plans; and (d) compliance reporting and corporate communications. In
particular, significant operational decisions and all decisions relating to: (i)
the acquisition and disposition of properties for a purchase price or proceeds
in excess of $10,000,000; (ii) the approval of capital expenditure budgets; and
(iii) establishment of credit facilities are made by the Board of Directors of
ARC Resources. In addition, the Trustee has delegated broad discretion in
relation to the day to day operations of the Trust Fund to the Board of
Directors of ARC Resources including all decisions relating to: (i) matters
relating to any offers for Trust Units; (ii) issuances of additional Trust
Units; and (iii) the determination of the amount of distributable income. Any
amendment to the royalty agreement between either ARC Resources or ARC (Sask.)
Energy Trust and the Trust requires the approval of the Board of Directors of
ARC Resources on behalf of the Trust. The Board of Directors of ARC Resources
holds regularly scheduled meetings at least quarterly to review the business and
affairs of the subsidiaries of the Trust and make any necessary decisions
relating thereto.

The Trust Indenture gives to the Board of Directors of ARC Resources the
authority to exercise the rights, powers and privileges for all matters relating
to the maximization of Unitholder value in the context of an Offer including any
Unitholder rights protection plan, any defensive action to an Offer, any
Directors Circular in response to an Offer, any regulatory or court proceeding
relating to an Offer and any related or ancillary matter.

Additional information in respect of corporate governance matters is contained
in the Annual Meeting 2004 Information Circular.

<PAGE>

                                       43


BOARD OF DIRECTORS OF ARC RESOURCES

ARC Resources has a Board of Directors consisting of eight individuals, all of
whom have been elected by the Unitholders, including by the holders of the
Exchangeable Shares through the Special Voting Unit.

The name, municipality of resident, position held and principal occupation of
each director and officer of ARC Resources are set out below:

<TABLE>
<CAPTION>
        Name and                                  Offices Held
   Municipality of Residence                  and Time as Director                           Principal Occupation
-----------------------------         ----------------------------------        ------------------------------------------
<S>                                   <C>                                       <C>
Mac H. Van Wielingen(1)(3)(4)(5)      Chairman of the Board and Director        Co-Chairman of ARC Financial Corporation
Van Wielingen(1)(3)(4)(5)             since May 3, 1996                         (an investment management company)
Calgary, Alberta

Walter DeBoni(1)(3)(4)                Vice Chairman and Director since          Vice-President, Canada Frontier &
Calgary, Alberta                      June 26, 1996                             International Business of Husky Energy Inc.
                                                                                (a public oil and gas company)
John P. Dielwart                      President, Chief Executive Officer        President and Chief Executive Officer of
Calgary, Alberta                      and Director since May 3, 1996            ARC Resources

John M. Beddome(2)(4)                 Director since May 3, 1996                Independent Businessman
Calgary, Alberta

Frederic C. Coles(2)(3)               Director since May 3, 1996                Independent Businessman
Calgary, Alberta

Fred J. Dyment(1)(2)                  Director since April 17, 2003             Independent Businessman
Calgary, Alberta

Michael M. Kanovsky(1)(2)             Director since May 3, 1996                Independent Businessman
Victoria, B.C.

John M. Stewart(3)(4)(5)              Director since February 11, 1998          Vice Chairman of ARC Financial Corporation
Calgary, Alberta

Doug J. Bonner                        Vice-President, Engineering               Vice-President, Engineering of ARC Resources
Calgary, Alberta

David P. Carey                        Vice President, Business Development      Vice President, Business Development of ARC
Calgary, Alberta                                                                Resources

Danny G. Geremia                      Treasurer                                 Treasurer of ARC Resources
Calgary, Alberta

Susan D. Healy                        Vice-President, Land                      Vice-President, Land of ARC Resources
Calgary, Alberta

Steven W. Sinclair                    Vice-President, Finance and Chief         Vice-President, Finance and Chief Financial
Calgary, Alberta                      Financial Officer                         Officer of ARC Resources

Myron M. Stadnyk                      Vice-President, Operations                Vice-President, Operations of ARC Resources
Calgary, Alberta
</TABLE>


<PAGE>
                                       44

<TABLE>
<CAPTION>
        Name and                                  Offices Held
   Municipality of Residence                  and Time as Director                           Principal Occupation
-----------------------------         ----------------------------------        ------------------------------------------
<S>                                   <C>                                       <C>
Allan R. Twa                          Secretary                                 Partner, Burnet, Duckworth & Palmer LLP
Calgary, Alberta                                                                (barristers and solicitors)
</TABLE>

Notes:

(1)      Member of Audit Committee.

(2)      Member of Reserve Audit Committee.

(3)      Member of Human Resource and Compensation Committee.

(4)      Member of Board Governance Committee.

(5)      Member of Management Advisory Committee.

For further information in relation to the background of the directors of ARC
Resources, see the Annual Meeting 2004 Information Circular under the heading
"Matters to be Acted Upon at Meeting - Election of Directors of ARC Resources",
which is hereby incorporated by reference into this Annual Information Form. The
following comprises a brief description of the background of the officers of ARC
Resources.

JOHN P. DIELWART, B.SC., P.ENG.

Mr. Dielwart is President and CEO of ARC Resources and has overall management
responsibility for the Trust. Prior to joining ARC in 1994, Mr. Dielwart spent
12 years with a major Calgary based oil and natural gas engineering consulting
firm, as senior vice-president and a director, where he gained extensive
technical knowledge of oil and natural gas properties in western Canada. He
began his career working for five years with a major oil and natural gas company
in Calgary. Mr. Dielwart is a member of the Associate of Professional Engineers,
Geologists and Geophysicists of Alberta (APEGGA). Mr. Dielwart is currently past
Chairman of the board of governors for the Canadian Association of Petroleum
Producers (CAPP). He holds a Bachelor of Science with Distinction (Civil
Engineering) degree, University of Calgary. Mr. Dielwart is a director of ARC
Financial Corporation. He has been a director of ARC Resources since 1996.

STEVEN W. SINCLAIR, B. COMM., CA

Mr. Sinclair is Vice-President Finance and Chief Financial Officer of ARC
Resources and oversees all of the financial affairs of the Trust. Mr. Sinclair
has a Bachelor of Commerce from the University of Calgary, obtained his
Chartered Accountant's designation in 1981 and has over 20 years experience
within the finance, accounting and taxation areas of the oil and gas industry.
Mr. Sinclair has been with the Trust since 1996.

DOUGLAS J. BONNER, B.SC., P.ENG.

Mr. Bonner is Vice-President, Engineering of ARC Resources and is responsible
for all exploitation and development activities. He holds a B.Sc. in Geological
Engineering from the University of Manitoba. Mr. Bonner's major area of
expertise is reservoir engineering and he has extensive technical knowledge of
oil and natural gas fields throughout western Canada, the east coast and
northern Canada. Mr. Bonner is a member of the Association of Professional
Engineers, Geologists and Geophysicists of Alberta. Prior to joining ARC
Resources in 1996, Mr. Bonner spent 18 years with various major oil and natural
gas companies in positions of increasing responsibility.

DAVID P. CAREY, B.SC., P.ENG., MBA

Mr. Carey is Vice-President, Business Development of ARC Resources and is
responsible for all facets of business development and investor relations. He
holds both a B.Sc. in Geological Engineering and a

<PAGE>
                                       45


MBA from Queen's University. Mr. Carey brings over 20 years of diverse
experience in the Canadian and international energy industries covering
exploration, production and project evaluations in western Canada, oilsands, the
Canadian frontiers and internationally. Mr. Carey is a member of the Association
of Professional Engineers, Geologists and Geophysicists of Alberta. Prior to
joining ARC Resources in 2001, Mr. Carey held senior positions with Athabasca
Oil Sands Investments Inc. and a major Canadian oil and gas company.

DANNY G. GEREMIA, B. COMM., CA

Mr. Geremia is Treasurer of ARC Resources and is responsible for all
treasury-related activities. Mr. Geremia has a Bachelor of Commerce from the
University of Calgary and obtained his Chartered Accountant's designation in
1999. Prior to joining the Trust in December 1999, Mr. Geremia worked with a
major public accounting firm in both their audit and taxation departments. Mr.
Geremia is currently a member of the Treasury Management Association of Canada.

SUSAN D. HEALY, P. LAND

Ms. Healy, Vice-President, Land is responsible for all land related activities
for ARC Resources. Ms. Healy joined the Trust at inception in July 1996,
bringing with her over 17 years of diverse experience gained from working with
junior and senior oil and gas companies. Ms. Healy has a Professional Land
designation granted by the Canadian Association of Petroleum Landmen.

MR. MYRON M. STADNYK, B.SC., P.ENG.

Mr. Stadnyk is Vice-President, Operations of ARC Resources and is responsible
for all of ARC Resources' operational activities. He has 18 years experience in
all aspects of oil and gas production operations. Prior to joining ARC Resources
in 1997, Mr. Stadnyk worked with a major oil and gas company in both domestic
and international operations and oil and gas facility design and construction.
He has a B.Sc. in Mechanical Engineering and is a member of the Association of
Professional Engineers, Geologists and Geophysicists in Alberta and
Saskatchewan.

ALLAN R. TWA, Q.C.

A member of the Alberta Bar since 1971, Mr. Twa is a partner in the law firm
Burnet, Duckworth & Palmer LLP. Mr. Twa holds a B.A. (Political Science) from
the University of Calgary, a LL.B. from the University of Alberta and a LL.M.
from the University of London, England. Over the last 25 years, Mr. Twa has been
engaged in a legal practice involving legal administration of public companies
and trusts, corporate finance, and mergers and acquisitions. Mr. Twa is the
Corporate Secretary.

Allan R. Twa, the Secretary of ARC Resources, was a director of Bracknell
Corporation until November 1, 2001 at which time Mr. Twa and the other directors
of Bracknell resigned. At that time the principal bankers of Bracknell had given
notice of default under Bracknell's credit facilities and expressed their intent
to realize on their security. Bracknell consented to those proceedings.

Mac Van Wielingen is the Chairman and a Director of ARC Resources and Allan R.
Twa is the Secretary of ARC Resources. Mr. Van Wielingen and Mr. Twa were
directors of Gauntlet Energy Corporation which secured creditor protection
pursuant to the COMPANIES' CREDITORS ARRANGEMENT ACT on June 17, 2003 and was
subsequently acquired by Ketch Resources Ltd. in December, 2003.

All of the directors of ARC Resources were elected on April 17, 2003 to hold
office until the next annual general meeting of ARC Resources. As at March 31,
2004, the directors and officers of ARC Resources, as a group, beneficially
owned, directly or indirectly, or exercised control or direction over, 802,834
Trust Units or approximately 0.4 percent of the issued and outstanding Trust

<PAGE>

                                       46


Units, and 1,141,135 Exchangeable Shares or approximately 37.4% of the issued
and outstanding Exchangeable Shares.

                              CONFLICTS OF INTEREST

Circumstances may arise where members of the Board of Directors of ARC Resources
serve as directors or officers of corporations which are in competition to the
interests of ARC Resources and the Trust. No assurances can be given that
opportunities identified by such board members will be provided to ARC Resources
and the Trust.

The BUSINESS CORPORATIONS ACT (Alberta) provides that in the event that a
director has an interest in a contract or proposed contract or agreement, the
director shall disclose his interest in such contract or agreement and shall
refrain from voting on any matter in respect of such contract or agreement
unless otherwise provided under such Act. To the extent that conflicts of
interest arise, such conflicts will be resolved in accordance with the
provisions of such Act.

                   SELECTED CONSOLIDATED FINANCIAL INFORMATION

                                FINANCIAL SUMMARY
                     ($000'S, EXCEPT PER TRUST UNIT NUMBERS)

<TABLE>
<CAPTION>
                                                    Year Ended               Year Ended             Year Ended
                                                 December 31, 2003       December 31, 2002      December 31, 2001
                                                 -----------------       -----------------      -----------------
<S>                                              <C>                     <C>                    <C>
EARNINGS INFORMATION
Revenue                                                 731,233              $444,835               $515,596
Royalties                                               150,995               $85,155               $112,209
Expenses(1)                                             383,581              $316,567               $289,605
Future Income Tax Recovery(1)                            93,544               $27,934                $21,690
Net Income (loss)(1)                                    290,201               $71,047               $135,472
Income (loss) per trust unit(1)
Basic                                                     $1.85                 $0.59                  $1.33
Diluted                                                   $1.82                 $0.59                  $1.32

DISTRIBUTABLE INCOME INFORMATION
Distributable Income                                    279,328              $183,617               $234,053
Distributable Income per trust unit                       $1.80                 $1.56                  $2.31

BALANCE SHEET INFORMATION
Total Assets(1)                                       2,281,775            $1,494,647             $1,335,752
Long Term Debt                                          232,402              $337,728               $294,489
Trust Units Outstanding and trust units                 182,777               126,444                111,692
Reserved for Exchangeable Shares at Year End
</TABLE>

Note:

(1)      Financial results have been restated for years 2001 and 2002. The
         restatement was the result of the retroactive application of the change
         in accounting policy relating to asset retirement obligations that was
         implemented in the fourth quarter of 2003. The restatement affected
         total assets, expenses, future income tax recovery, net income and
         income per trust unit.

<PAGE>
                                       47


                          DISTRIBUTIONS TO UNITHOLDERS

The following per Trust Unit distributions have been made in the last three
completed financial years:

                2001            Distribution Per Trust Unit
          ---------------       ---------------------------
          First Quarter                    $0.60
          Second Quarter                   $0.66
          Third Quarter                    $0.60
          Fourth Quarter                   $0.45

                  2002
          First Quarter                    $0.39
          Second Quarter                   $0.39
          Third Quarter                    $0.39
          Fourth Quarter                   $0.39

                  2003
          First Quarter                    $0.45
          Second Quarter                   $0.45
          Third Quarter                    $0.45
          Fourth Quarter                   $0.45

Cash distributions paid to Unitholders in 2001 were 32 percent tax deferred,
2002 cash distributions were 32 percent tax deferred and 2003 cash distributions
were 15% percent tax deferred.


                      MANAGEMENT'S DISCUSSION AND ANALYSIS

Reference is made to the information under the heading "Management's Discussion
and Analysis" on pages 31 to 57, inclusive, of the Trust's 2003 Annual Report,
which pages are incorporated herein by reference.

                              INDUSTRY REGULATIONS

The oil and natural gas industry is subject to extensive controls and
regulations governing its operations (including land tenure, exploration,
development, production, refining, transportation and marketing) imposed by
legislation enacted by various levels of government and with respect to pricing
and taxation of oil and natural gas by agreements among the governments of
Canada, Alberta, British Columbia and Saskatchewan, all of which should be
carefully considered by investors in the oil and gas industry. It is not
expected that any of these controls or regulations will affect the operations of
ARC Resources in a manner materially different than they would affect other oil
and gas companies of similar size. All current legislation is a matter of public
record and ARC Resources is unable to predict what additional legislation or
amendments may be enacted. Outlined below are some of the principal aspects of
legislation, regulations and agreements governing the oil and gas industry.

PRICING AND MARKETING OIL AND NATURAL GAS

The producers of oil are entitled to negotiate sales contracts directly with oil
purchasers, with the result that the market determines the price of oil. Such
price depends in part on oil quality, prices of competing oils, distance to
market, the value of refined products and the supply/demand balance. Oil
exporters are also entitled to enter into export contracts with terms not
exceeding one year in the case of light crude oil and two years in the case of
heavy crude oil, provided that an order approving such export has been obtained
from the National Energy Board of Canada (the "NEB"). Any oil export to be made
pursuant to a contract of longer duration (to a maximum of 25 years) requires an
exporter to obtain an export licence from the NEB and the issuance of such
licence requires the approval of the Governor in Council.

<PAGE>

                                       48


The price of natural gas is determined by negotiation between buyers and
sellers. Natural gas exported from Canada is subject to regulation by the NEB
and the Government of Canada. Exporters are free to negotiate prices with
purchasers, provided that the export contracts must continue to meet certain
other criteria prescribed by the NEB and the Government of Canada. Natural gas
exports for a term of less than 2 years or for a term of 2 to 20 years (in
quantities of not more than 30,000 m3/day), must be made pursuant to an NEB
order. Any natural gas export to be made pursuant to a contract of longer
duration (to a maximum of 25 years) or a larger quantity requires an exporter to
obtain an export licence from the NEB and the issuance of such licence requires
the approval of the Governor in Council.

The governments of Alberta, British Columbia and Saskatchewan also regulate the
volume of natural gas which may be removed from those provinces for consumption
elsewhere based on such factors as reserve ability, transportation arrangements
and market considerations.

The lack of firm pipeline capacity continues to limit the ability to produce and
market natural gas production although pipeline expansions are ongoing. In
addition, the prorationing of capacity on the interprovincial pipeline systems
continues to limit oil exports.

THE NORTH AMERICAN FREE TRADE AGREEMENT

The North American Free Trade Agreement ("NAFTA") among the governments of
Canada, United States of America and Mexico became effective on January 1, 1994.
NAFTA carries forward most of the material energy terms that are contained in
the Canada United States Free Trade Agreement. Canada continues to remain free
to determine whether exports of energy resources to the United States or Mexico
will be allowed, provided that any export restrictions do not: (i) reduce the
proportion of energy resources exported relative to domestic use (based upon the
proportion prevailing in the most recent 36 month period); (ii) impose an export
price higher than the domestic price; or (iii) disrupt normal channels of
supply. All three countries are prohibited from imposing minimum export or
import price requirements.

NAFTA contemplates the reduction of Mexican restrictive trade practices in the
energy sector and prohibits discriminatory border restrictions and export taxes.
The agreement also contemplates clearer disciplines on regulators to ensure fair
implementation of any regulatory changes and to minimize disruption of
contractual arrangements, which is important for Canadian natural gas exports.

PROVINCIAL ROYALTIES AND INCENTIVES

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

From time to time the governments of the western Canadian provinces create
incentive programs for exploration and development. Such programs often provide
for royalty rate reductions, royalty holidays and tax credits, and are generally
introduced when commodity prices are low. The programs are designed to encourage
exploration and development activity by improving earnings and cash flow within
the industry.

<PAGE>

                                       49


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

Crude oil and natural gas royalty programs for specific wells and royalty
reductions reduce the amount of Crown royalties paid by ARC Resources to the
provincial governments. In general, the ARTC program provides a rebate on
Alberta Crown royalties paid in respect of eligible producing properties.

LAND TENURE

Crude oil and natural gas located in the western provinces is owned
predominantly by the respective provincial governments. Provincial governments
grant rights to explore for and produce oil and natural gas pursuant to leases,
licences and permits for varying terms from two years and on conditions set
forth in provincial legislation including requirements to perform specific work
or make payments. Oil and natural gas located in such provinces can also be
privately owned and rights to explore for and produce such oil and natural gas
are granted by lease on such terms and conditions as may be negotiated.

ENVIRONMENTAL REGULATION

The oil and natural gas industry is currently subject to environmental
regulations pursuant to a variety of provincial and federal legislation. Such
legislation provides for restrictions and prohibitions on the release or
emission of various substances produced in association with certain oil and gas
industry operations. In addition, such legislation requires that well and
facility sites be abandoned and reclaimed to the satisfaction of provincial
authorities. Compliance with such legislation can require significant
expenditures and a breach of such requirements may result in suspension or
revocation of necessary licenses and authorizations, civil liability for
pollution damage and the imposition of material fines and penalties.

Environmental legislation in the Province of Alberta has been consolidated into
the Alberta Environmental Protection and Enhancement Act (the "APEA"), which
came into force on September 1, 1993. The APEA imposes stricter environmental
standards, requires more stringent compliance, reporting and monitoring
obligations and significantly increases penalties. ARC Resources is committed to
meeting its responsibilities to protect the environment wherever it operates and
anticipates making increased expenditures of both a capital and an expense
nature as a result of the increasingly stringent laws relating to the protection
of the environment and will be taking such steps as required to ensure
compliance with the APEA and similar legislation in other jurisdictions in which
it operates. ARC Resources believes that it is in material compliance with
applicable environmental laws and regulations. ARC Resources also believes that
it is reasonably likely that the trend towards stricter standards in
environmental legislation and regulation will continue.

In December 2002 the Government of Canada ratified the Kyoto Protocol. This
protocol calls for Canada to reduce its greenhouse gas emissions to 6 percent
below 1990 levels during the period between 2008 and 2012. The protocol will
only become legally binding when it is ratified by at least 55 countries,
covering at least 55 percent of the emissions addressed by the protocol. If the
protocol becomes legally binding, it is expected to affect the operation of all
industries in Canada, including the oil and gas industry. As details of the
implementation of this protocol have yet to be announced, the effect on ARC
Resources cannot be determined at this time.

<PAGE>

                                       50


                         QUARTERLY FINANCIAL INFORMATION

<TABLE>
<CAPTION>
                                                   2003                                                2002
                            --------------------------------------------------   ---------------------------------------------------
                               Fourth      Third        Second        First         Fourth      Third         Second       First
                              Quarter     Quarter       Quarter      Quarter       Quarter      Quarter       Quarter      Quarter
                            -----------  -----------  -----------  -----------   -----------  -----------   -----------  -----------
                                                        (thousands except per Trust Unit amounts)
<S>                         <C>          <C>          <C>          <C>           <C>          <C>           <C>          <C>
EARNINGS INFORMATION
Revenue                     $   178,927  $   180,596  $   195,081  $   176,629   $   117,639  $   113,625   $   112,707  $   100,864
Royalties                        36,408       36,817       41,331       36,439        24,906       21,493        21,195       17,561
Expenses(1)                     104,421      111,514       96,764       70,882        71,152      102,183        69,044       74,188
Future Income Tax                16,367        9,270       71,173       (3,266)        6,793        7,312         7,175        6,654
Recovery(1)
Net Income (loss)                54,465       41,535      128,159       66,043        28,374       (2,739)       29,643       15,769
Income (loss) per
trust unit(1)
Basic                              0.31         0.25         0.85         0.50          0.22        (0.02)         0.26         0.14
Diluted                            0.31         0.25         0.79         0.50          0.22        (0.02)         0.26         0.14

DISTRIBUTABLE
INCOME INFORMATION
Distributable Income        $    78,603  $    73,890  $    67,495  $    59,340   $    48,060  $    47,644   $    44,684  $    43,229
Distributable
Income per trust                   0.45         0.45         0.45         0.45          0.39         0.39          0.39         0.39
unit

BALANCE SHEET
INFORMATION
Total Assets(1)             $ 2,281,775  $ 2,293,553  $ 2,382,519  $ 1,538,438   $ 1,494,647  $ 1,435,495   $ 1,377,782  $ 1,389,586
Long Term Debt                  232,402      385,923      437,881      219,907       337,728      271,533       213,364      316,446
trust units
Outstanding and
trust units
Reserved for
Exchangeable shares
at Quarter End                  182,777      167,531      163,184      139,239       126,444      126,270       122,359      111,957
</TABLE>

Note:
(1)      Financial results have been restated for 2002 and for the first quarter
         of 2003 through the third quarter of 2003. The restatement was the
         result of the retroactive application of the change in accounting
         policy relating to asset retirement obligations that was implemented in
         the fourth quarter of 2003.


                              MARKET FOR SECURITIES

The Trust Units and the Exchangeable Shares are listed and traded on the TSX.
The trading symbol for the Trust Units is AET.UN and for the Exchangeable Shares
is ARX.

                                  RISK FACTORS

The following is a summary of certain risk factors relating to the business of
the Trust which prospective investors should carefully consider before deciding
whether to purchase Trust Units or Exchangeable Shares.

PURCHASE OF PROPERTIES

The price paid for the purchase of the Properties is based on engineering and
economic estimates of the reserves made by independent engineers modified to
reflect the technical and economic views of management. These assessments
include a number of material assumptions regarding such factors as
recoverability and marketability of oil, natural gas, natural gas liquids and
sulphur, future prices of oil, natural gas, natural gas liquids and sulphur and
operating costs, future capital expenditures and royalties and other government
levies which will be imposed over the producing life of the reserves. Many of
these factors are subject to change and are beyond the control of the operators
of the Properties, ARC Resources, management and the Trust. In particular,
changes in the prices of and markets for petroleum,

<PAGE>

                                       51


natural gas, natural gas liquids and sulphur from those anticipated at the time
of making such assessments will affect the amount of future distributions and as
such the value of the Trust Units. In addition, all such estimates involve a
measure of geological and engineering uncertainty which could result in lower
production and reserves than attributed to the Properties. Actual reserves could
vary materially from these estimates. Consequently, the reserves acquired may be
less than expected, which could adversely impact cash flows and distributions to
Unitholders.

RESERVE ESTIMATES

The reserve and recovery information contained in the Gilbert Report is only an
estimate and the actual production and ultimate reserves from the properties may
be greater or less than the estimates prepared by Gilbert. A significant portion
of the principal properties acquired in the Star Acquisition have relatively
short production histories which may make estimates on those properties more
subject to revisions. The Gilbert Report has been prepared using certain
commodity price assumptions which are described in the notes to the reserve
tables. If lower prices for crude oil, natural gas liquids and natural gas are
realized by the Trust and substituted for the price assumptions utilized in
those reserve reports, the present value of estimated future net cash flows for
the Trust's reserves would be reduced and the reduction could be significant,
particularly based on the constant price case assumptions.

VOLATILITY OF OIL AND NATURAL GAS PRICES

The Trust's operational results and financial condition, and therefore the
amounts paid to the Trust pursuant to the Royalties, will be dependent on the
prices received for oil and natural gas production. Oil and natural gas prices
have fluctuated widely during recent years and are determined by economic and in
the case of oil prices, political factors. Supply and demand factors, including
weather and general economic conditions as well as conditions in other oil and
natural gas regions impact prices. Any movement in oil and natural gas prices
could have an effect on the Trust's financial condition and therefore on the
Distributable Income to be distributed to holders of Trust Units. ARC Resources
may manage the risk associated with changes in commodity prices by entering into
oil or natural gas price hedges. If ARC Resources hedges its commodity price
exposure, the Trust will forego the benefits it would otherwise experience if
commodity prices were to increase. In addition, commodity hedging activities
could expose ARC Resources to losses. To the extent that ARC Resources engages
in risk management activities related to commodity prices, it will be subject to
credit risks associated with counterparties with which it contracts.

VARIATIONS IN INTEREST RATES AND FOREIGN EXCHANGE RATES

An increase in interest rates could result in a significant increase in the
amount the Trust pays to service debt, resulting in a decrease in distributions
to Unitholders, as well as impact the market price of the Trust Units on the
TSX.

World oil prices are quoted in Unites States dollars and the price received by
Canadian producers is therefore affected by the Canadian/U.S. dollar exchange
rate that may fluctuate over time. A material increase in the value of the
Canadian dollar may negatively impact the Trust's net production revenue.

In addition, the exchange rate for the Canadian dollar versus the U.S. dollar
has increased significantly over the last 12 months, resulting in the receipt by
the Trust of fewer Canadian dollars for its production which may affect future
distributions. ARC Resources has initiated certain hedges to attempt to mitigate
these risks. To the extent that ARC Resources engages in risk management
activities related to foreign exchange rates, it will be subject to credit risk
associated with counterparties with which it contracts. The increase in the
exchange rate for the Canadian dollar and future Canadian/United States exchange
rates

<PAGE>

                                       52


will impact future distributions and the future value of the Trust's reserves as
determined by independent evaluators.

CHANGES IN LEGISLATION

Income tax laws, or other laws or government incentive programs relating to the
oil and gas industry, such as the treatment of mutual fund trusts and resource
taxation, may in the future be changed or interpreted in a manner that adversely
affects the Trust and its Unitholders. Tax authorities having jurisdiction over
the Trust or the Unitholders may disagree with how the Trust calculates its
income for tax purposes or could change administrative practises to the
detriment of the Trust or the detriment of its Unitholders.

ARC Resources intends that the Trust will continue to qualify as a mutual fund
trust for purposes of the Tax Act. The Trust may not, however, always be able to
satisfy any future requirements for the maintenance of mutual fund trust status.
Should the status of the Trust as a mutual fund trust be lost or successfully
challenged by a relevant tax authority, certain adverse consequences may arise
for the Trust and its Unitholders. Some of the significant consequences of
losing mutual fund trust status are as follows:

     o   The Trust would be taxed on certain types of income distributed to
         Unitholders, including income generated by the royalties held by the
         Trust. Payment of this tax may have adverse consequences for some
         Unitholders, particularly Unitholders that are not residents of Canada
         and residents of Canada that are otherwise exempt from Canadian income
         tax.

     o   The Trust would cease to be eligible for the capital gains refund
         mechanism available under Canadian tax laws if it ceased to be a mutual
         fund trust.

     o   Trust Units held by Unitholders that are not residents of Canada would
         become taxable Canadian property. These non-resident holders would be
         subject to Canadian income tax on any gains realized on a disposition
         of Trust Units held by them.

     o   Trust Units would not constitute qualified investments for registered
         retirement savings plans ("RRSPs"), registered retirement income funds
         ("RRIFs"), registered education savings plans ("RESTs") or deferred
         profit sharing plans ("DPSPs"). If, at the end of any month, one of
         these exempt plans holds Trust Units that are not qualified
         investments, the plan must pay a tax equal to 1% of the fair market
         value of the Trust Units at the time the Trust Units were acquired by
         the exempt plan. An RRSP or RRIF holding non-qualified Trust Units
         would be subject to taxation on income attributable to the Trust Units.
         If an RESP holds non-qualified Trust Units, it may have its
         registration revoked by the Canada Customs and Revenue Agency.

In addition, ARC Resources may take certain measures in the future to the extent
it believes necessary to ensure that the Trust maintains its status as a mutual
fund trust. These measures could be adverse to certain holders of Trust Units,
particularly "non-residents" of Canada as defined in the Tax Act. See "Risk
Factors - Non-resident Ownership of Trust Units".

MAINTENANCE OF DISTRIBUTIONS

ARC Resources does not actively explore for oil and natural gas reserves.
Instead, ARC Resources adds to its oil and natural gas reserves primarily
through development and acquisitions. As a result, future oil and natural gas
reserves are highly dependent on ARC Resources' success in exploiting existing
properties and acquiring additional reserves. The Trust also distributes the
majority of its net cash flow to Unitholders rather than reinvesting it in
reserve additions. Accordingly, if external sources of capital,

<PAGE>

                                       53


including the issuance of additional Trust Units, become limited or unavailable
on commercially reasonable terms, ARC Resources' ability to make the necessary
capital investments to maintain or expand its oil and natural gas reserves will
be impaired. To the extent that ARC Resources is required to use cash flow to
finance capital expenditures or property acquisitions, the level of cash flow
available for distribution to Unitholders will be reduced. Additionally, ARC
Resources cannot guarantee that it will be successful in developing additional
reserves or acquiring additional reserves on terms that meet is investment
objectives. Without these reserve additions, ARC Resources' reserves will
deplete and as a consequence, either production from, or the average reserve
life of, its properties will decline. Either decline may result in a reduction
in the value of Trust Units and in a reduction in cash available for
distributions to Unitholders.

OPERATIONAL MATTERS

The operation of oil and gas wells involves a number of operating and natural
hazards which may result in blowouts, environmental damage and other unexpected
or dangerous conditions resulting in damage to ARC Resources and other operating
subsidiaries of the Trust and possible liability to third parties. ARC Resources
will maintain liability insurance, where available, in amounts consistent with
industry standards. Business interruption insurance may also be purchased for
selected facilities, to the extent that such insurance is available. ARC
Resources may become liable for damages arising from such events against which
it cannot insure or against which it may elect not to insure because of high
premium costs or other reasons. Costs incurred to repair such damage or pay such
liabilities will reduce Royalty Income.

Continuing production from a property, and to some extent the marketing of
production therefrom, are largely dependent upon the ability of the operator of
the property. Operating costs on most properties have increased steadily over
recent years. To the extent the operator fails to perform these functions
properly, revenue may be reduced. Payments from production generally flow
through the operator and there is a risk of delay and additional expense in
receiving such revenues if the operator becomes insolvent. Although satisfactory
title reviews are generally conducted in accordance with industry standards,
such reviews do not guarantee or certify that a defect in the chain of title may
not arise to defeat the claim of ARC Resources or ARC Sask. to certain
Properties. A reduction of the Royalty Income could result in such
circumstances.

EXPANSION OF OPERATIONS

The operations and expertise of management of the Trust are currently focused on
conventional oil and gas production and development in the Western Canadian
Sedimentary Basin. In the future, the Trust may acquire oil and gas properties
outside this geographic area. In addition, the Trust Indenture does not limit
the activities of the Trust to oil and gas production and development, and the
Trust could acquire other energy related assets, such as oil and natural gas
processing plants or pipelines, or an interest in an oil sands project.
Expansion of our activities into new areas may present new additional risks or
alternatively, significantly increase the exposure to one or more of the present
risk factors which may result in future operational and financial conditions of
the Trust being adversely affected.

NON-RESIDENT OWNERSHIP OF TRUST UNITS

In order for the Trust to maintain its status as a mutual fund trust under the
Tax Act, the Trust must not be established or maintained primarily for the
benefit of non-residents of Canada ("non-residents") within the meaning of the
Tax Act. The Trust Indenture provides that if at any time the Trust or ARC
Resources becomes aware that the beneficial owners of 50% or more of the Trust
Units then outstanding are or may be non-residents or that such a situation is
imminent, the Trust, by or through ARC Resources on the Trust's behalf, shall
take such action as may be necessary to carry out the foregoing intention. See
"Information Relating to the Trust - Limitations on Non-resident Ownership".

<PAGE>

                                       54


ACCOUNTING WRITE-DOWNS AS A RESULT OF GAAP

Canadian Generally Accepted Accounting Principles ("GAAP") require that
management apply certain accounting policies and make certain estimates and
assumptions which affect reported amounts in the consolidated financial
statements of the Trust. The accounting policies may result in non-cash charges
to net income and write-downs of net assets in the financial statements. Such
non-cash charges and write-downs may be viewed unfavourably by the market and
result in an inability to borrow funds and/or may result in a decline in the
Trust Unit price.

Under GAAP, the net amounts at which petroleum and natural gas costs on a
property or project basis are carried are subject to a cost-recovery test which
is based in part upon estimated future net cash flows from reserves. If net
capitalized costs exceed the estimated recoverable amounts, ARC Resources will
have to charge the amounts of the excess to earnings. A decline in the net value
of oil and natural gas properties could cause capitalized costs to exceed the
cost ceiling, resulting in a charge against earnings. The net value of oil and
gas properties are highly dependent upon the prices of oil and natural gas. See
"Risk Factors - Volatility of Oil and Natural Gas Prices".

GAAP requires that goodwill balances be assessed at least annually for
impairment and that any permanent impairment be charged to net income. A
permanent reduction in reserves, decline in commodity prices, and/or reduction
in the Trust Unit price may indicate a goodwill impairment. As at December 31,
2003 the Trust had $157.6 million recorded on its balance sheet as goodwill
arising out of its acquisition of Star. An impairment would result in a
write-down of the goodwill value and a non-cash charge against net income. The
calculation of impairment value is subject to management estimates and
assumptions.

Emerging GAAP surrounding hedge accounting may result in non-cash charges
against net income as a result of changes in the fair market value of hedging
instruments. A decrease in the fair market value of the hedging instruments as
the result of fluctuations in commodity prices and foreign exchange rates may
result in a write-down of net assets and a non-cash charge against net income.
Such write-downs and non-cash charges may be temporary in nature if the fair
market value subsequently increases.

ENVIRONMENTAL CONCERNS

The oil and natural gas industry is subject to environmental regulation pursuant
to local, provincial and federal legislation. A breach of such legislation may
result in the imposition of fines or issuance of clean up orders in respect of
ARC Resources, ARC Sask. or the Properties. Such legislation may be changed to
impose higher standards and potentially more costly obligations on ARC Resources
or ARC Sask. See "Industry Regulations - Environmental Regulation". Although ARC
Resources has established a reclamation fund for the purpose of funding its
currently estimated future environmental and reclamation obligations based on
its current knowledge, there can be no assurance that the Trust will be able to
satisfy its actual future environmental and reclamation obligations.
Additionally, the potential impact on the Trust's operations and business of the
December 1997 Kyoto Protocol, which has now been ratified by Canada, with
respect to instituting reductions of greenhouse gases is difficult to quantify
at this time as specific measures for meeting Canada's commitments have not been
developed. See "Other Oil and Gas Information - Additional Information
Concerning Abandonment and Reclamation Costs".

DEBT SERVICE

Amounts paid in respect of interest and principal on debt incurred in respect of
the Properties will reduce Royalty Income. Variations in interest rates and
scheduled principal repayments could result in significant changes in the amount
required to be applied to debt service before payment of the Royalties and
Distributable Income. Certain covenants of the agreements with ARC Resources'
and ARC Sask.'s lenders

<PAGE>

                                       55


may also limit distributions to the Trust. Although ARC Resources believes the
credit facilities will be sufficient for ARC Resources' and ARC Sask.'s
immediate requirements, there can be no assurance that the amount will be
adequate for the future financial obligations of ARC Resources and ARC Sask. or
that additional funds will be able to be obtained.

The lenders have or will be provided with security over substantially all of the
assets of ARC Resources. If ARC Resources becomes unable to pay its debt service
charges or otherwise commits an event of default such as bankruptcy, the lender
may foreclose on or sell the Properties free from or together with the
Royalties. The payment of interest and principal on debt may also result in the
Trust or its subsidiaries having taxable income and cash taxes payable as
taxable income would no longer be reduced by royalty payments at the time debt
repayment occurs.

DELAY IN CASH DISTRIBUTIONS

In addition to the usual delays in payment by purchasers of oil and natural gas
to the operators of the Properties, and by the operator to ARC Resources,
payments between any of such parties may also be delayed by restrictions imposed
by lenders, delays in the sale or delivery of products, delays in the connection
of wells to a gathering system, blowouts or other accidents, recovery by the
operator of expenses incurred in the operation of the Properties or the
establishment by the operator of reserves for such expenses.

RELIANCE ON MANAGEMENT

Unitholders will be dependent on the management of ARC Resources in respect of
the administration and management of all matters relating to the Properties, the
Royalty, the Trust and Trust Units. ARC Resources, as of December 31, 2003,
operated approximately 63% of the total daily production of the Properties.
Investors who are not willing to rely on the management of ARC Resources should
not invest in the Trust Units.

DEPLETION OF RESERVES

Distributions of Distributable Income in respect of Properties, absent commodity
price increases or cost effective acquisition and development activities, will
decline over time in a manner consistent with declining production from typical
oil, natural gas and natural gas liquids reserves. ARC Resources and ARC Sask.
will not be reinvesting cash flow in the same manner as other industry
participants as ARC Resources and ARC Sask. conduct only minimal exploratory
activities; nor to the same extent as other industry participants as one of the
main objectives of the Trust is to maximize long-term distributions.
Accordingly, absent capital injections, ARC Resources' and ARC Sask.'s initial
production levels and reserves will decline and the level of Distributable
Income will be reduced.

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

To the extent that external sources of capital, including the issuance of
additional Trust Units become limited or unavailable, ARC Resources' and ARC
Sask.'s ability to make the necessary capital investments to maintain or expand
its oil and natural gas reserves will be impaired. To the extent that ARC
Resources and ARC Sask. are required to use cash flow to finance capital
expenditures or property acquisitions, the level of Distributable Income will be
reduced.

<PAGE>

                                       56


There can be no assurance that the ARC Resources and ARC Sask. will be
successful in developing or acquiring additional reserves on terms that meet the
Trust's investment objectives.

NET ASSET VALUE

The net asset value of the assets of the Trust from time to time will vary
dependent upon a number of factors beyond the control of management, including
oil and gas prices. The trading prices of the Trust Units from time to time is
also determined by a number of factors which are beyond the control of
management and such trading prices may be greater than the net asset value of
the Trust's assets.

ADDITIONAL FINANCING

In the normal course of making capital investments to maintain and expand the
oil and gas reserves of the Trust additional Trust Units are issued from
treasury which may result in a decline in production per Trust Unit and reserves
per Trust Unit. Additionally, from time to time the Trust issues Trust Units
from treasury in order to reduce debt and maintain a more optimal capital
structure. Conversely to the extent that external sources of capital, including
the issuance of additional Trust Units become limited or unavailable, the
Trust's, ARC Resources' and ARC Sask.'s ability to make the necessary capital
investments to maintain or expand its oil and gas reserves will be impaired. To
the extent that the Trust, ARC Resources or ARC Sask. are required to use cash
flow to finance capital expenditures or property acquisitions or to pay debt
service charges or to reduce debt, the level of Distributable Income will be
reduced.

COMPETITION

There is strong competition relating to all aspects of the oil and gas industry.
There are numerous trusts in the oil and gas industry, who are competing for the
acquisitions of properties with longer life reserves and properties with
exploitation and development opportunities. As a result of such increasing
competition, it will be more difficult to acquire reserves on beneficial terms.
The Trust, ARC Resources and ARC Sask. also compete for reserve acquisitions and
skilled industry personnel with a substantial number of other oil and gas
companies, many of which have significantly greater financial and other
resources than the Trust, ARC Resources or ARC Sask.

RETURN OF CAPITAL

Trust Units will have no value when reserves from the Properties can no longer
be economically produced and, as a result, cash distributions do not represent a
"yield" in the traditional sense and are not comparable to bonds or other fixed
yield securities, where investors are entitled to a full return of the principal
amount of debt on maturity in addition to a return on investment through
interest payments. Distributions represent a blend of return of Unitholders
initial investment and a return on Unitholders initial investment.

Unitholders have a limited right to require the Trust to repurchase their Trust
Units, which is referred to as a redemption right. See "Information Relating to
the Trust - Right of Redemption". It is anticipated that the redemption right
will not be the primary mechanism for Unitholders to liquidate their investment.
The right to receive cash in connection with a redemption is subject to
limitations. Any securities which may be distributed IN SPECIE to Unitholders in
connection with a redemption may not be listed on any stock exchange and a
market may not develop for such securities. In addition, there may be resale
restrictions imposed by law upon the recipients of the securities pursuant to
the redemption right.

<PAGE>

                                       57


NATURE OF TRUST UNITS

The Trust Units do not represent a traditional investment in the oil and natural
gas sector and should not be viewed by investors as shares in ARC Resources. The
Trust Units represent a fractional interest in the Trust. As holders of Trust
Units, Unitholders will not have the statutory rights normally associated with
ownership of shares of a corporation including, for example, the right to bring
"oppression" or "derivative" actions. The Trust's sole assets will be the
Royalty and other investments in securities. The price per Trust Unit is a
function of anticipated Distributable Income, the Properties acquired by ARC
Resources and ARC Sask. and ARC Resources' ability to effect long-term growth in
the value of the Trust. The market price of the Trust Units will be sensitive to
a variety of market conditions including, but not limited to, interest rates and
the ability of the Trust to acquire suitable oil and natural gas properties.
Changes in market conditions may adversely affect the trading price of the Trust
Units.

THE TRUST UNITS ARE NOT "DEPOSITS" WITHIN THE MEANING OF THE CANADA DEPOSIT
INSURANCE CORPORATION ACT (CANADA) AND ARE NOT INSURED UNDER THE PROVISIONS OF
THAT ACT OR ANY OTHER LEGISLATION. FURTHERMORE, THE TRUST IS NOT A TRUST COMPANY
AND, ACCORDINGLY, IS NOT REGISTERED UNDER ANY TRUST AND LOAN COMPANY LEGISLATION
AS IT DOES NOT CARRY ON OR INTEND TO CARRY ON THE BUSINESS OF A TRUST COMPANY.

UNITHOLDER LIMITED LIABILITY

The Trust Indenture provides that no Unitholder will be subject to any liability
in connection with the Trust or its obligations and affairs and, in the event
that a court determines Unitholders are subject to any such liabilities, the
liabilities will be enforceable only against, and will be satisfied only out of
the Trust's assets. Pursuant to the Trust Indenture, the Trust will indemnify
and hold harmless each Unitholder from any costs, damages, liabilities,
expenses, charges and losses suffered by a Unitholder resulting from or arising
out of such Unitholder not having such limited liability.

The Trust Indenture provides that all written instruments signed by or on behalf
of the Trust must contain a provision to the effect that such obligation will
not be binding upon Unitholders personally. The principal investment of the
Trust is the Royalty Agreements which contain such provisions. Personal
liability may also arise in respect of claims against the Trust that do not
arise under contracts, including claims in tort, claims for taxes and possibly
certain other statutory liabilities. The possibility of any personal liability
of this nature arising is considered unlikely. One province of Canada has
introduced draft legislation with the purpose of limiting liability for
investors in trusts. If the legislation is passed and similar legislation
introduced in the Province of Alberta, this risk would be mitigated.

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


<PAGE>

                                       58


                             ADDITIONAL INFORMATION

Additional information including remuneration of directors and officers of ARC
Resources and the Manager, principal holders of the Trust Units and rights to
purchase Trust Units, is contained in the Information Circular - Proxy Statement
of the Trust dated March 31, 2004 which relates to the Annual Meeting of
Unitholders to be held on May 12, 2004, and additional financial information is
provided in the consolidated financial statements of the Trust and ARC Resources
for the year ended December 31, 2003.

The Trust shall provide to any person, upon request to the Secretary of ARC
Resources on behalf of the Trust:

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

         (a)      one copy of the Annual Information Form of the Trust, together
                  with one copy of any document, or the pertinent pages of any
                  document, incorporated by reference in the Annual Information
                  Form;

         (b)      one copy of the consolidated financial statements of the Trust
                  for the most recently completed fiscal year together with the
                  accompanying report of the auditor and one copy of any
                  subsequent interim financial statements;

         (c)      one copy of the Information Circular - Proxy Statement of the
                  Trust dated March 31, 2004; and

         (d)      one copy of any other documents that are incorporated by
                  reference into the preliminary short form prospectus or the
                  short form prospectus and are not required to be provided
                  under (a) to (c) above; or

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

For additional copies of the Annual Information Form and the materials listed in
the preceding paragraphs please contact:

         ARC Energy Trust
         c/o ARC Resources Ltd.
         2100, 440 - 2nd Avenue S.W.
         Calgary, Alberta, T2P 5E9
         Toll free in Canada:  1-888-272-4900
         Fax: (403) 503-8609



<PAGE>

                                  APPENDIX "A"

                  FINANCIAL STATEMENTS OF STAR OIL & GAS LTD.



<PAGE>


                                       A-1





Star Oil & Gas Ltd.

Consolidated Financial Statements
December 31, 2002, 2001 and 2000
(in thousands of Canadian dollars)

<PAGE>

PRICEWATERHOUSECOOPERS [LOGO]

                                                   PricewaterhouseCoopers LLP
                                                   Chartered Accountants
                                                   111 5th Avenue SW, Suite 3100
                                                   Calgary, Alberta
                                                   Canada T2P 5L3
                                                   Telephone +1 (403) 509 7500
                                                   Facsimile +1 (403) 781 1825

January 31, 2003
(except for note 15 which is at April 16, 2003)

Auditors' Report

To the Directors of
Star Oil & Gas Ltd.

We have audited the consolidated balance sheet of STAR OIL AND GAS LTD. as at
December 31, 2002, 2001 and 2000 and the consolidated statements of income and
retained earnings and cash flows for each of the years then ended. These
financial statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with Canadian generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
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 company as at December 31,
2002, 2001 and 2000 and the results of its operations and its cash flows for
each of the years then ended in accordance with Canadian generally accepted
accounting principles.


(SIGNED) "PRICEWATERHOUSECOOPERS LLP"

CHARTERED ACCOUNTANTS

Calgary, Alberta

<PAGE>
                                      A-3


STAR OIL & GAS LTD.
CONSOLIDATED BALANCE SHEETS
AS AT DECEMBER 31, 2002, 2001 AND 2000
--------------------------------------------------------------------------------

(in thousands of Canadian dollars)

                                                2002          2001          2000
                                                   $             $             $
                                                                     (restated -
                                                                         note 2)

ASSETS

CURRENT ASSETS
Short-term deposits                               --            --         9,988
Accounts receivable                           29,434        20,022        36,850
Prepaid expenses                               1,191         1,348         1,197
Income taxes receivable                           --         1,999            --
                                             -----------------------------------

                                              30,625        23,369        48,035

CAPITAL ASSETS (note 3)                      474,319       445,756       429,125

OTHER ASSETS (note 5)                            323           267           179
                                             -----------------------------------

                                             505,267       469,392       477,339
                                             ===================================

LIABILITIES

CURRENT LIABILITIES
Bank indebtedness (note 6)                     2,424         1,591         1,850
Accounts payable                              25,080        19,577        50,921
Income taxes payable                           3,010            --        29,710
                                             -----------------------------------

                                              30,514        21,168        82,481

LONG-TERM DEBT (note 7)                      136,490       139,815       136,005

SHAREHOLDER LOANS (note 8)                    48,458        48,783        46,473

SITE RESTORATION ACCRUAL (note 3)              4,958         4,359         4,511

DEFERRED LIABILITIES                           1,244         1,747         2,307

FUTURE INCOME TAXES (note 10)                106,392       101,161        90,936
                                             -----------------------------------

                                             328,056       317,033       362,713
                                             -----------------------------------

SHAREHOLDERS' EQUITY

CAPITAL STOCK (note 9)                        33,371        33,371        33,371

RETAINED EARNINGS                            143,840       118,988        81,255
                                             -----------------------------------

                                             177,211       152,359       114,626
                                             -----------------------------------

                                             505,267       469,392       477,339
                                             ===================================

COMMITMENTS AND CONTINGENCIES (note 14)


APPROVED BY THE BOARD OF DIRECTORS


  "STEVEN W SINCLAIR"     Director        "DANNY G. GEREMIA"           Director
--------------------------              -------------------------------
STEVEN W. SINCLAIR                      DANNY G. GEREMIA

<PAGE>
                                      A-4


STAR OIL & GAS LTD.
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
--------------------------------------------------------------------------------

(in thousands of Canadian dollars)

<TABLE>
<CAPTION>
                                                           2002           2001           2000
                                                              $              $              $
                                                                                  (restated -
                                                                                      note 2)
<S>                                                     <C>            <C>            <C>
REVENUE
Production and royalties                                199,982        267,688        233,739
Crown and other royalties                               (44,763)       (67,977)       (54,506)
Alberta royalty tax credit                                  512            197            521
                                                       --------------------------------------

                                                        155,731        199,908        179,754
                                                       --------------------------------------

EXPENSES
Production                                               41,177         45,649         34,424
General and administrative                                4,889          8,324          9,853
Interest on long-term debt                                8,738         11,670         11,089
Depletion and depreciation                               54,865         55,694         41,335
Foreign exchange (gain) loss                               (653)         4,595          2,853
                                                       --------------------------------------

                                                        109,016        125,932         99,554
                                                       --------------------------------------

INCOME BEFORE PROVISION FOR TAXES                        46,715         73,976         80,200
                                                       --------------------------------------

PROVISION FOR TAXES (note 10)
Current                                                  16,632         27,151         32,517
Future                                                    5,231          9,092          6,880
                                                       --------------------------------------

                                                         21,863         36,243         39,397
                                                       --------------------------------------

NET INCOME                                               24,852         37,733         40,803

RETAINED EARNINGS - BEGINNING OF YEAR                   118,988         81,255         42,400

Adjustment - accounting policy change (note 2(a))            --             --         (1,564)
Adjustment - accounting policy change (note 2(b))            --             --           (384)
                                                       --------------------------------------

RETAINED EARNINGS - END OF YEAR                         143,840        118,988         81,255
                                                       ======================================
</TABLE>

<PAGE>
                                      A-5


STAR OIL & GAS LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
--------------------------------------------------------------------------------

(in thousands of Canadian dollars)

<TABLE>
<CAPTION>
                                                                             2002           2001            2000
                                                                                $              $               $
                                                                                                     (restated -
                                                                                                         note 2)
<S>                                                                       <C>            <C>          <C>
CASH PROVIDED BY (USED IN)

OPERATING ACTIVITIES
Net income                                                                 24,852         37,733         40,803
Adjustments for
             Depletion and depreciation                                    54,865         55,694         41,335
             Future income taxes                                            5,231          9,092          6,880
             Unrealized foreign exchange (gain) loss                         (650)         4,620          2,842
             Amortization of deferred liability                              (560)          (590)          (551)
                                                                         --------------------------------------

                                                                           83,738        106,549         91,309
                                                                         --------------------------------------
Changes in non-cash working capital items
             (Increase) decrease in accounts receivable                    (9,412)        16,828        (13,697)
             Increase (decrease) in prepaid expenses                          157           (151)          (165)
             Increase (decrease) in accounts payable                        2,768        (24,183)        12,781
             Increase (decrease) in income taxes payable/receivable         5,009        (31,709)        22,932
                                                                         --------------------------------------

                                                                           (1,478)       (39,215)        21,851
                                                                         --------------------------------------

                                                                           82,260         67,334        113,160
                                                                         --------------------------------------

INVESTING ACTIVITIES
Payment for land and property                                              (5,843)        (6,029)       (19,411)
Expenditures on drilling and exploration                                  (46,082)       (50,008)       (59,473)
Expenditures on production and other equipment                            (30,179)       (16,969)       (25,108)
                                                                         --------------------------------------

                                                                          (82,104)       (73,006)      (103,992)
Changes in non-cash working capital items
             Increase (decrease) in accounts payable                        2,792         (7,131)         6,061
                                                                         --------------------------------------

                                                                          (79,312)       (80,137)       (97,931)
Proceeds from sale of capital assets                                           --          2,979          2,728
Purchase of Place Resources Corporation                                        --             --        (49,680)
Expenditures on site restoration                                             (725)        (1,317)        (1,185)
Other assets                                                                  (56)           (88)            34
                                                                         --------------------------------------

                                                                          (80,093)       (78,563)      (146,034)
                                                                         --------------------------------------

FINANCING ACTIVITIES
Increase in (repayments of) bank indebtedness                                 833           (259)          (313)
(Repayments of) proceeds from long-term borrowings                         (3,000)         1,500         42,242
                                                                         --------------------------------------

                                                                           (2,167)         1,241         41,929
                                                                         --------------------------------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                           --         (9,988)         9,055

CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR (note A)                         --          9,988            933
                                                                         --------------------------------------

CASH AND CASH EQUIVALENTS - END OF YEAR                                        --             --          9,988
                                                                         ======================================
</TABLE>

<PAGE>
                                      A-6


STAR OIL & GAS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002, 2001 AND 2000
--------------------------------------------------------------------------------

(tabular amounts in thousands of Canadian dollars)

SUPPLEMENTAL INFORMATION FOR THE CASH FLOWS

A.    CASH AND CASH EQUIVALENTS

      Cash and cash equivalents consist of cash on hand and balances with banks,
      and investments in money market instruments that mature within three
      months. Cash and cash equivalents included in the cash flow statement
      comprise the following balance sheet amounts:

                                               2002        2001        2000
                                                  $           $           $

         Short-term investments                  --          --       9,988
                                            -------------------------------

         Total cash and cash equivalents         --          --       9,988
                                            ===============================

B.    NON-CASH TRANSACTIONS

                                               2002        2001        2000
                                                  $           $           $

         Accounts payable                        57          30       3,315
         Deferred liabilities                   (57)        (30)     (3,315)
         Long-term debt                        (325)     (2,310)     (1,421)
         Shareholders' loans                   (325)     (2,310)     (1,421)

      There were approximately $2,659,000 of properties swapped for other
      properties in 2002 (2001 - $1,668,000; 2000 - $1,206,000).

C.    CASH PAYMENTS

                                               2002        2001        2000
                                                  $           $           $

         Interest paid                       (7,985)    (11,640)    (10,650)
         Interest received                       45          63          76
         Cash income taxes paid             (17,949)    (61,650)    (13,642)
         Cash income taxes received           4,326         634         795

The objectivity and integrity of data in these financial statements, including
estimates and judgements relating to matters not concluded by year end, are the
responsibility of management of the company. In management's opinion, the
financial statements have been properly prepared within reasonable limits of
materiality and within the framework of the company's accounting policies.

<PAGE>
                                      A-7


      (1)   Summary of significant accounting policies

      Basis of presentation

      These consolidated financial statements include the accounts of the
      company and its wholly owned subsidiary.

      Capital assets - oil and gas

      The company follows the full cost method of accounting for oil and gas
      operations as outlined in the guideline issued by the Canadian Institute
      of Chartered Accountants, whereby all costs associated with the
      exploration for and development of oil and gas reserves are capitalized.
      Such amounts include land acquisition costs, geological and geophysical
      expenditures, carrying charges on non-producing properties, costs of
      drilling productive and non-productive wells, administration costs related
      to exploration and development activities and related plant and equipment
      expenditures. These amounts are accumulated in separate cost centres for
      each country where the company is active. At present, all of the company's
      operations are in Canada.

      Depletion and depreciation are provided using the unit of production
      method based on the company's share of gross proven reserves of oil and
      gas. For purposes of this calculation, reserves and production of gas and
      associated liquids are converted into equivalent barrels of oil based on
      the relative energy content.

      Proceeds on dispositions of oil and gas properties and production
      equipment are recorded against accumulated costs. However, gains or losses
      on the disposition of oil and gas properties are only recognized in the
      statement of income when the depletion and depreciation rate would be
      changed by a factor of 20% or more.

      The company's oil and gas properties are subject to a ceiling test under
      which the carrying value is limited to the future net revenue from
      production of estimated proven oil and gas reserves valued at year end
      "constant" prices or contractually determined prices plus the unimpaired
      costs of non-producing properties less future administration costs,
      financing costs, future restoration costs and income taxes.

      Expenditures for repairs and maintenance are charged to production
      expense. Betterments and major renewals are capitalized.

<PAGE>
                                      A-8


      OTHER EQUIPMENT

      Depreciation on other equipment is provided based on diminishing value
      basis over the useful life of the assets.

      Site restoration accrual

      Estimated future costs of site restoration, including removal of
      production facilities, are provided for on a unit of production basis.
      Costs are based on estimates provided by independent reservoir engineers.
      The annual charge is recorded as additional depletion and depreciation.

      HEDGING

      The company enters into various swap agreements to reduce its exposure to
      interest rate, foreign exchange, and crude oil and natural gas commodity
      price fluctuations related to future sales. Gains or losses on these
      contracts, which constitute effective hedges, are deferred and recognized
      as a component of the related transaction.

      INCOME TAXES

      The company follows the liability method of tax allocation accounting.
      Under this method, recognition of a future tax liability or asset is
      dependent on the expected tax outflows or benefits to be derived from
      differences between the carrying value and tax basis of assets and
      liabilities.

      MANAGEMENT ESTIMATES

      The accounts include management estimates relating to the amortization of
      capital assets which are subject to revisions which could be significant
      over time, depending on estimates of reserves. Future estimated
      abandonment costs are subject to significant revision over time as they
      are a current estimate of events which will occur in the future.

      RECLASSIFICATION

      Certain information provided in the prior years has been reclassified to
      conform with the current period presentation.

<PAGE>
                                      A-9


      (2)   CHANGES IN ACCOUNTING POLICIES

Effective January 1, 2001, the company changed from the deferral method of
accounting for exchange gains and losses on conversion of foreign currency
denominated long-term debt to the new standard set by the Canadian Institute of
Chartered Accountants. The new standard requires recognition of the gains and
losses in the period they occur. This standard was applied retroactively with
restatement of prior period financial statements. The effect of this change on
the 2001 amounts in the financial statements is to eliminate the deferred
foreign exchange loss asset on the balance sheet of $5,879,000 (2000 -
$3,085,000), to increase the unrealized foreign exchange expense by $2,793,000
(2000 - $1,521,000) and to reduce the opening retained earnings in 2000 by
$1,564,000.

Effective January 1, 2000, the company changed from the deferral method of
accounting for income taxes to the liability method in accordance with the new
standard set by the Canadian Institute of Chartered Accountants. The new
standard was applied retroactively without restatement of prior period financial
statements.

      (3)   CAPITAL ASSETS

<TABLE>
<CAPTION>
                                                             2002         2001         2000
                                                                $            $            $
<S>                                                      <C>          <C>          <C>
         Land and property acquisition                    187,754      181,910      177,753
         Drilling and exploration                         392,653      346,571      296,464
         Production and other equipment                   228,543      198,365      181,565
                                                         ----------------------------------

                                                          808,950      726,846      655,782
         Less: Accumulated depletion and depreciation    (334,631)    (281,090)    (226,657)
                                                         ----------------------------------

                                                          474,319      445,756      429,125
                                                         ==================================
</TABLE>

      General and administrative costs of $1,555,520 (2001 - $2,451,605; 2000 -
      $2,895,889) relating to exploration and development activities were
      capitalized during the year. No interest costs have been capitalized.

      The company's estimated average wellhead prices used in performing the
      full cost ceiling test were $47.47 (2001 - $29.25; 2000 - $42.06) per
      barrel for oil and $6.06 (2001 - $3.18; 2000 - $7.04) per mcf for natural
      gas.

      Future estimated abandonment costs identified in the "Constant Price"
      Reserve Report are $19,463,000 (2001 - $18,221,000; 2000 - $14,662,000).
      Depletion and amortization includes a charge of $1,324,000 for 2002 (2001
      - $1,165,000; 2000 - $1,068,000) with respect to the site restoration
      liability.

<PAGE>
                                      A-10


      (4)   ACQUISITION OF PLACE RESOURCES CORPORATION

      On October 16, 2000, the company made an offer for all of the outstanding
      shares of Place Resources Corporation ("Place"), an oil and gas
      exploration development and production company, for consideration of $3.00
      cash for each Place common share outstanding. As at December 31, 2000, the
      company was deemed to have acquired 100 percent of the outstanding shares
      of Place.

      The transaction, effective November 7, 2000, has been accounted for using
      the purchase method with the results of operations included in the
      consolidated statement of income from the date of acquisition. At December
      31, 2000, the company allocated the purchase price to Place's assets and
      liabilities as follows:

      Net assets acquired and liabilities assumed

                                                                  $

            Capital assets                                  105,596
            Working capital                                     556
            Debt                                            (25,497)
            Site restoration                                   (920)
            Future income taxes                             (30,055)
                                                           --------

                                                             49,680
                                                           ========

            Consideration - cash                             49,680
                                                           ========

      In 2001, capital assets and future income taxes were increased by
      $1,133,000 to reflect final income tax adjustments.

      (5)   OTHER ASSETS

      Drilling and operating deposits of $323,000 (2001 - $267,000; 2000 -
      $179,000) are recorded at cost.

      (6)   BANK INDEBTEDNESS

      The bank indebtedness is funded by an operating facility with a
      $20,000,000 limit. This facility is included in and has the same
      attributes as the total credit facility described in long-term debt (note
      7).

<PAGE>
                                      A-11


      (7)   LONG-TERM DEBT

      The company maintains various credit facilities under certain long-term
      debt agreements as follows:

<TABLE>
<CAPTION>
                                     Total credit                     Long-term credit facility used at
                                         facility                                          December 31,
                                     ------------       -----------------------------------------------

                                       2002, 2001
                                         and 2000              2002              2001              2000
                                                $                 $                 $                 $
<S>                                   <C>               <C>               <C>               <C>
      Revolving Credit Facility       185,000,000       141,716,133       145,071,777       141,350,503
                                     ==================================================================
</TABLE>

      The revolving credit facility may be drawn down or repaid at any time. The
      company may use the available credit facilities within certain limits as
      direct Canadian or US dollar loans, short or long-term Bankers'
      Acceptances, fixed loans, LIBOR US loans or letters of credit.

      At December 31, 2002, various letters of credit totalling Cdn $5,226,133
      (2001 - Cdn $5,256,777; 2000 - $5,345,503) were outstanding.

      As at December 31, 2002, there was $39,490,000 (US $25,000,000) (2001 -
      Cdn $39,815,000; 2000 - $37,505,000) of LIBOR dollar loans outstanding.
      Interest rates on the US $25,000,000 of LIBOR loans vary from 2.60% to
      2.98%.

      At December 31, 2002, there was $97,000,000 of Bankers' Acceptances (2001
      - $100,000,000; 2000 - $98,500,000) outstanding. On March 25, 1998, the
      company entered into floating for fixed interest rate swaps, which
      effectively fixed the interest rate on $10,000,000 of bankers' acceptances
      at 6.120% until March 25, 2003. On September 25, 1998, the company entered
      into floating for fixed interest rate swaps, which effectively fixed the
      interest rate on $10,000,000 of Bankers' Acceptances at 6.520% until
      September 25, 2008. The following is a listing of the Bankers' Acceptance
      agreements as at December 31, 2002:

               Issue Date              Maturity Date          Interest Rate (%)

                29 Aug-02                  24 Jan-03                       4.33
               05 Sept-02                  24 Jan-03                       4.10
               25 Sept-02                  25 Feb-03                       4.18
                25 Nov-02                  25 Feb-03                       4.06
                10 Oct-02                  25 Mar-03                       4.15
                18 Dec-02                  25 Mar-03                       4.03
                25 Oct-02                  25 Apr-03                       4.15
                06 Nov-02                  26 May-03                       4.13

<PAGE>
                                      A-12


      The mark to market value of the bankers' acceptance swaps is a $841,645
      unrecorded loss at December 31, 2002.

      As the long-term debt of the company consists of revolving credit
      facilities and fluctuating interest rates, the carrying value approximates
      fair market value, except for the long-term debt relating to the mark to
      market values noted above.

      At July 12, 2002, the company amended their credit agreement to extend the
      term-out date to August 29, 2003. The company has the right to request an
      extension to the credit facility within the revolving period which would
      make the first payment due March 2004.

      The credit facilities are secured by a floating charge debenture, a
      general security agreement, including an assignment of book debts, and an
      assignment of specific contracts. The debt would become a current
      liability on a change of control.

      (8)   SHAREHOLDER LOANS

      An unsecured shareholder loan bears interest at the rate of a USA
      chartered bank prime rate of 4.25% plus 1% at December 31, 2002. The
      remaining unsecured shareholder loan bears interest at a Canadian
      chartered banks prime rate of 4.50% at December 31, 2002. Pursuant to a
      priorities agreement between the lender of the credit facilities and the
      shareholders, the shareholders may demand payment only with the consent of
      the bank. The current shareholders have no intention of calling these
      loans unless otherwise negotiated as part of the banking facility. Of the
      $48,458,470 in loans, $39,490,000 (US $25,000,000) is repayable in US
      dollars.

      (9)   CAPITAL STOCK

      Authorized

            Unlimited first preferred shares issuable in series

            Unlimited second preferred shares issuable in series

            Unlimited third preferred shares issuable in series

            Unlimited common shares

      Issued

<TABLE>
<CAPTION>
                                                                                                2002, 2001 and 2000
                                                                                            -----------------------

                                                                                            Number of  Stated value
                                                                                               shares             $
<S>                                                                                         <C>              <C>
         Preferred shares - 3% cumulative, redeemable, convertible first preferred
            shares, Series 1 dividends are in arrears in the amount of $4,756,027 (2001
            - $4,173,504; 2000 - $3,590,980)                                                2,222,906        19,418
               Common shares - Class A                                                      6,111,111        13,953
                                                                                                          ---------

                                                                                                             33,371
                                                                                                          =========
</TABLE>

<PAGE>
                                      A-13


      (10)  INCOME TAXES

<TABLE>
<CAPTION>
                                                                    2002                   2001                   2000
                                                        ----------------       ----------------       ----------------

                                                            %          $           %          $           %          $
<S>                                                     <C>      <C>           <C>      <C>           <C>      <C>
         Income before provision for taxes                        46,715                 73,976                 80,200
                                                                 -------                -------                -------

               Expected tax                              43.3     20,227        43.8     32,401        44.9     36,010

               Increase (decrease) resulting from
                     Non-deductible crown payments       35.5     16,581        35.6     26,375        27.2     21,791
                     Federal resource allowance         (28.0)   (13,088)      (26.1)   (19,332)      (24.8)   (19,929)
                     Alberta Royalty Tax Credit          (0.5)      (222)         --        (86)       (0.3)      (234)
                     Foreign exchange (gain) loss        (0.6)      (281)        2.7      2,002         1.6      1,309
                     Large corporation tax                0.5        229         0.6        463         0.2        201
                     Rate adjustment                     (2.0)      (924)       (5.7)    (4,208)         --         --
                     Prior year (over provision)         (4.3)    (2,021)       (2.8)    (2,102)         --         --
                     Other                                2.9      1,362         0.9        730         0.3        249
                                                        --------------------------------------------------------------

               Total taxes                               46.8     21,863        49.1     36,243        49.1     39,397
                                                        ==============================================================
</TABLE>

      The future income tax liability is composed of temporary differences and
      future income tax reductions. These tax-effected differences are as
      follows:

<TABLE>
<CAPTION>
                                                                          2002         2001         2000
                                                                             $            $            $
<S>                                                                   <C>          <C>           <C>
         Net book value of property, plant and equipment in excess
         of tax basis                                                 (105,983)    (103,734)     (94,271)
         Future site restoration deductions                              1,551        1,837        1,998
         Other                                                          (1,960)         736        1,337
                                                                      ----------------------------------

         Future income tax liability                                  (106,392)    (101,161)     (90,936)
                                                                      ==================================
</TABLE>

      At December 31, 2002, the company had tax pools available for deduction
      against future taxable income of approximately $211,789,481 (2001 -
      $193,069,731; 2000 - $195,982,000).

      (11)  FINANCIAL INSTRUMENTS

      The company has determined the estimated fair values of its financial
      instruments based on its best judgment of the appropriate valuation
      methodologies. However, considerable judgement is necessary to develop
      these estimates. Accordingly, the estimates presented herein are not
      necessarily indicative of the amounts the company could realize in current
      market exchanges. The use of different assumptions or methodologies may
      have a material effect on the estimated fair value amounts.

<PAGE>
                                      A-14


      The financial instruments of the company include short-term deposits,
      accounts receivable, prepaid expenses, income taxes receivable, other
      assets, bank indebtedness, accounts payable, income taxes payable,
      long-term debt, shareholder loans and off balance sheet commodity
      contracts. It is estimated that the fair values would not be materially
      different than the book values, with the exception of the commodity
      contracts (see note 13) and long-term debt (see note 7).

      FOREIGN CURRENCY RISK

      The shareholder loan (see note 8) and the LIBOR US $ bank loans (see note
      7) are exposed to the fluctuations in the Cdn/US foreign exchange rate.

      A $0.01 movement in the exchange rate will cause the carrying value of
      these loans to fluctuate by $500,000.

      The company also holds some accounts payable, including the interest
      payable on the loans above, accounts receivable and short-term deposits in
      US dollars, however, exposure to foreign exchange volatility is minimal
      due to the relatively low amount of those balances.

      INTEREST RATE RISK

      The company's bank indebtedness, shareholder loans (see note 8) and
      Canadian bankers' acceptance and US $ LIBOR loans (see note 7) totalling
      Cdn $167,372,470 are exposed to the movement in interest rates. A 1% move
      in the interest rate would cause the company's interest payments to
      fluctuate by $1,673,725. The remaining bankers' acceptances are set at
      fixed interest rates and are not exposed to interest rate fluctuations.

      CREDIT RISK

      The company's client portfolio consists of transactions with companies
      which are subject to oil and gas industry credit risks.

      (12)  PENSION PLAN

      The company has a defined contribution pension plan. The company
      contributes an amount equal to 5% of the employees' salaries to the plan.

      The company's pension expense in 2002 was $220,488 (2001 - $212,831; 2000
      - $185,357).

<PAGE>
                                      A-15


      (13)  PRODUCT HEDGING ACTIVITIES

      Losses resulting from crude oil and natural gas transactions amounted to
      $5,577,920 in 2002 (2001 - $3,378,378 loss; 2000 - $13,432,142 loss).

      At December 31, 2002, the company had no outstanding natural gas financial
      hedge transactions.

      At December 31, 2002, the company had the following outstanding crude oil
      financial hedge transactions.

            1,000 barrels per day at US $23.55 per barrel for January 2003 to
            December 2003

            A costless collar for 1,000 barrels per day with a floor of US
                $23.00 and a cap of US $25.80 per barrel for January 2003 to
                December 2003

      The mark to market value of these agreements is a $2,564,941 unrecorded
      loss at December 31, 2002.

      (14)  COMMITMENTS AND CONTINGENCIES

      Fixed price gas contracts and physical delivery

      At December 31, 2002, the company had the following fixed price gas sales
      and commitments to deliver physical product:

            7,000 GJ per day at $4.55 FLOOR and $7.15 CAP per GJ at AECO ending
            March 2003

            5,000 GJ per day at $4.00 FLOOR and $5.91 CAP per GJ at AECO ending
            October 2003

            2,000 GJ per day at $2.525 per GJ at AECO ending October 2003

            1,000 GJ per day at $2.48 per GJ at AECO ending October 2003

            5,000 GJ per day at $2.955 per GJ at AECO ending October 2004

      PIPELINE TRANSPORTATION COMMITMENT

      On October 26, 1999, the company entered into an agreement with a pipeline
      company, whereby the company is committed to transport 5,000 mcf per day
      of natural gas for nine years until 2008. As part of this transaction, the
      company received a prepayment of $3,538,080 for taking the future
      transportation commitment. The company is not committed to a set delivery
      price. This commitment increased the existing commitment to transport
      5,000 mcf per day to 10,000 mcf per day. The amount received is being
      deferred and amortized over the commitment period.

      On March 4, 1999, the company entered into an agreement which commits it
      to transport 4,000 mcf per day until 2015.

      OTHER

      Commitments and contingencies exist under agreements and operations in the
      normal course of business, the total amount of which, in the opinion of
      management, is not significant to the financial position of the company.

<PAGE>
                                      A-16


      LEASE COMMITMENTS

      The company leases various types of property and equipment. Minimum
      payments under non-cancellable operating leases with terms of one year or
      more as at December 31, 2002 are as follows:

                                                                     $

         2003                                                      483
         2004                                                      163
         2005                                                        8
                                                                   ---

                                                                   654
                                                                   ===

      ENRON CAPITAL AND TRADE RESOURCES CANADA CORP. ("ENRON")

      The company had entered into an agreement with Enron to sell and deliver
      5,000 GJ's of gas per day at $2.50 per GJ through November 1, 2003. Enron
      failed to pay for sales of gas in the months of November and December 2001
      in the amounts of $401,250 and $80,250, respectively. Accordingly, the
      company made an allowance for doubtful accounts in the full amount of the
      gas sales.

      The company filed notice of default under the agreement, terminated the
      agreement and discontinued gas deliveries to Enron effective December 7,
      2001. Enron also filed a notice of default and terminated the agreement
      effective December 24, 2001.

      The company is of the opinion that it does not have a mark-to-market
      liability with respect to the early cancellation of the agreement.

      TERMINATED GAS CONTRACT

      On February 18, 1999, the company had entered into an agreement with a
      third party to sell and deliver 5,700 GJ's of Gas per day at Empress, and
      3,800 GJ per day at AECO, through October 31, 2004. The fixed contract
      price on the Empress delivery was $2.83 per GJ. The price of the AECO
      delivery was contracted at either an index price without a ceiling, or a
      price capped index price. The determination of the price of the AECO
      delivery for each contract year (November to October) was subject to an
      election to be made by the third party by September 30th prior to the
      start of that contract year. As at September 30th, 2002, the third party
      had not elected to take delivery at the capped price, therefore under the
      terms of the contract the company invoiced the third party for delivery in
      November and December of 2002 at the default pricing option, which was not
      subject to a price cap. The third party paid for the deliveries at the
      lower, price-capped rate, leaving total unpaid outstanding receivables
      related to those two months of $345,900 as at December 31, 2002. The
      company believes that this amount will be recoverable in some form during
      negotiations relating to the termination of the contract, and accordingly
      has made no allowance for doubtful accounts in respect of this amount.

<PAGE>
                                      A-17


      In addition, the company filed notice of default under the agreement,
      terminated the agreement, and discontinued gas deliveries effective
      December 12, 2002. While the third party is claiming a mark-to-market
      liability, the company is of the opinion that it does not have a
      mark-to-market liability with respect to the cancellation of the
      agreement. Currently the amount of any such future contingent liability is
      undeterminable, and in the opinion of the company it is expected to be
      negligible.

      (15)  CHANGE OF CONTROL

      On March 31, 2003, the company's shareholders entered into an acquisition
      agreement with ARC Energy Trust ("ARC") whereby ARC offered to purchase
      all of the issued and outstanding shares of Star Oil & Gas Ltd. for a
      total purchase price of $710 million to be financed by cash and $320
      million in convertible debentures. The sale closed on April 16, 2003.
      Pursuant to the change in control, the company's long-term debt balance
      became a current liability, and the full principal and interest owing on
      the shareholder loans was repaid.

<PAGE>
                                      A-18


STAR OIL & GAS LTD.

Consolidated Financial Statements
MARCH 31, 2003 AND 2002
(in thousands of Canadian dollars)

<PAGE>
                                      A-19


STAR OIL & GAS LTD.
Consolidated Balance Sheets
(Unaudited)
--------------------------------------------------------------------------------

(CDN $ - thousands)

<TABLE>
<CAPTION>
                                                   MARCH 31,   DECEMBER 31,      MARCH 31,   DECEMBER 31,
                                                        2003           2002           2002           2001
<S>                                                  <C>            <C>            <C>            <C>
ASSETS

CURRENT ASSETS
Cash and short-term investments                           --             --          2,028             --
Accounts receivable                                   33,880         29,434         18,602         20,022
Prepaid expenses                                         393          1,191            977          1,348
Income taxes receivable                                   --             --          1,813          1,999
                                                   ------------------------------------------------------

                                                      34,273         30,625         23,420         23,369

CAPITAL ASSETS                                       479,346        474,319        452,517        445,756

OTHER ASSETS                                             323            323            252            267
                                                   ------------------------------------------------------

                                                     513,942        505,267        476,189        469,392
                                                   ======================================================
LIABILITIES

Current liabilities
Bank indebtedness                                        803          2,424             --          1,591
Accounts payable                                      25,031         25,080         18,568         19,577
Income taxes payable                                  13,384          3,010             --             --
Current portion of shareholder loans (note 2)         45,701             --             --             --
Current portion of bank debt (note 2)                112,172             --             --             --
                                                   ------------------------------------------------------

                                                     197,091         30,514         18,568         21,168

LONG-TERM DEBT (note 2)                                   --        136,490        144,837        139,815

SHAREHOLDER LOANS (note 2)                                --         48,458         48,806         48,783

SITE RESTORATION                                       5,019          4,958          4,520          4,359

DEFERRED LIABILITIES                                   1,137          1,244          1,623          1,747

FUTURE INCOME TAXES                                  107,010        106,392        101,256        101,161
                                                   ------------------------------------------------------

                                                     310,257        328,056        319,610        317,033
                                                   ------------------------------------------------------
SHAREHOLDERS' EQUITY

CAPITAL STOCK                                         33,371         33,371         33,371         33,371

RETAINED EARNINGS                                    170,314        143,840        123,208        118,988
                                                   ------------------------------------------------------

                                                     203,685        177,211        156,579        152,359
                                                   ------------------------------------------------------

                                                     513,942        505,267        476,189        469,392
                                                   ======================================================
</TABLE>

<PAGE>
                                      A-20


STAR OIL & GAS LTD.
Consolidated Statements of Income and Retained Earnings
(Unaudited) FOR THE THREE MONTHS ENDED MARCH 31
--------------------------------------------------------------------------------

(CDN $ - thousands)

                                                           2003            2002

REVENUE
Production and royalties                                 87,068          41,764
Crown and other royalties                               (20,470)         (8,229)
                                                       ------------------------

                                                         66,598          33,535
                                                       ------------------------

EXPENSES
Production                                               10,429           8,912
General and administrative                                1,250           1,065
Interest on long-term debt                                2,074           2,224
Depletion and depreciation                               15,442          13,520
Foreign exchange (gain) loss                             (5,489)             53
                                                       ------------------------

                                                         23,706          25,774
                                                       ------------------------

INCOME BEFORE PROVISION FOR TAXES                        42,892           7,761
                                                       ------------------------

PROVISION FOR TAXES
Current                                                  15,800           3,446
Future                                                      618              95
                                                       ------------------------

                                                         16,418           3,541
                                                       ------------------------

NET INCOME                                               26,474           4,220

RETAINED EARNINGS - BEGINNING OF PERIOD                 143,840         118,988
                                                       ------------------------

RETAINED EARNINGS - END OF PERIOD                       170,314         123,208
                                                       ========================

<PAGE>
                                      A-21


STAR OIL & GAS LTD.
Consolidated Statements of Cash Flows
(Unaudited) For the three months ended March 31
--------------------------------------------------------------------------------

(CDN $ - thousands)

                                                               2003        2002

Cash provided by (used in)

Operating activities
Net income                                                   26,474       4,220
Adjustments for
             Depletion and depreciation                      15,442      13,520
             Future income taxes                                618          95
             Unrealized foreign exchange (gain) loss         (5,514)         46
             Amortization of deferred liability                (125)       (138)
                                                            -------------------

                                                             36,895      17,743
                                                            -------------------
Changes in non-cash working capital items
             (Increase) decrease in accounts receivable      (4,446)      1,420
             Increase in prepaid expenses                       798         371
             Increase (decrease) in accounts payable            260      (2,002)
             Increase in income taxes payable/receivable     10,374         186
                                                            -------------------

                                                              6,986         (25)
                                                            -------------------

                                                             43,881      17,718
                                                            -------------------
Investing activities
Payment for land and property                                (1,000)     (2,128)
Expenditures on drilling and exploration                    (15,597)     (8,981)
Expenditures on production and other equipment               (7,563)     (9,242)
                                                            -------------------

                                                            (24,160)    (20,351)
Changes in non-cash working capital items
             Increase (decrease) in accounts payable           (291)      1,007
                                                            -------------------

                                                            (24,451)    (19,344)

Proceeds from sale of capital assets                          4,038         396
Expenditures on site restoration                               (286)       (164)
Other assets                                                     --          14
                                                            -------------------

                                                            (20,699)    (19,098)
                                                            -------------------
Financing activities
Increase in (repayments of) bank indebtedness                (1,621)     (1,591)
(Repayments of) proceeds from long-term borrowings          (21,561)      4,999
                                                            -------------------

                                                            (23,182)      3,408
                                                            -------------------

Net (decrease) increase in cash and cash equivalents             --       2,028

Cash and cash equivalents - Beginning of period                  --          --
                                                            -------------------

Cash and cash equivalents - End of period                        --       2,028
                                                            ===================

Supplemental information
Interest paid                                                 1,404       1,515
Taxes paid                                                    5,915       3,746

<PAGE>
                                      A-22


Star Oil & Gas Ltd.
Notes to Consolidated Financial Statements
(Unaudited)
--------------------------------------------------------------------------------

1           Summary of accounting policies

      These interim financial statements have been prepared based on the
      consistent application of the accounting policies as set out in the most
      recent annual financial statements. The note disclosure requirements for
      annual financial statements provide additional disclosure that is required
      for interim financial statements. Accordingly, these interim financial
      statements should be read in conjunction with the financial statements
      included in the company's 2002 audited financial statements.

2           Subsequent events

      Change of control

      On March 31, 2003, the company's shareholders entered into an acquisition
      agreement with ARC Energy Trust ("ARC") whereby ARC offered to purchase
      all of the issued and outstanding shares of Star Oil & Gas Ltd. for a
      total purchase price of $710 million to be financed by cash and $320
      million in convertible debentures. The sale closed on April 16, 2003.

      Long-term debt

      Pursuant to the change in control on April 16, 2003, the company's
      long-term debt balance became a current liability. The company has
      reclassified the long-term balance to current liabilities as at March 31,
      2003.

      Hedging activity

      On April 14, 2003 the company made a payment of $524,300 to terminate the
      interest rate hedge contract which was in place at March 31, 2003. The
      interest rate hedge fixed the interest rate on $10 million of Banker's
      Acceptances at a rate of 6.520% to September 25, 2008.

      On April 14, 2003, the company made a payment of $1,826,700 to terminate
      crude oil contracts which were in place at March 31, 2003. The terminated
      oil contracts consisted of a fixed price contract at US$23.55 per barrel
      on 1,000 barrels-per-day for the period April through December 2003 and a
      costless collar with a floor of US$23.00 and cap of US$25.80 per barrel on
      1,000 barrels-per-day for the period April through December 2003.

      On April 14, 2003, the company made a payment of $13,305,902 to terminate
      the following physical delivery natural gas fixed price contracts that
      were in place at March 31, 2003:

            o     5,000 GJ-per-day AECO contract with a $4.00 per GJ floor and
                  $5.91 per GJ cap through to October 2003

            o     2,000 GJ-per-day AECO contract at $2.525 per GJ through to
                  October 2003

            o     1,000 GJ per day AECO contract at $2.48 per GJ through to
                  October 2003

            o     5,000 GJ per day AECO contract at $2.955 per GJ through to
                  October 2004

      Shareholder loans

      On April 16, 2003, the full principal and interest owing on the
      shareholder loans was repaid.

<PAGE>

                                  APPENDIX "B"

               PRO FORMA FINANCIAL STATEMENTS OF ARC ENERGY TRUST

                UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME

<PAGE>
                                      B-1


                UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME

To the Directors of ARC Resources Ltd.:

We have read the accompanying unaudited pro forma combined statement of income
of ARC Energy Trust (the "Trust") for the year ended December 31, 2003, and have
performed the following procedures.

1.    Compared the figures in the column captioned "ARC" to the audited
      consolidated statement of income of the Trust for the year ended December
      31, 2003, and found them to be in agreement.

2.    Compared the figures in the column captioned "Star" to the unaudited
      consolidated statement of income of Star Oil and Gas Ltd. ("Star") for the
      three month period ended March 31, 2003, and the unaudited financial
      records of Star for the period April 1, 2003 to April 15, 2003,
      respectively, and found them to be in agreement.

3.    Made enquiries of certain officials of the Trust who have responsibility
      for financial and accounting matters about:

      (a)   the basis for determination of the pro forma adjustments; and

      (b)   whether the pro forma combined statement of income complies as to
            form in all material respects with the regulatory requirements of
            the various securities commissions and regulatory authorities in
            Canada.

      The officials:

      (a)   described to us the basis for determination of the pro forma
            adjustments; and

      (b)   stated that the pro forma combined statement of income complies as
            to form in all material respects with the regulatory requirements of
            the various securities commissions and regulatory authorities in
            Canada.

4.    Read the notes to the pro forma combined statement of income and found
      them to be consistent with the basis described to us for determination of
      the pro forma adjustments.

5.    Recalculated the application of the pro forma adjustments to the aggregate
      of the amounts in the columns captioned "ARC" for the year ended December
      31, 2003 and "Star" for the three month period ended March 31, 2003 and
      the period from April 1, 2003 to April 15, 2003, and found the amounts in
      the column captioned "Pro Forma" to be arithmetically correct.

A pro forma financial statement is based on management assumptions and
adjustments which are inherently subjective. The foregoing procedures are
substantially less than either an audit or a review, the objective of which is
the expression of assurance with respect to management's assumptions, the pro
forma adjustments, and the application of the adjustments to the historical
financial information. Accordingly, we express no such assurance. The foregoing
procedures would not necessarily reveal matters of significance to the pro forma
combined statement of income, and we therefore make no representation about the
sufficiency of the procedures for the purposes of a reader of such statements.


Calgary, Alberta, Canada                   (signed) "Deloitte & Touche LLP"
March 19, 2004                                        Chartered Accountants

<PAGE>
                                      B-2


COMMENTS FOR UNITED STATES READERS ON DIFFERENCES BETWEEN CANADIAN AND UNITED
STATES REPORTING STANDARDS

The above compilation report, provided solely pursuant to Canadian requirements,
is expressed in accordance with standards of reporting generally accepted in
Canada. To report in conformity with United States standards on the pro forma
financial adjustments and their application to the pro forma combined statement
of income would require an examination or review which would be substantially
greater in scope than the review as to compilation only that we have conducted.
Consequently, under United States standards, such compilation report would not
be included.


Calgary, Alberta, Canada                   (signed) "Deloitte & Touche LLP"
March 19, 2004                                        Chartered Accountants

<PAGE>
                                      B-3


ARC ENERGY TRUST
PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 2003
(UNAUDITED)
($ THOUSANDS, EXCEPT PER UNIT AMOUNTS)

<TABLE>
<CAPTION>
                                                                                    PRO FORMA          NOTE
                                           ARC           STAR           STAR       ADJUSTMENTS         REF.        PRO FORMA
                                                       JANUARY 1-    APRIL 1-15,
                                                     MARCH 31, 2003     2003
<S>                                      <C>            <C>            <C>             <C>           <C>            <C>
REVENUE
   Oil, natural gas, natural gas
      liquids and sulphur sales          731,233         87,068            313          9,473           2.2         828,087
   Royalties                            (150,995)       (20,470)        (2,906)         1,201        2.1, 2.3      (173,170)
                                        -----------------------------------------------------------------------------------
                                         580,238         66,598         (2,593)        10,674                       654,917
                                        -----------------------------------------------------------------------------------
EXPENSES
   Operating                             140,734         10,429          3,988           (893)          2.1         154,258
   General and administrative             22,566          1,250          6,242             --          2.10          30,058
   Interest on long-term debt             18,482          2,074            810            812           2.4          22,178
   Capital taxes                           1,812             --             --             --                         1,812
   (Gain) loss on foreign exchange       (18,564)        (5,489)          (506)         5,995           2.6         (18,564)
   Depletion, depreciation and
      Accretion                          218,551         15,442          2,655          8,834           2.5         245,482
                                        -----------------------------------------------------------------------------------
                                         383,581         23,706         13,189         14,748                       435,224
                                        -----------------------------------------------------------------------------------
INCOME (LOSS) BEFORE INCOME TAXES        196,657         42,892        (15,782)        (4,074)                      219,693
   Current income taxes                       --        (15,800)         7,254          8,546           2.7              --
   Future income taxes                    93,544           (618)          (765)         3,090           2.8          95,251
                                        -----------------------------------------------------------------------------------
NET INCOME (LOSS)                        290,201         26,474         (9,293)         7,562                       314,944
                                        ===================================================================================

NET INCOME PER UNIT
   Basic                                    1.85                                                        3.1            1.91
                                        ===================================================================================
   Diluted                                  1.82                                                        3.1            1.88
                                        ===================================================================================
</TABLE>

<PAGE>
                                      B-4


ARC ENERGY TRUST
NOTES TO PRO FORMA COMBINED STATEMENT OF INCOME
(UNAUDITED)
(ALL AMOUNTS IN $ THOUSANDS)
--------------------------------------------------------------------------------

1.    BASIS OF PRESENTATION

On April 16, 2003, ARC Energy Trust ("ARC") completed the acquisition of Star
Oil & Gas Ltd. ("Star") for total consideration of $722 million. In conjunction
with this acquisition, ARC entered into agreements to sell certain of Star's
producing properties and undeveloped acreage to third parties for net proceeds
of $78 million. The net purchase price of approximately $644 million was funded
through a combination of bank debt using ARC's existing facilities and the
issuance to the vendor of $320 million in special convertible debentures (the
"Debentures").

The Debentures had the following terms:

      o     Subordinated to senior debt.

      o     A coupon rate of 8 per cent per annum commencing on June 30, 2003
            and increasing to 10 per cent per annum commencing June 30, 2005,
            payable quarterly.

      o     Maturity on June 30, 2008 could have been satisfied by issuing Trust
            Units.

      o     The Trust had the right to redeem in full with cash at any time or
            redeem $40 million per quarter subsequent to June 30, 2003, using a
            combination of cash (minimum of 50 per cent) and Trust Units.

      o     Holders of the Debentures had a conversion privilege at $11.84 per
            Trust Unit through June 30, 2005 and $11.38 per Trust Unit after
            that date.

The accompanying unaudited pro forma combined statement of income for the year
ended December 31, 2003 has been prepared from information derived from the
following:

      a)    the audited consolidated financial statements for the year ended
            December 31, 2003 for ARC;

      b)    the unaudited interim consolidated financial statements for the
            three month period ended March 31, 2003 for Star; and

      c)    the unaudited financial records for the period from April 1, 2003 to
            April 15, 2003 for Star.

In the opinion of the management of ARC, the accompanying unaudited pro forma
combined statement of income includes all material adjustments necessary for
fair presentation in accordance with Canadian generally accepted accounting
principles. The unaudited pro forma combined statement of income gives effect to
the transactions as if they had occurred on January 1, 2003.

The unaudited pro forma combined statement of income should be read in
conjunction with the various financial statements of ARC and Star referred to
above.

<PAGE>
                                      B-5


ARC ENERGY TRUST
NOTES TO PRO FORMA COMBINED STATEMENT OF INCOME
(UNAUDITED)
(ALL AMOUNTS IN $ THOUSANDS)

PAGE 2
--------------------------------------------------------------------------------

Accounting policies used in the preparation of the unaudited pro forma combined
statement of income are in accordance with those used in the preparation of the
audited consolidated financial statements of ARC for the year ended December 31,
2003.

THE UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME IS NOT NECESSARILY
INDICATIVE EITHER OF THE RESULTS OF OPERATIONS THAT WOULD HAVE OCCURRED IF THE
EVENTS REFLECTED HEREIN HAD BEEN IN EFFECT ON THE DATE INDICATED OR OF THE
RESULTS OF OPERATIONS EXPECTED IN FUTURE YEARS. IN PREPARING THIS UNAUDITED PRO
FORMA COMBINED STATEMENT OF INCOME, NO ADJUSTMENTS HAVE BEEN MADE TO REFLECT THE
OPERATING SYNERGIES AND THE RESULTING COST SAVINGS EXPECTED TO RESULT FROM
COMBINING THE OPERATIONS OF ARC AND STAR.

2.    Pro Forma Assumptions and Adjustments

The unaudited pro forma combined statement of income gives effect to the
following assumptions and adjustments:

2.1   Adjustments have been made to reflect the reduction of revenues of
      ($8,114), royalties of $1,346 and operating expenses of $893 associated
      with the properties sold to third parties in conjunction with the Star
      acquisition.

2.2   Star's hedging losses of $1,930 (before loss on termination of hedges) for
      the 15 day period ended April 15, 2003 have been eliminated. All of Star's
      hedges were terminated on April 14, 2003 for $15,657; this amount has been
      eliminated for the 15 day period ended April 15, 2003. Star's revenue of
      $17,900 for the period from April 1 to April 15, 2003 has been offset by
      hedging losses of $1,930 and a hedging settlement of $15,657 to terminate
      the contracts.

            Total adjustment to revenue
            Note 2.1 - revenue adjustment                       ($8,114)
            Note 2.2 - hedging adjustment                        17,587
                                                                -------
            Total                                               $ 9,473
                                                                =======

2.3   The impact of the association rules on ARC and Star for Alberta Royalty
      Tax Credit ("ARTC") purposes reduces ARTC by $145 for the year ended
      December 31, 2003.

2.4   Interest expense has been increased to reflect the additional debt drawn
      on existing facilities required to finance the Star acquisition. The
      Debenture interest is not included in the unaudited pro forma combined
      statement of income as the Debentures are considered to be equity under
      Canadian generally accepted accounting principles.

<PAGE>
                                      B-6


ARC ENERGY TRUST
NOTES TO PRO FORMA COMBINED STATEMENT OF INCOME
(UNAUDITED)
(ALL AMOUNTS IN $ THOUSANDS)
PAGE 3
--------------------------------------------------------------------------------

2.5   Depletion, depreciation and accretion has been adjusted to reflect the pro
      forma value of the oil and gas assets, the pro forma value of the asset
      retirement obligation, the reserves acquired and the production for the
      respective periods.

2.6   Star's foreign exchange gain of $5,995 for the period from January 1, 2003
      to April 15, 2003 has been eliminated. All U.S. dollar debt was retired on
      the closing date.

2.7   Star's current taxes of $8,546 for the period January 1, 2003 to April 15,
      2003 have been eliminated. In ARC's structure, payments are made between
      ARC's corporate subsidiaries and ARC, transferring both income and tax
      liability from the corporate subsidiaries to the unitholders.

2.8   The future income tax recovery (provision) reflects changes based upon the
      above adjustments.

2.9   The Debentures issued upon the acquisition of Star on April 16, 2003 were
      fully converted by August 5, 2003, 111 days from issuance. The Debentures
      have been reflected as converted in the same 111 day period from January
      1, 2003.

2.10  Star's general and administrative expenses for the period from April 1 to
      April 15, 2003 include severance costs paid to Star employees and various
      other non-recurring expenses. No adjustment has been recognized in the
      unaudited pro forma combined statement of income for these one time costs.

3.    PER UNIT INFORMATION

3.1   Pro forma per unit information has been calculated using the weighted
      average and diluted number of units outstanding of 162,469,939 and
      167,574,482, respectively, for the year ended December 31, 2003. The
      weighted average and diluted units for the year ended December 31, 2003
      include the impact of conversions of the Debentures within 111 days of
      issuance.

      Pro forma net income has been adjusted for interest on the Debentures of
      $4,070 for the year ended December 31, 2003 in the basic net income per
      unit calculation.

      Basic and diluted units outstanding for the year ended December 31, 2003
      both include an additional 7,774,898 additional trust units for the impact
      of the assumed conversion of the Debentures within 111 days of issuance.

<PAGE>

                                  APPENDIX "C"

       REPORT ON RESERVES DATA BY INDEPENDENT QUALIFIED RESERVES EVALUATOR

To the board of directors of ARC Resources Ltd. (the "Company"):

1.    We have prepared an evaluation of the Company's reserves data as at
      January 1, 2004. The reserves data consist of the following:

      (a)   proved and proved plus probable oil and gas reserves estimated as at
            January 1, 2004 using forecast prices and costs; and

      (b)   the related estimated future net revenue; and

      (c)   proved oil and gas reserves estimated as at January 1, 2004 using
            constant prices and costs; and

      (d)   the related estimated future net revenue.

2.    The reserves data are the responsibility of the Company's management. Our
      responsibility is to express an opinion on the reserves data based on our
      evaluation.

      We carried out our evaluation in accordance with standards set out in the
      Canadian Oil and Gas Evaluation Handbook (the "COGE Handbook") prepared
      jointly by the Society of Petroleum Evaluation Engineers (Calgary Chapter)
      and the Canadian Institute of Mining, Metallurgy & Petroleum (Petroleum
      Society).

3.    Those standards require that we plan and perform an evaluation to obtain
      reasonable assurance as to whether the reserves data are free of material
      misstatement. An evaluation also includes assessing whether the reserves
      data are in accordance with principles and definitions presented in the
      COGE Handbook.

4.    The following table sets forth the estimated future net revenue (before
      deduction of income taxes) attributed to proved plus probable reserves,
      estimated using forecast prices and costs and calculated using a discount
      rate of 10 percent, included in the reserves data of the Company evaluated
      by us for the year ended December 31, 2003, and identifies the respective
      portions thereof that we have audited, evaluated and reviewed and reported
      on to the Company's board of directors:

<TABLE>
<CAPTION>
                                                                                    Net Present Value of Future Net Revenue
                                                                          (before income taxes, 10% discount rate, millions dollars)
Description and Preparation Date of     Location of Reserves (Country     ----------------------------------------------------------
         Evaluation Report               or Foreign Geographic Area)       Audited         Evaluated        Reviewed          Total
-----------------------------------     -----------------------------      -------         ---------        --------          -----
<S>                                                 <C>                       <C>            <C>               <C>            <C>
           February 5, 2004                         Canada                    --             1,689             --             1,689
</TABLE>

5.    In our opinion, the reserves data respectively evaluated by us have, in
      all material respects, been determined and are in accordance with the COGE
      Handbook.

6.    We have no responsibility to update this evaluation for events and
      circumstances occurring after the preparation dates.

<PAGE>
                                      C-2


7.    Because the reserves data are based on judgements regarding future events,
      actual results will vary and the variations may be material.

Executed as to our report referred to above:

Gilbert Laustsen Jung Associates Ltd.           Dated February 5, 2004
Calgary, Alberta, Canada


(signed) "James H. Willmon"

James H. Willmon, P.Eng
Vice President

<PAGE>

                                  APPENDIX "D"

                      REPORT OF MANAGEMENT AND DIRECTORS ON
                       RESERVES DATA AND OTHER INFORMATION

Management of ARC Resources Ltd. (the "Company") on behalf of ARC Energy Trust
(the "Trust") are responsible for the preparation and disclosure of information
with respect to the Company's and the other Trust's subsidiaries' oil and gas
activities in accordance with securities regulatory requirements. This
information includes reserves data, which consist of the following:

      (a)   (i)   proved and proved plus probable oil and gas reserves estimated
                  as at January 1, 2004 using forecast prices and costs; and

            (ii)  the related estimated future net revenue; and

      (b)   (i)   proved oil and gas reserves estimated as at January 1, 2004
                  using constant prices and costs; and

            (ii)  the related estimated future net revenue.

An independent qualified reserves evaluator has evaluated the Company's and the
other Trust's subsidiaries' reserves data. The report of the independent
qualified reserves evaluator is presented below.

The Reserve Audit Committee of the board of directors of the Company has

      (c)   reviewed the Company's procedures for providing information to the
            independent qualified reserves evaluator;

      (d)   met with the independent qualified reserves evaluator to determine
            whether any restrictions affected the ability of the independent
            qualified reserves evaluator to report without reservation; and

      (e)   reviewed the reserves data with management and the independent
            qualified reserves evaluator.

The Reserve Audit Committee of the board of directors has reviewed the Company's
procedures for assembling and reporting other information associated with oil
and gas activities and has reviewed that information with management. The board
of directors has, on the recommendation of the Reserve Audit Committee, approved

      (f)   the content and filing with securities regulatory authorities of the
            reserves data and other oil and gas information;

      (g)   the filing of the report of the independent qualified reserves
            evaluator on the reserves data; and

      (h)   the content and filing of this report.

<PAGE>

Because the reserves data are based on judgments regarding future events, actual
results will vary and the variations may be material.


/s/ John P. Dielwart                      /s/ Doug Bonne
-----------------------------             ---------------------------------
JOHN P. DIELWART                          DOUG BONNER
President and Chief Executive Officer     Vice-President, Engineering



/s/ Frederic Coles                        /s/ John Beddome
-----------------------------             ---------------------------------
FREDERIC COLES                            JOHN BEDDOME
Director and Chairman of the Reserve      Director and Member of the Reserve
Audit Committee                           Audit Committee


April 8, 2004