The Energy of Enerplus

Canadian Royalty TrustsFriend or Foe?

IPA

A P

rese

ntat

ion,

Jun

e 16

, 200

5

2

Dramatic Sector Growthand Performance

Source: Bloomberg and public documents

Market Capitalisation

0

10

20

30

40

50

60

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

C$

bil

lio

ns

0

5

10

15

20

25

30

35

40

# o

f T

rust

s

# of Trusts

Trust Market Cap

Relative Performance

$426

$264

$241

$745

0

100

200

300

400

500

600

700

800

900

Ap

r-95

Mar

-96

Mar

-97

Mar

-98

Mar

-99

Mar

-00

Mar

-01

Mar

-02

Mar

-03

Mar

-04

Mar

-05

CD

N$

S&P/TSX Oil & Gas Exploration &Production Index

S&P/TSX Composite Index

S&P 500

Enerplus

3

Significant Force in Industry

Trust Reserves Growth

0

500

1,000

1,500

2,000

2,500

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

Ye

ar

En

d P

rov

en

Re

se

rve

s (

MM

bo

e)

Source: Scotia Capital / First Energy Capital Corp. / Benjamin Financial

Note: Excludes Canadian Oil Sands Trust from Trust category and includes Penn West as a Trust in 2004

2004 Canadian Market Shareby Production

0%

5%

10%

15%

20%

25%

30%

4

Typical Structure

Unit HoldersBeneficial interest in thetrust

Assets or Royalties

Purchase units Cash distributions

Trust orIncome Fund

ManagementCompanyMajority of Companies areowned by Trust

Fees

Services

Operating Co3rd Party

Credit Facility

Creditfacility

Debtservice

Purchase assetsor royalties

Proceeds from saleof gas and oil

Trust owns inter-company note and receives interest and principal payments

or

Trust owns royalty and receives royalty payments

Trust lends Operating Co. money

or

Trust purchases royalty from Operating Co.

5

Structural Comparison

Canadian Royalty Trust US MLP US Royalty Trust

Structure: Publicly traded, mostmanagement companiesnow owned by the trust

Publicly traded partnership,general partner owns 1-2%interest and usually asignificant amount of limitedpartner units

Publicly traded withsponsor typically retaining asignificant net profitsinterest and often ownsunits

Tax Treatment: Pass-through entity withportions of distributionstaxable. Conversion totrust is non-taxable.

Pass-through partnershipwith complex partnershiptax rules. Conveyance ofassets is non-taxable.

Pass-though entity withdistributions fully taxable.Conveyance of assets is ataxable event.

Assets: Typically working interestwith majority operated.

Typically working interestwith majority operated.

Typical overrides withlimited / no operatorship.

Growth: Free to add assets,reinvest cash flow, issuenew units and incur debt.

Free to add assets, reinvestcash flow, issue new unitsand incur debt

Typically static asset inblowdown.

Management: Typically activelymanaged by internalemployees.

Actively managed byoutside general partner.

Passively managed bytrustee.

Owners Rights Comparable to publiccorporation with AnnualGeneral Meeting andelection rights

Limited rights to modifypartnership agreement.

Limited rights with norequirements for annualmeetings or periodicreelection.

6

Trusts Activity Focused OnValue Creation

Source: FirstEnergy Capital Corp., CAPP, and Benjamin Financial

Note: Includes Penn West as a trust in 2004

Total Wells Drilled and % Drilled by Trusts

0

5,000

10,000

15,000

20,000

25,000

30,0001

99

6

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

To

tal W

ells

Dri

lled

0%

2%

4%

6%

8%

10%

12%

% o

f W

ells

Dri

lled

by

Tru

sts

Total Wells Drilled

Trusts as % of total

7

Royalty Trust Drivers

• Perfect Storm for Royalty Trusts 2000 - Present• Robust energy prices

• Falling or modest interest rates

• Yield oriented investors

• Attractive relative performance

• Attractive Business Model• Tax efficiency

• Management discipline / corporate governance

• Risk mitigation

• Shift towards technical excellence

• Shift towards self sustainability

8

Impact on the Market

• Changed the landscape of Canadian E&P through conversions

• Driving increase in M&A metrics,especially longer-life, lower risk assets

• Increasing competition for labor, services, land, and capital

• Supporting US E&P MLP / LLC movement

• Driving asset sales, junior exits, and consideration of self-trusts by large independents and majors

9

Lofty Valuations

Price to Cash Flow

0

2

4

6

8

10

12

Canadian Juniors Canadian Trusts US Seniors Canadian Seniors

P /

CF

2005

2000

Source: Benjamin Financial Solutions

10

Trusts Driving M & A

Trusts % of Canadian M&A MarketDeals over C$100 Million

0

10

20

30

40

50

60

70

80

90

2001 2002 2003 2004

%

Source: CIBC World Markets and Sayer Securities Limited.

11

Macrotrends SupportContinued Growth

• Recent approval for index inclusion

• High commodity prices driving need for tax efficiency

• Maturing oil and gas sector

• Focus on value creation including international acquisitions

• Desire for risk mitigation and corporate discipline

• Investor demographics

• Dividend tax treatment in the U.S.A.

12

…Although not without issues

• Canadian market is getting crowded

• Increasing interest rates and spreads

• Sustainability of underlying reserves / unit

• Vagaries of US retail market

• Ability to attract / retain top quartile management and technical staff

13

Trust Model in the US

• Drivers• Favorable tax treatment

• Possible valuation arbitrage

• Positive Canadian experience

• Strong demand for yield

• Questions• Appropriate structure given commodity price risk

• Interest rate risk

• Trading liquidity and market pricing

• Memories from prior efforts

14

Future Expectations

• Canadian trusts will be aggressive acquisitors

• Strong equity markets, robust valuations, and forward markets support aggressive

bids

• Ideal acquisition mature property with some upside and low tax basis

• Trust market will continue to grow in and outside of Canada

• Continued product supply given valuation prospects

• More conversions likely including trust spinouts from large E&P

• Consolidations expected, due to lack of qualified management and desire for size

• International acquisitions will increase including US despite tax leakage

• Trusts will continue to move towards technical value creation including a

portion of exploration

• US structures will evolve based on Canadian experience

• US E&P MLP or LLC imminent

• Hi-split MLP’s structures vulnerable to competition over time

15

Industry Implications

• Trusts will be a strong competitor in Canada and will enter new markets

• US MLP / LLC could change the US M&A market over time

• Consider partnering on acquisitions with a strong Canadian Trust, especially in

limited tax pool situations or on deals with a mix of exploration and exploitation

upside which could be split

• Include trusts on all divestment offerings including infrastructure deals

• Develop long-term relationships - trusts are here to stay

16

A Final Suggestion . . . .

• Oldest and largest conventional trust (~75,500 BOE/day)

• NYSE and TSE listed (>US$4B EV)

• Superior equity value

• Strong technical staff

• Creative deal structures

• Tax advantaged

• Contact:

• Garry Tanner, Sr. Vice President and COO (403) 298-2724

• Ian Dundas, Sr. Vice President, Business Development (403) 218-4554

17

Enerplus Performance

Total Return (C$)

21.5%

41.1%

60.7%

19.9%

0%

10%

20%

30%

40%

50%

60%

70%

1 year 3 year 5 year 10 year

$426

$264

$241

$745

0

100

200

300

400

500

600

700

800

900

Apr-95 Mar-96 Mar-97 Mar-98 Mar-99 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05

CD

N$

S&P/TSX Oil & Gas Exploration & Production Index S&P/TSX Composite IndexS&P 500 Enerplus

(1) Source: Bloomberg; Assumes the reinvestment of distributions and/or dividends; Based on the weekly closing price of Enerplus trust units on the Toronto Stock Exchange. S&P 500 was converted to CDN$ using the closing exchange rate at week end