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FOR: NUVISTA ENERGY LTD.

TSX SYMBOL: NVA - |  View Quote |  View Chart |  View Financials | 

NuVista Energy Ltd. Announcing Second Quarter Results

Aug 4, 2004 - 20:41 ET

CALGARY, ALBERTA--(CCNMatthews - Aug. 4, 2004) - NuVista Energy 
Ltd. is pleased to announce today its financial and operating 
results for the three and six months ended June 30, 2004 as 
follows: 


/T/

---------------------------------------------------------------------
Corporate Highlights
---------------------------------------------------------------------
                                          Three Months     Six Months
                                                 ended          ended
                                               June 30,       June 30,
                                                  2004           2004
---------------------------------------------------------------------
Financial
($ thousands, except per share)

Production revenue                              16,642         32,098

Cash flow from operations (1)                   11,368         20,967
 Per share - basic                                0.30           0.56
 Per share - diluted                              0.30           0.54

Net income (2)                                   4,540          8,272
 Per share - basic                                0.12           0.22
 Per share - diluted                              0.12           0.21

Total assets                                                  101,051

Bank loan, net of working capital                              10,275

Shareholders' equity                                           80,760

Net capital expenditures                        10,946         18,120

Weighted average common shares
 outstanding (thousands):
  Basic                                         37,334         37,335
  Diluted                                       38,519         38,517

---------------------------------------------------------------------
Operating
(boe conversion - 6:1 basis)

Production:
 Natural gas (mmcf/day)                           21.2           20.9
 Crude oil (bbls/day)                            1,187          1,181
  Total oil equivalent (boe/day)                 4,712          4,682

Product prices:
 Natural gas ($/mcf)                              6.80           6.58
 Crude oil ($/bbl)                               32.94          32.40

Operating expenses:
 Natural gas ($/mcf)                              0.65           0.64
 Crude oil ($/bbl)                                3.94           3.93
  Total oil equivalent ($/boe)                    3.91           3.86

General and administrative expenses ($/boe)       0.35           0.35

Cash costs ($/boe)                                4.50           4.41

Cash flow netback ($/boe) (1)                    26.51          24.61
---------------------------------------------------------------------

NOTES:

(1) Cash flow from operations is used before changes in non-cash
    working capital to analyze operating performance and leverage.
    Cash flow does not have a standardized measure prescribed by
    Canadian Generally Accepted Accounting Principles and therefore
    may not be comparable with the calculations with similar measures
    for other companies.

(2) Net income and net income per share for 2003 have been restated
    for the adoption of new accounting standards for asset retirement
    obligations and stock based compensation. See Note 1 of the interim
    consolidated financial statements for details of this restatement.

/T/

MESSAGE TO SHAREHOLDERS 

NuVista Energy Ltd. ("NuVista") is pleased to report to 
shareholders its financial and operating results for the three 
and six months ended June 30, 2004. NuVista has now completed its 
first full year of operations and the Board of Directors and 
management are very pleased with the results, accomplishments and 
corresponding value created for its shareholders. The results of 
the second quarter of 2004 represents the fourth consecutive 
quarter of continuous profitable growth for NuVista since its 
creation through the Plan of Arrangement involving Bonavista 
Petroleum Ltd. and Bonavista Energy Trust (collectively 
"Bonavista") on July 2, 2003. 

Subsequent to June 30, 2004, NuVista was also successful in the 
completion of one major acquisition, a private company, for 
approximately $47.4 million. Through a series of transactions, 
NuVista acquired 1,280 boe per day of production, consisting of 
7.1 mmcf per day of natural gas and 100 bbls per day of oil and 
natural gas liquids. This acquisition provides NuVista with a 
significantly expanded land position and prospect inventory in 
two areas, the Provost area (a northwest extension of NuVista's 
Eastern Natural Gas Region) and a new core region in the Pembina 
area. Concurrent with this acquisition, NuVista announced an 
expansion in its 2004 capital program from $70 million to $95 
million and an increase in its drilling program to 95 wells from 
the 80 to 85 wells previously forecasted. This expanded capital 
program will allow NuVista to focus on organic growth through 
active land and seismic acquisitions and an increased number of 
drilling prospects in these areas over the remainder of 2004 and 
2005. The issue of 3 million shares in connection with the 
acquisition and the expansion in NuVista's bank facility in June, 
leaves NuVista with significant financial flexibility, with a 
projected 2004 exit debt to cash flow ratio remaining unchanged 
at 0.5:1. 

Other significant highlights for NuVista include: 

- Since inception, production has increased by 35% to average 
4,712 boe per day for the second quarter of 2004, consisting of 
21.2 mmcf per day of natural gas and 1,187 bbls per day of crude 
oil from the 3,500 boe per day. This significant growth was 
accomplished while capital expenditures were only 1.1 times cash 
flow during this period. With the acquisition of the private 
company, installation of additional natural gas compression and 
recent tie-ins of second quarter wells, NuVista's current 
production has increased to 6,350 boe per day, consisting of 29.7 
mmcf per day of natural gas and 1,400 bbls per day of oil and 
natural gas liquids; 

- Increased undeveloped land by 72%, to over 295,000 net acres 
from the 172,000 net acres on commencement of operations, further 
enhancing the drilling prospect inventory in its Core Regions. In 
addition, NuVista has optioned over 40,000 net acres of 
undeveloped land through farm-in commitments with industry 
partners; 

- Acquired 700 kilometers of 2D and 90 square kilometers of 3D 
seismic to further enhance the prospectivity of NuVista's 
undeveloped land thus far in 2004; 

- Participated in 38 (30.1 net) wells year to date in 2004, with 
an overall success rate of 84%; 

- Evaluated and submitted proposals on a number of acquisition 
opportunities in the second quarter of 2004, resulting in 
commitments for four complimentary property acquisitions, two in 
the Eastern Natural Gas Region and two in the Provost-Amisk 
Region; 

- Continued focus on controllable cash costs has been a top 
priority, with recorded cash costs of  $4.50 per boe for the 
second quarter of 2004, maintaining NuVista in the top decile of 
its industry peers; and 

- In June 2004, completed the expansion of the bank facility from 
$32 million to $43 million, leaving it with significant financial 
flexibility to fund future opportunities as they arise. 

MANAGEMENT'S DISCUSSION AND ANALYSIS 

Management's discussion and analysis ("MD&A") of financial 
conditions and results of operations should be read in 
conjunction with the unaudited consolidated financial statements 
for the six months ended June 30, 2004 and NuVista's audited 
consolidated financial statements and MD&A for the period from 
July 2, 2003 to December 31, 2003. Barrels of oil equivalent 
("boe") have been calculated using a conversion rate of six 
thousand cubic feet of natural gas to one barrel of oil. 

Forward-Looking Statements - Certain information set forth in 
this document, including management's assessment of NuVista's 
future plans and operations, contains forward-looking statements. 
By their nature, forward-looking statements are subject to 
numerous risks and uncertainties, some of which are beyond 
NuVista's control, including the impact of general economic 
conditions, industry conditions, volatility of commodity prices, 
currency fluctuations, imprecision of reserve estimates, 
environmental risks, competition from other industry 
participants, the lack of availability of qualified personnel or 
management, stock market volatility and ability to access 
sufficient capital from internal and external sources. Readers 
are cautioned that the assumptions used in the preparation of 
such information, although considered reasonable at the time of 
preparation, may prove to be imprecise and, as such, undue 
reliance should not be placed on forward-looking statements. 
NuVista's actual results, performance or achievement could differ 
materially from those expressed in, or implied by, these 
forward-looking statements, or if any of them do so, what 
benefits that NuVista will derive therefrom. NuVista disclaims 
any intention or obligation to update or revise any 
forward-looking statements, whether as a result of new 
information, future events or otherwise. 

New accounting policies - On January 1, 2004, NuVista adopted and 
implemented retroactively, new accounting policies pursuant to 
requirements of the Canadian Institute of Chartered Accountants 
("CICA") Handbook. The new accounting policies adopted included: 
"Asset Retirement Obligations", "Stock-based Compensation and 
Other Stock-based Payments" and "Hedge Accounting" and are 
detailed further in Note 1 of the Notes to the Consolidated 
Financial Statements. 

Operating activities - In the second quarter of 2004, NuVista 
drilled 20 wells with an average working interest of 83%. The 
success rate of 80% in this drilling program resulted in 13 
natural gas wells and three oil wells. Of the 20 wells, 15 were 
medium depth natural gas prospects drilled in the Eastern Alberta 
Natural Gas Region. As currently being reported throughout the 
industry, NuVista also experienced some weather related delays 
resulting in drilling five fewer natural gas tests than 
originally planned and the delay of tie-ins and compression 
projects until late in the second quarter. NuVista is currently 
completing and connecting the successful second quarter wells and 
will drill the remaining second quarter locations as part of the 
third quarter program. NuVista operated 17 of the 20 wells, with 
an average working interest of 89% in the operated wells. During 
the quarter, NuVista also participated in three non-operated 
wells with an average working interest of 50% in these wells. 
NuVista continues to actively drill in its core regions, with 
approximately 55 wells planned for the remainder of the year. For 
the six months ended June 30, 2004, NuVista drilled 38 (30.1 net) 
wells, operating 32 of them, resulting in 24 natural gas wells, 
eight oil wells and six dry holes. 

Production - NuVista's production results for the six months 
ended June 30, 2004 benefited from continued success in its 
Eastern Alberta Core Region drilling program. Although NuVista's 
average production of 4,712 boe per day, comprised of 21.2 mmcf 
per day of natural gas and 1,187 bbls per day of crude oil, for 
the second quarter of 2004 represents only a 1% increase over the 
first quarter of 2004, a significant portion of NuVista's second 
quarter natural gas drilling success will be brought on-stream in 
July and August, 2004. NuVista has recently drilled four 
horizontal and three vertical oil wells at Amisk, which were 
brought on stream in late June. In addition, a facility expansion 
was completed at Amisk in mid-July, which resulted in further 
increased oil production due to increased water handling 
capability. 

Revenues - Revenues for the three months ended June 30, 2004 were 
$16.6 million, an 8% increase from  $15.5 million for the three 
months ended March 31, 2004. Revenues for the six months ended 
June 30, 2004 were $32.1 million, a 28% increase from $25.1 
million for the six months ended December 31, 2003. These 
revenues were comprised of $25.1 million of natural gas revenues 
and $7.0 million of crude oil revenues for the six months ended 
June 30, 2004. The increase in revenues for the six months ended 
June 30, 2004 versus the six months ended December 31, 2003, 
results from a 9% increase in production and a 13% increase in 
the natural gas price to $6.58 per mcf from $5.81 per mcf and a 
17% increase in the crude oil price to $32.94 per bbl from $28.08 
per bbl, respectively. Revenues for the three and the six months 
ended June 30, 2004 were slightly reduced by $240,000 as a result 
of hedging activities. 

Royalties - Royalties of $3.3 million for the three months ended 
June 30, 2004 were 17% lower than $4.0 million for the three 
months ended March 31, 2004. The reduction in royalties in the 
second quarter resulted from lower actual natural gas crown 
royalties than estimated for the first quarter. Royalties for the 
reporting period were  $7.4 million, an average rate of 23% 
versus $6.1 million or 24% for the six months ended December 31, 
2003. Natural gas royalties were $6.3 million, an average royalty 
rate of 25% and crude oil royalties were $1.2 million, or an 
average royalty rate of 16.7%. 

Operating expenses - Operating expenses of $1.7 million for the 
three months ended June 30, 2004 were comparable to the $1.6 
million for the three months ended March 31, 2004. Operating 
expenses for the six months ended June 30, 2004 were $3.3 
million, a 17.8% increase from $2.8 million for the six months 
ended December 31, 2003. This increase resulted primarily from 
the higher production volumes in the six months ended June 30, 
2004, from the six months ended December 31, 2003. In the first 
half of 2004, natural gas operating expenses averaged $0.64 per 
mcf and crude oil expenses were $3.93 per bbl as compared to 
$0.58 per mcf and $4.32 per bbl respectively for the six months 
ended December 31, 2003. On a boe basis, operating costs 
increased 5% to $3.86 per boe in the first half of 2004 as 
compared to $3.69 per boe for the six months ended December 31, 
2003, primarily due to cost pressures facing the entire industry. 
Despite this increase, NuVista still remains in the top decile 
for oil and natural gas companies in its peer group. Overall, 
NuVista's cash costs, which include operating, general and 
administrative, interest expenses and Large Corporation Tax, have 
remained consistent at $4.50 per boe in the second quarter of 
2004. This too places us in the top decile in our peer group in 
this performance criteria. 

General and administrative - General and administrative expenses 
of $153,000 net of overhead recoveries, were comparable with the 
charge of $149,000 for the three months March 31, 2004. General 
and administrative expenses, net of overhead recoveries were 
$302,000 or $0.35 per boe for the six months ended June 30, 2004. 
Included in these expenses is an allocation of $520,000 from 
Bonavista, pursuant to the Technical Services Agreement entered 
into as part of the Plan of Arrangement. The Technical Services 
Agreement allowed NuVista to initiate and continue with a 
successful and active program, through the use of Bonavista's 
personnel in managing its operations and at the same time take 
advantage of Bonavista's low overhead cost structure. In 
addition, as a result of adopting the new accounting rules, 
NuVista recorded a stock based non-cash compensation charge of 
$478,000 for the six months ended June 30, 2004, in connection 
with both of the Class B Performance shares and stock options. 

Interest expenses - For the three months ended June 30, 2004, 
interest expense was $78,000, up from $51,000 in the first 
quarter of 2004, due to higher average debt levels in the second 
quarter. Interest expense during the first half of 2004 was 
$129,000 or $0.15 per boe versus $282,000 or $0.37 per boe for 
the six months ended December 31, 2003 because of lower average 
debt levels in the first half of 2004. Currently, NuVista's 
average borrowing rate is approximately 3.1%. 

Depreciation, depletion and accretion expenses - Depreciation, 
depletion and accretion expenses were  $3.5 million for the 
second quarter of 2004. The average cost per unit was $8.13 per 
boe in the second quarter of 2004 versus $7.63 per boe for the 
three months ended March 31, 2004 due to higher costs of adding 
reserves in the current quarter as compared to historic levels. 
The overall depreciation, depletion and accretion rate has been 
reduced as a result of the retroactive adoption of the new 
accounting rules relating to asset retirement obligations. 

Income and other taxes - For the second quarter of 2004, the 
provision for income and other taxes was   $3.1 million for an 
effective tax rate of 40.7%, as compared to $2.4 million with an 
effective tax rate of 39.3% for the first quarter of 2004. For 
the six months ended June 30, 2004, the provision for income and 
other taxes was  $5.5 million for an effective tax rate of 40.1% 
as compared to the restated provision of $3.7 million, with an 
effective tax rate of 39.5% for the period from July 2 to 
December 31, 2003. 

Capital expenditures - Capital expenditures were $10.9 million 
during the second quarter of 2004 and consisted primarily of 
exploration and development spending. These expenditures were 17% 
lower than the planned amount of approximately $13.2 million for 
the quarter, as poor weather conditions delayed NuVista's field 
activities. In addition, only a small portion of the acquisition 
budget was spent in the quarter. In spite of these factors, 
NuVista still exceeded its production and cash flow targets for 
the current reporting period. For the six months ended June 30, 
2004, capital expenditures were $18.1 million, which represents 
approximately 86% of the cash flow for the period. 

Cash flow and net income - In the second quarter of 2004, cash 
flow was $11.4 million ($0.30 per share, basic), an 18% increase 
over $9.6 million ($0.26 per share, basic) for the first quarter 
of 2004. For the six months ended June 30, 2004, NuVista's cash 
flow was $21.0 million ($0.56 per share, basic), a 34.6% increase 
from $15.6 million ($0.43 per share, basic) for the six months 
ended December 31, 2003. Net income also increased 45.6% during 
the first half of 2004 to $8.3 million ($0.22 per share, basic) 
from $5.6 million ($0.15 per share, basic), restated for the six 
months ended December 31, 2003. These increases resulted from 
stronger commodity prices and increased production rates for the 
reporting period in 2004 and allowed NuVista to maintain a strong 
net income to cash flow ratio of almost 40%. 

Liquidity and capital resources - As at June 30, 2004, total bank 
debt (net of working capital) was $10.3 million, resulting in a 
debt to cash flow ratio of approximately 0.3 to 1. NuVista has 
approximately $32.7 million of unused bank borrowing capability 
based on the current line of credit of $43 million, which 
provides substantial flexibility to fund expanded capital 
programs into the future. 

Quarterly financial information - The following table highlights 
NuVista's performance for the quarterly periods from July 2, 2003 
to June 30, 2004. NuVista commenced operations on July 2, 2003 
through the Plan of Arrangement involving Bonavista: 


/T/

                            2004                     2003
---------------------------------------------------------------------
                                                            July 2 to
                      June 30   March 31   December 31   September 30
---------------------------------------------------------------------
(thousands, except
 per share amounts)                          (restated)     (restated)

Production revenue   $ 16,642   $ 15,456      $ 12,735       $ 12,399

Net income              4,540      3,732         2,878          2,746

Net income per
 share:
   Basic             $   0.12   $   0.10      $   0.08       $   0.08
   Diluted               0.12       0.10          0.08           0.07
---------------------------------------------------------------------

/T/

BUSINESS RISKS AND OUTLOOK 

NuVista's management remains committed to the same principles and 
disciplined growth strategy that has led to the tremendous 
success of Bonavista. The undeveloped land base now exceeding 
295,000 net acres, an increased drilling inventory, coupled with 
our strong balance sheet, leaves NuVista positioned to continue 
posting strong operational and financial results for the 
remainder of 2004 and beyond. With the $47.4 million acquisition 
completed on July 29, 2004, NuVista announced an increase of its 
base capital budget from $70 million to   $95 million for 2004 
and the increase in the drilling program by 10 to 15 wells to 95 
wells. The expanded capital program for 2004 will enable 
NuVista's 2004 forecasted exit production to increase 12% to 
7,500 boe per day as opposed to the 6,700 boe per day originally 
forecasted. NuVista will continue to focus on its core strategy 
of applying technical expertise to its operating regions in a 
prudent and disciplined manner, through both the drill bit and 
strategic acquisitions. The execution of these strategies will 
enable NuVista to continue to grow its production, cash flow and 
net income consistently and profitability. The continued 
expectations of exploration, development and acquisition success, 
leaves NuVista in an excellent position to average approximately 
5,600 boe per day and a cash flow estimate of $1.30 per share in 
2004. Furthermore, our solid financial position, will enable us 
to execute our 2004 capital program and remain positioned to 
pursue additional strategic opportunities as they arise. The 
increase in the 2004 base capital program positions NuVista to 
deliver profitable long term growth. We remain unwavering in our 
commitment to enhance shareholder value by accessing the broad 
depth and expertise of the Bonavista team in a diligent and 
prudent manner. 


/T/

Consolidated Balance Sheets
                                              June 30,   December 31,
(thousands)                                      2004           2003
--------------------------------------------------------------------
                                           (unaudited)     (restated)

Assets
Accounts receivable                          $  6,784       $  6,251
Oil and natural gas properties and equipment   91,603         79,959
Future tax asset                                2,664          8,164
--------------------------------------------------------------------
                                             $101,051       $ 94,374
--------------------------------------------------------------------
--------------------------------------------------------------------

Liabilities and Shareholders' Equity
Accounts payable and accrued liabilities     $  9,328       $ 12,402
Bank loan                                           -          6,928
--------------------------------------------------------------------
                                                9,328         19,330

Bank loan                                       7,731              -

Asset retirement obligation                     3,232          3,027

Shareholders' equity:
 Share capital                                 65,925         65,932
 Contributed surplus                              939            461
 Retained earnings                             13,896          5,624
--------------------------------------------------------------------
                                               80,760         72,017
--------------------------------------------------------------------
                                             $101,051       $ 94,374
--------------------------------------------------------------------
--------------------------------------------------------------------


Consolidated Statement of Operations and Retained Earnings

(thousands, except per share amounts)    Three Months     Six Months
                                                ended          ended
                                        June 30, 2004  June 30, 2004
--------------------------------------------------------------------
(unaudited)
Revenues:
 Production                                  $ 16,642       $ 32,098
 Royalties, net of Alberta Royalty
  Tax Credit                                   (3,342)        (7,375)
--------------------------------------------------------------------
                                               13,300         24,723
--------------------------------------------------------------------

Expenses:
 Operating                                      1,676          3,289
 General and administrative                       153            302
 Financing charges                                 78            129
 Stock based compensation expense                 246            478
 Depreciation, depletion and accretion          3,487          6,717
--------------------------------------------------------------------
                                                5,640         10,915
--------------------------------------------------------------------
Income before income and other taxes            7,660         13,808
 Income and other taxes                         3,120          5,536
--------------------------------------------------------------------

Net income                                      4,540          8,272
Retained earnings, beginning of period          9,356          5,668
Retroactive application of changes in
 accounting policies (Note 1)                       -            (44)
--------------------------------------------------------------------
Retained earnings, end of period             $ 13,896       $ 13,896
--------------------------------------------------------------------
--------------------------------------------------------------------
Net income per share - basic                 $   0.12       $   0.22
--------------------------------------------------------------------
--------------------------------------------------------------------
Net income per share - diluted               $   0.12       $   0.21
--------------------------------------------------------------------
--------------------------------------------------------------------


Consolidated Statement of Cash Flows

(thousands)                              Three Months     Six Months
                                                ended          ended
                                        June 30, 2004  June 30, 2004
--------------------------------------------------------------------
(unaudited)

Cash provided by (used in):

Operating Activities:
 Net income                                   $ 4,540        $ 8,272
  Items not requiring cash from operations:
  Depreciation, depletion and accretion         3,487          6,717
  Stock based compensation expense                246            478
  Future income taxes                           3,095          5,500
--------------------------------------------------------------------
 Funds flow from operations                    11,368         20,967
 Asset retirement expenditures                    (13)           (36)
 Increase in non-cash working capital items    (1,681)        (3,607)
--------------------------------------------------------------------
                                                9,674         17,324
--------------------------------------------------------------------
Financing Activities:
 Repurchase of share capital                        -             (7)
 Increase in bank loan                          1,272            803
--------------------------------------------------------------------
                                                1,272            796
--------------------------------------------------------------------

Investing Activities:
 Oil and natural gas properties and
  equipment additions                         (11,048)       (18,222)
 Proceeds on disposal of oil and natural
  gas properties and equipment                    102            102
--------------------------------------------------------------------
                                              (10,946)       (18,120)
--------------------------------------------------------------------
Decrease in cash                                    -              -
Cash, beginning of period                           -              -
--------------------------------------------------------------------
Cash, end of period                           $     -        $     -
--------------------------------------------------------------------
--------------------------------------------------------------------

/T/

SELECTED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS 

(unaudited) 

The unaudited interim consolidated financial statements have been 
prepared by management in accordance with Canadian Generally 
Accepted Accounting Principles (GAAP), using the same accounting 
policies as those set out in Note 1 to the Consolidated Financial 
Statements for the period from July 2, 2003 to December 31, 2003, 
except as noted below. These interim consolidated financial 
statements should be read in conjunction with the consolidated 
financial statements for the period from July 2, 2003 to December 
31, 2003. 

1. Changes in accounting policies: 

a) Oil and natural gas assets: 

Oil and natural gas assets are evaluated in each reporting period 
to determine that the carrying amount in a cost centre is 
recoverable and does not exceed the fair value of the properties 
in the cost centre. 

The carrying amounts are assessed to be recoverable when the sum 
of the undiscounted cash flows expected from the production of 
proved reserves, the lower of cost and market of unproved 
properties and the cost of major development projects exceeds the 
carrying amount of the cost centre. When the carrying amount is 
not assessed to be recoverable, an impairment loss is recognized 
to the extent that the carrying amount of the cost centre exceeds 
the sum of the discounted cash flows expected from the production 
of proved and probable reserves, the lower of cost and market of 
unproved properties and the cost of major development projects of 
the cost centre. The cash flows are estimated using expected 
future product prices and costs and are discounted using a 
risk-free interest rate. 

Effective January 1, 2004, NuVista adopted the new accounting 
standard relating to full cost accounting. The adoption of this 
new policy on January 1, 2004 resulted in no write-down to the 
carrying value of oil and natural gas assets. Prior to January 1, 
2004 the ceiling test amount was the sum of the undiscounted cash 
flows expected from the production of proved reserves, the lower 
of cost or market of unproved properties and the cost of major 
development projects less estimated future costs for 
administration, financing, site restoration and income taxes. The 
cash flows were estimated using period end prices and costs. 

NuVista has performed the ceiling test under AcG-16 as of January 
1, 2004. The impairment test was calculated using the benchmark 
reference prices as at January 1, 2004 for the years 2004 to 2008 
and adjusted for commodity price differentials specific to 
NuVista: 


/T/

Benchmark Reference Price Forecast:               Year
                                   ---------------------------------
                                    2004   2005   2006   2007   2008
--------------------------------------------------------------------
WTI ($U.S./bbl)                    29.00  26.50  25.50  25.00  25.00
--------------------------------------------------------------------
AECO ($Cdn/mmbtu)                   5.80   5.47   5.14   4.94   4.78
--------------------------------------------------------------------

/T/

b) Asset retirement obligations: 

On January 1, 2004, NuVista adopted CICA Handbook Section 3110 
"Asset Retirement Obligations". This change in accounting policy 
has been applied retroactively with the restatement of the prior 
period presented for comparative purposes. Previously, NuVista 
recognized a provision for future site reclamation and 
abandonment costs calculated on the unit-of-production method 
over the life of the oil and natural gas properties based on 
total estimated proved reserves and the estimated future 
liability. 

As a result of this change in accounting policy, net income 
increased by $313,000 ($481,000 net of a future tax expense of 
$168,000) or $0.01 per share on a basic and diluted basis for the 
period from inception on July 2, 2003 to December 31, 2003. The 
Asset Retirement Obligation increased by $1.7 million, oil and 
natural gas properties and equipment, net of accumulated 
depreciation and depletion increased by $3.2 million, future tax 
asset decreased by $509,000, share capital increased by $642,000 
and retained earnings increased by $313,000 as at December 31, 
2003. 

c) Stock-based compensation: 

NuVista has retroactively adopted the new accounting standard for 
stock-based compensation, which requires the use of the fair 
value method for valuing stock option grants on or after January 
1, 2002. Under this method, the compensation cost attributable to 
all share options granted is measured at fair value at the grant 
date and expensed over the vesting period with a corresponding 
increase to contributed surplus. Upon the exercise of the stock 
options, consideration received together with the amount 
previously recognized in contributed surplus is recorded as an 
increase to share capital. NuVista has incorporated an estimated 
forfeiture rate of 10% for stock options. 

As a result of adopting the new accounting standard, net income 
decreased by $357,000, or $0.01 per share on a basic and diluted 
basis for the period from July 2, 2003 to December 31, 2003. The 
completion of this change in accounting policy resulted in an 
increase of $357,000 to contributed surplus and a decrease of 
$357,000 to retained earnings as at December 31, 2003. 

d) Hedge relationships: 

The Canadian Institute of Chartered Accountants ("CICA") issued 
Accounting Guideline 13 - Hedging Relationships, which deals with 
the identification, designation, documentation and effectiveness 
of hedging relationships for the purpose of applying hedge 
accounting. The guideline establishes conditions for applying 
hedge accounting. The guideline is effective for fiscal years 
beginning on or after July 1, 2003. Where hedge accounting does 
not apply, any changes in the fair value of the financial 
derivative contracts relating to a financial period can either 
reduce or increase net income and net income per share for that 
period. 

2. Asset retirement obligations: 

NuVista's asset retirement obligations result from net ownership 
interests in oil and natural gas assets including well sites, 
gathering systems and processing facilities. NuVista estimates 
the total undiscounted amount of cash flows required to settle 
its asset retirement obligations is approximately $11.6 million 
which will be incurred over the next 51 years. The majority of 
the costs will be incurred between 2018 and 2034. A 
credit-adjusted risk-free rate of 8.0% was used to calculate the 
fair value of the asset retirement obligations. 


/T/

A reconciliation of the asset retirement obligation is provided below:

                                      Six months         Period from
                                           ended           July 2 to
                                   June 30, 2004   December 31, 2003
--------------------------------------------------------------------
(thousands)
Balance, beginning of period             $ 3,027             $ 2,846

Accretion expense                            103                  85
Liabilities incurred                         138                 206
Liabilities settled                          (36)               (110)
--------------------------------------------------------------------

Balance, end of period                   $ 3,232             $ 3,027
--------------------------------------------------------------------
--------------------------------------------------------------------

/T/

3. Bank loan: 

In June 2004, the Company and its lenders agreed to amend the 
Company's revolving bank loan facility to increase the maximum 
borrowing to $43 million. The facility is subject to an annual 
review by the lenders, at which time a lender can request 
conversion to a term loan for one year. Under the term period, no 
principal payments would be required until June 29, 2006 or later 
after the annual review. As such, this loan facility is now 
classified as a long-term liability. 

4. Share capital: 

As at June 30, 2004 there were 37,334,487 common shares and 
1,193,750 Class B Performance Shares outstanding. In addition, 
there were 1,436,950 stock options outstanding, with an average 
exercise price of $6.44 per share as at June 30, 2004. 

5. Hedging activities: 

As at June 30, 2004, NuVista has entered into physical purchase 
contracts to sell 200 bbls per day for the period from April 1, 
2004 to September 30, 2004 at prices ranging from US $27.50 per 
bbl to US $28.50 per bbl. In addition, NuVista has sold 3,000 
gj's per day for the period from April 1, 2004 to October 31, 
2004 by way of costless collars with an average floor price of 
$5.00 per gj and an average ceiling price of $6.62 per gj at AECO 
and 3,000 gj's per day for the period from November 1, 2004 to 
March 31, 2005 by way of costless collars with an average floor 
price of $6.63 per gj and an average ceiling price of $10.48 per 
gj. 

6. Subsequent event: 

On July 29, 2004, the Company completed the acquisition of all of 
the outstanding shares of a private company. The consideration 
for this acquisition consisted of three million common shares of 
NuVista plus $23.7 million of cash and assumption of debt, for a 
total purchase price of approximately $47.4 million. 

INVESTOR INFORMATION 

NuVista is an independent Canadian oil and natural gas 
exploration, development and production company with its common 
shares trading on the Toronto Stock Exchange under the symbol 
"NVA". 

Corporate information provided herein contains forward-looking 
information. The reader is cautioned that assumptions used in the 
preparation of such information, which are considered reasonable 
by NuVista at the time of preparation, may be proven to be 
incorrect. Actual results achieved during the forecast period 
will vary from the information provided herein and the variations 
may be material. There is no representation by NuVista that 
actual results achieved during the forecast period will be the 
same in whole or in part as those forecast. 

-30-


FOR FURTHER INFORMATION PLEASE CONTACT:

NuVista Energy Ltd.
Keith A. MacPhail
Chairman
(403) 213-4315

or

NuVista Energy Ltd.
Alex G. Verge
President and Chief Executive Officer
(403) 213-4306

or

NuVista Energy Ltd.
Glenn A. Hamilton
Vice President and Chief Financial Officer
(403) 213-4302