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FOR: NUVISTA ENERGY LTD.

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

NuVista Energy Ltd. Announcing Third Quarter Results

Nov 4, 2004 - 19:24 ET

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

/T/

------------------------------------------------------------------------
Corporate Highlights
------------------------------------------------------------------------
                                 Three                             Nine
                                Months   Period (1)              Months
                                 ended       ended                ended
                             September   September            September
                              30, 2004    30, 2003  % Change   30, 2004
------------------------------------------------------------------------
                                         (restated)
Financial
($ thousands, except per share)

Production revenue              21,565      12,399        74     53,663
Cash flow from operations (2)   13,682       7,554        81     34,649
 Per share - basic                0.35        0.21        67       0.91
 Per share - diluted              0.34        0.20        70       0.88

Net income (3)                   4,335       2,746        58     12,607
 Per share - basic                0.11        0.08        38       0.33
 Per share - diluted              0.11        0.07        57       0.32

Total assets                   161,782      82,142        97    161,787

Bank loan,
 net of working capital         34,517       7,586       355     34,517

Shareholders' equity           109,080      69,699        56    109,080

Net capital expenditures        57,746       7,523       668     75,862

Weighted average common shares
 outstanding (thousands):
 Basic                          39,643      35,382        12     38,110
 Diluted                        40,699      37,846         8     39,250

------------------------------------------------------------------------

Operating
(boe conversion - 6:1 basis)

Production:
 Natural gas (mmcf/day)           27.8        17.8        56       23.3
 Oil and liquids (bbls/day)      1,475         983        50      1,280
 Total oil equivalent (boe/day)  6,113       3,949        55      5,163

Product prices:
 Natural gas ($/mcf)              6.40        6.02         6       6.51
 Oil and liquids ($/bbl)         38.11       29.70        28      34.61

Operating expenses ($/boe):
 Natural gas ($/mcf)              0.73        0.56        30       0.68
 Oil and liquids ($/bbl)          4.08        4.26        (4)      3.99
 Total oil equivalent ($/boe)     4.31        3.58        20       4.04

General & administrative
 expenses ($/boe)                 0.37        0.35         6       0.36

Cash costs ($/boe)                5.24        4.77        10       4.74

Cash flow netback ($/boe) (2)    24.33       21.02        16      24.50

------------------------------------------------------------------------

NOTES:

(1) Period is from July 2, 2003 to September 30, 2003.
(2) 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.
(3) Net income and net income per share for 2003 have been restated for
    the adoption of new accounting standards for asset retirement
    obligations and stockbased 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 nine months ended 
September 30, 2004. NuVista has now completed fifteen months 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 third quarter of 2004 represent the 
fifth consecutive quarter of continuous profitable growth for NuVista, 
since its creation on July 2, 2003 through the Plan of Arrangement 
involving Bonavista Petroleum Ltd. and Bonavista Energy Trust 
(collectively "Bonavista"). 

During the third quarter of 2004, NuVista was successful in the 
completion of one major acquisition, a private company, for 
approximately $47.4 million.  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. With the 
private company 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 to 
approximately 90 wells. The expanded capital program for 2004 will 
enable NuVista's 2004 forecasted exit production to increase 12% to 
7,500 boe per day from the 6,700 boe per day originally forecasted.

Other significant highlights for NuVista include:

- Since inception, production has increased by 94% to the current level 
of 6,800 boe per day, consisting of 32 mmcf per day of natural gas and 
1,420 bbls per day of oil and liquids;

- Increased undeveloped land by 77%, to over 305,000 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 acquired options on, over 40,000 net acres of undeveloped land 
through farm-in commitments to industry partners;

- Acquired 1,700 kilometers of 2D and 210 square kilometers of 3D 
seismic to further enhance the prospectivity of NuVista's undeveloped 
land thus far in 2004;

- Participated in 63 (49.6 net) wells year to date in 2004, with an 
overall success rate of 89%;

- Evaluated and submitted proposals on a number of acquisition 
opportunities in the third quarter of 2004, resulting in commitments for 
four complimentary property acquisitions, two in the Eastern Alberta 
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 $5.24 per boe for the third quarter of 2004, 
leaving NuVista in the top decile of its industry peers; and

- In October 2004, completed the expansion of the bank facility to $55 
million, an increase of 72% since inception, leaving 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 three and nine 
months ended September 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 new accounting policies pursuant to requirements of the 
Canadian Institute of Chartered Accountants ("CICA") Handbook. The new 
accounting policies adopted included: "Stock-based Compensation and 
Other Stock-based Payments", "Asset Retirement Obligations" and "Hedge 
Accounting" and are detailed further in Note 1 of the Notes to the 
Consolidated Financial Statements.

Operating activities - The third quarter of 2004 was highlighted with 
the private company acquisition whereby NuVista added 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 liquids. This acquisition added two new core 
areas at Provost and Pembina in Alberta. In the Provost area over 40 
re-entry or drilling opportunities have been identified, as well as 
numerous complementary acquisition opportunities. Two of these 
acquisition opportunities have been completed to date. In general the 
Provost area is expected to provide 20 to 25 drilling prospects per 
year. In the Pembina area, NuVista has access to over 20,000 net acres 
of highly prospective undeveloped land and has approved 10 re-entry and 
drilling opportunities, targeting both low risk shallow and deeper 
medium risk prospects. In the third quarter, NuVista also drilled 16 
wells with an average working interest of 87%. The success rate of 94% 
in this drilling program resulted in 15 natural gas wells. Of these 15 
wells, 11 were medium depth natural gas prospects drilled in the Oyen 
Natural Gas Region and four wells at the Provost area. As currently 
being reported throughout the industry, NuVista also experienced minor 
weather related delays resulting in drilling fewer natural gas tests and 
oil prospects than originally planned and the delay of tie-ins and 
compression projects until late in the third quarter. NuVista is 
currently completing the successful third quarter wells and will drill 
the remaining third quarter locations as part of the fourth quarter 
program. NuVista operated all of the wells drilled in the third quarter, 
with an average working interest of 87%. NuVista continues to actively 
drill in its core regions, with 25 - 30 wells planned for the fourth 
quarter. For the nine months ended September 30, 2004, NuVista drilled 
54 (44.1 net) wells, operating 48, resulting in 39 natural gas wells, 
eight oil wells and seven dry holes.

Production - For the third quarter of 2004 NuVista's average production 
of 6,113 boe per day, which was comprised of 27.8 mmcf per day of 
natural gas and 1,475 bbls per day of oil and liquids, represents a 55% 
increase over the same period of 2003. A significant portion of 
NuVista's third quarter natural gas drilling success will be brought 
on-stream in the fourth quarter of 2004. NuVista's production results 
for the nine months ended September 30, 2004 benefited from continued 
success in its Eastern Alberta Core Region drilling program and 
consisted of 23.3 mmcf per day of natural gas and 1,280 bbls per day of 
oil and liquids.  

Revenues - Revenues for the three months ended September 30, 2004 were 
$21.6 million, a 74% increase from $12.4 million for the period from 
July 2 to September 30, 2003. These revenues were comprised of $16.4 
million of natural gas and $5.2 million of oil and liquids for the three 
months ended September 30, 2004. The increase in revenues for the three 
months ended September 30, 2004 versus the period from July 2 to 
September 30, 2003 results from a 55% increase in production and an 11% 
increase in commodity prices. The commodity price increase is made up of 
a 6% increase in the natural gas price to $6.40 per mcf from $6.02 per 
mcf and a 28% increase in the oil and liquids price to $38.11 per bbl 
from $29.70 per bbl. Revenues for the nine months ended September 30, 
2004 were $53.7 million.

Commodity hedging - As part of our financial management strategy, 
NuVista has adopted a disciplined commodity-hedging program. The purpose 
of the hedging program is to reduce volatility in the financial results, 
protect acquisition economics and stabilize cash flow against the 
unpredictable commodity price environment. At any given period of time 
our hedging strategy is restricted to a maximum hedge of 40% of 
forecasted production, net of royalties and primarily utilizes costless 
collars in our hedging participation in commodity price increases. In 
the third quarter of 2004, our hedging program resulted in a net loss of 
$366,000 and for the nine months ended September 30, 2004 a net loss of 
$730,000 was experienced due to the stronger than expected commodity 
prices realized throughout the period. A summary of hedging contracts in 
place as at September 30, 2004 is outlined in Note 6 of the Notes to the 
Consolidated Financial Statements.

Royalties - Royalties of $4.9 million for the three months ended 
September 30, 2004 were 58% higher than the $3.1 million for the period 
from July 2 to September 30, 2003. The increase in royalties in the 
third quarter resulted from higher revenues compared to the period from 
July 2 to September 30, 2003, largely generated by higher production 
volumes and oil and liquids prices. As a percentage of revenue, the 
average royalty rate for the third quarter of 2004 was 23% compared to 
25% for the comparative period of 2003. Royalties by product for the 
third quarter of 2004 were 25% for natural gas and 17% for oil and 
liquids versus 28% for natural gas and 15% for oil and liquids for the 
similar period in 2003. The decrease in natural gas royalties results 
from gas cost allowance credits received during the third quarter of 
2004. Royalties for the nine months ended September 30, 2004 were $12.3 
million or 23% of revenues, 25% for natural gas and 17% for oil and 
liquids. 

Operating expenses - Operating expenses were $2.4 million for the three 
months ended September 30, 2004 versus $1.3 million for the period from 
July 2 to September 30, 2003, an 85% increase. This increase resulted 
primarily from the higher production volumes and higher per unit natural 
gas operating costs associated with the private company acquisition. In 
the third quarter of 2004, natural gas operating expenses averaged $0.73 
per mcf and oil and liquids operating expenses were $4.08 per bbl as 
compared to $0.56 per mcf and $4.26 per bbl respectively for the period 
from July 2 to September 30, 2003. On a boe basis, operating costs 
increased 20% to $4.31 per boe in the third quarter of 2004 as compared 
to $3.58 per boe for the period from July 2 to September 30, 2003, 
primarily due to higher costs of the newly acquired assets and 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. Operating expenses for the nine months ended September 30, 
2004 were $5.7 million or $4.04 per boe. By commodity, natural gas 
operating expenses were, $0.68 per mcf for natural gas and $3.99 per boe 
for oil and liquids for the nine months ended September 30, 2004. 
Overall, NuVista's cash costs, which include operating, general and 
administrative, interest expenses and Large Corporation Tax, were $5.24 
per boe in the third quarter of 2004 compared to $4.77 per boe for the 
period from July 2 to September 30, 2003 and $4.74 for the nine months 
ended September 30, 2004. This too places us in the top decile in our 
peer group in this performance criteria.

General and administrative - General and administrative expenses, net of 
overhead recoveries for the third quarter of 2004, were $206,000 ($0.37 
per boe), an increase of 62% over the $127,000 ($0.35 per boe),for the 
three months ended September 30, 2003, and is directly attributable to 
the higher production base in NuVista. General and administrative 
expenses, net of overhead recoveries were $508,000 ($0.36 per boe) for 
the nine months ended September 30, 2004. Included in these expenses is 
an allocation of $320,000 for the three months ended and $840,000 for 
the nine months ended September 30, 2004 from Bonavista, charged 
pursuant to the Technical Services Agreement. For the period from July 2 
to September 30, 2003, $175,000 was allocated to NuVista under the 
Technical Services Agreement. The Technical Services Agreement, entered 
into as part of the Plan of Arrangement, has allowed NuVista to initiate 
and continue with its successful and active capital programs, 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. As 
a result of adopting the new accounting rules, NuVista recorded a 
stock-based compensation charge of $255,000 for the three months and 
$733,000 for the nine months ended September 30, 2004, in connection 
with the issuance of both the Class B Performance Shares and stock 
options. The stock based non-cash compensation charge to net income for 
the period from July 2 to September 30, 2003 was $230,000.

Financing charges - Financing charges during the third quarter of 2004 
were $201,000 ($0.36 per boe) versus $244,000 ($0.68 per boe) for the 
period from July 2 to September 30, 2003 because of lower average debt 
levels and higher production volumes in the third quarter of 2004. For 
the nine months ended September 30, 2004, financing charges were 
$330,000 ($0.23 per boe). Currently, NuVista's average borrowing rate is 
approximately 3.6%.

Depreciation, depletion and accretion expenses - Depreciation, depletion 
and accretion expenses were $6.7 million for the third quarter of 2004 
compared to $3.0 million for the same period in 2003. The average cost 
per unit was $11.86 per boe in the third quarter of 2004 versus $8.52 
per boe for the period from July 2 to September 30, 2003, due to higher 
costs of adding reserves, primarily from the acquisition of the private 
company, in the current quarter as compared to historic levels. 
Depreciation, depletion and accretion expenses were $13.4 million for 
the nine month period ended September 30, 2004, or $9.47 per boe. The 
cumulative 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 third quarter of 2004, the provision 
for income and other taxes was $2.5 million for an effective tax rate of 
37%, as compared to $1.6 million with an effective tax rate of 37% for 
the period from July 2 to September 30, 2003. For the nine months ended 
September 30, 2004, the provision for income and other taxes was $8.1 
million for an effective tax rate of 39%. 

Capital expenditures - Capital expenditures were $57.7 million during 
the third quarter of 2004 consisting of exploration and development 
spending of $10.0 million and $47.7 million of net acquisitions, which 
included the private company acquisition. For the nine months ended 
September 30, 2004, capital expenditures were $75.9 million. 

Cash flow and net income - In the third quarter of 2004, cash flow was 
$13.7 million ($0.35 per share, basic), an 81% increase over the $7.6 
million ($0.21 per share, basic) for the period from July 2 to September 
30, 2003. For the nine months ended September 30, 2004, NuVista's cash 
flow was $34.7 million ($0.91 per share, basic). Net income also 
increased 58% during the third quarter of 2004 to $4.3 million ($0.11 
per share, basic) from the $2.7 million ($0.08 per share, basic) 
restated for the period from July 2 to September 30, 2003. For the nine 
months ended September 30, 2004 net income was $12.6 million ($0.33 per 
share, basic). All of these increases resulted from stronger commodity 
prices and increased production rates as NuVista continues to maintain a 
strong net income to cash flow ratio of 31% for the third quarter ending 
September 30, 2004 and 36% for the nine months ended September 30, 2004.

Liquidity and capital resources - As at September 30, 2004, total bank 
debt (net of working capital) was $34.5 million, resulting in a debt to 
running cash flow ratio of approximately 0.6 to 1. NuVista has 
approximately $20.5 million of unused bank borrowing capability based on 
the current line of credit of $55 million, which provides substantial 
flexibility to fund expanded capital programs into the future. As at 
November 4, 2004, there were 40,558,824 common shares and 884,066 Class 
B Performance Shares outstanding. In addition, there were 1,666,487 
stock options outstanding, with an average exercise price of $6.72 per 
share.

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

/T/

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


Production revenue     $21,565 $16,642 $15,456    $12,735       $12,399
Net income               4,335   4,540   3,732      2,878         2,746
Net income per share:
     Basic             $  0.11 $  0.12 $  0.10    $  0.08       $  0.08
     Diluted              0.11    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 led to the tremendous success of 
Bonavista over its first six year period as a high growth exploration 
and production company. With the undeveloped land base now exceeding 
305,000 net acres, an increased drilling inventory, coupled with our 
strong balance sheet, NuVista is well positioned to continue posting 
strong operational and financial results for the remainder of 2004 and 
beyond. 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. 

For 2005 NuVista's Board of Directors has approved an initial capital 
program of $100 million, which is expected to average production of 
between 8,200 and 8,600 boe per day for the year. Using the current 
forward strip prices of $7.75 per gj at AECO for natural gas and US 
$49.00 per bbl WTI for oil, this production forecast should result in 
cash flow in the range of $88 million to $92 million ($2.15 per share to 
$2.25 per share) for 2005.

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
(thousands)                                 September 30,   December 31,
                                                    2004           2003
-----------------------------------------------------------------------
-----------------------------------------------------------------------
                                              (unaudited)     (restated)
Assets

Accounts receivable                            $  10,048       $  6,251
Oil and natural gas properties and equipment     142,888         79,959
Goodwill                                           8,851              -
Future tax asset                                       -          8,164
-----------------------------------------------------------------------

                                               $ 161,787       $ 94,374
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Liabilities and Shareholders' Equity

Accounts payable and accrued liabilities       $  11,261       $ 12,402
Bank loan                                              -          6,928
-----------------------------------------------------------------------
                                                  11,261         19,330

Bank loan                                         33,304              -
Asset retirement obligations                       4,453          3,027
Future income taxes                                3,689              -

Shareholders' equity:
 Share capital                                    89,655         65,932
 Contributed surplus                               1,194            461
 Retained earnings                                18,231          5,624
-----------------------------------------------------------------------

                                                 109,080         72,017
-----------------------------------------------------------------------
                                               $ 161,787       $ 94,374
-----------------------------------------------------------------------
-----------------------------------------------------------------------


Consolidated Statement of Operations and Retained Earnings

                                 Three                  Nine
                                Months  Period (1)    Months  Period (1)
                                 ended      ended      ended      ended
(thousands, except           September  September  September  September
 per share amounts)           30, 2004   30, 2003   30, 2004   30, 2003
-----------------------------------------------------------------------
-----------------------------------------------------------------------
(unaudited)                             (restated)            (restated)
Revenues:

 Production                   $ 21,565   $ 12,399   $ 53,663   $ 12,399
 Royalties, net                 (4,935)    (3,129)   (12,310)    (3,129)
-----------------------------------------------------------------------
                                16,630      9,270     41,353      9,270
-----------------------------------------------------------------------

Expenses:

 Operating                       2,426      1,287      5,715      1,287
 General and administrative        206        127        508        127
 Financing charges                 201        244        330        244
 Stock-based compensation          255        230        733        230
 Depreciation, depletion and
  accretion                      6,671      3,027     13,388      3,027
-----------------------------------------------------------------------
                                 9,759      4,915     20,674      4,915
-----------------------------------------------------------------------
Income before income and
 other taxes                     6,871      4,355     20,679      4,355
  Income and other taxes         2,536      1,609      8,072      1,609
-----------------------------------------------------------------------

Net income                       4,335      2,746     12,607      2,746
Retained earnings, beginning
  of period                     13,896          -      5,668          -
Retroactive application of
 changes in accounting
 policies (note 1)                   -          -        (44)         -
-----------------------------------------------------------------------

Retained earnings,
 end of period                $ 18,231   $  2,746   $ 18,231   $  2,746
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Net income per share -basic   $   0.11   $   0.08   $   0.33   $   0.08
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Net income per share -diluted $   0.11   $   0.07   $   0.32   $   0.07
-----------------------------------------------------------------------
-----------------------------------------------------------------------
(1) Period is from July 2, 2003 to September 30, 2003.


Consolidated Statement of Cash Flows

(thousands)                      Three                  Nine
                                Months  Period (1)    Months  Period (1)
                                 ended      ended      ended      ended
                             September  September  September  September
                              30, 2004   30, 2003   30, 2004   30, 2003
-----------------------------------------------------------------------
-----------------------------------------------------------------------
(unaudited)                             (restated)            (restated)
Cash provided by (used in):

Operating Activities:
 Net income                    $ 4,335    $ 2,746   $ 12,607   $  2,746
  Items not requiring cash
   from operations:
  Depreciation, depletion
   and accretion                 6,671      3,027     13,388      3,027
  Stock-based compensation         255        230        733        230
  Future income taxes            2,421      1,551      7,921      1,551
-----------------------------------------------------------------------

 Funds flow from operations     13,682      7,554     34,649      7,554
 Asset retirement expenditures      17         (1)       (19)        (1)
 Decrease (Increase) in non-cash
  working capital items         (3,037)     3,547     (6,644)     3,547
-----------------------------------------------------------------------

                                10,662     11,100     27,986     11,100
-----------------------------------------------------------------------

Financing Activities:
 Issue (Repurchase) of
  share capital                   (30)     17,526        (37)    17,526
 Increase (Decrease)
  in bank loan                 25,573     (21,103)    26,376    (21,103)
-----------------------------------------------------------------------

                               25,543      (3,577)    26,339     (3,577)
-----------------------------------------------------------------------

Investing Activities:
 Business acquisition
  (note 2)                    (22,882)          -    (22,882)         -
 Oil and natural gas
  properties and equipment
  additions                   (13,323)     (7,523)   (31,545)    (7,523)
 Proceeds on disposal of oil
  and natural gas properties
  and equipment                     -           -        102          -
-----------------------------------------------------------------------

                              (36,205)     (7,523)   (54,325)    (7,523)
-----------------------------------------------------------------------

Decrease in cash                    -           -          -          -
Cash, beginning of period           -           -          -          -
-----------------------------------------------------------------------

Cash, end of period           $     -      $    -    $     -    $     -
-----------------------------------------------------------------------
-----------------------------------------------------------------------
(1) Period is from July 2, 2003 to September 30, 2003.

Cash paid for interest was $194,000 for the three months and $312,000
 for the nine months ended September 30, 2004.

/T/

SELECTED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Nine months ended September 30, 2004. 
The 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 properties and equipment:

Oil and natural gas properties and equipment 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 at January 1 for the years 2004 to 2008 and adjusted for 
commodity differentials specific to NuVista:

/T/

Benchmark Reference Price Forecasts:

                                              Year
                         -----------------------------------------------
                           2004      2005      2006      2007      2008
                         -----------------------------------------------
WTI ($U.S./bbl)           29.00     26.50     25.50     25.00     25.00
AECO ($Cdn/mcf)            5.80      5.47      5.14      4.94      4.78
                         -----------------------------------------------

/T/

b) Asset retirement obligations:

On January 1, 2004, NuVista adopted the Canadian Institute of Chartered 
Accountants (the "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 
a contributed surplus and a decrease of $357,000 to retained earnings as 
at December 31, 2003.

d) Hedge relationships:

The 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. Acquisition of Grid Resources Ltd.:

On July 29, 2004, NuVista acquired all of the issued and outstanding 
shares of Grid Resources Ltd. ("Grid"). NuVista purchased Grid through a 
series of transactions, which included the disposition of certain 
non-core assets to a private company and the residual assets being 
acquired in an existing partnership, owned approximately 76% by NuVista 
and 24% by Bonavista Petroleum. The acquisition has been accounted for 
using the purchase method, with results of operations included from the 
date of acquisition. The purchase equation, which reflects the NuVista 
portion of the acquisition, is as follows:

/T/

                                                                 Amount
------------------------------------------------------------------------
Net assets acquired:                                         (thousands)

 Oil and natural gas properties                                $ 44,420
 Goodwill                                                         8,851
 Natural gas hedge liability                                       (915)
 Asset retirement obligations                                      (991)
 Future income taxes                                             (3,931)
------------------------------------------------------------------------

Net assets acquired                                            $ 47,434
------------------------------------------------------------------------
------------------------------------------------------------------------

Purchase consideration:

 Issue of common shares                                        $ 23,760
 Cash and assumption of bank loan                                22,882
 Assumption of working capital deficiency                           792
------------------------------------------------------------------------

Total purchase consideration                                   $ 47,434
------------------------------------------------------------------------
------------------------------------------------------------------------

/T/

3. 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 $15.8 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% 
was used to calculate the fair value of the asset retirement obligations.

A reconciliation of the asset retirement obligations is provided below:

/T/

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

 Accretion expense                          184                      85
 Liabilities incurred                       270                     206
 Liabilities acquired                       991                       -
 Liabilities settled                        (19)                   (110)
------------------------------------------------------------------------
Balance, end of period                  $ 4,453                 $ 3,027
------------------------------------------------------------------------
------------------------------------------------------------------------

/T/

4. Bank loan:

In June 2004, NuVista and its lenders agreed to amend the Company's 
revolving bank loan facility to increase the maximum borrowing to $43 
million. Subsequent to September 30, 2004, NuVista and its lenders 
agreed to a further increase in the maximum borrowing to $55 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 30, 
2006 or later, after the annual review. As such, this loan facility is 
classified as a long term liability.

5. Share capital:

As at September 30, 2004 there were 40,557,324 common shares and 885,566 
Class B Performance Shares outstanding. In addition, there were 
1,667,987 stock options outstanding, with an average exercise price of 
$6.72 per share as at September 30, 2004.

6. Hedging activities:

As at September 30, 2004, NuVista has entered into physical purchase 
contracts to sell natural gas as follows:

/T/

------------------------------------------------------------------------
At AECO                                     Price   Term
------------------------------------------------------------------------
3,000 gj's/day                              $6.93   October 1, 2004
                                                     - October 31, 2004
------------------------------------------------------------------------
4,500 gj's/day   (costless collars)   $4.92-$6.78   October 1, 2004
                                                     - October 31, 2004
------------------------------------------------------------------------
8,600 gj's/day   (costless collars)   $5.74-$9.68   November 1, 2004
                                                     - March 31, 2005
------------------------------------------------------------------------

/T/

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