2005 Enerplus Annual Report - Acquisitions and Divestments

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2005 was another milestone year for Enerplus as we closed our largest transaction to date and successfully executed our strategic expansion into the United States.

Lyco Energy Corporation
On August 30, we completed our single largest transaction to date and first acquisition outside of Canada with the purchase of Lyco Energy Corporation, a private oil and natural gas producer operating in Montana and North Dakota for $501.9 million, prior to adjustments for working capital. The strategic move into the United States establishes a new core resource play producing high quality Middle Bakken light oil from the Sleeping Giant project area of the Williston basin in Montana. The Middle Bakken resource play covers a large, aerial extent and exhibits relatively low geologic risk.

Sleeping Giant LLC
In a follow-on transaction, on October 4, we closed the acquisition of Sleeping Giant LLC, a private U.S. company, for $111.9 million prior to working capital adjustments. The acquired assets increased our working interest in the Sleeping Giant project area to approximately 70%. As well as the establishment of a new resource focused core area, the U.S. acquisitions provide us with a significant operating platform, expanding our opportunity set for future acquisitions and providing us with flexibility and an alternate market in which to invest. Enerplus now has over 120,000 net acres of undeveloped land in Montana and North Dakota.

TriLoch Resources Inc.
On July 1, we completed the acquisition of TriLoch Resources Inc. ('TriLoch') for $77.4 million prior to working capital adjustments. The single property owned by TriLoch is adjacent to our existing properties in the Enchant area of southern Alberta. While meeting our objective of acquiring Canadian assets in existing core areas, the acquired property also permits us to exploit our competitive technical advantage through our expertise in waterflood development and shallow natural gas drilling. We have identified numerous drilling opportunities in the Mannville formation as well as shallow gas infill drilling locations.

Through these acquisitions, we acquired 42.8 MMBOE of proved plus probable reserves and added approximately 10,000 BOE/day of production. These assets were all within our strategic focus areas as they represented resource plays or waterflood areas. High quality assets such as these with significant upside potential are typically characterized by higher flowing barrel and per BOE reserve costs yet provide greater long-term value.

Divestments
As part of our ongoing portfolio management strategy, we also divested $66.5 million of non-core properties. These properties are characterized by small working interests with high operating costs and limited upside potential. These types of assets typically receive lower valuations on both a flowing barrel and reserve basis because of the lower asset quality. In aggregate, we sold approximately 8.2 MMBOE of proved plus probable reserves with associated production of 2,529 BOE/day. We will continue to rationalize non-core assets, however, we currently do not have plans for a significant divestment program in 2006.

2005 Acquisition & Divestment Summary

	Cost/Proceeds* ($ millions)	Proved plus Probable Reserves (MBOE)	Production (BOE/day)	Cost of Proved plus Probable Reserves ($/BOE)	Cost per Daily Barrel
Acquired	$704.0	42,832	10,021	$16.44	$70,255
Divested	($66.5)	(8,248)	(2,529)	($8.06)	$26,299
Net	$637.5	34,584	7,492	$18.43	$85,082

* after adjustments for working capital and excluding future development capital

Strategic Execution
Since 2001, we have been focused on building our presence in strategic portfolio areas which are marked by attractive decline profiles, strategic fit with our execution capabilities and development upside with larger, more scalable projects. Over these past four years we have completed approximately $1.8 billion of acquisitions which have resulted not only in significant growth, but an improvement in the quality of our portfolio and a focus on resource oriented plays.

As a group, these acquisitions have exceeded our expectations although certain projects within these acquisitions have been delayed such as the Bantry North development from the ChevronTexaco acquisition in 2004. Despite these delays, there has been a significant amount of additional value creation because of both the rapid rise in commodity prices over the period and the identification of development opportunities that exceeded our initial expectations.

2006 Outlook
In 2006, we anticipate the Canadian domestic acquisition market will remain competitive with a limited supply of opportunities coupled with continued strong demand from the trust sector and overall industry. We will continue to focus on add-on transactions (additional working interests in existing areas) where we have a natural competitive advantage. We will monitor overall market developments in pursuit of opportunities that meet our acquisition criteria. We believe the U.S. market may be more attractive given current valuation levels and more abundant opportunities. Through the establishment of our U.S. platform, we feel we have a strategic advantage, compared to trusts without U.S. operations, to capitalize on the differences between these two markets.

We see increasing competition in the United States, however, as new tax-advantaged U.S. exploration and production companies enter the market. Despite these challenges, we expect to grow our U.S. presence in and around our existing Williston basin production and in new areas throughout the U.S. including the Rocky Mountain region. We will remain disciplined in seeking acquisitions that provide attractive economics, accretion and long-term growth. In addition to evaluating opportunities both domestically and in the United States, we will continue to examine both non-conventional and international opportunities which meet our strategic focus and long-range plans.

Equity Investment Strategy
We continued to execute on our equity investment strategy in 2005 with the aim of creating a limited number of meaningful relationships with experienced management teams of junior exploration and production companies. The strategic foundation of these relationships provide for the transfer of intellectual knowledge, partnering opportunities/development of higher risk properties, acquisition potential as well as the monetization of some of our under-utilized assets. In addition to the strategic drivers, our equity investment strategy has also generated value creation through the investment itself.

In 2003 we made our first investment using this strategy in a private oil and gas company, Ice Energy, which we subsequently purchased in a limited auction process in January of 2004. Key in that acquisition was our advance knowledge of the assets and our initial equity stake. Since Ice Energy, we have made a limited number of strategic investments including investments in both private and public companies with a resource play focus. In cases where the company is acquired and/or converted to a trust, we have generally monetized our interests and realized good returns on the investment without the benefit of a strategic acquisition.

In our latest investment, in early 2006, we sold a 1% working interest in our Joslyn oil sands lease in exchange for an equity stake in Laricina Energy Ltd. and the formation of an area of mutual interest to jointly pursue additional in-situ oil sands ventures. This partnership will allow us to accelerate additional oil sands resource development, facilitate the transfer of intellectual expertise while supporting our efforts to internally attract and build a focused oil sands area team. Laricina is a private oil sands focused company led by the former Chief Executive Officer of Deer Creek Energy.

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