2005 Enerplus Annual Report

Waterflood development is a significant component of our investment portfolio in which we have considerable technical knowledge and experience. Waterfloods fit the trust model because they contain known concentrations of oil and natural gas with minimal geologic risk. Pressure maintenance and the sweep of oil from water injection often result in a production profile with decreasing and stable declines and substantial value generated from the higher recovery of reserves. Infill drilling and well/injector optimization are effective methods of enhancing reserve recovery even further.

In a waterflood, water is injected into the producing formation to supplement original reservoir pressure and provide a drive mechanism to move additional oil to the producing well. This supplemental drive typically increases recovery from 10-20% to 20-40% of the original oil in place. The water that is produced with the oil is recycled and re-injected into the reservoir. Effective waterfloods require significant technical expertise and information sharing to enhance the understanding and management of the reservoir.

Key Facts about our Waterfloods:

Represent approximately 23% of our production and 24% of our reserves with over 108 MMBOE of proved plus probable reserves.
Features a substantial reserve life index of 16.9 years.
We currently have 12 major waterfloods and 15 minor waterflood properties within our portfolio.
With over 1.4 billion barrels net of original oil in place and an average expected ultimate recovery of 39%, we see significant upside potential in these assets within our portfolio.
Year-end reserve additions from waterflood properties were approximately 3 MMBOE on a proved plus probable basis.

In a waterflood, water is injected into the producing formation to supplement original reservoir pressure and provide a drive mechanism to move additional oil to the producing well. This supplemental drive typically increases recovery from 10 - 20% to 20 - 40% of the original oil in place. The water that is produced with the oil is recycled and re-injected into the reservoir.

2005 Activities
In 2005, we invested over $62 million on waterflood development activities including infill drilling, facility upgrades, well injection enhancements and installation of high volume lifts on wells. A total of 52 gross wells (36.7 net) were drilled in 2005. Significant infill drilling, facility upgrades and injector/well optimization projects occurred at Joarcam, Pembina and Medicine Hat Glauconitic 'C'. At Joarcam, we drilled 18 Viking oil wells (17.5 net) and completed construction of a battery to handle additional production. At Pembina Block A, we drilled 10 (100% WI) Cardium oil wells and upgraded our battery and water injection capabilities. Development at Medicine Hat Glauconitic 'C' included the drilling of 2 gross horizontal infill oil wells (1.6 net) along with facility and pump upgrades. Our 2005 waterflood development program resulted in production increases of 2,000 BOE/day at an on-stream cost of $31,100/BOE/day.

2006 Outlook
We plan to invest approximately $78 million on infill drilling and optimization opportunities on our waterflood properties in 2006. Major development activities are planned for Giltedge, Joarcam, Mitsue, Pembina and in the Virden area. Most of our planned 80 gross well (approximately 60 net) drilling program will be focused at our Joarcam and Pembina properties. If successful, a number of these programs have significant expansion potential in the years ahead.

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