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NuVista Energy Ltd.: Announcing 2003 Year End Results

CALGARY, ALBERTA--NuVista Energy Ltd. ("NuVista") is pleased to announce today its financial and operating results for the three and six months ended December 31, 2003 as follows: /T/---------------------------------------------------------------------Corporate Highlights---------------------------------------------------------------------                                           Three Months        Period                                                  ended         ended                                               December      December                                               31, 2003   31, 2003 (1)---------------------------------------------------------------------Financial($ thousands, except per share amounts)Production Revenue                               12,735        25,134Cash flow from operations (2)                     8,052        15,606  Per share - basic                                0.22          0.43  Per share - diluted                              0.21          0.42Net income                                        2,900         5,668  Per share - basic                                0.08          0.16  Per share - diluted                              0.08          0.15Total assets                                                   91,674Bank loan, net of working capital                              13,077Shareholders' equity                                           71,062Net capital expenditures                         13,437        20,960Weighted average common shares outstanding (thousands)  Basic                                          37,338        36,360  Diluted                                        38,355        37,337---------------------------------------------------------------------Operating(boe conversion - 6:1 basis)Production:  Natural gas (mmcf/day)                           19.7          18.7  Crude oil (bbls/day)                            1,035         1,009    Total oil equivalent (boe/day)                4,316         4,133Product prices:  Natural gas ($/mcf)                              5.64          5.81  Crude oil ($/bbl)                               26.56         28.08Operating expenses:  Natural gas ($/mcf)                              0.60          0.58  Crude oil ($/bbl)                                4.38          4.32    Total oil equivalent ($/boe)                   3.79          3.69General and administrative expenses ($/boe)        0.35          0.35Cash costs ($/boe)                                 4.38          4.56Cash flow netback ($/boe)                         20.28         20.63Undeveloped land:  Gross acres                                                 254,156  Net acres                                                   221,389  Average working interest                                         87%Reserves (NI 51 - 101) - January 1, 2004  Proven and probable:    Natural gas (bcf)                                            39.8    Oil and liquids (mbbls)                                     3,313      Total barrels of oil equivalent (mboe)                    9,949        % of Reserves Proven Producing                             59%        % of Reserves Total Proven                                 78%        % of Reserves Probable                                     22%    Net present value of future cash flows     before tax ($ millions):      @ 10% discount rate                                       121.6      @ 15% discount rate                                       107.3    Net present value of future cash flows     after tax ($ millions):      @ 10% discount rate                                        97.1      @ 15% discount rate                                        84.9Finding and development costs ($/boe): (3)  Total Proven                                                   7.82  Proven and Probable                                            9.08Recycle Ratio (Cash flow netback per boe/finding and development costs per boe):  Total Proven                                                    2.6  Proven and Probable                                             2.3---------------------------------------------------------------------(1) Period from July 2, 2003 to December 31, 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) Calculated in accordance with National Instrument 51 - 101, which    is after reserve revisions and includes changes in future capital    expenditures./T/MESSAGE TO SHAREHOLDERS NuVista Energy Ltd. ("NuVista") is pleased to report to shareholders its audited consolidated financial and operating results for the period from July 2, 2003 to December 31, 2003. NuVista was formed as part of the Plan of Arrangement dated July 2, 2003 involving Bonavista Petroleum Ltd. ("Bonavista"). As part of the reorganization, Bonavista Energy Trust (the "Trust") retained approximately 90% of the oil and natural gas properties, with the remainder transferred to NuVista. In this initial period of operations, NuVista has employed the same strategies adopted by Bonavista, through focus on operatorship, high working interest ownership, concentrating and dominating in select core regions and low cost operations. Significant highlights of NuVista from July 2, 2003 to December 31, 2003 include: - Increased production by 30% from the 3,500 boe per day (consisting of 15.0 mmcf per day of natural gas and 1,000 bbls per day of crude oil) on July 2, 2003 to the 2003 exit production level of 4,550 boe per day consisting of 20.0 mmcf per day of natural gas and 1,215 bbls per day of crude oil. NuVista exceeded its initial 2003 exit volume target of 4,400 boe per day while spending only 70% of its capital expenditure budget; - Added 3.0 mmboes of proven reserves resulting in a 55% increase in proven reserves since July 2, 2003, which have been determined in accordance with NI 51 - 101. These additions equate to a finding and development cost of $7.82 per boe for proven reserves and replaced production by approximately 400%; - Increased undeveloped land by 28% to over 221,000 net acres in NuVista's Eastern Alberta Core Region from the 172,000 net acres on commencement of operations, further enhancing the drilling prospect inventory in this Core Region; - Participated in 40 (27.4 net) wells with an overall success rate of 90%; - Shot 45 km of 2D and 100 square km of 3D seismic to further enhance the prospectivity of NuVista's undeveloped land; - On completion of the Plan of Arrangement, NuVista commenced operations seamlessly and through the Technical Services Agreement with Bonavista was able to average general and administrative expenses of $0.35 per boe and overall cash costs (operating, general and administrative, interest expenses and capital taxes) of $4.56 per boe for the period, ranking in the top decile of its industry peers; and - Completed the issuance of 2.5 million shares for gross proceeds of $18.4 million, providing NuVista significant flexibility to finance current and future capital programs. 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 audited consolidated financial statements 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. Operating activities - NuVista's exploration and development program from July 2, 2003 to December 31, 2003 led to the drilling of 40 (27.4 net) wells, with an overall success rate of 90%. This program resulted in 18.7 net natural gas wells, 4.7 net oil wells and 4.0 net dry holes. NuVista operated 31 of the 40 wells, with an average working interest of 82% in the operated wells. During the period, NuVista also participated in nine non-operated wells with an average working interest of 22.5%. NuVista continues to actively drill, with 70-80 wells planned for 2004. Reserves - An evaluation of all of NuVista's reserves as at January 1, 2004 was conducted by independent engineers in accordance with the new reporting guidelines of NI 51 - 101. NuVista's reserves were not significantly impacted by the adoption of these new reporting guidelines. Proven reserves experienced a positive revision of 7.1% or 392 mboe, largely due to the conversion of reserves from the probable to proven categories because of enhanced performance on certain natural gas properties. Total proven and probable reserves experienced a negative revision of 5.3% or 428 mboe, primarily due to the application of risk on the opening balance of the probable reserve category. Finding and development costs for proven reserves calculated in accordance with NI 51 - 101 policy were $7.82 per boe and proven and probable finding and development costs were $9.08 per boe. These costs are presented after revisions and include the change in future capital expenditures required to bring base reserves on-stream.  Removing the impact of revisions would result in proven finding and development costs of $8.98 per boe and proven and probable finding development costs of $7.82 per boe. Production - NuVista's production for the period between July 2, 2003 and December 31, 2003 averaged 4,133 boe per day representing an 18% increase since commencement of operations. At December 31, 2003, production for NuVista was 20.0 mmcf per day of natural gas and 1,215 bbls per day of crude oil for a total of 4,550 boe per day. The increase in production over the period occurred as a result of an active and successful natural gas drilling program in its Eastern core region. Natural gas volumes exceeded our forecast to average 19.7 mmcf per day for the three months ended December 31, 2003. Crude oil volumes remained relatively flat for the three months ended December 31, 2003 compared to the three months ended September 30, 2003, however, a 100% success rate in the oil drilling program at Amisk, occurring late in the three months ended December 31, 2003 resulted in NuVista attaining its exit rate of 1,215 bbls per day. Revenues - Revenues for the period from July 2, 2003 to December 31, 2003 were $25.1 million, comprised of $19.9 million from natural gas revenues and $5.2 million from crude oil. The average natural gas price for the period was $5.81 per mcf and $28.08 per bbl for crude oil. Royalties - Royalties for the reporting period were $6.1 million, an average royalty rate of 24.2%. Natural gas royalties were $5.3 million, an average royalty rate of 26.6% and crude oil royalties were $774,000 for an average royalty rate of 15.0%. Operating expenses - Operating expenses for the period ended December 31, 2003 were $2.8 million. Natural gas operating expenses averaged $0.58 per mcf and crude oil expenses were $4.32 per bbl. On a boe basis, operating costs were $3.69 leaving NuVista in the top decile for oil and natural gas companies in its peer group. General and administrative - General and administrative expenses, net of overhead recoveries, were $268,000 or $0.35 per boe for the period from July 2, 2003 to December 31, 2003. Included in these expenses is an allocation of $372,000 from Bonavista, pursuant to the technical services agreement entered into as part of the Plan of Arrangement. The technical services agreement has allowed NuVista to initiate and continue with its successful and active programs through the use of Bonavista's personnel in managing its operations and at the same time benefit from Bonavista's low overhead cost structure. In addition, NuVista recorded a non-cash stock based compensation charge of $104,000 in connection with the issue of the Class B Performance shares. Interest expenses - Interest expenses for the reporting period were $282,000 or $0.37 per boe. Currently, NuVista's average borrowing rate is approximately 3.5%. Depreciation, depletion and site restoration expenses - Depreciation, depletion and site restoration expenses were $6.4 million for the period. The average unit cost was $8.52 per boe and is based on the cost of proven reserve additions and allocation of Bonavista's net book value of assets transferred to NuVista, in accordance with the Plan of Arrangement. Income and other taxes - The provision for income and other taxes was $3.5 million. Included in income taxes for the period is a provision of $107,000 for the Large Corporations Tax. Capital expenditures - Capital expenditures were $21.0 million during the period and consisted of only exploration and development spending. These expenditures were considerably lower than the planned amount of approximately $30 million for the period due to the reallocation of expenditures from acquisitions to more attractive exploration and development opportunities. In spite of the $9 million reduction in budgeted capital expenditures, NuVista exceeded its 2003 exit by 150 boe per day to achieve 4,550 boe per day. Cash flow and net income - For the period from July 2, 2003 to December 31, 2003, NuVista's cash flow was $15.6 million or $0.43 per share. Net income during the period was $5.7 million or $0.16 per share. This resulted in a strong net income to cash flow ratio of 36% for the reporting period. Liquidity and capital resources - As at December 31, 2003, total bank debt (net of working capital) was $13.1 million, resulting in a debt to cash flow ratio of approximately 0.4 to 1. This leaves NuVista with approximately $18.9 million of unused bank borrowing capability and combined with the equity issue completed in September 2003, NuVista has significant financial flexibility to carry out the capital programs for 2004 and for future years. 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. With an undeveloped land base exceeding 221,000 net acres, an increasing drilling inventory, coupled with a strong balance sheet, NuVista is strategically positioned to continue posting strong operational and financial results for 2004 and beyond. The Board of Directors of NuVista has approved a base capital budget of $70 million for 2004, which will result in the drilling of 70 to 80 wells. 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 profitably both in aggregate and on a per share basis. With current production levels at 4,600 boe per day and continued expectations of exploration, development and acquisition success, NuVista is in an excellent position to achieve its forecasted average production level of 5,600 boe per day in 2004. Assuming an AECO natural gas price of $6.00 per gj and an oil price US $32.50 WTI, NuVista expects cash flow of $43 million or $1.15 per share. Furthermore, our strong balance sheet with a 0.4:1 debt to cash flow ratio will enable us to execute our 2004 capital program and pursue additional strategic opportunities as they arise. Regardless of price volatility, NuVista has positioned itself to deliver profitable growth now and into the future. We remain unwavering in our commitment to enhance shareholder value by utilizing the broad depth and expertise of our dedicated team in a diligent and cost-effective manner. /T/Balance Sheet(thousands)                                         December 31, 2003---------------------------------------------------------------------                                                             (audited)AssetsAccounts receivable                                          $  6,251Oil and natural gas properties and equipment                   76,752Future tax asset                                                8,671---------------------------------------------------------------------                                                             $ 91,674------------------------------------------------------------------------------------------------------------------------------------------Liabilities and Shareholders' EquityAccounts payable and accrued liabilities                     $ 12,400Bank loan                                                       6,928---------------------------------------------------------------------Total current liabilities                                      19,328Site restoration provision                                      1,284Shareholders' equity:  Share capital                                                65,394  Retained earnings                                             5,668---------------------------------------------------------------------                                                               71,062---------------------------------------------------------------------                                                             $ 91,674------------------------------------------------------------------------------------------------------------------------------------------Statements of Operations and Retained Earnings                                           Three Months     Period (1)                                                  ended         ended                                               December      December(thousands, except per share amounts)          31, 2003      31, 2003---------------------------------------------------------------------                                             (unaudited)     (audited)Revenues:  Production                                    $12,735       $25,134  Royalties, net of Alberta Royalty Tax Credit   (2,950)       (6,079)---------------------------------------------------------------------                                                  9,785        19,055---------------------------------------------------------------------Expenses:  Operating                                       1,505         2,792  General and administrative                        141           268  Financing charges                                  38           282  Stock based compensation                           52           104  Depreciation, depletion and site restoration    3,238         6,444---------------------------------------------------------------------                                                  4,974         9,890---------------------------------------------------------------------Income before income and other taxes              4,811         9,165  Income and other taxes                          1,911         3,497---------------------------------------------------------------------Net income                                        2,900         5,668Retained earnings, beginning of period            2,768             ----------------------------------------------------------------------Retained earnings, end of period                $ 5,668       $ 5,668------------------------------------------------------------------------------------------------------------------------------------------Net income per share - basic                    $  0.08       $  0.16------------------------------------------------------------------------------------------------------------------------------------------Net income per share - diluted                  $  0.08       $  0.15------------------------------------------------------------------------------------------------------------------------------------------(1) Period from July 2, 2003 to December 31, 2003Statement of Cash Flows                                           Three Months     Period (1)                                                  ended         ended                                               December      December(thousands, except per share amounts)          31, 2003      31, 2003---------------------------------------------------------------------                                             (unaudited)     (audited)Cash provided by (used in):Operating Activities:  Net income                                    $ 2,900       $ 5,668  Items not requiring cash from operations:    Depreciation, depletion and site restoration  3,238         6,444    Stock based compensation expense                 52           104    Future income taxes                           1,862         3,390---------------------------------------------------------------------Funds flow from operations                        8,052        15,606Decrease in non-cash working capital items          134           106---------------------------------------------------------------------                                                  8,186        15,712---------------------------------------------------------------------Financing Activities:  Issuance of share capital, net of share   issue costs                                      (48)       17,478  Increase (decrease) in bank loan                2,940       (18,163)---------------------------------------------------------------------                                                  2,892         (685)---------------------------------------------------------------------Investing Activities:  Oil and natural gas properties and   equipment additions                          (13,437)      (20,960)  Site restoration expenditures                    (109)         (110)  Decrease in non-cash working capital items      2,468         6,043---------------------------------------------------------------------                                                (11,078)      (15,027)---------------------------------------------------------------------Decrease in cash                                      -             -Cash, beginning of period                             -             ----------------------------------------------------------------------Cash, end of period                                 $ -           $ -------------------------------------------------------------------------------------------------------------------------------------------(1) Period from July 2, 2003 to December 31, 2003./T/NUVISTA ENERGY LTD. NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS Period from July 2, 2003 to December 31, 2003. 1. Significant accounting policies: As the determination of many assets, liabilities, revenues and expenses is dependent upon future events, the preparation of these financial statements requires the use of estimates and assumptions, which have been made using careful judgement. In the opinion of management, these financial statements have been properly prepared within reasonable limits of materiality and within the framework of the significant accounting policies summarized below. NuVista Energy Ltd. ("NuVista") was established with an effective date of July 2, 2003 under a Plan of Arrangement entered into by Bonavista Energy Trust (the "Trust"), Bonavista Petroleum Ltd. ("Bonavista") and NuVista. Under the Plan of Arrangement, various assets of Bonavista comprising certain producing and exploration assets were transferred to NuVista. As NuVista is a new entity, these financial statements reflect the results of operations for the period from July 2, 2003 to December 31, 2003. (a) Oil and natural gas operations: NuVista follows the full cost method of accounting, whereby all costs associated with the exploration for and development of oil and natural gas reserves are capitalized in cost centres on a country-by-country basis. Such costs include land acquisitions, drilling, well equipment and geological and geophysical activities. General and administrative costs are not capitalized. Gains or losses are not recognized upon disposition of oil and natural gas properties unless crediting the proceeds against accumulated costs would result in a change in the rate of depletion of 20 percent or more. Costs capitalized in the cost centres, including well equipment, together with estimated future capital costs associated with proven reserves, are depreciated and depleted using the unit-of-production method which is based on gross production and estimated proven oil and natural gas reserves as determined by independent engineers. The cost of significant unproven properties is excluded from the depreciation and depletion base. For purposes of the depreciation and depletion calculations, oil and natural gas reserves are converted to a common unit of measure on the basis of their relative energy content. Facilities are depreciated using the declining balance method over their useful lives, which range from 12 to 15 years. The provision for future site restoration costs are calculated using the unit-of-production method and is included within the provision for depreciation, depletion and site restoration. Costs are estimated each year by management based upon current regulations, costs, technology and industry standards. Actual costs as incurred are charged against the accumulated liability. In applying the full cost method, NuVista calculates a ceiling test which restricts the capitalized costs less accumulated depreciation and depletion from exceeding an amount equal to the estimated undiscounted value of future net revenues from proven oil and natural gas reserves, based on year end prices and costs, plus the cost, net of impairments, of unproved properties and after deducting estimated future site restoration costs, general and administrative expenses, financing costs and income taxes. (b) Joint venture accounting: A portion of NuVista's oil and natural gas operations is conducted jointly with others. Accordingly, the financial statements reflect only NuVista's proportionate interest in such activities. (c) Financial instruments: From time to time, NuVista may use swap agreements or other financial instruments to hedge its exposure to fluctuations in oil and natural gas prices. Gains and losses arising from these swap arrangements are reported as adjustments to the related revenue account over the term of the financial instrument. Financial instruments are not used for speculative purposes. The carrying values of NuVista's monetary assets and liabilities approximate their fair values. (d) Stock based compensation: NuVista has equity incentive plans, which are described in note 5. These stock based compensation plans for employees do not involve the direct award of stock, or call for the settlement in cash or other assets. Any consideration received on exercise of the stock options is credited to share capital. Compensation costs are recognized in the financial statements for the performance shares. Compensation expense relating to stock options is disclosed in note 5. (e) Income taxes: NuVista follows the liability method of accounting for future income taxes. (f) Per share amounts: Diluted per share amounts reflect the potential dilution that could occur if securities or other contracts to issue common shares were exercised or converted to common shares. The treasury stock method is used to determine the dilutive effect of stock options and other dilutive instruments. 2. Transfer of assets and commencement of operations: Under the Plan of Arrangement, Bonavista transferred to NuVista certain assets, being certain producing and exploratory oil and natural gas properties in Bonavista's Eastern Core Region, and an allocation of its bank loan. The producing oil and natural gas properties were transferred into a general partnership that is 70% owned by NuVista and 30% owned by Bonavista. As this was a related party transaction, assets and liabilities were transferred at its book value. Details are as follows: /T/                                                              Amount--------------------------------------------------------------------(thousands)Oil and natural gas assets and equipment                    $ 61,825Future income tax asset                                       11,751--------------------------------------------------------------------Total assets transferred                                      73,576Bankloan                                                     (29,103)Provision for site restoration                                  (983)--------------------------------------------------------------------Net assets received and common shares issued                $ 43,490----------------------------------------------------------------------------------------------------------------------------------------/T/The above amounts are estimates, which were made by management at the time of the Plan of Arrangement based on information available at the time. Under the Plan of Arrangement, NuVista entered into a Technical Services Agreement with Bonavista. Under this agreement, Bonavista receives payment for certain technical and administrative services provided by it to NuVista, on a cost recovery basis. Pursuant to the Technical Services Agreement, there was $372,000 of fees were charged relating to general and administrative activities and $317,000 of fees were charged relating to capital expenditure activities for the period from July 2, 2003 to December 31, 2003. 3. Oil and natural gas properties and equipment: /T/                                                  Accumulated                                                 depreciation                                                          and  Net bookDecember 31, 2003                          Cost     depletion     value-----------------------------------------------------------------------(thousands)Oil and natural gas properties         $ 65,307       $ 5,518  $ 59,789Facilities and well equipment            17,478           515    16,963-----------------------------------------------------------------------                                       $ 82,785       $ 6,033  $ 76,752----------------------------------------------------------------------------------------------------------------------------------------------/T/Unproved property costs of $10,713,000 as at December 31, 2003 were excluded from the depreciation and depletion calculation. During the period ended December 31, 2003, NuVista recorded a provision of $411,000 for site restoration in the consolidated financial statements. 4. Bank loan: NuVista has a $32 million revolving production loan facility with a syndicate of Canadian chartered banks, which provides that borrowings may be made by way of prime loans, bankers' acceptances and/or US dollar LIBOR advances. These advances bear interest at the banks' prime rate and/or at money market rates plus a stamping fee. The bank loan facility is secured by a first floating charge debenture, general assignment of book debts and NuVista's oil and natural gas properties and equipment. The facility is subject to an annual review by the lenders. 5. Share capital: (a) Authorized: Unlimited number of voting Common Shares and 1,200,000 Class B Performance Shares. (b) Issued: Prior to the Plan of Arrangement, NuVista completed the private placement of 2,000,000 Common Shares and 1,200,000 Class B Performance Shares for gross proceeds of $4,012,000. /T/(i) Common Shares-----------------------------------------------------------------------                                             Number              Amount-----------------------------------------------------------------------(thousands)Outstanding as at July 2, 2003                2,000            $  4,000 Issued pursuant to the Plan of  Arrangement (Note 2)                       32,839              43,490 Issued for cash                              2,500              18,375 Stock based compensation                         -                 104 Reacquired and cancelled                        (1)                 (2) Costs associated with shares issued,  net of future tax benefit                       -                (585)-----------------------------------------------------------------------Outstanding as at December 31, 2003          37,338            $ 65,382----------------------------------------------------------------------------------------------------------------------------------------------/T/(ii) Class B Performance Shares Each Class B Performance Share was sold for a price of $0.01 per share and is convertible into the fraction of a Common Share equal to the closing trading price of the Common Shares on the Toronto Stock Exchange on the day prior to such conversion less $2.00, if positive, divided by the Common Share closing price. The Class B Performance Shares will automatically convert into Common Shares as to 25% of the Class B Performance Shares outstanding on a pro-rata basis from holders on each of July 1, 2004, 2005, 2006 and 2007. If the NuVista Closing Price less $2.00 is not positive on any conversion date, NuVista will, subject to applicable law, redeem the Class B Performance Shares that would have otherwise been converted at the redemption price of $0.01 per share. The fair value of each Class B Performance Share was determined, at date of issuance, using the Black-Scholes model with the variables described in Note 5(e). This amount is amortized over the life of the Class B Performance Share and is included in stock based compensation expense. /T/-----------------------------------------------------------------------                                               Number            Amount-----------------------------------------------------------------------(thousands)Outstanding as at July 2, 2003                  1,200               $12  Reacquired and cancelled                         (4)                ------------------------------------------------------------------------Outstanding as at December 31, 2003             1,196               $12----------------------------------------------------------------------------------------------------------------------------------------------/T/(c) Per share amounts: During the period from July 2, 2003 to December 31, 2003, there were 36,359,841 weighted average shares outstanding. On a diluted basis, there were 37,336,785 weighted average shares outstanding after giving effect for dilutive stock options. (d) Stock Options: NuVista has established a stock option plan whereby officers, directors, employees and service providers may be granted options to purchase Common Shares. Options granted vest at the rate of 25 percent per year and expire two years after the date of vesting to a maximum term of six years. The total stock options outstanding plus the Class B Performance Shares cannot exceed 10% of the outstanding Common Shares. During the period from July 2, 2003 to December 31, 2003, 1,369,800 stock options were granted with prices ranging from $6.30 per share to $7.42 per share. Stock option summary of transactions for the period from July 2, 2003 to December 31, 2003 are as follows: /T/-----------------------------------------------------------------------                                                       Weighted average                                                Number   exercise price-----------------------------------------------------------------------Outstanding as at July 2, 2003                       -                - Granted                                     1,369,800           $ 6.35 Exercised                                           -                - Cancelled                                      (4,500)          $ 6.30------------------------------------------------------Outstanding, December 31, 2003               1,365,300           $ 6.35----------------------------------------------------------------------------------------------------------------------------------------------Exercisable, December 31, 2003                       -                -----------------------------------------------------------------------------------------------------------------------------------------------/T/(e) Stock-based compensation: Under the intrinsic value method, no compensation costs are recorded in the financial statements for stock options granted. If the fair value based method had been used, the stock-based compensation costs, pro forma net income and pro forma net income per share would be as follows: /T/-----------------------------------------------------------------------                                        Three Months        Period from                                               ended    July 2, 2003 to                                   December 31, 2003  December 31, 2003-----------------------------------------------------------------------(thousands, except per share amounts)Stock based compensation (stock options)                             $    29            $   357Net income  As reported                                $ 2,900            $ 5,668  Pro forma                                  $ 2,871            $ 5,311Net income per common share  Basic    As reported                              $  0.08            $  0.16    Pro forma                                $  0.08            $  0.15  Diluted    As reported                              $  0.07            $  0.15    Pro forma                                $  0.07            $  0.14----------------------------------------------------------------------------------------------------------------------------------------------/T/The pro forma amounts include the compensation costs associated with stock options granted subsequent to July 2, 2003. The fair value of each option granted was estimated on the date of grant using the Black-Scholes option pricing model. In the pricing model the fair value of stock options granted was $2.41 per share; risk free interest rate was 3.5%; volatility of 40%; and an expected life of 4.5 years. 6. Income taxes: The provision for income tax differs from the result of which would have been obtained by applying the combined Federal and Provincial income tax rate to the income before taxes. This difference results from the following items: /T/-----------------------------------------------------------------------                                     Three Months                Period                                            ended     from July 2, 2003                                December 31, 2003  to December 31, 2003-----------------------------------------------------------------------(thousands)Expected tax expense at 40.6%             $ 1,954               $ 3,723Non deductible crown payments, net          1,014                 1,846Resource allowance                           (993)               (1,809)Effect of change in tax rate                 (134)                 (412)Other                                          21                    42Capital taxes                                  49                   107-----------------------------------------------------------------------Provision for income taxes                $ 1,911               $ 3,497----------------------------------------------------------------------------------------------------------------------------------------------The provision for income taxes consists of: Current                                  $    49               $   107 Future                                     1,862                 3,390-----------------------------------------------------------------------Provision for income taxes                $ 1,911               $ 3,497----------------------------------------------------------------------------------------------------------------------------------------------The significant components of the future tax asset as at December31, 2003 are:-----------------------------------------------------------------------                                                                 Amount-----------------------------------------------------------------------(thousands)Oil and natural gas properties                                  $ 6,915Facilities and well equipment                                     1,073Site restoration provision                                          444Share issue costs                                                   239-----------------------------------------------------------------------Future tax asset                                                $ 8,671----------------------------------------------------------------------------------------------------------------------------------------------/T/7. Hedging activities: As at December 31, 2003, NuVista has entered into physical purchase contracts to sell 200 bbls per day for the period from January 1, 2004 to September 30, 2004 at prices ranging from U.S. $27.50 per bbl to U.S. $31.70 per bbl. In addition NuVista has sold 1,000 gj's per day for the period from April 1, 2004 to October 31, 2004 by way of a costless collar with a floor price of $5.00 per gj and a ceiling price of $6.25 per gj at AECO. 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-
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