Calgary-based Enterra Energy Trust Tuesday announced the signing of a definitive agreement for the acquisition of all of the issued and outstanding common shares of another Canadian producer, High Point Resources Inc. The deal is valued at approximately US$250 million.

High Point, whose operations are focused on the deeper part of the Western Canada Sedimentary Basin in western Alberta and British Columbia, has approximately 11.5 million barrels of oil equivalent of proved and probable reserves, consisting of 54.5 Bcf of natural gas and 2.4 million bbl of oil and natural gas liquids, which will more than double Enterra’s current reserves. Approximately 80% of the reserves of High Point are in the proved category, with 90% of its current production in natural gas and natural gas liquids.

Enterra itemized anticipated benefits from the transaction:

The acquisition is to be completed by way of a plan of arrangement pursuant to which shareholders of High Point will receive for each share of High Point held 0.105 of a trust unit of Enterra. The closing price of the Enterra Trust units on Friday, May 27th was C$25.41, valuing the common shares of High Point at C$2.67 per share. High Point has approximately 85 million shares outstanding. The transaction, including assumption of High Point’s debt of approximately US$67 million, has been valued at approximately US$250 million. Enterra will be issuing approximately 8.9 million units or approximately 34% of the total number of Enterra trust units currently outstanding.

Enterra believes the transaction will be accretive immediately to cash flow on a per unit basis, net asset value and reserves, based onr an independent reserve report dated Dec. 31, 2004, As per Enterra’s business plan, it is anticipated that JED Oil will develop the properties by way of joint venture arrangements.

Upon completion of the transaction, High Point’s shareholders will participate in Enterra’s monthly cash distributions, which have increased five times since Enterra Energy Trust was established just over a year and a half ago.

“This acquisition is consistent with and extends Enterra’s business plan, providing both existing production and substantial development opportunities,” said Reg Greenslade, Enterra chairman. “We also hope to supplement our current staff by retaining some of High Point’s staff once the acquisition closes.”

The boards of directors of both High Point and Enterra have each unanimously approved the transaction and the board of directors of High Point has agreed to recommend that its shareholders vote in favor of the transaction.

Enterra also announcd that effective June 1, 2005, Macon Resources Ltd. (“Macon”) has been contracted to perform the management duties for Enterra. Macon has been an investor and manager of private and public oil and gas companies as well as direct investment and operator of oil and gas assets over the last 20 years. Macon has agreed to convert 2.3 million shares of High Point into Enterra units as part of this transaction. Keith Conrad, Macon’s chairman, will assume the role of Enterra’s president & CEO and a director and John Kalman will become the CFO. It is anticipated that other individuals may be added to assist in the management of Enterra. Reg Greenslade, previously the president and CEO, will remain chairman of the board of directors.

Greenslade said the Macon management deal is not on the basis of an outside contractor. “This is not a percentage and fees deal. Essentially we are hiring two individuals and their support staff.” He said Enterra has been looking for people to strengthen the management team since the first of the year and Macon happened to have the right people. The contract is for the equivalent of the new hires’ salaries and stock options.

“With the addition of Keith and John, we have ensured that Enterra has the management to facilitate our anticipated growth,” added Mr. Greenslade.

On another subject, Greenslade said the previously announced acquisition of Rocky Mountain Gas Inc. (RMG) is now scheduled to close on June 1, 2005. RMG holds natural gas assets in Montana and Wyoming. A portion of the Wyoming assets currently generates net/net production of approximately 2.2 MMBtu/d. RMG has approximately 130,000 net acres of production rights to coalbed methane. Under the terms of the agreement, for a transition period of up to 12 months following the merger, U.S. Energy Corp., based in Riverton, WY, the major shareholder of RMG which employs all personnel at RMG, will continue to provide personnel and advice to RMG under a consulting contract.

The final terms of the agreement have been amended to require RMG to divest itself of its 17% ownership of Pinnacle Gas Resources Inc., which also lowered the purchase price to US$20 million. It was further agreed that the consideration would be paid as to US$14 million by the issuance of exchangeable shares, US$5.5 million by the issuance of trust units and US$0.5 million in cash, which was paid as a deposit when the agreement was signed.

If the share exchange is approved by the RMG shareholders on May 31, 2005, Enterra will issue approximately 737,000 exchangeable shares, 248,160 trust units, US$500,000 cash and assume RMG’s outstanding long-term debt of approximately US$3.5 million. The exchangeable shares issued to RMG holders will be exchangeable on a one-for-one basis for Enterra trust units 12 months after the completion of the merger. In a contemporaneous transaction, a gross overriding royalty on some of RMG’s assets will be terminated for a cash payment of US$425,000.

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