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True Energy Trust announces third quarter 2008 financial results


View All News Releases November 6, 2008

    TSX: TUI.UN

    CALGARY, Nov. 6 /CNW/ - (TSX: TUI.UN) True Energy Trust ("True" or the
"Trust") announces its financial and operating results for the three and nine
months ended September 30, 2008.
    Following True's concentrated efforts on debt reduction through the first
half of 2008, the focus for the second half of 2008 is the maintenance of a
stable production base and the completion of the Trust's capital program.
Accomplishments during the first nine months of 2008 include:-   In the first nine months of 2008 True reduced its net debt by
        approximately $57 million.
    -   As of September 30, 2008, True renewed its $152 million credit
        facility borrowing base, which is currently scheduled for renewal on
        March 31, 2009; approximately $35 million was not drawn under these
        facilities.
    -   The Board announced a fourth quarter distribution policy of
        $0.04 per unit per month consistent with the first through
        third quarter distribution policy.
    -   In the nine month period ended September 30, 2008, funding
        requirements for distributions declared was 40% of funds flow from
        operations(*).
    -   In the nine month period ended September 30, 2008, combined funding
        requirements for distributions declared and capital expenditures was
        76% of funds flow from operations(*).
    -   For the nine month period ended September 30, 2008, sales volumes
        averaged 12,242 boe/d. Third quarter 2008 sales volumes averaged
        11,263 boe/d with full year guidance remaining at an average 12,000
        to 12,500 boe/d.
    -   On October 1, 2008, True closed the purchase of further working
        interests in the Mantario, Saskatchewan area for $4.3 million in cash
        after adjustments. Effective October 1, 2008 this tuck-in acquisition
        adds approximately 225 bbls/d of heavy oil production for metrics of
        $19,100/boe/d and $8.60/boe.
    -   While True has not finalized its level of capital spending for 2009,
        the Trust will continue to take a balanced approach to the priority
        use of cash flow between level of distributions and size of its 2009
        capital program.

    Highlights from the third quarter include:

    -   True's revolving term credit facility was renewed effective
        June 27, 2008 and ends on June 26, 2009 unless extended for a further
        364 day period. Should the facilities not be renewed they convert to
        366 day non-revolving facilities on the renewal date. The current
        facility consists of a $15 million demand operating facility and a
        $137 million extendible revolving term syndicated credit facility for
        a total credit facility of $152 million. The borrowing base was
        renewed effective September 30, 2008 and is currently scheduled for
        renewal on March 31, 2009. As at September 30, 2008, approximately
        $35 million was not drawn (or available) under these facilities.

    -   True's total net debt, including convertible debentures, excluding
        unrealized commodity contract assets and liabilities, future income
        taxes and asset retirement obligations, as at September 30, 2008 was
        $193.8 million, representing $116.6 million outstanding on the credit
        facility, $80.7 million in convertible debentures (liability
        component) and the net balance of working capital. The convertible
        debentures have a maturity date of June 30, 2011. During the
        nine month period ended September 30, 2008, True has reduced its
        total net debt by approximately $57 million.

    -   During the third quarter of 2008, True drilled or participated in
        12 (9.0 net) wells including 3 net natural gas wells, 1 net light oil
        well, 0.75 net heavy oil, and 1 net disposal well. 3.25 net wells
        were dry and abandoned.

    -   On October 15, 2008, the Trust announced that the Board has set the
        distribution policy for the fourth quarter of 2008 at a monthly
        distribution rate of $0.04 per unit, subject to monthly confirmation
        by the Board of Directors, based on current commodity prices, hedging
        program, anticipated production volumes and market conditions.

    -   True generated average sales volumes for the third quarter of 2008 of
        11,263 boe/d as compared to 14,096 boe/d for the third quarter of
        2007. For the nine month period ended September 30, 2008, sales
        volumes averaged 12,242 boe/d as compared to 16,544 boe/d for the
        same period in 2007. In addition to natural production decline and
        minimal 2008 capital spending, year over year production volumes were
        also impacted by dispositions totalling approximately 1,000 boe/d
        that were closed during the first half of 2008. Additionally, a
        number of turnaround and maintenance shutdowns were conducted in the
        third quarter. October field production is approximately 11,700
        boe/d. Based on maintenance of current production volumes, True
        remains on track to meet full year 2008 field production guidance of
        an average of 12,000 to 12,500 boe/d.

    -   Funds flow from operations(*) for the third quarter of 2008 was
        $21.5 million on gross sales of $72.2 million compared to funds flow
        from operations(*) of $17.5 million on gross sales of $50.5 million
        for the same period in 2007. The increase in funds flow for the
        2008 third quarter compared to 2007 was primarily the result of
        improved commodity pricing and operating netbacks for 2008, despite
        lower sales volumes and higher realized hedging losses. Funds flow
        from operations(*) for the third quarter of 2008 decreased 18% from
        second quarter 2008 funds flow from operations(*) of $26.3 million,
        primarily reflecting a softening of commodity prices in August and
        September 2008.

    -   True maintains a commodity price risk management program to provide a
        measure of stability to cash distributions and capital expenditures.
        Unrealized mark-to-market gains or losses are non-cash adjustments to
        the current fair market value of the contract over its entire term
        and are included in the calculation of net income (loss).

    -   A net income of $29.9 million for the third quarter of 2008 compared
        to a net loss of $17.0 million for the third quarter of 2007 was
        primarily due to the reversal of significant unrealized
        mark-to-market, non-cash losses recorded in the second quarter of
        2008. The net loss for the nine month period ended September 30, 2008
        was $10.1 million compared to $23.8 million for the same period in
        2007.

    (*) Refer to note (2) in the highlights section of the third quarter
        report in respect of the term "funds flow from operations", which is
        also commonly referred to as "cash flow from operations".


    True's third quarter report is presented below.


                                 HIGHLIGHTS

    -------------------------------------------------------------------------
                                  Three months ended       Nine months ended
                                        September 30,           September 30,
                                    2008        2007        2008        2007
    -------------------------------------------------------------------------
    FINANCIAL (unaudited)

    (CDN$000s except unit and
     per unit amounts)
    Revenue (before royalties
     and hedging(1))              72,225      50,547     224,332     196,734
    Funds flow from
     operations(2)                21,491      17,478      72,028      81,658
      Per basic trust unit         $0.27       $0.22       $0.91       $1.10
      Per diluted trust unit(5)    $0.27       $0.22       $0.91       $1.09
    Net income (loss)             29,939     (17,003)    (10,056)    (23,833)
      Per basic trust unit         $0.38      $(0.21)     $(0.13)     $(0.32)
      Per diluted trust unit(5)    $0.38      $(0.21)     $(0.13)     $(0.32)
    Distributions declared         9,474      19,132      28,486      54,374
      Per unit                     $0.12       $0.24       $0.36       $0.72
    -------------------------------------------------------------------------
    Exploration and development   14,097      11,229      26,204      71,998
    Corporate and property
     acquisitions                   (286)        139         337       1,493
    -------------------------------------------------------------------------
    Capital expenditures - cash   13,811      11,368      26,541      73,491
    Property dispositions - cash     (32)     (3,806)    (44,350)    (31,275)
    Corporate acquisitions and
     other - non-cash               (144)       (684)     (2,858)       (997)
    -------------------------------------------------------------------------
    Total capital
     expenditures - net           13,635       6,878     (20,667)     41,219
    -------------------------------------------------------------------------
    Long-term debt               116,591     159,212     116,591     159,212
    Convertible debentures        80,693      79,021      80,693      79,021
    Working capital surplus       (3,508)     (4,380)     (3,508)     (4,380)
    -------------------------------------------------------------------------
    Total net debt (3)           193,776     233,853     193,776     233,853
    -------------------------------------------------------------------------
    Total assets                 752,030     909,876     752,030     909,876
    Unitholders' equity          424,121     485,075     424,121     485,075
    -------------------------------------------------------------------------
    OPERATING

    Daily sales volumes
      Crude oil,
       condensate
       and NGLs        (bbls/d)    3,977       3,958       4,329       5,316
      Natural gas       (mcf/d)   43,715      60,827      47,480      67,364
      Total oil
       equivalent       (boe/d)   11,263      14,096      12,242      16,544
    Average prices
      Crude oil,
       condensate
       and NGLs         ($/bbl)    96.89       50.54       89.49       46.94
      Crude oil,
       condensate
       and NGLs
       (including
       hedging(1))      ($/bbl)    77.39       50.26       73.32       47.60
      Natural gas       ($/mcf)     8.97        5.44        8.92        6.82
      Natural gas
       (including
       hedging(1))      ($/mcf)     7.80        6.19        8.20        7.16
      Total oil
       equivalent       ($/boe)    69.03       37.68       66.24       42.87
      Total oil
       equivalent
       (including
       hedging(1))      ($/boe)    57.61       40.81       57.71       44.44
    Statistics
      Operating
       netback          ($/boe)    38.31       15.76       36.39       22.73
      Operating
       netback
       (including
       hedging(1))      ($/boe)    26.90       18.89       27.87       24.30
      Transportation    ($/boe)     2.45        1.29        1.75        1.06
      Production
       expenses         ($/boe)    14.95       13.13       14.51       11.46
      General &
       administrative   ($/boe)     3.48        3.26        3.54        2.98
      Royalties as a
       % of sales after
       transportation                 20%         21%         21%         18%

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



    -------------------------------------------------------------------------
                                  Three months ended       Nine months ended
                                        September 30,           September 30,
                                    2008        2007        2008        2007
    -------------------------------------------------------------------------
    TRUST UNITS

    Trust units outstanding   78,862,690  79,715,595  78,862,690  79,715,595
    Trust unit incentive
     rights outstanding        2,539,166   6,086,832   2,539,166   6,086,832
    Units issuable for
     exchangeable shares         340,642     316,547     340,642     316,547
    Units issuable for
     convertible debentures    5,390,625   5,390,625   5,390,625   5,390,625
    -------------------------------------------------------------------------
    Diluted trust units
     outstanding              87,133,123  91,509,599  87,133,123  91,509,599
    Diluted weighted
     average trust units(5)   78,996,154  79,714,539  79,140,544  74,528,093

    -------------------------------------------------------------------------
    TRUST UNIT TRADING STATISTICS

    (CDN$, except volumes)
     based on intra-day trading
    High                            4.45        6.10        4.69        7.47
    Low                             2.74        4.51        2.74        4.51
    Close                           3.03        4.95        3.03        4.95
    Average daily volume         257,512     364,661     260,393     469,513
    -------------------------------------------------------------------------
    (1) The Trust has entered into various commodity risk management
        contracts which are considered to be economic hedges. Per unit
        metrics after hedging includes only the realized portion of gains or
        losses on commodity contracts.

        Effective January 1, 2007 on adoption of CICA handbook sections 3855
        and 3865, the Trust no longer applies hedge accounting to these
        contracts. As such, these contracts are revalued to fair value at the
        end of each reporting date. This results in recognition of unrealized
        gains or losses over the term of these contracts which is reflected
        each reporting period until these contracts are settled, at which
        time realized gains or losses are recorded. These unrealized gains or
        losses on commodity contracts are not included for purposes of per
        unit metrics calculations disclosed.

    (2) The highlights section contains the term "funds flow from
        operations" (or as commonly referred to as "cash flow from
        operations"), which should not be considered an alternative to, or
        more meaningful than cash flow from operating activities as
        determined in accordance with Canadian generally accepted accounting
        principles ("GAAP") as an indicator of the Trust's performance.
        Therefore reference to diluted funds flow from operations or funds
        flow from operations per trust unit may not be comparable with the
        calculation of similar measures for other entities. Management uses
        funds flow from operations to analyze operating performance and
        leverage and considers funds flow from operations to be a key measure
        as it demonstrates the Trust's ability to generate the cash necessary
        to fund future capital investments and to repay debt. The
        reconciliation between funds flow from operations and cash flow from
        operating activities can be found in the Management Discussion and
        Analysis ("MD&A"). Funds flow from operations per trust unit is
        calculated using the weighted average number of trust units for the
        period.

    (3) Net debt includes the net working capital deficiency (excess) before
        short-term commodity contract assets and liabilities and short-term
        future income tax assets. Total net debt also includes the liability
        component of convertible debentures and excludes asset retirement
        obligations and the future income tax liability.

    (4) Operating netbacks are calculated by subtracting royalties,
        transportation, and operating costs from revenues.

    (5) In computing weighted average diluted earnings per trust unit for the
        three month period ended September 30, 2008 a total of 2,539,166
        (2007: 6,086,832) trust incentive units, 340,642 (2007: 316,547)
        exchangeable shares and 5,390,625 (2007: 5,390,625) trust units
        issuable pursuant to the conversion of convertible debentures were
        excluded from the calculation for the three month period ended
        September 30, 2008 as they were not dilutive.

        In computing weighted average diluted earnings per trust unit for the
        nine month period ended September 30, 2008 a total of 2,539,166
        (2007: 6,887,499) trust incentive units, 340,642 (2007: 309,216)
        exchangeable shares and 5,390,625 (2007: 5,390,625) trust units
        issuable pursuant to the conversion of convertible debentures were
        excluded from the calculation as they were not dilutive. To calculate
        weighted average diluted funds flow from operations for the nine
        month period ended September 30, 2007, 316,547 exchangeable shares
        were added to the denominator, resulting in diluted weighted average
        trust units of 74,844,640 under this calculation.


                            REPORT TO UNITHOLDERSCurrent global financial issues have prompted significant deterioration
in the equity and capital markets. Commodity prices have pulled back
dramatically from those experienced earlier in the year, tempered somewhat by
the growing US to Canadian dollar exchange rate. True's concentrated efforts
on debt reduction through the first half of the 2008 has improved the Trust's
financial flexibility in the current economic environment. The second half
2008 focus is the maintenance of a stable production base and the completion
of the Trust's capital program. In addition to an aggressive workover,
recompletion, and optimization program, True focused on drilling opportunities
in West Central Alberta and West Central Saskatchewan during the third
quarter. A reduced fourth quarter program will focus on completion of the
Viking Horizontal light oil pilot project in Kindersley and conventional
natural gas drilling at Saddle Lake in North East Alberta. Preparations for
the first quarter of 2009 are also underway.

    Accomplishments for the third quarter ended September 30, 2008 include:

    Distributions

    For the third quarter of 2008, monthly distributions of $0.04 per unit
were declared and paid on August 15, 2008, September 15, 2008 and October 15,
2008.
    On October 15, 2008, the Trust announced that the Board has set the
distribution policy for the fourth quarter of 2008 at a monthly distribution
rate of $0.04 per unit, subject to monthly confirmation by the Board of
Directors, based on current commodity prices, hedging program, anticipated
production volumes and market conditions.

    In the nine month period ended September 30, 2008, funding requirements
for distributions declared was 40% of funds flow from operations.

    Production

    2008 third quarter sales volumes averaged 11,263 boe/d as compared to
14,096 boe/d for the same period in 2007. For the nine month period ended
September 30, 2008, sales volumes averaged 12,242 boe/d as compared to
16,544 boe/d for the same period in 2007. In addition to natural production
decline and minimal 2008 capital spending, year over year production volumes
were also impacted by dispositions totalling approximately 1,000 boe/d that
were closed during the first half of 2008. Additionally, a number of
turnaround and maintenance shutdowns were completed in the third quarter.
October field production is approximately 11,700 boe/d. Based on maintenance
of current production levels, True remains on track to meet full year 2008
field production guidance of an average of 12,000 to 12,500 boe/d.
    On October 1, 2008, True closed the purchase of further working interests
in the Mantario, Saskatchewan area for $4.3 million in cash after adjustments.
Effective October 1, 2008 this tuck-in acquisition adds approximately
225 bbls/d of heavy oil production for metrics of $19,100/boe/d and $8.60/boe.

    Drilling

    During the third quarter of 2008, True drilled or participated in 12
(9.0 net) wells including 3 net natural gas wells, 1 net light oil well, 0.75
net heavy oil, and 1 net disposal well. 3.25 net wells were dry and abandoned.
    On track to meet production guidance through the success of True's
ongoing workover, recompletion, and optimization campaign and the acquisition
of additional interests in the Mantario area, the Trust has deferred a portion
of its planned drilling program. A further 2 net light oil wells have been
drilled thus far in the fourth quarter with an additional 2.5 net natural gas
well scheduled for November 2008. True will drill approximately 16.5 net wells
in 2008, deferring 11.5 net natural gas wells to future programs.
    True has been increasing its farm-out activities in non-core areas. In
Alberta during the third quarter, True farmed-out its interest in 8 gross
wells. These natural gas wells have been drilled at no cost to True and have
resulted in a 16% working interest in a successful Obed area well and an
average 2.9% royalty interest in 7 West Central Alberta wells.

    Financial

    Funds flow from operations for the third quarter of 2008 was
$21.5 million on gross sales of $72.2 million compared to funds flow from
operations of $17.5 million on gross sales of $50.5 million for the same
period in 2007. The increase in funds flow for the 2008 third quarter compared
to 2007 was primarily the result of improved commodity pricing and operating
netbacks for 2008, despite lower sales volumes and higher realized hedging
losses. Funds flow from operations for the third quarter of 2008 decreased 18%
from second quarter 2008 funds flow from operations of $26.3 million,
primarily reflecting a softening of commodity prices in August and September
2008.
    Funds flow from operations for the nine month period ended September 30,
2008 was $72.0 million on gross sales of $224.3 million compared to funds flow
from operations of $81.7 million on gross sales of $196.7 million for the same
period in 2007. This was reflective of higher commodity prices, offset by
lower sales volumes and higher costs in 2008.
    True maintains a commodity price risk management program to provide a
measure of stability to cash distributions and capital expenditures.
Unrealized mark-to-market gains or losses are non-cash adjustments to the
current fair market value of the contract over its entire term and are
included in the calculation of net income (loss).
    A net income of $29.9 million for the third quarter of 2008 compared to a
net loss of $17.0 million for the third quarter of 2007 was primarily due to
the reversal of significant unrealized mark-to-market, non-cash losses
recorded in the second quarter of 2008. The net loss for the nine month period
ended September 30, 2008 was $10.1 million compared to $23.8 million for the
same period in 2007.

    Liquidity

    True's net debt, excluding unrealized commodity contract assets and
liabilities, future income taxes and asset retirement obligations, as at
September 30, 2008 was $193.8 million, representing $116.6 million outstanding
on the credit facility, $80.7 million in convertible debentures (liability
component) and the net balance of working capital. The convertible debentures
have a maturity date of June 30, 2011.
    Combined funding requirements for distributions declared and True's
capital expenditures represented approximately 109% and 76% of funds flow from
operations in the three and nine months ended September 30, 2008,
respectively. The excess funds flow from operations in the first half of 2008
was applied to the repayment of net debt.
    True's revolving term credit facility was renewed effective June 27, 2008
and ends on June 26, 2009 unless extended for a further 364 day period. Should
the facilities not be renewed they convert to 366 day non-revolving facilities
on the renewal date. The current facility consists of a $15 million demand
operating facility and a $137 million extendible revolving term syndicated
credit facility for a total credit facility of $152 million. The borrowing
base was renewed effective September 30, 2008 and is currently scheduled for
renewal on March 31, 2009. As at September 30, 2008, approximately $35 million
was not drawn (or available) under these facilities.
    In August 2008, the Trust announced approval of the renewal of its normal
course issuer bid ("NCIB") program to repurchase up to 7.8 million of its
outstanding trust units during the period August 28, 2008 through August 27,
2009, subject to certain restrictions. As of October 24, 2008, the Trust has
purchased 550,100 trust units at a weighted average price of $2.80 per trust
unit under the NCIB renewed on August 28, 2008. Of the units purchased,
186,300 were cancelled as of September 30, 2008; the remaining 363,800 trust
units have been or will be subsequently cancelled. This purchase is in
response to True's belief that the current market price for True trust units
does not reflect the underlying value of the Trust and the cancellation of the
above purchased Trust Units will increase the proportionate interest of, and
be advantageous to, all remaining unitholders. Future repurchases will be
dependent on excess cash available after consideration of the Trust's priority
uses of cash and the trading price of the Trust's units relative to the net
asset value of the Trust.
    True does not hold any Asset-Backed Commercial Paper investments. As a
non-operating working interest owner, True has a minor exposure of
approximately $70,000 from oil sales marketed through SemCanada Crude Company,
which filed for CCAA protection on July 22, 2008. True does not have any
exposure to Lehman Brothers, which recently filed for Chapter 11 bankruptcy
protection in the United States.
    True maintains an active commodity price risk management program.
Approximately 50% of current natural gas production is hedged through the
fourth quarter of 2008 with approximately 23% hedged through the first half of
2009, and approximately 12% hedged through the second half of 2009.
Approximately 18% of current liquids production is hedged through the
remainder of 2008. No liquids are currently hedged subsequent to December 31,
2008. The Trust will continue its hedging strategies focusing on maintaining
sufficient cash flow to fund True's unitholder distributions and the capital
program.
    In addition to the Trust's financial commodity risk management contracts,
the Trust has entered into a natural gas physical delivery sales contract to
sell 5,275 GJ/day at a fixed price of $7.29/GJ and $7.90/GJ for the third and
fourth quarter of 2009, respectively.

    Fourth quarter 2008 and 2009 Year Outlook

    True's capital program for the first nine months of 2008 of approximately
$26.5 million compares to approximately $73.5 million spent for 2007. True
plans to spend the balance of its $40 to $45 million 2008 capital expenditure
program in the fourth quarter, including the October 1, 2008 purchase of
further working interests in Mantario.
    The current global economic environment has created volatility in
commodity prices, especially with crude oil prices declining to less than 50%
of their recent highs. This has been somewhat mitigated by the widening US to
Canadian dollar exchange rate. Natural gas prices have shown more strength but
have also retreated from those seen earlier in 2008.
    While True has not finalized its level of capital spending for 2009, the
Trust will continue to take a balanced approach to the priority use of cash
flow between level of distributions and size of its 2009 capital program.
True's first half 2009 capital program is not expected to exceed $20 million.
Given the nature of True's lands and their inherent advantage of year round
access, True currently plans to spread its 2009 capital program evenly through
the full year of 2009 to take advantage of reduced service costs during
non-peak times. True will focus on continuing its successful farm-out activity
in non-core areas. If the 2009 outlook for commodity prices improves, True
would plan to increase its capital spending in third and fourth quarters of
2009 dependant upon cash flow.Wayne M. Chorney, P. Eng.
    President, CEO and COO
    November 6, 2008



                    MANAGEMENT'S DISCUSSION AND ANALYSISNovember 6, 2008 - The following Management's Discussion and Analysis of
financial results as provided by the management of True Energy Trust ("True"
or the "Trust") should be read in conjunction with the unaudited interim
consolidated financial statements and selected notes for the three and nine
months ended September 30, 2008 and the audited consolidated financial
statements for the years ended December 31, 2007 and 2006 for the Trust. This
commentary is based on information available to, and is dated as of,
November 6, 2008. The financial data presented is in accordance with Canadian
generally accepted accounting principles ("GAAP") in Canadian dollars, except
where indicated otherwise.

    CONVERSION: The term barrels of oil equivalent ("boe") may be misleading,
particularly if used in isolation. A boe conversion ratio of six thousand
cubic feet of natural gas to one barrel of oil equivalent (6 mcf/bbl) is based
on an energy equivalency conversion method primarily applicable at the burner
tip and does not represent a value equivalency at the wellhead. All boe
conversions in this report are derived from converting gas to oil in the ratio
of six thousand cubic feet of gas to one barrel of oil.

    NON-GAAP MEASURES: This Management's Discussion and Analysis contains the
term "funds flow from operations" (or also commonly referred to as "cash flow
from operations"), which should not be considered an alternative to, or more
meaningful than "cash flow from operating activities" as determined in
accordance with Canadian GAAP as an indicator of the Trust's performance.
Therefore reference to funds flow from operations or funds flow from
operations per unit may not be comparable with the calculation of similar
measures for other entities. Management uses funds flow from operations to
analyze operating performance and leverage and considers funds flow from
operations to be a key measure as it demonstrates the Trust's ability to
generate the cash necessary to fund future capital investments and to repay
debt. The reconciliation between funds flow from operations and cash flow from
operating activities can be found in the Management's Discussion and Analysis.
Funds flow from operations per unit is calculated using the weighted average
number of units for the period.
    This Management's Discussion and Analysis also contains other terms such
as net debt and operating netbacks, which are not recognized measures under
Canadian GAAP. Management believes these measures are useful supplemental
measures of firstly, the total amount of current and long-term debt and
secondly, the amount of revenues received after transportation, royalties and
operating costs. Readers are cautioned, however, that these measures should
not be construed as an alternative to other terms such as current and
long-term debt or net income determined in accordance with GAAP as measures of
performance. True's method of calculating these measures may differ from other
entities, and accordingly, may not be comparable to measures used by other
trusts or companies.
    Additional information relating to the Trust, including the Trust's
Annual Information Form, is available on SEDAR at www.sedar.com.

    FORWARD LOOKING STATEMENTS: Certain information contained herein may
contain forward looking statements including management's assessment of future
plans and operations, drilling plans and the timing thereof, expected
production increases from certain projects and the timing thereof, the effect
of government announcements, proposals and legislation, plans regarding wells
to be drilled, expected or anticipated production rates, hedging strategies,
distributions and method of funding thereof, proportion of distributions
anticipated to be taxable and non-taxable, maintenance of productive capacity
and capital expenditures and the nature of capital expenditures and the timing
and method of financing thereof, may constitute forward-looking statements
under applicable securities laws and necessarily involve risks including,
without limitation, risks associated with oil and gas exploration,
development, exploitation, production, marketing and transportation, loss of
markets, volatility of commodity prices, currency fluctuations, imprecision of
reserve estimates, environmental risks, competition from other producers,
inability to retain drilling rigs and other services, incorrect assessment of
the value of acquisitions, failure to realize the anticipated benefits of
acquisitions, delays resulting from or inability to obtain required regulatory
approvals and ability to access sufficient capital from internal and external
sources. The recovery and reserve estimates of True's reserves provided herein
are estimates only and there is no guarantee that the estimated reserves will
be recovered. Events or circumstances may cause actual results to differ
materially from those predicted, as a result of the risk factors set out and
other known and unknown risks, uncertainties, and other factors, many of which
are beyond the control of True. In addition, forward-looking statements or
information are based on a number of factors and assumptions which have been
used to develop such statements and information but which may prove to be
incorrect. Although the Trust believes that the expectations reflected in such
forward-looking statements or information are reasonable, undue reliance
should not be placed on forward-looking statements because the Trust can give
no assurance that such expectations will prove to be correct. In addition to
other factors and assumptions which may be identified herein, assumptions have
been made regarding, among other things: the impact of increasing competition;
the general stability of the economic and political environment in which the
Trust operates; the timely receipt of any required regulatory approvals; the
ability of the Trust to obtain qualified staff, equipment and services in a
timely and cost efficient manner; drilling results; the ability of the
operator of the projects which the Trust has an interest in to operate the
field in a safe, efficient and effective manner; the ability of the Trust to
obtain financing on acceptable terms; field production rates and decline
rates; the ability to replace and expand oil and natural gas reserves through
acquisition, development of exploration; the timing and costs of pipeline,
storage and facility construction and expansion and the ability of the Trust
to secure adequate product transportation; future commodity gas prices;
currency, exchange and interest rates; the regulatory framework regarding
royalties, taxes and environmental matters in the jurisdictions in which the
Trust operates; and the ability of the Trust to successfully market its oil
and natural gas products. Readers are cautioned that the foregoing list is not
exhaustive of all factors and assumptions which have been used. As a
consequence, actual results may differ materially from those anticipated in
the forward-looking statements. Additional information on these and other
factors that could effect True's operations and financial results are included
in reports on file with Canadian securities regulatory authorities and may be
accessed through the SEDAR website (www.sedar.com), at True's website
(www.trueenergytrust.com). Furthermore, the forward-looking statements
contained herein are made as at the date hereof and True does not undertake
any obligation to update publicly or to revise any of the included forward-
looking statements, whether as a result of new information, future events or
otherwise, except as may be required by applicable securities laws.
    The reader is further cautioned that the preparation of financial
statements in accordance with GAAP requires management to make certain
judgments and estimates that affect the reported amounts of assets,
liabilities, revenues and expenses. Estimating reserves is also critical to
several accounting estimates and requires judgments and decisions based upon
available geological, geophysical, engineering and economic data. These
estimates may change, having either a negative or positive effect on net
earnings as further information becomes available, and as the economic
environment changes.

    Net Income (Loss) and Funds Flow from Operations

    True generated funds flow from operations of $21.5 million ($0.27 per
diluted unit) for the three months ended September 30, 2008, up 23% from
$17.5 million ($0.22 per diluted unit) from the third quarter of 2007. The
increase in funds flow for the 2008 third quarter compared to 2007 was
primarily the result of improved commodity pricing and operating netbacks for
2008, despite lower sales volumes and higher realized hedging losses. Funds
flow from operations for the third quarter of 2008 decreased 18% from second
quarter 2008 funds flow from operations of $26.3 million. Funds flow from
operations for the nine month period ended September 30, 2008 was $72.0
million ($0.91 per diluted unit), down from the $81.7 million ($1.09 per
diluted unit) for the same period in 2007. This was reflective of higher
commodity prices, offset by lower sales volumes and higher costs in 2008.
    True maintains a commodity price risk management program to provide a
measure of stability to cash distributions and capital expenditures.
Unrealized mark-to-market gains or losses are non-cash adjustments to the
current fair market value of the contract over its entire term and are
included in the calculation of net income (loss).
    True generated a net income of $29.9 million ($0.38 per diluted unit) in
the third quarter of 2008 primarily due to the reversal of significant higher
unrealized mark-to-market, non-cash losses on commodity risk management
contracts recorded in the second quarter of 2008. This compares to a net loss
of $17.0 million ($(0.21) per diluted unit for the same period in 2007. The
net loss for the nine months ended September 30, 2008 was $10.1 million
compared to a net loss of $23.8 million for the same period in 2007.Funds Flow From Operations and Net Income (Loss)

    -------------------------------------------------------------------------
                                  Three months ended       Nine months ended
    ($000s, except per                  September 30,           September 30,
     unit amounts)                  2008        2007        2008        2007
    -------------------------------------------------------------------------

    Funds flow from operations    21,491      17,478      72,028      81,658
      Basic ($/unit)                0.27        0.22        0.91        1.10
      Diluted ($/unit)              0.27        0.22        0.91        1.09

    Net income (loss)             29,939     (17,003)    (10,056)    (23,833)
      Basic ($/unit)                0.38       (0.21)      (0.13)      (0.32)
      Diluted ($/unit)              0.38       (0.21)      (0.13)      (0.32)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Reconciliation of Funds Flow from Operations and Cash Flow from Operating
    Activities

    -------------------------------------------------------------------------
                                  Three months ended       Nine months ended
    ($000s, except per                  September 30,           September 30,
     unit amounts)                  2008        2007        2008        2007
    -------------------------------------------------------------------------

    Funds flow from operations    21,491      17,478      72,028      81,658

    Asset retirement costs
     incurred                       (893)        (32)     (1,605)       (607)

    Change in non-cash
     working capital               8,808      (2,598)     (3,282)    (21,842)
    -------------------------------------------------------------------------
    Cash flow from operating
     activities                   29,406      14,848      67,141      59,209
    -------------------------------------------------------------------------Sales Volumes

    Sales volumes for the three months ended September 30, 2008 averaged
11,263 boe/d as compared to 14,096 boe/d for the same period in 2007,
representing a 20% decrease. Sales volumes for the nine months ended
September 30, 2008 averaged 12,242 boe/d as compared to 16,544 boe/d for the
same period in 2007, representing a 26% decrease. In comparison, sales volumes
for the second quarter of 2008 averaged 11,922 boe/d.
    In addition to natural production decline and minimal 2008 capital
spending, year over year production volumes were also impacted by dispositions
totalling approximately 1,000 boe/d that were closed during the first half of
2008. Additionally, a number of turnaround and maintenance shutdowns were
completed in the third quarter. October field production is approximately
11,700 boe/d. Based on maintenance of current production levels, True remains
on track to meet full year 2008 field production guidance of an average of
12,000 to 12,500 boe/d.Sales Volumes

    -------------------------------------------------------------------------
                                  Three months ended       Nine months ended
                                        September 30,           September 30,
                                    2008        2007        2008        2007
    -------------------------------------------------------------------------

    Natural gas         (mcf/d)   43,715      60,827      47,480      67,364
    -------------------------------------------------------------------------

    Heavy oil          (bbls/d)    2,820       3,001       2,789       3,466
    Light oil and
     condensate        (bbls/d)      760         531       1,088       1,261
    NGLs               (bbls/d)      397         426         452         589
    -------------------------------------------------------------------------
    Total crude oil
     and NGLs          (bbls/d)    3,977       3,958       4,329       5,316
    -------------------------------------------------------------------------
    Total boe/d           (6:1)   11,263      14,096      12,242      16,544
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------During the third quarter of 2008, True drilled or participated in 12
(9.0 net) wells including 3 net natural gas wells, 1 net light oil well, 0.75
net heavy oil, and 1 net disposal well. 3.25 net wells were dry and abandoned.
    For the three months ended September 30, 2008, the weighting towards
natural gas sales averaged 65% compared to 72% in the same period in 2007. For
the nine month period ended September 30, 2008, the weighting towards natural
gas averaged 65% compared to 67% for the same period in 2007. Heavy oil sales
made up 25% of total production for the 2008 third quarter compared to 21% in
the 2007 third quarter. In comparison, heavy oil sales made up 23% of total
production in the second quarter of 2008.
    Sales of natural gas averaged 43.7 mmcf/d for the third quarter of 2008,
compared to 60.8 mmcf/d in the same period of 2007, a decrease of 28%. Crude
oil and NGL sales for the third quarter of 2008 averaged 3,977 bbls/d,
compared to 2007 third quarter average sales of 3,958 bbls/d.Commodity Prices

    Average Commodity Prices

    -------------------------------------------------------------------------
                               Three months ended          Nine months ended
                                     September 30,              September 30,
                           2008     2007  % Change    2008     2007  % Change
    -------------------------------------------------------------------------

    Exchange rate
     (US$/Cdn$)          1.0000   0.9560        5%  0.9980   0.9050       10%

    Natural gas:
    NYMEX (US$/mmbtu)      8.99     6.24       44%    9.67     7.02       38%
    AECO daily index
     (CDN$/Mcf)            7.74     5.14       51%    8.61     6.52       32%
    AECO monthly index
     (CDN$/Mcf)            9.24     6.81       36%    8.57     6.81       26%
    True's average price
     ($/mcf)               8.97     5.44       65%    8.92     6.82       31%
    True's average price
     (including
     hedging(1)) ($/mcf)   7.80     6.19       26%    8.20     7.16       15%

    Crude oil:
    WTI (US$/bbl)        118.28    75.15       57%  100.64    66.19       52%
    Edmonton par -
     light oil ($/bbl)   122.61    80.70       52%  115.85    73.69       57%
    Bow River -
     medium/heavy oil
     ($/bbl)             104.95    55.61       89%   95.53    52.01       84%
    Hardisty Heavy -
     heavy oil ($/bbl)    98.07    47.43      107%   88.23    39.35      124%
    True's average
     prices ($/bbl)
      Light crude oil,
       condensate,
       and NGLs          107.55    76.37       41%   98.85    59.64       66%
      Heavy crude oil     92.51    42.30      119%   84.32    40.17      110%
      Total crude oil
       and NGLs           96.89    50.54       92%   89.49    46.94       91%
      Total crude oil
       and NGLs
       (including
       hedging(1))        77.39    50.26       54%   73.32    47.60       54%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Per unit metrics including hedging include realized gains or losses
        on commodity contracts and exclude unrealized gains or losses on
        commodity contracts.True's natural gas sales are priced with reference to the daily or
monthly AECO indices. During the third quarter of 2008, the AECO daily and
monthly reference price increased by 51% and 36%, respectively, compared to
the same period in 2007. True's average sales price before hedging for the
third quarter of 2008 increased by 65% compared to the same period in 2007.
The higher increase in True's average sale price for the third quarter of 2008
compared to the change in the AECO indices was due to a higher weighting of
sales priced at the monthly index in the period. In comparison, True's third
quarter 2008 natural gas price before hedging was 10% lower than the second
quarter 2008 price of $9.94/mcf. True's natural gas price after including
hedging for the third quarter of 2008 was $7.80/mcf compared to $6.19/mcf for
the same period in 2007.
    The Trust has entered into a natural gas physical delivery sales contract
to sell 5,275 GJ/day at a fixed price of $7.29/GJ and $7.90/GJ for the third
and fourth quarter of 2009, respectively.
    For heavy crude oil, True received an average price before transportation
of $92.51/bbl for the third quarter of 2008, an increase of 119% over prices
in the 2007 period. The Bow River reference price increased by 89% and the
Hardisty Heavy reference price increased by 107% over the same period. The
majority of True's heavy crude oil density ranges between 11 and 16 degrees
API consistent with the Hardisty Heavy reference price. During 2008, the
blending costs for condensate were lower which has also contributed to higher
pricing received. In comparison, True's third quarter 2008 heavy oil price was
7% lower than the second quarter of 2008 price of $99.37/bbl. Earlier in 2008,
a portion of heavy oil sales were being sold through the Bow River Pipeline at
higher pricing, but for September 2008 forward these sales are being delivered
at a more local delivery point; this has resulted in lower heavy oil pricing,
but will be offset by substantively reduced transportation costs.
    For light oil, condensate and NGLs, True recorded an average $107.55/bbl
before hedging during the third quarter of 2008, 41% higher than the average
price received in the same period of 2007. The Edmonton par price increased by
52% over the same period. The average WTI crude oil US dollar based price
increased 57% from the third quarter of 2007 to that in 2008. In comparison,
True's realized price for the third quarter of 2008 decreased 3% from the
second quarter 2008 average price of $110.23/bbl, whereas the Edmonton par
price also decreased by 3%. True's realized price after including hedging was
$40.57/bbl for the third quarter of 2008 compared to $75.22/bbl for the same
period in 2007.

    Revenue

    Revenue before other income and hedging for the three months ended
September 30, 2008 was $71.5 million, 46% higher than the $48.9 million in the
same period in 2007. The higher revenue for the 2008 period was the result of
significantly higher commodity prices, despite lower sales volumes.-------------------------------------------------------------------------
                                  Three months ended       Nine months ended
                                        September 30,           September 30,
    ($000s)                         2008        2007        2008        2007
    -------------------------------------------------------------------------

    Light crude oil, condensate
     and NGLs                     11,455       6,724      41,717      30,118
    Heavy oil                     23,999      11,680      64,425      38,009
    -------------------------------------------------------------------------
    Crude oil and NGLs            35,454      18,404     106,142      68,127
    Natural gas                   36,073      30,455     116,034     125,495
    -------------------------------------------------------------------------
    Total revenue before other    71,527      48,859     222,176     193,622
    Other (1)                        698       1,688       2,156       3,112
    -------------------------------------------------------------------------
    Total revenue before
     royalties and hedging        72,225      50,547     224,332     196,734
    -------------------------------------------------------------------------
    (1) Other revenue primarily consists of processing and other third party
        income.Commodity Price Risk Management

    The Trust has a formal risk management policy which permits management to
use specified price risk management strategies for up to 50% of crude oil,
natural gas and NGL production including fixed price contracts, collars and
the purchase of floor price options and other derivative financial instruments
and physical delivery sales contracts to reduce the impact of price volatility
and ensure minimum prices for a maximum of eighteen months beyond the current
date. The program is designed to provide price protection on a portion of the
Trust's future production in the event of adverse commodity price movement,
while retaining significant exposure to upside price movements. By doing this,
the Trust seeks to provide a measure of stability to cash distributions, as
well as, to ensure True realizes positive economic returns from its capital
developments and acquisition activities. The Trust will continue its hedging
strategies focusing on maintaining sufficient cash flow to fund True's
unitholder distributions and capital program.
    A summary of the financial hedge volumes and average prices by quarter
currently outstanding as of November 6, 2008 is shown in the following tables
(see Note 15 to the consolidated financial statements for a detailed
disclosure of all commodity contracts in place as at November 6, 2008):Crude oil and liquids    Average Volumes (bbls/d)
    -------------------------------------------------------------------------
                                             Q4 2008     Q1 2009     Q2 2009
    -------------------------------------------------------------------------
    Collars                                      674           -           -
    -------------------------------------------------------------------------
    Total bbls/d                                 674           -           -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Average Price (US$/bbl WTI)
    -------------------------------------------------------------------------
                                             Q4 2008     Q1 2009     Q2 2009
    -------------------------------------------------------------------------
    Collar ceiling price                       82.00           -           -
    Collar floor price                         65.00           -           -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Natural gas              Average Volumes (GJ/d)
    -------------------------------------------------------------------------
                                             Q4 2008     Q1 2009     Q2 2009
    -------------------------------------------------------------------------
    Collars                                        -           -           -
    Fixed                                     24,326      10,550      10,550
    -------------------------------------------------------------------------
    Total GJ/d                                24,326      10,550      10,550
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Average Price ($/GJ AECO C)
    -------------------------------------------------------------------------
                                             Q4 2008     Q1 2009     Q2 2009
    -------------------------------------------------------------------------
    Collar ceiling price                           -           -           -
    Collar floor price                             -           -           -
    Fixed                                       6.89        7.74        7.01
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------As of September 30, 2008, the fair value of True's outstanding commodity
contracts is an unrealized asset of $1.5 million and an unrealized liability
of $5.2 million as reflected in the financial statements.
    The following is a summary of the gain (loss) on commodity contracts for
the three and nine month periods ended September 30, 2008 and 2007:Commodity contracts
    -------------------------------------------------------------------------
                               Crude Oil     Natural     Q3 2008     Q3 2007
    ($000s)                    & Liquids         Gas       Total       Total
    -------------------------------------------------------------------------
    Realized cash gain
     (loss) on contracts (1)      (7,136)     (4,695)    (11,831)      4,064
    Unrealized gain (loss)
     on contracts (2)             20,002      29,909      49,911      (2,908)
    -------------------------------------------------------------------------
    Total gain (loss) on
     commodity contracts          12,866      25,214      38,080       1,156
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
                               Crude Oil     Natural     Q3 2008     Q3 2007
    ($000s)                    & Liquids         Gas       Total       Total
    -------------------------------------------------------------------------
    Realized cash gain
     (loss) on contracts (1)     (19,182)     (9,410)    (28,592)      7,090
    Unrealized gain (loss)
     on contracts (2)              6,200         474       6,674         580
    -------------------------------------------------------------------------
    Total gain (loss) on
     commodity contracts         (12,982)     (8,936)    (21,918)      7,670
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Includes the crude oil and natural gas commodity contract premium
        expenses in the 2007 period and the amortization of prior year crude
        oil and natural gas commodity contract premiums of a total
        $0.3 million and $3.7 million, respectively, for the three and nine
        months ended September 30, 2007.
    (2) Unrealized gain (loss) commodity contracts represent non-cash
        adjustments for changes in the fair value of these contracts during
        the period.Royalties

    For the three months ended September 30, 2008, total royalties were
$13.8 million, compared to $9.7 million incurred in the same period in 2007.
Overall royalties as a percentage of revenue (after transportation costs) in
the third quarter of 2008 were 20%, compared with 21% in the same period in
2007. Royalties for the nine months ended September 30, 2008 were
$45.6 million compared to $34.4 million for the same period in 2007. Royalties
were lower by approximately $5.3 million for the nine months ended September
30, 2007 due to the reversal of certain prior period over accruals for light
and heavy crude oil royalties; excluding these adjustments, the average
royalty rate for the nine month period ended September 30, 2007 would have
been 21%.-------------------------------------------------------------------------
    Royalties by Commodity Type   Three months ended       Nine months ended
                                        September 30,           September 30,
    ($000s, except where noted)     2008        2007        2008        2007
    -------------------------------------------------------------------------

    Light crude oil,
     condensate and NGLs           2,893       2,212       9,556       6,749
      $/bbl                        27.16       25.12       22.64       13.36
      Average light crude oil,
       condensate and NGLs
       royalty rate (%)               26          33          23          22

    Heavy Oil                      4,174       1,278      11,806       4,214
      $/bbl                        16.09        4.63       15.45        4.45
      Average heavy oil
       royalty rate (%)               18          11          19          11

    Natural Gas                    6,732       6,237      24,226      23,459
      $/mcf                         1.67        1.01        1.86        1.28
      Average natural gas
       royalty rate (%)               19          21          21          19

    -------------------------------------------------------------------------
                         Total    13,799       9,727      45,588      34,422
    -------------------------------------------------------------------------
                         $/boe     13.32        7.50       13.59        7.62
    -------------------------------------------------------------------------
                 Average total
              royalty rate (%)        20          21          21          18
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Royalties, by Type
    -------------------------------------------------------------------------
                                  Three months ended       Nine months ended
                                        September 30,           September 30,
    ($000s)                         2008        2007        2008        2007
    -------------------------------------------------------------------------
    Crown royalties                6,931       6,499      25,474      19,732
    Indian Oil and
     Gas Canada royalties          2,031         544       5,566       3,855
    Freehold & GORR                4,837       2,684      14,548      10,835
    -------------------------------------------------------------------------
    Total                         13,799       9,727      45,588      34,422
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Expenses
    -------------------------------------------------------------------------
                                  Three months ended       Nine months ended
                                        September 30,           September 30,
    ($000s)                         2008        2007        2008        2007
    -------------------------------------------------------------------------
    Production                    15,494      17,024      48,660      51,774
    Transportation                 2,534       1,671       5,855       4,791
    General and administrative     3,610       4,232      11,872      13,468
    Interest and financing
     charges                       3,318       4,422      11,321      13,542
    Unit-based compensation          660         869       1,089       3,256
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Expenses per boe
    -------------------------------------------------------------------------
                                  Three months ended       Nine months ended
                                        September 30,           September 30,
    ($ per boe)                     2008        2007        2008        2007
    -------------------------------------------------------------------------
    Production                     14.95       13.13       14.51       11.46
    Transportation                  2.45        1.29        1.75        1.06
    General and administrative      3.48        3.26        3.54        2.98
    Interest and financing charges  3.20        3.41        3.37        3.00
    Unit-based compensation         0.64        0.67        0.72        0.72
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------Production Expenses

    For the three months ended September 30, 2008, production expenses
totaled $15.5 million ($14.95/boe), compared to $17.0 million ($13.13/boe)
recorded in the same period in 2007. Production expenses were $48.7 million
($14.51/boe) and $51.8 million ($11.46/boe) for the year to date 2008 and
2007, respectively. In 2008, fuel gas cost associated with steam generation at
the Kerrobert facility added $1.50/boe in the third quarter and $2.01/boe year
to date to corporate operating costs.Production Expenses, by Commodity Type
    -------------------------------------------------------------------------
                                  Three months ended       Nine months ended
                                        September 30,           September 30,
    ($000s, except where noted)     2008        2007        2008        2007
    -------------------------------------------------------------------------
    Light crude oil, condensate
     and NGLs                      2,974       1,524       8,248       6,292
    $/bbl                          27.92       17.31       19.55       12.45

    Heavy oil                      6,612       4,067      17,455      15,084
    $/bbl                          25.49       14.73       22.85       15.93

    Natural gas                    5,908      11,433      22,957      30,398
    $/mcf                           1.47        2.04        1.76        1.65

    -------------------------------------------------------------------------
    Total                         15,494      17,024      48,660      51,774
    -------------------------------------------------------------------------
    $/boe                          14.95       13.13       14.51       11.46
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Total                         15,494      17,024      48,660      51,774
    -------------------------------------------------------------------------
    Processing and other third
     party income(1)                (698)     (1,688)     (2,156)     (3,112)
    -------------------------------------------------------------------------
    Total after deducting
     processing and other
     third party income           14,796      15,336      46,504      48,662
    -------------------------------------------------------------------------
    $/boe                          14.28       11.83       13.86       10.77
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Processing and other third party income is included within petroleum
        and natural gas sales on the statement of income.Transportation

    Transportation expenses are expected to be approximately 2% to 3% of
gross revenues for the 2008 year. For the three and nine months ended
September 30, 2008, transportation expenses averaged approximately 4% and 3%,
respectively. Higher transportation expenses on a percentage basis in the
third quarter of 2008, as compared to that for the year to date average,
reflects primarily higher heavy oil trucking costs for the quarter.

    Operating Netback

    For the third quarter of 2008, corporate field operating netback (before
hedging) was $38.31/boe compared to $15.76/boe in the same period in 2007.
This was the result of increased overall commodity prices, partially offset by
higher transportation, royalties and operating costs experienced in the 2008
period. By comparison, corporate field operating netback (before hedging) for
the second quarter of 2008 was $42.66/boe. After including hedging activities,
the corporate field operating netback for the third quarter of 2008 was
$26.90/boe compared to $18.89/boe in the same period in 2007.Field Operating Netback - Corporate (before hedging)
    -------------------------------------------------------------------------
                                  Three months ended       Nine months ended
                                        September 30,           September 30,
    ($/boe)                         2008        2007        2008        2007
    -------------------------------------------------------------------------
    Sales                          69.03       37.68       66.24       42.87
    Transportation                 (2.45)      (1.29)      (1.75)      (1.06)
    Royalties                     (13.32)      (7.50)     (13.59)      (7.62)
    Production expense            (14.95)     (13.13)     (14.51)     (11.46)
    -------------------------------------------------------------------------
    Field operating netback        38.31       15.76       36.39       22.73
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Field operating netback for natural gas for the third quarter of 2008
increased 168% to $5.50/mcf, compared to $2.05/mcf for the same period in
2007, reflecting stronger natural gas prices experienced, the effects of which
were partially offset by higher royalties and transportation expenses. After
including hedging activities, field operating netback for natural gas for the
third quarter of 2008 was $4.33/mcf compared to $2.79/mcf in the same period
in 2007.

    Field Operating Netback - Natural Gas (before hedging)
    -------------------------------------------------------------------------
                                  Three months ended       Nine months ended
                                        September 30,           September 30,
    ($/mcf)                         2008        2007        2008        2007
    -------------------------------------------------------------------------
    Sales                           8.97        5.44        8.92        6.82
    Transportation                 (0.33)      (0.24)      (0.18)      (0.22)
    Royalties                      (1.67)      (1.11)      (1.86)      (1.28)
    Production expense             (1.47)      (2.04)      (1.76)      (1.65)
    -------------------------------------------------------------------------
    Field operating netback         5.50        2.05        5.12        3.67
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Field operating netback for crude oil, condensate and NGLs averaged
$48.07/bbl for the third quarter of 2008, up 95% compared to $24.71/bbl for
the same period in 2007. This compares to a 41% increase in the crude oil,
condensate and NGLs sales price combined with a lower corresponding increase
in overall expenses over the same period. After including hedging activities,
field operating netback for crude oil and NGLs for the third quarter of 2008
was $28.58/boe compared to $24.44/boe in the same period in 2007.

    Field Operating Netback - Crude Oil, Condensate and NGLs (before hedging)
    -------------------------------------------------------------------------
                                  Three months ended       Nine months ended
                                        September 30,           September 30,
    ($/bbl)                         2008        2007        2008        2007
    -------------------------------------------------------------------------
    Sales                          96.89       50.54       89.49       46.94
    Transportation                 (3.31)      (0.89)      (2.98)      (0.44)
    Royalties                     (19.31)      (9.59)     (18.01)      (7.56)
    Production expense            (26.20)     (15.35)     (21.67)     (14.73)
    -------------------------------------------------------------------------
    Field operating netback        48.07       24.71       46.83       24.21
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------General and Administrative

    Net general and administrative ("G&A") expenses for the three and nine
months ended September 30, 2008 were $3.6 million and $11.9 million,
respectively, compared to $4.2 million and $13.5 million, respectively, for
the same period in 2007. The decrease in the G&A expense for the nine month
period ended September 30, 2008 from the same period in 2007 reflects a
reduction of the number of salaried personnel on staff and other efforts to
reduce costs. The reduction in amounts of capitalized G&A for 2008 is
consistent with a lower capital program. On a per boe basis, G&A expenses for
the three and nine months ended September 30, 2008 were $3.48/boe and
$3.54/boe, respectively compared to $3.26/boe and $2.98/boe, respectively for
the same period in 2007. The increase in G&A on a per boe basis is consistent
with reduced sales volumes experienced in 2008 compared to 2007. By
comparison, G&A expenses for the second quarter of 2008 were $4.14/boe.General and Administrative Expenses
    -------------------------------------------------------------------------
                                  Three months ended       Nine months ended
                                        September 30,           September 30,
    ($000s, except where noted)     2008        2007        2008        2007
    -------------------------------------------------------------------------
    Gross expenses                 4,690       5,551      15,077      17,833
    Capitalized                     (664)       (863)     (1,863)     (2,677)
    Recoveries                      (416)       (456)     (1,342)     (1,688)
    -------------------------------------------------------------------------
    Net expenses                   3,610       4,232      11,872      13,468
    -------------------------------------------------------------------------
    Net expenses, per unit ($/boe)  3.48        3.26        3.54        2.98
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------Interest and Financing Charges

    True recorded $3.3 million of interest and financing charges for the
three months ended September 30, 2008 compared to $4.4 million in the same
period in 2007. For the nine months ended September 30, 2008, interest and
financing charges totaled $11.3 million compared to $13.5 million for the same
period in 2007. True's net debt at September 30, 2008 of $193.8 million
includes the $80.7 million liability portion of convertible debentures,
$116.6 million of bank debt and the net balance of working capital. The
convertible debentures have a maturity date of June 30, 2011.Interest and Financing Charges
    -------------------------------------------------------------------------
                                  Three months ended       Nine months ended
                                        September 30,           September 30,
    ($000s, except where noted)     2008        2007        2008        2007
    -------------------------------------------------------------------------
    Interest and financing
     charges                       3,318       4,422      11,321      13,542
    Interest and financing
     charges ($/boe)                3.20        3.40        3.37        3.00

    Net debt(1) including
     convertible debentures
     at quarter end              193,776     233,853     193,776     233,853
    Debt to periods funds flow
     from operations ratio
     annualized(2)                  2.3x        3.3x        2.0x        2.1x

    Net debt excluding
     convertible debentures
     at quarter end              113,083     154,832     113,083     154,832
    Debt to periods funds flow
     from operations ratio
     annualized(2)                  1.3x        2.2x        1.2x        1.4x
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Net debt includes the net working capital deficiency (excess) before
        short-term commodity contract assets and liabilities and short-term
        future tax assets. Total net debt also includes the liability
        component of convertible debentures and excludes asset retirement
        obligations and the future income tax liability.
    (2) Debt to funds flow from operations ratio is calculated based upon
        annualizing of funds flow from operations for the three and nine
        month periods ended September 30, 2008, respectively.Unit-Based Compensation

    Non-cash unit-based compensation expense for the three and nine month
period ended September 30, 2008 was $0.7 million and $1.1 million,
respectively, compared to $0.9 million and $3.3 million in 2007, respectively.
The decrease in the expense for the nine months ended September 30, 2008
reflects a reduction in the estimated weighted average fair value of incentive
rights granted for more recent options and a reduction to the 2008 expense of
$0.6 million for a reversal of prior year unit-based compensation expense for
2008 forfeitures of unvested incentive rights and reduced incentive rights
being granted in 2008 compared to the 2007 period, offset by $0.5 million of
additional compensation expense for the incentive units voluntarily
surrendered and cancelled in the period.

    Capital Expenditures

    True invested $14.1 million on exploration and development activities
during the third quarter of 2008, compared to $11.3 million in the same period
in 2007. For the nine months ended September 30, 2008, the Trust invested
$26.2 million on exploration and development activities compared to
$72.0 million for the same period in 2007.
    During the third quarter of 2008, True drilled or participated in 12
(9.0 net) wells including 3 net natural gas wells, 1 net light oil well,
0.75 net heavy oil, and 1 net disposal well. 3.25 net wells were dry and
abandoned.Capital Expenditures(1)
    -------------------------------------------------------------------------
                                  Three months ended       Nine months ended
                                        September 30,           September 30,
    ($000s)                         2008        2007        2008        2007
    -------------------------------------------------------------------------
    Lease acquisitions and
     retention                       136         358       1,101       1,860
    Geological and geophysical       322         263         334       3,727
    Drilling and completion
     costs                         5,696       8,716      15,200      57,061
    Facilities and equipment       7,943       1,892       9,569       9,350
    -------------------------------------------------------------------------
      Exploration and
       development                14,097      11,229      26,204      71,998
    Corporate and property
     acquisitions                   (286)        139         337       1,493
    -------------------------------------------------------------------------
      Total capital
       expenditures - cash        13,811      11,368      26,541      73,491
    Property dispositions
     - cash                          (32)     (3,806)    (44,350)    (31,275)
    -------------------------------------------------------------------------
      Total net capital
       expenditures - cash        13,779       7,562     (17,809)     42,216
    -------------------------------------------------------------------------
    Other - non-cash(2)             (144)       (684)     (2,858)       (997)
    -------------------------------------------------------------------------
      Total capital
       expenditures               13,635       6,878     (20,667)     41,219
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Excludes capitalized costs related to asset retirement obligation
        expenditures incurred during the year.
    (2) Other includes current period's asset retirement obligations and
        unit based compensation capitalized. For 2007, it also includes
        a $(0.8 million) initial fair value adjustment for marketable
        securities acquired.The $26.5 million and $73.5 million capital program for the first nine
months of 2008 and 2007, respectively, were financed entirely with funds flow
from operations.
    While True has not finalized its level of capital spending for 2009, the
Trust will continue to take a balanced approach to the priority use of cash
flow between level of distributions and size of its 2009 capital program.
True's first half 2009 capital program is not expected to exceed $20 million.
    True holds an extensive land base. At September 30, 2008, True had
approximately 386,304 net undeveloped acres of land of its total developed and
undeveloped net acreage position of 691,912 net acres in Saskatchewan,
Alberta, and British Columbia.
    On October 1, 2008 True closed the purchase of further working interests
in the Mantario, Saskatchewan area for $4.3 million in cash after adjustments.

    Depletion, Depreciation and Accretion

    Depletion, depreciation and accretion expense for the third quarter of
2008 was $30.0 million ($28.94/boe), compared to the $38.9 million
($29.99/boe) in the same period of 2007, which reflects lower production
volumes combined with reduced carrying costs in the 2008 period as compared to
2007.
    For the three month period ended September 30, 2008, True has included
$52.8 million for future development costs in the depletion calculation and
excluded from the depletion calculation $33.2 million for undeveloped land and
$41.3 million for estimated salvage.Depletion, Depreciation and Accretion Costs

    -------------------------------------------------------------------------
                                  Three months ended       Nine months ended
                                        September 30,           September 30,
    ($000s, except where noted)     2008        2007        2008        2007
    -------------------------------------------------------------------------
    Depletion and Depreciation    29,446      38,347      97,890     130,116
    Accretion                        539         543       1,607       1,581
    -------------------------------------------------------------------------
      Total                       29,985      38,890      99,497     131,697
    -------------------------------------------------------------------------
    Per unit ($/boe)               28.94       29.99       29.66       29.16
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------Ceiling Test

    The Trust calculates a ceiling test quarterly and annually to place a
limit on the aggregate carrying value of its capitalized costs, which may be
amortized against revenues of future periods. The ceiling test is performed in
accordance with the requirements of the Canadian Institute of Chartered
Accountants ("CICA") AcG-16 "Oil and Gas Accounting - Full Cost, a two step
process.
    The Trust performed a ceiling test calculation at September 30, 2008
resulting in undiscounted cash flows from proved reserves and the undeveloped
properties exceeding the carrying value of oil and gas assets. Consequently,
no impairment in oil and gas assets was identified as at September 30, 2008.
    The ceiling test calculation will be updated as at December 31, 2008
based upon the latest available data, including but not limited to an updated
annual external reserve engineering report which incorporates a full
evaluation of reserves and the latest commodity pricing deck. Estimating
reserves is very complex, requiring many judgments based on available
geological, geophysical, engineering and economic data. Changes in these
judgments could have a material impact on the estimated reserves. These
estimates may change, having either a negative or positive effect on net
earnings as further information becomes available and as the economic
environment changes.

    Asset Retirement Obligations

    As at September 30, 2008, the Trust has recorded an Asset Retirement
Obligation ("ARO") of $26.7 million, compared to $27.7 million at
September 30, 2007, for future abandonment and reclamation of the Trust's
properties. For the nine months ended September 30, 2008, the ARO decreased by
$1.7 million total as a result of accretion expense of $1.6 million, and
$1.1 million net changes in estimates and liabilities incurred on development
activities, offset by $2.8 million of liabilities released on dispositions and
$1.6 million of liabilities settled during the year.

    Income Taxes

    For the nine months ended September 30, 2008, the Trust has recorded
capital tax expense of $1.7 million compared to $1.5 million expensed in the
same period of 2007. Capital taxes are based on debt and equity levels of the
Trust at the end of the year in addition to a resource surcharge component of
provincial taxes calculated as a percentage of revenues.
    Future income taxes arise from differences between the accounting and tax
bases of the Trust's assets and liabilities. For the nine months ended
September 30, 2008, the Trust recognized a future income tax recovery of
$13.1 million compared to a recovery of $30.0 million in the same period in
2007.
    Under our current structure, the operating entities make interest and
royalty payments to the Trust, which transfers taxable income to the Trust to
eliminate income subject to corporate and other income taxes in the operating
entities. Under the SIFT legislation (as referred to below), such amounts
transferred to the Trust could be taxable beginning in 2011 as distributions
will no longer be deductible for income tax purposes. At that time, True could
claim discretionary tax deductions in its operating companies, reduce the
income transferred to the Trust, and pay all or a portion of distributions as
a return of capital. Until 2011, under the terms of its trust indenture, the
Trust is required to distribute amounts equal to at least its taxable income.
In the event that the Trust has undistributed taxable income in a taxation
year (prior to 2011), an additional special taxable distribution, subject to
certain withholding taxes for non-resident holders, would be required under
the trust indenture.
    The SIFT legislation is not expected to directly affect our cash flow
levels and distribution policies until 2011 at the earliest.

    Enactment of the Tax on Income Trusts

    On June 22, 2007, the legislation implementing a new tax (the "SIFT tax")
on publicly traded income trusts and limited partnerships, referred to as
"Specified investment flow-through" ("SIFTs") entities (Bill C-52) received
Royal Assent. As a result, the SIFT tax was considered to be enacted for
accounting purposes in June 2007, which resulted in a $1.2 million future
income tax recovery amount being recorded to reflect current temporary
differences between the book and tax basis of assets and liabilities expected
to be remaining in the Trust in 2011. The SIFT tax announcement and the
related future income tax recovery did not affect cash flow or distributions
and is not expected to affect distribution policies until 2011 at the
earliest.
    SIFTs are certain publicly traded income and royalty trusts and limited
partnerships including True. For SIFTs in existence on October 31, 2006 the
SIFT tax will be effective in 2011, unless certain rules related to "undue
expansion" are not adhered to. Under the guidance provided, True can increase
its equity by approximately $737 million between now and 2011 without
prematurely triggering the SIFT tax.
    In June 2008, Bill C-50, which contains legislation to adjust the deemed
provincial component on the tax rate on distributions from income and royalty
trusts expected to apply to the Trust commencing in 2011, received Royal
Assent. Under this legislation, instead of basing the provincial component of
the SIFT tax on a flat rate of 13%, the provincial component will instead be
based on the general provincial corporate income tax rate in each province in
which the SIFT has a permanent establishment. For purposes of calculating this
component of the tax, the general corporate taxable income allocation formula
will be used. Specifically, the Trust's taxable distributions will be
allocated to provinces by taking half of the aggregate of:-  that proportion of the Trust's taxable distributions for the year
       that the Trust's wages and salaries in the province are of its total
       wages and salaries in Canada; and

    -  that proportion of the Trust's taxable distributions for the year
       that the Trust's gross revenues in the province are of its total
       gross revenues in Canada.Under the Bill C-50 legislation, the Trust would be considered to have a
permanent establishment only in Alberta, where the provincial tax rate in 2011
is expected to be 10%.
    On July 14, 2008, the Department of Finance released proposed amendments
(the "Conversion Rules") to the Income Tax Act (Canada) to facilitate the
conversion of existing income trusts into corporations. In general, the
proposed amendments will permit a conversion to be tax deferred for both the
unitholders and the income trust. However, the Conversion Rules provide
alternative approaches to completing a tax deferred conversion. The Department
of Finance requested comments on the Conversion Rules by September 15, 2008,
which may result in amendments to the Conversion Rules. We expect future
technical interpretations and details will further clarify the legislation.
    The True Board of Directors and Management continue to review the impact
of this tax on business strategy as well as the Conversion Rules in
considering alternatives available. At the present time, True believes some or
all of the following actions will or could result due to the enactment of the
SIFT tax:-  If structural or other similar changes are not made, the distribution
       yield net of the SIFT tax in 2011 and beyond to taxable Canadian
       investors will remain approximately the same; however, the
       distribution yield to tax-deferred Canadian investors (RRSPs, RRIFs,
       pension plans, etc.) would fall by an estimated 26.5 percent in 2011
       and 25.0 percent in 2012 and beyond. For U.S. investors, the
       distribution yield net of the SIFT and withholding taxes would fall
       by an estimated 25.3 percent in 2011 and 25.1 percent in 2012 and
       beyond;

    -  A portion of True's cash flow could be allocated to the payment of
       the SIFT tax, or other forms of tax, and would not be available for
       distribution or re-investment;

    -  True could convert to a corporate structure to facilitate investing a
       higher proportion or all of its cash flow in exploration and
       development projects. Such a conversion and change to capital
       programs could result in a significant reduction to or elimination of
       distributions and/or dividends;

    -  True might determine that it is more economic to remain in the trust
       structure, at least for a period of time, and shelter its taxable
       income using discretionary tax deductions and pay all or a portion of
       its distributions on a return of capital basis, likely at a lower
       payout ratio.The Trust is reviewing all organizational structures and alternatives to
minimize the impact of the SIFT tax on our unitholders. While there can be no
assurance that the negative effect of the tax can be minimized or eliminated,
True and its advisors will continue to work diligently on these issues.
    As at September 30, 2008, the operating subsidiaries and the Trust itself
have a total net future income tax liability balance of $51.2 million.
Canadian GAAP requires that a future income tax liability be recorded when the
book value of assets exceeds the balance of tax pools.
    At September 30, 2008, the Trust and operating subsidiaries of the Trust
had approximately $472 million in tax pools available for deduction against
future income as follows:-------------------------------------------------------------------------
                                                       Operating
    ($000s)                                 Trust   subsidiaries       Total
    -------------------------------------------------------------------------
    Intangible resource pools                  15            295         310
    Undepreciated capital cost                  -            148         148
    Loss carryforwards (expire through 2027)    -              8           8
    Unit issue costs                            4              2           6
    -------------------------------------------------------------------------
                                               19            453         472
    -------------------------------------------------------------------------

    Distributions

    Trust unitholders who held their trust units throughout the first nine
months of 2008 received distributions of $0.36 per unit. For the nine months
ended September 30, 2008 the Trust declared distributions as follows:

    -------------------------------------------------------------------------
    ($000s, except per unit amount)                 Distribution
    Nine months ended September 30, 2008                Per Unit       Total
    -------------------------------------------------------------------------

    Distributions declared                                $ 0.36    $ 28,486
    -------------------------------------------------------------------------

    Distribution Paid History(1)

    Distributions comprise a taxable portion and a return of capital portion
(tax deferred). The return of capital component reduces the cost basis of the
trust units held, as described below. For additional information, please see
our website at www.trueenergytrust.com.

    -------------------------------------------------------------------------
                           Distributions
    Calendar Year               per unit  Taxable Portion  Return of Capital
    -------------------------------------------------------------------------

    2005 (two months)(2)         $ 0.480          $ 0.456            $ 0.024
    2006                         $ 2.640          $ 2.033            $ 0.607
    -------------------------------------------------------------------------
    Cumulative to
     Dec. 31, 2006               $ 3.120          $ 2.489            $ 0.631
    -------------------------------------------------------------------------
    2007 year                    $ 0.960          $ 0.960                  -
    -------------------------------------------------------------------------
    Cumulative to
     Dec. 31, 2007               $ 4.080          $ 3.449            $ 0.631
    -------------------------------------------------------------------------
    2008 year to date (nine
     months)(3)                  $ 0.360
    -------------------------------------
    Cumulative to
     September 30, 2008          $ 4.440
    -------------------------------------

    (1) Applies to unitholders who are residents of Canada and hold their
        trust units as capital property.

    (2) Based upon the distributions paid in the 2005 calendar year, after
        the November 2, 2005 Arrangement with TKE Energy Trust.

    (3) It is currently estimated that the approximate taxable portion of
        2008 distributions to Canadian unitholders will be between 90 to
        100%. Any non-taxable amounts will be treated as a tax deferred
        return of capital, or an adjustment to the cost base of the units.
        Actual taxable amounts may vary depending on actual distributions
        and are dependent upon production, commodity prices and funds flow
        from operations experienced throughout the year.

        In consultation with its U.S. tax advisors, True believes that its
        Trust units should be "qualified dividends" for U.S. federal
        purposes. As such, the portion of distributions made during 2008
        that are considered dividends for U.S. federal purposes should
        qualify for the reduced rate of tax applicable to long-term capital
        gains. Unitholders or potential unitholders should consult their own
        legal or tax advisors as to their particular income tax consequences
        of holding True units. Please review our February 27, 2008 press
        release addressing this.

    Monthly Distributions

    Actual distributions paid and declared per trust unit along with relevant
payment dates for 2008 to date are as follows:
    -------------------------------------------------------------------------
                                                                 Distribution
    Ex-distribution Date  Record Date         Payment Date           per unit
    -------------------------------------------------------------------------
    December 27, 2007     December 31, 2007   January 15, 2008      $ 0.08
    January 29, 2008      January 31, 2008    February 15, 2008       0.04
    February 27, 2008     February 29, 2008   March 17, 2008          0.04
    March 27, 2008        March 31, 2008      April 15, 2008          0.04
    April 28, 2008        April 30, 2008      May 15, 2008            0.04
    May 28, 2008          May 30, 2008        June 16, 2008           0.04
    June 26, 2008         June 30, 2008       July 15, 2008           0.04
    July 29, 2008         July 31, 2008       August 15, 2008         0.04
    August 27, 2008       August 29, 2008     September 15, 2008      0.04
    September 26, 2008    September 30, 2008  October 15, 2008        0.04
    October 29, 2008      October 31, 2008    November 17, 2008       0.04
    November 26, 2008(1)  November 28, 2008   December 15, 2008       0.04(2)
    December 29, 2008(1)  December 31, 2008   January 15, 2009        0.04(2)
    -------------------------------------------------------------------------

    (1) Anticipated ex-distribution dates for November and December 2008.
        These dates are subject to change and/or confirmation by the Toronto
        Stock Exchange and will be confirmed by monthly press.
    (2) Subject to confirmation by the board of directors and based on
        True's current commodity prices, hedge positions, anticipated
        production volumes and market conditions and subject to change based
        an actual conditionsIn the nine month period ended September 30, 2008, funding requirements
for distributions declared was 40% of funds flow from operations.

    Foreign Ownership Update

    Based on information from Trust records and information provided by
intermediaries holding Trust units for others, the Trust estimates that, as of
October 17, 2008 approximately 27 percent of unitholders are non-Canadian
residents with the remaining 73 percent being Canadian residents.
    In order that the Trust maintain its status as a "mutual fund trust"
under the Income Tax Act (Canada), certain provisions of the Income Tax Act
(Canada) require that the trust not be established or maintained primarily for
the benefit of non-residents of Canada ("non-residents"). The Trust Indenture
for the Trust provides that if the Trust or its administrator becomes aware
that the activities of the Trust and ownership of Trust Units by non-residents
may threaten the status of the Trust under the Income Tax Act (Canada) as a
"unit trust" or "mutual fund trust", the Trust is authorized to take action as
may be necessary to maintain the status of the Trust as a unit trust and a
mutual fund trust, including the imposition or restrictions on the issuance by
the Trust, or the transfer of any unitholder, of Trust Units to a non-
resident.

    Liquidity and Capital Resources

    Global financial markets have recently experienced severe turmoil. This
economic crisis has spread resulting in a tightening of credit markets
characterized by a decline in liquidity and higher borrowing costs. While the
Trust continues to generate significant cash from operating activities and
currently has $35 million of unutilized credit facilities to support
liquidity, access to capital markets has become constrained and significantly
more expensive. The current global economic environment has also created
volatility in commodity prices, tempered somewhat by the growing US to
Canadian dollar exchange rate. Given the current uncertain economic
conditions, the Trust is reviewing its level of capital spending for 2009 and
will continue to take a balanced approach to the use of cash flows between
distribution levels and the capital program. The Trust will continue to
monitor forecasted debt levels to help ensure that debt covenants are not
exceeded. In addition, the Trust will continue to monitor developments within
the global economic environment to consider the impacts on current or future
lending arrangements.
    Liquidity risk is the risk that The Trust will not be able to meet its
financial obligations as they fall due. The Trust actively manages its
liquidity through daily and longer-term cash, debt and equity management
strategies. Such strategies encompass, among other factors: having adequate
sources of financing available through its bank credit facilities, estimating
future cash generated from operations based on reasonable production and
pricing assumptions, analysis of economic hedging opportunities, maintaining a
balanced approach to the use of cash flows between distribution levels and the
capital program and compliance with debt covenants.
    Credit risk is the risk of financial loss to the Trust if a customer or
counterparty to a financial instrument fails to meet its contractual
obligations, and arises principally from the Trust's trade receivables from
joint venture partners, petroleum and natural gas marketers, and financial
derivative counterparties.
    A substantial portion of the Trust's accounts receivable are with
customers and joint interest partners in the petroleum and natural gas
industry and are subject to normal industry credit risks. The Trust sells
substantially all of its production to eleven primary purchasers under normal
industry sale and payment terms. Purchasers of the Trust's natural gas, crude
oil and natural gas liquids are subject to a periodic internal credit review
to minimize the risk of non-payment. The Trust has continued to closely
monitor and reassess the creditworthiness of its counterparties, including
financial institutions. This has resulted in the Trust reducing or mitigating
its exposures to certain counterparties where it is deemed warranted and
permitted under contractual terms.
    True's net debt as at September 30, 2008 was $193.8 million, representing
$116.6 million outstanding on the credit facility, $80.7 million in
convertible debentures (liability component) and the net balance of working
capital. The convertible debentures have a maturity date of June 30, 2011. Our
calculation of net debt includes the net working capital before short-term
commodity contract assets and liabilities and short-term future income tax
assets. Total net debt also includes the liability component of convertible
debentures and excludes asset retirement obligations and long-term future
income taxes.
    During the nine month period ended September 30, 2008, the Trust has
reduced its net debt by approximately $57 million.
    Combined funding requirements for distributions declared and True's
capital expenditures represented 109% and 76% of funds flow from operations in
the three and nine months ended September 30, 2008, respectively. The excess
funds flow from operations was applied to the repayment of net debt.
    Effective June 27, 2008, True's revolving term credit facility was
renewed and consists of a $15 million demand operating facility provided by
one Canadian bank and a $137 million extendible revolving credit facility
syndicated by two Canadian chartered banks, a Canadian financial institution,
one institutional lender and a U.S. bank. The revolving period on the
revolving term credit facility ends on June 26, 2009, unless extended for a
further 364 day period. Should the facilities not be renewed they convert to
366 day non-revolving facilities on the renewal date. The borrowing base was
renewed effective September 30, 2008 and is currently scheduled for renewal on
March 31, 2009. Further details of the credit facilities are disclosed in
note 6 of the consolidated financial statements. As at September 30, 2008,
there was approximately $35.0 million not drawn under these facilities.
    The Trust does not hold any Asset-Backed Commercial Paper investments. As
a non-operating working interest owner, True has a minor exposure of
approximately $70,000 from oil sales marketed through SemCanada Crude Company,
which filed for CCAA protection on July 22, 2008. True does not have any
exposure to Lehman Brothers, which recently filed for Chapter 11 bankruptcy
protection in the United States.
    On June 15, 2006 the Trust completed a bought deal public offering of
86,250 7.5% convertible unsecured subordinated debentures at a price of $1,000
per debenture for aggregate gross proceeds of $86,250,000. The debentures have
a face value of $1,000 per debenture and a maturity date of June 30, 2011. The
debentures bear interest at an annual rate of 7.50% payable semi-annually on
June 30 and December 31 in each year commencing December 31, 2006. The
debentures are convertible at anytime at the option of the holders into trust
units of the Trust at a conversion price of $16.00 per trust unit. The Trust
will have the right to redeem all or a portion of the debentures at a price of
$1,050 per debenture after June 30, 2009 and on or before June 30, 2010 and at
a price of $1,025 per debenture after June 30, 2010 and before the maturity
date. Upon maturity or redemption of the debentures, the Trust may, subject to
notice and regulatory approval, pay the outstanding principal and premium (if
any) on the debentures in cash or through the issue of additional trust units
at 95% of the weighted average trading price of the trust units.
    In August 2008, the Trust announced approval of the renewal of its normal
course issuer bid ("NCIB") program to repurchase up to 7.8 million of its
outstanding trust units during the period August 28, 2008 through August 27,
2009, subject to certain restrictions. As of October 24, 2008, the Trust has
purchased 550,100 trust units at a weighted average price of $2.80 per trust
unit under the NCIB renewed on August 28, 2008. Of the units purchased,
186,300 were cancelled as of September 30, 2008; the remaining 363,800 trust
units have been or will be subsequently cancelled. This purchase is in
response to True's belief that the current market price for True trust units
does not reflect the underlying value of the Trust and the cancellation of the
above purchased Trust Units will increase the proportionate interest of, and
be advantageous to, all remaining unitholders. Future repurchases will be
dependent on excess cash available after consideration of the Trust's priority
uses of cash and the trading price of the Trust's units.
    As at October 31, 2008, the Trust had outstanding a total of 2,544,498
incentive units exercisable at an average exercise price of $4.30 per unit,
355,380 exchangeable shares (convertible, as at October 31, 2008 into an
aggregate of 346,940 trust units, subject to further adjustments based on
distributions made on trust units), $86.25 million principal amount of
debentures convertible into trust units (at a conversion price of $16.00 per
trust unit) and 78,548,990 trust units. The details of the Trust's unit
incentive rights outstanding for the nine month period ended September 30,
2008 are summarized in note 9(b) of the financial statements.

    Off-Balance Sheet Arrangements

    The Trust has certain lease agreements, including primarily office space
leases, which were entered into in the normal course of operations. All leases
have been treated as operating leases whereby the lease payments are included
in operating expenses or G&A expenses depending on the nature of the lease. No
asset or liability value has been assigned to these leases in the balance
sheet as of September 30, 2008.

    Business Prospects and Fourth Quarter 2008 and 2009 Year Outlook

    The Trust continues to develop its core assets and conduct some
exploration programs utilizing its large inventory of geological prospects. In
addition, the Trust will continue to explore potential acquisition
opportunities. Currently, the Trust's producing properties are located in
Saskatchewan, Alberta and British Columbia.
    The Trust continues to maintain a large undeveloped land base of
approximately 691,912 (386,304 net) acres containing a significant multi-year
drilling inventory.
    True's capital program for the first nine months of 2008 of approximately
$26.5 million compares to a front end loaded 2007 capital program of
approximately $73.5 million in first nine months of 2007. True plans to spend
the balance of its $40 to $45 million 2008 capital expenditure program in the
fourth quarter, including the October 1, 2008 purchase of further working
interests in Mantario.
    Based on maintenance of current production, full year 2008 field
production guidance remains at an average of 12,000 to 12,500 boe/d.
    The current global economic environment has created volatility in
commodity prices, especially with crude oil prices declining to less than 50%
of their recent highs. This has been somewhat mitigated by the widening US to
Canadian dollar exchange rate. Natural gas prices have shown more strength but
have also retreated from those seen earlier in 2008.
    While True has not finalized its level of capital spending for 2009, the
Trust will continue to take a balanced approach to the priority use of cash
flow between level of distributions and size of its 2009 capital program.
True's first half 2009 capital program is not expected to exceed $20 million.
Given the nature of True's lands and their inherent advantage of year round
access, True currently plans to spread its 2009 capital program evenly through
the full year of 2009 to take advantage of reduced service costs during
non-peak times. True will focus on increasing its farm-out activity in
non-core areas. If the 2009 outlook for commodity prices improves, True would
plan to increase its capital spending in third and fourth quarters of 2009
dependant upon cash flow.

    Financial Reporting Update

    Capital disclosures

    The CICA issued a new accounting standard, Section 1535 "Capital
Disclosures", which requires the disclosure of both qualitative and
quantitative information that provides users of financial statements with
information to evaluate the entity's objective, policies and processes for
managing capital. This new section is effective for the Trust beginning
January 1, 2008. Refer to note 15 of the financial statements for additional
disclosure for this new section.

    Financial instruments

    Two new accounting standards were issued by the CICA, Section 3862
"Financial Instruments - Disclosures", and Section 3863 "Financial Instruments
- Presentation". These sections replaced Section 3861 "Financial Instruments -
Disclosure and Presentation" as adopted. The objective of Section 3862 is to
provide users with information to evaluate the significance of the financial
instruments on the entity's financial position and performance, the nature and
extent of risks arising from financial instruments, and how the entity manages
those risks. The provisions of Section 3863 deal with the classification of
financial instruments, related interest, dividends, losses and gains, and the
circumstances in which financial assets and financial liabilities are offset.
These new sections are effective for the Trust beginning January 1, 2008. The
additional disclosures required under these sections are included in note 15
of the financial statements.

    Goodwill and intangible assets

    In February 2008, the CICA issued a new accounting standard, Section 3064
- Goodwill and Intangible Assets, which replaces Section 3062 - Goodwill and
Other Intangible Assets, and Section 3450 - Research and Development costs.
The new section establishes standards for the recognition, measurement and
disclosure of goodwill and intangible assets. The section is effective for the
Trust beginning January 1, 2009. Application of the new section is not
currently expected to have any impact on the Trust's financial statements.

    International Financial Reporting Standards ("IFRS")

    On February 13, 2008 the CICA Accounting Standards Board announced that
Canadian public reporting issuers will be required to report under
International Financial Reporting Standards ("IFRS"), which will replace
Canadian generally accepted accounting principles ("GAAP") for years beginning
on or after January 1, 2011. True is monitoring industry discussion regarding
the replacement of the CICA's Accounting Guideline 16, which is expected to
have major implications for True's current full cost accounting policies.
Currently, we are assessing the effects of adoption and developing a plan
accordingly. We will continue to monitor any changes in the adoption of IFRS
and will update plans as necessary.

    Business Risks and Uncertainties

    The reader is advised that True continues to be subject to various types
of business risks and uncertainties as described in the Management Discussion
and Analysis for the year ended December 31, 2007 or the Trust's Annual
Information Form. In addition, the Trust is also subject to the following
business risks and uncertainties:

    Environmental Regulations and Risks

    All phases of the oil and natural gas business present environmental
risks and hazards and are subject to environmental regulation pursuant to a
variety of federal, provincial and local laws and regulations. Compliance with
such legislation can require significant expenditures and a breach may result
in the imposition of fines and penalties, some of which may be material.
Environmental legislation is evolving in a manner expected to result in
stricter standards and enforcement, larger fines and liability and potentially
increased capital expenditures and operating costs. In 2002, the Government of
Canada ratified the Kyoto Protocol (the "Protocol"), which calls for Canada to
reduce its greenhouse gas emissions to 6% below 1990 emission levels. The
Federal government has introduced legislation aimed at reducing greenhouse gas
emissions using a "intensity based" approach, the specifics of which have yet
to be determined. Bill C-288, which is intended to ensure that Canada meets
its global climate change obligations under the Kyoto Protocol, was passed by
the House of Commons on February 14, 2007. There has been much public debate
with respect to Canada's ability to meet these targets and the Government's
strategy or alternative strategies with respect to climate change and the
control of greenhouse gases. Implementation of strategies for reducing
greenhouse gases whether to meet the limits required by the Protocol or as
otherwise determined could have a material impact on the nature of oil and
natural gas operations, including those of the Trust.
    In Alberta, the reduction emission guidelines outlined the Climate Change
and Emissions Management Amendment Act (the "Act") came into effect July 1,
2007. Alberta facilities emitting more than 100,000 tonnes of greenhouse gases
a year must reduce their emissions intensity by 12 per cent. Industries have
three options to choose from in order to meet the reduction requirements
outlined in the Act, and these are: (a) by making improvement to operations
that result in reductions; (b) by purchasing emission credits from other
sectors or facilities that have emissions below the 100,000 tonne threshold
and are voluntarily reducing their emissions; or (c) by contributing to the
Climate Change and Emissions Management Fund. Pursuant to the Act, March 31,
2008 was the deadline for industries to choose one of these options or a
combination thereof. On April 26, 2007, the Federal Government released its
Action Plan to Reduce Greenhouse Gases and Air Pollution (the "Action Plan"),
also known as ecoACTION which includes the Regulatory Framework for Air
Emissions. This Action Plan covers not only large industry, but regulates the
fuel efficiency of vehicles and the strengthening of energy standards for a
number of energy-using products.
    In January 24, 2008, the Alberta Government announced a new climate
change action plan that will cut Alberta's projected 400 million tonnes of
emissions in half by 2050. This plan is based on three areas: (i) carbon
capture and storage, which will be mandatory for in situ oil sand facilities
that use heavy fuels for steam generation; (ii) energy conservation and
efficiency; and (iii) greening production through increased investment in
clean energy technology, including supporting research on new oil sands
extraction processes, as well as the funding of projects that reduce the cost
of separating CO2 from other emissions supporting carbon capture and storage.
    The Government of Canada and the Province of Alberta released on
January 31, 2008 the final report of the Canada-Alberta ecoENERGY Carbon
Capture and Storage Task Force, which recommends among others:
(i) incorporating carbon capture and storage into Canada's clean air
regulations; (ii) allocating new funding into projects through competitive
process; and targeting research to lower the cost of technology.
    On March 10, 2008, the Government of Canada released "Turning the Corner
- Taking Action to Fight Climate Change" (the "Updated Action Plan") which
provides some additional guidance with respect to the Government's plan to
reduce greenhouse gas emissions by 20% by 2020 and by 60% to 70% by 2050.
Details of the Updated Action Plan are provided in the Trust's Annual
Information Form for the year ended December 31, 2007.
    Given the evolving nature of the debate related to climate change and the
control of greenhouse gases and resulting requirements, it is not currently
possible to predict either the nature of those requirements or the impact on
the Trust and its operations and financial condition.

    Alberta Royalty Regime

    On October 25, 2007, the Alberta Government announced its intent to
increase royalty rates commencing on January 1, 2009. As of December 31, 2007,
the province had not introduced the enabling legislation nor had they provided
enough clarity on a number of issues for the Trust's independent reserves
evaluator, GLJ Petroleum Consultants Ltd. ("GLJ"), to provide a precise
calculation of the net reserves and NPV under the New Royalty Framework
("NRF"). However, in conjunction with the 2007 year-end reserve evaluation,
GLJ did provide analysis of the proposed royalty regime, based on a high and
low sensitivity to the NRF utilizing the Consultants' Consensus Methodology
recommended by the Society of Petroleum Engineers, Calgary Chapter (the
"Consensus Methodology"). Based on public information available when the
Trust's reserves were evaluated, the net present value of future net revenue
of proved and probable reserves based on the high scenario at a 10% discount
rate using the Consultants' Average Forecast Prices would be $8.9 million or
1.5 percent higher and $1.9 million or 0.33% percent higher based on the NRF
for the low scenario, in each case, as compared to the existing royalty rules.
The proposed royalty changes are very sensitive to production rate and natural
gas prices.
    Since the foregoing sensitivity was prepared, the Alberta Government has
announced new royalty incentives for deep, high-cost drilling. The incentives
will apply to oil exploration wells and to both development and exploration
gas wells. This initiative provides some relief to the recently introduced
NRF. On the oil side, a royalty credit of up to $1 million will pertain to
exploration wells drilled below 2,000m. Gas wells drilled below 2,500m qualify
for credits with no distinction for development versus exploration wells
drilled from 2,500m-4,000m. Overall, the deep royalty credits are a modest
positive for the industry with a more significant impact for producers that
target deep and prolific gas wells at a depth greater than 4,000m. The impact
of these new incentives is not expected to be significant to True.
    The majority of True's current Alberta wells are in the 500m to 1,000m
depth range and typically produce at lower rates. The overall impact of the
NRF, as currently announced, is mitigated by the Trust's current Saskatchewan
properties and the lower shallow gas Alberta natural gas rate royalty
production in True's Alberta conventional oil and gas production portfolio.
The NRF will impact future drilling decisions in order for the Trust to
maintain acceptable rates of return on its capital deployed.

    Critical Accounting Estimates

    The reader is advised that the critical accounting estimates, policies,
and practices as described in the Management Discussion and Analysis for the
year ended December 31, 2007 continue to be critical in determining True's
unaudited financial results as at September 30, 2008. Except as described in
note 3 of the attached unaudited interim consolidated financial statements,
there were no changes in accounting policies for the nine month period ended
September 30, 2008

    Legal, Environmental Remediation and Other Contingent Matters

    The Trust reviews legal, environmental remediation and other contingent
matters to both determine whether a loss is probable based on judgment and
interpretation of laws and regulations and determine that the loss can
reasonably be estimated. When the loss is determined, it is charged to
earnings. The Trust's management monitor known and potential contingent
matters and make appropriate provisions by charges to earnings when warranted
by the circumstances.

    Controls and Procedures

    Disclosure Controls and Procedures

    Disclosure controls and procedures have been designed to provide
reasonable assurance that material information relating to the Trust,
including its consolidated subsidiaries, is made known to the Trust's Chief
Executive Officer and Chief Financial Officer by others within those entities,
particularly during the period in which the annual and interim filings are
being prepared.

    Internal Controls over Financial Reporting

    The Trust's Chief Executive Officer and Chief Financial Officer have
designed or caused to be designed under their supervision internal controls
over financial reporting to provide reasonable assurance regarding the
reliability of the Trust's financial reporting and the preparation of
financial statements for external purposes in accordance with the Canadian
GAAP.
    The Trust's Chief Executive Officer and Chief Financial Officer are
required to cause the Trust to disclose herein any change in the Trust's
internal control over financial reporting that occurred during the Trust's
most recent interim period that has materially affected, or is reasonably
likely to materially affect, the Trust's internal control over financial
reporting. No material changes in the Trust's internal control over financial
reporting were identified during the three months ended September 30, 2008,
that has materially affected, or are reasonably likely to materially affect,
the Trust's internal control over financial reporting.
    It should be noted that a control system, including the Trust's
disclosure and internal controls and procedures, no matter how well conceived,
can provide only reasonable, but not absolute, assurance that the objectives
of the control system will be met and it should not be expected that the
disclosure and internal controls and procedures will prevent all errors or
fraud.

    Standardized Distributable Cash

    The Canadian Securities Administrators revised and re-issued in July 2007
National Policy 41-201 "Income Trusts and Other Indirect Offerings", which
includes disclosures regarding distributable cash for Income Trusts. Further,
the Canadian Institute of Chartered Accountants ("CICA") issued the
Interpretive Release "Standardized Distributable Cash in Income Trusts and
Other Flow-Through Entities: Guidance on Preparation and Disclosure" (the
"Release"). In the new guidance, sustainability concepts are discussed and
standardized distributable cash is defined as cash flow from operating
activities less adjustments for productive capacity maintenance, long-term
unfunded contractual obligations and the effect of any foreseeable financing
matters, related to debt covenants, which could impair True's ability to pay
distributions or maintain productive capacity. This Management Discussion and
Analysis is in all material respects in accordance with the recommendations
provided in CICA's Release and NP 41-201.-------------------------------------------------------------------------
                                  Three months ended       Nine months ended
    ($000s, except per unit             September 30,           September 30,
     amounts and percentages)       2008        2007        2008        2007
    -------------------------------------------------------------------------

    Net income (loss)             29,939     (17,003)    (10,056)    (23,833)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cash flow from operating
     activities                   29,406      14,848      67,141      59,209
    Productive capacity
     maintenance(1)              (14,097)    (11,229)    (26,204)    (71,998)
    -------------------------------------------------------------------------

    Standardized distributable
     cash                         15,309       3,619      40,937     (12,789)

    Proceeds on sale of property,
     plant and equipment              32       3,806      44,350      31,275
    Corporate and property
     acquisition and other
     capital expenditures            286        (139)       (337)     (1,493)
    Net proceeds from issue
     of trust units                    -         (11)          -      54,375
    Repurchase of trust units
     under normal course
     issuer bid                     (944)          -      (1,540)          -

    Bank borrowings (debt
     repayment) and working
     capital changes and other    (5,209)     11,857     (54,924)    (16,994)
    -------------------------------------------------------------------------

    Cash Distributions declared    9,474      19,132      28,486      54,374

    Accumulated distributions,
     beginning of period         234,179     176,958     215,167     141,716
    -------------------------------------------------------------------------

    Accumulated distributions,
     end of period               243,653     196,090     243,653     196,090
    -------------------------------------------------------------------------

    Standardized distributable
     cash per unit - basic         $0.19       $0.05       $0.52      $(0.17)

    Standardized distributable
     cash per unit - diluted       $0.19       $0.05       $0.52      $(0.17)
    -------------------------------------------------------------------------

    Standardized distributable
     cash payout ratio(2)           0.62        5.29        0.70         N/A
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Distributions declared per
     unit for outstanding units
     in the period                  0.12        0.24        0.36        0.72

    Accumulated distributions per
     unit, beginning of period      4.32        3.60        4.08        3.12
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Accumulated distributions per
     unit, end of period            4.44        3.84        4.44        3.84
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Excess (shortfall) of net
     income over cash
     distributions declared       20,465     (36,135)    (38,542)    (78,207)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Excess of cash flow from
     operating activities over
     cash distributions declared  19,932      (4,284)     38,655       4,835
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1) Please refer to the discussion of productive capacity maintenance
        below
    (2) Represents cash distributions declared divided by standardized
        distributable cashTrue strives to fund both distributions and maintenance capital primarily
from funds flow from operations. True's 2008 capital budget was initially set
at approximately 40% to 50% of annual funds flow. Property dispositions,
equity issues or additional borrowings may be required from time to time to
fund a portion of the distributions and/or capital expenditures to maintain or
increase productive capacity may be required based on forecast levels of cash
flow, capital efficiency and debt levels.
    Productive capacity is the amount of capital funds required in a period
for an enterprise to maintain its ability to generate future cash flow from
operating activities at a constant level. As commodity prices can be volatile
and short-term variations in production levels are often experienced in the
oil and gas industry, True defines production capacity as production on a
barrel of oil equivalent basis. A quantifiable measure for these short-term
variations is not objectively determinable or verifiable due to various
factors including the inability to distinguish natural production declines
from the effect of production additions resulting from capital and
optimization programs, and the effect of temporary production interruptions.
As a result, the adjustment for productive capacity maintenance in True's
calculation of standardized distributable cash is True's capital expenditures
excluding the cost of any asset acquisition, corporate asset acquisitions or
proceeds of any asset disposition. True believes that its capital programs
based on 40% to 50% of forecasted funds flow including its current view of
True's assets and opportunities and True's outlook for commodity prices and
industry conditions in the medium term, should be sufficient to maintain
True's productive capacity in the medium term. True sets its hurdle rates for
evaluating potential development and optimization projects according to these
parameters. Due to the risks inherent in the oil and natural gas industry,
particularly True's exploration and development activities and inherent
variations in commodity prices, there can be no assurance that capital
programs, whether limited to excess of cash flow over distributions or not,
will be sufficient to maintain or increase True's production levels or cash
flow from operating activities. True's capital expenditures and production can
be impacted by the timing of the capital program and spring break up
associated with certain operating areas of its properties. As True strives to
maintain sufficient credit facilities and appropriate levels of bank debt,
this seasonality is not expected to influence True's distribution policies.
    True's calculation of standardized distributable cash has no adjustment
for long-term unfunded contractual obligations. True's only long-term unfunded
contractual obligation at this time is for asset retirement obligations.
True's abandonment obligations are being funded on an annual basis with cash
flow from operating activities. Cash flow from operating activities, used in
our standardized distributable cash calculation, includes a deduction for
abandonment expenditures incurred in the year. True currently has no financing
restrictions on distributions arising from compliance with its debt covenants.
True regularly monitors its current forecast debt levels to ensure debt
covenants are not exceeded.
    Distributions typically exceed net income as a result of non-cash items
such as unit-based compensation, depletion, depreciation and accretion,
unrealized loss (gain) on commodity contracts, and future income tax expense
(recovery). These non-cash items generally result in a reduction to net
income, with no impact to cash flow from operating activities. Therefore,
distributions will exceed net income in most periods. In the event
distributions exceed cash flow from operating activities and the requirements
of True's capital program, the shortfall will typically be funded by a
combination of available bank facilities, equity or debt issues, or the sale
proceeds from non-core assets.
    The board of directors and management regularly review the level of
distributions. The board considers a number of factors, including expectations
of future current commodity prices, hedge positions, production volumes,
capital expenditure requirements, market conditions, the availability of debt
and equity capital and other factors. As a result of the volatility in
commodity prices, changes in production levels and capital expenditure
requirements, there can be no certainty that True will be able to maintain
current levels of distributions and distributions can and may fluctuate in the
future.-------------------------------------------------------------------------

    ($000s, except ratios)                             To September 30, 2008
    -------------------------------------------------------------------------
    Cumulative distributable cash from operations(1)                  65,235
    Proceeds on sale of property, plant and equipment                100,672
    Corporate and property acquisitions and
     other capital expenditures                                      (20,220)
    Net proceeds from issue of trust units                            54,375
    Proceeds from issue of convertible debentures,
     net of issue costs                                               82,261
    Repurchase of trust units under
     normal course issuer bid                                         (3,198)
    Funding from DRIP                                                 42,909
    Bank borrowings (debt repayment) and
     working capital changes and other                               (78,381)
    -------------------------------------------------------------------------
    Cumulative cash distributions declared(1)                        243,653
    -------------------------------------------------------------------------
    Standardized distributable cash payout ratio(2)                     3.74
    -------------------------------------------------------------------------
    (1) Subsequent to the November 2, 2005 reverse takeover of TKE Energy
        Trust
    (2) Represents cumulative distributions declared divided by cumulative
        standardized distributable cashSensitivity Analysis

    The table below shows sensitivities to funds flow as a result of product
price and operational changes. This is based on actual average prices received
for the third quarter of 2008 and average production volumes of 11,263 boe/d
during that period, as well as the same level of debt outstanding at September
30, 2008. Diluted weighted average trust units is based upon the third quarter
of 2008. These sensitivities are approximations only, and not necessarily
valid under other significantly different production levels or product mixes.
Hedging activities can significantly affect these sensitivities. Changes in
any of these parameters will affect funds flow as shown in the table below:-------------------------------------------------------------------------
                                             Funds Flow           Funds Flow
                                        from Operations      from Operations
                                            (annualized)    Per Diluted Unit
    -------------------------------------------------------------------------
    Sensitivity Analysis                         ($000s)                  ($)
    -------------------------------------------------------------------------
    Change of US $1/bbl WTI                       1,200                 0.02
    Change of $0.10/mcf                           1,300                 0.02
    Change of US $0.01 Cdn/US exchange rate       1,100                 0.01
    Change in prime of 1%                         1,200                 0.02
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Selected Quarterly Consolidated Information

    The following table sets forth selected consolidated financial information
of the Trust for the most recently completed quarters ending at

    -------------------------------------------------------------------------
    2008 - Quarter ended
     (unaudited)
    ($000s, except per
     unit amounts)              March 31     June 30    Sept. 30
    -------------------------------------------------------------------------
    Revenues before royalties
     and hedging                  70,033      82,074      72,225
    Funds flow from
     operations(1)                24,233      26,304      21,491
    Funds flow from operations
     per unit(1)
      Basic                        $0.31       $0.33       $0.27
      Diluted                      $0.30       $0.33       $0.27
    Net income (loss)            (18,621)    (21,374)     29,939
    Net income (loss) per unit
      Basic                       $(0.24)     $(0.27)      $0.38
      Diluted                     $(0.24)     $(0.27)      $0.38
    Net capital
     expenditures (cash)           2,862     (34,450)     13,779
    Distributions declared         9,507       9,505       9,474
    Distributions per unit         $0.12       $0.12       $0.12
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    2007 - Quarter ended
     (unaudited)
    ($000s, except per
     unit amounts)              March 31     June 30    Sept. 30     Dec. 31
    -------------------------------------------------------------------------
    Revenues before royalties
     and hedging                  71,196      74,991      50,547      61,756
    Funds flow from
     operations(1)                29,988      34,192      17,478      19,514
    Funds flow from operations
     per unit(1)
      Basic                        $0.43       $0.47       $0.22       $0.25
      Diluted                      $0.42       $0.45       $0.22       $0.25
    Net income (loss)             (8,571)      1,741     (17,003)       (434)
    Net income (loss) per unit
      Basic                       $(0.12)      $0.02      $(0.21)     $(0.01)
      Diluted                     $(0.12)      $0.02      $(0.21)     $(0.01)
    Net capital
     expenditures (cash)          27,915       6,739       7,562      14,828
    Distributions declared        16,866      18,376      19,132      19,077
    Distributions per unit         $0.24       $0.24       $0.24       $0.24
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    2006 - Quarter ended
     (unaudited)
    ($000s, except per
     unit amounts)              March 31     June 30    Sept. 30     Dec. 31
    -------------------------------------------------------------------------
    Revenues before royalties
     and hedging                  46,396      43,004      54,263      77,250
    Funds flow from
     operations(1)                18,995      16,386      23,225      31,785
    Funds flow from operations
     per unit(1)
      Basic                        $0.52       $0.44       $0.52       $0.45
      Diluted                      $0.52       $0.42       $0.50       $0.44
    Net income (loss)              3,259      12,243       1,652    (250,718)
    Net income (loss) per unit
      Basic                        $0.09       $0.43       $0.04      $(3.58)
      Diluted                      $0.09       $0.42       $0.04      $(3.58)
    Net capital
     expenditures (cash)          22,561      (7,080)     46,095      29,922
    Distributions declared        26,150      27,771      36,846      33,588
    Distributions per unit         $0.72       $0.72       $0.72       $0.48
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Refer to "Non-GAAP Measures" in respect of the term "funds flow from
        operations" and "funds flow from operations per unit".



    TRUE ENERGY TRUST
    CONSOLIDATED BALANCE SHEETS
    As at September 30 and December 31 (unaudited)
    -------------------------------------------------------------------------

    ($000s)                                                 2008        2007
    -------------------------------------------------------------------------

    ASSETS
    Current assets
      Accounts receivable                              $  39,177   $  48,522
      Marketable securities (note 4)                         470         850
      Deposits and prepaid expenses                        6,453       6,096
      Capital taxes recoverable                              266         626
      Commodity contract asset (note 15)                   1,535       1,061
      Future income taxes (note 12)                        1,100       3,116
                                                      -----------------------
                                                          49,001      60,271
    Property, plant and equipment (note 5)               703,029     819,981
                                                      -----------------------
    Total assets                                       $ 752,030   $ 880,252
                                                      -----------------------
                                                      -----------------------

    LIABILITIES
    Current liabilities
      Accounts payable and accrued liabilities          $ 39,700   $  52,188
      Distribution payable to unitholders                  3,155       6,337
      Commodity contract liability (note 15)               5,204      11,404
                                                      -----------------------
                                                          48,059      69,929
    Long-term debt (note 6)                              116,591     168,475
    Convertible debentures                                80,693      79,407
    Asset retirement obligations (note 7)                 26,702      28,373
    Future income taxes (note 12)                         52,326      67,366
                                                      -----------------------
    Total liabilities                                    324,371     413,550
                                                      -----------------------

    NON-CONTROLLING INTEREST
      Exchangeable shares of subsidiary (note 8)           3,538       3,922

    UNITHOLDERS' EQUITY
      Unitholders' capital (note 9)                      921,411     925,573
      Equity component of convertible debentures           5,119       5,119
      Contributed surplus (note 10)                       23,822      19,454
      Accumulated other comprehensive income                (323)          -
      Deficit                                           (525,908)   (487,366)
                                                      -----------------------
    Total unitholders' equity                            424,121     462,780
                                                      -----------------------
    Total liabilities and unitholders' equity          $ 752,030   $ 880,252
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying selected notes to the consolidated financial statements.



    TRUE ENERGY TRUST
    CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)
    For the three and nine months ended September 30 (unaudited)

                                  Three months ended       Nine months ended
                                        September 30,           September 30,
    ($000s)                         2008        2007        2008        2007
    -------------------------------------------------------------------------

    REVENUES
      Petroleum and natural
       gas sales              $   72,225  $   50,547  $  224,332  $  196,734
      Royalties                  (13,799)     (9,727)    (45,588)    (34,422)
      Gain (loss) on commodity
       contracts (note 15)        38,080       1,156     (21,918)      7,670
                              -----------------------------------------------
                                  96,506      41,976     156,826     169,982

    EXPENSES
      Production                  15,494      17,024      48,660      51,774
      Transportation               2,534       1,671       5,855       4,791
      General and
       administrative              3,610       4,232      11,872      13,468
      Interest and financing
       charges                     3,318       4,422      11,321      13,542
      Unit-based compensation
       (notes 9 and 10)              660         869       1,089       3,256
      Depletion, depreciation
       and accretion              29,985      38,890      99,497     131,697
      Special meeting costs
       (note 13)                       -           -           -       3,805
                              -----------------------------------------------
                                  55,601      67,108     178,294     222,333

    INCOME (LOSS) BEFORE TAXES    40,905     (25,132)    (21,468)    (52,351)

    TAXES
      Capital taxes                  588         442       1,702       1,533
      Future income taxes
       (recovery)                 10,245      (8,501)    (13,071)    (29,957)
                              -----------------------------------------------
                                  10,833      (8,059)    (11,369)    (28,424)

    NET INCOME (LOSS) BEFORE
     NON-CONTROLLING INTEREST     30,072     (17,073)    (10,099)    (23,927)

      Non-controlling interest       133         (70)        (43)        (94)
                              -----------------------------------------------
                              -----------------------------------------------

    NET INCOME (LOSS)             29,939     (17,003)    (10,056)    (23,833)
                              -----------------------------------------------

    Net changes in cash flow
     hedges (net of tax of
     $0.6 million and
     $1.8 million,
     respectively)                     -        (138)          -      (3,703)
    Unrealized loss on available
     for sale marketable
     securities (net of tax
     recovery of $0.06 million)
      (note 4)                      (323)          -        (323)          -
                              -----------------------------------------------
                                    (323)       (138)       (323)     (3,703)

    COMPREHENSIVE INCOME
     (LOSS)                   $   29,616  $  (17,141) $  (10,379) $  (27,536)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net income (loss) per
     trust unit
      Basic                   $     0.38  $    (0.21) $    (0.13) $    (0.32)
      Diluted                 $     0.38  $    (0.21) $    (0.13) $    (0.32)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying selected notes to the consolidated financial statements.



    TRUE ENERGY TRUST
    CONSOLIDATED STATEMENTS OF UNITHOLDERS' EQUITY
    For the three and nine months ended September 30 (unaudited)

                                  Three months ended       Nine months ended
                                        September 30,           September 30,
    ($000s)                         2008        2007        2008        2007
    -------------------------------------------------------------------------

    UNITHOLDERS' CAPITAL
      Balance, beginning
       of period              $  924,158  $  931,336  $  925,573  $  876,904
      Issued for cash (net
       of issue costs of
       $3.1 million)                   -         (11)          -      54,375
      Repurchased under
       normal course issuer
       bid                        (2,926)          -      (4,503)          -
      Exchangeable shares
       converted                     179          85         341         131
                              -----------------------------------------------
      Balance, end of period     921,411     931,410     921,411     931,410
                              -----------------------------------------------

    EQUITY COMPONENT OF
     CONVERTIBLE DEBENTURES
                              -----------------------------------------------
      Balance, beginning and
       end of period               5,119       5,119       5,119       5,119
                              -----------------------------------------------

    CONTRIBUTED SURPLUS
      Balance, beginning of
       period                     21,158      15,407      19,454      12,818
      Unit-based compensation
       expense (note 9 and 10)       364         948       1,529       3,537
      Incentive units
       voluntarily surrendered       466                     466
      Reversal of prior period
       unit-based compensation
       expense for forfeitures
       of unvested incentive
       units                        (148)          -        (590)          -
      Adjustment for repurchase
       of units under normal
       course issuer bid           1,982           -       2,963           -
                              -----------------------------------------------
      Balance, end of period      23,822      16,355      23,822      16,355
                              -----------------------------------------------

    DEFICIT
      Balance, beginning of
       period                   (546,373)   (431,720)   (487,366)   (389,745)
      Net income (loss)           29,939     (17,003)    (10,056)    (23,833)
      Impact of changes in
       accounting policy for
       financial instruments
       (net of tax of
       $0.05 million)(1)               -           -           -          97
      Distributions declared      (9,474)    (19,132)    (28,486)    (54,374)
                              -----------------------------------------------
      Balance, end of period    (525,908)   (467,855)   (525,908)   (467,855)
                              -----------------------------------------------

    ACCUMULATED OTHER
     COMPREHENSIVE INCOME
      Balance, beginning of
       period                          -         184           -           -
      Impact of new cash flow
       hedge accounting
       standards (net of tax
       of $1.8 million)(1)             -           -           -       3,749
      Reclassification to
       earnings of net hedging
       gains on commodity
       contracts (net of tax
       of $0.6 million and
       $1.8 million,
       respectively)                            (138)          -      (3,703)
      Unrealized loss on
       available for sale
       marketable securities
       (net of tax recovery of
       $0.06 million)               (323)          -        (323)          -
                              -----------------------------------------------
      Balance, end of period        (323)         46        (323)         46
                              -----------------------------------------------

    -------------------------------------------------------------------------
    TOTAL UNITHOLDERS'
     EQUITY                   $  424,121  $  485,075  $  424,121  $  485,075
    -------------------------------------------------------------------------

    (1) Represents the January 1, 2007 transitional adjustments on adoption
        of the CICA handbook sections 1530, 3251, 3855 and 3865.

    See accompanying selected notes to the consolidated financial statements.



    TRUE ENERGY TRUST
    CONSOLIDATED STATEMENTS OF CASH FLOWS
    For the three and nine months ended September 30 (unaudited)

                                  Three months ended       Nine months ended
                                        September 30,           September 30,
    ($000s)                         2008        2007        2008        2007
    -------------------------------------------------------------------------

    Cash provided by (used in):
    CASH FLOW FROM OPERATING
     ACTIVITIES

    Net income (loss)         $   29,939  $  (17,003) $  (10,056) $  (23,833)

    Items not involving cash:
      Non-controlling
       interest (note 8)             133         (70)        (43)        (94)
      Depletion, depreciation
       and accretion              29,985      38,890      99,497     131,697
      Unit-based compensation
       (notes 9 and 10)              660         869       1,089       3,256
      Unrealized loss (gain)
       on commodity contracts
       (note 15)                 (49,911)      2,908      (6,674)       (580)
      Accretion on convertible
       debentures                    440         385       1,286       1,169
      Future income taxes
       (recovery) (note 12)       10,245      (8,501)    (13,071)    (29,957)
                              -----------------------------------------------
                                  21,491      17,478      72,028      81,658
      Asset retirement costs
       incurred                     (893)        (32)     (1,605)       (607)
      Change in non-cash working
       capital (note 11)           8,808      (2,598)     (3,282)    (21,842)
                              -----------------------------------------------
                                  29,406      14,848      67,141      59,209

    CASH FLOW FROM (USED IN)
     FINANCING ACTIVITIES
      Increase (decrease) in
       bank debt                  (8,867)     17,059     (51,884)      2,328
      Obligations under capital
       lease                           -           -           -        (111)
      Issue of trust units
       for cash                        -           -           -      57,523
      Unit issue costs                 -         (11)          -      (3,148)
      Repurchase of trust units
       under normal course
       issuer bid                   (944)          -      (1,540)          -
      Distributions declared      (9,474)    (19,132)    (28,486)    (54,374)
                              -----------------------------------------------
                                 (19,285)     (2,084)    (81,910)      2,218
      Change in non-cash
       working capital
       (note 11)                    (207)       (261)     (3,317)     (2,074)
                              -----------------------------------------------
                                 (19,492)     (2,345)    (85,227)        144

    CASH FLOW FROM (USED IN)
     INVESTING ACTIVITIES
      Additions to property,
       plant and equipment       (13,811)    (11,368)    (26,541)    (73,491)
      Proceeds on sale of
       property, plant and
       equipment                      32       3,806      44,350      31,275
      Purchase of marketable
       securities (note 4)             -         (50)          -         (50)
                              -----------------------------------------------
                                 (13,779)     (7,612)     17,809     (42,266)
      Change in non-cash
       working capital
       (note 11)                   3,865      (4,891)        277     (17,087)
                              -----------------------------------------------
                                  (9,914)    (12,503)     18,086     (59,353)

      Change in cash                   -           -           -           -

      Cash, beginning of
       period                          -           -           -           -
    -------------------------------------------------------------------------

      Cash, end of period     $        -  $        -  $        -  $        -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying selected notes to the consolidated financial statements.



    SELECTED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

    September 30, 2008 and 2007 (unaudited)
    -------------------------------------------------------------------------

    1.  STRUCTURE OF THE TRUST

        True Energy Trust ("True" or the "Trust") is an open-ended,
        unincorporated investment trust governed by the laws of the Province
        of Alberta.

        The purpose of the Trust is to indirectly explore for, develop and
        hold interests in petroleum and natural gas properties, through
        investments in securities of subsidiaries and net profits interests
        in oil and natural gas properties. The business of the Trust is
        carried on by True Energy Inc. and its indirect wholly owned
        subsidiary True Energy Peru S.A.C. The Trust owns, directly and
        indirectly, 100% of the common shares, (excluding the exchangeable
        shares - see note 8) of True Energy Inc. and True Energy Peru S.A.C.
        The activities of True Energy Inc. are financed through interest
        bearing notes from the Trust and third party debt.

    2.  SIGNIFICANT ACCOUNTING POLICIES

        The interim consolidated financial statements of the Trust have been
        prepared by management in accordance with generally accepted
        accounting policies in Canada. The unaudited interim consolidated
        financial statements have been prepared following the same accounting
        policies and methods of computation as the consolidated financial
        statements for the fiscal year ended December 31, 2007, except as
        described in note 3. The interim consolidated financial statement
        note disclosures do not include all of those required by Canadian
        generally accepted accounting principles ("GAAP") applicable for
        annual financial statements. Accordingly, the interim consolidated
        financial statements should be read in conjunction with the
        consolidated financial statements and the notes thereto as at and for
        the year ended December 31, 2007.

        Certain prior period comparative figures have been restated to
        conform to the current year's presentation.

    3.  CHANGES IN ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS

        Effective January 1, 2008, the Trust adopted the following new
        accounting standards:

        a. Capital disclosures

           The CICA issued a new accounting standard, Section 1535 "Capital
           Disclosures", which requires the disclosure of both qualitative
           and quantitative information that provides users of financial
           statements with information to evaluate the entity's objective,
           policies and processes for managing capital. This new section is
           effective for the Trust beginning January 1, 2008. Refer to
           note 15 for additional disclosure for this new section.

        b. Financial instruments

           Two new accounting standards were issued by the CICA, Section 3862
           "Financial Instruments - Disclosures", and Section 3863 "Financial
           Instruments - Presentation. These sections replace Section 3861
           "Financial Instruments - Disclosure and Presentation" and are
           effective for the Trust beginning January 1, 2008. The objective
           of Section 3862 is to provide users with information to evaluate
           the significance of the financial instruments on the entity's
           financial position and performance, the nature and extent of risks
           arising from financial instruments, and how the entity manages
           those risks. The provisions of Section 3863 deal with the
           classification of financial instruments, related interest,
           dividends, losses and gains, and the circumstances in which
           financial assets and financial liabilities are offset. The
           additional disclosures required under these sections are included
           in note 15.

        Goodwill and intangible assets

        In February 2008, the CICA issued a new accounting standard, Section
        3064 - Goodwill and Intangible Assets, which replaces Section 3062 -
        Goodwill and Other Intangible Assets, and Section 3450 - Research and
        Development costs. The new section establishes standards for the
        recognition, measurement and disclosure of goodwill and intangible
        assets. The section is effective for the Trust beginning January 1,
        2009. Application of the new section is not currently expected to
        have any impact on the Trust's financial statements.

        International Financial Reporting Standards ("IFRS")

        On February 13, 2008 the CICA Accounting Standards Board announced
        that Canadian public reporting issuers will be required to report
        under International Financial Reporting Standards ("IFRS"), which
        will replace Canadian generally accepted accounting principles for
        years beginning on or after January 1, 2011. Currently, we are
        assessing the effects of adoption and developing a plan accordingly.
        We will continue to monitor any changes in the adoption of IFRS and
        will update plans as necessary.

    4.  MARKETABLE SECURITIES

        The Trust's investment in Veraz Petroleum Ltd. Is classified as
        available-for-sale and has been recorded at fair value. Changes in
        the fair value of the marketable securities are recorded net of the
        income tax effect to other comprehensive income.

    5.  PROPERTY, PLANT AND EQUIPMENT

        ($000s)
        ---------------------------------------------------------------------
                                                    Accumulated
                                                      depletion
                                                            and          Net
        September 30, 2008                   Cost  depreciation   book value
        ---------------------------------------------------------------------
        Petroleum and natural gas
         properties                   $ 1,351,311   $   650,421  $   700,890
        Office furniture and
         equipment                          3,938         1,799        2,139
        ---------------------------------------------------------------------
                                      $ 1,355,249   $   652,220  $   703,029
        ---------------------------------------------------------------------

        December 31, 2007
        ---------------------------------------------------------------------
        Petroleum and natural gas
         properties                   $ 1,370,219   $   552,899  $   817,320
        Office furniture and
         equipment                          4,092         1,431        2,661
        ---------------------------------------------------------------------
                                      $ 1,374,311   $   554,330  $   819,981
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        The Trust has included $52.8 million (2007: $36.9 million) for future
        development costs and excluded $33.2 million (2007: $38.4 million)
        for undeveloped land and $41.3 million (2007: $46.9 million) for
        estimated salvage from the depletion calculation during the nine
        month period ended September 30, 2008.

        For the nine month period ended September 30, 2008, the Trust
        capitalized $1.8 million of general and administrative expenses and
        $0.4 million, including the future tax effect thereon of
        $0.1 million, of unit-based compensation expense directly related to
        exploration and development activities.

    6.  LONG-TERM DEBT

        As of June 27, 2008, the credit facility was renewed and consists of
        a $15 million demand operating facility provided by one Canadian bank
        and $137 million extendible revolving term credit facility syndicated
        by two Canadian chartered banks, a Canadian financial institution,
        one institutional lender and a U.S. bank. Amounts borrowed under the
        credit facility bear interest at a floating rate based on the
        applicable Canadian prime rate, U.S. base rates, LIBOR rates, plus
        between 0.10% and 2.05%, depending on the types of borrowings and the
        Trust's debt to cash flow ratio. Security is provided by a
        $400 million debenture containing a first ranking security interest
        on all of the Trust's assets. The credit facility is secured against
        all the assets of True Energy Inc., the Trust and all material
        subsidiaries. True has provided a negative pledge and undertaking to
        provide fixed charges over major petroleum and natural gas reserves
        in certain circumstances. A standby fee is charged on between 0.150%
        and 0.400% on the undrawn portion of the facility, depending on the
        Trust's debt to cash flow ratio.

        As at September 30, 2008, there was $9.6 million outstanding under
        the operating facility and $107 million outstanding under the
        revolving term credit facility. As at September 30, 2008, there was
        approximately $35.4 million, not drawn under the existing facilities.

        The revolving period on the new revolving term credit facility ends
        on June 26, 2009, unless extended for a further 364 day period.
        Should the facilities not be renewed they convert to 366 day
        non-revolving term facilities on the renewal date. The borrowing base
        was renewed effective September 30, 2008 and is currently scheduled
        for renewal on March 31, 2009.

        Payment will not be required under the revolving term facility for
        more than 365 days from the balance sheet date as at September 30,
        2008 as there is sufficient availability under the revolving term
        credit facility to also cover the operating facility and, as such,
        the entire credit facility has been classified as long-term.

    7.  ASSET RETIREMENT OBLIGATIONS

        The Trust's asset retirement obligations result from net ownership
        interests in petroleum and natural gas assets including well sites,
        gathering systems and processing facilities. The Trust estimates the
        total undiscounted amount of cash flows required to settle its asset
        retirement obligations is approximately $66.9 million which will be
        incurred between 2008 and 2053. A credit-adjusted risk-free rate of
        8 percent and an inflation rate of 2 percent were used to calculate
        the fair value of the asset retirement obligation.

        ---------------------------------------------------------------------
        ($000s)                        September 30, 2008  December 31, 2007
        ---------------------------------------------------------------------
        Asset retirement obligation,
         beginning of period                     $ 28,373           $ 26,605
        Liabilities incurred on
         development activities                        53                433
        Changes in prior period
         estimates                                  1,052                960
        Liabilities released on
         dispositions                              (2,778)              (927)
        Liabilities settled during
         the year                                  (1,605)              (835)
        Accretion expense                           1,607              2,137
        ---------------------------------------------------------------------
        Asset retirement obligation,
         end of period                           $ 26,702           $ 28,373
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    8.  EXCHANGEABLE SHARES OF SUBSIDIARY / NON-CONTROLLING INTEREST

        ---------------------------------------------------------------------
                             September 30, 2008         December 31, 2007
                               Number       Amount       Number       Amount
                                            ($000s)                   ($000s)
        ---------------------------------------------------------------------
        Balance, beginning
         of period            390,276  $     3,922      403,536  $     4,153
        Non-controlling
         interest expense
         (recovery)                 -          (43)           -          (95)
        Exchanged for
         trust units          (34,896)        (341)     (13,260)        (136)
        ---------------------------------------------------------------------
        Balance, end of
         period               355,380  $     3,538      390,276  $     3,922
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        The exchange ratio is calculated monthly based on the five day
        weighted average trust unit trading price preceding the monthly
        effective date and at September 30, 2008 was 0.95853. The
        exchangeable shares are not eligible for cash distributions; however
        cash distributions will increase the exchange ratio.

    9.  UNITHOLDERS' CAPITAL

        a. Trust Units
           ------------------------------------------------------------------
                             September 30, 2008         December 31, 2007
                               Number       Amount       Number       Amount
                                            ($000s)                   ($000s)
           ------------------------------------------------------------------
           Balance,
            beginning
            of period      79,216,046  $    925,573  70,275,703  $   876,904
           Issued for cash
            (net of issue
            costs of
            $3.1 million)           -             -   9,430,000       54,375
           Repurchased
            under normal
            course issuer
            bid              (385,500)       (4,503)   (500,000)      (5,842)
           Exchangeable
            shares
            converted          32,144           341      10,343          136
           ------------------------------------------------------------------
           Balance, end of
            period          78,862,690 $   921,411   79,216,046  $   925,573
           ------------------------------------------------------------------
           ------------------------------------------------------------------

           In August 2008, the Trust announced approval of the renewal of its
           normal course issuer bid ("NCIB") program to repurchase up to
           7.8 million of its outstanding trust units during the period
           August 28, 2008 through August 27, 2009, subject to certain
           restrictions. As of October 24, 2008, the Trust has purchased
           550,100 trust units at a weighted average price of $2.80 per trust
           unit under the NCIB renewed on August 28, 2008. Of the units
           purchased, 186,300 were cancelled as of September 30, 2008; the
           remaining 363,800 trust units have been or will be subsequently
           cancelled.

        b. Trust Unit Incentive Plan

           The following tables summarize information regarding trust unit
           incentive rights for the nine month period ended
           September 30, 2008

           Unit Rights Continuity
           ------------------------------------------------------------------
                                               Weighted Average
                                               Exercise Price(a)      Number
           ------------------------------------------------------------------
           Balance, December 31, 2007                   $  9.18    5,931,997
           Granted                                      $  3.89      289,500
           Forfeited(b)                                 $ 11.55   (3,682,331)
           ------------------------------------------------------------------
           Balance, September  30, 2008                 $  4.34    2,539,166
           ------------------------------------------------------------------
           (a) Exercise prices reflect grant prices less reduction in
               exercise prices.
           (b) Total forfeited in the nine month period ended September 30,
               2008 includes 2,148,750 incentive units which were voluntarily
               surrendered by existing employees, directors, and consultants
               of the Trust and were cancelled in July 2008.

    Unit Rights Outstanding, September 30, 2008
    -------------------------------------------------------------------------
                                  Outstanding                 Exercisable

                                        Weighted
                                         Average
                                        Exercise  Weighted          Exercise
    Exercise                               Price   Average             Price
    Price         Exercise                Net of Remaining            Net of
    Before           Price         At      Price    Contr-       At    Price
    Price           Net of   Sept. 30,     Redu-   actual  Sept. 30,   Redu-
    Reductions  Reductions       2008     ctions     Life      2008   ctions
    -------------------------------------------------------------------------
    $ 2.92      $ 2.59      1,043,500     $ 2.86      4.3         -        -
     - $ 4.07    - $ 4.41
    $ 4.98      $ 4.39      1,470,666     $ 5.16      3.6   513,314   $ 5.16
     - $ 6.70    - $ 5.69
    $20.40      $17.07         25,000     $17.07      2.2    25,000   $17.07
     - $20.40    - $17.07
    -------------------------------------------------------------------------
    $ 2.92      $ 2.59      2,539,166     $4.34       3.9   538,314   $ 5.71
     - $20.40    - $17.07
    -------------------------------------------------------------------------

    10. CONTRIBUTED SURPLUS

        ---------------------------------------------------------------------
        ($000s)                                  September 30,   December 31,
                                                         2008           2007
        ---------------------------------------------------------------------
        Balance, beginning of period                 $ 19,454       $ 12,818
        Unit-based compensation expense                 1,529          4,249
        Incentive units voluntarily surrendered           466              -
        Reversal of prior period unit-based
         compensation expense for forfeitures of
         unvested incentive units                        (590)        (1,797)
        Adjustment for repurchase of units under
         NCIB                                           2,963          4,184
        ---------------------------------------------------------------------
        Balance, end of period                       $ 23,822       $ 19,454
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Unit-based Compensation Expense

        During the nine months ended September 30, 2008, the Trust granted
        289,500 unit incentive rights to employees. During the nine months
        ended September 30, 2008, the Trust recorded unit-based compensation
        of $1.4 million, of which $0.03 million was capitalized to property,
        plant and equipment.

        The fair values of all incentive rights granted are estimated on the
        date of grant using the Black-Scholes option-pricing model. The
        weighted average fair market value of incentive rights granted during
        the nine month period ended September 30, 2008 and the assumptions
        used in their determination are as noted below:

        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        Assumptions:
          Risk free interest rate (%)                                      3
          Expected life (years)                                            5
          Expected volatility (%)                                         26
        ---------------------------------------------------------------------
        Results:
          Weighted average fair value of each incentive right
           granted                                                    $ 1.12
        ---------------------------------------------------------------------

    11. SUPPLEMENTAL CASH FLOW INFORMATION

        Cash Interest and Taxes Paid
        ---------------------------------------------------------------------
                                Three months ended         Nine months ended
                                      September 30,             September 30,
        ($000s)                  2008         2007         2008         2007
        ---------------------------------------------------------------------

        Cash paid:
          Interest        $     1,406  $     3,555  $     9,491  $    12,284
          Taxes (net of
           refunds)       $       811  $       219  $     1,342  $     3,978
        ---------------------------------------------------------------------

        Change in Non-cash Working Capital
        ---------------------------------------------------------------------
                                Three months ended         Nine months ended
                                      September 30,             September 30,
        ($000s)                  2008         2007         2008         2007
        ---------------------------------------------------------------------
        Changes in non-cash
         working capital
         items:
          Accounts
           receivable     $    14,402  $     1,313  $     9,345  $    17,580
          Deposits and
           prepaid
           expenses            (1,422)      (1,873)        (357)       1,169
          Accounts
           payable and
           accrued
           liabilities           (626)      (7,547)     (12,488)     (55,451)
          Capital taxes
           recoverable            125          357          360       (2,245)
          Distribution
           payable to
           unitholders            (13)           -       (3,182)      (2,056)
        ---------------------------------------------------------------------
                          $    12,466  $    (7,750) $    (6,322) $   (41,003)
        ---------------------------------------------------------------------
        Changes related
         to:
          Operating
           activities     $     8,808  $    (2,598) $    (3,282) $   (21,842)
          Financing
           activities            (207)        (261)      (3,317)      (2,074)
          Investing
           activities           3,865       (4,891)         277      (17,087)
        ---------------------------------------------------------------------
                          $    12,466  $    (7,750) $    (6,322) $   (41,003)
        ---------------------------------------------------------------------

    12. INCOME TAXES

        The Trust is a mutual fund trust as defined under the Income Tax Act
        (Canada). All taxable income earned by the Trust has been allocated
        to unitholders and such allocations are deducted for income tax
        purposes.

        In June 2007, the government legislation implementing the new tax
        (the "SIFT tax") on publicly traded income trust and limited
        partnerships (Bill C-52) received third reading in the House of
        Commons and Royal Assent. For existing income trusts and limited
        partnerships, the SIFT tax will be effective in 2011 unless certain
        rules related to "undue expansion" are not adhered to. As such, the
        Trust would not be subject to the new measures until the 2011
        taxation year provided the Trust continues to meet certain
        requirements.

        In accordance with generally accepted accounting principles, prior to
        the enactment, the Trust's temporary differences were not recorded as
        future income taxes. As at September 30, 2008, the total "temporary
        difference" (tax basis exceeds accounting basis) in the Trust is
        $9 million. As at September 30, 2008, the Trust's subsidiaries have a
        tax basis of approximately $453 million that is available to shelter
        future taxable income. Included in this tax basis are estimated
        non-capital loss carry forwards of approximately $8 million that
        expire in years through 2027. In addition, the Trust itself has
        approximately $19 million of tax basis.

        As at September 30, 2008, a current future tax asset of $1.1 million
        has been recorded in respect of the net unrealized commodity contract
        liability of $3.7 million.

    13. SPECIAL MEETING COSTS

        On January 15, 2007, the Trust announced its proposal to convert into
        an intermediate exploration and production company (the
        "Reorganization"). Pursuant to the Reorganization, it was
        contemplated that holders of trust units of the Trust would receive
        an equal number of common shares of a newly formed corporation that
        will hold the assets previously held directly or indirectly by the
        Trust. The exchangeable shares were also to be exchanged for common
        shares based on the conversion ratio thereof. The Reorganization was
        subject to all required regulatory approvals and securityholder
        approval by at least 66 2/3% of the votes cast by unitholders of the
        Trust and holders of the exchangeable shares. At the Special and
        Annual Meeting held on March 30, 2007, the special resolution related
        to the Reorganization was not approved. As a result, the
        Reorganization was not completed. The Trust incurred $3.8 million in
        costs for legal, financial advisory, accounting, unitholder
        solicitation services, printing, mailing and other expenses that are
        included as special meeting costs within the statement of income for
        the nine months ended September 30, 2007.

    14. PER TRUST UNIT AMOUNTS

        ---------------------------------------------------------------------
                                Three months ended         Nine months ended
                                 2008         2007         2008         2007
        ---------------------------------------------------------------------
        Basic trust units
         outstanding       78,862,690   79,715,595   78,862,690   79,715,595

        Dilutive effect of:

          Trust unit
           incentive
           rights
           outstanding      2,539,166    6,086,832    2,539,166    6,086,832

          Units issuable
           for
           exchangeable
           shares             340,642      316,547      340,642      316,547

          Units issuable
           for convertible
           debentures       5,390,625    5,390,625    5,390,625    5,390,625
        ---------------------------------------------------------------------
        Diluted trust
         units
         outstanding       87,133,123   91,509,599   87,133,123   91,509,599
        ---------------------------------------------------------------------
        Weighted average
         trust units
         outstanding       78,996,154   79,714,539   79,140,544   74,528,093
        Dilutive effect of
         exchangeable
         shares, trust
         unit incentive
         plan and
         convertible
         debentures(1)              -            -            -            -
        ---------------------------------------------------------------------
        Diluted weighted
         average trust
         units
         outstanding       78,996,154   79,714,539   79,140,544   74,528,093
        ---------------------------------------------------------------------
        (1) A total of 2,539,166 (2007: 6,086,832) trust incentive units,
            340,642 (2007: 316,547) exchangeable shares and 5,390,625 (2007:
            5,390,625) trust units issuable pursuant to the conversion of
            convertible debentures were excluded from the calculation for the
            three and nine month period ended September 30, 2008 as they were
            not dilutive

    15. FINANCIAL RISK MANAGEMENT

        a. Overview

        The Trust has exposure to the following risks from its use of
        financial instruments:
        -  Credit risk
        -  Liquidity risk
        -  Market risk

        This note presents information about the Trust's exposure to each of
        the above risks, the Trust's objectives, policies and processes for
        measuring and managing risk, and the Trust's management of capital.
        Further quantitative disclosures are included throughout these
        financial statements.

        The Board of Directors has overall responsibility for the
        establishment and oversight of the Trust's risk management framework.
        The Board has implemented and monitors compliance with risk
        management policies.

        The Trust's risk management policies are established to identify and
        analyze the risks faced by the Trust, to set appropriate risk limits
        and controls, and to monitor risks and adherence to market conditions
        and the Trust's activities.

        b. Credit risk

        Credit risk is the risk of financial loss to the Trust if a customer
        or counterparty to a financial instrument fails to meet its
        contractual obligations, and arises principally from the Trust's
        trade receivables from joint venture partners, petroleum and natural
        gas marketers, and financial derivative counterparties.

        A substantial portion of the Trust's accounts receivable are with
        customers and joint interest partners in the petroleum and natural
        gas industry and are subject to normal industry credit risks. The
        Trust sells substantially all of its production to eleven primary
        purchasers under normal industry sale and payment terms. Purchasers
        of the Trust's natural gas, crude oil and natural gas liquids are
        subject to an internal credit review to minimize the risk of
        non-payment.

        The Trust has continued to closely monitor and reassess the
        creditworthiness of its counterparties, including financial
        institutions. This has resulted in the Trust reducing or mitigating
        its exposures to certain counterparties where it is deemed warranted
        and permitted under contractual terms.

        Receivables from petroleum and natural gas marketers are normally
        collected on the 25th day of the month following production. The
        Trust's policy to mitigate credit risk associated with these balances
        is to establish marketing relationships with a range of medium to
        large purchasers and to conduct credit reviews of these parties on a
        regular basis. Joint venture receivables are typically collected
        within one to three months of the joint venture bill being issued to
        the partner. The Trust attempts to mitigate the risk from joint
        venture receivables by obtaining partner approval of significant
        capital expenditures prior to expenditure. However, the receivables
        are from participants in the petroleum and natural gas sector, and
        collection of the outstanding balances is dependent on industry
        factors such as commodity price fluctuations, escalating costs and
        the risk of unsuccessful drilling, in addition further risk exists
        with joint venture partners as disagreements occasionally arise that
        increase the potential for non- collection. The Trust does not
        typically obtain collateral from petroleum and natural gas marketers
        or joint venture partners; however, in certain instances the Trust
        does have the ability to withhold production from joint venture
        partners in the event of non-payment.

        As at September 30, 2008, accounts receivable was comprised of the
        following:

        ($000s)
        ---------------------------------------------------------------------
        Trade accounts receivable                                      7,323
        Accrued and other accounts receivable                         31,854
        ---------------------------------------------------------------------
                                                                      39,177
        ---------------------------------------------------------------------

        The carrying amount of accounts receivable represents the maximum
        credit exposure. The Trust has an allowance for doubtful accounts as
        at September 30, 2008 of $0.5 million.  As at September 30, 2008 the
        Trust estimates its trade accounts receivables to be aged as follows:

        ---------------------------------------------------------------------
        Aging ($000s)
        ---------------------------------------------------------------------
        Not past due (less than 90 days)                               3,419
        Past due (90 or more days)                                     3,904
        ---------------------------------------------------------------------
        Total                                                          7,323
        ---------------------------------------------------------------------

        After considering offsetting September 30, 2008 trade accounts
        payable from the same companies and cash receipts received subsequent
        to September 30, 2008, the Trust's trade receivables aged 90 or more
        days of approximately $3.9 million are reduced to a net balance of
        approximately $1.1 million.

        c. Liquidity risk

        Liquidity risk is the risk that the Trust will not be able to meet
        its financial obligations as they are due. The Trust's approach to
        managing liquidity is to make reasonable efforts to sustain
        sufficient liquidity to meet its liabilities when due, under both
        normal and stressed conditions without incurring unacceptable losses
        or risking harm to the Trust's reputation.

        The Trust prepares annual capital expenditure budgets and confirms
        unitholder distributions on a monthly basis. Capital expenditure
        budgets and levels of monthly unitholder distributions are regularly
        monitored and updated as considered necessary. Further, the Trust
        utilizes authorizations for expenditures on both operated and
        non-operated projects to further manage capital expenditures. To
        facilitate the capital expenditure program, the Trust has a revolving
        reserve based credit facility, as outlined in note 6, which is at
        least reviewed annually by the lender. The Trust also attempts to
        match its payment cycle with collection of petroleum and natural gas
        revenues on the 25th of each month.

        The following are the contractual maturities of financial liabilities
        as at September 30, 2008:
        ---------------------------------------------------------------------
        Financial liability   (less than)
         ($000s)                  1 Year   1-2 Years   2-5 Years  Thereafter
        ---------------------------------------------------------------------

        Accounts payable and
         accrued liabilities      39,700           -           -           -

        Distribution payable
         to unitholders            3,155           -           -           -

        Derivative contracts       5,204           -           -           -

        Bank debt - principal          -     116,591           -           -

        Convertible debentures
         - principal                   -           -      86,250           -
        ---------------------------------------------------------------------

        Total                     48,059     116,591      86,250           -
        ---------------------------------------------------------------------

        d. Market risk

        Market risk is the risk that changes in market prices, such as
        foreign exchange rates, commodity prices, and interest rates will
        affect the Trust's net earnings or the value of financial
        instruments. The objective of market risk management is to manage and
        control market risk exposures within acceptable limits, while
        maximizing returns.

        Foreign currency exchange rate risk

        Foreign currency exchange rate risk is the risk that the fair value
        of future cash flows will fluctuate as a result of changes in foreign
        exchange rates. Although substantially all of the company's petroleum
        and natural gas sales are denominated in Canadian dollars, the
        underlying market prices in Canada for petroleum and natural gas are
        impacted by changes in the exchange rate between the Canadian and
        United States dollar.  As at September 30, 2008, if the Canadian/US
        dollar exchange rate had decreased by US$0.01 with all other
        variables held constant, after tax net earnings for the three month
        period ended September 30, 2008 would have been approximately
        $0.8 million lower. An equal and opposite impact would have occurred
        to net earnings had the Canadian/US dollar exchange rate increased by
        US$0.01.

        The Trust had no forward exchange rate contracts in place as at or
        during the year ended September 30, 2008.

        Commodity price risk

        Commodity price risk is the risk that the fair value or future cash
        flows will fluctuate as a result of changes in commodity prices.
        Commodity prices for petroleum and natural gas are impacted by not
        only the relationship between the Canadian and United States dollar,
        as outlined above, but also world economic events that dictate the
        levels of supply and demand.

        The Trust utilizes both financial derivatives and physical delivery
        sales contracts to manage commodity price risks. All such
        transactions are conducted in accordance with the risk management
        policy that has been approved by the Board of Directors.

        The Trust's formal risk management policy permits management to use
        specified price risk management strategies for up to 50% of crude
        oil, natural gas and NGL production including fixed price contracts,
        costless collars and the purchase of floor price options, other
        derivative financial instruments, and physical delivery sales
        contracts to reduce the impact of price volatility and ensure minimum
        prices for a maximum of eighteen months beyond the current date. The
        program is designed to provide price protection on a portion of the
        Trust's future production in the event of adverse commodity price
        movement, while retaining significant exposure to upside price
        movements. By doing this, the Trust seeks to provide a measure of
        stability to cash distributions, as well as, to ensure True realizes
        positive economic returns from its capital developments and
        acquisition activities.

        As at September 30, 2008, the Trust had entered into commodity price
        risk management arrangements as follows:

    -------------------------------------------------------------------------
                                                  Price        Price
    Type                 Period       Volume      Floor      Ceiling   Index
    -------------------------------------------------------------------------

    Oil collar(1)  April 1, 2008 to   1,000  $ 65.00 US   $ 82.00 US     WTI
                     Dec. 31, 2008     bbl/d

    Oil collar(1)  April 1, 2008 to   1,000  $ 65.00 US   $ 82.00 US     WTI
                     Dec. 31, 2008     bbl/d

    Natural Gas    Jan. 1, 2008 to    5,000  $ 6.65 CDN   $ 6.65 CDN    AECO
     fixed           Dec. 31, 2008     GJ/day

    Natural Gas    Jan. 1, 2008 to   10,551  $ 6.65 CDN   $ 6.65 CDN    AECO
     fixed           Dec. 31, 2008     GJ/day

    Natural Gas    April 1, 2008 to   5,275  $ 6.64 CDN   $ 6.64 CDN    AECO
     fixed           Oct. 31, 2008     GJ/day

    Natural Gas    April 1, 2008 to   3,500  $ 6.90 CDN   $ 6.90 CDN    AECO
     fixed           Oct. 31, 2008     GJ/day

    Natural Gas    Nov. 1, 2008 to    3,500  $ 7.58 CDN   $ 7.58 CDN    AECO
     fixed           Dec. 31, 2008     GJ/day

    Natural Gas    Nov. 1, 2008 to    5,275  $ 7.61 CDN   $ 7.61 CDN    AECO
     fixed          March 31, 2009     GJ/day

    Natural Gas    Jan. 1, 2009 to    5,275  $ 7.86 CDN   $ 7.86 CDN    AECO
     fixed          March 31, 2009     GJ/day

    Natural Gas    April 1, 2009 to   5,275  $ 7.01 CDN   $ 7.01 CDN    AECO
     fixed          June 30, 2009      GJ/day

    Natural Gas    April 1, 2009 to   5,275  $ 7.015 CDN  $ 7.015 CDN   AECO
     fixed          June 30, 2009      GJ/day
    -------------------------------------------------------------------------

    (1) Effective November 1, 2008, the remainder of these contracts was
        settled for US$550,000.


        For the three and nine months ended September 30, 2008, the gain
        (loss) on commodity contracts was comprised of the following:

        ---------------------------------------------------------------------
                                Three months ended         Nine months ended
                                      September 30,             September 30,
        ($000s)                  2008         2007         2008         2007
        ---------------------------------------------------------------------

        Gain (loss) on
         commodity
         contracts
          Realized(1)     $   (11,831) $     4,064  $   (28,592) $     7,090
          Unrealized(2)        49,911       (2,908)       6,674          580
        ---------------------------------------------------------------------
                          $    38,080  $     1,156  $   (21,918) $     7,670
        ---------------------------------------------------------------------
        (1) Realized gains and losses on commodity contracts represent
            actual cash settlements and other amounts paid under these
            contracts.
        (2) Unrealized gains and losses on commodity contracts represent
            non- cash adjustments for changes in the fair value of these
            contracts during the period.

        The Trust has entered into a natural gas physical delivery sales
        contract to sell 5,275 GJ/day at a fixed price of $7.29/GJ and
        $7.90/GJ for the third and fourth quarter of 2009, respectively.

        As at September 30, 2008, if oil and natural gas liquids prices had
        been US$1 per barrel and natural gas prices $0.10 per mcf lower, with
        all other variables held constant, after tax net earnings for the
        three month period ended September 30, 2008 would have been
        approximately $1.7 million lower. An equal and opposite impact would
        have occurred to net earnings had oil and natural gas liquids prices
        been US$1 per barrel and natural gas $0.10 per mcf higher.

        Interest rate risk

        Interest rate risk is the risk that future cash flows will fluctuate
        as a result of changes in market interest rates. The Trust is exposed
        to interest rate fluctuations on its bank debt which bears a floating
        rate of interest. As at September 30, 2008, if interest rates had
        been 1% lower with all other variables held constant, after tax net
        earnings for the three month period ended September 30, 2008 would
        have been approximately $0.8 million higher, due to lower interest
        expense. An equal and opposite impact would have occurred to net
        earnings had interest rates been 1% higher.

        The Trust had no interest rate swap or financial contracts in place
        as at or during the nine months ended September 30, 2008.

        e. Capital management

        The Trust's policy is to maintain a strong capital base so as to
        maintain investor, creditor and market confidence and to sustain the
        future development of the business. The Trust manages its capital
        structure and makes adjustments to it in the light of changes in
        economic conditions and the risk characteristics of the underlying
        petroleum and natural gas assets. The Trust considers its capital
        structure to include unitholders' equity, bank debt, convertible
        debentures and working capital. In order to maintain or adjust the
        capital structure, the Trust may from time to time issue trust units,
        adjust its capital spending, and/or dispose of certain assets to
        manage current and projected debt levels.

        The Trust monitors capital based on the ratio of net debt to
        annualized cash flow (the "ratio"). This ratio is calculated as net
        debt, defined as outstanding bank debt, plus the liability component
        of convertible debentures, plus or minus working capital (excluding
        commodity contract assets and liabilities and future income tax
        assets or liabilities), divided by funds flow from operations (cash
        flow from operating activities before changes in non-cash working
        capital and deductions for asset retirement costs) for the most
        recent calendar quarter, annualized (multiplied by four). The Trust's
        strategy is to target a ratio of between 1.0 and 1.5 times. This
        ratio may increase at certain times as a result of acquisitions and
        other factors. In order to facilitate the management of this ratio,
        the Trust prepares annual capital expenditure budgets and sets
        unitholder distributions on a monthly basis. Capital expenditure
        budgets and levels of monthly unitholder distributions are reviewed
        and updated as necessary depending on varying factors including
        current and forecast prices, successful capital deployment and
        general industry conditions. The annual and updated budgets and
        monthly unitholder distributions are approved by the Board of
        Directors.

        As at September 30, 2008, the Trust's ratio of net debt to annualized
        cash flow based on third quarter results was 2.3 times. The Trust
        expects this ratio to decrease during the remainder of 2008 and
        through 2009 as net debt levels are reduced; True continues to take a
        balanced approach to the priority use of cash flows between
        distribution levels and its capital program. This ratio as at
        September 30, 2008 increased from that at June 30, 2008 of 1.8 times
        due to lower funds flow from operations in the third quarter, in
        addition to slightly higher net debt due partially to the timing of
        the capital program in the second half of 2008. The Trust's bank debt
        facility is based on petroleum and natural gas reserves (see note 6).

        True's calculation of net debt as at September 30, 2008 was
        $193.8 million, representing $116.6 million outstanding on the credit
        facility, $80.7 million in convertible debentures (liability
        component) and the net balance of working capital. Funds flow from
        operations for the three month period ended September 30, 2008 of
        $21.5 million was calculated as cash flow from operating activities
        of $29.4 million plus asset retirement costs of $0.9 million and less
        changes in non-cash working capital of $8.8 million.

        The Trust's ability to issue trust units is subject to external
        restrictions as a result of the Specified Investment Flow-Through
        Entities Legislation (the "SIFT tax") whereby the Trust may lose the
        benefit of a four year grandfathering period if the Trust exceeds the
        limits on the issuance of new trust units and convertible debt that
        constitute normal growth during the grandfathering period (subject to
        certain exceptions). The normal growth limits are calculated as a
        percentage of the Trust's market capitalization of approximately
        $737 million on October 31, 2006, which the Trust may currently issue
        in additional equity without offending the normal growth guidelines
        between now and 2011. The normal growth restriction on trust unit
        issuance is monitored by management as part of the overall capital
        management objectives. The Trust is in compliance with the normal
        growth restrictions.

        There were no changes in the Trust's approach to capital management
        during the year.

        f. Fair value of financial instruments

        The Trust's financial instruments as at September 30, 2008 include
        accounts receivable, deposits, capital taxes recoverable, marketable
        securities, commodity contract liability, accounts payable and
        accrued liabilities, distributions payable, long-term debt and
        convertible debentures. The fair value of accounts receivable,
        accounts payable and accrued liabilities and distributions payable
        approximate their carrying amounts due to their short-terms to
        maturity.

        The fair value of commodity contracts is determined by discounting
        the difference between the contracted price and published forward
        price curves as at the balance sheet date, using the remaining
        contracted petroleum and natural gas volumes.

        Long-term bank debt bears interest at a floating market rate and
        accordingly the fair market value approximates the carrying value.

        The fair value of the convertible debentures of $80.2 million is
        based on exchange traded values.

        True Energy Trust is a Calgary-based oil and natural gas trust. True
        is an open-ended, incorporated investment trust governed by the laws
        of the Province of Alberta. The purpose of the Trust is to indirectly
        explore for, develop and hold interests in petroleum and natural gas
        properties, through investments in securities of subsidiaries and net
        profits interests. The trust structure allows individual unitholders
        to participate in the cash flow of the business. Cash flow is
        realized from the Trust's subsidiaries' ownership of natural gas and
        petroleum properties and related facilities. Trust units of True
        trade on the Toronto Stock Exchange ("TSX") under the symbol TUI.UN.%SEDAR: 00021401E



Bellatrix Exploration Ltd.
1920, 800 5th Avenue SW
Calgary, Alberta T2P 3T6
Main: 403-266-8670
Fax: 403-264-8163
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Bellatrix Exploration
Investor Relations
investor.relations@bxe.com
Emergency Contact
1-403-266-8670