Focus Energy Trust announces Q2 financial & operating results



    CALGARY, Aug. 9 /CNW/ - Focus Energy Trust ("Focus") (FET.UN - TSX)
announces its consolidated financial and operating results for the second
quarter ending June 30, 2007.


    
    Consolidated Highlights

    (thousands of              Three Months            Six Months
     dollars, except          Ended June 30,        Ended June 30,
     where indicated)       2007       2006       2007       2006     Change
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    FINANCIAL
    Production revenue
     and financial
     commodity contract
     settlements(1)       96,294     48,663    195,564     96,809       102%
    Funds flow from
     operations(2)        62,780     27,988    127,194     56,677       124%
      Per unit(3)(4)   $    0.80  $    0.70  $    1.61  $    1.47        10%
    Cash distributions
      Per unit         $    0.42  $    0.57  $    0.84  $    1.14       (26%)
      Payout ratio
       (per-unit basis)      53%        82%        52%        78%       (26%)
    Net income            23,790     21,873     29,538     38,651       (24%)
      Per unit         $    0.30  $    0.57  $    0.38  $    1.03       (63%)
    Capital
     expenditures(5)       8,863      2,674     58,505     26,963       117%
    Acquisitions(5)        3,973  1,091,294      3,973  1,091,294      (100%)
    Long-term debt less
     working
     capital(8)          305,223    297,450    305,223    297,450         3%
      Increase (decrease)
       for the period    (18,914)   188,356     (2,735)   204,932
    Total Trust Units
     - outstanding
     (000's)(4)           79,097     78,359     79,097     78,359         1%
    Weighted average
     Total Trust Units
     (000's)(6)           78,909     39,335     78,776     38,417       105%
    -------------------------------------------------------------------------
    OPERATIONS
    Average daily
     production
      Crude oil
       (bbls/d)            1,798      1,563      1,854      1,587        17%
      NGLs (bbls/d)          831        682        821        733        12%
      Natural gas
       (mcf/d)           115,585     46,753    115,550     45,950       151%
      Barrels of oil
       equivalent
       (@ 6:1)         21,894     10,038     21,933      9,978       120%
    Average product
     prices realized(7)
      Crude oil
       (CDN$/bbl)      $   67.64  $   73.08  $   65.06  $   68.06        (4%)
      NGLs (CDN$/bbl)  $   61.35  $   66.37  $   58.40  $   62.69        (7%)
      Natural gas
       (CDN$/mcf)      $    7.35  $    7.36  $    7.56  $    7.63        (1%)
    Field netback per
     BOE
      Revenue(7)       $   46.70  $   50.27  $   47.54  $   50.69        (6%)
      Royalties, net
       of ARTC         $   (9.10) $   (9.71) $   (8.96) $  (10.80)      (17%)
      Production
       expenses        $   (3.71) $   (4.62) $   (4.10) $   (5.05)      (19%)
      Field netback    $   33.90  $   35.95  $   34.48  $   34.83        (1%)
    Wells drilled
      Gross                   90          8        187         17     1,000%
      Net                   57.0        8.0      147.1       15.4       855%
      Success rate          100%       100%       100%       100%
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    TRUST UNIT TRADING
     STATISTICS

    Unit prices
      High             $   20.41  $   25.89  $   20.41  $   25.89
      Low              $   17.45  $   20.31  $   16.19  $   20.31
      Close            $   17.80  $   23.65  $   17.80  $   23.65       (25%)
    Daily average
     trading volume      207,162    243,598    205,431    180,902        14%
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    (1) Production revenue includes settlements for financial commodity
        contracts. For 2007, it excludes any unrealized gains or losses
        recorded for financial commodity contracts and excludes the
        reclassification to earnings of gains on hedges held at
        January 1, 2007.

    (2) Funds flow from operations ("funds flow" before changes in non-cash
        working capital and reclamation costs) is used by management to
        analyze operating performance and leverage. Funds flow as presented
        does not have any standardized meaning prescribed by Canadian GAAP
        and therefore it may not be comparable with the calculation of
        similar measures of other entities. Funds flow as presented is not
        intended to represent operating cash flow or operating profits for
        the period nor should it be viewed as an alternative to cash flow
        from operating activities, net earnings or other measures of
        financial performance calculated in accordance with Canadian GAAP.
        All references to funds flow throughout this report are based on
        funds flow from operations before changes in non-cash working capital
        and reclamation costs.

    (3) Based on the weighted average Total Trust Units outstanding for the
        period

    (4) Total Trust Units being trust units, exchangeable partnership units,
        and exchangeable shares converted at the exchange ratio prevailing at
        the time. Total Trust Units as presented does not have any
        standardized meaning prescribed by Canadian GAAP and therefore it may
        not be comparable with the calculation of similar measures of other
        entities. The exchange ratio for exchangeable shares was 1.41974 at
        June 30, 2006. All outstanding exchangeable shares were redeemed for
        trust units on January 16, 2007. Each exchangeable partnership unit
        is exchangeable into one trust unit.

    (5) Cost of capital expenditures and acquisitions excluding any asset
        retirement obligation or future income tax

    (6) Weighted average Total Trust Units including trust units,
        exchangeable partnership units and exchangeable shares converted at
        the average exchange ratio

    (7) Includes settlements for financial commodity contracts and net of
        transportation charges. For 2007, it excludes any unrealized gains or
        losses recorded for financial commodity contracts and excludes the
        reclassification to earnings of gains on hedges held at
        January 1, 2007.

    (8) Long-term debt less working capital excludes any derivative asset or
        derivative liability. At June 30, 2007, there was a $17.2 million
        derivative asset as compared to a derivative liability of
        $0.2 million at December 31, 2006.
    

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    Forward-Looking Information - Certain information set forth in this
    document, including management's assessment of Focus' future plans and
    operations, contains forward-looking statements. By their nature,
    forward-looking statements are subject to numerous risks and
    uncertainties, some of which are beyond Focus' control, including the
    impact of general economic conditions, industry conditions, changes in
    legislation, volatility of commodity prices, currency fluctuations,
    imprecision of reserve estimates, environmental risks, competition from
    other industry participants, the lack of availability of qualified
    personnel or management, stock market volatility and ability to access
    sufficient capital from internal and external sources. Readers are
    cautioned that the assumptions used in the preparation of such
    information, although considered reasonable at the time of preparation,
    may prove to be imprecise and, as such, undue reliance should not be
    placed on forward-looking statements. Focus' actual results, performance
    or achievement could differ materially from those expressed in, or
    implied by, these forward-looking statements and, accordingly, no
    assurance can be given that any of the events anticipated by the forward-
    looking statements will transpire or occur, or if any of them do, what
    benefits Focus will derive therefrom. Focus disclaims any intention or
    obligation to update or revise any forward-looking statements, whether as
    a result of new information, future events or otherwise. Readers are
    cautioned that net present value of reserves does not represent fair
    market value of reserves.

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

    
    Highlights
    -------------------------------------------------------------------------
    -   Despite a lower gas price environment, Focus continues to replace
        production, report strong netbacks and demonstrate sustainability.
        For the first half of 2007, funds flow from operations of
        $127.2 million has essentially funded capital expenditures of
        $58.5 million, distributions to unitholders of $66.2 million and
        $3.0 million of contributions to the reclamation fund.

    -   Our Shackleton drilling inventory continues to increase through areal
        extensions of the pool boundaries and new production intervals in
        existing wellbores.

    -   Field capital costs are dropping significantly and are being
        complemented by increased service efficiency.

    -   Our natural gas hedging programs provide additional certainty to our
        distribution and capital programs, generating $5.2 million of
        incremental revenue in Q2 2007 and $14.3 million year to date.

    -   Strong netbacks of $33.90/BOE were driven by good realized natural
        gas prices and low operating, royalty and general and administrative
        costs.

    -   Second quarter funds flow from operations ($0.80/unit) was
        essentially flat to Q1 ($0.82/unit) in a quarter where the average
        AECO daily reference price for natural gas decreased by five percent.

    -   Selective acquisitions around our core areas have been successful,
        adding 13 (6.5 net) sections of land at our new Trutch Halfway gas
        pool and 60 (30 net) sections of land in the Shackleton field.
    

    Message to Unitholders
    -------------------------------------------------------------------------
    We are pleased with our results for the second quarter. Our Q2 capital
program was focused on the Shackleton field and directed towards development
drilling and expanding the boundaries of the Shackleton field. During the
quarter we drilled 90 (57 net) Milk River gas wells. We had 100 percent
success with our drilling program and are pleased with the results, not only
from a production and cost perspective but, as importantly, from the additions
to our drilling inventory.
    Although we had an early start to our summer Shackleton program, an
extremely wet June delayed the program somewhat. Additional equipment has been
mobilized to minimize the production impact of the weather delays. Production
volumes in the quarter averaged 21,894 BOE/d. During the quarter we tied in
13 Shackleton wells from our Q1 drilling program. New production from the
Shackleton summer program will not be pipeline connected prior to the
Q4 winter heating season.
    Funds flow from operations for the second quarter of 2007 was
$62.8 million. Funds flow from operations remained strong for the quarter,
with continued support from natural gas price protection activities, lower
production expenses and lower general and administrative expenses. Focus'
realized natural gas price per mcf of $7.35 in the second quarter of 2007 was
higher than the average AECO daily reference price of $7.07, reflecting the
positive contribution of our natural gas hedging program.
    Operating expenses in the second quarter were $3.71 per BOE.
Historically, the second quarter is our lowest operating cost quarter due to
high initial flush volumes from new wells in Tommy Lakes and Shackleton. Our
overall operating costs continue to be among the lowest in the trust sector,
driven by low operating costs at Tommy Lakes ($2.02/BOE) and Shackleton ($2.72
/BOE).

    Outlook
    -------------------------------------------------------------------------
    Focus is well positioned to handle and prosper from the current
volatility in natural gas prices. We have strong hedge positions with in
excess of 50 percent of our gross natural gas sales hedged for the period
July 2007 to March 2008 at $8.36 per mcf. Our royalty, operating, general and
administrative, and interest cost structures are among the lowest in the
sector and reflect our continued focus on the aspects of our business that we
can control. These factors combined, result in high netbacks supporting our
significant capital and distribution programs. Our inventory of drilling
opportunities continues to expand and we have three years of drilling
inventory at our current pace. This inventory generates attractive rates of
return at a flat $5.00 per mcf natural gas price. We have a conservative debt
position with debt-to-funds-flow of 1.2 times and our sustainable business
model ensures that we live within our funds flow and that only the best
projects get capitalized.
    Focus was built not only to be able to survive a volatile natural gas
market, but also to be in a position to benefit from it. We continue to
evaluate acquisition opportunities and note that while transaction prices have
been falling in recent months, the quality of assets available has remained
challenging. Quality assets continue to be recognized as such, making them
unavailable or extremely expensive. The Trust has the financial strength and
flexibility to compete on quality acquisition opportunities where our
operational strength can be applied.
    Our capital program for the remainder of the year is focused on the
drilling of approximately 200 gross wells in Shackleton, as well as the start
of our winter drilling program at Tommy Lakes. In an effort to take advantage
of the improving cost environment in Southwest Saskatchewan, and to move away
from more costly winter drilling operations, we have shifted $15 million of
Shackleton Q1 2008 capital into 2007. This capital will be put to work in 2007
but will not impact our production profile until 2008 as the wells are brought
on production in late 2007. This change and the $4.0 million of acquisitions
done in Q2 will move our capital guidance for 2007 to the top end of the range
as outlined in the Outlook section of the MD&A.
    The Trust is in excellent shape with a larger inventory of drilling
opportunities than at any other point in its history. With our high netbacks,
we are well positioned to handle the short-term volatility in natural gas
prices. Longer term, the new cost efficiencies from the service sector
combined with a sustained recovery in natural gas prices, will significantly
increase our profitability and funds flow.
    I would like to thank all of our unitholders for their ongoing support
and confidence in Focus.

    On behalf of the Board of Directors,

    (signed)

    Derek W. Evans
    President and Chief Executive Officer


    Management's Discussion and Analysis
    -------------------------------------------------------------------------
    The following is Management's Discussion and Analysis (MD&A) of the
operating and financial results of Focus for the three months and six months
ended June 30, 2007 compared with the prior year, as well as information and
opinions concerning the Trust's future outlook based on currently available
information. This discussion is dated August 7, 2007 and should be read in
conjunction with the annual MD&A and the audited consolidated financial
statements for the years ended December 31, 2006 and 2005, together with
accompanying notes.
    Throughout the MD&A, we use the term funds flow from operations ("funds
flow" before changes in non-cash working capital and reclamation costs). Funds
flow is used by management to analyze operating performance and leverage.
Funds flow as presented does not have any standardized meaning prescribed by
Canadian GAAP and therefore it may not be comparable with the calculation of
similar measures of other entities. Funds flow as presented is not intended to
represent operating cash flow or operating profits for the period nor should
it be viewed as an alternative to cash flow from operating activities, net
earnings or other measures of financial performance calculated in accordance
with Canadian GAAP. All references to funds flow throughout this report are
based on funds flow from operations before changes in non-cash working capital
and reclamation costs.


    
                                          Three Months            Six Months
                                         Ended June 30,        Ended June 30,
    OPERATIONS SUMMARY                 2007       2006       2007       2006
    -------------------------------------------------------------------------

    Average daily production
      Barrels of oil equivalent
       (@ 6:1)                    21,894     10,038     21,933      9,978
      % of Natural gas                  88%        78%        88%        77%
    Average product prices realized
      Crude oil sales (CDN$/bbl)  $   67.73  $   77.19  $   64.88  $   71.18
        Financial commodity
         contract settlements
         (CDN$/bbl)               $   (0.09) $   (4.11) $    0.18  $   (3.11)
    -------------------------------------------------------------------------
        Realized price (CDN$/bbl) $   67.64  $   73.08  $   65.06  $   68.06
    -------------------------------------------------------------------------
      NGLs (CDN$/bbl)             $   61.35  $   66.37  $   58.40  $   62.69
      NGL price/crude oil price         91%        86%        90%        88%
      Natural gas sales
       (CDN$/mcf)                 $    7.29  $    6.71  $    7.38  $    7.62
        Transportation system
         charges (CDN$/mcf)       $   (0.31) $   (0.65) $   (0.33) $   (0.63)
        Financial commodity
         contract settlements
         (CDN$/mcf)               $    0.36  $    1.29  $    0.51  $    0.65
    -------------------------------------------------------------------------
        Realized price (CDN$/mcf) $    7.35  $    7.36  $    7.56  $    7.63
    -------------------------------------------------------------------------
    Reference prices & differential
     to Focus sales price, after
     transportation and before
     price protection
      Crude oil (Edm. Light Price
       CDN$/bbl)                  $   71.87  $   78.63  $   69.48  $   73.82
        Differential (CDN$/bbl)   $   (4.14) $   (1.44) $   (4.60) $   (2.65)
      Natural gas (AECO daily
       CDN$/mcf)                  $    7.07  $    6.04  $    7.24  $    6.77
        Differential (CDN$/mcf)   $   (0.22) $   (0.39) $   (0.36) $   (0.27)
    -------------------------------------------------------------------------
    Funds flow from operations
     per BOE
      Production revenue          $   46.44  $   47.90  $   46.57  $   51.11
        Financial commodity
         contract settlements          1.89       5.38       2.69       2.49
        Transportation system
         charges                      (1.63)     (3.01)     (1.72)     (2.92)
    -------------------------------------------------------------------------
      Realized price                  46.70      50.27      47.54      50.69
      Royalties, net of ARTC          (9.10)     (9.71)     (8.96)    (10.80)
      Production expenses             (3.71)     (4.62)     (4.10)     (5.05)
    -------------------------------------------------------------------------
      Field netback                   33.90      35.95      34.48      34.83
      Facility income                  0.28       1.05       0.30       0.92
      Business interruption insurance  0.05          -       0.03          -
      Interest income                  0.01          -       0.03       0.01
      General and administrative,
       cash portion                   (0.59)     (1.66)     (0.71)     (1.34)
      Elimination of the Executive
       Bonus Plan                         -      (3.14)         -      (1.59)
      Interest and financing
       and other                      (2.13)     (1.49)     (2.09)     (1.33)
      Current and large
       corporations tax                   -      (0.07)         -      (0.12)
    -------------------------------------------------------------------------
      Funds flow from operations
       per BOE                    $   31.51  $   30.64  $   32.04  $   31.38
    -------------------------------------------------------------------------
    Funds flow from operations/
     field netback                      93%        85%        93%        90%
    -------------------------------------------------------------------------
    Royalty rate (before financial
     commodity contract settlements)    20%        22%        20%        22%
      Effective royalty rate (after
       financial commodity contract
       settlements)                     19%        19%        19%        21%
    -------------------------------------------------------------------------
    Production revenue and financial
     commodity contract settlements
     ($ thousands)
      Crude oil                      11,110     11,017     21,833     20,538
        Financial commodity contract
         settlements                    (15)      (585)        61       (895)
      NGLs                            4,641      4,122      8,676      8,315
      Natural gas, before
       transportation system
       charges                       76,771     28,609    154,385     63,457
        Financial commodity contract
         settlements                  3,787      5,500     10,609      5,393
    -------------------------------------------------------------------------
        Production revenue and
         financial commodity
         contract settlements        96,294     48,663    195,564     96,809
    -------------------------------------------------------------------------
    Funds flow from operations
     ($ thousands)
      Cash flow from operating
       activities                    70,405     26,146    143,232     53,180
        Reclamation costs               338        285        821        285
        Net change in non-cash
         working capital items       (7,963)     1,557    (16,859)     3,212
    -------------------------------------------------------------------------
        Funds flow from operations   62,780     27,988    127,194     56,677
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Overall Performance
    -------------------------------------------------------------------------
    Overall results for the second quarter of 2007 reflect the significant
growth of Focus over the past year resulting from the Profico acquisition a
year ago, a significant reinvestment into our natural gas properties and the
benefits of our price protection activities.
    The main activity for Focus during the second quarter of 2007 was the
continuation of the development drilling program in the Shackleton field.
    Funds flow from operations remained strong for the quarter, with
continued support from natural gas price protection activities, lower
production expenses and lower general and administrative expenses. Natural gas
reference prices decreased five percent during the quarter, however price
protection activities added $0.49 per mcf to the realized natural gas price.
Production volumes were constant in the second quarter of 2007 compared with
the first quarter of 2007 and the fourth quarter of 2006.
    Funds flow from operations for the second quarter of 2007 was
$62.8 million or $0.80 per unit, compared with $64.4 million or $0.82 per unit
in the first quarter of 2007. Funds flow from operations increased from
$28.0 million, or $0.70 per unit, in the second quarter of 2006 primarily due
to the 120 percent increase in production resulting from the Profico
acquisition. Funds flow from operations per unit for the six months ended
June 30, 2007 has increased 10 percent compared with the prior year. A seven
percent increase in the reference price of natural gas and a significant
decrease in production expenses and general and administrative expenses on a
BOE basis were the driving factors.
    During the quarter, funds flow from operations of $62.8 million funded
capital expenditures of $8.9 million, distributions of $33.1 million,
contributions to the reclamation fund and reclamation costs of $1.6 million
and debt repayment of $19.1 million. Long-term debt less working capital
(excluding derivative assets and liabilities) decreased by $18.9 million
during the quarter, resulting from the $19.1 million repayment from
operations, $3.3 million in proceeds from the Distribution Reinvestment and
Optional Trust Unit Purchase Plan ("DRIP Plan"), $0.4 million from the
exercise of trust unit rights and less $4.0 million in acquisitions.
    On a year-to-date basis, funds flow from operations of $127.2 million
plus $0.5 million of debt, funded capital expenditures of $58.5 million,
distributions of $66.2 million and contributions to the reclamation fund and
reclamation costs of $3.0 million. Long-term debt less working capital
(excluding derivative assets and liabilities) decreased by $2.7 million,
resulting from $6.3 million in proceeds from the DRIP Plan and $0.9 million
from the exercise of trust unit rights, partially offset by the $0.5 million
debt funding for operations and $4.0 million in acquisitions. Focus remains
committed to a strong balance sheet and sustainability whereby capital
expenditures and distributions are funded by funds flow from operations. On a
year-to-date basis, Focus has essentially funded all of its field capital
expenditures, distributions to unitholders and reclamation fund contributions
out of funds flow from operations. The ratio of debt to annualized funds flow
from operations is approximately 1.2 times.
    Capital expenditures for the six months ended June 30, 2007 were
$58.5 million with 95 percent directed towards natural gas. Of the investment
in natural gas properties, 66 percent has been reinvested at Shackleton with
the drilling of 178 gas wells and expansion of gas processing facilities. A
further 28 percent has been reinvested at Tommy Lakes in British Columbia with
the drilling of six wells, a 50-kilometer seismic program south of the main
Halfway pool and the tie in of the new Trutch pool to the northwest of the
main Halfway pool. Results of our capital programs for the first six months
remain in line with expectations.
    Net income for the three months ended June 30, 2007 of $23.8 million, or
$0.30 per unit, compares with net income of $21.9 million, or $0.57 per unit,
in the second quarter of 2006. On a year-to-date basis, net income for the six
months ended June 30, 2007 was $29.5 million, or $0.38 per unit, compared with
net income of $38.6 million, or $1.03 per unit, in 2006. The significant
change from the prior year is primarily due to higher depletion and
depreciation charges resulting from the major acquisition in June 2006 and the
change in accounting policy January 1, 2007 to record the unrealized losses on
commodity contracts.
    Compared with the first quarter of 2007, funds flow from operations and
production were relatively flat and the change in net income was lower
primarily due to the change in accounting policy January 1, 2007 to record the
unrealized losses on commodity contracts.

    Seasonality of Operations
    -------------------------------------------------------------------------
    Prior to the Profico acquisition of Saskatchewan properties in June 2006,
the majority of Focus' natural gas production was in British Columbia and was
only accessible in the winter. This included Tommy Lakes and Kotcho-Cabin.
These areas represented approximately 70 percent of our production and the
majority of the Trust's capital program. Seasonality resulted in capital
expenditures, overhead recoveries and utilization of bank credit facilities
being highest in the first and fourth quarters of the year. In addition,
higher production volumes, revenue and royalties were reported in Q1 and
production expenses were higher in the first and fourth quarters when the
properties were accessible.
    With the Profico acquisition in June 2006, only 30 percent of natural gas
production is now from northeast British Columbia and seasonality will be less
of a factor on our operations.

    Production
    -------------------------------------------------------------------------
    2007 Q2 compared with 2007 Q1:

    
    -   Average production during the quarter of 21,894 BOE/d was constant
        compared to 21,974 BOE/d in the first quarter of 2007. Production was
        weighted 88 percent towards natural gas and four percent towards
        natural gas liquids.

    -   Average natural gas production of 115.6 Mmcf per day was constant
        compared with 115.5 Mmcf per day in the first quarter of 2007.
        Natural gas production increased at Tommy Lakes to 35.5 Mmcf per day
        compared to 33.5 Mmcf per day in the first quarter of 2007 due to new
        production that came on stream in March. Saskatchewan natural gas
        production was negatively impacted by delayed activity in the field
        due to wet weather experienced in the second quarter and averaged
        71.8 Mmcf per day compared to 73.1 Mmcf per day in the first quarter
        of 2007.

    -   NGL production increased three percent due to new Tommy Lakes
        production.

    -   Oil production decreased six percent reflecting the natural
        production decline and limited capital investment on crude oil
        properties.

    2007 Q2 compared with 2006 Q2:

    -   Production in the second quarter of 2007 increased 118 percent from
        10,038 BOE/d in the second quarter of 2006. The two most significant
        factors impacting production were the Profico acquisition in late
        June 2006 and ongoing reinvestment in natural gas properties to
        replace production and expand our drilling inventory.

    -   Natural gas production increased 147 percent from 46.8 Mmcf per day
        in the second quarter of 2006 to 115.6 Mmcf per day in the second
        quarter of 2007. Saskatchewan properties contributed 71.8 Mmcf per
        day to second quarter 2007 production and 3.4 Mmcf per day to second
        quarter 2006 production. Production at Tommy Lakes was 35.5 Mmcf per
        day in the second quarter of 2007 compared to 33.4 Mmcf per day in
        the second quarter of 2006.

    -   Oil production increased 235 BOE/d, or 15 percent, from 1,563 BOE/d
        in the second quarter of 2006 to 1,798 BOE/d in the second quarter of
        2007. The Saskatchewan properties acquired in 2006 contributed
        251 BOE/d to Q2 2007 production.

    -   NGL production increased 151 BOE/d from 682 BOE/d in the second
        quarter of 2006 to 831 BOE/d in the second quarter of 2007 due to
        increased recovery of natural gas liquids at our Tommy Lakes and
        Sylvan Lake properties.

    Pricing and Price Risk Management
    -------------------------------------------------------------------------
    Natural Gas Pricing to June 30, 2006 (prior to the Profico acquisition)

    -   Focus had a differential between the realized price compared to the
        AECO average daily reference price resulting from:
        a) a higher than standard heat content of our natural gas at
           1.16 GJ's per mcf;
        b) approximately 83 percent of our natural gas being delivered to
           British Columbia markets which received a lower price;
        c) approximately 83 percent of our natural gas incurring
           transportation system charges in British Columbia which have a
           higher charge per mcf;
        d) the timing differences between how physical gas is sold during the
           period versus the AECO daily average.

    Natural Gas Pricing after June 30, 2006 (after the Profico acquisition)

    -   Focus has a differential between the realized price compared to the
        AECO average daily reference price resulting from:
        a) an average heat content of our natural gas of 1.06 GJ's per mcf;
        b) approximately 30 percent of natural gas being delivered to British
           Columbia markets which receives a lower price than the AECO
           reference price;
        c) approximately 30 percent of natural gas incurring transportation
           system charges in British Columbia which have a higher charge per
           mcf;
        d) the timing differences between how physical gas is sold during the
           period versus the AECO daily average.

    -   Realized natural gas price compared to AECO daily reference price to
        June 30, 2007:

                                    Three Months Ended      Six Months Ended
                                               June 30,              June 30,
    Realized Price Per Mcf             2007       2006       2007       2006
    -------------------------------------------------------------------------
    AECO daily average
     (CDN$/mcf)(1)                $    7.07  $    6.04  $    7.24  $    6.77
    Plus: heat content
     adjustment(1)(2)                  0.06       0.60       0.04       0.67
    Less: differential to B.C.
     markets(1)(2)                    (0.06)     (0.47)     (0.07)     (0.40)
    Less: transportation system
     charges(2)                       (0.31)     (0.65)     (0.33)     (0.63)
    Adjust: timing of actual gas
     sales(1)(2)                       0.09       0.14      (0.01)      0.09
    -------------------------------------------------------------------------
    Price before price protection
     (physical & financial)            6.85       5.65       6.88       6.50
    Impact of longer term physical
     sales contracts(1)                0.13       0.42       0.17       0.49
    Financial hedging settlements      0.36       1.29       0.51      (0.65)
    -------------------------------------------------------------------------
    Focus realized price per
     mcf(3)                       $    7.35  $    7.36  $    7.56  $    7.63
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Focus natural gas sales
        price per mcf (before
        transportation system
        charges and financial
        commodity contract
        settlements)              $    7.29  $    6.72  $    7.38  $    7.62
    -------------------------------------------------------------------------
    (2) Differential of Focus sales
        price to AECO daily
        reference price after
        transportation and before
        price protection per mcf  $   (0.22) $   (0.39) $   (0.36) $   (0.27)
    -------------------------------------------------------------------------
    (3) For 2007, excludes any unrealized gains or losses recorded for
        financial commodity contracts and excludes the reclassification to
        earnings of gains on hedges held at January 1, 2007

    Natural Gas Pricing

    -   Natural gas reference prices declined in Q2 2007 due to continued
        strong levels of U.S. natural gas drilling activity and higher levels
        of LNG imports into the U.S. resulting in anticipated high storage
        levels. Natural gas reference prices are continuing to decline in the
        beginning of the third quarter with mild weather in the highest
        consuming areas of North America and high injections of natural gas
        into storage. The average AECO daily reference price per mcf for
        natural gas was $7.07 during the second quarter of 2007 compared with
        $7.41 for the first quarter of 2007 and $6.04 in the second quarter
        of 2006.

    -   Focus' realized natural gas price of $7.35 per mcf in the second
        quarter of 2007 was five percent lower compared to the first quarter
        of 2007 price of $7.77 per mcf due to a five percent decrease in the
        reference price and a lower level of gains from the settlement of
        physical and financial commodity contracts.

    -   The realized price in the second quarter of 2007 was essentially flat
        to the second quarter of 2006 as the increase in the reference price
        of natural gas was offset by lower financial hedging settlements.

    -   During the second quarter of 2007, the price protection program of
        Focus reduced some of the volatility in natural gas prices and
        increased the realized price received by $0.49 per mcf. During the
        quarter, 20 percent of natural gas was sold under forward physical
        sales contracts which resulted in natural gas sales being
        $1.4 million higher than if the natural gas had been sold based on
        the AECO daily reference price. A further 47 percent of natural gas
        production was hedged with financial instruments. The impact of the
        financial instrument settlements was positive $3.8 million for the
        second quarter of 2007.

    -   Year-to-date price protection programs have increased realized
        natural gas prices by $0.68 per mcf and increased revenue by
        approximately $14.3 million. This compares with a benefit of $1.14
        per mcf and $9.3 million for the comparable period in 2006.

    -   Accounting for financial contracts changed in 2007 to mark-to-market
        accounting from hedge accounting. This is further discussed in Notes
        3 and 13 of the notes to consolidated financial statements.

    Crude Oil

    -   The price realized by Focus for crude oil, after settlement of
        financial hedges, was $67.64 per barrel for the second quarter of
        2007 versus $73.08 for the comparable period in 2006 and $62.61 per
        barrel in the first quarter of 2007.

    -   The differential between the sales price of our crude oil compared
        with the Edmonton par reference price for light oil in the second
        quarter of 2007 was $4.14 per barrel compared with a differential of
        $4.92 per barrel in the first quarter of 2007. Heavy oil production,
        representing 14 percent of oil production for the quarter, had a
        differential of $29.50 per barrel compared with the light oil
        production which had a differential of $0.02 per barrel.

    -   Focus has utilized price protection for a portion of its crude oil
        production. For Q2 2007, 800 barrels per day were hedged financially
        with a cost of $15,000, or $0.09 per barrel. This compares with a
        cost of $0.6 million in the second quarter of 2006 on 700 barrels per
        day hedged, or $4.11 per barrel. For the first quarter of 2007,
        400 barrels per day were hedged with financial commodity contracts
        which resulted in a gain of $0.1 million, or $0.44 per barrel.

    Price Protection
    -------------------------------------------------------------------------
    -   Focus uses price protection through longer term physical delivery
        contracts and financial contracts to reduce the volatility in
        commodity prices in an effort to help maintain sustainable
        distributions.

    -   A full description of the outstanding financial instruments and
        physical sales contracts and their estimated mark-to-market values is
        contained in Notes 12 and 14 of the notes to consolidated financial
        statements.

    -------------------------------------------------------------------------
    Price Protection (volume
     and reference price)                     2007                 2008
                                              Q3            Q4            Q1
    -------------------------------------------------------------------------
    Natural gas  Mmcf/d                     77.5          63.4          56.4
                 CDN$/mcf                  $8.01   $8.43-$8.55   $8.71-$8.91
    Crude oil    bbls/d                      800           400             -
                 CDN$/bbl          $70.47-$79.00 $70.00-$79.00             -
    -------------------------------------------------------------------------
    
    These amounts assume a heat content of 1.06 GJ per mcf for our natural
gas.

    Changes in Accounting Policy
    -------------------------------------------------------------------------
    Effective January 1, 2007, the Trust adopted the new recommendations of
the Canadian Institute of Chartered Accountants (CICA) Handbook Section 1530,
"Comprehensive Income"; Section 3861, "Financial Instruments - Disclosure and
Presentation"; Section 3855, "Financial Instruments - Recognition and
Measurement"; and, Section 3865, "Hedges", prospectively and therefore the
comparative interim financial statements have not been restated. These new
Handbook Sections, which apply to fiscal years beginning on or after
October 1, 2006, provide requirements for the recognition and measurement of
financial instruments and on the use of hedge accounting.
    Upon adoption of these new standards, the Trust discontinued hedge
accounting on its financial commodity contracts. The unrealized gain on the
outstanding contracts at January 1, 2007 has been included in accumulated
other comprehensive income on adoption and will be deferred in accumulated
other comprehensive income until the original hedged transaction is recognized
in earnings which is over its original term. All financial commodity contracts
entered into subsequent to January 1, 2007 will be recorded at fair value on
the balance sheet. These contracts will be adjusted to fair value each period
with the change recognized in the determination of income. See Notes 3 and 13
of the notes to consolidated financial statements for further discussion.
    The following table summarizes the income statement impact of the
financial commodity contracts:

    
                                                  Three Months    Six Months
                                                         Ended         Ended
                                                       June 30,      June 30,
    (thousands)                                           2007          2007
    -------------------------------------------------------------------------
    Fair value of financial contracts outstanding
     at end of period (asset)(1)                     $  17,191     $  17,191
    Fair value of financial contracts outstanding
     at beginning of period(2)                          (3,400)       25,786
    -------------------------------------------------------------------------
    Change in fair value - unrealized gain (loss)
     on financial commodity contracts                   20,591        (8,595)
    Cash settlement of financial contracts in the
     period                                              3,772        10,670
    Reclassification to earnings of gains on
     hedges(3)                                           6,175        16,826
    -------------------------------------------------------------------------
    Income statement impact before tax               $  30,538     $  18,901
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Represents the net derivative asset amount on the balance sheet

    (2) The fair value of financial commodity contracts outstanding at
        December 31, 2006 was $25.8 million. This was recognized in
        accumulated other comprehensive income ("AOCI") and is amortized to
        income over the term of those contracts. AOCI and changes in other
        comprehensive income are presented in financial statements on a net-
        of-tax basis.

    (3) Transitional provisions of the new standards require the fair value
        of the outstanding financial contracts at December 31, 2006 be
        recognized in income over the term of the contracts. This amount
        represents the second quarter and six month amortization of the
        December 31, 2006 fair value amount.

    The following table summarizes the financial statement effects of the
recognition of accumulated other comprehensive income:

    (thousands)
    -------------------------------------------------------------------------
    On adoption, net of tax ($25.9 million less
     related tax of $8.0 million)(1)                               $  17,947
    Amortized to income, net of tax ($16.9 million
     less related tax of $5.1 million)                                11,637
    -------------------------------------------------------------------------
    Balance as at June 30, 2007                                    $   6,310
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1) Adoption amount includes $0.2 million related to the amortization of
        other commodity contracts.

    Physical commodity contracts will continue to be accounted for on an
accrual basis.

    Production Revenue
    -------------------------------------------------------------------------
    -   Production revenue, including financial contract hedging settlements,
        was $96.3 million for the three months ended June 30, 2007 compared
        to $48.7 million in Q2 2006. Approximately 84 percent of production
        revenue was from natural gas.

    -   The increase in production revenue is mostly due to increased
        production volumes since the Profico acquisition and partially offset
        by lower price realizations for crude oil and NGL's.

    -   Production revenue for Q2 2007 decreased by approximately
        $3.0 million from Q1 2007, mainly due to lower natural gas
        realizations which were partially offset by higher crude oil and NGL
        realizations.
    

    Royalties
    -------------------------------------------------------------------------
    Royalties, as a percentage of revenue before financial commodity contract
settlements and net of transportation charges, were 20 percent in the second
quarter of 2007 compared to 22 percent in the second quarter of 2006. Crown
royalties on the Saskatchewan properties are generally lower than on the
properties in Alberta and British Columbia. Results for the second quarter of
2006 included four days of production and related royalties from the
Saskatchewan properties. The effective royalty rate for the first quarter of
2007 and the first quarter of 2006 was constant at 19 percent as generally
lower Crown royalties on the Saskatchewan properties in Q2 2007 offset the
benefit from higher financial hedging settlements in Q2 2006. Financial
commodity contract settlements are not subject to royalties.

    
    Production Expenses
    -------------------------------------------------------------------------
                           2007                 2006                 2005
                         Q2     Q1     Q4     Q3     Q2     Q1     Q4     Q3
    -------------------------------------------------------------------------
    Production
     expenses
     per BOE          $3.71  $4.50  $4.04  $3.50  $4.62  $5.50  $4.61  $3.56
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -   Production expenses for the second quarter of 2007 were $3.71 per BOE
        compared with $4.50 per BOE for the first quarter of 2007 and $4.62
        for the second quarter of 2006. Our yearly production expenses remain
        on target to our guidance of $3.75 to $4.25 per BOE.

    -   Production expenses decreased significantly from the first quarter of
        2007. The first quarter of 2007 had higher production expenses due to
        additional costs related to cold weather freeze-offs in Saskatchewan,
        repairs to compressor equipment in Saskatchewan and the regular
        maintenance and restocking of supplies in the winter-only access
        areas of British Columbia.

    -   Production expenses declined from the second quarter of 2006 largely
        due to the addition of the lower production expense Saskatchewan
        properties.

    General and Administrative Expenses
    -------------------------------------------------------------------------
                                    Three Months Ended      Six Months Ended
                                               June 30,              June 30,
    (thousands)                        2007       2006       2007       2006
    -------------------------------------------------------------------------
    Cash G&A expenses             $   3,000  $   2,071  $   7,312  $   3,921
    Overhead recoveries              (1,817)      (553)    (4,512)    (1,496)
    -------------------------------------------------------------------------
    Total cash G&A expenses           1,183      1,518      2,800      2,425
    Non-cash G&A expense(1)               -        422          -        804
    Trust Unit Rights Incentive
     Plan expense(2)                    920        333      1,607        665
    -------------------------------------------------------------------------
    Net G&A reported              $   2,103  $   2,273  $   4,407  $   3,894
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Cash-based G&A per BOE        $    0.59  $    1.66  $    0.71  $    1.34
    Net reported G&A per BOE      $    1.06  $    2.49  $    1.11  $    2.16

    (1) Gross general and administrative expenses for the six months ended
        June 30, 2006 include $0.8 million related to the Executive Bonus
        Plan. Half of this amount was non-cash and settled through the
        issuance of units from treasury at a price equal to the average of
        the last five trading days of the month for which the bonus relates.
        The Executive Bonus Plan was terminated June 30, 2006.

    (2) Trust Unit Rights Incentive Plan compensation expense is calculated
        using the fair value method adopted in 2003 and represents a non-cash
        charge. Details of this compensation expense are contained in Note 10
        of the notes to consolidated financial statements.
    

    Cash-based general and administrative expenses were $0.59 per BOE for the
second quarter of 2007 and $0.71 per BOE for the six months ended June 30,
2007 compared to $1.66 per BOE for the second quarter of 2006 and $1.34 per
BOE for the six months ended June 30, 2006. With the acquisition of Profico in
late June 2006, Focus increased its organizational strength with the addition
of personnel in all areas of the Trust as required by the expanded production
base, capital programs and corporate requirements. This growth increased
general and administrative costs associated with personnel, rent and corporate
activities. Notwithstanding that Focus has grown in size, general and
administrative expenses per BOE have declined due to increased production of
the Trust after the 2006 acquisition and additional overhead recoveries from
the acquired operated properties.
    Cash-based general and administrative expenses decreased by $0.23 per BOE
in the second quarter of 2007 from $0.82 per BOE in the first quarter of 2007.
The decrease resulted from recognition in the first quarter of a one-time cash
bonus of $1.2 million (discussed below) and reduced recoveries in the second
quarter. The level of overhead recoveries from capital projects is determined
by the magnitude of capital programs operated by Focus and is generally higher
in the first quarter of the year.
    Focus has completed a process to review and update the long-term
compensation plans to better suit the employee base of the Trust and be more
comparable with the standard industry compensation framework for a trust of
this size. At the Annual General and Special Meeting on May 17, 2007,
unitholders approved a new Unit Award Incentive Plan ("Unit Award Plan") which
will grant awards of restricted trust units and performance trust units, and
amended the Trust Unit Rights incentive Plan ("Rights Plan") such that no
further rights would be granted under that plan. Additional information on
these plans is contained in Notes 10 and 11 of the notes to consolidated
financial statements. This process of change took several months and resulted
in Focus being without an effective long-term incentive plan from the Fall of
2006 to the middle of 2007. As a bridge to a new long-term incentive plan
implemented in July 2007, Focus paid a bonus to employees in July 2007. This
payment was approved by the Board of Directors during the first quarter of
2007 and was recorded in the March 31, 2007 financial statements.
    In July 2007, the Board of Directors approved an initial grant of 321,564
restricted trust units ("RTU's") and 616,251 performance trust units ("PTU's)
under the Unit Award Plan discussed above. The Unit Award Plan will settle in
trust units which may be issued from treasury or purchased on the Toronto
Stock Exchange. Additional trust units will be issued for the value of accrued
distributions. The number of RTU's is fixed and will vest over a period of
three years. The number of PTU's is dependent upon the performance of the
Trust and will vest over a period of three years. The number of PTU's issued
is dependent upon the payout multiplier which will vary between zero and two.
The payout multiplier is determined annually and is based on value measure
ratios as defined by the Board of Directors. The Unit Award Plan provides that
the maximum number of trust units reserved for issuance from time to time
pursuant to the Unit Award Plan shall not exceed five percent: (i) of our
outstanding trust units (including trust units issuable upon exchange of
exchangeable shares and any other fully paid exchangeable securities of any
other entity controlled by us) less (ii) the aggregate number of trust units
reserved under the Rights Plan.
    The RTU's and PTU's will be accounted for on a fair value basis beginning
in the third quarter of 2007. Compensation expense is a non-cash charge and is
based on the fair value of the trust units on the date of grant. Compensation
expense is recognized in income over the three-year vesting period with a
corresponding increase in contributed surplus.

    Interest and Financing Expenses
    -------------------------------------------------------------------------
    Interest and financing expenses were $4.2 million in the second quarter
of 2007 compared to $4.1 million in the first quarter of 2007. Average debt
levels decreased during the second quarter and interest rates increased
slightly. Outstanding long-term debt decreased $25 million from $311 million
at March 31, 2007 to $286 million at June 30, 2007.
    Interest and financing expenses increased from $1.4 million in the second
quarter of 2006 to $4.2 million in the second quarter of 2007 commensurate
with higher debt levels and slightly higher interest rates. Outstanding
long-term debt at June 30, 2007 was $286 million compared to $242 million at
June 30, 2006. Additional debt associated with the Profico business
acquisition of $179 million was incurred near the end of June 2006.

    Depletion and Depreciation
    -------------------------------------------------------------------------
    The depletion and depreciation rate, excluding the impact of exchangeable
share conversions, for the three months ended June 30, 2007, increased
slightly to $23.27 per BOE ($25.11 per BOE, including the exchangeable share
impact) compared to $23.18 per BOE ($25.00 per BOE, including the exchangeable
share impact) in the first quarter of 2007.
    The depletion and depreciation rate, excluding the impact of exchangeable
share conversions, for the three months ended June 30, 2006 was $11.86 per BOE
($15.31 per BOE, including the exchangeable share impact) for the period
April 1 to June 26, 2006 which does not include the acquisition of the
Saskatchewan properties and $23.97 per BOE ($27.42 per BOE, including the
exchangeable share impact) for the period June 27 to June 30, 2007, reflecting
the acquisition of the Saskatchewan properties.
    The depletion and depreciation rate incorporates the results of
independent reserve reports dated December 31, 2006 and actual capital
expenditures.

    Asset Retirement Obligation
    -------------------------------------------------------------------------
    The asset retirement obligation increased $1.4 million to $39.3 million
at June 30, 2007 from $37.9 million at March 31, 2007. The increase is largely
due to drilling activity and slightly higher accretion expense. The asset
retirement obligation recorded represents the net present value of cash flows
required to settle asset retirement obligations, and a full description is
contained in Note 5 of the notes to consolidated financial statements.

    Income and Other Taxes
    -------------------------------------------------------------------------
    On June 22, 2007, Bill C-52, the Federal Government's legislation
containing provisions to impose a tax on publicly traded income trusts and
partnerships, received Royal Assent. The legislation includes a 31.5 percent
tax for taxation years beginning in 2011 on income of the Trust before
distributions. Distributions will effectively be taxed as a dividend to the
taxable Canadian investor.
    Certain of the Trust's assets are held by entities which transfer taxable
income to unitholders. Prior to the legislation becoming enacted, future
income taxes were not required to be recorded on temporary differences related
to the carrying value of these assets over their tax value. As a result of the
legislation becoming enacted, the Trusts' tax status has changed for purposes
of Canadian accounting guidelines. A non-cash, future income tax expense of
$13.8 million has been recorded on these temporary differences in the second
quarter of 2007 because of this change in tax status.
    Income and other taxes include a future income tax expense of
$3.3 million in the second quarter of 2007 compared to a recovery of
$10.4 million in the second quarter of 2006. The future income tax expense in
the second quarter resulting from the previously unrecorded temporary
differences is offset by the transfer of taxable income from the Trust to
individual unitholders and from the depletion associated with the accounting
for exchangeable shares.
    As noted above, the legislation is effective January 1, 2011 provided the
Trust continues to comply with the "normal growth" guidelines in the
transitional period until 2011.
    Current guidelines effectively measure "normal growth" with reference to
the Trust's market capitalization on October 31, 2006, the date the government
first announced the proposal for the tax. The "normal growth" will permit new
equity of 40 percent to the end of December 31, 2007 with an additional
20 percent per year 2008 to 2010, for a total of 100 percent. In addition, the
Trust will be permitted to repay existing outstanding debt on October 31, 2006
without impacting the normal growth limits.
    The Trust is currently assessing various structural alternatives in light
of the legislation however, in spite of the structural implications, the core
business of the Trust remains the same.

    Capital Expenditures
    -------------------------------------------------------------------------
    Capital expenditures for field operations in the second quarter of 2007
were $8.9 million. Expenditures were almost entirely in our core area of
Shackleton, where we drilled 90 (57 net) Milk River gas wells with a
100 percent success rate. In addition, we tied in 13 wells that were drilled
in Q1 but were not tied in prior to breakup.
    Although rain delays slowed down our Shackleton drilling program in the
second quarter, we are working hard to catch up and thereby minimize any
production impact. We continue to be pleased with our 2007 drilling program in
Shackleton and are confident that, overall, the program will come in on time,
on budget and as per expectations in terms of well results. We will continue
to have an active program in Shackleton throughout the second half of 2007.
    Also during the second quarter, we acquired two minor partner interests
in our core areas of Shackleton and Tommy Lakes at a cost of $4.0 million.

    Liquidity and Capital Resources
    -------------------------------------------------------------------------
    As at June 30, 2007 Focus had a working capital deficit of $19.2 million
(excluding any derivative asset or liability) compared with working capital
deficit of $11.0 million (excluding any derivative asset or liability) at
December 31, 2006 and working capital deficit of $55.4 million at June 30,
2006. The working capital deficiency has increased from year end mainly due to
a decrease in revenue receivables from a lower natural gas price at June 30,
2007 compared to December 31, 2006. On a monthly basis there are fluctuations
in accounts receivable and accounts payable reflecting the extent of capital
programs, distributions to unitholders after month end and accrued revenue and
royalties for the current month.
    Long-term debt at June 30, 2007 was $286 million compared with
$297 million at December 31, 2006 and $242 million at June 30, 2006. The
decrease in long-term debt from year end results from the timing of capital
expenditures, as Focus is more active in the winter than in the second quarter
with its winter drilling programs. In addition, current bank debt at June 30,
2007 was $14.5 million compared to $5.0 million at December 31, 2006 due to
timing of cheques cashed.
    Focus had a $350 million revolving syndicated credit facility among four
Canadian financial institutions and a $15 million operating facility at
June 30, 2007. The credit facility revolves until June 24, 2008, whereupon it
may be renewed for a further 364-day term subject to a review by the lenders.
If not extended, principal payments will commence after expiry of the
revolving period and will consist of three quarterly payments of eight and
one-third percent commencing 15 months after the term date and the remaining
75 percent at the end of the term. The credit facilities are secured by a
floating charge debenture covering all of the assets of the Trust and a
general security agreement.
    Long-term debt plus the working capital deficiency decreased $2.7 million
during the first six months of 2007 from $307.9 million at December 31, 2006
to $305.2 million at June 30, 2007. This decrease during the first six months
of the year primarily resulted from the following factors:

    
    -   Funds flow from operations of $127.2 million plus $0.5 million of
        debt were used to fund $66.2 million in distributions declared to
        unitholders, $58.5 million invested in capital expenditures for field
        operations and $3.0 million of contributions to the reclamation fund
        and reclamation costs.

    -   Proceeds of $7.2 million from the issuance of equity pursuant to the
        exercise of trust unit appreciation rights ($0.9 million) and from
        the DRIP Plan ($6.3 million), were used to fund $4.0 million of
        property acquisitions and debt repayment of $3.2 million.
    

    Central to Focus' business strategy is the concept of sustainability
where the sum of capital expenditures to maintain production and distributions
is equal to funds flow from operations. Focus plans to finance its program for
production replacement primarily through investing approximately 35 to
45 percent of funds flow from operations. Capital expenditures, including
acquisitions and significant purchases of undeveloped land, above this level
will be financed through a combination of funds flow, debt and equity.
    In October 2006 Focus approved the DRIP Plan which provides eligible
unitholders of Focus trust units the advantage of accumulating additional
trust units by reinvesting their cash distributions paid by Focus and by
making optional payment for additional trust units. Under the distribution
reinvestment portion of the DRIP Plan, participants can potentially buy
additional units from treasury at 95 percent of the average market price. This
DRIP Plan provides a service to unitholders and increases the financial
flexibility of Focus. Focus wants to maintain financial flexibility at a time
of shifting commodity prices. We expect the DRIP Plan will generate
approximately $10.0 million through the issuance of equity on an annual basis.
Focus will generally use funds generated by this plan to reduce debt and
invest in additional capital projects (including land purchases and expanded
development operations).

    
    Capitalization Table
                                                       June 30,  December 31,
    (thousands except per-unit amounts)                   2007          2006
    -------------------------------------------------------------------------
    Long-term debt                                  $  286,000    $  297,000
    Plus: working capital deficiency (excluding
     derivative asset & liability)                      19,223        10,958
    -------------------------------------------------------------------------
    Total debt (excluding derivative asset &
     liability)                                     $  305,223    $  307,958
    Units outstanding and exchangeable partnership
     units                                              79,097        78,504
    Market price                                    $    17.80    $    18.18
    Market capitalization                           $1,407,927    $1,427,203
    Total capitalization                            $1,713,150    $1,735,161
    -------------------------------------------------------------------------
    Total debt as a percentage of total
     capitalization                                      17.8%         17.7%
    Annualized funds flow from operations(1)        $  256,496    $  247,062
    Total debt to funds flow                              1.2x          1.2x
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1) June 30, 2007 is based on the funds flow of the Trust for the 181-day
        period. The calculation of debt to annualized funds flow at
        December 31, 2006 is based on the $124.5 million of funds flow from
        operations of the Trust for the period of July 1 to December 31, 2006
        to more appropriately match the asset base after the acquisition with
        the debt level after the acquisition late in June 2006.

    2007 Cash Distributions
    -------------------------------------------------------------------------
    Ex-Distribution                         Distribution        Distribution
    Date                Record Date         Payment Date        per Unit
    -------------------------------------------------------------------------
    January 29, 2007    January 31, 2007    February 15, 2007   $0.14
    February 26, 2007   February 28, 2007   March 15, 2007      $0.14
    March 28, 2007      March 31, 2007      April 16, 2007      $0.14
    April 26, 2007      April 30, 2007      May 15, 2007        $0.14
    May 29, 2007        May 31, 2007        June 15, 2007       $0.14
    June 27, 2007       June 30, 2007       July 16, 2007       $0.14
    July 27,2007        July 31, 2007       August 15, 2007     $0.14
    August 29, 2007     August 31, 2007     September 17, 2007  $0.14((*))
    September 26, 2007  September 30, 2007  October 15, 2007    $0.14((*))
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    ((*)) estimated
    

    Focus declared distributions of $0.84 per unit in respect of January to
June 2007 production. Cash distributions of the Trust are essentially taxed to
the unitholders as ordinary income.
    The distribution rate reflects Focus' commitment to a business strategy
of sustainability where the sum of capital expenditures and distributions is
approximately equal to cash flow. The Trust continually monitors the forward
strip for natural gas and takes action in a prudent and proactive manner to
ensure sustainability through price protection activities and by adjusting
capital programs and distribution levels.
    Exchangeable partnership units receive a cash distribution equal to the
cash distribution declared for each Focus unit.

    Contractual Obligations and Commitments
    -------------------------------------------------------------------------
    The Trust has contractual obligations in the normal course of operations
including purchase of assets and services, operating agreements,
transportation commitments and sales commitments. These obligations are of a
recurring and consistent nature and impact cash flow in an ongoing manner. See
Note 18 of the notes to consolidated financial statements for further details.

    Critical Accounting Estimates
    -------------------------------------------------------------------------
    Focus' financial and operating results incorporate certain estimates
including:

    
    -   estimated revenues, royalties and operating expenses on production as
        at a specific reporting date but for which actual revenues and
        expenses have not yet been received;

    -   estimated capital expenditures on projects that are in progress;

    -   estimated depletion, depreciation and accretion that are based on
        estimates of oil and gas reserves that the Trust expects to recover
        in the future, estimated future salvage values, and estimated future
        capital costs;

    -   estimated fair values of derivative contracts and physical sales
        contracts that are subject to fluctuation depending upon the
        underlying commodity prices and foreign exchange rates;

    -   estimated value of asset retirement obligations that are dependent
        upon estimates of future costs and timing of expenditures.
    

    The Trust has hired individuals and consultants who have the skill sets
to make such estimates and ensures that the individuals and departments with
the most knowledge of an activity are responsible for the estimates. Past
estimates are reviewed and compared to actual results in order to make more
informed decisions on future estimates. The management team's mandate includes
ongoing development of procedures, standards and systems to allow the Trust to
make the best estimates possible.

    Assessment of Business Risks
    -------------------------------------------------------------------------
    Refer to the Assessment of Business Risks section of the Trust's 2006
Annual Report MD&A for a detailed assessment.

    Environmental Regulation and Risk
    ---------------------------------
    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 specified levels. 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 Focus.
    The Federal Government released on April 26, 2007, its Action Plan to
Reduce Greenhouse Gases and Air Pollution (the "Action Plan"), also known as
ecoACTION and 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. Regarding large industry and industry related projects,
the Government's Action Plan intends to achieve the following: (i) an absolute
reduction of 150 megatonnes in greenhouse gas emissions by 2020 by imposing
mandatory targets; and (ii) air pollution from industry is to be cut in half
by 2015 by setting certain targets. New facilities using cleaner fuels and
technologies will have a grace period of three years. In order to facilitate
companies' compliance of the Action Plan's requirements, while at the same
time allowing them to be cost-effective, innovative and adopt cleaner
technologies, certain options are provided. These are: (i) in-house
reductions; (ii) contributions to technology funds; (iii) trading of emissions
with below-target emission companies; (iv) offsets; and (v) access to Kyoto's
Clean Development Mechanism.
    On March 8, 2007, the Alberta Government introduced Bill 3, the Climate
Change and Emissions Management Amendment Act, which intends to reduce
greenhouse gas emission intensity from large industries. Bill 3 states that
facilities emitting more than 100,000 tonnes of greenhouse gases a year must
reduce their emissions intensity by 12 percent starting July 1, 2007; if such
reduction is not initially possible, the companies owning the large emitting
facilities will be required to pay $15 per tonne for every tonne above the
12 percent target. These payments will be deposited into an Alberta-based
technology fund that will be used to develop infrastructure to reduce
emissions or to support research into innovative climate change solutions. As
an alternate option, large emitters can invest in projects outside of their
operations that reduce or offset emissions on their behalf, provided that
these projects are based in Alberta. Prior to investing, the offset
reductions, offered by a prospective operation, must be verified by a third
party to ensure that the emission reductions are real.
    Given the evolving nature of the debate related to climate change and the
control of greenhouse gases and resulting requirements, it is not possible to
predict the impact of those requirements on Focus and its operations and
financial condition.

    Review of Alberta Royalty and Tax Regime
    ----------------------------------------
    On February 16, 2007, the Alberta Government announced that a review of
the province's royalty and tax regime (including income tax and freehold
mineral rights tax) pertaining to oil and gas resources, including oil sands,
conventional oil and gas and coalbed methane, will be conducted by a panel of
experts, with the assistance of individual Albertans and key stakeholders. The
review panel is to produce a final report that will be presented to the
Minister of Finance by August 31, 2007.
    For the six months ended June 30, 2007, approximately 13 percent of the
Trust's production was from Alberta.

    Disclosure Controls and Controls Over Financial Reporting
    -------------------------------------------------------------------------
    The Trust maintains a Disclosure Committee (the "Committee") that is
responsible for ensuring that all public and regulatory disclosures are
sufficient, timely and appropriate, and that disclosure controls and
procedures are operating effectively. The Committee consists of the Chief
Executive Officer and each of the Vice Presidents. The Trust's disclosure
controls and procedures are in place to ensure that any material, or
potentially material, information is made known to the Committee and is
properly included in this report.
    Management has designed internal controls over financial reporting to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of the financial statements for external purposes in
accordance with GAAP and had concluded, at December 31, 2006, that the design
of internal controls over financial reporting was effective.
    There were no changes in internal control over financial reporting that
have materially affected or are reasonably likely to materially affect the
Trust's internal control over financial reporting in the six months ended
June 30, 2007.
    The Trust's management, including the Chief Executive Officer and the
Chief Financial Officer, do not expect that our disclosure controls or our
internal control over financial reporting will prevent or detect all error or
fraud. A control system, no matter how well designed and operated, can provide
only reasonable, not absolute, assurance that the control system's objectives
will be met. The design of a control system must reflect the fact that there
are resource constraints, and the benefits of controls must be considered
relative to their costs. Further, because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute assurance that
misstatements due to error or fraud will not occur or that all control issues
and instances of fraud, if any, within the Trust have been detected.

    Outlook - 2007
    -------------------------------------------------------------------------
    The Trust's operational results and financial condition will be dependent
on the prices received for oil and natural gas production. Oil and natural gas
prices have fluctuated significantly over recent years and are determined by
global demand and supply factors.
    The following chart summarizes Focus' 2007 outlook. No acquisitions are
assumed for the purpose of these forecasts.
    In 2007, Focus will continue its active drilling and development program
on its major natural gas properties. It is anticipated that these development
opportunities will maintain production by offsetting production declines.
    We do not attempt to forecast commodity prices, and as a result, we do
not forecast funds flow from operations or future cash distributions to
unitholders.

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

    Summary of 2007 Expectations
    -------------------------------------------------------------------------
    Average annual production                          21,500 - 23,500 BOE/d
    Weighting to natural gas                                             89%
    Production expenses per BOE                                $3.75 - $4.25
    Cash G&A expenses per BOE                                  $0.90 - $1.10
    Capital expenditures - field                          $95 - $115 million
    Average annual payout ratio                                    55% - 65%
    Approximate taxable portion of distributions                        100%
    Funds from operations/net debt                               1.1x - 1.3x
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Focus is committed to increasing the long-term value of the Trust to
unitholders. The following goals are the foundation of our commitment to value
creation:

    -   Maximize the value of existing assets;
    -   Attract and retain the best value creation team;
    -   Pursue quality acquisitions that are strategic and accretive;
    -   Protect margins and improve profitability;
    -   Create value through operational expertise and control; and
    -   Maintain financial flexibility and strength.

    Summary of Quarterly Results
    -------------------------------------------------------------------------
    The following table provides a summary of results for each of the last
eight quarters. Significant factors and trends which have impacted these
results include:

    -   Revenue and royalties are directly related to fluctuations in the
        underlying commodity prices and the extent to which price protection
        has been achieved through financial hedges and forward physical sales
        contracts.

    -   Prior to the Profico acquisition in late June 2006, many of the
        natural gas areas of Focus were only accessible in the winter. This
        includes the Tommy Lakes area, which is significant from a production
        and development program perspective. Please refer to the Seasonality
        of Operations section for additional information.

    -   Focus completed a major acquisition in June 2006 for approximately
        $1.1 billion where production more than doubled. Properties acquired
        allow for year-round access. The acquisition was financed with the
        issuance of 40.8 million trust units or exchangeable partnership
        units and an increase in long-term debt plus working capital
        deficiency of $179 million. See the Business Acquisition section for
        additional information.

    -   Effective January 1, 2007, the Trust discontinued hedge accounting on
        its financial commodity contracts. See Changes in Accounting Policy
        section for further discussion.

    Summary of Quarterly Results
    -------------------------------------------------------------------------

                                          2007                    2006
    (thousands of dollars,
     except as indicated)             Q2          Q1          Q4          Q3
    -------------------------------------------------------------------------
    FINANCIAL
    Production revenue and
     financial commodity contract
     settlements(1)               96,294      99,269      98,434      90,395
    Funds flow from operations    62,780      64,414      64,412      60,134
     Per unit - basic              $0.80       $0.82       $0.81       $0.77
    Cash distributions
     per trust unit                $0.42       $0.42       $0.48       $0.48
    Payout ratio (per-unit basis)    53%         51%         59%         63%
    Net income(2)                 23,790       5,748      21,646      12,671
    Per unit - basic               $0.30       $0.07       $0.28       $0.19
    Capital expenditures           8,863      49,642      26,986      36,457
    Acquisition expenditures,
     net                           3,973           -          45           -
    Long-term debt plus
     working capital(3)          305,223     324,137     307,958     313,390
    Total Trust Units -
     outstanding (000's)          79,097      78,765      78,504      78,425
    -------------------------------------------------------------------------
    OPERATIONS
    Average daily production
      Crude oil (bbls/d)           1,798       1,911       1,965       1,844
      NGLs (bbls/d)                  831         810         706         740
      Natural gas (mcf/d)        115,585     115,515     113,539     115,612
      BOE (@ 6:1)              21,894      21,974      21,594      21,853
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                          2006                    2005
    (thousands of dollars,
    except as indicated)              Q2          Q1          Q4          Q3
    -------------------------------------------------------------------------
    FINANCIAL
    Production revenue and
     financial commodity contract
     settlements(1)               48,663      48,146      52,315      48,790
    Funds flow from operations    27,988      28,688      32,350      29,773
     Per unit - basic              $0.70       $0.77       $0.86       $0.80
    Cash distributions
     per trust unit                $0.57       $0.57       $0.54       $0.52
    Payout ratio (per-unit basis)    82%         74%         63%         65%
    Net income(2)                 21,873      16,780      17,858      17,573
    Per unit - basic               $0.57       $0.46       $0.49       $0.48
    Capital expenditures           2,674      24,289      10,865       5,658
    Acquisition expenditures,
     net                       1,091,294           -         (33)     10,394
    Long-term debt plus
     working capital(3)          297,451     109,094      92,518      94,252
    Total Trust Units -
     outstanding (000's)          78,359      37,521      37,456      37,418
    -------------------------------------------------------------------------
    OPERATIONS
    Average daily production
      Crude oil (bbls/d)           1,563       1,610       1,714       1,718
      NGLs (bbls/d)                  682         784         762         833
      Natural gas (mcf/d)         46,753      45,137      42,629      44,910
      BOE (@ 6:1)              10,038       9,917       9,582      10,036
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1) Production revenue includes settlements for financial commodity
        contracts. For 2007, it excludes any unrealized gains or losses
        recorded for financial commodity contracts and excludes the
        reclassification to earnings of gains on hedges held at
        January 1, 2007.
    (2) Effective January 1, 2007, the Trust discontinued hedge accounting
        for its financial commodity contracts. See Changes in Accounting
        Policy for further discussion.
    (3) Long-term debt less working capital excludes any derivative asset or
        derivative liability.



    Consolidated Balance Sheets (unaudited)
                                                       June 30,  December 31,
    (thousands)                                           2007          2006
    -------------------------------------------------------------------------
    ASSETS
    Current assets
      Accounts receivable                           $   35,642    $   51,392
      Derivative asset                                  17,191             -
      Prepaid expenses and deposits                      6,202         5,467
      Commodity contracts                                    -         2,959
    -------------------------------------------------------------------------
                                                        59,035        59,818
    Petroleum and natural gas
     properties and equipment                        1,278,909     1,301,056
    Goodwill                                           453,241       453,241
    Reclamation fund                                     7,793         5,649
    -------------------------------------------------------------------------
                                                    $1,798,978    $1,819,764
    -------------------------------------------------------------------------
    LIABILITIES
    Current
      Accounts payable and accrued liabilities      $   35,516    $   50,426
      Cash distributions payable                        11,073        12,443
      Current bank debt                                 14,478         4,948
      Commodity contracts                                    -         3,123
    -------------------------------------------------------------------------
                                                        61,067        70,940
    Long-term debt (note 6)                            286,000       297,000
    Asset retirement obligation (note 5)                39,346        36,131
    Future income taxes                                328,716       318,800
    -------------------------------------------------------------------------
                                                       715,129       722,871
    -------------------------------------------------------------------------
    NON-CONTROLLING INTEREST
    Exchangeable shares (note 7)                             -         4,550
    UNITHOLDERS' EQUITY
      Unitholders' capital (note 8)                    960,427       922,426
      Exchangeable partnership units (note 9)          201,001       218,500
      Contributed surplus                                4,310         2,945
      Accumulated income (note 12)                     (88,199)      (51,528)
      Accumulated other comprehensive
       income (note 14)                                  6,310             -
    -------------------------------------------------------------------------
                                                     1,083,849     1,092,343
    -------------------------------------------------------------------------
    Commitments and contingencies (note 18)
    -------------------------------------------------------------------------
                                                    $1,798,978    $1,819,764
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See Notes to Consolidated Financial Statements

    Approval on behalf of the Board of Directors:

    "Signed"                    "Signed"
    STUART G. CLARK             JAMES H. MCKELVIE
    Director                    Director



    Consolidated Statements of Income and Accumulated Income (Deficit)
    (unaudited)

                                    Three Months Ended,     Six Months Ended,
    (thousands except                      June 30,              June 30,
     per-unit amounts)                 2007       2006       2007       2006
    -------------------------------------------------------------------------
    Revenue
    Production revenue            $  92,522  $  43,748  $ 184,894  $  92,311
    Financial commodity contract
     settlements (note 3)             3,772      4,915     10,670      4,498
    Unrealized gain (loss) on
     commodity contracts (note 3)    20,591          -     (8,595)         -
    Reclassification to earnings
     of gains on hedges (note 3)      6,175          -     16,826          -
    Royalties                       (18,134)    (8,991)   (35,582)   (19,765)
    Alberta Royalty Tax Credit            -        125          -        259
    Facility income                     657        960      1,285      1,667
    Interest income                      13          2        123         10
    -------------------------------------------------------------------------
                                    105,596     40,759    169,621     78,980
    -------------------------------------------------------------------------
    Expenses
    -------------------------------------------------------------------------
    Transportation system charges     3,244      2,746      6,828      5,271
    Production                        7,385      4,217     16,276      9,128
    General and administrative        2,103      2,273      4,407      3,894
    Elimination of the Executive
     Bonus Plan                           -      2,872          -      2,872
    Interest and financing            4,238      1,357      8,292      2,395
    Depletion and depreciation       50,034     15,082     99,538     28,818
    Accretion of asset
     retirement obligation              761        520      1,437        784
    -------------------------------------------------------------------------
                                     67,765     29,067    136,778     53,162
    -------------------------------------------------------------------------
    Income before income taxes       37,831     11,692     32,843     25,818
    Income and other taxes
    Future income tax expense
     (reduction)                     14,041    (10,458)     3,305    (13,605)
    Current tax                           -         62          -        212
    -------------------------------------------------------------------------
                                     14,041    (10,396)     3,305    (13,393)
    -------------------------------------------------------------------------
    Non-controlling interest
     - exchangeable shares                -        215          -        560
    -------------------------------------------------------------------------
    Net income for the period        23,790     21,873     29,538     38,651
    Changes in other comprehensive
     income (note 14)                (4,270)         -    (11,637)         -
    -------------------------------------------------------------------------
    Comprehensive income             19,520          -     17,901          -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Accumulated income (deficit),
     beginning of period            (78,827)    (4,416)   (51,528)      (258)
    Net income                       23,790     21,873     29,538     38,651
    Cash distributions              (33,162)   (28,719)   (66,209)   (49,655)
    -------------------------------------------------------------------------
    Accumulated deficit,
     end of period                $ (88,199) $ (11,262) $ (88,199) $ (11,262)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net income per unit (note 16)
    Basic                         $    0.30  $    0.57  $    0.38  $    1.03
    Diluted                       $    0.30  $    0.55  $    0.37  $    1.01

    See Notes to Consolidated Financial Statements



    Consolidated Statements of Cash Flows (unaudited)

                                    Three Months Ended,     Six Months Ended,
                                           June 30,              June 30,
    (thousands)                        2007       2006       2007       2006
    -------------------------------------------------------------------------
    Operating activities
    Net income for the period     $  23,790  $  21,873  $  29,538  $  38,651
    Add non-cash items:
      Non-controlling interest
       - exchangeable shares              -        215          -        560
      Non-cash general and
       administrative expenses
       (note 10)                        920        756      1,607      1,469
      Depletion and depreciation     50,034     15,082     99,538     28,818
      Accretion on asset
       retirement obligation            761        520      1,437        784
      Reclassification to earnings
       of gains on hedges            (6,175)         -    (16,826)         -
      Unrealized (gain) loss on
       commodity contracts          (20,591)         -      8,595          -
      Future income tax expense      14,041    (10,458)     3,305    (13,605)
    Reclamation costs                  (338)      (285)      (821)      (285)
    Net change in non-cash
     working capital items            7,963     (1,557)    16,859     (3,212)
    -------------------------------------------------------------------------
                                     70,405     26,146    143,232     53,180
    -------------------------------------------------------------------------
    Financing activities
    Proceeds from issue of
     trust units (pursuant
     to Distribution
     Reinvestment Plan)               3,314       (140)     6,264       (140)
    Proceeds from exercise of
     unit appreciation rights           435         38        929        461
    Increase (decrease) in
     long-term debt                 (25,000)   143,000    (11,000)   154,500
    Cash distributions paid         (33,115)   (20,960)   (67,578)   (41,515)
    -------------------------------------------------------------------------
                                    (54,366)   121,938    (71,385)   113,306
    -------------------------------------------------------------------------
    Investing activities
    Capital asset additions          (8,863)    (2,674)   (58,505)   (26,963)
    Acquisition expenditures         (3,973)  (142,500)    (3,973)  (142,500)
    Reclamation fund contributions,
     net of costs                    (1,279)      (450)    (2,144)      (897)
    Net change in non-cash
     working capital items           (3,193)    (2,462)    (7,225)      (819)
    -------------------------------------------------------------------------
                                    (17,308)  (148,086)   (71,847)  (171,179)
    -------------------------------------------------------------------------
    Increase (decrease) in cash
     and cash equivalents
     during the period               (1,269)        (2)         -     (4,693)
    Cash and cash equivalents,
     beginning                        1,269          5          -      4,696
    -------------------------------------------------------------------------
    Cash and cash equivalents,
     ending                        $      -  $       3  $       -  $       3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See Notes to Consolidated Financial Statements



    Notes to Consolidated Financial Statements
    -------------------------------------------------------------------------
    JUNE 30, 2007 AND 2006 (UNAUDITED)

    1.  STRUCTURE OF THE TRUST

        Focus Energy Trust (the "Trust") was established on August 23, 2002
        under a Plan of Arrangement involving the Trust, Storm Energy Inc.,
        FET Resources Ltd., and Storm Energy Ltd. The Trust is an open-end
        unincorporated investment trust governed by the laws of the Province
        of Alberta and created pursuant to a trust indenture (the "Trust
        Indenture"). Valiant Trust Company has been appointed Trustee under
        the Trust Indenture. The beneficiaries of the Trust are the holders
        of the trust units (the "unitholders").

        Under the Trust Indenture, the Trust may declare payable to
        unitholders all or any part of the income of the Trust. The income of
        the Trust consists primarily of interest earned on promissory notes
        issued to FET Resources Ltd., Focus BC Trust, and FET Energy Ltd.,
        entities that are wholly owned by the Trust, distributions paid on
        subordinated units from Focus BC Trust units owned by the Trust, as
        well as amounts attributed to a net profits interest agreement (the
        "NPI Agreement").

        Pursuant to the terms of the NPI Agreement, the Trust is entitled,
        through a subsidiary, to a payment from FET Resources Ltd. each month
        essentially equal to the amount by which the gross proceeds from the
        sale of production exceed certain deductible expenditures (as
        defined). Under the terms of the NPI Agreement, deductible
        expenditures may include amounts, determined on a discretionary
        basis, to fund capital expenditures, to repay third party debt and to
        provide for working capital required to carry out the operations of
        FET Resources Ltd.

        The taxable income of the Trust includes a deduction for the
        allocation of taxable income to unitholders, which is paid or becomes
        payable in the year. The Trust Indenture provides that an amount at
        least equal to the taxable income of the Trust must be paid or
        payable each year to unitholders in order to reduce the Trust's
        taxable income to zero. Such taxable income relating to the payable
        amount is allocated to unitholders of record at the end of the year,
        and each unitholder at the distribution record date receives a pro
        rata share of the payable amount.

        FET Resources Ltd. (the "Company") is a subsidiary of the Trust.
        Under the Plan of Arrangement, the Company became the successor
        company to Storm Energy Inc. through amalgamation on August 23, 2002.
        The Company is actively engaged in the business of oil and natural
        gas exploitation, development, acquisition and production.

        FET Energy Ltd. is a subsidiary of the Trust. Under a Plan of
        Arrangement with Profico Energy Management Ltd. ("PEML") dated
        June 26, 2006, FET Energy Ltd. become the successor company to PEML
        through amalgamation on June 27, 2006. FET Energy Ltd., through its
        interest in a partnership, is engaged in the business of oil and
        natural gas exploitation, development, acquisition and production.

    2.  SUMMARY OF ACCOUNTING POLICIES

        The consolidated financial statements have been prepared by
        management in accordance with Canadian generally accepted accounting
        principles. The specific accounting principles used are described in
        the annual consolidated financial statements of the Trust and should
        be read in conjunction with these consolidated financial statements.
        The preparation of these consolidated financial statements requires
        management to make estimates and assumptions that affect the reported
        amounts of assets and liabilities and the disclosure of contingencies
        at the date of the financial statements, and revenues and expenses
        during the reporting period. Correspondingly, actual results could
        differ from estimated amounts. These consolidated financial
        statements have, in management's opinion, been properly prepared
        within reasonable limits of materiality.

        In particular, the amounts recorded for depletion and depreciation of
        the petroleum and natural gas properties and equipment and for asset
        retirement obligations are based on estimates of reserves and future
        costs. The cost impairment test is based on estimates of proved
        reserves, production rates, oil and natural gas prices, future costs
        and other relevant assumptions. By their nature, these estimates are
        subject to measurement uncertainty and the impact on the consolidated
        financial statements of future periods could be material.

        The Trust's most significant properties in terms of production and
        capital expenditures, prior to the acquisition of properties from
        PEML, are only accessible by road in the winter. This restricted
        access typically results in higher capital expenditures in the first
        and fourth quarters. Production is typically higher due to flush
        production from the winter drilling program at the end of the first
        quarter and beginning of the second quarter. Production from the new
        wells stabilizes within 12 months. The properties acquired from PEML
        allow year-round access which will reduce the significance of the
        seasonality of operations for the Trust.

    3.  CHANGES IN ACCOUNTING POLICY

        Effective January 1, 2007, the Trust adopted the new recommendations
        of the Canadian Institute of Chartered Accountants (CICA) Handbook
        Section 1530, "Comprehensive Income"; Section 3861, "Financial
        Instruments - Disclosure and Presentation"; Section 3855, "Financial
        Instruments - Recognition and Measurement"; and Section 3865,
        "Hedges", prospectively and therefore the comparative interim
        financial statements have not been restated. These new Handbook
        Sections, which apply to fiscal years beginning on or after
        October 1, 2006, provide requirements for the recognition and
        measurement of financial instruments and on the use of hedge
        accounting.

        Effective January 1, 2007, the following adjustments were made to the
        balance sheet to adopt the new standards:

        Increase (decrease) ($ thousands)
        ---------------------------------------------------------------------
        Derivative assets                                             25,950
        Derivative liabilities                                             -
        Future income tax liability                                   (8,003)
        ---------------------------------------------------------------------
        Accumulated other comprehensive income
        Hedges, net of income taxes                                   17,947
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        The following table summarizes the income statement (before tax)
        effects of the financial commodity contracts:

                                                Three Months      Six Months
                                                       Ended           Ended
                                               June 30, 2007   June 30, 2007
        ---------------------------------------------------------------------
        Financial commodity contract settlements     $ 3,772         $10,670
        Unrealized gain (loss) on
         commodity contracts                          20,591          (8,595)
        Reclassification to earnings
         of gains on hedges                            6,175          16,826
        ---------------------------------------------------------------------
                                                     $30,538         $18,901
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        (a)   Financial Instruments - Recognition and Measurement

        This new standard requires all financial instruments within its
        scope, including all derivatives, to be recognized on the balance
        sheet initially at fair value. Subsequent measurement of all
        financial assets and liabilities except those held-for-trading and
        available-for-sale are measured at amortized cost determined using
        the effective interest rate method. Held-for-trading financial assets
        are measured at fair value with changes in fair value recognized in
        earnings. Changes to the measurement of existing financial assets and
        liabilities at the date of adoption were adjusted to opening
        accumulated other comprehensive income as noted above.

        (b)   Derivatives

        The Trust continues to utilize financial derivatives and non-
        financial derivatives, such as commodity sales contracts requiring
        physical delivery, to manage a portion of the price risk attributable
        to future sales of petroleum and natural gas production.

        The Trust has elected to account for its commodity sales contracts,
        which were entered into and continue to be held for the purpose of
        receipt or delivery of non-financial items in accordance with its
        expected purchase, sale or usage requirements as executory contracts
        on an accrual basis rather than as non-financial derivatives. Prior
        to adoption of the new standards, physical receipt and delivery
        contracts did not fall within the scope of the definition of a
        financial instrument and were also accounted for as operating
        contracts.

        Subsequent changes in fair value of derivatives that are not
        designated or do not qualify for hedge accounting are recognized in
        net earnings as incurred.

        Prior to January 1, 2007, the Trust applied hedge accounting to its
        financial derivatives. On January 1, 2007, the Trust discontinued
        hedge accounting for all existing financial derivatives. Net
        derivative gains of $17.9 million in accumulated other comprehensive
        income at January 1, 2007 are reclassified to earnings in future
        periods as the original hedged transactions affect net earnings. From
        that date forward, the changes in fair value of such derivatives will
        be recognized in net earnings when incurred. Discontinuing hedge
        accounting will not affect the Trust's reported financial position or
        cash flows.

        (c)   Embedded Derivatives

        On adoption, the Trust elected to recognize as separate assets and
        liabilities, only those embedded derivatives in hybrid instruments
        issued, acquired or substantively modified after January 1, 2003. The
        Trust did not identify any material embedded derivatives which
        required separate recognition and measurement.

        (d)   Other Comprehensive Income

        The new standards require a new statement of comprehensive income,
        which consists of net earnings and other comprehensive income which,
        for the Trust, relates to changes in gains or losses on derivatives
        previously designated as hedges. This information is contained in
        Note 14.

    4.  BUSINESS ACQUISITION

        Effective June 27, 2006 Focus acquired PEML pursuant to a Plan of
        Arrangement with PEML. On June 26, 2006, the unitholders of the Trust
        and the shareholders of PEML voted to approve resolutions to effect
        the Plan of Arrangement by which security holders of PEML received a
        total of 5.17 Focus Energy Trust units and/or Focus Limited
        Partnership exchangeable units and $25.12 cash for each PEML common
        share and the Trust received the assets and assumed the liabilities
        of PEML for total consideration of $1,091.3 million. Of this amount,
        $1,070.5 million was for the acquisition of oil and gas assets, and
        the remaining $20.8 million was for the acquisition of working
        capital.

        This amount consisted of the issuance of 30,802,817 Focus Energy
        Trust units, 9,999,992 Focus Limited Partnership exchangeable units
        and $199.8 million in cash and transaction costs. Both the Trust and
        Partnership units had a fair value of $21.85 per unit. The Board of
        Directors approved the Information Circular dated May 25, 2006 with
        respect to the Plan of Arrangement on May 24, 2006.

        The Trust's aggregate consideration for the acquisition of PEML
        consists of the following:

        Consideration for the acquisition:

        ($ thousands)
        ---------------------------------------------------------------------
        Trust units issued                                           673,041
        Exchangeable partnership units issued                        218,500
        Cash                                                         198,253
        Transaction costs                                              1,500
        ---------------------------------------------------------------------
                                                                   1,091,294
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        This transaction has been accounted for using the purchase method
        whereby the assets acquired and the liabilities assumed are recorded
        at their fair values with the excess consideration over the fair
        value of the identifiable net assets allocated to goodwill. The
        following summarizes the allocation of the aggregate consideration of
        the PEML acquisition.

        Allocation of purchase price:

        ($ thousands)
        ---------------------------------------------------------------------
        Cash acquired                                                 55,800
        Net working capital                                          (36,717)
        Petroleum and natural gas properties and equipment           903,645
        Fair value of commodity contracts                              1,679
        Goodwill                                                     448,141
        Asset retirement obligation                                  (14,570)
        Future income taxes                                         (266,684)
        ---------------------------------------------------------------------
                                                                   1,091,294
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Effective June 27, 2006, the results from operations from the assets
        purchased from PEML have been included in the consolidated financial
        statements of the Trust.

    5.  ASSET RETIREMENT OBLIGATION

        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 $92.0 million which will be
        incurred between 2007 and 2040. The majority of the costs will be
        incurred after 2021. A credit-adjusted risk-free rate of 7.5 percent
        and an inflation rate of 2.1 percent were used to calculate the fair
        value of the asset retirement obligation.

        A reconciliation of the asset retirement obligation is provided
        below:

        ---------------------------------------------------------------------
        (thousands)                                         2007        2006
        ---------------------------------------------------------------------
        Balance, beginning of period                     $36,131     $15,090
        Accretion expense                                  1,437         784
        Development activity and change in estimates       2,599         241
        Acquisition of PEML assets                                    14,570
        Settlement of liabilities                           (821)       (285)
        ---------------------------------------------------------------------
        Balance as at June 30                            $39,346     $30,400
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    6.  LONG-TERM DEBT

        As at June 30, 2007 the Trust has a $350 million revolving syndicated
        credit facility among four Canadian financial institutions with an
        extendible 364-day revolving period and a two-year amortization
        period. In addition, the Trust has a $15 million demand operating
        line of credit. At June 30, 2007, the available borrowings under
        these facilities were reduced by $3.0 million of letters of credit.
        The credit facilities are secured by a floating charge debenture
        covering all of the assets of the Trust and a general security
        agreement.

        Advances bear interest at the bank's prime rate, bankers' acceptance
        rates plus stamping fees, or U.S. LIBOR rates plus applicable margins
        depending on the form of borrowing by the Trust. Stamping fees and
        margins vary from zero percent to 1.5 percent dependent upon
        financial statement ratios and type of borrowing. The effective rate
        on debt outstanding at June 30, 2007 is approximately 5.4 percent.

        The credit facility will revolve until June 24, 2008, whereupon it
        may be renewed for a further 364-day term subject to review by the
        lenders. If not extended, principal payments will commence after
        expiry of the revolving period and will consist of three quarterly
        payments of eight and one-third percent commencing 15 months after
        the term date and the remaining 75 percent at the end of the term.
        The Trust has requested the extension.

    7.  NON-CONTROLLING INTEREST - EXCHANGEABLE SHARES

        The exchangeable shares of FET Resources Ltd. were convertible at any
        time into trust units (at the option of the holder) based on the
        exchange ratio. The exchange ratio was increased monthly based on the
        cash distribution paid on the trust units divided by the ten-day
        weighted average unit price preceding the record date. The
        exchangeable shares of FET Resources Ltd. were listed for trading on
        the Toronto Stock Exchange under the symbol FTX.

        The exchangeable shares of FET Resources Ltd. were redeemable by FET
        Resources Ltd. at any time when the aggregate number of issued and
        outstanding exchangeable shares was less than 1,000,000. As a result
        of a minimal number of exchangeable shares outstanding, FET Resources
        Ltd. elected to redeem all of its exchangeable shares outstanding on
        January 16, 2007. In connection with this redemption, FET Resources
        Ltd. exercised its overriding redemption call right to purchase such
        exchangeable shares from holders of record. Each redeemed
        exchangeable share was purchased for trust units of the Trust in
        accordance with the exchange ratio in effect at January 15, 2007,
        rounded to the nearest whole trust unit. A Notice of Redemption was
        mailed to all exchangeable shareholders outlining the terms of this
        redemption.

                                                               Consideration
                                    Number of Shares              (thousands)
        Exchangeable Shares of ----------------------------------------------
         FET Resources Ltd.         2007        2006        2007        2006
        ---------------------------------------------------------------------
        Balance as at January 1  502,587     560,218   $   4,550    $  4,131
        Net income attributable
         to non-controlling
         interest                      -           -           -         392
        Exchanged for
         trust units            (502,587)    (23,751)     (4,550)       (179)
        ---------------------------------------------------------------------
        Balance as at June 30          -     536,467   $       -    $  4,344
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    8.  UNITHOLDERS' CAPITAL

        An unlimited number of trust units may be issued pursuant to the
        Trust Indenture. Each trust unit entitles the holder to one vote at
        any meeting of the unitholders and represents an equal fractional
        undivided beneficial interest in any distribution from the Trust and
        in any net assets in the event of termination or winding up of the
        Trust. The trust units are redeemable at the option of unitholders up
        to a maximum of $250,000 per annum. This limitation may be waived at
        the discretion of the Trust.

        In October 2006, the Trust put in place the Distribution Reinvestment
        and Optional Trust Unit Purchase Plan ("DRIP Plan") which provides
        the option for unitholders to reinvest cash distributions into
        additional units, either issued from treasury at 95 percent of the
        prevailing market price or through the facilities of the Toronto
        Stock Exchange at prevailing market rates with no additional
        commissions or fees. To date the Trust has issued units from treasury
        at a discount to satisfy the distribution reinvestment component of
        the DRIP Plan. The Trust will determine and announce, prior to each
        distribution payment date, the amount of equity, if any, that will be
        made available from treasury under the DRIP Plan on that date. As at
        June 30, 2007, the Trust has listed and reserved 577,621 trust units
        for the DRIP Plan.

                                                               Consideration
                                         Number of Units          (thousands)
        Trust Units of Focus     --------------------------------------------
          Energy Trust                  2007        2006      2007      2006
        ---------------------------------------------------------------------
        Balance as at January 1   67,768,125  36,687,167  $922,426  $244,426
        Issued pursuant to Plan
         of Arrangement
         with PEML(i)                         30,802,799             672,902
        Issued on conversion of
         exchangeable shares(ii)     740,311      33,128    13,066       776
        Issued pursuant to the
         Executive Bonus Plan(iii)         -      31,253         -       767
        Issued pursuant to the
         Distribution Reinvestment
         Plan(iv)                    363,586           -     6,264         -
        Issued on conversion of
         exchangeable partnership
         units(v)                    800,882           -    17,499         -
        Exercise of Unit
         Appreciation Rights(vi)     225,500      42,750     1,172       654
        ---------------------------------------------------------------------
        Balance as at June 30     69,898,404  67,597,097  $960,427  $919,525
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    (i)    Issued pursuant to Plan of Arrangement with PEML at a fair value
           of $21.85 per trust unit
    (ii)   Issued on conversion of exchangeable shares to trust units with
           the consideration recorded being equal to the market value of the
           trust units received on the date of conversion
    (iii)  Pursuant to the Executive Bonus Plan, 50 percent of all amounts
           due under such plan are payable through the issuance of trust
           units priced at the five day weighted average trading price for
           the last five trading days of the month for which the bonus
           relates. The Executive Bonus Plan was eliminated in 2006.
    (iv)   Issued pursuant to the DRIP Plan, with units issued from treasury
           at 95 percent of the average market price for the 10 days
           immediately preceding the distribution date
    (v)    Issued on conversion of exchangeable partnership units to trust
           units with the consideration recorded being equal to the
           historical value of the exchangeable partnership units
    (vi)   Exercise of Unit Appreciation Rights includes cash consideration
           of $928,940 (2006 - $461,000) and contributed surplus credit of
           $242,696 (2006 - $193,713).

    9.  EXCHANGEABLE PARTNERSHIP UNITS

        The exchangeable partnership units of Focus Limited Partnership are
        convertible after January 1, 2007 into trust units, at the option of
        the holder, on a one-for-one basis. Cash distributions equal to the
        distribution paid to Trust unitholders are paid to the holders of the
        exchangeable partnership units.

        The Board of Directors may redeem the exchangeable partnership units
        after January 8, 2017, unless certain conditions are met to permit an
        earlier redemption date.

        The exchangeable partnership units are entitled to vote on Focus
        matters with Trust unitholders through the Special Voting Unit. The
        exchangeable partnership units are not listed on any stock exchange
        and are not transferable.

                                                               Consideration
        Exchangeable Partnership         Number of Units          (thousands)
         Units of Focus          --------------------------------------------
         Energy Trust                   2007        2006      2007      2006
        ---------------------------------------------------------------------
        Balance as at January 1    9,999,992           -  $218,500  $      -
        Issued pursuant to Plan of
         Arrangement with PEML             -   9,999,992         -   218,500
        Exchanged for trust units   (800,882)          -   (17,499)        -
        ---------------------------------------------------------------------
        Balance as at June 30      9,199,110   9,999,992  $201,001  $218,500
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        The exchangeable partnership units were issued at a fair value of
        $21.85 per unit.

    10. TRUST UNIT RIGHTS INCENTIVE PLAN

        The Trust Unit Rights Incentive Plan ("Rights Plan") was established
        August 23, 2002 as part of the Plan of Arrangement. The Rights Plan
        granted rights to employees, directors, consultants and other service
        providers of the Trust and any of its subsidiaries.

        At the Annual General and Special Meeting on May 17, 2007,
        unitholders approved amendments to the Rights Plan and approved the
        new Unit Award Incentive Plan ("Unit Award Plan"). The amendments to
        the Rights Plan included reducing the current maximum of 5 percent of
        the outstanding trust units (including trust units issuable upon
        exchange of Focus Limited Partnership B Units) by the number of trust
        units reserved under the Unit Award Plan such that the combined
        maximum number of trust units issuable under the Rights Plan and Unit
        Award Plan will be 5 percent of the outstanding trust units
        (including trust units issuable upon exchange of Focus Limited
        Partnership B Units). To June 30, 2007, the Trust has listed and
        reserved 3,622,821 trust units in respect of the Rights Plan and Unit
        Award Plan.

        There were no further grants under the Rights Plan after May 17,
        2007. At June 30, 2007, there were rights outstanding to purchase
        2,190,081 trust units pursuant to the terms of the Rights Plan.

        The initial exercise price of rights granted under the Rights Plan is
        equal to the weighted average of the closing price of the trust units
        on the immediately preceding five trading days. At the option of the
        unitholder, the exercise price per right is calculated by deducting
        from the grant price the aggregate of all distributions, on a per-
        unit basis, made by the Trust after the grant date which represents a
        return of more than 0.833 percent of the Trust's recorded cost of
        capital assets (excluding any ceiling test write-downs and
        adjustments due to the conversion of exchangeable shares or any other
        fully paid exchangeable securities of the Corporation and Limited
        Partnership units of Focus Limited Partnership into trust units) less
        depletion, depreciation and amortization charges and any future
        income tax liability associated with such capital assets at the end
        of each month. Provided this test is met, then the entire amount of
        the distribution is deducted from the grant price. Rights granted
        prior to June 2006 have a life of five years and vest equally over a
        four-year period commencing on the first anniversary of the grant.
        Rights granted under the Rights Plan subsequent to May 2006 have a
        life of four years and vest equally over a three-year period
        commencing on the first anniversary of the grant.

                                                 2007                   2006
                                 --------------------------------------------
                                             Weighted               Weighted
                                              Average                Average
                                 Number of   Exercise   Number of   Exercise
                                    Rights      Price      Rights      Price
        ---------------------------------------------------------------------
        Balance as at January 1  2,438,063  $   16.52   1,311,100  $   12.52
        Granted                     52,670  $   18.16      89,500  $   24.61
        Exercised                 (225,500) $    5.20     (42,750) $   10.78
        Forfeitures                (75,152) $   21.16     (44,000) $   19.48
        ---------------------------------------------------------------------
        Before reduction of
         exercise price          2,190,081  $   17.57   1,313,850  $   13.16
        Reduction of
         exercise price                  -  $   (0.84)          -  $   (1.05)
        ---------------------------------------------------------------------
        Balance as at June 30    2,190,081  $   16.73   1,313,850  $   12.11
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        -  The average exercise price at the grant date was $20.22.
        -  The average contractual life of the rights outstanding is
           2.66 years.
        -  The number of rights exercisable at June 30, 2007 is 279,750.
        -  The average fair value at the grant date for the six months ended
           June 30, 2007 is $4.91. The fair value of rights is estimated
           using a modified Black Scholes option pricing model and amortized
           over the vesting period.

        The Trust has recorded non-cash compensation expense of $919,931 and
        $1,607,470 for the quarter and six months ended June 30, 2007. The
        Trust recorded non-cash compensation expense of $332,843 and $664,718
        for the quarter and six months ended June 30, 2006.

    11. UNIT AWARD INCENTIVE PLAN

        At the Annual General and Special Meeting on May 17, 2007,
        unitholders approved a Unit Award Plan which authorizes the Board of
        Directors to grant awards of restricted trust units and performance
        trust units. The Unit Award Plan will settle in trust units which may
        be issued from treasury or purchased on the Toronto Stock Exchange.
        The number of trust units reserved under the Unit Award Plan is such
        that the combined maximum number of trust units issuable under the
        Rights Plan and Unit Award Plan will be 5 percent of the outstanding
        trust units (including trust units issuable upon exchange of Focus
        Limited Partnership B Units). To June 30, 2007, the Trust has listed
        and reserved 3,622,821 trust units in respect of the Rights Plan and
        Unit Award Plan. As at June 30, 2007, there had not been any grants
        made under the Unit Award Plan. On July 20, 2007 321,564 restricted
        trust units and 616,251 performance trust units were granted.

    12. ACCUMULATED INCOME (DEFICIT)

        (thousands)                                          2007       2006
        ---------------------------------------------------------------------
        Accumulated income, before cash distributions   $ 289,463  $ 225,608
        Accumulated cash distributions                   (377,662)  (236,870)
        ---------------------------------------------------------------------
        Balance as at June 30                           $ (88,199) $ (11,262)
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    13. FINANCIAL INSTRUMENTS

        As described in Note 3 of the notes to consolidated financial
        statements, on January 1, 2007 Focus adopted the new CICA
        requirements relating to financial instruments.

        The Company's financial instruments included in the balance sheet
        consist of accounts receivable, other receivables, accounts payable
        and accrued liabilities and bank debt.

        Credit risk:

        The Company's accounts receivable are due from a diverse group of
        customers and as such are subject to normal credit risks.

        Interest rate risk:

        The Company is also exposed to interest rate risk to the extent that
        long-term debt is at a floating rate of interest.

        Fair values:

        The fair values of short-term financial instruments, being accounts
        receivable, accounts payable and accrued liabilities and cash
        distributions payable approximate their carrying values due to their
        short term to maturity. The fair value of long-term debt approximates
        its carrying value due to the floating interest rate and the
        revolving nature of the obligation.

        The following financial contracts were outstanding at the date of
        writing.

        Financial        Daily           Contract     Price
        Contracts     Quantity              Price     Index            Term
        ---------------------------------------------------------------------
        Crude oil     400 bbls  $ 70.00-79.00 Cdn       WTI      July 2007 -
                                                               December 2007
                      400 bbls  $       70.93 Cdn       WTI      July 2007 -
                                                              September 2007
        Natural gas   7,300 GJ  $        7.70 Cdn      AECO      July 2007 -
                                                                October 2007
                     15,000 GJ  $        7.77 Cdn      AECO      July 2007 -
                                                                October 2007
                     10,000 GJ  $        7.90 Cdn      AECO      July 2007 -
                                                                October 2007
                      5,000 GJ  $        8.00 Cdn      AECO      July 2007 -
                                                                October 2007
                      5,000 GJ  $        7.52 Cdn      AECO      July 2007 -
                                                                October 2007
                      5,000 GJ  $        7.50 Cdn      AECO      July 2007 -
                                                                October 2007
                      5,000 GJ  $        7.53 Cdn      AECO      July 2007 -
                                                                October 2007
                      5,000 GJ  $        7.50 Cdn      AECO      July 2007 -
                                                                October 2007
                     15,000 GJ  $   8.25-9.00 Cdn      AECO  November 2007 -
                                                                  March 2008
                     15,000 GJ  $        8.02 Cdn      AECO  November 2007 -
                                                                  March 2008
                     10,000 GJ  $        8.60 Cdn      AECO  November 2007 -
                                                                  March 2008
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        New CICA Handbook Standards, Section 3855 "Financial Instruments -
        Recognition and Measurement", Section 3865 "Hedges", and Section 1530
        "Comprehensive Income" are applicable for the Trust beginning in
        2007.

        As a result, hedge accounting for financial contracts has not been
        continued in future periods beyond 2006. All derivative contracts
        commencing January 1, 2007 are recorded at fair value on the balance
        sheet. Derivatives are adjusted to fair value each period with the
        change recognized in the determination of income. Settlement of
        derivatives is included in the Statement of Cash Flows as an
        operating activity. Unrealized gains and losses are subtracted or
        added back as a non-cash item.

    14. ACCUMULATED OTHER COMPREHENSIVE INCOME

        (thousands)                                                     2007
        ---------------------------------------------------------------------
        Accumulated other comprehensive income,
         beginning of period                                       $       -
        Adoption of financial instruments (notes 3 and 13),
         net of tax ($8.0 million)                                    17,947
        Reclassification to earnings of gains on hedges,
         net of tax ($5.2 million)                                   (11,637)
        ---------------------------------------------------------------------
        Balance as at June 30                                      $   6,310
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        As described in Note 3 of the notes to consolidated financial
        statements, on January 1, 2007 Focus adopted the new CICA
        requirements relating to financial instruments. The new standards
        require a new statement of comprehensive income, which consists of
        net earnings and other comprehensive income which, for the Trust,
        relates to changes in gains or losses on derivatives previously
        designated as cash flow hedges.

        At December 31, 2006 the fair value of the Trust's outstanding hedges
        was $25.8 million. The adjustment to accumulated other comprehensive
        income is shown net of tax. This value will be reclassified and
        brought through income over the life of the original contracts until
        March 2008 at which time the balance will be nil.

    15. PHYSICAL SALES CONTRACTS

        In addition to the financial contracts described above, the following
        physical contracts were outstanding at the date of writing. The fair
        market value of these contracts at June 30, 2007, which have no book
        value, would have resulted in a net payment to the Trust of
        $6.7 million.

        Physical Sales Contracts Daily Quantity Contract Price Term

                                         Daily     Contract
        Physical Sales Contracts      Quantity        Price             Term
        ---------------------------------------------------------------------
        Natural gas - fixed price    15,000 GJ    $7.15 Cdn      July 2007 -
                                                                October 2007
                                     10,000 GJ    $7.18 Cdn      July 2007 -
                                                                October 2007
                                     10,000 GJ    $8.96 Cdn  November 2007 -
                                                                  March 2008
                                     10,000 GJ    $7.12 Cdn  November 2007 -
                                                                March 2008(*)
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        (*)contract entered into subsequent to June 30, 2007

    16. PER-UNIT AMOUNTS AND SUPPLEMENTARY CASH FLOW INFORMATION

        Basic per-unit calculations are based on the weighted average number
        of trust units and exchangeable partnership units outstanding during
        the period. Diluted per-unit calculations include additional trust
        units for the dilutive impact of rights outstanding pursuant to the
        Rights Plan and include exchangeable partnership units and
        exchangeable shares converted at the average exchange ratio.

        Basic per-unit calculations for the three-month period ended June 30
        are based on the weighted average number of trust units outstanding
        in 2007 of 78,909,306 (2006 of 38,573,537). Basic per-unit
        calculations for the six-month period ending June 30, 2007 are based
        on the weighted average number of trust units outstanding in 2007 of
        78,776,328 (2006 of 37,651,345).

        Diluted calculations for the three-month period ended June 30 include
        additional trust units for the dilutive impact of the Rights Plan in
        2007 of 328,325 (2006 of 518,289) and nil exchangeable shares (2006
        of 761,285) converted at the average exchange rate. Net income has
        been increased for the net income attributable to the exchangeable
        shareholders in calculating dilutive per-unit amounts. Diluted
        calculations for the six-month period ended June 30, include
        additional trust units for the dilutive impact of the Rights Plan in
        2007 of 359,309 (2006 of 515,835) and 61,768 for exchangeable shares
        (2006 of 766,185) converted at the average exchange rate.

        Supplementary cash flow information for the six months ended June 30:

        (thousands)                                          2007       2006
        ---------------------------------------------------------------------
        Interest paid                                   $   8,332  $   4,196
        Interest received                               $     123  $       9
        Taxes paid                                      $       6  $     928
        Cash distributions paid                         $  67,578  $  41,515
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    17. INCOME TAXES

        On June 22, 2007, Bill C-52, the Federal Government's legislation
        containing provisions to impose a tax on publicly traded income
        trusts and partnerships, received Royal Assent. The legislation
        includes a 31.5 percent tax for taxation years beginning in 2011 on
        income of the Trust before distributions. Distributions will
        effectively be taxed as a dividend to the taxable Canadian investor.

        Certain of the Trust's assets are held by entities which transfer
        taxable income to unitholders. Prior to the legislation becoming
        enacted, future income taxes were not required to be recorded on
        temporary differences related to the carrying value of these assets
        over their tax value. As a result of the legislation becoming
        enacted, the Trusts' tax status has changed for purposes of Canadian
        accounting guidelines. A non-cash, future income tax expense of
        $13.8 million has been recorded on these temporary differences in the
        second quarter of 2007 because of this change in tax status.

        The Federal Government also announced a reduction in the general
        corporate tax rate in 2011 to 18.5 percent. Prior to that, the
        government had announced a reduction in the general corporate tax
        rate from 21 percent to 19 percent from 2007 to 2010 and the
        elimination of the corporate surtax in 2008. The Saskatchewan general
        corporate tax rate decreased from 14 percent to 13 percent on July 1,
        2007 and will further decrease to 12 percent on July 1, 2008.

    18. COMMITMENTS AND CONTINGENCIES

        The Trust is involved in litigation and claims arising in the normal
        course of operations. Management is of the opinion that any resulting
        settlements would not materially affect the Trust's financial
        position or reported results in operations.

        The following table is a summary of all contractual obligations and
        commitments for the next five years.

                                                                        2012
                                                                         and
                                                       2008-   2010-  there-
        ($ thousands)                  Total    2007    2009    2011   after
        ---------------------------------------------------------------------
        Office premises                3,419     769   1,924     726       -
        Operating leases                 359     359       -       -       -
        Mineral and surface leases(2) 28,262   4,710   9,421   9,421   4,710
        Transportation and processing 29,323  13,414  11,224   1,351   3,334
        Asset retirement
         obligations(3)               39,346     894     486     950  37,016
        ---------------------------------------------------------------------
        Total contractual
         obligations                 100,709  20,146  23,055  12,448  45,060
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        (1)   The table does not include the Trust's obligations for
              financial instruments and physical sales contracts which are
              fully disclosed in Notes 13 and 15.
        (2)   The Trust makes payments for mineral and surface leases. The
              table includes payments for each of the years 2007 to 2012
              under these leases, assuming continuation of the leases. The
              continuation of leases is based on decisions by the Trust
              relating to each of the underlying properties. Payments for the
              period after 2012 have not been included in the table but would
              continue at the same yearly rate if there were no change to the
              underlying properties.
        (3)   Based on the estimated timing of expenditures to be made in
              future periods

        In addition, the Trust has income and capital tax filings that are
        subject to audit and potential reassessment. The findings from such
        audit may impact the tax liability of the Trust. The final results
        are not reasonably determinable at this time and management believes
        it has adequately provided for income and capital taxes.

    Focus Energy Trust is a natural gas weighted energy trust. Focus is
committed to maintaining its emphasis on operating high-quality oil and gas
properties, delivering consistent distributions to unitholders and ensuring
financial strength and sustainability.

    Focus Energy Trust units trade on the TSX under the symbol FET.UN.
    

    %SEDAR: 00018353E




For further information:

For further information: Derek W. Evans, President and Chief Executive
Officer Or Bill Ostlund, Senior Vice President and Chief Financial Officer,
Focus Energy Trust, Suite 3300, 205 - 5 Avenue S.W., Calgary, Alberta, T2P
2V7, Telephone: (403) 781-8409, Fax: (403) 781-8408

Organization Profile

FOCUS ENERGY TRUST

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