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Provident Energy Ltd. (PVE)
Market: CDN Consolidated
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CALGARY, ALBERTA--(Marketwire - Nov. 12, 2008) - Provident Energy Trust (TSX:PVE.UN) (NYSE:PVX)

All values are in Canadian dollars and conversions of natural gas volumes to barrels of oil equivalent (boe) are at 6:1 unless otherwise indicated.

"Provident's third quarter was highlighted by strong commodity prices, outstanding cash flow, and the successful and timely conclusion of the sale of our U.S. Oil and Gas business." said Provident's President and Chief Executive Officer, Tom Buchanan. "We are proud of these accomplishments. In addition, our improved financial flexibility is critical in the current business environment. Provident remains committed to prudent fiscal policy and leverage, balancing capital investment and distributions for the long-term benefit of unitholders. In light of these factors, Provident has adjusted its monthly distribution to $0.09 per unit starting with the November distribution payable in December."

Third Quarter Highlights

- Provident completed the sale of its equity interest in BreitBurn Energy Company L.P. on August 26, 2008 for total consideration of US$305 million. This successfully concludes the sale process for Provident's U.S. Oil and Natural Gas division. Total consideration for the business unit including the proceeds from the June disposition of BreitBurn Energy Partners L.P. and BreitBurn Energy Partners G.P. was $663 million. Combined after tax proceeds were $449 million.

- Consolidated funds flow from operations in the third quarter was $152 million ($0.59 per unit), up 44 percent from $105 million ($0.43 per unit) in the third quarter of 2007.

- Distributions for the third quarter held constant at $0.36 per unit, resulting in a consolidated payout ratio of 61 percent, an improvement of 31 percent from the 89 percent payout ratio reported in the third quarter of 2007. Provident's payout ratio for the nine months ended September 30, 2008 was 53 percent, down from 88 percent in 2007.

- Production from the Canadian Oil and Gas business unit increased for the third consecutive quarter to approximately 28,300 barrels of oil equivalent per day (boed), up one percent from 28,000 boed in the third quarter of 2007.

- Midstream earnings before interest, taxes, depletion, depreciation, accretion and other non-cash items (EBITDA) was $37 million in the third quarter, down 21 percent from $47 million in the third quarter of 2007. Gross operating margin (before the impact of financial derivative instruments) was 21 percent higher than the third quarter of 2007.

- Consolidated senior bank debt at the end of the quarter was $394 million drawn from Provident's $1.125 billion revolving credit facility, down 58 percent from $942 million a year earlier due to the sale of the U.S. Oil and Natural Gas division and strong year to date funds flow from operations.

Emerging Oil Play in Northwest Alberta

Provident has acquired a 100 percent interest in approximately 54,000 acres of undeveloped land in Northwest Alberta, offsetting Provident's existing operations in the area. Provident is pursuing an internally-generated exploration play targeting medium gravity oil from the Pekisko formation. This is consistent with Provident's increased focus on full cycle exploration and development activities. This land base was assembled through 2008 and covers an extensive exploration trend which Provident believes contains significant oil in place. During 2008, Provident has conducted a geological and seismic study and drilled two horizontal exploratory wells which have each production tested in excess of 250 barrels of oil per day. Provident's independent reserve evaluator has assigned approximately 2 million barrels of total proved plus probable oil reserves associated with these two test wells and offset locations. Provident has identified in excess of 300 potential drilling locations on its lands to exploit the Pekisko play and will continue to use multi-stage frac technology to enhance the ultimate recovery of this resource.

A significant portion of the 2009 capital budget will be directed towards development of this long-term prospective opportunity. The winter work plan includes drilling up to 10 wells to further delineate the extent of the play and determine its eventual production capability. Subject to drilling results, Provident will begin construction of gathering, processing and storage infrastructure to facilitate year-round production. Any material reserve and production additions attributable to this opportunity will likely occur in late 2009 and beyond.

November Distribution

Provident, in determining distributions, considers prevailing economic conditions, capital spending requirements for key projects, and the prudent use of leverage. In response to the recent deterioration of the economic climate, in particular the significant decline in, and volatility of, commodity prices, the Board of Directors have determined that Provident's monthly distribution will be reduced to $0.09 per unit starting with the November distribution payable in December.

Provident's November cash distribution of $0.09 per unit will be payable on December 15, 2008. The November distribution will be paid to unitholders of record on November 25, 2008. The ex-distribution date will be November 21, 2008. Based on the revised annualized distribution rate and the closing price on November 11, 2008 of $6.95, Provident's yield is approximately 16 percent.

For unitholders receiving their distribution in U.S. funds, the November 2008 cash distribution will be approximately US$0.07 per unit based on an exchange rate of 0.8133. The actual U.S. dollar distribution will depend on the Canadian/U.S. dollar exchange rate on the payment date and will be subject to applicable withholding taxes.

2009 Capital Budget

Provident believes that capital spending must be aligned with prevailing economic conditions. To this end, the Board of Directors has adopted a conservative capital budget of $165 million. Provident has an extensive inventory of quality opportunities available for additional investment. Provident will review its capital program throughout 2009 to determine whether any combination of work program results, commodity prices, equity and debt market conditions or other material factors merit changes to the capital budget.

Provident's Canadian Oil and Gas business unit has a capital budget for 2009 of $125 million. Approximately $44 million will be directed towards development of Provident's emerging Pekisko opportunity in Northwest Alberta. Additionally, approximately $39 million is planned for the Dixonville area in order to drill up to 10 wells and implement a full field waterflood program. Provident has applied for and is awaiting regulatory approval to advance the Dixonville waterflood project beyond the pilot stage. The waterflood program consists of three phases including conversion of existing wells to water injectors, installation of water handling systems and drilling water source wells. Incremental production is expected to be added upon completion of the program in 2010. The remainder of the capital budget will be directed towards drilling and optimization activities in the remaining core areas.

Provident's Midstream business unit has a capital budget for 2009 of $40 million. A portion of this budget will be used to fund the initial phases of a proposed project to build a new depropanizer facility, with the ultimate goal of replacing 6,000 bpd of leased fractionation capacity at Sarnia. If this project proceeds, additional capital investment will be required to complete this facility which would be expected to be operational in the fourth quarter of 2009. The remainder of the capital budget will be directed towards facility maintenance and the completion of two condensate caverns which will enter service in the first and third quarters of next year. Midstream has also commenced drilling an additional cavern and anticipates its completion in 2011.

This press release does not constitute and is not intended to be legal or tax advice to any particular holder or potential holder of Provident units. Holders or potential holders of Provident units are urged to consult their own legal and tax advisors as to their particular income tax consequences of holding Provident units.

Provident Energy Trust is a Calgary-based, open-ended energy income trust that owns and manages an oil and gas production business and a natural gas liquids midstream services and marketing business. Provident's energy portfolio is located in some of the most stable and predictable producing regions in Western Canada. Provident provides monthly cash distributions to its unitholders and trades on the Toronto Stock Exchange and the New York Stock Exchange under the symbols PVE.UN and PVX, respectively.

This document contains certain forward-looking statements concerning Provident, as well as other expectations, plans, goals, objectives, information or statements about future events, conditions, results of operations or performance that may constitute "forward-looking statements" or "forward-looking information" under applicable securities legislation. Such statements or information involve substantial known and unknown risks and uncertainties, certain of which are beyond Provident's control, including the impact of general economic conditions in Canada and the United States, industry conditions, changes in laws and regulations including the adoption of new environmental laws and regulations and changes in how they are interpreted and enforced, increased competition, the lack of availability of qualified personnel or management, pipeline design and construction, fluctuations in commodity prices, foreign exchange or interest rates, stock market volatility and obtaining required approvals of regulatory authorities.

Such forward-looking statements or information are based on a number of assumptions which may prove to be incorrect. In addition to other assumptions identified in this news release, assumptions have been made regarding, among other things, commodity prices, operating conditions, capital and other expenditures, and project development activities.

Although Provident believes that the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should not be placed on forward-looking statements because Provident can give no assurance that such expectations will prove to be correct. Forward-looking statements or information are based on current expectations, estimates and projections that involve a number of risks and uncertainties which could cause actual results to differ materially from those anticipated by Provident and described in the forward-looking statements or information.

The forward-looking statements or information contained in this news release are made as of the date hereof and Provident undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise unless so required by applicable securities laws. The forward-looking statements or information contained in this news release are expressly qualified by this cautionary statement.


Consolidated financial highlights

Consolidated
($ 000s except per unit data)               Three months ended September 30,
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                                         2008           2007       % Change
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Revenue (net of royalties and
 financial derivative
 instruments) from continuing
 operations                       $ 1,102,624  $     494,065            123
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Funds flow from COGP operations
 (1)                              $   107,442  $      47,143            128
Funds flow from Midstream
 operations (1)                        32,537         32,350              1
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Funds flow from continuing
 operations                           139,979         79,493             76
Funds flow from discontinued
 operations (USOGP) (1) (2) (3)        11,682         25,656            (54)
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Total funds flow from operations
 (1)                              $   151,661  $     105,149             44
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Per weighted average unit - basic $      0.59  $        0.43             37
Per weighted average unit -
 diluted (4)                      $      0.57  $        0.43             33
Distributions to unitholders      $    92,188  $      87,782              5
Per unit                          $      0.36  $        0.36              -
Percent of funds flow from
 operations paid out as declared
 distributions (5)                         61%            89%           (31)
Net income (loss)                 $   351,105  $     (35,005)             -
Per weighted average unit
 - basic                          $      1.37  $       (0.14)             -
Per weighted average unit
 - diluted (4)                    $      1.29  $       (0.14)             -
Capital expenditures (continuing
 operations)                      $    73,252  $      36,787             99
Capitol Energy acquisition        $         -  $           -
Oil and gas property acquisitions,
 net (continuing operations)      $       136  $       1,860
Proceeds on sale of discontinued
 operations, net of tax           $   232,513  $           -
Weighted average trust units
 outstanding (000s)
- Basic                               255,842        243,600              5
- Diluted (4)                         277,102        243,775             14
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Consolidated
($ 000s except per unit data)                Nine months ended September 30,
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                                         2008           2007       % Change
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Revenue (net of royalties and
 financial derivative
 instruments) from continuing
 operations                       $ 2,225,059  $   1,516,867             47
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Funds flow from COGP operations
 (1)                              $   291,453  $     145,585            100
Funds flow from Midstream
 operations (1)                       144,390        101,323             43
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Funds flow from continuing
 operations                           435,843        246,908             77
Funds flow from discontinued
operations (USOGP) (1) (2) (3)        137,535         43,784            214
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Total funds flow from operations
 (1)                              $   573,378  $     290,692             97
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Per weighted average unit
 - basic                          $      2.25  $        1.30             73
Per weighted average unit
 - diluted (4)                    $      2.25  $        1.30             73
Distributions to unitholders      $   274,967  $     244,289             13
Per unit                          $      1.08  $        1.08              -
Percent of funds flow from
 operations paid out as declared
 distributions (5)                         53%            88%           (40)
Net income (loss)                 $   200,640  $     (38,111)             -
Per weighted average unit
 - basic                          $      0.79  $       (0.17)             -
Per weighted average unit
 - diluted (4)                    $      0.79  $       (0.17)             -
Capital expenditures (continuing
 operations)                      $   192,044  $     102,900             87
Capitol Energy acquisition        $         -  $     467,850
Oil and gas property acquisitions,
 net (continuing operations)      $    19,587  $      11,569
Proceeds on sale of discontinued
 operations, net of tax           $   438,862  $           -
Weighted average trust units
 outstanding (000s)
- Basic                               254,391        224,174             13
- Diluted (4)                         254,391        224,349             13
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Consolidated
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                                        As at          As at
                                 September 30,   December 31,
($ 000s)                                 2008           2007       % Change
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Capitalization
 Long-term debt (including
  current portion)            $       673,593 $    1,199,634            (44)
 Unitholders' equity          $     1,746,603 $    1,708,665              2
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(1) Represents cash flow from operations before changes in working capital
    and site restoration expenditures.
(2) Effective in the first quarter of 2008, Provident's USOGP business is
    accounted for as discontinued operations (see note 9 of interim
    consolidated financial statements).
(3) Prior to the sale of USOGP, Provident owned approximately 22 percent of
    the MLP and 96 percent of BreitBurn. In accordance with generally
    accepted accounting principles (GAAP) in Canada and the United States,
    these investments were consolidated into Provident's results. On a
    proportionate basis, Provident's share of funds flow from operations
    relating to discontinued operations (USOGP) for the three and nine
    months ended September 30, 2008 was $11.3 million and $57.9 million,
    respectively.
(4) Includes dilutive impact of unit options and convertible debentures.
(5) Calculated as distributions to unitholders divided by funds flow from
    operations less distributions to non-controlling interests of $51.4
    million year-to-date and nil for the quarter (2007 - $13.7 million and
    $6.6 million, repsectively).


Operational highlights

                                            Three months ended September 30,
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                                          2008           2007      % Change
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Oil and Gas Production
Daily production - COGP (continuing
 operations)
 Crude oil (bpd)                        12,805         11,182            15
 Natural gas liquids (bpd)               1,195          1,255            (5)
 Natural gas (mcfpd)                    85,628         93,511            (8)
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 COGP oil equivalent (boed) (1)         28,271         28,022             1
 USOGP (discontinued operations)
  oil equivalent (boed) (1)              1,963         10,803           (82)
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 Consolidated oil equivalent (boed)(1)  30,234         38,825           (22)
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Average realized price from
 continuing operations
 (before realized financial
 derivative instruments)
 Crude oil blend ($/bbl)            $  102.66 $        57.88             77
 Natural gas liquids ($/bbl)        $   91.72 $        55.47             65
 Natural gas ($/mcf)                $    8.60 $         4.94             74
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 Oil equivalent ($/boe) (1)         $   76.42 $        42.07             82
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Field netback from continuing
 operations (before realized
  financial derivative instruments)
  ($/boe)                           $   48.41 $        21.18            129
Field netback from continuing
 operations (including realized
 financial derivative instruments)
 ($/boe)                            $   46.18 $        22.51            105
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Midstream
 Midstream NGL sales volumes (bpd)    111,313        112,386             (1)
 EBITDA (000s) (2)                  $  37,339 $       47,425            (21)
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                                             Nine months ended September 30,
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                                         2008           2007       % Change
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Oil and Gas Production
Daily production - COGP (continuing
 operations)
 Crude oil (bpd)                       12,529          9,307             35
 Natural gas liquids (bpd)              1,227          1,329             (8)
 Natural gas (mcfpd)                   85,244         92,309             (8)
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 COGP oil equivalent (boed) (1)        27,963         26,021              7
 USOGP (discontinued operations)
  oil equivalent (boed) (1)            16,034          9,382             71
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 Consolidated oil equivalent (boed)(1) 43,997         35,403             24
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Average realized price from
 continuing operations
 (before realized financial
 derivative instruments)
 Crude oil blend ($/bbl)             $   94.49 $        54.70             73
 Natural gas liquids ($/bbl)         $   85.96 $        52.30             64
 Natural gas ($/mcf)                 $    8.74 $         6.54             34
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 Oil equivalent ($/boe) (1)          $   72.74 $        45.44             60
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Field netback from continuing
 operations (before realized
 financial derivative instruments)
 ($/boe)                            $   45.85 $        24.90             84
Field netback from continuing
 operations (including realized
 financial derivative instruments)
 ($/boe)                            $   43.50 $        25.07             74
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Midstream
 Midstream NGL sales volumes (bpd)    119,456        115,664              3
 EBITDA (000s) (2)                  $ 175,095 $      136,252             29
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(1) Provident reports oil equivalent production converting natural gas to
    oil on a 6:1 basis.
(2) EBITDA is earnings before interest, taxes, depletion, depreciation,
    accretion and other non-cash items. See "Reconciliation of non-GAAP
    measures".

Management's discussion and analysis

The following analysis dated November 12, 2008 provides a detailed explanation of Provident Energy Trust's ("Provident's") operating results for the three and nine months ended September 30, 2008 compared to the same time periods in 2007 and should be read in conjunction with the consolidated financial statements of Provident, found later in the interim report.

Provident Energy Trust has diversified investments in certain segments of the energy value chain. Provident currently operates in two key business segments: Canadian crude oil and natural gas production ("COGP"), and Midstream. Provident's COGP business produces crude oil and natural gas from seven core areas in the western Canadian sedimentary basin. The Midstream business unit operates in Canada and the U.S.A. and extracts, processes, markets, transports and offers storage of natural gas liquids within the integrated facilities at Younger in British Columbia, Redwater and Empress in Alberta, Kerrobert in Saskatchewan, Sarnia in Ontario, Superior in Wisconsin and Lynchburg in Virginia. Effective in the first quarter of 2008, Provident's United States oil and natural gas production ("USOGP") business is accounted for as discontinued operations and comparative figures have been reclassified to conform with this presentation (see note 9 of the interim consolidated financial statements). USOGP produced crude oil and natural gas in California, Wyoming, Texas, Florida, Michigan, Indiana and Kentucky. The USOGP business was sold in two portions, the first in June and the second in August, 2008.

This analysis commences with a summary of the consolidated financial and operating results followed by segmented reporting on the COGP business unit and the Midstream business unit. The reporting focuses on the financial and operating measurements management uses in making business decisions and evaluating performance.

This analysis contains forward-looking information and statements. See "Forward-looking statements" at the end of the analysis for further discussion.

Third quarter and nine months ended September 30, 2008 highlights

The third quarter highlights section provides commentary for the third quarter and for the nine months ended September 30, 2008 and for corresponding periods in 2007.

Effective in the first quarter of 2008, Provident's United States oil and natural gas production (USOGP) business is accounted for as discontinued operations (see note 9 of the interim consolidated financial statements).

In June 2008, the Trust sold a portion of the USOGP business, consisting of its 22 percent interest in BreitBurn Energy Partners, L.P. (MLP) and its 96 percent interest in BreitBurn GP LLC, for cash proceeds, net of transaction costs, of U.S. $342.2 million. The Trust has recorded a gain on sale of $187.9 million and $139.7 million in current tax expense, related to this transaction. Also recorded was a realized foreign exchange loss of $30.3 million, representing the recognition of the related portion of the foreign exchange loss in accumulated other comprehensive income, which was generated since acquisition in 2006. These amounts are recorded as part of net income from discontinued operations for the nine months ended September 30, 2008.

In August 2008, the Trust sold the remaining portion of the USOGP business, comprised of an approximate 96 percent interest in BreitBurn Energy Company L.P., for total consideration of U.S. $300.4 million, consisting of cash proceeds, net of transaction costs, of U.S. $290.4 million and a U.S. $10 million note. The Trust has recorded a gain on sale of $75.7 million and $74.0 million in current tax expense related to this transaction. Also recorded was a realized foreign exchange loss of $26.8 million, representing the recognition of the related portion of the foreign exchange loss in accumulated other comprehensive income, which was generated since acquisition in 2004. These amounts are recorded as part of net income from discontinued operations for the three and nine months ended September 30, 2008.

The Trust has applied the proceeds on the sale of the USOGP business to reduce long-term debt, resulting in a ratio of net debt to total capitalization as at September 30, 2008 of 29 percent compared to 40 percent at December 31, 2007 (see "Liquidity and capital resources").


Consolidated funds flow from operations and cash distributions

Consolidated                                Three months ended September 30,
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($ 000s, except per unit data)           2008           2007       % Change
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Funds Flow from Operations and
 Distributions
Funds flow from continuing
 operations                         $ 139,979      $  79,493             76
Funds flow from discontinued
 operations (1)                        11,682         25,656            (54)
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Total funds flow from operations    $ 151,661      $ 105,149             44
  Per weighted average unit
   - basic                          $    0.59      $    0.43             37
  Per weighted average unit
   - diluted (2)                    $    0.57      $    0.43             33
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Declared distributions              $  92,188      $  87,782              5
  Per Unit                               0.36      $    0.36              -
Percent of funds flow from
 operations distributed (3)                61%            89%           (31)
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Consolidated                                 Nine months ended September 30,
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($ 000s, except per unit data)           2008           2007       % Change
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Funds Flow from Operations and
 Distributions
Funds flow from continuing
 operations                         $ 435,843      $ 246,908             77
Funds flow from discontinued
 operations (1)                       137,535         43,784            214
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Total funds flow from operations    $ 573,378      $ 290,692             97
 Per weighted average unit
  - basic                           $    2.25      $    1.30             73
 Per weighted average unit
  - diluted (2)                     $    2.25      $    1.30             73
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Declared distributions              $ 274,967      $ 244,289             13
  Per Unit                          $    1.08      $    1.08              -
Percent of funds flow from
 operations distributed (3)         $      53%     $      88%           (40)
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(1) Prior to the sale of USOGP, Provident owned approximately 22 percent of
    the MLP and 96 percent of BreitBurn. In accordance with generally
    accepted accounting principles (GAAP) in Canada and the United States,
    these investments were consolidated into Provident's results. On a
    proportionate basis, Provident's share of funds flow from operations
    relating to discontinued operations (USOGP) for the three and nine
    months ended September 30, 2008 was $11.3 million and $57.9 million,
    respectively.
(2) Includes dilutive impact of unit options and convertible debentures.
(3) Calculated as declared distributions to unitholders divided by funds
    flow from operations less distributions to non-controlling interests of
    $51.4 million year-to-date and nil for the quarter (2007 - $13.7 million
    and $6.6 million, respectively).

Management uses funds flow from operations to analyze operating performance. Funds flow from operations represents cash flow from operations before changes in working capital and site restoration expenditures. Provident also reviews funds flow from operations in setting monthly distributions and takes into account cash required for debt repayment and/or capital programs in establishing the amount to be distributed.

Funds flow from operations as presented does not have any standardized meaning prescribed by Canadian generally accepted accounting principles (GAAP) and therefore it may not be comparable with the calculations of similar measures for other entities. Funds flow from operations as presented is not intended to represent operating cash flow from operations or operating profits for the period nor should it be viewed as an alternative to cash provided by operating activities, net earnings or other measures of financial performance calculated in accordance with Canadian GAAP. All references to funds flow from operations throughout this report are based on cash provided by operating activities before changes in non-cash working capital and site restoration expenditures.

Third quarter 2008 funds flow from operations was $151.7 million, 44 percent above the $105.1 million recorded in the third quarter of 2007. For the nine month period ended September 30, 2008 funds flow from operations was $573.4 million, 97 percent above the $290.7 million in the same period of 2007. COGP provided 71 percent of third quarter 2008 funds flow from operations, Midstream contributed 21 percent and USOGP generated the remaining eight percent.

COGP 2008 third quarter funds flow from operations was $107.5 million, a 128 percent increase from the $47.1 million recorded in the comparable 2007 quarter. This increase was a result of increased realized crude oil, natural gas liquids and natural gas prices combined with an increase in production. Production increased by one percent primarily due to the acquisition of Triwest Energy Inc. on December 3, 2007 ("Triwest"), and the successful execution of the drilling and development program offsetting natural production declines. For the nine month period ended September 30, 2008 COGP funds flow from operations was $291.5 million, a 100 percent improvement above the $145.6 million recorded in the comparable 2007 period, resulting from a seven percent increase in year-to-date production, as well as higher commodity prices.

The Midstream business unit contributed $32.5 million to the third quarter of 2008 funds flow from operations, one percent above the $32.4 million recorded in the comparable 2007 quarter, reflecting lower earnings before interest, taxes, depletion, depreciation, accretion and other non-cash items (EBITDA), offset by reduced interest expense and tax charges. The lower EBITDA reflects higher operating margins, offset by an increase in the realized loss on financial derivative instruments. For the nine months ended September 30, 2008, Midstream contributed $144.4 million to funds flow from operations, a 43 percent increase from the $101.3 million in the comparable 2007 period, resulting from a 70 percent increase in operating margin, partially offset by higher realized losses on financial derivative instruments.

Funds flow from discontinued operations (USOGP) in the third quarter of 2008 was $11.7 million, compared to $25.6 million in the third quarter of 2007. The decrease is due to the sale of the majority of the USOGP business in June 2008 and the remainder in August. For the nine months ended September 30, 2008, funds flow from discontinued operations (USOGP) was $137.5 million, compared to the $43.8 million in the comparable 2007 period. The increase is primarily driven by increased production due to oil and gas property acquisitions by the MLP in 2007, combined with higher commodity prices. Prior to the sale of USOGP, Provident owned approximately 22 percent of the MLP and 96 percent of BreitBurn. In accordance with generally accepted accounting principles (GAAP) in Canada and the United States, these investments were consolidated into Provident's results. On a proportionate basis, Provident's share of funds flow from operations relating to discontinued operations (USOGP) for the three and nine months ended September 30, 2008 was $11.3 million and $57.9 million, respectively. Management uses proportionate information to analyze operating performance. The proportionate information as presented here does not have any standardized meaning prescribed by Canadian GAAP and therefore may not be comparable with the calculation of similar measures for other entities. This proportionate information is not intended to be viewed as an alternative to the corresponding measures of financial performance calculated in accordance with Canadian GAAP.

Declared distributions in the third quarter of 2008 totaled $92.2 million compared to $87.8 million of declared distributions in 2007. This represented 61 percent and 89 percent of funds flow from operations, respectively, after distributions to non-controlling interests of nil (2007 - $6.6 million). On a segmented basis, the Midstream business, due to its low sustaining capital requirements, effectively contributed 95 percent of its funds flow from operations for distribution in the three months ended September 30, 2008. The remaining distributions were effectively contributed by the oil and natural gas production businesses (COGP and USOGP) representing 51 percent of their combined funds flow from operations in the third quarter of 2008.

Outlook

Uncertainty in the North American debt and equity markets has had a substantial impact on the valuation of equities including Provident's trust units. The recent dramatic decline in, and volatility of, commodity prices combined with volatility in currency exchange rates will have an impact on cash flow in the energy sector during the fourth quarter and into 2009. Provident will continue to make prudent capital spending and financial decisions in this context with the objective of preserving financial flexibility and protecting long-term value.

The Canadian Oil and Natural Gas Production business unit (COGP) performed favourably through the third quarter with strong production and netbacks. Capital spending will be approximately $197 million in 2008. Provident still anticipates exiting 2008 near the high end of previously disclosed production guidance. Prospectively, COGP economics will be impacted by declining commodity prices. Provident will also be adversely impacted by the Alberta Government's New Royalty Framework as it estimates its average corporate royalty rate will increase from roughly 20 percent in 2008 to approximately 26 percent in 2009. These royalties are subject to fluctuation depending on commodity prices.

The Midstream business unit has experienced price-driven margin contraction during the second half of 2008. Typically, this trend is reversed as demand for NGL products increases in the winter months. However, this seasonal pattern may be impacted by lower demand in the petrochemical sector due to plant outages in the Texas refining and petrochemical complex caused by recent hurricane activity in the Gulf of Mexico. The Midstream business unit intends to spend approximately $38 million of its 2008 capital budget by the end of the year.

Provident continues to evaluate strategic and structural options for its upstream and midstream business units although current market conditions add to the complexity of this review. In addition to the sale of its U.S. business, Provident has taken steps to facilitate the separation of its business units as it has completed an internal reorganization of entities within the Provident structure. Ultimately, Provident plans to implement a strategy that optimizes business unit structures, improves overall competitiveness, reduces the cost of capital and enhances unitholder value. While evaluating future scenarios, management's primary focus remains on managing the business in a prudent, responsible manner.


Net income

Consolidated                                Three months ended September 30,
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($ 000s, except per unit data)           2008           2007       % Change
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Net income (loss)                   $ 351,105      $ (35,005)            -
Per weighted average unit
 - basic (1)                        $    1.37      $   (0.14)            -
 - diluted (2)                      $    1.29      $   (0.14)            -
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Consolidated                                 Nine months ended September 30,
----------------------------------------------------------------------------
($ 000s, except per unit data)           2008           2007       % Change
----------------------------------------------------------------------------

Net income (loss)                   $ 200,640      $ (38,111)             -
Per weighted average unit
 - basic (1)                        $    0.79      $   (0.17)             -
 - diluted (2)                      $    0.79      $   (0.17)             -
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Based on weighted average number of trust units outstanding.
(2) Based on weighted average number of trust units outstanding including
    the dilutive impact of the unit option plan and convertible debentures.

Net income for the third quarter of 2008 was $351.1 million compared to a $35.0 million net loss in the comparable 2007 quarter which was attributable to a $47.6 million, or 47 percent, increase in EBITDA from continuing operations combined with a $318.6 million increase in unrealized gain on financial derivative instruments.

The COGP business segment's third quarter 2008 net income was $76.9 million, an increase of $94.7 million compared to the 2007 third quarter net loss of $17.8 million. This increase was the result of increased realized crude oil, natural gas liquids and natural gas prices and a $43.1 million increase in unrealized gain on financial derivative instruments.

The Midstream segment's net income was $233.0 million in the third quarter of 2008 as compared to an $8.6 million net loss in the third quarter of 2007. A $275.4 million increase in the third quarter from unrealized gains on financial derivative instruments, partially offset by a $10.1 million, or 21 percent decrease in EBITDA and a future income tax expense were the drivers of the change.

In the third quarter of 2008, net income from discontinued operations (USOGP) was $41.2 million as compared to 2007 third quarter net loss of $8.6 million. Unrealized gains on financial derivative instruments, combined with the gain on sale of discontinued operations and related taxes account for the increase in net income in the third quarter of 2008.

Provident's net income figures are affected by the requirement to "mark-to-market" all financial derivative instruments at the end of the period and report these unrealized gains or losses as part of current period net income. Because Provident's commodity price risk management program extends up to five years into the future in the Midstream segment, net earnings can show substantial quarterly variation that is not necessarily related to current operations.

Reconciliation of non-GAAP measures

Provident calculates earnings before interest, taxes, depletion, depreciation, accretion and other non-cash items (EBITDA) within its segment disclosure. EBITDA is a non-GAAP measure. A reconciliation between EBITDA and (loss) income from continuing operations before taxes follows:


                                            Three months ended September 30,
----------------------------------------------------------------------------
($ 000s)                                 2008           2007       % Change
----------------------------------------------------------------------------
EBITDA                              $ 148,595     $  100,955             47
Adjusted for:
Cash interest                         (11,619)       (15,515)           (25)
Unrealized gain (loss) on financial
 derivative instruments               286,255        (32,304)             -
Depletion, depreciation and
 accretion and other non-cash
 expenses                             (94,941)       (93,897)             1
----------------------------------------------------------------------------
Income (loss) from continuing
operations before taxes             $ 328,290     $  (40,761)             -
----------------------------------------------------------------------------
----------------------------------------------------------------------------

                                             Nine months ended September 30,
----------------------------------------------------------------------------
($ 000s)                                 2008           2007       % Change
----------------------------------------------------------------------------
EBITDA                              $ 478,831    $   294,995             62
Adjusted for:
Cash interest                         (40,795)       (38,173)             7
Unrealized gain (loss) on financial
 derivative instruments              (182,555)       (35,183)           419
Depletion, depreciation and
 accretion and other non-cash
 expenses                            (261,418)      (239,442)             9
----------------------------------------------------------------------------
Income (loss) from continuing
operations before taxes              $ (5,937)   $   (17,803)           (67)
----------------------------------------------------------------------------
----------------------------------------------------------------------------


The following table reconciles funds flow from operations with cash provided
by operating activities and distributions to unitholders:

Reconciliation of funds flow from
 operations to distributions                Three months ended September 30,
----------------------------------------------------------------------------
                                         2008           2007       % Change
----------------------------------------------------------------------------
Cash provided by operating
 activities                         $ 177,068    $    90,655             95
Change in non-cash operating
 working capital                      (26,726)        13,904              -
Site restoration expenditures           1,319            590            124
----------------------------------------------------------------------------
Funds flow from operations            151,661        105,149             44
Distributions to non-controlling
 interests                                  -         (6,583)          (100)
Cash retained for financing and
 investing activities                 (59,473)       (10,784)           451
----------------------------------------------------------------------------
Distributions to unitholders           92,188         87,782              5
Accumulated cash distributions,
 beginning of period                1,442,956      1,083,332             33
----------------------------------------------------------------------------
Accumulated cash distributions,
 end of period                    $ 1,535,144    $ 1,171,114             31
----------------------------------------------------------------------------
Cash distributions per unit       $      0.36    $      0.36              -
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Reconciliation of funds flow
 from operations to distributions            Nine months ended September 30,
----------------------------------------------------------------------------
                                         2008           2007       % Change
----------------------------------------------------------------------------
Cash provided by operating
 activities                         $ 524,394    $   327,125             60
Change in non-cash operating
 working capital                       45,027        (38,773)             -
Site restoration expenditures           3,957          2,340             69
----------------------------------------------------------------------------
Funds flow from operations            573,378        290,692             97
Distributions to non-controlling
 interests                            (51,433)       (13,722)           275
Cash retained for financing and
 investing activities                (246,978)       (32,681)           656
----------------------------------------------------------------------------
Distributions to unitholders          274,967        244,289             13
Accumulated cash distributions,
 beginning of period                1,260,177        926,825             36
----------------------------------------------------------------------------
Accumulated cash distributions,
 end of period                    $ 1,535,144    $ 1,171,114             31
----------------------------------------------------------------------------
Cash distributions per unit       $      1.08    $      1.08              -
----------------------------------------------------------------------------
----------------------------------------------------------------------------


Taxes

                                            Three months ended September 30,
----------------------------------------------------------------------------
($ 000s)                                 2008           2007       % Change
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Capital tax expense                  $    932      $   2,364            (61)
Current and withholding tax
 (recovery) expense                    (3,900)         3,459              -
Future income tax expense (recovery)   21,411        (20,147)             -
----------------------------------------------------------------------------
                                     $ 18,443      $ (14,324)             -
----------------------------------------------------------------------------
----------------------------------------------------------------------------

                                             Nine months ended September 30,
----------------------------------------------------------------------------
($ 000s)                                 2008           2007       % Change
----------------------------------------------------------------------------
Capital tax expense                   $ 2,624       $  3,252            (19)
Current and withholding tax
 (recovery) expense                       (76)         6,357              -
Future income tax expense (recovery)  (82,144)        43,459              -
----------------------------------------------------------------------------
                                    $ (79,596)      $ 53,068              -
----------------------------------------------------------------------------
----------------------------------------------------------------------------

For the nine months ended September 30, 2008, the total income tax recovery was $79.6 million. Based on year-to-date loss before taxes of $5.9 million, the expected income tax recovery was $1.6 million. The difference between the expected recovery and the total tax recovery is primarily a result of deductions allowed when computing taxable income of the Trust for distributions made to unitholders. The Trust is a taxable entity under Canadian income tax law and is currently taxable only on income that is not distributed or distributable to the unitholders until 2011, when the new tax on distributions comes into effect. If the Trust distributes all of its taxable income to the unitholders, no current provision for taxes is required by the Trust until 2011. Since inception, the Trust has distributed all of its taxable income to the unitholders. Additionally, interest and royalties are charged by the Trust to its subsidiaries, which are deductible in the computation of taxable income at the incorporated subsidiary level reducing tax pool claims in certain subsidiaries and potentially creating tax loss carry-forwards that result in future income tax recoveries.

Capital taxes in the third quarter totaled $0.9 million, a decrease from the $2.4 million expense recorded in the third quarter of 2007, and $2.6 million year-to-date, compared to $3.3 million year-to-date for 2007. The decrease reflects adjustments made in 2007 upon filing of tax returns.

The current and withholding tax recovery of $3.9 million in the third quarter of 2008 compares to an expense of $3.5 million in the third quarter of 2007. For the nine months ended September 30, 2008, current and withholding tax recovery was $0.1 million, compared with an expense of $6.4 million in 2007. These taxes are associated with Midstream operations.

The 2008 third quarter future income tax expense of $21.4 million compares to a recovery of $20.1 million in the third quarter of 2007. The third quarter 2008 expense was primarily a result of the unrealized gain on financial derivative instruments. For the nine months ended September 30, 2008, future income tax recovery was $82.1 million compared with an expense of $43.5 million in 2007. The 2008 year-to-date recovery results from deductible interest and royalties in taxable subsidiaries reducing tax pool claims and creating tax loss carry forwards, combined with unrealized losses on financial derivative instruments. The 2007 expense includes $105.7 million relating to the second quarter 2007 enactment of legislation to tax publicly traded trusts in 2011.


Interest expense

Continuing operations                       Three months ended September 30,
----------------------------------------------------------------------------
($ 000s, except as noted)                2008           2007       % Change
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Interest on bank debt                $  6,636  $      12,684            (48)
Interest on convertible debentures      4,983          5,014             (1)
Discontinued operations portion             -         (2,183)          (100)
----------------------------------------------------------------------------
Total cash interest                  $ 11,619  $      15,515            (25)
----------------------------------------------------------------------------

Weighted average interest rate on
 all long-term debt                       5.3%           5.8%            (9)
Debenture accretion and other
 non-cash interest expense              1,462          1,151             27
----------------------------------------------------------------------------
Total interest expense               $ 13,081  $      16,666            (22)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Continuing operations                        Nine months ended September 30,
----------------------------------------------------------------------------
($ 000s, except as noted)                2008           2007       % Change
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Interest on bank debt                $ 30,029  $      29,356              2
Interest on convertible debentures     14,951         15,214             (2)
Discontinued operations portion        (4,185)        (6,397)           (35)
----------------------------------------------------------------------------
Total cash interest                  $ 40,795  $      38,173              7
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Weighted average interest rate on
 all long-term debt                       5.4%           5.8%            (7)
Debenture accretion and other
 non-cash interest expense              3,774          3,554              6
----------------------------------------------------------------------------
Total interest expense               $ 44,569  $      41,727              7
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Interest on bank debt decreased in the third quarter of 2008 compared to 2007 due to significantly lower debt levels and lower market interest rates. Cash proceeds on the sale of USOGP in June and August of 2008, amounting to U.S. $632.6 million, were used to pay down debt.

Commodity price risk management program

Provident's commodity price risk management program is intended to mitigate the volatility of commodity prices and to assist with stabilizing cash flow and distributions. Provident seeks to accomplish this through the use of financial instruments to reduce its exposure to fluctuations in commodity prices and foreign exchange rates.

In accordance with the Trust's credit policy, the Trust mitigates associated credit risk by limiting financial derivative transactions with primarily investment grade counterparties to approved credit limits. Risk is also minimized through regular management review of the potential exposure to and credit ratings of such counterparties. In some cases the Trust may request collateral to manage exposures that exceed the approved credit limit.

In the Midstream business, production margins are affected by the spread between the purchase cost of natural gas and sales price of propane, butane and condensate. Market conditions have not provided sufficient or adequate opportunity to directly manage propane, butane and condensate prices over the longer term. Prices for propane, butane and condensate historically have correlated with prices for crude oil. As a consequence, Provident has entered into natural gas, natural gasoline and crude oil financial derivative contracts through March 2013 in order to protect operating margins in the Midstream business. Short term financial derivative instruments directly fixing propane and natural gasoline prices have also been executed.

Activity in the Third Quarter

A summary of Provident's risk management contracts from continuing operations executed during the third quarter of 2008 is contained in the following tables:


COGP

               Volume
Year Product  (Buy)/Sell   Terms                           Effective Period
----------------------------------------------------------------------------
     Crude                 WCS blend at 80% of US$             October 1 -
2008  Oil      2,000 Bpd    WTI (3)                             December 31

     Crude                 WCS blend at 80% of US$              January 1 -
2009  Oil      2,000 Bpd    WTI (3)                                March 31
----------------------------------------------------------------------------
----------------------------------------------------------------------------


Midstream

               Volume
Year Product  (Buy)/Sell   Terms                            Effective Period
----------------------------------------------------------------------------
     Crude                                                      October 1 -
2008  Oil     (2,245) Bpd  US $111.19 per bbl (6)               December 31
                                                               November 1 -
               667    Bpd  US $114.85 per bbl (7)               November 30

                                                                October 1 -
     Propane   3,150  Bpd  US $1.62 per gallon (6)              December 31
                                                                October 1 -
               2,079  Bpd  US $1.66 per gallon (7)              December 31

     Normal                                                     October 1 -
      Butane   968    Bpd  US $107.35 per bbl (2) (7)            October 31

     Crude                                                      January 1 -
2009  Oil     (280)   Bpd  US $99.93 per bbl (6)                   March 31

                                                                January 1 -
     Propane   400    Bpd  US $1.42 per gallon (6)                 March 31
               456    Bpd  US $1.61 per gallon (7)              January 1 -
                                                                   March 31
----------------------------------------------------------------------------
----------------------------------------------------------------------------


Corporate

               Volume
Year Product  (Buy)/Sell  Terms                            Effective Period
----------------------------------------------------------------------------
     Foreign
2008  exchange            Buy US $72,000,000 @ 1.0481 (8) December 15, 2008
----------------------------------------------------------------------------
----------------------------------------------------------------------------

(1) The above table represents a number of transactions entered into over
    the third quarter 2008.
(2) Crude Oil contracts are settled against NYMEX WTI calendar average.
(3) WCS contracts are settled against the monthly index for physical WCS
    (quoted as a differential to WTI) by NetThruPut Inc.
(4) Propane contracts are settled against Belvieu C3 TET.
(5) Normal Butane contracts are settled against Belvieu NC4 TET.
(6) Conversion of Crude Oil BTU hedges to liquids.
(7) Midstream Inventory Hedges.
(8) Forward purchase of US dollars.

A summary of all of Provident's risk management contracts in place at September 30, 2008 is available on Provident's website at www.providentenergy.com.

Settlement of commodity contracts

The following is a summary of the net funds flow from operations to settle commodity contracts (related to continuing operations) during the third quarter and first nine months of 2008. For comparative purposes the 2007 amounts are also summarized.

a) Crude oil -COGP

For the quarter ended September 30, 2008, Provident paid $5.8 million to settle various oil market based contracts on an aggregate volume of 0.4 million barrels. During the quarter ended September 30, 2007, Provident paid $2.5 million to settle various oil market based contracts on an aggregate volume of 0.5 million barrels.

For the nine months ended September 30, 2008, Provident paid $17.0 million to settle various oil based contracts on an aggregate volume of 1.2 million barrels. During the nine months ended September 30, 2007, Provident paid $3.3 million to settle various oil market based contracts on an aggregate volume of 1.0 million barrels. Strong oil prices during 2008 resulted in an opportunity cost related to oil price risk management activities.

If all contracts in place had been settled at September 30, 2008 an estimated opportunity cost of $16.6 million (September 30, 2007 - $10.1 million) would have been incurred.

b) Natural Gas - COGP

For the quarter ended September 30, 2008, Provident paid $1.1 million to settle various natural gas market based contracts on an aggregate volume of 2.7 million gj's. For comparison, during the three months ended September 30, 2007, Provident received $5.9 million to settle various natural gas market based contracts on an aggregate volume of 4.6 million gj's.

For the nine months ended September 30, 2008, Provident paid $2.1 million to settle various natural gas market based contracts on an aggregate volume of 9.0 million gj's. For comparison, during the nine months ended September 30, 2007, Provident received $4.5 million to settle various natural gas market based contracts on an aggregate volume of 12.2 million gj's.

If contracts in place had been settled at September 30, 2008 an estimated opportunity gain of $3.9 million (September 30, 2007 - $13.8 million gain) would have been incurred.

c) Midstream

For the quarter ended September 30, 2008, Provident paid $61.8 million (2007 - received $5.2 million) to settle Midstream oil market based contracts on an aggregate volume of 1.5 million barrels (2007 - 0.3 million barrels) and received $3.8 million (2007 - paid $19.5 million) to settle Midstream natural gas market based contracts on an aggregate volume of 6.7 million gj's (2007 - 6.8 million gj's). In addition, for the third quarter of 2008, Provident received $0.3 million (2007 - paid $9.0 million) to settle Midstream NGL market based contracts on an aggregate volume of 0.1 million barrels (2007 - 1.7 million barrels).

For the nine months ended September 30, 2008, Provident paid $131.6 million (2007 - received $17.7 million) to settle Midstream oil market based contracts on an aggregate volume of 2.9 million barrels (2007 - 0.8 million barrels) and paid $3.9 million (2007 - $31.9 million) to settle Midstream natural gas market based contracts on an aggregate volume of 20.1 million gj's (2007 - 18.7 million gj's). This net opportunity cost was primarily caused by record high crude oil prices. In addition, Provident paid $8.3 million (2007 - $21.6 million) to settle Midstream NGL market based contracts on an aggregate volume of 2.1 million barrels (2007 - 4.8 million barrels).

If contracts in place had been settled at September 30, 2008 an estimated opportunity cost of $448.2 million (September 30, 2007 - $99.9 million) would have been incurred. These unrealized "mark-to-market" opportunity costs relate to positions with effective periods ranging from 2008 through 2013 and are required to be recognized in the financial statements under generally accepted accounting principles. These unrealized opportunity costs relate to financial derivative instruments which were entered into in order to manage commodity prices and protect future Midstream product margins. Fluctuations in the market value of these instruments have no impact on funds flow from operations until the instrument is settled.

d) Foreign exchange contracts

For the quarter ended September 30, 2008, Provident received $6.9 million to settle various foreign exchange based contracts (2007 - $1.8 million). For the nine months ended September 30, 2008, Provident received $12.4 million to settle various foreign exchange based contracts (2007 - $1.3 million). If contracts in place had been settled at September 30, 2008 an estimated opportunity gain of $2.6 million (September 30, 2007 - $0.8 million gain) would have been incurred.

e) Interest rate contracts

For the quarter ended September 30, 2008, Provident paid $0.1 million to settle various interest rate based contracts (2007 - nil). For the nine months ended September 30, 2008, Provident paid $0.2 million to settle various interest rate based contracts (2007 - nil).

f) Power contracts

For the quarter ended September 30, 2008, Provident received $0.2 million to settle various electricity based contracts (2007 - nil). For the nine months ended September 30, 2008, Provident received $1.6 million to settle various electricity based contacts (2007 - nil).


Liquidity and capital resources

Continuing operations
----------------------------------------------------------------------------
($ 000s)                   September 30, 2008   December 31, 2007  % Change
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Long-term debt - revolving
 term credit facility             $   394,038         $   923,996       (57)
Long-term debt -
 convertible debentures
 (including current portion)          279,555             275,638         1
Working capital deficit
 (surplus) (1)                         30,529             (58,732)        -
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net debt                          $   704,122         $ 1,140,902       (38)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Unitholders' equity (at
 book value)                        1,746,603           1,708,665         2
----------------------------------------------------------------------------
Total capitalization at
 book value                       $ 2,450,725         $ 2,849,567       (14)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total net debt as a
 percentage of total book
 value capitalization                      29%                 40%      (28)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) The working capital deficit (surplus) excludes balances for the current
    portion of financial derivative instruments.

Provident operates two business units with similar but not identical monthly cash settlement cycles. Midstream revenues are received at various times throughout the month. Provident's working capital position is affected by seasonal fluctuations that reflect commodity price changes, drilling cycles in its oil and gas operations and inventory balances in its Midstream business unit. Provident relies on funds flow from operations, external lines of credit and access to equity markets to fund capital programs and acquisitions.

As at September 30, 2008, Provident held non-bank sponsored asset-backed commercial paper amounting to $4.3 million. These securities have been classified as investments due to a reduction in market liquidity for these investments. Provident does not expect the resolution of the liquidity issues to have a significant impact on its operations.

As a result of the recent weakening of the global economy, oil and gas industry participants, including Provident, are experiencing more restricted access to capital and anticipate increased borrowing costs. Although Provident's business and asset base have not changed, the lending capacity of financial institutions has been diminished and risk premiums have increased. Management continues to believe that cash flows from operating activities and availability under existing bank facilities will be adequate to settle Provident's financial liabilities. However, these issues will affect Provident as it reviews financing alternatives for future capital expenditures and potential acquisition opportunities in the current lower commodity price environment.

Substantially all of Provident's accounts receivable are due from customers and joint venture partners in the oil and gas and midstream services and marketing industries and are subject to credit risk. Provident partially mitigates associated credit risk by limiting transactions with certain counterparties to limits imposed by Provident based on management's assessment of the creditworthiness of such counterparties. The carrying value of accounts receivable reflects management's assessment of the associated credit risks.

Long-term debt and working capital

As at September 30, 2008 Provident had drawn on 35 percent of its Canadian term credit facility of $1,125 million. This compares to 81 percent drawn as at December 31, 2007. The significant decrease in bank debt reflects the application of U.S. $632.6 million of cash proceeds realized on the disposition of USOGP.

The ratio of net debt (as calculated under "Liquidity and capital resources") to annualized third quarter funds flow from continuing operations was 1.3 to one, as compared to third quarter 2007 net debt to annualized funds flow from continuing operations of 3.5 to one. The decreased ratio reflects a decrease in net debt as well as higher funds flow in both COGP and Midstream.

At September 30, 2008 Provident had letters of credit guaranteeing Provident's performance under certain commercial and other contracts that totaled $35.2 million, increasing bank line utilization to 38 percent. The guarantees totaled $31.6 million at December 31, 2007.

Provident's working capital from continuing operations decreased by $153.5 million as at September 30, 2008 relative to December 31, 2007. This amount includes a $36.4 million decrease in accounts receivable, a $5.3 million increase in accounts payable and accrued liabilities, a $25.3 million increase in current portion of convertible debentures, a $105.5 million increase in income taxes payable driven by taxes incurred on the sale of the USOGP business in the second and third quarters of 2008, a $39.0 million increase in the current portion of financial derivative instruments, partially offset by a $53.8 million increase in inventory, and a $5.0 million increase in prepaid expenses and other current assets.

Trust units

For the quarter ended September 30, 2008, the Trust issued four thousand units on conversion of convertible debentures (2007 - 0.5 million units). An additional 0.1 million units pursuant to the unit option plan were issued for the quarter ended September 30, 2008 (2007 - 0.1 million units). Under Provident's Premium Distribution, Distribution Reinvestment (DRIP) and Optional Unit Purchase Plan program 1.5 million units were elected in the third quarter and were issued or are to be issued representing proceeds of $14.5 million (2007 - 1.3 million units for proceeds of $14.8 million).

At September 30, 2008, management and directors held less than one percent of the outstanding units.


Capital expenditures and funding

Continuing operations                       Three months ended September 30,
----------------------------------------------------------------------------
($ 000s)                                 2008           2007       % Change
----------------------------------------------------------------------------
Capital Expenditures
Capital expenditures and site
 restoration expenditures          $  (74,571) $     (37,377)           100
Property acquisitions, net               (136)        (1,860)           (93)
Corporate acquisitions                      -              -              -
----------------------------------------------------------------------------
Net capital expenditures           $  (74,707) $     (39,237)            90
----------------------------------------------------------------------------

Funded By
Funds flow from continuing
 operations net of declared
 distributions to unitholders      $   47,791  $      (8,289)             -
Proceeds on sale of discontinued
 operations, net of tax               232,513              -              -
(Decrease) increase in long-term
 debt                                (232,290)        39,044              -
Issue of trust units, net of cost;
 excluding DRIP                           467            471             (1)
DRIP proceeds                          14,520         14,777             (2)
Change in working capital, including
 cash, sale of assets and change in
 investments                           11,706         (6,766)             -
----------------------------------------------------------------------------
Net capital expenditure funding    $   74,707  $      39,237             90
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Continuing operations                        Nine months ended September 30,
----------------------------------------------------------------------------
($ 000s)                                 2008           2007       % Change
----------------------------------------------------------------------------
Capital Expenditures
Capital expenditures and site
 restoration expenditures          $ (196,001) $    (105,240)            86
Property acquisitions, net            (19,587)       (11,569)            69
Corporate acquisitions                      -       (467,850)          (100)
----------------------------------------------------------------------------
Net capital expenditures           $ (215,588) $    (584,659)           (63)
----------------------------------------------------------------------------

Funded By
Funds flow from continuing
 operations net of declared
 distributions to unitholders      $  160,876  $       2,619          6,043
Proceeds on sale of discontinued
 operations, net of tax               438,862              -              -
(Decrease) increase in long-term
 debt                                (530,866)       138,277              -
Issue of trust units, net of cost;
 excluding DRIP                         1,671        361,118           (100)
DRIP proceeds                          43,194         35,357             22
Change in working capital, including
 cash, sale of assets and change in
 investments                          101,851         47,288            115
----------------------------------------------------------------------------
Net capital expenditure funding    $  215,588  $     584,659            (63)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

For the comparable quarters Provident has funded its net capital expenditures with funds flow from operations, debt and equity issued from treasury through public offerings, the DRIP (Distribution Re-Investment Program), and the sale of assets.

Non-cash unit based compensation

Non-cash unit based compensation includes expenses associated with Provident's restricted and performance unit plan, as well as the unit option plan. Provident accounts for the unit option plan using the fair value of the option at the time of issue. The other unit based compensation is recorded at the estimated fair value of the notional units granted. Compensation expense associated with the plans is recognized in earnings over the vesting period of each plan. The expense associated with each period is recorded as non-cash unit based compensation (a component of general and administrative expense). A portion relating to operational employees at field and plant locations is also allocated to operating expense. Provident recorded a unit based compensation recovery of $0.4 million for the quarter ended September 30, 2008 (2007 - $8.8 million expense) included primarily in general and administrative expense. Provident made no payments in respect of unit based compensation in the third quarter of 2008 (2007 - nil). For the nine months ended September 30, 2008, Provident recorded unit based compensation expense of $9.8 million (2007 - $17.9 million) and made related cash payments of $8.3 million (2007 - $1.8 million). At September 30, 2008, the current portion of the liability totaled $18.0 million (December 31, 2007 - $9.9 million) and the long-term portion totaled $5.4 million (December 31, 2007 - $12.4 million).


COGP segment review

Crude oil and liquids price

The following prices are net of transportation expense.

COGP                                        Three months ended September 30,
----------------------------------------------------------------------------
----------------------------------------------------------------------------
($ per bbl)                              2008           2007       % Change
----------------------------------------------------------------------------

Oil per barrel
WTI (US$)                            $ 117.98       $  75.38             57
Exchange rate (from US$ to Cdn$)     $   1.04       $   1.04              -
WTI expressed in Cdn$                $ 122.91       $  78.74             56
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Realized pricing before financial
 derivative instruments
Crude oil                            $ 102.66       $  57.88             77
Natural gas liquids                  $  91.72       $  55.47             65
----------------------------------------------------------------------------
Crude oil and natural gas liquids    $ 101.73       $  57.63             77
----------------------------------------------------------------------------
----------------------------------------------------------------------------


COGP                                         Nine months ended September 30,
----------------------------------------------------------------------------
----------------------------------------------------------------------------
($ per bbl)                              2008           2007       % Change
----------------------------------------------------------------------------

Oil per barrel
WTI (US$)                            $ 113.29       $  66.19             71
Exchange rate (from US$ to Cdn$)     $   1.02       $   1.10             (7)
WTI expressed in Cdn$                $ 115.40       $  73.13             58
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Realized pricing before financial
 derivative instruments
Crude oil                            $  94.49       $  54.70             73
Natural gas liquids                  $  85.96       $  52.30             64
----------------------------------------------------------------------------
Crude oil and natural gas liquids    $  93.73       $  54.40             72
----------------------------------------------------------------------------
----------------------------------------------------------------------------

In the third quarter of 2008, COGP's realized crude oil and natural gas liquids price, prior to the impact of financial derivative instruments, increased by 77 percent to $101.73 per barrel compared to $57.63 in the third quarter of 2007. The 2008 increase was a result of a 57 percent increase in $US WTI crude oil price combined with narrower price differentials relative to WTI.


Natural gas price

The following prices are net of transportation expense.

COGP                                        Three months ended September 30,
----------------------------------------------------------------------------
----------------------------------------------------------------------------
($ per mcf)                              2008           2007       % Change
----------------------------------------------------------------------------

AECO monthly index (Cdn$ per mcf)    $   9.24       $   5.61             65
Corporate natural gas price per mcf
 before financial derivative
 instruments (Cdn$)                  $   8.60       $   4.94             74
----------------------------------------------------------------------------
----------------------------------------------------------------------------

COGP                                         Nine months ended September 30,
----------------------------------------------------------------------------
----------------------------------------------------------------------------
($ per mcf)                              2008           2007       % Change
----------------------------------------------------------------------------
AECO monthly index (Cdn$ per mcf)    $   8.57       $   6.79             26
Corporate natural gas price per mcf
 before financial derivative
 instruments (Cdn$)                  $   8.74       $   6.54             34
----------------------------------------------------------------------------
----------------------------------------------------------------------------

COGP's third quarter 2008 realized natural gas price, before financial derivative instruments, increased 74 percent as compared to the third quarter of 2007, which was nine percent greater than the increase in the AECO monthly index over the same period. Provident markets to aggregators and can sell to the market on daily and monthly indices, receiving prices which are based on the heat content of the natural gas. Provident's realized prices and changes in prices will therefore differ from benchmark indices.


Production

COGP                                        Three months ended September 30,
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                         2008           2007       % Change
----------------------------------------------------------------------------
Daily production
 Crude oil (bpd)                       12,805         11,182             15
 Natural gas liquids (bpd)              1,195          1,255             (5)
 Natural gas (mcfd)                    85,628         93,511             (8)
----------------------------------------------------------------------------
 Oil equivalent (boed) (1)             28,271         28,022              1
----------------------------------------------------------------------------
----------------------------------------------------------------------------

COGP                                         Nine months ended September 30,
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                         2008           2007       % Change
----------------------------------------------------------------------------
Daily production
 Crude oil (bpd)                       12,529          9,307             35
 Natural gas liquids (bpd)              1,227          1,329             (8)
 Natural gas (mcfd)                    85,244         92,309             (8)
----------------------------------------------------------------------------
 Oil equivalent (boed) (1)             27,963         26,021              7
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Provident reports equivalent production converting natural gas to oil on
    a 6:1 basis.

Production increased one percent to 28,271 boed during the third quarter of 2008 as compared to 28,022 boed in the comparable 2007 quarter. The increase in production was primarily a result of the Triwest acquisition (included as part of Southeast Saskatchewan core area) in the fourth quarter of 2007, acquisition of additional working interests in the Triwest assets in 2008 and active drilling and development programs. This was partially offset by natural production declines. Production for the third quarter of 2008 was weighted 50 percent natural gas, and 50 percent crude oil and natural gas liquids, a change from the 56 percent natural gas, and 44 percent crude oil and natural gas liquids for the third quarter of 2007. The change in the production weighting reflects the oil-weighted acquisitions completed in 2007 and their associated drilling programs. Production over the nine months ended September 30, 2008 was weighted 51 percent natural gas, and 49 percent crude oil and natural gas liquids, compared to 59 percent natural gas, and 41 percent crude oil and natural gas liquids for the nine months ended September 30, 2007.


Provident's COGP production summarized by core areas is as follows:

                                            Three months ended September 30,
----------------------------------------------------------------------------
COGP                                     2008           2007       % Change
----------------------------------------------------------------------------
Daily Production - by area (boed) (1)
West Central Alberta                    6,215          6,614             (6)
Southern Alberta                        4,931          5,534            (11)
Northwest Alberta                       4,912          5,061             (3)
Dixonville (2)                          3,854          3,618              7
Southeast Saskatchewan                  2,931          1,638             79
Southwest Saskatchewan                  1,312          1,714            (23)
Lloydminster                            4,116          3,843              7
----------------------------------------------------------------------------
                                       28,271         28,022              1
----------------------------------------------------------------------------
----------------------------------------------------------------------------

                                             Nine months ended September 30,
----------------------------------------------------------------------------
COGP                                     2008           2007       % Change
----------------------------------------------------------------------------
Daily Production - by area (boed) (1)
West Central Alberta                    6,361          7,092            (10)
Southern Alberta                        4,847          5,665            (14)
Northwest Alberta                       4,826          4,969             (3)
Dixonville (2)                          3,768          1,373            174
Southeast Saskatchewan                  3,127          1,643             90
Southwest Saskatchewan                  1,375          1,792            (23)
Lloydminster                            3,659          3,487              5
----------------------------------------------------------------------------
                                       27,963         26,021              7
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Provident reports equivalent production converting natural gas to oil on
    a 6:1 basis.
(2) Dixonville production in 2007 represents production from June 19, 2007
    (date of Capitol Energy Resources Ltd. Acquisition) amounting to 3,639
    boed for the 103 days.


Revenue and royalties

COGP                                        Three months ended September 30,
----------------------------------------------------------------------------
($ 000s except per boe and mcf data)     2008           2007       % Change
----------------------------------------------------------------------------

Oil
Revenue                            $  120,936  $      59,542            103
Realized loss on financial
 derivative instruments                (4,636)        (2,475)            87
Royalties                             (22,944)       (11,358)           102
----------------------------------------------------------------------------
Net revenue                        $   93,356  $      45,709            104
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net revenue (per barrel)           $    79.25  $       44.43             78
Royalties as a percentage of
 revenue                                 19.0%          19.1%

Natural gas
Revenue                            $   67,745  $      42,516             59
Realized (loss) gain on financial
 derivative instruments                (1,153)         5,892              -
Royalties                             (12,282)        (9,662)            27
----------------------------------------------------------------------------
Net revenue                        $   54,310  $      38,746             40
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net revenue (per mcf)              $     6.89  $        4.50             53
Royalties as a percentage of
 revenue                                 18.1%          22.7%

Natural gas liquids
Revenue                            $   10,081  $       6,404             57
Royalties                              (2,530)        (1,444)            75
----------------------------------------------------------------------------
Net revenue                        $    7,551  $       4,960             52
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net revenue (per barrel)           $    68.68  $       42.96             60
Royalties as a percentage of
 revenue                                 25.1%          22.5%

Total
Revenue                            $  198,762  $     108,462             83
Realized (loss) gain on financial
 derivative instruments                (5,789)         3,417              -
Royalties                             (37,756)       (22,464)            68
----------------------------------------------------------------------------
Net revenue                        $  155,217  $      89,415             74
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net revenue (per boe)              $    59.67  $       34.68             72
Royalties as a percentage of
 revenue                                 19.0%          20.7%
----------------------------------------------------------------------------
----------------------------------------------------------------------------

COGP                                         Nine months ended September 30,
----------------------------------------------------------------------------
($ 000s except per boe and mcf data)     2008           2007       % Change
----------------------------------------------------------------------------

Oil
Revenue                            $  324,384  $     138,989            133
Realized loss on financial
 derivative instruments               (15,898)        (3,230)           392
Royalties                             (60,738)       (26,720)           127
----------------------------------------------------------------------------
Net revenue                        $  247,748  $     109,039            127
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net revenue (per barrel)           $    72.17  $       42.91             68
Royalties as a percentage of
 revenue                                 18.7%          19.2%

Natural gas
Revenue                            $  204,095  $     164,860             24
Realized (loss) gain on financial
 derivative instruments                (2,119)         4,459              -
Royalties                             (37,072)       (31,717)            17
----------------------------------------------------------------------------
Net revenue                        $  164,904  $     137,602             20
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net revenue (per mcf)              $     7.06  $        5.46             29
Royalties as a percentage of
 revenue                                 18.2%          19.2%

Natural gas liquids
Revenue                            $   28,887  $      18,974             52
Royalties                              (7,229)        (4,799)            51
----------------------------------------------------------------------------
Net revenue                        $   21,658  $      14,175             53
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net revenue (per barrel)           $    64.42  $       39.07             65
Royalties as a percentage of
 revenue                                 25.0%          25.3%

Total
Revenue                            $  557,366 $      322,823             73
Realized (loss) gain on financial
 derivative instruments               (18,017)         1,229              -
Royalties                            (105,039)       (63,236)            66
----------------------------------------------------------------------------
Net revenue                        $  434,310  $     260,816             67
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net revenue (per boe)              $    56.68  $       36.72             54
Royalties as a percentage of
 revenue                                 18.8%          19.6%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Note: the above revenue, net revenue and net revenue per boe figures are
      presented net of transportation expenses.

Quarter over quarter, 2008 COGP net revenue increased by 74 percent to $155.2 million and by 72 percent to $59.67 per boe. The increases reflect higher realized crude oil, natural gas liquids, and natural gas prices and higher crude oil production volumes. Royalties, which are price sensitive and affected by production levels, decreased as a percentage of revenue in the third quarter of 2008, compared to the third quarter in 2007. The third quarter of 2007 included a one-time override royalty payment which resulted in a higher natural gas royalty rate as a percentage of revenue. The increase in realized loss on financial derivative instruments to $5.8 million in the third quarter of 2008 from a $3.4 million gain in the comparable 2007 quarter reflects a $1.2 million loss on natural gas derivative contracts in 2008 combined with a $4.6 million loss on oil derivative contracts in a record high crude oil price environment. For the nine months ended September 30, 2008, net revenue per boe was $56.68 or 54 percent above $36.72 in the same period of 2007.


Production expenses

COGP                                        Three months ended September 30,
----------------------------------------------------------------------------
----------------------------------------------------------------------------
($ 000s, except per boe data)            2008           2007       % Change
----------------------------------------------------------------------------

Production expenses                  $ 35,080       $ 31,378             12
Production expenses (per boe)        $  13.49       $  12.17             11
----------------------------------------------------------------------------
----------------------------------------------------------------------------

COGP                                         Nine months ended September 30,
----------------------------------------------------------------------------
----------------------------------------------------------------------------
($ 000s, except per boe data)            2008           2007       % Change
----------------------------------------------------------------------------

Production expenses                 $ 101,014       $ 82,743             22
Production expenses (per boe)       $   13.18       $  11.65             13
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Third quarter 2008 production expenses increased to $35.1 million from $31.4 million in the comparable 2007 quarter. The increase was due to the one percent increase in quarter over quarter production, and the impact of COGP returning wells to production with higher operating costs to take advantage of higher netbacks resulting from the record high crude oil price environment. As well, the increased commodity prices raised prices for fuel consumption and power, and increased costs in service related activities for down-hole and maintenance work. On a per boe basis, production expenses increased to $13.49 per boe compared to $12.17 per boe in the third quarter of 2007. The per boe production expenses includes the impact of the decision to return higher cost wells to production as well as additional costs due to battery turnarounds, further compounded by the associated lost production during the turnarounds.

Year-to-date production expenses increased 22 percent to $101.0 million from $82.7 million in 2007, reflecting the seven percent increase in production, the higher cost environment and the return to production of wells with higher operating costs.


Operating netback

COGP                                        Three months ended September 30,
----------------------------------------------------------------------------
----------------------------------------------------------------------------
($ per boe)                              2008           2007       % Change
----------------------------------------------------------------------------
Netback per boe
Gross production revenue              $ 76.42      $   42.06             82
Royalties                              (14.52)         (8.71)            67
Operating costs                        (13.49)        (12.17)            11
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Field operating netback                 48.41          21.18            129
Realized (loss) gain on financial
 derivative instruments                 (2.23)          1.33              -
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating netback after realized
 financial derivative instruments     $ 46.18      $   22.51            105
----------------------------------------------------------------------------
----------------------------------------------------------------------------

COGP                                         Nine months ended September 30,
----------------------------------------------------------------------------
----------------------------------------------------------------------------
($ per boe)                              2008           2007       % Change
----------------------------------------------------------------------------
Netback per boe
Gross production revenue              $ 72.74      $   45.45             60
Royalties                              (13.71)         (8.90)            54
Operating costs                        (13.18)        (11.65)            13
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Field operating netback                 45.85          24.90             84
Realized (loss) gain on financial
 derivative instruments                 (2.35)          0.17              -
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating netback after realized
 financial derivative instruments     $ 43.50      $   25.07             74
----------------------------------------------------------------------------
----------------------------------------------------------------------------

COGP operating netbacks have transportation expense netted against gross production revenue.

Third quarter 2008 field operating netback increased 129 percent to $48.41 per boe from $21.18 per boe in the comparable 2007 quarter. Year-to-date field operating netback of $45.85 per boe was 84 percent above the field operating netback for the same period in 2007. The increase in field operating netback reflects a higher production weighting to crude oil accompanied by an increase in realized crude oil, natural gas liquids, and natural gas prices. Royalties on a per boe basis increased due to the increase in realized commodity prices. Operating netbacks after realized financial derivative instruments increased by 105 percent to $46.18 per boe from $22.51 per boe for the quarter, reflecting a realized loss on financial derivative instruments of $2.23 per boe compared to $1.33 per boe realized gain in the comparable quarter in 2007. The realized loss is primarily from oil derivative contracts in a record high crude oil price environment.


General and administrative

COGP                                        Three months ended September 30,
----------------------------------------------------------------------------
----------------------------------------------------------------------------
($ 000s, except per boe data)            2008           2007       % Change
----------------------------------------------------------------------------
Cash general and administrative       $ 7,664       $  6,399             20
Non-cash unit based compensation           36          3,701            (99)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                      $ 7,700       $ 10,100            (24)

Cash general and administrative
 (per boe)                            $  2.95       $   2.48             19
----------------------------------------------------------------------------

COGP                                         Nine months ended September 30,
----------------------------------------------------------------------------
----------------------------------------------------------------------------
($ 000s, except per boe data)            2008           2007       % Change
----------------------------------------------------------------------------
Cash general and administrative      $ 27,415       $ 21,519             27
Non-cash unit based compensation          841          6,712            (87)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                     $ 28,256       $ 28,231              -

Cash general and administrative
 (per boe)                           $   3.58       $   3.03             18
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Third quarter 2008 COGP cash general and administrative expenses increased 20 percent to $7.7 million compared to $6.4 million in the third quarter of 2007. On a per barrel basis, cash general and administrative expenses increased 19 percent to $2.95 per boe in 2008 compared to the $2.48 per boe in the third quarter of 2007. The increase reflects higher office-related expenses, particularly rent, as well as software licensing fees.

For the nine months ended September 30, 2008, COGP cash general and administrative expenses increased 27 percent to $27.4 million (2007 - $21.5 million). On a per barrel basis, cash general and administrative expenses increased 18 percent to $3.58 per boe in 2008 compared to the $3.03 per boe in the nine months ended September 30, 2007. For the nine months ended September 30, 2008, cash general and administrative expense includes $4.5 million or $0.59 per boe (2007 - $0.9 million or $0.13 per boe) related to payments associated with performance unit based compensation. The unit based expense was accrued over a three-year vesting period as non-cash unit based compensation, consequently there is an offsetting reduction in non-cash unit based compensation in 2008, when the payments were made. Excluding these payments, cash general and administrative expenses were $22.9 million or $2.99 per boe compared to $20.6 million, or $2.90 per boe. The increase is primarily due to higher office-related expenses, particularly rent, as well as software licensing fees.

Non-cash unit based compensation for the nine months ended September 30, 2008 decreased to $0.8 million (2007 - $6.7 million). Excluding the related cash payments in the periods, non-cash unit based compensation was $5.3 million in the nine months ended September 30, 2008 (2007 - $7.6 million). Non-cash unit based compensation expense is lower in 2008 as a result of a lower Provident trust unit trading price, upon which the compensation is based.


Capital expenditures

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

Capital expenditures - by category
Geological, geophysical and land     $ 14,716  $  1,819  $ 18,419  $  3,900
Drilling and recompletions             37,945    27,314   118,229     5,940
Facilities and equipment                5,725     2,783    23,832     7,551
Other capital                             679     1,744     6,234     6,273
----------------------------------------------------------------------------
Total additions                      $ 59,065  $ 33,660  $166,714  $ 93,664
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Capital expenditures - by area
West central Alberta                 $  1,783  $  2,299  $  6,943  $  6,892
Southern Alberta                        6,866     4,711    13,739    11,201
Northwest Alberta                      15,923     2,798    56,884    30,101
Dixonville                             22,307    15,868    53,048    17,671
Southeast Saskatchewan                  7,681     2,367    17,009     3,224
Southwest Saskatchewan                  1,367     1,677     4,259    12,283
Lloydminster                            1,282     2,157     6,589     5,852
Office and other                        1,856     1,783     8,243     6,440
----------------------------------------------------------------------------
Total additions                      $ 59,065  $ 33,660  $166,714  $ 93,664
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Property acquisitions, net           $    136  $  1,860  $ 19,587  $ 11,569
----------------------------------------------------------------------------
----------------------------------------------------------------------------

In the third quarter of 2008, COGP continued the successful execution of its capital program throughout its core areas. The COGP business unit spent 64 percent of its capital during third quarter 2008, or $37.9 million, on drilling and recompletion activities, drilling 29.4 net wells with 97 percent success. In addition, 25 percent, or $14.7 million, was related to geophysical work and land acquisitions. The remaining capital went to facility and infrastructure activities.

The majority of the capital was deployed in Dixonville with ongoing drilling of 17.0 net wells and continued development of the oil pool. In Northwest Alberta, $15.9 million was incurred as a result of recompletion, facility and land acquisition activities. Southeast Saskatchewan spent $7.7 million on its drilling and completion programs which included 6.6 net oil wells. The $13.2 million of capital spent in the remaining core areas included drilling, completion, tie-ins, recompletions, facility upgrades and production optimization activities.

Net property acquisitions of $19.6 million in 2008 include additional working interests in the Triwest assets in Southeast Saskatchewan, originally acquired in December 2007.


Depletion, depreciation and accretion (DD&A)

COGP                                        Three months ended September 30,
----------------------------------------------------------------------------
($ 000s, except per boe data)            2008           2007       % Change
----------------------------------------------------------------------------

DD&A                                 $ 80,457       $ 72,288             11
DD&A (per boe)                       $  30.93       $  28.04             10
----------------------------------------------------------------------------
----------------------------------------------------------------------------

COGP                                         Nine months ended September 30,
----------------------------------------------------------------------------
----------------------------------------------------------------------------
($ 000s, except per boe data)            2008           2007       % Change
----------------------------------------------------------------------------

DD&A                                $ 228,382      $ 185,858             23
DD&A (per boe)                      $   29.81      $   26.16             14
----------------------------------------------------------------------------
----------------------------------------------------------------------------

The COGP DD&A rate of $29.81 per boe for the first nine months of 2008 increased by 14 percent compared to $26.16 per boe in 2007. The increase was primarily as a result of the two acquisitions of Capitol and Triwest in 2007. These recent COGP acquisitions and the Rainbow assets acquired in 2006 differed from earlier acquisitions in that they included significant reserves that were not yet proved. Since depletion calculations are based on proved reserves, acquisitions with not yet proved reserves generally result in higher depletion rates. The impact of this, combined with the higher cost of acquiring or drilling proved reserves in western Canada in an environment with higher commodity prices and increased drilling costs, will be reflected in the DD&A rate going forward.

In the third quarter of 2008, accretion expense associated with asset retirement obligations was $0.9 million compared to $0.6 million in the comparable period of 2007. Year-to-date accretion expense was $2.5 million (2007 - $1.8 million).

Midstream business segment review

The Midstream business

The Midstream business unit extracts, processes, stores, transports and markets natural gas liquids (NGL) for Provident and offers these services to third party customers. The Provident Midstream segment contains three business lines:


Empress East
Redwater West
Commercial Services


Midstream business unit results can be summarized as follows:

                                            Three months ended September 30,
----------------------------------------------------------------------------
----------------------------------------------------------------------------
($ 000s)                                 2008           2007       % Change
----------------------------------------------------------------------------
Empress East Margin                  $ 42,537      $  42,176              1
Redwater West Margin                   38,343         23,921             60
Commercial Services Margin             12,264         10,905             12
----------------------------------------------------------------------------
Gross operating margin                 93,144         77,002             21
Realized loss on financial
 derivative instruments               (51,823)       (23,357)           122
Cash general and administrative
 expenses                              (7,624)        (6,221)            23
Foreign exchange gain (loss)
 and other                              3,642              1              -
----------------------------------------------------------------------------
Midstream EBITDA                     $ 37,339      $  47,425            (21)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

                                             Nine months ended September 30,
----------------------------------------------------------------------------
----------------------------------------------------------------------------
($ 000s)                                 2008           2007       % Change
----------------------------------------------------------------------------
Empress East Margin                 $ 157,076      $ 106,455             48
Redwater West Margin                  138,694         52,891            162
Commercial Services Margin             34,446         35,062             (2)
----------------------------------------------------------------------------
Gross operating margin                330,216        194,408             70
Realized loss on financial
 derivative instruments              (131,103)       (35,843)           266
Cash general and administrative
 expenses                             (27,110)       (22,314)            21
Foreign exchange gain (loss)
 and other                              3,092              1              -
----------------------------------------------------------------------------
Midstream EBITDA                    $ 175,095      $ 136,252             29
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Gross operating margin

The Empress East business line:

The Empress East business line extracts NGLs from natural gas at the Empress straddle plants and sells finished products into markets in Central Canada and the Eastern United States. The margin in this business is determined primarily by the "frac spread ratio", which is the ratio between crude oil prices and natural gas prices. Traditionally, the higher the ratio, the better this business line will perform. There is also a differential between propane, butane and condensate (collectively, these products are referred to as "propane-plus") prices and crude oil prices which can change prices received and margins realized for Midstream products separate from frac spread ratio changes. In the third quarter of 2008, the margin for this business line was relatively flat at $42.5 million (2007 - $42.2 million) with increases in revenue offset with similar increases in costs. The year-to-date margin was $157.1 million in 2008 compared to year-to-date margin of $106.5 million in 2007. The year-to-date 48 percent increase in margin is the result of approximately 40 percent higher propane-plus prices while per-unit cost of goods sold only increased approximately 35 percent. The higher propane-plus prices reflect the stronger WTI crude oil price in the first nine months of 2008. The margins reflect a cost of goods sold per unit increase that was significantly less than sales price per unit as a result of the natural gas prices which were lower in relation to crude oil prices in 2008, when compared to 2007. As a result, the frac spread ratio was higher in 2008.

The Redwater West business line:

The Redwater West business line purchases an NGL mix from various producers and fractionates it into finished products at the Redwater fractionation facility near Edmonton, Alberta. Because the feedstock for this business line is primarily NGL mix rather than natural gas, the frac spread ratio has a smaller impact on margin than in the Empress East business line. This facility also has the largest rail rack in Western Canada to receive products for delivery into the local condensate market. Provident has considerably increased its participation in the condensate market over the past year, reflecting the increasing diluent demand for heavy oil production. In the third quarter of 2008, the margin for the Redwater West business line was $38.3 million (2007 - $23.9 million). The $14.4 million increase reflects approximately 15 percent higher propane-plus sales volumes, primarily condensate and propane. Provident made effective use of its transportation and storage assets to increase condensate sales in the quarter. In addition, propane-plus per-unit margins increased by approximately 50 percent, when compared to the third quarter of 2007, reflecting an approximate 45 percent increase in propane-plus prices. The higher propane-plus prices reflect the stronger crude oil price in the third quarter of 2008. Year-to-date margin increased to $138.7 million from $52.9 million in 2007. Sales volumes in 2008 have increased approximately 15 percent, primarily relating to condensate and propane. Additionally, per-unit selling prices increased approximately 50 percent and per-unit cost of goods sold only increased approximately 45 percent.

The Commercial Services business line:

The Commercial Services business line generates income from relatively stable fee-for-service contracts to provide fractionation, storage, loading, and marketing services to upstream producers. Income from pipeline tariffs from Provident's ownership in NGL pipelines is also included in this business line. In the third quarter of 2008, the margin for this business line was $12.3 million (2007 - $10.9 million). The 12 percent increase in the margin is due primarily to increases in loading/unloading revenue. Year-to-date 2008, the commercial services margin was $34.4 million (2007 - $35.0 million). This marginal decrease is due to reduced third party fractionation revenue and reduced pipeline revenue offset by increased loading/unloading revenues.

Operations - Midstream NGL sales volumes

Midstream sold 111,313 bpd in the third quarter of 2008, relatively unchanged when compared with 112,386 bpd in the third quarter of 2007. Year-to-date Midstream sold 119,456 bpd in 2008, up three percent when compared to sales of 115,664 bpd in 2007.

Earnings before interest, taxes, depletion, depreciation, accretion, and other non-cash items ("EBITDA") and funds flow from operations

Third quarter 2008 EBITDA decreased to $37.3 million from $47.4 million in 2007. Higher operating margins for all three business lines were offset by higher realized losses on financial derivative instruments. Year-to-date EBITDA increased to $175.1 million from $136.3 million in 2007. Funds flow from operations for the third quarter of 2008 was $32.5 million, an increase of $0.1 million or one percent above the $32.4 million for the third quarter 2007. The increase in funds flow is driven by lower EBITDA, offset by reduced interest expense and tax charges. Year-to-date funds flow from operations increased to $144.4 million from $101.3 million in 2007. This 43 percent increase reflects the higher EBITDA and operating margins, as described above.

Cash general and administrative expenses and other were $7.6 million for the third quarter of 2008 (2007 - $6.2 million). The increase is primarily due higher office-related expenses, particularly rent, as well as software licensing fees.

Cash general and administrative expenses and other were $27.1 million for the nine months ended September 30, 2008 (2007 - $22.3 million). Year-to-date cash general and administrative expenses include $3.8 million (2007 - $0.9 million) related to payments associated with performance unit-based compensation. The expense was accrued over the three-year vesting period as non-cash unit based compensation, consequently there is an offsetting reduction in non-cash unit based compensation in 2008, when the payments were made. Excluding these payments, year-to-date cash general and administrative expenses was $23.3 million (2007 - $21.4 million). The increase is primarily due to higher office rent costs.

Management uses EBITDA to analyze the operating performance of the Midstream business unit. EBITDA 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 for other entities. EBITDA as presented is not intended to represent operating funds flow from operations or operating profits for the period nor should it be viewed as an alternative to funds flow from operations from operating activities, net earnings or other measures of financial performance calculated in accordance with Canadian GAAP. All references to EBITDA throughout this report are based on earnings before interest, taxes, depletion, depreciation, accretion, and other non-cash items ("EBITDA").

Capital expenditures

Midstream capital expenditures for the third quarter of 2008 totaled $14.2 million, and $25.3 million year-to-date. In 2008, $8.0 million was spent on continued development of product storage and increased condensate offloading capacity, $6.3 million was spent on sustaining capital requirements, $7.7 million was added to capitalized line-fill and $3.3 million was spent primarily on office furniture and equipment for new office space.

Discontinued operations (USOGP)

In February 2008, the Trust announced a strategic process respecting the decision to sell the operations that comprise the United States oil and natural gas production (USOGP) business. This business was comprised of approximately 22 percent ownership of BreitBurn Energy Partners, L.P., a publicly-traded U.S. Master Limited Partnership ("the MLP"). This MLP ownership also included units held by the General Partner of which Provident owned approximately 96 percent. In addition, Provident owned approximately 96 percent of privately held BreitBurn Energy Company L.P. ("BreitBurn") which operates assets in California.

Given the sales decision, effective in the first quarter of 2008, the USOGP business is accounted for as discontinued operations. Discontinued operations (USOGP) includes the consolidated results of 100 percent of the MLP and BreitBurn. Non-controlling interests are comprised mainly of the public ownership in the MLP, and to a lesser extent the ownership interests of the managers in the MLP and BreitBurn, as well as third party investment in USOGP's land development project, which commenced in 2006.

In June 2008, the Trust sold a portion of the USOGP business, consisting of its 22 percent interest in BreitBurn Energy Partners, L.P. (MLP) and its 96 percent interest in BreitBurn GP LLC, for cash proceeds, net of transaction costs, of U.S. $342.2 million. The Trust has recorded a gain on sale of $187.9 million and $139.7 million in current tax expense, related to this transaction. Also recorded was a realized foreign exchange loss of $30.3 million, representing the recognition of the related portion of the foreign exchange loss in accumulated other comprehensive income, which was generated since acquisition in 2006. These amounts are recorded as part of net income from discontinued operations for the nine months ended September 30, 2008.

In August 2008, the Trust sold the remaining portion of the USOGP business, comprised of an approximate 96 percent interest in BreitBurn Energy Company L.P., for total consideration of U.S. $300.4 million, consisting of cash proceeds, net of transaction costs, of U.S. $290.4 million and a U.S. $10 million note. The Trust has recorded a gain on sale of $75.7 million and $74.0 million in current tax expense related to this transaction. Also recorded was a realized foreign exchange loss of $26.8 million, representing the recognition of the related portion of the foreign exchange loss in accumulated other comprehensive income, which was generated since acquisition in 2004. These amounts are recorded as part of net income from discontinued operations for the three and nine months ended September 30, 2008.

Provident has become aware of a lawsuit filed by Quicksilver Resources Inc. on October 31, 2008 against BreitBurn Energy Partners, L.P., certain of its directors (including three Provident nominees), and Provident. The claim relates to a transaction between BreitBurn Energy Partners, L.P. and Quicksilver Resources Inc. and certain other BreitBurn Energy Partners, L.P. matters. Provident believes the claims made in the lawsuit are without merit and will vigorously defend itself and its named director nominees against the allegations.

Distributions

The following table summarizes distributions paid or declared by the Trust since inception:


                                                        Distribution Amount
Record Date                            Payment Date       (Cdn$)    (US$)(1)
----------------------------------------------------------------------------
2008
January 24, 2008                       February 15, 2008 $ 0.12        0.12
February 25, 2008                      March 14, 2008      0.12        0.12
March 24, 2008                         April 15, 2008      0.12        0.12
April 22, 2008                         May 15, 2008        0.12        0.12
May 23, 2008                           June 13, 2008       0.12        0.12
June 20, 2008                          July 15, 2008       0.12        0.12
July 22, 2008                          August 15, 2008     0.12        0.12
August 22, 2008                        September 15, 2008  0.12        0.11
September 22, 2008                     October 15, 2008    0.12        0.10
----------------------------------------------------------------------------
2008 Cash Distributions paid as
 declared                                                $ 1.08        1.05
----------------------------------------------------------------------------
----------------------------------------------------------------------------
2007 Cash Distributions paid as
 declared                                                  1.44        1.35
2006 Cash Distributions paid as
 declared                                                  1.44        1.26
2005 Cash Distributions paid as
 declared                                                  1.44        1.20
2004 Cash Distributions paid as
 declared                                                  1.44        1.10
2003 Cash Distributions paid as
 declared                                                  2.06        1.47
2002 Cash Distributions paid as
 declared                                                  2.03        1.29
2001 Cash Distributions paid as
 declared - March 2001 - December 2001                     2.54        1.64
----------------------------------------------------------------------------
Inception to September 30, 2008 -
 Distributions paid as declared                          $13.47       10.36
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Exchange rate based on the Bank of Canada noon rate on the payment date.

Foreign ownership

As at September 30, 2008, based on information received from the transfer agent and financial intermediaries, an estimated 85 percent of Provident's outstanding trust units are held by non-residents. However, this estimate may not be accurate as it is based on certain assumptions and data from the security industry that does not have a well-defined methodology to determine the residency of beneficial holders of securities.

The Trust qualifies as a Mutual Fund Trust under the Canadian Income Tax Act because substantially all the value of its asset portfolio is derived from non-taxable Canadian properties, comprised principally of royalties and inter-company debt. Provident monitors on an ongoing basis the value of its asset portfolio to confirm that substantially all of the value of its assets is derived from non-taxable Canadian properties.

On September 17, 2003 Canadian unitholders approved an amendment to the Trust's Trust Indenture providing that residency restriction provisions need not be enforced while the Trust continues to qualify as a Mutual Fund Trust under Canadian tax legislation. To allow Provident to remain a Mutual Fund Trust and to execute a business plan that maximizes unitholder returns without regard to the types of assets the Trust may hold, the approved amendment provides for Provident's board of directors to have sole discretion to determine whether and when it is appropriate to reduce or limit the number of trust units held by non-residents of Canada.

Change in accounting policies

The interim consolidated financial statements have been prepared based on the consistent application of the accounting policies and procedures as set out in the consolidated financial statements of the Trust for the year ended December 31, 2007 and are consistent with policies adopted in the third quarter of 2007, except as described in note 2 of the interim consolidated financial statements.

In 2006, the Accounting Standards Board adopted a strategic plan for the direction of accounting standards in Canada. Accounting standards for public companies in Canada will converge with International Financial Reporting Standards (IFRS) by 2011 and Provident will be required to report according to IFRS standards for the year ended December 31, 2011. Provident is currently assessing the impact of the convergence of Canadian GAAP and IFRS on results of operations, financial position and disclosures. To date, Provident has completed an initial assessment of areas to review, prepared a work plan to implement IFRS, provided initial training to staff who will be implementing IFRS, and has commenced testing software which will assist in the ongoing accounting after adoption and implementation of IFRS.

Business risks

The trust industry is subject to risks that can affect the amount of funds flow from operations available for distribution to unitholders, and the ability to grow. These risks include but are not limited to:

- capital markets risk and the ability to finance future growth; and

- the impact of Canadian governmental regulation on Provident, including the effect of the new tax on trust distributions;

The oil and natural gas industry is subject to numerous risks that can affect the amount of funds flow from operations available for distribution to unitholders and the ability to grow. These risks include but are not limited to:

- fluctuations in commodity price, exchange rates and interest rates;

- government and regulatory risk in respect of royalty and income tax regimes;

- operational risks that may affect the quality and recoverability of reserves;

- geological risk associated with accessing and recovering new quantities of reserves;

- transportation risk in respect of the ability to transport oil and natural gas to market;

- marketability of oil and natural gas;

- the ability to attract and retain employees; and

- environmental, health and safety risks.

The midstream industry is also subject to risks that can affect the amount of funds flow from operations available for distribution to unitholders and the ability to grow. These risks include but are not limited to:

- operational matters and hazards including the breakdown or failure of equipment, information systems or processes, the performance of equipment at levels below those originally intended, operator error, labour disputes, disputes with owners of interconnected facilities and carriers and catastrophic events such as natural disasters, fires, explosions, fractures, acts of eco-terrorists and saboteurs, and other similar events, many of which are beyond the control of the Trust or Provident;

- the Midstream NGL assets are subject to competition from other gas processing plants, and the pipelines and storage, terminal and processing facilities are also subject to competition from other pipelines and storage, terminal and processing facilities in the areas they serve, and the gas products marketing business is subject to competition from other marketing firms;

- exposure to commodity price fluctuations;

- regulatory intervention in determining processing fees and tariffs; and

- reliance on significant customers.

Provident strives to minimize these business risks by:

- employing and empowering management and technical staff with extensive industry experience and providing competitive remuneration;

- adhering to a strategy of acquiring, developing and optimizing quality, low-risk reserves in areas where we have technical and operational expertise;

- developing a diversified, balanced asset portfolio that generally offers developed operational infrastructure, year-round access and close proximity to markets;

- adhering to a consistent and disciplined Commodity Price Risk Management Program to mitigate the impact that volatile commodity prices have on funds flow from operations available for distribution;

- marketing crude oil and natural gas to a diverse group of customers, including aggregators, industrial users, well-capitalized third-party marketers and spot market buyers;

- marketing natural gas liquids and related services to selected, credit worthy customers at competitive rates;

- maintaining a low cost structure to maximize funds flow from operations and profitability;

- maintaining prudent financial leverage and developing strong relationships with the investment community and capital providers;

- adhering to strict guidelines and reporting requirements with respect to environmental, health and safety practices; and

- maintaining an adequate level of property, casualty, comprehensive and directors' and officers' insurance coverage.

Unit trading activity

The following table summarizes the unit trading activity of the Provident units for each quarter in the nine months ended September 30, 2008 on both the Toronto Stock Exchange and the New York Stock Exchange:


                                           Q1             Q2             Q3
----------------------------------------------------------------------------
TSE - PVE.UN (Cdn$)
High                                 $  11.37       $  12.25       $  11.66
Low                                  $   8.80       $  10.76       $   8.71
Close                                $  10.95       $  11.74       $   9.50
Volume (000s)                          34,702         28,161         26,269
----------------------------------------------------------------------------
NYSE - PVX (US$)
High                                 $  11.28       $  12.40       $  11.50
Low                                  $   8.50       $  10.50       $   8.50
Close                                $  10.60       $  11.43       $   8.98
Volume (000s)                          74,533         77,141         76,617
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Forward-looking statements

This MD&A contains forward-looking information or forward-looking statements under applicable securities legislation. These statements relate to future events or the Trust's future performance. Such forward-looking statements or information are provided for the purpose of providing information about management's current expectations and plans relating to the future. Readers are cautioned that reliance on such information may not be appropriate for other purposes, such as making investment decisions. All statements other than statements of historical fact are forward-looking statements. In some cases, forward-looking statements can be identified by terminology such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "potential", "continue", or the negative of these terms or other comparable terminology. Statements relating to "reserves" or "resources" are deemed to be forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions, that the resources and reserves described can be profitably produced in the future. Forward looking statements or information in this MD&A include, but are not limited to, business strategy and objectives, reserve quantities and the discounted present value of future net cash flows from such reserves, net revenue, future production levels, capital expenditures, exploration plans, development plans, acquisition and disposition plans and the timing thereof, operating and other costs, royalty rates, budgeted levels of cash distributions and the performance associated with Provident's natural gas midstream, NGL processing and marketing business. Forward-looking statements or information are based on current expectations, estimates and projections that involve a number of risks and uncertainties which could cause actual events or results to differ materially from those anticipated by the Trust and described in the forward-looking statements or information. In addition, this MD&A may contain forward-looking statements attributed to third party industry sources. Undue reliance should not be placed on forward-looking statements or information, as there can be no assurance that the plans, intentions or expectations upon which they are based will occur. By its nature, forward-looking information involves numerous assumptions, known and unknown risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and other forward-looking statements will not occur. Forward-looking statements in this MD&A include, but are not limited to, statements with respect to:

- the Trust's ability to benefit from the combination of growth opportunities and the ability to grow through the capital markets;

- the Trust's acquisition strategy, the criteria to be considered in connection therewith and the benefits to be derived therefrom;

- sustainability and growth of production and reserves through prudent management and acquisitions;

- the emergence of accretive growth opportunities;

- the ability to achieve a consistent level of monthly cash distributions;

- the impact of Canadian governmental regulation on the Trust;

- the existence, operation and strategy of the commodity price risk management program;

- the approximate and maximum amount of forward sales and hedging to be employed;

- changes in oil and natural gas prices and the impact of such changes on cash flow after hedging;

- the level of capital expenditures devoted to development activity rather than exploration;

- the sale, farming out or development using third party resources to exploit or produce certain exploration properties;

- the use of development activity and acquisitions to replace and add to reserves;

- the quantity of oil and natural gas reserves and oil and natural gas production levels;

- currency, exchange and interest rates;

- the performance characteristics of Provident's natural gas midstream, NGL processing and marketing business;

- the growth opportunities associated with the natural gas midstream, NGL processing and marketing business; and

- the nature of contractual arrangements with third parties in respect of Provident's natural gas midstream, NGL processing and marketing business.

Although the Trust believes that the expectations reflected in the forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct. The Trust can not guarantee future results, levels of activity, performance, or achievements. Moreover, neither the Trust nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. Some of the risks and other factors, some of which are beyond the Trust's control, which could cause results to differ materially from those expressed in the forward-looking information or forward-looking statements contained in this MD&A include, but are not limited to:

- general economic conditions in Canada, the United States and globally;

- industry conditions associated with the NGL services, processing and marketing business;

- fluctuations in the price of crude oil, natural gas and natural gas liquids;

- uncertainties associated with estimating reserves;

- royalties payable in respect of oil and gas production;

- interest payable on notes issued in connection with acquisitions;

- income tax legislation relating to income trusts, including the effect of new legislation taxing trust income;

- governmental regulation in North America of the oil and gas industry, including income tax and environmental regulation;

- fluctuation in foreign exchange or interest rates;

- stock market volatility and market valuations;

- the impact of environmental events;

- the need to obtain required approvals from regulatory authorities;

- unanticipated operating events which can reduce production or cause production to be shut-in or delayed;

- failure to realize the anticipated benefits of acquisitions;

- competition for, among other things, capital reserves, undeveloped lands and skilled personnel;

- failure to obtain industry partner and other third party consents and approvals, when required;

- risks associated with foreign ownership;

- third party performance of obligations under contractual arrangements; and

- the other factors set forth under "Business risks" in this MD&A.

Readers are cautioned that the foregoing list is not exhaustive of all possible risks and uncertainties. With respect to forwarding looking statements and forward looking information contained in this MD&A, the Trust has made assumptions regarding, among other things:

- future natural gas and crude oil prices;

- the ability of the Trust to obtain qualified staff and equipment in a timely and cost-efficient manner to meet demand;

- the regulatory framework regarding royalties, taxes and environmental matters in which the Trust conducts its business;

- the impact of increasing competition; and

- the Trust's ability to obtain financing on acceptable terms.

- the general stability of the economic and political environment in which the Trust operates;

- the timely receipt of any required regulatory approvals;

- the ability of the operator of the projects which the Trust has an interest in to operate the field in a safe, efficient and effective manner;

- field production rates and decline rates;

- the ability to replace and expand oil and natural gas reserves through acquisition, development of exploration;

- the timing and costs of pipeline, storage and facility construction and expansion and the ability of the Trust to secure adequate product transportation;

- currency, exchange and interest rates; and

- the ability of the Trust to successfully market its oil and natural gas products.

Readers are cautioned that the foregoing list is not exhaustive of all factors and assumptions which have been used. The forward-looking statements or information contained in this MD&A are made as of the date hereof and the Trust undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise unless required by applicable securities laws. The forward looking statements or information contained in this MD&A are expressly qualified by this cautionary statement.


Segmented information by quarter
----------------------------------------------------------------------------
($ 000s except for per unit
 and operating amounts)                            2008
----------------------------------------------------------------------------
                                  First     Second        Third    Year-to-
                                Quarter    Quarter      Quarter        Date
----------------------------------------------------------------------------
Financial - consolidated
 Revenue (continuing
  operations)                 $ 702,215 $  420,220  $ 1,102,624 $ 2,225,059
 Funds flow from operations   $ 180,230 $  241,487  $   151,661 $   573,378
 Net income (loss)            $  33,616 $ (184,081) $   351,105 $   200,640
 Net income (loss) per unit -
  basic                       $    0.13 $    (0.72) $      1.37 $      0.79
 Net income (loss) per unit -
  diluted                     $    0.13 $    (0.72) $      1.29 $      0.79
 Unitholder distributions     $  91,117 $   91,662  $    92,188 $   274,967
 Distributions per unit       $    0.36 $     0.36  $      0.36 $      1.08
----------------------------------------------------------------------------

Oil and gas production
 (continuing operations)
Cash revenue                  $ 122,815 $  164,442  $   159,704 $   446,961
Earnings before interest,
 DD&A, taxes and other
 non-cash items               $  75,348 $  117,132  $   111,256 $   303,736
Funds flow from operations    $  71,142 $  112,869  $   107,442 $   291,453
Net income                    $   9,591 $   28,935  $    76,881 $   115,407
----------------------------------------------------------------------------

Midstream
Cash revenue                  $ 641,673 $  662,315  $   656,665 $ 1,960,653
Earnings before interest,
 DD&A, taxes and other
 non-cash items               $  75,987 $   61,769  $    37,339 $   175,095
Funds flow from operations    $  59,252 $   52,601  $    32,537 $   144,390
Net income (loss)             $  15,516 $ (290,230) $   232,966 $   (41,748)

Operating
Oil and gas production
 (continuing operations)
 Light/medium oil (bpd)          10,535     10,179       10,109      10,274
 Heavy oil (bpd)                  1,752      2,315        2,696       2,255
 Natural gas liquids (bpd)        1,307      1,178        1,195       1,227
 Natural gas (mcfd)              83,970     86,130       85,628      85,244
 Oil equivalent (boed)           27,589     28,027       28,271      27,963
----------------------------------------------------------------------------

Average selling price net of
 transportation expense
 (continuing operations) (Cdn$)
 Crude oil per bbl            $   75.06 $   105.13  $    102.66 $     94.49
  (before realized financial
  derivative instruments)
 Crude oil per bbl            $   71.54 $    98.68  $     98.73 $     89.86
  (including realized financial
  derivative instruments)
 Natural gas liquids per
  barrel                      $   72.85 $    94.59  $     91.72 $     85.96
 Natural gas per mcf          $    7.61 $     9.98  $      8.60 $      8.74
  (before realized financial
  derivative instruments)
 Natural gas per mcf          $    7.74 $     9.73  $      8.45 $      8.65
  (including realized financial
  derivative instruments)
----------------------------------------------------------------------------

Midstream
 Midstream NGL sales volumes
  (bpd)                         136,320    110,826      111,313     119,456
----------------------------------------------------------------------------
----------------------------------------------------------------------------


Segmented information by quarter
----------------------------------------------------------------------------
($ 000s except for per
 unit and operating amounts)                    2007
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                            First    Second
                          Quarter   Quarter     Third    Fourth      Annual
                               (1)       (1)  Quarter   Quarter       Total
----------------------------------------------------------------------------
Financial - consolidated
 Revenue (continuing
  operations)            $558,807 $ 463,995  $494,065  $521,648  $2,038,515
 Funds flow from
  operations             $ 87,040 $  98,503  $105,149  $177,563  $  468,255
 Net income (loss)       $ 43,093 $ (46,199) $(35,005) $ 68,545  $   30,434
 Net income (loss) per
  unit - basic and
  diluted                $   0.20 $   (0.21) $  (0.14) $   0.28  $     0.13
 Unitholder
  distributions          $ 76,271 $  80,236  $ 87,782  $ 89,063  $  333,352
 Distributions per unit  $   0.36 $    0.36  $   0.36  $   0.36  $     1.44
----------------------------------------------------------------------------

Oil and gas production
 (continuing operations)
Cash revenue             $ 84,668 $  90,028  $ 92,419  $101,746  $  368,861
Earnings before interest,
 DD&A, taxes and other
 non-cash items          $ 49,756 $  55,457  $ 53,530  $ 63,009  $  221,752
Funds flow from
 operations              $ 46,410 $  52,032  $ 47,143  $ 58,667  $  204,252
Net (loss) income        $ (4,510)$  50,429  $(17,807) $ 16,953  $   45,065
----------------------------------------------------------------------------

Midstream
Cash revenue             $453,272 $ 397,713  $433,950  $598,963  $1,883,898
Earnings before interest,
 DD&A, taxes and other
 non-cash items          $ 52,853 $  35,974  $ 47,425  $ 89,423  $  225,675
Funds flow from
 operations              $ 39,404 $  29,569  $ 32,350  $ 77,109  $  178,432
Net income (loss)        $ 51,838 $(142,191) $ (8,630) $(62,037) $ (161,020)
----------------------------------------------------------------------------

Operating
Oil and gas production
 (continuing operations)
 Light/medium oil (bpd)     6,428     6,692     8,858     9,483       7,876
 Heavy oil (bpd)            1,669     1,918     2,324     1,769       1,921
 Natural gas liquids (bpd)  1,422     1,311     1,255     1,277       1,316
 Natural gas (mcfd)        88,928    94,437    93,511    92,584      92,378
 Oil equivalent (boed)     24,340    25,660    28,022    27,960      26,509
----------------------------------------------------------------------------

Average selling price
 net of transportation
 expense (continuing
 operations) (Cdn$)
 Crude oil per bbl       
  (before realized
  financial derivative
  instruments)           $  51.23 $   53.75  $  57.88  $  61.75  $    56.74
 Crude oil per bbl       
  (including realized
  financial derivative
  instruments)           $  51.25 $   52.77  $  55.47  $  57.23  $    54.53
 Natural gas liquids
  per barrel             $  49.02 $   52.79  $  55.47  $  63.63  $    55.07
 Natural gas per mcf
  (before realized
  financial derivative
  instruments)           $   7.48 $    7.27  $   4.94  $   6.08  $     6.42
 Natural gas per mcf
  (including realized
  financial derivative
  instruments)           $   7.37 $    7.20  $   5.63  $   6.68  $     6.71
----------------------------------------------------------------------------

Midstream
 Midstream NGL sales
  volumes (bpd)           125,033   109,713   112,386   135,981     120,785
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Restated


Segmented information by quarter
----------------------------------------------------------------------------
($ 000s except for per
 unit and operating
 amounts)                                       2006
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                            First    Second     Third    Fourth      Annual
                          Quarter   Quarter   Quarter   Quarter       Total
----------------------------------------------------------------------------
Financial -
 consolidated
 Revenue (continuing
  operations)            $522,315 $ 398,225  $597,082  $505,556  $2,023,178
 Funds flow from
  operations             $ 78,906 $ 110,990  $120,089  $122,679  $  432,664
 Net income (loss)       $ 24,200 $  21,371  $120,850  $(25,501) $  140,920
 Net income (loss) per
  unit - basic           $   0.13 $    0.11  $   0.61  $  (0.12) $     0.72
 Net income (loss) per
  unit - diluted         $   0.13 $    0.11  $   0.58  $  (0.12) $     0.72
 Unitholder
  distributions          $ 68,350 $  68,572  $ 70,970  $ 75,573  $  283,465
 Distributions per unit  $   0.36 $    0.36  $   0.36  $   0.36  $     1.44
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Oil and gas production
 (continuing operations)
Cash revenue             $ 78,343 $  84,118  $ 75,766  $ 87,014  $  325,241
Earnings before
 interest, DD&A, taxes   
 and other non-cash
 items                   $ 47,615 $  54,746  $ 45,335  $ 50,749  $  198,445
 Funds flow from
  operations             $ 39,949 $  55,490  $ 41,315  $ 48,574  $  185,328
 Net income (loss)       $ 33,987 $  35,094  $ 22,621  $ (8,249) $   83,453
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Midstream
Cash revenue             $474,515 $ 367,624  $459,603  $447,244  $1,748,986
Earnings before
 interest, DD&A, taxes   
 and other non-cash
 items                   $ 32,813 $  46,438  $ 65,958  $ 74,422  $  219,631
Funds flow from
 operations              $ 26,093 $  39,123  $ 58,618  $ 60,532  $  184,366
Net income (loss)        $(12,284)$  (4,609) $ 82,733  $(10,971) $   54,869
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Operating
Oil and gas production
(continuing operations)
 Light/medium oil (bpd)     7,302     6,623     6,640     6,569       6,815
 Heavy oil (bpd)            2,506     2,011     2,004     1,838       2,057
 Natural gas liquids (bpd)  1,505     1,457     1,310     1,331       1,401
 Natural gas (mcfd)        75,840    77,803    78,560    97,489      82,469
 Oil equivalent (boed)     23,953    23,058    23,047    25,986      24,018
----------------------------------------------------------------------------

Average selling price
 net of transportation
 expense (continuing
 operations) (Cdn$)
 Crude oil per bbl        
  (before realized
  financial derivative
  instruments)           $  43.75 $   65.92  $  54.94 $   46.23  $    52.45
 Crude oil per bbl        
  (including realized
  financial derivative
  instruments)           $  42.77 $   64.64  $  54.09 $   45.38  $    51.47
 Natural gas liquids per
  barrel                 $  53.89 $   54.12  $  51.91 $   47.46  $    51.91
 Natural gas per mcf      
  (before realized
  financial derivative
  instruments)           $   7.98 $    6.10  $   5.90 $    6.73  $     6.66
 Natural gas per mcf      
  (including realized
  financial derivative
  instruments)           $   7.82 $    6.41  $   6.26 $    7.15  $     6.92
----------------------------------------------------------------------------

Midstream
 Midstream NGL sales
  volumes (bpd)           130,735   100,284   114,839   115,727     115,354
----------------------------------------------------------------------------
----------------------------------------------------------------------------


PROVIDENT ENERGY TRUST
CONSOLIDATED BALANCE SHEETS
Canadian dollars (000s)
(unaudited)
                                                       As at          As at
                                                September 30,   December 31,
                                                        2008           2007
                                              ---------------- -------------
Assets
Current assets
 Accounts receivable                         $       301,719  $     338,105
 Petroleum product inventory                         138,391         84,638
 Prepaid expenses and other current assets            13,307          8,313
 Financial derivative instruments (note 7)            11,481          1,329
 Assets held for sale - USOGP (note 9)                     -         93,578
----------------------------------------------------------------------------
                                                     464,898        525,963
Investments and other long term assets                17,053          5,862
Property, plant and equipment                      2,485,910      2,510,271
Intangible assets                                    161,700        171,793
Goodwill                                             517,299        517,299
Assets held for sale - USOGP (note 9)                      -      2,027,604
----------------------------------------------------------------------------
                                             $     3,646,860  $   5,758,792
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Liabilities
Current liabilities
 Accounts payable and accrued liabilities    $       352,490  $     347,224
 Income taxes payable (note 9)                       105,501              -
 Cash distributions payable                           25,955         25,100
 Current portion of convertible debentures
  (note 3)                                            44,476         19,198
 Financial derivative instruments (note 7)           179,407        130,276
 Liabilities held for sale - USOGP (note 9)                -        114,681
----------------------------------------------------------------------------
                                                     707,829        636,479

Long-term debt - revolving term credit
 facilities (note 3)                                 394,038        923,996
Long-term debt - convertible debentures
 (note 3)                                            235,079        256,440
Asset retirement obligation (note 4)                  44,709         43,886
Long-term financial derivative instruments
 (note 7)                                            290,382        146,199
Other long-term liabilities (note 6)                   5,410         12,400
Future income taxes                                  222,810        302,089
Liabilities held for sale - USOGP (note 9)                 -        628,502
Non-controlling interests (note 9)
 Discontinued operations (USOGP)                           -      1,100,136

Unitholders' equity
Unitholders' contributions (note 5)                2,795,427      2,750,374
Convertible debentures equity component               18,209         18,213
Contributed surplus (note 6)                             684            801
Accumulated other comprehensive loss                  (1,855)       (69,188)
Accumulated income                                   469,282        268,642
Accumulated cash distributions                    (1,535,144)    (1,260,177)
----------------------------------------------------------------------------
                                                   1,746,603      1,708,665
----------------------------------------------------------------------------
                                             $     3,646,860  $   5,758,792
----------------------------------------------------------------------------
----------------------------------------------------------------------------

The accompanying notes are an integral part of these statements.


PROVIDENT ENERGY TRUST
CONSOLIDATED STATEMENT OF OPERATIONS AND ACCUMULATED INCOME
Canadian dollars (000s except per unit amounts)
(unaudited)

                                Three months ended        Nine months ended
                                      September 30,            September 30,
                                  2008        2007         2008        2007
Revenue
 Revenue                     $ 873,981   $ 546,309  $ 2,556,734 $ 1,586,664
 Realized loss on financial
  derivative instruments       (57,612)    (19,940)    (149,120)    (34,614)
 Unrealized gain (loss) on
  financial derivative
  instruments                  286,255     (32,304)    (182,555)    (35,183)
----------------------------------------------------------------------------
                             1,102,624     494,065    2,225,059   1,516,867

Expenses
 Cost of goods sold            607,523     373,996    1,738,069   1,104,913
 Production, operating and
  maintenance                   39,008      34,317      112,213      93,101
 Transportation                  8,380       6,374       24,923      17,398
 Depletion, depreciation
  and accretion                 91,379      83,506      257,542     219,387
 General and administrative
  (note 6)                      14,862      20,856       54,976      58,392
 Interest on bank debt           6,771      13,119       30,936      30,663
 Interest and accretion on
  convertible debentures         6,310       3,547       13,633      11,064
 Foreign exchange loss
  (gain) and other                 101        (889)      (1,296)       (248)
----------------------------------------------------------------------------
                               774,334     534,826    2,230,996   1,534,670
----------------------------------------------------------------------------

Income (loss) from
 continuing operations
 before taxes                  328,290     (40,761)      (5,937)    (17,803)
----------------------------------------------------------------------------

Capital tax expense                932       2,364        2,624       3,252
Current and withholding
 tax (recovery) expense         (3,900)      3,459          (76)      6,357
Future income tax expense
 (recovery)                     21,411     (20,147)     (82,144)     43,459
----------------------------------------------------------------------------
                                18,443     (14,324)     (79,596)     53,068
----------------------------------------------------------------------------
Net income (loss) for the
 period from continuing
 operations                    309,847     (26,437)      73,659     (70,871)
Net income (loss) from
 discontinued operations
 (note 9)                       41,258      (8,568)     126,981      32,760
----------------------------------------------------------------------------
Net income (loss) for the
 period                        351,105     (35,005)     200,640     (38,111)
----------------------------------------------------------------------------
Accumulated income,
 beginning of period         $ 118,177   $ 235,102  $   268,642  $  238,208
----------------------------------------------------------------------------
Accumulated income, end of
 period                      $ 469,282   $ 200,097  $   469,282  $  200,097
----------------------------------------------------------------------------

Net income (loss) from
 continuing operations
 per unit
  - basic                    $    1.21   $   (0.11) $      0.29  $    (0.32)
  - diluted                  $    1.14   $   (0.11) $      0.29  $    (0.32)
----------------------------------------------------------------------------

Net income (loss) per unit
  - basic                    $    1.37   $   (0.14) $      0.79  $    (0.17)
  - diluted                  $    1.29   $   (0.14) $      0.79  $    (0.17)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

The accompanying notes are an integral part of these statements.


PROVIDENT ENERGY TRUST
CONSOLIDATED STATEMENT OF CASH FLOWS
Canadian dollars (000s)
(unaudited)

                                Three months ended        Nine months ended
                                      September 30,            September 30,
                               ---------------------------------------------
                                  2008        2007         2008        2007
                               ---------------------------------------------
Cash provided by operating
 activities
 Net income (loss) for the
  period from continuing
  operations                 $ 309,847   $ (26,437)  $   73,659   $ (70,871)
 Add (deduct) non-cash items:
  Depletion, depreciation and
   accretion                    91,379      83,506      257,542     219,387
  Non-cash interest expense
   and other                     1,463         666        3,454       2,106
  Non-cash unit based
   compensation (recovery)
   expense (note 6)               (392)      8,597        1,126      15,702
  Unrealized (gain) loss on
   financial derivative
   instruments                (286,255)     32,304      182,555      35,183
  Unrealized foreign exchange
   loss (gain) and other         2,526       1,004         (349)      1,942
  Future income tax expense
   (recovery)                   21,411     (20,147)     (82,144)     43,459
----------------------------------------------------------------------------
 Funds flow from continuing
  operations                   139,979      79,493      435,843     246,908
 Funds flow from discontinued
  operations                    11,682      25,656      137,535      43,784
----------------------------------------------------------------------------
 Funds flow from operations    151,661     105,149      573,378     290,692
----------------------------------------------------------------------------
 Site restoration
  expenditures                  (1,319)       (590)      (3,957)     (2,340)
 Change in non-cash operating
  working capital from
  continuing operations         27,129     (18,560)     (17,993)     25,333
 Change in non-cash operating
  working capital from
  discontinued operations         (403)      4,656      (27,034)     13,440
----------------------------------------------------------------------------
                               177,068      90,655      524,394     327,125
----------------------------------------------------------------------------

Cash (used for) provided by
 financing activities
 (Decrease) increase in
   long-term debt             (232,290)     39,044     (530,866)    138,277
  Declared distributions to
   unitholders                 (92,188)    (87,782)    (274,967)   (244,289)
  Issue of trust units, net of
   issue costs                  14,987      15,248       44,865     396,475
  Change in non-cash financing
   working capital                  85       3,060          855       7,913
  Financing activities from
   discontinued operations      (4,881)     26,593      (47,511)    288,764
----------------------------------------------------------------------------
                              (314,287)     (3,837)    (807,624)    587,140
----------------------------------------------------------------------------

Cash provided by (used for)
 investing activities
  Capital expenditures         (73,252)    (36,787)    (192,044)   (102,900)
  Capitol Energy acquisition         -           -            -    (467,850)
  Oil and gas property
   acquisitions                   (136)     (1,860)     (19,587)    (11,569)
  Decrease (increase) in
   investments                     365      (5,450)        (642)     (5,450)
  Proceeds on sale of assets,
   net of tax (note 9)         232,513           -      438,862       7,624
  Change in non-cash investing
   working capital             (17,494)     12,666      119,631       7,321
  Investing activities from
   discontinued operations      (7,257)    (54,345)     (69,810)   (341,682)
----------------------------------------------------------------------------
                               134,739     (85,776)     276,410    (914,506)
----------------------------------------------------------------------------

(Decrease) increase in cash
 and cash equivalents           (2,480)      1,042       (6,820)       (241)
Cash and cash equivalents,
 beginning of period             2,480       9,019        6,820      10,302
----------------------------------------------------------------------------
Cash and cash equivalents,
 end of period              $        -    $ 10,061  $         -    $ 10,061
Cash and cash equivalents,
 end of period from
 discontinued operations    $        -    $  5,709  $         -    $  5,709
----------------------------------------------------------------------------
Cash and cash equivalents,
 end of period from
 continuing operations      $        -    $  4,352  $         -    $  4,352
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Supplemental disclosure of
 cash flow information
 Cash interest paid
  including debenture
  interest                  $   10,963    $ 17,691  $    52,730    $ 46,547
 Cash taxes paid (note 9)   $   87,943    $  1,740  $    98,815    $ 10,539
----------------------------------------------------------------------------
----------------------------------------------------------------------------

The accompanying notes are an integral part of these statements.


PROVIDENT ENERGY TRUST
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
AND ACCUMULATED OTHER COMPREHENSIVE INCOME
Canadian Dollars (000s)
(unaudited)
                                Three months ended        Nine months ended
                                      September 30,            September 30,
                         ---------------------------------------------------
                                  2008        2007         2008        2007
                         ---------------------------------------------------

Net income (loss)         $    351,105  $  (35,005) $   200,640  $  (38,111)
----------------------------------------------------------------------------

Other comprehensive
 income (loss), net
 of taxes
 Foreign currency
  translation adjustments        2,372     (11,899)      10,315     (27,023)
 Reclassification
  adjustment for foreign
  currency losses included
  in net income                 26,760           -       57,062           -
 Unrealized loss on
  available-for-sale
  investments (net
  of taxes)                       (230)        (33)         (44)     (1,314)
----------------------------------------------------------------------------
                                28,902     (11,932)      67,333     (28,337)
----------------------------------------------------------------------------

Comprehensive income
 (loss)                   $    380,007  $  (46,937) $   267,973  $  (66,448)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Accumulated other
 comprehensive loss,
 beginning of period           (30,757)    (58,699)     (69,188)    (42,294)
Other comprehensive
 income (loss)                  28,902     (11,932)      67,333     (28,337)
----------------------------------------------------------------------------
Accumulated other
 comprehensive loss,
 end of period           $      (1,855) $  (70,631) $    (1,855) $  (70,631)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Accumulated income,
 end of period                 469,282     200,097      469,282     200,097
Accumulated cash
 distributions, end
 of period                  (1,535,144) (1,171,114)  (1,535,144) (1,171,114)
----------------------------------------------------------------------------
Retained earnings
 (deficit), end of period   (1,065,862)   (971,017)  (1,065,862)   (971,017)
Accumulated other
comprehensive loss,
 end of period                  (1,855)    (70,631)      (1,855)    (70,631)
----------------------------------------------------------------------------
Total retained
 earnings (deficit) and
 accumulated other
comprehensive loss,
 end of period            $ (1,067,717)$(1,041,648) $(1,067,717)$(1,041,648)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

The accompanying notes are an integral part of these statements.


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in Cdn$000's, except unit and per unit amounts)
(unaudited)

September 30, 2008

The Interim Consolidated Financial Statements of Provident Energy Trust ("the Trust") have been prepared by management in accordance with accounting principles generally accepted in Canada. Certain information and disclosures normally required in the notes to the annual financial statements have been condensed or omitted. The Interim Consolidated Financial Statements should be read in conjunction with the Trust's audited Financial Statements and notes for the year ended December 31, 2007.

1. Significant accounting policies

The Interim Consolidated Financial Statements have been prepared based on the consistent application of the accounting policies and procedures as set out in the Consolidated Financial Statements of the Trust for the year ended December 31, 2007 and are consistent with policies adopted in the third quarter of 2007, except as described in note 2. Certain comparative numbers have been reclassified to conform with the current period's presentation. In particular, the comparative figures have been reclassified to reflect discontinued operations presentation for the United States oil and natural gas production (USOGP) business (see note 9).

2. Changes in accounting policies and practices

(i) Inventory

In the first quarter of 2008, the Trust adopted the new accounting standard, CICA Handbook Section 3031 - Inventories, which replaced the previous standard for inventories, Section 3030. The main features of the new Section are as follows:

- measurement of inventories at the lower of cost and net realizable value;

- consistent use of either first-in, first-out or a weighted average cost formula to measure cost;

- reversal of previous write-downs to net realizable value when there is a subsequent increase to the value of inventories.

Adoption of the new Section has not had a material impact on the consolidated financial statements.

(ii) Capital disclosures

In the first quarter of 2008, the Trust adopted CICA Handbook Section 1535 "Capital Disclosures" which addresses the requirements for an entity to disclose qualitative information about its objectives, policies and processes for managing capital. This section also establishes the requirement for an entity to disclose quantitative data about what it regards as capital as well as disclose whether it has complied with any externally imposed capital requirements and, if not, the consequences of such non-compliance. The new disclosure is included in note 8.

(iii) Financial instruments - disclosures

In the first quarter of 2008, the Trust adopted CICA Handbook Section 3862 "Financial Instruments-Disclosures" and Section 3863 "Financial Instruments-Presentation". Section 3862 requires entities to provide disclosures in their financial statements that enable users to evaluate the significance of financial instruments to the entity's financial position and performance. It also requires that entities disclose the nature and extent of risks arising from financial instruments and how the entity manages those risks. Section 3863 establishes presentation guidelines for financial instruments and non-financial derivatives and addresses the classification of financial instruments, from the perspective of the issuer, between liabilities and equity, the classification of related interest, dividends, losses and gains, and circumstances in which financial assets and financial liabilities are offset. The new disclosure is included in note 7.


3. Long-term debt

                                                September 30,   December 31,
                                                        2008           2007
----------------------------------------------------------------------------
Revolving term credit facilities              $      394,038  $     923,996
----------------------------------------------------------------------------
Convertible debentures                               279,555        275,638
Current portion of convertible debentures            (44,476)       (19,198)
----------------------------------------------------------------------------
                                                     235,079        256,440
----------------------------------------------------------------------------
Total                                         $      629,117  $   1,180,436
----------------------------------------------------------------------------
----------------------------------------------------------------------------

(i) Revolving term credit facility

At September 30, 2008 the Trust had a $1,125 million term credit facility (December 31, 2007 - $1,125 million). At September 30, 2008, $394.4 million was drawn on the facility. Included in the carrying value at September 30, 2008 were financing costs of $0.4 million.

At September 30, 2008 the Trust had letters of credit guaranteeing Provident's performance under certain commercial and other contracts that totaled $35.2 million. The guarantees totaled $31.6 million at December 31, 2007.

In the second quarter of 2008, under the terms of the credit facility, the expiry date of the facility was extended from May 30, 2010 to May 30, 2011.

(ii) Convertible debentures

The Trust may elect to satisfy interest and principal obligations by the issue of trust units. For the three and nine month periods ended September 30, 2008, $42 thousand and $67 thousand, respectively, of the face value of debentures were converted to trust units at the election of debenture holders (2007 - $5.2 million and $5.8 million, respectively). Included in the carrying value at September 30, 2008 were financing costs of $5.3 million. The fair value of the convertible debentures at September 30, 2008 approximates the face value of the instruments. The following table details each convertible debenture:


Convertible            As at               As at
 Debentures     September 30, 2008   December 31, 2007
----------------------------------------------------------------------------
($000s except                                                    Conversion
 conversion    Carrying       Face Carrying       Face  Maturity  Price per
 pricing)      Value (1)     Value Value (1)     Value      Date   unit (2)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
6.5%
 Convertible                                            April 30,
 Debentures    $142,537  $ 149,980  140,515  $ 149,980      2011      14.75
6.5%
 Convertible                                            Aug. 31,
 Debentures      92,542     98,999   91,460     99,024      2012      13.75
8.0%        
 Convertible                                             July 31,
 Debentures      24,770     25,109   24,465     25,109      2009      12.00
8.75%       
 Convertible                                             Dec. 31,
 Debentures      19,706     19,889   19,198     19,931      2008      11.05
----------------------------------------------------------------------------
               $279,555  $ 293,977 $275,638  $ 294,044
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Excluding equity component of convertible debentures
(2) The debentures may be converted into trust units at the option of the
    holder of the debenture at the conversion price per unit

4. Asset retirement obligation

The Trust's asset retirement obligation is based on the Trust's net ownership in wells, facilities and the midstream assets and represents management's estimate of the costs to abandon and reclaim those wells, facilities and midstream assets as well as an estimate of the future timing of the costs to be incurred. Estimated cash flows have been discounted at the Trust's credit-adjusted risk free rate of seven percent and an inflation rate of two percent.


                                     Three months ended   Nine months ended
                                           September 30,       September 30,
----------------------------------------------------------------------------
($000s)                                  2008      2007      2008      2007
----------------------------------------------------------------------------
Carrying amount, beginning of
 period                             $  44,445  $ 35,218  $ 43,886  $ 33,246
Acquisitions                                -         -         -     1,752
Increase in liabilities incurred
 during the period                        462       225     1,484       988
Settlement of liabilities during
 the period                            (1,319)     (590)   (3,957)   (2,340)
Decrease in liabilities due to
 disposition                                -      (205)        -      (654)
Accretion of liability                  1,121       853     3,296     2,509
----------------------------------------------------------------------------
Carrying amount, end of period      $  44,709  $ 35,501  $ 44,709  $ 35,501
----------------------------------------------------------------------------
----------------------------------------------------------------------------

5. Unitholders' contributions

The Trust has authorized capital of an unlimited number of common voting trust units.


                                 Nine months ended September 30,
----------------------------------------------------------------------------
                                      2008                    2007
----------------------------------------------------------------------------
                               Number of     Amount    Number of     Amount
Trust Units                        units      (000s)       units      (000s)
----------------------------------------------------------------------------
Balance at beginning of
 period                      252,634,773 $2,750,374  211,228,407 $2,254,048
Issued for cash                        -          -   29,313,727    373,750
Issued pursuant to unit
 option plan                     191,448      1,790      694,017      7,036
Issued pursuant to the
 distribution
 reinvestment plan             3,736,719     38,359    2,564,432     30,120
To be issued pursuant to the
 distribution reinvestment
 plan                            479,182      4,835      423,697      5,237
Debenture conversions              5,616         69      523,571      5,985
Unit issue costs                       -          -            -    (19,188)
----------------------------------------------------------------------------
Balance at end of period     257,047,738 $2,795,427  244,747,851 $2,656,988
----------------------------------------------------------------------------
----------------------------------------------------------------------------

The per trust unit amounts for the quarter ended September 30, 2008 were calculated based on the weighted average number of units outstanding of 255,841,933 (2007 - 243,600,188). The diluted per trust unit amounts for 2008 were calculated including an additional 21,260,389 trust units (2007 - 175,068) for the dilutive effect of the unit option plan and convertible debentures.

The per trust unit amounts for the nine months ended September 30, 2008 were calculated based on the weighted average number of units outstanding of 254,390,640 (2007 - 224,173,699). The diluted per trust unit amounts for 2008 were calculated including an additional nil trust units (2007 - 175,068) for the dilutive effect of the unit option plan and convertible debentures.

6. Unit based compensation

(i) Restricted/Performance units

As of September 30, 2008 there were 1,081,522 RTUs and 3,222,089 PTUs outstanding (December 31, 2007 - 849,672 RTUs and 2,478,037 PTUs). The fair value estimate associated with the RTUs and PTUs is expensed in the statement of operations over the vesting period. At September 30, 2008, $18.0 million (December 31, 2007 - $9.9 million) is included in accounts payable and accrued liabilities for this plan and $5.4 million (December 31, 2007 - $12.4 million) is included in other long-term liabilities. The following table reconciles the expense recorded for RTUs and PTUs.


                                      Three months ended  Nine months ended
                                            September 30,      September 30,
----------------------------------------------------------------------------
                                         2008       2007     2008      2007
----------------------------------------------------------------------------
Cash general and administrative      $      -   $      - $  8,287  $  1,767
Non-cash unit based compensation
 (included in general and
 administrative)                         (392)     8,595    1,126    15,645
Production, operating and
 maintenance expense                       (4)       181      419       408
----------------------------------------------------------------------------
                                     $   (396)  $  8,776 $  9,832  $ 17,820
----------------------------------------------------------------------------
----------------------------------------------------------------------------

(ii) Unit option plan

At September 30, 2008, the Trust had 1,056,722 options outstanding and exercisable (December 31, 2007 - 1,279,169) with strike prices ranging from $10.92 to $12.14 per unit (December 31, 2007 - $10.49 and $12.14 per unit). The weighted average remaining contractual life of the options was 0.16 years (December 31, 2007 - 0.87 years) and the weighted average exercise price was $11.08 per unit (December 31, 2007 - $11.04 per unit) excluding average potential reductions to the strike prices of $2.15 per unit (December 31, 2007 - $1.77 per unit).


The following table reconciles the movement in the contributed surplus
balance.

                                     Three months ended   Nine months ended
                                           September 30,       September 30,
----------------------------------------------------------------------------
                                         2008      2007      2008      2007
----------------------------------------------------------------------------
Contributed surplus, beginning of
 the period                         $     714   $   935  $    801   $ 1,315
Non-cash unit based compensation
 (included in general and
  administrative)                           -         2         -        57
Benefit on options exercised
 charged to unitholders' equity           (30)      (45)     (117)     (480)
----------------------------------------------------------------------------
Contributed surplus, end of period  $     684   $   892  $    684   $   892
----------------------------------------------------------------------------
----------------------------------------------------------------------------

7. Financial instruments

Risk Management overview

Provident has a comprehensive Enterprise Risk Management program that is designed to identify and manage risks that could negatively affect its business, operations or results. The program's activities include risk identification, assessment, response, control, monitoring and communication.

Provident's Risk Management group executes the program with oversight from the Risk Management Committee ("RMC"), which provides regular reports to the Audit Committee and Board of Directors.

Provident has established and implemented Risk Management strategies, policies and limits that are monitored by Provident's Risk Management group. The derivative instruments the Trust uses include put and call options, costless collars, participating swaps, and fixed price products that settle against indexed referenced pricing. Put option contracts effectively create a floor price for the commodity while allowing for full participation if prices increase. Call options are contracts that allow for a commodity to be sold at a fixed price at the option of the contract holder. Costless collars are contracts that provide a floor and a ceiling price to limit the risk if prices fall and allowing upward participation within a set range. Participating swaps are contracts that provide a floor and also provide a ceiling for a certain percentage of the volume of the contract. This type of derivative allows for price protection if the price falls, while still allowing some participation if the price increases. Fixed price swaps are contracts that specify a fixed price at which a certain volume of product will be bought or sold at in the future.

The Risk Management group monitors risk exposure by generating and reviewing mark-to-market reports and counterparty credit exposure of Provident's outstanding derivative contracts. Additional monitoring activities include reviewing available derivative positions, regulatory changes and bank and analyst reports.

Provident's commodity price risk management program includes a consistent, active and disciplined program that utilizes derivative instruments to provide for insurance against lower commodity prices and product margins, as well as fluctuating interest and foreign exchange rates. The program is designed to stabilize cash flows in order to support cash distributions, capital programs and bank financing. The risk management strategy protects a percentage of Provident's oil and natural gas production against a decline in commodity prices. Provident seeks to use products that allow participation in a rising commodity price environment where possible and economic. The program provides price stabilization and protection of a percentage of inventory values and fractionation spread margin associated with the midstream business unit. As well, the Provident risk management strategy reduces foreign exchange risk due to the exposure arising from the conversion of U.S. dollars into Canadian dollars.

Fair Values

The fair values of financial instruments are determined by reference to independent monthly forward settlement prices, interest rate yield curves, currency rates, and volatility rates at the period-end dates. All of Provident's financial instruments are executed in liquid markets.


As at                                                                 Total
 September   Held for  Held to Available   Loans and       Other   Carrying
 30, 2008     Trading Maturity  for Sale Receivables Liabilities      Value
----------------------------------------------------------------------------
Assets
Accounts
 receivable  $      - $      - $       - $   301,719 $         - $  301,719
Financial
 derivative
 instruments
 - current
 asset         11,481        -         -           -           -     11,481
Investments         -    4,257     2,197      10,599           -     17,053
----------------------------------------------------------------------------
             $ 11,481 $  4,257 $   2,197 $   312,318 $         - $  330,253
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Liabilities
Accounts
 payable and
 accrued
 liabilities $      - $      - $       - $         - $   352,490 $  352,490
Cash
 distributions
 payable            -        -         -           -      25,955     25,955
Current
 portion of
 convertible
 debentures         -        -         -           -      44,476     44,476
Financial
 derivative
 instruments
 - current
 liabilities  179,407        -         -           -           -    179,407
Long-term
 debt -
 revolving
 term credit
 facilities         -                  -           -     394,038    394,038
Long-term
 debt -
 convertible
 debentures         -        -         -           -     235,079    235,079
Financial
 derivative
 instruments
 - long-term
 liabilities  290,382        -         -           -           -    290,382
Other
 long-term
 liabilities        -        -         -           -       5,410      5,410
----------------------------------------------------------------------------
             $469,789 $      - $       - $         - $ 1,057,448 $1,527,237
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Except as disclosed in note 3 in connection with the convertible debentures, there were no significant differences between the carrying value of these financial instruments and their estimated fair value as at September 30, 2008.


The following table is a summary of the net financial derivative instruments
liability:

                                                       As at          As at
                                                September 30,   December 31,
----------------------------------------------------------------------------
($000s)                                                 2008           2007
----------------------------------------------------------------------------
Commodity prices
 Crude Oil                                     $      16,658  $      19,215
 Natural Gas                                          (3,967)        (5,901)
Midstream                                            448,202        261,587
Other                                                 (2,585)           245
----------------------------------------------------------------------------
Total                                          $     458,308  $     275,146
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Market Risk

Market risk is the risk that the fair value of a financial instrument will fluctuate because of changes in market prices. Market risk generally comprises of price risk, currency risk and interest rate risk.

a) Price risk

Commodity Price Risk Management Program

The decisions to enter into financial derivative positions and to execute risk management strategy are made by senior officers of Provident who are also members of the RMC. The RMC receives input and commodity expertise from each business unit in the decision making process. Strategies are selected based on their ability to help Provident provide stable cash flow and distributions per unit rather than to simply lock in a specific price per barrel of oil or cubic foot of natural gas.

Oil and Natural Gas

Provident's risk management program employs derivative instruments, such as puts, participating swaps and costless collars, to protect a floor level of Provident's revenue on a portion of the oil and gas sold. At the same time, these instruments enable Provident to retain various levels of participation to the extent oil and gas prices rise. Provident may also use fixed price derivative instruments for its oil and natural gas business lines to protect acquisition economics.

The major identified risks for the oil and natural gas business line are commodity price volatility and market location and product quality differentials. Provident addresses these risks using a risk management program designed to protect a portion of its cash flow in order to support continued unitholder distributions, capital programs and bank financing.

Midstream

Commodity price volatility and market location differentials also affect the Midstream business. In addition, Midstream is exposed to possible price declines between the time Provident purchases natural gas liquid (NGL) feedstock and sells NGL products, and to narrowing frac spreads. Frac spread is the margin between the price paid for the natural gas feedstock from which Provident extracts NGLs, and the absolute price at which Provident sells NGL products (propane, butane and condensate).

Provident responds to these risks using a risk management program that protects a margin or floor level of operating income on a portion of its NGL inventory and production, while retaining some ability to participate in a widening margin environment. For the longer-term, Provident uses crude oil contracts in place of NGLs. Provident may replace these positions with actual NGL positions as market conditions allow. This strategy enables Provident to mitigate commodity price risk related to its NGL production business up to approximately five years into the future.

b) Currency risk

Provident's oil, natural gas and NGL sales are exposed to both positive and negative effects of fluctuations in the Canadian/U.S. exchange rate. Provident manages this exposure by matching a significant portion of the cash costs that it expects with revenues in the same currency. As well, Provident uses derivative instruments to manage the U.S. cash requirements of its U.S. and Canadian business lines.

Provident regularly sells or purchases forward a portion of expected U.S. cashflows. Provident's strategy also manages the exposure it has to fluctuations in the U.S./Canadian dollar exchange rate when the underlying commodity price is based upon a U.S. index price. Provident may also use derivative products that provide for protection against a stronger Canadian dollar, while allowing it to participate if the currency weakens relative to the U.S. dollar.

c) Interest rate risk

The Trust's revolving term credit facilities bear interest at a floating rate. Using debt levels as at September 30, 2008, an increase/decrease of 50 basis points in the lender's base rate would result in an increase/decrease of annual interest expense of approximately $1.9 million.

Financial derivative sensitivity analysis

The following table shows the impact on unrealized gain (loss) on financial derivative instruments if the underlying risk variables of the financial derivative instruments changed by a specified amount, with other variables held constant.


(000's)                                                + Change    - Change
----------------------------------------------------------------------------
COGP
Crude Oil                   (WTI +/- $10.00 per bbl) $   (4,976) $    5,135
Natural Gas                  (AECO +/- $1.00 per gj)     (3,047)      3,361
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Midstream
Crude Oil                   (WTI +/- $10.00 per bbl)   (129,214)    128,885
Natural Gas                  (AECO +/- $1.00 per gj)     71,634     (71,436)
NGL's                    (Belvieu +/- $0.15 per gal)     (1,025)      1,022
Foreign Exchange
 ($U.S. vs $Cdn)                (FX rate +/- $ 0.01)     (2,390)      2,390
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Liquidity Risk

Liquidity risk is the risk the Trust will not be able to meet its financial obligations as they fall due. The Trust's approach to managing liquidity risk is to ensure that it always has sufficient cash and credit facilities to meet its obligations when due, without incurring unacceptable losses or damage to the Trust's reputation.

Management typically forecasts cash flows for a period of twelve months to identify financing requirements. These requirements are then addressed through a combination of committed and demand credit facilities and access to capital markets, as discussed in note 8.


The following table outlines the timing of the cash outflows relating to
financial liabilities.

As at September 30, 2008                   Payment due by period
----------------------------------------------------------------------------
                                        Less than
($000s)                           Total    1 year 1 to 3 years 4 to 5 years
----------------------------------------------------------------------------
Accounts payable and accrued
 liabilities                 $  352,490 $ 352,490 $          - $          -
Cash distributions payable       25,955    25,955            -            -
Current portion of
 convertible debentures          44,476    44,476            -            -
Financial derivative
 instruments - current          179,407   179,407            -            -
Long-term debt - revolving
 term credit facilities (1)     394,038         -      394,038            -
Long-term debt - convertible
 debentures                     235,079         -      142,537       92,542
Long-term financial
 derivative instruments         290,382         -      213,266       77,116
Other long-term liabilities       5,410         -        5,410            -
----------------------------------------------------------------------------
Total                        $1,527,237 $ 602,328 $    755,251 $    169,658
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) The terms of the Canadian credit facility have a revolving three year
    period expiring on May 30, 2011.

Credit Risk

Provident's Credit Policy governs the activities undertaken to mitigate the risks associated with counterparty (customer) non-payment. The Policy requires a formal credit review for counterparties entering into a commodity contract with Provident. This review determines an approved credit limit. Activities undertaken include regular monitoring of counterparty exposures, an annual review of all active counterparties, utilizing master netting arrangements and obtaining financial assurances where warranted. Financial assurances include guarantees, letters of credit and cash. In addition, the policy sets criteria to ensure that Provident has a diversified base of creditors.

Substantially all of the Trust's accounts receivable are due from customers and joint venture partners in the oil and gas and midstream services and marketing industries and are subject to credit risk. The Trust partially mitigates associated credit risk by limiting transactions with certain counterparties to limits imposed by the Trust based on management's assessment of the creditworthiness of such counterparties. The carrying value of accounts receivable reflects management's assessment of the associated credit risks.

8. Capital management

Provident considers its total capital to be comprised of net debt and Unitholders' Equity. Net debt is comprised of long-term debt and working capital deficit (surplus), excluding balances for the current portion of financial derivative instruments. The balance of these items at September 30, 2008 and December 31, 2007 was as follows:


                                                       As at          As at
                                                September 30,   December 31,
----------------------------------------------------------------------------
($000s)                                                 2008           2007
----------------------------------------------------------------------------
Working capital deficit (surplus) (1)        $        30,529  $     (58,732)
Long-term debt (including current portion)           673,593      1,199,634
----------------------------------------------------------------------------
Net debt                                             704,122      1,140,902
Unitholders' equity                                1,746,603      1,708,665
----------------------------------------------------------------------------
Total capitalization                         $     2,450,725  $   2,849,567
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Net debt to total capitalization (%)                      29%            40%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) The working capital deficit (surplus) excludes balances for the current
    portion of financial derivative instruments.

Provident's primary objective for managing capital is to maximize long-term Unitholder value by:

- providing an appropriate return to shareholders relative to the risk of Provident's underlying assets; and

- ensuring financing capacity for Provident's internal development opportunities and acquisitions of energy related assets that are expected to add value to our Unitholders.

Provident makes adjustments to its capital structure based on economic conditions and the Company's planned requirements. Provident has the ability to adjust its capital structure by issuing new equity or debt, controlling the amount it returns to unitholders, and making adjustments to its capital expenditure program. Provident relies on cash flow from operations, external lines of credit and access to equity markets to fund capital programs and acquisitions.

The Trust is subject to certain capital growth restrictions as a result of the Canadian trust tax legislation passed in June 2007 and effective January 1, 2011. The restrictions provide that "normal growth" would include equity growth within certain "safe harbour" limits, measured by reference to the Trust's market capitalization as of the end of trading on October 31, 2006. These rules limit the amount of Unitholders' capital that can be issued by the Trust in each of the next three years, as follows:


----------------------------------------------------------------------------
($ billions)                                          Annual     Cumulative
----------------------------------------------------------------------------
Normal growth capital allowed in:
2008 (1)                                                 0.6            1.7
2009                                                     0.6            2.3
2010                                                     0.5            2.8
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) The Trust's allowed growth capital prior to 2008 was approximately $1.1
    billion.

If the maximum equity growth allowed is exceeded, the Trust may be subject to trust taxation prior to 2011. In 2007, the Trust issued equity amounting to $496.3 million.

9. Discontinued operations (USOGP)

In February 2008, the Trust announced a strategic process respecting the decision to dispose of the operations that comprise the United States oil and natural gas production (USOGP) business. Effective in the first quarter of 2008, Provident's USOGP business is accounted for as discontinued operations and comparative figures have been reclassified to conform with this presentation.

In June 2008, the Trust sold a portion of the USOGP business, consisting of its 22 percent interest in BreitBurn Energy Partners, L.P. (MLP) and its 96 percent interest in BreitBurn GP LLC, for cash proceeds, net of transaction costs, of U.S. $342.2 million. The Trust has recorded a gain on sale of $187.9 million and $139.7 million in current tax expense, related to this transaction. Also recorded was a realized foreign exchange loss of $30.3 million, representing the recognition of the related portion of the foreign exchange loss in accumulated other comprehensive income, which was generated since acquisition in 2006. These amounts are recorded as part of net income from discontinued operations for the nine months ended September 30, 2008.

In August 2008, the Trust sold the remaining portion of the USOGP business, comprised of an approximate 96 percent interest in BreitBurn Energy Company L.P., for total consideration of U.S. $300.4 million, consisting of cash proceeds, net of transaction costs, of U.S. $290.4 million and a U.S. $10 million note. The Trust has recorded a gain on sale of $75.7 million and $74.0 million in current tax expense related to this transaction. Also recorded was a realized foreign exchange loss of $26.8 million, representing the recognition of the related portion of the foreign exchange loss in accumulated other comprehensive income, which was generated since acquisition in 2004. These amounts are recorded as part of net income from discontinued operations for the three and nine months ended September 30, 2008.

During the third quarter of 2008, the Trust made a tax installment payment of $87.0 million relating to the sale of the MLP and BreitBurn GP LLC. Included in income taxes payable at September 30, 2008 was $133.9 million related to these transactions.

Provident has become aware of a lawsuit filed by Quicksilver Resources Inc. on October 31, 2008 against BreitBurn Energy Partners, L.P., certain of its directors (including three Provident nominees), and Provident. The claim relates to a transaction between BreitBurn Energy Partners, L.P. and Quicksilver Resources Inc. and certain other BreitBurn Energy Partners, L.P. matters. Provident believes the claims made in the lawsuit are without merit and will vigorously defend itself and its named director nominees against the allegations.

The following tables show the net assets of discontinued operations and information about net income from USOGP.


                                                       As at          As at
Balance sheets                                  September 30,   December 31,
Canadian dollars (000s)                                 2008           2007
----------------------------------------------------------------------------
Assets
Current assets                                $            -  $      93,578
----------------------------------------------------------------------------
Property, plant and equipment                              -      2,008,549
Other long-term assets                                     -         19,055
----------------------------------------------------------------------------
                                                           -      2,027,604
----------------------------------------------------------------------------
                                              $            -  $   2,121,182
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Liabilities
Current liabilities
 Accounts payable and accrued liabilities     $            -  $      77,244
 Financial derivative instruments                          -         37,437
----------------------------------------------------------------------------
                                                           -        114,681
----------------------------------------------------------------------------
Long-term debt - revolving term credit
 facilities                                                -        368,836
Long-term financial derivative instruments                 -         66,382
Asset retirement obligation and other
 long-term liabilities                                     -         45,373
Future income taxes                                        -        147,911
----------------------------------------------------------------------------
                                                           -        628,502
----------------------------------------------------------------------------
Non-controlling interests                                  -      1,100,136
----------------------------------------------------------------------------
Net Assets - discontinued operations          $            -  $     277,863
----------------------------------------------------------------------------
----------------------------------------------------------------------------


Net income from discontinued         Three months ended   Nine months ended
 operations                                September 30,       September 30,
----------------------------------------------------------------------------
Canadian dollars (000's)                 2008      2007      2008      2007
----------------------------------------------------------------------------
Revenue                             $  18,852  $ 66,373  $303,146  $152,777
----------------------------------------------------------------------------
Income (loss) from discontinued
 operations before
 taxes, non-controlling interests
 and impact of sale
 of discontinued operations            19,339   (12,194) (237,233)   67,492
Gain on sale of discontinued
 operations                            75,698         -   263,618         -
Foreign exchange loss related to
 sale of
 discontinued operations              (26,760)        -   (57,062)        -
Current and withholding tax
 (expense) recovery                   (69,186)      (34) (197,751)     (266)
Future income tax recovery
 (expense)                             42,889      (845)  151,975   (44,621)
Non-controlling interests                (722)    4,505   203,434    10,155
----------------------------------------------------------------------------
Net income (loss) from discontinued
 operations for the period          $  41,258  $ (8,568) $126,981  $ 32,760
----------------------------------------------------------------------------
----------------------------------------------------------------------------

10. Segmented information

The Trust's business activities are conducted through two business segments: Canadian oil and natural gas production and Midstream.

Oil and natural gas production includes exploitation, development and production of crude oil and natural gas reserves. Midstream includes fractionation, transportation, loading and storage of natural gas liquids, and marketing of crude oil and natural gas liquids.

Geographically the Trust operates in Canada in the oil and gas production business segment and in Canada and the USA in the Midstream business.


                                      Three months ended September 30, 2008
                             -----------------------------------------------
                                 Canadian Oil
                                  and Natural
                               Gas Production   Midstream (1)         Total
----------------------------------------------------------------------------
Revenue
 Gross production revenue      $      203,249   $          - $      203,249
 Royalties                            (37,756)             -        (37,756)
 Product sales and service
  revenue                                   -        708,488        708,488
 Realized loss on financial
  derivative instruments               (5,789)       (51,823)       (57,612)
----------------------------------------------------------------------------
                                      159,704        656,665        816,369
----------------------------------------------------------------------------

Expenses
 Cost of goods sold                         -        607,523        607,523
 Production, operating and
  maintenance                          35,080          3,928         39,008
 Transportation                         4,487          3,893          8,380
 Foreign exchange loss (gain)
  and other                             1,217         (3,642)        (2,425)
 General and administrative             7,664          7,624         15,288
----------------------------------------------------------------------------
                                       48,448        619,326        667,774
----------------------------------------------------------------------------

Earnings before interest,
 taxes, depletion,
 depreciation,
 accretion and other non-cash
 items                                111,256         37,339        148,595
Other revenue
 Unrealized gain (loss) on
  financial derivative
  instruments                          41,721        244,534        286,255
----------------------------------------------------------------------------

Other expenses
 Depletion, depreciation and
  accretion                            80,457         10,922         91,379
 Interest on bank debt                  1,693          5,078          6,771
 Interest and accretion on
  convertible debentures                1,577          4,733          6,310
 Unrealized foreign exchange
  loss (gain) and other                     3          2,523          2,526
 Non-cash unit based compensation          36           (428)          (392)
 Internal management charge               (34)             -            (34)
 Capital tax expense                      932              -            932
 Current and withholding tax
  (recovery) expense                       13         (3,913)        (3,900)
 Future income tax expense
  (recovery)                           (8,581)        29,992         21,411
----------------------------------------------------------------------------
                                       76,096         48,907        125,003
----------------------------------------------------------------------------
Net income (loss) for the
 period from continuing
 operations                    $       76,881    $   232,966 $       309,847
Net income (loss) from
 discontinued operations
 (note 9)                                                            41,258
----------------------------------------------------------------------------
Net income (loss) for the
 period                                                      $      351,105
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Included in the Midstream segment is product sales and service revenue
    of $39.5 million associated with U.S. operations.


                                    As at and for the three months ended
                                                September 30, 2008
                               ---------------------------------------------
                                 Canadian Oil
                                  and Natural
                               Gas Production      Midstream          Total
----------------------------------------------------------------------------
Selected balance sheet items
Capital assets
 Property, plant and equipment
  net                          $    1,743,182 $      742,728 $    2,485,910
 Intangible assets                          -        161,700        161,700
 Goodwill                             416,890        100,409        517,299
Capital expenditures
 Capital Expenditures                  59,065         14,187         73,252
 Oil and gas property
  acquisitions, net                       136              -            136
Working capital
 Accounts receivable                   84,655        217,064        301,719
 Petroleum product inventory                -        138,391        138,391
 Accounts payable and accrued
  liabilities                         155,455        197,035        352,490
Long-term debt - revolving
 term credit facilities                98,510        295,528        394,038
Long-term debt - convertible
 debentures                            58,770        176,309        235,079
Financial derivative
 instruments                   $       10,106 $      448,202 $      458,308
----------------------------------------------------------------------------
----------------------------------------------------------------------------


                                      Three months ended September 30, 2007
                              ----------------------------------------------
                                 Canadian Oil
                                  and Natural
                               Gas Production   Midstream (1)         Total
----------------------------------------------------------------------------
Revenue
 Gross production revenue      $      111,466  $           -  $     111,466
 Royalties                            (22,464)             -        (22,464)
 Product sales and service
  revenue                                   -        457,307        457,307
 Realized loss on financial
  derivative instruments                3,417        (23,357)       (19,940)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                       92,419        433,950        526,369
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Expenses
 Cost of goods sold                         -        373,996        373,996
 Production, operating and
  maintenance                          31,378          2,939         34,317
 Transportation                         3,004          3,370          6,374
 Foreign exchange loss (gain)
  and other                            (1,892)            (1)        (1,893)
 General and administrative             6,399          6,221         12,620
----------------------------------------------------------------------------
                                       38,889        386,525        425,414
----------------------------------------------------------------------------

Earnings before interest,
 taxes, depletion,
 depreciation,
 accretion and other non-cash
 items                                 53,530         47,425        100,955
Other revenue
 Unrealized gain (loss) on
 financial derivative
 instruments                           (1,400)       (30,904)       (32,304)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Other expenses
 Depletion, depreciation and
  accretion                            72,288         11,218         83,506
 Interest on bank debt                  3,280          9,839         13,119
 Interest and accretion on
  convertible debentures                  887          2,660          3,547
 Unrealized foreign exchange
  loss (gain) and other                    27            977          1,004
 Non-cash unit based
  compensation                          3,701          4,896          8,597
 Internal management charge              (361)             -           (361)
 Capital tax expense                    2,364              -          2,364
 Current and withholding tax
  (recovery) expense                       19          3,440          3,459
 Future income tax expense
  (recovery)                          (12,268)        (7,879)       (20,147)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                       69,937         25,151         95,088
----------------------------------------------------------------------------
Net income (loss) for the
 period from continuing
 operations                    $      (17,807) $      (8,630) $     (26,437)
Net income (loss) from
discontinued operations
 (note 9)                                                            (8,568)
----------------------------------------------------------------------------
Net income (loss) for the
 period                                                       $     (35,005)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Included in the Midstream segment is product sales and service revenue
    of $46.8 million associated with U.S. operations.


                                     As at and for the three months ended
                                              September 30, 2007
                               ---------------------------------------------
                                 Canadian Oil
                                  and Natural
                               Gas Production      Midstream          Total
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Selected balance sheet items
Capital assets
 Property, plant and equipment
  net                          $    1,664,934  $     719,925 $    2,384,859
 Intangible assets                          -        176,900        176,900
 Goodwill                             417,614        100,409        518,023
Capital expenditures
 Capital Expenditures                  33,660          3,127         36,787
 Corporate acquisitions                     -              -              -
 Oil and gas property
  acquisitions, net                     1,860              -          1,860
Goodwill additions                          -              -              -
Working capital
 Accounts receivable                   64,196        187,394        251,590
 Petroleum product inventory                -        134,446        134,446
 Accounts payable and accrued
  liabilities                         131,083        202,201        333,284
Long-term debt - revolving
 term credit facilities               220,399        661,195        881,594
Long-term debt - convertible
 debentures                            68,660        205,981        274,641
Financial derivative
 instruments (asset) liability $       (4,430) $      99,882 $       95,452
----------------------------------------------------------------------------
----------------------------------------------------------------------------


                                       Nine months ended September 30, 2008
                              ----------------------------------------------
                                 Canadian Oil
                                  and Natural
                               Gas Production   Midstream (1)         Total
----------------------------------------------------------------------------

Revenue
 Gross production revenue      $      570,017   $          -  $     570,017
 Royalties                           (105,039)             -       (105,039)
 Product sales and service
  revenue                                   -      2,091,756      2,091,756
 Realized loss on financial
  derivative instruments              (18,017)      (131,103)      (149,120)
----------------------------------------------------------------------------
                                      446,961      1,960,653      2,407,614
----------------------------------------------------------------------------

Expenses
 Cost of goods sold                         -      1,738,069      1,738,069
 Production, operating and
  maintenance                         101,014         11,199        112,213
 Transportation                        12,651         12,272         24,923
 Foreign exchange loss (gain)
  and other                             2,145         (3,092)          (947)
 General and administrative            27,415         27,110         54,525
----------------------------------------------------------------------------
                                      143,225      1,785,558      1,928,783
----------------------------------------------------------------------------

Earnings before interest,
 taxes, depletion,
 depreciation,
 accretion and other non-cash
 items                                303,736        175,095        478,831
Other revenue
 Unrealized gain (loss) on
 financial derivative
 instruments                            3,932       (186,487)      (182,555)
----------------------------------------------------------------------------

Other expenses
 Depletion, depreciation and
  accretion                           228,382         29,160        257,542
 Interest on bank debt                  7,734         23,202         30,936
 Interest and accretion on
  convertible debentures                3,408         10,225         13,633
 Unrealized foreign exchange
  loss (gain) and other                    48           (397)          (349)
 Non-cash unit based
  compensation                            841            285          1,126
 Internal management charge              (675)             -           (675)
 Capital tax expense                    2,624              -          2,624
 Current and withholding tax
  (recovery) expense                     (186)           110            (76)
 Future income tax expense
  (recovery)                          (49,915)       (32,229)       (82,144)
----------------------------------------------------------------------------
                                      192,261         30,356        222,617
----------------------------------------------------------------------------
Net income (loss) for the
 period from continuing
 operations                    $      115,407   $    (41,748) $      73,659
Net income (loss) from
 discontinued operations
 (note 9)                                                           126,981
----------------------------------------------------------------------------
Net income (loss) for the
 period                                                       $     200,640
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Included in the Midstream segment is product sales and service revenue
    of $203.8 million associated with U.S. operations.


                     As at and for the nine months ended September 30, 2008
                    --------------------------------------------------------
                                
                                 Canadian Oil
                                  and Natural
                               Gas Production   Midstream             Total
----------------------------------------------------------------------------
Selected balance sheet items
Capital assets
 Property, plant and equipment
  net                           $   1,743,182 $   742,728    $    2,485,910
 Intangible assets                          -     161,700           161,700
 Goodwill                             416,890     100,409           517,299
Capital expenditures
 Capital Expenditures                 166,714      25,330           192,044
 Oil and gas property
  acquisitions, net                    19,587           -            19,587
Working capital
 Accounts receivable                   84,655     217,064           301,719
 Petroleum product inventory                -     138,391           138,391
 Accounts payable and accrued
  liabilities                         155,455     197,035           352,490
Long-term debt - revolving
 term credit facilities                98,510     295,528           394,038
Long-term debt - convertible
 debentures                            58,770     176,309           235,079
Financial derivative
 instruments                    $      10,106 $   448,202    $      458,308
----------------------------------------------------------------------------
----------------------------------------------------------------------------


                                     Nine months ended September 30, 2007
                               ---------------------------------------------
                                 Canadian Oil
                                  and Natural
                               Gas Production   Midstream (1)         Total
----------------------------------------------------------------------------

Revenue
 Gross production revenue      $      329,122  $           -      $ 329,122
 Royalties                            (63,236)             -        (63,236)
 Product sales and service
  revenue                                   -      1,320,778      1,320,778
 Realized loss on financial
  derivative instruments                1,229        (35,843)       (34,614)
----------------------------------------------------------------------------
                                      267,115      1,284,935      1,552,050
----------------------------------------------------------------------------

Expenses
 Cost of goods sold                         -      1,104,913      1,104,913
 Production, operating and
  maintenance                          82,743         10,358         93,101
 Transportation                         6,299         11,099         17,398
 Foreign exchange loss (gain)
  and other                            (2,189)            (1)        (2,190)
 General and administrative            21,519         22,314         43,833
----------------------------------------------------------------------------
                                      108,372      1,148,683      1,257,055
----------------------------------------------------------------------------

Earnings before interest,
 taxes, depletion,
 depreciation,
 accretion and other non-cash
 items                                158,743        136,252        294,995
Other revenue
 Unrealized gain (loss) on
  financial derivative
  instruments                          (4,096)       (31,087)       (35,183)
----------------------------------------------------------------------------

Other expenses
 Depletion, depreciation and
  accretion                           185,858         33,529        219,387
 Interest on bank debt                  7,666         22,997         30,663
 Interest and accretion on
  convertible debentures                2,766          8,298         11,064
 Unrealized foreign exchange
  loss (gain) and other                  (890)         2,832          1,942
 Non-cash unit based
  compensation                          6,712          8,990         15,702
 Internal management charge            (1,143)             -         (1,143)
 Capital tax expense                    3,252              -          3,252
 Current and withholding tax
  (recovery) expense                       57          6,300          6,357
 Future income tax expense
  (recovery) (2)                      (77,743)       121,202         43,459
----------------------------------------------------------------------------
                                      126,535        204,148        330,683
----------------------------------------------------------------------------
Net income (loss) for the
 period from continuing
 operations                    $       28,112  $     (98,983)     $ (70,871)
Net income (loss) from
 discontinued operations
 (note 9)                                                             32,760
----------------------------------------------------------------------------
Net income (loss) for the
 period                                                           $ (38,111)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Included in the Midstream segment is product sales and service revenue
    of $181.0 million associated with U.S. operations.
(2) Future income tax (recovery) expense includes a charge of $105.7 million
    relating to the enactment of Bill C-52, Budget Implementation Act 2007
    by the Canadian government.


                                     As at and for the nine months ended
                                             September 30, 2007
                              ----------------------------------------------
                                 Canadian Oil
                                  and Natural
                               Gas Production      Midstream          Total
----------------------------------------------------------------------------
Selected balance sheet items
Capital assets
 Property, plant and equipment
  net                           $   1,664,934  $     719,925 $    2,384,859
 Intangible assets                          -        176,900        176,900
 Goodwill                             417,614        100,409        518,023
Capital expenditures
 Capital Expenditures                  93,664          9,236        102,900
 Corporate acquisitions               467,850              -        467,850
 Oil and gas property
  acquisitions, net                    11,569              -         11,569
Goodwill additions                     86,670              -         86,670
Working capital
 Accounts receivable                   64,196        187,394        251,590
 Petroleum product inventory                -        134,446        134,446
 Accounts payable and accrued
  liabilities                         131,083        202,201        333,284
Long-term debt - revolving
 term credit facilities               220,399        661,195        881,594
Long-term debt - convertible
 debentures                            68,660        205,981        274,641
Financial derivative
 instruments (asset) liability  $      (4,430) $      99,882 $       95,452
----------------------------------------------------------------------------
----------------------------------------------------------------------------


FOR FURTHER INFORMATION PLEASE CONTACT:

Provident Energy Trust
Investor and Media Contact:
Dallas McConnell
Manager, Investor Relations

Phone: (403) 231-6710
Email: info@providentenergy.com


Corporate Head Office:
2100, 250 - 2nd Street SW
Calgary, Alberta T2P 0C1
(403) 296-2233 or Toll Free: 1-800-587-6299
(403) 262-8973 (FAX)

Website: www.providentenergy.com

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