News Releases

Advantage Announces 2nd Quarter Results 2008

Aug 14, 2008


    (TSX: AVN.UN, NYSE: AAV)

    CALGARY, Aug. 14 /CNW/ - Advantage Energy Income Fund ("Advantage" or the
"Fund") is pleased to announce its unaudited operating and financial results
for the second quarter ended June 30, 2008.Financial and Operating Highlights

                                  Three months ended        Six months ended
                                        June 30                  June 30
                                    2008        2007        2008        2007
    -------------------------------------------------------------------------
    Financial ($000, except
     as otherwise indicated)

    Revenue before
     royalties(1)              $ 208,868   $ 125,075   $ 397,373   $ 260,577
      per Trust Unit(2)        $    1.51   $    1.10   $    2.88   $    2.35
      per boe                  $   71.69   $   50.69   $   67.03   $   51.31
    Funds from operations      $ 103,754   $  62,634   $ 198,372   $ 128,279
      per Trust Unit(3)        $    0.74   $    0.54   $    1.42   $    1.13
      per boe                  $   35.62   $   25.38   $   33.46   $   25.26
    Distributions declared     $  50,364   $  52,096   $ 100,385   $ 102,302
      per Trust Unit(3)        $    0.36   $    0.45   $    0.72   $    0.90
    Expenditures on property
     and equipment             $  21,632   $  25,678   $  88,535   $  75,374
    Working capital
     deficit(4)                $  42,201   $  11,512   $  42,201   $  11,512
    Bank indebtedness          $ 547,946   $ 377,812   $ 547,946   $ 377,812
    Convertible debentures
     (face value)              $ 224,587   $ 180,725   $ 224,587   $ 180,725
    Trust Units outstanding
     at end of period (000)      140,271     116,091     140,271     116,091
    Basic weighted average
     Trust Units (000)           138,612     113,854     138,105     111,108

    Operating
    Daily Production
      Natural gas (mcf/d)        123,104     108,978     124,109     111,636
      Crude oil and NGLs
       (bbls/d)                   11,498       8,952      11,890       9,452
      Total boe/d at 6:1          32,015      27,115      32,575      28,058
    Average prices
     (including hedging)
      Natural gas ($/mcf)      $    9.18   $    7.52   $    8.70   $    7.80
      Crude oil and NGLs
       ($/bbl)                 $  101.34   $   61.93   $   92.81   $   60.21

    (1) includes realized derivative gains and losses
    (2) based on basic weighted average Trust Units outstanding
    (3) based on Trust Units outstanding at each distribution record date
    (4) working capital deficit excludes derivative assets and liabilities


                           MESSAGE TO UNITHOLDERS

    Record Second Quarter Funds from Operations and Payout Ratio:

    -   Strong natural gas and crude oil pricing combined with solid
        operational results generated a record level of funds from operations
        during the second quarter of 2008 resulting in a payout ratio of 49%.
        This is the lowest payout ratio in the history of Advantage and
        reinforces our strategy to finance our highly efficient capital
        program from operating cash flow.

    -   Funds from operations for the second quarter of 2008 increased 66% to
        $103.8 million and 37% to $0.74 per Trust Unit compared to
        $62.6 million or $0.54 per Trust Unit for the same period of 2007.

    -   The Fund declared three distributions during the quarter totaling
        $0.36 per Trust Unit. Since inception, the Fund has distributed
        $980.2 million or $16.98 per Trust Unit.

    -   Production volumes in the second quarter of 2008 increased 18% to
        32,015 boe/d compared to 27,115 boe/d in the second quarter of 2007.
        Second quarter 2008 production volumes were negatively impacted by a
        significant number of third party turnaround maintenance outages
        which amounted to approximately 1,400 boe/d for the quarter.

    -   Natural gas production for the second quarter of 2008 increased 13%
        to 123.1 mmcf/d, compared to 109.0 mmcf/d reported in the second
        quarter of 2007. Crude oil and natural gas liquids production
        increased 28% to average 11,498 bbls/d compared to 8,952 bbls/d in
        the second quarter of 2007.

    Drilling Underway at our Glacier Montney Natural Gas Resource Play
    Following increased Capital Budget

    -   On June 27, 2008, Advantage's Board of Directors approved an increase
        of $55 million to the 2008 capital budget, which has resulted in an
        annual budget total of $200 million.

    -   Approximately $39 million will be spent on the next phase of
        development at Glacier that includes drilling an additional 5 gross
        horizontal wells, 5 gross vertical delineation wells, and initial
        infrastructure activities. During the first quarter of 2008, the Fund
        drilled 5 vertical delineation wells at Glacier which helped confirm
        geological formations, reservoir productivity and pool continuity.

    -   Drilling has commenced with three drilling rigs on the property and
        initial commitments toward facilities expansion plans have been made.
        We anticipate longer term development plans to be further defined by
        year-end based on the timing of well information.

    -   Advantage's extensive 83 section land block, which may support in
        excess of 150 horizontal wells, is located directly adjacent and on-
        trend to EnCana's Swan Lake and Murphy's Tupper project developments
        which are continuing to exhibit successful results.

    Strong Results Continue with our Conventional Assets

    -   Capital spending for the quarter was $21.6 million net which included
        $9.4 million on drilling and completion activities. During the second
        quarter, 4 gross (3 net) wells were drilled at 100% success rate with
        the balance of capital activity directed at well completions carried
        over from the first quarter, facilities expansions and maintenance
        capital. Year to date drilling activity has resulted in 57 gross
        (41 net) wells at a 98% success rate.

    -   At Nevis in Central Alberta, horizontal light oil wells are exceeding
        initial budgeted productivities and additional oil facilities
        expansion work is required. Further to our phase 1 Horseshoe Canyon
        coal bed methane program, which included 22 wells in the first
        quarter, an additional 15 well phase 2 program has commenced on the
        lands acquired in connection with the acquisition of Sound Energy
        Trust. The wells have excellent initial productivities ranging from
        125 to 250 mcf/d. Several years of future light oil and natural gas
        drilling opportunities are available at our Nevis property.

    -   At Martin Creek in Northwest British Columbia, new well production
        information from our highly successful first quarter drilling program
        is confirming the significant upside potential that exists in this
        property.

    -   At Willesden Green in Central Alberta, follow-up drilling locations
        are being pursued on a light oil discovery that was made in the first
        quarter of 2008.

    -   With continued drilling success and a highly attractive suite of
        assets, Advantage has over 5 years of conventional drilling inventory
        and is well positioned to additionally capitalize on the significant
        natural gas resource play in the Montney formation at our Glacier and
        Stoddart properties.

    Improved Commodity Prices & Hedging Update

    -   With improved natural gas and crude oil pricing realized through the
        first six months of 2008 and including our commodity risk management
        positions for this year, we anticipate generating cash flow in excess
        of our $200 million revised capital budget and current distribution
        requirements. Surplus cash flow provides security to our current
        distribution level, flexibility to fund our highly efficient capital
        program, and the ability to capitalize on acquisition opportunities
        or reduce debt.

    -   Advantage maintains a hedging program to reduce cash flow volatility
        and to ensure that our capital program can be funded out of cash
        flow. Additional natural gas pricing hedges have been secured for
        April to December of 2009 for approximately 23% of our gross
        production at an average AECO price of $8.76 Canadian per mcf or
        equivalent to approximately NYMEX $9.64 US per mmbtu. Details on our
        hedging program are available in our MD&A for the quarter and on our
        website.

    Looking Forward

    -   Our 2008 annual guidance includes capital expenditures of
        $200 million and production of 32,000 to 34,000 boe/d with a 63%
        weighting to natural gas. Royalty rates are estimated to range
        between 18% to 20%. Operating costs are now forecasted to be $13.40
        to $13.90/boe due to cost escalations resulting from increased third
        party processing fees especially at our Lookout Butte property. The
        higher commodity price environment has also increased electrical
        power costs and the cost of supplies derived from crude oil and
        natural gas as feedstocks.

    -   Production at our Lookout Butte property in Southern Alberta will be
        impacted during the third quarter by an extended third party facility
        outage at Shell's Waterton gas plant where a significant modification
        project is underway. Estimates provided by Shell indicate a potential
        outage of approximately 55 to 75 days that begins August 13, 2008.

    -   Advantage's current intention is to continue to be a cash
        distributing entity after 2010. We will continue to closely monitor
        industry dynamics and are considering a number of alternative
        structures. Advantage's significant tax pools of $1.7 billion affords
        us flexibility to evaluate many options in this regard.MANAGEMENT'S DISCUSSION & ANALYSIS

    The following Management's Discussion and Analysis ("MD&A"), dated as of
August 14, 2008, provides a detailed explanation of the financial and
operating results of Advantage Energy Income Fund ("Advantage", the "Fund",
"us", "we" or "our") for the three and six months ended June 30, 2008 and
should be read in conjunction with the consolidated financial statements
contained within this interim report and the audited financial statements and
MD&A for the year ended December 31, 2007. The consolidated financial
statements have been prepared in accordance with Canadian generally accepted
accounting principles ("GAAP") and all references are to Canadian dollars
unless otherwise indicated. All per barrel of oil equivalent ("boe") amounts
are stated at a conversion rate of six thousand cubic feet of natural gas
being equal to one barrel of oil or liquids.

    Non-GAAP Measures

    The Fund discloses several financial measures in the MD&A that do not
have any standardized meaning prescribed under GAAP. These financial measures
include funds from operations, funds from operations per Trust Unit and cash
netbacks. Management believes that these financial measures are useful
supplemental information to analyze operating performance, leverage and
provide an indication of the results generated by the Fund's principal
business activities prior to the consideration of how those activities are
financed or how the results are taxed. Investors should be cautioned that
these measures should not be construed as an alternative to net income, cash
provided by operating activities or other measures of financial performance as
determined in accordance with GAAP. Advantage's method of calculating these
measures may differ from other companies, and accordingly, they may not be
comparable to similar measures used by other companies.
    Funds from operations, as presented, is based on cash provided by
operating activities before expenditures on asset retirement and changes in
non-cash working capital. Funds from operations per Trust Unit is based on the
number of Trust Units outstanding at each distribution record date. Cash
netbacks are dependent on the determination of funds from operations and
include the primary cash revenues and expenses on a per boe basis that
comprise funds from operations. Funds from operations reconciled to cash
provided by operating activities is as follows:Three months ended           Six months ended
                            June 30                     June 30
                        2008      2007  % change    2008      2007  % change
    -------------------------------------------------------------------------
    Cash provided by
     operating
     activities       $ 93,882  $ 49,932     88%  $175,475  $100,452     75%
    Expenditures on
     asset retirement      982      (302) (425)%     5,947     3,707     60%
    Changes in non-cash
     working capital     8,890    13,004   (32)%    16,950    24,120   (30)%
    -------------------------------------------------------------------------
    Funds from
     operations       $103,754  $ 62,634     66%  $198,372  $128,279     55%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------Forward-Looking Information

    The information in this report contains certain forward-looking
statements. These statements relate to future events or our future
performance. All statements other than statements of historical fact may be
forward-looking statements. Forward-looking statements are often, but not
always, identified by the use of words such as "seek", "anticipate", "plan",
"continue", "estimate", "expect", "may", "will", "project", "predict",
"potential", "targeting", "intend", "could", "might", "should", "believe",
"would" and similar expressions. These statements involve substantial known
and unknown risks and uncertainties, certain of which are beyond Advantage's
control, including: the impact of general economic conditions; 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; fluctuations in commodity prices and foreign exchange and interest
rates; stock market volatility and market valuations; volatility in market
prices for oil and natural gas; liabilities inherent in oil and natural gas
operations; uncertainties associated with estimating oil and natural gas
reserves; competition for, among other things, capital, acquisitions of
reserves, undeveloped lands and skilled personnel; incorrect assessments of
the value of acquisitions; changes in income tax laws or changes in tax laws,
royalty regimes and incentive programs relating to the oil and gas industry
and income trusts; geological, technical, drilling and processing problems and
other difficulties in producing petroleum reserves; obtaining required
approvals of regulatory authorities; and other risk factors set forth in
Advantage's Annual Information Form which is available at
www.advantageincome.com and www.sedar.com. Additionally, references to test
production rates and test rates for recently drilled wells are useful in
confirming the presence of hydrocarbons, however, such rates are not
determinative of the rates at which such wells will commence production and
decline thereafter. While encouraging, readers are cautioned not to place
reliance on such rates in calculating the aggregate production for the Fund.
Advantage's actual results, performance or achievement could differ materially
from those expressed in, or implied by, such forward-looking statements and,
accordingly, no assurances can be given that any of the events anticipated by
the forward-looking statements will transpire or occur or, if any of them do,
what benefits that Advantage will derive from them. Except as required by law,
Advantage undertakes no obligation to publicly update or revise any
forward-looking statements.Overview

                      Three months ended           Six months ended
                            June 30                     June 30
                        2008      2007  % change    2008      2007  % change
    -------------------------------------------------------------------------
    Cash provided by
     operating
     activities
     ($000)           $ 93,882  $ 49,932     88%  $175,475  $100,452     75%
    Funds from
     operations
     ($000)           $103,754  $ 62,634     66%  $198,372  $128,279     55%
      per Trust
       Unit(1)        $   0.74  $   0.54     37%  $   1.42  $   1.13     26%

    (1) Based on Trust Units outstanding at each distribution record date.Cash provided by operating activities and funds from operations have
increased significantly as compared to 2007 due to considerably higher
revenue. The increased revenue has been primarily due to improved commodity
prices that continue to exceed the prior year. Our financial results have also
substantially benefited from the Sound Energy Trust ("Sound") acquisition,
which closed on September 5, 2007. The financial and operating results from
the acquired Sound properties are included in all 2008 figures but are not
included in the three and six month periods ended June 30, 2007. Funds from
operations per Trust Unit have also increased significantly, but not in the
same proportion as funds from operations due to the higher number of Trust
Units outstanding for 2008. Trust Units outstanding has increased due to Trust
Units issued in exchange for the Sound acquisition and our distribution
reinvestment plan that allows Unitholders to purchase Trust Units in exchange
for their regular monthly distributions. The number of Trust Units has
increased 21% from June 30, 2007.
    The primary factor that causes significant variability of Advantage's
cash provided by operating activities, funds from operations, and net income
is commodity prices. Refer to the section "Commodity Prices and Marketing" for
a more detailed discussion of commodity prices and our price risk management.Distributions

                      Three months ended           Six months ended
                            June 30                     June 30
                        2008      2007  % change    2008      2007  % change
    -------------------------------------------------------------------------
    Distributions
     declared ($000)  $ 50,364  $ 52,096    (3)%  $100,385  $102,302    (2)%
      per Trust
       Unit(1)        $   0.36  $   0.45   (20)%  $   0.72  $   0.90   (20)%

    (1) Based on Trust Units outstanding at each distribution record date.Total distributions for both the three and six months ended June 30, 2008
are comparable to 2007. Although the Fund has more Trust Units outstanding
during 2008, there has been a 20% reduction in the monthly distribution per
Trust Unit. In December 2007, we decreased the monthly distribution from the
$0.15 per Trust Unit paid for January to November 2007 to $0.12 per Trust Unit
due to the weak natural gas prices at that time. The monthly distribution
currently remains at $0.12 per Trust Unit. Commodity prices have strengthened
in 2008 such that the current environment, in combination with our hedging
program, provides strong support for continuation of the current distribution
level and our expanded 2008 capital program.
    Distributions from the Fund to Unitholders are entirely discretionary and
are determined by Management and the Board of Directors. We closely monitor
our distribution policy considering forecasted cash flows, optimal debt
levels, capital spending activity, working capital requirements, and other
potential cash expenditures. Distributions are announced monthly and are based
on the cash available after retaining a portion to meet such spending
requirements. The level of distributions are primarily determined by cash
flows received from the production of oil and natural gas from existing
Canadian resource properties and will be susceptible to the risks and
uncertainties associated with the oil and natural gas industry generally. If
the oil and natural gas reserves associated with the Canadian resource
properties are not supplemented through additional development or the
acquisition of additional oil and natural gas properties, our distributions
will decline over time in a manner consistent with declining production from
typical oil and natural gas reserves. Therefore, distributions are highly
dependent upon our success in exploiting the current reserve base and
acquiring additional reserves. Furthermore, monthly distributions we pay to
Unitholders are highly dependent upon the prices received for such oil and
natural gas production. Oil and natural gas prices can fluctuate widely on a
month-to-month basis in response to a variety of factors that are beyond our
control. Declines in oil or natural gas prices will have an adverse effect
upon our operations, financial condition, reserves and ultimately on our
ability to pay distributions to Unitholders. The Fund attempts to mitigate the
volatility in commodity prices through our hedging program. It is our
long-term objective to provide stable and sustainable distributions to the
Unitholders, while continuing to grow the Fund. However, given that funds from
operations can vary significantly from month-to-month due to these factors,
the Fund may utilize various financing alternatives, including our credit
facility, as an interim measure to maintain stable distributions.Revenue

                    Three months ended             Six months ended
                          June 30                       June 30
                      2008      2007    % change    2008      2007  % change
    -------------------------------------------------------------------------
    Natural gas
     excluding
     hedging        $115,687  $ 74,760       55%  $205,681  $153,093     34%
    Realized
     hedging gains
     (losses)        (12,861)     (136)   9,357%    (9,151)    4,484  (304)%
    -------------------------------------------------------------------------
    Natural gas
     including
     hedging        $102,826  $ 74,624       38%  $196,530  $157,577     25%
    -------------------------------------------------------------------------
    Crude oil and
     NGLs excluding
     hedging        $115,266  $ 50,371      129%  $211,370  $101,310    109%
    Realized
     hedging gains
     (losses)         (9,224)       80 (11,630)%   (10,527)    1,690  (723)%
    -------------------------------------------------------------------------
    Crude oil and
     NGLs including
     hedging        $106,042  $ 50,451      110%  $200,843  $103,000     95%
    -------------------------------------------------------------------------
    Total revenue   $208,868  $125,075       67%  $397,373  $260,577     52%
    -------------------------------------------------------------------------Revenues have increased significantly for 2008 due to additional
production, primarily from the Sound acquisition, as well as stronger
commodity prices. The higher revenue has been partially offset by our realized
hedging losses that have also resulted from the higher commodity price
environment. The Fund enters derivative contracts whereby realized hedging
gains and losses partially offset commodity price fluctuations, which can
positively or negatively impact revenues.Production

                      Three months ended           Six months ended
                            June 30                     June 30
                        2008      2007  % change    2008      2007  % change
    -------------------------------------------------------------------------
    Natural gas
     (mcf/d)           123,104   108,978     13%   124,109   111,636     11%
    Crude oil
     (bbls/d)            9,311     6,615     41%     9,581     7,083     35%
    NGLs (bbls/d)        2,187     2,337    (6)%     2,309     2,369    (3)%
    -------------------------------------------------------------------------
    Total (boe/d)       32,015    27,115     18%    32,575    28,058     16%
    -------------------------------------------------------------------------
    Natural gas (%)        64%       67%               64%       67%
    Crude oil (%)          29%       24%               29%       25%
    NGLs (%)                7%        9%                7%        8%The Fund's total daily production averaged 32,015 boe/d for the three
months and 32,575 boe/d for the six months ended June 30, 2008, an increase of
18% and 16%, respectively. Production increases were realized primarily due to
the Sound acquisition. Natural declines and third party facility turnarounds
have caused total production in the second quarter of 2008 to decrease 3% from
33,133 boe/d realized in the first quarter of 2008. Wet weather delays in the
second quarter of 2008 prevented some of our new wells from being put into
production that would have offset such declines. For 2008, we expect
production to average approximately 32,000 to 34,000 boe/d, weighted 63% to
natural gas.Commodity Prices and Marketing

    Natural Gas

                      Three months ended           Six months ended
                            June 30                     June 30
    ($/mcf)             2008      2007  % change    2008      2007  % change
    -------------------------------------------------------------------------
    Realized natural
     gas prices
      Excluding
       hedging        $  10.33  $   7.54     37%  $   9.11  $   7.58     20%
      Including
       hedging        $   9.18  $   7.52     22%  $   8.70  $   7.80     12%
    AECO monthly
     index            $   9.35  $   7.37     27%  $   8.24  $   7.42     11%Realized natural gas prices, excluding hedging, were considerably higher
for the three and six months ended June 30, 2008 with a significant
improvement from the first quarter of 2008. The 2007/2008 winter season in
North America has caused inventory levels that had been high prior to winter,
to decline to approximately the five-year average. In addition, reduced
liquefied natural gas imports into the US and the slowdown in natural gas
drilling in Western Canada has provided upward price support. We believe that
longer-term pricing fundamentals for natural gas will be supported due to: (i)
the continued strength of crude oil prices, which has eliminated the economic
advantage of fuel switching away from natural gas, (ii) significantly less
natural gas drilling in Canada projected for 2008, which will reduce
productivity to offset declines, (iii) the increasing focus on resource style
natural gas wells, which have high initial declines and require a higher
threshold economic price than conventional gas drilling and (iv) the demand
for natural gas for the Canadian oil sands projects.Crude Oil and NGLs

                      Three months ended           Six months ended
                            June 30                     June 30
    ($/bbl)             2008      2007  % change    2008      2007  % change
    -------------------------------------------------------------------------
    Realized crude
     oil prices
      Excluding
       hedging        $ 113.71  $  64.23     77%  $ 100.57  $  61.48     64%
      Including
       hedging        $ 102.83  $  64.37     60%  $  94.53  $  62.79     51%
    Realized NGLs
     prices
      Excluding
       hedging        $  95.02  $  55.05     73%  $  85.67  $  52.47     63%
    Realized crude
     oil and NGLs
     prices
      Excluding
       hedging        $ 110.15  $  61.84     78%  $  97.68  $  59.22     65%
      Including
       hedging        $ 101.34  $  61.93     64%  $  92.81  $  60.21     54%
    WTI ($US/bbl)     $ 124.00  $  65.02     91%  $ 110.98  $  61.59     80%
    $US/$Canadian
     exchange rate    $   0.99  $   0.91      9%  $   0.99  $   0.88     13%Advantage's crude oil prices are based on the benchmark pricing of West
Texas Intermediate Crude ("WTI") adjusted for quality, transportation costs
and $US/$Canadian exchange rates. For the three and six months ended June 30,
2008, WTI increased 91% and 80%, respectively. Advantage's realized crude oil
price has not changed to the same extent as WTI, owing to the Canadian dollar
achieving parity with the US dollar, and changes in Canadian crude oil
differentials relative to WTI. The price of WTI fluctuates based on worldwide
supply and demand fundamentals. There has been significant price volatility
experienced over the last several years whereby WTI has reached historic high
levels. Many developments have resulted in the current price levels, including
significant continuing geopolitical issues, general market speculation and
ongoing supply concerns. As a result, prices have continued to increase, with
WTI recently surpassing US$140/bbl. However, we have recently seen a
correction in the price levels as demand has appeared to decline, with WTI
decreasing to approximately US$115/bbl. Regardless whether the current price
level is sustainable or a short-term anomaly, we believe that the pricing
fundamentals for crude oil remain strong with many factors affecting the
continued strength including (i) supply management and supply restrictions by
the OPEC cartel, (ii) ongoing civil unrest in Venezuela, Nigeria, and the
Middle East, (iii) strong relative world wide demand, particularly in China,
India and the United States and (iv) North American refinery capacity
constraints.

    Commodity Price Risk

    The Fund's operational results and financial condition will be dependent
on the prices received for oil and natural gas production. Oil and natural gas
prices have fluctuated widely during recent years and are determined by
economic and, in the case of oil prices, political factors. Supply and demand
factors, including weather and general economic conditions as well as
conditions in other oil and natural gas regions, impact prices. Any movement
in oil and natural gas prices could have an effect on the Fund's financial
condition and therefore on the distributions to holders of Advantage Trust
Units. As current and future practice, Advantage has established a financial
hedging strategy and may manage the risk associated with changes in commodity
prices by entering into derivatives. Although these commodity price risk
management activities could expose Advantage to losses or gains, entering
derivative contracts helps us to stabilize cash flows and ensure that our
capital expenditure program is substantially funded by such cash flows. To the
extent that Advantage engages in risk management activities related to
commodity prices, it will be subject to credit risk associated with
counterparties with which it contracts. Credit risk is mitigated by entering
into contracts with only stable, creditworthy parties and through frequent
reviews of exposures to individual entities. Currently, the Fund has fixed the
commodity price on anticipated production as follows:Approximate Production          Average
    Commodity                     Hedged, Net of Royalties          Price
    -------------------------------------------------------------------------
    Natural gas - AECO
      July to September 2008                 70%                Cdn$7.22/mcf
      October to December 2008               65%                Cdn$7.64/mcf
      -----------------------------------------------------------------------
      Total 2008                             56%                Cdn$7.52/mcf
      -----------------------------------------------------------------------
      January to March 2009                  64%                Cdn$7.87/mcf
      April to June 2009(1)                  29%                Cdn$8.76/mcf
      July to September 2009(1)              29%                Cdn$8.76/mcf
      October to December 2009(1)            29%                Cdn$8.76/mcf
      -----------------------------------------------------------------------
      Total 2009                             38%                Cdn$8.38/mcf
      -----------------------------------------------------------------------

    Crude Oil - WTI
      July to September 2008                 49%               Cdn$94.39/bbl
      October to December 2008               47%               Cdn$94.39/bbl
      -----------------------------------------------------------------------
      Total 2008                             40%               Cdn$94.07/bbl
      -----------------------------------------------------------------------
      January to March 2009                  33%               Cdn$95.84/bbl

    (1) Derivative contracts entered into after June 30, 2008.For the six month period ended June 30, 2008, we recognized in income a
realized derivative loss of $19.7 million (June 30, 2007 - $6.2 million
realized derivative gain). As at June 30, 2008, the fair value of the
derivatives outstanding and to be settled from July 2008 to March 2009 was a
net liability of approximately $121.7 million (December 31, 2007 -
$2.2 million net asset). For the six months ended June 30, 2008, $123.9
million was recognized in income as an unrealized derivative loss due to
changes in the fair values of these contracts since December 31, 2007. The
valuation of the derivatives is the estimated fair value to settle the
contracts as at June 30, 2008 and is based on pricing models, estimates,
assumptions and market data available at that time. As such, the unrealized
amounts are not cash and the actual gains or losses realized on eventual cash
settlement can vary materially due to subsequent fluctuations in commodity
prices as compared to the valuation assumptions. These fair values are
extremely sensitive to assumptions regarding forward commodity prices and such
prices have declined significantly since June 30, 2008. As a result, at August
14, 2008, it is estimated that the net liability of our derivatives at June
30, 2008, have reduced by approximately $70 million. The Fund does not apply
hedge accounting and current accounting standards require changes in the fair
value to be included in the consolidated statement of income and comprehensive
income as an unrealized derivative gain or loss with a corresponding
derivative asset and liability recorded on the balance sheet. These derivative
contracts will settle from July 2008 to March 2009 corresponding to when
Advantage will receive revenues from production.Royalties

                      Three months ended           Six months ended
                            June 30                     June 30
    	                    2008      2007  % change    2008      2007  % change
    -------------------------------------------------------------------------
    Royalties
     ($000)           $ 46,173  $ 22,749    103%  $ 80,054  $ 48,914     64%
      per boe         $  15.85  $   9.22     72%  $  13.50  $   9.63     40%
    As a percentage
     of revenue,
     excluding
     hedging             20.0%     18.2%    1.8%     19.2%     19.2%       -Advantage pays royalties to the owners of mineral rights from which we
have leases. The Fund currently has mineral leases with provincial
governments, individuals and other companies. Royalties have increased in
total due to the increase in revenue from higher production and commodity
prices. Royalties as a percentage of revenue, excluding hedging, have
increased as higher prices generally attract a higher royalty rate. Royalty
rates are dependent on prices and individual well production levels such that
average royalty rates will vary as the nature of our properties change through
ongoing development activities and acquisitions. We expect the royalty rate to
be in the range of 18% to 20% for the remainder of 2008 given the current
environment.Operating Costs

                      Three months ended           Six months ended
                            June 30                     June 30
                        2008      2007  % change    2008      2007  % change
    -------------------------------------------------------------------------
    Operating costs
     ($000)           $ 39,917  $ 26,919     48%  $ 80,189  $ 57,189     40%
      per boe         $  13.70  $  10.91     26%  $  13.53  $  11.26     20%Total operating costs increased 48% for the three months and 40% for the
six months ended June 30, 2008 as compared to 2007, mainly due to increased
production from the Sound acquisition, which closed September 5, 2007. Total
operating costs for the three months ended June 30, 2008 was slightly down
from $40.3 million incurred in the three months ended March 31, 2008.
Operating costs per boe increased 26% for the three months and 20% for the six
months ended June 30, 2008, due to severe cold weather experienced in the
first quarter of 2008, lower production volumes resulting from several third
party facility turnaround maintenance outages in the second quarter of 2008, a
higher percentage of oil properties which incur higher operating costs than
gas properties, and escalating costs including electricity, chemicals, gas
processing fees, and transportation. We will continue to be opportunistic and
proactive in pursuing optimization initiatives that will improve our operating
cost structure. We expect that operating costs per boe will be in the range of
$13.40 to $13.90 for the remainder of the 2008 year.General and Administrative

                      Three months ended           Six months ended
                            June 30                     June 30
                        2008      2007  % change    2008      2007  % change
    -------------------------------------------------------------------------
    General and
     administrative
     expense ($000)   $  5,763  $  4,861     19%  $ 12,995  $  9,577     36%
      per boe         $   1.98  $   1.97       -  $   2.19  $   1.89     16%
    Employees at
     June 30                                           174       135     29%Total general and administrative ("G&A") expense has increased 19% and
36% for the three and six months ended June 30, 2008. The higher total G&A
expense has been primarily due to an increase in staff levels that have
resulted from the Sound acquisition, general growth of the Fund, and a
one-time payment to terminate an office lease that occurred in the first
quarter of 2008. Total G&A expense has decreased 20% as compared to the first
quarter of 2008.Management Internalization

                      Three months ended           Six months ended
                            June 30                     June 30
                        2008      2007  % change    2008      2007  % change
    -------------------------------------------------------------------------
    Management
     internalization
     ($000)           $  2,439  $  5,350   (54)%  $  4,930  $ 10,719   (54)%
      per boe         $   0.84  $   2.17   (61)%  $   0.83  $   2.11   (61)%In 2006, the Fund and the Manager reached an agreement to internalize the
pre-existing management contract arrangement. As part of the agreement,
Advantage agreed to purchase all of the outstanding shares of the Manager
pursuant to the terms of the Arrangement, thereby eliminating the management
fee and performance incentive effective April 1, 2006. The Trust Unit
consideration issued in exchange for the outstanding shares of the Manager was
placed in escrow for a 3-year period and is being deferred and amortized into
income as management internalization expense over the specific vesting periods
during which employee services are provided. The management internalization is
lower for the three and six months as one third vested and was paid in June
2007 with an additional one third vested and paid in June 2008.Interest

                      Three months ended           Six months ended
                            June 30                     June 30
                        2008      2007  % change    2008      2007  % change
    -------------------------------------------------------------------------
    Interest expense
     ($000)           $  7,118  $  5,005     42%  $ 14,884  $ 10,192     46%
      per boe         $   2.44  $   2.03     20%  $   2.51  $   2.01     25%
    Average effective
     interest rate        5.1%      5.4%  (0.3)%      5.4%      5.4%       -
    Bank indebtedness
     at June 30 ($000)                            $547,946  $377,812     45%Total interest expense and interest expense per boe increased as compared
to 2007 primarily due to the additional debt assumed by the Fund from the
Sound acquisition on September 5, 2007. Interest expense versus the first
quarter of 2008 was 8% less as our debt level decreased during the second
quarter of 2008. We monitor the debt level to ensure an optimal mix of
financing and cost of capital that will provide a maximum return to our
Unitholders. Our current credit facilities have been a favorable financing
alternative with an effective interest rate of only 5.4% for the six months
ended June 30, 2008. The Fund's interest rates are primarily based on short
term Bankers Acceptance rates plus a stamping fee.Interest and Accretion on Convertible Debentures

                      Three months ended           Six months ended
                            June 30                     June 30
                        2008      2007  % change    2008      2007  % change
    -------------------------------------------------------------------------
    Interest on
     convertible
     debentures
     ($000)           $  4,204  $  3,293     28%  $  8,391  $  6,531     28%
      per boe         $   1.44  $   1.33      8%  $   1.42  $   1.29     10%
    Accretion on
     convertible
     debentures
     ($000)           $    720  $    605     19%  $  1,440  $  1,204     20%
      per boe         $   0.25  $   0.25       -  $   0.24  $   0.24       -
    Convertible
     debentures
     maturity value
     at June 30 ($000)                            $224,587  $180,725     24%Interest and accretion on convertible debentures has increased compared
to 2007 due to Advantage assuming Sound's 8.75% and 8.00% convertible
debentures on the acquisition. The increased interest and accretion from the
additional debentures has been slightly offset by the maturation of the 10%
convertible debentures with a face value of $1.4 million on November 1, 2007.
The interest per boe for 2008 is slightly higher as our convertible debentures
outstanding have somewhat increased relative to our level of production.Depletion, Depreciation and Accretion

                  Three months ended             Six months ended
                        June 30                       June 30
                    2008      2007    % change    2008      2007    % change
    -------------------------------------------------------------------------
    Depletion,
     depreciation
     and accretion
     ($000)       $ 74,704  $ 61,365        22% $151,584  $125,283        21%
      per boe     $  25.64  $  24.87         3% $  25.57  $  24.67         4%Depletion and depreciation of property and equipment is provided on the
"unit-of-production" method based on total proved reserves. The depletion,
depreciation and accretion ("DD&A") provision has increased in total due to
the increase in production and fixed assets in comparison to the three and six
months ended June 30, 2007, mainly attributed to the Sound acquisition. The
slight increase in the DD&A rate per boe compared to the prior year is due to
high capital expenditures in the first half of 2008 and the higher value
assigned to the Sound acquisition than accumulated from prior development
activities.

    Taxes

    Current taxes paid or payable for the quarter ended June 30, 2008
amounted to $0.9 million, as compared to the $0.2 million expensed for the
same period of 2007. Current taxes primarily represent Saskatchewan resource
surcharge, which is based on the petroleum and natural gas revenues within the
province of Saskatchewan.
    Future income taxes arise from differences between the accounting and tax
bases of the assets and liabilities. For the six months ended June 30, 2008,
the Fund recognized an income tax reduction of $44.0 million compared to a
reduction of $16.3 million for 2007. As at June 30, 2008, the Fund had a
future income tax liability of $22.7 million compared to $66.7 million at
December 31, 2007.
    Under the Fund's current structure, payments are made between the
operating company and the Fund transferring income tax obligations to
Unitholders and as a result no cash income taxes would be paid by the
operating company or the Fund prior to 2011. However, the Specified Investment
Flow-Through Entity ("SIFT") tax legislation was enacted on June 22, 2007
altering the tax treatment by subjecting income trusts to a two-tier tax
structure, similar to that of corporations, whereby the taxable portion of
distributions paid by trusts will be subject to tax at the trust level and at
the Unitholder level. The rules are effective for tax years beginning in 2011
for existing publicly-traded trusts. The effect of the new tax law was
recognized in the future income tax expense and liability for the year ended
December 31, 2007. Canadian generally accepted accounting principles require
that a future income tax liability be recorded when the book value of assets
exceeds the balance of tax pools.
    On July 14, 2008, the Department of Finance released draft legislative
proposals to facilitate the conversion of SIFT trusts into corporations. In
general, the rules are meant to ensure that existing SIFT's can choose to
reorganize as corporations on a tax efficient basis without undue tax effects
for unitholders and the SIFT trust. It is expected that the draft legislative
proposals will form part of a bill to be introduced into Parliament later in
2008. Management continues to review the impact of the SIFT tax on its
business strategy and the Fund's organizational structure.Net Income (Loss)

                  Three months ended             Six months ended
                        June 30                       June 30
                    2008      2007    % change    2008      2007    % change
    -------------------------------------------------------------------------
    Net income
     (loss)
     ($000)       $(14,369) $  4,531     (417)% $(38,491) $  4,872     (890)%
      per Trust
       Unit  -
       Basic and
       diluted    $  (0.10) $   0.04     (350)% $  (0.28) $   0.04     (800)%Advantage has experienced net losses for 2008 as compared to the similar
periods of 2007. Although higher production and commodity prices in the three
and six months ended June 30, 2008 resulted in considerable increased revenue,
this was more than offset by unrealized losses on derivatives of $62.7 million
and $123.9 million for the three and six months ended June 30, 2008,
respectively. The unrealized losses on derivatives are due to improved forward
commodity prices as compared to the prices per the open derivative positions.
The unrealized amounts are not cash and the actual gains or losses realized on
eventual cash settlement can vary materially due to subsequent fluctuations in
commodity prices. The Fund does not apply hedge accounting and current
accounting standards require changes in the fair value to be included in the
consolidated statement of income and comprehensive income as an unrealized
derivative gain or loss with a corresponding derivative asset and liability
recorded on the balance sheet. These derivative contracts will settle from
July 2008 to March 2009 corresponding to when Advantage will receive revenues
from production.Cash Netbacks

                                                Three months ended
                                                      June 30
                                             2008                2007
                                        $000     per boe    $000     per boe
    -------------------------------------------------------------------------
    Revenue                           $230,953  $  79.27  $125,131  $  50.71
    Realized gain (loss) on
     derivatives                       (22,085)    (7.58)      (56)    (0.02)
    Royalties                          (46,173)   (15.85)  (22,749)    (9.22)
    Operating costs                    (39,917)   (13.70)  (26,919)   (10.91)
    -------------------------------------------------------------------------
    Operating                         $122,778  $  42.14  $ 75,407  $  30.56
    General and administrative(1)       (6,831)    (2.34)   (4,232)    (1.72)
    Interest                            (7,118)    (2.44)   (5,005)    (2.03)
    Interest on convertible
     debentures(1)                      (4,204)    (1.44)   (3,293)    (1.33)
    Income and capital taxes              (871)    (0.30)     (243)    (0.10)
    -------------------------------------------------------------------------
    Funds from operations             $103,754  $  35.62  $ 62,634  $  25.38
    -------------------------------------------------------------------------


                                                 Six months ended
                                                      June 30
                                             2008                2007
                                        $000     per boe    $000     per boe
    -------------------------------------------------------------------------
    Revenue                           $417,051  $  70.35  $254,403  $  50.09
    Realized gain (loss) on
     derivatives                       (19,678)    (3.32)    6,174      1.22
    Royalties                          (80,054)   (13.50)  (48,914)    (9.63)
    Operating costs                    (80,189)   (13.53)  (57,189)   (11.26)
    -------------------------------------------------------------------------
    Operating                         $237,130  $  40.00  $154,474  $  30.42
    General and administrative(1)      (13,924)    (2.35)   (8,948)    (1.76)
    Interest                           (14,884)    (2.51)  (10,192)    (2.01)
    Interest on convertible
     debentures(1)                      (8,391)    (1.42)   (6,531)    (1.29)
    Income and capital taxes            (1,559)    (0.26)     (524)    (0.10)
    -------------------------------------------------------------------------
    Funds from operations             $198,372  $  33.46  $128,279  $  25.26
    -------------------------------------------------------------------------
    (1) General and administrative expense excludes non-cash unit-based
        compensation expense. Interest on convertible debentures excludes
        non-cash accretion expense.Funds from operations of Advantage increased for both the three and six
months ended June 30, 2008, compared to corresponding periods in 2007, due
primarily to additional production from the Sound acquisition and greatly
improved commodity prices. Cash netbacks per boe are also higher due to
stronger realized commodity prices. Increased cash netbacks were partially
offset by realized losses on derivatives, and increased operating expenses and
royalties. Realized hedging losses resulted from the higher commodity price
environment as the Fund entered derivative contracts to lessen commodity price
fluctuations, which can positively or negatively impact cash flows and
resulting distributions. Operating costs have steadily increased over the past
year due to significantly higher field costs associated with supplies and
services, an overall industry labour cost increase, and higher relative
operating costs from the Sound acquisition. Specific to the Fund, we have
experienced production outages caused by weather and turnaround shut-downs in
2008. Royalties have increased as would be expected since they are generally
based on current commodity prices.

    Contractual Obligations and Commitments

    The Fund has contractual obligations in the normal course of operations
including purchases of assets and services, operating agreements,
transportation commitments, sales contracts and convertible debentures. These
obligations are of a recurring and consistent nature and impact cash flow in
an ongoing manner. The following table is a summary of the Fund's remaining
contractual obligations and commitments. Advantage has no guarantees or
off-balance sheet arrangements other than as disclosed.Payments due by period
    ($ millions)    Total     2008      2009      2010      2011      2012
    -------------------------------------------------------------------------
    Building
     leases       $   13.4  $    2.1  $    4.1  $    4.1  $    1.8  $    1.3
    Capital leases     7.0       0.8       2.1       2.2       1.9         -
    Pipeline/
     transportation    5.7       2.0       2.4       1.0       0.3         -
    Convertible
     debentures(1)   224.6       5.4      87.0      69.9      62.3         -
    -------------------------------------------------------------------------
    Total
     contractual
     obligations  $  250.7  $   10.3  $   95.6  $   77.2  $   66.3  $    1.3
    -------------------------------------------------------------------------

    (1) As at June 30, 2008, Advantage had $224.6 million convertible
        debentures outstanding (excluding interest payable during the various
        debenture terms). Each series of convertible debentures are
        convertible to Trust Units based on an established conversion price.
        The Fund settled the principal amount of 9.00% convertible debenture
        by payment of $5.4 million in cash on August 1, 2008. All remaining
        obligations related to convertible debentures have the option to be
        settled through the issuance of Trust Units.
    (2) Bank indebtedness of $547.9 million has been excluded from the
        contractual obligations table as the credit facilities constitute a
        revolving facility for a 364 day term which is extendible annually
        for a further 364 day revolving period at the option of the
        syndicate. If not extended, the revolving credit facility is
        converted to a two year term facility with the first payment due one
        year and one day after commencement of the term.

    Liquidity and Capital Resources

    The following table is a summary of the Fund's capitalization structure.

    ($000, except as otherwise indicated)                      June 30, 2008
    -------------------------------------------------------------------------
    Bank indebtedness (long-term)                                $   547,946
    Working capital deficit(1)                                        42,201
    -------------------------------------------------------------------------
    Net debt                                                     $   590,147
    -------------------------------------------------------------------------
    Trust Units outstanding (000)                                    140,271
    Trust Unit closing market price ($/Trust Unit)               $     13.15
    -------------------------------------------------------------------------
    Market value                                                 $ 1,844,563
    -------------------------------------------------------------------------
    Convertible debentures maturity value (long-term)            $   184,489
    Capital lease obligation (long-term)                               5,008
    -------------------------------------------------------------------------
    Total capitalization                                         $ 2,624,207
    -------------------------------------------------------------------------

    (1) Working capital deficit includes accounts receivable, prepaid
        expenses and deposits, accounts payable and accrued liabilities,
        distributions payable, and the current portion of capital lease
        obligations and convertible debentures.Unitholders' Equity and Convertible Debentures

    Advantage has utilized a combination of Trust Units, convertible
debentures and bank debt to finance acquisitions and development activities.
    As at June 30, 2008, the Fund had 140.3 million Trust Units outstanding.
During the six months ended June 30, 2008, 1,854,776 Trust Units were issued
as a result of the Premium Distribution™, Distribution Reinvestment and
Optional Trust Unit Purchase Plan (the "Plan"), generating $19.5 million
reinvested in the Fund and representing an approximate 20% participation rate
(for six months ended June 30, 2007, 2,076,686 Trust Units were issued under
the Plan, generating $24.6 million reinvested in the Fund). As at August 14,
2008, Advantage had 140.6 million Trust Units issued and outstanding.
    At both June 30, 2008 and December 31, 2007, the Fund had $224.6 million
convertible debentures outstanding that were immediately convertible to
9.8 million Trust Units based on the applicable conversion prices. During the
period ended June 30, 2008, $25,000 debentures were converted resulting in the
issuance of 1,001 Trust Units. As at August 14, 2008, the convertible
debentures outstanding have decreased to $219.2 million given that the 9.00%
debentures matured on August 1, 2008, resulting in a cash payment of
$5,392,000 to the debenture holders.
    Advantage has a Trust Units Rights Incentive Plan for external directors
as approved by the Unitholders of the Fund. A total of 500,000 Trust Units
have been reserved for issuance under the plan with an aggregate of
400,000 rights granted since inception. The initial exercise price of rights
granted under the plan may not be less than the current market price of the
Trust Units as of the date of the grant and the maximum term of each right is
not to exceed ten years with all rights vesting immediately upon grant. At the
option of the rights holder, the exercise price of the rights can be adjusted
downwards over time based upon distributions paid by the Fund to Unitholders.
In June 2008, all remaining 150,000 outstanding rights were exercised at
$8.60 per right for total cash proceeds of $1,290,000, of which $322,500 was
received after June 30, 2008.

    Bank Indebtedness, Credit Facility and Other Obligations

    At June 30, 2008, Advantage had bank indebtedness outstanding of
$547.9 million. The Fund has a $710 million credit facility agreement
consisting of a $690 million extendible revolving loan facility and a
$20 million operating loan facility. The current credit facilities are
collateralized by a $1 billion floating charge demand debenture, a general
security agreement and a subordination agreement from the Fund covering all
assets and cash flows. During the second quarter, the Fund repaid
$15.6 million of bank indebtedness due to the strength of our operating
results. Bank indebtedness is relatively unchanged from December 31, 2007. In
June 2008, the Fund renewed its credit facilities for a further year with the
next annual review scheduled to occur in June 2009.
    Advantage had a working capital deficiency of $42.2 million as at
June 30, 2008. Our working capital includes items expected for normal
operations such as trade receivables, prepaids, deposits, trade payables and
accruals as well as the current portion of capital lease obligations and
convertible debentures. Working capital varies primarily due to the timing of
such items, the current level of business activity including our capital
program, commodity price volatility, and seasonal fluctuations. Advantage has
no unusual working capital requirements. We do not anticipate any problems in
meeting future obligations as they become due given the strength of our funds
from operations. It is also important to note that working capital is
effectively integrated with Advantage's operating credit facility, which
assists with the timing of cash flows as required.
    Advantage has capital lease obligations on various pieces of equipment
used in its operations. The total amount of principal obligation outstanding
at June 30, 2008 is $6.3 million, bearing interest at effective rates ranging
from 5.5% to 6.7%, and is collateralized by the related equipment. The leases
expire at dates ranging from December 2009 to August 2010.Capital Expenditures
                                      Three months ended   Six months ended
                                            June 30             June 30
    ($000)                              2008      2007      2008      2007
    -------------------------------------------------------------------------
    Land and seismic                  $     11  $  1,581  $  4,181  $  3,921
    Drilling, completions
     and workovers                       9,425    15,475    46,169    42,610
    Well equipping and facilities       11,978     8,464    37,576    28,574
    Other                                  218       158       609       269
    -------------------------------------------------------------------------
                                      $ 21,632  $ 25,678  $ 88,535  $ 75,374
    Property acquisitions                    -         -         -    12,851
    Property dispositions                    -         -       (91)     (427)
    -------------------------------------------------------------------------
    Total capital expenditures        $ 21,632  $ 25,678  $ 88,444  $ 87,798
    -------------------------------------------------------------------------Advantage's growth strategy has been to acquire properties in or near
areas where we have large land positions, shallow to medium depth drilling
opportunities, and a balance of year round access. We focus on areas where
past activity has yielded long-life reserves with high cash netbacks.
Advantage is very well positioned to selectively exploit the highest
value-generating drilling opportunities given the size, strength and diversity
of our asset base. As a result, the Fund has a high level of flexibility to
distribute its capital program and ensure a risk-balanced platform of
projects. Our preference is to operate a high percentage of our properties
such that we can maintain control of capital expenditures, operations and cash
flows.
    For the three month period ended June 30, 2008, the Fund spent a net
$21.6 million. The majority of the capital expenditures for this quarter
related to completions, tie-ins and the addition of new facilities related to
bringing production on-stream from wells drilled during the very active first
quarter winter drilling program. As operations wound down with the onset of
seasonal spring breakup, only 3 net (4 gross) wells were drilled in the second
quarter. Total capital spending in the quarter included $8.5 million at Nevis,
$2.4 million at Sousa, $1.3 million at Glacier, $1.2 million at Willesden
Green, and $1.2 million at Martin Creek.
    On June 27, 2008, the Board of Directors approved an increase of
$55.0 million to the 2008 capital expenditures budget, bringing the 2008 total
capital expenditure budget to $200.0 million. It is anticipated that these
additional expenditures can be fully funded with funds from operations, and
therefore no incremental debt or other financing will be required. The
increased capital spending will be primarily directed towards further drilling
in our Montney natural gas resource play at Glacier in Northwest Alberta with
the balance directed towards additional opportunities that have resulted from
increased commodity prices.

    Sources and Uses of Funds

    The following table summarizes the various funding requirements during
the six months ended June 30, 2008 and 2007 and the sources of funding to meet
those requirements:Six months ended
                                                                June 30
    ($000)                                                  2008      2007
    -------------------------------------------------------------------------
    Sources of funds
      Funds from operations                               $198,372  $128,279
      Units issued, net of costs                               925   104,486
      Increase in bank indebtedness                            520         -
      Property dispositions                                     91       427
    -------------------------------------------------------------------------
                                                          $199,908  $233,192
    -------------------------------------------------------------------------
    Uses of funds
      Expenditures on property and equipment              $ 88,535  $ 75,374
      Distributions to Unitholders                          80,632    79,305
      Increase in working capital                           23,882    27,123
      Expenditures on asset retirement                       5,947     3,707
      Reduction of capital lease obligations                   912     2,070
      Decrease in bank indebtedness                              -    32,762
      Property acquisitions                                      -    12,851
    -------------------------------------------------------------------------
                                                          $199,908  $233,192
    -------------------------------------------------------------------------The Fund has enjoyed a substantial increase in funds from operations
during 2008 from the higher production levels and stronger commodity price
environment. As a result, the Fund has been able to adequately finance its
capital expenditures and distributions to Unitholders without additional debt.
We believe that our current strategy, including our capital program and
distribution level, are balanced and will continue to ensure that Advantage is
well positioned for future growth.Quarterly Performance

                                         2008                    2007
    ($000, except as
     otherwise indicated)           Q2          Q1          Q4          Q3
    -------------------------------------------------------------------------
    Daily production
      Natural gas (mcf/d)        123,104     125,113     128,556     115,991
      Crude oil and NGLs
       (bbls/d)                   11,498      12,281      12,895      10,014
      Total (boe/d)               32,015      33,133      34,321      29,346
    Average prices
      Natural gas ($/mcf)
        Excluding hedging      $   10.33   $    7.90   $    6.23   $    5.62
        Including hedging      $    9.18   $    8.23   $    6.97   $    6.35
        AECO monthly index     $    9.35   $    7.13   $    6.00   $    5.62
      Crude oil and NGLs
       ($/bbl)
        Excluding hedging      $  110.15   $   85.99   $   73.40   $   69.03
        Including hedging      $  101.34   $   84.83   $   70.40   $   68.51
        WTI ($US/bbl)          $  124.00   $   97.96   $   90.63   $   75.33
    Total revenues (before
     royalties)                $ 208,868   $ 188,505   $ 165,951   $ 130,830
    Net income (loss)          $ (14,369)  $ (24,122)  $  13,795   $ (26,202)
      per Trust Unit -
       basic and diluted       $   (0.10)  $   (0.18)  $    0.10   $   (0.22)
    Funds from operations      $ 103,754   $  94,618   $  80,519   $  62,345
    Distributions declared     $  50,364   $  50,021   $  57,875   $  55,017


                                         2007                    2006
    ($000, except as
     otherwise indicated)           Q2          Q1          Q4          Q3
    -------------------------------------------------------------------------
    Daily production
      Natural gas (mcf/d)        108,978     114,324     117,134     122,227
      Crude oil and NGLs
       (bbls/d)                    8,952       9,958       9,570       9,330
      Total (boe/d)               27,115      29,012      29,092      29,701
    Average prices
      Natural gas ($/mcf)
        Excluding hedging      $    7.54   $    7.61   $    6.90   $    5.89
        Including hedging      $    7.52   $    8.06   $    7.27   $    5.90
        AECO monthly index     $    7.37   $    7.46   $    6.36   $    6.03
      Crude oil and NGLs
       ($/bbl)
        Excluding hedging      $   61.84   $   56.84   $   54.58   $   67.77
        Including hedging      $   61.93   $   58.64   $   55.86   $   67.77
        WTI ($US/bbl)          $   65.02   $   58.12   $   60.21   $   70.55
    Total revenues (before
     royalties)                $ 125,075   $ 135,502   $ 127,539   $ 124,521
    Net income (loss)          $   4,531   $     341   $   8,736   $   1,209
      per Trust Unit -
       basic and diluted       $    0.04   $    0.00   $    0.08   $    0.01
    Funds from operations      $  62,634   $  65,645   $  62,737   $  63,110
    Distributions declared     $  52,096   $  50,206   $  58,791   $  60,498The table above highlights the Fund's performance for the second quarter
of 2008 and also for the preceding seven quarters. A combination of natural
reserve declines and spring breakup resulted in production decreases from the
third quarter of 2006 through the second quarter of 2007. The second quarter
of 2007 was further disrupted by several facility turnarounds in that period.
The Sound acquisition closed on September 5, 2007, and significantly increased
production for the third and fourth quarters of 2007. Production has gradually
decreased since the acquisition of Sound once again due to natural declines
combined with spring breakup and facility turnarounds that occurred in the
second quarter of 2008. Financial results have also steadily improved during
these periods, particularly revenues and funds from operations, as both
commodity prices and production have generally increased. We experienced a net
loss in the third quarter of 2007 due to a significant drop in natural gas
prices realized at that time, amortization of the management internalization
consideration and increased depletion and depreciation expense. Net income
increased in the fourth quarter of 2007 due to the full integration of the
Sound acquisition and moderately improved commodity prices. Net losses were
realized in the first and second quarters of 2008, primarily as a result of
significant unrealized losses on hedging positions for future periods. These
losses are not cash and have no impact on our cash position, funds from
operations, or our distributions.

    Critical Accounting Estimates

    The preparation of financial statements in accordance with GAAP requires
Management to make certain judgments and estimates. Changes in these judgments
and estimates could have a material impact on the Fund's financial results and
financial condition.
    Management relies on the estimate of reserves as prepared by the Fund's
independent qualified reserves evaluator. The process of estimating reserves
is critical to several accounting estimates. The process of estimating
reserves is complex and requires significant judgments and decisions based on
available geological, geophysical, engineering and economic data. These
estimates may change substantially as additional data from ongoing development
and production activities becomes available and as economic conditions impact
crude oil and natural gas prices, operating costs, royalty burden changes, and
future development costs. Reserve estimates impact net income through
depletion and depreciation of fixed assets, the provision for asset retirement
costs and related accretion expense, and impairment calculations for fixed
assets and goodwill. The reserve estimates are also used to assess the
borrowing base for the Fund's credit facilities. Revision or changes in the
reserve estimates can have either a positive or a negative impact on net
income and the borrowing base of the Fund.
    Management's process of determining the provision for future income
taxes, the provision for asset retirement obligation costs and related
accretion expense, and the fair values assigned to any acquired company's
assets and liabilities in a business combination is based on estimates. These
estimates are significant and can include reserves, future production rates,
future crude oil and natural gas prices, future costs, future interest rates,
future tax rates and other relevant assumptions. Revisions or changes in any
of these estimates can have either a positive or a negative impact on asset
and liability values and net income.
    In accordance with GAAP, derivative assets and liabilities are recorded
at their fair values at the reporting date, with unrealized gains and losses
recognized directly into net income and comprehensive income in the same
period. The fair value of derivatives outstanding is an estimate based on
pricing models, estimates, assumptions and market data available at that time.
As such, the unrealized amounts are not cash and the actual gains or losses
realized on eventual cash settlement can vary materially due to subsequent
fluctuations in commodity prices as compared to the valuation assumptions.

    International Financial Reporting Standards ("IFRS")

    In February 2008, the Accounting Standards Board of the Canadian
Institute of Chartered Accountants confirmed that publicly accountable
entities will be required to adopt IFRS effective January 1, 2011, including
preparation of comparative financial information. Management is currently
evaluating the effects of adopting IFRS on its financial statements and is in
the planning stage, including assessment and evaluation of key differences
between Canadian GAAP and IFRS. Upon completion of this initial diagnosis
stage, we will be organizing a detailed project plan to ensure all accounting
differences are dealt with and implemented in a timely manner such that
Advantage's financial statements are prepared in accordance with IFRS by the
required deadline.

    Controls and Procedures

    The Fund has established procedures and internal control systems to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in
accordance with GAAP. Management of the Fund is committed to providing timely,
accurate and balanced disclosure of all material information about the Fund.
Disclosure controls and procedures are in place to ensure all ongoing
reporting requirements are met and material information is disclosed on a
timely basis. The Chief Executive Officer and Vice-President, Finance and
Chief Financial Officer, individually, sign certifications that the financial
statements, together with the other financial information included in the
regular filings, fairly present in all material respects the financial
condition, results of operations, and cash flows as of the dates and for the
periods presented in the filings. The certifications further acknowledge that
the filings do not contain any untrue statement of a material fact or omit to
state a material fact required to be stated or that is necessary to make a
statement not misleading in light of the circumstances under which it was
made, with respect to the period covered by the filings. During the six months
ended June 30, 2008, there were no significant changes that would materially
affect, or are reasonably likely to materially affect, the internal controls
over financial reporting.
    Because of inherent limitations, internal control over financial
reporting may not prevent or detect misstatements and even those systems
determined to be effective can provide only reasonable assurance with respect
to the financial statement preparation and presentation. Further, projections
of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.

    Outlook

    The Fund's 2008 Budget, as approved by the Board of Directors, retains a
high degree of activity and focus on drilling in many of our key properties
where a high level of success was realized through 2007. Capital has also been
directed to delineate the Montney natural gas resource play at Glacier in
Northwest Alberta and to accommodate facility expansions and enhanced recovery
schemes as necessary.
    For 2008, we are forecasting production to be in the range of 32,000 to
34,000 boe/d. Advantage's 2008 capital expenditures budget was originally
estimated to be approximately $145 million to drill approximately 143 gross
(88 net) wells. On June 27, 2008, the Board approved an increase of
$55 million to the capital budget, bringing the 2008 total capital budget to
$200 million. The additional capital spending will be directed primarily
towards the Montney natural gas resource play at Glacier in Northwest Alberta,
and any remainder towards additional opportunities. During the first quarter
of 2008, the Fund drilled five vertical delineation wells in the Glacier
property which helped confirm geological formations, reservoir productivity
and pool continuity. Additional activity will be pursued during the balance of
2008 to further define longer term development plans. The Glacier property is
accessible through most of the year and rigs have been secured to drill the
additional wells. Approximately $39 million will be spent on the next phase of
development at Glacier where the Fund plans to drill five gross horizontal
wells, five gross vertical delineation wells and initiate infrastructure
expansion.
    Operating costs on an annual basis are expected to now range between
$13.40 and $13.90 per boe. Industry supply, servicing and maintenance costs
have increased during the first six months of 2008 driven primarily from
higher crude oil and natural gas prices. In particular, we have seen
significant increases from electrical power costs, processing fees, steel and
chemicals.
    On October 25, 2007, the Alberta Provincial Government announced changes
to royalties for conventional oil, natural gas and oil sands that will become
effective January 1, 2009. Royalty rates will be commodity price sensitive and
dependent on individual well productivity. Advantage has a significant number
of lower rate wells producing within our long life Alberta properties. We also
have a significant Horseshoe Canyon coal bed methane drilling inventory that
can be pursued which will also have a favorable royalty treatment due to lower
rate per well characteristics. Our exposure in Northeast British Columbia and
Saskatchewan also affords us further flexibility with mitigating the royalty
impact in our capital program. If the current higher price commodity
environment were to continue, we would expect our future royalty rates to be
higher than what we have historically experienced under the current royalty
regime. We anticipate our royalty rates will range from 18% to 20% for the
2008 year.
    Advantage's funds from operations in 2008 will continue to be impacted by
the volatility of crude oil and natural gas prices and the $US/$Canadian
exchange rate. Hedging has been completed for 2008 and a portion of 2009 to
(i) stabilize cash flows and (ii) ensure that the Fund's capital program is
substantially funded out of cash flow. Approximately 56% of our natural gas
production, net of royalties, is hedged for the 2008 calendar year at an
average price of $7.52 Canadian per mcf. Advantage has also hedged 40% of its
2008 crude oil production, net of royalties, at an average price of
$94.07 Canadian per bbl.
    Advantage will continue to follow its strategy of acquiring properties
that provide highly economic development opportunities to enhance long-term
cash flow. Advantage will also continue to focus on efficient production and
reserve additions through low to medium risk development drilling
opportunities that have arisen as a result of the acquisitions completed in
prior years and from the significant inventory of drilling opportunities that
has resulted from the Ketch and Sound acquisitions.
    Looking forward, Advantage's high quality assets combined with a greater
than five year conventional drilling inventory, exposure to the Montney
natural gas resource play and excellent tax pools provides many options for
the Fund and we are committed to maximizing value generation for our
Unitholders.

    Additional Information

    Additional information relating to Advantage can be found on SEDAR at
www.sedar.com and the Fund's website at www.advantageincome.com. Such other
information includes the annual information form, the annual information
circular - proxy statement, press releases, material contracts and agreements,
and other financial reports. The annual information form will be of particular
interest for current and potential Unitholders as it discusses a variety of
subject matter including the nature of the business, structure of the Fund,
description of our operations, general and recent business developments, risk
factors, reserves data and other oil and gas information.

    August 14, 2008CONSOLIDATED FINANCIAL STATEMENTS

    Consolidated Balance Sheets

                                                        June 30, December 31,
    (thousands of dollars)                                  2008        2007
    -------------------------------------------------------------------------
                                                      (unaudited)
    Assets
    Current assets
      Accounts receivable                             $  117,925  $   95,474
      Prepaid expenses and deposits                       14,939      21,988
      Derivative asset (note 10)                             545       7,027
    -------------------------------------------------------------------------
                                                         133,409     124,489
    Derivative asset (note 10)                                 -         174
    Fixed assets (note 3)                              2,125,736   2,177,346
    Goodwill                                             120,271     120,271
    -------------------------------------------------------------------------
                                                      $2,379,416  $2,422,280
    -------------------------------------------------------------------------
    Liabilities
    Current liabilities
      Accounts payable and accrued liabilities        $  117,232  $  122,087
      Distributions payable to Unitholders                16,833      16,592
      Current portion of capital lease
       obligations (note 4)                                1,270       1,537
      Current portion of convertible
       debentures (note 5)                                39,730       5,333
      Derivative liability (note 10)                     122,246       2,242
    -------------------------------------------------------------------------
                                                         297,311     147,791
    Derivative liability (note 10)                             -       2,778
    Capital lease obligations (note 4)                     5,008       5,653
    Bank indebtedness (note 6)                           547,946     547,426
    Convertible debentures (note 5)                      179,221     212,203
    Asset retirement obligations (note 7)                 62,797      60,835
    Future income taxes                                   22,683      66,727
    -------------------------------------------------------------------------
                                                       1,114,966   1,043,413
    -------------------------------------------------------------------------
    Unitholders' Equity
    Unitholders' capital (note 8)                      2,053,471   2,027,065
    Convertible debentures equity component (note 5)       9,632       9,632
    Contributed surplus (note 8)                              58       2,005
    Accumulated deficit (note 9)                        (798,711)   (659,835)
    -------------------------------------------------------------------------
                                                       1,264,450   1,378,867
    -------------------------------------------------------------------------
                                                      $2,379,416  $2,422,280
    -------------------------------------------------------------------------
    Commitments (note 12)

    see accompanying Notes to Consolidated Financial Statements



    Consolidated Statements of Income (Loss),
    Comprehensive Income (Loss) and Accumulated Deficit

    (thousands of dollars,       Three months ended       Six months ended
     except for per Trust        June 30,    June 30,    June 30,    June 30,
     Unit amounts) (unaudited)      2008        2007        2008        2007
    -------------------------------------------------------------------------
    Revenue
      Petroleum and natural
       gas                    $  230,953  $  125,131  $  417,051  $  254,403
      Realized gain (loss) on
       derivatives (note 10)     (22,085)        (56)    (19,678)      6,174
      Unrealized gain (loss)
       on derivatives (note 10)  (62,696)     10,126    (123,882)     (1,903)
      Royalties                  (46,173)    (22,749)    (80,054)    (48,914)
    -------------------------------------------------------------------------
                                  99,999     112,452     193,437     209,760
    -------------------------------------------------------------------------
    Expenses
      Operating                   39,917      26,919      80,189      57,189
      General and administrative   5,763       4,861      12,995       9,577
      Management internalization
       (note 8)                    2,439       5,350       4,930      10,719
      Interest                     7,118       5,005      14,884      10,192
      Interest and accretion on
       convertible debentures      4,924       3,898       9,831       7,735
      Depletion, depreciation
       and accretion              74,704      61,365     151,584     125,283
    -------------------------------------------------------------------------
                                 134,865     107,398     274,413     220,695
    -------------------------------------------------------------------------
    Income (loss) before taxes   (34,866)      5,054     (80,976)    (10,935)
    Future income tax expense
     (reduction)                 (21,368)        280     (44,044)    (16,331)
    Income and capital taxes         871         243       1,559         524
    -------------------------------------------------------------------------
                                 (20,497)        523     (42,485)    (15,807)
    -------------------------------------------------------------------------
    Net income (loss) and
     comprehensive income (loss) (14,369)      4,531     (38,491)      4,872
    Accumulated deficit,
     beginning of period        (733,978)   (486,971)   (659,835)   (437,106)
    Distributions declared       (50,364)    (52,096)   (100,385)   (102,302)
    -------------------------------------------------------------------------
    Accumulated deficit, end
     of period                $ (798,711) $ (534,536) $ (798,711)  $(534,536)
    -------------------------------------------------------------------------
    Net income (loss) per
     Trust Unit (note 8)
      Basic and diluted       $    (0.10) $     0.04  $    (0.28)  $    0.04
    -------------------------------------------------------------------------

    see accompanying Notes to Consolidated Financial Statements



    Consolidated Statements of Cash Flows

                                 Three months ended       Six months ended
    (thousands of dollars)       June 30,    June 30,    June 30,    June 30,
    (unaudited)                     2008        2007        2008        2007
    -------------------------------------------------------------------------
    Operating Activities
    Net income (loss)         $  (14,369) $    4,531  $  (38,491) $    4,872
    Add (deduct) items not
     requiring cash:
      Unrealized loss (gain)
       on derivatives             62,696     (10,126)    123,882       1,903
      Unit-based compensation     (1,068)        629        (929)        629
      Management internalization   2,439       5,350       4,930      10,719
      Accretion on convertible
       debentures                    720         605       1,440       1,204
      Depletion, depreciation
       and accretion              74,704      61,365     151,584     125,283
      Future income taxes        (21,368)        280     (44,044)    (16,331)
    Expenditures on asset
     retirement                     (982)        302      (5,947)     (3,707)
    Changes in non-cash
     working capital              (8,890)    (13,004)    (16,950)    (24,120)
    -------------------------------------------------------------------------
    Cash provided by
     operating activities         93,882      49,932     175,475     100,452
    -------------------------------------------------------------------------
    Financing Activities
    Units issued, net of
     costs (note 8)                  967         386         925     104,486
    Increase (decrease) in
     bank indebtedness           (15,554)     23,369         520     (32,762)
    Reduction of capital
     lease obligations              (306)     (1,719)       (912)     (2,070)
    Distributions to Unitholders (40,330)    (39,767)    (80,632)    (79,305)
    -------------------------------------------------------------------------
    Cash used in financing
     activities                  (55,223)    (17,731)    (80,099)     (9,651)
    -------------------------------------------------------------------------
    Investing Activities
    Expenditures on property
     and equipment               (21,632)    (25,678)    (88,535)    (75,374)
    Property acquisitions              -           -           -     (12,851)
    Property dispositions              -           -          91         427
    Changes in non-cash
     working capital             (17,027)     (6,523)     (6,932)     (3,003)
    -------------------------------------------------------------------------
    Cash used in investing
     activities                  (38,659)    (32,201)    (95,376)    (90,801)
    -------------------------------------------------------------------------
    Net change in cash                 -           -           -           -
    Cash, beginning of period          -           -           -           -
    -------------------------------------------------------------------------
    Cash, end of period       $        -  $        -  $        -  $        -
    -------------------------------------------------------------------------

    Supplementary Cash Flow
     Information
      Interest paid           $   10,013  $   10,171  $   18,579  $   17,176
      Taxes paid              $      638  $      469  $      792  $      830

    see accompanying Notes to Consolidated Financial Statements



                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

    June 30, 2008 (unaudited)

    All tabular amounts in thousands except as otherwise indicated.

    The interim consolidated financial statements of Advantage Energy Income
    Fund ("Advantage" or the "Fund") have been prepared by management in
    accordance with Canadian generally accepted accounting principles using
    the same accounting policies as those set out in note 2 to the
    consolidated financial statements for the year ended December 31, 2007,
    except as described below. The interim consolidated financial statements
    should be read in conjunction with the audited consolidated financial
    statements of Advantage for the year ended December 31, 2007 as set out
    in Advantage's Annual Report.

    1.  Changes in Accounting Policies

        (a) Capital disclosures

        Effective January 1, 2008, the Fund adopted CICA Handbook Section
        1535, Capital Disclosures. This Section establishes standards for
        disclosing information about an entity's capital and how it is
        managed to enable users of financial statements to evaluate the
        entity's objectives, policies and procedures for managing capital.
        The adoption of this Section requires that information on capital
        management be included in the notes to the consolidated financial
        statements (note 11). This new standard does not have any effect on
        our financial position or results of operations.

        (b) Comparative figures

        Certain comparative figures have been reclassified to conform to the
        current year's presentation.

        (c) Recent accounting changes not implemented

            (i) Goodwill and intangible assets

            In February 2008, the CICA issued Section 3064, Goodwill and
            Intangible Assets, replacing Section 3062, Goodwill and Other
            Intangible Assets and Section 3450, Research and Development
            Costs. The new Section will become effective January 1, 2009.
            Management has evaluated the new Section and there will be no
            impact for the financial statements of the Fund. The only
            applicable item for the Fund is goodwill, and the standards
            concerning goodwill are unchanged from the prior standard.

            (ii) International Financial Reporting Standards ("IFRS")

            In February 2008, the CICA Accounting Standards Board confirmed
            that IFRS will replace Canadian GAAP effective January 1, 2011
            for publicly accountable enterprises. Management is currently
            evaluating the effects of all current and pending pronouncements
            of the International Accounting Standards Board on the financial
            statements of the Fund, and is developing a plan for
           implementation.

    2.  Sound Energy Trust Acquisition

        On September 5, 2007, Advantage acquired all of the issued and
        outstanding Trust Units and Exchangeable Shares of Sound Energy Trust
        ("Sound") for $21.4 million cash consideration, 16,977,184 Advantage
        Trust Units and $0.9 million of acquisition costs. Sound Unitholders
        and Exchangeable Shareholders could elect to receive 0.30 Advantage
        Trust Units for each Sound Trust Unit or receive $0.66 in cash and
        0.2557 Advantage Trust Units for each Sound Trust Unit. All of the
        Sound Exchangeable Shares were exchanged for Advantage Trust Units on
        the same ratio as the Sound Trust Units based on the conversion ratio
        in effect at the effective date of the acquisition. Sound was an
        energy trust engaged in the development, acquisition and production
        of natural gas and crude oil in western Canada. The acquisition is
        being accounted for using the "purchase method" with the results of
        operations included in the consolidated financial statements as of
        the closing date of the acquisition.

        The purchase price has been allocated as follows:

        Net assets acquired and            Consideration:
         liabilities assumed:


        Fixed assets           $ 513,604   16,977,184 Trust
        Accounts receivable       27,654    Units issued           $ 228,852
        Prepaid expenses                   Cash                       21,403
         and deposits              3,873   Acquisition costs
        Derivative asset, net      2,797    incurred                     904
        Bank indebtedness       (107,959)                         -----------
        Convertible debentures  (101,553)                          $ 251,159
        Accounts payable and                                      -----------
         accrued liabilities     (39,565)
        Future income taxes      (29,430)
        Asset retirement
         obligations             (16,695)
        Capital lease
         obligations              (1,567)
                              -----------
                               $ 251,159
                              -----------



        The value of the Trust Units issued as consideration was determined
        based on the weighted average trading value of Advantage Trust Units
        during the two-day period before and after the terms of the
        acquisition were agreed to and announced. The allocation of the
        purchase price has been revised in 2008 due to the realization of
        estimates and is subject to further refinement as additional cost
        estimates and tax balances are finalized. As a result, fixed assets
        increased $4.0 million, accounts receivable increased $0.2 million,
        and accounts payable and accrued liabilities increased $4.2 million.

    3.  Fixed Assets

                                                  Accumulated
                                                 Depletion and     Net Book
        June 30, 2008                    Cost     Depreciation       Value
        ---------------------------------------------------------------------
        Petroleum and natural gas
         properties                  $ 3,113,515   $   993,153   $ 2,120,362
        Furniture and equipment           11,157         5,783         5,374
        ---------------------------------------------------------------------
                                     $ 3,124,672   $   998,936   $ 2,125,736
        ---------------------------------------------------------------------

                                                  Accumulated
                                                 Depletion and     Net Book
        December 31, 2007                Cost     Depreciation       Value
        ---------------------------------------------------------------------
        Petroleum and natural gas
         properties                  $ 3,016,243   $   844,671   $ 2,171,572
        Furniture and equipment           10,548         4,774         5,774
        ---------------------------------------------------------------------
                                     $ 3,026,791   $   849,445   $ 2,177,346
        ---------------------------------------------------------------------

        During the six months ended June 30, 2008, Advantage capitalized
        general and administrative expenditures directly related to
        exploration and development activities of $6,349,000 (June 30, 2007 -
        $3,943,000).

    4.  Capital Lease Obligations

        The Fund has capital leases on a variety of fixed assets. Future
        minimum lease payments at June 30, 2008 consist of the following:

        2008                               $     799
        2009                                   2,040
        2010                                   2,200
        2011                                   1,925
        ---------------------------------------------
                                               6,964
        Less amounts representing interest      (686)
        ---------------------------------------------
                                               6,278
        Current portion                       (1,270)
        ---------------------------------------------
                                           $   5,008
        ---------------------------------------------

    5.  Convertible Debentures

        The balance of debentures outstanding at June 30, 2008 and changes in
        the liability and equity components during the six months ended June
        30, 2008 are as follows:

                          9.00%         8.25%         8.75%         7.50%
        ---------------------------------------------------------------------
        Debentures
         outstanding  $      5,392  $      4,867  $     29,839  $     52,268
        ---------------------------------------------------------------------
        Liability
         component:
          Balance at
           Dec. 31,
           2007       $      5,333  $      4,767  $     29,382  $     50,671
          Accretion
           of
           discount             50            46           152           451
          Converted to
           Trust Units           -             -             -             -
        ---------------------------------------------------------------------
          Balance at
           June 30,
           2008       $      5,383  $      4,813  $     29,534  $     51,122
        ---------------------------------------------------------------------
        Equity
         component:
          Balance at
           Dec. 31,
           2007       $        229  $        248  $        852  $      2,248
          Converted to
           Trust Units           -             -             -             -
        ---------------------------------------------------------------------
          Balance at
           June 30,
           2008       $        229  $        248  $         852  $     2,248
        ---------------------------------------------------------------------


                            6.50%       7.75%         8.00%         Total
        ---------------------------------------------------------------------
        Debentures
         outstanding  $     69,927  $     46,766  $     15,528  $    224,587
        ---------------------------------------------------------------------
        Liability
         component:
          Balance at
           Dec. 31,
           2007       $     68,092  $     44,360  $     14,931  $    217,536
          Accretion
           of
           discount            368           300            73         1,440
          Converted to
           Trust Units         (25)            -             -           (25)
        ---------------------------------------------------------------------
          Balance at
           June 30,
           2008       $     68,435  $     44,660  $     15,004  $    218,951
        ---------------------------------------------------------------------
        Equity
         component:
          Balance at
           Dec. 31,
           2007       $      2,971  $      2,286  $        798  $      9,632
          Converted to
           Trust Units           -             -             -             -
        ---------------------------------------------------------------------
          Balance at
           June 30,
           2008       $      2,971  $      2,286  $        798  $      9,632
        ---------------------------------------------------------------------


        During the six months ended June 30, 2008, $25,000 debentures (June
        30, 2007 - $5,000 debentures) were converted resulting in the
        issuance of 1,001 Trust Units (June 30, 2007 - 375 Trust Units). The
        principal amount of 9.00% convertible debentures matured on August 1,
        2008 and the Fund settled the obligation by payment of $5.4 million
        in cash.

    6.  Bank Indebtedness

        Advantage has a credit facility agreement with a syndicate of
        financial institutions which provides for a $690 million extendible
        revolving loan facility and a $20 million operating loan facility.
        The loan's interest rate is based on either prime, US base rate,
        LIBOR or bankers' acceptance rates, at the Fund's option, subject to
        certain basis point or stamping fee adjustments ranging from 0.00% to
        1.50% depending on the Fund's debt to cash flow ratio. The credit
        facilities are collateralized by a $1 billion floating charge demand
        debenture, a general security agreement and a subordination agreement
        from the Fund covering all assets and cash flows. The credit
        facilities are subject to review on an annual basis with the next
        review due in June 2009. Various borrowing options are available
        under the credit facilities, including prime rate-based advances, US
        base rate advances, US dollar LIBOR advances and bankers' acceptances
        loans. The credit facilities constitute a revolving facility for a
        364 day term which is extendible annually for a further 364 day
        revolving period at the option of the syndicate. If not extended, the
        revolving credit facility is converted to a two year term facility
        with the first payment due one year and one day after commencement of
        the term. The credit facilities contain standard commercial covenants
        for facilities of this nature. The only financial covenant is a
        requirement for Advantage Oil & Gas Ltd. ("AOG") to maintain a
        minimum cash flow to interest expense ratio of 3.5:1, determined on a
        rolling four quarter basis. The credit facilities also prohibit the
        Fund from entering into any derivative contract where the term of
        such contract exceeds two years or the aggregate of such contracts
        hedge greater than 60% of the Fund's estimated oil and gas
        production. Breach of any covenant will result in an event of default
        in which case AOG has 20 days to remedy such default. If the default
        is not remedied or waived, and if required by the majority of
        lenders, the administrative agent of the lenders has the option to
        declare all obligations of AOG under the credit facilities to be
        immediately due and payable without further demand, presentation,
        protest, or notice of any kind. Distributions by AOG to the Fund (and
        effectively by the Fund to Unitholders) are subordinated to the
        repayment of any amounts owing under the credit facilities.
        Distributions to Unitholders are not permitted if the Fund is in
        default of such credit facilities or if the amount of the Fund's
        outstanding indebtedness under such facilities exceeds the then
        existing current borrowing base. Interest payments under the
        debentures are also subordinated to indebtedness under the credit
        facilities and payments under the debentures are similarly
        restricted. For the six months ended June 30, 2008, the effective
        interest rate on the outstanding amounts under the facility was
        approximately 5.4% (June 30, 2007 - 5.4%).

    7.  Asset Retirement Obligations

        A reconciliation of the asset retirement obligations is provided
        below:
                                                    Six months
                                                      ended       Year ended
                                                     June 30,    December 31,
                                                       2008          2007
        ---------------------------------------------------------------------
        Balance, beginning of period               $    60,835   $    34,324
        Accretion expense                                2,093         2,795
        Assumed in Sound acquisition                         -        16,695
        Liabilities incurred and
         change in estimates                             5,816        13,972
        Liabilities settled                             (5,947)       (6,951)
        ---------------------------------------------------------------------
        Balance, end of period                     $    62,797   $    60,835
        ---------------------------------------------------------------------

    8.  Unitholders' Equity

        (a) Unitholders' capital

            (i)  Authorized

                 Unlimited number of voting Trust Units

            (ii) Issued

                                               Number of Units        Amount
        ---------------------------------------------------------------------
        Balance at December 31, 2007               138,269,374   $ 2,036,121
        Distribution reinvestment plan               1,854,776        19,512
        Issued for cash, net of costs                        -           (42)
        Issued on conversion of debentures               1,001            25
        Issued on exercise of Trust Unit rights        150,000         1,981
        Management internalization forfeitures          (4,193)          (84)
        ---------------------------------------------------------------------
                                                   140,270,958   $ 2,057,513
        ---------------------------------------------------------------------
        Management internalization
         escrowed Trust Units                                         (4,042)
        ---------------------------------------------------------------------
        Balance at June 30, 2008                                 $ 2,053,471
        ---------------------------------------------------------------------

        On June 23, 2006, Advantage internalized the external management
        contract structure and eliminated all related fees for total original
        consideration of 1,933,208 Advantage Trust Units initially valued at
        $39.1 million and subject to escrow provisions over a 3-year period,
        vesting one-third each year beginning June 23, 2007. For the six
        months ended June 30, 2008, a total of 4,193 Trust Units issued for
        the management internalization were forfeited (June 30, 2007 -
        14,139 Trust Units) and $4.9 million has been recognized as
        management internalization expense (June 30, 2007 - $10.7 million).
        As at June 30, 2008, 594,725 Trust Units remain held in escrow
        (December 31, 2007 - 1,193,622 Trust Units).

        During the six months ended June 30, 2008, 1,854,776 Trust Units
        (June 30, 2007 - 2,076,686 Trust Units) were issued under the Premium
        Distribution™, Distribution Reinvestment and Optional Trust Unit
        Purchase Plan, generating $19.5 million (June 30, 2007 -
        $24.6 million) reinvested in the Fund.

        Effective June 25, 2002, a Trust Units Rights Incentive Plan for
        external directors was established and approved with a total of
        500,000 Trust Units reserved for issuance and an aggregate of
        400,000 rights granted since inception. At December 31, 2007,
        150,000 rights remained outstanding under the plan, all of which were
        exercised at $8.60 per right in June 2008 for total cash proceeds of
        $1,290,000, of which $322,500 was received after June 30, 2008.
        Contributed surplus of $691,000 in respect of these rights has been
        transferred to Unitholders' capital. No rights are outstanding as of
        June 30, 2008.

    (b) Contributed surplus
                                                    Six months
                                                      ended       Year ended
                                                     June 30,    December 31,
                                                       2008          2007
        ---------------------------------------------------------------------
        Balance, beginning of period               $     2,005   $       863
        Unit-based compensation                         (1,256)        1,256
        Expiration of convertible debentures
         equity component                                    -            58
        Exercise of Trust Unit Rights                     (691)         (172)
        ---------------------------------------------------------------------
        Balance, end of period                     $        58   $     2,005
        ---------------------------------------------------------------------

    (c) Net income (loss) per Trust Unit

        The calculations of basic and diluted net income (loss) per Trust
        Unit are derived from both income (loss) available to Unitholders and
        weighted average Trust Units outstanding, calculated as follows:

                          Three months ended           Six months ended
                         June 30,      June 30,      June 30,      June 30,
                           2008          2007          2008          2007
        ---------------------------------------------------------------------
        Income (loss)
         available to
         Unitholders
          Basic and
           diluted     $   (14,369)  $     4,531   $   (38,491)  $     4,872
        ---------------------------------------------------------------------
        Weighted average
         Trust Units
         outstanding
          Basic        138,611,924   113,854,335   138,105,497   111,108,403
          Trust Units
           Rights
           Incentive
           Plan                  -        43,259             -        39,487
          Management
           Internali-
           zation                -       223,495             -       152,844
        ---------------------------------------------------------------------
          Diluted      138,611,924   114,121,089   138,105,497   111,300,734
        ---------------------------------------------------------------------

        The calculation of diluted net income per Trust Unit excludes all
        series of convertible debentures for the three and six months ended
        June 30, 2008 and 2007 as the impact would be anti-dilutive. Total
        weighted average Trust Units issuable in exchange for the convertible
        debentures and excluded from the diluted net income per Trust Unit
        calculation for the three and six months ended June 30, 2008 were
        9,846,252 and 9,846,610, respectively (June 30, 2007 - 8,334,353 and
        8,334,403 Trust Units, respectively). As at June 30, 2008, the total
        convertible debentures outstanding were immediately convertible to
        9,846,252 Trust Units (June 30, 2007 - 8,334,077 Trust Units).

        All of the Trust Unit Rights and Management Internalization escrowed
        Trust Units have been excluded from the calculation of diluted net
        income per Trust Unit for the three and six months ended June 30,
        2008, as the impact would be anti-dilutive. Total weighted average
        Trust Units issuable in exchange for the Trust Unit Rights and
        excluded from the diluted net income per Trust Unit calculation for
        the three and six months ended June 30, 2008 were 42,145 and 37,634.
        Total weighted average Trust Units issuable in exchange for the
        Management Internalization escrowed Trust Units and excluded from the
        diluted net income per Trust Unit calculation for the three and six
        months ended June 30, 2008 were 528,068 and 484,869, respectively.

    9.  Accumulated Deficit

        Accumulated deficit consists of accumulated income and accumulated
        distributions for the Fund since inception as follows:

                                                     June 30,    December 31,
                                                       2008          2007
        ---------------------------------------------------------------------
        Accumulated Income                         $   181,497   $   219,988
        Accumulated Distributions                     (980,208)     (879,823)
        ---------------------------------------------------------------------
        Accumulated Deficit                        $  (798,711)  $  (659,835)
        ---------------------------------------------------------------------

        For the six months ended June 30, 2008, the Fund declared
        $100.4 million in distributions, representing $0.72 per distributable
        Trust Unit (six months ended June 30, 2007 - $102.3 million
        representing $0.90 per distributable Trust Unit).

    10. Financial Instruments

        Financial instruments of the Fund include accounts receivable,
        deposits, accounts payable and accrued liabilities, distributions
        payable to Unitholders, bank indebtedness, convertible debentures and
        derivative assets and liabilities.

        Accounts receivable and deposits are classified as loans and
        receivables and measured at amortized cost. Accounts payable and
        accrued liabilities, distributions payable to Unitholders and bank
        indebtedness are all classified as other liabilities and similarly
        measured at amortized cost. As at June 30, 2008, there were no
        significant differences between the carrying amounts reported on the
        balance sheet and the estimated fair values of these financial
        instruments due to the short terms to maturity and the floating
        interest rate on the bank indebtedness.

        The Fund has convertible debenture obligations outstanding, of which
        the liability component has been classified as other liabilities and
        measured at amortized cost. The convertible debentures have different
        fixed terms and interest rates (note 5) resulting in fair values that
        will vary over time as market conditions change. As at June 30, 2008,
        the estimated fair value of the total outstanding convertible
        debenture obligation was $227.7 million (December 31, 2007 -
        $215.4 million). The fair value of the liability component of
        convertible debentures was determined primarily based on a discounted
        cash flow model assuming no future conversions and continuation of
        current interest and principal payments as well as taking into
        consideration the current public trading activity of such debentures.
        The Fund applied discount rates of between 5 and 6% considering
        current available market information, assumed credit adjustments, and
        various terms to maturity.

        Advantage has an established strategy to manage the risk associated
        with changes in commodity prices by entering into derivatives, which
        are recorded at fair value as derivative assets and liabilities with
        gains and losses recognized through earnings. As the fair value of
        the contracts varies with commodity prices, they give rise to
        financial assets and liabilities. The fair values of the derivatives
        are determined through valuation models completed by third parties.
        Various assumptions based on current market information were used in
        these valuations, including settled forward commodity prices,
        interest rates, foreign exchange rates, volatility and other relevant
        factors. The actual gains and losses realized on eventual cash
        settlement can vary materially due to subsequent fluctuations in
        commodity prices as compared to the valuation assumptions.

        Credit Risk

        Accounts receivable, deposits, and derivative assets are subject to
        credit risk exposure and the carrying values reflect Management's
        assessment of the associated maximum exposure to such credit risk.
        Substantially all of the Fund's accounts receivable are due from
        customers and joint operation partners concentrated in the Canadian
        oil and gas industry. As such, accounts receivable are subject to
        normal industry credit risks. Advantage mitigates such credit risk by
        closely monitoring significant counterparties and dealing with a
        broad selection of partners that diversify risk within the sector.
        The Fund's deposits are primarily due from the Alberta Provincial
        government and are viewed by Management as having minimal associated
        credit risk. To the extent that Advantage enters derivatives to
        manage commodity price risk, it may be subject to credit risk
        associated with counterparties with which it contracts. Credit risk
        is mitigated by entering into contracts with only stable,
        creditworthy parties and through frequent reviews of exposures to
        individual entities. In addition, the Fund generally enters into
        derivative contracts with investment grade institutions that are
        members of Advantage's credit facility syndicate to further mitigate
        associated credit risk.

        Liquidity Risk

        The Fund is subject to liquidity risk attributed from accounts
        payable and accrued liabilities, distributions payable to
        Unitholders, bank indebtedness, convertible debentures, and
        derivative liabilities. Accounts payable and accrued liabilities,
        distributions payable to Unitholders and derivative liabilities are
        primarily due within one year of the balance sheet date and Advantage
        does not anticipate any problems in satisfying the obligations due to
        the strength of cash provided by operating activities and the
        existing credit facility. The Fund's bank indebtedness is subject to
        a $710 million credit facility agreement which mitigates liquidity
        risk by enabling Advantage to manage interim cash flow fluctuations.
        The credit facility constitutes a revolving facility for a 364 day
        term which is extendible annually for a further 364 day revolving
        period at the option of the syndicate. If not extended, the revolving
        credit facility is converted to a two year term facility with the
        first payment due one year and one day after commencement of the
        term. The terms of the credit facility are such that it provides
        Advantage adequate flexibility to evaluate and assess liquidity
        issues if and when they arise. Additionally, the Fund regularly
        monitors liquidity related to obligations by evaluating forecasted
        cash flows, optimal debt levels, capital spending activity, working
        capital requirements, and other potential cash expenditures. This
        continual financial assessment process further enables the Fund to
        mitigate liquidity risk.

        Advantage has several series of convertible debentures outstanding
        that mature from 2008 to 2011 (note 5). Interest payments are made
        semi-annually with excess cash provided by operating activities. As
        the debentures become due, the Fund can satisfy the obligations in
        cash or issue Trust Units at a price determined in the applicable
        debenture agreements. This settlement alternative allows the Fund to
        adequately manage liquidity, plan available cash resources and
        implement an optimal capital structure.

        To the extent that Advantage enters derivatives to manage commodity
        price risk, it may be subject to liquidity risk as derivative
        liabilities become due. While the Fund has elected not to follow
        hedge accounting, derivative instruments are not entered for
        speculative purposes and Management closely monitors existing
        commodity risk exposures. As such, liquidity risk is mitigated since
        any losses actually realized are subsidized by increased cash flows
        realized from the higher commodity price environment.

        Interest Rate Risk

        The Fund is exposed to interest rate risk to the extent that bank
        indebtedness is at a floating rate of interest and the Fund's maximum
        exposure to interest rate risk is based on the effective interest
        rate and the current carrying value of the bank indebtedness. The
        Fund monitors the interest rate markets to ensure that appropriate
        steps can be taken if interest rate volatility compromises the Fund's
        cash flows. A 1% interest rate fluctuation for the six months ended
        June 30, 2008 could potentially have impacted net income by
        approximately $1.9 million for that period.

        Price and Currency Risk

        Advantage's derivative assets and liabilities are subject to both
        price and currency risks as their fair values are based on
        assumptions including forward commodity prices and foreign exchange
        rates. The Fund enters derivative financial instruments to manage
        commodity price risk exposure relative to actual commodity production
        and does not utilize derivative instruments for speculative purposes.
        Changes in the price assumptions can have a significant effect on the
        fair value of the derivative assets and liabilities and thereby
        impact net income. It is estimated that a 10% change in the forward
        natural gas prices used to calculate the fair value of the natural
        gas derivatives at June 30, 2008 could impact net income by
        approximately $15.1 million for the six months ended June 30, 2008.
        As well, a change of 10% in the forward crude oil prices used to
        calculate the fair value of the crude oil derivatives at June 30,
        2008 could impact net income by $6.9 million for the six months ended
        June 30, 2008. A change of 10% in the forward power prices used to
        calculate the fair value of the power derivatives at June 30, 2008
        could impact net income by $0.1 million for the six months ended
        June 30, 2008. A similar change in the currency rate assumption
        underlying the derivatives fair value does not have a material impact
        on net income. As at June 30, 2008 the Fund had the following
        derivatives in place:


    Description of
     Derivative     Term             Volume                    Average Price
    -------------------------------------------------------------------------
    Natural gas - AECO

      Fixed    April 2008 to      14,217 mcf/d                  Cdn$6.85/mcf
       price    October 2008
      Fixed    April 2008 to       9,478 mcf/d                  Cdn$7.25/mcf
       price    October 2008
      Fixed    April 2008 to      14,217 mcf/d                  Cdn$7.83/mcf
       price    October 2008
      Fixed    April 2008 to      14,217 mcf/d                  Cdn$7.10/mcf
       price    March 2009
      Fixed    April 2008 to      14,217 mcf/d                  Cdn$7.06/mcf
       price    March 2009
      Fixed    November 2008 to   14,217 mcf/d                  Cdn$7.77/mcf
       price    March 2009
      Fixed    November 2008 to    4,739 mcf/d                  Cdn$8.10/mcf
       price    March 2009
      Fixed    November 2008 to   14,217 mcf/d                  Cdn$9.45/mcf
       price    March 2009

    Crude oil - WTI

      Fixed    February 2008 to    2,000 bbls/d                Cdn$90.93/bbl
       price    January 2009
      Collar   February 2008 to    2,000 bbls/d      Sold put  Cdn$70.00/bbl
                January 2009                    Purchase call Cdn$105.00/bbl
                                                         Cost   Cdn$1.52/bbl
      Fixed    April 2008 to       2,500 bbls/d                Cdn$97.15/bbl
       price    March 2009

    Electricity - Alberta Pool Price

      Fixed    January 2008 to       3.0 MW                    Cdn$54.00/MWh
       price    December 2008


        As at June 30, 2008, the fair value of the derivatives outstanding
        resulted in an asset of approximately $545,000 (December 31, 2007 -
        $7,201,000) and a liability of approximately $122,246,000
        (December 31, 2007 - $5,020,000). For the six months ended June 30,
        2008, $123,882,000 was recognized in income as an unrealized
        derivative loss (June 30, 2007 - $1,903,000 unrealized derivative
        loss) and $19,678,000 was recognized in income as a realized
        derivative loss (June 30, 2007 - $6,174,000 realized derivative
        gain).

    11. Capital Management

        The Fund manages its capital with the following objectives:

        -   To ensure sufficient financial flexibility to achieve the ongoing
            business objectives including replacement of production, funding
            of future growth opportunities, and pursuit of accretive
            acquisitions; and

        -   To maximize Unitholder return and provide stable distributions
            that will enhance the Trust Unit value.

        Advantage monitors its capital structure and makes adjustments
        according to market conditions in an effort to meet its objectives
        given the current outlook of the business and industry in general.
        The capital structure of the Fund is composed of working capital
        (excluding derivative assets and liabilities), bank indebtedness,
        convertible debentures, capital lease obligations and Unitholders'
        equity. The Fund internally views convertible debentures as another
        form of equity as the obligations can be settled through the issuance
        of Trust Units. Advantage may manage its capital structure by issuing
        new Trust Units, obtaining additional financing either through bank
        indebtedness or convertible debenture issuances, refinancing current
        debt, issuing other financial or equity-based instruments, adjusting
        the amount of monthly distributions, suspending or renewing its
        distribution reinvestment plan, adjusting capital spending, or
        disposing of non-core assets. The capital structure is reviewed by
        Management and the Board of Directors on an ongoing basis.
        Advantage's capital structure as at June 30, 2008 is as follows:

                                                               June 30, 2008
        ---------------------------------------------------------------------
        Bank indebtedness (long-term)                            $   547,946
        Working capital deficit(1)                                    42,201
        ---------------------------------------------------------------------
        Net debt                                                     590,147
        Trust Units outstanding market value                       1,844,563
        Convertible debentures maturity value (long-term)            184,489
        Capital lease obligations (long-term)                          5,008
        ---------------------------------------------------------------------
        Total                                                    $ 2,624,207
        ---------------------------------------------------------------------

        (2) Working capital deficit includes accounts receivable, prepaid
            expenses and deposits, accounts payable and accrued liabilities,
            distributions payable, and the current portion of capital lease
            obligations and convertible debentures.

        The Fund's bank indebtedness is governed by a $710 million credit
        facility agreement (note 6) that contains standard commercial
        covenants for facilities of this nature. The only financial covenant
        is a requirement for AOG to maintain a minimum cash flow to interest
        expense ratio of 3.5:1, determined on a rolling four quarter basis.
        The Fund is in compliance with all credit facility covenants. As
        well, the borrowing base for the Fund's credit facilities is
        determined through utilizing the regular reserve estimates. Revision
        or changes in the reserve estimates can have either a positive or a
        negative impact on the borrowing base of the Fund. Advantage's
        issuance of convertible debentures is limited by its Trust Indenture
        which currently restricts the issuance of additional convertible
        debentures to 25% of market capitalization subsequent to issuance.
        Advantage's Trust Indenture also provides for the issuance of an
        unlimited number of Trust Units. However, through new tax
        legislation, an income trust is restricted to doubling its market
        capitalization as it stands on October 31, 2006 by growing a maximum
        of 40% in 2007 and 20% for the years 2008 to 2010. In addition, an
        income trust may replace debt that was outstanding as of October 31,
        2006 with new equity or issue new, non-convertible debt without
        affecting the normal growth percentage. As a result of the "normal
        growth" guidelines, the Fund is permitted to issue approximately
        $2.0 billion of new equity from October 31, 2006 to January 1, 2011,
        which we believe is adequate for any growth we expect to incur. If an
        income trust exceeds the established limits on the issuance of new
        trust units and convertible debt that constitute normal growth, the
        income trust will be immediately subject to the Specified Investment
        Flow-Through Entity tax legislation whereby the taxable portion of
        distributions paid will be subject to tax at the trust level.

        Management of the Fund's capital structure is facilitated through its
        financial and operational forecasting processes. The forecast of the
        Fund's future cash flows is based on estimates of production,
        commodity prices, forecast capital and operating expenditures, and
        other investing and financing activities. The forecast is regularly
        updated based on new commodity prices and other changes, which the
        Fund views as critical in the current environment. Selected forecast
        information is frequently provided to the Board of Directors.

        The Fund's capital management objectives, policies and processes have
        remained unchanged during the six month period ended June 30, 2008.

    12. Commitments

        Advantage has several lease commitments relating to office buildings.
        The estimated remaining annual minimum operating lease rental
        payments for the buildings are as follows:

        2008                          $   2,055
        2009                              4,126
        2010                              4,141
        2011                              1,735
        2012                              1,314
        ----------------------------------------
                                       $ 13,371
        ----------------------------------------Advisory

    The information in this release contains certain forward-looking
statements. These statements relate to future events or our future
performance. All statements other than statements of historical fact may be
forward-looking statements. Forward-looking statements are often, but not
always, identified by the use of words such as "seek", "anticipate", "plan",
"continue", "estimate", "expect", "may", "will", "project", "predict",
"potential", "targeting", "intend", "could", "might", "should", "believe",
"would" and similar expressions. These statements involve substantial known
and unknown risks and uncertainties, certain of which are beyond Advantage's
control, including: the impact of general economic conditions; 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; fluctuations in commodity prices and foreign exchange and interest
rates; stock market volatility and market valuations; volatility in market
prices for oil and natural gas; liabilities inherent in oil and natural gas
operations; uncertainties associated with estimating oil and natural gas
reserves; competition for, among other things, capital, acquisitions, of
reserves, undeveloped lands and skilled personnel; incorrect assessments of
the value of acquisitions; changes in income tax laws or changes in tax laws
and incentive programs relating to the oil and gas industry and income trusts;
geological, technical, drilling and processing problems and other difficulties
in producing petroleum reserves; and obtaining required approvals of
regulatory authorities. Advantage's actual results, performance or achievement
could differ materially from those expressed in, or implied by, such
forward-looking statements and, accordingly, no assurances can be given that
any of the events anticipated by the forward-looking statements will transpire
or occur or, if any of them do, what benefits that Advantage will derive from
them. Except as required by law, Advantage undertakes no obligation to
publicly update or revise any forward-looking statements.

    %SEDAR: 00016522E          %CIK: 0001259995



For further information:

For further information: Investor Relations, Toll free: 1-866-393-0393;
ADVANTAGE ENERGY INCOME FUND, 700, 400 - 3rd Avenue SW, Calgary, Alberta, T2P
4H2, Phone: (403) 718-8000, Fax: (403) 718-8300, Web Site:
www.advantageincome.com, E-mail: advantage@advantageincome.com


print email rss