Strategy

Our oil sands strategy is to economically develop our bitumen resource in phases to provide low-risk, stable, future growth. Our strategy involves integrating bitumen production with field upgrading technology to produce a premium synthetic crude oil that significantly reduces our need to purchase natural gas. Our oil sands strategy also includes our 7.23% investment in the Syncrude oil sands mining operation.

Phased Development

We currently have approximately 5 billion barrels of bitumen resource on 214,000 net acres in the Athasbasca region, and we plan to continue acquiring more acreage. In 2004, we sanctioned commercial development of Phase 1, at Long Lake, which is expected to develop approximately 10% of our total bitumen resource. We expect SAGD production on stream in late 2006 and upgrader start-up in 2007.

We have begun planning Phase 2 and are looking ahead to future phases. Phase 2 will develop the southern portion of the Long Lake lease. Phases 3 and 4 are planned to develop jointly held lands at Cottonwood and Leismer. Each subsequent phase will leverage the knowledge and experience gained from successfully developing Long Lake and be similar in size and design to Long Lake. In total, we expect to produce 120,000 bbls/d, net to us, of synthetic crude by 2016.

Fiscal Terms

We will pay royalties based on bitumen production, which includes a 1% royalty on gross revenue until all costs have been recovered at which time the royalty reverts to 25% on net revenue. With the combination of low royalties, our operating cost advantage and a premium product, we expect attractive financial returns.