Investing: Suncor - A Strategic Advantage

Transcription

1 UBS Energy 1x1 Conference Boston November 23, 2015 Ryan Kubik President and Chief Executive Officer

2 Suncor s Hostile Bid Suncor has offered 0.25 Suncor shares for each COS share COS board has recommended that shareholders reject the Suncor bid: 1. The value offered substantially undervalues COS 2. Timing is entirely opportunistic and intended to take advantage of unprecedented conditions in the energy industry 3. Suncor is an insider to the Syncrude joint venture and has an informational advantage over the market and COS Shareholders COS is examining the full range of strategic alternatives from a full or partial sale to remaining an independent company COS is strongly positioned to withstand low oil prices and emerge with even greater value when oil prices recover More information is available at

3 Suncor s Offer Substantially Undervalues COS 1. High quality lease position 2. Valuable upgrader 3. Reduced cost structure 4. Higher oil price leverage 5. Anticipated production increases 6. Value-enhancing strategic opportunities available at Syncrude - Sale or swaps of undeveloped leases such as Lease 29 - Inter-site pipeline - Multiple products to increase production levels - Low-cost debottlenecking capacity additions

4 COS Unique Strategic Assets: Prime Position Largest directly investable public oil sands mining resource High quality leases located in the heart of the Athabasca oil sands Borders every oil sands mining project in the region Fully integrated production of light sweet synthetic crude oil Long-life non-declining asset base Significant operational, logistical and capital synergies Source: RBC Capital Markets. 1.6 billion barrels 2P reserves and 1.7 billion barrels contingent resources all upgraded light crude oil; net to COS

5 Million Barrels COS Unique Strategic Assets: High Quality, Producing Reserves The Suncor hostile bid provides staggering dilution to COS Shareholders: 2,500 Large Reserve Base Supports Decades of SCO Production Years % change in Production or Reserves owned by COS Shareholders Current Production 1-46% Proved, Developed Producing Reserves 2-68% 2,000 1,500 1,000 Requires minimal capital to produce 20 Years Proved Plus Probable Reserves 2-55% 696 MMbbl 26 Years 913 MMbbl 1,609 MMbbl Reserve Life Index (Years) Suncor s bid significantly undervalues COS high quality, long life, already producing reserve base 1. Calculated on a pro forma basis including all Suncor production. Sources: Canadian Oil Sands; Suncor, News Release, Suncor Energy reports second quarter 2015 results (29 July 2015); Suncor Interim Consolidated Financial Statements for the three and six months ended June 30, Calculated on a pro forma basis including all Suncor reserves. Reserves figures as at December 31, Source: Suncor Annual Information Form dated February 26, 2015 for the year ended December 31, 2014; Teck Resources Limited 2014 Annual Report. COS Shareholders would own substantially less production and reserves; current Suncor Shareholders would own substantially more Proved Developed Producing Reserves Probable Reserves Proved Plus Probable Reserve life index (RLI) is calculated using Canadian Oil Sands reserves figures prepared by GLJ Petroleum Consultants Ltd. with an effective date of December 31, 2014 and is based on current annual production of 95 million barrels per year of Syncrude production in 2015 (34.9 million barrels net to Canadian Oil Sands). See Oil and Gas Information in the Advisories, and COS AIF dated February 24,

6 COS Unique Strategic Assets: Long Life Reserve Base Best Remaining Undeveloped Oil Sands Mining Leases (1) Represents the total volume of material to be excavated (overburden, interburden and ore) to bitumen in place. See Oil and Gas Information in Advisories. Source: Summary of oil sands mining project metrics prepared by Norwest Corporation for Canadian Oil Sands (16 October 2015), based on the most recent available regulatory filings with the Alberta government. COS has the highest quality undeveloped mining leases in the oil sands

7 Lease Optimization: Lease 29 Syncrude s high quality Lease 29 is contiguous with Suncor s North Steepbank mine COS, with the support of other Syncrude owners, entered into discussions for the sale of Lease 29 to Suncor; billions of dollars of value could be derived The value of Lease 29 is available to other third parties as well Location of Syncrude Lease 29 Relative to Suncor s North Steepbank Mine Syncrude Suncor s Voyageur South Lease Develop new mine Significant capital Lower quality and smaller ore body New environmental footprint Suncor Syncrude s Lease 29 Continue mining Minimal capital Higher quality and larger ore body Suncor s North Steepbank mine Exhausted early 2020s Lease 29 would allow Suncor to avoid significant required capital to develop its Voyageur South mine once its North Steepbank mine is exhausted Not to scale. For illustrative purposes only. Sources: Canadian Oil Sands; Suncor s Voyageur South Mine Fact Sheet. There is significant unrecognized value in COS undeveloped leases

8 COS Unique Strategic Assets: High Value Syncrude Barrel WTI Bakken Syncrude SCO Syncrude barrel has larger cuts of the premium priced fractions Value (as % of crude price) LPG Naptha Distillate VGO Resid 65% 100% 115+% 110% 65-70% Based on analysis provided to COS by Muse Stancil; crude oil fractions shown assume a maximum distillate operating mode; the fraction values as percent of crude are reflective of the pricing relationships for the period on the U.S. Gulf Coast.

9 % of C$ WTI COS Unique Strategic Assets: A Valuable Upgrader Value of Syncrude s upgrader is clear when comparing Syncrude pricing to bitumen pricing Syncrude s SCO has averaged a ~40-55% premium to bitumen Since 2009, Syncrude s upgrader generated ~$5 billion or ~60% of COS cash flow from operations 1 and ~$4 billion or 75% of COS free cash flow 1,2 Bitumen vs. Upgraded SCO Pricing 120% 100% 80% 60% 2014 Avg: SCO at 41% Premium to Bitumen SCO at Syncrude % of C$ WTI Bitumen at Hardisty % of C$ WTI 2015 Q1-Q3 Avg: SCO at 54% Premium to Bitumen 40% 20% Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep Cash flow from operations is an Additional GAAP Financial Measure. Free cash flow, is a Non-GAAP Financial Measure. See Additional GAAP and Non-GAAP Financial Measures. 2. Free cash flow in this calculation excludes major capital projects. Sources: Canadian Oil Sands; Bloomberg. COS upgrader has significant value

10 COS upgrader provides a distinct advantage over bitumen-only project COS should attract a significant premium over a bitumen only-project like Fort Hills COS includes an upgrader to produce light, sweet SCO Fort Hills is 2 years from production and will produce bitumen Mine Only Project vs. Canadian Oil Sands Mine + Upgrader Implied Capital Efficiency ($/bbl/d) Mine Only $56,000 Suncor / Fort Hills Transaction (Sep. 21, 2015) Illustrative Upgrader Value Mine & Upgrader $54,000 Suncor Offer (Oct. 2, 2015) Calculated as Suncor s $310 million acquisition cost for a 10% interest in Fort Hills Project from Total E&P Canada Ltd. plus remaining capital associated with that 10% interest (approximately $700 million) divided by the 18 Mbbl/d productive capacity associated with that 10% interest. 2. Calculated as the total enterprise value of the Suncor Offer (calculated as the Implied Offer Price of $8.84 as of October 2, 2015, multiplied by million Common Shares outstanding, plus long term debt of the Corporation as at June 30, 2015, less cash of the Corporation as at June 30, 2015), divided by estimated 2016 consensus SCO production of 105 Mbbl/d, grossed up by a factor of 0.86 bbl of SCO = 1 bbl of bitumen. Suncor recently paid more for a lower quality asset

11 Syncrude Entering Era of Lower Cost Operations Progress on cost reductions exceeding expectations Over $1 billion, $367 million net to COS, of cost savings realized in first 9 months of 2015 Operating expenses down 18% from last year 1 Capital expenditures down 39% from last year 2 Spending on major projects completed Only regular maintenance spending anticipated until 2019 Decades of production and improved environmental performance Cost reductions have exceeded market expectations, and are expected to continue into future years 1. Compared to 2015 Budget issued December 3, 2014; capital expenditures exclude capitalized interest. 2. Operating and capital expenditures for the 9-month period ending September 30/15 compared with the same period ending September 30/14; capital expenditures reflect completion of major project spending

12 Syncrude s improving cost structure Operating Expenses (C$/bbl) $48.86 $45.69 $40.56 $37.00 Capital Expenditures (C$MM) $930 $564 $368 $ Original Budget 2015 Guidance Avg Forecast Original Budget 2015 Guidance Avg Forecast Expected decreases in operating expenses and capital expenditures are based on management estimates and assumptions and are subject to various risks. See Forward-Looking Information. Source: Canadian Oil Sands. Cost reductions exceeding market expectations, and are expected to continue into future years

13 Strong financial position Net debt 1 of $2.2 billion 2 Long-term debt-to-total capitalization 1 of 38% 2 No debt maturities until 2019 Credit facilities totalling $1.5 billion, extended to 2019 $320 million drawn 2 Canadian Oil Sands is resilient in a lower for longer oil price environment 1. Additional GAAP measure. 2. As at September 30/15

14 COS Shareholders Benefit Significantly When Oil Prices Rise COS cash flow from operations 1 and free cash flow 1 are significantly levered to even small increases in oil prices Since 2001, COS has paid approximately $7.9 billion, or $17 per Common Share, in cash dividends representing all free cash flow 1 generated; oil prices averaged ~US$65/bbl over this period Even a modest increase in oil prices would be expected to significantly increase COS free cash flow 1 and ability to pay dividends COS 2015 Estimated Free Cash Flow Per Share 1 Sensitivity $1.20 $0.92 $0.64 $0.20 $0.29 $0.36 $1.48 Current COS Dividend Implied Current Suncor Dividend US$55 WTI US$60 WTI US$65 WTI US$70 WTI US$75 WTI Source: Canadian Oil Sands. 1. Cash flow from operations is an Additional GAAP Financial Measure. Free cash flow and free cash flow per share are Non-GAAP Financial Measures. See Additional GAAP and Non-GAAP Financial Measures. Free cash flow per share in the chart excludes major capital projects as these are expected to be $nil over the next several years; implied current Suncor dividend assumes $0.29 per common share quarterly dividend and 0.25 exchange ratio per Suncor Offer; assumes exchange rate of 0.79 US$/C$. COS currently covers all costs at US$45 WTI and produces significant free cash flow at US$55+ WTI

15 COS Shareholders Benefit Significantly When Oil Prices Rise COS share price is 98% correlated to oil prices vs. 66% for Suncor When oil prices rise, COS share price has increased more than two and a half times as much as Suncor s 1 Major international oil companies, including Suncor, are acquiring companies and assets and continuing to invest in long-term projects with a belief in rising prices 1. On trading days between January 1, 2015 and October 2, 2015, where the S&P/TSX Energy Index increased, COS share price increased by an average 3.2% whereas Suncor s share price increased by an average 1.2% COS Share Price Ranges at Different WTI Ranges (Last 5 Years) $28.31 $30.05 $31.59 $33.73 $9.70 $5.76 $6.19 $8.60 $10.97 Source: Bloomberg $12.07 $13.48 $17.38 $16.03 $18.30 $19.23 $19.75 $35 - $45 $45 - $55 $55 - $65 $65 - $75 $75 - $85 $85 - $95 $95 - $100 >$100 WTI Range (US$/bbl) Suncor s bid assumes oil prices are low forever while they continue to invest and acquire assuming higher sooner

16 Significant Investments Have Recently Been Made to Improve Production Bitumen Production and Extraction Upgrading Hydrotreating $4.6 billion ($1.7 billion net to COS) to rebuild, redesign and expand mine trains Retrofit, reconfigure and debottleneck centrifuges to improve bitumen quality Modifications to Flue Gas Desulphurizer to remove coker bottleneck Improvements to CO boiler design to reduce unplanned maintenance Replace heat exchangers in hydrogen plants to reduce unit outages Operational improvements remove known production constraints

17 COS is Strongly Positioned to Withstand Low Oil Prices and Emerge With Even Greater Value COS investment proposition remains sound: 1. A proven cash generating business that returns cash to shareholders 2. A premier oil sands mining lease position, located in the heart of the mining region, and an upgrader that converts all bitumen into light, sweet crude oil that receives a premium price 3. Unparalleled oil price leverage; even a modest increase in oil prices would be expected to significantly increase COS free cash flow 1 and ability to pay dividends 4. Positive free cash flow 1 above US$45 WTI and benefiting from operating cost reductions and the recent completion of major projects capital investment 5. A strong balance sheet with significant financial flexibility - a 38% long-term debt-tototal capitalization ratio 1, over $1 billion of its $1.5 billion credit facility still available, and no long-term debt maturities until Suite of value-enhancing opportunities available to and under consideration by Syncrude and its owners 1. Free cash flow and long-term debt-to-total capitalization are Non-GAAP and Additional GAAP Financial Measures, respectively. See Additional GAAP and Non-GAAP Measures.

18 Appendix

19 Suncor Substantially Undervalues COS Unique Strategic Assets: No Control Premium Imperial Oil 25% 36.74% Canadian Oil Sands (COS) COS interest in Syncrude offers a unique opportunity for a third party to potentially achieve control of Syncrude Suncor 12% Sinopec 7.23% Nexen (CNOOC) 5% Mocal (JX Nippon) Murphy Oil The Suncor bid does not offer a control premium to reflect the synergistic value or strategic potential of COS interest COS 36.74% interest offers the clearest path to control of Syncrude; the Suncor bid offers COS Shareholders no value for this

20 Markets for COS Syncrude Production Kitimat Syncrude Edmonton Burnaby Hardisty Quebec City Montreal Chicago Sarnia Cushing Patoka Current synthetic crude oil markets Potential new markets Houston

21 Lease Optimization: Mildred Lake Extension (MLX)

22 Syncrude Crown Royalty Terms* All figures gross to Syncrude Greater of 25% net bitumen revenue less capital and operating costs, or 1% of gross bitumen revenue* Previously based on Synthetic Crude Oil (upgraded from bitumen) revenues and costs Repay $1.25 billion plus interest over 25 years for previously deducted upgrader growth capital Payments deferred during minimum royalty periods Pay an additional $975 million in royalties as per schedule: Total $75 mm $75 mm $100 mm $150 mm $225 mm $350 mm $975 mm Amount will be prorated to extent Syncrude daily average bitumen production over 6-year period less than 345 KBPD * Terms and rates effective Jan. 1/09 to Dec. 31/15. The royalty agreements are available on the Corporation s profile at Effective Jan. 1/16 New Royalty Framework rates apply.

23 2015 Crown Royalty Calculation Based on 2015 Guidance provided October 19, 2015 SCO % Mining Bitumen Revenue 1 2,165 1,559 Operating expenses (1,416) 77% (1,090) Development expense (98) 88% (87) Capital expenditures 3 (324) 56% (182) Net revenue 200 Crown royalty 2 50 Upgrader growth capital recapture payment 26 Additional Crown royalty expense 4 53 Total Crown royalty 129 Crown royalty (per bbl) $ Bitumen revenue is based on an SCO yield of 85% and a bitumen price equal to 60% of C$WTI. 2. Royalty rate is the greater of 25% of net revenue or 1% of revenue. 3. Before capitalized interest. 4. As part of the transition to the generic royalty regime, Syncrude is obligated to pay additional Crown Royalties of $975 million over The $53 million shown above is COS share of the 2015 expense based on accrual accounting; actual cash payments are per the schedule on previous slide. In any given year, the difference will be reflected as a change in Crown royalty payable. The cash payment for 2015 is expected to be approximately $129 million. See COS 2014 Annual MD&A dated Feb. 24/15 for further discussion on Crown royalties.

24 New Royalty Framework Effective January 1, 2016, Syncrude will be subject to the generic Crown royalty framework that applies to most of Alberta s oil sands industry Greater of: Gross deemed bitumen revenues less capital and operating costs, starting at 1% and rising to 9% Net deemed bitumen revenues less capital and operating costs, starting at 25% and rising to 40% Both rates correspond to a sliding scale of C$-WTI prices, starting at less than or equal to $55/bbl up to $120/bbl or higher PLUS, continue to repay $1.25 billion plus interest over 25 years (until 2033) for previously deducted upgrader growth capital (gross to Syncrude) This equates to approximately $26 million per year, net to COS Payments deferred during minimum royalty periods

25 US$ per bbl Quality and Location Differentials Cdn $/bbl Trailing 3-Month Average $125 $115 $105 $95 $85 $75 $65 $55 $45 $35 $25 Brent SCO WTI WCS Bitumen

26 Syncrude: A Leader in Responsible Oil Sands Development Reflects industry best practices Mining Association Toward Sustainable Mining Canadian Association of Petroleum Producers Responsible Canadian Energy Program Canadian Council for Aboriginal Business Progress Aboriginal Relations Program Canadian Business for Social Responsibility Canadian Industry Program for Energy Conservation Aboriginal relations Recognized with Gold Level accreditation by the Canadian Council of Aboriginal Business (CCAB) in their Progressive Aboriginal Relations (PAR) program; only oil sands operator to achieve this level. One of Canada s largest employers of Aboriginal people about 9% of workforce. Total cumulative spending with Aboriginal-owned businesses is over $2 billion Leading Research and Development Operates the industry s only dedicated R&D centre Spends $60 million on R&D each year; one of top 50 spenders in Canada Member of COSIA, an alliance of oil sands producers focused on accelerating the pace of improvement in environmental performance through collaborative action and innovation. For more information, see Syncrude s sustainability report at

27 Advisories Suncor Offer Certain information in this presentation relating to Suncor Energy Inc. ( Suncor ) and the Suncor offer to purchase all of the common shares ( Common Shares ) of Canadian Oil Sands Limited (the Corporation ) has been derived from the Suncor offer and bid circular dated October 5, 2015 and other public sources. Neither the board of directors of the Corporation nor the Corporation independently verified such information or assumes any responsibility for the accuracy or completeness of such information or for any failure by Suncor to disclose events that may have occurred or that may affect the significance or accuracy of any such information. The information provided in this presentation regarding the Suncor offer is a summary only, does not purport to be complete and is qualified in its entirety by reference to the complete text of the directors circular of the Corporation dated October 19, 2015 (the Directors Circular ). The Directors Circular contains important information that should be read carefully before any decision is made with respect to the Suncor offer. Forward-Looking Information This presentation, including the discussion of the reasons for the board of directors unanimous recommendation that shareholders of the Corporation ( Shareholders ) reject the Suncor offer and not tender their Common Shares, contains forward-looking information (as defined in the Securities Act (Alberta)) and statements (collectively, forward-looking statements ) that are based on expectations, estimates and projections as of the date of this presentation. These forward-looking statements can often, but not always, be identified by the use of forward-looking terminology such as plans, predicts, expects or does not expect, is expected, budget, scheduled, estimates, forecasts, intends, anticipates or does not anticipate, or believes, or variations of such words and phrases, or statements that certain actions, events or results may, could, would, might or will be taken, occur or be achieved. Examples of such forward-looking statements in this presentation include, but are not limited to, the Corporation s expectations for future profitability; expectations regarding the Corporation s cash flow from operations and free cash flow; expectations with respect to production, capital expenditures and operating expenses at Syncrude; expectations with respect to dividend payments by the Corporation; expectations with respect to the Corporation s liquidity; the amount of reserves recoverable and the time frame to recover such reserves; the estimated resources; future trading prices of the Common Shares; future commodity prices; all expectations regarding net debt; the regulatory application relating to the Mildred Lake mine extension (the MLX Project ); capital investment and construction for the MLX Project; Crown royalties payable in the future; the estimated sales volume, operating expenses, capital expenditures, cash flow from operations in 2015; the realized selling price for the Corporation s product in 2015; the estimated price for crude oil and natural gas in 2015; and the estimated foreign exchange rate in Although the Corporation believes that the assumptions and expectations represented by such forward-looking statements are reasonable and reflect the current views of the Corporation with respect to future events, there can be no assurance that such assumptions and expectations will prove to be correct. The factors or assumptions on which the forward-looking statements are based include, but are not limited to: the assumptions outlined in the Corporation s 2015 guidance document as posted on the Corporation s website at as of the date hereof and as subsequently amended or replaced from time to time, including without limitation, the assumptions as to production, operating expenses, capital expenditures and oil prices; the successful and timely implementation of capital and maintenance projects; Syncrude s business, maintenance and spending plans; the ability to obtain regulatory and joint venture owner approval; the continuation of assumed tax, royalty and other legislative and regulatory regimes; and the accuracy of the estimates of the reserves and resources.

28 Advisories In addition to being subject to a number of assumptions, forward-looking statements in this presentation involve known and unknown risks, uncertainties and other factors that may cause actual results and developments to be materially different from those expressed or implied by such forward-looking statements. Some of the risks and other factors which could cause actual results or events to differ materially from current expectations expressed in the forward-looking statements contained in this presentation include, but are not limited to: volatility of crude oil prices; volatility of the synthetic crude oil ( SCO ) to West Texas Intermediate differential; the impact of the anticipated Syncrude cost reductions not materializing; the impact that pipeline capacity and apportionment and refinery demand have on prices for SCO and the Corporation s ability to deliver SCO; the impacts of legislative and regulatory changes especially those which relate to royalties, taxation, tailings, water and the environment; the impact of new technologies on the cost of oil sands mining; the impacts of rising costs associated with tailings and water management; the inability of Syncrude to obtain required consents, permits or approvals, including without limitation, the inability of Syncrude to obtain approval to return water from its operations; various events which could disrupt operations including fires, equipment failures and severe weather; unsuccessful or untimely implementation of capital or maintenance projects; the impact of technology on operations and processes and how new technology may not perform as expected; the obtaining of required joint venture owner approvals from the Syncrude owners for expansions, operational issues and contractual issues; labour turnover and shortages and the productivity achieved from labour in the Fort McMurray area; uncertainty of estimates with respect to reserves and resources; the supply and demand metrics for oil and natural gas; the variances of stock market activities generally; currency and interest rate fluctuations; volatility of natural gas prices; the Corporation s inability to either generate sufficient cash flow from operations to meet its current and future obligations or obtain external sources of debt and equity capital; general economic, business and market conditions; and such other risks and uncertainties described in the Corporation s Annual Information Form dated February 24, 2015 and in the reports and filings made with securities regulatory authorities from time to time by the Corporation which are available on the Corporation s profile on SEDAR at and on the Corporation s website at You are cautioned that the foregoing list of important factors is not exhaustive. Furthermore, the forward-looking statements contained in this presentation are made as of the date of this presentation and unless required by law, the Corporation does not undertake any obligation to update publicly or revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained in this presentation are expressly qualified by this cautionary statement. Additional GAAP and Non-GAAP Financial Measures In this presentation, reference is made to additional GAAP and non-gaap financial measures that do not have any standardized meaning as prescribed by GAAP. Additional GAAP financial measures are line items, headings or subtotals in addition to those required under GAAP, and financial measures disclosed in the notes to the financial statements which are relevant to an understanding of the financial statements and are not presented elsewhere in the financial statements. Non-GAAP and additional GAAP measures have been described and presented in order to provide Shareholders with additional measures for analyzing the Corporation s operational performance, its ability to generate funds to finance its operations and information regarding its liquidity. Users are cautioned that non-gaap and additional GAAP financial measures presented by the Corporation may not be comparable with measures provided by other entities.

29 Advisories Additional GAAP financial measures include: cash flow from operations (which is calculated as cash from operating activities before changes in non-cash working capital) and long-term debt-to-total capitalization (which is calculated as long-term debt divided by long-term debt plus Shareholders equity). For more information on additional GAAP financial measures please refer to our 2015 Third Quarter MD&A which is available on the Corporation s profile on SEDAR at and on the Corporation s website at Non-GAAP financial measures include: free cash flow (which is calculated as cash from operating activities before changes in non-cash working capital less capital expenditures), free cash flow per share (which is calculated as cash flow from operations before changes in non-cash working capital less capital expenditures, divided by the weighted-average number of shares outstanding in the period) and total enterprise value (total enterprise value is discussed in this presentation). Oil and Gas Information The securities regulatory authorities in Canada have adopted NI , which imposes oil and gas disclosure standards for Canadian public issuers engaged in oil and gas activities. NI permits oil and gas issuers, in their filings with Canadian securities regulatory authorities, to disclose not only proved, probable and possible reserves but also resources, and to disclose reserves and production on a gross basis before deducting royalties. Probable reserves, possible reserves and resources are of a higher risk and are less likely to be accurately estimated or recovered than proved reserves. The Corporation is permitted to disclose reserves in accordance with Canadian securities law requirements and the disclosure included in this presentation includes reserves designated as probable reserves. The U.S. Securities and Exchange Commission s ( SEC ) definitions of proved, probable and possible reserves are different than the definitions contained in NI ; therefore, proved and probable reserves disclosed in this presentation in compliance with NI may not be comparable to United States standards. The SEC requires United States oil and gas reporting companies, in their filings with the SEC, to disclose only proved reserves after the deduction of royalties and production due to others but permits the optional disclosure of probable and possible reserves. Moreover, as permitted by NI , the Corporation has determined and disclosed the net present value of future net revenue from its reserves in its NI compliant reserves disclosure using forecast prices and costs. The SEC requires that reserves and related future net revenue be estimated based on historical 12-month average prices, but permits the optional disclosure of revenue estimates based on different price and cost criteria, including standardized future prices or management s own forecasts.

30 Advisories In this presentation, reference is made to the metrics reserve life index and total volume to bitumen in place. Reserve life index is the ratio of reserves divided by the current annual production rate. Reserve life index is included for Shareholders as a measure of the Corporation s sustainability. Reserve life index does not have any standardized meaning and should not be used to make comparisons. As a result, readers are cautioned as to the reliability of disclosure of reserve life index. Total volume to bitumen in place is the ratio of total volume of material to be excavated (overburden, interburden and ore) to bitumen in place. It indicates the amount of overburden, interburden and ore that must be removed to obtain a given volume of bitumen; however, it is not indicative of the total volume of the ore body nor does it reflect all criteria which relate to assessing the quality of an ore body. Total volume to bitumen in place does not have any standardized meaning and should not be used to make comparisons. As a result, readers are cautioned as to the reliability of disclosure of total volume to bitumen in place. bbl means barrel of oil. bbl/d means barrels of oil per day. Mbbl/d means thousand barrels of oil per day. MM means million. MMbbl means million barrels of oil. probable reserves are those additional reserves that are less certain to be recovered than proved reserves. It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated proved plus probable reserves. proved developed producing reserves or PDP are those reserves that correspond to volumes recoverable through installed extraction equipment and infrastructure operational at the time of the reserves estimate. proved plus probable reserves are those additional reserves that are less certain to be recovered than proved reserves. NI defines the certainty level as at least a 50 per cent probability that the quantities actually recovered will equal or exceed the sum of the estimated proved plus probable reserves. Therefore, under NI , the proved plus probable reserves represent a best estimate or expected reserves. proved reserves are those reserves that can be estimated with a high degree of certainty to be recoverable. NI further identifies the certainty level for proved reserves as at least a 90 per cent probability that the quantities actually recovered will equal or exceed the estimated proved reserves. NI means National Instrument Standards of Disclosure for Oil and Gas Activities.