Canadian Oil Sands Announces Third Quarter 2012 Financial

Canadian Oil Sands Announces Third Quarter 2012 Financial Results and
a $0.35 Per Share Dividend 
CALGARY, ALBERTA -- (Marketwire) -- 10/29/12 -- Canadian Oil Sands
Limited (TSX:COS) (OTCQX:COSWF) 
All financial figures are unaudited and in Canadian dollars unless
otherwise noted. 
Highlights for the three and nine-month periods ended September 30,
2012: 


 
--  COS has declared a quarterly dividend of $0.35 per Share. The dividend
    will be paid on November 30, 2012 to Shareholders of record on November
    26, 2012. 
--  Cash flow from operations decreased eight per cent to $470 million
    ($0.97 per Share) in the third quarter of 2012 from $512 million ($1.06
    per Share) in the third quarter of 2011. The decrease was due mainly to
    a lower average realized selling price, partially offset by higher sales
    volumes in 2012. Year-to-date cash flow from operations decreased 24 per
    cent to $1,163 million ($2.40 per Share) in 2012 from $1,534 million
    ($3.16 per Share) in the same 2011 period. The decline is due mainly to
    a lower average realized selling price and lower sales volumes in 2012. 
--  Net income increased to $338 million ($0.70 per Share) in the third
    quarter of 2012 from $242 million ($0.50 per Share) in the third quarter
    of 2011. Year-to-date net income decreased to $760 million ($1.57 per
    Share) in 2012 from $912 million ($1.88 per Share) in 2011. In addition
    to the variances in sales, pricing and Crown royalties, 2012 net income
    was impacted by foreign exchange gains and losses and tax expense. 
--  The third quarter 2012 realized selling price averaged $89.89 per
    barrel, an $8.00 per barrel decrease from $97.89 per barrel in the third
    quarter of 2011. The realized selling price in the first nine months of
    2012 averaged $92.59 per barrel, a $7.61 per barrel decrease from
    $100.20 per barrel in the 2011 comparative period. The lower realized
    prices in 2012 reflect a Synthetic Crude Oil ("SCO") discount relative
    to WTI in 2012 as opposed to a significant premium in 2011. 
--  Sales volumes averaged about 113,300 barrels per day in the third
    quarter of 2012, up from 109,300 barrels per day in the 2011 third
    quarter. Year-to-date, sales volumes averaged about 103,700 barrels per
    day compared with 111,000 barrels per day in the 2011 period. 
--  Per barrel operating expenses in the third quarter of 2012 decreased to
    $36.17 from $37.19 in the third quarter of 2011, mainly as a result of
    higher production volumes. Year-to-date, 2012 operating expenses have
    increased to $39.14 per barrel from $36.56 per barrel in the comparative
    2011 period, reflecting lower production volumes in 2012. Total
    operating expenses year-to-date in 2012 are essentially flat compared to
    the same period in 2011. 
--  COS announced earlier this month that Syncrude will embark upon a mine
    extension project at its Mildred Lake mine ("the MLX Project"). The MLX
    Project will employ the same mine trains that are currently being
    constructed at Mildred Lake. This project is expected to be highly
    economic, enabling Syncrude to access a large bitumen source at a cost
    that is expected to be significantly lower than the cost of a new mine. 

 
"As a result of stronger than expected pricing for SCO year-to-date,
we have increased our 2012 cash flow guidance by 20 per cent to
approximately $1.7 billion. Based on our guidance, we anticipate
exiting the year with $1.6 billion of cash and about $0.2 billion of
net debt. While we had expected to draw down on our cash balances
this year, we were able to fund our capital expenditures and
dividends essentially from internally generated cash flow.  As such,
we continue to be well-positioned to finance the remainder of our
major project capital program while maintaining an attractive
dividend.  These projects are tracking to plan, and Syncrude's owners
remain confident in the schedule and budget estimates," said Marcel
Coutu, President and CEO.  
Mr. Coutu added: "The recently announced MLX project further
positions Syncrude very favourably amongst oil sands mining projects.
Our Mildred Lake and Aurora North mines should operate into the 2030s
and 2040s, respectively. The scope of the MLX project is of a much
smaller scale than what is required to develop a new mine, with the
majority of construction limited to a bridge and utilities. As a
result, we believe this will be a highly economic project while also
providing the opportunity to minimize new land disturbance by
utilizing existing infrastructure."   


 
Highlights                                                                  
                                                                            
                                       Three Months Ended  Nine Months Ended
                                             September 30       September 30
                                           2012      2011     2012      2011
----------------------------------------------------------------------------
                                                                            
Cash flow from operations(1)($                                              
 millions)                             $    470  $    512 $  1,163  $  1,534
 Per Share(1)($/Share)                 $   0.97  $   1.06 $   2.40  $   3.16
                                                                            
Net income ($ millions)                $    338  $    242 $    760  $    912
 Per Share, Basic and Diluted                                               
  ($/Share)                            $   0.70  $   0.50 $   1.57  $   1.88
                                                                            
Sales volumes(2)                                                            
 Total (mmbbls)                            10.4      10.1     28.4      30.3
 Daily average (bbls)                   113,331   109,260  103,669   110,988
                                                                            
Realized SCO selling price ($/bbl)     $  89.89  $  97.89 $  92.59  $ 100.20
                                                                            
West Texas Intermediate ("WTI")                                             
 (average $US/bbl)                     $  92.20  $  89.54 $  96.16  $  95.47
                                                                            
SCO premium (discount) to WTI                                               
 (weighted average $/bbl)              $  (2.09) $   9.77 $  (4.32) $   6.99
                                                                            
Operating expenses ($/bbl)             $  36.17  $  37.19 $  39.14  $  36.56
                                                                            
Capital expenditures ($ millions)      $    354  $    189 $    787  $    438
                                                                            
Dividends ($ millions)                 $    170  $    145 $    485  $    387
 Per Share ($/Share)                   $   0.35  $   0.30 $   1.00  $   0.80
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(1) Cash flow from operations and cash flow from operations per Share are   
    non-GAAP measures and are defined on page 5 within the Management's     
    Discussion and Analysis ("MD&A") section of this report.                
                              
                                              
(2) The Corporation's sales volumes differ from its production volumes due  
    to changes in inventory, which are primarily in-transit pipeline        
    volumes. Sales volumes are net of purchases.                            

 
Syncrude operations 
SCO production from Syncrude during the third quarter of 2012
totalled 28.8 million barrels, or 313,300 barrels per day, compared
with 27.5 million barrels, or 299,100 barrels per day, in the third
quarter of 2011. Both periods reflected stable operations. Volumes in
the 2011 third quarter reflect the Coker 8-2 turnaround, which
commenced in early September 2011 and continued through October 2011.
There was no major maintenance activity in the third quarter of 2012. 
Syncrude produced 77.4 million barrels, or 282,300 barrels per day,
of SCO through the first nine months of 2012 compared with 82.0
million barrels, or 300,500 barrels per day, in the comparative 2011
period. Production volumes in 2012 reflect maintenance on Coker 8-1
in the first quarter and the planned Coker 8-3 and Vacuum
Distillation Unit turnarounds in the second quarter while 2011
production volumes partially reflect the Coker 8-2 turnaround. 
MLX Project  
The MLX Project will leverage current investments in the replacement
of the two mine trains being constructed at the Mildred Lake mine. By
employing existing operational and environmental infrastructure to
access nearby high-quality bitumen deposits on Syncrude's existing
leases, MLX is expected to be highly economic. 
The proposed project should extend the life of mining operations at
Mildred Lake by about a decade. Project scoping is currently
underway, and pending regulatory approval, construction and spending
would commence in the next 10 years.  
COS included in the Dow Jones Sustainability North America Index 
COS was recently named for the third time to the Dow Jones
Sustainability Indexes ("DJSI") North America Index.  
The DJSI is a partnership between the Dow Jones Indexes and SAM
Sustainability Assessments that rates the top corporate performers in
financial performance and sustainable business practices. The DJSI
reviews companies on several general and industry-specific topics
related to economic, environmental and social dimensions, including
corporate governance, environmental policy, climate strategy, human
capital development and labour practices. The DJSI North America
Index ranks the top 20 percent of the 600 largest North American
companies on the Dow Jones Total Stock Market Index. More information
about the DJSI is available at http://www.sustainability-index.com/. 
2012 Outlook 
Canadian Oil Sands has revised its outlook for 2012, which includes
the following estimates and assumptions: 


 
--  Annual Syncrude production of 107 million barrels (292,300 barrels per
    day) with a range of 105 million to 108 million barrels. Net to Canadian
    Oil Sands, this is equivalent to 39.3 million barrels (107,400 barrels
    per day). The 107 million barrel estimate assumes robust production
    without major interruptions for the remainder of the year. No major
    maintenance is planned for the fourth quarter of 2012. 
--  A realized selling price of $94 per barrel, an increase of $10 per
    barrel from prior guidance, which assumes a U.S. $95 per barrel WTI oil
    price, a foreign exchange rate of $1.00 U.S./Cdn, and a SCO discount to
    Cdn dollar WTI of $1.00. 
--  Operating expenses of $1,485 million, or $37.77 per barrel, reflecting
    actual costs incurred to date and a reduced natural gas price assumption
    of $2.25 per gigajoule. 
--  Total expected capital expenditures have decreased by $10 million to
    $1,114 million.  
--  Current taxes of approximately $40 million in 2012 and approximately
    $400 million in 2013. 
--  Cash flow from operations of $1,746 million, or $3.60 per Share. After
    deducting forecast 2012 capital expenditures, we estimate $632 million
    in remaining cash flow from operations for the year, or $1.30 per Share.
--  We expect cash levels to decrease significantly from the current $1.5
    billion as we fund the major capital projects and repay the 2013 debt
    maturity. As a result, net debt levels should rise to $1 billion to $2
    billion by the end of 2014, coincident with the reduced capital
    expenditure risk from the completion of the major capital projects. 

 
More information on the outlook is provided in the Management's
Discussion and Analysis ("MD&A") section of this report and the
October 29, 2012 guidance document, which is available on our web
site at www.cdnoilsands.com under "Investor Information." 
The 2012 Outlook contains forward-looking information and users are
cautioned that the actual amounts may vary from the estimates
disclosed. Please refer to the "Forward-Looking Information Advisory"
in the MD&A section of this report for the risks and assumptions
underlying this forward-looking information.  
Management's Discussion and Analysis 
The following Management's Discussion and Analysis ("MD&A") was
prepared as of October 29, 2012 and should be read in conjunction
with the unaudited consolidated financial statements and notes
thereto of Canadian Oil Sands Limited (the "Corporation") for the
three and nine months ended September 30, 2012 and September 30,
2011, the audited consolidated financial statements and MD&A of the
Corporation for the year ended December 31, 2011 and the
Corporation's Annual Information Form ("AIF") dated February 23,
2012. Additional information on the Corporation, including its AIF,
is available on SEDAR at www.sedar.com or on the Corporation's
website at www.cdnoilsands.com. References to "Canadian Oil Sands" or
"we" include the Corporation, its subsidiaries and partnerships. The
financial results of Canadian Oil Sands have been prepared in
accordance with Canadian Generally Accepted Accounting Principles
("GAAP") and are reported in Canadian dollars, unless stated
otherwise.  
Forward Looking Information Advisory 
In the interest of providing the Corporation's shareholders and
potential investors with information regarding the Corporation,
including management's assessment of the Corporation's future
production and cost estimates, plans and operations, certain
statements throughout this MD&A and the related press release contain
"forward-looking information" under applicable securities law.
Forward-looking statements are typically identified by words such as
"anticipate", "expect", "believe", "plan", "intend" or similar words
suggesting future outcomes. 
Forward-looking statements in this MD&A and the related press release
include, but are not limited to, statements with respect to: the
expectations regarding the 2012 annual Syncrude forecasted production
range of 105 million barrels to 108 million barrels and the
single-point Syncrude production estimate of 107 million barrels
(39.3 million barrels net to the Corporation); future dividends and
any increase or decrease from current payment amounts; the
establishment of future dividend levels with the intent of absorbing
short-term market volatility over several quarters; the level of
natural gas consumption in 2012 and beyond; the expected sales,
operating expenses, Crown royalties, capital expenditures and cash
flow from operations for 2012; the anticipated amount of current
taxes in 2012 and 2013; the expectation that proceeds from the March
2012 senior note offering will be used to repay U.S. $300 million of
senior notes which mature on August 15, 2013, to fund major capital
projects over the next few years and for general corporate purposes;
expectations regarding the Corporation's cash levels for 2012 and
over the next several years; the expected price for crude oil and
natural gas in 2012; the expected foreign exchange rates in 2012; the
expected realized selling price, which includes the anticipated
differential to West Texas Intermediate ("WTI") to be received in
2012 for the Corporation's product; the expectations regarding net
debt; the anticipated impact of increases or decreases in oil prices,
production, operating expenses, foreign exchange rates and natural
gas prices on the Corporation's cash flow from operations; the
expectation that regular maintenance capital costs will average
approximately $10 per barrel over the next 
few years; 
the expected amount of total major project costs, anticipated target
in-service dates and estimated completion percentages for the Mildred
Lake mine train replacements, the Aurora North mine train
relocations, the composite tails plant at the Aurora North mine and
the centrifuge plant at the Mildred Lake mine; the expectation that
the Corporation will finance the major projects primarily with
existing cash balances and cash flow from operations; the cost
estimates for 2012 to 2015 major project spending; the expectation
that the volatility in the Synthetic Crude Oil ("SCO") to WTI
differential is likely to persist for several years until additional
pipeline capacity is available to deliver crude oil from western
Canada to Cushing, Oklahoma or the U.S. Gulf Coast; the expectation
that the proposed Mildred Lake Mine extension project (the "MLX
Project) should extend the life of mining operations at Mildred Lake
by about a decade; the belief that the Mildred Lake and Aurora North
mines should operate into the 2030s and 2040s, respectively; the
expectations regarding the timing of construction and spending for
the MLX Project; and the expectation that the MLX Project should
enable Syncrude to access a large bitumen source at a cost that is
expected to be significantly lower than the cost of a new mine. 
You are cautioned not to place undue reliance on forward-looking
statements, as there can be no assurance that the plans, intentions
or expectations upon which they are based will occur. By their
nature, forward-looking statements involve numerous assumptions,
known and unknown risks and uncertainties, both general and specific,
that contribute to the possibility that the predictions, forecasts,
projections and other forward-looking statements will not occur.
Although the Corporation believes that the 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 information
is based include, but are not limited to: the assumptions outlined in
the Corporation's guidance document as posted on the Corporation's
website at www.cdnoilsands.com as of October 29, 2012 and as
subsequently amended or replaced from time to time, including without
limitation, the assumptions as to production, operating expenses and
oil prices; the successful and timely implementation of capital
projects; Syncrude's major project spending plans; the ability to
obtain regulatory and Syncrude joint venture owner approval; our
ability to either generate sufficient cash flow from operations to
meet our current and future obligations or obtain external sources of
debt and equity capital; the continuation of assumed tax, royalty and
regulatory regimes and the accuracy of the estimates of our reserves
and resources volumes.  
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 MD&A and the related
press release include, but are not limited to: the impacts of
legislative or regulatory changes especially as such relate to
royalties, taxation, the environment and tailings; the impact of
technology on operations and processes and how new complex technology
may not perform as expected; skilled labour shortages and the
productivity achieved from labour in the Fort McMurray area; the
supply and demand metrics for oil and natural gas; the impact that
pipeline capacity and refinery demand have on prices for our
products; the unanimous joint venture owner approval for major
expansions and changes in product types; the variances of stock
market activities generally; global economic conditions/volatility;
normal risks associated with litigation, general economic, business
and market conditions; the impact of Syncrude being unable to meet
the conditions of its approval for its tailings management plan under
Directive 074; volatility of crude oil prices; volatility of the SCO
to WTI price differential; unsuccessful or untimely implementation of
capital or maintenance projects and such other risks and
uncertainties described in the Corporation's AIF dated February 23,
2012 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 www.sedar.com and on the
Corporation's website at www.cdnoilsands.com. 
You are cautioned that the foregoing list of important factors is not
exhaustive. Furthermore, the forward-looking statements contained in
this MD&A and the related press release are made as of October 29,
2012, and unless required by law, the Corporation does not undertake
any obligation to update publicly or to 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 MD&A and the related press release are expressly qualified by
this cautionary statement. 
Non-GAAP Financial Measures 
In this MD&A and the related press release, we refer to financial
measures that do not have any standardized meaning as prescribed by
Canadian GAAP. These non-GAAP financial measures include cash flow
from operations, cash flow from operations on a per Share basis, net
debt, total debt, total net capitalization, total capitalization, net
debt-to-total net capitalization, and total debt-to-total
capitalization. In addition, the Corporation refers to various per
barrel figures, such as net realized selling prices, operating
expenses and Crown royalties, which also are considered non-GAAP
measures. We derive per barrel figures by dividing the relevant sales
or cost figure by our sales volumes, which are net of purchased crude
oil volumes in a period. Non-GAAP financial measures provide
additional information that we believe is meaningful regarding the
Corporation's operational performance, its liquidity and its capacity
to fund dividends, capital expenditures and other investing
activities. Users are cautioned that non-GAAP financial measures
presented by the Corporation may not be comparable with measures
provided by other entities. 
Cash flow from operations is calculated as cash from operating
activities, as reported on the Consolidated Statement of Cash Flows,
before changes in non-cash working capital. Cash flow from operations
per Share is calculated as cash flow from operations divided by the
weighted-average number of Shares outstanding in the period. We
believe cash flow from operations, which is not impacted by
fluctuations in non-cash working capital balances, is more indicative
of operational performance. The majority of our non-cash working
capital is liquid and typically settles within 30 days. 
Cash flow from operations is reconciled to cash from operating
activities as follows: 


 
                                      Three Months Ended   Nine Months Ended
                                            September 30        September 30
($ millions)                             2012       2011      2012      2011
----------------------------------------------------------------------------
                                                                            
Cash flow from operations            $    470   $    512  $  1,163  $  1,534
Change in non-cash working                                                  
 capital(1)                              (124)       144       105       108
----------------------------------------------------------------------------
Cash from operating activities(1)    $    346   $    656  $  1,268  $  1,642
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(1) As reported in the Consolidated Statements of Cash Flows.               
                                                                            
Overview                                                                    
                                     Three Months Ended    Nine Months Ended
                                           September 30         September 30
                                        2012       2011      2012       2011
----------------------------------------------------------------------------
Cash flow from operations(1)($                                              
 millions)                          $    470   $    512  $  1,163   $  1,534
 Per Share(1)($/Share)              $   0.97   $   1.06  $   2.40   $   3.16
                                                                            
Net income ($ millions)             $    338   $    242  $    760   $    912
 Per Share, Basic and Diluted                                               
  ($/Share)                         $   0.70   $   0.50  $   1.57   $   1.88
      
                                                                      
Sales volumes(2)                                                            
 Total (mmbbls)                         10.4       10.1      28.4       30.3
 Daily average (bbls)                113,331    109,260   103,669    110,988
                                                                            
Realized SCO selling price ($/bbl)  $  89.89   $  97.89  $  92.59   $ 100.20
                                                                            
West Texas Intermediate ("WTI")                                             
 (average $US/bbl)                  $  92.20   $  89.54  $  96.16   $  95.47
                                                                            
SCO premium (discount) to WTI       $  (2.09)  $   9.77  $  (4.32)  $   6.99
 (weighted average $/bbl)                                                   
                                                                            
Operating expenses ($/bbl)          $  36.17   $  37.19  $  39.14   $  36.56
                                                                            
Capital expenditures ($ millions)   $    354   $    189  $    787   $    438
                                                                            
Dividends ($ millions)              $    170   $    145  $    485   $    387
 Per Share ($/Share)                $   0.35   $   0.30  $   1.00   $   0.80
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(1) Cash flow from operations and cash flow from operations per Share are   
    non-GAAP measures and are defined on page 5 of this report.             
(2) The Corporation's sales volumes differ from its production volumes due  
    to changes in inventory, which are primarily in-transit pipeline        
    volumes. Sales volumes are net of purchases.                            

 
Cash flow from operations decreased eight per cent to $470 million,
or $0.97 per Share, in the third quarter of 2012 from $512 million,
or $1.06 per Share, in the third quarter of 2011, due mainly to a
lower realized selling price partially offset by higher sales volumes
in 2012. Year-to-date cash flow from operations decreased 24 per cent
to $1,163 million, or $2.40 per Share, in 2012 from $1,534 million,
or $3.16 per Share, in 2011 due mainly to a lower realized selling
price and lower sales volumes in 2012. 
The third quarter 2012 realized selling price averaged $89.89 per
barrel, an $8.00 per barrel decrease from $97.89 per barrel in the
third quarter of 2011. The realized selling price in the first nine
months of 2012 averaged $92.59 per barrel, a $7.61 per barrel
decrease from $100.20 per barrel in the 2011 comparative period. The
lower realized prices in 2012 reflect a Synthetic Crude Oil ("SCO")
discount relative to WTI in 2012 as opposed to a significant premium
in 2011. 
SCO production from the Syncrude Joint Venture ("Syncrude") during
the third quarter of 2012 totalled 28.8 million barrels, or 313,300
barrels per day, compared with 27.5 million barrels, or 299,100
barrels per day, in the third quarter of 2011. Net to the
Corporation, sales volumes totalled 10.4 million barrels, or about
113,300 barrels per day, in the third quarter of 2012, compared with
10.1 million barrels, or about 109,300 barrels per day, in the third
quarter of 2011, based on Canadian Oil Sands' 36.74 per cent working
interest in Syncrude. Both periods exhibited stable operations.
Volumes in the 2011 third quarter reflect the Coker 8-2 turnaround,
which commenced in early September and continued through October.
There was no major maintenance activity in the third quarter of 2012. 
Syncrude produced 77.4 million barrels, or 282,300 barrels per day,
of SCO through the first nine months of 2012 compared with 82.0
million barrels, or 300,500 barrels per day, in the comparative 2011
period. Net to the Corporation, sales volumes totalled 28.4 million
barrels, or 103,700 barrels per day, through the first nine months of
2012, down from 30.3 million barrels, or 111,000 barrels per day, in
the comparative 2011 period. Volumes in 2012 reflect Coker 8-1
maintenance in the first quarter and the planned Coker 8-3 and Vacuum
Distillation Unit turnarounds in the second quarter, while 2011
production volumes partially reflect the Coker 8-2 turnaround.  
Additional information on realized selling prices and sales volumes
is provided in the "Sales Net of Crude Oil Purchases and
Transportation Expense" section of this MD&A. 
Operating expenses in the third quarter of 2012 decreased $1.02 per
barrel to $36.17 per barrel from $37.19 per barrel in the third
quarter of 2011, mainly as a result of higher 2012 production
volumes. Year-to-date, 2012 operating expenses increased $2.58 per
barrel to $39.14 per barrel from $36.56 per barrel in 2011,
reflecting lower 2012 production volumes. Additional information is
provided in the "Operating Expenses" section of this MD&A. 
Crown royalties decreased to $33 million, or $3.16 per barrel, in the
third quarter of 2012, from $65 million, or $6.53 per barrel, in the
third quarter of 2011, due primarily to higher bitumen-related
capital costs in 2012. On a year-to-date basis, 2012 Crown royalties
decreased to $145 million, or $5.11 per barrel, from $234 million, or
$7.74 per barrel, in 2011, reflecting lower 2012 bitumen volumes and
higher bitumen-related capital costs. Additional information is
provided in the "Crown Royalties" section of this MD&A. 
Net income increased to $338 million, or $0.70 per Share, in the
third quarter of 2012 from $242 million, or $0.50 per Share, in the
third quarter of 2011. Year-to-date net income decreased to $760
million, or $1.57 per Share, in 2012 from $912 million, or $1.88 per
Share, in 2011. In addition to the variances in net sales and Crown
royalties described earlier, the change in net income was impacted by
foreign exchange gains and losses and tax expense. 
The Corporation recognizes foreign exchange gains and losses
primarily as a result of revaluations of its U.S. dollar-denominated
long-term debt caused by fluctuations in U.S./Cdn dollar exchange
rates. The Corporation recorded foreign exchange gains of $51 million
and $41 million for the third quarter and first nine months of 2012,
respectively, reflecting a strengthening Canadian dollar during these
periods. Conversely, foreign exchange losses of $75 million and $45
million were recorded in the third quarter and first nine months of
2011, respectively, reflecting a weakening Canadian dollar during
those periods. 
Tax expense increased to $104 million in the third quarter of 2012
from $95 million in the third quarter of 2011 due to higher 2012
earnings before tax, while year-to-date tax expense in 2012 fell to
$243 million from $317 million in 2011 due to lower 2012 earnings
before tax. 
Capital expenditures totalled $354 million and $787 million in the
third quarter and first nine months of 2012, respectively, up from
$189 million and $438 million in the comparative 2011 periods, as
spending increased on multi-year capital projects to replace or
relocate Syncrude mining trains and to support tailings management
plans. Additional information is provided in the "Capital
Expenditures" section of this MD&A. 
Net debt, comprised of current and non-current portions of long-term
debt less cash and cash equivalents, decreased to $0.3 billion at
September 30, 2012 from $0.4 billion at December 31, 2011. While
$1,163 million of cash flow from operations in the first nine months
of 2012 fell short of capital expenditures and dividend payments of
$787 million and $485 million, respectively, a reduction in non-cash
working capital balances more than offset this difference. 


 
Review of Financial Results                                                 
                                                                            
Net Income per Barrel    
                                                   
                                                                            
                              Three Months Ended          Nine Months Ended 
                                    September 30               September 30 
($ per barrel)(1)         2012     2011 $ Change     2012     2011 $ Change 
----------------------------------------------------------------------------
Sales net of crude oil                                                      
 purchases and                                                              
 transportation                                                             
 expense               $ 90.10  $ 98.42  $ (8.32) $ 92.82  $100.68  $ (7.86)
Operating expenses      (36.17)  (37.19)    1.02   (39.14)  (36.56)   (2.58)
Crown royalties          (3.16)   (6.53)    3.37    (5.11)   (7.74)    2.63 
----------------------------------------------------------------------------
                       $ 50.77  $ 54.70  $ (3.93) $ 48.57  $ 56.38  $ (7.81)
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Non-production                                                              
 expenses              $ (2.40) $ (2.86) $  0.46  $ (2.65) $ (2.85) $  0.20 
Administration and                                                          
 insurance               (0.93)   (0.65)   (0.28)   (0.96)   (0.77)   (0.19)
Depreciation and                                                            
 depletion               (9.28)   (9.20)   (0.08)  (10.00)   (9.41)   (0.59)
Net finance expense      (0.87)   (0.97)    0.10    (1.15)   (1.30)    0.15 
Foreign exchange                                                            
 (loss) gain              4.86    (7.43)   12.29     1.43    (1.47)    2.90 
Tax expense              (9.96)   (9.47)   (0.49)   (8.55)  (10.47)    1.92 
----------------------------------------------------------------------------
                        (18.58)  (30.58)   12.00   (21.88)  (26.27)    4.39 
----------------------------------------------------------------------------
Net income per barrel  $ 32.19  $ 24.12  $  8.07  $ 26.69  $ 30.11  $ (3.42)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Sales volumes                                                               
 (mmbbls)(2)              10.4     10.1      0.3     28.4     30.3     (1.9)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Unless otherwise specified, the per barrel measures in this MD&A have   
    been derived by dividing the relevant item by sales volumes in the      
    period.                                                                 
(2) Sales volumes, net of purchased crude oil volumes.                      
                                                                            
Sales Net of Crude Oil Purchases and Transportation Expense                 
                                                                            
                            Three Months Ended            Nine Months Ended 
                                  September 30                 September 30 
($ millions,                                                                
 except where                                                               
 otherwise noted)      2012      2011 $ Change      2012      2011 $ Change 
----------------------------------------------------------------------------
                                                                            
Sales(1)           $  1,022  $  1,034  $   (12) $  2,983  $  3,209  $  (226)
Crude oil                                                                   
 purchases              (72)      (38)     (34)     (319)     (138)    (181)
Transportation                                                              
 expense                 (9)       (7)      (2)      (27)      (21)      (6)
----------------------------------------------------------------------------
                   $    941  $    989  $   (48) $  2,637  $  3,050  $  (413)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Sales volumes(2)                                                            
 Total (mmbbls)        10.4      10.1      0.3      28.4      30.3     (1.9)
 Daily average                                                              
  (bbls)            113,331   109,260    4,071   103,669   110,988   (7,319)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Realized SCO                                                                
 selling                                                                    
 price(3)(average                                                           
 $Cdn/bbl)         $  89.89  $  97.89  $ (8.00) $  92.59  $ 100.20  $ (7.61)
                                                                            
West Texas                                                                  
 Intermediate                                                               
 ("WTI") (average                                                           
 $US/bbl)             92.20     89.54     2.66     96.16     95.47     0.69 
                                                                            
SCO premium                                                                 
 (discount) to WTI                                                          
 (weighted average                                                          
 $Cdn/bbl)            (2.09)     9.77   (11.86)    (4.32)     6.99   (11.31)
                                                                            
Average foreign                                                             
 exchange rate                                                              
 ($US/$Cdn)            1.00      1.02    (0.02)     1.00      1.02    (0.02)
                                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Sales include sales of purchased crude oil and sulphur.                 
(2) Sales volumes, net of purchased crude oil volumes.                      
(3) SCO sales net of crude oil purchases and transportation expense divided 
    by sales volumes, net of purchased crude oil volumes.                   

 
The $48 million, or five per cent, decrease in third quarter 2012
sales, net of crude oil purchases and transportation expense,
reflects a lower average realized SCO selling price partially offset
by higher sales volumes relative to the 2011 third quarter. 
The third quarter 2012 realized selling price averaged $89.89 per
barrel, an $8.00 per barrel decrease from $97.89 per barrel in the
third quarter of 2011. The Corporation realized a $2.09 per barrel
weighted-average SCO discount to WTI in the third quarter of 2012 as
opposed to a $9.77 per barrel premium in the third quarter of 2011.
WTI averaged U.S. $92 per barrel and the Canadian dollar averaged
$1.00 U.S. in the 2012 third quarter compared with U.S. $90 per
barrel and $1.02 U.S., respectively, in the 2011 third quarter. 
Third quarter 2012 sales volumes averaged 113,300 barrels per day, up
from 109,300 barrels per day in the 2011 third quarter, primarily due
to the 2011 Coker 8-2 turnaround. 
On a year-to-date basis, the $413 million, or 14 per cent, decrease
in 2012 sales, net of crude oil purchases and transportatio
n expense,
reflects lower sales volumes and a lower average realized SCO selling
price. 
Sales volumes averaged 103,700 barrels per day in the first nine
months of 2012 compared with 111,000 barrels per day in the
comparative 2011 period, reflecting lower production at Syncrude.
Volumes in 2012 reflect Coker 8-1 maintenance in the first quarter
and the planned Coker 8-3 and Vacuum Distillation Unit turnarounds in
the second quarter, while 2011 production volumes reflect the Coker
8-2 turnaround. 
The realized selling price in the first nine months of 2012 averaged
$92.59 per barrel compared with $100.20 per barrel in the 2011
comparative period. The Corporation realized a $4.32 per barrel
weighted-average SCO discount to WTI in the first nine months of 2012
as opposed to a $6.99 per barrel premium in the comparative 2011
period. WTI averaged U.S. $96 per barrel and the Canadian dollar
averaged $1.00 U.S. in the first nine months of 2012, compared with
U.S. $95 per barrel and $1.02 U.S., respectively, in the comparative
2011 periods. 
The volatile SCO to WTI differential reflects supply/demand
fundamentals for inland North American light crude oil. Increasing
North American production of both SCO and light crude oil, and
refinery modifications that enable processing of heavier crude oils,
can push light crude sales, including SCO, to more distant
refineries, thereby increasing transportation costs and reducing the
net realized price. Pipeline apportionments can exacerbate this
situation by restricting the ability of SCO and other crude oils to
reach their preferred markets. However, strong demand from customers
and increases in rail shipments of inland crude to coastal refineries
can offset these forces. These supply and demand dynamics create
price volatility that is likely to persist for several years until
additional pipeline capacity is available to deliver crude oil from
western Canada to Cushing, Oklahoma or the U.S. Gulf Coast. 
The Corporation purchases crude oil from third parties to fulfill
sales commitments with customers when there are shortfalls in
Syncrude's production and to facilitate certain transportation and
tankage arrangements and operations. Sales include the sale of
purchased crude oil while the cost of these purchases is included in
crude oil purchases and transportation expense. Crude oil purchases
were higher in the three and nine months ended September 30, 2012
relative to the comparative 2011 periods, reflecting additional 2012
purchased volumes to support transportation and storage arrangements
and unanticipated production shortfalls. 
Operating Expenses 
The following table breaks down operating expenses into their major
components and shows operating expenses per barrel of bitumen and
SCO. The information allocates costs to bitumen production and
upgrading on the basis used to determine Crown royalties. 


 
                           Three Months Ended             Nine Months Ended 
                                 September 30                  September 30 
                          2012        2011(4)           2012        2011(4) 
----------------------------------------------------------------------------
($ per barrel)  Bitumen    SCO Bitumen    SCO Bitumen    SCO Bitumen    SCO 
----------------------------------------------------------------------------
Bitumen                                                                     
 production      $23.84 $27.46  $24.07 $28.61  $27.64 $32.01  $24.05 $28.61 
Internal fuel                                                               
 allocation(2)     1.92   2.21    1.86   2.21    2.13   2.47    2.38   2.83 
----------------------------------------------------------------------------
Total produced                                                              
 bitumen costs    25.76  29.67   25.93  30.82   29.77  34.48   26.43  31.44 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Upgrading                                                                   
 costs(1)                10.09           9.63          11.35           9.69 
Less: internal                                                              
 fuel allocation                                                            
 to bitumen(2)           (2.21)         (2.21)         (2.47)         (2.83)
----------------------------------------------------------------------------
Total Syncrude                                                              
 operating                                                                  
 expenses                37.55          38.24          43.36          38.30 
Canadian Oil                                                                
 Sands                                                                      
 adjustments(3)          (1.38)         (1.05)         (4.22)         (1.74)
----------------------------------------------------------------------------
Total operating                                                             
 expenses                36.17          37.19          39.14          36.56 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
(thousands of                                                               
 barrels per                                                                
 day)                                                                       
----------------------------------------------------------------------------
Syncrude                                                                    
 production                                                                 
 volumes            361    313     355    299     327    282     358    301 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Upgrading costs include the production and ongoing maintenance costs    
    associated with processing and upgrading of bitumen to SCO.             
(2) Reflects energy generated by the upgrader that is used in the bitumen   
    production process and is valued by reference to natural gas and diesel 
    prices. Natural gas prices averaged $2.00 per GJ and $2.10 per GJ in the
    three and nine months ended September 30, 2012, respectively, and $3.50 
    per GJ and $3.60 per GJ in the three and nine months ended September 30,
    2011, respectively. Diesel prices averaged $0.80 per litre and $0.90 per
    litre in the three and nine months ended September 30, 2012,            
    respectively, and $0.90 per litre in the three and nine months ended    
    September 30, 2011, respectively.                                       
(3) Canadian Oil Sands' adjustments mainly pertain to actual reclamation    
    costs and major turnaround costs, which Syncrude includes in operating  
    expenses. Canadian Oil Sands capitalizes major turnaround costs and     
    recognizes actual reclamation costs through its asset retirement        
    obligation. Major turnaround costs are expensed through depreciation and
    reclamation costs are expensed through both depletion and accretion     
    (within net finance expense). Costs of non-major turnarounds are        
    expensed through operating expenses.                                    
(4) Certain comparative period amounts have been restated to conform to the 
    current period presentation.                                            

 
Operating expenses in the third quarter of 2012 decreased $1.02 per
barrel to $36.17 per barrel from $37.19 per barrel in the third
quarter of 2011, mainly as a result of higher 2012 production
volumes. Year-to-date, 2012 operating expenses increased $2.58 per
barrel to $39.14 per barrel from $36.56 per barrel in 2011
,
reflecting lower 2012 production volumes.  
On a total dollar basis, operating expenses in the third quarter and
first nine months of 2012 were $378 million and $1,112 million,
respectively, compared with $374 million and $1,108 million in the
comparative 2011 periods. Operating expenses in the 2012 periods
reflect: 


 
--  higher mining contractor costs in the 2012 third quarter relative to the
    2011 third quarter; 
--  more maintenance activity in the first nine months of 2012 compared to
    the same period in 2011; and 
--  an increase in the value of Syncrude's long-term incentive plans, as
    opposed to a decrease in the comparative 2011 periods. A portion of
    Syncrude's long-term incentive plans is based on the market return
    performance of several Syncrude owners' shares, including those of the
    Corporation, which was stronger in 2012 than in 2011. 

 
The increase in operating expenses was offset by: 


 
--  lower purchased energy costs, due to lower natural gas prices and diesel
    volumes, relative to the comparative 2011 periods. 

 
Crown Royalties 
Crown royalties decreased to $33 million, or $3.16 per barrel, in the
third quarter of 2012 from $65 million, or $6.53 per barrel, in the
third quarter of 2011 due primarily to higher bitumen-related capital
costs in 2012. On a year-to-date basis, Crown royalties decreased to
$145 million, or $5.11 per barrel, in 2012 from $234 million, or
$7.74 per barrel, in 2011 due primarily to lower bitumen volumes and
higher bitumen-related capital costs in 2012. 
The Syncrude Royalty Amending Agreement requires that bitumen be
valued by a formula that references the value of bitumen based on
North American heavy oil reference prices adjusted for reasonable
quality, transportation and handling deductions (including diluent
costs) to reflect the quality and location differences between
Syncrude's bitumen and the reference price of bitumen. Canadian Oil
Sands' share of the royalties recognized for the period from January
1, 2009 to September 30, 2012 are estimated to be approximately $45
million lower than the amount calculated using the
Alberta-government-provided bitumen value for Syncrude. The Syncrude
owners and the Alberta government continue to discuss the basis for
reasonable quality, transportation, and other adjustments but if such
discussions do not result in an agreed upon solution, either party
may seek judicial determination of the matter. The cumulative impact,
if any, of such discussions or judicial determination, as applicable,
would be recognized immediately and would impact both net income and
cash flow from operations accordingly. 
Non-Production Expenses 
Non-production expenses totalled $25 million and $75 million in the
third quarter and first nine months of 2012, respectively, compared
with $28 million and $86 million in the comparative 2011 periods.
Non-production expenses consist primarily of development expenditures
relating to capital programs, which are expensed, such as
pre-feasibility engineering, technical and support services, research
and development, evaluation drilling and regulatory and stakeholder
consultation expenditures. Non-production expenses can vary from
period to period depending on the number of projects underway and the
development stage of the projects. 
Depreciation and Depletion Expense  
Depreciation and depletion expense totalled $96 million and $284
million in the third quarter and first nine months of 2012,
respectively, compared with $93 million and $285 million in the
comparative 2011 periods, as Canadian Oil Sands' depreciable
property, plant and equipment, and the estimated useful lives over
which most of these assets are depreciated, were similar in both
periods. 


 
Net Finance Expense                                                         
                                                                            
                                     Three Months Ended   Nine Months Ended 
                                           September 30        September 30 
($ millions)                             2012      2011      2012      2011 
----------------------------------------------------------------------------
Interest costs                        $    28   $    22   $    78   $    67 
  Less capitalized interest               (25)      (15)      (65)      (39)
----------------------------------------------------------------------------
Interest expense                            3         7        13        28 
Accretion of asset retirement                                               
 obligation                                 6         4        19        12 
----------------------------------------------------------------------------
Net finance expense                   $     9   $    11   $    32   $    40 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
Interest costs in 2012 were higher than the comparative 2011 periods
as a result of the U.S. $700 million debt issued on March 29, 2012;
however, interest expense in 2012 was lower than the comparative 2011
periods because a higher portion of interest costs were capitalized
in 2012, as cumulative capital expenditures on qualifying assets
rose. The period-over-period increases in accretion of the asset
retirement obligation from 2011 to 2012 reflect the increase in the
estimated asset retirement obligation recognized in the fourth
quarter of 2011. 


 
Foreign Exchange (Gain) Loss                                                
                                                                            
                                     Three Months Ended   Nine Months Ended 
                                           September 30        September 30 
($ millions)                             2012      2011      2012      2011 
----------------------------------------------------------------------------
Foreign exchange (gain) loss - long-                                        
 term debt                            $   (64)  $    83   $   (48)  $    49 
Foreign exchange (gain) loss - other       13        (8)        7        (4)
----------------------------------------------------------------------------
Total foreign exchange (gain) loss    $   (51)  $    75   $   (41)  $    45 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
Foreign exchange gains/losses are primarily the result of
revaluations of our U.S. dollar-denominated long-term debt caused by
fluctuations in U.S./Cdn dollar exchange rates. 
The foreign exchange gains on long-term debt in 2012 were the result
of a strengthening in the value of the Canadian dollar relative to
the U.S. dollar to $1.02 U.S./Cdn at September 30, 2012 from $0.98
U.S./Cdn at June 30, 2012 and December 31, 2011. Conversely, the
foreign exchange losses in 2011 were the result of a weakening in the
value of the Canadian dollar relative to the U.S. dollar to $0.96
U.S./Cdn at September 30, 2011 from $1.04 U.S./Cdn at June 30, 2011
and $1.01 U.S./Cdn at December 31, 2010. 


 
Tax Expense                                                                 
                                                                            
                                        Three Months Ended Nine Months Ended
                                              September 30      September 30
($ millions)                                 2012     2011     2012     2011
----------------------------------------------------------------------------
Current tax expense                       $    10  $     -  $    30  $     -
Deferred tax expense                           94       95      213      317
----------------------------------------------------------------------------
Total tax expense                         $   104  $    95  $   243  $   317
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
The quarter-over-quarter increase in total tax expense from 2011 to
2012 reflects higher earnings before tax in 2012, while the decrease
in year-to-date total tax expense from 2011 to 2012 reflects lower
2012 earnings before tax. 
Asset Retirement Obligation 
Canadian Oil Sands increased its estimated asset retirement
obligation from $1,037 million at December 31, 2011 to $1,076 million
at September 30, 2012. The increase reflects a lower interest rate
used to discount future reclamation payments, partially offset by $48
million of reclamation spending during the first nine months of 2012.
The $29 million current portion of the asset retirement obligation is
included in accounts payable and accrued liabilities, while the
$1,047 million non-current portion is presented separately as an
asset retirement obligation on the September 30, 2012 Consolidated
Balance Sheet. 
Pension and Other Post-Employment Benefit Plans  
The Corporation's share of the estimated unfunded portion of Syncrude
Canada's pension and other post-employment benefit plans decreased to
$460 million at September 30, 2012 from $465 million at December 31,
2011, reflecting contributions to the plans largely offset by a lower
discount rate used in determining the liability. For the nine months
ended September 30, 2012, a $28 million actuarial loss, net of $10
million in deferred taxes, has been recognized in other comprehensive
income to reflect the change in the discount rate. 


 
Summary of Quarterly Results                                               
                                                                           
                                                 2012               2011   
                                           Q3        Q2        Q1        Q4
---------------------------------------------------------------------------
                                                                           
Sales(1)($ millions)                 $    941  $    740  $    956  $    884
                                                                           
Net income ($ millions)              $    338  $    101  $    321  $    232
 Per Share, Basic & Diluted          $   0.70  $   0.21  $   0.66  $   0.48
                                                                           
Cash flow from operations(2)($                                             
 millions)                           $    470  $    245  $    454  $    363
 Per Share(2)                        $   0.97  $   0.51  $   0.94  $   0.75
                                                                           
Dividends ($ millions)               $    170  $    170  $    145  $    146
 Per Share                           $   0.35  $   0.35  $   0.30  $   0.30
                                                                           
Daily average sales volumes(3) (bbls) 113,331    89,597   108,108    91,259
                                                                           
Realized SCO selling price ($/bbl)   $  89.89  $  90.45  $  97.07  $ 104.78
                                                                           
Operating expenses(4) ($/bbl)        $  36.71  $  50.66  $  32.68  $  46.88
                                                                           
Purchased natural gas price ($/GJ)   $   2.00  $   1.79  $   2.23  $   3.19
                                                                           
WTI(5) (average $US/bbl)             $  92.20  $  93.35  $ 103.03  $  94.06
                                                                           
Foreign exchange rates ($US/$Cdn)                                          
 Average                             $   1.00  $   0.99  $   1.00  $   0.98
 Quarter-end                         $   1.02  $   0.98  $   1.00  $   0.98
---------------------------------------------------------------------------
---------------------------------------------------------------------------
 
Summary of Quarterly Results                                                
                                                                            
                                                  2011                  2010
                                            Q3        Q2        Q1        Q4
----------------------------------------------------------------------------
                                                                            
Sales(1)($ millions)                  $    989  $  1,045  $  1,016  $    912
                                                                            
Net income ($ millions)               $    242  $    346  $    324  $    575
 Per Share, Basic & Diluted           $   0.50  $   0.71  $   0.67  $   1.19
                                                                            
Cash flow from operations(2)($                                              
 millions)                            $    512  $    544  $    478  $    398
 Per Share(2)                         $   1.06  $   1.12  $   0.99  $   0.82
                                                                            
Dividends ($ millions)                $    145  $    145  $     97  $    242
 Per Share                            $   0.30  $   0.30  $   0.20  $   0.50
                                                                            
Daily average sales volumes(3) (bbls)  109,260   102,938   120,894   114,739
                                                                            
Realized SCO selling price ($/bbl)    $  97.89  $ 111.00  $  93.04  $  83.97
                                                                            
Operating expenses(4) ($/bbl)         $  37.19  $  37.07  $  35.53  $  35.81
                                                                            
Purchased natural gas price ($/GJ)    $   3.51  $   3.62  $   3.59  $   3.45
                                                                            
WTI(5) (average $US/bbl)              $  89.54  $ 102.34  $  94.60  $  85.24
                                                                            
Foreign exchange rates ($US/$Cdn)                                           
 Average                              $   1.02  $   1.03  $   1.02  $   0.99
 Quarter-end                          $   0.96  $   1.04  $   1.03  $   1.01
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Sales after crude oil purchases and transportation expense.             
(2) Cash flow from operations and cash flow from operations per Share are   
    non-GAAP measures and are defined on page 5 of this report.             
(3) Daily average sales volumes net of crude oil purchases.                 
(4) Derived from operating expenses, as reported on the Consolidated        
    Statements of Income and Comprehensive Income, divided by sales volumes 
    during the period.                                                      
(5) Pricing obtained from Bloomberg.                                        

 
During the last eight quarters, the following items have had a
significant impact on the Corporation's financial results:  


 
--  fluctuations in realized selling prices have affected the Corporation's
    sales, Crown royalties, net income and cash flow from operations. WTI
    prices have ranged from U.S. $76 per barrel to U.S. $114 per barrel, and
    the monthly average differentials between SCO and Canadian dollar WTI
    prices have ranged from a $15 per barrel premium to a $15 per barrel
    discount; 
--  U.S. to Canadian dollar exchange rate fluctuations have resulted in
    foreign exchange gains and losses on the revaluation of U.S. dollar-
    denominated debt and have impacted realized selling prices; 
--  planned and unplanned maintenance activities have reduced quarterly
    production volumes and revenues and increased operating expenses; and, 
--  beginning in the first quarter of 2011, net income reflects an increase
    in tax expense following the December 31, 2010 conversion from an income
    trust to a corporation. Net income was higher in the fourth quarter of
    2010 due to a $269 million deferred tax recovery resulting from re-
    measuring the deferred tax liability at a lower tax rate upon corporate
    conversion. 

 
Quarterly variances in net income and cash flow from operations are
caused mainly by fluctuations in realized selling prices, production
and sales volumes, operating expenses and natural gas prices. Net
income is also impacted by foreign exchange gains and losses,
depreciation and depletion, and tax expense. The dividends paid to
Shareholders are likewise dependent on the factors impacting cash
flow from operations as well as the amount and timing of capital
expenditures. 
While the supply/demand balance for crude oil affects selling prices,
the impact of this relationship has not displayed significant
seasonality. Natural gas prices are typically higher in winter months
as heating demand rises, but this seasonality is influenced by
weather conditions and North American natural gas inventory levels.
Recent technological developments in North American natural gas
production have significantly increased production levels and reduced
natural gas prices. These conditions may persist for the next several
years. 
Syncrude production levels may not display seasonal patterns or
trends. While maintenance and turnaround activities are typically
scheduled to avoid the winter months, the exact timing of unit
outages cannot be precisely scheduled and unplanned outages may
occur. The costs of major turnarounds are capitalized as property,
plant and equipment and depreciated over the period until the next
scheduled turnaround. The costs of all other turnarounds and
maintenance activities are expensed
 in the period incurred, which can
result in volatility in quarterly operating expenses. All turnarounds
and maintenance activities impact per barrel operating expenses
because sales volumes are lower in the periods when this work is
occurring. 


 
Capital Expenditures                                                        
                                                                            
                                      Three Months Ended   Nine Months Ended
                                            September 30        September 30
($ millions, except % amounts)            2012      2011      2012      2011
----------------------------------------------------------------------------
                                                                            
Major Projects                                                              
                                                                            
  Mildred Lake Mine Train                                                   
   Replacement                        $    135  $     39  $    266  $     77
  Reconstruct crushers, surge                                               
   facilities, and slurry prep                                              
   facilities to support tailings                                           
   storage requirements                                                     
                                                                            
  Aurora North Mine Train Relocation        32         7        64        15
  Relocate crushers, surge                                                  
   facilities, and slurry prep                                              
   facilities to support tailings                                           
   storage requirements                                                     
                                                                            
  Aurora North Tailings Management          52         9        91        21
  Construct a composite tails (CT)                                          
   plant at the Aurora North mine to                                        
   process tailings                                                         
                                                                            
  Centrifuge Tailings Management            16         -        36         -
  Construct a centrifuge plant at                                           
   the Mildred Lake mine to process                                         
   tailings                                                                 
                                                                            
  Syncrude Emissions Reduction (SER)         7        30        18        96
  Retrofit technology into                                                  
   Syncrude's original two cokers to                                        
   reduce total sulphur dioxide and                                         
   other emissions                                                          
                                                                            
----------------------------------------------------------------------------
Capital expenditures on major                                               
 projects                                  242        85       475       209
----------------------------------------------------------------------------
                                                                            
Regular maintenance                                                         
  Capitalized turnaround costs               9        17        76        23
  Other capital(1)                          78        72       171       167
----------------------------------------------------------------------------
Capital expenditures on regular                                             
 maintenance                                87        89       247       190
----------------------------------------------------------------------------
                                                                            
Capitalized interest                        25        15        65        39
                                                                            
----------------------------------------------------------------------------
Total capital expenditures            $    354  $    189  $    787  $    438
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Other regular maintenance capital includes expenditures on relocation of
    tailings facilities and other infrastructure projects.                  

 
Year-to-date capital expenditures increased to $787 million in 2012
from $438 million in 2011, and to $354 million in the third quarter
of 2012 from $189 million in the third quarter of 2011. The increase
reflects spending on the major capital projects at Syncrude. More
information on the major projects is provided in the "Outlook"
section of this MD&A. 
The increase in capitalized turnaround costs from 2011 to 2012
reflects the planned turnarounds of Coker 8-3 and the Vacuum
Distillation Unit during the second quarter of 2012; by comparison,
2011 capitalized turnaround costs reflect the Coker 8-2 turnaround,
which commenced in September 2011 and continued through October 2011.
The increase in capitalized interest costs from 2011 to 2012 reflects
higher cumulative capital expenditures on qualifying assets in 2012. 
Contractual Obligations and Commitments  
During the first nine months of 2012, Canadian Oil Sands entered into
new contractual obligations totalling approximately $1.2 billion for
the transportation and storage of crude oil in support of the
Corporation's strategy to secure access to preferred markets and
enhance marketing flexibility. The Corporation also assumed $312
million in new funding commitments primarily related to the major
capital projects discussed in the "Outlook" section of this MD&A,
increased its funding commitment by $120 million in respect of
Syncrude Canada's registered pension plan, and assumed $84 million in
new commitments related to Syncrude Canada's employee retention
program. 
Dividends 
On October 29, 2012, the Corporation declared a quarterly dividend of
$0.35 per Share for a total dividend of approximately $170 million.
The dividend will be paid on November 30, 2012 to Shareholders of
record on November 26, 2012. 
Dividend payments continue to be set quarterly by the Board of
Directors in the context of current and expected crude oil prices,
economic conditions, Syncrude's operating performance, and the
Corporation's capacity to finance operating and investing
obligations. Dividend levels are established with the intent of
absorbing short-term market volatility over several quarters.
Dividend levels also recognize our intention to fund the current
major projects primarily with cash flow from operations and existing
cash balances, while maintaining a strong balance sheet to reduce
exposure to potential oil price declines, capital cost increases or
major operational upsets. 


 
Liquidity and Capital Resources                                             
                                                                            
                                                September 30    December 31 
($ millions, except % amounts)                          2012           2011 
----------------------------------------------------------------------------
Total debt(1,2)                                    $   1,773      $   1,132 
Cash and cash equivalents                             (1,469)          (718)
----------------------------------------------------------------------------
Net debt(1,3)                                      $     304      $     414 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Shareholders' equity                               $   4,456      $   4,210 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total net capitalization(1,4)                      $   4,760      $   4,624 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total capitalization(1,5)                          $   6,229      $   5,342 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net debt-to-total net capitalization(1,6) (%)              6              9 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total debt-to-total capitalization(1,7) (%)               28             21 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Non-GAAP measure.                                                       
(2) Includes current and non-current portions of long-term debt.            
(3) Total debt less cash and cash equivalents.                              
(4) Net debt plus Shareholders' equity.                                     
(5) Total debt plus Shareholders' equity.                                   
(6) Net debt divided by total net capitalization.                           
(7) Total debt divided by total capitalization.                             

 
Net debt, comprised of current and non-current portions of long-term
debt less cash and cash equivalents, decreased to $0.3 billion at
September 30, 2012 from $0.4 billion at December 31, 2011. While
$1,163 million of cash flow from operations in the first nine months
of 2012 fell short of capital expenditures and dividend payments of
$787 million and $485 million, respectively, a reduction in non-cash
working capital balances more than offset this difference.
Shareholders' equity increased to $4.5 billion at September 30, 2012
from $4.2 billion at December 31, 2011, as net income exceeded
dividends in the first nine months of 2012. 
In June 2012, the Corporation extended the terms of its credit
facilities by one year. The term of the $1,500 million operating
credit facility was extended to June 1, 2016 and the $40 million
extendible revolving term credit facility to June 30, 2014. No
amounts were drawn against these facilities at September 30, 2012. 
In March 2012, Canadian Oil Sands issued U.S. $400 million of 4.5%
senior unsecured notes due April 1, 2022 and U.S. $300 million of
6.0% senior unsecured notes due April 1, 2042 (collectively, the
"Notes"). Interest on the Notes is payable semi-annually on April 1
and October 1. Proceeds from the issues will be used to repay U.S.
$300 million of senior notes, which mature on August 15, 2013, to
fund major capital projects over the next few years and for general
corporate purposes. 
The senior notes indentures and credit facility agreements contain
certain covenants that restrict Canadian Oil Sands' ability to sell
all or substantially all of its assets or change the nature of its
business, and limit total debt-to-total capitalization to 55 per
cent. Canadian Oil Sands is in compliance with its debt covenants
and, with a total debt-to-total capitalization of 28 per cent at
September 30, 2012, a significant increase in debt or decrease in
equity would be required to negatively impact the Corporation's
financial flexibility. 
The Corporation's liquidity position has improved in the first nine
months of 2012 as a result of our growing cash position and the
issuance of the Notes. We expect cash levels to decrease
significantly over the next several years as we fund major capital
projects and repay the 2013 debt maturity. As a result, net debt
levels should rise to $1 billion to $2 billion by the end of 2014,
coincident with reduced capital expenditure risk from the completion
of our major capital projects. 
Shareholders' Capital and Trading Activity 
The Corporation's shares trade on the Toronto Stock Exchange under
the symbol COS. On September 30, 2012, the Corporation had a market
capitalization of approximately $10.2 billion with 484.6 million
shares outstanding and a closing price of $21.05 per Share. The
following table summarizes the trading activity for the third quarter
of 2012. 


 
Canadian Oil Sands Limited - Trading Activity                               
                                                                            
                                         Third                              
                                       Quarter              August September
                                          2012 July 2012      2012      2012
----------------------------------------------------------------------------
                                                                            
Share price                                                                 
  High                                $  22.34  $  21.41  $  22.30  $  22.34
  Low                                 $  18.74  $  18.74  $  19.62  $  20.54
  Close                               $  21.05  $  20.18  $  21.04  $  21.05
                                                                            
Volume of Shares traded (millions)        91.7      25.4      30.8      35.5
Weighted average Shares outstanding                                         
 (millions)                              484.5     484.5     484.5     484.6
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
Financial Instruments and Financial Risks 
The Corporation's financial instruments include cash and cash
equivalents, accounts receivable, reclamation trust investments,
accounts payable, accrued liabilities and current and non-current
portions of long-term debt. The nature, the Corporation's use of, and
the risks associated with these instruments are unchanged from
December 31, 2011. The Corporation did not have any financial
derivatives outstanding in the first nine months of 2012. 
Changes in Accounting Policies 
There were no new accounting policies adopted, nor any changes to
accounting policies, in the first nine months of 2012. 


 
2012 Outlook                                                                
                                                                            
                                                       As of          As of 
(millions of Canadian dollars, except volume      October 29        July 27 
 and per barrel amounts)                                2012           2012 
----------------------------------------------------------------------------
Operating assumptions                                                       
Syncrude production (mmbbls)                             107            110 
Canadian Oil Sands sales (mmbbls)                       39.3           40.4 
Sales, net of crude oil purchases and                                       
 transportation                                    $   3,698      $   3,393 
Operating expenses                                 $   1,485      $   1,514 
Operating expenses per barrel                      $   37.77      $   37.46 
Crown royalties                                    $     191      $     139 
Cash flow from operations                          $   1,746      $   1,461 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Capital expenditure assumptions                                             
Major projects                                     $     701      $     714 
Regular maintenance                                $     325      $     335 
Capitalized interest                               $      88      $      75 
Total capital expenditures                         $   1,114      $   1,124 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Business environment assumptions                                            
West Texas Intermediate (U.S.$/bbl)                $   95.00      $   90.00 
Premium (Discount) to average Cdn$ WTI prices                               
 (Cdn$/bbl)                                        $   (1.00)     $   (7.00)
Foreign exchange rate (U.S.$/Cdn$)                 $    1.00      $    0.99 
AECO natural gas (Cdn$/GJ)                         $    2.25      $    2.50 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
Canadian Oil Sands has increased estimated 2012 sales, net of crude
oil purchases and transportation expense, to $3,698 million, due
primarily to an increase in the forecast realized selling price
partially offset by a decrease in estimated production volumes. 
The forecast plant-gate realized selling price has increased $10 per
barrel to $94 per barrel and assumes a U.S. $95 per barrel WTI oil
price, a foreign exchange rate of $1.00 U.S./Cdn, and a SCO discount
to Cdn dollar WTI of $1.00 per barrel. 
The increase in forecast SCO prices relative to WTI reflects actual
year-to-date results and our assessment of supply/demand fundamentals
for inland North American light crude oil. Increasing North American
production of SCO and light crude oil, and refinery modifications
that enable processing of heavier crude oils, can push light crude
sales, including SCO, to more distant refineries, thereby increasing
transportation costs and reducing the net realized price. Pipeline
apportionments can exacerbate this situation by restricting the
ability of SCO and other crude oils to reach their preferred markets.
However, strong demand from customers and increases in rail shipments
of inland crude to coastal refineries can offset these forces. These
supply and demand dynamics create price volatility that is likely to
persist for several years until additional pipeline capacity is
available to deliver crude oil from western Canada to Cushing,
Oklahoma or the U.S. Gulf Coast. 
We have reduced our single-point 2012 Syncrude production estimate by
three million barrels to 107 million barrels (39.3 million barrels
net to the Corporation) or 292,300 barrels per day (107,400 barrels
per day net to the Corporation), and have adjusted our production
range estimate to 105 million to 108 million barrels, based on the
results achieved during the first nine months of the year. The 107
million barrel single-point estimate assumes robust production
without major interruptions for the remainder of the year. There is
no major maintenance planned for the fourth quarter of 2012. 
We estimate 2012 operating expenses of $1,485 million, or $37.77 per
barrel, reflecting actual costs incurred to date and a reduced
natural gas price assumption of $2.25 per gigajoule. 
The estimate for 2012 capital expenditures has decreased by $10
million to $1,114 million.  
We estimate current taxes of approximately $40 million in 2012 and
approximately $400 million in 2013. 
We estimate 2012 cash flow from operations of $1,746 million, or
$3.60 per Share. After deducting forecast 2012 capital expenditures,
we estimate $632 million in remaining cash flow from operations for
the year, or $1.30 per Share. 
We estimate having approximately $1.6 billion of cash, and
approximately $0.2 billion of net debt, at December 31, 2012. 
We expect cash levels to decrease significantly over the next several
years as we fund major capital projects and repay the 2013 debt
maturity. As a result, net debt levels should rise to $1 billion to
$2 billion by the end of 2014, coincident with reduced capital
expenditure risk from the completion of the major capital projects.  
Changes in certain factors and market conditions could potentially
impact Canadian Oil Sands' Outlook. The following table provides a
sensitivity analysis of the key factors affecting the Corporation's
performance. 


 
Outlook Sensitivity Analysis (October 29, 2012)                             
                                                          Cash Flow from    
                                                            Operations      
                                                             Increase       
                                       Annual                               
Variable(1)                            Sensitivity     $ millions  $ / Share
----------------------------------------------------------------------------
Syncrude operating expense decrease    Cdn$1.00/bbl     $      32  $    0.07
Syncrude operating expense decrease    Cdn$50 million   $      15  $    0.03
WTI crude oil price increase           U.S.$1.00/bbl    $      33  $    0.07
Syncrude production increase           2 million bbls   $      57  $    0.12
Canadian dollar weakening              U.S.$0.01/Cdn$   $      30  $    0.06
AECO natural gas price decrease        Cdn$0.50/GJ      $      23  $    0.05
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) 2012 cash flow from operations sensitivities are not expected to be     
    significantly impacted by income taxes; however, in 2013, Canadian Oil  
    Sands expects to record current taxes of approximately $400 million.    

 
The 2012 Outlook contains forward-looking information and users are
cautioned that the actual amounts may vary from the estimates
disclosed. Please refer to the "Forward-Looking Information Advisory"
section of this MD&A for the risks and assumptions underlying this
forward-looking information. 
Major Projects 
The following tables provide cost and schedule estimates for
Syncrude's major projects. Regular maintenance capital costs for
years after 2012 will be provided on an annual basis when we disclose
the budgets for those years, and are currently estimated to average
approximately $10 per barrel over the next few years. 


 
Major Projects - Total Project Cost and Schedule Estimates (1)              
                                         Estimated %                        
                              Total Cost Complete at                  Target
                                Estimate     Sep 30, Estimated %  In-Service
                            ($ billions)     2012(2)    Accuracy        Date
----------------------------------------------------------------------------
Mildred Lake                                                                
 Mine Train                                                                 
  Replacement       Syncrude   $     4.2          30    +15%/-15%    Q4 2014
 Reconstruct             COS         1.6                                    
  crushers, surge      share                                                
  facilities, and                                                           
  slurry prep                                                               
  facilities to                                                             
  support tailings                                                          
  storage                                                                   
  requirements                                                              
                                                                            
Aurora North Mine                                                           
 Train Relocation   Syncrude   $     1.0          40    +15%/-15%    Q1 2014
 Relocate crushers,      COS         0.4                                    
  surge facilities,    s
hare                                                
  and slurry prep                                                           
  facilities to                                                             
  support tailings                                                          
  storage                                                                   
  requirements                                                              
                                                                            
Aurora North                                                                
 Tailings ManagementSyncrude   $     0.8          55    +15%/-15%    Q4 2013
 Construct a             COS         0.3                                    
  composite tails      share                                                
  (CT) plant at the                                                         
  Aurora North mine                                                         
  to process                                                                
  tailings                                                                  
                                                                            
Centrifuge Tailings                                                         
 Management         Syncrude   $     1.9           5    +15%/-15%    H1 2015
 Construct a             COS         0.7                                    
  centrifuge plant     share                                                
  at the Mildred                                                            
  Lake mine to                                                              
  process tailings                                                          
                                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Major Projects - Annual Spending Profile(1)                                 
                                                                            
                                Spent to                                    
($ billions)                Dec 31, 2011     2012     2013     2014     2015
----------------------------------------------------------------------------
                                                                            
Syncrude                      $      0.9  $   1.9  $   2.6  $   2.2  $   0.3
Canadian Oil Sands share      $      0.4  $   0.7  $   0.9  $   0.8  $   0.2
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Major projects costs include capital expenditures, excluding capitalized
    interest, and certain non-production expenses.                          
(2) The estimated percentage complete is based on hours spent as a          
    percentage of total forecasted hours to project completion.             

 
Canadian Oil Sands plans to finance these major projects primarily
with existing cash balances and cash flow from operations. The SER
project is currently in start-up and commissioning. 
The major projects tables contain forward-looking information and
users of this information are cautioned that the actual yearly and
total major project costs and the actual in-service dates for the
major projects may vary from the plans disclosed. The major project
cost estimates and major project target in-service dates are based on
current spending plans. Please refer to the "Forward-Looking
Information Advisory" section of this MD&A for the risks and
assumptions underlying this forward-looking information. For a list
of additional risk factors that could cause the actual amount of the
major project costs and the major project target in-service dates to
differ materially, please refer to the Corporation's Annual
Information Form dated February 23, 2012 which is available on the
Corporation's profile on SEDAR at www.sedar.com and on the
Corporation's website at www.cdnoilsands.com. 
Proposed Mildred Lake Mine Extension Project  
On October 1, 2012, Canadian Oil Sands announced that Syncrude will
embark upon a mine extension project at its Mildred Lake mine ("the
MLX Project"). The MLX Project will leverage current investments in
the replacement of the two mine trains being constructed at the
Mildred Lake mine (the "Mildred Lake Mine Train Replacement"
project), and will be integrated with existing environmental
infrastructure to access nearby bitumen deposits on Syncrude leases.
The project is expected to be highly economic, enabling Syncrude to
access a large bitumen source at a cost that is expected to be
significantly lower than the cost of a new mine. The proposed project
should extend the life of mining operations at Mildred Lake by about
a decade. Project scoping is currently underway, and pending
regulatory approval, construction and spending would commence in the
next 10 years. 


 
Consolidated Statements of Income and Comprehensive Income                  
(unaudited)                                                                 
                                                                            
                                 Three Months Ended       Nine Months Ended 
                                       September 30            September 30 
(millions of Canadian dollars,                                              
 except per Share and Share                                                 
 volume amounts)                   2012        2011        2012        2011 
----------------------------------------------------------------------------
                                                                            
Sales                           $ 1,022   $   1,034   $   2,983   $   3,209 
Crown royalties (Note 14)           (33)        (65)       (145)       (234)
----------------------------------------------------------------------------
Revenues                            989         969       2,838       2,975 
----------------------------------------------------------------------------
                                                                            
Expenses                                                                    
 Operating                          378         374       1,112       1,108 
 Non-production                      25          28          75          86 
 Crude oil purchases and                                                    
  transportation                     81          45         346         159 
 Administration                       5           4          19          17 
 Insurance                            4           2           8           6 
 Depreciation and depletion          96          93         284         285 
----------------------------------------------------------------------------
                                    589         546       1,844       1,661 
----------------------------------------------------------------------------
Earnings from operating                                                     
 activities                         400         423         994       1,314 
 Foreign exchange loss (gain)                                               
  (Note 9)                          (51)         75         (41)         45 
 Net finance expense (Note 10)        9          11          32          40 
----------------------------------------------------------------------------
Earnings before taxes               442         337       1,003       1,229 
 Tax expense (Note 11)              104          95         243         317 
----------------------------------------------------------------------------
Net income                          338         242         760         912 
Other comprehensive loss, net of                                            
 income taxes                                                               
 Actuarial gain (loss) on                                                   
  employee future benefit plans                                             
  (Note 8)                            2         (68)        (28)        (72)
 Reclassification of derivative                                             
  gains to net income                 -          (1)         (2)         (2)
----------------------------------------------------------------------------
Comprehensive income            $   340   $     173   $     730   $     838 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Weighted average Shares                                                     
 (millions)                         485         485         485         485 
Shares, end of period (millions)    485         485         485         485 
                                                                            
Net income per Share                                                        
 Basic and diluted              $  0.70   $    0.50   $    1.57   $    1.88 
----------------------------------------------------------------------------
                                                                            
See Notes to Unaudited Consolidated Financial Statements                    
                                                                            
Consolidated Statements of Shareholders' Equity                             
(unaudited)                                                                 
                                                                            
                                 Three Months Ended       Nine Months Ended 
                                       September 30            September 30 
(millions of Canadian                                                       
 dollars)                          2012        2011        2012        2011 
----------------------------------------------------------------------------
                                                                            
Retained earnings                                                           
 Balance, beginning of                                                      
  period                      $   1,594   $   1,458   $   1,517   $   1,034 
 Net income                         338         242         760         912 
 Actuarial gain (loss) on                                                   
  employee future benefit                                                   
  plans                               2         (68)        (28)        (72)
 Dividends                         (170)       (145)       (485)       (387)
----------------------------------------------------------------------------
 Balance, end of period           1,764       1,487       1,764       1,487 
----------------------------------------------------------------------------
Accumulated other                                                           
 comprehensive income                                                       
 Balance, beginning of                                                      
  period                             10          14          12          15 
 Reclassification of                                                        
  derivative gains to net                                                   
  income                              -          (1)         (2)         (2)
----------------------------------------------------------------------------
 Balance, end of period              10          13          10          13 
----------------------------------------------------------------------------
Shareholders' capital                                                       
 Balance, beginning of                                                      
  period                          2,673       2,672       2,673       2,671 
 Issuance of shares                   -           -           -           1 
----------------------------------------------------------------------------
 Balance, end of period           2,673       2,672       2,673       2,672 
----------------------------------------------------------------------------
Contributed surplus                                                         
 Balance, beginning of                                                      
  period                              9           7           8           6 
 Share-based compensation             -           -           1           1 
----------------------------------------------------------------------------
 Balance, end of period               9           7           9           7 
----------------------------------------------------------------------------
Total Shareholders' equity    $   4,456   $   4,179   $   4,456   $   4,179 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
See Notes to Unaudited Consolidated Financial Statements                    
                                                                            
Consolidated Balance Sheets                                                 
(unaudited)                                                                 
                                                           As at            
                                                 September 30    December 31
(millions of Canadian dollars)                           2012           2011
----------------------------------------------------------------------------
                                                                            
ASSETS                                                                      
Current assets                                                              
  Cash and cash equivalents                       $     1,469    $       718
  Accounts receivable                                     386            376
  Inventories                                             137            142
  Prepaid expenses                                         11             10
----------------------------------------------------------------------------
                                                        2,003          1,246
Property, plant and equipment, net (Note 4)             7,797          7,227
Exploration and evaluation                                 89             89
Reclamation trust                                          66             58
----------------------------------------------------------------------------
                                                  $     9,955    $     8,620
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
LIABILITIES AND SHAREHOLDERS' EQUITY                                        
Current liabilities                                                         
  Accounts payable and accrued liabilities        $       641    $       479
  Current portion of long-term debt                       293              -
  Current taxes                                            30              -
  Current portion of employee future benefits              76             47
----------------------------------------------------------------------------
                                                        1,040            526
Employee future benefits and other liabilities            466            480
Long-term debt (Note 6)                                 1,480          1,132
Asset retirement obligation (Note 7)                    1,047          1,008
Deferred taxes                                          1,466          1,264
----------------------------------------------------------------------------
                                                        5,499          4,410
Shareholders' equity                                    4,456          4,210
----------------------------------------------------------------------------
                                                  $     9,955    $     8,620
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Commitments and Contingency (Notes 13 and 14, respectively)                 
                                                                            
See Notes to Unaudited Consolidated Financial Statements                    
                                                                            
Consolidated Statements of Cash Flows                                       
(unaudited)                                                                 
                                 Three Months Ended       Nine Months Ended 
                                       September 30            September 30 
(millions of Canadian                                                       
 dollars)                          2012        2011        2012        2011 
----------------------------------------------------------------------------
                                                                            
Cash from (used in)                                                         
 operating activities                                                       
 Net income                   $     338   $     242   $     760   $     912 
 Items not requiring an                                                     
  outlay of cash                                                            
  Depreciation and depletion         96          93         284         285 
  Accretion of asset                                                        
   retirement obligation                                                    
   (Note 10)                          6           4          19          12 
  Foreign exchange (gain)                                                   
   loss on long-term debt                                                   
   (Note 9)                         (64)         83         (48)         49 
  Deferred tax expense (Note                                                
   11)                               94          95         213         317 
  Share-based compensation           (1)          1           2           3 
 Reclamation expenditures                                                   
  (Note 7)                           (6)         (4)        (48)        (35)
 Change in employee future                                                  
  benefits and other                  7          (2)        (19)         (9)
----------------------------------------------------------------------------
                                    470         512       1,163       1,534 
 Change in non-cash working                                                 
  capital (Note 15(a))             (124)        144         105         108 
----------------------------------------------------------------------------
  Cash from operating                                                       
   activities                       346         656       1,268       1,642 
----------------------------------------------------------------------------
                                                                            
Cash from (used in)                                                         
 financing activities                                                       
 Issuance of senior notes                                                   
  (Note 6)                            -           -         689           - 
 Repayment of bank credit                                                   
  facilities                          -           -           -        (145)
 Issuance of shares                   -           -           -           1 
 Dividends                         (170)       (145)       (485)       (387)
----------------------------------------------------------------------------
  Cash from (used in)                                                       
   financing activities            (170)       (145)        204        (531)
----------------------------------------------------------------------------
                                                                            
Cash from (used in)                                                         
 investing activities                                                       
 Capital expenditures              (354)       (189)       (787)       (438)
 Reclamation trust funding           (2)         (1)         (7)         (4)
 Change in non-cash working                                                 
  capital (Note 15(a))               42          13          78          21 
----------------------------------------------------------------------------
  Cash used in investing                                                    
   activities                      (314)       (177)       (716)       (421)
----------------------------------------------------------------------------
                                                                            
Foreign exchange loss on                                                    
 cash and cash equivalents                                                  
 held in foreign currency           (11)          -          (5)          - 
----------------------------------------------------------------------------
                                                                            
Increase (decrease) in cash                                                 
 and cash equivalents              (149)        334         751         690 
Cash and cash equivalents,                                                  
 beginning of period              1,618         436         718          80 
----------------------------------------------------------------------------
Cash and cash equivalents,                                                  
 end of period                $   1,469   $     770   $   1,469   $     770 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Cash and cash equivalents                                                   
 consist of:                                                                
 Cash                         $     150   $      82   $     150   $      82 
 Short-term investments           1,319         688       1,319         688 
----------------------------------------------------------------------------
                              $   1,469   $     770   $   1,469   $     770 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Supplementary Information (Note 15)                                         
                                                                            
See Notes to Unaudited Consolidated Financial Statements                    

 
Notes to Unaudited Consolidated Financial Statements 
For the Three and Nine Months Ended September 30, 2012 
(Tabular amounts expressed in millions of Canadian dollars, except
where otherwise noted) 
1) Nature of Operations 
Canadian Oil Sands Limited ("Canadian Oil Sands" or the
"Corporation") was incorporated under the laws of the Province of
Alberta, Canada in 2010 pursuant to a plan of arrangement effecting
the reorganization from an income trust into a corporate structure
effective December 31, 2010. 
The Corporation indirectly owns a 36.74 per cent interest ("Working
Interest") in the Syncrude Joint Venture ("Syncrude"). Syncrude is
involved in the mining and upgrading of bitumen from oil sands near
Fort McMurray in northern Alberta. The Syncrude Project is comprised
of open-pit oil sands mines, utilities plants, bitumen extraction
plants, and an upgrading complex that processes bitumen into
Synthetic Crude Oil. Each joint-venture owner, including the
Corporation, takes its proportionate share of production in kind, and
funds its proportionate share of Syncrude's operating and capital
costs on a daily basis. The Corporation also owns 36.74 per cent of
the issued and outstanding shares of Syncrude Canada Ltd. ("Syncrude
Canada"). Syncrude Canada operates Syncrude on behalf of the
joint-venture owners and is responsible for selecting, compensating,
directing and controlling Syncrude's employees, and for administering
all related employment benefits and obligations. The Corporation's
investment in Syncrude and Syncrude Canada represents its only
producing asset. 
The Corporation's office is located at the following address: 2500
First Canadian Centre, 350 - 7th Avenue S.W., Calgary, Alberta,
Canada T2P 3N9. 
2) Basis of Presentation 
These unaudited interim consolidated financial statements are
prepared and reported in Canadian dollars in accordance with Canadian
generally accepted accounting principles as set out in the Handbook
of the Canadian Institute of Chartered Accountants ("CICA Handbook").
The CICA Handbook incorporates International Financial Reporting
Standards ("IFRS") and publicly accountable enterprises, like the
Corporation, are required to apply such standards. These unaudited
interim financial statements have been prepared in accordance with
IFRS applicable to the preparation of interim finanacial statements
and International Accounting Standard ("IAS") 34, Interim Financial
Reporting, and the accounting policies applied in these interim
unaudited consolidated financial statements are based on IFRS as
issued, outstanding and effective on October 29, 2012. 
Certain disclosures that are normally required to be included in the
notes to the annual audited consolidated financial statements have
been condensed or omitted. These unaudited interim consolidated
financial statements should be read in conjunction with the
Corporation's audited consolidated financial statements and notes
thereto for the year ended December 31, 2011. 
3) Accounting Policies 
The same accounting policies and methods of computation are followed
in these unaudited interim consolidated financial statements as
compared with the most recent audited annual consolidated financial
statements for the year ended December 31, 2011 except for current
income taxes which, in interim periods, are accrued based on an
estimate of the annualized effective tax rate applied to year-to-date
earnings. 
4) Property, Plant and Equipment, Net  


 
                                Nine Months Ended September 30, 2012        
                                                                            
                          Upgrading            Vehicles                Asset
                                and    Mining       and           Retirement
($ millions)             extracting equipment equipment Buildings      costs
----------------------------------------------------------------------------
                                                                            
Cost                                                                        
Balance at January 1,                                                       
 2012                      $  4,688  $  1,417   $   690   $   310    $   931
Additions                         -         -        22         -          -
Change in asset                                                             
 retirement costs                 -         -         -         -         68
Retirements                      (3)       (1)      (17)       (1)         -
Reclassifications(1)              -         -         -        11          -
----------------------------------------------------------------------------
Balance at September                                                        
 30, 2012                  $  4,685  $  1,416   $   695   $   320    $   999
----------------------------------------------------------------------------
                                                                            
Accumulated                                                                 
 depreciation                                                               
Balance at January 1,                                                       
 2012                      $  1,284  $    480   $   294   $   100    $   138
Depreciation                    122        47        43         6         29
Retirements                      (3)       (1)      (16)       (1)         -
Reclassifications                 -         -         -         -          -
----------------------------------------------------------------------------
Balance at September                                                        
 30, 2012                  $  1,403  $    526   $   321   $   105    $   167
----------------------------------------------------------------------------
                                                                            
Net book value at                                                           
 September 30, 2012        $  3,282  $    890   $   374   $   215    $   832
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
 
                               Nine Months Ended September 30, 2012         
                                                                            
                               Major                                        
                          Turnaround  Construction         Mine             
($ millions)                   costs   in progress  development       Total 
----------------------------------------------------------------------------
                                                                            
Cost                                                                        
Balance at January 1,                                                       
 2012                      $     114     $   1,144      $   393     $ 9,687 
Additions                         76           689            -         787 
Change in asset                                                             
 retirement costs                  -             -            -          68 
Retirements                        -             -           (1)        (23)
Reclassifications(1)               -           (11)           -           - 
----------------------------------------------------------------------------
Balance at September                                                        
 30, 2012                  $     190     $   1,822      $   392     $10,519 
----------------------------------------------------------------------------
                                                                            
Accumulated                                                                 
 depreciation                                                               
Balance at January 1,                                                       
 2012                      $      53     $       -      $   111     $ 2,460 
Depreciation                      29             -            8         284 
Retirements                        -             -           (1)        (22)
Reclassifications                  -             -            -           - 
----------------------------------------------------------------------------
Balance at September                                                        
 30, 2012                  $      82     $       -      $   118     $ 2,722 
----------------------------------------------------------------------------
                                                                            
Net book value at                                                           
 September 30, 2012        $     108     $   1,822      $   274     $ 7,797 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
                                    Year Ended December 31, 2011            
                                                                            
                          Upgrading            Vehicles                Asset
                                and    Mining       and           Retirement
($ millions)             extracting equipment equipment Buildings      costs
----------------------------------------------------------------------------
                                                                            
Cost                                                                        
Balance at January 1,                                                       
 2011                      $  4,669  $  1,381   $   688   $   304    $   362
Additions                         -         -         -         -          -
Change in asset                                                             
 retirement costs                 -         -         -         -        569
Retirements                      (6)       (9)      (22)       (1)         -
Reclassifications(1)             25        45        24         7          -
----------------------------------------------------------------------------
Balance at December 31,                                                     
 2011                      $  4,688  $  1,417   $   690   $   310    $   931
----------------------------------------------------------------------------
                                                                            
Accumulated                                                                 
 depreciation                                                               
Balance at January 1,                                                       
 2011                      $  1,092  $    449   $   264   $   100    $   103
Depreciation                    169        92        54         7         14
Retirements                      (6)       (9)      (22)       (1)         -
Reclassifications                29       (52)       (2)       (6)        21
----------------------------------------------------------------------------
Balance at December 31,                                                     
 2011                      $  1,284  $    480   $   294   $   100    $   138
----------------------------------------------------------------------------
                                                                            
Net book value at                                                           
 December 31, 2011         $  3,404  $    937   $   396   $   210    $   793
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
                                   Year Ended December 31, 2011             
                                                                            
                               Major                                        
                          Turnaround   Construction         Mine            
($ millions)                   costs    in progress  development      Total 
----------------------------------------------------------------------------
                                                                            
Cost                                                                        
Balance at January 1,                                                       
 2011                      $     103      $     694      $   345    $ 8,546 
Additions                         43            600            -        643 
Change in asset                                                             
 retirement costs                  -              -            -        569 
Retirements                      (32)             -           (1)       (71)
Reclassifications(1)               -           (150)          49          - 
----------------------------------------------------------------------------
Balance at December 31,                                                     
 2011                      $     114      $   1,144      $   393    $ 9,687 
----------------------------------------------------------------------------
                                                                            
Accumulated                                                                 
 depreciation                                                               
Balance at January 1,                                                       
 2011                      $      50      $       -      $    92    $ 2,150 
Depreciation                      35              -           10        381 
Retirements                      (32)             -           (1)       (71)
Reclassifications                  -              -           10          - 
----------------------------------------------------------------------------
Balance at December 31,                                                     
 2011                      $      53      $       -      $   111    $ 2,460 
----------------------------------------------------------------------------
                                                                            
Net book value at                                                           
 December 31, 2011         $      61      $   1,144      $   282    $ 7,227 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Reclassifications are primarily transfers from Construction in progress 
    to other categories of property, plant and equipment when construction  
    is completedand assets are available for use.                           

 
For the three and nine months ended September 30, 2012, interest
costs of $25 million and $65 million, respectively, were capitalized
and included in property, plant and equipment (three and nine months
ended September 30, 2011 - $15 million and $39 million, respectively)
based on 6.5 per cent and 6.7 per cent interest capitalization rates
for the three and nine months ended September 30, 2012, respectively
(7.3 per cent for the three and nine months ended September 30,
2011). 
5) Bank Credit Facilities 
During the nine months ended September 30, 2012, the Corporation
extended the terms of its credit facilities by one year. The term of
the $1,500 million operating credit facility was extended to June 1,
2016 and the $40 million extendible revolving term credit facility to
June 30, 2014. No amounts were drawn against these facilities at
September 30, 2012 (December 31, 2011 - $nil). 
6) Long-Term Debt 
On March 29, 2012, the Corporation issued U.S. $400 million of 4.50%
unsecured Senior Notes maturing April 1, 2022 and U.S. $300 million
of 6.00% unsecured Senior Notes maturing April 1, 2042. Interest on
the new Senior Notes is payable semi-annually on April 1 and October
1. The Senior Notes are unsecured, rank pari passu with other senior
unsecured debt of the Corporation, and contain certain covenants that
place limitations on the sale of assets and the granting of liens or
other security interests.  
7) Asset Retirement Obligation 
The Corporation and each of the other Syncrude owners are liable for
their share of ongoing environmental obligations related to the
ultimate reclamation of the Syncrude properties on abandonment. The
Corporation estimates reclamation expenditures will be made
progressively over the next 70 years and has applied a risk-free
interest rate of 2.25 per cent at September 30, 2012 (December 31,
2011 - 2.50 per cent) in deriving the asset retirement obligation.
The risk-free rate is based on the yield for benchmark Government of
Canada long-term bonds. 
The following table presents the reconciliation of the beginning and
ending aggregate carrying amount of the Corporation's share of the
obligation associated with the retirement of the Syncrude properties: 


 
                                                  Nine Months          Year 
                                                        Ended         Ended 
                                                 September 30   December 31 
($ millions)                                             2012          2011 
----------------------------------------------------------------------------
Asset retirement obligation, beginning of period  $     1,037   $       501 
Change in estimated liability                               -           471 
Liabilities settled                                       (48)          (49)
Accretion expense                                          19            16 
Change in risk-free interest rate                          68            98 
----------------------------------------------------------------------------
Asset retirement obligation, end of period        $     1,076   $     1,037 
Less current portion                                      (29)          (29)
----------------------------------------------------------------------------
Non-current portion                               $     1,047   $     1,008 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
The increase in the asset retirement obligation from $1,037 million
at December 31, 2011 to $1,076 million at September 30, 2012 reflects
a decrease in the risk-free interest rate used to discount future
reclamation payments and accretion of the discounted liability,
partially offset by $48 million of reclamation spending.  
The total undiscounted estimated cash flows required to settle the
Corporation's share of the asset retirement obligation were $2,162
million at September 30, 2012 (December 31, 2011 - $2,210 million). 
8) Employee Future Benefits 
The Corporation's share of Syncrude Canada's defined benefit and
contribution plans' costs for the three and nine months ended
September 30, 2012 and 2011 is based on its 36.74 per cent working
interest. The costs have been recorded in operating expenses and
other comprehensive income as follows: 


 
                                      Three Months Ended   Nine Months Ended
                                            September 30        September 30
($ millions)                             2012       2011      2012      2011
----------------------------------------------------------------------------
                                                                            
Operating expenses                                                          
 Defined benefit plans                                                      
  Pension plan                        $    10    $     9   $    31   $    24
  Other post employment benefits                                            
   plan                                     1          1         3         3
----------------------------------------------------------------------------
                                      $    11    $    10   $    34   $    27
 Defined contribution plans                 1          -         3         2
----------------------------------------------------------------------------
                                      $    12    $    10   $    37   $    29
Other comprehensive 
income                                                  
 Defined benefit plans                                                      
 Actuarial (gain) loss on pension                                           
  plan                                     (2)        68        28        72
                                                                            
----------------------------------------------------------------------------
Total benefit cost                    $    10    $    78   $    65   $   101
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
The Corporation's share of the estimated unfunded portion of Syncrude
Canada's pension and other post-employment benefit plans decreased to
$460 million at September 30, 2012 from $465 million at December 31,
2011 reflecting Syncrude Canada's contributions to the plans during
the nine months ended September 30, 2012, largely offset by a 0.25
per cent decrease in the interest rate used to discount estimated
future pension costs to 4.0 per cent. For the nine months ended
September 30, 2012, a $28 million actuarial loss, net of $10 million
in deferred taxes, has been recognized in other comprehensive income
to reflect the change in the discount rate. A liability for the $460
million unfunded balance is recognized on the September 30, 2012
Consolidated Balance Sheet.  


 
9) Foreign Exchange                                                         
                                                                            
                                   Three Months Ended     Nine Months Ended 
                                         September 30          September 30 
($ millions)                          2012       2011       2012       2011 
----------------------------------------------------------------------------
                                                                            
Foreign exchange (gain) loss -                                              
 long-term debt                    $   (64)   $    83    $   (48)   $    49 
Foreign exchange (gain) loss -                                              
 other                                  13         (8)         7         (4)
----------------------------------------------------------------------------
Total foreign exchange (gain)                                               
 loss                              $   (51)   $    75    $   (41)   $    45 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
10)Net Finance Expense                                                      
                                                                            
                                   Three Months Ended     Nine Months Ended 
                                         September 30          September 30 
($ millions)                          2012       2011       2012       2011 
----------------------------------------------------------------------------
                                                                            
Interest costs                     $    28    $    22    $    78    $    67 
 Less capitalized interest             (25)       (15)       (65)       (39)
----------------------------------------------------------------------------
Interest expense                         3          7         13         28 
Accretion of asset retirement                                               
 obligation                              6          4         19         12 
----------------------------------------------------------------------------
Net finance expense                $     9    $    11    $    32    $    40 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
11)Tax Expense                                                              
                                                                            
                                      Three Months Ended   Nine Months Ended
                                            September 30        September 30
($ millions)                              2012      2011      2012      2011
----------------------------------------------------------------------------
                                                                            
Current tax expense                    $    10   $     -   $    30   $     -
Deferred tax expense                        94        95       213       317
----------------------------------------------------------------------------
Total tax expense                      $   104   $    95   $   243   $   317
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
12) Capital Management 
The Corporation's capital consists of cash and cash equivalents, debt
and Shareholders' equity. The balance of each of these items at
September 30, 2012 and December 31, 2011 was as follows: 


 
                                               September 30     December 31 
($ millions, except % amounts)                         2012            2011 
----------------------------------------------------------------------------
                                                                            
Total debt(1,2)                                 $     1,773     $     1,132 
Cash and cash equivalents                            (1,469)           (718)
----------------------------------------------------------------------------
Net debt(1,3)                                   $       304     $       414 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Shareholders' equity                            $     4,456     $     4,210 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Total net capitalization(1,4)                   $     4,760     $     4,624 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Total capitalization(1,5)                       $     6,229     $     5,342 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Net debt-to-total net capitalization(1,6)                                   
 (%)                                                      6               9 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Total debt-to-total capitalization(1,7) (%)              28              21 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Non-GAAP measure.                                                       
(2) Includes current and non-current portions of long-term debt.            
(3) Total debt less cash and cash equivalents.                              
(4) Net debt plus Shareholders' equity.                                     
(5) Total debt plus Shareholders' equity.                                   
(6) Net debt divided by total net capitalization.                           
(7) Total debt divided by total capitalization.                             

 
Net debt, comprised of current and non-current portions of long-term
debt less cash and cash equivalents, decreased to $0.3 billion at
September 30, 2012 from $0.4 billion at December 31, 2011. While cash
from operating activities in the first nine months of 2012 fell short
of capital expenditures and dividend payments of $787 million and
$485 million, respectively, a reduction in investing non-cash working
capital balances more than offset the difference. 
Shareholders' equity increased to $4.5 billion at September 30, 2012
from $4.2 billion at December 31, 2011, as net income exceeded
dividends in the nine months ended September 30, 2012. 
As disclosed in Notes 9 and 10 to the 2011 annual consolidated
financial statements, the Corporation's senior notes indentures and
credit facility agreements contain certain covenants which restrict
Canadian Oil Sands' ability to sell all or substantially all of its
assets or change the nature of its business, and limit total
debt-to-total capitalization to 55 per cent. Canadian Oil Sands is in
compliance with its debt covenants and, with a total debt-to-total
capitalization of 28 per cent at September 30, 2012, a significant
increase in debt or decrease in equity would be required to
negatively impact the Corporation's financial flexibility. 
13) Commitments 
Commitments are summarized in Canadian Oil Sands' 2011 annual
consolidated financial statements and include future cash payments
that the Corporation is required to make under existing contractual
arrangements entered into directly or as a 36.74 per cent owner in
Syncrude. During the nine months ended September 30, 2012, Canadian
Oil Sands entered into new contractual obligations totalling
approximately $1.2 billion for the transportation and storage of
crude oil in support of the Corporation's strategy to secure access
to preferred markets and enhance marketing flexibility. The
Corporation also assumed $312 million in new funding commitments
relating to major capital projects, increased its funding commitment
by $120 million in respect of Syncrude Canada's registered pension
plan, and assumed $84 million in new commitments related to Syncrude
Canada's employee retention program. 
14) Contingency 
Crown royalties include amounts due under the Syncrude Royalty
Amending Agreement with the Alberta government. The Syncrude Royalty
Amending Agreement requires that bitumen be valued by a formula that
references the value of bitumen based on North American heavy oil
reference prices adjusted for reasonable quality, transportation and
handling deductions (including diluent costs) to reflect the quality
and location differences between Syncrude's bitumen and the reference
price of bitumen. Canadian Oil Sands' share of the royalties
recognized for the period from January 1, 2009 to September 30, 2012
are estimated to be approximately $45 million lower than the amount
calculated using the Alberta-government-provided bitumen value for
Syncrude. The Syncrude owners and the Alberta government continue to
discuss the basis for reasonable quality, transportation, and other
adjustments but if such discussions do not result in an agreed upon
solution, either party may seek judicial determination of the matter.
The cumulative impact, if any, of such discussions or judicial
determination, as applicable, would be recognized immediately and
would impact both net income and cash from operating activities
accordingly. 
15) Supplementary Information 


 
a) Change in Non-Cash Working Capital                                       
                                                                            
                                   Three Months Ended     Nine Months Ended 
                                         September 30          September 30 
($ millions)                          2012       2011       2012       2011 
----------------------------------------------------------------------------
                                                                            
Operating activities:                                                       
 Accounts receivable ("AR")        $  (167)   $    79    $   (10)   $    82 
 Inventories                            (2)       (16)         5        (14)
 Prepaid expenses                      (10)        (8)        (1)        (3)
 Accounts payable and accrued                                               
  liabilities ("AP")                    97         99        192         62 
 Less: AP and AR changes                                                    
  reclassified to investing and                                             
  other                                (42)       (10)       (81)       (19)
----------------------------------------------------------------------------
Change in operating non-cash                                                
 working capital                   $  (124)   $   144    $   105    $   108 
----------------------------------------------------------------------------
                                                                            
Investing activities:                                                       
 Accounts payable and accrued                                               
  liabilities                      $    42    $    13    $    78    $    21 
----------------------------------------------------------------------------
Change in investing non-cash                                                
 working capital                   $    42    $    13    $    78    $    21 
----------------------------------------------------------------------------
                                                                            
----------------------------------------------------------------------------
Change in total non-cash working                                            
 capital                           $   (82)   $   157    $   183    $   129 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
b) Income Taxes and Interest Paid                                           
                                                                            
                                      Three Months Ended   Nine Months Ended
                                            September 30        September 30
($ millions)                              2012      2011      2012      2011
----------------------------------------------------------------------------
                                                                            
Income taxes paid                      $     -   $     -   $     -   $     -
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Interest paid                          $    20   $    25   $    65   $    71
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
Income taxes and interest expense are included within cash from
operating activities on the Consolidated Statements of Cash Flows.
The portion of interest costs that is capitalized as PP&E is included
within cash used in investing activities on the Consolidated
Statements of Cash Flows. 
16) Comparative figures 
Certain prior period comparative figures have been reclassified to
conform to the current period's presentation. 
Canadian Oil Sands Limited 
Marcel Coutu  
President & Chief Executive Officer 
Shares Listed - Symbol: COS 
Toronto Stock Exchange
Contacts:
Canadian Oil Sands Limited
Siren Fisekci
Vice President, Investor & Corporate Relations
(403) 218-6228 
Canadian Oil Sands Limited
Alison Trollope
Manager, Investor Relations
(403) 218-6231 
Canadian Oil Sands Limited
2500 First Canadian Centre, 350 - 7 Avenue S.W.
Calgary, Alberta T2P 3N9
(403) 218-6200
(403) 218-6201 (FAX)
invest@cdnoilsands.com
www.cdnoilsands.com
 
 
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