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Canadian Oil Sands Announces Third Quarter Financial Results and a $0.35 Per Share Dividend

Canadian Oil Sands Announces Third Quarter Financial Results and a $0.35 Per 
Share Dividend 
CALGARY, ALBERTA -- (Marketwired) -- 10/30/13 -- 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,
2013: 


 
--  COS has maintained its quarterly dividend at $0.35 per Share, payable on
    November 29, 2013 to shareholders of record on November 22, 2013. During
    the first nine months of 2013, we paid dividends to shareholders
    totalling $509 million, or $1.05 per Share. 
--  Sales volumes were down in the third quarter of 2013, averaging about
    84,300 barrels per day compared with 113,300 barrels per day in the 2012
    third quarter due to extended turnarounds on the Coker 8-1, LC Finer and
    hydrotreating units. Year-to-date sales volumes in 2013 were also lower
    than 2012, averaging about 93,300 barrels per day compared with 103,700
    barrels per day in 2012. The decline in 2013 sales volumes reflects the
    extended turnarounds as well as unplanned outages in extraction units. 
--  Lower sales volumes partially offset by higher realized selling prices
    resulted in cash flow from operations declining to $339 million, or
    $0.70 per Share, in the third quarter of 2013 from $470 million, or
    $0.97 per Share, in the 2012 third quarter. In the first nine months of
    2013, a higher realized selling price largely offset lower sales
    volumes; however, higher current taxes reduced 2013 cash flow from
    operations to $957 million, or $1.97 per Share, from $1,163 million, or
    $2.40 per Share, in the comparative 2012 period. 
--  Operating expenses in the third quarter and first nine months of 2013
    increased to $46.15 per barrel and $43.43 per barrel, respectively, from
    $36.07 per barrel and $38.96 per barrel in the comparative 2012 periods.
    The increase in per barrel operating expenses is due to lower sales
    volumes in 2013, as total operating expenses for both the third quarter
    and year-to-date 2013 were largely unchanged from the prior year
    periods. 
--  The Aurora North Mine Train Relocation project has been completed, ahead
    of schedule and under budget, following the relocation and start-up of
    the second of two mine trains at the Aurora North mine in early October.
    The first mine train was relocated in July of this year. 

 
"We reached an important milestone with the completion of Syncrude's
Aurora North Mine Train Relocation project ahead of schedule and
under budget," said Marcel Coutu, President and Chief Executive
Officer. "The remaining projects are also progressing well and
tracking to plan. Healthy crude oil prices have facilitated funding
of these major projects and our dividend while maintaining a very
strong balance sheet, despite lower than expected production at
Syncrude."  
Mr. Coutu added: "It has been a particularly challenging year for
Syncrude operations with maintenance issues in our extraction
facilities and an extended coker turnaround in the third quarter.
Syncrude is continuing to work through the implementation of
reliability systems, and improving reliability remains ours and
Syncrude's main focus." 
Highlights 


 
                                  Three Months Ended      Nine Months Ended 
                                        September 30           September 30 
                                     2013       2012        2013       2012 
----------------------------------------------------------------------------
                                                                            
Cash flow from operations (1)                                               
 ($ millions)                   $     339  $     470   $     957  $   1,163 
 Per Share (1) ($/Share)        $    0.70  $    0.97   $    1.97  $    2.40 
                                                                            
Net income ($ millions)         $     246  $     336   $     642  $     755 
 Per Share, Basic and Diluted                                               
  ($/Share)                     $    0.51  $    0.69   $    1.32  $    1.56 
                                                                            
Sales volumes  (2)                                                          
 Total (mmbbls)                       7.8       10.4        25.5       28.4 
 Daily average (bbls)              84,250    113,331      93,301    103,669 
                                                                            
Realized SCO selling price                                                  
 ($/bbl)                        $  112.55  $   89.89   $  102.83  $   92.59 
                                                                            
West Texas Intermediate                                                     
 ("WTI") (average $US/bbl)      $  105.81  $   92.20   $   98.20  $   96.16 
                                                                            
SCO premium (discount) to WTI   $    2.51  $   (2.09)  $    2.74  $   (4.32)
 (weighted average $/bbl)                                                   
                                                                            
Operating expenses ($                                                       
 millions)                      $     357  $     377   $   1,106  $   1,107 
 Per barrel ($/bbl)             $   46.15  $   36.07   $   43.43  $   38.96 
                                                                            
Capital expenditures ($                                                     
 millions)                      $     413  $     354   $   1,050  $     787 
                                                                            
Dividends ($ millions)          $     170  $     170   $     509  $     485 
 Per Share ($/Share)            $    0.35  $    0.35   $    1.05  $    1.00 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
(1) Cash flow from operations and cash flow from operations per Share are   
    additional GAAP financial measures and are defined in the "Additional   
    GAAP Financial Measures" section of our Management's Discussion and     
    Analysis ("MD&A").                                                      
(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.                            

 
COS named for the third time to the Dow Jones Sustainability Index
("DJSI") North America  
COS has been named to the Dow Jones Sustainability North America
Index for the third year in a row. The Dow Jones Sustainability Index
(DJSI) recognizes companies for leadership in corporate
responsibility. Inclusion in the index is based on Syncrude's
practices, policies and performance related to sustainability, as
well as COS' own strong governance and community investment
initiatives. More information about the selection criteria and
detailed performance data is available at
www.sustainability-indices.com. Information on Syncrude's
sustainability performance is available on their website and in their
sustainability report at www.syncrude.ca. 
2013 Outlook revised  
We have revised our key estimates and assumptions for 2013 as
follows: 


 
--  The production range estimate for Syncrude has been reduced to 97 to 100
    million barrels. The single-point estimate of 98 million barrels
    requires Syncrude to average 313,400 barrels per day in the fourth
    quarter. 
--  Sales, net of crude oil purchases and transportation expense, increased
    to $3.6 billion, reflecting a higher forecast plant-gate realized
    selling price of $100 per barrel (based on a U.S. $98 per barrel WTI oil
    price, no SCO premium/discount to Canadian dollar WTI and a foreign
    exchange rate of $0.98 U.S./Cdn) partially offset by lower estimated
    sales volumes of 36 million barrels. 
--  Operating expenses of $1,504 million, or $41.77 per barrel, reflecting
    actual costs incurred to date and a natural gas price assumption of
    $3.00 per gigajoule. 
--  Cash flow from operations of $1,331 million, or $2.75 per Share. 

 
More information on the 2013 Outlook is provided in our MD&A and the
October 30, 2013 guidance document, which is available on our web
site at www.cdnoilsands.com under "Investor Centre". 
The 2013 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 30, 2013 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, 2013 and September 30,
2012, the audited consolidated financial statements and MD&A of the
Corporation for the year ended December 31, 2012 and the
Corporation's Annual Information Form ("AIF") dated February 21,
2013. 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",
"COS" 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
otherwise noted. 
Advisories 
Forward Looking Information  
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 2013 annual Syncrude forecasted production
range of 97 million barrels to 100 million barrels and the
single-point Syncrude production estimate of 98 million barrels (36.0
million barrels net to the Corporation); the intention to maintain a
quarterly dividend of $0.35 per Share in 2013 based on the
assumptions in our 2013 Outlook; 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 expected sales, operating
expenses, Crown royalties, capital expenditures and cash flow from
operations for 2013; the anticipated amount of current taxes in 2013;
expectations regarding the Corporation's cash levels for 2013 and
2014; the expected price for crude oil and natural gas in 2013; the
expected foreign exchange rates in 2013; the expected realized
selling price, which includes the anticipated differential to West
Texas Intermediate ("WTI") to be received in 2013 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 belief
that items that impacted the Corporation's financial results in the
last eight quarters are reasonably likely to impact the Corporation's
financial results in the future; 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 cost estimates for 2013 to 2015 major project spending; and
the expectation that the volatility in the Synthetic Crude Oil
("SCO") to WTI differential is likely to persist for several years
until additional pipeline or other delivery capacity is available to
deliver crude oil from Western Canada to Cushing, Oklahoma, the U.S.
Gulf Coast or the Canadian East or West Coasts.  
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 30, 2013 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 product;
the unanimous joint venture owner approval for major expansions and
changes in product types; the variances of stock market activities
generally; 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 74; volatility of crude oil prices; volatility
of the SCO to WTI price differential; unsuccessful or untimely
implementation of capital or maintenance projects; various events
that could disrupt operations, including fires, equipment failures
and severe weather and such other risks and uncertainties described
in the Corporation's AIF dated February 21, 2013 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 30,
2013, 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. 
Additional GAAP Financial Measures 
In this MD&A and the related press release, we refer to additional
GAAP financial measures that do not have any standardized meaning as
prescribed by Canadian GAAP. Additional GAAP financial measures are
line items, headings or subtotals in addition to those required under
Canadian GAAP, and financial measures disclosed in the notes to the
financial statements which are relevant to an understanding of the
financial statements and are not presented elsewhere in the financial
statements. These measures have been described and presented in order
to provide shareholders and potential investors with additional
measures for analyzing our ability to generate funds to finance our
operations and information regarding our liquidity. Users are
cautioned that additional GAAP financial measures presented by the
Corporation may not be comparable with measures provided by other
entities. 
Additional GAAP financial measures include: cash flow from
operations, cash flow from operations per Share, net debt, total net
capitalization, total capitalization, net debt-to-total net
capitalization and long-term debt-to-total capitalization. 
Cash flow from operations is calculated as cash from operating
activities 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 and cash flow from
operations per Share, which are not impacted by fluctuations in
non-cash working capital balances, are more indicative of operational
performance than cash from operating activities. With the exception
of current tax payable, liabilities for Crown royalties and the
current portion of our asset retirement obligation, 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)                            2013       2012       2013      2012
----------------------------------------------------------------------------
                                                                            
Cash flow from operations(1)       $     339  $     470  $     957 $   1,163
Change in non-cash working                                                  
 capital (1)                             (14)      (124)       158       105
----------------------------------------------------------------------------
Cash from operating activities(1)  $     325  $     346  $   1,115 $   1,268
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
(1) As reported in the Unaudited Consolidated Statements of Cash Flows.     

 
Net debt, total net capitalization, total capitalization, net
debt-to-total net capitalization and long-term debt-to-total
capitalization are used by the Corporation to manage capital, as
discussed in the "Liquidity and Capital Resources" section of this
MD&A and in Note 12 to the unaudited consolidated financial
statements for the three and nine months ended September 30, 2013. 
Overview 
Synthetic Crude Oil ("SCO") production from the Syncrude Joint
Venture ("Syncrude") was lower than expected in the third quarter of
2013, primarily due to delays completing turnarounds on Coker 8-1,
the LC Finer and two hydrotreating units. The turnarounds were
completed and the respective units returned to operation in late
August and early September. Syncrude third quarter production volumes
totalled 20.9 million barrels, or 227,000 barrels per day, compared
with 26.0 million barrels, or 282,600 barrels per day forecasted in
our July 30, 2013 Outlook (included in the second quarter 2013 MD&A). 
Cash flow from operations totalled $339 million in the third quarter,
reflecting a U.S. $106 per barrel West Texas Intermediate ("WTI") oil
price and a $2.51 per barrel SCO premium to WTI. COS realized a $113
per barrel average selling price, 20 per cent higher than the $94 per
barrel annual forecast in the July 30, 2013 Outlook. Operating
expenses in the 2013 third quarter were similar to the 2012 third
quarter on a total dollar basis but, on a per-barrel basis, increased
to $46.15 per barrel, reflecting lower 2013 volumes. Syncrude's major
projects progressed as planned with $413 million of total capital
spending (net to COS) in the quarter. We achieved another important
milestone with the relocation and start-up of the second of two mine
trains at the Aurora North mine earlier this month. The Aurora North
Mine Train Relocation project is now complete, ahead of schedule and
under budget. 
Based on the results achieved in the first nine months of the year,
we have updated our 2013 Outlook to reflect a higher $100 per barrel
annual realized selling price, a lower Syncrude production range of
97 to 100 million barrels (with a single-point estimate of 98 million
barrels). Cash flow from operations for 2013 is now estimated at
$1,331 million, six per cent higher than our July 30, 2013 forecast. 
Highlights 


 
                                  Three Months Ended      Nine Months Ended 
                                        September 30           September 30 
                                     2013       2012        2013       2012 
----------------------------------------------------------------------------
                                                                            
Cash flow from operations (1)                                               
 ($ millions)                   $     339  $     470   $     957  $   1,163 
 Per Share (1) ($/Share)        $    0.70  $    0.97   $    1.97  $    2.40 
                                                                            
Net income ($ millions)         $     246  $     336   $     642  $     755 
 Per Share, Basic and Diluted                                               
  ($/Share)                     $    0.51  $    0.69   $    1.32  $    1.56 
                                                                            
Sales volumes  (2)                                                          
 Total (mmbbls)                       7.8       10.4        25.5       28.4 
 Daily average (bbls)              84,250    113,331      93,301    103,669 
                                                                            
Realized SCO selling price                                                  
 ($/bbl)                        $  112.55  $   89.89   $  102.83  $   92.59 
                                                                            
West Texas Intermediate                                                     
 ("WTI") (average $US/bbl)      $  105.81  $   92.20   $   98.20  $   96.16 
                                                                            
SCO premium (discount) to WTI   $    2.51  $   (2.09)  $    2.74  $   (4.32)
 (weighted average $/bbl)                                                   
                                                                            
Operating expenses ($                                                       
 millions)                      $     357  $     377   $   1,106  $   1,107 
 Per barrel ($/bbl)             $   46.15  $   36.07   $   43.43  $   38.96 
                                                                            
Capital expenditures ($                                                     
 millions)                      $     413  $     354   $   1,050  $     787 
                                                                            
Dividends ($ millions)          $     170  $     170   $     509  $     485 
 Per Share ($/Share)            $    0.35  $    0.35   $    1.05  $    1.00 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
(1) Cash flow from operations and cash flow from operations per Share are   
    additional GAAP financial measures and are defined in the "Additional   
    GAAP Financial Measures" section of this MD&A.                          
(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.                             

 
Review of Financial Results 
Cash Flow from Operations 
To see the graphs associated with this release, please select the
following link: http://media3.marketwire.com/docs/907277.jpg. 
Cash flow from operations decreased to $339 million, or $0.70 per
Share, in the third quarter of 2013 from $470 million, or $0.97 per
Share, in the third quarter of 2012 primarily due to lower sales
volumes and higher Crown royalties, partially offset by a higher
realized selling price. On a year-to-date basis, cash flow from
operations decreased to $957 million, or $1.97 per Share, in 2013
from $1,163 million, or $2.40 per Share, in 2012 reflecting higher
current taxes, with lower sales volumes largely offsetting a higher
realized selling price in 2013. 
Syncrude production in the 2013 third quarter totalled 20.9 million
barrels, or 227,000 barrels per day, a 27 per cent decrease from
third quarter 2012 production of 28.8 million barrels, or 313,300
barrels per day. Production volumes in the third quarter of 2013
reflect the Coker 8-1, LC Finer and hydrotreating unit turnarounds,
while third quarter 2012 production volumes reflect stable operations
with no major maintenance activity. Net to the Corporation, sales
volumes decreased to 7.8 million barrels, or 84,300 barrels per day,
in the 2013 third quarter from 10.4 million barrels, or 113,300
barrels per day, in the 2012 third quarter. 
On a year-to-date basis, Syncrude produced 69.2 million barrels, or
253,400 barrels per day, in 2013 compared with 77.4 million barrels,
or 282,300 barrels per day in 2012. The decrease in 2013 production
volumes reflects the delays completing the turnarounds as well as
unplanned outages in extraction units. Net to the Corporation, sales
volumes totalled 25.5 million barrels, or 93,300 barrels per day, in
the first nine months of 2013 compared with 28.4 million barrels, or
103,700 barrels per day, in the comparative 2012 period. 
Crown royalties increased to $71 million in the third quarter of 2013
from $33 million in the third quarter of 2012 primarily due to
refinements in our estimates of bitumen values for both current and
prior years, partially offset by higher deductible capital
expenditures in the 2013 third quarter. 
Current taxes increased in 2013 primarily because tax pools and the
partnership structure sheltered the majority of 2012 income from
current taxes. 
The realized selling price averaged $112.55 per barrel and $102.83
per barrel in the third quarter and first nine months of 2013,
respectively, compared with $89.89 per barrel and $92.59 per barrel
in the comparative 2012 periods. The increase in 2013 realized
selling prices reflects both a higher WTI oil price and an
improvement in the SCO differential to WTI. 
Net Income  
Net income decreased to $246 million, or $0.51 per Share, in the
third quarter of 2013 from $336 million, or $0.69 per Share, in the
third quarter of 2012 reflecting lower sales volumes and higher Crown
royalties, partially offset by a higher realized selling price in the
2013 third quarter. On a year-to-date basis, net income decreased to
$642 million, or $1.32 per Share, in 2013 from $755 million, or $1.56
per Share, in 2012. Lower sales volumes were largely offset by a
higher realized selling price in 2013; however, the Corporation
realized a $42 million foreign exchange loss as a result of revaluing
U.S. dollar-denominated debt, cash and accounts receivable in the
first nine months of 2013 compared with a $41 million foreign
exchange gain in the comparative 2012 period. 
The following table shows the components of net income per barrel of
SCO: 


 
                           Three Months Ended          Nine Months Ended    
                              September 30               September 30       
($ per barrel)(1)         2013     2012   Change     2013     2012   Change 
----------------------------------------------------------------------------
                                                                            
Sales net of crude oil                                                      
 purchases and                                                              
 transportation                                                             
 expense               $112.52  $ 90.10  $ 22.42  $102.85  $ 92.82  $ 10.03 
Operating expense       (46.15)  (36.07)  (10.08)  (43.43)  (38.96)   (4.47)
Crown royalties          (9.20)   (3.16)   (6.04)   (4.79)   (5.11)    0.32 
----------------------------------------------------------------------------
                       $ 57.17  $ 50.87  $  6.30  $ 54.63  $ 48.75  $  5.88 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Development expense                                                         
 (2)                   $ (5.27) $ (2.40) $ (2.87) $ (4.10) $ (2.65) $ (1.45)
Administration and                                                          
 insurance expenses      (1.43)   (0.93)   (0.50)   (1.34)   (0.96)   (0.38)
Depreciation and                                                            
 depletion expense      (13.01)   (9.19)   (3.82)  (12.78)  (10.00)   (2.78)
Net finance expense      (1.62)   (1.25)   (0.37)   (1.49)   (1.57)    0.08 
Foreign exchange gain                                                       
 (loss)                   4.03     4.86    (0.83)   (1.65)    1.43    (3.08)
Tax expense              (8.24)   (9.86)    1.62    (8.06)   (8.48)    0.42 
----------------------------------------------------------------------------
                        (25.54)  (18.77)   (6.77)  (29.42)  (22.23)   (7.19)
----------------------------------------------------------------------------
Net income per barrel  $ 31.63  $ 32.10  $ (0.47) $ 25.21  $ 26.52  $ (1.31)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Sales volumes (mmbbls)                                                      
 (3)                       7.8     10.4     (2.6)    25.5     28.4     (2.9)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 

 
(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) Previously referred to as non-production expenses.                      
(3) 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                     2012                                         
 noted)              2013       (4)    Change      2013   2012(4)    Change 
----------------------------------------------------------------------------
                                                                            
Sales(1)         $  1,163  $  1,006  $    157  $  3,160  $  2,905  $    255 
Crude oil                                                                   
 purchases           (281)      (55)     (226)     (505)     (240)     (265)
Transportation                                                              
 expense              (11)      (10)       (1)      (35)      (28)       (7)
----------------------------------------------------------------------------
                 $    871  $    941  $    (70) $  2,620  $  2,637  $    (17)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Sales volumes(2)                                                            
 Total (mmbbls)       7.8      10.4      (2.6)     25.5      28.4      (2.9)
 Daily average                                                              
  (bbls)           84,250   113,331   (29,081)   93,301   103,669   (10,368)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Realized SCO                                                                
 selling                                                                    
 price (3)       $ 112.55  $  89.89  $  22.66  $ 102.83  $  92.59  $  10.24 
 (average                                                                   
  $Cdn/bbl)                                                                 
                                                                            
West Texas                                                                  
 Intermediate                                                               
 ("WTI")         $ 105.81  $  92.20  $  13.61  $  98.20  $  96.16  $   2.04 
 (average                                                                   
  $US/bbl)                                                                  
                                                                            
SCO premium                                                                 
 (discount) to                                                              
 WTI             $   2.51  $  (2.09) $   4.60  $   2.74  $  (4.32) $   7.06 
 (weighted-                                                                 
  average                                                                   
  $Cdn/bbl)                                                                 
                                                                            
Average foreign                                                             
 exchange rate   $   0.96  $   1.00  $  (0.04) $   0.98  $   1.00  $  (0.02)
 ($US/$Cdn)                                                                 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
(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.                   
(4) During the fourth quarter of 2012, the Corporation completed a review of
    the presentation of crude oil purchase and sales transactions and       
    determined that certain transactions previously reported on a gross     
    basis (sales presented gross of crude oil purchases and transportation  
    expense) are more appropriately reflected on a net basis (crude oil     
    purchases and/or transportation expense are netted against sales). Prior
    period comparative amounts have been reclassified for comparability with
    the current period presentation. The impact is as follows:              
                                                                            
                                 Three months ended       Nine months ended 
                                September 30, 2012       September 30, 2012 
($ millions)                     Increase (decrease)     Increase (decrease)
----------------------------------------------------------------------------
Sales                         $                 (16)  $                 (78)
Crude oil purchases                             (16)                    (79)
Transportation expense                            -                       1 
----------------------------------------------------------------------------
Sales net of crude oil                                                      
 purchases and                                                              
 transportation expense       $                   -   $                   - 
----------------------------------------------------------------------------

 
The $70 million, or seven per cent, decrease in third quarter 2013
sales, net of crude oil purchases and transportation expense,
reflects lower sales volumes partially offset by a higher realized
selling price relative to the 2012 third quarter. 


 
--  Third quarter 2013 sales volumes, which averaged 84,300 barrels per day,
    were impacted by the extended turnarounds on Coker 8-1, the LC Finer and
    hydrotreating units while third quarter 2012 sales volumes, which
    averaged 113,300 barrels per day, reflect stable operations with no
    major maintenance activity. 
--  The third quarter 2013 realized selling price increased by $22.66 per
    barrel reflecting a U.S. $13.61 per barrel increase in WTI oil prices, a
    $4.60 per barrel improvement in the SCO differential to WTI and a weaker
    Canadian dollar. 

 
On a year-to-date basis, sales, net of crude oil purchases and
transportation expense, decreased $17 million, or less than one per
cent, relative to the comparative 2012 period as lower sales volumes
in 2013 were largely offset by a higher realized selling price. 


 
--  Sales volumes in the first nine months of 2013 averaged 93,300 barrels
    per day, down from 103,700 barrels per day in the comparative 2012
    period, reflecting delays completing the turnarounds and unplanned
    outages in extraction units. 
--  The realized selling price for the first nine months of 2013 increased
    $10.24 per barrel relative to the comparative 2012 period, reflecting a
    $7.06 per barrel improvement in the SCO differential to WTI, a U.S.
    $2.04 per barrel increase in WTI oil prices and a weaker Canadian
    dollar. 

 
Both WTI and the SCO differential to WTI reflect supply/demand
fundamentals for inland North American light crude oil. Increasing
North American production of 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
exposing COS' product to supply/demand factors in different markets
and increasing transportation costs. A number of pipelines in both
Canada and the United States are at, or near, capacity and any
pipeline apportionments can exacerbate this situation by restricting
the ability of SCO and other crude oils to reach preferred markets.
However, rail shipments of crude to refineries have become another
transportation option, alleviating some of the pipeline capacity
constraints. 
Increases in pipeline and rail capacity in 2013 have resulted in a
narrowing of the discount between WTI and world oil prices. However,
we expect volatility in the SCO differential to WTI to persist for
several years until additional pipeline or other delivery capacity is
available to deliver crude oil from Western Canada to Cushing,
Oklahoma, the U.S. Gulf Coast, or the Canadian East or West Coasts. 
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
arrangements. 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 third
quarter and first nine months of 2013, relative to the comparative
2012 periods, reflecting additional purchased volumes to support
unanticipated production shortfalls and facilitate certain
transportation arrangements combined with higher oil prices in 2013.  
Operating Expenses  
The following table shows the major components of operating expenses
in total dollars and per barrel of SCO: 


 
                                                          Three Months Ended
                                                                September 30
                                                2013                    2012
                               $millions   $ per bbl   $millions   $ per bbl
----------------------------------------------------------------------------
                                                                            
Production and                                                              
 maintenance(1)                $     300   $   38.77   $     317   $   30.37
Natural gas and diesel                                                      
 purchases(2)                         24        3.10          28        2.70
Syncrude pension and                                                        
 incentive compensation               24        3.11          23        2.16
Other(3)                               9        1.17           9        0.84
----------------------------------------------------------------------------
Total operating expenses       $     357   $   46.15   $     377   $   36.07
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
 
                                                           Nine Months Ended
                                                                September 30
                                                2013                    2012
                               $millions   $ per bbl   $millions   $ per bbl
----------------------------------------------------------------------------
                                                                            
Production and                                                              
 maintenance(1)                $     909   $   35.69   $     922   $   32.47
Natural gas and diesel                                                      
 purchases(2)                        107        4.18          89        3.13
Syncrude pension and                                                        
 incentive compensation               64        2.53          66        2.32
Other(3)                              26        1.03          30        1.04
----------------------------------------------------------------------------
Total operating expenses       $   1,106   $   43.43   $   1,107   $   38.96
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
(1) Includes non-major turnaround costs. Major turnaround costs are         
    capitalized as property, plant and equipment.                           
(2) Includes costs to purchase natural gas used to produce energy and       
    hydrogen and diesel consumed as fuel.                                   
(3) Includes fees for management services provided by Imperial Oil          
    Resources, insurance premiums, and greenhouse gas emissions levies.     

 
On a total dollar basis, operating expenses in the third quarter of
2013 decreased slightly, relative to the third quarter of 2012, as
lower production costs, due primarily to less mining activity, were
partially offset by higher maintenance costs associated with the
extended turnarounds, the Aurora North mine train relocations and
unplanned outages in extraction units. Year to date, total dollar
operating expenses were similar in 2013 and 2012, as lower production
costs were offset by higher maintenance costs and higher natural gas
prices in 2013. 
On a per barrel basis, operating expenses in the third quarter and
first nine months of 2013 increased, reflecting lower sales volumes. 
The following table shows operating expenses per barrel of bitumen
and SCO. Costs are allocated to bitumen production and upgrading on
the basis used to determine Crown royalties. 


 
                                                 Three Months Ended         
                                                    September 30            
                                                    2013            2012(3) 
----------------------------------------------------------------------------
($ per barrel)                          Bitumen      SCO   Bitumen      SCO 
----------------------------------------------------------------------------
Bitumen production                     $  27.56 $  36.84  $  24.92 $  28.69 
Internal fuel allocation(1)                2.76     3.68      1.97     2.27 
----------------------------------------------------------------------------
Total bitumen production expenses      $  30.32 $  40.52  $  26.89 $  30.96 
----------------------------------------------------------------------------
                                                                            
Upgrading(2)                                    $   9.31           $   7.38 
Less: internal fuel allocation(1)                  (3.68)             (2.27)
----------------------------------------------------------------------------
Total upgrading expenses                        $   5.63           $   5.11 
----------------------------------------------------------------------------
                                                                            
Total operating expenses                        $  46.15           $  36.07 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
(thousands of barrels per day)                                              
----------------------------------------------------------------------------
Syncrude production volumes                 303      227       361      313 
Canadian Oil Sands sales volumes                      84                113 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
 
                                                 Nine Months Ended          
                                                    September 30            
                                                    2013            2012(3) 
----------------------------------------------------------------------------
($ per barrel)                          Bitumen      SCO   Bitumen      SCO 
----------------------------------------------------------------------------
Bitumen production                     $  27.36 $  33.67  $  25.63 $  29.68 
Internal fuel allocation(1)                2.70     3.32      2.14     2.48 
----------------------------------------------------------------------------
Total bitumen production expenses      $  30.06 $  36.99  $  27.77 $  32.16 
----------------------------------------------------------------------------
                                                                            
Upgrading(2)                                    $   9.76           $   9.28 
Less: internal fuel allocation(1)                  (3.32)             (2.48)
----------------------------------------------------------------------------
Total upgrading expenses                        $   6.44           $   6.80 
----------------------------------------------------------------------------
                                                                            
Total operating expenses                        $  43.43           $  38.96 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
(thousands of barrels per day)                                              
----------------------------------------------------------------------------
Syncrude production volumes                 312      253       327      282 
Canadian Oil Sands sales volumes                      93                104 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
(1) 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 $2.59 per GJ and $3.02 per GJ in the
    three and nine months ended September 30, 2013, respectively, and $2.23 
    per GJ and $2.06 per GJ in the three and nine months ended September 30,
    2012, respectively. Diesel prices averaged $0.92 per litre and $0.90 per
    litre in the three and nine months ended September 30, 2013,            
    respectively, and $0.81 per litre and $0.87 per litre in the three and  
    nine months ended September 30, 2012, respectively.                     
(2) Upgrading expenses include the production and maintenance expenses      
    associated with processing and upgrading bitumen to SCO.                
(3) Certain comparative period amounts have been restated to conform to the 
    current period presentation.                                            

 
Crown Royalties  
Crown royalties increased to $71 million, or $9.20 per barrel, in the
third quarter of 2013 from $33 million, or $3.16 per barrel, in the
third quarter of 2012, primarily due to refinements in our estimates
of bitumen values for both current and prior years, partially offset
by increases in deductible capital expenditures in the 2013 third
quarter. On a year-to-date basis, Crown royalties decreased to $122
million, or $4.79 per barrel, in 2013 from $145 million, or $5.11 per
barrel, in the comparative 2012 period, as higher deductible capital
expenditures and lower bitumen volumes in 2013 more than offset the
impact of the refinements in our bitumen value estimates. 
The higher capital expenditures in 2013 reflect spending on capital
projects to replace or relocate Syncrude mine trains and to support
tailings management plans. 
The Syncrude Royalty Amending Agreement requires that bitumen be
valued by a formula that references the value of bitumen based on a
Canadian heavy oil reference price adjusted to reflect quality and
location differences between Syncrude's bitumen and the Canadian
reference price bitumen. In addition, the agreement provides that a
minimum bitumen value, or "floor price", may be imposed in
circumstances where Canadian heavy oil prices are temporarily
suppressed relative to North American heavy oil prices. 
Canadian Oil Sands' share of the royalties recognized for the period
from January 1, 2009 to September 30, 2013 reflect management's best
estimate of the adjustments to reflect the quality and location
differences and "floor price". However, the Syncrude owners and the
Alberta government are disputing the basis for these adjustments.
Under alternate assumptions, Canadian Oil Sands' share of Crown
royalties for this period could be as much as $35 million (on an
after-tax basis) more than the amounts recognized. 
The Syncrude owners and the Alberta government continue to discuss
these matters, 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 and impact
both net income and cash flow from operations accordingly. 
Development Expenses  
Development expenses totalled $41 million and $104 million in the
third quarter and first nine months of 2013, respectively, compared
with $25 million and $75 million in the comparative 2012 periods.
Development expenses consist primarily of expenditures relating to
capital programs, which are expensed, such as pre-feasibility
engineering, technical and support services, research, evaluation
drilling and regulatory and stakeholder consultation expenditures.
Development 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 increased to $101 million and $326
million in the third quarter and first nine months of 2013,
respectively, from $96 million and $284 million in the comparative
2012 periods, reflecting: 


 
--  changes made to the estimated useful lives of certain assets; and 
--  new depreciation charges related to the Syncrude Emissions Reduction
    (SER) project. 

 
Net Finance Expense 


 
                                             Three Months       Nine Months 
                                                    Ended             Ended 
                                             September 30      September 30 
($ millions)                                2013     2012     2013     2012 
---------------------------------------------------------------------
-------
                                                                            
Interest costs on long-term debt(1)       $   30   $   28   $   87   $   78 
 Less capitalized interest on long-term                                     
  debt                                       (29)     (25)     (80)     (65)
----------------------------------------------------------------------------
Interest expense on long-term debt        $    1   $    3   $    7   $   13 
Interest expense on employee future                                         
 benefits                                      4        4       12       12 
Accretion of asset retirement obligation       7        6       19       19 
----------------------------------------------------------------------------
Net finance expense                       $   12   $   13   $   38   $   44 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
(1) Interest costs on long-term debt are net of interest income of $3       
    million and $11 million for the three and nine months ended September   
    30, 2013 and $4 million and $9 million for the three and nine months    
    ended September 30, 2012, respectively.                                 

 
Interest costs on long-term debt were higher in the first nine months
of 2013 relative to the comparative 2012 period as a result of the
U.S. $700 million debt issued on March 29, 2012. Conversely, interest
expense on long-term debt was lower in the first nine months of 2013,
relative to the comparative 2012 periods, because a higher portion of
interest costs were capitalized in 2013, as cumulative capital
expenditures on qualifying assets rose. 
Foreign Exchange (Gain) Loss 


 
                                   Three Months Ended     Nine Months Ended 
                                         September 30          September 30 
($ millions)                          2013       2012       2013       2012 
----------------------------------------------------------------------------
                                                                            
Foreign exchange (gain) loss -                                              
 long-term debt                   $    (40)  $    (64)  $     62   $    (48)
Foreign exchange (gain) loss -                                              
 other                                   9         13        (20)         7 
----------------------------------------------------------------------------
Total foreign exchange (gain)                                               
 loss                             $    (31)  $    (51)  $     42   $    (41)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
Foreign exchange gains/losses are the result of revaluations of our
U.S. dollar-denominated long-term debt, cash, and accounts receivable
into Canadian dollars. 
The foreign exchange gains in the third quarter of 2013 were the
result of a strengthening Canadian dollar to U.S. $0.97 at September
30, 2013 from U.S. $0.95 at June 30, 2013, whereas the foreign
exchange losses in the first nine months of 2013 were the result of a
weakening Canadian dollar from U.S. $1.01 at December 31, 2012. The
foreign exchange gains in 2012 were the result of a strengthening
Canadian dollar from U.S. $0.98 at December 31, 2011 and June 30,
2012 to U.S. $1.02 at September 30, 2012. 
Tax Expense 


 
                                           Three Months                     
                                                  Ended    Nine Months Ended
                                           September 30         September 30
($ millions)                             2013      2012      2013       2012
----------------------------------------------------------------------------
                                                                            
Current tax expense                  $     32  $     10  $    212   $     30
Deferred tax expense (recovery)            32        93        (6)       211
----------------------------------------------------------------------------
Total tax expense                    $     64  $    103  $    206   $    241
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
Total tax expense decreased in 2013 because earnings before tax were
lower than in 2012. 
Current taxes increased in 2013 because: 


 
--  additional tax pools were available to shelter the majority of 2012
    income from current taxes; and 
--  taxes on a portion of income generated in the Corporation's partnership
    in 2012 were deferred to 2013. 

 
Asset Retirement Obligation 


 
                                                               September 30 
Nine months ended ($ millions)                                         2013 
----------------------------------------------------------------------------
                                                                            
Asset retirement obligation, beginning of period           $          1,102 
Increase in risk-free interest rate                                    (170)
Accretion expense                                                        19 
Reclamation expenditures                                                (40)
----------------------------------------------------------------------------
Asset retirement obligation, end of period                 $            911 
Less current portion                                                    (45)
----------------------------------------------------------------------------
Non-current portion                                        $            866 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
Canadian Oil Sands' asset retirement obligation decreased from $1,102
million at December 31, 2012 to $911 million at September 30, 2013,
mainly reflecting a 75 basis point increase in the interest rate used
to discount future reclamation and closure expenditures. 
Pension and Other Post-Employment Benefit Plans  
The Corporation's share of the estimated unfunded portion of Syncrude
Canada Ltd.'s ("Syncrude Canada") pension and other post-employment
benefit plans (the "accrued benefit liability") decreased to $309
million at September 30, 2013 from $438 million at December 31, 2012,
reflecting a 50 basis point increase in the interest rate used to
discount the accrued benefit liability and contributions to the plans
in excess of the current period expenses. 
Summary of Quarterly Results 


 
                                                                        2013
                                         Q3               Q2              Q1
----------------------------------------------------------------------------
                                                                            
Sales (1)($ millions)        $          871   $          921   $         828
                                                                            
Net income ($ millions)      $          246   $          219   $         177
 Per Share, Basic &                                                         
  Diluted                    $         0.51   $         0.45   $        0.37
                                                                            
Cash flow from operations                                                   
 (2)($ millions)             $          339   $          343   $         275
 Per Share (2)               $         0.70   $         0.71   $        0.57
                                                                            
Dividends ($ million
s)       $          170   $          169   $         170
 Per Share                   $         0.35   $         0.35   $        0.35
                                                                            
Daily average sales                                                         
 volumes (3) (bbls)                  84,250          100,094          95,683
                                                                            
Realized SCO selling price                                                  
 ($/bbl)                     $       112.55   $       100.90   $       96.11
                                                                            
WTI(4) (average $US/bbl)     $       105.81   $        94.17   $       94.36
                                                                            
SCO premium (discount) to                                                   
 WTI                         $         2.51   $         4.69   $        0.88
(weighted-average $/bbl)                                                    
                                                                            
Operating expenses(5)                                                       
 ($/bbl)                     $        46.15   $        43.23   $       41.20
                                                                            
Purchased natural gas                                                       
 price ($/GJ)                $         2.59   $         3.41   $        2.95
                                                                            
Foreign exchange rates                                                      
 ($US/$Cdn)                                                                 
 Average                     $         0.96   $         0.98   $        0.99
 Quarter-end                 $         0.97   $         0.95   $        0.98
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
 
                                                           2012(6)   2011(6)
                                  Q4        Q3        Q2        Q1        Q4
----------------------------------------------------------------------------
                                                                            
Sales (1)($ millions)      $     929 $     941 $     740 $     956 $     884
                                                                            
Net income ($ millions)    $     219 $     336 $     101 $     318 $     232
 Per Share, Basic &                                                         
  Diluted                  $    0.45 $    0.69 $    0.21 $    0.66 $    0.48
                                                                            
Cash flow from operations                                                   
 (2)($ millions)           $     418 $     470 $     245 $     454 $     363
 Per Share (2)             $    0.86 $    0.97 $    0.51 $    0.94 $    0.75
                                                                            
Dividends ($ millions)     $     169 $     170 $     170 $     145 $     146
 Per Share                 $    0.35 $    0.35 $    0.35 $    0.30 $    0.30
                                                                            
Daily average sales                                                         
 volumes (3) (bbls)          111,669   113,331    89,460   108,108    91,259
                                                                            
Realized SCO selling price                                                  
 ($/bbl)                   $   89.99 $   89.89 $   90.59 $   97.07 $  104.78
                                                                            
WTI(4) (average $US/bbl)   $   88.23 $   92.20 $   93.35 $  103.03 $   94.06
                                                                            
SCO premium (discount) to                                                   
 WTI                       $    2.43 $  (2.09) $  (5.31) $  (5.89) $    8.51
(weighted-average $/bbl)                                                    
                                                                            
Operating expenses(5)                                                       
 ($/bbl)                   $   38.76 $   36.07 $   50.25 $   32.68 $   46.88
                                                                            
Purchased natural gas                                                       
 price ($/GJ)              $    3.02 $    2.23 $    1.79 $    2.23 $    3.19
                                                                            
Foreign exchange rates                                                      
 ($US/$Cdn)                                                                 
 Average                   $    1.01 $    1.00 $    0.99 $    1.00 $    0.98
 Quarter-end               $    1.01 $    1.02 $    0.98 $    1.00 $    0.98
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
(1) Sales after crude oil purchases and transportation expense.             
(2) Cash flow from operations and cash flow from operations per Share are   
    additional GAAP financial measures and are defined in the "Additional   
    GAAP Financial Measures" section of this MD&A.                          
(3) Daily average sales volumes net of crude oil purchases.                 
(4) Pricing obtained from Bloomberg.                                        
(5) Derived from operating expenses, as reported on the Consolidated        
    Statements of Income and Comprehensive Income, divided by sales volumes 
    during the period.                                                      
(6) Net income and operating expenses in 2012 have been adjusted to reflect 
    the amendments to International Accounting Standard ("IAS") 19, Employee
    Benefits. Net income and operating expenses in 2011 have not been       
    adjusted. Additional information on the amendments to IAS 19 is provided
    in the "Changes in Accounting Policies" section of this MD&A and in Note
    3 to the unaudited consolidated financial statements for the three and  
    nine months ended September 30, 2013 and September 30, 2012.            

 
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 and Crown royalties. Monthly average WTI prices have ranged from
    U.S. $82 per barrel to U.S. $107 per barrel, and the monthly average
    differentials between our realized selling price and Canadian dollar WTI
    prices have ranged from an $11 per barrel premium to 
    a $17 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; 
--  increased spending on capital projects to replace or relocate Syncrude
    mining trains and to support tailings management plans has reduced Crown
    royalties; 
--  bitumen valuation estimates used to calculate Crown royalties from 2009
    to 2013 have changed as new information becomes available; 
--  fluctuations in natural gas prices have affected operating expenses and
    Crown royalties; and 
--  increases in current taxes in 2013 have reduced cash flow from
    operations. Prior to 2013, tax pools sheltered the Corporation's income
    from significant current taxes. In addit
ion, taxes on a portion of the
    income generated in the Corporation's partnership in 2012 were deferred
    to 2013. 

 
These same factors are reasonably likely to impact the Corporation's
financial results in the future.  
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.
Technological developments in North American oil and natural gas
production have significantly increased production, impacting prices
and volatility. 
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. Given the
relatively fixed nature of operating costs, 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)                              2013      2012      2013      2012
----------------------------------------------------------------------------
                                                                            
Major Projects                                                              
                                                                            
 Mildred Lake Mine Train Replacement  $    124  $    135  $    352  $    266
 Reconstruct crushers, surge                                                
  facilities, and slurry prep                                               
  facilities to support tailings                                            
  storage requirements                                                      
                                                                            
 Aurora North Mine Train Relocation         54        32       142        64
 Relocate crushers, surge                                                   
  facilities, and slurry prep                                               
  facilities to support tailings                                            
  storage requirements                                                      
                                                                            
 Aurora North Tailings Management           22        52        67        91
 Construct a composite tails (CT)                                           
  plant at the Aurora North mine to                                         
  process tailings                                                          
                                                                            
 Centrifuge Tailings Management             62        16       146        36
 Construct a centrifuge plant at the                                        
  Mildred Lake mine to process                                              
  tailings                                                                  
                                                                            
----------------------------------------------------------------------------
Capital expenditures on major                                               
 projects                             $    262  $    235  $    707  $    457
----------------------------------------------------------------------------
                                                                            
Regular maintenance                                                         
 Capitalized turnaround costs         $     33  $      9  $     54  $     76
 Other(1)                                   89        85       209       189
----------------------------------------------------------------------------
Capital expenditures on regular                                             
 maintenance                          $    122  $     94  $    263  $    265
----------------------------------------------------------------------------
                                                                            
Capitalized interest                  $     29  $     25  $     80  $     65
----------------------------------------------------------------------------
Total capital expenditures            $    413  $    354  $  1,050  $    787
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
(1) Other regular maintenance capital includes expenditures to relocate     
    tailings facilities as well as other infrastructure projects.           

 
Capital expenditures increased to $1,050 million in the first nine
months of 2013 from $787 million in the comparative 2012 period,
primarily due to spending on the major projects at Syncrude. 
Capital expenditures increased to $413 million in the third quarter
of 2013 from $354 million in the comparative 2012 quarter due to: 


 
--  spending on the major projects; and 
--  the Coker 8-1 and LC Finer turnarounds. 

 
More information on the major projects is provided in the "Outlook"
section of this MD&A. 
Contractual Obligations and Commitments  
Canadian Oil Sands' contractual obligations and commitments are
summarized in the 2012 annual MD&A 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 first nine months of 2013, Canadian Oil Sands
entered into new contractual obligations totalling approximately $700
million for the transportation of crude oil in support of the
Corporation's strategy to secure access to preferred markets and
enhance marketing flexibility. 
Dividends 
On October 30, 2013, 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 29, 2013 to shareholders of
record on November 22, 2013. During the first nine months of 2013,
the Corporation paid dividends to shareholders totalling $509
million, or $1.05 per Share. 
Dividend payments are 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 
As at ($ millions, except % amounts)                2013               2012 
----------------------------------------------------------------------------
                                                                            
Long-term debt(1,2)                     $          1,549   $          1,794 
Cash and 
cash equivalents                           (840)            (1,553)
----------------------------------------------------------------------------
Net debt(1,3)                           $            709   $            241 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Shareholders' equity                    $          4,716   $          4,515 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Total net capitalization(1,4)           $          5,425   $          4,756 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Total capitalization(1,5)               $          6,265   $          6,309 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Net debt-to-total net                                                       
 capitalization(1,6) (%)                              13                  5 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Long-term debt-to-total                                                     
 capitalization (1,7)  (%)                            25                 28 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
(1) Additional GAAP financial measure.                                      
(2) Includes current and non-current portions of long-term debt.            
(3) Long-term debt less cash and cash equivalents.                          
(4) Net debt plus Shareholders' equity.                                     
(5) Long-term debt plus Shareholders' equity.                               
(6) Net debt divided by total net capitalization.                           
(7) Long-term debt divided by total capitalization.                         

 
Net debt, comprised of current and non-current portions of long-term
debt less cash and cash equivalents, increased to $709 million at
September 30, 2013 from $241 million at December 31, 2012, as
existing cash balances were used to fund capital expenditures and
dividend payments in excess of cash flow from operations. In
addition, a weakening Canadian dollar from December 31, 2012 to
September 30, 2013 increased the Canadian dollar equivalent value of
Canadian Oil Sands' outstanding long-term debt, all of which is
denominated in U.S. dollars. As a result, net debt-to-total net
capitalization increased to 13 per cent at September 30, 2013 from
five per cent at December 31, 2012. 
On August 15, 2013, Canadian Oil Sands repaid U.S. $300 million of
Senior Notes upon maturity, resulting in long-term debt-to-total
capitalization of 25 per cent at September 30, 2013 compared with 28
per cent at December 31, 2012. 
We plan to spend existing cash balances by the end of 2014 to fund
our major projects and settle accounts payable for accrued current
taxes and Crown royalties. As a result, and based on the assumptions
in our 2013 Outlook, our net debt levels are expected to rise to $1
billion to $2 billion by the end of 2014, coincident with reduced
capital expenditure risk from the expected substantial completion of
our major projects. 
Shareholders' equity increased to $4,716 million at September 30,
2013 from $4,515 million at December 31, 2012, as net income exceeded
dividends in the first nine months of 2013. 
In June 2013, Canadian Oil Sands extended the terms of its credit
facilities by one year. The $1,500 million operating credit facility
was extended to June 1, 2017 and the $40 million extendible revolving
term credit facility was extended to June 30, 2015. No amounts were
drawn against these facilities at September 30, 2013 or December 31,
2012. 
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 long-term debt-to-total capitalization to 55 per
cent. Canadian Oil Sands is in compliance with its debt covenants,
and with a long-term debt-to-total capitalization of 25 per cent at
September 30, 2013, a significant increase in debt or decrease in
equity would be required to negatively impact the Corporation's
financial flexibility. 
Shareholders' Capital and Trading Activity 
The Corporation's shares trade on the Toronto Stock Exchange under
the symbol COS. On September 30, 2013, the Corporation had a market
capitalization of approximately $9.7 billion with 484.6 million
shares outstanding and a closing price of $19.96 per Share. The
following table summarizes the trading activity for the third quarter
of 2013. 
Canadian Oil Sands Limited - Trading Activity 


 
                                      Third                                 
                                    Quarter       July     August  September
                                       2013       2013       2013       2013
----------------------------------------------------------------------------
                                                                            
Share price                                                                 
 High                            $    21.18 $    20.97 $    21.18 $    20.68
 Low                             $    19.60 $    19.60 $    20.05 $    19.92
 Close                           $    19.96 $    19.94 $    20.21 $    19.96
                                                                            
Volume of Shares traded                                                     
 (millions)                           130.4       33.2       48.7       48.5
Weighted average Shares                                                     
 outstanding (millions)               484.6      484.6      484.6      484.6
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
Changes in Accounting Policies 
In June 2011, the International Accounting Standards Board ("IASB")
amended International Accounting Standard ("IAS") 19, Employee
Benefits, addressing the recognition and measurement of defined
benefit pension expense and termination benefits and disclosures for
all employee benefits. The key amendments are as follows: 


 
--  Actuarial gains and losses, which are now referred to as re-
    measurements, are recognized immediately in "other comprehensive income"
    ("OCI"), eliminating the choice between immediate recognition through
    net income or OCI, or deferral using the corridor approach. This change
    does not impact Canadian Oil Sands as the Corporation previously
    recognized actuarial gains and losses immediately through OCI. 
--  The expected rate of return on plan assets is no longer calculated.
    Instead, the estimated rate of return on plan assets is now the same
    rate used to accrete the discounted accrued benefit obligation. The
    interest cost component of the pension expense, which previously
    represented accretion of the discounted accrued benefit obligation, now
    represents accretion of the net accrued benefit liability (the accrued
    benefit obligation n
et of the fair value of plan assets). 
--  The interest cost component of pension expense, which was previously
    presented within operating expenses, is now presented within net finance
    expense. 

 
Canadian Oil Sands has applied the amendments effective January 1,
2013 in accordance with the applicable transitional provisions with
no material impact to the Corporation's financial results. Additional
information is provided in Note 3 to the unaudited consolidated
financial statements for the three and nine months ended September
30, 2013 and September 30, 2012. 
2013 Outlook 


 
                                                          As of        As of
                                                     October 30      July 30
(millions of Canadian dollars, except volume and                            
 per barrel amounts)                                       2013         2013
----------------------------------------------------------------------------
                                                                            
Operating assumptions                                                       
Syncrude production (mmbbls)                                 98          102
Canadian Oil Sands sales (mmbbls)                          36.0         37.5
Sales, net of crude oil purchases and                                       
 transportation                                     $     3,603  $     3,518
Operating expenses                                  $     1,504  $     1,507
Operating expenses per barrel                       $     41.77  $     40.21
Crown royalties                                     $       194  $       104
Current taxes                                       $       300  $       400
Cash flow from operations(1)                        $     1,331  $     1,260
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Capital expenditure assumptions                                             
Major projects                                      $       842  $       828
Regular maintenance                                 $       346  $       349
Capitalized interest                                $       104  $       102
Total capital expenditures                          $     1,292  $     1,279
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Business environment assumptions                                            
West Texas Intermediate (U.S.$/bbl)                 $     98.00  $     90.00
Premium to average Cdn$ WTI prices (Cdn$/bbl)       $         -  $      2.00
Foreign exchange rate (U.S.$/Cdn$)                  $      0.98  $      0.98
AECO natural gas (Cdn$/GJ)                          $      3.00  $      3.50
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
(1) Cash flow from operations is an additional GAAP financial measure and is
    defined in the "Additional GAAP Financial Measures" section of this     
    MD&A.                                                                   

 
We have increased estimated 2013 sales, net of crude oil purchases
and transportation expense, to $3,603 million due to an increase in
the forecast realized selling price partially offset by a decrease in
estimated production volumes. 
The forecast annual realized selling price for 2013 has increased $6
per barrel to $100 per barrel and assumes a U.S. $98 per barrel WTI
oil price, no SCO premium/discount to Canadian dollar WTI and a
foreign exchange rate of $0.98 U.S./Cdn. 
We have adjusted our 2013 Syncrude production range to 97 to 100
million barrels with a single-point estimate of 98 million barrels
(268,500 barrels per day). Net to Canadian Oil Sands, the
single-point estimate is equivalent to 36.0 million barrels (98,600
barrels per day). The production outlook reflects actual results to
date and assumes reliable operations for the remainder of the year,
requiring average daily Syncrude production volumes of 313,400
barrels in the fourth quarter. 
We estimate 2013 operating expenses of $1,504 million, reflecting
actual costs incurred to date and a reduced natural gas price
assumption of $3.00 per gigajoule. We have increased our per barrel
operating expense estimate to $41.77 per barrel, reflecting the lower
production forecast. 
Our estimate of 2013 Crown royalties has increased to $194 million
due primarily to refinements in our estimates of bitumen values. 
Our estimate of 2013 current taxes has decreased to $300 million,
reflecting changes in the estimated timing of capital expenditure and
other deductions. 
Based on these assumptions, estimated 2013 cash flow from operations
has increased to $1,331 million, or $2.75 per Share. 
We estimate 2013 capital expenditures of $1,292 million, comprised of
$842 million of spending on major projects, $346 million in regular
maintenance of the business and other projects, and $104 million in
capitalized interest.  
We plan to spend existing cash balances by the end of 2014 to fund
our major projects and settle accounts payable for accrued current
taxes and Crown royalties. As a result, and based on the assumptions
in our 2013 Outlook, our net debt levels are expected to rise to $1
billion to $2 billion by the end of 2014, coincident with reduced
capital expenditure risk from the expected substantial completion of
our major 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 30, 2013) 


 
                                                  Cash Flow from Operations 
                                                          Increase          
                                       Annual                               
Variable                          Sensitivity  $millions(1,2)  $/ Share(1,2)
----------------------------------------------------------------------------
                                                                            
Syncrude operating expense                                                  
 decrease                        Cdn$1.00/bbl  $           21  $        0.04
Syncrude operating expense             Cdn$50                               
 decrease                             million  $           11  $        0.02
WTI crude oil price increase    U.S.$1.00/bbl  $           22  $        0.05
                                    2 million                               
Syncrude production increase             bbls  $           45  $        0.09
                                U.S.$0.01/Cdn                               
Canadian dollar weakening                   $  $           23  $        0.05
AECO natural gas price decrease   Cdn$0.50/GJ  $           13  $        0.03
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
(1) Canadian Oil Sands anticipates recording approximately $300 million in  
    current taxes in 2013. These sensitivities are after the impact of      
    taxes.                                                                  
(2) These sensitivities assume Canadian Oil Sands pays Crown royalties based
    on net bitumen revenues in 2013. Lower bitumen revenues or higher       
    deductible bitumen-related costs may result in minimum Crown royalties  
    ba
sed on gross revenues which will change the sensitivities to these    
    variables.                                                              

 
The 2013 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 2013 will be provided on an annual basis when we disclose
the budgets for those years. 
Major Projects - Total Project Cost and Schedule Estimates(1) 


 
                             Total Cost Total Cost     Estimated%     Target
                               Estimate   Estimate   Complete at  In-Service
                                                        Sept 30,            
                            $ (billions) Accuracy(%)     2013(2)        Date
----------------------------------------------------------------------------
                                                                            
Mildred Lake                                                                
 Mine Train                                                                 
 Replacement      Syncrude  $       4.2   +15%/-15%           65%    Q4 2014
                 COS share          1.6                                     
                                                                            
Aurora North                                                                
 Mine Train                                                                 
 Relocation       Syncrude  $       1.0    +0%/-10%          100%    Q4 2013
                 COS share          0.4                                     
                                                                            
Aurora North                                                                
 Tailings                                                                   
 Management       Syncrude  $       0.8    +5%/-10%           95%    Q4 2013
                 COS share          0.3                                     
                                                                            
Centrifuge                                                                  
 Tailings                                                                   
 Management       Syncrude  $       1.9   +15%/-15%           50%    H1 2015
                 COS share          0.7                                     
                                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
Major Projects - Annual Spending Profile(1)  


 
                                    Spent to                                
                                      to Dec                                
($ billions)                        31, 2012    2013    2014    2015   Total
----------------------------------------------------------------------------
                                                                            
Syncrude                           $     2.6  $  2.4  $  2.3  $  0.6  $  7.9
Canadian Oil Sands share           $     1.0  $  0.9  $  0.9  $  0.2  $  3.0
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
(1) Major projects costs include capital expenditures, excluding capitalized
    interest, and certain development expenses.                             
(2) The estimated percentage complete is based on hours spent as a          
    percentage of total forecasted hours to project completion.             

 
The second of the two mine train relocations at Aurora North was
completed earlier this month. The Aurora North Mine Train Relocation
project is now complete, ahead of schedule and under budget. The
Aurora North Tailings Management project is on schedule for
completion in the fourth quarter of 2013. The Mildred Lake Mine Train
and Centrifuge Tailings Management projects are tracking to plan. 
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 21, 2013 which is available on the
Corporation's profile on SEDAR at www.sedar.com and on the
Corporation's website at www.cdnoilsands.com. 
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)                      2013       2012       2013       2012 
----------------------------------------------------------------------------
                                                                            
Sales (Note 17)                   $  1,163   $  1,006   $  3,160   $  2,905 
Crown royalties (Note 15)              (71)       (33)      (122)      (145)
----------------------------------------------------------------------------
Revenues                          $  1,092   $    973   $  3,038   $  2,760 
----------------------------------------------------------------------------
                                                                            
Expenses                                                                    
 Operating (Note 3)               $    357   $    377   $  1,106   $  1,107 
 Development                            41         25        104         75 
 Crude oil purchases and                                                    
  transportation (Note 17)             292         65        540        268 
 Administration                          8          5         24         19 
 Insurance                               2          4         10          8 
 Depreciation and depletion            101         96        326        284 
----------------------------------------------------------------------------
                                  $    801   $    572   $  2,110   $  1,761 
----------------------------------------------------------------------------
Earnings from operating                                                     
 activities                       $    291   $    401   $    928   $    999 
 Foreign exchange (gain) loss                                               
  (Note 9)                             (31)       (51)        42        (41)
 Net finance expense (Notes 3                                               
  and 10)                               12         13         38         44 
----------------------------------------------------------------------------
Earnings before taxes             $    310   $    439   $    848   $    996 
 Tax expense (Notes 3 and 11)           64        103        206        241 
----------------------------------------------------------------------------
Net income    
                    $    246   $    336   $    642   $    755 
Other comprehensive income                                                  
 (loss), net of income taxes                                                
 Items not reclassified to net                                              
  income:                                                                   
  Re-measurements of employee                                               
   future benefit plans (Notes 3                                            
   and 8)                               68          4         68        (23)
 Items reclassified to net                                                  
  income:                                                                   
  Derivative gains                      (1)         -         (2)        (2)
----------------------------------------------------------------------------
Comprehensive income              $    313   $    340   $    708   $    730 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Weighted average Shares                                                     
 (millions)                            485        485        485        485 
Shares, end of period (millions)       485        485        485        485 
                                                                            
Net income per Share                                                        
 Basic and diluted                $   0.51   $   0.69   $   1.32   $   1.56 
----------------------------------------------------------------------------
                                                                            
See Notes to Unaudited Consolidated Financial Statements                    

 
Consolidated Statements of Shareholders' Equity 
(unaudited) 


 
                                             Three Months       Nine Months 
                                                    Ended             Ended 
                                             September 30      September 30 
(millions of Canadian dollars)              2013     2012     2013     2012 
----------------------------------------------------------------------------
                                                                            
Retained earnings                                                           
 Balance, beginning of period             $1,880   $1,594   $1,823   $1,517 
 Net income                                  246      336      642      755 
 Re-measurements of employee future                                         
  benefit plans                               68        4       68      (23)
 Dividends                                  (170)    (170)    (509)    (485)
----------------------------------------------------------------------------
 Balance, end of period                   $2,024   $1,764   $2,024   $1,764 
----------------------------------------------------------------------------
Accumulated other comprehensive income                                      
 Balance, beginning of period             $    8   $   10   $    9   $   12 
 Reclassification of derivative gains to                                    
  net income                                  (1)       -       (2)      (2)
----------------------------------------------------------------------------
 Balance, end of period                   $    7   $   10   $    7   $   10 
----------------------------------------------------------------------------
Shareholders' capital                                                       
 Balance, beginning of period             $2,674   $2,673   $2,673   $2,673 
 Issuance of shares                            -        -        1        - 
----------------------------------------------------------------------------
 Balance, end of period                   $2,674   $2,673   $2,674   $2,673 
----------------------------------------------------------------------------
Contributed surplus                                                         
 Balance, beginning of period             $   11   $    9   $   10   $    8 
 Share-based compensation                      -        -        1        1 
----------------------------------------------------------------------------
 Balance, end of period                       11        9       11        9 
----------------------------------------------------------------------------
Total Shareholders' equity                $4,716   $4,456   $4,716   $4,456 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
See Notes to Unaudited Consolidated Financial Statements                    

 
Consolidated Balance Sheets 
(unaudited) 


 
                                            September 30         December 31
As at (millions of Canadian dollars)                2013                2012
----------------------------------------------------------------------------
                                                                            
Assets                                                                      
Current assets                                                              
 Cash and cash equivalents              $            840    $          1,553
 Accounts receivable                                 415                 311
 Inventories                                         160                 137
 Prepaid expenses                                      9                   9
----------------------------------------------------------------------------
                                        $          1,424    $          2,010
Property, plant and equipment, net                                          
 (Note 4)                                          8,558               8,003
Exploration and evaluation                            89                  89
Reclamation trust                                     75                  69
----------------------------------------------------------------------------
                                        $         10,146    $         10,171
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Liabilities and Shareholders' Equity                                        
Current liabilities                                                         
 Accounts payable and accrued                                               
  liabilities (Note 5)                  $            882    $            704
 Current portion of long-term debt                     -                 297
 Current taxes                                       185                  40
 Current portion of employee future                                         
  benefits                                            82                  76
----------------------------------------------------------------------------
                                        $          1,149    $          1,117
Employee future benefits                             227                 362
Other liabilities (Note 6)                            89                  89
Long-term debt                                     1,549               1,497
Asset retirement obligation (Note 7)                 866               1,058
Deferred taxes                                     1,550               1,533
----------------------------------------------------------------------------
                                        $          5,430    $          5,656
Shareholders' equity                               4,716               4,515
--------------------------------
--------------------------------------------
                                        $         10,146    $         10,171
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Commitments and Contingencies (Notes                                        
 14 and 15, 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)        2013       2012       2013       2012 
----------------------------------------------------------------------------
                                                                            
Cash from (used in) operating                                               
 activities                                                                 
 Net income                       $    246   $    336   $    642   $    755 
 Adjustments to reconcile net                                               
  income to cash flow from                                                  
  operations:                                                               
  Depreciation and depletion           101         96        326        284 
  Accretion of asset retirement                                             
   obligation (Note 7)                   7          6         19         19 
  Foreign exchange (gain) loss                                              
   on long-term debt (Note 9)          (40)       (64)        62        (48)
  Deferred taxes (Note 11)              32         93         (6)       211 
  Share-based compensation               1         (1)         4          2 
  Reclamation expenditures (Note                                            
   7)                                   (1)        (6)       (40)       (48)
  Change in employee future                                                 
   benefits and other                   (7)        10        (50)       (12)
----------------------------------------------------------------------------
  Cash flow from operations       $    339   $    470   $    957   $  1,163 
 Change in non-cash working                                                 
  capital (Note 16)                    (14)      (124)       158        105 
----------------------------------------------------------------------------
  Cash from operating activities  $    325   $    346   $  1,115   $  1,268 
----------------------------------------------------------------------------
                                                                            
Cash from (used in) financing                                               
 activities                                                                 
 Repayment of senior notes        $   (310)  $      -   $   (310)  $      - 
 Issuance of senior notes                -          -          -        689 
 Issuance of shares                      -          -          1          - 
 Dividends                            (170)      (170)      (509)      (485)
----------------------------------------------------------------------------
  Cash from (used in) financing                                             
   activities                     $   (480)  $   (170)  $   (818)  $    204 
----------------------------------------------------------------------------
                                                                            
Cash from (used in) investing                                               
 activities                                                                 
 Capital expenditures             $   (413)  $   (354)  $ (1,050)  $   (787)
 Reclamation trust funding              (2)        (2)        (7)        (7)
 Change in non-cash working                                                 
  capital (Note 16)                      -         42         36         78 
----------------------------------------------------------------------------
  Cash used in investing                                                    
   activities                     $   (415)  $   (314)  $ (1,021)  $   (716)
----------------------------------------------------------------------------
                                                                            
                                                                            
Foreign exchange gain (loss) on                                             
 cash and cash equivalents held                                             
 in foreign currency              $     (6)  $    (11)  $     11   $     (5)
----------------------------------------------------------------------------
                                                                            
Increase (decrease) in cash and                                             
 cash equivalents                 $   (576)  $   (149)  $   (713)  $    751 
Cash and cash equivalents,                                                  
 beginning of period                 1,416      1,618      1,553        718 
----------------------------------------------------------------------------
Cash and cash equivalents, end                                              
 of period                        $    840   $  1,469   $    840   $  1,469 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Cash and cash equivalents                                                   
 consist of:                                                                
 Cash                             $    659   $    150   $    659   $    150 
 Short-term investments                181      1,319        181      1,319 
----------------------------------------------------------------------------
                                  $    840   $  1,469   $    840   $  1,469 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Supplementary Information (Note 16)                                         
                                                                            
See Notes to Unaudited Consolidated Financial Statements                    

 
Notes to Unaudited Consolidated Financial Statements  
For the Three and Nine Months Ended September 30, 2013 
(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 in 2010 under the laws of the
Province of Alberta, Canada 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 ("SCO"). Syncrude is a joint operation jointly
controlled by seven owners. Decisions about Syncrude's relevant
activities require unanimous consent of the owners. Each owner takes
its proportionate share of production in kind, and funds its
propo
rtionate share of Syncrude's operating development 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 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: 2000
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, such as 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 financial 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 September 30, 2013. 
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, 2012. 
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, 2012 except as follows: 
Taxes  
Current taxes in interim periods are accrued based on our best
estimate of the annual effective tax rate applied to year-to-date
earnings. Current taxes accrued in one interim period may be adjusted
prospectively in a subsequent interim period if the estimate of the
annual effective tax rate changes. 
Employee Future Benefits  
In June 2011, the International Accounting Standards Board ("IASB")
amended International Accounting Standard ("IAS") 19, Employee
Benefits, addressing the recognition and measurement of defined
benefit pension expense and termination benefits and disclosures for
all employee benefits. The key amendments are as follows: 


 
--  Actuarial gains and losses, which are now referred to as re-
    measurements, are recognized immediately in "other comprehensive income"
    ("OCI"), eliminating the choice between immediate recognition through
    net income or OCI, or deferral using the corridor approach. This change
    does not impact Canadian Oil Sands as the Corporation previously
    recognized actuarial gains and losses immediately through OCI. 
--  The expected rate of return on plan assets is no longer calculated.
    Instead, the estimated rate of return on plan assets is now the same
    rate used to accrete the discounted accrued benefit obligation. The
    interest cost component of the pension expense, which previously
    represented accretion of the discounted accrued benefit obligation, now
    represents accretion of the net accrued benefit liability (the accrued
    benefit obligation net of the fair value of plan assets). 
--  The interest cost component of pension expense, which was previously
    presented within operating expenses, is now presented within net finance
    expense. 

 
Canadian Oil Sands has applied the amendments effective January 1,
2013 in accordance with the applicable transitional provisions.
Certain amounts reported in the Corporation's Consolidated Statements
of Income and Comprehensive Income have been adjusted as follows: 


 
                                              Three Months Ended            
                                              September 30, 2013            
($ millions, except per Share          Before                          After
 amounts)                         Adjustments    Adjustments     Adjustments
----------------------------------------------------------------------------
                                                                            
Operating expenses               $        357   $          -    $        357
Net finance expense              $          8   $          4    $         12
Tax expense                      $         65   $         (1)   $         64
Net income                       $        249   $         (3)   $        246
Re-measurements of employee                                                 
 future benefit plans, net of                                               
 tax                             $         65   $          3    $         68
                              ----------------------------------------------
Earnings per Share               $       0.52   $      (0.01)   $       0.51
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
                                               Nine Months Ended            
                                              September 30, 2013            
($ millions, except per Share          Before                          After
 amounts)                         Adjustments    Adjustments     Adjustments
----------------------------------------------------------------------------
                                                                            
Operating expenses               $      1,106   $          -    $      1,106
Net finance expense              $         26   $         12    $         38
Tax expense                      $        209   $         (3)   $        206
Net income                       $        651   $         (9)   $        642
Re-measurements of employee                                                 
 future benefit plans, net of                                               
 tax                             $         59   $          9    $         68
                              ----------------------------------------------
Earnings per Share               $       1.34   $      (0.02)   $       1.32
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 

 
                                             Three Months Ended             
                                             September 30, 2012             
($ millions, except per               Before                           After
 Share amounts)                  Adjustments    Adjustments      Adjustments
----------------------------------------------------------------------------
                                                                            
Operating expenses            $          378  $          (1)  $          377
Net finance expense           $            9  $           4   $           13
Tax expense                   $          104  $          (1)  $          103
Net income                    $          338  $          (2)  $          336
Re-measurements of employee                                                 
 future benefit plans, net                                                  
 of tax                       $            2  $           2   $            4
                            ------------------------------------------------
Earnings per Share            $         0.70  $       (0.01)  $         0.69
 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
                                             Nine Months Ended              
                                            September 30, 2012              
($ millions, except per              Before                           After 
 Share amounts)                 Adjustments     Adjustments     Adjustments 
----------------------------------------------------------------------------
                                                                            
Operating expenses            $       1,112   $          (5)  $       1,107 
Net finance expense           $          32   $          12   $          44 
Tax expense                   $         243   $          (2)  $         241 
Net income                    $         760   $          (5)  $         755 
Re-measurements of employee                                                 
 future benefit plans, net                                                  
 of tax                       $         (28)  $           5   $         (23)
                            ------------------------------------------------
Earnings per Share            $        1.57   $       (0.01)  $        1.56 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
Consolidation  
In May 2011, the IASB issued IFRS 10, Consolidated Financial
Statements; IFRS 11, Joint Arrangements, to replace International
Accounting Standard ("IAS") 31, Interests in Joint Ventures; IFRS 12,
Disclosure of Interests in Other Entities; and amendments to IAS 27,
Separate Financial Statements and IAS 28 Investments in Associates
and Joint Ventures. 
Canadian Oil Sands has applied these new standards effective January
1, 2013 in accordance with the transitional provisions. IFRS 10,
which establishes principles for the presentation and preparation of
consolidated financial statements, has not impacted Canadian Oil
Sands' financial statements or disclosures. IFRS 11 eliminates the
accounting policy choice between proportionate consolidation and
equity method accounting for joint ventures available under IAS 31
and, instead, mandates one of these two methodologies based on the
economic substance of the joint arrangement. Canadian Oil Sands has
determined that its investments in Syncrude and Syncrude Canada are
considered joint operations under the new standard and continues to
recognize its proportionate share of the assets, liabilities,
revenues, expenses, and commitments of both. IFRS 12 requires
entities to disclose information about the nature of their interests
in joint ventures, which has resulted in additional disclosures in
Note 1, Nature of Operations. 
Fair Value Measurement  
In May 2011, the IASB issued IFRS 13, Fair Value Measurements, which
establishes a single source of guidance for fair value measurements
and related disclosures. Canadian Oil Sands has applied this new
standard effective January 1, 2013 in accordance with the
transitional provisions, resulting in new fair value disclosures in
Note 13, Financial Instruments. 
Financial Instruments: Disclosures  
In December 2011, the IASB issued amendments to IFRS 7, Financial
Instruments: Disclosures, requiring entities to disclose information
about the effect, or potential effect, of netting arrangements on an
entity's financial position. Canadian Oil Sands has applied these
amendments effective January 1, 2013 in accordance with their
transitional provisions, resulting in additional disclosures in Note
13, Financial Instruments. 
Production Stripping Costs  
In October 2011, the IASB issued International Financial Reporting
Interpretations Committee ("IFRIC") Interpretation 20, Stripping
Costs in the Production Phase of a Surface Mine, which clarifies the
accounting for costs associated with waste removal in surface mining
during the production phase of a mine. Canadian Oil Sands has applied
this new interpretation effective January 1, 2013 in accordance with
the transitional provisions and there has been no impact on Canadian
Oil Sands' financial statements or disclosures. 
4) Property, Plant and Equipment, Net  


 
                                   Nine Months Ended September 30, 2013     
                                                                            
                                   Upgrading                       Vehicles 
                                         and          Mining            and 
($ millions)                      Extracting       Equipment      Equipment 
----------------------------------------------------------------------------
                                                                            
Cost                                                                        
Balance at January 1, 2013     $       5,300   $       1,397  $         686 
Additions                                  -               -              8 
Change in asset retirement                                                  
 costs                                     -               -              - 
Retirements                              (22)              -            (18)
Reclassifications(1)                      11             154              - 
----------------------------------------------------------------------------
Balance at September 30, 2013  $       5,289   $       1,551  $         676 
----------------------------------------------------------------------------
                                                                            
Accumulated depreciation                                                    
Balance at January 1, 2013     $       1,447   $         539  $         320 
Depreciation                             156              47             38 
Retirements                              (22)              -            (19)
Reclassifications (1)                      -               -              - 
----------------------------------------------------------------------------
Balance at September 30, 2013  $       1,581   $         586  $         339 
----------------------------------------------------------------------------
                                                                            
Net book value at September                                                 
 30, 2013                      $       3,708   $         965  $         337 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
 
                                   Nine Months Ended September 30, 2013     
                                                                            
                                                      Asset           Major 
                                                 Retirement      Turnaround 
($ millions)                       Buildings          Costs           Costs 
----------------------------------------------------------------------------
                                                                            
Cost                                                                        
Balance at January 1, 2013     $         324  $       1,024   $         166 
Additions                                  -              -              54 
Change in asset retirement                                                  
 costs                                     -           (170)              - 
Retirements                                -              -             (47)
Reclassifications(1)                       5             17               - 
----------------------------------------------------------------------------
Balance at September 30, 2013  $         329  $         871   $         173 
-----------------------------------------
-----------------------------------
                                                                            
Accumulated depreciation                                                    
Balance at January 1, 2013     $         107  $         180   $          73 
Depreciation                               6             33              42 
Retirements                                -              -             (47)
Reclassifications (1)                      -              -               - 
----------------------------------------------------------------------------
Balance at September 30, 2013  $         113  $         213   $          68 
----------------------------------------------------------------------------
                                                                            
Net book value at September                                                 
 30, 2013                      $         216  $         658   $         105 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
 
                                  Nine Months Ended September 30, 2013      
                                                                            
                                Construction            Mine                
($ millions)                     in Progress     Development          Total 
----------------------------------------------------------------------------
                                                                            
Cost                                                                        
Balance at January 1, 2013     $       1,501   $         392  $      10,790 
Additions                                988               -          1,050 
Change in asset retirement                                                  
 costs                                     -               -           (170)
Retirements                                -               -            (87)
Reclassifications(1)                    (187)              -              - 
----------------------------------------------------------------------------
Balance at September 30, 2013  $       2,302   $         392  $      11,583 
----------------------------------------------------------------------------
                                                                            
Accumulated depreciation                                                    
Balance at January 1, 2013     $           -   $         121  $       2,787 
Depreciation                               -               4            326 
Retirements                                -               -            (88)
Reclassifications (1)                      -               -              - 
----------------------------------------------------------------------------
Balance at September 30, 2013  $           -   $         125  $       3,025 
----------------------------------------------------------------------------
                                                                            
Net book value at September                                                 
 30, 2013                      $       2,302   $         267  $       8,558 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
(1) Reclassifications are primarily transfers from construction in progress 
    to other categories of property, plant and equipment when construction  
    is completed and assets are available for use.                          

 
For the three and nine months ended September 30, 2013, interest
costs of $29 million and $80 million, respectively, were capitalized
and included in property, plant and equipment (three and nine months
ended September 30, 2012 - $25 million and $65 million, respectively)
based on a 6.5 per cent interest capitalization rate for the three
and nine months ended September 30, 2013 (6.5 per cent and 6.7 per
cent, respectively, for the three and nine months ended September 30,
2012). 
5) Accounts Payable and Accrued Liabilities 


 
                                               September 30     December 31 
($ millions)                                           2013            2012 
----------------------------------------------------------------------------
                                                                            
Trade payables                                $         586   $         498 
Crown royalties                                         291             215 
Current portion of asset retirement                                         
 obligation                                              45              44 
Interest payable                                         38              29 
----------------------------------------------------------------------------
                                              $         960   $         786 
Less non-current portion of Crown royalties             (78)            (82)
----------------------------------------------------------------------------
Accounts payable and accrued liabilities      $         882   $         704 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
6) Other Liabilities 


 
                                                 September 30    December 31
($ millions)                                             2013           2012
----------------------------------------------------------------------------
                                                                            
Non-current portion of Crown royalties          $          78  $          82
Other                                                      11              7
----------------------------------------------------------------------------
Other liabilities                               $          89  $          89
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
7) Asset Retirement Obligation 
The Corporation and each of the other Syncrude owners are liable for
their share of ongoing obligations related to the reclamation and
closure of the Syncrude properties on abandonment. The Corporation
estimates reclamation and closure expenditures will be made
progressively over the next 70 years and has applied a risk-free
interest rate of 3.0 per cent at September 30, 2013 (December 31,
2012 - 2.25 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. 


 
                                                Nine Months            Year 
                                                      Ended           Ended 
                                               September 30     December 31 
($ millions)                                           2013            2012 
----------------------------------------------------------------------------
                                                                            
Asset retirement obligation, beginning of                                   
 period                                       $       1,102   $       1,037 
Change in risk-free interest rate                      (170)             68 
Change in estimated reclamation and closure                                 
 expenditures                                             -              25 
Accretion expense                                        19              26 
Reclamation expenditures                                (40)            (54)
----------------------------------------------------------------------------
Asset 
retirement obligation, end of period    $         911   $       1,102 
Less current portion                                    (45)            (44)
----------------------------------------------------------------------------
Non-current portion                           $         866   $       1,058 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
The $170 million decrease in the asset retirement obligation in 2013,
due to the increase in the risk-free rate, was recorded as a decrease
in property, plant and equipment. The $45 million current portion of
the asset retirement obligation is included in accounts payable and
accrued liabilities, while the $866 million non-current portion is
presented separately as a liability on the September 30, 2013
Consolidated Balance Sheet. The total undiscounted estimated cash
flows required to settle Canadian Oil Sands' share of the asset
retirement obligation were $2,064 million at September 30, 2013
(December 31, 2012 - $2,104 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, 2013 and 2012 is based on its 36.74 per cent working
interest. The costs have been recorded in operating expenses, net
finance expense and other comprehensive loss as follows: 


 
                                              Three Months       Nine Months
                                                     Ended             Ended
                                              September 30      September 30
($ millions)                                 2013     2012     2013     2012
----------------------------------------------------------------------------
                                                                            
Operating expenses                        $    12  $    11  $    34  $    32
Net finance expense                             4  $     4       12  $    12
Other comprehensive (income) loss (1)         (93)      (5)     (92)      31
----------------------------------------------------------------------------
Total benefit cost (recovery)             $   (77) $    10  $   (46) $    75
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
(1) The other comprehensive (income) loss is presented net of tax on the    
    Consolidated Statements of Income and Comprehensive Income.             

 
9) Foreign Exchange 


 
                                             Three Months       Nine Months 
                                                    Ended             Ended 
                                             September 30      September 30 
($ millions)                                2013     2012     2013     2012 
----------------------------------------------------------------------------
                                                                            
Foreign exchange (gain) loss - long-term                                    
 debt                                    $   (40) $   (64) $    62  $   (48)
Foreign exchange (gain) loss - other           9       13      (20)       7 
----------------------------------------------------------------------------
Total foreign exchange (gain) loss       $   (31) $   (51) $    42  $   (41)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
10) Net Finance Expense 


 
                                             Three Months       Nine Months 
                                                    Ended             Ended 
                                             September 30      September 30 
($ millions)                                2013     2012     2013     2012 
----------------------------------------------------------------------------
                                                                            
Interest costs on long-term debt(1)      $    30  $    28  $    87  $    78 
 Less capitalized interest on long-term                                     
  debt                                       (29)     (25)     (80)     (65)
----------------------------------------------------------------------------
Interest expense on long-term debt       $     1  $     3  $     7  $    13 
Interest expense on employee future                                         
 benefits                                      4        4       12       12 
Accretion of asset retirement obligation       7        6       19       19 
----------------------------------------------------------------------------
Net finance expense                      $    12  $    13  $    38  $    44 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
(1) Interest costs on long-term debt are net of interest income of $3       
    million and $11 million for the three and nine months ended September   
    30, 2013 and $4 million and $9 million for the three and nine months    
    ended September 30, 2012, respectively.                                 

 
11) Tax Expense 


 
                                               Three Months      Nine Months
                                                      Ended            Ended
                                               September 30     September 30
($ millions)                                   2013    2012    2013     2012
----------------------------------------------------------------------------
                                                                            
Current tax expense                         $    32 $    10 $   212  $    30
Deferred tax expense (recovery)                  32      93      (6)     211
----------------------------------------------------------------------------
Total tax expense                           $    64 $   103 $   206  $   241
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
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, 2013 and December 31, 2012 was as follows: 


 
                                               September 30     December 31 
($ millions, except % amounts)                         2013            2012 
----------------------------------------------------------------------------
                                                                            
Long-term debt(1,2)                           $       1,549   $       1,794 
Cash and cash equivalents                              (840)         (1,553)
----------------------------------------------------------------------------
Net debt(1,3)                                 $         709   $         241 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Shareholders' equity                          $       4,716   $       4,515 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Total net capitalization(1,4)                 $       5,425   $       4,756 
----------------------------------------------------------------------------
----------------------------------------------
------------------------------
                                                                            
Total capitalization (1,5)                    $       6,265   $       6,309 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Net debt-to-total net capitalization(1,6)                                   
 (%)                                                     13               5 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Long-term debt-to-total                                                     
 capitalization (1,7)  (%)                               25              28 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
(1) Additional GAAP financial measure.                                      
(2) Includes current and non-current portions of long-term debt.            
(3) Long-term debt less cash and cash equivalents.                          
(4) Net debt plus Shareholders' equity.                                     
(5) Long-term debt plus Shareholders' equity.                               
(6) Net debt divided by total net capitalization.                           
(7) Long-term debt divided by total capitalization.                         

 
Net debt, comprised of current and non-current portions of long-term
debt less cash and cash equivalents, increased to $709 million at
September 30, 2013 from $241 million at December 31, 2012, as
existing cash balances were used to fund capital expenditures and
dividend payments in excess of cash flow from operations. In
addition, a weakening Canadian dollar from December 31, 2012 to
September 30, 2013 increased the Canadian equivalent value of
Canadian Oil Sands' outstanding long-term debt, all of which is
denominated in U.S. dollars. As a result, net debt-to-total net
capitalization increased to 13 per cent at September 30, 2013 from
five per cent at December 31, 2012. 
On August 15, 2013, Canadian Oil Sands repaid U.S. $300 million of
Senior Notes upon maturity. As result, long-term debt-to-total
capitalization fell to 25 per cent at September 30, 2013 from 28 per
cent at December 31, 2012. 
Shareholders' equity increased to $4,716 million at September 30,
2013 from $4,515 million at December 31, 2012, as net income exceeded
dividends in the first nine months of 2013. 
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 long-term debt-to-total
capitalization to 55 per cent. Canadian Oil Sands is in compliance
with its debt covenants, and with a long-term debt-to-total
capitalization of 25 per cent at September 30, 2013, a significant
increase in debt or decrease in equity would be required to
negatively impact the Corporation's financial flexibility. 
13) Financial Instruments 
The Corporation's financial instruments include cash and cash
equivalents, accounts receivable, investments held in a reclamation
trust, accounts payable and 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, 2012. 
Offsetting Financial Assets and Financial Liabilities  
The carrying values of accounts receivable and accounts payable and
accrued liabilities have each been reduced by $73 million ($25
million at December 31, 2012) as a result of netting agreements with
counterparties. 
Fair Values  
The fair values of cash and cash equivalents, accounts receivable,
reclamation trust investments and accounts payable and accrued
liabilities approximate their carrying values due to the short-term
nature of those instruments. The fair value of long-term debt, based
on third-party market indications, is as follows: 


 
                                                 September 30    December 31
As at ($ millions)                                       2013           2012
----------------------------------------------------------------------------
                                                                            
8.2% Senior Notes due April 1, 2027 (U.S.                                   
 $73.95 million)                                $          94  $         104
7.9% Senior Notes due September 1, 2021 (U.S.                               
 $250 million)                                            315            332
5.8% Senior Notes due August 15, 2013 (U.S.                                 
 $300 million)                                              -            309
7.75% Senior Notes due May 15, 2019 (U.S. $500                              
 million)                                                 616            628
4.5% Senior Notes due April 1, 2022 (U.S. $400                              
 million)                                                 415            435
6.0% Senior Notes due April 1, 2042 (U.S. $300                              
 million)                                                 314            350
----------------------------------------------------------------------------
                                                $       1,754  $       2,158
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
14) Commitments 
Canadian Oil Sands' commitments are summarized in the 2012 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 first nine months of 2013, Canadian Oil Sands
entered into new contractual obligations totalling approximately $700
million for the transportation of crude oil in support of the
Corporation's strategy to secure access to preferred markets and
enhance marketing flexibility. 
15) Contingencies 
Crown royalties include Canadian Oil Sands' share of 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 a Canadian heavy oil reference price adjusted to reflect
quality and location differences between Syncrude's bitumen and the
Canadian reference price bitumen. In addition, the agreement provides
that a minimum bitumen value, or "floor price", may be imposed in
circumstances where Canadian heavy oil prices are temporarily
suppressed relative to North American heavy oil prices. 
Canadian Oil Sands' share of the royalties recognized for the period
from January 1, 2009 to September 30, 2013 reflect management's best
estimate of the adjustments to reflect the quality and location
differences and "floor price". However, the Syncrude owners and the
Alberta government are disputing the basis for these adjustments.
Under alternate assumptions, Canadian Oil Sands' share of Crown
royalties for this period could be as much as $35 million (on an
after-tax basis) more than the amounts recognized. 
The Syncrude owners and the Alberta government continue to discuss
these matters, 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 and impact
both net income and cash flow from operations accordingly. 
16) Supplementary Information 
a) Change in Non-Cash Working Capital 


 
                                             Three Months       Nine Months 
                                                    Ended             Ended 
                                             September 30      September 30 
($ millions)                                2013     2012     2013     2012 
----------------------------------------------------------------------------
                                                                            
Operating activities:                                                       
  Accounts receivable ("AR")             $  (131) $  (167) $  (104) $   (10)
  Inventories                                (12)      (2)     (23)       5 
  Prepaid expenses                            (7)     (10)       -       (1)
  Accounts payable and accrued                                              
   liabilities ("AP")                        116       87      178      162 
  Current taxes                               21       10      145       30 
  Less: AP and AR changes reclassified                                      
   to investing and other                     (1)     (42)     (38)     (81)
----------------------------------------------------------------------------
Change in operating non-cash working                                        
 capital                                 $   (14) $  (124) $   158  $   105 
----------------------------------------------------------------------------
                                                                            
Investing activities:                                                       
  Accounts payable and accrued                                              
   liabilities                           $     -  $    42  $    36  $    78 
----------------------------------------------------------------------------
Change in investing non-cash working                                        
 capital                                 $     -  $    42  $    36  $    78 
----------------------------------------------------------------------------
                                                                            
----------------------------------------------------------------------------
Change in total non-cash working capital $   (14) $   (82) $   194  $   183 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
b) Income Taxes and Interest Paid 


 
                                              Three Months       Nine Months
                                                     Ended             Ended
                                              September 30      September 30
($ millions)                                 2013     2012     2013     2012
----------------------------------------------------------------------------
                                                                            
Income taxes paid                         $    10  $     -  $    66  $     -
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Interest paid                             $    20  $    20  $    83  $    65
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
Income taxes paid and the portion of interest costs that is expensed
are included within cash from operating activities on the
Consolidated Statements of Cash Flows. The portion of interest costs
that is capitalized as property, plant and equipment is included
within cash used in investing activities on the Consolidated
Statements of Cash Flows. 
c) Cash Flow from Operations per Share  


 
                                              Three Months       Nine Months
                                                     Ended             Ended
                                              September 30      September 30
($ millions)                                 2013     2012     2013     2012
----------------------------------------------------------------------------
                                                                            
Cash Flow From Operations Per Share,                                        
 basic and diluted                        $  0.70  $  0.97  $  1.97  $  2.40
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
Cash flow from operations per Share is calculated as cash flow from
operations, which is cash from operating activities before changes in
non-cash working capital, divided by the weighted-average number of
outstanding Shares in the period. 
17) Prior Period Comparative Amounts 
During the fourth quarter of 2012, the Corporation completed a review
of the presentation of crude oil purchase and sale transactions and
it was determined that certain transactions previously reported on a
gross basis (sales are presented gross of crude oil purchases and
transportation expense) are more appropriately reflected on a net
basis (crude oil purchases and transportation expense are netted
against sales). Prior period comparative amounts have been
reclassified to conform to the current period presentation. The
impact is as follows: 


 
                                               Three Months     Nine Months 
                                                      Ended           Ended 
                                                  September       September 
($ millions)                                       30, 2012        30, 2012 
----------------------------------------------------------------------------
                                                                            
Sales                                         $         (16)  $         (78)
Crude oil purchases and transportation                                      
 expense                                                (16)            (78)
----------------------------------------------------------------------------
Net income                                    $           -   $           - 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
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
2000 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