Canadian Oil Sands Announces 2013 Financial Results and a $0.35 per Share Dividend

Canadian Oil Sands Announces 2013 Financial Results and a $0.35 per Share 
Dividend 
CALGARY, ALBERTA -- (Marketwired) -- 01/30/14 --   Canadian Oil Sands
Limited (TSX: COS)(OTCQX: COSWF) -  
All financial figures are unaudited and in Canadian dollars unless
otherwise noted. 
Highlights for the three months and year ended December 31, 2013: 


 
 
--  Cash flow from operations was $392 million ($0.81 per Share) in the
    fourth quarter of 2013 compared with cash flow from operations of $418
    million ($0.86 per Share) in the same quarter of 2012. For the 2013
    year, cash flow from operations totalled $1,349 million ($2.78 per
    Share), down 15 per cent from $1,581 million ($3.26 per Share) in 2012. 
--  The quarter-over-quarter change in cash flow from operations primarily
    reflects higher current taxes partially offset by a higher realized
    selling price. The year-over-year change in cash flow from operations
    reflects higher current taxes, with lower sales volumes offsetting a
    higher realized selling price. 
--  Net income for the fourth quarter of 2013 was $192 million ($0.40 per
    Share), down from $218 million ($0.45 per Share) in the 2012 fourth
    quarter. On an annual basis, net income was $834 million ($1.72 per
    Share) in 2013 compared with $973 million ($2.01 per Share) in 2012.  
--  COS maintained its quarterly dividend at $0.35 per Share, payable on
    February 28, 2014 to shareholders of record on February 21, 2014. During
    2013, the Corporation paid a total of $678 million, or $1.40 per Share,
    in dividends to shareholders. 
--  Sales volumes averaged 98,000 barrels per day in 2013 compared with
    volumes averaging 105,700 barrels per day in 2012. 
--  Operating expenses were $1,494 million, or $41.75 per barrel, in 2013,
    compared with operating expenses of $1,505 million, or $38.91 per
    barrel, in 2012. The increase in per barrel operating expenses in 2013
    relative to 2012 reflects lower sales volumes. 
--  Syncrude completed its Aurora North Tailings Management and Aurora North
    Mine Train Relocation projects in 2013, ahead of schedule and about $200
    million (gross to Syncrude) under budget.  
--  Capital expenditures increased to $1,342 million in 2013 from $1,086
    million in 2012, as planned, to execute Syncrude's major capital
    projects. 
--  Net debt (total debt less cash and cash equivalents) increased to $796
    million at December 31, 2013 from $241 million at December 31, 2012. COS
    plans to continue drawing down its cash balance in 2014 to fund the
    major capital projects, which is expected to increase net debt levels
    during 2014. 

"We achieved a key milestone during the quarter with the completion of
two of Syncrude's major projects. We can now look forward to the
completion of the remaining two projects and the potential for free
cash flow expansion following the decline in capital expenditures
after 2014," said Ryan Kubik, President and Chief Executive Officer.
"Syncrude operations performed largely as expected in the fourth
quarter of 2013 and we remain focused on delivering more consistent
production levels in 2014." 
Highlights 


                                Three Months Ended         Year Ended       
                                   December 31             December 31      
                                     2013       2012        2013        2012
----------------------------------------------------------------------------
 
Cash flow from operations(1)  $      392  $      418 $    1,349  $    1,581 
 ($ millions)                                                               
  Per Share(1) ($/Share)      $     0.81  $     0.86 $     2.78  $     3.26 
 
Net income ($ millions)       $      192  $      218 $      834  $      973 
  Per Share, Basic and        $     0.40  $     0.45 $     1.72  $     2.01 
   Diluted ($/Share)                                                        
 
Sales volumes(2)                                                            
  Total (mmbbls)                    10.3        10.3       35.8        38.7 
  Daily average (bbls)           112,092     111,669     98,037     105,680 
 
Realized SCO selling price    $    91.47  $    89.99 $    99.55  $    91.90 
 ($/bbl)                                                                    
 
West Texas Intermediate       $    97.61  $    88.23 $    98.05  $    94.15 
 ("WTI") (average $US/bbl)                                                  
 
SCO premium (discount) to WTI $   (10.84) $     2.52 $    (1.10) $    (2.42)
  (weighted average $/bbl)                                                  
 
Operating expenses ($         $      388  $      398 $    1,494  $    1,505 
 millions)                                                                  
  Per barrel ($/bbl)          $    37.60  $    38.76 $    41.75  $    38.91 
 
Capital expenditures ($       $      292  $      299 $    1,342  $    1,086 
 millions)                                                                  
 
Dividends ($ millions)        $      169  $      169 $      678  $      654 
  Per Share ($/Share)         $     0.35  $     0.35 $     1.40  $     1.35 
----------------------------------------------------------------------------
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(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.                                        

Syncrude operations 
Syncrude produced an average of 307,600 barrels per day (total 28.3
million barrels) during the fourth quarter of 2013, up from 298,900
barrels per day (total 27.5 million barrels) during the same 2012
period.  
In 2013 Syncrude production averaged about 267,000 barrels per day
(total 97.5 million barrels) compared with about 286,500 barrels per
day (total 104.9 million barrels) in 2012. The decrease in 2013
volumes primarily reflects delays completing turnarounds on the Coker
8-1, LC Finer and secondary upgrading units. Production volumes in
both 2013 and 2012 reflect unplanned outages in extraction units. 
Progress on Syncrude's major capital projects is tracking to plan,
with the Mildred Lake Mine Train Replacement project reaching an
estimated 80 per cent completion and the Centrifuge Tailings
Management project reaching 70 per cent completion at the end of
2013. The Aurora North Mine Train Relocation and Aurora North
Tailings Management projects were completed in 2013.  
Syncrude recently released its 2012 Sustainability Report, which is
available on Syncrude's website at the following link:
http://syncrudesustainability.com/2012/. The report provides an
overview of Syncrude's performance in the areas of economic
contribution, stakeholder and employee engagement, community
investment, health and safety, and environmental stewardship. 
2014 Outlook 
The following highlights Canadian Oil Sands' key estimates and
assumptions for 2014: 


 
 
--  We estimate an annual production range for Syncrude of 95 million to 110
    million barrels in 2014. The single-point production figure of 105
    million barrels, 38.6 million barrels net to COS, incorporates the
    turnaround of Coker 8-2 in the second quarter of the year. 
--  Sales, net of crude oil purchases and transportation expense, of
    approximately $3.4 billion reflect a production estimate of 38.6 million
    barrels net to COS and an $88 per barrel plant-gate realized selling
    price (based on a U.S. $90 per barrel WTI oil price, a foreign exchange
    rate of $0.97 U.S./Cdn, and a SCO discount to Cdn dollar WTI of $5 per
    barrel). 
--  We estimate cash flow from operations of $1,158 million, or $2.39 per
    Share. 
--  Capital expenditures are estimated to total $1,097 million, comprised of
    $653 million of spending on major projects, $361 million in regular
    maintenance of the business and other projects, and $83 million in
    capitalized interest. 

More information on the 2014 Outlook is provided in our MD&A and the
January 30, 2014 guidance document, which is available on our web
site at www.cdnoilsands.com under "Investor Centre". 
The 2014 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 January 30, 2014 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 months and year ended December 31, 2013 and December 31, 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. 
Table of Contents 


 
 
 1.   Advisories                                                         4-6
 2.   Overview                                                             7
 3.   Review of Financial Results                                       8-14
 4.   Summary of Quarterly Results                                     15-16
 5.   Capital Expenditures                                                16
 6.   Contractual Obligations and Commitments                             16
 7.   Dividends                                                           17
 8.   Liquidity and Capital Resources                                  17-18
 9.   Shareholders' Capital and Trading Activity                          18
 10.  Changes in Accounting Policies                                      18
 11.  2014 Outlook                                                     19-20
 12.  Major Projects                                                      21

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 2014 annual Syncrude forecasted production
range of 95 million barrels to 110 million barrels and the
single-point Syncrude production estimate of 105 million barrels
(38.6 million barrels net to the Corporation; the timing of the Coker
8-2 turnaround; the intention to fund the Syncrude major projects
primarily with cash flow from operations and existing cash balances;
the establishment of future dividend levels with the intent of
absorbing short-term market volatility over several quarters; the
expected sales, operating expenses, purchased energy costs,
development expenses, Crown royalties, capital expenditures and cash
flow from operations for 2014; the anticipated amount of current
taxes in 2014; expectations regarding the Corporation's cash levels
for 2014; the expected price for crude oil and natural gas in 2014;
the expected foreign exchange rates in 2014; the expected realized
selling price, which includes the anticipated differential to West
Texas Intermediate ("WTI") to be received in 2014 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 fluctuations in the Corporation's realized selling prices, U.S.
to Canadian dollar exchange rate fluctuations and planned and
unplanned maintenance activities may 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
and the centrifuge plant at the Mildred Lake mine; the cost estimates
for 2014 and 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 January 30, 2014 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; currency and interest rate fluctuations;
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 January 30,
2014, 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. Because cash flow from operations and cash flow from
operations per Share are not impacted by fluctuations in non-cash
working capital balances, we believe these measures 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        Year Ended      
                                      December 31           December 31     
($ millions)                           2013       2012       2013       2012
----------------------------------------------------------------------------
 
Cash flow from operations(1)     $      392 $      418 $    1,349 $    1,581
Change in non-cash working                                                  
 capital(1)                              75        178        233        283
----------------------------------------------------------------------------
Cash from operating                                                         
 activities(1)                   $      467 $      596 $    1,582 $    1,864
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
(1) As reported in the 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 analyze liquidity and
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 months and year ended December 31,
2013. 
Overview 
Synthetic crude oil ("SCO") production from the Syncrude Joint
Venture ("Syncrude") totalled 28.3 million barrels, or 307,600
barrels per day, in the fourth quarter of 2013 and 97.5 million
barrels, or 267,000 barrels per day, for the full year, which is
within the 97 to 100 million barrel range forecast provided in our
2013 Outlook dated October 30, 2013 (included in the third quarter
2013 MD&A). Canadian Oil Sands sales volumes averaged 112,100 barrels
per day in the fourth quarter and 98,000 barrels per day in the full
year 2013. 
COS' realized selling price for the quarter was also in line with our
October 2013 Outlook and averaged approximately $91 per barrel,
reflecting a U.S. $98 per barrel West Texas Intermediate ("WTI") oil
price, an average foreign exchange rate of 0.95 $US/$Cdn, and an $11
per barrel SCO discount to Canadian dollar WTI.  
Operating expenses were $37.60 per barrel and cash flow from
operations totalled $392 million in the quarter. 
Syncrude's major projects progressed as planned with $292 million of
total capital spending (net to COS) in the quarter. The Aurora North
Tailings Management and Aurora North Mine Train Relocation projects
were completed in the fourth quarter, ahead of schedule and about
$200 million (gross to Syncrude) under budget. The Mildred Lake Mine
Train Replacement and Centrifuge Tailings Management projects remain
on schedule and on budget.  
Net debt was approximately $800 million at December 31, 2013 and is
expected to increase in 2014 as we spend existing cash balances to
fund our major projects and settle accounts payable of approximately
$500 million for taxes and Crown royalties. 
Highlights 


                                Three Months Ended         Year Ended       
                                   December 31             December 31      
                       
              2013       2012        2013        2012
----------------------------------------------------------------------------
 
Cash flow from operations(1)                                                
 ($ millions)                 $      392  $      418 $    1,349  $    1,581 
  Per Share(1) ($/Share)      $     0.81  $     0.86 $     2.78  $     3.26 
 
Net income ($ millions)       $      192  $      218 $      834  $      973 
  Per Share, Basic and                                                      
   Diluted ($/Share)          $     0.40  $     0.45 $     1.72  $     2.01 
 
Sales volumes(2)                                                            
  Total (mmbbls)                    10.3        10.3       35.8        38.7 
  Daily average (bbls)           112,092     111,669     98,037     105,680 
 
Realized SCO selling price                                                  
 ($/bbl)                      $    91.47  $    89.99 $    99.55  $    91.90 
 
West Texas Intermediate                                                     
 ("WTI") (average $US/bbl)    $    97.61  $    88.23 $    98.05  $    94.15 
 
SCO premium (discount) to WTI $   (10.84) $     2.52 $    (1.10) $    (2.42)
  (weighted average $/bbl)                                                  
 
Operating expenses ($                                                       
 millions)                    $      388  $      398 $    1,494  $    1,505 
  Per barrel ($/bbl)          $    37.60  $    38.76 $    41.75  $    38.91 
 
Capital expenditures ($                                                     
 millions)                    $      292  $      299 $    1,342  $    1,086 
 
Dividends ($ millions)        $      169  $      169 $      678  $      654 
  Per Share ($/Share)         $     0.35  $     0.35 $     1.40  $     1.35 
----------------------------------------------------------------------------
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(1) Cash flow from oper
ations 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 view graph comparison, visit the following link:
http://media3.marketwire.com/docs/Q4_GraphFigures.jpg 
Cash flow from operations decreased to $392 million, or $0.81 per
Share, in the fourth quarter of 2013 from $418 million, or $0.86 per
Share, in the fourth quarter of 2012 primarily due to higher current
taxes partially offset by a higher realized selling price in the 2013
fourth quarter. On an annual basis, cash flow from operations
decreased to $1,349 million, or $2.78 per Share, in 2013 from $1,581
million, or $3.26 per Share, in 2012 reflecting higher current taxes,
with lower sales volumes offsetting a higher realized selling price
in 2013. 
Current taxes increased in 2013 primarily because tax pools and the
partnership structure sheltered the majority of 2012 income from
current taxes. 
The average realized selling price increased to $91.47 per barrel in
the fourth quarter of 2013 from $89.99 per barrel in the same quarter
of 2012, reflecting a higher WTI oil price and a weaker Canadian
dollar, largely offset by a deterioration in the SCO differential to
WTI. On an annual basis, the average realized selling price increased
to $99.55 per barrel in 2013 from $91.90 in 2012, reflecting a higher
WTI oil price, an improvement in the SCO differential to WTI and a
weaker Canadian dollar. 
Syncrude production in the 2013 fourth quarter totalled 28.3 million
barrels, or 307,600 barrels per day, a three per cent increase over
fourth quarter 2012 production of 27.5 million barrels, or 298,900
barrels per day. Net to the Corporation, sales volumes were 10.3
million barrels, or approximately 112,000 barrels per day, in the
fourth quarters of 2013 and 2012. 
On an annual basis, Syncrude produced 97.5 million barrels, or
267,000 barrels per day, in 2013 compared with 104.9 million barrels,
or 286,500 barrels per day, in 2012. The decrease in 2013 volumes
primarily reflects delays completing turnarounds on the Coker 8-1, LC
Finer and secondary upgrading units. Production volumes in both 2013
and 2012 reflect unplanned outages in extraction units. Net to the
Corporation, sales volumes totalled 35.8 million barrels, or 98,000
barrels per day, in 2013 compared with 38.7 million barrels, or
105,700 barrels per day, in 2012. 
Net Income 
Net income decreased to $192 million, or $0.40 per Share, in the
fourth quarter of 2013 from $218 million, or $0.45 per Share, in the
fourth quarter of 2012 reflecting higher depreciation and depletion
expense and a $30 million increase in the Corporation's foreign
exchange loss, partially offset by a higher realized selling price in
the 2013 fourth quarter. Changes in net income components are
discussed in greater detail later in this MD&A. 
On an annual basis, net income decreased to $834 million, or $1.72
per Share, in 2013 from $973 million, or $2.01 per Share, in 2012.
Lower sales volumes were largely offset by a higher realized selling
price in 2013. However, depreciation and depletion expense increased
by $75 million in 2013 and the Corporation recognized an $88 million
foreign exchange loss as opposed to a $25 million foreign exchange
gain in 2012. 
The following table shows the components of net income per barrel of
SCO: 


 
 
                           Three Months Ended             Year Ended        
                              December 31                December 31        
($ per barrel)(1)          2013     2012   Change     2013     2012   Change
----------------------------------------------------------------------------
 
Sales net of crude oil                                                      
 purchases and                                                              
 transportation                                                             
 expense               $ 91.63  $ 90.47  $  1.16  $ 99.63  $ 92.20  $  7.43 
Operating expense       (37.60)  (38.76)    1.16   (41.75)  (38.91)   (2.84)
Crown royalties          (5.00)   (5.52)    0.52    (4.85)   (5.21)    0.36 
----------------------------------------------------------------------------
                       $ 49.03  $ 46.19  $  2.84  $ 53.03  $ 48.08  $  4.95 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Development expense(2) $ (2.80) $ (2.55) $ (0.25) $ (3.72) $ (2.62) $ (1.10)
Administration and                                                          
 insurance expenses      (0.72)   (0.95)    0.23    (1.16)   (0.94)   (0.22)
Depreciation and                                                            
 depletion expense      (14.78)  (11.54)   (3.24)  (13.36)  (10.41)   (2.95)
Net finance expense      (0.53)   (1.15)    0.62    (1.21)   (1.45)    0.24 
Foreign exchange gain                                                       
 (loss)                  (4.48)   (1.54)   (2.94)   (2.46)    0.65    (3.11)
Tax expense              (7.12)   (7.23)    0.11    (7.79)   (8.15)    0.36 
----------------------------------------------------------------------------
                        (30.43)  (24.96)   (5.47)  (29.70)  (22.92)   (6.78)
----------------------------------------------------------------------------
Net income per barrel  $ 18.60  $ 21.23  $ (2.63) $ 23.33  $ 25.16  $ (1.83)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Sales volumes                                                               
 (mmbb
ls)(3)              10.3     10.3        -     35.8     38.7     (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              Year Ended         
                            December 31                  December 31        
($ millions, except                                                         
 where otherwise                                                            
 noted)                  2013      2012   Change     2013      2012   Change
----------------------------------------------------------------------------
 
Sales(1)            $  1,048  $  1,000  $    48  $ 4,208  $  3,905  $   303 
Crude oil purchases      (87)      (55)     (32)    (591)     (295)    (296)
Transportation                                                              
 expense                 (16)      (16)       -      (52)      (44)      (8)
----------------------------------------------------------------------------
                    $    945  $    929  $    16  $ 3,565  $  3,566  $    (1)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Sales volumes(2)                                                            
 Total (mmbbls)         10.3      10.3        -     35.8      38.7     (2.9)
 Daily average                                                              
  (bbls)             112,092   111,669      423   98,037   105,680   (7,643)
-------------------------
---------------------------------------------------
----------------------------------------------------------------------------
 
Realized SCO                                                                
 selling price(3)   $  91.47  $  89.99  $  1.48  $ 99.55  $  91.90  $  7.65 
 (average $Cdn/bbl)                                                         
 
West Texas                                                                  
 Intermediate                                                               
 ("WTI")            $  97.61  $  88.23  $  9.38  $ 98.05  $  94.15  $  3.90 
 (average $US/bbl)                                                          
 
SCO premium                                                                 
 (discount) to WTI  $ (10.84) $   2.52  $(13.36) $ (1.10) $  (2.42) $  1.32 
 (weighted-average                                                          
  $Cdn/bbl)                                                                 
 
Average foreign                                                             
 exchange rate      $   0.95  $   1.01  $ (0.06) $  0.97  $   1.00  $ (0.03)
 ($US/$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.                      

The $16 million, or two per cent, increase in fourth quarter 2013
sales, net of crude oil purchases and transportation expense, mainly
reflects a higher realized selling price relative to the 2012 fourth
quarter. 


 
 
--  The fourth quarter 2013 realized selling price increased by $1.48 per
    barrel reflecting a U.S. $9.38 per barrel increase in WTI oil prices and
    a weaker Canadian dollar, largely offset by a $13.36 per barrel
    deterioration in the SCO differential to WTI.  

On an annual basis, sales, net of crude oil purchases and
transportation expense, were virtually unchanged year over year as
lower sales volumes in 2013 were offset by a higher realized selling
price. 


 
 
--  The realized selling price in 2013 increased $7.65 per barrel relative
    to 2012, reflecting a U.S. $3.90 per barrel increase in WTI oil prices,
    a $1.32 per barrel improvement in the SCO differential to WTI, and a
    weaker Canadian dollar. 
--  Sales volumes in 2013 averaged 98,000 barrels per day, down from 105,700
    barrels per day in 2012, reflecting delays completing the Coker 8-1, LC
    Finer and secondary upgrading unit turnarounds in 2013. Sales volumes in
    both 2013 and 2012 reflect unplanned outages in extraction units.  

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 and heavy crude oils, and refinery
modifications that enable processing of heavier crude oils, can push
light crude sales, including SCO, to more distant refineries,
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 restrict 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. 
The $10.84 per barrel SCO discount to WTI in the fourth quarter of
2013 reflects pipeline apportionment and resulting limitation on
access to preferred markets. The impact of pipeline apportionment has
lessened to date in 2014 and differentials have narrowed. 
On an annual basis, the differential was negative $1.10 per barrel in
2013, largely in line with expectations and slightly improved from
2012. 
We expect that volatility in the SCO differential to WTI will 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 2013,
relative to 2012, reflecting higher oil prices and additional
purchased volumes to support unanticipated production shortfalls and
to facilitate certain transportation arrangements.  
Operating Expenses  
The following table shows the major components of operating expenses
in total dollars and per barrel of SCO: 


 
 
                                               Three Months Ended           
                                                   December 31              
                                            2013                2012        
                                     $millions  $per bbl $millions  $per bbl
----------------------------------------------------------------------------
 
Production and maintenance(1)        $     308 $   29.88 $     320 $   31.12
Natural gas and diesel purchases(2)         37      3.62        36      3.49
Syncrude pension and incentive                                              
 compensation                               34      3.25        31      3.05
Other(3)                                     9      0.85        11      1.10
----------------------------------------------------------------------------
Total operating expenses             $     388 $   37.60 $     398 $   38.76
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
(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.        
 
                                                   Year Ended               
                                                   December 31              
                                            2013                2012        
                                     $millions  $per bbl $millions  $per bbl
----------------------------------------------------------------------------
 
Produ
ction and maintenance(1)        $   1,217 $   34.01 $   1,242 $   32.12
Natural gas and diesel purchases(2)        144      4.02       125      3.22
Syncrude pension and incentive                                              
 compensation                               98      2.74        97      2.52
Other(3)                                    35      0.98        41      1.05
----------------------------------------------------------------------------
Total operating expenses             $   1,494 $   41.75 $   1,505 $   38.91
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
(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.        

Operating expenses in the fourth quarter of 2013 were similar to the
fourth quarter of 2012 on a total dollar and per barrel basis. 
On an annual basis, total-dollar operating expenses were similar in
2013 and 2012, reflecting: 


 
 
--  lower production costs, primarily due to lower mining volumes, in 2013; 

offset by: 


 
 
--  higher maintenance costs associated with the extended turnarounds and
    the Aurora North mine train relocations in 2013; and 
--  higher natural gas prices in 2013. 

Higher per-barrel operating expenses for the full year 2013 reflect
lower sales volumes than 2012. 
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 M
onths Ended          
                                                    December 31             
                                              2013             2012(3)      
----------------------------------------------------------------------------
($ per barrel)                          Bitumen       SCO  Bitumen       SCO
----------------------------------------------------------------------------
Bitumen production                     $  25.12 $  29.01  $  25.29 $  29.15 
Internal fuel allocation(1)                2.68     3.10      2.16     2.49 
----------------------------------------------------------------------------
Total bitumen production expenses      $  27.80 $  32.11  $  27.45 $  31.64 
----------------------------------------------------------------------------
 
Upgrading(2)                                    $   8.59           $   9.61 
Less: internal fuel allocation(1)                  (3.10)             (2.49)
----------------------------------------------------------------------------
Total upgrading expenses                        $   5.49           $   7.12 
----------------------------------------------------------------------------
 
Total operating expenses                        $  37.60           $  38.76 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
(thousands of barrels per day)                                              
----------------------------------------------------------------------------
Syncrude production volumes                 355      308       345      299 
Canadian Oil Sands sales volumes                     112                112 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
(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 $3.28 per GJ and $3.09 per GJ in the   
 three months and year ended December 31, 2013, respectively, and $3.02 per 
 GJ and $2.34 per GJ in the three months and year ended December 31, 2012,  
 respectively. Diesel prices averaged $1.01 per litre and $0.91 per litre in
 the three months and year ended December 31, 2013, respectively, and $0.90 
 per litre in the three months and year ended December 31, 2012.            
(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.                                               
 
                                                    Year Ended              
                                                    December 31             
                                              2013             2012(3)      
----------------------------------------------------------------------------
($ per barrel)                          Bitumen       SCO  Bitumen       SCO
----------------------------------------------------------------------------
Bitumen production                     $  26.74 $  32.32  $  25.54 $  29.54 
Internal fuel allocation(1)                2.69     3.25      2.15     2.48 
----------------------------------------------------------------------------
Total bitumen production expenses      $  29.43 $  35.57  $  27.69 $  32.02 
----------------------------------------------------------------------------
 
Upgrading(2)                                    $   9.43           $   9.37 
Less: internal fuel allocation(1)                  (3.25)             (2.48)
----------------------------------------------------------------------------
Total upgrading expenses                        $   6.18           $   6.89 
----------------------------------------------------------------------------
 
Total operating expenses                        $  41.75           $  38.91 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
(thousands of barrels per day)                                              
----------------------------------------------------------------------------
Syncrude production volumes                 323      267       331      287 
Canadian Oil Sands sales volumes                      98                106 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
(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 $3.28 per GJ and $3.09 per GJ in the   
 three months and year ended December 31, 2013, respectively, and $3.02 per 
 GJ and $2.34 per GJ in the three months and year ended December 31, 2012,  
 respectively. Diesel prices averaged $1.01 per litre and $0.91 per litre   
 in the three months and year ended December 31, 2013, respectively, and    
 $0.90 per litre in the three months and year ended December 31, 2012.      
(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 decreased to $52 million in the fourth quarter of
2013 from $57 million in the fourth quarter of 2012, primarily
reflecting lower bitumen prices in the 2013 period. On an annual
basis, Crown royalties decreased to $174 million in 2013 from $202
million in 2012 due primarily to higher deductible capital
expenditures and lower bitumen volumes in 2013. 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. 
The Syncrude owners and the Alberta government had been disputing the
basis for determining the adjustments to reflect the quality and
location differences and "floor price". In December 2013, the parties
resolved the dispute with no impact on the fourth quarter net income
or cash flow from operations, as the Corporation had provided for the
anticipated settlement amounts in prior periods. 
Development Expenses  
Development expenses totalled $29 million and $133 million in the
2013 fourth quarter and full year, respectively, compared with $26
million and $101 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 $152 million and $478
million in the 2013 fourth quarter and full year, respectively, from
$119 million and $403 million in the comparative 2012 periods,
reflecting: 


 
 
--  a $35 million write-off of the Arctic natural gas assets' carrying value
    in the fourth quarter of 2013; and 
--  $20 million in new depreciation charges in 2013 related to the Syncrude
    Emissions Reduction (SER) project. 

Net Finance Expense 


 
 
                                        Three Months Ended    Year Ended    
                                            December 31       December 31   
($ millions)                                 2013     2012     2013     2012
----------------------------------------------------------------------------
 
Interest costs on long-term debt         $    28  $    29  $   123  $   117 
  Less capitalized interest on long-term                                    
   debt                                      (27)     (26)    (107)     (92)
----------------------------------------------------------------------------
Interest expense on long-term debt       $     1  $     3  $    16  $    25 
Interest expense on employee future                                         
 benefits                                      4        5       16       17 
Accretion of asset retirement obligation       7        7       26       26 
Interest income                               (6)      (3)     (14)     (12)
----------------------------------------------------------------------------
Net finance expense                      $     6  $    12  $    44  $    56 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Interest costs on the Corporation's U.S. dollar-denominated long-term
debt were higher in 2013, reflecting higher average outstanding debt
levels and a weaker Canadian dollar in 2013. Conversely, interest
expense on long-term debt was lower in 2013 because a higher portion
of interest costs were capitalized as spending on the major projects
continued. 
Foreign Exchange (Gain) Loss 


 
 
                                        Three Months Ended    Year Ended    
                                            December 31       December 31   
($ millions)                                 2013     2012     2013     2012
----------------------------------------------------------------------------
 
Foreign exchange (gain) loss - long-term                                    
 debt                                    $    53  $    20  $   115  $   (28)
Foreign exchange (gain) loss - other          (7)      (4)     (27)       3 
----------------------------------------------------------------------------
Total foreign exchange (gain) loss       $    46  $    16  $    88  $   (25)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Foreign exchange gains/losses are the result of revaluations of the
Corporation's U.S. dollar-denominated long-term debt, cash, and
accounts receivable into Canadian dollars. 
The foreign exchange losses in the 2013 fourth quarter and full year
were the result of a weakening Canadian dollar to U.S. $0.94 at
December 31, 2013 from U.S. $0.97 at September 30, 2013 and U.S.
$1.01 at December 31, 2012.  
The foreign exchange losses in the 2012 fourth quarter were the
result of a weakening Canadian dollar to U.S. $1.01 at December 31,
2012 from U.S. $1.02 at September 30, 2012, whereas the foreign
exchange gains in the full year 2012 were the result of a
strengthening Canadian dollar from U.S. $0.98 at December 31, 2011.  
Tax Expense 


 
 
                                             Three Months                   
                                                Ended          Year Ended   
                                             December 31      December 31   
($ millions)                                   2013    2012     2013    2012
----------------------------------------------------------------------------
 
Current tax expense                        $    85  $    10 $   297  $    40
Deferred tax expense (recovery)                (12)      64     (18)     275
----------------------------------------------------------------------------
Total tax expense                          $    73  $    74 $   279  $   315
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Total tax expense decreased in 2013 because earnings before tax were
lower than in 2012. 
Current taxes increased in the fourth quarter and full year 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 


 
 
                                                                 December 31
Year ended ($ millions)                                                 2013
----------------------------------------------------------------------------
 
Asset retirement obligation, beginning of year                  $     1,102 
Increase in risk-free interest rate                                    (217)
Reclamation expenditures                                                (42)
Increase in estimated reclamation and closure expenditures               27 
Accretion expense                                                        26 
----------------------------------------------------------------------------
Asset retirement obligation, end of year                        $       896 
Less current portion                                                    (28)
----------------------------------------------------------------------------
Non-current portion                                             $       868 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Canadian Oil Sands' asset retirement obligation decreased from $1,102
million at December 31, 2012 to $896 million at December 31, 2013,
primarily due to a 100 basis point increase in the interest rate used
to discount future reclamation and closure expenditures (from 2.25
per cent at December 31, 2012 to 3.25 per cent at December 31, 2013).
The annual review of estimated future reclamation and closure
expenditures resulted in a $27 million increase in the discounted
asset retirement obligation and a $56 million increase in the
undiscounted obligation. 
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 $308
million at December 31, 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, higher than estimated returns
on plan assets and contributions to the plans in excess of the
current period expenses. These factors were partially offset by the
impact of an increase in the estimated average lifespan of the plans'
beneficiaries as a result of new actuarial standards. 
Summary of Quarterly Results 


 
 
                                                       2013                
                                              Q4       Q3       Q2       Q1
 --------------------------------------------------------------------------
 
 Sales(1) ($ millions)                 $    945  $    871 $    921 $    828
 
 Net income ($ millions)               $    192  $    246 $    219 $    177
  Per Share, Basic & Diluted           $   0.40  $   0.51 $   0.45 $   0.37
 
 Cash flow from operations(2) ($                                           
  millions)                            $    392  $    339 $    343 $    275
  Per Share(2)                         $   0.81  $   0.70 $   0.71 $   0.57
 
 Dividends ($ millions)                $    169  $    170 $    169 $    170
  Per Share                            $   0.35  $   0.35 $   0.35 $   0.35
 
 Daily average sales volumes(3) (bbls)  112,092    84,250  100,094   95,683
 
 Realized SCO selling price ($/bbl)    $  91.47  $ 112.55 $ 100.90 $  96.11
 
 WTI(4) (average $US/bbl)              $  97.61  $ 105.81 $  94.17 $  94.36
 
 SCO premium (discount) to WTI         $ (10.84) $   2.63 $   4.79 $   1.00
  (weighted-average $/bbl)                                                 
 
 Operating expenses(5) ($/bbl)         $  37.60  $  46.15 $  43.23 $  41.20
 
 Purchased natural gas price ($/GJ)    $   3.28  $   2.59 $   3.41 $   2.95
 
 Foreign exchange rates ($US/$Cdn)                                         
  Average                              $   0.95  $   0.96 $   0.98 $   0.99
  Quarter-end                          $   0.94  $   0.97 $   0.95 $   0.98
 --------------------------------------------------------------------------
 --------------------------------------------------------------------------
 
 (1) Sales after crude oil purchase
s 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. 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 months and year ended December 31, 2013 and December 31, 2012.     
 
                                                     2012(6)                
                                            Q4        Q3        Q2        Q1
----------------------------------------------------------------------------
 
Sales(1) ($ millions)                 $    929 $    941  $    740  $    956 
 
Net income ($ millions)               $    218 $    336  $    101  $    318 
 Per Share, Basic & Diluted           $   0.45 $   0.69  $   0.21  $   0.66 
 
Cash flow from operations(2) ($                                             
 millions)                            $    418 $    470  $    245  $    454 
 Per Share(2)                         $   0.86 $   0.97  $   0.51  $   0.94 
 
Dividends ($ millions)                $    169 $    170  $    170  $    145 
 Per Share                            $   0.35 $   0.35  $   0.35  $   0.30 
 
Daily average sales volumes(3) (bbls)  111,669  113,331    89,460   108,108 
 
Realized SCO selling price ($/bbl)    $  89.99 $  89.89  $  90.59  $  97.07 
 
WTI(4) (average $US/bbl)              $  88.23 $  92.20  $  93.35  $ 103.03 
 
SCO premium (discount) to WTI         $   2.52 $  (2.00) $  (5.20) $  (5.80)
 (weighted-average $/bbl)                                                   
 
Operating expenses(5) ($/bbl)         $  38.76 $  36.07  $  50.25  $  32.68 
 
Purchased natural gas price ($/GJ)    $   3.02 $   2.23  $   1.79  $   2.23 
 
Foreign exchange rates ($US/$Cdn)                                           
 Average                              $   1.01 $   1.00  $   0.99  $   1.00 
 Quarter-end                          $   1.01 $   1.02  $   0.98  $   1.00 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
(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. 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 months    
 and year ended December 31, 2013 and December 31, 2012.                    

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


 
 
--  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 $10 per barrel premium to a $16 per barrel
    discount; 
--  U.S. to Canadian dollar exchange rate fluctuations have resulted in
    foreign exchange gains and losses on the revaluation of U.S. dollar-
    denominated debt and have impacted realized selling prices; 
--  planned and unplanned maintenance activities have reduced quarterly
    production volumes and revenues and increased operating expenses; and 
--  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 addition, taxes on a portion of the
    income generated in the Corporation's partnership in 2012 were deferred
    to 2013.  

Bitumen valuation estimates used to calculate Crown royalties from 2009
to 2013 have changed as new information becomes available. These
changes have had a significant impact on the Corporation's financial
results over the last eight quarters but are not expected to impact
the financial results in the future. 
Increased spending on capital projects to replace or relocate
Syncrude mining trains and to support tailings management plans has
reduced Crown royalties over the past eight quarters. These projects
are all expected to be complete or substantially complete by the end
of 2014. 
Capital Expenditures 


 
 
                                             Three Months                  
                                                 Ended        Year Ended   
                                              December 31     December 31  
($ millions)                                   2013    2012    2013    2012
---------------------------------------------------------------------------
 
Major Projects                                                             
 
 Mildred Lake Mine Train Replacement        $   105 $    96 $   457 $   362
 Reconstruct crushers, surge facilities,                                   
  and slurry prep facilities to support                                    
  tailings storage requirements                                            
 
 Aurora North Mine Train Relocation               7      34     149      98
 Relocate crushers, surge facilities, and                                  
  slurry prep facilities to support                                        
  tailings storage requirements                                            
 
 Aurora North Tailings Management                10      32      77     123
 Construct a composite tails (CT) plant at                                 
  the Aurora North mine to process tailings                                
 
 Centrifuge Tailings Management                  83      34     229      69
 Construct a centrifuge plant at the                                       
  Mildred Lake mine to process tailings                                    
 
---------------------------------------------------------------------------
Capital expenditures on major projects      $   205 $   196 $   912 $   652
---------------------------------------------------------------------------
 
Regular maintenance                                                        
 Capitalized turnaround costs               $     - $     - $    54 $    76
 Other                                           60      77     269     266
---------------------------------------------------------------------------
Capital expenditures on regular maintenance $    60 $    77 $   323 $   342
---------------------------------------------------------------------------
 
Capitalized interest                        $    27 $    26 $   107 $    92
---------------------------------------------------------------------------
Total capital expenditures                  $   292 $   299 $ 1,342 $ 1,086
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Capital expenditures increased to $1,342 million in 2013, as expected,
primarily due to spending on the major projects at Syncrude. 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 2013, Canadian Oil Sands entered into new
contractual obligations totalling approximately $700 million due over
the next 25 years for the transportation of crude oil to secure
access to preferred markets and enhance marketing flexibility and
approximately $90 million due over the next two years for new funding
commitments primarily related to the major projects. 
Dividends 
On January 30, 2014, 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 February 28, 2014 to shareholders of
record on February 21, 2014. The Corporation paid dividends to
shareholders totalling $678 million, or $1.40 per Share in 2013. 
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
amounts are established with the intent of absorbing short-term
market volatility over several quarters and 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 


 
 
                                                    December 31  December 31
As at ($ millions, except % amounts)                       2013         2012
----------------------------------------------------------------------------
 
Long-term debt(1,2)                                $     1,602  $     1,794 
Cash and cash equivalents(1)                              (806)      (1,553)
----------------------------------------------------------------------------
Net debt(3,4)                                      $       796  $       241 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Shareholders' equity(1)                            $     4,732  $     4,515 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Total net capitalization(3,5)                      $     5,528  $     4,756 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Total capitalization(3,6)                          $     6,334  $     6,309 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Net debt-to-total net capitalization(3,7) (%)               14            5 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Long-term debt-to-total capitalization(3,8) (%)             25           28 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
(1) As reported in the Consolidated Balance Sheets.                         
(2) Includes current and non-current portions of long-term debt.            
(3) Additional GAAP financial measure.                                      
(4) Long-term debt less cash and cash equivalents.                          
(5) Net debt plus Shareholders' equity.                                     
(6) Long-term debt plus Shareholders' equity.                               
(7) Net debt divided by total net capitalization.                           
(8) Long-term debt divided by total capitalization.                         

Net debt, which is comprised of current and non-current portions of
long-term debt less cash and cash equivalents, increased to $796
million at December 31, 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 2013. In
addition, a weakening Canadian dollar from December 31, 2012 to
December 31, 2013 increased the Canadian dollar equivalent carrying
value of Canadian Oil Sands' outstanding long-term debt, all of which
is denominated in U.S. dollars, by $115 million. As a result, net
debt-to-total net capitalization increased to 14 per cent at December
31, 2013 from five per cent at December 31, 2012. 
In August, 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 December 31, 2013 compared with 28
per cent at December 31, 2012. 
In 2014, we plan to continue to spend existing cash balances to fund
our major projects, settle accounts payable of approximately $500
million for taxes and Crown royalties and pay dividends. Based on the
assumptions in our 2014 Outlook, net debt is expected to rise to a
level within our targeted range of $1 billion to $2 billion by the
end of 2014, coincident with the expected substantial completion of
our major projects. 
Shareholders' equity increased to $4,732 million at December 31, 2013
from $4,515 million at December 31, 2012, as net income exceeded
dividends in 2013. 
In June 2013, Canadian Oil Sands extended the terms of its $1,500
million operating credit facility to June 1, 2017 and its $40 million
extendible revolving term credit facility to June 30, 2015. No
amounts were drawn against these facilities at December 31, 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
December 31, 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 December 31, 2013, the Corporation had a market
capitalization of approximately $9.7 billion with 484.6 million
shares outstanding and a closing price of $19.98 per Share. The
following table summarizes the trading activity for the fourth
quarter of 2013. 
Canadian Oil Sands Limited - Trading Activity 


 
 
                                     Fourth                                 
                                    Quarter    October   November   December
                                       2013       2013       2013       2013
----------------------------------------------------------------------------
 
Share price                                                                 
  High                           $    21.17 $    20.79 $    21.17 $    20.21
  Low                            $    19.40 $    19.60 $    19.75 $    19.40
  Close                          $    19.98 $    20.32 $    19.87 $    19.98
 
Volume of Shares traded                                                     
 (millions)                            72.1       25.8       22.4       23.9
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 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 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 months and years ended December
31, 2013 and December 31, 2012. 
2014 Outlook 


 
 
                                                                       As of
                                                                  January 30
(millions of Canadian dollars, except volume and per barrel                 
 amounts)                                                               2014
----------------------------------------------------------------------------
 
Operating assumptions                                                       
Syncrude production (mmbbls)                                            105 
Canadian Oil Sands sales (mmbbls)                                      38.6 
Sales, net of crude oil purchases and transportation            $     3,386 
Realized SCO selling price ($/bbl)                              $     87.78 
Operating expenses                                              $     1,600 
Operating expenses per barrel                                   $     41.48 
Development expenses                                            $       181 
Crown royalties                                                 $       128 
Current taxes                                                   $       200 
Cash flow from operations(1)                                    $     1,158 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Capital expenditure assumptions                                             
Major projects                                                  $       653 
Regular maintenance                                             $       361 
Capitalized interest                                            $        83 
Total capital expenditures                                      $     1,097 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Business environment assumptions                                            
West Texas Intermediate (U.S.$/bbl)                             $     90.00 
Discount to average Cdn$ WTI prices (Cdn$/bbl)                  $     (5.00)
Foreign exchange rate (U.S.$/Cdn$)                              $      0.97 
AECO natural gas (Cdn$/GJ)                                      $      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.                                                                      

There are no changes to the 2014 Outlook provided in the Corporation's
guidance document dated December 9, 2013.  
Canadian Oil Sands continues to estimate annual Syncrude production
of 95 to 110 million barrels for 2014. For the purpose of generating
our 2014 Outlook, we have selected a single-point production estimate
of 105 million barrels (287,700 barrels per day). Net to Canadian Oil
Sands, the single-point estimate is equivalent to 38.6 million
barrels (105,700 barrels per day). The production estimate reflects a
planned turnaround of Coker 8-2 in the second quarter of the year and
the successful start-up of the new Mildred Lake mine trains. 
Sales, net of crude oil purchases and transportation expense, are
estimated to be approximately $3.4 billion, reflecting our 38.6
million barrel production estimate and an approximate $88 per barrel
plant-gate realized selling price. The estimated selling price
assumes a U.S. $90 per barrel WTI oil price, a foreign exchange rate
of $0.97 U.S./Cdn, and a SCO discount to Cdn dollar WTI of $5.00 per
barrel. 
We are estimating operating expenses of $1,600 million in 2013,
comprised of $1,423 million in production costs and $177 million in
purchased energy costs, reflecting a $3.50 per gigajoule ("GJ")
natural gas price assumption. Based on our single-point production
estimate, this translates to operating expenses of $41.48 per barrel. 
Development expenses are estimated to increase by $48 million to $181
million in 2014. 
Crown royalties are estimated to decrease by $46 million to $128
million in 2014, reflecting lower assumed bitumen prices. 
Capital expenditures are estimated to total $1,097 million in 2014,
comprised of $653 million of spending on major projects, $361 million
in regular maintenance of the business and other projects, and $83
million in capitalized interest. 
Current taxes are estimated to decrease to $200 million in 2014. 
Based on these assumptions, we estimate 2014 cash flow from
operations of $1,158 million, or $2.39 per Share. 
In 2014, we plan to continue to spend existing cash balances to fund
our major projects, settle accounts payable of approximately $500
million for taxes and Crown royalties and pay dividends. Based on the
assumptions in our 2014 Outlook, net debt is expected to rise to a
level within our targeted range of $1 billion to $2 billion by the
end of 2014, coincident with 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 (January 30, 2014) 


 
 
                               
                            Cash Flow from   
                                                             Operations     
                                                              Increase      
                                                        $ millions $ / Share
Variable                              Annual Sensitivity     (1,2)     (1,2)
----------------------------------------------------------------------------
 
Syncrude operating expense decrease   Cdn$1.00/bbl       $      23 $    0.05
Syncrude operating expense decrease   Cdn$50 million     $      11 $    0.02
WTI crude oil price increase          U.S.$1.00/bbl      $      25 $    0.05
Syncrude production increase          2 million bbls     $      40 $    0.08
Canadian dollar weakening             U.S.$0.01/Cdn$     $      23 $    0.05
AECO natural gas price decrease       Cdn$0.50/GJ        $      15 $    0.03
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
(1) These sensitivities are after the impact of taxes.                      
(2) These sensitivities assume Canadian Oil Sands pays Crown royalties based
 on net bitumen revenues in 2014. Lower bitumen revenues or higher          
 deductible bitumen-related costs may result in minimum Crown royalties     
 based on gross revenues which will change the sensitivities to these       
 variables.                                                                 

The 2014 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 2014 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  In-Service
                              ($ billions)   Accuracy          at       Date
                                                  (%)    Dec 31,            
                                                          2013(2)           
----------------------------------------------------------------------------
 
Mildred Lake Mine  Syncrude    $       4.2 +15%/-15%         80%     Q4 2014
 Train Replacement                                                          
                   COS share           1.6                                  
 
Centrifuge         Syncrude    $       1.9 +15%/-15%         70%     H1 2015
 Tailings                                                                   
 Management                                                                 
                   COS share           0.7                                  
 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Major Projects - Annual Spending Profile(1) 


 
 
                         Spent to                           
                         December                           
($ billions)             31, 2013     2014     2015    Total
------------------------------------------------------------
 
Syncrude                 $    3.6 $    2.0 $    0.5 $    6.1
Canadian Oil Sands share $    1.3 $    0.8 $    0.2 $    2.3
------------------------------------------------------------
------------------------------------------------------------
 
(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 Mildred Lake Mine Train and Centrifuge Tailings Management projects
are tracking to plan. The Aurora North Mine Train Relocation and
Aurora North Tailings Management projects were completed in the
quarter and have been removed from the spending profile. 
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    Year Ended    
                                            December 31       December 31   
(millions of Canadian dollars, except                                       
 per Share and Share volume amounts)         2013     2012     2013     2012
----------------------------------------------------------------------------
 
Sales                                    $ 1,048  $ 1,000  $ 4,208  $ 3,905 
Crown royalties                              (52)     (57)    (174)    (202)
----------------------------------------------------------------------------
Revenues                                 $   996  $   943  $ 4,034  $ 3,703 
----------------------------------------------------------------------------
 
Expenses                                                                    
 Operating (Note 3)                      $   388  $   398  $ 1,494  $ 1,505 
 Development                                  29       26      133      101 
 Crude oil purchases and transportation      103       71      643      339 
 Administration                                6        7       30       26 
 Insurance                                     1        2       11       10 
 Depreciation and depletion                  152      119      478      403 
----------------------------------------------------------------------------
                                         $   679  $   623  $ 2,789  $ 2,384 
----------------------------------------------------------------------------
Earnings from operating activities       $   317  $   320  $ 1,245  $ 1,319 
 Foreign exchange (gain) loss (Note 9)        46       16       88      (25)
 Net finance expense (Notes 3 and 10)          6       12       44       56 
----------------------------------------------------------------------------
Earnings before taxes                    $   265  $   292  $ 1,113  $ 1,288 
 Tax expense (Notes 3 and 11)                 73       74      279      315 
----------------------------------------------------------------------------
Net income                               $   192  $   218  $   834  $   973 
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)              (7)      10       61      (13)
 Items reclassified to net income:                                          
  Derivative gains                            (1)      (1)      (3)      (3)
----------------------------------------------------------------------------
Comprehensive income                     $   184  $   227  $   892  $   957 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Weighted average Shares (millions)           485      485      485      485 
Shares, end of period (millions)             485      485      485      485 
 
Net income per Share                                                        
 Basic and diluted                       $  0.40  $  0.45  $  1.72  $  2.01 
----------------------------------------------------------------------------
 
See Notes to Unaudited Consolidated Financial Statements                    
 

 
 
Consolidated Statements of Shareholders' Equity                             
(unaudited)                                                                 
                                        Three Months Ended    Year Ended    
                                            December 31       December 31   
(millions of Canadian dollars)               2013     2012     2013     2012
----------------------------------------------------------------------------
 
Retained earnings                                                           
 Balance, beginning of period            $ 2,024  $ 1,764  $ 1,823  $ 1,517 
 Net income                                  192      218      834      973 
 Re-measurements of employee future                                         
  benefit plans                               (7)      10       61      (13)
 Dividends                                  (169)    (169)    (678)    (654)
----------------------------------------------------------------------------
 Balance, end of period                  $ 2,040  $ 1,823  $ 2,040  $ 1,823 
----------------------------------------------------------------------------
Accumulated other comprehensive income                                      
 Balance, beginning of period            $     7  $    10  $     9  $    12 
 Reclassification of derivative gains to                                    
  net income                                  (1)      (1)      (3)      (3)
----------------------------------------------------------------------------
 Balance, end of period                  $     6  $     9  $     6  $     9 
----------------------------------------------------------------------------
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        2        2 
----------------------------------------------------------------------------
 Balance, end of period                       12       10       12       10 
----------------------------------------------------------------------------
Total Shareholders' equity               $ 4,732  $ 4,515  $ 4,732  $ 4,515 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
See Notes to Unaudited Consolidated Financial Statements                    
 
Consolidated Balance Sheets                                                 
(unaudited)                                                                 
                                                     December 31 December 31
As at (millions of Canadian dollars)                        2013        2012
----------------------------------------------------------------------------
 
Assets                                                                      
Current assets                                                              
  Cash and cash equivalents                          $       806 $     1,553
  Accounts receivable                                        369         311
  Inventories                                                163         137
  Prepaid expenses                                             8           9
----------------------------------------------------------------------------
                                                     $     1,346 $     2,010
Property, plant and equipment, net (Note 4)                8,712       8,003
Exploration and evaluation (Note 4)                           54          89
Reclamation trust                                             78          69
----------------------------------------------------------------------------
                                                     $    10,190 $    10,171
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Liabilities and Shareholders' Equity                                        
Current liabilities                                                         
  Accounts payable and accrued liabilities (Note 5)  $       786 $       704
  Current portion of long-term debt                            -         297
  Current taxes                                              259          40
  Current portion of employee future benefits                 82          76
----------------------------------------------------------------------------
                                                     $     1,127 $     1,117
Employee future benefits                                     226         362
Other liabilities (Note 6)                                   100          89
Long-term debt                                             1,602       1,497
Asset retirement obligation (Note 7)                         868       1,058
Deferred taxes                                             1,535       1,533
----------------------------------------------------------------------------
                                                     $     5,458 $     5,656
Shareholders' equity                                       4,732       4,515
----------------------------------------------------------------------------
                                                     $    10,190 $    10,171
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Commitments and Contingencies (Notes 14 and 15)                             
 
See Notes to Unaudited Consolidated Financial Statements                    
 
Consolidated Statements of Cash Flows                                       
(unaudited)                                                                 
                                        Three Months Ended    Year Ended    
                                            December 31       December 31   
(millions of Canadian dollars)               2013     2012     2013     2012
----------------------------------------------------------------------------
 
Cash from (used in) operating activities                                    
 Net income                              $   192  $   218  $   834  $   973 
 Adjustments to reconcile net income to                                     
  cash flow from operations:                                                
  Depreciation and depletion                 152      119      478      403 
  Accretion of asset retirement                                             
   obligation (Note 7)                         7        7       26       26 
  Foreign exchange (gain) loss on long-                                     
   term debt (Note 9)                         53       20      115      (28)
  Deferred taxes (Note 11)                   (12)      64      (18)     275 
  Share-based compensation                     1        3        5        5 
  Reclamation expenditures (Note 7)           (2)      (6)     (42)     (54)
  Change in employee future benefits and                                    
   other                                       1       (7)     (49)     (19)
----------------------------------------------------------------------------
  Cash flow from operations              $   392  $   418  $ 1,349  $ 1,581 
 Change in non-cash working capital                                         
  (Note 16)                                   75      178      233      283 
----------------------------------------------------------------------------
  Cash from operating activities         $   467  $   596  $ 1,582  $ 1,864 
----------------------------------------------------------------------------
 
Cash from (used in) financing activities                                    
 Repayment of senior notes               $     -  $     -  $  (310) $     - 
 Issuance of senior notes                      -        -        -      689 
 Issuance of shares                            -        -        1        - 
 Dividends                                  (169)    (169)    (678)    (654)
----------------------------------------------------------------------------
  Cash from (used in) financing                                             
   activities                            $  (169) $  (169) $  (987) $    35 
----------------------------------------------------------------------------
 
Cash from (used in) investing activities                                    
 Capital expenditures                    $  (292) $  (299) $(1,342) $(1,086)
 Reclamation trust funding                    (2)      (3)      (9)     (10)
 Change in non-cash working capital                                         
  (Note 16)                                  (38)     (44)      (2)      34 
----------------------------------------------------------------------------
  Cash used in investing activities      $  (332) $  (346) $(1,353) $(1,062)
----------------------------------------------------------------------------
 
Foreign exchange gain (loss) on cash and                                    
 cash equivalents held in foreign                                           
 currency                                $     -  $     3  $    11  $    (2)
----------------------------------------------------------------------------
 
Increase (decrease) in cash and cash                                        
 equivalents                             $   (34) $    84  $  (747) $   835 
Cash and cash equivalents, beginning of                                     
 period                                      840    1,469    1,553      718 
----------------------------------------------------------------------------
Cash and cash equivalents, end of period $   806  $ 1,553  $   806  $ 1,553 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Cash and cash equivalents consist of:                                       
 Cash                                    $   639  $   607  $   639  $   607 
 Short-term investments                      167      946      167      946 
----------------------------------------------------------------------------
                                         $   806  $ 1,553  $   806  $ 1,553 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Supplementary Information (Note 16)                                         
 
See Notes to Unaudited Consolidated Financial Statements                    

Notes to Unaudited Consolidated Financial Statements  
For the Three Months and Year Ended December 31, 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, and decisions about relevant activities
require unanimous consent of the owners. Each owner takes its
proportionate share of production in kind, and funds its 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 December 31, 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          
                                                December 31, 2013           
                                            Before                     After
($ millions, except per Share                                               
 amounts)                              Adjustments  Adjustments  Adjustments
----------------------------------------------------------------------------
 
Operating expenses                    $       388  $         -  $       388 
Net finance expense                   $         2  $         4  $         6 
Tax expense                           $        74  $        (1) $        73 
Net income                            $       195  $        (3) $       192 
Re-measurements of employee future                                          
 benefit plans, net of tax            $       (10) $         3  $        (7)
                                     ---------------------------------------
Earnings per Share                    $      0.41  $     (0.01) $      0.40 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
                                                    Year Ended             
                                                December 31, 2013          
                                            Before                    After
 ($ millions, except per Share                                             
  amounts)                             Adjustments  Adjustments Adjustments
 --------------------------------------------------------------------------
 
 Operating expenses                    $     1,494 $         -  $     1,494
 Net finance expense                   $        28 $        16  $        44
 Tax expense                           $       283 $        (4) $       279
 Net income                            $       846 $       (12) $       834
 Re-measurements of employee future                                        
  benefit plans, net of tax            $        49 $        12  $        61
                                      -------------------------------------
 Earnings per Share                    $      1.75 $     (0.03) $      1.72
 --------------------------------------------------------------------------
 --------------------------------------------------------------------------
                                                Three Months Ended         
                                                December 31, 2012          
                                            Before                    After
 ($ millions, except per Share                                             
  amounts)                             Adjustments  Adjustments Adjustments
 --------------------------------------------------------------------------
 
 Operating expenses                    $       399 $        (1) $       398
 Net finance expense                   $         7 $         5  $        12
 Tax expense                           $        75 $        (1) $        74
 Net income                            $       221 $        (3) $       218
 Re-measurements of employee future                                        
  benefit plans, net of tax            $         7 $         3  $        10
                                      -------------------------------------
 Earnings per Share                    $      0.46 $     (0.01) $      0.45
 --------------------------------------------------------------------------
 --------------------------------------------------------------------------
 
                                                    Year Ended              
                                                December 31, 2012           
                                            Before                     After
($ millions, except per Share                                               
 amounts)                              Adjustments  Adjustments  Adjustments
----------------------------------------------------------------------------
 
Operating expenses                    $     1,511  $        (6) $     1,505 
Net finance expense                   $        39  $        17  $        56 
Tax expense                           $       318  $        (3) $       315 
Net income                            $       981  $        (8) $       973 
Re-measurements of employee future                                          
 benefit plans, net of tax            $       (21) $         8  $       (13)
                                     ---------------------------------------
Earnings per Share                    $      2.02  $     (0.01) $      2.01 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

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  


 
 
                                     Year Ended December 31, 2013           
 
                           Upgrading            Vehicles               Asset
                                 and    Mining       and          Retirement
($ millions)              Extracting Equipment Equipment Buildings     Costs
----------------------------------------------------------------------------
 
Cost                                                                        
Balance at January 1, 2013 $  5,300  $  1,397  $    686  $     324 $  1,024 
Additions                         -         -        31          -        - 
Change in asset retirement                                                  
 costs                            -         -         -          -     (190)
Retirements                     (25)       (8)      (24)         -        - 
Reclassifications(1)            233       552         2         21       17 
----------------------------------------------------------------------------
Balance at December 31,                                                     
 2013                      $  5,508  $  1,941  $    695  $     345 $    851 
----------------------------------------------------------------------------
 
Accumulated depreciation                                                    
Balance at January 1, 2013 $  1,447  $    539  $    320  $     107 $    180 
Depreciation(2)                 204        70        53          8       43 
Retirements                     (25)       (8)      (24)         -        - 
Reclassifications(1)              -         -         -          -        - 
----------------------------------------------------------------------------
Balance at December 31,                                                     
 2013                      $  1,626  $    601  $    349  $     115 $    223 
----------------------------------------------------------------------------
 
Net book value at December                                                  
 31, 2013                  $  3,882  $  1,340  $    346  $     230 $    628 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
(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.                                
(2) Depreciation and depletion expense on the consolidated statements of net
 income and comprehensive income includes a $35 million charge to write off 
 the carrying value of the Arctic natural gas assets, which are classified  
 as exploration and evaluation assets on the consolidated balance sheets.   
 
                                     Year Ended December 31, 2013           
 
                                  Major Construction                        
                             Turnaround           in        Mine            
($ millions)                      Costs     Progress Development       Total
----------------------------------------------------------------------------
 
Cost                                                                        
Balance at January 1, 2013 $       166  $     1,501  $       392 $   10,790 
Additions                           54        1,257            -      1,342 
Change in asset retirement                                                  
 costs                               -            -            -       (190)
Retirements                        (46)           -            -       (103)
Reclassifications(1)                 -       (1,111)         286          - 
----------------------------------------------------------------------------
Balance at December 31,                                                     
 2013                      $       174  $     1,647  $       678 $   11,839 
----------------------------------------------------------------------------
 
Accumulated depreciation                                                    
Balance at January 1, 2013 $        73  $         -  $       121 $    2,787 
Depreciation(2)                     59            -            6        443 
Retirements                        (46)           -            -       (103)
Reclassifications(1)                 -            -            -          - 
----------------------------------------------------------------------------
Balance at December 31,                                                     
 2013                      $        86  $         -  $       127 $    3,127 
----------------------------------------------------------------------------
 
Net book value at December                                                  
 31, 2013                  $        88  $     1,647  $       551 $    8,712 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
(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.                                
(2) Depreciation and depletion expense on the consolidated statements of    
 net income and comprehensive income includes a $35 million charge to write 
 off  the carrying value of the Arctic natural gas assets, which are        
 classified as exploration and evaluation assets on the consolidated        
 balance sheets.                                                            

For the three months and year ended December 31, 2013, interest costs
of $27 million and $107 million, respectively, were capitalized and
included in property, plant and equipment (three months and year
ended December 31, 2012 - $26 million and $92 million, respectively)
based on an interest capitalization rate of 6.6 per cent and 6.5 per
cent, respectively, for the three months and year ended December 31,
2013 (6.5 per cent and 6.7 per cent, respectively, for the three
months and year ended December, 2012). 
5) Accounts Payable and Accrued Liabilities 


 
 
                                                  December 31    December 31
($ millions)                                             2013           2012
----------------------------------------------------------------------------
 
Trade payables                                 $         491  $         498 
Crown royalties                                          334            215 
Current portion of asset retirement obligation            28             44 
Interest payable                                          23             29 
----------------------------------------------------------------------------
                                               $         876  $         786 
Less non-current portion of Crown royalties              (90)           (82)
----------------------------------------------------------------------------
Accounts payable and accrued liabilities       $         786  $         704 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

6) Other Liabilities 


 
 
                                                   December 31   December 31
($ millions)                                              2013          2012
----------------------------------------------------------------------------
 
Non-current portion of Crown royalties(1)        $          90 $          82
Other                                                       10             7
----------------------------------------------------------------------------
Other liabilities                                $         100 $          89
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
(1) Transition royalties due under Syncrude's Royalty Amending Agreement and
 payable in January 2015 and January 2016.                                  

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 3.25 per cent at December 31, 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. 


 
 
                                                         Year           Year
                                                        Ended          Ended
                                                  December 31    December 31
($ millions)                                             2013           2012
----------------------------------------------------------------------------
 
Asset retirement obligation, beginning of year $       1,102  $       1,037 
Change in risk-free interest rate                       (217)            68 
Reclamation expenditures                                 (42)           (54)
Increase in estimated reclamation and closure                               
 expenditures                                             27             25 
Accretion expense                                         26             26 
----------------------------------------------------------------------------
Asset retirement obligation, end of year       $         896  $       1,102 
Less current portion                                     (28)           (44)
----------------------------------------------------------------------------
Non-current portion                            $         868  $       1,058 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

The $217 million decrease in the asset retirement obligation, due to
the increase in the risk-free rate, and the $27 million increase, due
to an increase in estimated reclamation and closure expenditures,
were recorded as a decrease in property, plant and equipment. The $28
million current portion of the asset retirement obligation is
included in accounts payable and accrued liabilities, while the $868
million non-current portion is presented separately as a liability on
the December 31, 2013 Consolidated Balance Sheet. The total
undiscounted estimated cash flows required to settle Canadian Oil
Sands' share of the asset retirement obligation were $2,160 million
at December, 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 months and year ended
December 31, 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 Ended       Year Ended     
                                       December 31          December 31     
($ millions)                            2013       2012       2013      2012
----------------------------------------------------------------------------
 
Operating expenses                 $      14 $      14  $      48  $      46
Net finance expense                        4         5         16         17
Other comprehensive (income)                                                
 loss(1)                                   9       (14)       (82)        17
----------------------------------------------------------------------------
Total benefit cost (recovery)      $      27 $       5  $     (18) $      80
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
(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 Ended      Year Ended     
                                         December 31         December 31    
($ millions)                              2013      2012      2013      2012
----------------------------------------------------------------------------
 
Foreign exchange (gain) loss - long-                                        
 term debt                           $     53  $     20  $    115  $    (28)
Foreign exchange (gain) loss - other       (7)       (4)      (27)        3 
----------------------------------------------------------------------------
Total foreign exchange (gain) loss   $     46  $     16  $     88  $    (25)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

10) Net Finance Expense 


 
 
                                    Three Months Ended      Year Ended     
                                        December 31         December 31    
($ millions)                             2013      2012      2013      2012
---------------------------------------------------------------------------
 
Interest costs on long-term debt    $     28  $     29  $    123  $    117 
 Less capitalized interest on long-                                        
  term debt                              (27)      (26)     (107)      (92)
---------------------------------------------------------------------------
Interest expense on long-term debt  $      1  $      3  $     16  $     25 
Interest expense on employee future                                        
 benefits                                  4         5        16        17 
Accretion of asset retirement                                              
 obligation                                7         7        26        26 
Interest income                           (6)       (3)      (14)      (12)
---------------------------------------------------------------------------
Net finance expense                 $      6  $     12  $     44  $     56 
---------------------------------------------------------------------------
---------------------------------------------------------------------------

11) Tax Expense 


 
 
                                       Three Months Ended     Year Ended    
                                          December 31        December 31    
($ millions)                                2013     2012      2013     2012
----------------------------------------------------------------------------
 
Current tax expense                    $     85  $     10 $    297  $     40
Deferred tax expense (recovery)             (12)       64      (18)      275
----------------------------------------------------------------------------
Total tax expense                      $     73  $     74 $    279  $    315
----------------------------------------------------------------------------
----------------------------------------------------------------------------

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
December 31, 2013 and December 31, 2012 was as follows: 


 
 
                                                  December 31    December 31
As at ($ millions, except % amounts)                     2013           2012
----------------------------------------------------------------------------
 
Long-term debt(1,2)                            $       1,602  $       1,794 
Cash and cash equivalents(1)                            (806)        (1,553)
----------------------------------------------------------------------------
Net debt(3,4)                                  $         796  $         241 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Shareholders' equity(1)                        $       4,732  $       4,515 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Total net capitalization(3,5)                  $       5,528  $       4,756 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Total capitalization(3,6)                      $       6,334  $       6,309 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Net debt-to-total net capitalization(3,7) (%)             14              5 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Long-term debt-to-total capitalization(3,8)                                 
 (%)                                                      25             28 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
(1) As reported in the Consolidated Balance Sheets.                         
(2) Includes current and non-current portions of long term debt.            
(3) Additional GAAP financial measure.                                      
(4) Long-term debt less cash and cash equilavents.                          
(5) Net debt plus Shareholders' equity.                                     
(6) Long-term debt plus Shareholders' equity.                               
(7) Net debt divided by total net capitalization.                           
(8) Long-term debt divided by total capitalization.                         

Net debt, which is comprised of current and non-current portions of
long-term debt less cash and cash equivalents, increased to $796
million at December 31, 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 in 2013 increased the Canadian
equivalent carrying value of Canadian Oil Sands' outstanding
long-term debt, all of which is denominated in U.S. dollars, by $115
million. As a result, net debt-to-total net capitalization increased
to 14 per cent at December 31, 2013 from five per cent at December
31, 2012. 
In August, 2013, Canadian Oil Sands repaid U.S. $300 million of
Senior Notes upon maturity. As a result, long-term debt-to-total
capitalization fell to 25 per cent at December 31, 2013 from 28 per
cent at December 31, 2012. 
Shareholders' equity increased to $4,732 million at December 31, 2013
from $4,515 million at December 31, 2012, as net income exceeded
dividends in 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 December 31, 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 $49 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: 


 
 
                                                     December 31 December 31
As at ($ millions)                                          2013        2012
----------------------------------------------------------------------------
 
8.2% Senior Notes due April 1, 2027 (U.S. $73.95                            
 million)                                            $        95 $       104
7.9% Senior Notes due September 1, 2021 (U.S. $250                          
 million)                                                    321         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)                                                    636         628
4.5% Senior Notes due April 1, 2022 (U.S. $400                              
 million)                                                    425         435
6.0% Senior Notes due April 1, 2042 (U.S. $300                              
 million)                                                    323         350
----------------------------------------------------------------------------
                                                     $     1,800 $     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 2013, Canadian Oil Sands entered into new
contractual obligations totalling approximately $700 million due over
the next 25 years for the transportation of crude oil to secure
access to preferred markets and enhance marketing flexibility and
approximately $90 million due over the next two years for new funding
commitments primarily related to the major projects. 
15) Contingencies 
In December, 2013, the Syncrude owners and the Alberta government
settled their dispute over the basis for determining "floor price",
quality and location adjustments under the Syncrude Royalty Amending
Agreement and, as a result, Canadian Oil Sands no longer has a
contingent liability for additional Crown royalties. 
16) Supplementary Information 
a) Change in Non-Cash Working Capital 


 
 
                                        Three Months Ended    Year Ended    
                                            December 31       December 31   
($ millions)                                 2013     2012     2013     2012
----------------------------------------------------------------------------
 
Operating activities:                                                       
 Accounts receivable ("AR")              $    46  $    75  $   (58) $    65 
 Inventories                                  (3)       -      (26)       5 
 Prepaid expenses                              1        2        1        1 
 Accounts payable and accrued                                               
  liabilities ("AP")                         (96)      63       82      225 
 Current taxes                                74       10      219       40 
 Less: AP and AR changes reclassified to                                    
  investing and other                         53       28       15      (53)
----------------------------------------------------------------------------
Change in operating non-cash working                                        
 capital                                 $    75  $   178  $   233  $   283 
----------------------------------------------------------------------------
 
Investing activities:                                                       
 Accounts payable and accrued                                               
  liabilities                            $   (38) $   (44) $    (2) $    34 
----------------------------------------------------------------------------
Change in investing non-cash working                                        
 capital                                 $   (38) $   (44) $    (2) $    34 
----------------------------------------------------------------------------
 
----------------------------------------------------------------------------
Change in total non-cash working capital $    37  $   134  $   231  $   317 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

b) Income Taxes and Interest Paid 


 
 
                                        Three Months Ended    Year Ended    
                                            December 31       December 31   
($ millions)                                 2013     2012     2013     2012
----------------------------------------------------------------------------
 
Income taxes paid                        $     11 $      - $     77 $      -
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Interest paid                            $     43 $     41 $    126 $    106
----------------------------------------------------------------------------
----------------------------------------------------------------------------

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 Ended    Year Ended    
                                            December 31       December 31   
($ millions)                                 2013     2012     2013     2012
----------------------------------------------------------------------------
 
Cash Flow From Operations Per Share,                                        
 basic and diluted                       $   0.81 $   0.86 $   2.78 $   3.26
----------------------------------------------------------------------------
----------------------------------------------------------------------------

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. 
Ryan Kubik, 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
 
 
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