Liquidity And Capital Resources

Canadian Oil Sands’ capital structure improved at December 31, 2006 compared to December 31, 2005. The $834 million of net income generated in 2006 exceeded the $263 million of distributions, net of the Premium Distribution, Distribution Reinvestment and Optional Unit Purchase Plan (“DRIP”), paid in the year, leading to an increase in Unitholders’ equity. The DRIP generated $249 million in new equity in 2006 at an average price of $30.49 per Unit.

Long-term debt decreased to $1.6 billion at December 31, 2006, as a result of credit facility repayments during the year. After deducting cash and cash equivalents of $0.3 billion, net debt was $1.3 billion at December 31, 2006. Accordingly, net debt to total capitalization, which we monitor as part of our ongoing compliance under our debt and credit facilities, was 25% at December 31, 2006 compared to 33% at December 31, 2005. We also consider net debt to cash from operating activities to be a key measure of financial leverage.