Summary of Quarterly Results

Quarterly variances in revenues, net income, and cash from operating activities are caused mainly by fluctuations in crude oil prices, production and sales volumes, production costs, and natural gas prices. Net income is also impacted by non-cash foreign exchange gains and losses caused by fluctuations in foreign exchange rates on our U.S. dollar denominated debt and by future income tax changes. While the supply/demand balance for crude oil affects selling prices, the impact of this equation is difficult to predict and quantify and has not displayed significant seasonality. A large proportion of operating costs are fixed, and as such, per barrel operating costs are highly variable to production volumes. Maintenance and turnaround activities are typically scheduled to occur in the first or second quarter. However, the exact timing of unit shutdowns cannot be precisely scheduled, and unplanned outages will occur. As a result, production levels also may not display reliable seasonality patterns or trends. Maintenance and turnaround costs are expensed in the period incurred and can lead to significant increases in operating costs and reductions in production in those periods, as demonstrated by the high per barrel operating costs, particularly in the first quarters of 2006 and 2005. Natural gas prices are typically higher in winter months as heating demand rises, but this seasonality is significantly influenced by weather conditions and North American natural gas inventory levels.

Higher revenues, after crude oil purchases, transportation and marketing expense, in the last half of 2006 reflect the additional Stage 3 volumes, which came on at the end of August 2006. The unplanned maintenance on Coker 8-2 that occurred in the latter half of the fourth quarter reduced the full impact of higher Stage 3 volumes and increased operating costs. The third quarter of 2006 reflected reliable operations and the start-up of the Stage 3 facilities, which resulted in lower operating costs on a per barrel basis relative to the other quarters in 2006 and 2005. The increased volumes in the third quarter of 2006 were supported by strong selling prices for our SSB, reflecting robust WTI prices averaging US$70.60 per barrel, which generated $689 million in revenues.  In the second quarter of 2006, we realized $79.35 per barrel on our SSB sales, which also resulted in increased revenues compared to 2005. In each of the first quarters of 2006 and 2005, production was impacted by significant turnaround schedules, thereby reducing revenues and increasing operating costs.

During the second quarter of 2006, Crown royalties shifted to the higher rate of 25% of net revenues, compared to the minimum 1% of gross revenues that had been in place since January 1, 2002. The 2006 third and fourth quarter results reflect the full impact of the higher Crown royalty expense compared to the second quarter of 2006, which included only one month at the higher rate.

Foreign exchange gains and future income tax recoveries of $46 million and $29 million, respectively, in the second quarter of 2006 increased net income relative to the other quarters in the year. Comparatively, in the third quarter of 2005, a $53 million foreign exchange gain contributed to net income totalling $380 million, or $0.83 per Unit.

Canadian Oil Sands’ unaudited fourth quarter 2006 results have been discussed and analyzed in our MD&A released on January 29, 2007 and filed with the Trust’s January 29, 2007 press release, which is available at www.sedar.com.