Operations

We are working with Syncrude Canada and the other Joint Venture owners to enhance the reliability and performance of Syncrude operations. We expect that the Management Services Agreement is an important step, enabling Syncrude to benefit from the global best practices, technology and expertise of Imperial Oil Resources and ExxonMobil.

The priority is to stabilize operations following our Stage 3 expansion, and to achieve sustained Stage 3 design capacity of 128 million barrels annually to Syncrude. We expect it will take time to ramp up to full rates as we optimize the performance of new operating units. We currently are working to unlock constrained production from Coker 8-3. During 2007, we anticipate production to be about 85% of full design capacity, totaling 110 million barrels gross to Syncrude.

In 2007, we plan on transitioning production to the higher SyncrudeTM Sweet Premium quality level through a planned modification of a hydrogen plant in the fall. We also are working to and identify a solution to use on-site produced ammonia in the operation of our flue gas desulphurizer.

Distributions

Canadian Oil Sands remains committed to its previously stated objective of approaching fuller payout of free cash flow once we reach our net debt target, unless capital investment growth opportunities exist that offer unitholders better value.

In late 2006, we raised our net debt target to $1.6 billion to accelerate fuller payout of free cash flow, allowing the Trust to optimize distributions prior to the proposed income trust tax changes taking effect.

Distributions are expected to reflect some of the variability of free cash flow once we approach fuller payout; they will be determined quarterly by the board of directors in light of current and expected economic and operating conditions, and with the objective of maintaining an investment grade credit rating and ensuring financing capacity for Syncrude’s expansion projects and/or acquisitions.

Our long reserve life provides the potential to generate substantial free cash flow and a solid foundation for sustainable distributions over the long-term.

Growth

We plan to continue to grow responsibly. We have an excellent resource base through our Syncrude interest that can support further increases in productive capacity. Current plans call for productive capacity to grow to about 184,000 barrels per day, based on our 36.74% interest, late in the next decade.

We also will continue to evaluate opportunities to acquire additional oil sands interests. Our preference would be to increase our Syncrude ownership; however, we would consider other opportunities along the oil sands business chain, from reserves to downstream refining assets.

Above all, we aim to be prudent in our decision-making and to maximize the value for our investors.

Competitive environment

We will continue to represent Canada’s energy and trust sector to maintain a competitive regulatory environment.

In early 2007, we helped lead the formation of the Canadian Association of Income Trust Investors whose mission is to preserve the ongoing viability and sustainability of the Canadian income trust market.

We plan to continue to steward our Syncrude operations with a view to developing this resource in an environmentally and socially responsible manner. As well, we recognize our obligation to educate the public and various stakeholders on Syncrude’s sustainability practices.