Financial and Economic Performance

AS SYNCRUDE WORKS TO SECURE CANADA’S ENERGY FUTURE, we are also working to generate attractive financial returns to our joint venture owners, as well as substantial benefits to Alberta’s and Canada’s economies. We are the country’s leading producer of crude oil from oil sand and aim to maintain this position through a strategic growth program built on a foundation of operational excellence.

About our Financial Reporting

Syncrude’s business activities are restricted to the operation of the Syncrude Project, a Joint Venture, and as such Syncrude does not sell or receive revenue from its production. Accordingly, Syncrude is not able to provide conventional financial statements.

Syncrude incurs operating costs and capital expenditures associated with its operations. Certain additional costs, liabilities and obligations are carried directly by each Joint Venture owner. These include reclamation and site restoration obligations, hedging of commodity prices and foreign exchange, development expenses, owner marketing and administrative costs, and pension costs dependent on market performance and changes in discount rates. Each Joint Venture owner accounts for their proportionate share of Syncrude’s costs in accordance with their stated accounting policies.

Financial information has been prepared by management in accordance with accounting principles generally accepted in Canada and includes certain amounts based on estimates and management’s best judgments. This information is presented in unaudited form.

Certain financial information contained in this report is based on pro-forma financial analysis completed by Syncrude. The pro-forma information is theoretical and not intended to represent the actual financial results of any individual Joint Venture owner.

Management maintains a system of internal controls that provides reasonable assurance that all transactions are recorded, that the financial information realistically portrays the operating and business results, and that the assets of the Syncrude Project are safeguarded. Syncrude’s internal auditors review and evaluate compliance with internal controls. The Board of Directors of Syncrude is responsible for ensuring that management meets the requirements for internal control and financial reporting. The Audit and Pension Committee of the Board of Directors discharges this responsibility and engages an external auditor to conduct an independent review of the financial reports.

Syncrude’s policy and practice is to meet the highest standard of ethical conduct in all of its activities, and to continuously improve its systems of internal business controls. Toward this end, the Syncrude organization is now upgrading its control systems and processes to ensure effective compliance with Bill C198 and related CSA regulations M52-109 and 111 by year-end 2006.

Philip C. Lachambre
Executive Vice President and Chief Financial Officer