Canadian Oil Sands 12-Jan-2015 Presentation

8/9/2019 Canadian Oil Sands 12-Jan-2015 Presentation

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January 12-13, 2015

Ryan Kubik

President & Chief Executive Officer

TD Securities

London Energy Conference


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Forward-looking InformationIn the interest of providing you with information regarding Canadian Oil Sands Limited (the Corporation), including managem ents assessment of the Corporations future plans and operations, certainstatements and graphs throughout this presentation contain forward-looking information and forward-looking statements (collectiv ely referred to as forward-looking statements) under applicable securitieslaws. 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 thispresentation include, but are not limited to, statements and graphs with respect to: the est imated value and amount of reserves recoverable and the time frame to recover such reserves; the estimatedreserve life; the estimated resources; plans regarding crude oil hedges in the future; the anticipated impact on cash flow from operations and cash flow from operat ions per share from increasing/decreasingcrude oil prices; all expectations regarding dividends; all expectations regarding net debt; all expectations regarding the amount of undrawn credit facilities; the estimated sales volume in 2015; the estimatedoperating expenses in 2015; the estimated cash flow from operations and cash flow from operations per share in 2015; the est imated realized selling price for the Corporations product in 2015; theanticipated break-even approximation; the belief that Syncrude production can grow from demonstrated levels through improved reliability initiatives, while at the same time reducing maintenance and repaircosts; the anticipated impact on cash flow from operations from increasing Syncrude production; the views on future additional steam and power utilities at Syncrude; the regulatory application relating to theMildred Lake mine extension (the MLX Project); the timing of construction and spending for the MLX Project; all expectations regarding future free cash flow; the views regarding the timing ofplanned/announced market access pipelines; the Corporations views on future oil prices; the views on future demand for oil a nd global energy use; all views regarding the synthetic crude oil (SCO) andWest Texas Intermediate (WTI) and Brent differentials; the 2015 Syncrude production range of 95 to 110 million barrels (35 to 40 million barrels net to the Corporation); the Corporations 2015 budgetassumption of 103 million barrels (37.8 million barrels net to the Corporation); the anticipated benefits of the management services agreement with Imperial Oil; Crown royalties payable in the future; theestimated amount of spending on the Syncrude major projects in 2015; the estimated amount of regular maintenance capital in 2015; the estimated amount of total capital expenditures in 2015 and theexpectations regarding the commissioning of the Mildred Lake mine train replacements.You are cautioned not to place undue reliance on forward-looking statements, as there can be no assurance that the p lans, 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 cont ribute to the possibility that the predictions, forecasts, projections

and other forward-looking statements will not occur. Although the Corporation believes that the assumptions and expectations represented by such forward-looking statements are reasonable and reflect thecurrent 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 statements are based include, but are not limited to: the assumptions outlined in the Corporations 2015 guidance documents as posted on theCorporations website at www.cdnoilsands.com as of the date hereof and as subsequently amended or replaced from time to time, including without limitation, the assumptions as to production, operatingexpenses and oil prices; the successful and timely implementation of capital projects; Syncrudes major project spending plans; the ab ility to obtain regulatory and joint venture owner approval; our ability toeither 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 regulatoryregimes 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 presentation include,but are not limited to: volatility of crude oil prices; volatility of the SCO to WTI differential; the impact that pipeline capacity and apportionment and refinery demand have on prices for SCO and our ability todeliver SCO; the impacts of regulatory changes especially those which relate to royalties, taxation, tailings, water and the environment; the impact of new technologies on the cost of oil sands mining; theimpacts of rising costs associated with tailings and water management; the inability of Syncrude to obtain required consents, permits or approvals, including without limitation, the inability of Syncrude toobtain approval to release water from its operations; the impact of Syncrude being unable to meet the conditions of its approval for its tailings management plan under Directive 074; various events whichcould disrupt operations including fires, equipment failures and severe weather; unsuccessful or unt imely implementation of capital or maintenance projects; the impact of technology on operations andprocesses and how new complex technology may not perform as expected; the obtaining of required joint venture owner approvals from the Syncrude owners for expansions, operational issues and

contractual issues; labour turnover and shortages and the productivity achieved from labour in the Fort McMurray area; uncertainty of estimates with respect to reserves and resources; the supply anddemand metrics for oil and natural gas; the variances of stock market activities generally; currency and interest rate fluctuations; volatility of natural gas prices; the Corporations inability to either generatesufficient cash flow from operations to meet our current and future obligations or obtain external sources of debt and equity capital; general economic, business and market conditions and such other risksand uncertainties described in the Corporations Annual Information Form dated February 20, 2014 and in the reports and filin gs made with securities regulatory authorities from time to time by theCorporation which are available on the Corporations profile on SEDAR at www.sedar.com and on the Corporations 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 presentation are made as of the date of this presentation andunless required by law, the Corporation does not undertake any obligation to update publicly or revise any of the included forward-looking statements, whether as a result of new information, future events orotherwise. The forward-looking statements contained in this presentation are expressly qualified by this cautionary statement.In this presentation we refer to additional GAAP and non-GAAP financial measures that do not have any standardized meaning as prescribed by Canadian Generally Accepted Accounting Principles(GAAP). We refer to additional GAAP financial measures such as cash flow from operations, cash flow from operations on a per share basis and net debt. For more information on additional GAAPfinancial measures please refer to our 2014 Third Quarter Report which is available on the Corporations profile on SEDAR at www.sedar.com and on the Corporations website at www.cdnoilsands.com. Inthis presentation we also refer to non-GAAP financial measures such as free cash flow, free cash flow per share, return on equity, enterprise value and the break-even approximation. For more informationon free cash flow and return on equity (referred to as return on average shareholders equity in our 2013 Annual Report) please refer to our 2013 Annual Report, which is available on the Corporations profileon SEDAR at www.sedar.com and on the Corporations website at www.cdnoilsands.com. Enterprise value and the break-even approximation are discussed in th is presentation.

Third party information: To the extent that information contained in this presentation, forward-looking or otherwise, has been derived from third party sources such as Bloomberg, the International EnergyAgency, CAPP, WorleyParsons, Muse Stancil and IHS CERA, the Corporation makes no representations or warranties, express or implied, as to the quality, accuracy and completeness of such information.
http://www.cdnoilsands.com/http://www.sedar.com/http://www.cdnoilsands.com/http://www.sedar.com/http://www.cdnoilsands.com/http://www.sedar.com/http://www.cdnoilsands.com/http://www.cdnoilsands.com/http://www.sedar.com/http://www.cdnoilsands.com/http://www.sedar.com/http://www.cdnoilsands.com/http://www.sedar.com/http://www.cdnoilsands.com/


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Overview

1. Syncrude resource base

2. 2015 outlook

3. Debt and liquidity

4. Approach to dividends

5. 2015 focus areas at Syncrude

6. Market access and SCO pricing

7. Relative valuation


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Syncrude: A High Quality Resource

Established production base

Fully upgraded light, sweet crude oil

Proven operator and proven

technology Predictable reservoir recovery

over 90%

Non-declining production profile

40+ year 2P reserve life

4.5 billion barrels 2P reserves and 5.1 billion barrels contingent resources

all upgraded light crude oil

All amounts gross to Syncrude. COS, through its wholly-owned partnership, holds a 36.74% interest in Syncrude. Based on independent reserves and resources estimates by GLJ Petroleum

Consultants, Ltd. as of Dec. 31/13. See reserves and resources cautionary advisory in COSAnnual Information Form dated Feb. 20/14 and definitions and forward-looking information advisory.


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2015 Outlook 1

1. 2015 Outlook issued December 3, 2014

2. Other expenses include: development expense, interest, administration, insurance, reclamation, and other.

3. Free cash flow and free cash flow per share are non-GAAP financial measures.

$ millions $/barrel $/share

Sales 3,074 81.23

Operating expenses 1,729 45.69

Crown royalties 176 4.65

Other expenses 2 319 8.43

Current taxes 120 3.17

Cash flow from operations 730 19.29 1.51

Capital expenditures 564 14.92

Free cash flow 3 166 4.37 0.34


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2015F 2015F 2015F

Oil Price Sensitivity 1

1. Based on assumptions contained in 2015 Guidance issued December 3, 2014: USD $75/bbl WTI, $0.88 CAD:USD FX, $45.69/bbl operating expenses and

sales of ~103,700 bbls/d; assumes COS continues to pay Crown royalties based on net deemed bitumen revenues; see December 3, 2014 guidancedocument for other sensitivities.

Current 2015 Outlook 1

USD $75/bbl WTI USD $85/bbl WTI

$1.51

$0.95

$2.06

USD $65/bbl WTI

Cash flow from operations (per share)


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Break-even cost

CAD $/barrel

Operating expenses 1 46

Capital expenditures 2 10-13

Crown royalties 3 2-3

Development expenses4 and reclamation 3-4

Syncrude break-even cost 61-66

COS interest, administration, insuranceand other 5

COS break-even cost 66-71

1. Based on 2015 Guidance issued December 3, 2014

2. Based on estimated spending of $400-$500 million over the next few years and single point production assumption from 2015 Guidance issued December 3,

2014; excludes 2015 spending on major capital projects

3. Minimum royalty based on approximate break-even oil price and generic royalty regime

4. Excludes 2015 development expense spending on major capital projects5. Break-even is a non-GAAP financial measure and is calculated as shown above; assumes CAD:USD exchange rate of $0.84 to $0.85

Cost to produce Syncrudes fully upgraded, light, sweet oil

US$51 - US$56/bbl 5

US$55 - US$60/bbl 5


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Dividends Reflect Free Cash Flow Over Time (1,2)

1. Includes distributions on trust units prior to Dec. 31/102. Free cash flow (FCF) is cash flowfrom operations less capital expenditures and is a non-GAAP measure

Cumulative Dividends/FCFAnnual Total Dividends

$ millions


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Strong Liquidity Position

Net debt target of $1 2 billion- net debt is expected to be ~ $1.9 billion at the end of 2014

Bond portfolio of USD 1.5 billion

- next maturity in 2019- maintain debt-to-total capitalization of less than 55%

- COS long-term debt-to-capitalization at Sept. 30, 2014 was 29%

Credit facilities totalling $1.5 billion

- largely undrawn

- maintain debt-to-total capitalization of less than 60%

- committed syndicated facility expires June 2018


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Focused on Operational Performance

2013-14 accomplishments:

Replacing/rebuilding mine train equipmentcompleted in Q4 2014

Retrofitting and reconfiguring centrifuges to improve bitumen feed to upgrader

completed in Q1 2014

Replacing heat exchangers in all hydrogen plants completed in Q2 2014


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High Value Syncrude Barrel

WTI Bakken Syncrude SCO

Value

(as % of crude price)

2

29

37

8

25

3

28

37

6

26

2

16

48

33

115+%100% 110%65% 65-70%

Based on analysis provided to COS by Muse Stancil; crude oil fractions shown assume a maximum distillate operating mode; the fraction values as percent of crude arereflective of the pricing relationships for the period 2010-2014 on the U.S. Gulf Coast.

Syncrude

barrel has

larger cuts

of thepremium

priced

fractions

1

LPG Naptha Distillate VGO Resid


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Kitimat

Hardisty

Edmonton

Burnaby

Cushing

Montreal

Houston

Sarnia

Patoka

Quebec City

Markets for COS Syncrude Production

Chicago

Syncrude

Current synthetic crude oil markets

Potential new markets


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Crude Oil to Remain a Key Component of

World Energy Demand

Source: International Energy Agency, World Energy Outlook 2013

Global energy n eeds expected to in crease by 30%

Oil use is expected to increase 13% to 101 mil l ion barrels p er day


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COS Demonstrates Compelling Valuation

Per flowing bbl of capacity

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

Cost of Mine

Infrastructure

COS

COS enterprise value

reflects mine infrastructure

PLUS:

Upgrader producing light,

sweet crude oil All of our reserves and

resources

Production today,

generating a high dividend

yield

1. COS value per flowing bbl of capacity represents enterprise value based on market cap as at January 8/15 and net debt at September 30/14, divided by

production design capacity of 128,600 bbl/d; enterprise value is a non-GAAP measure.

2. Cost of Mine Infrastructure reflects range of costs and production capacities based on company estimates for the Fort Hills project (Suncor/Total/Teck) and KearlLake (Imperial).

1

2


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Appendix

Follow us:

Twitter @cdnoilsands

www.blog.cdnoilsands.com


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Syncrude Joint Venture Structure

Canadian Oil Sands

(COS)25%

Suncor

Sinopec

36.74%

12%

Nexen

(CNOOC)

7.23%

Murphy Oil

Mocal

(JX Nippon)

5%

Imperial Oil

ExxonMobil and Imperial provide global best

practices, proprietary systems and staff expertise


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Demonstrating Strong Return on

Shareholders Equity

Average ROE of 24% since 2001

Return on Equity calculated as net income divided by average shareholders equity; Net income as per COS financial statementsReturn on shareholders equity is a non-GAAP measure.

$0.00

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

$35.00

$40.00

$45.00

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Percentage

Return

Canadian Oil Sands' ROE

Return on Equity

Average ROE of 24%

Average Share Price


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Mildred Lake Extension (MLX)


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Syncrude Crown Royalty Terms*

Greater of 25% net bitumen revenue less capital and operating costs, or 1% of

gross bitumen revenue*

Previously based on Synthetic Crude Oil (upgraded from bitumen) revenues

and costs

Repay $1.25 billion plus interest over 25 years for previously deductedupgrader growth capital

Payments deferred during minimum royalty periods

Pay an additional $975 million in royalties as per schedule:

Amount will be prorated to extent Syncrude daily average bitumen production over 6-

year period less than 345 KBPD

* Terms and rates effective Jan. 1/09 to Dec. 31/15. The royalty agreements are available on the Corporations profile atwww.sedar.com. Effective Jan. 1/16 New Royalty Framework rates apply.

2010 2011 2012 2013 2014 2015 Total

$75 mm $75 mm $100 mm $150 mm $225 mm $350 mm $975 mm

All figures gross to Syncrude


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2015 Crown Royalty Calculation

1. Bitumen revenue is based on an SCO yield of 85% and a bitumen price equal to 60% of C$WTI.

2. Royalty rate is the greater of 25% of net revenue or 1% of revenue.

3. Before capitalized interest.

4. As part of the transition to the generic royalty regime, Syncrude is obligated to pay additional Crown Royalties of $975 million over 2010-

2015. The $57 million shown above is COS share of the 2015 expense based on accrual accounting; actual cash payments are per the

schedule on previous slide. In any given year, the difference will be reflected as a change in Crown royalty payable. The cash payment in 2015

is expected to be approximately $129 millionSee COS 2013 Annual MD&A dated Feb. 20/14 for further discussion on Crown royalties.

Based on 2015 Outlook provided December 3/14SCO % Mining Bitumen

Revenue1 3,074 2,277

Operating expenses (1,729) 85% (1,469)

Development expense (169) 70% (118)

Capital expenditures3 (529) 60% (318)

Net revenue 372

Crown royalty2 93

Upgrader growth capital recapture payment 26

Additional Crown royalty expense4 57

Total Crown royalty 176

Crown royalty (per bbl) $4.65


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Quality and Location Differentials

Cdn $/bbl

$40

$50

$60

$70

$80

$90

$100

$110

$120

$130

Sep-10Dec-10Mar-11 Jun-11 Sep-11Dec-11 Mar-12 Jun-12 Sep-12Dec-12Mar-13 Jun-13 Sep-13Dec-13Mar-14 Jun-14 Sep-14

Trailing 3-Month Average

Brent

SCO

WTI

WCS

Bitumen


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Canadian & US Crude Oil Pipeline Proposals

Source: CAPP


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Canadian Pipeline Capacity

vs 2014 Supply Forecast

Enbridge Mainline

Trans MountainExpress

PADD IV

Source: CAPP


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Syncrude: A Leader in Responsible

Oil Sands Development

Reflects industry best practices

Mining Association Toward Sustainable Mining

Canadian Association of Petroleum Producers Responsible

Canadian Energy Program

Canadian Council for Aboriginal Business Progress

Aboriginal Relations Program

Canadian Business for Social Responsibility

Canadian Industry Program for Energy Conservation

Leading Research and Development

Operates the industrys only dedicated R&D centre

Spends $60 million on R&D each year; one of top 50

spenders in Canada

Member of COSIA, an alliance of oil sands producers focusedon accelerating the pace of improvement in environmental

performance through collaborative action and innovation.

Aboriginal relations

Recognized with Gold Level accreditation by the Canadian

Council of Aboriginal Business (CCAB) in their Progressive

Aboriginal Relations (PAR) program; only oil sands operator

to achieve this level.

One of Canadas largest employers of Aboriginal people

about 9% of workforce.

Total cumulative spending with Aboriginal-owned businesses

is over $2 billion

For more information, see Syncrudes sustainability report at www.Syncrude.com
http://www.cosia.ca/http://www.cosia.ca/http://www.google.ca/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=AcZNK_FxalbWyM&tbnid=n4x7n2UKDA6MFM:&ved=0CAUQjRw&url=http://www.bmo.com/home/about/banking/corporate-information/awards-and-recognition/2009&ei=fufBUaTcGof7qgHdwICQAg&psig=AFQjCNH__qAjMuOC6ahro7qFPMlU-kPiMA&ust=1371748566856537http://www.google.ca/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=AcZNK_FxalbWyM&tbnid=n4x7n2UKDA6MFM:&ved=0CAUQjRw&url=http://www.bmo.com/home/about/banking/corporate-information/awards-and-recognition/2009&ei=fufBUaTcGof7qgHdwICQAg&psig=AFQjCNH__qAjMuOC6ahro7qFPMlU-kPiMA&ust=1371748566856537


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Wells-to-Wheels CO2 Emissions

Source: IHS CERA Special Report Oil Sands Dialogue: Oil Sands, Greenhouse Gases, and US Oil Supply: Getting the Numbers Right, November 2012

Average oil

sands is

only 9%more GHG

intensive

than

average

U.S. barrel


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An independent study compared Alberta, Canada with other world-class oil producingregions around the world in terms of their environmental policies, laws and regulatorysystem

The study compared environmental laws and government process with respect to:

1) Stringency how comprehensive are the environmental laws?

2) Transparency how easily can the public get information?

3) Compliance which country has rules to ensure compliance?

The report is available at http://www.capp.ca/library/third-party-reports/Pages/default.aspx

International Comparison of Leading Oil

and Gas Producing Regions1

1) Independent study WorleyParsons, 2014, commissioned by CAPP

Alberta, Canada is among the top three leading regions in

environmental policies, laws and regulatory systems
http://www.capp.ca/library/third-party-reports/Pages/default.aspxhttp://www.capp.ca/library/third-party-reports/Pages/default.aspx


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Stringency How Comprehensive are the

Environmental Laws?

Stringency Factors:

Requirements, timeand costs for projectapprovals

Number of regulatorsreviewing applications

Opportunities forpublic to review andcomment

Requirements formonitoring, facilitylicense renewals,

closure planning, anddecommissioning

Independent study WorleyParsons, 2014, commissioned by CAPP




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Transparency Factors:

Public access toproject and/or facilityinformation

Monitoring reports andclosure plans

Stakeholder

engagementprocesses andrequirements

Government disclosureof decisions, liabilitiesand industry

information Audits, incident

reporting and appeals

Transparency How Easily Can the Public

Get Information?

Independent study WorleyParsons, 2014, commissioned by CAPP




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Compliance Factors: Mechanisms to

monitor compliance

Consequences fornon-compliance ornon-performance

Enforcement ofregulations,penalties, defaultrates, approvalrequirements, andpost-closure long-term monitoring

Compliance Which Country Has Rules

to Ensure Compliance?

Independent study WorleyParsons 2014 commissioned by CAPP



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Canadian Oil Sands 12-Jan-2015 Presentation