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SENT Clair NP Avenue NP West NP , , Toronto NP , , Ontario NP , , Canada NP M NP 5 CD W NP 1 CD K NP 3 CD . SENT telephone NN 1 CD 800 CD 567 CD 3776 CD . SENT Exxon NP Mobil NP Corporation NP owns VVZ approximately RB 69 CD . SENT 6 CD percent NN of IN the DT outstanding JJ shares NNS of IN the DT Company NN with IN the DT remaining JJ shares NNS being VBG publicly RB held VVN , , with IN the DT majority NN of IN shareholders NNS having VHG Canadian JJ addresses NNS of IN record NN . SENT In IN this DT report NN , , unless IN the DT context NN otherwise RB indicates VVZ , , reference NN to TO the DT Company NN includes VVZ Imperial NP Oil NP Limited NP and CC its PP$ subsidiaries NNS . SENT The DT Company NN is VBZ Canada NP s VVZ largest JJS integrated JJ oil NN company NN . SENT It PP is VBZ active JJ in IN all DT phases NNS of IN the DT petroleum NN industry NN in IN Canada NP , , including VVG the DT exploration NN for IN , , and CC production NN and CC sale NN of IN , , crude JJ oil NN and CC natural JJ gas NN . SENT In IN Canada NP , , it PP is VBZ one CD of IN the DT largest JJS producers NNS of IN crude JJ oil NN and CC natural JJ gas NN liquids NNS and CC a DT major JJ producer NN of IN natural JJ gas NN , , and CC the DT largest JJS refiner NN and CC marketer NN of IN petroleum NN products NNS . SENT It PP is VBZ also RB a DT major JJ supplier NN of IN petrochemicals NNS . SENT The DT Company NP s PP operations NNS are VBP conducted VVN in IN three CD main JJ segments NNS . SENT natural JJ resources NNS upstream RB , , petroleum NN products NNS downstream JJ and CC chemicals NNS . SENT Natural JJ resources NNS operations NNS include VVP the DT exploration NN for IN , , and CC production NN of IN , , crude JJ oil NN and CC natural JJ gas NN , , including VVG upgraded VVN crude JJ oil NN and CC crude JJ bitumen NN . SENT Petroleum NP products NNS operations NNS consist VVP of IN the DT transportation NN , , refining NN and CC blending NN of IN crude JJ oil NN and CC refined JJ products NNS and CC the DT distribution NN and CC marketing NN thereof RB . SENT The DT chemicals NNS operations NNS consist VVP of IN the DT manufacturing NN and CC marketing NN of IN various JJ petrochemicals NNS . SENT Financial NP Information NP by IN Operating VVG Segments NNS under IN U NP . SENT S NP . SENT GAAP NP 2004 CD 2003 CD 2002 JJ 2001 CD 2000 CD millions NNS External NP revenues NNS 1 CD . 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SENT 2 LS These DT amounts NNS are VBP presented VVN as RB if IN each DT segment NN were VBD a DT separate JJ business NN entity NN and CC , , accordingly RB , , include VVP the DT financial JJ effect NN of IN transactions NNS between IN the DT segments NNS . SENT Intersegment NN sales NNS are VBP made VVN essentially RB at IN prevailing VVG market NN prices NNS . SENT 3 CD Includes VVZ primarily RB interest NN charges NNS on IN the DT debt NN obligations NNS of IN the DT Company NN , , interest NN income NN on IN investments NNS and CC intersegment NN consolidating VVG adjustments NNS . SENT 4 LS The DT identifiable JJ assets NNS in IN each DT operating NN segment NN represent VVP the DT net JJ book NN value NN of IN the DT tangible JJ and CC intangible JJ assets NNS attributed VVD to TO such JJ segment NN . SENT 3 CD Table NN of IN Contents NNS Natural NP Resources NPS Petroleum NP and CC Natural NP Gas NP Production NP The DT Company NN s PP average VVP daily JJ production NN of IN crude JJ oil NN and CC natural JJ gas NN liquids NNS during IN the DT five CD years NNS ended VVN December NP 31 CD , , 2004 CD , , was VBD as RB follows VVZ . SENT 2004 CD 2003 CD 2002 JJ 2001 CD 2000 CD thousands NNS a DT day NN Conventional JJ including VVG natural JJ gas NN liquids NNS . SENT Cubic JJ metres NNS Gross JJ 1 CD 12 CD . SENT 1 CD 11 CD . SENT 8 CD 12 CD . SENT 4 CD 13 CD . SENT 2 CD 14 CD . SENT 3 CD Net NN 2 CD 9 CD . SENT 4 CD 9 CD . SENT 1 CD 9 CD . SENT 5 CD 10 CD . SENT 2 CD 11 CD . SENT 0 CD Barrels NNS Gross JJ 1 CD 76 CD 74 JJ 78 CD 83 CD 90 CD Net NN 2 LS 59 CD 57 CD 60 JJ 64 CD 69 CD Oil NP Sands NPS Cold NP Lake NP . SENT Cubic JJ metres NNS Gross JJ 1 CD 20 CD . SENT 0 CD 20 CD . SENT 5 CD 17 CD . SENT 8 CD 20 CD . SENT 4 CD 18 CD . SENT 9 CD Net NN 2 CD 17 CD . SENT 7 CD 18 CD . SENT 4 CD 16 CD . SENT 9 CD 19 CD . SENT 2 CD 16 CD . SENT 2 CD Barrels NNS Gross JJ 1 CD 126 CD 129 JJ 112 CD 128 CD 119 CD Net NN 2 LS 112 CD 116 CD 106 JJ 121 CD 102 CD Tar NN Sands NP Syncrude NP . SENT Cubic JJ metres NNS Gross JJ 1 CD 9 CD . SENT 5 CD 8 CD . SENT 4 CD 9 CD . SENT 1 CD 8 CD . SENT 9 CD 8 CD . SENT 1 CD Net NN 2 CD 9 CD . SENT 4 CD 8 CD . SENT 3 CD 9 CD . SENT 1 CD 8 CD . SENT 3 CD 6 CD . SENT 7 CD Barrels NNS Gross JJ 1 CD 60 CD 53 JJ 57 CD 56 CD 51 CD Net NN 2 LS 59 CD 52 CD 57 JJ 52 CD 42 CD Total JJ . SENT Cubic JJ metres NNS Gross JJ 1 CD 41 CD . SENT 6 CD 40 CD . SENT 7 CD 39 CD . SENT 3 CD 42 CD . SENT 5 CD 41 CD . SENT 3 CD Net NN 2 CD 36 CD . SENT 5 CD 35 CD . SENT 8 CD 35 CD . SENT 5 CD 37 CD . SENT 7 CD 33 CD . SENT 9 CD Barrels NNS Gross JJ 1 CD 262 CD 256 JJ 247 CD 267 CD 260 CD Net NN 2 LS 230 CD 225 CD 223 JJ 237 CD 213 CD 1 CD Gross JJ production NN of IN crude JJ oil NN is VBZ the DT Company NN s PP share NN of IN production NN from IN conventional JJ wells NNS , , Syncrude NP tar NN sands NNS and CC Cold NP Lake NP oil NN sands NNS , , and CC gross JJ production NN of IN natural JJ gas NN liquids NNS is VBZ the DT amount NN derived VVN from IN processing VVG the DT Company NN s PP share NN of IN production NN of IN natural JJ gas NN excluding VVG purchased VVN gas NN , , in IN each DT case NN before IN deduction NN of IN the DT mineral NN owners NNS or CC governments NNS share NN or CC both DT . SENT 2 CD Net JJ production NN is VBZ gross JJ production NN less RBR the DT mineral NN owners NNS or CC governments NNS share NN or CC both DT . SENT From IN 2000 CD through IN 2003 CD , , conventional JJ production NN has VHZ declined VVN due JJ to TO the DT sale NN of IN oil NN and CC gas NN producing VVG properties NNS and CC the DT natural JJ decline NN in IN the DT productivity NN of IN the DT Company NN s PP conventional JJ oil NN fields NNS . SENT In IN 2004 CD , , conventional JJ production NN increased VVD primarily RB due JJ to TO increased JJ natural JJ gas NN liquids NNS production NN from IN the DT Wizard JJ Lake NP gas NN cap NN . SENT In IN 2001 CD , , Cold NP Lake NP net JJ production NN increased VVD mainly RB due JJ to TO the DT timing NN of IN steaming VVG cycles NNS and CC lower JJR royalties NNS and CC Syncrude NP production NN increased VVD mainly RB due JJ to TO the DT start NN up RB of IN the DT Aurora NP mine NN during IN the DT second JJ half NN of IN 2000 CD and CC fewer JJR disruptions NNS in IN upgrading VVG operations NNS than IN the DT previous JJ year NN . SENT In IN 2002 CD , , Cold NP Lake NP production NN decreased VVD mainly RB due JJ to TO the DT timing NN of IN steaming VVG cycles NNS and CC Syncrude NP net JJ production NN increased VVD mainly RB due JJ to TO lower VV royalties NNS . SENT In IN 2003 CD , , Cold NP Lake NP net JJ production NN increased VVN as IN a DT result NN of IN a DT full JJ year NN of IN production NN of IN stages NNS 11 CD to TO 13 CD , , which WDT was VBD offset VVN in IN part NN by IN the DT timing NN of IN steaming VVG cycles NNS and CC higher JJR royalties NNS . SENT Syncrude NP production NN decreased VVD in IN 2003 CD due JJ to TO extended JJ maintenance NN of IN upgrading VVG facilities NNS . SENT In IN 2004 CD , , Cold NP Lake NP production NN declined VVD due JJ to TO the DT timing NN of IN steaming VVG cycles NNS and CC higher JJR royalty NN , , and CC Syncrude NP production NN increased VVD due RB to TO fewer JJR disruptions NNS in IN upgrading VVG operations NNS than IN in IN 2003 CD . SENT 4 CD Table NN of IN Contents NNS The DT Company NN s PP average VVP daily JJ production NN and CC sales NNS of IN natural JJ gas NN during IN the DT five CD years NNS ended VVN December NP 31 CD , , 2004 CD are VBP set VVN forth RB below RB . SENT All DT gas NN volumes NNS in IN this DT report NN are VBP calculated VVN at IN a DT pressure NN base NN of IN , , in IN the DT case NN of IN cubic JJ metres NNS , , 101 CD . SENT 325 CD kilopascals NNS absolute JJ at IN 15 CD degrees NNS Celsius JJ and CC , , in IN the DT case NN of IN cubic JJ feet NNS , , 14 CD . SENT 73 CD pounds NNS per IN square JJ inch NN at IN 60 CD degrees NNS Fahrenheit NN . SENT 2004 CD 2003 CD 2002 JJ 2001 CD 2000 CD millions NNS a DT day NN Sales NP 1 CD . SENT Cubic JJ metres NNS 14 CD . SENT 7 CD 13 CD . SENT 0 CD 14 CD . SENT 1 CD 14 CD . SENT 2 CD 11 CD . SENT 9 CD Cubic JJ feet NNS 520 CD 460 CD 499 JJ 502 CD 419 CD Gross JJ Production NP 2 CD . SENT Cubic JJ metres NNS 16 CD . SENT 1 CD 14 CD . SENT 5 CD 15 CD . SENT 0 CD 16 CD . SENT 2 CD 14 CD . SENT 9 CD Cubic JJ feet NNS 569 CD 513 CD 530 JJ 572 CD 526 CD Net JJ Production NP 2 CD . SENT Cubic JJ metres NNS 14 CD . SENT 7 CD 12 CD . SENT 9 CD 13 CD . SENT 1 CD 13 CD . SENT 2 CD 13 CD . SENT 0 CD Cubic JJ feet NNS 518 CD 457 CD 463 JJ 466 CD 459 CD 1 CD Sales NNS are VBP sales NNS of IN the DT Company NN s PP share NN of IN production NN before IN deduction NN of IN the DT mineral NN owners NNS and CC or CC governments NNS share NN and CC sales NNS of IN gas NN purchased VVN , , processed VVN and CC or CC resold VVN . SENT 2 CD Gross JJ production NN of IN natural JJ gas NN is VBZ the DT Company NN s PP share NN of IN production NN excluding VVG purchases NNS before IN deducting VVG the DT shares NNS of IN mineral NN owners NNS or CC governments NNS or CC both DT . SENT Net JJ production NN excludes VVZ those DT shares NNS . SENT Production NN data NNS include VVP amounts NNS used VVN for IN internal JJ consumption NN with IN the DT exception NN of IN amounts NNS reinjected VVN . SENT In IN 2001 CD , , natural JJ gas NN production NN increased VVD primarily RB due JJ to TO gas NN production NN from IN the DT Sable NP Offshore NP Energy NP Project NP , , which WDT went VVD into IN production NN at IN the DT end NN of IN 1999 CD , , and CC increased VVD production NN from IN gas NN caps NNS overlaying VVG two CD former JJ oil NN fields NNS , , both CC in IN Alberta NP . SENT In IN 2002 CD and CC 2003 CD , , natural JJ gas NN production NN decreased VVD primarily RB due JJ to TO the DT depletion NN of IN gas NN caps NNS in IN Alberta NP and CC in IN 2003 CD also RB due JJ to TO increased JJ maintenance NN activity NN at IN gas NN processing NN facilities NNS . SENT In IN 2004 CD natural JJ gas NN production NN increased VVD primarily RB due JJ to TO increased JJ production NN from IN the DT Wizard JJ Lake NP gas NN cap NN . SENT Most JJS of IN the DT Company NN s PP natural JJ gas NN sales NNS are VBP made VVN under IN short JJ term NN contracts NNS . SENT The DT Company NN s PP average VVP sales NNS price NN and CC production NN lifting NN costs NNS for IN conventional JJ and CC Cold NP Lake NP crude JJ oil NN and CC natural JJ gas NN liquids NNS and CC natural JJ gas NN for IN the DT five CD years NNS ended VVN December NP 31 CD , , 2004 CD , , were VBD as RB follows VVZ . SENT 2004 CD 2003 CD 2002 JJ 2001 CD 2000 CD Average JJ Sales NNS Price NN . SENT Crude JJ oil NN and CC natural JJ gas NN liquids NNS . SENT Per IN cubic JJ metre NN 207 CD . SENT 26 CD 181 CD . SENT 92 CD 174 CD . SENT 72 CD 134 CD . SENT 16 CD 190 CD . SENT 02 CD Per IN barrel NN 32 CD . SENT 95 CD 28 CD . SENT 92 CD 27 CD . SENT 78 CD 21 CD . SENT 33 CD 30 CD . SENT 21 CD Natural JJ gas NN . SENT Per IN thousand CD cubic JJ metres NNS 239 CD . SENT 34 CD 232 CD . SENT 99 CD 141 CD . SENT 91 CD 201 CD . SENT 92 CD 176 CD . SENT 15 CD Per IN thousand CD cubic JJ feet NNS 6 CD . SENT 78 CD 6 CD . SENT 60 CD 4 CD . SENT 02 CD 5 CD . SENT 72 CD 4 CD . SENT 99 CD Average JJ Production NN Lifting VVG Costs NNS Per IN Unit NN of IN Net JJ Production NP 1 CD . SENT Per IN cubic JJ metre NN 60 CD . SENT 38 CD 63 CD . SENT 85 CD 48 CD . SENT 81 CD 46 CD . SENT 17 CD 47 CD . SENT 36 CD Per IN barrel NN 9 CD . SENT 60 CD 10 CD . SENT 15 CD 7 CD . SENT 76 CD 7 CD . SENT 34 CD 7 CD . SENT 53 CD 1 CD Average JJ production NN lifting NN costs NNS do VVP not RB include VV depreciation NN and CC depletion NN of IN capitalized JJ acquisition NN , , exploration NN and CC development NN costs NNS . SENT Administrative JJ expenses NNS are VBP included VVN . SENT Average JJ production NN lifting VVG costs NNS per IN unit NN of IN net JJ production NN were VBD computed VVN after IN converting VVG gas NN production NN into IN equivalent JJ units NNS of IN oil NN on IN the DT basis NN of IN relative JJ energy NN content NN . SENT Canadian JJ crude JJ oil NN prices NNS are VBP mainly RB determined VVN by IN international JJ crude JJ oil NN markets NNS which WDT are VBP volatile JJ . SENT Canadian JJ natural JJ gas NN prices NNS are VBP determined VVN by IN North NP American NP gas NN markets NNS and CC are VBP also RB volatile JJ . SENT Prices NNS for IN Canadian JJ natural JJ gas NN increased VVD significantly RB in IN 2000 CD and CC again RB in IN early JJ 2001 CD and CC 2003 CD , , in IN line NN with IN tighter JJR North JJ American JJ market NN conditions NNS . SENT Canadian JJ natural JJ gas NN prices NNS decreased VVD in IN 2002 CD primarily RB due JJ to TO a DT weaker JJR U NP . SENT S NP . SENT economy NN and CC warmer JJR weather NN . SENT In IN 2001 CD , , average JJ production NN lifting NN costs NNS decreased VVD mainly RB due JJ to TO higher JJR net JJ production NN at IN Cold NP Lake NP . SENT In IN 2002 CD , , average JJ production NN lifting NN costs NNS increased VVD mainly RB due JJ to TO lower VV net JJ production NN at IN Cold NP Lake NP . SENT In IN 2003 CD , , average JJ production NN lifting NN costs NNS increased VVD mainly RB due JJ to TO higher JJR costs NNS of IN purchased VVN natural JJ gas NN at IN Cold NP Lake NP . SENT In IN 2004 CD , , average JJ production NN lifting NN costs NNS decreased VVD mainly RB due JJ to TO higher JJR production NN from IN the DT Wizard JJ Lake NP gas NN cap NN . SENT The DT Company NN has VHZ interests NNS in IN a DT large JJ number NN of IN facilities NNS related VVN to TO the DT production NN of IN crude JJ oil NN and CC natural JJ gas NN . SENT Among IN these DT facilities NNS are VBP 27 CD plants NNS that WDT process VVP natural JJ gas NN to TO produce VV marketable JJ gas NN and CC recover VV natural JJ gas NN liquids NNS or CC sulphur NN . SENT The DT Company NN is VBZ the DT principal JJ owner NN and CC operator NN of IN 11 CD of IN the DT plants NNS . SENT The DT Company NP s PP production NN of IN conventional JJ and CC Cold NP Lake NP crude JJ oil NN and CC natural JJ gas NN is VBZ derived VVN from IN wells NNS located VVN exclusively RB in IN Canada NP . SENT The DT total JJ number NN of IN producing VVG wells NNS in IN which WDT the DT Company NN had VHD interests NNS at IN December NP 31 CD , , 2004 CD , , is VBZ set VVN forth RB in IN the DT following VVG table NN . SENT The DT statistics NNS in IN the DT table NN are VBP determined VVN in IN part NN from IN information NN received VVN from IN other JJ operators NNS . SENT 5 CD Table NN of IN Contents NNS Crude JJ Oil NP Natural NP Gas NP Total JJ Gross NP 1 CD Net NN 2 CD Gross NP 1 CD Net NN 2 CD Gross NP 1 CD Net NN 2 CD Conventional JJ wells NNS 2 CD , , 322 CD 1 CD , , 292 CD 4 CD , , 326 CD 2 CD , , 275 CD 6 CD , , 648 CD 3 CD , , 567 CD Oil NP Sands NPS Cold NP Lake NP wells NNS 3 CD , , 815 CD 3 CD , , 815 CD 3 CD , , 815 CD 3 CD , , 815 CD 1 CD Gross JJ wells NNS are VBP wells NNS in IN which WDT the DT Company NN owns VVZ a DT working VVG interest NN . SENT 2 CD Net JJ wells NNS are VBP the DT sum NN of IN the DT fractional JJ working NN interests NNS owned VVN by IN the DT Company NN in IN gross JJ wells NNS , , rounded VVD to TO the DT nearest JJS whole JJ number NN . SENT Conventional JJ Oil NP and CC Gas NP The DT Company NN has VHZ major JJ interests NNS in IN the DT Norman NP Wells NP oil NN field NN in IN the DT Northwest NP Territories NP and CC the DT West NP Pembina NP oil NN field NN in IN Alberta NP . SENT Together RB they PP currently RB account VVP for IN approximately RB 60 CD percent NN of IN the DT Company NN s PP net JJ production NN of IN conventional JJ crude JJ oil NN approximately RB 65 CD percent NN of IN gross JJ production NN . SENT Norman NP Wells NP is VBZ the DT Company NN s VVZ largest JJS producing VVG conventional JJ oil NN field NN . SENT In IN 2004 CD , , net JJ production NN of IN crude JJ oil NN and CC natural JJ gas NN liquids NNS was VBD about RB 2 CD , , 400 CD cubic JJ metres NNS 14 CD , , 800 CD barrels NNS per IN day NN and CC gross JJ production NN was VBD about RB 3 CD , , 500 CD cubic JJ metres NNS 22 CD , , 000 CD barrels NNS per IN day NN . SENT The DT Government NN of IN Canada NP has VHZ a DT one CD third JJ carried VVN interest NN and CC receives VVZ a DT production NN royalty NN of IN five CD percent NN in IN the DT Norman NP Wells NP oil NN field NN . SENT The DT Government NN of IN Canada NP s PP carried VVN interest NN entitles VVZ it PP to TO receive VV payment NN of IN a DT one CD third JJ share NN of IN an DT amount NN based VVN on IN revenues NNS from IN the DT sale NN of IN Norman NP Wells NP production NN , , net JJ of IN operating NN and CC capital NN costs NNS . SENT Under IN a DT shipping NN agreement NN , , the DT Company NN pays VVZ for IN the DT construction NN , , operating NN and CC other JJ costs NNS of IN the DT 870 CD kilometre NN 540 CD mile NN pipeline NN which WDT transports VVZ the DT crude JJ oil NN and CC natural JJ gas NN liquids NNS from IN the DT project NN . SENT In IN 2004 CD , , those DT costs NNS were VBD about RB 35 CD million CD . SENT Most JJS of IN the DT larger JJR oil NN fields NNS in IN the DT Western NP Provinces NP have VHP been VBN in IN production NN for IN several JJ decades NNS , , and CC the DT amount NN of IN oil NN that WDT is VBZ produced VVN from IN conventional JJ fields NNS is VBZ declining VVG . SENT In IN some DT cases NNS , , however RB , , additional JJ oil NN can MD be VB recovered VVN by IN using VVG various JJ methods NNS of IN enhanced JJ recovery NN . SENT The DT Company NN s VVZ largest JJS enhanced JJ recovery NN projects NNS are VBP located VVN at IN the DT West NP Pembina NP oil NN field NN . SENT The DT Company NN produces VVZ natural JJ gas NN from IN a DT large JJ number NN of IN gas NN fields NNS located VVN in IN the DT Western NP Provinces NP , , primarily RB in IN Alberta NP . SENT The DT Company NN has VHZ a DT nine CD percent NN interest NN in IN a DT project NN to TO develop VV natural JJ gas NN reserves NNS in IN the DT Sable NP Island NP area NN off IN the DT coast NN of IN the DT Province NP of IN Nova NP Scotia NP . SENT About IN 4 CD billion CD has VHZ been VBN spent VVN by IN the DT participants NNS to TO the DT end NN of IN 2004 CD on IN the DT project NN . SENT Production NN from IN the DT Sable NP Offshore NP Energy NP Project NP began VVD at IN the DT end NN of IN 1999 CD and CC is VBZ expected VVN to TO average NN about IN 12 CD million CD cubic JJ metres NNS 420 CD million CD cubic JJ feet NNS per IN day NN of IN natural JJ gas NN and CC 3 CD , , 200 CD cubic JJ metres NNS 20 CD , , 000 CD barrels NNS per IN day NN of IN natural JJ gas NN liquids NNS through IN the DT end NN of IN the DT decade NN . SENT Cold NP Lake NP The DT Company NN holds VVZ about IN 78 CD , , 000 CD leased VVD hectares NNS 192 CD , , 000 CD acres NNS of IN oil NN sands NNS near IN Cold NP Lake NP , , Alberta NP . SENT This DT oil NN sands NNS deposit NN contains VVZ a DT very RB heavy JJ crude JJ oil NN crude NN bitumen NN . SENT To TO develop VV the DT technology NN necessary JJ to TO produce VV this DT oil NN commercially RB , , the DT Company NN has VHZ conducted VVN experimental JJ pilot NN operations NNS since IN 1964 CD to TO recover VV the DT crude JJ bitumen NN from IN wells NNS by IN means NNS of IN new JJ drilling NN and CC production NN techniques NNS including VVG steam NN injection NN . SENT Research NN at IN , , and CC operation NN of IN , , the DT Cold NP Lake NP pilots NNS is VBZ continuing VVG . SENT In IN late JJ 1983 CD , , the DT Company NN commenced VVD the DT development NN , , in IN stages NNS , , of IN its PP$ oil NN sands NNS resources NNS at IN Cold NP Lake NP . SENT During IN 2004 CD , , average JJ net JJ production NN at IN Cold NP Lake NP was VBD about RB 17 CD , , 700 CD cubic JJ metres NNS 111 CD , , 500 CD barrels NNS per IN day NN and CC gross JJ production NN was VBD about RB 20 CD , , 000 CD cubic JJ metres NNS 125 CD , , 800 CD barrels NNS per IN day NN . SENT To TO maintain VV production NN at IN Cold NP Lake NP , , capital NN expenditures NNS for IN additional JJ production NN wells NNS and CC associated VVN facilities NNS will MD be VB required VVN periodically RB . SENT In IN 2004 CD , , the DT Company NN spent VVD 127 CD million CD on IN a DT development NN drilling NN program NN of IN 218 CD wells NNS on IN existing VVG stages NNS . SENT In IN 2005 CD , , a DT development NN drilling NN program NN of IN more JJR than IN 150 CD wells NNS is VBZ planned VVN within IN the DT currently RB approved VVN development NN area NN to TO enhance VV productivity NN from IN existing VVG Cold NP Lake NP stages NNS . SENT In IN addition NN , , opportunities NNS are VBP also RB being VBG evaluated VVN to TO improve VV utilization NN of IN the DT existing JJ infrastructure NN . SENT In IN 2004 CD , , the DT Company NN received VVD regulatory JJ approval NN for IN further JJR expansion NN of IN its PP$ operations NNS at IN Cold NP Lake NP . SENT Production NN is VBZ expected VVN to TO begin VV in IN 2006 CD from IN part NN of IN the DT approved VVN expansion NN , , the DT development NN of IN which WDT is VBZ expected VVN to TO cost VV about IN 300 CD million CD and CC is VBZ expected VVN to TO have VH gross JJ production NN of IN about IN 4 CD , , 770 CD cubic JJ metres NNS 30 CD , , 000 CD barrels NNS per IN day NN by IN the DT end NN of IN the DT decade NN . SENT Development NN plans NNS for IN the DT remainder NN of IN the DT approved VVN expansion NN are VBP being VBG examined VVN to TO reduce VV development NN costs NNS through IN increased JJ integration NN with IN existing VVG infrastructure NN . SENT Most JJS of IN the DT production NN from IN Cold NP Lake NP is VBZ sold VVN to TO refineries NNS in IN the DT northern JJ United NP States NPS . SENT The DT remainder NN of IN the DT Cold NP Lake NP production NN is VBZ shipped VVN to TO certain JJ of IN the DT Company NN s PP refineries NNS and CC to TO a DT heavy JJ oil NN upgrader NN in IN Lloydminster NP , , Saskatchewan NP . SENT 6 CD Table NN of IN Contents NNS The DT Province NP of IN Alberta NP , , in IN its PP$ capacity NN as IN lessor NN of IN the DT Cold NP Lake NP oil NN sands NNS leases NNS , , is VBZ entitled VVN to TO a DT royalty NN on IN production NN from IN the DT Cold NP Lake NP production NN project NN . SENT In IN late JJ 2000 CD , , the DT Company NN entered VVN into IN an DT agreement NN with IN the DT Province NP of IN Alberta NP , , effective JJ January NP 1 CD , , 2000 CD , , on IN a DT transitional JJ royalty NN arrangement NN that WDT will MD apply VV to TO all DT of IN the DT Company NN s PP current JJ and CC proposed VVN operations NNS at IN Cold NP Lake NP until IN the DT end NN of IN 2007 CD , , at IN which WDT time NN the DT generic JJ Alberta NP regulations NNS for IN royalties NNS that WDT apply VVP to TO all DT other JJ oil NN sands NNS development NN in IN the DT Province NP will MD take VV effect NN . SENT This DT transition NN is VBZ expected VVN to TO be VB royalty NN neutral JJ . SENT The DT effective JJ royalty NN on IN gross JJ production NN was VBD 11 CD percent NN in IN 2004 CD , , 10 CD percent NN in IN 2003 CD , , five CD percent NN in IN 2002 CD and CC 2001 CD , , and CC 14 CD percent NN in IN 2000 CD . SENT The DT Company NN expects VVZ that IN after IN 2007 CD the DT royalty NN will MD be VB the DT greater JJR of IN one CD percent NN of IN gross JJ revenue NN or CC 25 CD percent NN of IN an DT amount NN based VVN on IN revenue NN net NN of IN operating NN and CC capital NN costs NNS for IN the DT Cold NP Lake NP production NN project NN and CC the DT pilot NN operations NNS . SENT Other JJ Oil NP Sands NPS Activity NP The DT Company NN has VHZ interests NNS in IN other JJ oil NN sands NNS leases NNS in IN the DT Athabasca NP and CC Peace NP River NP areas NNS of IN northern JJ Alberta NP . SENT Evaluation NN wells NNS completed VVN on IN these DT leased VVN areas NNS established VVD the DT presence NN of IN very RB heavy JJ crude JJ oil NN in IN place NN . SENT The DT Company NN continues VVZ to TO evaluate VV these DT leases NNS to TO determine VV their PP$ potential NN for IN future JJ development NN . SENT The DT Company NN holds VVZ varying VVG interests NNS in IN lands NNS totalling VVG about IN 68 CD , , 000 CD leased VVD net JJ hectares NNS 168 CD , , 000 CD net JJ acres NNS in IN the DT Athabasca NP area NN where WRB the DT oil NN sands NNS are VBP buried VVN too RB deeply RB to TO permit VV recovery NN by IN surface NN mining NN methods NNS . SENT The DT Company NN , , as IN part NN of IN an DT industry NN consortium NN and CC several JJ joint JJ ventures NNS , , has VHZ been VBN involved VVN in IN recovery NN research NN and CC pilot NN studies NNS and CC in IN evaluating VVG the DT quality NN and CC extent NN of IN the DT oil NN sands NNS . SENT Syncrude NP Mining NP Operations NP The DT Company NN holds VVZ a DT 25 CD percent NN participating VVG interest NN in IN Syncrude NP , , a DT joint JJ venture NN established VVN to TO recover VV shallow JJ deposits NNS of IN tar NN sands NNS using VVG open JJ pit NN mining NN methods NNS , , to TO extract VV the DT crude JJ bitumen NN , , and CC to TO produce VV a DT high JJ quality NN , , light NN 32 CD degree NN API NP , , sweet JJ , , synthetic JJ crude JJ oil NN . SENT The DT Syncrude NP operation NN , , located VVN near IN Fort NP McMurray NP , , Alberta NP , , exploits VVZ a DT portion NN of IN the DT Athabasca NP Oil NP Sands NPS Deposit NP . SENT The DT location NN is VBZ readily RB accessible JJ by IN public JJ road NN . SENT The DT produced VVN synthetic JJ crude NN oil NN is VBZ shipped VVN from IN the DT Syncrude NP site NN to TO Edmonton NP , , Alberta NP by IN Alberta NP Oil NP Sands NP Pipeline NP Ltd NP . SENT The DT pipeline NN is VBZ currently RB being VBG expanded VVN to TO accommodate VV increased JJ Syncrude NP production NN . SENT Since IN startup NN in IN 1978 CD , , Syncrude NP has VHZ produced VVN about IN 1 CD . SENT 5 CD billion CD barrels NNS of IN synthetic JJ crude JJ oil NN . SENT Syncrude NP has VHZ an DT operating NN license NN issued VVN by IN the DT Province NP of IN Alberta NP which WDT is VBZ effective JJ until IN 2035 CD . SENT This DT license NN permits VVZ Syncrude NP to TO mine JJ tar NN sands NNS and CC produce VV synthetic JJ crude JJ oil NN from IN approved VVN development NN areas NNS on IN tar NN sands NNS leases NNS . SENT Syncrude NP holds VVZ eight CD tar NN sands NNS leases NNS covering VVG about IN 102 CD , , 000 CD hectares NNS 252 CD , , 000 CD acres NNS in IN the DT Athabasca NP Oil NP Sands NPS Deposit NP . SENT Issued VVN by IN the DT Province NP of IN Alberta NP , , the DT leases NNS are VBP automatically RB renewable JJ as RB long RB as IN tar NN sands NNS operations NNS are VBP ongoing JJ or CC the DT leases NNS are VBP part NN of IN an DT approved VVN development NN plan NN . SENT Syncrude NP leases NNS 10 CD , , 12 CD , , 17 CD , , 22 CD and CC 34 CD containing VVG proven JJ reserves NNS and CC leases VVZ 29 CD , , 30 CD and CC 31 CD containing VVG no DT proven JJ reserves NNS are VBP included VVN within IN a DT development NN plan NN approved VVN by IN the DT Province NP of IN Alberta NP . SENT There EX were VBD no RB known VVN previous JJ commercial JJ operations NNS on IN these DT leases NNS prior RB to TO the DT start NN up RB of IN operations NNS in IN 1978 CD . SENT As IN of IN January NP 1 CD , , 2002 CD , , a DT greater JJR of IN 25 CD percent NN deemed VVN net JJ profit NN royalty NN or CC one CD percent NN gross JJ royalty NN applies VVZ to TO all DT Syncrude NP production NN after IN the DT deduction NN of IN new JJ capital NN expenditures NNS . SENT The DT Government NN of IN Canada NP had VHD issued VVN an DT order NN that WDT expired VVD at IN the DT end NN of IN 2003 CD which WDT provided VVD for IN the DT remission NN of IN any DT federal JJ income NN tax NN otherwise RB payable JJ by IN the DT participants NNS as IN the DT result NN of IN the DT non JJ deductibility NN from IN the DT income NN of IN the DT participants NNS of IN amounts NNS receivable JJ by IN the DT Province NP of IN Alberta NP as IN a DT royalty NN or CC otherwise RB with IN respect NN to TO Syncrude NP . SENT That DT remission NN order NN excluded VVD royalty NN payable JJ on IN production NN for IN the DT Aurora NP project NN . SENT Operations NNS at IN Syncrude NP involve VVP three CD main JJ processes NNS . SENT open JJ pit NN mining NN , , extraction NN of IN crude JJ bitumen NN and CC upgrading VVG of IN crude JJ bitumen NN into IN synthetic JJ crude JJ oil NN . SENT In IN the DT Base NP mine NN lease NN 17 CD , , the DT mining NN and CC transportation NN system NN uses VVZ draglines NNS , , bucketwheel NN reclaimers NNS and CC belt NN conveyors NNS . SENT In IN the DT North JJ mine NN leases VVZ 17 CD and CC 22 CD and CC in IN the DT Aurora NP mine NN leases VVZ 10 CD , , 12 CD and CC 34 CD , , truck NN , , shovel NN and CC hydrotransport NN systems NNS are VBP used VVN . SENT The DT extraction NN facilities NNS , , which WDT separate JJ crude JJ bitumen NN from IN sand NN , , are VBP capable JJ of IN processing VVG approximately RB 495 CD , , 000 CD tonnes NNS 545 CD , , 000 CD tons NNS of IN tar NN sands NNS a DT day NN , , producing VVG about IN 18 CD million CD cubic JJ metres NNS 110 CD million CD barrels NNS of IN crude JJ bitumen NN a DT year NN . SENT This DT represents VVZ recovery NN capability NN of IN about RB 92 CD percent NN of IN the DT crude JJ bitumen NN contained VVN in IN the DT mined VVN tar NN sands NNS . SENT 7 CD Table NN of IN Contents NNS Crude JJ bitumen NN extracted VVN from IN tar NN sands NNS is VBZ refined VVN to TO a DT marketable JJ hydrocarbon NN product NN through IN a DT combination NN of IN carbon NN removal NN in IN two CD large JJ , , high JJ temperature NN , , fluid JJ coking VVG vessels NNS and CC by IN hydrogen NN addition NN in IN high JJ temperature NN , , high JJ pressure NN , , hydrocracking VVG vessels NNS . SENT These DT processes VVZ remove VV carbon NN and CC sulphur NN and CC reformulate VV the DT crude NN into IN a DT low JJ viscosity NN , , low JJ sulphur NN , , high JJ quality NN synthetic JJ crude JJ oil NN product NN . SENT In IN 2004 CD , , the DT upgrading VVG process NN yielded VVD 0 CD . SENT 855 CD cubic JJ metres NNS of IN synthetic JJ crude JJ oil NN per IN cubic JJ metre NN of IN crude JJ bitumen NN 0 CD . SENT 855 CD barrels NNS of IN synthetic JJ crude JJ oil NN per IN barrel NN of IN crude JJ bitumen NN . SENT In IN 2004 CD , , about RB 45 CD percent NN of IN the DT synthetic JJ crude NN oil NN was VBD processed VVN by IN Edmonton NP area NN refineries NNS and CC the DT remaining VVG 55 CD percent NN was VBD pipelined VVN to TO refineries NNS in IN eastern JJ Canada NP or CC exported VVN to TO the DT United NP States NPS . SENT Electricity NN is VBZ provided VVN to TO Syncrude NP by IN a DT 270 CD megawatt NN electricity NN generating NN plant NN and CC a DT 80 CD megawatt NN electricity NN generating NN plant NN , , both CC located VVN at IN Syncrude NP . SENT The DT generating NN plants NNS are VBP owned VVN by IN the DT Syncrude NP participants NNS . SENT The DT Company NN s VVZ 25 CD percent NN share NN of IN net JJ investment NN in IN plant NN , , property NN and CC equipment NN , , including VVG surface NN mining NN facilities NNS , , transportation NN equipment NN and CC upgrading VVG facilities NNS is VBZ about IN 2 CD . SENT 8 CD billion CD . SENT In IN 2004 CD , , Syncrude NP s PP net JJ production NN of IN synthetic JJ crude JJ oil NN was VBD about RB 37 CD , , 500 CD cubic JJ metres NNS 235 CD , , 600 CD barrels NNS per IN day NN and CC gross JJ production NN was VBD about RB 37 CD , , 800 CD cubic JJ metres NNS 238 CD , , 000 CD barrels NNS per IN day NN . SENT The DT Company NP s PP share NN of IN net JJ production NN in IN 2004 CD was VBD about RB 9 CD , , 400 CD cubic JJ metres NNS 58 CD , , 900 CD barrels NNS per IN day NN . SENT In IN 2000 CD , , Syncrude NP completed VVD development NN of IN the DT first JJ stage NN of IN the DT Aurora NP mine NN . SENT The DT Aurora NP investment NN involved VVD extending VVG mining NN operations NNS to TO a DT new JJ location NN about IN 35 CD km NN from IN the DT main JJ Syncrude NP site NN and CC expanding VVG upgrading NN capacity NN . SENT In IN 2001 CD , , the DT Syncrude NP owners NNS approved VVD another DT major JJ expansion NN of IN upgrading VVG capacity NN and CC further JJR development NN of IN the DT Aurora NP mine NN . SENT The DT second JJ Aurora NP mining NN and CC extraction NN development NN became VVD fully RB operational JJ in IN 2004 CD . SENT The DT increased JJ upgrading NN capacity NN is VBZ expected VVN to TO be VB available JJ in IN 2006 CD . SENT These DT projects NNS are VBP expected VVN to TO lead VV to TO a DT total JJ production NN capacity NN of IN about IN 56 CD , , 500 CD cubic JJ metres NNS 355 CD , , 000 CD barrels NNS of IN synthetic JJ crude JJ oil NN a DT day NN when WRB completed VVN . SENT The DT Company NP s PP share NN of IN project NN costs NNS is VBZ expected VVN to TO be VB about IN 2 CD billion CD of IN which WDT about IN 1 CD . SENT 6 CD billion CD has VHZ been VBN incurred VVN to TO the DT end NN of IN 2004 CD . SENT The DT following VVG table NN sets VVZ forth RB certain JJ operating VVG statistics NNS for IN the DT Syncrude NP operations NNS . SENT 2004 CD 2003 CD 2002 JJ 2001 CD 2000 CD Total JJ mined VVN volume NN 1 CD millions NNS of IN cubic JJ metres NNS 76 CD . SENT 6 CD 83 CD . SENT 5 CD 77 CD . SENT 9 CD 90 CD . SENT 3 CD 65 CD . SENT 0 CD millions NNS of IN cubic JJ yards NNS 100 CD . SENT 3 CD 109 CD . SENT 2 CD 102 CD . SENT 0 CD 118 CD . SENT 3 CD 85 CD . SENT 1 LS Mined VVN volume NN to TO tar NN sands NNS ratio NN 1 CD 0 CD . SENT 94 CD 1 CD . SENT 15 CD 1 CD . SENT 05 CD 1 CD . SENT 15 CD 0 CD . SENT 96 CD Tar NN sands NNS mined VVD millions NNS of IN tonnes NNS 170 CD . SENT 9 CD 152 CD . SENT 4 CD 156 CD . SENT 5 CD 164 CD . SENT 8 CD 142 CD . SENT 2 CD millions NNS of IN tons NNS 188 CD . SENT 0 CD 168 CD . SENT 0 CD 172 CD . SENT 1 CD 181 CD . SENT 2 CD 156 CD . SENT 4 CD Average JJ bitumen NN grade NN weight NN percent NN 11 CD . SENT 1 CD 11 CD . SENT 0 CD 11 CD . SENT 2 CD 11 CD . SENT 0 CD 11 CD . SENT 0 CD Crude JJ bitumen NN in IN mined VVN tar NN sands NNS millions NNS of IN tonnes NNS 19 CD . SENT 0 CD 16 CD . SENT 8 CD 17 CD . SENT 5 CD 18 CD . SENT 1 CD 15 CD . SENT 6 CD millions NNS of IN tons NNS 20 CD . SENT 9 CD 18 CD . SENT 5 CD 19 CD . SENT 2 CD 19 CD . SENT 9 CD 17 CD . SENT 2 CD Average JJ extraction NN recovery NN percent NN 87 CD . SENT 3 CD 88 CD . SENT 6 CD 89 CD . SENT 9 CD 87 CD . SENT 0 CD 89 CD . SENT 7 CD Crude JJ bitumen NN production NN 2 CD millions NNS of IN cubic JJ metres NNS 16 CD . SENT 4 CD 14 CD . SENT 7 CD 15 CD . SENT 5 CD 15 CD . SENT 5 CD 13 CD . SENT 8 CD millions NNS of IN barrels NNS 103 CD . SENT 3 CD 92 CD . SENT 3 CD 97 CD . SENT 8 CD 97 CD . SENT 6 CD 86 CD . SENT 8 CD Average JJ upgrading VVG yield NN percent NN 85 CD . SENT 5 CD 86 CD . SENT 0 CD 86 CD . SENT 3 CD 84 CD . SENT 5 CD 84 CD . SENT 3 CD Gross JJ synthetic JJ crude NN oil NN produced VVD millions NNS of IN cubic JJ metres NNS 14 CD . SENT 1 CD 12 CD . SENT 5 CD 13 CD . SENT 5 CD 13 CD . SENT 1 CD 11 CD . SENT 6 CD millions NNS of IN barrels NNS 88 CD . SENT 4 CD 78 CD . SENT 4 CD 84 CD . SENT 8 CD 82 CD . SENT 4 CD 73 CD . SENT 2 CD Company NN s PP net JJ share NN 3 CD millions NNS of IN cubic JJ metres NNS 3 CD 3 CD 3 CD 3 CD 2 CD millions NNS of IN barrels NNS 22 CD 19 CD 21 CD 19 CD 15 JJ 1 CD Includes VVZ pre NP stripping VVG of IN mine NN areas NNS and CC reclamation NN volumes NNS . SENT 2 CD Crude JJ bitumen NN production NN is VBZ equal JJ to TO crude JJ bitumen NN in IN mined VVN tar NN sands NNS multiplied VVN by IN the DT average JJ extraction NN recovery NN and CC the DT appropriate JJ conversion NN factor NN . SENT 3 CD Reflects VVZ the DT Company NN s VVZ 25 CD percent NN interest NN in IN production NN , , less JJR applicable JJ royalties NNS payable JJ to TO the DT Province NP of IN Alberta NP . SENT Other JJ Tar NN Sands NP Activity NP The DT Company NN holds VVZ a DT 100 CD percent NN interest NN in IN approximately RB 16 CD , , 500 CD hectares NNS 40 CD , , 700 CD acres NNS of IN surface NN mineable JJ tar NN sands NNS in IN the DT Kearl NP area NN in IN the DT Athabasca NP area NN of IN northern JJ Alberta NP . SENT A DT 400 CD well NN delineation NN drilling NN program NN to TO better RBR define VV the DT available JJ resource NN was VBD begun VVN in IN 2003 CD and CC is VBZ expected VVN to TO be VB completed VVN in IN 2005 CD . SENT The DT Company NN is VBZ assessing VVG a DT potential JJ phased VVN project NN with IN another DT company NN to TO jointly RB develop VV mineable JJ bitumen NN , , which WDT may MD have VH the DT potential NN to TO produce VV up RP to TO approximately RB 47 CD , , 700 CD cubic JJ metres NNS 300 CD , , 000 CD barrels NNS per IN day NN . SENT The DT Company NN plans VVZ on IN filing VVG a DT regulatory JJ application NN with IN the DT Alberta NP Energy NP and CC Utilities NP Board NP for IN the DT Kearl NP oil NN sands NNS project VVP in IN 2005 CD . SENT 8 CD Table NN of IN Contents NNS Land NP Holdings NPS At IN December NP 31 CD , , 2004 CD and CC 2003 CD , , the DT Company NN held VVD the DT following VVG oil NN and CC gas NN rights NNS , , and CC tar NN sands NNS leases NNS . SENT Hectares NNS Acres NP Developed VVD Undeveloped JJ Total JJ Developed VVN Undeveloped JJ Total NP 2004 CD 2003 CD 2004 JJ 2003 CD 2004 CD 2003 JJ 2004 CD 2003 CD 2004 JJ 2003 CD 2004 CD 2003 CD thousands NNS Western JJ Provinces NP Conventional JJ Gross NP 1 CD 1 CD , , 080 CD 1 CD , , 101 CD 173 CD 187 CD 1 CD , , 253 CD 1 CD , , 288 CD 2 CD , , 669 CD 2 CD , , 721 CD 427 CD 462 CD 3 CD , , 096 CD 3 CD , , 183 CD Net NN 2 CD 446 CD 450 JJ 118 CD 127 CD 564 JJ 577 CD 1 CD , , 102 CD 1 CD , , 112 CD 292 CD 314 CD 1 CD , , 394 CD 1 CD , , 426 CD Oil NP Sands NPS Cold NP Lake NP and CC other JJ Gross NP 1 CD 42 CD 42 JJ 193 CD 175 CD 235 JJ 217 CD 104 CD 104 JJ 477 CD 432 CD 581 CD 536 CD Net NN 2 LS 41 CD 41 CD 104 JJ 104 CD 145 CD 145 JJ 101 CD 101 CD 257 JJ 257 CD 358 CD 358 CD Tar NN Sands NP Syncrude NP and CC other JJ Gross NP 1 CD 45 CD 41 JJ 73 CD 77 CD 118 JJ 118 CD 111 CD 101 JJ 180 CD 190 CD 291 CD 291 CD Net NN 2 LS 11 CD 10 CD 31 JJ 32 CD 42 CD 42 JJ 27 CD 25 CD 77 JJ 79 CD 104 CD 104 CD Canada NP Lands NP 3 CD . SENT Conventional JJ Gross NP 1 CD 31 CD 31 JJ 321 CD 321 CD 352 JJ 352 CD 77 CD 77 JJ 793 CD 793 CD 870 CD 870 CD Net NN 2 LS 3 CD 4 CD 98 JJ 98 CD 101 CD 102 JJ 7 CD 10 CD 242 JJ 242 CD 249 CD 252 CD Atlantic NP Offshore NP Conventional JJ Gross NP 1 CD 17 CD 17 CD 2 CD , , 603 CD 1 CD , , 329 CD 2 CD , , 620 CD 1 CD , , 346 CD 42 CD 42 CD 6 CD , , 432 CD 3 CD , , 284 CD 6 CD , , 474 CD 3 CD , , 326 CD Net NN 2 LS 2 CD 2 CD 832 JJ 565 CD 834 CD 567 JJ 5 CD 5 CD 2 CD , , 056 CD 1 CD , , 396 CD 2 CD , , 061 CD 1 CD , , 401 CD Total JJ 4 CD . SENT Gross NP 1 CD 1 CD , , 215 CD 1 CD , , 232 CD 3 CD , , 363 CD 2 CD , , 089 CD 4 CD , , 578 CD 3 CD , , 321 CD 3 CD , , 003 CD 3 CD , , 045 CD 8 CD , , 309 CD 5 CD , , 161 CD 11 CD , , 312 CD 8 CD , , 206 CD Net NN 2 LS 503 CD 507 CD 1 CD , , 183 CD 926 CD 1 CD , , 686 CD 1 CD , , 433 CD 1 CD , , 242 CD 1 CD , , 253 CD 2 CD , , 924 CD 2 CD , , 288 CD 4 CD , , 166 CD 3 CD , , 541 CD 1 CD Gross JJ hectares NNS or CC acres NNS include VVP the DT interests NNS of IN others NNS . SENT 2 CD Net JJ hectares NNS or CC acres NNS exclude VVP the DT interests NNS of IN others NNS . SENT 3 CD Canada NP Lands NP include VVP the DT Arctic NP Islands NP , , Beaufort NP Sea NP Mackenzie NP Delta NP , , and CC Other JJ Northwest NP Territories NP , , Nunavut NP and CC the DT Yukon NP . SENT 4 CD Certain JJ land NN holdings NNS are VBP subject JJ to TO modification NN under IN agreements NNS whereby WRB others NNS may MD earn VV interests NNS in IN the DT Company NN s PP holdings NNS by IN performing VVG certain JJ exploratory JJ work NN farmout NN and CC whereby WRB the DT Company NN may MD earn VV interests NNS in IN others NNS holdings NNS by IN performing VVG certain JJ exploratory JJ work NN farmin NN . SENT Exploration NP and CC Development NP The DT Company NN has VHZ been VBN involved VVN in IN the DT exploration NN for IN and CC development NN of IN petroleum NN and CC natural JJ gas NN in IN the DT Western NP Provinces NP , , in IN the DT Canada NP Lands NP which WDT include VVP the DT Arctic NP Islands NP , , the DT Beaufort NP Sea NP Mackenzie NP Delta NP , , and CC Other JJ Northwest NP Territories NP , , Nunavut NP and CC the DT Yukon NP and CC in IN the DT Atlantic NP Offshore NP . SENT The DT Company NP s PP exploration NN strategy NN in IN the DT Western NP Provinces NP is VBZ to TO search VV for IN hydrocarbons NNS on IN its PP$ existing JJ land NN holdings NNS and CC especially RB near IN established JJ facilities NNS . SENT Higher JJR risk NN areas NNS are VBP evaluated VVN through IN shared VVN ventures NNS with IN other JJ companies NNS . SENT The DT following VVG table NN sets VVZ forth RB the DT conventional JJ and CC oil NN sands NNS net JJ exploratory JJ and CC development NN wells NNS that WDT were VBD drilled VVN or CC participated VVN in IN by IN the DT Company NN during IN the DT five CD years NNS ended VVN December NP 31 CD , , 2004 CD . SENT 2004 CD 2003 CD 2002 JJ 2001 CD 2000 CD Western NP and CC Atlantic NP Provinces NP . SENT Conventional JJ Exploratory JJ Oil NN Gas NP 2 CD 3 CD 1 CD 1 CD 3 CD Dry NP Holes NNS 1 CD 1 CD 2 CD 1 CD Development NP Oil NP 3 CD 4 CD 1 CD 17 CD 18 CD Gas NP 207 CD 89 CD 42 JJ 68 CD 49 CD Dry NP Holes NNS 1 CD 3 CD 3 CD Oil NP Sands NPS Cold NP Lake NP and CC other JJ Development NP Oil NP 218 CD 118 CD 332 JJ 307 CD 112 CD Total JJ 432 CD 218 CD 381 JJ 393 CD 183 CD The DT 218 CD oil NN sands NNS development NN wells NNS in IN 2004 CD were VBD related VVN to TO productivity NN maintenance NN in IN existing VVG stages NNS at IN Cold NP Lake NP . SENT In IN 2004 CD , , there EX was VBD an DT increase NN in IN gas NN development NN wells NNS related VVN to TO an DT increase NN in IN drilling NN in IN shallow JJ gas NN fields NNS . SENT At IN December NP 31 CD , , 2004 CD , , the DT Company NN was VBD participating VVG in IN the DT drilling NN of IN 17 CD gross JJ 11 CD net JJ exploratory JJ and CC development NN wells NNS . SENT 9 CD Table NN of IN Contents NNS Western JJ Provinces NP In IN 2004 CD , , the DT Company NN had VHD a DT working VVG interest NN in IN seven CD gross JJ three CD net JJ exploratory JJ wells NNS and CC 483 CD gross JJ 211 CD net JJ development NN wells NNS , , while IN retaining VVG an DT overriding JJ royalty NN in IN an DT additional JJ 11 CD gross JJ exploratory JJ wells NNS drilled VVN by IN others NNS . SENT The DT majority NN of IN the DT exploratory JJ wells NNS were VBD directed VVN toward IN extending VVG reserves NNS around IN existing VVG fields NNS . SENT Beaufort NP Sea NP Mackenzie NP Delta NP Substantial JJ quantities NNS of IN gas NN have VHP been VBN found VVN by IN the DT Company NN and CC others NNS in IN the DT Beaufort NP Sea NP Mackenzie NP Delta NP . SENT In IN 1999 CD , , the DT Company NN and CC three CD other JJ companies NNS entered VVN into IN an DT agreement NN to TO study VV the DT feasibility NN of IN developing VVG Mackenzie NP Delta NP gas NN . SENT The DT four CD companies NNS are VBP participating VVG in IN development NN planning NN for IN onshore JJ natural JJ gas NN resources NNS totaling VVG approximately RB 170 CD billion CD cubic JJ metres NNS six CD trillion CD cubic JJ feet NNS . SENT The DT Company NP s PP share NN of IN these DT resources NNS is VBZ about RB 50 CD percent NN The DT commercial JJ viability NN of IN these DT natural JJ gas NN resources NNS , , and CC the DT pipeline NN required VVN to TO transport VV this DT natural JJ gas NN to TO markets NNS , , is VBZ dependent JJ on IN a DT number NN of IN factors NNS . SENT These DT factors NNS include VVP natural JJ gas NN markets NNS , , support NN from IN northern JJ parties NNS , , regulatory JJ approvals NNS , , environmental JJ considerations NNS , , pipeline NN participation NN , , fiscal JJ terms NNS , , and CC the DT cost NN of IN constructing VVG , , operating VVG and CC abandoning VVG the DT field NN production NN and CC pipeline NN facilities NNS . SENT There EX are VBP complex JJ issues NNS to TO be VB resolved VVN and CC many JJ interested JJ parties NNS to TO be VB consulted VVN , , before IN any DT development NN could MD proceed VV . SENT In IN October NP 2001 CD , , the DT four CD companies NNS and CC the DT Aboriginal JJ Pipeline NP Group NP APG NP , , which WDT represents VVZ aboriginal JJ peoples NNS of IN the DT Northwest NP Territories NP , , signed VVD a DT memorandum NN of IN understanding VVG to TO pursue VV economic JJ and CC timely JJ development NN of IN a DT Mackenzie NP Valley NP pipeline NN . SENT In IN 2002 CD , , the DT four CD companies NNS completed VVD a DT preliminary JJ study NN of IN the DT feasibility NN of IN developing VVG existing JJ discoveries NNS of IN Mackenzie NP Delta NP gas NN and CC based VVN on IN the DT results NNS of IN the DT study NN announced VVD together RB with IN the DT APG NP their PP$ intention NN to TO begin VV preparing VVG the DT regulatory JJ applications NNS needed VVN to TO develop VV the DT gas NN resources NNS , , including VVG construction NN of IN a DT Mackenzie NP Valley NP pipeline NN . SENT In IN 2003 CD , , the DT Preliminary JJ Information NN Package NN for IN the DT Mackenzie NP Gas NP Project NP was VBD submitted VVN to TO the DT regulatory JJ authorities NNS , , and CC funding NN and CC participation NN agreements NNS between IN the DT four CD companies NNS , , the DT APG NP and CC TransCanada NP PipeLines NPS Limited NP were VBD reached VVN for IN the DT proposed VVN Mackenzie NP Valley NP pipeline NN . SENT In IN late JJ 2004 CD , , the DT four CD companies NNS and CC the DT APG NP signed VVD agreements NNS covering VVG the DT development NN and CC operations NNS of IN the DT Mackenzie NP Valley NP pipeline NN . SENT In IN October NP 2004 CD , , the DT main JJ regulatory JJ applications NNS and CC environmental JJ impact NN statement NN for IN the DT project NN were VBD filed VVN with IN the DT National NP Energy NP Board NP and CC other JJ boards NNS , , panels NNS and CC agencies NNS responsible JJ for IN assessing VVG and CC regulating VVG energy NN developments NNS in IN the DT Northwest NP Territories NP . SENT The DT regulatory JJ review NN process NN is VBZ expected VVN to TO take VV up RP to TO 24 CD months NNS . SENT The DT initial JJ cost NN for IN the DT project NN is VBZ estimated VVN to TO be VB about IN 7 CD billion CD with IN the DT Company NN s PP share NN of IN the DT cost NN estimated VVN to TO be VB about IN 3 CD billion CD . SENT Other JJ land NN holdings NNS include VVP majority NN interests NNS in IN 20 CD and CC minority NN interests NNS in IN six CD significant JJ discovery NN licences NNS granted VVN by IN the DT Government NN of IN Canada NP as IN the DT result NN of IN previous JJ oil NN and CC gas NN discoveries NNS , , all DT of IN which WDT are VBP managed VVN by IN the DT Company NN and CC majority NN interests NNS in IN two CD and CC minority NN interests NNS in IN 16 CD other JJ significant JJ discovery NN licences NNS and CC one CD production NN licence NN , , managed VVN by IN others NNS . SENT Arctic NP Islands NPS The DT Company NN has VHZ an DT interest NN in IN 16 CD significant JJ discovery NN licences NNS and CC one CD production NN licence NN granted VVN by IN the DT Government NN of IN Canada NP in IN the DT Arctic NP Islands NPS . SENT These DT licences NNS are VBP managed VVN by IN another DT company NN on IN behalf NN of IN all DT participants NNS . SENT The DT Company NN has VHZ not RB participated VVN in IN wells NNS drilled VVN in IN this DT area NN since IN 1984 CD . SENT Atlantic NP Offshore NP The DT Company NN manages VVZ five CD significant JJ discovery NN licences NNS granted VVN by IN the DT Government NN of IN Canada NP in IN the DT Atlantic NP offshore RB . SENT The DT Company NN also RB has VHZ minority NN interests NNS in IN 27 CD significant JJ discovery NN licences NNS , , and CC five CD production NN licences NNS , , managed VVN by IN others NNS . SENT In IN 2004 CD the DT Company NN s VVZ nine CD percent NN working VVG interest NN in IN an DT exploration NN licence NN for IN about IN 74 CD , , 000 CD gross JJ hectares NNS 183 CD , , 000 CD gross JJ acres NNS in IN the DT Sable NP Island NP area NN off IN the DT coast NN of IN the DT Province NP of IN Nova NP Scotia NP expired VVD . SENT In IN 1998 CD , , the DT Company NN acquired VVD a DT 20 CD percent NN interest NN in IN an DT exploration NN licence NN for IN about IN 23 CD , , 500 CD gross JJ hectares NNS 58 CD , , 100 CD gross JJ acres NNS in IN the DT Sable NP Island NP area NN . SENT One CD exploratory JJ well NN was VBD completed VVN in IN 2004 CD in IN that DT area NN , , without IN commercial JJ success NN . SENT In IN 1999 CD , , the DT Company NN acquired VVD a DT 20 CD percent NN interest NN in IN six CD exploration NN licences VVZ for IN about IN 217 CD , , 000 CD gross JJ hectares NNS 536 CD , , 000 CD gross JJ acres NNS in IN the DT Sable NP Island NP area NN . SENT One CD exploratory JJ well NN was VBD completed VVN in IN 2000 CD in IN that DT area NN , , without IN commercial JJ success NN . SENT In IN 2004 CD , , five CD of IN these DT exploration NN licences VVZ totalling VVG about IN 196 CD , , 000 CD gross JJ hectares NNS 484 CD , , 000 CD gross JJ acres NNS were VBD allowed VVN to TO expire VV . SENT Also RB in IN 1999 CD , , the DT Company NN acquired VVD a DT 100 CD percent NN interest NN in IN two CD exploration NN licences VVZ for IN about IN 225 CD , , 000 CD gross JJ hectares NNS 556 CD , , 000 CD gross JJ acres NNS farther RBR offshore RB in IN deeper JJR water NN . SENT A DT 3 CD D NP seismic JJ evaluation NN program NN was VBD begun VVN in IN 2000 CD in IN that DT area NN , , and CC was VBD completed VVN in IN 2001 CD , , and CC in IN 2002 CD there RB were VBD 3 CD D NP seismic JJ and CC geological JJ evaluations NNS . SENT In IN 2002 CD , , the DT Company NN signed VVD a DT farmout NN agreement NN with IN another DT company NN whereby WRB that DT company NN earned VVD a DT 30 CD percent NN interest NN in IN these DT licences NNS by IN participating VVG in IN the DT first JJ exploration NN well RB . SENT In IN 2003 CD , , one CD exploratory JJ well NN was VBD drilled VVN on IN these DT licences NNS , , without IN commercial JJ success NN . SENT In IN 2004 CD , , the DT Company NN allowed VVD the DT undrilled JJ licence NN to TO expire VV while IN retaining VVG its PP$ 70 CD percent NN interest NN in IN the DT other JJ exploration NN licence NN for IN about IN 113 CD , , 000 CD gross JJ hectares NNS 279 CD , , 000 CD gross JJ acres NNS . SENT In IN early JJ 2001 CD , , the DT Company NN acquired VVN about IN a DT 17 CD percent NN interest NN in IN three CD additional JJ deep JJ water NN exploration NN licences VVZ for IN about IN 475 CD , , 000 CD gross JJ hectares NNS 1 CD , , 174 CD , , 000 CD gross JJ acres NNS . SENT In IN 2004 CD , , these DT licences NNS were VBD allowed VVN to TO expire VV . SENT The DT Company NN is VBZ not RB planning VVG further JJR exploration NN in IN these DT areas NNS . SENT 10 CD Table NN of IN Contents NNS In IN early JJ 2004 CD , , the DT Company NN acquired VVD a DT 25 CD percent NN interest NN in IN eight CD deep JJ water NN exploration NN licences VVZ offshore JJ Newfoundland NP in IN the DT Orphan NN Basin NP for IN about IN 2 CD , , 125 CD , , 000 CD gross JJ hectares NNS 5 CD , , 251 CD , , 000 CD gross JJ acres NNS . SENT In IN February NP of IN 2005 CD , , the DT Company NN reduced VVD its PP$ interest NN to TO 15 CD through IN an DT agreement NN with IN another DT company NN . SENT The DT Company NP s PP share NN of IN proposed VVN exploration NN spending NN is VBZ about IN 100 CD million CD with IN a DT minimum JJ commitment NN of IN about RB 25 CD million CD . SENT In IN 2004 CD , , the DT Company NN participated VVD in IN a DT 3 CD D NP seismic JJ survey NN in IN this DT area NN . SENT In IN 2004 CD , , the DT Company NN converted VVD nine CD exploration NN permits NNS in IN the DT Laurentian JJ basin NN area NN offshore JJ Newfoundland NP and CC Labrador NP to TO a DT single JJ exploration NN licence NN for IN about IN 192 CD , , 000 CD gross JJ hectares NNS 474 CD , , 000 CD gross JJ acres NNS . SENT The DT Company NN holds VVZ a DT 100 CD percent NN interest NN in IN this DT licence NN . SENT Petroleum NP Products NPS Supply NP To TO supply VV the DT requirements NNS of IN its PP$ own JJ refineries NNS and CC condensate NN requirements NNS for IN blending VVG with IN crude JJ bitumen NN , , the DT Company NN supplements NNS its PP$ own JJ production NN with IN substantial JJ purchases NNS from IN others NNS . SENT The DT Company NN purchases VVZ domestic JJ crude JJ oil NN at IN freely RB negotiated VVN prices NNS from IN a DT number NN of IN sources NNS . SENT Domestic JJ purchases NNS of IN crude JJ oil NN are VBP generally RB made VVN under IN 30 CD day NN contracts NNS . SENT There EX are VBP no DT domestic JJ purchases NNS of IN crude JJ oil NN under IN contracts NNS longer JJR than IN 60 CD days NNS . SENT Crude JJ oil NN from IN foreign JJ sources NNS is VBZ purchased VVN by IN the DT Company NN at IN competitive JJ prices NNS mainly RB through IN Exxon NP Mobil NP Corporation NP which WDT has VHZ beneficial JJ access NN to TO major JJ market NN sources NNS of IN crude JJ oil NN throughout IN the DT world NN . SENT Refining VVG The DT Company NN owns VVZ and CC operates VVZ four CD refineries NNS . SENT Two CD of IN these DT , , the DT Sarnia NP refinery NN and CC the DT Strathcona NP refinery NN , , have VHP lubricating VVG oil NN production NN facilities NNS . SENT The DT Strathcona NP refinery NN processes VVZ Canadian JJ crude JJ oil NN , , and CC the DT Dartmouth NP , , Sarnia NP and CC Nanticoke NP refineries NNS process VVP a DT combination NN of IN Canadian JJ and CC foreign JJ crude JJ oil NN . SENT In IN addition NN to TO crude JJ oil NN , , the DT Company NP purchases NNS finished VVD products NNS to TO supplement VV its PP$ refinery NN production NN . SENT In IN 2004 CD , , capital NN expenditures NNS of IN about IN 159 CD million CD were VBD made VVN at IN the DT Company NN s PP refineries NNS . SENT About IN 60 CD percent NN of IN those DT expenditures NNS were VBD on IN new JJ facilities NNS required VVN to TO meet VV Government NP of IN Canada NP regulations NNS on IN the DT sulphur NN level NN in IN motor NN fuels NNS with IN the DT remaining JJ expenditures NNS being VBG on IN safety NN and CC efficiency NN improvements NNS , , and CC environmental JJ control NN projects NNS . SENT The DT approximate JJ average JJ daily JJ volumes NNS of IN refinery NN throughput NN during IN the DT five CD years NNS ended VVN December NP 31 CD , , 2004 CD , , and CC the DT daily JJ rated VVN capacities NNS of IN the DT refineries NNS at IN December NP 31 CD , , 1999 CD and CC 2004 CD , , were VBD as RB follows VVZ . SENT Average NP Daily NP Volumes NNS of IN Daily NP Rated NP Refinery NN Throughput NN 1 CD Capacities NNS at IN Year NN Ended VVN December NP 31 CD December NP 31 CD 2 CD 2004 JJ 2003 CD 2002 CD 2001 JJ 2000 CD 2004 CD 1999 CD thousands NNS of IN cubic JJ metres NNS Strathcona NP , , Alberta NP 27 CD . SENT 1 CD 27 CD . SENT 6 CD 26 CD . SENT 0 CD 25 CD . SENT 4 CD 27 CD . SENT 0 CD 29 CD . SENT 8 CD 28 CD . SENT 6 CD Sarnia NP , , Ontario NP 17 CD . SENT 2 CD 14 CD . SENT 7 CD 16 CD . SENT 5 CD 16 CD . SENT 5 CD 16 CD . SENT 2 CD 19 CD . SENT 2 CD 19 CD . SENT 2 CD Dartmouth NP , , Nova NP Scotia NP 12 CD . SENT 7 CD 13 CD . SENT 0 CD 12 CD . SENT 5 CD 12 CD . SENT 3 CD 11 CD . SENT 2 CD 13 CD . SENT 1 CD 13 CD . SENT 1 CD Nanticoke NP , , Ontario NP 17 CD . SENT 3 CD 16 CD . SENT 3 CD 16 CD . SENT 2 CD 17 CD . SENT 2 CD 17 CD . SENT 2 CD 17 CD . SENT 8 CD 17 CD . SENT 8 CD Total JJ 74 CD . SENT 3 CD 71 CD . SENT 6 CD 71 CD . SENT 2 CD 71 CD . SENT 4 CD 71 CD . SENT 6 CD 79 CD . SENT 9 CD 78 CD . SENT 7 CD Average JJ Daily JJ Volumes NNS of IN Daily NP Rated NP Refinery NN Throughput NN 1 CD Capacities NNS at IN Year NN Ended VVN December NP 31 CD December NP 31 CD 2 CD 2004 JJ 2003 CD 2002 CD 2001 JJ 2000 CD 2004 CD 1999 CD thousands NNS of IN barrels NNS Strathcona NP , , Alberta NP 170 CD 174 CD 163 JJ 160 CD 170 CD 187 CD 180 CD Sarnia NP , , Ontario NP 108 CD 92 CD 104 JJ 104 CD 102 CD 121 CD 121 CD Dartmouth NP , , Nova NP Scotia NP 80 CD 82 CD 78 JJ 77 CD 70 CD 82 CD 82 CD Nanticoke NP , , Ontario NP 109 CD 102 CD 102 JJ 108 CD 108 CD 112 CD 112 CD Total JJ 467 CD 450 CD 447 JJ 449 CD 450 CD 502 JJ 495 CD 1 CD Refinery NN throughput NN is VBZ the DT volume NN of IN crude JJ oil NN and CC feedstocks NNS that WDT is VBZ processed VVN in IN the DT refinery NN atmospheric JJ distillation NN units NNS . SENT 2 LS Rated VVN capacities NNS are VBP based VVN on IN definite JJ specifications NNS as RB to TO types NNS of IN crude JJ oil NN and CC feedstocks NNS that WDT are VBP processed VVN in IN the DT refinery NN atmospheric JJ distillation NN units NNS , , the DT products NNS to TO be VB obtained VVN and CC the DT refinery NN process NN , , adjusted VVN to TO include VV an DT estimated JJ allowance NN for IN normal JJ maintenance NN shutdowns NNS . SENT Accordingly RB , , actual JJ capacities NNS may MD be VB higher JJR or CC lower JJR than IN rated VVN capacities NNS due JJ to TO changes NNS in IN refinery NN operation NN and CC the DT type NN of IN crude JJ oil NN available JJ for IN processing NN . SENT Refinery NN throughput NN was VBD 93 CD percent NN of IN capacity NN in IN 2004 CD , , three CD percent NN higher JJR than IN the DT previous JJ year NN . SENT 11 CD Table NN of IN Contents NNS Distribution NN The DT Company NN maintains VVZ a DT nation NN wide JJ distribution NN system NN , , including VVG 30 CD primary JJ terminals NNS , , to TO handle VV bulk NN and CC packaged VVN petroleum NN products NNS moving VVG from IN refineries NNS to TO market NN by IN pipeline NN , , tanker NN , , rail NN and CC road NN transport NN . SENT The DT Company NN owns VVZ and CC operates VVZ crude JJ oil NN , , natural JJ gas NN liquids NNS and CC products NNS pipelines NNS in IN Alberta NP , , Manitoba NP and CC Ontario NP and CC has VHZ interests NNS in IN the DT capital NN stock NN of IN two CD products NNS and CC three CD crude JJ oil NN pipeline NN companies NNS . SENT At IN December NP 31 CD , , 2004 CD , , the DT Company NN owned VVN and CC operated VVN two CD barges NNS . SENT These DT vessels NNS are VBP used VVN primarily RB for IN domestic JJ transportation NN of IN refined JJ petroleum NN products NNS . SENT Marketing VVG The DT Company NN markets NNS more JJR than IN 700 CD petroleum NN products NNS throughout IN Canada NP under IN well RB known VVN brand NN names NNS , , notably RB Esso NP , , to TO all DT types NNS of IN customers NNS . SENT The DT Company NN sells VVZ to TO the DT motoring VVG public NN through IN approximately RB 2 CD , , 000 CD Esso NP service NN stations NNS , , of IN which WDT about RB 720 CD are VBP Company NP owned VVN or CC leased VVN , , but CC none NN of IN which WDT are VBP Company NN operated VVD . SENT The DT Company NN continues VVZ to TO improve VV its PP$ Esso NP service NN station NN network NN , , providing VVG more JJR customer NN services NNS such JJ as IN car NN washes VVZ and CC convenience NN stores NNS , , primarily RB at IN high JJ volume NN sites NNS in IN urban JJ centres NNS . SENT The DT Canadian JJ farm NN , , residential JJ heating NN and CC small JJ commercial JJ markets NNS are VBP served VVN through IN about RB 100 CD sales NNS facilities NNS , , of IN which WDT about IN 40 CD also RB sell VVP fertilizers NNS to TO the DT western JJ Canadian JJ farm NN markets NNS . SENT Heating NN oil NN is VBZ provided VVN through IN authorized JJ dealers NNS as RB well RB as IN through IN three CD Company NN operated VVN Home NP Comfort NP facilities NNS in IN urban JJ markets NNS . SENT The DT Company NN also RB sells VVZ petroleum NN products NNS to TO large JJ industrial JJ and CC commercial JJ accounts NNS as IN well RB as RB to TO other JJ refiners NNS and CC marketers NNS . SENT The DT approximate JJ daily JJ volumes NNS of IN petroleum NN products NNS sold VVN during IN the DT five CD years NNS ended VVN December NP 31 CD , , 2004 CD , , are VBP set VVN out RP in IN the DT following VVG table NN . SENT 2004 CD 2003 CD 2002 JJ 2001 CD 2000 CD thousands NNS a DT day NN Gasolines NNS . SENT Cubic JJ metres NNS 33 CD . SENT 2 CD 33 CD . SENT 0 CD 32 CD . SENT 9 CD 32 CD . SENT 3 CD 32 CD . SENT 0 CD Barrels NNS 209 CD 208 CD 207 JJ 203 CD 201 CD Heating NN , , Diesel NP and CC Jet NP Fuels NNS . SENT Cubic JJ metres NNS 27 CD . SENT 3 CD 26 CD . SENT 2 CD 25 CD . SENT 0 CD 26 CD . SENT 5 CD 27 CD . SENT 5 CD Barrels NNS 172 CD 165 CD 157 JJ 166 CD 173 CD Heavy JJ Fuel NN Oils NNS . SENT Cubic JJ metres NNS 5 CD . SENT 9 CD 5 CD . SENT 4 CD 4 CD . SENT 9 CD 5 CD . SENT 4 CD 5 CD . SENT 1 CD Barrels NNS 37 CD 34 CD 31 JJ 34 CD 32 CD Lube NP Oils NNS and CC Other JJ Products NP 1 CD . SENT Cubic JJ metres NNS 7 CD . SENT 0 CD 5 CD . SENT 8 CD 6 CD . SENT 4 CD 5 CD . SENT 4 CD 5 CD . SENT 0 CD Barrels NNS 44 CD 36 CD 41 JJ 34 CD 31 CD Net JJ petroleum NN product NN sales NNS . SENT Cubic JJ metres NNS 73 CD . SENT 4 CD 70 CD . SENT 4 CD 69 CD . SENT 2 CD 69 CD . SENT 6 CD 69 CD . SENT 6 CD Barrels NNS 462 CD 443 CD 436 JJ 437 CD 437 CD Sales NNS under IN purchase NN and CC sale NN agreements NNS . SENT Cubic JJ metres NNS 14 CD . SENT 2 CD 14 CD . SENT 6 CD 13 CD . SENT 9 CD 11 CD . SENT 6 CD 10 CD . SENT 7 CD Barrels NNS 89 CD 92 CD 87 JJ 73 CD 67 CD Total JJ . SENT Cubic JJ metres NNS 87 CD . SENT 6 CD 85 CD . SENT 0 CD 83 CD . SENT 1 CD 81 CD . SENT 2 CD 80 CD . SENT 3 CD Barrels NNS 551 JJ 535 CD 523 CD 510 CD 504 JJ 1 CD Includes VVZ 1 CD . SENT 0 CD thousand CD cubic JJ metres NNS 6 CD thousand CD barrels NNS per IN day NN of IN butane NN commencing VVG in IN 2002 CD . SENT Butane NN is VBZ not RB included VVN in IN prior JJ years NNS . SENT The DT total JJ domestic JJ sales NNS of IN petroleum NN products NNS as IN a DT percentage NN of IN total JJ sales NNS of IN petroleum NN products NNS during IN the DT five CD years NNS ended VVN December NP 31 CD , , 2004 CD , , were VBD as RB follows VVZ . SENT 2004 CD 2003 CD 2002 JJ 2001 CD 2000 CD 93 CD . SENT 0 CD 93 CD . SENT 3 CD 91 CD . SENT 5 CD 93 CD . SENT 4 CD 94 CD . SENT 0 CD The NP Company NP continues VVZ to TO evaluate VV and CC adjust VV its PP$ Esso NP service NN station NN and CC distribution NN system NN to TO increase VV productivity NN and CC efficiency NN . SENT During IN 2004 CD , , the DT Company NN closed VVD or CC debranded VVD about RB 140 CD Esso NN service NN stations NNS , , about RB 60 CD of IN which WDT were VBD Company NN owned VVN , , and CC added VVD about RB 50 CD sites NNS . SENT The DT Company NN s PP average VVP annual JJ throughput NN in IN 2004 CD per IN Esso NP service NN station NN was VBD 3 CD . SENT 4 CD million CD litres NNS , , the DT same JJ as IN for IN 2003 CD . SENT Average JJ throughput NN per IN Company NN owned VVN Esso NP service NN station NN was VBD 5 CD . SENT 5 CD million CD litres NNS in IN 2004 CD , , an DT increase NN of IN about IN 0 CD . SENT 3 CD million CD litres NNS from IN 2003 CD . SENT 12 CD Table NN of IN Contents NNS Chemicals NNS The DT Company NN s PP Chemicals NP operations NNS manufacture NN and CC market NN ethylene NN , , benzene NN , , aromatic JJ and CC aliphatic JJ solvents NNS , , plasticizer NN intermediates NNS and CC polyethylene NN resin NN . SENT Its PP$ major JJ petrochemical NN and CC polyethylene NN manufacturing NN operations NNS are VBP located VVN in IN Sarnia NP , , Ontario NP , , adjacent JJ to TO the DT Company NN s PP petroleum NN refinery NN . SENT There EX is VBZ also RB a DT heptene NN and CC octene NN plant NN located VVN in IN Dartmouth NP , , Nova NP Scotia NP . SENT The DT Company NN s PP average VVP daily JJ sales NNS of IN petrochemicals NNS during IN the DT five CD years NNS ended VVN December NP 31 CD , , 2004 CD , , were VBD as RB follows VVZ . SENT 2004 CD 2003 CD 2002 JJ 2001 CD 2000 CD thousands NNS a DT day NN Petrochemicals NNS . SENT Tonnes NNS 3 CD . SENT 3 CD 3 CD . SENT 3 CD 3 CD . SENT 5 CD 3 CD . SENT 3 CD 3 CD . SENT 1 CD Tons NNS 3 CD . SENT 6 CD 3 CD . SENT 6 CD 3 CD . SENT 9 CD 3 CD . SENT 6 CD 3 CD . SENT 4 CD Research NP In IN 2004 CD , , the DT Company NP s PP research NN expenditures NNS in IN Canada NP , , before IN deduction NN of IN investment NN tax NN credits NNS , , were VBD 40 CD million CD , , as RB compared VVN with IN 36 CD million CD in IN 2003 CD and CC 50 CD million CD in IN 2002 CD . SENT Those DT funds NNS were VBD used VVN mainly RB for IN developing VVG improved JJ heavy JJ crude JJ oil NN recovery NN methods NNS and CC better JJR lubricants NNS . SENT A DT research NN facility NN to TO support VV the DT Company NN s PP natural JJ resources NNS operations NNS is VBZ located VVN in IN Calgary NP , , Alberta NP . SENT Research NN in IN these DT laboratories NNS is VBZ aimed VVN at IN developing VVG new JJ technology NN for IN the DT production NN and CC processing NN of IN crude JJ bitumen NN . SENT About IN 40 CD people NNS were VBD involved VVN in IN this DT type NN of IN research NN in IN 2004 CD . SENT The DT Company NN also RB participated VVD in IN bitumen NN recovery NN and CC processing NN research NN for IN tar NN sands NNS development NN through IN its PP$ interest NN in IN Syncrude NP , , which WDT maintains VVZ research NN facilities NNS in IN Edmonton NP , , Alberta NP and CC through IN research NN arrangements NNS with IN others NNS . SENT In IN Company NN laboratories NNS in IN Sarnia NP , , Ontario NP , , research NN is VBZ mainly RB conducted VVN on IN the DT development NN and CC improvement NN of IN lubricants NNS and CC fuels NNS . SENT About IN 120 CD people NNS were VBD employed VVN in IN this DT type NN of IN research NN at IN the DT end NN of IN 2004 CD . SENT Also RB in IN Sarnia NP , , there EX are VBP about RB 15 CD people NNS engaged VVN in IN new JJ product NN development NN for IN the DT Company NN s PP and CC Exxon NP Mobil NP Corporation NP s PP polyethylene NN injection NN and CC rotational JJ molding NN businesses NNS . SENT The DT Company NN has VHZ scientific JJ research NN agreements NNS with IN affiliates NNS of IN Exxon NP Mobil NP Corporation NP which WDT provide VVP for IN technical JJ and CC engineering NN work NN to TO be VB performed VVN by IN all DT parties NNS , , the DT exchange NN of IN technical JJ information NN and CC the DT assignment NN and CC licensing NN of IN patents NNS and CC patent NN rights NNS . SENT These DT agreements NNS provide VVP mutual JJ access NN to TO scientific JJ and CC operating VVG data NNS related VVN to TO nearly RB every DT phase NN of IN the DT petroleum NN and CC petrochemical NN operations NNS of IN the DT parties NNS . SENT Environmental NP Protection NP The DT Company NN is VBZ concerned VVN with IN and CC active JJ in IN protecting VVG the DT environment NN in IN connection NN with IN its PP$ various JJ operations NNS . SENT The DT Company NN works VVZ in IN cooperation NN with IN government NN agencies NNS and CC industry NN associations NNS to TO deal VV with IN existing VVG and CC to TO anticipate VV potential JJ environmental JJ protection NN issues NNS . SENT In IN the DT past JJ five CD years NNS , , the DT Company NN has VHZ spent VVN about IN 825 CD million CD on IN environmental JJ protection NN and CC facilities NNS . SENT In IN 2004 CD , , the DT Company NP s PP capital NN expenditures NNS relating VVG to TO environmental JJ protection NN totaled VVD approximately RB 130 CD million CD , , and CC are VBP expected VVN to TO be VB about IN 350 CD million CD in IN 2005 CD . SENT The DT increased JJ environmental JJ expenditures NNS over IN the DT past JJ three CD years NNS primarily RB reflect VVP spending NN on IN two CD major JJ projects NNS . SENT One CD project NN completed VVN in IN 2004 CD , , costing VVG 600 CD million CD , , reduced VVN sulphur NN in IN motor NN gasolines NNS , , meeting VVG a DT requirement NN of IN the DT Government NN of IN Canada NP a DT year NN in IN advance NN . SENT The DT second JJ project NN underway JJ in IN 2004 CD is VBZ to TO meet VV a DT new JJ Government NN of IN Canada NP regulation NN requiring VVG ultra JJ low JJ sulphur NN on IN road NN diesel NN fuel NN commencing VVG in IN 2006 CD and CC which WDT is VBZ to TO be VB fully RB implemented VVN in IN 2007 CD . SENT In IN 2004 CD , , there EX were VBD capital NN expenditures NNS of IN about IN 90 CD million CD on IN this DT second JJ project NN , , which WDT is VBZ expected VVN to TO cost VV about IN 500 CD million CD when WRB completed VVN . SENT Capital NN expenditures NNS on IN safety NN related VVN projects NNS in IN 2004 CD were VBD approximately RB 20 CD million CD . SENT Human NP Resources NPS At IN December NP 31 CD , , 2004 CD , , the DT Company NN employed VVN full JJ time NN approximately RB 6 CD , , 100 CD persons NNS compared VVN with IN about IN 6 CD , , 300 CD at IN the DT end NN of IN 2003 CD and CC 6 CD , , 500 CD at IN the DT end NN of IN 2002 CD . SENT About IN eight CD percent NN of IN those DT employees NNS are VBP members NNS of IN unions NNS . SENT The DT Company NN continues VVZ to TO maintain VV a DT broad JJ range NN of IN benefits NNS , , including VVG illness NN , , disability NN and CC survivor NN benefits NNS , , a DT savings NNS plan NN and CC pension NN plan NN . SENT Competition NN The DT Canadian JJ petroleum NN , , natural JJ gas NN and CC chemical NN industries NNS are VBP highly RB competitive JJ . SENT Competition NN includes VVZ the DT search NN for IN and CC development NN of IN new JJ sources NNS of IN supply NN , , the DT construction NN and CC operation NN of IN crude JJ oil NN and CC refined JJ products NNS pipelines NNS and CC the DT refining NN , , distribution NN and CC marketing NN of IN petroleum NN products NNS and CC chemicals NNS . SENT The DT petroleum NN industry NN also RB competes VVZ with IN other JJ industries NNS in IN supplying VVG energy NN , , fuel NN and CC other JJ needs NNS of IN consumers NNS . SENT 13 CD Table NN of IN Contents NNS Government NP Regulation NP Petroleum NP and CC Natural NP Gas NP Rights NPS Most JJS of IN the DT Company NN s PP petroleum NN and CC natural JJ gas NN rights NNS were VBD acquired VVN from IN governments NNS , , either CC federal JJ or CC provincial JJ . SENT Reservations NNS , , permits NNS or CC licences NNS are VBP acquired VVN from IN the DT provinces NNS for IN cash NN and CC entitle VV the DT holder NN to TO obtain VV leases NNS upon IN completing VVG specified JJ work NN . SENT Leases NNS may MD also RB be VB acquired VVN for IN cash NN . SENT A DT lease NN entitles VVZ the DT holder NN to TO produce VV petroleum NN or CC natural JJ gas NN from IN the DT leased VVN lands NNS . SENT The DT holder NN of IN a DT licence NN relating VVG to TO Canada NP Lands NP and CC the DT Atlantic NP Offshore NP is VBZ generally RB required VVN to TO make VV cash NN payments NNS or CC to TO undertake VV specified JJ work NN or CC amounts NNS of IN exploration NN expenditures NNS in IN order NN to TO retain VV the DT holder NN s PP interest NN in IN the DT land NN and CC may MD become VV entitled VVN to TO produce VV petroleum NN or CC natural JJ gas NN from IN the DT licenced VVN land NN . SENT Crude NP Oil NP Production NP The DT maximum JJ allowable JJ gross JJ production NN of IN crude JJ oil NN from IN wells NNS in IN Canada NP is VBZ subject JJ to TO limitation NN by IN various JJ regulatory JJ authorities NNS on IN the DT basis NN of IN engineering NN and CC conservation NN principles NNS . SENT Exports NNS Export NN contracts NNS of IN more JJR than IN one CD year NN for IN light JJ crude JJ oil NN and CC petroleum NN products NNS and CC two CD years NNS for IN heavy JJ crude JJ oil NN including VVG crude JJ bitumen NN require VV the DT prior JJ approval NN of IN the DT National NP Energy NP Board NP the DT NEB NN and CC the DT Government NN of IN Canada NP . SENT Natural NP Gas NP Production NP The DT maximum JJ allowable JJ gross JJ production NN of IN natural JJ gas NN from IN wells NNS in IN Canada NP is VBZ subject JJ to TO limitation NN by IN various JJ regulatory JJ authorities NNS on IN the DT basis NN of IN engineering NN and CC conservation NN principles NNS . SENT A DT permit NN is VBZ required VVN from IN the DT Alberta NP Energy NP and CC Utilities NP Board NP , , subject JJ to TO the DT approval NN of IN the DT Province NP of IN Alberta NP , , for IN the DT removal NN from IN Alberta NP of IN natural JJ gas NN produced VVN in IN that DT province NN . SENT Exports VVZ The DT Government NN of IN Canada NP has VHZ the DT authority NN to TO regulate VV the DT export NN price NN for IN natural JJ gas NN and CC has VHZ a DT gas NN export NN pricing NN policy NN which WDT accommodates VVZ export NN prices NNS for IN natural JJ gas NN negotiated VVN between IN Canadian JJ exporters NNS and CC U NP . SENT S NP . SENT importers NNS . SENT Exports NNS of IN natural JJ gas NN from IN Canada NP require VVP approval NN by IN the DT NEB NN and CC the DT Government NN of IN Canada NP . SENT The DT Government NN of IN Canada NP allows VVZ the DT export NN of IN natural JJ gas NN by IN NEB NN order NN without IN volume NN limitation NN for IN terms NNS not RB exceeding VVG 24 CD months NNS . SENT Royalties NNS The DT Government NN of IN Canada NP and CC the DT provinces NNS in IN which WDT the DT Company NN produces VVZ crude JJ oil NN and CC natural JJ gas NN impose VV royalties NNS on IN production NN from IN lands NNS where WRB they PP own VVP the DT mineral NN rights NNS . SENT Some DT producing VVG provinces NNS also RB receive VVP revenue NN by IN imposing VVG taxes NNS on IN production NN from IN lands NNS where WRB they PP do VVP not RB own VV the DT mineral NN rights NNS . SENT Different JJ royalties NNS are VBP imposed VVN by IN the DT Government NN of IN Canada NP and CC each DT of IN the DT producing VVG provinces NNS . SENT Royalties NNS imposed VVN by IN the DT producing VVG provinces NNS on IN crude JJ oil NN vary VVP depending VVG on IN well RB production NN volumes NNS , , selling VVG prices NNS , , recovery NN methods NNS and CC the DT date NN of IN initial JJ production NN . SENT Royalties NNS imposed VVN by IN the DT producing VVG provinces NNS on IN natural JJ gas NN and CC natural JJ gas NN liquids NNS vary VVP depending VVG on IN well RB production NN volumes NNS , , selling VVG prices NNS and CC the DT date NN of IN initial JJ production NN . SENT For IN information NN with IN respect NN to TO royalty NN rates NNS for IN Norman NP Wells NP , , Cold NP Lake NP and CC Syncrude NP , , see VVP Natural NP Resources NP Petroleum NP and CC Natural NP Gas NP Production NP . SENT Investment NP Canada NP Act NP The NP Investment NP Canada NP Act NP requires VVZ Government NN of IN Canada NP approval NN , , in IN certain JJ cases NNS , , of IN the DT acquisition NN of IN control NN of IN a DT Canadian JJ business NN by IN an DT entity NN that WDT is VBZ not RB controlled VVN by IN Canadians NNS . SENT In IN certain JJ circumstances NNS , , the DT acquisition NN of IN natural JJ resource NN properties NNS may MD be VB considered VVN to TO be VB a DT transaction NN that WDT constitutes VVZ an DT acquisition NN of IN control NN of IN a DT Canadian JJ business NN requiring VVG Government NP of IN Canada NP approval NN . SENT The DT Act NP requires VVZ notification NN of IN the DT establishment NN of IN new JJ unrelated JJ businesses NNS in IN Canada NP by IN entities NNS not RB controlled VVN by IN Canadians NNS , , but CC does VVZ not RB require VV Government NP of IN Canada NP approval NN except IN when WRB the DT new JJ business NN is VBZ related VVN to TO Canada NP s PP cultural JJ heritage NN or CC national JJ identity NN . SENT By IN virtue NN of IN the DT majority NN stock NN ownership NN of IN the DT Company NN by IN Exxon NP Mobil NP Corporation NP , , the DT Company NN is VBZ considered VVN to TO be VB an DT entity NN which WDT is VBZ not RB controlled VVN by IN Canadians NNS . SENT The DT Company NN Online JJ The DT Company NN s PP website JJ www NNS . SENT imperialoil NN . SENT ca MD contains VVZ a DT variety NN of IN corporate JJ and CC investor NN information NN which WDT are VBP available JJ free RB of IN charge NN , , including VVG the DT Company NN s PP annual JJ report NN on IN Form NP 10 CD K NP , , quarterly JJ reports NNS on IN Form NP 10 CD Q NP and CC current JJ reports NNS on IN Form NP 8 CD K NN and CC amendments NNS to TO these DT reports NNS . SENT These DT reports NNS are VBP made VVN available JJ as RB soon RB as IN reasonably RB practicable JJ after IN they PP are VBP filed VVN or CC furnished VVN to TO the DT U NP . SENT S NP . SENT Securities NPS and CC Exchange NP Commission NP . SENT 14 CD Table NN of IN Contents NNS Item NN 2 CD . SENT Properties NNS . SENT Reference NN is VBZ made VVN to TO Item NN 1 CD above RB , , and CC for IN the DT reserves NNS of IN the DT Syncrude NP mining NN operations NNS and CC oil NN and CC gas NN producing VVG activities NNS , , reference NN is VBZ made VVN to TO Item NN 8 CD of IN this DT report NN . SENT Item NN 3 CD . SENT Legal JJ Proceedings NNS . SENT Not RB applicable JJ . SENT Item NN 4 CD . SENT Submission NN of IN Matters NNS to TO a DT Vote NP of IN Security NP Holders NNS . SENT Not RB applicable JJ . SENT PART NN II CD Item NN 5 CD . SENT Market NN for IN Registrant NN s PP Common NP Equity NP , , Related JJ Stockholder NN Matters NNS and CC Issuer NN Purchases NNS of IN Equity NP Securities NPS . SENT Information NN for IN Security NP Holders NNS Outside IN Canada NP Cash NP dividends NNS paid VVD to TO shareholders NNS resident JJ in IN countries NNS with IN which WDT Canada NP has VHZ an DT income NN tax NN convention NN are VBP usually RB subject JJ to TO a DT Canadian JJ nonresident JJ withholding NN tax NN of IN 15 CD percent NN . SENT The DT withholding NN tax NN is VBZ reduced VVN to TO five CD percent NN on IN dividends NNS paid VVN to TO a DT corporation NN resident NN in IN the DT United NP States NP that WDT owns VVZ at IN least JJS 10 CD percent NN of IN the DT voting NN shares NNS of IN the DT Company NN . SENT The DT Company NN is VBZ a DT qualified JJ foreign JJ corporation NN for IN purposes NNS of IN the DT new JJ reduced JJ U NP . SENT S NP . SENT capital NN gains NNS tax NN rates VVZ 15 CD percent NN and CC 5 CD percent NN for IN certain JJ individuals NNS which WDT are VBP applicable JJ to TO dividends NNS paid VVN by IN U NP . SENT S NP . SENT domestic JJ corporations NNS and CC qualified JJ foreign JJ corporations NNS . SENT There EX is VBZ no DT Canadian JJ tax NN on IN gains NNS from IN selling VVG shares NNS or CC debt NN instruments NNS owned VVN by IN nonresidents NNS not RB carrying VVG on IN business NN in IN Canada NP . SENT Quarterly JJ Financial NP and CC Stock NP Trading NP Data NP 2004 CD 2003 CD three CD months NNS ended VVD three CD months NNS ended VVN Mar NP . SENT 31 CD June NP 30 CD Sept NP . SENT 30 CD Dec NP . SENT 31 CD Mar NP . SENT 31 CD June NP 30 CD Sept NP . SENT 30 CD Dec NP . SENT 31 CD Per IN share NN information NN dollars NNS Dividends NNS declared VVD quarterly JJ 0 CD . SENT 22 CD 0 CD . SENT 22 CD 0 CD . SENT 22 CD 0 CD . SENT 22 CD 0 CD . SENT 21 CD 0 CD . SENT 22 CD 0 CD . SENT 22 CD 0 CD . SENT 22 CD Share NN prices NNS dollars NNS Toronto NP Stock NP Exchange NP High NP 64 CD . SENT 45 CD 64 CD . SENT 25 CD 66 CD . SENT 76 CD 73 CD . SENT 65 CD 47 CD . SENT 80 CD 47 CD . SENT 40 CD 53 CD . SENT 49 CD 58 CD . SENT 22 CD Low NP 56 CD . SENT 42 CD 58 CD . SENT 40 CD 59 CD . SENT 50 CD 65 CD . SENT 28 CD 43 CD . SENT 48 CD 43 CD . SENT 20 CD 45 CD . SENT 62 CD 50 CD . SENT 16 CD Close NP 58 CD . SENT 87 CD 62 CD . SENT 40 CD 65 CD . SENT 48 CD 71 CD . SENT 15 CD 47 CD . SENT 35 CD 47 CD . SENT 10 CD 50 CD . SENT 80 CD 57 CD . SENT 53 CD American NP Stock NP Exchange NP U NP . SENT S NP . SENT High NP 48 CD . SENT 70 CD 47 CD . SENT 13 CD 52 CD . SENT 22 CD 62 CD . SENT 45 CD 32 CD . SENT 20 CD 34 CD . SENT 99 CD 38 CD . SENT 79 CD 44 CD . SENT 75 CD Low NP 42 CD . SENT 34 CD 43 CD . SENT 17 CD 45 CD . SENT 50 CD 51 CD . SENT 43 CD 28 CD . SENT 25 CD 29 CD . SENT 94 CD 33 CD . SENT 04 CD 37 CD . SENT 24 CD Close NP 44 CD . SENT 84 CD 46 CD . SENT 82 CD 51 CD . SENT 71 CD 59 CD . SENT 37 CD 32 CD . SENT 14 CD 34 CD . SENT 92 CD 37 CD . SENT 21 CD 44 CD . SENT 42 CD The NP Company NP s PP shares NNS are VBP listed VVN on IN the DT Toronto NP Stock NP Exchange NP and CC are VBP admitted VVN to TO unlisted JJ trading NN on IN the DT American NP Stock NP Exchange NP in IN New NP York NP . SENT The DT symbol NN on IN these DT exchanges NNS for IN the DT Company NN s PP common JJ shares NNS is VBZ IMO NP . SENT Share NN prices NNS were VBD obtained VVN from IN stock NN exchange NN records NNS . SENT As RB of IN February NP 28 CD , , 2005 CD , , there EX were VBD 14 CD , , 868 CD holders NNS of IN record NN of IN common JJ shares NNS of IN the DT Company NN . SENT During IN the DT period NN October NP 1 CD , , 2004 CD to TO December NP 31 CD , , 2004 CD , , the DT Company NN issued VVD 85 CD , , 925 CD common JJ shares NNS for IN 46 CD . SENT 50 CD per IN share NN as IN a DT result NN of IN the DT exercise NN of IN stock NN options NNS by IN the DT holders NNS of IN the DT stock NN options NNS , , who WP are VBP all DT employees NNS or CC former JJ employees NNS of IN the DT Company NN , , in IN sales NNS of IN those DT common JJ shares NNS outside IN the DT U NP . SENT S NP . SENT A DT . SENT which WDT were VBD not RB registered VVN under IN the DT Securities NPS Act NP in IN reliance NN on IN Regulation NP S NP thereunder RB . SENT Issuer NN purchases NNS of IN equity NN securities NNS 1 CD a DT Total JJ number NN c SYM Total JJ number NN of IN shares NNS d SYM Maximum JJ number NN or CC approximate JJ of IN shares NNS b SYM Average JJ price NN purchased VVN as IN part NN dollar NN value NN or CC shares NNS that IN or CC units NNS paid VVN per IN share NN of IN publicly RB announced VVN may MD yet RB be VB purchased VVN under IN Period NP purchased VVD or CC unit NN plans NNS or CC programs NNS the DT plans NNS or CC programs NNS October NP 2004 CD October NP 1 CD October NP 31 CD 909 CD , , 277 CD 69 CD . SENT 34 CD 909 CD , , 277 CD 12 CD , , 981 CD , , 800 CD November NP 2004 CD November NP 1 CD November NP 30 CD 2 CD , , 043 CD , , 336 CD 70 CD . SENT 61 CD 2 CD , , 043 CD , , 336 CD 10 CD , , 903 CD , , 650 CD December NP 2004 CD December NP 1 CD December NP 31 CD 1 CD , , 198 CD , , 579 CD 70 CD . SENT 25 CD 1 CD , , 198 CD , , 579 CD 9 CD , , 670 CD , , 839 CD 1 CD The DT purchases NNS were VBD pursuant JJ to TO a DT 12 CD month NN normal JJ course NN share NN purchase NN program NN that WDT was VBD renewed VVN on IN June NP 23 CD , , 2004 CD under IN which WDT the DT Company NN may MD purchase VV up RB to TO 17 CD , , 864 CD , , 398 CD of IN its PP$ outstanding JJ common JJ shares NNS less CC any DT shares NNS purchased VVN by IN the DT employee NN savings NN plan NN and CC Company NN pension NN fund NN . SENT If IN not RB previously RB terminated VVN , , the DT program NN will MD terminate VV on IN June NP 22 CD , , 2005 CD . SENT 15 CD Table NN of IN Contents NNS Item NN 6 CD . SENT Selected JJ Financial NP Data NP . SENT 2004 CD 2003 CD 2002 JJ 2001 CD 2000 CD millions NNS Total JJ revenues NNS 22 CD , , 460 CD 19 CD , , 208 CD 17 CD , , 042 CD 17 CD , , 253 CD 18 CD , , 051 CD Net JJ income NN 2 CD , , 052 CD 1 CD , , 705 CD 1 CD , , 214 CD 1 CD , , 223 CD 1 CD , , 408 CD Total JJ assets NNS 14 CD , , 027 CD 12 CD , , 337 CD 12 CD , , 003 CD 10 CD , , 888 CD 11 CD , , 266 CD Long JJ term NN debt NN 367 CD 859 CD 1 CD , , 466 CD 1 CD , , 029 CD 1 CD , , 037 CD Other JJ long JJ term NN obligations NNS 1 CD , , 525 CD 1 CD , , 314 CD 1 CD , , 822 CD 1 CD , , 303 CD 1 CD , , 110 CD dollars NNS Net JJ income NN share NN basic JJ 5 CD . SENT 75 CD 4 CD . SENT 58 CD 3 CD . SENT 20 CD 3 CD . SENT 11 CD 3 CD . SENT 37 CD Net JJ income NN share NN diluted VVD 5 CD . SENT 74 CD 4 CD . SENT 58 CD 3 CD . SENT 20 CD 3 CD . SENT 11 CD 3 CD . SENT 37 CD Cash NP dividends NNS share NN 0 CD . SENT 88 CD 0 CD . SENT 87 CD 0 CD . SENT 84 CD 0 CD . SENT 83 CD 0 CD . SENT 78 CD Reference NN is VBZ made VVN to TO the DT table NN setting VVG forth RB exchange NN rates NNS for IN the DT Canadian JJ dollar NN , , expressed VVN in IN U NP . SENT S NP . SENT dollars NNS , , on IN page NN 2 CD of IN this DT report NN . SENT Item NN 7 CD . SENT Management NP s PP Discussion NN and CC Analysis NN of IN Financial NP Condition NN and CC Results NNS of IN Operation NN . SENT Overview NN While IN commodity NN prices NNS remain VVP volatile JJ on IN a DT short JJ term NN basis NN depending VVG upon IN supply NN and CC demand NN , , the DT Company NP s PP investment NN decisions NNS are VBP based VVN on IN long JJ term NN outlooks NNS . SENT The DT corporate JJ plan NN is VBZ a DT fundamental JJ annual JJ management NN process NN that WDT is VBZ the DT basis NN for IN setting VVG near JJ term NN operating NN and CC capital NN objectives NNS in IN addition NN to TO providing VVG the DT longer JJR term NN economic JJ assumptions NNS used VVN for IN investment NN evaluation NN purposes NNS . SENT Annual JJ plan NN volumes NNS are VBP based VVN on IN individual JJ field NN production NN profiles NNS updated VVN annually RB . SENT Prices NNS for IN natural JJ gas NN and CC other JJ products NNS used VVN for IN investment NN evaluation NN purposes NNS are VBP based VVN on IN corporate JJ plan NN assumptions NNS that WDT are VBP developed VVN annually RB . SENT Potential JJ investment NN opportunities NNS are VBP tested VVN over IN a DT wide JJ range NN of IN economic JJ scenarios NNS to TO establish VV the DT resiliency NN of IN each DT opportunity NN . SENT Once RB investments NNS are VBP made VVN , , a DT reappraisal NN process NN is VBZ completed VVN . SENT Business NN environment NN and CC outlook NN Natural JJ resources NNS The DT Company NN produces VVZ crude JJ oil NN and CC natural JJ gas NN for IN sale NN into IN large JJ North JJ American JJ markets NNS . SENT Economic JJ and CC population NN growth NN are VBP expected VVN to TO remain VV the DT primary JJ drivers NNS of IN energy NN demand NN . SENT The DT Company NN expects VVZ the DT global JJ economy NN to TO grow VV at IN an DT average JJ rate NN of IN about RB three CD percent NN per IN year NN through IN 2030 CD . SENT World NN energy NN demand NN should MD grow VV by IN about RB two CD percent NN per IN year NN , , and CC oil NN and CC gas NN are VBP expected VVN to TO account VV for IN about RB 60 CD percent NN of IN world NN energy NN supply NN by IN 2030 CD . SENT Over IN the DT same JJ period NN , , the DT Canadian JJ economy NN is VBZ expected VVN to TO grow VV at IN an DT average JJ rate NN of IN two CD percent NN per IN year NN , , and CC Canadian JJ demand NN for IN energy NN at IN a DT rate NN of IN about RB one CD percent NN per IN year NN . SENT Oil NN and CC gas NN are VBP expected VVN to TO continue VV to TO supply VV two CD thirds NNS of IN Canadian JJ energy NN demand NN . SENT It PP is VBZ expected VVN that IN Canada NP will MD also RB be VB a DT growing VVG supplier NN of IN energy NN to TO U NP . SENT S NP . SENT markets NNS through IN this DT period NN . SENT Oil NN products NNS are VBP the DT transportation NN fuel NN of IN choice NN for IN the DT world NN s PP fleet NN of IN cars NNS , , trucks NNS , , trains NNS , , ships NNS and CC airplanes NNS . SENT Primarily RB because IN of IN increased JJ demand NN in IN developing VVG countries NNS , , oil NN production NN is VBZ expected VVN to TO increase VV by IN 50 CD percent NN or CC nearly RB 30 CD million CD barrels NNS per IN day NN over IN the DT next JJ three CD decades NNS . SENT Canada NP s PP oil NN sands NNS represent VVP an DT important JJ additional JJ source NN of IN supply NN . SENT Natural JJ gas NN is VBZ expected VVN to TO be VB the DT fastest JJS growing VVG primary JJ energy NN source NN globally RB , , capturing VVG about IN one CD third NN of IN all DT incremental JJ energy NN growth NN and CC approaching VVG one CD quarter NN of IN global JJ energy NN supplies NNS . SENT Natural JJ gas NN production NN from IN mature JJ established VVN regions NNS in IN the DT United NP States NPS and CC Canada NP is VBZ not RB expected VVN to TO meet VV increasing VVG demand NN , , strengthening VVG the DT market NN opportunities NNS for IN new JJ gas NN supply NN from IN Canada NP s PP frontier NN areas NNS . SENT Crude JJ oil NN and CC natural JJ gas NN prices NNS are VBP determined VVN by IN global JJ and CC North JJ America NP markets NNS and CC are VBP subject JJ to TO changing VVG supply NN and CC demand NN conditions NNS . SENT These DT can MD be VB influenced VVN by IN a DT wide JJ range NN of IN factors NNS including VVG economic JJ conditions NNS , , international JJ political JJ developments NNS and CC weather NN . SENT In IN the DT past JJ , , crude JJ oil NN and CC natural JJ gas NN prices NNS have VHP been VBN volatile JJ and CC the DT Company NN expects VVZ that DT volatility NN to TO continue VV . SENT The DT Company NN has VHZ a DT large JJ and CC diverse JJ portfolio NN of IN oil NN and CC gas NN resources NNS , , both CC developed JJ and CC undeveloped JJ , , in IN Canada NP , , which WDT helps VVZ reduce VV the DT risks NNS of IN dependence NN on IN potentially RB limited JJ supply NN sources NNS in IN the DT upstream JJ . SENT With IN the DT relative JJ maturity NN of IN conventional JJ production NN in IN the DT established JJ producing VVG areas NNS of IN Western NP Canada NP , , the DT Company NP s PP production NN is VBZ expected VVN to TO come VV increasingly RB from IN frontier NN and CC unconventional JJ sources NNS , , particularly RB oil NN sands NNS and CC natural JJ gas NN from IN the DT Far NP North NP , , where WRB the DT Company NN has VHZ large JJ undeveloped JJ resource NN opportunities NNS . SENT 16 CD Table NN of IN Contents NNS Petroleum NP products NNS The DT downstream JJ continues VVZ to TO experience VV ongoing JJ volatility NN in IN industry NN margins NNS . SENT Refining NN margins NNS are VBP the DT difference NN between IN what WP a DT refinery NN pays VVZ for IN its PP$ raw JJ materials NNS primarily RB crude JJ oil NN and CC the DT wholesale JJ market NN prices NNS for IN the DT range NN of IN products NNS produced VVD primarily RB gasoline NN , , diesel JJ fuel NN , , heating VVG oil NN , , jet NN fuel NN and CC fuel NN oil NN . SENT Crude JJ oil NN and CC many JJ products NNS are VBP widely RB traded VVN with IN published VVN international JJ prices NNS . SENT Prices NNS for IN those DT commodities NNS are VBP determined VVN by IN the DT marketplace NN , , often RB an DT international JJ marketplace NN , , and CC are VBP impacted VVN by IN many JJ factors NNS , , including VVG global JJ and CC regional JJ supply NN demand NN balances NNS , , inventory NN levels NNS , , refinery NN operations NNS , , import NN export NN balances NNS , , seasonality NN and CC weather NN . SENT Canadian JJ wholesale JJ prices NNS in IN particular JJ are VBP largely RB determined VVN by IN wholesale JJ prices NNS in IN adjacent JJ U NP . SENT S NP . SENT regions NNS . SENT These DT prices NNS and CC factors NNS are VBP continually RB monitored VVN and CC provide VV input NN to TO operating VVG decisions NNS about IN which WDT raw JJ materials NNS to TO buy VV , , facilities NNS to TO operate VV and CC products NNS to TO make VV . SENT However RB , , there EX are VBP no DT reliable JJ indicators NNS of IN future JJ market NN factors NNS that WDT accurately RB predict VVP changes NNS in IN margins NNS from IN period NN to TO period NN . SENT The DT Company NN s PP downstream JJ strategies NNS are VBP to TO provide VV customers NNS with IN quality NN service NN at IN the DT lowest JJS total JJ cost NN offer NN , , have VHP the DT lowest JJS unit NN costs NNS amongst IN the DT Company NN s PP competitors NNS , , ensure VV efficient JJ and CC effective JJ use NN of IN capital NN and CC capitalize VV on IN integration NN with IN the DT Company NN s PP other JJ businesses NNS . SENT The DT Company NN owns VVZ and CC operates VVZ four CD refineries NNS in IN Canada NP with IN distillation NN capacity NN of IN 502 CD , , 000 CD barrels NNS a DT day NN and CC lubricant JJ manufacturing VVG capacity NN of IN 9 CD , , 000 CD barrels NNS a DT day NN . SENT The DT Company NP s PP fuels NNS marketing VVG business NN includes VVZ retail JJ operations NNS across IN Canada NP serving VVG customers NNS through IN about IN 2 CD , , 000 CD Esso NP branded VVD service NN stations NNS , , of IN which WDT about RB 720 CD are VBP Company NP owned VVN or CC leased VVN , , and CC wholesale JJ and CC industrial JJ operations NNS through IN a DT network NN of IN 30 CD distribution NN terminals NNS . SENT Chemicals NNS Although IN the DT current JJ business NN environment NN is VBZ favourable JJ , , the DT North NP American NP petrochemical NN industry NN is VBZ cyclical JJ . SENT The DT Company NP s PP strategy NN for IN its PP$ chemicals NNS business NN is VBZ to TO reduce VV costs NNS and CC maximize VV value NN by IN continuing VVG to TO increase VV the DT integration NN of IN its PP$ chemicals NNS plants NNS at IN Sarnia NP and CC Dartmouth NP with IN the DT refineries NNS . SENT The DT Company NN also RB benefits VVZ from IN its PP$ integration NN within IN ExxonMobil NP s PP North NP American NP chemicals NNS businesses NNS , , enabling VVG the DT Company NN to TO maintain VV a DT leadership NN position NN in IN its PP$ key JJ market NN segments NNS . SENT Results NNS of IN operations NNS Net JJ income NN in IN 2004 CD was VBD 2 CD , , 052 CD million CD or CC 5 CD . SENT 74 CD a DT share NN the DT best JJS year NN on IN record NN compared VVN with IN 1 CD , , 705 CD million CD or CC 4 CD . SENT 58 CD a DT share NN in IN 2003 CD 2002 CD 1 CD , , 214 CD million CD or CC 3 CD . SENT 20 CD a DT share NN . SENT Higher JJR realizations NNS for IN crude JJ oil NN , , stronger JJR industry NN refining NN and CC petrochemical NN margins NNS , , and CC higher JJR volumes NNS of IN Syncrude NP production NN , , natural JJ gas NN and CC petroleum NN products NNS contributed VVD positively RB to TO net JJ income NN , , partly RB offset VVN by IN lower JJR marketing NN margins NNS . SENT Compared VVN with IN 2003 CD , , these DT favourable JJ operating NN results NNS were VBD partly RB offset VVN by IN the DT combined JJ negative JJ effects NNS of IN a DT higher JJR Canadian JJ dollar NN on IN resource NN and CC product NN prices NNS of IN about IN 260 CD million CD , , the DT absence NN of IN favourable JJ foreign JJ exchange NN effects NNS on IN the DT Company NP s PP U NP . SENT S NP . SENT dollar NN denominated VVN debt NN of IN about RB 110 CD million CD , , and CC lower JJR benefits NNS from IN tax NN matters NNS of IN about IN 100 CD million CD . SENT Total JJ revenues NNS were VBD 22 CD . SENT 5 CD billion CD , , up RB about IN 17 CD percent NN from IN 2003 CD . SENT Natural NP Resources NP Net JJ income NN from IN natural JJ resources NNS was VBD a DT record JJ 1 CD , , 487 CD million CD , , up RB from IN 1 CD , , 143 CD million CD in IN 2003 CD 2002 CD 1 CD , , 042 CD million CD . SENT The DT positive JJ earnings NNS effects NNS of IN improved JJ realizations NNS for IN crude JJ oil NN and CC natural JJ gas NN , , combined VVN with IN higher JJR Syncrude NP , , natural JJ gas NN and CC natural JJ gas NN liquids NNS NGLs NP volumes NNS were VBD partly RB offset VVN by IN lower JJR Cold NP Lake NP bitumen NN production NN , , lower JJR benefits NNS from IN tax NN matters NNS and CC the DT negative JJ effects NNS of IN a DT higher JJR Canadian JJ dollar NN . SENT Resource NP revenues NNS were VBD 6 CD . SENT 6 CD billion CD , , up RB from IN 5 CD . SENT 6 CD billion CD in IN 2003 CD 2002 CD 4 CD . SENT 9 CD billion CD . SENT The DT main JJ reasons NNS for IN the DT increase NN were VBD higher JJR prices NNS for IN crude JJ oil NN and CC increased VVD natural JJ gas NN and CC Syncrude NP volumes NNS . SENT Financial JJ statistics NNS 2004 CD 2003 CD 2002 JJ 2001 CD 2000 CD millions NNS Net JJ income NN 1 CD , , 487 CD 1 CD , , 143 CD 1 CD , , 042 CD 941 CD 1 CD , , 165 CD Revenues NNS 6 CD , , 625 CD 5 CD , , 648 CD 4 CD , , 894 CD 5 CD , , 321 CD 5 CD , , 900 CD U NP . SENT S NP . SENT dollar NN world NN oil NN prices NNS were VBD considerably RB higher JJR in IN 2004 CD than IN in IN the DT previous JJ year NN . SENT The DT annual JJ average JJ price NN of IN Brent NP crude JJ oil NN , , the DT most RBS actively RB traded VVN North NP Sea NP crude NN and CC a DT common JJ benchmark NN of IN world NN oil NN markets NNS , , was VBD 38 CD U NP . SENT S NP . SENT a DT barrel NN in IN 2004 CD , , a DT more JJR than IN 30 CD percent NN increase NN over IN the DT average JJ price NN of IN 29 CD in IN 2003 CD 2002 CD 25 CD . SENT However RB , , increases NNS in IN the DT Company NN s PP Canadian JJ dollar NN realizations NNS for IN conventional JJ crude JJ oil NN and CC Cold NP Lake NP bitumen NN were VBD dampened VVD by IN the DT effects NNS of IN a DT higher JJR Canadian JJ dollar NN . SENT Average JJ realizations NNS for IN conventional JJ crude JJ oil NN during IN the DT year NN were VBD 48 CD . SENT 96 CD Cdn NP a DT barrel NN , , an DT increase NN of IN 22 CD percent NN from IN that DT of IN 40 CD . SENT 10 CD in IN 2003 CD 2002 CD 36 CD . SENT 81 CD . SENT 17 CD Table NN of IN Contents NNS Average JJ prices NNS for IN Canadian JJ heavy JJ crude NN oil NN were VBD higher JJR in IN 2004 CD , , but CC by IN less JJR than IN the DT relative JJ increase NN in IN light JJ crude JJ oil NN prices NNS , , as IN increased VVN supply NN of IN heavy JJ crude JJ oil NN widened VVD the DT average JJ spread NN between IN light JJ and CC heavy JJ crude NN . SENT The DT price NN of IN Bow NP River NP , , a DT benchmark JJ Canadian JJ heavy JJ crude NN oil NN , , increased VVN by IN 15 CD percent NN in IN 2004 CD , , much RB less JJR than IN the DT increase NN in IN prices NNS for IN Canadian JJ light JJ crude NN oil NN . SENT Cold JJ Lake NP bitumen NN realizations NNS in IN U NP . SENT S NP . SENT dollars NNS averaged VVD 19 CD percent NN higher JJR in IN 2004 CD than IN in IN 2003 CD . SENT Average JJ realizations NNS for IN Cold NP Lake NP bitumen NN were VBD only RB about RB 10 CD percent NN higher JJR than IN the DT previous JJ year NN , , reflecting VVG the DT effect NN of IN the DT higher JJR Canadian JJ dollar NN . SENT Prices NNS for IN Canadian JJ natural JJ gas NN in IN 2004 CD were VBD essentially RB unchanged JJ from IN the DT previous JJ year NN . SENT The DT average NN of IN 30 CD day NN spot NN prices NNS for IN natural JJ gas NN at IN the DT AECO NP hub NN in IN Alberta NP was VBD about RB 6 CD . SENT 80 RB a DT thousand CD cubic JJ feet NNS in IN 2004 CD , , compared VVN with IN 6 CD . SENT 70 CD in IN 2003 CD 2002 CD 4 CD . SENT 10 CD . SENT The DT Company NN s PP average VVP realizations NNS on IN natural JJ gas NN sales NNS were VBD 6 CD . SENT 78 RB a DT thousand CD cubic JJ feet NNS , , compared VVN with IN 6 CD . SENT 60 CD in IN 2003 CD 2002 CD 4 CD . SENT 02 CD . SENT Average JJ realizations NNS and CC prices NNS 2004 CD 2003 CD 2002 JJ 2001 CD 2000 CD Conventional JJ crude JJ oil NN realizations NNS a DT barrel NN 48 CD . SENT 96 CD 40 CD . SENT 10 CD 36 CD . SENT 81 CD 35 CD . SENT 56 CD 41 CD . SENT 52 CD Natural JJ gas NN liquids NNS realizations NNS a DT barrel NN 33 CD . SENT 78 CD 32 CD . SENT 09 CD 23 CD . SENT 38 CD 29 CD . SENT 31 CD 29 CD . SENT 57 CD Natural JJ gas NN realizations NNS a DT thousand CD cubic JJ feet NNS 6 CD . SENT 78 CD 6 CD . SENT 60 CD 4 CD . SENT 02 CD 5 CD . SENT 72 CD 4 CD . SENT 99 CD Par NP crude JJ oil NN price NN at IN Edmonton NP a DT barrel NN 53 CD . SENT 26 CD 43 CD . SENT 93 CD 40 CD . SENT 44 CD 39 CD . SENT 64 CD 45 CD . SENT 02 CD Heavy JJ crude JJ oil NN price NN at IN Hardisty NP Bow NP River NP , , a DT barrel NN 37 CD . SENT 98 CD 33 CD . SENT 00 CD 31 CD . SENT 85 CD 25 CD . SENT 11 CD 34 CD . SENT 49 CD Gross JJ production NN of IN crude JJ oil NN and CC NGL NP increased VVD to TO 262 CD , , 000 CD barrels NNS a DT day NN from IN 256 CD , , 000 CD barrels NNS in IN 2003 CD 2002 CD 247 CD , , 000 CD . SENT Gross JJ bitumen NN production NN at IN the DT Company NN s PP wholly RB owned VVD facilities NNS at IN Cold NP Lake NP decreased VVD to TO 126 CD , , 000 CD barrels NNS a DT day NN from IN 129 CD , , 000 CD barrels NNS in IN 2003 CD 2002 CD 112 CD , , 000 CD , , due JJ to TO the DT cyclic JJ nature NN of IN production NN at IN Cold NP Lake NP . SENT Production NN from IN the DT Syncrude NP operation NN , , in IN which WDT the DT Company NN has VHZ a DT 25 CD percent NN interest NN , , increased VVN during IN 2004 CD as IN a DT result NN of IN reduced JJ turnaround NN activities NNS . SENT Gross JJ production NN of IN upgraded VVN crude JJ oil NN increased VVD to TO a DT record JJ 238 CD , , 000 CD barrels NNS a DT day NN from IN 211 CD , , 000 CD barrels NNS in IN 2003 CD 2002 CD 229 CD , , 000 CD . SENT The DT Company NP s PP share NN of IN average JJ gross JJ production NN increased VVD to TO 60 CD , , 000 CD barrels NNS a DT day NN from IN 53 CD , , 000 CD barrels NNS in IN 2003 CD 2002 CD 57 CD , , 000 CD . SENT Gross JJ production NN of IN conventional JJ oil NN decreased VVD to TO 43 CD , , 000 CD barrels NNS a DT day NN from IN 46 CD , , 000 CD barrels NNS in IN 2003 CD 2002 CD 51 CD , , 000 CD as IN a DT result NN of IN the DT natural JJ decline NN in IN Western JJ Canadian JJ reservoirs NNS . SENT Gross JJ production NN of IN NGLs NP available JJ for IN sale NN averaged VVD 33 CD , , 000 CD barrels NNS a DT day NN in IN 2004 CD , , up RB from IN 28 CD , , 000 CD barrels NNS in IN 2003 CD 2002 CD 27 CD , , 000 CD . SENT Gross JJ production NN of IN natural JJ gas NN increased VVD to TO 569 CD million CD cubic JJ feet NNS a DT day NN from IN 513 CD million CD in IN 2003 CD 2002 CD 530 CD million CD . SENT Higher JJR natural JJ gas NN and CC NGL NP volumes NNS were VBD mainly RB a DT result NN of IN the DT full JJ year NN production NN of IN natural JJ gas NN from IN the DT Wizard JJ Lake NP gas NN cap NN in IN Alberta NP , , which WDT began VVD in IN the DT third JJ quarter NN of IN 2003 CD . SENT Crude JJ oil NN and CC NGLs NP production NN and CC sales NNS a DT 2004 CD 2003 CD 2002 JJ 2001 CD 2000 CD gross JJ net JJ gross JJ net JJ gross JJ net JJ gross JJ net JJ gross JJ net JJ thousands NNS of IN barrels NNS a DT day NN Conventional JJ crude NN oil NN 43 CD 33 CD 46 JJ 35 CD 51 CD 39 JJ 55 CD 42 CD 60 CD 46 CD Cold NP Lake NP 126 CD 112 CD 129 JJ 116 CD 112 CD 106 JJ 128 CD 121 CD 119 CD 102 CD Syncrude NP 60 CD 59 CD 53 JJ 52 CD 57 CD 57 JJ 56 CD 52 CD 51 CD 42 CD Total JJ crude JJ oil NN production NN 229 CD 204 CD 228 JJ 203 CD 220 CD 202 JJ 239 CD 215 CD 230 JJ 190 CD NGLs NNS available JJ for IN sale NN 33 CD 26 CD 28 JJ 22 CD 27 CD 21 JJ 28 CD 22 CD 30 CD 23 CD Total JJ crude JJ oil NN and CC NGL NP production NN 262 CD 230 CD 256 JJ 225 CD 247 CD 223 JJ 267 CD 237 CD 260 CD 213 CD Cold NP Lake NP sales NNS , , including VVG diluent JJ b NN 167 CD 170 CD 145 JJ 167 CD 156 CD NGL NP sales NNS 42 CD 39 CD 40 JJ 43 CD 42 CD Natural JJ gas NN production NN and CC sales NNS a DT 2004 CD 2003 CD 2002 JJ 2001 CD 2000 CD gross JJ net JJ gross JJ net JJ gross JJ net JJ gross JJ net JJ gross JJ net JJ millions NNS of IN cubic JJ feet NNS a DT day NN Production NN c SYM 569 CD 518 CD 513 JJ 457 CD 530 CD 463 JJ 572 CD 466 CD 526 JJ 459 CD Sales NNS 520 CD 460 CD 499 JJ 502 CD 419 CD a DT Daily JJ volumes NNS are VBP calculated VVN by IN dividing VVG total JJ volumes NNS for IN the DT year NN by IN the DT number NN of IN days NNS in IN the DT year NN . SENT Gross JJ production NN is VBZ the DT Company NN s PP share NN of IN production NN excluding VVG purchases NNS before IN deducting VVG the DT shares NNS of IN mineral NN owners NNS or CC governments NNS or CC both DT . SENT Net JJ production NN excludes VVZ those DT shares NNS . SENT b SYM Includes VVZ natural JJ gas NN condensate NN added VVD to TO the DT Cold NP Lake NP bitumen NN to TO facilitate VV transportation NN to TO market NN by IN pipeline NN . SENT c SYM Production NN of IN natural JJ gas NN includes VVZ amounts NNS used VVN for IN internal JJ consumption NN with IN the DT exception NN of IN amounts NNS reinjected VVN . SENT Operating NN costs NNS increased VVN by IN seven CD percent NN in IN 2004 CD . SENT The DT main JJ factor NN was VBD higher JJR depreciation NN and CC depletion NN expenses NNS in IN line NN with IN higher JJR production NN volumes NNS . SENT 18 CD Table NN of IN Contents NNS Petroleum NP Products NPS Net JJ income NN from IN petroleum NN products NNS was VBD a DT record JJ 500 CD million CD or CC 1 CD . SENT 6 CD cents NNS a DT litre NN in IN 2004 CD , , up RB from IN 407 CD million CD or CC 1 CD . SENT 3 CD cents NNS a DT litre NN in IN 2003 CD 2002 CD 127 CD million CD or CC 0 CD . SENT 4 CD cents NNS a DT litre NN . SENT Improved JJ earnings NNS were VBD mainly RB due JJ to TO stronger JJR international JJ refining NN margins NNS , , partly RB offset VVN by IN lower JJR fuels NNS marketing VVG margins NNS and CC the DT negative JJ impact NN of IN a DT higher JJR Canadian JJ dollar NN . SENT Sales NNS volumes NNS of IN petroleum NN products NNS were VBD higher JJR , , due JJ in IN part NN to TO higher JJR industry NN demand NN . SENT Revenues NNS were VBD 19 CD . SENT 2 CD billion CD , , up RB from IN 16 CD . SENT 1 CD billion CD in IN 2003 CD 2002 CD 14 CD . SENT 4 CD billion CD . SENT Financial JJ statistics NNS 2004 CD 2003 CD 2002 JJ 2001 CD 2000 CD millions NNS Net JJ income NN 500 CD 407 CD 127 JJ 353 CD 313 CD Revenues NNS 19 CD , , 211 CD 16 CD , , 058 CD 14 CD , , 434 CD 14 CD , , 405 CD 15 CD , , 120 CD Sales NNS of IN petroleum NN products NNS 2004 CD 2003 CD 2002 JJ 2001 CD 2000 CD millions NNS of IN litres NNS a DT day NN a DT Gasolines NNS 33 CD . SENT 2 CD 33 CD . SENT 0 CD 32 CD . SENT 9 CD 32 CD . SENT 3 CD 32 CD . SENT 0 CD Heating NN , , diesel NN and CC jet NN fuels NNS 27 CD . SENT 3 CD 26 CD . SENT 2 CD 25 CD . SENT 0 CD 26 CD . SENT 5 CD 27 CD . SENT 5 CD Heavy JJ fuel NN oils NNS 5 CD . SENT 9 CD 5 CD . SENT 4 CD 4 CD . SENT 9 CD 5 CD . SENT 4 CD 5 CD . SENT 1 CD Lube NP oils NNS and CC other JJ products NNS 7 CD . SENT 0 CD 5 CD . SENT 8 CD 6 CD . SENT 4 CD 5 CD . SENT 4 CD 5 CD . SENT 0 CD Net JJ petroleum NN products NNS sales JJ 73 CD . SENT 4 CD 70 CD . SENT 4 CD 69 CD . SENT 2 CD 69 CD . SENT 6 CD 69 CD . SENT 6 CD Sales NNS under IN purchase NN and CC sale NN agreements NNS 14 CD . SENT 2 CD 14 CD . SENT 6 CD 13 CD . SENT 9 CD 11 CD . SENT 6 CD 10 CD . SENT 7 CD Total JJ sales NNS of IN petroleum NN products NNS 87 CD . SENT 6 CD 85 CD . SENT 0 CD 83 CD . SENT 1 CD 81 CD . SENT 2 CD 80 CD . SENT 3 CD Total JJ domestic JJ sales NNS of IN petroleum NN products NNS percent NN 93 CD . SENT 0 CD 93 CD . SENT 3 CD 91 CD . SENT 5 CD 93 CD . SENT 4 CD 94 CD . SENT 0 CD Refinery NN utilization NN 2004 CD 2003 CD 2002 JJ 2001 CD 2000 CD millions NNS of IN litres NNS a DT day NN a DT Total JJ refinery NN throughput NN b SYM 74 CD . SENT 3 CD 71 CD . SENT 6 CD 71 CD . SENT 2 CD 71 CD . SENT 4 CD 71 CD . SENT 6 CD Refinery NN capacity NN at IN December NP 31 CD 79 CD . SENT 9 CD 79 CD . SENT 9 CD 79 CD . SENT 4 CD 79 CD . SENT 1 CD 78 CD . SENT 7 CD Utilization NN of IN total JJ refinery NN capacity NN percent NN 93 CD 90 CD 90 JJ 90 CD 91 CD a DT Volumes NNS a DT day NN are VBP calculated VVN by IN dividing VVG total JJ volumes NNS for IN the DT year NN by IN the DT number NN of IN days NNS in IN the DT year NN . SENT b SYM Crude JJ oil NN and CC feedstocks NNS sent VVD directly RB to TO atmospheric JJ distillation NN units NNS . SENT Margins NNS were VBD stronger JJR in IN the DT refining NN segment NN of IN the DT industry NN in IN 2004 CD compared VVN with IN those DT in IN 2003 CD , , as IN international JJ wholesale JJ product NN prices NNS increased VVD more JJR than IN raw JJ material NN costs NNS . SENT However RB , , the DT effects NNS of IN higher JJR international JJ margins NNS were VBD reduced VVN partially RB by IN a DT higher JJR Canadian JJ dollar NN . SENT Retail JJ margins NNS in IN the DT fuels NNS marketing NN area NN were VBD lower JJR in IN 2004 CD , , reflecting VVG the DT impact NN of IN highly RB competitive JJ markets NNS . SENT Throughput NN at IN the DT refineries NNS has VHZ increased VVN with IN refinery NN capacity NN utilization NN averaging VVG a DT record JJ 93 CD percent NN during IN 2004 CD , , compared VVN with IN 90 CD percent NN in IN 2003 CD 2002 CD 90 CD percent NN . SENT The DT Company NN s PP total VVP sales NNS volumes NNS , , including VVG those DT resulting VVG from IN reciprocal JJ supply NN agreements NNS with IN other JJ companies NNS , , were VBD 87 CD . SENT 6 CD million CD litres NNS a DT day NN , , compared VVN with IN 85 CD million CD litres NNS in IN 2003 CD 2002 CD 83 CD . SENT 1 CD million CD . SENT Excluding VVG sales NNS resulting VVG from IN reciprocal JJ agreements NNS , , sales NNS were VBD 73 CD . SENT 4 CD million CD litres NNS a DT day NN , , compared VVN with IN 70 CD . SENT 4 CD million CD litres NNS in IN 2003 CD 2002 CD 69 CD . SENT 2 CD million CD . SENT Operating NN costs NNS increased VVN by IN about RB two CD percent NN in IN 2004 CD from IN the DT previous JJ year NN , , mainly RB because IN of IN higher JJR energy NN , , environmental JJ and CC depreciation NN costs NNS . SENT Chemicals NNS Net JJ income NN from IN chemical NN operations NNS was VBD 100 CD million CD in IN 2004 CD , , compared VVN with IN 37 CD million CD in IN 2003 CD 2002 CD 52 CD million CD . SENT Strong JJ industry NN polyethylene NN and CC benzene NN margins NNS were VBD the DT main JJ factors NNS contributing VVG to TO the DT improvement NN . SENT Financial JJ statistics NNS 2004 CD 2003 CD 2002 JJ 2001 CD 2000 CD millions NNS Net JJ income NN 100 CD 37 CD 52 JJ 23 CD 59 CD Revenues NNS 1 CD , , 509 CD 1 CD , , 232 CD 1 CD , , 164 CD 1 CD , , 175 CD 1 CD , , 173 CD 19 CD Table NN of IN Contents NNS Sales NNS volumes NNS 2004 CD 2003 CD 2002 JJ 2001 CD 2000 CD thousands NNS of IN tonnes NNS a DT day NN a DT Polymers NNS basic JJ chemicals NNS 2 CD . SENT 7 CD 2 CD . SENT 4 CD 2 CD . SENT 5 CD 2 CD . SENT 4 CD 2 CD . SENT 2 CD Intermediates NNS and CC other JJ 0 CD . SENT 6 CD 0 CD . SENT 9 CD 1 CD . SENT 0 CD 0 CD . SENT 9 CD 0 CD . SENT 9 CD Total JJ chemicals NNS 3 CD . SENT 3 CD 3 CD . SENT 3 CD 3 CD . SENT 5 CD 3 CD . SENT 3 CD 3 CD . SENT 1 LS a DT Volumes NNS a DT day NN are VBP calculated VVN by IN dividing VVG total JJ volumes NNS for IN the DT year NN by IN the DT number NN of IN days NNS in IN the DT year NN . SENT Total JJ revenues NNS from IN chemical NN operations NNS were VBD 1 CD , , 509 CD million CD , , compared VVN with IN 1 CD , , 232 CD million CD in IN 2003 CD 2002 CD 1 CD , , 164 CD million CD . SENT Higher JJR prices NNS for IN polyethylene NN , , intermediate JJ chemicals NNS and CC aromatics NNS were VBD the DT contributing VVG factors NNS . SENT The DT average JJ industry NN price NN of IN polyethylene NN was VBD 1 CD , , 584 CD a DT tonne NN in IN 2004 CD , , up RB 12 CD percent NN from IN 1 CD , , 415 CD a DT tonne NN in IN 2003 CD 2002 CD 1 CD , , 229 CD . SENT Margins NNS were VBD higher JJR as IN demand NN for IN polyethylene NN products NNS grew VVD . SENT Sales NNS of IN chemicals NNS were VBD 3 CD , , 300 CD tonnes NNS a DT day NN , , unchanged JJ from IN 2003 CD 2002 CD 3 CD , , 500 CD tonnes NNS , , while IN polyethylene NN and CC benzene NN sales NNS were VBD up RB three CD percent NN and CC 32 CD percent NN respectively RB over IN 2003 CD . SENT Operating VVG costs NNS in IN the DT chemicals NNS segment NN for IN 2004 CD were VBD about IN the DT same JJ as IN 2003 CD . SENT Higher JJR energy NN costs NNS were VBD offset VVN by IN lower JJR depreciation NN expense NN . SENT A DT significant JJ portion NN of IN the DT property NN , , plant NN and CC equipment NN currently RB used VVN in IN production NN and CC manufacturing NN , , has VHZ been VBN fully RB depreciated VVD . SENT Corporate JJ and CC other JJ Net JJ income NN from IN corporate JJ and CC other JJ accounts NNS was VBD negative JJ 35 CD million CD in IN 2004 CD , , compared VVN with IN positive JJ 118 CD million CD in IN 2003 CD 2002 CD negative JJ 7 CD million CD . SENT Lower RBR net JJ income NN in IN 2004 CD was VBD mainly RB due JJ to TO the DT absence NN of IN the DT favourable JJ foreign JJ exchange NN effects NNS on IN the DT Company NP s PP U NP . SENT S NP . SENT dollar NN denominated VVN debt NN , , which WDT was VBD replaced VVN with IN Canadian JJ dollar NN denominated VVN debt NN in IN June NP and CC July NP of IN 2003 CD . SENT Net JJ income NN for IN 2004 CD also RB included VVD a DT nonrecurring VVG after IN tax NN write VV down RP of IN 42 CD million CD on IN a DT north JJ Toronto NP property NN , , which WDT was VBD acquired VVN in IN 1991 CD to TO be VB the DT Company NN s PP future JJ Toronto NP headquarters NN site NN . SENT The DT remeasurement NN at IN fair JJ value NN of IN this DT property NN reflected VVD a DT change NN in IN its PP$ intended JJ use NN and CC management NN s PP commitment NN to TO sell VV following VVG the DT announcement NN of IN the DT relocation NN of IN the DT Company NN s PP headquarters NNS to TO Calgary NP . SENT Liquidity NN and CC capital NN resources NNS Sources NNS and CC uses NNS of IN cash NN 2004 CD 2003 CD millions NNS of IN dollars NNS Cash NN provided VVN by IN used VVN in IN Operating VVG activities NNS 3 CD , , 312 CD 2 CD , , 227 CD Investing NN activities NNS 1 CD , , 306 CD 1 CD , , 426 CD Financing NP activities NNS 1 CD , , 175 CD 1 CD , , 119 RB Increase VV decrease NN in IN cash NN and CC cash NN equivalents NNS 831 CD 318 CD Cash NN and CC cash NN equivalents NNS at IN end NN of IN year NN 1 CD , , 279 CD 448 CD Although IN the DT Company NN issues NNS long JJ term NN debt NN from IN time NN to TO time NN , , internally RB generated VVD funds NNS cover VV the DT majority NN of IN its PP$ financial JJ requirements NNS . SENT The DT management NN of IN cash NN that WDT may MD be VB temporarily RB available JJ as IN surplus NN to TO the DT Company NN s PP immediate JJ needs NNS is VBZ carefully RB controlled VVN , , both CC to TO ensure VV that IN it PP is VBZ secure JJ and CC readily RB available JJ to TO meet VV the DT Company NN s PP cash NN requirements NNS as IN they PP arise VVP and CC to TO optimize VV returns NNS on IN cash NN balances NNS . SENT Cash NN flows NNS from IN operating VVG activities NNS are VBP highly RB dependent JJ on IN crude JJ oil NN and CC natural JJ gas NN prices NNS and CC product NN margins NNS . SENT In IN addition NN , , the DT Company NN will MD need VV to TO continually RB find VV and CC develop VV new JJ resources NNS , , and CC continue VVP to TO develop VV and CC apply VV new JJ technologies NNS and CC recovery NN processes NNS to TO existing JJ fields NNS , , in IN order NN to TO maintain VV or CC increase VV production NN and CC resulting VVG cash NN flows NNS in IN future JJ periods NNS . SENT Projects NNS are VBP in IN place NN , , or CC underway JJ , , to TO increase VV production NN capacity NN . SENT However RB , , these DT volume NN increases NNS are VBP subject JJ to TO a DT variety NN of IN risks NNS including VVG project NN execution NN , , operational JJ outages NNS , , reservoir NN performance NN and CC regulatory JJ changes NNS . SENT The DT Company NN s PP financial JJ strength NN enables VVZ it PP to TO make VV large JJ , , long JJ term NN capital NN expenditures NNS . SENT The DT Company NN s PP large JJ and CC diverse JJ portfolio NN of IN development NN opportunities NNS and CC the DT complementary JJ nature NN of IN its PP$ business NN segments NNS help VVP mitigate VV the DT overall JJ risks NNS of IN the DT Company NN and CC associated JJ cash NN flow NN . SENT Further RBR , , due JJ to TO its PP$ financial JJ strength NN , , debt NN capacity NN and CC diverse JJ portfolio NN of IN opportunities NNS , , the DT risk NN associated VVN with IN failure NN or CC delay NN of IN any DT single JJ project NN would MD not RB have VH a DT significant JJ impact NN on IN the DT Company NN s PP liquidity NN or CC ability NN to TO generate VV sufficient JJ cash NN flows NNS for IN operations NNS and CC its PP$ fixed JJ commitments NNS . SENT Cash NN flow NN from IN operating VVG activities NNS Cash NN provided VVN by IN operating VVG activities NNS was VBD 3 CD , , 312 CD million CD , , up RB from IN 2 CD , , 227 CD million CD in IN 2003 CD 2002 CD 1 CD , , 688 CD million CD . SENT The DT increased JJ cash NN inflow NN was VBD mainly RB due JJ to TO higher JJR net JJ income NN , , timing NN of IN scheduled VVN income NN tax NN payments NNS and CC the DT additional JJ funding NN contributions NNS to TO the DT employee NN pension NN plan NN in IN 2003 CD . SENT 20 CD Table NN of IN Contents NNS Capital NP and CC exploration NN expenditures NNS Total JJ capital NN and CC exploration NN expenditures NNS were VBD 1 CD , , 445 CD million CD in IN 2004 CD , , down RB slightly RB from IN 1 CD , , 559 CD million CD in IN 2003 CD 2002 CD 1 CD , , 612 CD million CD . SENT The DT funds NNS were VBD used VVN mainly RB to TO invest VV in IN growth NN opportunities NNS in IN the DT oil NN sands NNS and CC the DT Mackenzie NP gas NN project NN , , to TO upgrade VV refineries NNS to TO meet VV low JJ sulphur NN diesel NN requirements NNS and CC to TO enhance VV the DT Company NN s PP retail VVP network NN . SENT About IN 150 CD million CD was VBD spent VVN on IN projects NNS related VVN to TO reducing VVG the DT environmental JJ impact NN of IN its PP$ operations NNS and CC improving VVG safety NN including VVG about IN 90 CD million CD on IN the DT 500 CD million CD capital NN project NN to TO produce VV low JJ sulphur NN diesel NN . SENT The DT following VVG table NN shows VVZ the DT Company NN s PP capital NN and CC exploration NN expenditures NNS for IN natural JJ resources NNS during IN the DT five CD years NNS ending VVG December NP 31 CD , , 2004 CD . SENT 2004 CD 2003 CD 2002 JJ 2001 CD 2000 CD millions NNS Exploration NP 60 CD 57 CD 39 JJ 49 CD 56 CD Production NN 234 CD 181 CD 143 JJ 109 CD 110 CD Heavy NP oil NN 819 CD 769 CD 804 JJ 588 CD 268 CD Total JJ 1 CD , , 113 CD 1 CD , , 007 CD 986 CD 746 CD 434 CD For IN the DT natural JJ resources NNS segment NN , , about RB 90 CD percent NN of IN the DT capital NN and CC exploration NN expenditures NNS in IN 2004 CD was VBD focused VVN on IN growth NN opportunities NNS . SENT The DT single JJ largest JJS investment NN during IN the DT year NN was VBD the DT Company NN s PP share NN of IN the DT Syncrude NP expansion NN . SENT Construction NN on IN the DT upgrader NN expansion NN made VVD good JJ progress NN since IN the DT first JJ quarter NN of IN 2004 CD when WRB cost NN estimates NNS were VBD substantially RB increased VVN and CC the DT construction NN schedule NN was VBD extended VVN . SENT At IN year NN end NN , , the DT project NN was VBD tracking VVG to TO the DT revised VVN cost NN and CC construction NN schedule NN . SENT The DT remainder NN of IN 2004 CD investment NN was VBD directed VVN to TO advancing VVG the DT Mackenzie NP gas NN project NN and CC drilling NN at IN Cold NP Lake NP and CC in IN conventional JJ fields NNS in IN Eastern NP and CC Western NP Canada NP . SENT For IN the DT Mackenzie NP gas NN project NN , , in IN October NP 2004 CD , , the DT main JJ regulatory JJ applications NNS and CC environmental JJ impact NN statement NN were VBD filed VVN with IN the DT National NP Energy NP Board NP and CC other JJ boards NNS , , panels NNS and CC agencies NNS responsible JJ for IN assessing VVG and CC regulating VVG energy NN developments NNS in IN the DT Northwest NP Territories NP . SENT The DT regulatory JJ review NN process NN is VBZ expected VVN to TO take VV up RP to TO 24 CD months NNS . SENT A DT decision NN to TO proceed VV with IN the DT project NN will MD be VB made VVN by IN the DT co NP venturers NNS of IN the DT project NN after IN approvals NNS are VBP received VVN and CC any DT conditions NNS attached VVN to TO the DT approvals NNS are VBP assessed VVN . SENT Planned JJ capital NN and CC exploration NN expenditures NNS in IN natural JJ resources NNS are VBP expected VVN to TO be VB about IN 1 CD billion CD in IN 2005 CD , , with IN nearly RB 90 CD percent NN of IN the DT total NN focused VVN on IN growth NN opportunities NNS . SENT Much RB of IN the DT expenditure NN will MD be VB directed VVN to TO the DT expansion NN now RB underway JJ at IN Syncrude NP . SENT Investments NNS are VBP also RB planned VVN for IN the DT ongoing JJ development NN drilling NN at IN Cold NP Lake NP , , the DT Mackenzie NP gas NN project NN and CC further JJR development NN drilling NN in IN Western NP Canada NP . SENT Planned JJ expenditures NNS for IN exploration NN and CC development NN drilling NN , , as RB well RB as IN capacity NN additions NNS in IN conventional JJ oil NN and CC gas NN operations NNS , , are VBP expected VVN to TO be VB about IN 355 CD million CD . SENT The DT following VVG table NN shows VVZ the DT Company NN s PP capital NN expenditures NNS in IN the DT petroleum NN products NNS segment NN during IN the DT five CD years NNS ending VVG December NP 31 CD , , 2004 CD . SENT 2004 CD 2003 CD 2002 JJ 2001 CD 2000 CD millions NNS Marketing NP 85 CD 91 CD 133 JJ 171 CD 121 CD Refining NN and CC supply VV 178 CD 369 CD 399 JJ 118 CD 100 CD Other JJ a DT 20 CD 18 CD 57 JJ 50 CD 11 CD Total JJ 283 CD 478 CD 589 JJ 339 CD 232 CD a DT Consists VVZ primarily RB of IN purchases NNS of IN real JJ estate NN . SENT For IN the DT petroleum NN products NNS segment NN , , capital NN expenditures NNS decreased VVD to TO 283 CD million CD in IN 2004 CD , , compared VVN with IN 478 CD million CD in IN 2003 CD 2002 CD 589 CD million CD , , primarily RB because IN of IN the DT completion NN of IN the DT project NN to TO significantly RB reduce VV sulphur NN content NN in IN gasoline NN , , which WDT began VVD in IN 2001 CD . SENT New JJ investments NNS in IN 2004 CD included VVD about IN 90 CD million CD spent VVN on IN the DT initial JJ phases NNS of IN a DT three CD year NN project NN to TO reduce VV sulphur NN content NN in IN diesel NN . SENT In IN addition NN , , 24 CD million CD was VBD spent VVN on IN other JJ refinery NN projects NNS to TO improve VV energy NN efficiency NN and CC increase NN yield NN . SENT Major JJ investments NNS were VBD also RB made VVN to TO upgrade VV the DT network NN of IN Esso NP service NN stations NNS during IN the DT year NN . SENT Capital NN expenditures NNS for IN the DT petroleum NN products NNS segment NN in IN 2005 CD are VBP expected VVN to TO be VB about IN 550 CD million CD . SENT Major JJ items NNS include VVP additional JJ investment NN in IN refining NN facilities NNS to TO reduce VV the DT sulphur NN content NN in IN diesel NN to TO meet VV regulatory JJ requirements NNS and CC continued JJ enhancements NNS to TO the DT Company NN s PP retail VVP network NN . SENT The DT following VVG table NN shows VVZ the DT Company NN s PP capital NN expenditures NNS for IN the DT chemicals NNS operations NNS during IN the DT five CD years NNS ending VVG December NP 31 CD , , 2004 CD . SENT 2004 CD 2003 CD 2002 JJ 2001 CD 2000 CD millions NNS Chemicals NP 15 CD 41 CD 25 JJ 30 CD 13 CD Of IN the DT capital NN expenditures NNS for IN chemicals NNS in IN 2004 CD , , the DT major JJ investment NN focused VVN on IN improving VVG energy NN efficiency NN , , yields NNS and CC process NN control NN technology NN . SENT 21 CD Table NN of IN Contents NNS Planned NP capital NN expenditures NNS for IN chemicals NNS in IN 2005 CD will MD be VB about IN 20 CD million CD . SENT Total JJ capital NN and CC exploration NN expenditures NNS for IN the DT Company NN in IN 2005 CD , , which WDT will MD focus VV mainly RB on IN growth NN and CC productivity NN improvements NNS , , are VBP expected VVN to TO total VV about IN 1 CD . SENT 6 CD billion CD and CC will MD be VB financed VVN from IN internally RB generated VVN funds NNS . SENT Cash NN flow NN from IN financing NN activities NNS In IN June NP , , the DT Company NN renewed VVD the DT normal JJ course NN issuer NN bid NN share NN repurchase VVD program NN for IN another DT 12 CD months NNS . SENT During IN 2004 CD , , the DT Company NN purchased VVN about IN 14 CD million CD shares NNS for IN 872 CD million CD 2003 JJ 16 CD million CD shares NNS for IN 799 CD million CD . SENT Since IN the DT Company NN initiated VVD its PP$ first JJ share NN repurchase NN program NN in IN 1995 CD , , the DT Company NN has VHZ purchased VVN 233 CD million CD shares NNS representing VVG about IN 40 CD percent NN of IN the DT total NN outstanding JJ at IN the DT start NN of IN the DT program NN with IN resulting VVG distributions NNS to TO shareholders NNS of IN 6 CD . SENT 8 CD billion CD . SENT The DT Company NN declared VVD dividends NNS totalling VVG 88 CD cents NNS a DT share NN in IN 2004 CD , , up RB from IN 87 CD cents NNS in IN 2003 CD 2002 CD 84 CD cents NNS . SENT Regular JJ per IN share NN dividends NNS paid VVN have VHP increased VVN in IN each DT of IN the DT past JJ 10 CD years NNS and CC , , since IN 1986 CD , , payments NNS per IN share NN have VHP grown VVN by IN more JJR than IN 65 CD percent NN . SENT Total JJ debt NN outstanding JJ at IN the DT end NN of IN 2004 CD , , excluding VVG the DT Company NN s PP share NN of IN equity NN Company NN debt NN , , was VBD 1 CD , , 443 CD million CD , , compared VVN with IN 1 CD , , 432 CD million CD at IN the DT end NN of IN 2003 CD 2002 CD 1 CD , , 538 CD million CD . SENT Debt NN represented VVD 19 CD percent NN of IN the DT Company NN s PP capital JJ structure NN at IN the DT end NN of IN 2004 CD , , compared VVN with IN 21 CD percent NN at IN the DT end NN of IN 2003 CD 2002 CD 24 CD percent NN . SENT Debt NN related JJ interest NN incurred VVN in IN 2004 CD , , before IN capitalization NN of IN interest NN , , was VBD 37 CD million CD , , down RB from IN 38 CD million CD in IN 2003 CD 2002 CD 40 CD million CD . SENT The DT average JJ effective JJ interest NN rate NN on IN the DT Company NN s PP debt NN was VBD 2 CD . SENT 8 CD percent NN in IN 2004 CD , , compared VVN with IN 2 CD . SENT 9 CD percent NN in IN 2003 CD 2002 CD 2 CD . SENT 1 CD percent NN . SENT On IN May NP 6 CD , , 2004 CD , , the DT Company NN filed VVD a DT final JJ short JJ form NN shelf NN prospectus NN in IN Canada NP in IN connection NN with IN the DT issuance NN of IN medium JJ term NN notes NNS over IN the DT 25 CD month NN period NN that IN the DT shelf NN prospectus NN remains VVZ valid JJ . SENT The DT unsecured JJ notes NNS will MD be VB issued VVN from IN time NN to TO time NN at IN the DT discretion NN of IN the DT Company NN in IN an DT aggregate JJ amount NN not RB to TO exceed VV 1 CD billion CD . SENT The DT Company NN has VHZ not RB issued VVN any DT notes NNS under IN this DT shelf NN prospectus NN . SENT Financial JJ percentages NNS and CC ratios NNS 2004 CD 2003 CD 2002 JJ 2001 CD 2000 CD Total JJ debt NN as IN a DT percentage NN of IN capital NN a DT 19 CD 21 CD 24 JJ 26 CD 25 CD Interest NN coverage NN ratios NNS Earnings NNS basis NN b NN 83 CD 64 CD 46 JJ 26 CD 23 CD Cash NN flow NN basis NN c SYM 108 CD 80 CD 63 JJ 36 CD 29 CD a DT Current JJ and CC long JJ term NN portions NNS of IN debt NN page NN F NP 5 CD divided VVN by IN debt NN and CC shareholders NNS equity NN page NN F NP 5 CD . SENT b SYM Net JJ income NN page NN F NP 3 CD , , debt NN related JJ interest NN expense NN before IN capitalization NN page NN F NP 20 CD , , note NN 15 CD and CC income NN taxes NNS page NN F NP 3 CD divided VVN by IN debt NN related JJ interest NN expense NN before IN capitalization NN . SENT c SYM Cash NN flow NN from IN net JJ income NN adjusted VVN for IN the DT cumulative JJ effect NN of IN accounting NN change NN and CC other JJ non JJ cash NN items NNS page NN F NP 4 CD , , current JJ income NN tax NN expense NN page NN F NP 12 CD , , note NN 4 CD and CC debt NN related JJ interest NN expense NN before IN capitalization NN divided VVN by IN debt NN related JJ interest NN expense NN before IN capitalization NN . SENT Contractual JJ obligations NNS To TO more RBR fully RB explain VV the DT Company NN s PP financial JJ position NN , , the DT following VVG table NN shows VVZ the DT Company NN s PP contractual JJ obligations NNS outstanding JJ at IN December NP 31 CD , , 2004 CD . SENT It PP brings VVZ together RB , , for IN easier JJR reference NN , , data NNS from IN the DT consolidated JJ balance NN sheet NN and CC from IN individual JJ notes NNS to TO the DT consolidated JJ financial JJ statements NNS . SENT Financial JJ Payment NN due JJ by IN period NN statement NN note NN 2006 CD to TO 2010 CD and CC Total JJ millions NNS of IN dollars NNS reference NN 2005 CD 2009 CD beyond IN amount NN Long JJ term NN debt NN and CC capital NN leases NNS note VVP 3 CD 995 CD 334 JJ 33 CD 1 CD , , 362 CD Company NN s PP share NN of IN equity NN Company NN debt NN 56 CD 56 CD Operating NN leases NNS note VVP 12 CD 62 CD 181 JJ 91 CD 334 CD Unconditional JJ purchase NN obligations NNS a DT note NN 12 CD 102 CD 168 JJ 55 CD 325 CD Firm JJ capital JJ commitments NNS b SYM note NN 12 CD 119 CD 52 CD 171 CD Pension NP obligations NNS c SYM note NN 7 CD 371 CD 91 JJ 297 CD 759 CD Asset NP retirement NN obligations NNS d SYM note NN 8 CD 36 CD 116 JJ 176 CD 328 CD Other JJ long JJ term NN agreements NNS e NN note VVP 12 CD 241 CD 378 JJ 198 CD 817 CD a DT Unconditional JJ purchase NN obligations NNS mainly RB pertain VV to TO pipeline NN throughput NN agreements NNS . SENT b SYM Firm JJ capital NN commitments NNS related VVN to TO capital NN projects NNS , , shown VVN on IN an DT undiscounted JJ basis NN , , totalled VVD approximately RB 171 CD million CD at IN the DT end NN of IN 2004 CD , , compared VVN with IN 189 CD million CD at IN year NN end NN 2003 CD . SENT The DT largest JJS commitment NN outstanding JJ at IN year NN end NN 2004 CD was VBD associated VVN with IN the DT Company NN s PP share NN of IN upstream JJ capital NN projects NNS of IN 112 CD million CD at IN Syncrude NP and CC offshore JJ Canada NP s PP East NP Coast NP . SENT Table NN continued VVD on IN following VVG page NN 22 CD Table NN of IN Contents NNS c SYM The DT amount NN by IN which WDT accumulated VVN benefit NN obligations NNS ABO NN exceeded VVD the DT fair JJ value NN of IN fund NN assets NNS at IN year NN end NN page NN F NP 13 CD , , note NN 7 CD . SENT For IN funded JJ pension NN plans NNS , , this DT difference NN was VBD 446 CD million CD at IN December NP 31 CD , , 2004 CD . SENT For IN unfunded JJ plans NNS , , this DT was VBD the DT ABO NN amount NN of IN 313 CD million CD . SENT The DT payments NNS by IN period NN include VVP expected VVN contributions NNS to TO funded JJ pension NN plans NNS in IN 2005 CD and CC estimated VVN benefit NN payments NNS for IN unfunded JJ plans NNS in IN all DT years NNS . SENT d SYM Asset NP retirement NN obligations NNS represent VVP the DT discounted JJ present JJ value NN of IN legal JJ obligations NNS associated VVN with IN site NN restoration NN on IN the DT retirement NN of IN assets NNS with IN determinable JJ useful JJ lives NNS . SENT e SYM Other JJ long JJ term NN agreements NNS include VVP primarily RB raw JJ material NN supply NN and CC transportation NN services NNS agreements NNS . SENT The DT Company NN was VBD contingently RB liable JJ at IN December NP 31 CD , , 2004 CD , , for IN a DT maximum NN of IN 175 CD million CD relating VVG to TO guarantees NNS for IN purchasing VVG operating NN equipment NN and CC other JJ assets NNS from IN its PP$ rural JJ marketing NN associates NNS upon IN expiry NN of IN the DT associate NN agreement NN or CC the DT death NN or CC resignation NN of IN the DT associate NN . SENT The DT Company NN expects VVZ that IN the DT fair JJ value NN of IN the DT operating VVG equipment NN and CC other JJ assets NNS so RB purchased VVN would MD cover VV the DT maximum JJ potential JJ amount NN of IN future JJ payment NN under IN the DT guarantees NNS . SENT Various JJ lawsuits NNS are VBP pending VVG against IN Imperial NP Oil NP Limited NP and CC its PP$ subsidiaries NNS . SENT Based VVN on IN a DT consideration NN of IN all DT relevant JJ facts NNS and CC circumstances NNS , , the DT Company NN does VVZ not RB believe VV the DT ultimate JJ outcome NN of IN any DT currently RB pending VVG lawsuits NNS against IN the DT Company NN will MD have VH a DT material JJ adverse JJ effect NN upon IN the DT Company NN s PP operations NNS or CC financial JJ condition NN . SENT There EX are VBP no DT events NNS or CC uncertainties NNS known VVN to TO management NN beyond IN those DT already RB included VVN in IN reported VVN financial JJ information NN that WDT would MD indicate VV a DT material NN change NN in IN future JJ operating NN results NNS or CC financial JJ condition NN . SENT Recently RB issued VVN Statement NN of IN Financial NP Accounting NP Standards NPS In IN December NP 2004 CD , , the DT Financial NP Accounting NP Standards NPS Board NP FASB NP issued VVD a DT revised VVN Statement NN of IN Financial NP Accounting NP Standards NPS No NP . SENT 123 CD SFAS NP 123 CD R NN , , Share NN Based VVN Payments NNS . SENT SFAS NNS 123 CD R NN requires VVZ compensation NN costs NNS related VVN to TO share VV based VVN payment NN arrangements NNS to TO employees NNS to TO be VB recognized VVN in IN the DT income NN statement NN over IN the DT period NN that IN an DT employee NN provides VVZ service NN in IN exchange NN for IN the DT award NN . SENT The DT amount NN of IN the DT compensation NN cost NN will MD be VB measured VVN based VVN on IN the DT grant NN date NN fair JJ value NN of IN the DT instruments NNS issued VVD . SENT In IN addition NN , , liability NN awards NNS will MD be VB remeasured VVN each DT reporting VVG period NN through IN settlement NN . SENT SFAS NNS 123 CD R NN is VBZ effective JJ as RB of IN July NP 1 CD , , 2005 CD for IN all DT awards NNS granted VVN or CC modified VVN after IN that DT date NN and CC for IN those DT awards NNS granted VVD prior RB to TO that DT date NN for IN which WDT the DT requisite JJ employee NN service NN has VHZ not RB yet RB been VBN rendered VVN . SENT SFAS NNS 123 CD R NN will MD have VH no DT impact NN on IN the DT Company NN because IN in IN 2003 CD the DT Company NN adopted VVD a DT policy NN of IN expensing VVG all DT share NN based VVN payments NNS that WDT is VBZ consistent JJ with IN the DT provisions NNS of IN SFAS NP 123 CD R NN and CC the DT requisite JJ employee NN service NN for IN all DT prior JJ year NN outstanding JJ stock NN options NNS has VHZ been VBN rendered VVN . SENT Emerging VVG accounting NN and CC reporting NN issues NNS Accounting NN for IN purchases NNS and CC sales NNS of IN inventory NN with IN the DT same JJ counterparty NN At IN its PP$ November NP 2004 CD meeting NN , , the DT Emerging NP Issues NPS Task NP Force NP EITF NP of IN FASB NP began VVD discussion NN of IN Issue NN 04 CD 13 CD , , Accounting NN for IN Purchases NNS and CC Sales NNS of IN Inventory NN with IN the DT Same JJ Counterparty NN . SENT This DT Issue NN addresses VVZ the DT question NN of IN when WRB it PP is VBZ appropriate JJ to TO measure VV purchases NNS and CC sales NNS of IN inventory NN at IN fair JJ value NN and CC record VV them PP in IN cost NN of IN sales NNS and CC revenues NNS and CC when WRB they PP should MD be VB recorded VVN as IN an DT exchange NN measured VVN at IN the DT book NN value NN of IN the DT item NN sold VVD . SENT The DT EITF NP did VVD not RB reach VV a DT consensus NN on IN this DT issue NN , , but CC requested VVD the DT FASB NP staff NN to TO further RBR explore VV the DT alternative JJ views NNS . SENT The DT Company NN records VVZ certain JJ purchases NNS and CC sales NNS entered VVD into IN contemporaneously RB with IN the DT same JJ counterparty NN as IN cost NN of IN sales NNS and CC revenues NNS , , measured VVN at IN fair JJ value NN as RB agreed VVD upon RP by IN a DT willing JJ buyer NN and CC a DT willing JJ seller NN . SENT These DT transactions NNS occur VVP under IN contractual JJ arrangements NNS that WDT establish VV the DT agreement NN terms NNS either CC jointly RB , , in IN a DT single JJ contract NN , , or CC separately RB , , in IN individual JJ contracts NNS . SENT Should MD the DT EITF NP reach VV a DT consensus NN on IN this DT issue NN , , requiring VVG these DT transactions NNS to TO be VB recorded VVN as IN exchanges NNS measured VVN at IN book NN value NN , , the DT reported VVN amounts NNS in IN operating VVG revenues NNS and CC purchases NNS of IN crude JJ oil NN and CC products NNS on IN the DT consolidated JJ statement NN of IN income NN would MD be VB lower JJR by IN equal JJ amounts NNS with IN no DT impact NN on IN net JJ income NN . SENT The DT Company NN has VHZ not RB yet RB determined VVN the DT amount NN by IN which WDT operating NN revenues NNS and CC purchases NNS of IN crude JJ oil NN and CC products NNS would MD be VB lower JJR under IN this DT interpretation NN . SENT A DT special JJ effort NN is VBZ needed VVN to TO identify VV purchase NN sale NN transactions NNS from IN other JJ monetary JJ purchases NNS and CC monetary JJ sales NNS . SENT A DT best JJS effort NN estimate NN based VVN on IN this DT undertaking NN is VBZ expected VVN to TO be VB available JJ in IN the DT second JJ quarter NN of IN 2005 CD . SENT The DT Company NN will MD disclose VV this DT information NN , , if IN material NN , , once RB it PP is VBZ available JJ . SENT Critical JJ accounting NN policies NNS The DT Company NN s PP financial JJ statements NNS have VHP been VBN prepared VVN in IN accordance NN with IN United NP States NPS generally RB accepted VVN accounting NN principles NNS GAAP NP and CC include VV estimates NNS that WDT reflect VVP management NN s PP best RBS judgments NNS . SENT The DT Company NN s PP accounting VVG and CC financial JJ reporting NN fairly RB reflect VVP its PP$ straightforward JJ business NN model NN . SENT The DT Company NN does VVZ not RB use VV financing NN structures NNS for IN the DT purpose NN of IN altering VVG accounting NN outcomes NNS or CC removing VVG debt NN from IN the DT balance NN sheet NN . SENT The DT following VVG summary NN provides VVZ further JJR information NN about IN the DT critical JJ accounting NN policies NNS and CC the DT estimates NNS that WDT are VBP made VVN by IN the DT Company NN to TO apply VV those DT policies NNS . SENT It PP should MD be VB read VVN in IN conjunction NN with IN pages NNS F NN 7 CD to TO F NP 9 CD . SENT 23 CD Table NN of IN Contents NNS Hydrocarbon NN reserves NNS Proved VVD oil NN , , gas NN and CC synthetic JJ crude JJ oil NN reserve NN quantities NNS are VBP used VVN as IN the DT basis NN of IN calculating VVG unit NN of IN production NN rates NNS for IN depreciation NN and CC evaluating VVG for IN impairment NN . SENT Proved VVN oil NN and CC gas NN reserves NNS are VBP the DT estimated JJ quantities NNS of IN crude JJ oil NN , , natural JJ gas NN and CC natural JJ gas NN liquids NNS that IN geological JJ and CC engineering NN data NNS demonstrate VVP with IN reasonable JJ certainty NN to TO be VB recoverable JJ in IN future JJ years NNS from IN known VVN reservoirs NNS and CC deposits NNS under IN existing VVG economic JJ and CC operating NN conditions NNS . SENT Estimates NNS of IN synthetic JJ crude JJ oil NN reserves NNS are VBP based VVN on IN detailed JJ geological JJ and CC engineering NN assessments NNS of IN in IN place NN crude NN bitumen NN volume NN , , the DT mining NN plan NN , , historical JJ extraction NN recovery NN and CC upgrading VVG yield NN factors NNS , , installed VVN plant NN operating VVG capacity NN and CC operating VVG approval NN limits NNS . SENT The DT estimation NN of IN proved VVN reserves NNS is VBZ controlled VVN by IN the DT Company NN through IN long JJ standing NN approval NN guidelines NNS . SENT Reserve NP changes NNS are VBP made VVN with IN a DT well RB established JJ , , disciplined JJ process NN driven VVN by IN senior JJ level NN geoscience NN and CC engineering NN professionals NNS assisted VVN by IN a DT central JJ reserves NNS group NN with IN significant JJ independent JJ technical JJ experience NN culminating VVG in IN reviews NNS with IN and CC approval NN by IN senior JJ management NN and CC the DT Company NP s PP board NN of IN directors NNS . SENT Key JJ features NNS of IN the DT estimation NN include VVP rigorous JJ peer NN reviewed VVD technical JJ evaluations NNS and CC analysis NN of IN well NN and CC field NN performance NN information NN , , and CC a DT requirement NN that IN management NN make VVP a DT commitment NN toward IN the DT development NN of IN the DT reserves NNS prior RB to TO booking NN . SENT Notably RB , , technical JJ and CC other JJ professionals NNS involved VVN in IN the DT process NN are VBP not RB compensated VVN based VVN on IN the DT levels NNS of IN proved JJ reserves NNS bookings NNS . SENT Although IN the DT Company NN is VBZ reasonably RB certain JJ that IN proved JJ reserves NNS will MD be VB produced VVN , , the DT timing NN and CC ultimate JJ recovery NN can MD be VB affected VVN by IN a DT number NN of IN factors NNS including VVG completion NN of IN development NN projects NNS , , reservoir NN performance NN and CC significant JJ changes NNS in IN long JJ term NN oil NN and CC gas NN price NN levels NNS . SENT In IN compliance NN with IN the DT United NP States NPS Securities NPS and CC Exchange NP Commission NP regulatory JJ guidance NN , , the DT Company NN has VHZ reported VVN 2004 CD reserves NNS on IN the DT basis NN of IN the DT day NN of IN December NP 31 CD , , 2004 CD , , prices NNS and CC costs NNS year NN end NN prices NNS . SENT Resultant JJ changes NNS in IN Cold NP Lake NP bitumen NN and CC the DT associated VVN natural JJ gas NN reserves NNS from IN the DT year NN end NN 2003 CD estimates NNS , , which WDT were VBD based VVN on IN long JJ term NN projections NNS of IN oil NN and CC gas NN prices NNS consistent JJ with IN those DT used VVN in IN the DT Company NN s PP investment NN decision NN making VVG process NN , , are VBP shown VVN in IN the DT line NN titled VVN Year NN end NN price NN cost NN revisions NNS on IN page NN 29 CD . SENT The DT requirement NN to TO use VV year NN end NN prices NNS for IN reserves NNS estimation NN introduces VVZ single JJ day NN price NN focus NN and CC volatility NN in IN the DT valuation NN of IN reserves NNS to TO be VB produced VVN over IN the DT next JJ 20 CD to TO 30 CD years NNS . SENT The DT Company NN believes VVZ that IN this DT approach NN is VBZ inconsistent JJ with IN the DT long JJ term NN nature NN of IN the DT natural JJ resources NNS business NN . SENT The DT use NN of IN prices NNS from IN a DT single JJ date NN is VBZ not RB relevant JJ to TO the DT investment NN decisions NNS made VVN by IN the DT Company NN and CC annual JJ variations NNS in IN reserves NNS based VVN on IN such JJ year NN end NN prices NNS are VBP not RB of IN consequence NN in IN how WRB the DT business NN is VBZ managed VVN . SENT The DT impact NN of IN year NN end NN prices NNS on IN reserve NN estimation NN is VBZ most RBS clearly RB shown VVN at IN Cold NP Lake NP where WRB proved JJ bitumen NN and CC associated VVN natural JJ gas NN reserves NNS were VBD reduced VVN by IN about IN 485 CD million CD oil NN equivalent NN barrels NNS as IN a DT result NN of IN using VVG December NP 31 CD , , 2004 CD prices NNS , , which WDT were VBD unusually RB low JJ . SENT Prices NNS of IN Cold NP Lake NP bitumen NN were VBD strong JJ for IN most RBS of IN 2004 CD , , however RB , , they PP began VVD to TO deteriorate VV in IN the DT middle NN of IN the DT fourth JJ quarter NN and CC ended VVN on IN December NP 31 CD , , 2004 CD , , 70 CD percent NN below IN the DT year NN s PP average VVP . SENT Prices NNS quickly RB rebounded VVD from IN December NP 31 CD , , and CC through IN January NP 2005 CD returned VVD to TO levels NNS that WDT have VHP restored VVN the DT reserves NNS to TO the DT proved VVN category NN . SENT Performance NN related VVD revisions NNS can MD include VV upward JJ or CC downward JJ changes NNS in IN previously RB estimated VVN volumes NNS of IN proved VVN reserves NNS for IN existing VVG fields NNS due JJ to TO the DT evaluation NN or CC revaluation NN of IN 1 CD already RB available JJ geologic JJ , , reservoir NN or CC production NN data NNS , , or CC 2 CD new JJ geologic JJ or CC reservoir NN data NNS . SENT Performance NN related VVD revisions NNS can MD also RB include VV changes NNS associated VVN with IN the DT performance NN of IN improved JJ recovery NN projects NNS and CC significant JJ changes NNS in IN either DT development NN strategy NN or CC production NN equipment NN facility NN capacity NN . SENT The DT Company NN uses VVZ the DT successful JJ efforts NNS method NN to TO account VV for IN its PP$ exploration NN and CC production NN activities NNS . SENT Under IN this DT method NN , , costs NNS are VBP accumulated VVN on IN a DT field NN by IN field NN basis NN with IN certain JJ exploratory JJ expenditures NNS and CC exploratory JJ dry JJ holes NNS being VBG expensed VVN as IN incurred VVN . SENT The DT Company NN continues VVZ to TO carry VV as IN an DT asset NN the DT cost NN of IN drilling VVG exploratory JJ wells NNS that WDT find VVP sufficient JJ quantities NNS of IN reserves NNS to TO justify VV their PP$ completion NN as IN producing VVG wells NNS if IN the DT required JJ capital NN expenditure NN is VBZ made VVN and CC drilling NN of IN additional JJ exploratory JJ wells NNS is VBZ underway JJ or CC firmly RB planned VVN for IN the DT near JJ future NN . SENT Once IN exploration NN activities NNS demonstrate VVP that IN sufficient JJ quantities NNS of IN commercially RB producible JJ reserves NNS have VHP been VBN discovered VVN , , continued JJ capitalization NN is VBZ dependent JJ on IN project NN reviews NNS , , which WDT take VVP place NN at IN least JJS annually RB , , to TO ensure VV that DT satisfactory JJ progress NN toward IN ultimate JJ development NN of IN the DT reserves NNS is VBZ being VBG achieved VVN . SENT Exploratory JJ well NN costs NNS not RB meeting VVG these DT criteria NNS are VBP charged VVN to TO expense NN . SENT Capitalized VVN exploratory JJ drilling NN costs NNS pending VVG the DT determination NN of IN proved JJ reserves NNS or CC the DT amount NN of IN suspended VVN exploratory JJ well NN costs NNS were VBD negligible JJ , , 2 CD million CD and CC 13 CD million CD at IN December NP 31 CD , , 2004 CD , , 2003 CD and CC 2002 CD respectively RB . SENT Costs NNS of IN productive JJ wells NNS and CC development NN dry JJ holes NNS are VBP capitalized VVN and CC amortized VVN on IN the DT unit NN of IN production NN method NN for IN each DT field NN . SENT The DT Company NN uses VVZ this DT accounting NN policy NN instead RB of IN the DT full JJ cost NN method NN because IN it PP provides VVZ a DT more RBR timely JJ accounting NN of IN the DT success NN or CC failure NN of IN the DT Company NN s PP exploration NN and CC production NN activities NNS . SENT Impact NN of IN reserves NNS on IN depreciation NN The DT calculation NN of IN unit NN of IN production NN depreciation NN is VBZ a DT critical JJ accounting NN estimate NN that WDT measures VVZ the DT depreciation NN of IN natural JJ resources NNS assets NNS . SENT It PP is VBZ the DT ratio NN of IN 1 CD actual JJ volumes NNS produced VVD to TO 2 CD total NN proved VVD developed VVN reserves NNS those DT reserves NNS recoverable JJ through IN existing VVG wells NNS with IN existing VVG equipment NN and CC operating NN methods NNS applied VVD to TO 3 CD the DT asset NN cost NN . SENT The DT volumes NNS produced VVD and CC asset NN cost NN are VBP known VVN and CC while IN proved VVN developed JJ reserves NNS have VHP a DT high JJ probability NN of IN recoverability NN , , they PP are VBP based VVN on IN estimates NNS that WDT are VBP subject JJ to TO some DT variability NN . SENT This DT variability NN has VHZ generally RB resulted VVN in IN net JJ upward JJ revisions NNS of IN proved VVN reserves NNS in IN existing JJ fields NNS , , as RB more JJR information NN becomes VVZ available JJ through IN research NN and CC production NN . SENT Revisions NNS have VHP averaged VVN 16 CD million CD oil NN equivalent NN barrels NNS per IN year NN over IN the DT last JJ five CD years NNS and CC have VHP resulted VVN from IN effective JJ reservoir NN 24 CD Table NN of IN Contents NNS management NN and CC the DT application NN of IN new JJ technology NN . SENT While IN the DT upward JJ revisions NNS the DT Company NN has VHZ made VVN over IN the DT last JJ five CD years NNS are VBP an DT indicator NN of IN variability NN , , they PP have VHP had VHD little JJ impact NN on IN the DT unit NN of IN production NN rates NNS of IN depreciation NN because IN they PP have VHP been VBN small JJ compared VVN to TO the DT large JJ proved JJ reserves NNS base NN . SENT Impact NN of IN reserves NNS and CC prices NNS on IN testing NN for IN impairment NN Proved VVD oil NN and CC gas NN properties NNS held VVN and CC used VVN by IN the DT Company NN are VBP reviewed VVN for IN impairment NN whenever WRB events NNS or CC circumstances NNS indicate VVP that IN the DT carrying VVG amounts NNS may MD not RB be VB recoverable JJ . SENT Assets NNS are VBP grouped VVN at IN the DT lowest JJS level NN for IN which WDT there EX are VBP identifiable JJ cash NN flows NNS that WDT are VBP largely RB independent JJ of IN the DT cash NN flows VVZ of IN other JJ groups NNS of IN assets NNS . SENT The DT Company NN estimates VVZ the DT future JJ undiscounted JJ cash NN flows NNS of IN the DT affected JJ properties NNS to TO judge VV the DT recoverability NN of IN carrying VVG amounts NNS . SENT In IN general JJ , , impairment NN analyses NNS are VBP based VVN on IN proved JJ reserves NNS . SENT Where WRB probable JJ reserves NNS exist VVP , , an DT appropriately RB risk VVP adjusted JJ amount NN of IN these DT reserves NNS may MD be VB included VVN in IN the DT impairment NN evaluation NN . SENT An DT asset NN would MD be VB impaired VVN if IN the DT undiscounted JJ cash NN flows NNS were VBD less JJR than IN its PP$ carrying VVG value NN . SENT Impairments NNS are VBP measured VVN by IN the DT amount NN by IN which WDT the DT carrying VVG value NN exceeds VVZ its PP$ fair JJ value NN . SENT The DT impairment NN evaluation NN triggers VVZ include VV a DT significant JJ decrease NN in IN current JJ and CC projected JJ prices NNS or CC reserve NN volumes NNS , , an DT accumulation NN of IN project NN costs NNS significantly RB in IN excess NN of IN the DT amount NN originally RB expected VVN , , and CC historical JJ and CC current JJ negative JJ operating NN losses NNS . SENT In IN general NN , , the DT Company NN does VVZ not RB view VV temporarily RB low JJ oil NN prices NNS as IN a DT triggering VVG event NN for IN conducting VVG the DT impairment NN tests NNS . SENT The DT markets NNS for IN crude JJ oil NN and CC natural JJ gas NN have VHP a DT history NN of IN significant JJ price NN volatility NN . SENT Although IN prices NNS will MD occasionally RB drop VV precipitously RB , , the DT relative JJ growth NN decline NN in IN supply NN versus CC demand NN will MD determine VV industry NN prices NNS over IN the DT long JJ term NN and CC these DT cannot NN be VB accurately RB predicted VVN . SENT Accordingly RB , , any DT impairment NN tests NNS that IN the DT Company NN performs VVZ make VV use NN of IN the DT Company NN s PP long RB term VV price NN assumptions NNS for IN the DT crude JJ oil NN and CC natural JJ gas NN markets NNS , , petroleum NN products NNS and CC chemicals NNS . SENT These DT are VBP the DT same JJ price NN assumptions NNS that WDT are VBP used VVN in IN the DT Company NN s PP annual JJ planning NN and CC budgeting NN processes NNS and CC are VBP also RB used VVN for IN capital NN investment NN decisions NNS . SENT The DT standardized JJ measure NN of IN discounted JJ future JJ cash NN flows NNS on IN page NN 30 CD is VBZ based VVN on IN the DT year NN end NN 2004 CD price NN applied VVN for IN all DT future JJ years NNS , , as RB required VVN under IN Statement NN of IN Financial NP Accounting NP Standards NPS No NP . SENT 69 CD SFAS NP 69 CD . SENT Future JJ prices NNS used VVN for IN any DT impairment NN tests NNS will MD vary VV from IN the DT one NN used VVN in IN the DT SFAS NP 69 CD disclosure NN , , and CC could MD be VB lower JJR or CC higher JJR for IN any DT given VVN year NN . SENT Retirement NN benefits NNS The DT Company NN s PP pension NN plan NN is VBZ managed VVN in IN compliance NN with IN the DT requirements NNS of IN governmental JJ authorities NNS and CC meets VVZ funding NN levels NNS as RB determined VVN by IN independent JJ third JJ party NN actuaries NNS . SENT Pension NN accounting NN requires VVZ explicit JJ assumptions NNS regarding VVG , , among IN others NNS , , the DT discount NN rate NN for IN the DT benefit NN obligations NNS , , the DT expected VVN rate NN of IN return NN on IN plan NN assets NNS and CC the DT long JJ term NN rate NN of IN future JJ compensation NN increases NNS . SENT All DT pension NN assumptions NNS are VBP reviewed VVN annually RB by IN senior JJ management NN . SENT These DT assumptions NNS are VBP adjusted VVN only RB as RB appropriate JJ to TO reflect VV long JJ term NN changes NNS in IN market NN rates NNS and CC outlook NN . SENT The DT long JJ term NN expected VVN rate NN of IN return NN on IN plan NN assets NNS of IN 8 CD . SENT 25 CD percent NN used VVN in IN 2004 CD compares VVZ to TO actual JJ returns NNS of IN 10 CD . SENT 7 CD percent NN and CC 10 CD . SENT 1 CD percent NN achieved VVN over IN the DT last JJ 10 CD and CC 20 CD year NN periods NNS ending VVG December NP 31 CD , , 2004 CD . SENT If IN different JJ assumptions NNS are VBP used VVN , , the DT expense NN and CC obligations NNS could MD increase VV or CC decrease VV as IN a DT result NN . SENT The DT Company NN s PP potential JJ exposure NN to TO changes NNS in IN assumptions NNS is VBZ summarized VVD in IN note NN 7 CD to TO the DT consolidated JJ financial JJ statements NNS on IN page NN F NP 13 CD . SENT At IN the DT Company NN , , differences NNS between IN actual JJ returns NNS on IN plan NN assets NNS versus CC long JJ term NN expected VVN returns NNS are VBP not RB recorded VVN in IN the DT year NN the DT differences NNS occur VVP , , but CC rather RB are VBP amortized VVN in IN pension NN expense NN as IN permitted VVN by IN GAAP NP , , along RB with IN other JJ actuarial JJ gains NNS and CC losses NNS over IN the DT expected VVN remaining JJ service NN life NN of IN employees NNS . SENT The DT Company NN uses VVZ the DT fair JJ value NN of IN the DT plan NN assets NNS at IN year NN end NN to TO determine VV the DT amount NN of IN the DT actual JJ gain NN or CC loss NN that WDT will MD be VB amortized VVN and CC does VVZ not RB use VV a DT moving VVG average JJ value NN of IN plan NN assets NNS . SENT Pension NN expense NN represented VVD about RB one CD percent NN of IN total JJ expenses NNS in IN 2004 CD . SENT Asset NN retirement NN obligations NNS and CC other JJ environmental JJ liabilities NNS Legal JJ obligations NNS associated VVN with IN site NN restoration NN on IN the DT retirement NN of IN assets NNS with IN determinable JJ useful JJ lives NNS are VBP recognized VVN when WRB they PP are VBP incurred VVN , , which WDT is VBZ typically RB at IN the DT time NN the DT assets NNS are VBP installed VVN . SENT The DT obligations NNS are VBP initially RB measured VVN at IN fair JJ value NN and CC discounted VVN to TO present VV value NN . SENT Over IN time NN , , the DT discounted JJ asset NN retirement NN obligation NN amount NN will MD be VB accreted VVN for IN the DT change NN in IN its PP$ present JJ value NN , , with IN this DT effect NN included VVD in IN operating VVG expense NN . SENT As IN payments NNS to TO settle VV the DT obligations NNS occur VVP on IN an DT ongoing JJ basis NN and CC will MD continue VV over IN the DT lives NNS of IN the DT operating NN assets NNS , , which WDT can MD exceed VV 25 CD years NNS , , the DT discount NN rate NN will MD be VB adjusted VVN only RB as RB appropriate JJ to TO reflect VV long JJ term NN changes NNS in IN market NN rates NNS and CC outlook NN . SENT For IN 2004 CD , , the DT obligations NNS were VBD discounted VVN at IN six CD percent NN and CC the DT accretion NN expense NN was VBD 22 CD million CD , , which WDT was VBD significantly RB less JJR than IN one CD percent NN of IN total JJ expenses NNS in IN the DT year NN . SENT There EX would MD be VB no DT material NN impact NN on IN the DT Company NN s PP reported VVD financial JJ results NNS if IN a DT different JJ discount NN rate NN had VHD been VBN used VVN . SENT Asset NN retirement NN obligations NNS are VBP not RB recognized VVN for IN assets NNS with IN an DT indeterminate JJ useful JJ life NN . SENT For IN these DT and CC non JJ operating VVG assets NNS , , the DT Company NN accrues VVZ provisions NNS for IN environmental JJ liabilities NNS when WRB it PP is VBZ probable JJ that IN obligations NNS have VHP been VBN incurred VVN and CC the DT amount NN can MD be VB reasonably RB estimated VVN . SENT 25 CD Table NN of IN Contents NNS Asset NP retirement NN obligations NNS and CC other JJ environmental JJ liabilities NNS are VBP based VVN on IN engineering VVG estimated JJ costs NNS , , taking VVG into IN account NN the DT anticipated JJ method NN and CC extent NN of IN remediation NN consistent JJ with IN legal JJ requirements NNS , , current JJ technology NN and CC the DT possible JJ use NN of IN the DT location NN . SENT Since IN these DT estimates NNS are VBP specific JJ to TO the DT locations NNS involved VVN , , there EX are VBP many JJ individual JJ assumptions NNS underlying VVG the DT Company NN s PP total VVP asset NN retirement NN obligations NNS and CC provision NN for IN other JJ environmental JJ liabilities NNS . SENT While IN these DT individual JJ assumptions NNS can MD be VB subject JJ to TO change VV , , none NN of IN them PP is VBZ individually RB significant JJ to TO the DT Company NN s PP reported VVD financial JJ results NNS . SENT Item NN 7 CD A DT . SENT Quantitative JJ and CC Qualitative JJ Disclosures NNS About IN Market NP Risk NP . SENT The DT Company NN is VBZ exposed VVN to TO a DT variety NN of IN financial JJ , , operating NN and CC market NN risks NNS in IN the DT course NN of IN its PP$ business NN . SENT Some DT of IN these DT risks NNS are VBP within IN the DT Company NN s PP control VVP , , while IN others NNS are VBP not RB . SENT For IN those DT risks NNS that WDT can MD be VB controlled VVN , , specific JJ risk NN management NN strategies NNS are VBP employed VVN to TO reduce VV the DT likelihood NN of IN loss NN . SENT Other JJ risks NNS , , such JJ as IN changes NNS in IN international JJ commodity NN prices NNS and CC currency NN exchange NN rates NNS , , are VBP beyond IN the DT Company NN s PP control VVP . SENT Although IN the DT Government NN of IN Canada NP in IN ratifying VVG the DT Kyoto NP Protocol NP agreed VVD to TO restrictions NNS of IN greenhouse NN gas NN emissions NNS by IN the DT period NN 2008 CD 2012 CD , , it PP has VHZ not RB determined VVN what WP measures VVZ it PP will MD impose VV on IN companies NNS . SENT Consequently RB , , attempts VVZ to TO assess VV any DT impact NN on IN the DT Company NN can MD only RB be VB speculative JJ . SENT The DT Company NN will MD continue VV to TO monitor VV the DT development NN of IN legal JJ requirements NNS in IN this DT area NN . SENT The DT Company NN s PP size VVP , , strong JJ financial JJ position NN and CC the DT complementary JJ nature NN of IN its PP$ natural JJ resources NNS , , petroleum NN products NNS and CC chemicals NNS segments NNS help VVP mitigate VV the DT Company NN s PP exposure NN to TO changes NNS in IN these DT other JJ risks NNS . SENT The DT Company NN s PP potential JJ exposure NN to TO these DT types NNS of IN risk NN is VBZ summarized VVD in IN the DT table NN below RB . SENT The DT Company NN does VVZ not RB use VV derivative JJ markets NNS to TO speculate VV on IN the DT future JJ direction NN of IN currency NN or CC commodity NN prices NNS and CC does VVZ not RB sell VV forward RB any DT part NN of IN production NN from IN any DT business NN segment NN . SENT The DT following VVG table NN shows VVZ the DT estimated JJ annual JJ effect NN , , under IN current JJ conditions NNS , , of IN certain JJ sensitivities NNS of IN the DT Company NN s PP after IN tax NN net JJ income NN . SENT millions NNS of IN dollars NNS after IN tax NN Four CD dollars NNS U NP . SENT S NP . SENT a DT barrel NN change NN in IN crude JJ oil NN prices NNS 200 CD Sixty CD cents NNS a DT thousand CD cubic JJ feet NNS change VVP in IN natural JJ gas NN prices NNS 20 CD One CD cent NN a DT litre NN change NN in IN sales NNS margins NNS for IN total JJ petroleum NN products NNS 170 CD One CD cents NNS U NP . SENT S NP . SENT a DT pound NN change NN in IN sales NNS margins NNS for IN polyethylene NN 7 CD One CD quarter NN percent NN decrease NN increase NN in IN short JJ term NN interest NN rates NNS 2 CD Eight CD cents NNS decrease VVP increase NN in IN the DT value NN of IN the DT Canadian JJ dollar NN versus IN the DT U NP . SENT S NP . SENT dollar NN 260 CD The DT amount NN quoted VVN to TO illustrate VV the DT impact NN of IN each DT sensitivity NN represents VVZ a DT change NN of IN about RB 10 CD percent NN in IN the DT value NN of IN the DT commodity NN or CC rate NN in IN question NN at IN the DT end NN of IN 2004 CD . SENT Each DT sensitivity NN calculation NN shows VVZ the DT impact NN on IN net JJ income NN that IN results NNS from IN a DT change NN in IN one CD factor NN , , after IN tax NN and CC royalties NNS and CC holding VVG all DT other JJ factors NNS constant JJ . SENT While IN these DT sensitivities NNS are VBP applicable JJ under IN current JJ conditions NNS , , they PP may MD not RB apply VV proportionately RB to TO larger JJR fluctuations NNS . SENT The DT sensitivity NN of IN net JJ income NN to TO changes NNS in IN the DT Canadian JJ dollar NN versus IN the DT U NP . SENT S NP . SENT dollar NN decreased VVD from IN year NN end NN 2003 CD by IN about IN 10 CD million CD after IN tax NN a DT year NN for IN each DT one CD cent NN change NN . SENT This DT is VBZ primarily RB due JJ to TO the DT unusually RB low JJ year NN end NN prices NNS for IN Cold NP Lake NP bitumen NN , , which WDT is VBZ sold VVN in IN U NP . SENT S NP . SENT dollars NNS . SENT Item NN 8 CD . SENT Financial JJ Statements NNS and CC Supplementary JJ Data NNS . SENT Reference NN is VBZ made VVN to TO the DT Index NP to TO Financial NP Statements NNS on IN page NN F NP 1 CD of IN this DT report NN . SENT Syncrude NP Mining NP Operations NP Syncrude NP s PP crude JJ bitumen NN is VBZ contained VVN within IN the DT unconsolidated JJ sands NNS of IN the DT McMurray NP Formation NN . SENT Ore NP bodies NNS are VBP buried VVN beneath IN 15 CD to TO 45 CD metres NNS 50 CD to TO 150 CD feet NNS of IN overburden NN , , have VHP bitumen NN grades NNS ranging VVG from IN 4 CD to TO 14 CD weight NN percent NN and CC ore NN thickness NN of IN 35 CD to TO 50 CD metres NNS 115 CD to TO 160 CD feet NNS . SENT Estimates NNS of IN synthetic JJ crude JJ oil NN reserves NNS are VBP based VVN on IN detailed JJ geological JJ and CC engineering NN assessments NNS of IN in IN place NN crude NN bitumen NN volume NN , , the DT mining NN plan NN , , historical JJ extraction NN recovery NN and CC upgrading VVG yield NN factors NNS , , installed VVN plant NN operating VVG capacity NN and CC operating VVG approval NN limits NNS . SENT The DT in IN place NN volume NN , , depth NN and CC grade NN are VBP established VVN through IN extensive JJ and CC closely RB spaced VVD core JJ drilling NN . SENT Proven JJ reserves NNS include VVP the DT operating VVG Base NP and CC North NP mines NNS and CC the DT Aurora NP mine NN . SENT In IN accordance NN with IN the DT approved VVN mining NN plan NN , , there EX are VBP an DT estimated JJ 1 CD , , 865 CD million CD tonnes NNS 2 CD , , 055 CD million CD tons NNS of IN extractable JJ tar NN sands NNS , , in IN the DT Base NP and CC North NP mines NNS , , with IN an DT average JJ bitumen NN grade NN of IN 10 CD . SENT 6 CD weight NN percent NN . SENT In IN addition NN , , at IN the DT Aurora NP mine NN , , there EX are VBP an DT estimated JJ 4 CD , , 060 CD million CD tonnes NNS 4 CD , , 470 CD million CD tons NNS of IN extractable JJ tar NN sands NNS at IN an DT average JJ bitumen NN grade NN of IN 11 CD . SENT 1 CD weight NN percent NN . SENT After IN deducting VVG royalties NNS payable JJ to TO the DT Province NP of IN Alberta NP , , the DT Company NN estimates VVZ its PP$ 25 CD percent NN net JJ share NN of IN proven JJ reserves NNS is VBZ equivalent JJ to TO 120 CD million CD cubic JJ metres NNS 757 CD million CD barrels NNS of IN synthetic JJ crude JJ oil NN . SENT 26 CD Table NN of IN Contents NNS The DT following VVG table NN sets VVZ forth RB the DT Company NN s PP share NN of IN net JJ proven JJ reserves NNS of IN Syncrude NP after IN deducting VVG royalties NNS payable JJ to TO the DT Province NP of IN Alberta NP . SENT Synthetic JJ Crude NP Oil NP Base NP Mine NP and CC North NP Mine NP Aurora NP Mine NP Total JJ millions NNS of IN cubic JJ metres NNS Beginning VVG of IN year NN 2002 CD 58 CD 73 CD 131 CD Revision NN of IN previous JJ estimate NN Production NN 3 CD 1 CD 4 CD End NN of IN year NN 2002 CD 55 CD 72 CD 127 CD Revision NN of IN previous JJ estimate NN Production NN 2 CD 1 CD 3 CD End NN of IN year NN 2003 CD 53 CD 71 CD 124 CD Revision NN of IN previous JJ estimate NN 16 CD 16 CD 0 CD Production NN 2 LS 2 CD 4 CD End NN of IN year NN 2004 CD 35 CD 85 CD 120 CD Synthetic JJ Crude NP Oil NP Base NP Mine NP and CC North NP Mine NP Aurora NP Mine NP Total JJ millions NNS of IN barrels NNS Beginning VVG of IN year NN 2002 CD 358 CD 463 CD 821 CD Revision NN of IN previous JJ estimate NN Production NN 14 CD 7 CD 21 CD End NN of IN year NN 2002 CD 344 CD 456 CD 800 CD Revision NN of IN previous JJ estimate NN Production NN 13 CD 6 CD 19 CD End NN of IN year NN 2003 CD 331 CD 450 CD 781 CD Revision NN of IN previous JJ estimate NN 103 CD 100 CD 3 CD Production NN 11 CD 10 CD 21 CD End NN of IN year NN 2004 CD 217 CD 540 CD 757 NP Oil NP and CC Gas NP Producing VVG Activities NNS The DT following NN information NN is VBZ provided VVN in IN accordance NN with IN the DT United NP States NPS Statement NN of IN Financial NP Accounting NP Standards NPS No NP . SENT 69 CD , , Disclosures NNS about IN Oil NP and CC Gas NP Producing VVG Activities NNS . SENT Results NNS of IN operations NNS 2004 CD 2003 CD 2002 CD millions NNS of IN dollars NNS Sales NNS to TO customers NNS 2 CD , , 160 CD 2 CD , , 067 CD 1 CD , , 485 CD Intersegment NP sales NNS 976 CD 665 CD 797 CD Total JJ sales NNS 1 CD 2 CD 3 CD , , 136 CD 2 CD , , 732 CD 2 CD , , 282 CD Production NP expenses NNS 2 CD 915 CD 926 CD 736 CD Exploration NP expenses NNS 44 CD 55 CD 30 CD Depreciation NN and CC depletion NN 565 CD 463 CD 426 CD Income NP taxes NNS 532 CD 364 CD 350 CD Results NNS of IN operations NNS 1 CD , , 080 CD 924 CD 740 CD Capital NN and CC exploration NN expenditures NNS 2004 CD 2003 CD 2002 CD millions NNS of IN dollars NNS Property NP costs VVZ 3 CD Proved VVD 13 CD Unproved NN 1 CD 2 CD 5 CD Exploration NP costs NNS 43 CD 55 CD 34 CD Development NP costs NNS 408 CD 339 CD 469 CD Total JJ capital NN and CC exploration NN expenditures NNS 452 CD 396 CD 521 CD Table NN continued VVN on IN following VVG page NN 27 CD Table NN of IN Contents NNS Property NP , , plant NN and CC equipment NN 2004 CD 2003 CD millions NNS of IN dollars NNS Property NP costs VVZ 3 CD Proved JJ 3 CD , , 328 CD 3 CD , , 332 CD Unproved NN 141 CD 163 CD Producing VVG assets NNS 6 CD , , 099 CD 5 CD , , 775 CD Support NN facilities NNS 122 CD 125 CD Incomplete JJ construction NN 235 CD 200 CD Total JJ cost NN 9 CD , , 925 CD 9 CD , , 595 CD Accumulated VVN depreciation NN and CC depletion NN 6 CD , , 514 CD 6 CD , , 012 CD Net JJ property NN , , plant NN and CC equipment NN 3 CD , , 411 CD 3 CD , , 583 CD 1 CD Sales NNS of IN crude JJ oil NN to TO consolidated JJ affiliates NNS are VBP at IN market NN value NN , , using VVG posted VVN field NN prices NNS . SENT Sales NNS of IN natural JJ gas NN liquids NNS to TO consolidated JJ affiliates NNS are VBP at IN prices NNS estimated VVN to TO be VB obtainable JJ in IN a DT competitive JJ , , arm VV s PP length NN transaction NN . SENT Total JJ sales NNS exclude VVP the DT sale NN of IN natural JJ gas NN and CC natural JJ gas NN liquids NNS purchased VVN for IN resale NN . SENT 2 CD Beginning NN in IN 2004 CD , , fuel NN consumed VVN in IN operations NNS , , previously RB netted VVN against IN total JJ sales NNS , , has VHZ been VBN reclassified VVN as IN production NN expenses NNS . SENT Prior JJ period NN amounts NNS have VHP been VBN reclassified VVN for IN comparative JJ purposes NNS . SENT This DT reclassification NN has VHZ no DT impact NN on IN the DT results NNS of IN operations NNS . SENT 3 CD Property NP costs NNS are VBP payments NNS for IN rights NNS to TO explore VV for IN petroleum NN and CC natural JJ gas NN and CC for IN purchased VVN reserves NNS acquired VVD tangible JJ and CC intangible JJ assets NNS such JJ as IN gas NN plants NNS , , production NN facilities NNS , , and CC producing VVG well RB costs NNS are VBP included VVN under IN Producing VVG assets NNS . SENT Proved JJ represents VVZ areas NNS where WRB successful JJ drilling NN has VHZ delineated VVN a DT field NN capable JJ of IN production NN . SENT Unproved NN represents VVZ all DT other JJ areas NNS . SENT Net NN proved VVD developed VVN and CC undeveloped JJ reserves NNS 1 CD Crude JJ oil NN and CC natural JJ gas NN liquids NNS Conventional JJ Cold NP Lake NP Total NP Natural NP Gas NP millions NNS of IN cubic JJ metres NNS billions NNS of IN cubic JJ metres NNS Beginning VVG of IN year NN 2002 CD 26 CD 128 JJ 154 CD 40 CD Revisions NNS of IN previous JJ estimates NNS and CC improved JJ recovery NN 5 CD 5 CD Sale NN purchase NN of IN reserves NNS in IN place NN Discoveries NNS and CC extensions NNS Production NN 3 CD 6 CD 9 CD 5 CD End NN of IN year NN 2002 CD 23 CD 127 JJ 150 CD 35 CD Revisions NNS of IN previous JJ estimates NNS and CC improved JJ recovery NN 1 CD 1 CD 1 CD Sale NN purchase NN of IN reserves NNS in IN place NN Discoveries NNS and CC extensions NNS Production NN 3 CD 7 CD 10 CD 5 CD End NN of IN year NN 2003 CD 20 CD 121 JJ 141 CD 29 CD Performance NN related JJ revisions NNS and CC improved JJ recovery NN 1 CD 3 CD 2 CD 1 CD Sale NN purchase NN of IN reserves NNS in IN place NN Discoveries NNS and CC extensions NNS Production NN 3 CD 6 CD 9 CD 5 CD Total JJ before IN year NN end NN price NN cost VVD revisions NNS 18 CD 112 CD 130 CD 25 CD Year NN end NN price NN cost VVD revisions NNS 0 CD 75 CD 75 CD 3 CD End NN of IN year NN 2004 CD 18 CD 37 JJ 55 CD 22 CD 1 CD Net JJ reserves NNS are VBP the DT Company NN s PP share NN of IN reserves NNS after IN deducting VVG the DT shares NNS of IN mineral NN owners NNS or CC governments NNS or CC both DT . SENT All DT reported VVN reserves NNS are VBP located VVN in IN Canada NP . SENT Reserves NNS of IN natural JJ gas NN are VBP calculated VVN at IN a DT pressure NN of IN 101 CD . SENT 325 CD kilopascals NNS absolute JJ at IN 15 CD degrees NNS Celsius JJ . SENT 28 CD Table NN of IN Contents NNS Crude JJ oil NN and CC natural JJ gas NN liquids NNS Conventional JJ Cold NP Lake NP Total NP Natural NP Gas NP millions NNS of IN barrels NNS billions NNS of IN cubic JJ feet NNS Beginning VVG of IN year NN 2002 CD 165 CD 807 JJ 972 CD 1 CD , , 414 CD Revisions NNS of IN previous JJ estimates NNS and CC improved JJ recovery NN 3 CD 33 CD 36 CD 26 CD Sale NN purchase NN of IN reserves NNS in IN place NN 2 CD Discoveries NNS and CC extensions NNS 3 CD Production NN 22 CD 39 CD 61 CD 169 CD End NN of IN year NN 2002 CD 146 CD 801 JJ 947 CD 1 CD , , 224 CD Revisions NNS of IN previous JJ estimates NNS and CC improved JJ recovery NN 1 CD 5 CD 6 CD 40 CD Sale NN purchase NN of IN reserves NNS in IN place NN Discoveries NNS and CC extensions NNS 6 CD Production NN 21 CD 43 CD 64 CD 167 CD End NN of IN year NN 2003 CD 126 CD 763 JJ 889 CD 1 CD , , 023 CD Performance NP related JJ revisions NNS and CC improved JJ recovery NN 6 CD 20 CD 14 CD 57 CD Sale NN purchase NN of IN reserves NNS in IN place NN 13 CD Discoveries NNS and CC extensions NNS 3 CD Production NN 22 CD 41 CD 63 CD 190 CD Total JJ before IN year NN end NN price NN cost VVD revisions NNS 110 CD 702 CD 812 CD 880 CD Year NN end NN price NN cost VVD revisions NNS 5 CD 470 CD 465 CD 89 CD End NN of IN year NN 2004 CD 115 CD 232 JJ 347 CD 791 CD 1 CD Net JJ reserves NNS are VBP the DT Company NN s PP share NN of IN reserves NNS after IN deducting VVG the DT shares NNS of IN mineral NN owners NNS or CC governments NNS or CC both DT . SENT All DT reported VVN reserves NNS are VBP located VVN in IN Canada NP . SENT Reserves NNS of IN natural JJ gas NN are VBP calculated VVN at IN a DT pressure NN of IN 14 CD . SENT 73 CD pounds NNS per IN square JJ inch NN at IN 60 CD F NN . SENT The DT above JJ information NN describes VVZ changes NNS during IN the DT years NNS and CC balances NNS of IN proved VVN oil NN and CC gas NN reserves NNS at IN year NN end NN 2002 CD , , 2003 CD and CC 2004 CD . SENT The DT definitions NNS used VVN for IN oil NN and CC gas NN reserves NNS are VBP in IN accordance NN with IN the DT U NP . SENT S NP . SENT Securities NPS and CC Exchange NP Commission NP s PP SEC NP Rule NP 4 CD 10 CD a DT of IN Regulation NP S NP X NP , , paragraphs VVZ 2 CD , , 3 CD and CC 4 CD . SENT Crude JJ oil NN and CC natural JJ gas NN reserve NN estimates NNS are VBP based VVN on IN geological JJ and CC engineering NN data NNS , , which WDT have VHP demonstrated VVN with IN reasonable JJ certainty NN that IN these DT reserves NNS are VBP recoverable JJ in IN future JJ years NNS from IN known VVN reservoirs NNS under IN existing VVG economic JJ and CC operating NN conditions NNS . SENT i NP . SENT e SYM . SENT , , prices NNS and CC costs NNS as IN of IN the DT date NN the DT estimate NN is VBZ made VVN . SENT Reserves NNS of IN crude JJ oil NN at IN Cold NP Lake NP are VBP those DT estimated VVN to TO be VB recoverable JJ from IN the DT Leming NP plant NN and CC commercial JJ stages NNS 1 CD through IN 13 CD . SENT In IN compliance NN with IN SEC NP regulatory JJ guidance NN , , the DT Company NN has VHZ reported VVN 2004 CD reserves NNS on IN the DT basis NN of IN the DT day NN of IN December NP 31 CD , , 2004 CD prices NNS and CC costs NNS year NN end NN prices NNS . SENT Resultant JJ changes NNS in IN Cold NP Lake NP bitumen NN and CC the DT associated VVN natural JJ gas NN reserves NNS from IN the DT year NN end NN 2003 CD reserve NN estimates NNS , , which WDT were VBD based VVN on IN long JJ term NN projections NNS of IN oil NN and CC gas NN prices NNS consistent JJ with IN those DT used VVN in IN the DT Company NN s PP investment NN decision NN making VVG process NN , , are VBP shown VVN in IN the DT line NN titled VVN Year NN end NN price NN cost NN revisions NNS . SENT The DT requirement NN to TO use VV year NN end NN prices NNS for IN reserves NNS estimation NN introduces VVZ single JJ day NN price NN focus NN and CC volatility NN in IN the DT valuation NN of IN reserves NNS to TO be VB produced VVN over IN the DT next JJ 20 CD to TO 30 CD years NNS . SENT The DT Company NN believes VVZ that IN this DT approach NN is VBZ inconsistent JJ with IN the DT long JJ term NN nature NN of IN the DT natural JJ resources NNS business NN . SENT The DT use NN of IN prices NNS from IN a DT single JJ date NN is VBZ not RB relevant JJ to TO the DT investment NN decisions NNS made VVN by IN the DT Company NN and CC annual JJ variations NNS in IN reserves NNS based VVN on IN such JJ year NN end NN prices NNS are VBP not RB of IN consequence NN in IN how WRB the DT business NN is VBZ managed VVN . SENT The DT impact NN of IN year NN end NN prices NNS on IN reserve NN estimation NN is VBZ most RBS clearly RB shown VVN at IN Cold NP Lake NP where WRB proved JJ bitumen NN and CC associated VVN natural JJ gas NN reserves NNS were VBD reduced VVN by IN about IN 485 CD million CD oil NN equivalent NN barrels NNS as IN a DT result NN of IN using VVG December NP 31 CD , , 2004 CD prices NNS , , which WDT were VBD unusually RB low JJ . SENT Prices NNS quickly RB rebounded VVD from IN December NP 31 CD , , and CC through IN January NP 2005 CD returned VVD to TO levels NNS that WDT have VHP restored VVN the DT reserves NNS to TO the DT proved VVN category NN . SENT Performance NN related VVD revisions NNS can MD include VV upward JJ or CC downward JJ changes NNS in IN previously RB estimated VVN volumes NNS of IN proved VVN reserves NNS for IN existing VVG fields NNS due JJ to TO the DT evaluation NN or CC revaluation NN of IN 1 CD already RB available JJ geologic JJ , , reservoir NN or CC production NN data NNS , , or CC 2 CD new JJ geologic JJ or CC reservoir NN data NNS . SENT Performance NN related VVD revisions NNS can MD also RB include VV changes NNS associated VVN with IN the DT performance NN of IN improved JJ recovery NN projects NNS and CC significant JJ changes NNS in IN either DT development NN strategy NN or CC production NN equipment NN facility NN capacity NN . SENT During IN the DT past JJ five CD years NNS , , performance NN related JJ revisions NNS averaged VVD an DT upward JJ adjustment NN of IN 16 CD million CD oil NN equivalent NN barrels NNS per IN year NN . SENT Net JJ proved JJ reserves NNS are VBP determined VVN by IN deducting VVG the DT estimated JJ future JJ share NN of IN mineral NN owners NNS or CC governments NNS or CC both DT . SENT For IN conventional JJ crude JJ oil NN excluding VVG enhanced JJ oil NN recovery NN projects NNS and CC natural JJ gas NN , , net JJ proved JJ reserves NNS are VBP based VVN on IN estimated JJ future JJ royalty NN rates NNS representative NN of IN those DT existing VVG as RB of IN the DT date NN the DT estimate NN is VBZ made VVN . SENT Actual JJ future JJ royalty NN rates NNS may MD vary VV with IN production NN and CC price NN . SENT For IN enhanced JJ oil NN recovery NN projects NNS and CC Cold NP Lake NP , , net JJ proved JJ reserves NNS are VBP based VVN on IN the DT Company NN s PP best RBS estimate VVP of IN average JJ royalty NN rates NNS over IN the DT life NN of IN each DT project NN . SENT Actual JJ future JJ royalty NN rates NNS may MD vary VV with IN production NN , , price NN and CC costs NNS . SENT 29 CD Table NN of IN Contents NNS Reserves NNS data NNS do VVP not RB include VV certain JJ resources NNS of IN crude JJ oil NN and CC natural JJ gas NN such JJ as IN those DT discovered VVN in IN the DT Beaufort NP Sea NP Mackenzie NP Delta NP and CC the DT Arctic NP islands NNS , , or CC the DT resources NNS contained VVN in IN oil NN sands NNS other JJ than IN those DT attributable JJ to TO the DT Cold NP Lake NP Leming NP plant NN and CC stages VVZ 1 CD through IN 13 CD of IN Cold NP Lake NP production NN operations NNS . SENT Oil NN equivalent NN barrels NNS OEB NP may MD be VB misleading JJ , , particularly RB if IN used VVN in IN isolation NN . SENT An DT OEB NP conversion NN ratio NN of IN 6 CD , , 000 CD cubic JJ feet NNS to TO one CD barrel NN is VBZ based VVN on IN an DT energy NN equivalency NN conversion NN method NN primarily RB applicable JJ at IN the DT burner NN tip NN and CC does VVZ not RB represent VV a DT value NN equivalency NN at IN the DT well NN head NN . SENT No DT independent JJ qualified JJ reserves NNS evaluator NN or CC auditor NN was VBD involved VVN in IN the DT preparation NN of IN the DT reserves NNS data NNS . SENT Net NN Proved VVD Developed VVN and CC Undeveloped JJ Reserves NNS of IN Crude NP Oil NP and CC Natural NP Gas NP 1 CD 2004 CD 2003 JJ 2002 CD 2001 CD 2000 CD millions NNS Crude JJ Oil NP . SENT Conventional JJ . SENT Cubic JJ metres NNS 18 CD 20 CD 23 JJ 26 CD 31 CD Barrels NNS 115 CD 126 CD 146 JJ 165 CD 196 CD Oil NP Sands NPS Cold NP Lake NP crude JJ bitumen NN . SENT Cubic JJ metres NNS 37 CD 121 CD 127 JJ 128 CD 135 CD Barrels NNS 232 CD 763 CD 801 JJ 807 CD 851 CD Total JJ . SENT Cubic JJ metres NNS 55 CD 141 CD 150 JJ 154 CD 166 CD Barrels NNS 347 CD 889 CD 947 JJ 972 CD 1 CD , , 047 CD Natural NP Gas NP . SENT billions NNS Cubic JJ metres NNS 22 CD 29 CD 35 JJ 40 CD 45 CD Cubic JJ feet NNS 791 CD 1 CD , , 023 CD 1 CD , , 224 CD 1 CD , , 414 CD 1 CD , , 572 CD Net NN Proved VVD Developed VVN Reserves NNS of IN Crude NP Oil NP and CC Natural NP Gas NP 1 CD 2004 CD 2003 JJ 2002 CD 2001 CD 2000 CD millions NNS Crude JJ Oil NP . SENT Conventional JJ . SENT Cubic JJ metres NNS 18 CD 19 CD 22 JJ 25 CD 28 CD Barrels NNS 111 CD 121 CD 139 JJ 157 CD 175 CD Oil NP Sands NPS Cold NP Lake NP crude JJ bitumen NN . SENT Cubic JJ metres NNS 37 CD 63 CD 49 JJ 34 CD 40 CD Barrels NNS 232 CD 398 CD 308 JJ 216 CD 250 CD Total JJ . SENT Cubic JJ metres NNS 55 CD 82 CD 71 JJ 59 CD 68 CD Barrels NNS 343 CD 519 CD 447 JJ 373 CD 425 CD Natural NP Gas NP . SENT billions NNS Cubic JJ metres NNS 20 CD 24 CD 27 JJ 30 CD 35 CD Cubic JJ feet NNS 704 CD 859 CD 959 CD 1 CD , , 060 CD 1 CD , , 233 CD 1 CD Net JJ reserves NNS are VBP the DT Company NN s PP share NN of IN reserves NNS after IN deducting VVG the DT shares NNS of IN mineral NN owners NNS or CC governments NNS or CC both DT . SENT Standardized JJ Measure NN of IN Discounted JJ Future JJ Net JJ Cash NN Flows NNS Related VVN to TO Proved VVN Oil NP and CC Gas NP Reserves NNS As IN required VVN by IN the DT Financial NP Accounting NP Standards NPS Board NP , , the DT standardized JJ measure NN of IN discounted JJ future JJ net JJ cash NN flows NNS is VBZ computed VVN by IN applying VVG year NN end NN prices NNS , , costs NNS and CC legislated VVN tax NN rates NNS and CC a DT discount NN factor NN of IN 10 CD percent NN to TO net JJ proved JJ reserves NNS . SENT The DT standardized JJ measure NN includes VVZ costs NNS for IN future JJ dismantlement NN , , abandonment NN and CC rehabilitation NN obligations NNS . SENT The DT Company NN believes VVZ the DT standardized JJ measure NN does VVZ not RB provide VV a DT reliable JJ estimate NN of IN the DT Company NN s PP expected VVD future JJ cash NN flows VVZ to TO be VB obtained VVN from IN the DT development NN and CC production NN of IN its PP$ oil NN and CC gas NN properties NNS or CC of IN the DT value NN of IN its PP$ proved JJ oil NN and CC gas NN reserves NNS . SENT The DT standardized JJ measure NN is VBZ prepared VVN on IN the DT basis NN of IN certain JJ prescribed JJ assumptions NNS including VVG year NN end NN prices NNS , , which WDT represent VVP a DT single JJ point NN in IN time NN and CC therefore RB may MD cause VV significant JJ variability NN in IN cash NN flows NNS from IN year NN to TO year NN as IN prices NNS change VVP . SENT The DT table NN below RB excludes VVZ the DT Company NN s PP interest NN in IN Syncrude NP . SENT 2004 CD 2003 CD 2002 CD millions NNS Future JJ cash NN flows VVZ 11 CD , , 625 CD 27 CD , , 611 CD 35 CD , , 811 CD Future JJ production NN costs NNS 3 CD , , 123 CD 10 CD , , 871 CD 8 CD , , 940 CD Future JJ development NN costs NNS 1 CD , , 492 CD 3 CD , , 084 CD 3 CD , , 117 CD Future JJ income NN taxes NNS 2 CD , , 260 CD 5 CD , , 543 CD 9 CD , , 107 CD Future JJ net JJ cash NN flows VVZ 4 CD , , 750 CD 8 CD , , 113 CD 14 CD , , 647 CD Annual JJ discount NN of IN 10 CD percent NN for IN estimated JJ timing NN of IN cash NN flows NNS 1 CD , , 433 CD 3 CD , , 375 CD 6 CD , , 446 CD Discounted JJ future JJ net JJ cash NN flows VVZ 3 CD , , 317 CD 4 CD , , 738 CD 8 CD , , 201 CD 30 CD Table NN of IN Contents NNS Changes NP in IN Standardized JJ Measure NN of IN Discounted JJ Future JJ Net JJ Cash NN Flows NNS Related VVN to TO Proved VVN Oil NP and CC Gas NP Reserves NNS 2004 CD 2003 CD 2002 CD millions NNS Balance NN at IN beginning VVG of IN year NN 4 CD , , 738 CD 8 CD , , 201 CD 2 CD , , 789 CD Changes NP resulting VVG from IN . SENT Sales NNS and CC transfers NNS of IN oil NN and CC gas NN produced VVD , , net JJ of IN production NN costs NNS 2 CD , , 240 CD 2 CD , , 075 CD 1 CD , , 645 CD Net JJ changes NNS in IN prices NNS , , development NN costs NNS and CC production NN costs NNS 3 CD , , 692 CD 4 CD , , 395 CD 9 CD , , 276 CD Extensions NNS , , discoveries NNS , , additions NNS and CC improved JJ recovery NN , , less RBR related VVN costs NNS 43 CD 22 CD 34 CD Purchase NP sales NNS of IN minerals NNS in IN place NN 4 CD Development NP costs NNS incurred VVN during IN the DT year NN 345 CD 281 CD 432 CD Revisions NNS of IN previous JJ quantity NN estimates VVZ 1 CD , , 838 CD 368 CD 111 CD Accretion NN of IN discount NN 663 CD 1 CD , , 108 CD 423 CD Net JJ change NN in IN income NN taxes NNS 1 CD , , 708 CD 1 CD , , 964 CD 3 CD , , 223 CD Net JJ change NN 1 CD , , 421 CD 3 CD , , 463 CD 5 CD , , 412 CD Balance NN at IN end NN of IN year NN 3 CD , , 317 CD 4 CD , , 738 CD 8 CD , , 201 CD Within IN the DT past JJ 12 CD months NNS , , the DT Company NN has VHZ not RB filed VVN oil NN and CC gas NN reserve NN estimates NNS with IN any DT authority NN or CC agency NN of IN the DT United NP States NPS . SENT Item NN 9 CD . SENT Changes NNS in IN and CC Disagreements NNS with IN Accountants NNS on IN Accounting NP and CC Financial NP Disclosure NN . SENT None NN . SENT Item NN 9 CD A DT . SENT Controls NNS and CC Procedures NNS . SENT As IN indicated VVN in IN the DT certifications NNS in IN Exhibit NN 31 CD . SENT 1 CD and CC 31 CD . SENT 2 CD of IN this DT report NN , , the DT Company NN s PP principal JJ executive JJ officer NN and CC principal JJ financial JJ officer NN have VHP evaluated VVN the DT Company NN s PP disclosure NN controls NNS and CC procedures NNS as IN of IN December NP 31 CD , , 2004 CD . SENT Based VVN on IN that DT evaluation NN , , these DT officers NNS have VHP concluded VVN that IN the DT Company NN s PP disclosure NN controls NNS and CC procedures NNS are VBP appropriate JJ and CC effective JJ for IN the DT purpose NN of IN ensuring VVG that DT material NN information NN relating VVG to TO the DT Company NN , , including VVG its PP$ consolidated JJ subsidiaries NNS , , is VBZ made VVN known VVN to TO them PP by IN others NNS within IN those DT entities NNS , , particularly RB during IN the DT period NN in IN which WDT this DT annual JJ report NN is VBZ being VBG prepared VVN . SENT Reference NN is VBZ made VVN to TO page NN F NP 2 CD of IN this DT report NN for IN management NN s PP report VVP on IN internal JJ control NN over IN financial JJ reporting NN . SENT Reference NN is VBZ made VVN to TO page NN F NP 2 CD of IN this DT report NN for IN the DT report NN of IN the DT independent JJ registered JJ public JJ accounting NN firm NN on IN management NN s PP assessment NN on IN internal JJ control NN over IN financial JJ reporting NN . SENT There EX has VHZ not RB been VBN any DT change NN in IN the DT Company NN s PP internal JJ control NN over IN financial JJ reporting NN that WDT occurred VVD during IN the DT Company NN s PP fourth JJ fiscal JJ quarter NN of IN 2004 CD that WDT has VHZ materially RB affected VVN , , or CC is VBZ reasonably RB likely JJ to TO materially RB affect VV , , the DT Company NN s PP internal JJ control NN over IN financial JJ reporting NN . SENT 31 CD Table NN of IN Contents NNS PART NN III NP Item NN 10 CD . SENT Directors NNS and CC Executive NN Officers NNS of IN the DT Registrant NN . SENT The DT Company NN currently RB has VHZ nine CD directors NNS . SENT Each DT director NN is VBZ elected VVN to TO hold VV office NN until IN the DT close NN of IN the DT next JJ annual JJ meeting NN . SENT All DT of IN the DT nominees NNS , , except IN J NP . SENT M NP . SENT Jack NP Mintz NP , , are VBP now RB directors NNS and CC have VHP been VBN since IN the DT dates NNS indicated VVD . SENT The DT following VVG table NN provides VVZ information NN on IN the DT nominees NNS for IN election NN as IN directors NNS . SENT Last JJ major JJ position NN or CC office NN with IN the DT Name NN and CC current JJ principal JJ Company NN or CC Exxon NP Mobil NP occupation NN or CC employment NN Corporation NP Director NP since IN Holdings NP 1 CD 2 CD B NP . SENT J NP . SENT Brian NP Fischer NP Senior NP vice NN president NN , , September NP 1 CD , , 1992 CD Common JJ shares NNS of IN 33 CD , , 963 CD Senior JJ vice NN president NN , , Chemicals NNS division NN , , Imperial NP Oil NP Limited NP products NNS and CC chemicals NNS Imperial NP Oil NP Limited NP division NN , , Deferred JJ share NN units NNS of IN 20 CD , , 047 CD Imperial NP Oil NP Limited NP Imperial NP Oil NP Limited NP Restricted JJ stock NN units NNS of IN 82 CD , , 600 CD Imperial NP Oil NP Limited NP Shares NP of IN 0 CD Exxon NP Mobil NP Corporation NP T NN . SENT J NP . SENT Tim NP Hearn NP President NP , , January NP 1 CD , , 2002 CD Common JJ shares NNS of IN 25 CD , , 291 CD Chairman NP , , president NN and CC Imperial NP Oil NP Limited NP Imperial NP Oil NP Limited NP chief JJ executive NN officer NN , , Imperial NP Oil NP Limited NP Deferred JJ share NN units NNS of IN 100 CD Imperial NP Oil NP Limited NP Restricted JJ stock NN units NNS of IN 174 CD , , 400 CD Imperial NP Oil NP Limited NP Shares NP of IN 9 CD , , 453 CD Exxon NP Mobil NP Corporation NP J NP . SENT M NP . SENT Jack NP Mintz NP Common NP shares NNS of IN 100 CD President NP and CC chief JJ Imperial NP Oil NP Limited NP executive NN officer NN , , C NP . SENT D SYM . SENT Howe NP Institute NP Deferred JJ share NN units NNS of IN 0 CD public JJ policy NN institute NN and CC Imperial NP Oil NP Limited NP professor NN , , Joseph NP L NP . SENT Rotman NP School NP of IN Management NP , , Restricted JJ stock NN units NNS of IN 0 CD University NP of IN Toronto NP Imperial NP Oil NP Limited NP Shares NP of IN 0 CD Exxon NP Mobil NP Corporation NP R NP . SENT Roger NP Phillips NP April NP 23 CD , , 2002 CD Common JJ shares NNS of IN 3 CD , , 000 CD Retired NP president NN and CC Imperial NP Oil NP Limited NP chief JJ executive NN officer NN , , IPSCO NP Inc NP . SENT Deferred JJ share NN units NNS of IN 3 CD , , 334 CD steel NN manufacturing NN Imperial NP Oil NP Limited NP Restricted JJ stock NN units NNS of IN 2 CD , , 750 CD Imperial NP Oil NP Limited NP Shares NP of IN 2 CD , , 000 CD Exxon NP Mobil NP Corporation NP J NP . SENT F SYM . SENT Jim NP Shepard NP October NP 21 CD , , 1997 CD Common JJ shares NNS of IN 3 CD , , 000 CD Retired NP chairman NN and CC Imperial NP Oil NP Limited NP chief JJ executive NN officer NN , , Finning VVG International NP Inc NP . SENT Deferred JJ share NN units NNS of IN 5 CD , , 932 CD sale NN , , lease NN , , repair NN and CC Imperial NP Oil NP Limited NP financing NN of IN heavy JJ equipment NN Restricted VVN stock NN units NNS of IN 2 CD , , 750 CD Imperial NP Oil NP Limited NP Shares NP of IN 0 CD Exxon NP Mobil NP Corporation NP 32 CD Table NN of IN Contents NNS Last JJ major JJ position NN or CC office NN with IN the DT Name NN and CC current JJ principal JJ Company NN or CC Exxon NP Mobil NP occupation NN or CC employment NN Corporation NP Director NP since IN Holdings NP 1 CD 2 CD P NN . SENT A DT . SENT Paul NP Smith NP Corporate NP finance NN February NP 1 CD , , 2002 CD Common JJ shares NNS of IN 4 CD , , 302 CD Controller NN and CC manager NN , , Exxon NP Imperial NP Oil NP Limited NP senior JJ vice NN president NN , , Mobil NP Corporation NP finance NN and CC Deferred JJ share NN units NNS of IN 0 CD administration NN , , Imperial NP Oil NP Limited NP Imperial NP Oil NP Limited NP Restricted JJ stock NN units NNS of IN 48 CD , , 500 CD Imperial NP Oil NP Limited NP Shares NP of IN 1 CD , , 190 CD Exxon NP Mobil NP Corporation NP S NP . SENT D SYM . SENT Sheelagh NP Whittaker NP April NP 19 CD , , 1996 CD Common JJ shares NNS of IN 3 CD , , 000 CD Vice NP president NN , , Electronic NP Imperial NP Oil NP Limited NP Data NP Systems NPS Corporation NP EDS NP Deferred JJ share NN units NNS of IN 8 CD , , 400 CD of IN Plano NP , , Texas NP and CC Imperial NP Oil NP Limited NP managing NN director NN , , public JJ sector NN business NN , , Restricted JJ stock NN units NNS of IN 2 CD , , 750 CD Electronic NP Data NP Systems NPS Imperial NP Oil NP Limited NP Limited NP business NN and CC information NN Shares NNS of IN 0 CD technology NN services NNS Exxon NP Mobil NP Corporation NP J NP . SENT M NP . SENT Michael NP Yeager NP Vice NP president NN , , Africa NP , , August NP 1 CD , , 2004 CD Common JJ shares NNS of IN 5 CD , , 006 CD Senior JJ vice NN president NN , , ExxonMobil NP Production NP Imperial NP Oil NP Limited NP resources NNS division NN , , Company NP Imperial NP Oil NP Limited NP Deferred JJ share NN units NNS of IN Imperial NP Oil NP Limited NP Restricted JJ stock NN units NNS of IN Imperial NP Oil NP Limited NP Shares NP of IN 105 CD , , 809 CD Exxon NP Mobil NP Corporation NP V NN . SENT L NP . SENT Victor NP Young NP April NP 23 CD , , 2002 CD Common JJ shares NNS of IN 3 CD , , 000 CD Corporate JJ director NN of IN Imperial NP Oil NP Limited NP several JJ corporations NNS Deferred JJ share NN units NNS of IN 1 CD , , 080 CD Imperial NP Oil NP Limited NP Restricted JJ stock NN units NNS of IN 2 CD , , 750 CD Imperial NP Oil NP Limited NP Shares NP of IN Exxon NP Mobil NP 0 CD Corporation NP 1 CD The DT information NN includes VVZ the DT beneficial JJ ownership NN of IN common JJ shares NNS of IN Imperial NP Oil NP Limited NP and CC shares NNS of IN Exxon NP Mobil NP Corporation NP , , which WDT information NN not RB being VBG within IN the DT knowledge NN of IN the DT Company NN , , has VHZ been VBN provided VVN by IN the DT nominees NNS individually RB . SENT 2 LS The DT Company NN s PP plans VVZ for IN deferred JJ share NN units NNS and CC restricted JJ stock NN units NNS for IN selected JJ employees NNS and CC nonemployee NN directors NNS are VBP described VVN on IN pages NNS 38 CD and CC 39 CD . SENT Pierre NP Des NP Marais NP II NP is VBZ currently RB a DT director NN and CC has VHZ been VBN a DT director NN of IN the DT Company NN since IN April NP 22 CD , , 1977 CD . SENT He PP holds VVZ 1 CD , , 560 CD common JJ shares NNS of IN the DT Company NN , , 5 CD , , 031 CD deferred JJ share NN units NNS and CC 2 CD , , 750 CD restricted JJ stock NN units NNS . SENT The DT ages NNS of IN the DT directors NNS , , nominees NNS for IN election NN as IN directors NNS , , and CC the DT five CD senior JJ executives NNS of IN the DT Company NN are VBP . SENT Pierre NP Des NP Marais NP II NP 70 CD , , Brian NP J NP . SENT Fischer NP 58 CD , , Timothy NP J NP . SENT Hearn NP 61 CD , , Jack NP M NP . SENT Mintz NP 54 CD , , Roger NP Phillips NP 65 CD , , James NP F NP . SENT Shepard NP 66 CD , , Paul NP A NP . SENT Smith NP 52 CD , , Sheelagh NP D NP . SENT Whittaker NP 57 CD , , J NP . SENT Michael NP Yeager NP 51 CD , , Victor NP L NP . SENT Young NP 59 CD , , and CC John NP F NP . SENT Kyle NP 62 CD . SENT 33 CD Table NN of IN Contents NNS Jack NP Mintz NP is VBZ a DT director NN of IN Brascan NP Corporation NP and CC CHC NP Helicopter NN Corporation NP , , Roger NP Phillips NP is VBZ a DT director NN of IN Canadian NP Pacific NP Railway NP Limited NP , , Cleveland NP Cliffs NPS Inc NP . SENT , , and CC The DT Toronto NP Dominion NP Bank NP , , and CC Victor NP L NP . SENT Young NP is VBZ a DT director NN of IN Royal NP Bank NP of IN Canada NP and CC BCE NP Inc NP . SENT , , which WDT companies NNS are VBP subject JJ to TO reporting VVG requirements NNS under IN the DT U NP . SENT S NP . SENT Securities NPS Exchange NP Act NP of IN 1934 CD . SENT All DT of IN the DT directors NNS and CC nominees NNS for IN election NN as IN directors NNS , , except IN for IN Roger NP Phillips NP , , Victor NP L NP . SENT Young NP and CC James NP F NP . SENT Shepard NP , , have VHP been VBN engaged VVN for IN more JJR than IN five CD years NNS in IN their PP$ present JJ principal JJ occupations NNS or CC in IN other JJ executive JJ capacities NNS with IN the DT same JJ firm NN or CC affiliated JJ firms NNS . SENT During IN the DT five CD preceding JJ years NNS , , Roger NP Phillips NP was VBD president NN and CC chief JJ executive JJ officer NN of IN IPSCO NP Inc NP . SENT steel NN manufacturing NN until IN he PP retired VVD on IN January NP 1 CD , , 2002 CD . SENT During IN the DT five CD preceding JJ years NNS , , Victor NP L NP . SENT Young NP was VBD chairman NN and CC chief JJ executive JJ officer NN of IN Fishery NN Products NP International NP Limited NP seafood NN products NNS , , until IN May NP 1 CD , , 2001 CD and CC is VBZ currently RB a DT director NN of IN Royal NP Bank NP of IN Canada NP , , BCE NP Inc NP . SENT , , McCain NP Foods NPS Limited NP , , Aliant NP Inc NP . SENT , , and CC Telesat NP Canada NP . SENT James NP F NP . SENT Shepard NP s PP principal JJ occupation NN was VBD chairman NN and CC chief JJ executive JJ officer NN of IN Finning VVG International NP Inc NP . SENT sale NN , , lease NN , , repair NN and CC financing NN of IN heavy JJ equipment NN when WRB , , in IN 2000 CD , , he PP retired VVD . SENT The DT following VVG table NN provides VVZ information NN on IN the DT senior JJ executives NNS of IN the DT Company NN . SENT Name NN and CC Office NP Office NP held VVD since IN Timothy NP J NP . SENT Hearn NP April NP 23 CD , , 2002 CD chairman NN of IN the DT board NN , , president NN and CC chief JJ executive JJ officer NN Brian NP J NP . SENT Fischer NP February NP 1 CD , , 1994 CD senior JJ vice NN president NN , , products NNS and CC chemicals NNS division NN Paul NP A NP . SENT Smith NP February NP 1 CD , , 2002 CD controller NN and CC senior JJ vice NN president NN , , finance NN and CC administration NN J NP . SENT Michael NP Yeager NP August NP 1 CD , , 2004 CD senior JJ vice NN president NN , , resources NNS division NN John NP F NP . SENT Kyle NP June NP 1 CD , , 1991 CD vice NN president NN and CC treasurer NN All DT of IN the DT above JJ senior JJ executives NNS have VHP been VBN engaged VVN for IN more JJR than IN five CD years NNS at IN their PP$ current JJ occupations NNS or CC in IN other JJ executive JJ capacities NNS with IN the DT Company NN or CC its PP$ affiliates NNS . SENT All DT senior JJ executives NNS hold VVP office NN until IN their PP$ appointment NN is VBZ rescinded VVD by IN the DT directors NNS , , or CC by IN the DT chief JJ executive NN officer NN . SENT Audit NN committee NN The DT Company NN has VHZ an DT audit NN committee NN of IN the DT board NN of IN directors NNS . SENT The DT following VVG directors NNS are VBP members NNS of IN the DT audit NN committee NN . SENT P NN . SENT Des NP Marais NP II NP , , R NP . SENT Phillips NP , , J NP . SENT F SYM . SENT Shepard NP , , S NP . SENT D SYM . SENT Whittaker NP and CC V NN . SENT L NP . SENT Young NP . SENT Audit NN committee NN financial JJ expert NN The DT Company NN s PP board NN of IN directors NNS has VHZ determined VVN that IN R NP . SENT Phillips NP , , S NP . SENT D SYM . SENT Whittaker NP and CC V NN . SENT L NP . SENT Young JJ meet VVP the DT definition NN of IN audit NN committee NN financial JJ expert NN and CC that IN they PP and CC P NN . SENT Des NP Marais NP II NP and CC J NP . SENT F SYM . SENT Shepard NP are VBP independent JJ , , as IN that DT term NN is VBZ defined VVN by IN both CC the DT Securities NPS and CC Exchange NP Commission NP rules NNS and CC the DT listing NN standards NNS of IN the DT American NP Stock NP Exchange NP and CC the DT New NP York NP Stock NP Exchange NP . SENT The DT Securities NPS and CC Exchange NP Commission NP has VHZ indicated VVN that IN the DT designation NN of IN an DT audit NN committee NN financial JJ expert NN does VVZ not RB make VV that WDT person NN an DT expert NN for IN any DT purpose NN , , or CC impose VV any DT duties NNS , , obligations NNS or CC liability NN on IN that DT person NN that WDT are VBP greater JJR than IN those DT imposed VVN on IN members NNS of IN the DT audit NN committee NN and CC board NN of IN directors NNS in IN the DT absence NN of IN such JJ designation NN or CC identification NN . SENT Code NN of IN ethics NNS The DT Company NN has VHZ a DT code NN of IN ethics NNS that WDT applies VVZ to TO all DT employees NNS , , including VVG its PP$ principal JJ executive NN officer NN , , principal JJ financial JJ officer NN and CC principal JJ accounting NN officer NN . SENT The DT code NN of IN ethics NNS consists VVZ of IN the DT Company NN s PP ethics NNS policy NN , , conflicts NNS of IN interest NN policy NN , , corporate JJ assets NNS policy NN , , directorships NNS policy NN and CC procedures NNS and CC open JJ door NN communication NN . SENT Those DT documents NNS are VBP available JJ at IN the DT Company NN s PP website JJ www NNS . SENT imperialoil NN . SENT ca MD . SENT 34 CD Table NN of IN Contents NNS Item NN 11 CD . SENT Executive JJ Compensation NN . SENT Directors NNS compensation NN Directors NNS fees NNS are VBP paid VVN only RB to TO nonemployee NN directors NNS . SENT For IN 2004 CD , , nonemployee NN directors NNS were VBD paid VVN an DT annual JJ retainer NN of IN 35 CD , , 000 CD and CC 1 CD , , 000 CD restricted JJ stock NN units NNS for IN their PP$ services NNS as IN directors NNS , , plus CC an DT annual JJ retainer NN of IN 4 CD , , 500 CD for IN each DT committee NN on IN which WDT they PP served VVD , , an DT additional JJ 5 CD , , 000 CD for IN serving VVG as IN chair NN of IN a DT committee NN and CC 2 CD , , 000 CD for IN each DT board NN and CC board NN committee NN meeting NN attended VVD . SENT The DT restricted JJ stock NN units NNS issued VVN to TO nonemployee NN directors NNS have VHP the DT same JJ features NNS as IN the DT restricted JJ stock NN units NNS for IN selected JJ key JJ employees NNS described VVN on IN pages NNS 38 CD and CC 39 CD . SENT Starting VVG in IN 1999 CD , , the DT nonemployee NN directors NNS have VHP been VBN able JJ to TO receive VV all DT or CC part NN of IN their PP$ directors NNS fees NNS in IN the DT form NN of IN deferred JJ share NN units NNS for IN nonemployee NN directors NNS . SENT The DT purpose NN of IN the DT deferred JJ share NN unit NN plan NN for IN nonemployee NN directors NNS is VBZ to TO provide VV them PP with IN additional JJ motivation NN to TO promote VV sustained JJ improvement NN in IN the DT Company NN s PP business NN performance NN and CC shareholder NN value NN by IN allowing VVG them PP to TO have VH all DT or CC part NN of IN their PP$ directors NNS fees NNS tied VVN to TO the DT future JJ growth NN in IN value NN of IN the DT Company NN s PP common JJ shares NNS . SENT This DT plan NN is VBZ described VVN on IN page NN 38 CD . SENT While IN serving VVG as IN directors NNS in IN 2004 CD , , the DT aggregate JJ cash NN remuneration NN paid VVN to TO nonemployee NN directors NNS , , as IN a DT group NN , , was VBD 324 CD , , 875 CD , , and CC they PP received VVD an DT additional JJ 4 CD , , 167 CD deferred JJ share NN units NNS for IN nonemployee NN directors NNS , , as IN a DT group NN , , based VVN on IN an DT aggregate NN of IN 265 CD , , 625 CD of IN cash NN remuneration NN elected VVN to TO be VB received VVN as IN deferred JJ share NN units NNS . SENT The DT nonemployee NN directors NNS , , as IN a DT group NN , , received VVD an DT additional JJ 289 CD deferred JJ share NN units NNS granted VVN as IN the DT equivalent NN to TO the DT cash NN dividend NN paid VVN on IN Company NN shares NNS during IN 2004 CD for IN previously RB granted VVN deferred JJ share NN units NNS . SENT In IN addition NN , , the DT nonemployee NN directors NNS received VVD 5 CD , , 000 CD restricted JJ stock NN units NNS . SENT Senior JJ executive JJ compensation NN Summary NN compensation NN table NN The DT following VVG table NN shows VVZ the DT compensation NN for IN the DT chief JJ executive NN officer NN and CC the DT four CD other JJ senior JJ executives NNS of IN the DT Company NN who WP were VBD serving VVG as IN senior JJ executives NNS at IN the DT end NN of IN 2004 CD and CC the DT compensation NN for IN K NP . SENT C SYM . SENT Williams NP who WP was VBD a DT senior JJ executive NN of IN the DT Company NN until IN July NP 31 CD , , 2004 CD . SENT This DT information NN includes VVZ the DT dollar NN value NN of IN base NN salaries NNS , , cash NN bonus NN awards NNS , , and CC units NNS of IN other JJ long JJ term NN incentive NN compensation NN and CC certain JJ other JJ compensation NN . SENT 35 CD Table NN of IN Contents NNS Annual JJ Compensation NN Long NP Term NP Compensation NN Awards VVZ Payouts NNS Securities NNS Shares NNS or CC Units NNS Under IN Subject NN to TO Resale NN Name NN and CC Other JJ Annual NP Options NPS SARs NP Restricted VVD LTIP NP All DT Other JJ Principal NN Salary NN Bonus NP 2 CD Compensation NN 3 CD Granted VVD 4 CD 5 CD 6 CD 7 CD Payouts NNS Compensation NN 9 CD Position NN Year NN 8 CD T NN . SENT J NP . SENT Hearn NP 2004 CD 1 CD , , 000 CD , , 000 CD 872 CD , , 266 CD 246 CD , , 249 CD 64 CD , , 400 CD 750 CD , , 000 CD 30 CD , , 000 CD Chairman NP , , president NN restricted JJ stock NN units NNS and CC chief JJ executive NN 100 CD officer NN deferred JJ share NN units NNS 2003 CD 825 CD , , 000 CD 750 CD , , 000 CD 182 CD , , 072 CD 60 CD , , 000 CD 738 CD , , 000 CD 24 CD , , 750 CD U NP . SENT S NP . SENT 293 CD , , 450 CD restricted JJ stock NN units NNS 0 CD deferred JJ share NN units NNS 2002 CD 668 CD , , 333 CD 442 CD , , 000 CD 71 CD , , 777 CD 65 CD , , 000 CD 50 CD , , 000 CD 20 CD , , 050 CD U NP . SENT S NP . SENT 328 CD , , 796 CD stock NN options NNS restricted VVN stock NN units NNS 0 CD deferred JJ share NN units NNS P NN . SENT A DT . SENT Smith NP 2004 CD 378 CD , , 333 CD 193 CD , , 600 CD 67 CD , , 022 CD 19 CD , , 300 CD 183 CD , , 000 CD 22 CD , , 700 CD Controller NN and CC Senior JJ restricted JJ stock NN units NNS Vice NP president NN , , finance NN 0 CD and CC administration NN deferred JJ share NN units NNS 2003 CD 357 CD , , 917 CD 183 CD , , 000 CD 11 CD , , 083 CD 16 CD , , 700 CD 204 CD , , 510 CD 21 CD , , 475 CD U NP . SENT S NP . SENT 72 CD , , 891 CD restricted JJ stock NN units NNS 0 CD deferred JJ share NN units NNS 2002 CD 331 CD , , 667 CD 94 CD , , 500 CD U NP . SENT S NP . SENT 100 CD , , 390 CD 25 CD , , 000 CD 12 CD , , 500 CD 19 CD , , 900 CD stock NN options NNS restricted VVN stock NN units NNS 0 CD deferred JJ share NN units NNS B NP . SENT J NP . SENT Fischer NP 2004 CD 551 CD , , 667 CD 392 CD , , 775 CD 99 CD , , 744 CD 34 CD , , 200 CD 357 CD , , 000 CD 33 CD , , 100 CD Senior JJ vice NN president NN , , restricted JJ stock NN units NNS products NNS and CC 275 CD chemicals NNS division NN deferred VVN share NN units NNS 2003 CD 530 CD , , 833 CD 357 CD , , 000 CD 24 CD , , 815 CD 26 CD , , 700 CD 486 CD , , 000 CD 31 CD , , 850 CD restricted JJ stock NN units NNS 341 CD deferred JJ share NN units NNS 2002 CD 505 CD , , 000 CD 216 CD , , 000 CD 0 CD 50 CD , , 000 CD 21 CD , , 700 CD 30 CD , , 300 CD stock NN options NNS restricted VVN share NN units NNS 353 CD deferred JJ share NN unit NN K NP . SENT C SYM . SENT Williams NP 1 CD 2004 CD U NP . SENT S NP . SENT 257 CD , , 083 CD U NP . SENT S NP . SENT U NP . SENT S NP . SENT 204 CD , , 682 CD U NP . SENT S NP . SENT 158 CD , , 010 CD U NP . SENT S NP . SENT 17 CD , , 475 CD Senior JJ vice NN president NN resources NNS division NN 2003 CD U NP . SENT S NP . SENT 431 CD , , 667 CD U NP . SENT S NP . SENT 260 CD , , 900 CD U NP . SENT S NP . SENT 530 CD , , 391 CD U NP . SENT S NP . SENT 197 CD , , 490 CD U NP . SENT S NP . SENT 27 CD , , 900 CD until IN July NP 31 CD , , 2004 CD 2002 CD U NP . SENT S NP . SENT 412 CD , , 500 CD U NP . SENT S NP . SENT 158 CD , , 000 CD U NP . SENT S NP . SENT 363 CD , , 932 CD U NP . SENT S NP . SENT 197 CD , , 450 CD U NP . SENT S NP . SENT 26 CD , , 750 CD J NP . SENT M NP . SENT Yeager NP 1 CD 2004 CD U NP . SENT S NP . SENT 170 CD , , 833 CD U NP . SENT S NP . SENT 277 CD , , 000 CD U NP . SENT S NP . SENT 48 CD , , 831 CD U NP . SENT S NP . SENT 0 CD U NP . SENT S NP . SENT 10 CD , , 250 CD Senior NP Vice NP president NN , , Resources NPS division NN From IN Aug NN . SENT 1 CD , , 2004 CD J NP . SENT F SYM . SENT Kyle NP 2004 CD 359 CD , , 583 CD 172 CD , , 105 CD 74 CD , , 585 CD 13 CD , , 200 CD 171 CD , , 000 CD 21 CD , , 575 CD Vice NP president NN restricted VVN stock NN units NNS and CC treasurer NN 0 CD deferred JJ share NN units NNS 2003 CD 355 CD , , 000 CD 171 CD , , 000 CD 41 CD , , 391 CD 11 CD , , 400 CD 261 CD , , 000 CD 21 CD , , 300 CD restricted JJ stock NN units NNS 0 CD deferred JJ share NN units NNS 2002 CD 345 CD , , 000 CD 110 CD , , 000 CD 13 CD , , 077 CD 29 CD , , 000 CD 10 CD , , 600 CD 20 CD , , 700 CD stock NN options NNS restricted VVN stock NN units NNS 0 CD deferred JJ share NN units NNS 36 CD Table NN of IN Contents NNS 1 CD K NN . SENT C LS . SENT Williams NP was VBD on IN a DT loan NN assignment NN from IN Exxon NP Mobil NP Corporation NP until IN July NP 31 CD , , 2004 CD and CC J NP . SENT M NP . SENT Yeager NP is VBZ from IN August NP 1 CD , , 2004 CD . SENT Their PP$ compensation NN was VBD paid VVN to TO them PP directly RB by IN Exxon NP Mobil NP Corporation NP in IN United NP States NPS dollars NNS , , and CC is VBZ disclosed VVN in IN United NP States NPS dollars NNS . SENT Also RB , , they PP received VVD employee NN benefits NNS under IN Exxon NP Mobil NP Corporation NP s PP employee NN benefit NN plans NNS , , and CC not RB under IN the DT Company NN s PP employee NN benefit NN plans NNS . SENT The DT Company NN reimburses VVZ Exxon NP Mobil NP Corporation NP for IN the DT compensation NN paid VVD and CC employee NN benefits NNS provided VVD to TO them PP . SENT 2 LS Any DT part NN of IN bonus NN elected VVN to TO be VB received VVN as IN deferred JJ share NN units NNS is VBZ excluded VVN . SENT 3 CD Amounts NNS under IN Other JJ Annual JJ Compensation NN , , except IN for IN K NP . SENT C SYM . SENT Williams NP and CC J NP . SENT M NP . SENT Yeager NP , , consist VVP of IN interest NN paid VVN in IN respect NN of IN deferred JJ payments NNS for IN long JJ term NN incentive NN compensation NN , , other JJ than IN the DT Company NN s PP plan VVP for IN deferred JJ share NN units NNS for IN selected JJ executives NNS , , described VVN on IN pages NNS 37 CD to TO 39 CD , , dividend NN equivalent NN payments NNS on IN restricted JJ stock NN units NNS , , interest NN paid VVN in IN respect NN of IN deferred JJ payments NNS of IN bonuses NNS and CC reimbursement NN for IN any DT income NN tax NN paid VVN as IN a DT result NN of IN use NN of IN company NN aircraft NN . SENT The DT amounts NNS also RB include VVP an DT earned VVN benefits NNS allowance NN which WDT in IN 2004 CD was VBD 90 CD , , 000 CD for IN T NN . SENT J NP . SENT Hearn NP , , 45 CD , , 000 CD for IN P NN . SENT A DT . SENT Smith NP , , 45 CD , , 000 CD for IN B NP . SENT J NP . SENT Fischer NP and CC 35 CD , , 000 CD for IN J NP . SENT F SYM . SENT Kyle NP . SENT For IN T NN . SENT J NP . SENT Hearn NP and CC P NN . SENT A DT . SENT Smith NP , , the DT U NP . SENT S NP . SENT dollar NN amounts NNS were VBD payments NNS by IN the DT Company NN on IN account NN of IN U NP . SENT S NP . SENT income NN taxes NNS incurred VVN while IN on IN assignment NN in IN the DT U NP . SENT S NP . SENT A DT . SENT For IN K NP . SENT C SYM . SENT Williams NP and CC J NP . SENT M NP . SENT Yeager NP , , the DT amounts NNS are VBP the DT net JJ payments NNS by IN Exxon NP Mobil NP Corporation NP on IN account NN of IN Canadian JJ income NN taxes NNS and CC other JJ compensation NN for IN assignment NN outside NN of IN the DT United NP States NPS . SENT Each DT year NN , , while IN on IN assignment NN , , T NN . SENT J NP . SENT Hearn NP and CC P NN . SENT A DT . SENT Smith NP paid VVD to TO the DT Company NP and CC K NP . SENT C SYM . SENT Williams NP and CC J NP . SENT M NP . SENT Yeager NP paid VVD to TO Exxon NP Mobil NP Corporation NP amounts NNS that WDT were VBD approximate JJ to TO the DT income NN taxes NNS that WDT would MD have VH been VBN imposed VVN if IN they PP were VBD resident JJ in IN their PP$ originating VVG country NN of IN employment NN . SENT 4 CD In IN 2002 CD , , the DT Company NN granted VVD stock NN options NNS which WDT are VBP described VVN on IN page NN 38 CD . SENT 5 LS These DT include VVP the DT number NN of IN units NNS granted VVN under IN the DT Company NN s PP plan VVP for IN deferred JJ share NN units NNS for IN selected JJ executives NNS described VVN on IN page NN 38 CD . SENT The DT values NNS and CC number NN of IN these DT units NNS , , as RB at IN the DT end NN of IN 2004 CD , , were VBD 7 CD , , 034 CD for IN 100 CD units NNS for IN T NN . SENT J NP . SENT Hearn NP , , nil NN for IN P NN . SENT A DT . SENT Smith NP and CC J NP . SENT F SYM . SENT Kyle NP and CC 1 CD , , 426 CD , , 373 CD for IN 20 CD , , 047 CD units NNS for IN B NP . SENT J NP . SENT Fischer NP . SENT These DT amounts NNS include VVP no DT deferred JJ share NN units NNS elected VVN to TO be VB received VVN in IN lieu NN of IN bonus NN for IN 2004 CD , , 2003 CD and CC 2002 CD for IN B NP . SENT J NP . SENT Fischer NP , , P NN . SENT A DT . SENT Smith NP and CC J NP . SENT F SYM . SENT Kyle NP , , and CC 100 CD deferred JJ share NN units NNS based VVN on IN 7 CD , , 034 CD of IN bonus NN elected VVN to TO be VB received VVN as IN deferred JJ share NN units NNS for IN 2004 CD for IN T NN . SENT J NP . SENT Hearn NP . SENT 6 CD These DT also RB include VVP restricted JJ stock NN units NNS granted VVN under IN the DT Company NN s PP plan VVP for IN restricted JJ stock NN units NNS for IN selected JJ key JJ employees NNS and CC nonemployee NN directors NNS described VVN on IN pages NNS 38 CD and CC 39 CD . SENT The DT values NNS and CC number NN of IN these DT units NNS , , as RB at IN the DT end NN of IN 2004 CD , , were VBD 12 CD , , 408 CD , , 560 CD for IN 174 CD , , 400 CD units NNS for IN T NN . SENT J NP . SENT Hearn NP , , 3 CD , , 450 CD , , 775 CD for IN 48 CD , , 500 CD units NNS for IN P NN . SENT A DT . SENT Smith NP , , 5 CD , , 876 CD , , 990 CD for IN 82 CD , , 600 CD units NNS for IN B NP . SENT J NP . SENT Fischer NP , , and CC 2 CD , , 504 CD , , 480 CD for IN 35 CD , , 200 CD units NNS for IN J NP . SENT F SYM . SENT Kyle NP . SENT The DT values NNS of IN these DT units NNS granted VVN for IN 2004 CD , , as RB at IN the DT end NN of IN 2004 CD being VBG the DT date NN of IN grant NN , , were VBD 4 CD , , 582 CD , , 060 CD for IN T NN . SENT J NP . SENT Hearn NP , , 1 CD , , 373 CD , , 195 CD for IN P NN . SENT A DT . SENT Smith NP , , 2 CD , , 433 CD , , 330 CD for IN B NP . SENT J NP . SENT Fischer NP , , and CC 939 CD , , 180 CD for IN J NP . SENT F SYM . SENT Kyle NP . SENT The DT values NNS of IN these DT units NNS granted VVN for IN 2003 CD , , as RB at IN the DT end NN of IN 2003 CD being VBG the DT date NN of IN grant NN , , were VBD 3 CD , , 451 CD , , 800 CD for IN T NN . SENT J NP . SENT Hearn NP , , 960 CD , , 751 CD for IN P NN . SENT A DT . SENT Smith NP , , 1 CD , , 536 CD , , 051 CD for IN B NP . SENT J NP . SENT Fischer NP , , and CC 655 CD , , 842 CD for IN J NP . SENT F SYM . SENT Kyle NP . SENT The DT values NNS of IN these DT units NNS granted VVN for IN 2002 CD , , as RB at IN the DT end NN of IN 2002 CD being VBG the DT date NN of IN grant NN , , were VBD 2 CD , , 243 CD , , 000 CD for IN T NN . SENT J NP . SENT Hearn NP , , 560 CD , , 750 CD for IN P NN . SENT A DT . SENT Smith NP , , 973 CD , , 462 CD for IN B NP . SENT J NP . SENT Fischer NP and CC 475 CD , , 516 CD for IN J NP . SENT F SYM . SENT Kyle NP . SENT 7 CD K NP . SENT C SYM . SENT Williams NP and CC J NP . SENT M NP . SENT Yeager NP participate VVP in IN Exxon NP Mobil NP Corporation NP s PP restricted VVN stock NN plan NN which WDT is VBZ similar JJ to TO the DT Company NN s PP restricted VVD stock NN unit NN plan NN . SENT The DT value NN and CC number NN of IN these DT units NNS for IN K NP . SENT C SYM . SENT Williams NP , , as RB at IN the DT end NN of IN the DT year NN , , were VBD U NP . SENT S NP . SENT 2 CD , , 398 CD , , 968 CD for IN 46 CD , , 800 CD units NNS . SENT The DT value NN and CC number NN of IN these DT units NNS for IN J NP . SENT M NP . SENT Yeager NP , , as RB at IN the DT end NN of IN the DT year NN , , were VBD U NP . SENT S NP . SENT 4 CD , , 170 CD , , 924 CD for IN 81 CD , , 368 CD units NNS . SENT Under IN that DT plan NN , , K NP . SENT C SYM . SENT Williams NP was VBD granted VVN 23 CD , , 400 CD units NNS in IN 2003 CD whose WP$ value NN on IN the DT date NN of IN grant NN was VBD U NP . SENT S NP . SENT 959 CD , , 400 CD and CC 23 CD , , 400 CD units NNS in IN 2002 CD whose WP$ value NN on IN the DT date NN of IN grant NN was VBD U NP . SENT S NP . SENT 810 CD , , 576 CD . SENT Under IN that DT plan NN , , J NP . SENT M NP . SENT Yeager NP was VBD granted VVN 31 CD , , 400 CD units NNS in IN 2004 CD , , whose WP$ value NN on IN the DT date NN of IN grant NN was VBD U NP . SENT S NP . SENT 1 CD , , 609 CD , , 564 CD . SENT 8 CD Payouts NNS were VBD from IN 2003 CD earnings NNS bonus NN units NNS that WDT reached VVD maximum JJ value NN of IN 3 CD . SENT 00 CD per IN unit NN in IN 2004 CD . SENT That DT plan NN is VBZ described VVN on IN page NN 38 CD . SENT 9 CD Amounts NNS under IN All DT Other JJ Compensation NN , , except IN for IN K NP . SENT C SYM . SENT Williams NP and CC J NP . SENT M NP . SENT Yeager NP , , are VBP the DT Company NN s PP contributions NNS to TO the DT savings NNS plan NN , , which WDT is VBZ a DT plan NN available JJ to TO all DT employees NNS . SENT Under IN one CD of IN the DT options NNS of IN that DT plan NN to TO which WDT the DT senior JJ executives NNS subscribe VVP , , except IN for IN K NP . SENT C SYM . SENT Williams NP and CC J NP . SENT M NP . SENT Yeager NP , , the DT Company NN matched VVD employee NN contributions NNS up RB to TO six CD percent NN of IN base NN salary NN per IN year NN . SENT however RB , , an DT employee NN may MD elect VV to TO receive VV an DT enhanced JJ pension NN under IN the DT Company NN s PP pension NN plan NN by IN foregoing VVG three CD percent NN of IN the DT Company NN s PP matching VVG contributions NNS . SENT The DT plan NN is VBZ intended VVN to TO be VB primarily RB for IN retirement NN savings NNS , , although IN employees NNS may MD withdraw VV their PP$ contributions NNS prior RB to TO retirement NN . SENT For IN K NP . SENT C SYM . SENT Williams NP and CC J NP . SENT M NP . SENT Yeager NP , , the DT amounts NNS are VBP Exxon NP Mobil NP Corporation NP s PP contributions NNS to TO its PP$ employee NN savings NNS plan VVP . SENT Long JJ term NN incentive NN compensation NN Consistent JJ with IN the DT Company NN s PP compensation NN philosophy NN of IN being VBG performance NN driven VVN , , long JJ term NN incentive NN compensation NN is VBZ granted VVN to TO retain VV selected JJ employees NNS and CC reward VV them PP for IN high JJ performance NN . SENT The DT compensation NN has VHZ generally RB been VBN in IN the DT form NN of IN units NNS . SENT The DT assessment NN of IN employee NN performance NN is VBZ conducted VVN through IN the DT Company NN s PP appraisal NN program NN . SENT The DT appraisal NN program NN is VBZ a DT disciplined JJ annual JJ program NN that WDT incorporates VVZ business NN performance NN measures NNS relevant JJ to TO eligible JJ employees NNS , , and CC involves VVZ ranking JJ of IN employee NN performance NN using VVG a DT consistent JJ process NN throughout IN the DT organization NN at IN all DT levels NNS . SENT The DT number NN of IN units NNS received VVN by IN each DT employee NN is VBZ tied VVN to TO the DT performance NN of IN the DT employee NN in IN achieving VVG these DT business NN performance NN measures NNS . SENT The DT scope NN of IN the DT Company NN program NN is VBZ determined VVN by IN the DT overall JJ performance NN of IN the DT Company NN each DT year NN . SENT The DT Company NN s PP incentive JJ share NN units NNS give VVP the DT recipient NN a DT right NN to TO receive VV cash NN equal JJ to TO the DT amount NN by IN which WDT the DT market NN price NN of IN the DT Company NN s PP common JJ shares NNS at IN the DT time NN of IN exercise NN exceeds VVZ the DT issue NN price NN of IN the DT units NNS . SENT These DT units NNS were VBD granted VVN prior RB to TO 2002 CD . SENT The DT issue NN price NN of IN the DT units NNS granted VVN to TO executives NNS was VBD the DT closing VVG price NN of IN the DT Company NN s PP shares VVZ on IN the DT Toronto NP Stock NP Exchange NP on IN the DT grant NN date NN . SENT Incentive NN share NN units NNS are VBP eligible JJ for IN exercise NN up RB to TO 10 CD years NNS from IN issuance NN . SENT 37 CD Table NN of IN Contents NNS In IN 1998 CD , , an DT additional JJ form NN of IN long JJ term NN incentive NN compensation NN deferred JJ share NN units NNS was VBD made VVN available JJ to TO selected JJ executives NNS whereby WRB they PP could MD elect VV to TO receive VV all DT or CC part NN of IN their PP$ performance NN bonus NN compensation NN in IN the DT form NN of IN such JJ units NNS . SENT The DT number NN of IN units NNS granted VVN to TO an DT executive NN is VBZ determined VVN by IN dividing VVG the DT amount NN of IN the DT executive JJ s NN bonus NN elected VVN to TO be VB received VVN as IN deferred JJ share NN units NNS by IN the DT average NN of IN the DT closing VVG prices NNS of IN the DT Company NN s PP shares VVZ on IN the DT Toronto NP Stock NP Exchange NP for IN the DT five CD consecutive JJ trading NN days NNS average JJ closing NN price NN immediately RB prior RB to TO the DT date NN that IN the DT bonus NN would MD have VH been VBN paid VVN to TO the DT executive NN . SENT Additional JJ units NNS will MD be VB granted VVN to TO recipients NNS of IN these DT units NNS based VVN on IN the DT cash NN dividend NN payable JJ on IN the DT Company NN shares NNS divided VVN by IN the DT average JJ closing NN price NN immediately RB prior RB to TO the DT payment NN date NN for IN that DT dividend NN and CC multiplying VVG the DT resulting VVG number NN by IN the DT number NN of IN deferred JJ share NN units NNS held VVN by IN the DT recipient NN . SENT An DT executive NN may MD not RB exercise VV these DT units NNS until IN after IN termination NN of IN employment NN with IN the DT Company NN and CC must MD exercise VV the DT units NNS no RB later RBR than IN December NP 31 CD of IN the DT year NN following VVG termination NN of IN employment NN with IN the DT Company NN . SENT The DT units NNS held VVN must MD all RB be VB exercised VVN on IN the DT same JJ date NN . SENT On IN the DT date NN of IN exercise NN , , the DT cash NN value NN to TO be VB received VVN for IN the DT units NNS will MD be VB determined VVN by IN multiplying VVG the DT number NN of IN units NNS exercised VVN by IN the DT average JJ closing NN price NN immediately RB prior RB to TO the DT date NN of IN exercise NN . SENT Starting VVG in IN 1999 CD , , a DT form NN of IN long JJ term NN incentive NN compensation NN , , similar JJ to TO the DT deferred JJ share NN units NNS for IN executives NNS , , was VBD made VVN available JJ to TO nonemployee NN directors NNS in IN lieu NN of IN their PP$ receiving VVG all DT or CC part NN of IN their PP$ directors NNS fees NNS . SENT The DT main JJ differences NNS between IN the DT two CD plans NNS are VBP that IN all DT nonemployee NN directors NNS are VBP allowed VVN to TO participate VV in IN the DT plan NN for IN nonemployee NN directors NNS and CC that IN the DT number NN of IN units NNS granted VVN to TO a DT nonemployee NN director NN is VBZ determined VVN at IN the DT end NN of IN each DT calendar NN quarter NN by IN dividing VVG the DT amount NN of IN the DT directors NNS fees NNS for IN that DT calendar NN quarter NN that IN the DT nonemployee NN director NN elected VVN to TO receive VV as IN deferred JJ share NN units NNS by IN the DT average JJ closing NN price NN immediately RB prior RB to TO the DT last JJ day NN of IN the DT calendar NN quarter NN . SENT Starting VVG in IN 2001 CD , , the DT earnings NNS bonus NN unit NN plan NN was VBD made VVN available JJ to TO selected JJ executives NNS to TO promote VV individual JJ contribution NN to TO sustained JJ improvement NN in IN the DT Company NN s PP business NN performance NN and CC shareholder NN value NN . SENT Each DT earnings NNS bonus NN unit NN entitles VVZ the DT recipient NN to TO receive VV an DT amount NN equal JJ to TO the DT Company NN s PP cumulative JJ net JJ income NN per IN common JJ share NN as RB announced VVD each DT quarter NN beginning NN after IN the DT grant NN . SENT Payout NN occurs VVZ on IN the DT fifth JJ anniversary NN of IN the DT grant NN or CC when WRB the DT maximum JJ settlement NN value NN per IN unit NN is VBZ reached VVN , , if IN earlier RB . SENT Under IN the DT stock NN option NN plan NN , , adopted VVN by IN the DT Company NN in IN April NP 2002 CD , , a DT total NN of IN 3 CD , , 210 CD , , 200 CD options NNS were VBD granted VVN to TO selected JJ key JJ employees NNS on IN April NP 30 CD , , 2002 CD for IN the DT purchase NN of IN the DT Company NN s PP common JJ shares NNS at IN an DT exercise NN price NN of IN 46 CD . SENT 50 CD per IN share NN . SENT All DT of IN the DT options NNS are VBP exercisable JJ . SENT Any DT unexercised JJ options NNS expire VVP after IN April NP 29 CD , , 2012 CD . SENT As IN of IN February NP 18 CD , , 2005 CD there RB have VHP been VBN 534 CD , , 525 CD common JJ shares NNS issued VVN upon IN exercise NN of IN stock NN options NNS and CC 2 CD , , 643 CD , , 275 CD common JJ shares NNS are VBP issuable JJ upon IN future JJ exercise NN of IN stock NN options NNS . SENT The DT common JJ shares NNS that WDT were VBD issued VVN and CC those DT that WDT may MD be VB issued VVN in IN the DT future NN represent VVP about IN 0 CD . SENT 91 CD percent NN of IN the DT Company NN s PP currently RB outstanding JJ common JJ shares NNS . SENT The DT Company NP s PP directors NNS , , officers NNS and CC vice NN presidents NNS as IN a DT group NN hold VVP 7 CD . SENT 7 CD percent NN of IN the DT unexercised JJ stock NN options NNS . SENT The DT maximum JJ number NN of IN common JJ shares NNS that IN any DT one CD person NN may MD receive VV from IN the DT exercise NN of IN stock NN options NNS is VBZ 145 CD , , 000 CD common JJ shares NNS , , which WDT is VBZ about IN 0 CD . SENT 04 CD percent NN of IN the DT currently RB outstanding JJ common JJ shares NNS . SENT Stock NN options NNS may MD be VB exercised VVN only RB during IN employment NN with IN the DT Company NN except IN in IN the DT event NN of IN death NN , , disability NN or CC retirement NN . SENT Also RB , , stock NN options NNS may MD be VB forfeited VVN if IN the DT Company NN believes VVZ that IN the DT employee NN intends VVZ to TO terminate VV employment NN or CC if IN during IN employment NN or CC during IN the DT period NN of IN 24 CD months NNS after IN the DT termination NN of IN employment NN the DT employee NN , , without IN the DT consent NN of IN the DT Company NN , , engaged VVN in IN any DT business NN that WDT was VBD in IN competition NN with IN the DT Company NN or CC otherwise RB engaged VVN in IN any DT activity NN that WDT was VBD detrimental JJ to TO the DT Company NN . SENT The DT Company NN may MD determine VV that IN stock NN options NNS will MD not RB be VB forfeited VVN after IN the DT cessation NN of IN employment NN . SENT Stock NN options NNS cannot NN be VB assigned VVN except IN in IN the DT case NN of IN death NN . SENT The DT Company NN may MD amend VV or CC terminate VV the DT incentive NN stock NN option NN plan NN as IN it PP in IN its PP$ sole JJ discretion NN determines VVZ appropriate JJ . SENT No DT such JJ amendment NN or CC termination NN can MD be VB made VVN to TO impair VV any DT rights NNS of IN stock NN option NN holders NNS under IN the DT incentive NN stock NN option NN plan NN unless IN the DT stock NN option NN holder NN consents NNS , , except IN that DT in IN the DT event NN of IN a DT any DT adjustments NNS to TO the DT share NN capital NN of IN the DT Company NN or CC b LS a DT take VV over IN bid NN , , amalgamation NN , , combination NN , , merger NN or CC other JJ reorganization NN , , sale NN or CC lease NN of IN assets NNS , , or CC any DT liquidation NN , , dissolution NN , , or CC winding VVG up RP , , involving VVG the DT Company NN . SENT Appropriate JJ adjustments NNS may MD be VB made VVN by IN the DT Company NN to TO . SENT i NP the DT number NN of IN common JJ shares NNS that WDT may MD be VB acquired VVN on IN the DT exercise NN of IN outstanding JJ stock NN options NNS . SENT ii NP the DT exercise NN price NN of IN outstanding JJ stock NN options NNS , , or CC iii NNS the DT class NN of IN shares NNS that WDT may MD be VB acquired VVN in IN place NN of IN common JJ shares NNS on IN the DT exercise NN of IN outstanding JJ stock NN options NNS in IN order NN to TO preserve VV proportionately RB the DT rights NNS of IN the DT stock NN option NN holders NNS and CC give VV proper JJ effect NN to TO the DT event NN . SENT In IN December NP 2002 CD , , the DT Company NN introduced VVD a DT restricted JJ stock NN unit NN plan NN , , which WDT will MD be VB the DT primary JJ long JJ term NN incentive NN compensation NN plan NN in IN future JJ years NNS . SENT The DT purpose NN of IN the DT plan NN is VBZ to TO align VV the DT interests NNS of IN employees NNS and CC nonemployee NN directors NNS directly RB with IN the DT interests NNS of IN shareholders NNS . SENT Each DT unit NN entitles VVZ the DT recipient NN the DT conditional JJ right NN to TO receive VV from IN the DT Company NN , , upon IN exercise NN , , an DT amount NN equal JJ to TO the DT closing NN price NN of IN the DT Company NN s PP shares VVZ on IN the DT exercise NN dates VVZ . SENT Fifty CD percent NN of IN the DT units NNS will MD be VB exercised VVN on IN the DT third JJ anniversary NN of IN the DT grant NN date NN , , and CC the DT remainder NN will MD be VB exercised VVN on IN the DT seventh JJ anniversary NN of IN the DT grant NN date NN . SENT The DT Company NN will MD pay VV the DT recipients NNS cash NN with IN respect NN to TO each DT unexercised JJ unit NN granted VVN to TO the DT recipient NN corresponding JJ in IN time NN and CC amount NN to TO the DT cash NN dividend NN that WDT is VBZ paid VVN by IN the DT Company NN on IN a DT common JJ share NN of IN the DT Company NN . SENT The DT restricted JJ stock NN units NNS plan NN was VBD amended VVN for IN units NNS granted VVN in IN 2003 CD and CC future JJ years NNS by IN providing VVG that IN the DT recipient NN may MD receive VV one CD common JJ share NN of IN the DT Company NN per IN unit NN or CC elect VV to TO receive VV the DT cash NN payment NN for IN the DT units NNS to TO be VB exercised VVN on IN the DT seventh JJ anniversary NN of IN the DT grant NN date NN . SENT A DT total NN of IN 987 CD , , 480 CD units NNS were VBD granted VVN on IN December NP 31 CD , , 2004 CD . SENT 38 CD Table NN of IN Contents NNS There EX are VBP 927 CD , , 908 CD common JJ shares NNS issuable JJ upon IN future JJ exercise NN of IN restricted JJ stock NN units NNS , , which WDT represent VVP about IN 0 CD . SENT 27 CD percent NN of IN the DT Company NN s PP currently RB outstanding JJ common JJ shares NNS . SENT The DT Company NP s PP directors NNS , , officers NNS and CC vice NN presidents NNS have VHP available JJ as IN a DT group NN 22 CD percent NN of IN the DT common JJ shares NNS issuable JJ under IN outstanding JJ restricted JJ stock NN units NNS . SENT The DT maximum JJ number NN of IN common JJ shares NNS that IN any DT one CD person NN may MD receive VV from IN the DT exercise NN of IN outstanding JJ restricted JJ stock NN units NNS is VBZ 62 CD , , 200 CD common JJ shares NNS , , which WDT is VBZ about IN 0 CD . SENT 02 CD percent NN of IN the DT currently RB outstanding JJ common JJ shares NNS . SENT Restricted JJ stock NN units NNS will MD be VB exercised VVN only RB during IN employment NN except IN in IN the DT event NN of IN death NN , , disability NN or CC retirement NN . SENT Also RB , , restricted JJ stock NN units NNS may MD be VB forfeited VVN if IN the DT Company NN believes VVZ that IN the DT employee NN intends VVZ to TO terminate VV employment NN or CC if IN during IN employment NN or CC during IN the DT period NN of IN 24 CD months NNS after IN the DT termination NN of IN employment NN the DT employee NN , , without IN the DT consent NN of IN the DT Company NN , , engaged VVN in IN any DT business NN that WDT was VBD in IN competition NN with IN the DT Company NN or CC otherwise RB engaged VVN in IN any DT activity NN that WDT was VBD detrimental JJ to TO the DT Company NN . SENT The DT Company NN may MD determine VV that DT restricted JJ stock NN units NNS will MD not RB be VB forfeited VVN after IN the DT cessation NN of IN employment NN . SENT Restricted JJ stock NN units NNS cannot NN be VB assigned VVN . SENT In IN the DT case NN of IN any DT subdivision NN , , consolidation NN , , or CC reclassification NN of IN the DT shares NNS of IN the DT Company NN or CC other JJ relevant JJ change NN in IN the DT capitalization NN of IN the DT Company NN , , the DT Company NN , , in IN its PP$ discretion NN , , may MD make VV appropriate JJ adjustments NNS in IN the DT number NN of IN common JJ shares NNS to TO be VB issued VVN and CC the DT calculation NN of IN the DT cash NN amount NN payable JJ per IN restricted JJ stock NN unit NN . SENT Effective JJ December NP 31 CD , , 2004 CD , , the DT restricted JJ stock NN unit NN plan NN was VBD amended VVN by IN the DT Company NN to TO provide VV that IN on IN retirement NN the DT Company NN shall MD determine VV whether IN the DT employee NN s PP restricted VVD stock NN units NNS will MD not RB be VB forfeited VVN . SENT Shareholder NN approval NN for IN that DT change NN was VBD not RB required VVN by IN the DT Toronto NP Stock NP Exchange NP . SENT Earnings NNS bonus NN unit NN plan NN awards VVZ in IN most JJS recently RB completed VVN financial JJ year NN The DT following VVG table NN provides VVZ information NN on IN earnings NNS bonus NN units NNS granted VVN in IN 2004 CD to TO the DT named VVN senior JJ executives NNS . SENT Performance NN Securities NNS or CC Other JJ Estimated JJ Future JJ Payouts NNS Under IN Units NNS or CC Period NN Until IN Non JJ Securities NPS Price NP Based VVN Plans NNS Other JJ Rights NP Maturation NN or CC Threshold NN Target NP Maximum JJ Name NN Payout NN 1 CD 2 CD 2 CD T NN . SENT J NP . SENT Hearn NP 232 CD , , 000 CD Nov NP . SENT 17 CD , , 2009 CD 0 CD 3 CD . SENT 75 CD 3 CD . SENT 75 CD P NN . SENT A DT . SENT Smith NP 51 CD , , 500 CD Nov NP . SENT 17 CD , , 2009 CD 0 CD 3 CD . SENT 75 CD 3 CD . SENT 75 CD B NP . SENT J NP . SENT Fischer NP 104 CD , , 700 CD Nov NP . SENT 17 CD , , 2009 CD 0 CD 3 CD . SENT 75 CD 3 CD . SENT 75 CD K NP . SENT C SYM . SENT Williams NP J NP . SENT M NP . SENT Yeager NP 3 CD J NP . SENT F SYM . SENT Kyle NP 45 CD , , 700 CD Nov NP . SENT 17 CD , , 2009 CD 0 CD 3 CD . SENT 75 CD 3 CD . SENT 75 CD 1 CD Payment NN will MD be VB made VVN earlier RBR when WRB the DT cumulative JJ net JJ income NN per IN outstanding JJ common JJ share NN reach VV the DT maximum JJ settlement NN value NN per IN unit NN prior RB to TO the DT fifth JJ anniversary NN of IN the DT grant NN date NN . SENT 2 LS This DT is VBZ the DT maximum JJ settlement NN value NN payable JJ per IN earnings NNS bonus NN unit NN granted VVN in IN 2004 CD . SENT 3 CD J NP . SENT M NP . SENT Yeager NP participates VVZ in IN Exxon NP Mobil NP Corporation NP s PP earnings NNS bonus NN unit NN plan NN which WDT is VBZ similar JJ to TO the DT Company NN s PP earnings NNS bonus NN unit NN plan NN . SENT In IN 2004 CD , , J NP . SENT M NP . SENT Yeager NP was VBD granted VVN 85 CD , , 230 CD units NNS under IN that DT plan NN for IN which WDT the DT maximum JJ settlement NN value NN payable JJ per IN earnings NNS bonus NN unit NN is VBZ U NP . SENT S NP . SENT 3 LS . SENT 25 CD . SENT 39 CD Table NN of IN Contents NNS Aggregated VVD option NN SAR NN exercises VVZ during IN the DT most RBS recently RB completed VVN financial JJ year NN and CC financial JJ year NN end NN option NN SAR NN values VVZ The DT following VVG table NN provides VVZ information NN on IN the DT exercise NN in IN 2004 CD and CC the DT aggregate JJ holdings NNS at IN the DT end NN of IN 2004 CD of IN incentive NN share NN units NNS referred VVD to TO in IN the DT table NN as IN SARs NNS by IN the DT named VVN senior JJ executives NNS . SENT Value NN of IN Unexercised JJ Unexercised JJ in IN the DT Money NP Securities NPS Aggregate NN Options NP SARs NP Options NPS SARs NP Acquired VVD Value NP at IN Financial NP at IN Financial NP on IN Exercise NN Realized VVD Year NN End NN Year NN End NN Name NN Exercisable JJ Unexercisable NP 1 CD Exercisable JJ Unexercisable NP 1 CD T NN . SENT J NP . SENT Hearn NP 369 CD , , 375 CD 50 CD , , 000 CD 0 CD 1 CD , , 607 CD , , 500 CD 0 CD P NN . SENT A DT . SENT Smith NP 686 CD , , 100 CD 67 CD , , 000 CD 0 CD 2 CD , , 571 CD , , 250 CD 0 CD B NP . SENT J NP . SENT Fischer NP 125 CD , , 120 CD 152 CD , , 000 CD 0 CD 5 CD , , 885 CD , , 400 CD 0 CD K NP . SENT C SYM . SENT Williams NP J NP . SENT M NP . SENT Yeager NP J NP . SENT F SYM . SENT Kyle NP 0 CD 89 CD , , 000 CD 0 CD 3 CD , , 455 CD , , 250 CD 0 CD 1 CD Unexercisable JJ units NNS are VBP units NNS for IN which WDT the DT conditions NNS for IN exercise NN have VHP not RB been VBN met VVN . SENT The DT following VVG table NN provides VVZ information NN on IN the DT exercise NN in IN 2004 CD and CC the DT aggregate JJ holdings NNS at IN the DT end NN of IN 2004 CD of IN stock NN options NNS by IN the DT named VVN senior JJ executives NNS . SENT Value NN of IN Unexercised JJ Unexercised JJ in IN the DT Money NP Securities NPS Aggregate NN Options NP SARs NP Options NPS SARs NP Acquired VVD Value NP at IN Financial NP at IN Financial NP on IN Exercise NN Realized VVD Year NN End NN Year NN End NN Name NN Exercisable JJ Unexercisable NP 3 CD Exercisable JJ Unexercisable NP 3 CD T NN . SENT J NP . SENT Hearn NP 126 CD , , 059 CD 43 CD , , 750 CD 16 CD , , 250 CD 1 CD , , 078 CD , , 438 CD 400 CD , , 563 CD P NN . SENT A DT . SENT Smith NP 0 CD 18 CD , , 750 CD 6 CD , , 250 CD 462 CD , , 188 CD 154 CD , , 063 CD B NP . SENT J NP . SENT Fischer NP 0 CD 37 CD , , 500 CD 12 CD , , 500 CD 924 CD , , 375 CD 308 CD , , 125 CD K NP . SENT C SYM . SENT Williams NP 1 CD J NP . SENT M NP . SENT Yeager NP 2 CD J NP . SENT F SYM . SENT Kyle NP 0 CD 21 CD , , 750 CD 7 CD , , 250 CD 536 CD , , 138 CD 178 CD , , 713 CD 1 CD At IN the DT end NN of IN 2004 CD , , K NP . SENT C SYM . SENT Williams NP held VVD options NNS to TO acquire VV 373 CD , , 064 CD Exxon NP Mobil NP Corporation NP shares NNS of IN which WDT all DT options NNS were VBD exercisable JJ . SENT The DT values NNS of IN K NP . SENT C SYM . SENT Williams NP s PP exercisable JJ options NNS were VBD U NP . SENT S NP . SENT 5 CD , , 708 CD , , 941 CD at IN the DT end NN of IN 2004 CD . SENT In IN 2004 CD , , he PP exercised VVD 49 CD , , 000 CD options NNS and CC realized VVD an DT aggregate JJ value NN of IN U NP . SENT S NP . SENT 1 CD , , 369 CD , , 859 CD . SENT 2 CD At IN the DT end NN of IN 2004 CD , , J NP . SENT M NP . SENT Yeager NP held VVD options NNS to TO acquire VV 378 CD , , 176 CD Exxon NP Mobil NP Corporation NP shares NNS of IN which WDT all DT options NNS were VBD exercisable JJ . SENT The DT values NNS of IN J NP . SENT M NP . SENT Yeager NP s PP exercisable JJ options NNS were VBD U NP . SENT S NP . SENT 6 CD , , 383 CD , , 064 CD at IN the DT end NN of IN 2004 CD . SENT In IN 2004 CD , , J NP . SENT M NP . SENT Yeager NP exercised VVD 10 CD , , 560 CD options NNS and CC realized VVD an DT aggregate JJ value NN of IN U NP . SENT S NP . SENT 322 CD , , 430 CD . SENT 3 CD Unexercisable JJ units NNS are VBP units NNS for IN which WDT the DT conditions NNS for IN exercise NN have VHP not RB been VBN met VVN . SENT 40 CD Table NN of IN Contents NNS Payments NNS to TO employees NNS who WP retire VVP Pension NN plan NN table NN Remuneration NN for IN Estimated JJ undiscounted JJ payments NNS determining VVG payments NNS on IN retirement NN at IN the DT age NN of IN 65 CD after IN years NNS of IN service NN indicated VVD below IN on IN retirement NN 20 CD Years NNS 25 CD Years NNS 30 CD Years NNS 35 CD Years NNS 40 CD Years NNS 100 CD , , 000 CD 32 CD , , 000 CD 40 CD , , 000 CD 48 CD , , 000 CD 56 CD , , 000 CD 64 CD , , 000 CD 200 CD , , 000 CD 64 CD , , 000 CD 80 CD , , 000 CD 96 CD , , 000 CD 112 CD , , 000 CD 128 CD , , 000 CD 300 CD , , 000 CD 96 CD , , 000 CD 120 CD , , 000 CD 144 CD , , 000 CD 168 CD , , 000 CD 192 CD , , 000 CD 400 CD , , 000 CD 128 CD , , 000 CD 160 CD , , 000 CD 192 CD , , 000 CD 224 CD , , 000 CD 256 CD , , 000 CD 500 CD , , 000 CD 160 CD , , 000 CD 200 CD , , 000 CD 240 CD , , 000 CD 280 CD , , 000 CD 320 CD , , 000 CD 600 CD , , 000 CD 192 CD , , 000 CD 240 CD , , 000 CD 288 CD , , 000 CD 336 CD , , 000 CD 384 CD , , 000 CD 800 CD , , 000 CD 256 CD , , 000 CD 320 CD , , 000 CD 384 CD , , 000 CD 448 CD , , 000 CD 512 CD , , 000 CD 1 CD , , 000 CD , , 000 CD 320 CD , , 000 CD 400 CD , , 000 CD 480 CD , , 000 CD 560 CD , , 000 CD 640 CD , , 000 CD 1 CD , , 500 CD , , 000 CD 480 CD , , 000 CD 600 CD , , 000 CD 720 CD , , 000 CD 840 CD , , 000 CD 960 CD , , 000 CD 2 CD , , 000 CD , , 000 CD 640 CD , , 000 CD 800 CD , , 000 CD 960 CD , , 000 CD 1 CD , , 120 CD , , 000 CD 1 CD , , 280 CD , , 000 CD 2 CD , , 500 CD , , 000 CD 800 CD , , 000 CD 1 CD , , 000 CD , , 000 CD 1 CD , , 200 CD , , 000 CD 1 CD , , 400 CD , , 000 CD 1 CD , , 600 CD , , 000 CD 3 CD , , 000 CD , , 000 CD 960 CD , , 000 CD 1 CD , , 200 CD , , 000 CD 1 CD , , 440 CD , , 000 CD 1 CD , , 680 CD , , 000 CD 1 CD , , 920 CD , , 000 CD The DT Company NN s PP pension NN plan NN applies VVZ to TO almost RB all DT employees NNS . SENT The DT plan NN provides VVZ an DT annual JJ pension NN of IN a DT specific JJ percentage NN of IN an DT employee NN s PP final JJ three CD year NN average NN earnings NNS , , multiplied VVN by IN the DT employee NN s PP years NNS of IN service NN , , subject JJ to TO certain JJ requirements NNS concerning VVG age NN and CC length NN of IN service NN . SENT An DT employee NN may MD elect VV to TO forego VV three CD of IN the DT six CD percent NN of IN the DT Company NN s PP contributions NNS to TO the DT savings NNS plan VVP under IN one CD of IN the DT options NNS of IN that DT plan NN except IN for IN K NP . SENT C SYM . SENT Williams NP and CC J NP . SENT M NP . SENT Yeager NP , , to TO receive VV an DT enhanced JJ pension NN equal JJ to TO 0 CD . SENT 4 CD percent NN of IN the DT employee NN s PP final JJ three CD year NN average NN earnings NNS , , multiplied VVN by IN the DT employee NN s PP years NNS of IN service NN while IN foregoing VVG such JJ Company NN contributions NNS . SENT In IN addition NN to TO the DT pension NN payable JJ under IN the DT plan NN , , the DT Company NN has VHZ paid VVN and CC may MD continue VV to TO pay VV a DT supplemental JJ retirement NN income NN to TO employees NNS who WP have VHP earned VVN a DT pension NN in IN excess NN of IN the DT maximum JJ pension NN under IN the DT Income NP Tax NP Act NP . SENT The DT pension NN plan NN table NN on IN this DT page NN shows VVZ estimated JJ undiscounted JJ annual JJ payments NNS , , consisting VVG of IN pension NN and CC supplemental JJ retirement NN income NN , , payable JJ on IN retirement NN to TO employees NNS including VVG the DT senior JJ executives NNS in IN specified JJ classifications NNS of IN remuneration NN and CC years NNS of IN service NN currently RB applicable JJ to TO that DT group NN . SENT The DT remuneration NN used VVN to TO determine VV the DT payments NNS on IN retirement NN to TO the DT individuals NNS named VVN in IN the DT summary NN compensation NN table NN on IN pages NNS 36 CD and CC 37 CD , , corresponds VVZ generally RB to TO the DT salary NN , , bonus NN compensation NN , , and CC bonus NN compensation NN amount NN elected VVN to TO be VB received VVN as IN deferred JJ share NN units NNS in IN that DT table NN , , and CC the DT aggregate JJ maximum JJ settlement NN value NN that WDT could MD be VB paid VVN for IN earnings NNS bonus NN units NNS granted VVD shown VVN in IN the DT table NN on IN page NN 39 CD is VBZ included VVN in IN the DT employee NN s PP final JJ three CD year NN average JJ earnings NNS for IN the DT year NN of IN grant NN of IN such JJ units NNS . SENT As RB of IN February NP 18 CD , , 2005 CD , , the DT number NN of IN completed VVN years NNS of IN service NN with IN Imperial NP Oil NP Limited NP used VVD to TO determine VV payments NNS on IN retirement NN were VBD 38 CD for IN T NN . SENT J NP . SENT Hearn NP , , 36 CD for IN B NP . SENT J NP . SENT Fischer NP , , 25 CD for IN P NN . SENT A DT . SENT Smith NP and CC 28 CD for IN J NP . SENT F SYM . SENT Kyle NP . SENT K NP . SENT C SYM . SENT Williams NP and CC J NP . SENT M NP . SENT Yeager NP are VBP not RB members NNS of IN the DT Company NN s PP pension NN plan NN but CC are VBP members NNS of IN Exxon NP Mobil NP Corporation NP s PP pension NN plan NN . SENT Under IN that DT plan NN , , J NP . SENT M NP . SENT Yeager NP has VHZ 23 CD years NNS of IN service NN and CC he PP will MD receive VV a DT pension NN payable JJ in IN U NP . SENT S NP . SENT dollars NNS . SENT The DT remuneration NN used VVN to TO determine VV the DT payment NN on IN retirement NN to TO him PP also RB corresponds VVZ generally RB to TO his PP$ salary NN and CC bonus NN compensation NN in IN the DT summary NN compensation NN table NN on IN pages NNS 36 CD and CC 37 CD , , which WDT remuneration NN may MD be VB applied VVN to TO the DT pension NN plan NN table NN above IN but CC with IN the DT dollars NNS in IN that DT table NN representing VVG U NP . SENT S NP . SENT rather RB than IN Canadian JJ dollars NNS . SENT Composition NN of IN the DT Company NN s PP compensation NN committee NN The DT executive JJ resources NNS committee NN of IN the DT board NN of IN directors NNS , , composed VVN of IN the DT nonemployee NN directors NNS , , is VBZ responsible JJ for IN decisions NNS on IN the DT compensation NN of IN senior JJ management NN above IN the DT level NN of IN vice NN president NN including VVG all DT officers NNS of IN the DT Company NN , , and CC for IN reviewing VVG the DT executive JJ development NN system NN , , including VVG specific JJ succession NN plans NNS for IN senior JJ management NN positions NNS . SENT It PP also RB reviews VVZ corporate JJ policy NN on IN compensation NN . SENT During IN 2004 CD , , the DT membership NN of IN the DT executive JJ resources NNS committee NN was VBD as RB follows VVZ . SENT P NN . SENT Des NP Marais NP II NP Chair NN R NN . SENT Phillips NP Vice NP chair NN J NP . SENT F SYM . SENT Shepard NP S NP . SENT D SYM . SENT Whittaker NP V NN . SENT L NP . SENT Young JJ T NN . SENT J NP . SENT Hearn NP periodically RB attends VVZ meetings NNS at IN the DT request NN of IN the DT committee NN . SENT 41 CD Table NN of IN Contents NNS Executive NP resources NNS committee NN report NN on IN executive JJ compensation NN The DT Company NN s PP executive JJ compensation NN policy NN is VBZ designed VVN to TO reinforce VV the DT Company NN s PP orientation NN toward IN career NN employment NN and CC its PP$ emphasis NN on IN performance NN as IN the DT primary JJ determinant NN of IN advancement NN . SENT This DT acknowledges VVZ the DT long JJ term NN nature NN of IN the DT Company NN s PP business NN and CC its PP$ philosophy NN that IN the DT experience NN , , skill NN and CC motivation NN of IN its PP$ senior JJ executives NNS are VBP significant JJ determinants NNS of IN future JJ business NN success NN . SENT The DT compensation NN program NN emphasizes VVZ competitive JJ salaries NNS and CC performance NN based VVN incentives NNS as IN the DT primary JJ instruments NNS to TO develop VV and CC retain VV key JJ personnel NNS . SENT In IN establishing VVG levels NNS of IN compensation NN for IN its PP$ senior JJ executives NNS , , the DT executive JJ resources NNS committee NN relies VVZ on IN market NN comparisons NNS to TO other JJ leading JJ Canadian JJ employers NNS , , typically RB in IN the DT group NN of IN major JJ companies NNS with IN revenues NNS in IN excess NN of IN 1 CD billion CD a DT year NN . SENT These DT market NN comparisons NNS are VBP prepared VVN by IN independent JJ external JJ compensation NN consultants NNS . SENT On IN a DT case NN by IN case NN basis NN , , depending VVG on IN the DT scope NN of IN market NN coverage NN represented VVN by IN a DT particular JJ comparison NN , , compensation NN is VBZ targeted VVN to TO a DT range NN between IN the DT mid JJ point NN and CC the DT upper JJ quartile NN of IN comparable JJ employers NNS , , reflecting VVG the DT Company NN s PP emphasis NN on IN quality NN of IN management NN . SENT The DT Company NN s PP senior JJ executive JJ compensation NN policy NN has VHZ three CD main JJ elements NNS . SENT base NN salary NN , , short JJ term NN and CC long JJ term NN incentive NN compensation NN . SENT While IN these DT elements NNS are VBP related VVN to TO the DT extent NN that IN compensation NN policy NN is VBZ compared VVN in IN total NN to TO the DT competitive JJ practices NNS of IN other JJ major JJ Canadian JJ employers NNS , , individual JJ decisions NNS on IN base NN salary NN , , short JJ term NN and CC long JJ term NN incentive NN compensation NN are VBP made VVN independently RB of IN each DT other JJ . SENT Base JJ salary NN The DT Company NN s PP salary NN ranges NNS for IN executives NNS were VBD increased VVN by IN three CD percent NN in IN 2003 CD , , two CD and CC one CD half NN percent NN in IN 2004 CD and CC one CD and CC one CD half NN percent NN in IN 2005 CD . SENT High JJ performing VVG executives NNS , , and CC those DT recently RB promoted VVD , , whose WP$ salaries NNS were VBD low RB relative JJ to TO their PP$ level NN of IN responsibility NN , , were VBD given VVN limited JJ additional JJ salary NN increases NNS . SENT This DT included VVD senior JJ executives NNS . SENT T NN . SENT J NP . SENT Hearn NP s PP salary NN is VBZ currently RB assessed VVN to TO be VB within IN the DT range NN of IN the DT competitive JJ target NN for IN the DT Company NN s PP chief JJ executive NN officer NN which WDT is VBZ between IN the DT median JJ and CC upper JJ quartile NN . SENT The DT target NN is VBZ consistent JJ with IN the DT executive JJ resources NNS committee NN s PP view VVP that IN the DT chief JJ executive JJ officer NN s PP salary NN should MD be VB above IN the DT average NN of IN salaries NNS for IN chief JJ executive JJ officers NNS of IN major JJ Canadian JJ companies NNS , , reflecting VVG the DT Company NN s PP executive JJ development NN philosophy NN and CC the DT significance NN placed VVN on IN experience NN and CC judgment NN in IN leading VVG a DT large JJ , , complex JJ operation NN . SENT Cash NN bonus NN Cash NN bonuses NNS are VBP typically RB granted VVN to TO about IN 80 CD executives NNS at IN the DT end NN of IN each DT year NN , , based VVN on IN individual JJ performance NN . SENT The DT bonuses NNS are VBP drawn VVN from IN an DT aggregate JJ bonus NN amount NN established VVN annually RB by IN the DT executive JJ resources NNS committee NN based VVN on IN the DT Company NN s PP financial JJ performance NN , , and CC are VBP granted VVN in IN tandem NN with IN the DT Company NN s PP earnings NNS bonus NN units NNS , , which WDT are VBP described VVN on IN page NN 38 CD . SENT In IN 2004 CD , , the DT executive JJ resources NNS committee NN increased VVD the DT bonus NN awards VVZ including VVG the DT grant NN of IN earnings NNS bonus NN units NNS to TO reflect VV the DT Company NN s PP record VV financial JJ results NNS and CC in IN response NN to TO comparisons NNS to TO other JJ leading JJ Canadian JJ employers NNS . SENT In IN the DT case NN of IN T NN . SENT J NP . SENT Hearn NP , , the DT committee NN s PP approach VVP to TO cash NN bonuses NNS is VBZ based VVN on IN the DT Company NN s PP financial JJ and CC operating VVG performance NN and CC on IN the DT committee NN s PP assessment NN of IN T NN . SENT J NP . SENT Hearn NP s PP effectiveness NN in IN leading VVG the DT organization NN . SENT The DT continuing JJ progress NN being VBG made VVN in IN focussing VVG the DT organization NN on IN advancing VVG key JJ strategic JJ interests NNS , , safety NN , , environmental JJ performance NN , , productivity NN , , cost NN effectiveness NN and CC asset NN management NN were VBD primary JJ considerations NNS in IN determining VVG a DT cash NN bonus NN for IN the DT chief JJ executive NN officer NN . SENT T NN . SENT J NP . SENT Hearn NP s PP bonus NN including VVG the DT grant NN of IN earnings NNS bonus NN units NNS was VBD increased VVN in IN 2004 CD to TO reflect VV his PP$ effectiveness NN in IN the DT position NN , , the DT Company NN s PP record VV financial JJ results NNS , , and CC comparisons NNS to TO other JJ leading JJ Canadian JJ employers NNS . SENT Long JJ term NN incentive NN compensation NN Each DT year NN , , the DT executive JJ resources NNS committee NN has VHZ approved VVN long JJ term NN incentive NN awards NNS for IN selected JJ key JJ employees NNS . SENT These DT awards NNS were VBD an DT added JJ incentive NN to TO promote VV individual JJ contribution NN to TO sustained JJ improvement NN in IN business NN performance NN and CC shareholder NN value NN , , and CC to TO encourage VV key JJ employees NNS to TO remain VV with IN the DT Company NN . SENT Individual JJ awards NNS reflected VVD both DT level NN of IN responsibility NN and CC performance NN , , with IN an DT emphasis NN on IN ability NN to TO influence VV longer JJR term NN results NNS . SENT In IN each DT case NN , , including VVG senior JJ executives NNS and CC the DT chief JJ executive NN officer NN , , award NN amounts NNS took VVD into IN account NN the DT competitive JJ practices NNS of IN other JJ major JJ Canadian JJ employers NNS and CC were VBD not RB influenced VVN by IN prior JJ years NNS results NNS or CC by IN an DT individual JJ s NN holdings NNS of IN unexercised JJ long JJ term NN incentive NN compensation NN units NNS . SENT Incentive NN awards NNS also RB have VHP been VBN awarded VVN selectively RB to TO the DT general JJ managerial JJ , , professional JJ and CC technical JJ non JJ executive NN workforce NN as IN a DT way NN of IN delivering VVG added JJ financial JJ incentive NN to TO selected VVN high JJ performing VVG employees NNS . SENT 42 CD Table NN of IN Contents NNS For IN selected JJ executives NNS , , the DT executive JJ resources NNS committee NN allows VVZ cash NN bonus NN awards VVZ to TO be VB elected VVN to TO be VB received VVN in IN the DT form NN of IN deferred JJ share NN units NNS and CC also RB awards VVZ earnings NNS bonus NN units NNS as IN a DT means NN of IN providing VVG additional JJ incentive NN to TO promote VV the DT Company NN s PP long RB term VV financial JJ performance NN . SENT Eligibility NN to TO participate VV in IN the DT deferred JJ share NN unit NN and CC earnings NNS bonus NN plans NNS is VBZ restricted VVN to TO those DT executives NNS whose WP$ decisions NNS are VBP considered VVN to TO have VH a DT direct JJ effect NN on IN the DT long JJ term NN financial JJ performance NN of IN the DT Company NN . SENT In IN 2004 CD , , one CD executive NN elected VVN to TO receive VV deferred JJ share NN units NNS and CC 77 CD executives NNS were VBD awarded VVN earnings NNS bonus NN units NNS . SENT For IN many JJ years NNS , , the DT Company NN s PP long RB term NN incentive NN compensation NN programs NNS have VHP been VBN cash NN based VVN programs NNS tied VVN to TO earnings NNS and CC share NN performance NN , , and CC incentive NN awards NNS have VHP been VBN reported VVN as IN expenses NNS in IN the DT consolidated JJ statement NN of IN earnings NNS . SENT In IN 2002 CD , , to TO meet VV competitive JJ practices NNS , , the DT Company NN introduced VVD a DT stock NN option NN program NN . SENT However RB , , recognizing VVG current JJ concerns NNS over IN stock NN option NN incentive NN programs NNS and CC their PP$ proper JJ accounting NN treatment NN , , the DT Company NN decided VVD to TO return VV to TO straightforward JJ , , cash NN based VVN incentive NN compensation NN programs NNS that WDT will MD again RB be VB reported VVN as IN expenses NNS against IN earnings NNS . SENT There EX are VBP no DT plans NNS to TO issue VV stock NN options NNS in IN the DT future NN . SENT A DT total NN of IN 575 CD employees NNS , , including VVG executives NNS , , were VBD granted VVN restricted JJ stock NN units NNS in IN 2004 CD . SENT Submitted VVN on IN behalf NN of IN the DT executive JJ resources NNS committee NN . SENT P NN . SENT Des NP Marais NP II NP Chair NN R NN . SENT Phillips NP Vice NP chair NN J NP . SENT F SYM . SENT Shepard NP S NP . SENT D SYM . SENT Whittaker NP V NN . SENT L NP . SENT Young JJ Item NN 12 CD . SENT Security NP Ownership NP of IN Certain NP Beneficial NP Owners NP and CC Management NP and CC Related NP Stockholder NN Matters NNS . SENT To TO the DT knowledge NN of IN the DT management NN of IN the DT Company NN , , the DT only JJ shareholder NN who WP , , as RB of IN February NP 18 CD , , 2005 CD , , owned VVN beneficially RB , , or CC exercised VVN control NN or CC direction NN over RB , , more JJR than IN five CD percent NN of IN the DT outstanding JJ common JJ shares NNS of IN the DT Company NN is VBZ Exxon NP Mobil NP Corporation NP , , 5959 CD Las NP Colinas NP Boulevard NP , , Irving NP , , Texas NP 75039 CD 2298 CD , , which WDT owns VVZ beneficially RB 242 CD , , 453 CD , , 672 CD common JJ shares NNS , , representing VVG 69 CD . SENT 6 CD percent NN of IN the DT outstanding JJ voting NN shares NNS of IN the DT Company NN . SENT Reference NN is VBZ made VVN to TO the DT security NN ownership NN information NN under IN the DT preceding JJ Items NNS 10 CD and CC 11 CD . SENT As IN of IN February NP 18 CD , , 2005 CD , , John NP F NP . SENT Kyle NP was VBD the DT owner NN of IN 3 CD , , 774 CD common JJ shares NNS of IN the DT Company NN and CC held JJ options NNS to TO acquire VV 29 CD , , 000 CD common JJ shares NNS of IN the DT Company NN and CC restricted JJ share NN units NNS to TO acquire VV 12 CD , , 300 CD common JJ shares NNS of IN the DT Company NN . SENT The DT directors NNS and CC the DT senior JJ executives NNS of IN the DT Company NN consist VVP of IN 10 CD persons NNS , , who WP , , as IN a DT group NN , , own VVP beneficially RB 85 CD , , 896 CD common JJ shares NNS of IN the DT Company NN , , being VBG approximately RB 0 CD . SENT 02 CD percent NN of IN the DT total JJ number NN of IN outstanding JJ shares NNS of IN the DT Company NN , , and CC 118 CD , , 452 CD shares NNS of IN Exxon NP Mobil NP Corporation NP . SENT This DT information NN not RB being VBG within IN the DT knowledge NN of IN the DT Company NN has VHZ been VBN provided VVN by IN the DT directors NNS and CC the DT senior JJ executives NNS individually RB . SENT As IN a DT group NN , , the DT directors NNS and CC senior JJ executives NNS of IN the DT Company NN held VVD options NNS to TO acquire VV 163 CD , , 000 CD common JJ shares NNS of IN the DT Company NN and CC held JJ restricted JJ stock NN units NNS to TO acquire VV 127 CD , , 950 CD common JJ shares NNS of IN the DT Company NN , , as RB of IN February NP 18 CD , , 2005 CD . SENT Equity NN Compensation NN Plan NP Information NP as IN of IN December NP 31 CD , , 2004 CD Number NP of IN securities NNS Weighted JJ average NN remaining VVG available JJ for IN future JJ Number NP of IN securities NNS to TO exercise VV price NN of IN issuance NN under IN equity NN be VB issued VVN upon IN exercise NN outstanding JJ options NNS , , compensation NN plans NNS excluding VVG of IN outstanding JJ options NNS , , warrants NNS and CC rights NNS securities NNS reflected VVD in IN warrants NNS and CC rights NNS column NN a DT Plan NP category NN a DT b NN c SYM Equity NP compensation NN 2 CD , , 854 CD , , 500 CD 46 CD . SENT 50 CD 0 CD plans NNS approved VVN by IN security NN holders NNS 1 CD Equity NP compensation NN 927 CD , , 908 CD 2 CD , , 572 CD , , 092 CD plans NNS not RB approved VVN by IN security NN holders NNS 2 CD Total JJ 3 CD , , 782 CD , , 408 CD 46 CD . SENT 50 CD 2 CD , , 572 CD , , 092 CD 1 CD This DT is VBZ the DT stock NN option NN plan NN , , which WDT is VBZ described VVN on IN page NN 38 CD of IN this DT report NN . SENT 2 LS This DT is VBZ the DT restricted JJ stock NN unit NN plan NN , , which WDT is VBZ described VVN on IN pages NNS 38 CD and CC 39 CD of IN this DT report NN . SENT 43 CD Table NN of IN Contents NNS Item NN 13 CD . SENT Certain JJ Relationships NNS and CC Related JJ Transactions NNS . SENT On IN June NP 23 CD , , 2003 CD , , the DT Company NN implemented VVD another DT 12 CD month NN normal JJ course NN share NN purchase NN program NN under IN which WDT it PP purchased VVD 15 CD , , 511 CD , , 833 CD of IN its PP$ outstanding JJ shares NNS between IN June NP 23 CD , , 2003 CD , , and CC June NP 22 CD , , 2004 CD . SENT On IN June NP 23 CD , , 2004 CD , , another DT 12 CD month NN normal JJ course NN program NN was VBD implemented VVN under IN which WDT the DT Company NN may MD purchase VV up RB to TO 17 CD , , 864 CD , , 398 CD of IN its PP$ outstanding JJ shares NNS , , less CC any DT shares NNS purchased VVN by IN the DT employee NN savings NN plan NN and CC Company NN pension NN fund NN . SENT Exxon NP Mobil NP Corporation NP participated VVD by IN selling VVG shares NNS to TO maintain VV its PP$ ownership NN at IN 69 CD . SENT 6 CD percent NN . SENT In IN 2004 CD , , such JJ purchases NNS cost VVD 872 CD million CD , , of IN which WDT 594 CD million CD was VBD received VVN by IN ExxonMobil NP . SENT During IN 2003 CD , , the DT Company NN borrowed VVD 818 CD million CD from IN Exxon NP Overseas NP Corporation NP under IN two CD long JJ term NN loan NN agreements NNS at IN interest NN equivalent NN to TO Canadian JJ market NN rates NNS . SENT Interest NN paid VVD on IN the DT loans NNS in IN 2004 CD was VBD 20 CD million CD . SENT The DT average JJ effective JJ interest NN rates NNS for IN the DT loans NNS was VBD 2 CD . SENT 45 CD percent NN for IN 2004 CD . SENT The DT amounts NNS of IN purchases NNS and CC sales NNS by IN the DT Company NN and CC its PP$ subsidiaries NNS for IN other JJ transactions NNS in IN 2004 CD with IN Exxon NP Mobil NP Corporation NP and CC affiliates NNS of IN Exxon NP Mobil NP Corporation NP were VBD 3 CD , , 176 CD million CD and CC 1 CD , , 580 CD million CD , , respectively RB . SENT These DT transactions NNS were VBD conducted VVN on IN terms NNS as IN favorable JJ as IN they PP would MD have VH been VBN with IN unrelated JJ parties NNS , , and CC primarily RB consisted VVD of IN the DT purchase NN and CC sale NN of IN crude JJ oil NN , , petroleum NN and CC chemical NN products NNS , , as RB well RB as IN transportation NN , , technical JJ and CC engineering NN services NNS . SENT Transactions NNS with IN Exxon NP Mobil NP Corporation NP also RB include VVP amounts NNS paid VVN and CC received VVN in IN connection NN with IN the DT Company NN s PP participation NN in IN a DT number NN of IN natural JJ resources NNS activities NNS conducted VVD jointly RB in IN Canada NP . SENT The DT Company NN has VHZ agreements NNS with IN affiliates NNS of IN Exxon NP Mobil NP Corporation NP to TO provide VV computer NN and CC customer NN support NN services NNS to TO the DT Company NN and CC to TO share VV common JJ business NN and CC operational JJ support NN services NNS to TO allow VV the DT companies NNS to TO consolidate VV duplicate JJ work NN and CC systems NNS . SENT Item NN 14 CD . SENT Principal JJ Accountant NN Fees NNS and CC Services NPS . SENT Audit NN Fees NNS The DT aggregate JJ fees NNS of IN the DT Company NN s PP auditors NNS for IN professional JJ services NNS rendered VVN for IN the DT audit NN of IN the DT Company NN s PP financial JJ statements NNS and CC other JJ services NNS for IN the DT fiscal JJ years NNS ended VVN December NP 31 CD , , 2004 CD and CC December NP 31 CD , , 2003 CD were VBD as RB follows VVZ . SENT Dollars NNS thousands NNS 2004 CD 2003 CD Audit NP Fees NNS 1 CD , , 112 CD 767 CD Audit NP Related NP Fees NNS 92 CD 62 CD Tax NP Fees NNS 545 CD 395 CD All DT Other JJ Fees NNS Nil NP Nil NP Total NP Fees NNS 1 CD , , 749 CD 1 CD , , 224 CD Audit NP fees NNS include VVP the DT audit NN of IN the DT Company NN s PP annual JJ financial JJ statements NNS , , audit NN of IN management NN s PP report VVP on IN internal JJ control NN over IN financial JJ reporting NN and CC a DT review NN of IN the DT first JJ three CD quarterly JJ financial JJ statements NNS in IN 2004 CD . SENT Audit NP related JJ fees NNS include VVP other JJ assurance NN services NNS including VVG the DT audit NN of IN the DT Company NN s PP retirement NN plan NN , , the DT Imperial NP Oil NP Foundation NP , , and CC royalty NN statement NN audits NN for IN oil NN and CC gas NN producing VVG entities NNS . SENT Tax NN fees NNS are VBP mainly RB tax NN services NNS for IN employees NNS on IN foreign JJ loan NN assignments NNS . SENT The DT Company NN did VVD not RB engage VV the DT auditors NNS for IN any DT other JJ services NNS . SENT The DT audit NN committee NN recommends VVZ the DT external JJ auditors NNS to TO be VB appointed VVN by IN the DT shareholders NNS , , fixes VVZ their PP$ remuneration NN and CC oversees VVZ their PP$ work NN . SENT The DT audit NN committee NN also RB approves VVZ the DT proposed VVN current JJ year NN audit NN program NN of IN the DT auditors NNS , , assesses VVZ the DT results NNS of IN the DT program NN after IN the DT end NN of IN the DT program NN period NN and CC approves VVZ in IN advance NN any DT non JJ audit NN services NNS to TO be VB performed VVN by IN the DT auditors NNS after IN considering VVG the DT effect NN of IN such JJ services NNS on IN their PP$ independence NN . SENT All DT of IN the DT services NNS rendered VVN by IN the DT auditors NNS to TO the DT Company NN were VBD approved VVN by IN the DT audit NN committee NN . SENT 44 CD Table NN of IN Contents NNS PART NN IV NP Item NN 15 CD . SENT Exhibits NNS and CC Financial JJ Statement NN Schedules NNS . SENT Reference NN is VBZ made VVN to TO the DT Index NP to TO Financial NP Statements NNS on IN page NN F NP 1 CD of IN this DT report NN . SENT The DT following VVG exhibits NNS numbered VVN in IN accordance NN with IN Item NN 601 CD of IN Regulation NP S NP K NP are VBP filed VVN as IN part NN of IN this DT report NN . SENT 3 CD i NP Restated JJ certificate NN and CC articles NNS of IN incorporation NN of IN the DT Company NN Incorporated VVN herein RB by IN reference NN to TO Exhibit VV 3 CD to TO the DT Company NN s PP Quarterly JJ Report NP on IN Form NP 10 CD Q NP for IN the DT quarter NN ended VVN June NP 30 CD , , 1998 CD File NP No NP . SENT 0 CD 12014 CD . SENT ii NNS By IN laws NNS of IN the DT Company NN Incorporated VVN herein RB by IN reference NN to TO Exhibit VV 3 CD ii NN to TO the DT Company NN s PP Quarterly JJ Report NP on IN Form NP 10 CD Q NP for IN the DT quarter NN ended VVN March NP 31 CD , , 2003 CD File NP No NP . SENT 0 CD 12014 CD . SENT 4 LS The DT Company NN s PP long RB term NN debt NN authorized VVN under IN any DT instrument NN does VVZ not RB exceed VV 10 CD percent NN of IN the DT Company NN s PP consolidated VVD assets NNS . SENT The DT Company NN agrees VVZ to TO furnish VV to TO the DT Commission NP upon IN request NN a DT copy NN of IN any DT such JJ instrument NN . SENT 10 CD ii NN 1 CD Alberta NP Crown NP Agreement NP , , dated VVN February NP 4 CD , , 1975 CD , , relating VVG to TO the DT participation NN of IN the DT Province NP of IN Alberta NP in IN Syncrude NP Incorporated VVN herein RB by IN reference NN to TO Exhibit VV 13 CD a DT of IN the DT Company NN s PP Registration NN Statement NN on IN Form NP S NP 1 CD , , as RB filed VVN with IN the DT Securities NPS and CC Exchange NP Commission NP on IN August NP 21 CD , , 1979 CD File NP No NP . SENT 2 CD 65290 CD . SENT 2 CD Amendment NP to TO Alberta NP Crown NP Agreement NP , , dated VVN January NP 1 CD , , 1983 CD Incorporated VVN herein RB by IN reference NN to TO Exhibit VV 10 CD ii NN 2 CD of IN the DT Company NP s PP Annual NP Report NP on IN Form NP 10 CD K NN for IN the DT year NN ended VVN December NP 31 CD , , 1983 CD File NP No NP . SENT 2 CD 9259 CD . SENT 3 CD Syncrude NP Ownership NP and CC Management NP Agreement NP , , dated VVN February NP 4 CD , , 1975 CD Incorporated VVN herein RB by IN reference NN to TO Exhibit NN 13 CD b SYM of IN the DT Company NN s PP Registration NN Statement NN on IN Form NP S NP 1 CD , , as RB filed VVN with IN the DT Securities NPS and CC Exchange NP Commission NP on IN August NP 21 CD , , 1979 CD File NP No NP . SENT 2 CD 65290 CD . SENT 4 CD Letter NP Agreement NP , , dated VVN February NP 8 CD , , 1982 CD , , between IN the DT Government NN of IN Canada NP and CC Esso NP Resources NPS Canada NP Limited NP , , amending VVG Schedule NN C NP to TO the DT Syncrude NP Ownership NP and CC Management NP Agreement NP filed VVD as RB Exhibit VV 10 CD ii NN 2 LS Incorporated VVN herein RB by IN reference NN to TO Exhibit VV 20 CD of IN the DT Company NP s PP Annual NP Report NP on IN Form NP 10 CD K NN for IN the DT year NN ended VVN December NP 31 CD , , 1981 CD File NP No NP . SENT 2 CD 9259 CD . SENT 5 CD Norman NP Wells NP Pipeline NP Agreement NP , , dated VVN January NP 1 CD , , 1980 CD , , relating VVG to TO the DT operation NN , , tolls NNS and CC financing NN of IN the DT pipeline NN system NN from IN the DT Norman NP Wells NP field NN Incorporated VVN herein RB by IN reference NN to TO Exhibit VV 10 CD a DT 3 CD of IN the DT Company NP s PP Annual NP Report NP on IN Form NP 10 CD K NN for IN the DT year NN ended VVN December NP 31 CD , , 1981 CD File NP No NP . SENT 2 CD 9259 CD . SENT 6 CD Norman NP Wells NP Pipeline NP Amending VVG Agreement NN , , dated VVN April NP 1 CD , , 1982 CD Incorporated VVN herein RB by IN reference NN to TO Exhibit VV 10 CD ii NN 5 CD of IN the DT Company NP s PP Annual NP Report NP on IN Form NP 10 CD K NN for IN the DT year NN ended VVN December NP 31 CD , , 1982 CD File NP No NP . SENT 2 CD 9259 CD . SENT 7 CD Letter NP Agreement NP clarifying VVG certain JJ provisions NNS to TO the DT Norman NP Wells NP Pipeline NP Agreement NP , , dated VVN August NP 29 CD , , 1983 CD Incorporated VVN herein RB by IN reference NN to TO Exhibit VV 10 CD ii NN 7 CD of IN the DT Company NP s PP Annual NP Report NP on IN Form NP 10 CD K NN for IN the DT year NN ended VVN December NP 31 CD , , 1983 CD File NP No NP . SENT 2 CD 9259 CD . SENT 8 CD Norman NP Wells NP Pipeline NP Amending VVG Agreement NN , , made VVN as IN of IN February NP 1 CD , , 1985 CD , , relating VVG to TO certain JJ amendments NNS ordered VVN by IN the DT National NP Energy NP Board NP Incorporated VVD herein RB by IN reference NN to TO Exhibit VV 10 CD ii NN 8 CD of IN the DT Company NP s PP Annual NP Report NP on IN Form NP 10 CD K NN for IN the DT year NN ended VVN December NP 31 CD , , 1986 CD File NP No NP . SENT 0 CD 12014 CD . SENT 9 CD Norman NP Wells NP Pipeline NP Amending VVG Agreement NN , , made VVN as IN of IN April NP 1 CD , , 1985 CD , , relating VVG to TO the DT definition NN of IN Operating NN Year NN Incorporated VVN herein RB by IN reference NN to TO Exhibit VV 10 CD ii NN 9 CD of IN the DT Company NP s PP Annual NP Report NP on IN Form NP 10 CD K NN for IN the DT year NN ended VVN December NP 31 CD , , 1986 CD File NP No NP . SENT 0 CD 12014 CD . SENT 10 CD Norman NP Wells NP Expansion NN Agreement NN , , dated VVN October NP 6 CD , , 1983 CD , , relating VVG to TO the DT prices NNS and CC royalties NNS payable JJ for IN crude JJ oil NN production NN at IN Norman NP Wells NP Incorporated VVD herein RB by IN reference NN to TO Exhibit VV 10 CD ii NN 8 CD of IN the DT Company NP s PP Annual NP Report NP on IN Form NP 10 CD K NN for IN the DT year NN ended VVN December NP 31 CD , , 1983 CD File NP No NP . SENT 2 CD 9259 CD . SENT 11 CD Alberta NP Cold NP Lake NP Crown NP Agreement NP , , dated VVN June NP 25 CD , , 1984 CD , , relating VVG to TO the DT royalties NNS payable JJ and CC the DT assurances NNS given VVN in IN respect NN of IN the DT Cold NP Lake NP production NN project NN Incorporated VVN herein RB by IN reference NN to TO Exhibit VV 10 CD ii NN 11 CD of IN the DT Company NP s PP Annual NP Report NP on IN Form NP 10 CD K NN for IN the DT year NN ended VVN December NP 31 CD , , 1986 CD File NP No NP . SENT 0 CD 12014 CD . SENT 12 CD Amendment NP to TO Alberta NP Crown NP Agreement NP , , dated VVN January NP 1 CD , , 1986 CD Incorporated VVN herein RB by IN reference NN to TO Exhibit VV 10 CD ii NN 12 CD of IN the DT Company NP s PP Annual NP Report NP on IN Form NP 10 CD K NN for IN the DT year NN ended VVN December NP 31 CD , , 1987 CD File NP No NP . SENT 0 CD 12014 CD . SENT 13 CD Amendment NP to TO Alberta NP Crown NP Agreement NP , , dated VVN November NP 25 CD , , 1987 CD Incorporated VVN herein RB by IN reference NN to TO Exhibit VV 10 CD ii NN 13 CD of IN the DT Company NP s PP Annual NP Report NP on IN Form NP 10 CD K NN for IN the DT year NN ended VVN December NP 31 CD , , 1987 CD File NP No NP . SENT 0 CD 12014 CD . SENT 45 CD Table NN of IN Contents NNS 14 CD Amendment NP to TO Syncrude NP Ownership NP and CC Management NP Agreement NP , , dated VVN March NP 10 CD , , 1982 CD Incorporated VVN herein RB by IN reference NN to TO Exhibit VV 10 CD ii NN 14 CD of IN the DT Company NP s PP Annual NP Report NP on IN Form NP 10 CD K NN for IN the DT year NN ended VVN December NP 31 CD , , 1989 CD File NP No NP . SENT 0 CD 12014 CD . SENT 15 CD Amendment NP to TO Alberta NP Crown NP Agreement NP , , dated VVN August NP 1 CD , , 1991 CD Incorporated VVN herein RB by IN reference NN to TO Exhibit VV 10 CD ii NN 15 CD of IN the DT Company NP s PP Annual NP Report NP on IN Form NP 10 CD K NN for IN the DT year NN ended VVN December NP 31 CD , , 1991 CD File NP No NP . SENT 0 CD 12014 CD 16 CD Norman NP Wells NP Settlement NP Agreement NP , , dated VVN July NP 31 CD , , 1996 CD . SENT Incorporated VVN herein RB by IN reference NN to TO Exhibit VV 10 CD ii NN 16 CD of IN the DT Company NP s PP Annual NP Report NP on IN Form NP 10 CD K NN for IN the DT year NN ended VVN December NP 31 CD , , 1996 CD File NP No NP . SENT 0 CD 12014 CD . SENT 17 CD Amendment NP to TO Alberta NP Crown NP Agreement NP , , dated VVN January NP 1 CD , , 1997 CD . SENT Incorporated VVN herein RB by IN reference NN to TO Exhibit VV 10 CD ii NN 17 CD of IN the DT Company NP s PP Annual NP Report NP on IN Form NP 10 CD K NN for IN the DT year NN ended VVN December NP 31 CD , , 1996 CD File NP No NP . SENT 0 CD 12014 CD . SENT 18 CD Norman NP Wells NP Pipeline NP Amending VVG Agreement NN , , dated VVN December NP 12 CD , , 1997 CD . SENT Incorporated VVN herein RB by IN reference NN to TO Exhibit VV 10 CD ii NN 18 CD of IN the DT Company NP s PP Annual NP Report NP on IN Form NP 10 CD K NN for IN the DT year NN ended VVN December NP 31 CD , , 1998 CD File NP No NP . SENT 0 CD 12014 CD . SENT 19 CD Norman NP Wells NP Pipeline NP 1999 CD Amending VVG Agreement NN , , dated VVN May NP 1 CD , , 1999 CD . SENT Incorporated VVN herein RB by IN reference NN to TO Exhibit VV 10 CD ii NN 19 CD of IN the DT Company NP s PP Annual NP Report NP on IN Form NP 10 CD K NN for IN the DT year NN ended VVN December NP 31 CD , , 1999 CD File NP No NP . SENT 0 CD 12014 CD . SENT 20 CD Alberta NP Cold NP Lake NP Transition NN Agreement NN , , effective JJ January NP 1 CD , , 2000 CD , , relating VVG to TO the DT royalties NNS payable JJ in IN respect NN of IN the DT Cold NP Lake NP production NN project NN and CC terminating VVG the DT Alberta NP Cold NP Lake NP Crown NP Agreement NP . SENT Incorporated VVN herein RB by IN reference NN to TO Exhibit VV 10 CD ii NN 20 CD of IN the DT Company NP s PP Annual NP Report NP on IN Form NP 10 CD K NN for IN the DT year NN ended VVN December NP 31 CD , , 2001 CD File NP No NP . SENT 0 CD 12014 CD . SENT 21 CD Amendment NP to TO Alberta NP Crown NP Agreement NP effective JJ January NP 1 CD , , 2001 CD Incorporated VVN herein RB by IN reference NN to TO Exhibit VV 10 CD ii NN 21 CD of IN the DT Company NN s PP Quarterly JJ Report NP on IN Form NP 10 CD Q NP for IN the DT quarter NN ended VVN June NP 30 CD , , 2002 CD File NP No NP . SENT 0 CD 12014 CD . SENT 22 CD Amendment NP to TO Syncrude NP Ownership NP and CC Management NP Agreement NP effective JJ January NP 1 CD , , 2001 CD Incorporated VVN herein RB by IN reference NN to TO Exhibit VV 10 CD ii NN 22 CD of IN the DT Company NN s PP Quarterly JJ Report NP on IN Form NP 10 CD Q NP for IN the DT quarter NN ended VVN June NP 30 CD , , 2002 CD File NP No NP . SENT 0 CD 12014 CD . SENT 23 CD Amendment NP to TO Syncrude NP Ownership NP and CC Management NP Agreement NP effective JJ September NP 16 CD , , 1994 CD Incorporated VVN herein RB by IN reference NN to TO Exhibit VV 10 CD ii NN 23 CD of IN the DT Company NN s PP Quarterly JJ Report NP on IN Form NP 10 CD Q NP for IN the DT quarter NN ended VVN June NP 30 CD , , 2002 CD File NP No NP . SENT 0 CD 12014 CD . SENT 24 CD Amendment NP to TO Alberta NP Crown NP Agreement NN dated VVN November NP 29 CD , , 1995 CD Incorporated VVN herein RB by IN reference NN to TO Exhibit VV 10 CD ii NN 24 CD of IN the DT Company NN s PP Quarterly JJ Report NP on IN Form NP 10 CD Q NP for IN the DT quarter NN ended VVN June NP 30 CD , , 2002 CD File NP No NP . SENT 0 CD 12014 CD . SENT iii NP A NP 1 CD Form NN of IN Letter NP relating VVG to TO Supplemental NP Retirement NP Income NP Incorporated VVD herein RB by IN reference NN to TO Exhibit NN 10 CD c SYM 3 CD of IN the DT Company NP s PP Annual NP Report NP on IN Form NP 10 CD K NN for IN the DT year NN ended VVN December NP 31 CD , , 1980 CD File NP No NP . SENT 2 CD 9259 CD . SENT 2 CD Incentive NN Share NN Unit NP Plan NP and CC Incentive NN Share NN Units NNS granted VVN in IN 2001 CD are VBP incorporated VVN herein RB by IN reference NN to TO Exhibit VV 10 CD iii NNS A DT 2 CD of IN the DT Company NP s PP Annual NP Report NP on IN Form NP 10 CD K NN for IN the DT year NN ended VVN December NP 31 CD , , 2001 CD . SENT Units NNS granted VVN in IN 2000 CD are VBP incorporated VVN herein RB by IN reference NN to TO Exhibit VV 10 CD iii NNS A DT 2 CD of IN the DT Company NP s PP Annual NP Report NP on IN Form NP 10 CD K NN for IN the DT year NN ended VVN December NP 31 CD , , 2000 CD File NP No NP . SENT 0 CD 12014 CD . SENT units NNS granted VVN in IN 1999 CD are VBP incorporated VVN herein RB by IN reference NN to TO Exhibit VV 10 CD iii NNS A DT 3 CD of IN the DT Company NP s PP Annual NP Report NP on IN Form NP 10 CD K NN for IN the DT year NN ended VVN December NP 31 CD , , 1999 CD File NP No NP . SENT 0 CD 12014 CD . SENT units NNS granted VVN in IN 1998 CD are VBP incorporated VVN herein RB by IN reference NN to TO Exhibit VV 10 CD iii NNS A DT 3 CD of IN the DT Company NP s PP Annual NP Report NP on IN Form NP 10 CD K NN for IN the DT year NN ended VVN December NP 31 CD , , 1998 CD File NP No NP . SENT 0 CD 12014 CD . SENT units NNS granted VVN in IN 1997 CD are VBP incorporated VVN herein RB by IN reference NN to TO Exhibit VV 10 CD iii NNS A DT 3 CD of IN the DT Company NP s PP Annual NP Report NP on IN Form NP 10 CD K NN for IN the DT year NN ended VVN December NP 31 CD , , 1997 CD File NP No NP . SENT 0 CD 12014 CD . SENT units NNS granted VVN in IN 1996 CD are VBP incorporated VVN herein RB by IN reference NN to TO Exhibit VV 10 CD iii NNS A DT 3 CD of IN the DT Company NP s PP Annual NP Report NP on IN Form NP 10 CD K NN for IN the DT year NN ended VVN December NP 31 CD , , 1996 CD File NP No NP . SENT 0 CD 12014 CD . SENT units NNS granted VVN in IN 1995 CD are VBP incorporated VVN herein RB by IN reference NN to TO Exhibit VV 10 CD iii NNS A DT 3 CD of IN the DT Company NP s PP Annual NP Report NP on IN Form NP 10 CD K NN for IN the DT year NN ended VVN December NP 31 CD , , 1995 CD File NP No NP . SENT 0 CD 12014 CD . SENT and CC units NNS granted VVN in IN 1994 CD are VBP incorporated VVN herein RB by IN reference NN to TO Exhibit VV 10 CD iii NNS A DT 3 CD of IN the DT Company NP s PP Annual NP Report NP on IN Form NP 10 CD K NN for IN the DT year NN ended VVN December NP 31 CD , , 1994 CD File NP No NP . SENT 0 CD 12014 CD . SENT 3 CD Deferred JJ Share NN Unit NP Plan NP . SENT Incorporated VVN herein RB by IN reference NN to TO Exhibit VV 10 CD iii NNS A DT 5 CD of IN the DT Company NP s PP Annual NP Report NP on IN Form NP 10 CD K NN for IN the DT year NN ended VVN December NP 31 CD , , 1998 CD File NP No NP . SENT 0 CD 12014 CD . SENT 46 CD Table NN of IN Contents NNS 4 CD Deferred JJ Share NN Unit NP Plan NP for IN Nonemployee NP Directors NPS . SENT Incorporated VVN herein RB by IN reference NN to TO Exhibit VV 10 CD iii NNS A DT 6 CD of IN the DT Company NP s PP Annual NP Report NP on IN Form NP 10 CD K NN for IN the DT year NN ended VVN December NP 31 CD , , 1998 CD File NP No NP . SENT 0 CD 12014 CD . SENT 5 CD Form NN of IN Earnings NNS Bonus NP Units NNS Incorporated VVN herein RB by IN reference NN to TO Exhibit VV 10 CD iii NNS A DT 5 CD of IN the DT Company NP s PP Annual NP Report NP on IN Form NP 10 CD K NN for IN the DT year NN ended VVN December NP 31 CD , , 2003 CD File NP No NP . SENT 0 CD 12014 CD and CC Earnings NNS Bonus NP Unit NP Plan NP Incorporated VVD herein RB by IN reference NN to TO Exhibit VV 10 CD iii NNS A DT 5 CD of IN the DT Company NP s PP Annual NP Report NP on IN Form NP 10 CD K NN for IN the DT year NN ended VVN December NP 31 CD , , 2002 CD File NP No NP . SENT 0 CD 12014 CD . SENT 6 CD Incentive NN Stock NP Option NP Plan NP and CC Incentive JJ Stock NP Options NPS granted VVD in IN 2002 CD Incorporated VVN herein RB by IN reference NN to TO Exhibit VV 10 CD iii NNS A DT 6 CD of IN the DT Company NN s PP Quarterly JJ Report NP on IN Form NP 10 CD Q NP for IN the DT quarter NN ended VVN June NP 30 CD , , 2002 CD File NP No NP . SENT 0 CD 12014 CD . SENT 7 CD Restricted JJ Stock NP Unit NP Plan NP and CC Restricted JJ Stock NP Units NNS granted VVN in IN 2002 CD Incorporated VVN herein RB by IN reference NN to TO Exhibit VV 10 CD iii NNS A DT 7 CD of IN the DT Company NP s PP Annual NP Report NP on IN Form NP 10 CD K NN for IN the DT year NN ended VVN December NP 31 CD , , 2002 CD File NP No NP . SENT 0 CD 12014 CD . SENT 8 CD Restricted JJ Stock NP Unit NP Plan NP and CC Restricted JJ Stock NP Units NNS granted VVN in IN 2003 CD Incorporated VVN herein RB by IN reference NN to TO Exhibit VV 10 CD iii NNS A DT 8 CD of IN the DT Company NP s PP Annual NP Report NP on IN Form NP 10 CD K NN for IN the DT year NN ended VVN December NP 31 CD , , 2003 CD File NP No NP . SENT 0 CD 12014 CD . SENT 9 CD Restricted JJ Stock NP Unit NP Plan NP and CC general JJ form NN for IN Restricted JJ Stock NP Unites VVZ , , as IN amended VVN effective JJ December NP 31 CD , , 2004 CD Incorporated VVN herein RB by IN reference NN to TO Exhibit VV 99 CD . SENT 1 CD of IN the DT Company NP s PP Form NP 8 CD K NN dated VVN December NP 31 CD , , 2004 CD File NP No NP . SENT 0 CD 12014 CD . SENT 21 CD Imperial NP Oil NP Resources NPS Limited NP , , McColl NP Frontenac NP Petroleum NP Inc NP . SENT , , Imperial NP Oil NP Resources NPS N NP . SENT W NP . SENT T NN . SENT Limited NP and CC Imperial NP Oil NP Resources NP Ventures NPS Limited NP , , all DT incorporated VVN in IN Canada NP , , are VBP wholly RB owned VVN subsidiaries NNS of IN the DT Company NN . SENT The DT names NNS of IN all DT other JJ subsidiaries NNS of IN the DT Company NN are VBP omitted VVN because IN , , considered VVN in IN the DT aggregate NN as IN a DT single JJ subsidiary NN , , they PP would MD not RB constitute VV a DT significant JJ subsidiary NN as IN of IN December NP 31 CD , , 2004 CD . SENT 23 CD ii NNS A DT Consent NP of IN PricewaterhouseCoopers NP LLP NP . SENT B NP Consent NP of IN Chief NP Engineering NP Officer NP . SENT 31 CD . SENT 1 CD Certification NN by IN principal JJ executive JJ officer NN of IN Periodic JJ Financial NP Report NP pursuant JJ to TO Rule NP 13 CD a DT 14 CD a DT . SENT 31 CD . SENT 2 CD Certification NN by IN principal JJ financial JJ officer NN of IN Periodic JJ Financial NP Report NP pursuant JJ to TO Rule NP 13 CD a DT 14 CD a DT . SENT 32 CD . SENT 1 CD Certification NN by IN chief JJ executive JJ officer NN of IN Periodic JJ Financial NP Report NP pursuant JJ to TO Rule NP 13 CD a DT 14 CD b SYM and CC 18 CD U NP . SENT S NP . SENT C SYM . SENT Section NP 1350 CD . SENT 32 CD . SENT 2 CD Certification NN by IN chief JJ financial JJ officer NN of IN Periodic JJ Financial NP Report NP pursuant JJ to TO Rule NP 13 CD a DT 14 CD b SYM and CC 18 CD U NP . SENT S NP . SENT C SYM . SENT Section NP 1350 CD . SENT Copies NNS of IN Exhibits NNS may MD be VB acquired VVN upon IN written JJ request NN of IN any DT shareholder NN to TO the DT investor NN relations NNS manager NN , , Imperial NP Oil NP Limited NP , , 111 CD St NP . SENT Clair NP Avenue NP West NP , , Toronto NP , , Ontario NP , , Canada NP M NP 5 CD W NP 1 CD K NP 3 CD , , and CC payment NN of IN processing NN and CC mailing NN costs NNS . SENT 47 CD Table NN of IN Contents NNS SIGNATURES NNS Pursuant JJ to TO the DT requirements NNS of IN Section NP 13 CD or CC 15 CD d SYM of IN the DT Securities NPS Exchange NP Act NP of IN 1934 CD , , the DT registrant NN has VHZ duly RB caused VVN this DT report NN to TO be VB signed VVN on IN its PP$ behalf NN on IN March NP 9 CD , , 2005 CD by IN the DT undersigned JJ , , thereunto RB duly RB authorized VVN . SENT Imperial NP Oil NP Limited NP By IN s PP T NN . SENT J NP . SENT Hearn NP Timothy NP J NP . SENT Hearn NP , , Chairman NP of IN the DT Board NP , , President NP and CC Chief NP Executive NP Officer NP Pursuant JJ to TO the DT requirements NNS of IN the DT Securities NPS Exchange NP Act NP of IN 1934 CD , , this DT report NN has VHZ been VBN signed VVN below RB on IN March NP 9 CD , , 2005 CD by IN the DT following VVG persons NNS on IN behalf NN of IN the DT registrant NN and CC in IN the DT capacities NNS indicated VVD . SENT Signature NN Title NP Chairman NP of IN the DT Board NP , , President NP , , s PP T NN . SENT J NP . SENT Hearn NP Chief NP Executive NP Officer NP and CC Director NP Principal NN Executive NP Officer NP Timothy NP J NP . SENT Hearn NP Controller NN and CC Senior NP Vice NP President NP , , s VVZ Paul NP A NP . SENT Smith NP Finance NP and CC Administration NP and CC Director NP Principal NN Accounting NP Officer NP and CC Principal NN Financial NP Officer NP Paul NP A NP . SENT Smith NP s PP Pierre NP Des NP Marais NP II NP Director NP Pierre NP Des NP Marais NP II NP s PP Brian NP J NP . SENT Fischer NP Director NP Brian NP J NP . SENT Fischer NP s PP Roger NP Phillips NP Director NP Roger NP Phillips NP s PP J NP . SENT Shepard NP Director NP James NP F NP . SENT Shepard NP s PP Sheelagh NP D NP . SENT Whittaker NP Director NP Sheelagh NP D NP . SENT Whittaker NP s PP J NP . SENT Michael NP Yeager NP Director NP J NP . SENT Michael NP Yeager NP s PP Victor NP L NP . SENT Young NP Director NP Victor NP L NP . SENT Young NP 48 CD Table NN of IN Contents NNS INDEX NN TO TO FINANCIAL NP STATEMENTS NNS Pages NP in IN this DT Report NP Management NP s PP report VVP on IN internal JJ control NN over IN financial JJ reporting NN F NN 2 CD Auditors NNS report VVP F NP 2 CD Financial NP statements NNS . SENT Consolidated JJ statement NN of IN income NN for IN the DT years NNS 2002 CD , , 2003 CD and CC 2004 CD F NN 3 CD Consolidated NP statement NN of IN cash NN flows NNS for IN the DT years NNS 2002 CD , , 2003 CD and CC 2004 CD F NN 4 CD Consolidated NP balance NN sheet NN as IN at IN December NP 31 CD , , 2002 CD , , 2003 CD and CC 2004 CD F NN 5 CD Consolidated NP statement NN of IN shareholders NNS equity NN as IN at IN December NP 31 CD , , 2002 CD , , 2003 CD and CC 2004 CD F NN 6 CD Notes NNS to TO the DT consolidated JJ financial JJ statements NNS F NN 7 CD F NN 20 CD F NN 1 CD Table NN of IN Contents NNS MANAGEMENT NN S NP REPORT NN ON IN INTERNAL JJ CONTROL NN OVER IN FINANCIAL NP REPORTING VVG Management NP , , including VVG the DT Company NN s PP chief JJ executive JJ officer NN and CC principal JJ accounting NN officer NN and CC principal JJ financial JJ officer NN , , is VBZ responsible JJ for IN establishing VVG and CC maintaining VVG adequate JJ internal JJ control NN over IN the DT Company NN s PP financial JJ reporting NN . SENT Management NP conducted VVD an DT evaluation NN of IN the DT effectiveness NN of IN internal JJ control NN over IN financial JJ reporting NN based VVN on IN the DT Internal NP Control NP Integrated NP Framework NN issued VVN by IN the DT Committee NP of IN Sponsoring VVG Organizations NNS of IN the DT Treadway NP Commission NP . SENT Based VVN on IN this DT evaluation NN , , management NN concluded VVD that IN Imperial NP Oil NP Limited NP s PP internal JJ control NN over IN financial JJ reporting NN was VBD effective JJ as IN of IN December NP 31 CD , , 2004 CD . SENT Management NP s PP assessment NN of IN the DT effectiveness NN of IN internal JJ control NN over IN financial JJ reporting NN as IN of IN December NP 31 CD , , 2004 CD , , was VBD audited VVN by IN PricewaterhouseCoopers NP LLP NP , , an DT independent JJ registered JJ public JJ accounting NN firm NN , , as RB stated VVN in IN their PP$ report NN which WDT is VBZ included VVN herein RB . SENT s PP T NN . SENT J NP . SENT Hearn NP s PP Paul NP A NP . SENT Smith NP Timothy NP J NP . SENT Hearn NP Paul NP A NP . SENT Smith NP Chairman NP of IN the DT Board NP , , Controller NN and CC Senior NP Vice NP President NP , , President NP and CC Chief NP Executive NP Officer NP Finance NP and CC Administration NP Principal NN Accounting NP Officer NP and CC Principal NN Financial NP Officer NP REPORT NN OF IN INDEPENDENT JJ REGISTERED JJ PUBLIC JJ ACCOUNTING NN FIRM NN To TO the DT Shareholders NNS of IN Imperial NP Oil NP Limited NP . SENT We PP have VHP completed VVN an DT integrated JJ audit NN of IN Imperial NP Oil NP Limited NP s VVZ 2004 CD consolidated JJ financial JJ statements NNS and CC of IN its PP$ internal JJ control NN over IN financial JJ reporting NN as IN of IN December NP 31 CD , , 2004 CD , , and CC audits NN of IN its PP$ 2003 CD and CC 2002 CD consolidated JJ financial JJ statements NNS in IN accordance NN with IN the DT standards NNS of IN the DT Public NP Company NP Accounting NP Oversight NP Board NP United NP States NPS . SENT Our PP$ opinions NNS , , based VVN on IN our PP$ audits NN , , are VBP presented VVN below RB . SENT Consolidated JJ financial JJ statements NNS In IN our PP$ opinion NN , , the DT accompanying JJ consolidated JJ balance NN sheets NNS and CC the DT related JJ consolidated JJ statements NNS of IN income NN , , shareholders NNS equity NN and CC cash NN flows NNS appearing VVG on IN pages NNS F NN 3 CD through IN F NP 20 CD of IN this DT Annual JJ Report NP present NN fairly RB , , in IN all DT material NN respects VVZ , , the DT financial JJ position NN of IN Imperial NP Oil NP Limited NP and CC its PP$ subsidiaries NNS at IN December NP 31 CD , , 2004 CD and CC 2003 CD , , and CC the DT results NNS of IN its PP$ operations NNS and CC its PP$ cash NN flows VVZ for IN each DT of IN the DT three CD years NNS in IN the DT period NN ended VVN December NP 31 CD , , 2004 CD in IN conformity NN with IN accounting NN principles NNS generally RB accepted VVD in IN the DT United NP States NPS of IN America NP . SENT These DT financial JJ statements NNS are VBP the DT responsibility NN of IN the DT Company NN s PP management NN . SENT Our PP$ responsibility NN is VBZ to TO express VV an DT opinion NN on IN these DT financial JJ statements NNS based VVN on IN our PP$ audits NN . SENT We PP conducted VVD our PP$ audits NN of IN these DT statements NNS in IN accordance NN with IN the DT standards NNS of IN the DT Public NP Company NP Accounting NP Oversight NP Board NP United NP States NPS . SENT Those DT standards NNS require VVP that IN we PP plan VVP and CC perform VVP the DT audit NN to TO obtain VV reasonable JJ assurance NN about IN whether IN the DT financial JJ statements NNS are VBP free JJ of IN material NN misstatement NN . SENT An DT audit NN of IN financial JJ statements NNS includes VVZ examining VVG , , on IN a DT test NN basis NN , , evidence NN supporting VVG the DT amounts NNS and CC disclosures NNS in IN the DT financial JJ statements NNS , , assessing VVG the DT accounting NN principles NNS used VVN and CC significant JJ estimates NNS made VVN by IN management NN , , and CC evaluating VVG the DT overall JJ financial JJ statement NN presentation NN . SENT We PP believe VVP that IN our PP$ audits NN provide VV a DT reasonable JJ basis NN for IN our PP$ opinion NN . SENT Internal JJ control NN over IN financial JJ reporting NN Also RB , , in IN our PP$ opinion NN , , management NN s NN assessment NN , , included VVN in IN the DT accompanying JJ Management NP s PP Report NP on IN Internal NP Control NP Over IN Financial NP Reporting NP , , that IN the DT Company NN maintained VVD effective JJ internal JJ control NN over IN financial JJ reporting NN as IN of IN December NP 31 CD , , 2004 CD based VVN on IN criteria NNS established VVN in IN Internal NP Control NP Integrated NP Frame NP work NN issued VVN by IN the DT Committee NP of IN Sponsoring VVG Organizations NNS of IN the DT Treadway NP Commission NP COSO NP , , is VBZ fairly RB stated VVN , , in IN all DT material NN respects NNS , , based VVN on IN those DT criteria NNS . SENT Furthermore RB , , in IN our PP$ opinion NN , , the DT Company NN maintained VVD , , in IN all DT material NN respects NNS , , effective JJ internal JJ control NN over IN financial JJ reporting NN as IN of IN December NP 31 CD , , 2004 CD , , based VVN on IN criteria NNS established VVN in IN Internal NP Control NP Integrated NP Framework NN issued VVN by IN the DT COSO NP . SENT The DT Company NP s PP management NN is VBZ responsible JJ for IN maintaining VVG effective JJ internal JJ control NN over IN financial JJ reporting NN and CC for IN its PP$ assessment NN of IN the DT effectiveness NN of IN internal JJ control NN over IN financial JJ reporting NN . SENT Our PP$ responsibility NN is VBZ to TO express VV opinions NNS on IN management NN s PP assessment NN and CC on IN the DT effectiveness NN of IN the DT Company NN s PP internal JJ control NN over IN financial JJ reporting NN based VVN on IN our PP$ audit NN . SENT We PP conducted VVD our PP$ audit NN of IN internal JJ control NN over IN financial JJ reporting NN in IN accordance NN with IN the DT standards NNS of IN the DT Public NP Company NP Accounting NP Oversight NP Board NP United NP States NPS . SENT Those DT standards NNS require VVP that IN we PP plan VVP and CC perform VVP the DT audit NN to TO obtain VV reasonable JJ assurance NN about IN whether IN effective JJ internal JJ control NN over IN financial JJ reporting NN was VBD maintained VVN in IN all DT material NN respects VVZ . SENT An DT audit NN of IN internal JJ control NN over IN financial JJ reporting NN includes VVZ obtaining VVG an DT understanding NN of IN internal JJ control NN over IN financial JJ reporting NN , , evaluating VVG management NN s PP assessment NN , , testing VVG and CC evaluating VVG the DT design NN and CC operating VVG effectiveness NN of IN internal JJ control NN , , and CC performing VVG such JJ other JJ procedures NNS as IN we PP consider VVP necessary JJ in IN the DT circumstances NNS . SENT We PP believe VVP that IN our PP$ audit NN provides VVZ a DT reasonable JJ basis NN for IN our PP$ opinions NNS . SENT A DT company NN s PP internal JJ control NN over IN financial JJ reporting NN is VBZ a DT process NN designed VVN to TO provide VV reasonable JJ assurance NN regarding VVG the DT reliability NN of IN financial JJ reporting NN and CC the DT preparation NN of IN financial JJ statements NNS for IN external JJ purposes NNS in IN accordance NN with IN generally RB accepted VVN accounting NN principles NNS . SENT A DT company NN s PP internal JJ control NN over IN financial JJ reporting NN includes VVZ those DT policies NNS and CC procedures NNS that IN i NP pertain VV to TO the DT maintenance NN of IN records NNS that WDT , , in IN reasonable JJ detail NN , , accurately RB and CC fairly RB reflect VV the DT transactions NNS and CC dispositions NNS of IN the DT assets NNS of IN the DT company NN . SENT ii NNS provide VVP reasonable JJ assurance NN that IN transactions NNS are VBP recorded VVN as RB necessary JJ to TO permit VV preparation NN of IN financial JJ statements NNS in IN accordance NN with IN generally RB accepted VVN accounting NN principles NNS , , and CC that IN receipts NNS and CC expenditures NNS of IN the DT company NN are VBP being VBG made VVN only RB in IN accordance NN with IN authorizations NNS of IN management NN and CC directors NNS of IN the DT company NN . SENT and CC iii NNS provide VVP reasonable JJ assurance NN regarding VVG prevention NN or CC timely JJ detection NN of IN unauthorized JJ acquisition NN , , use NN , , or CC disposition NN of IN the DT company NN s PP assets NNS that WDT could MD have VH a DT material NN effect NN on IN the DT financial JJ statements NNS . SENT Because IN of IN its PP$ inherent JJ limitations NNS , , internal JJ control NN over IN financial JJ reporting NN may MD not RB prevent VV or CC detect VV misstatements NNS . SENT Also RB , , projections NNS of IN any DT evaluation NN of IN effectiveness NN to TO future JJ periods NNS are VBP subject JJ to TO the DT risk NN that IN controls NNS may MD become VV inadequate JJ because IN of IN changes NNS in IN conditions NNS , , or CC that IN the DT degree NN of IN compliance NN with IN the DT policies NNS or CC procedures NNS may MD deteriorate VV . SENT s PP PricewaterhouseCoopers NP LLP NP PricewaterhouseCoopers NP LLP NP Chartered VVD Accountants NNS Toronto NP , , Ontario NP , , Canada NP March NP 9 CD , , 2005 CD F NN 2 CD Table NN of IN Contents NNS Consolidated NP statement NN of IN income NN millions NNS of IN Canadian JJ dollars NNS For IN the DT years NNS ended VVN December NP 31 CD 2004 CD 2003 JJ 2002 CD Revenues NNS Operating VVG revenues NNS a DT 22 CD 408 CD 19 JJ 094 CD 16 CD 890 CD Investment NN and CC other JJ income NN note NN 11 CD 52 CD 114 CD 152 CD Total JJ revenues NNS 22 CD 460 CD 19 JJ 208 CD 17 CD 042 CD Expenses NNS Exploration NP 59 CD 55 CD 30 CD Purchases NNS of IN crude JJ oil NN and CC products NNS 13 JJ 094 CD 10 CD 823 JJ 9 CD 723 CD Production NN and CC manufacturing VVG 2 CD 883 CD 2 CD 782 JJ 2 CD 320 CD Selling NN and CC general JJ 1 CD 218 CD 1 CD 269 JJ 1 CD 222 CD Federal NP excise NN tax NN a DT 1 CD 264 CD 1 CD 254 JJ 1 CD 231 CD Depreciation NN and CC depletion NN 908 CD 755 CD 708 CD Financing NP costs NNS note VVP 15 CD 7 CD 120 CD 20 CD Total JJ expenses NNS 19 CD 433 CD 16 JJ 818 CD 15 CD 254 CD Income NN before IN income NN taxes NNS 3 CD 027 CD 2 CD 390 JJ 1 CD 788 CD Income NP taxes NNS 975 CD 689 CD 574 CD Income NN before IN cumulative JJ effect NN of IN accounting NN change NN 2 CD 052 CD 1 CD 701 JJ 1 CD 214 CD Cumulative JJ effect NN of IN accounting NN change NN , , after IN income NN tax NN 4 CD Net NN income NN 2 CD 052 CD 1 CD 705 JJ 1 CD 214 CD Per IN share NN information NN dollars NNS Net JJ income NN per IN common JJ share NN basic JJ note NN 13 CD Income NN before IN cumulative JJ effect NN of IN accounting NN change NN 5 CD . SENT 75 CD 4 CD . SENT 57 CD 3 CD . SENT 20 CD Cumulative JJ effect NN of IN accounting NN change NN , , after IN income NN tax NN 0 CD . SENT 01 CD Net JJ income NN 5 CD . SENT 75 CD 4 CD . SENT 58 CD 3 CD . SENT 20 CD Net JJ income NN per IN common JJ share NN diluted VVN note NN 13 CD Income NN before IN cumulative JJ effect NN of IN accounting NN change NN 5 CD . SENT 74 CD 4 CD . SENT 57 CD 3 CD . SENT 20 CD Cumulative JJ effect NN of IN accounting NN change NN , , after IN income NN tax NN 0 CD . SENT 01 CD Net JJ income NN 5 CD . SENT 74 CD 4 CD . SENT 58 CD 3 CD . SENT 20 CD Dividends NNS 0 CD . SENT 88 CD 0 CD . SENT 87 CD 0 CD . SENT 84 CD a DT Operating NN revenues NNS include VVP federal JJ excise NN tax NN of IN 1 CD , , 264 CD million CD 2003 CD 1 CD , , 254 CD million CD , , 2002 CD 1 CD , , 231 CD million CD . SENT The DT information NN on IN pages NNS F NN 7 CD through IN F NP 20 CD is VBZ part NN of IN these DT consolidated JJ financial JJ statements NNS . SENT Certain JJ figures NNS for IN prior JJ years NNS have VHP been VBN reclassified VVN in IN the DT financial JJ statements NNS to TO conform VV with IN the DT current JJ year NN s PP presentation NN . SENT F SYM 3 CD Table NN of IN Contents NNS Consolidated NP statement NN of IN cash NN flows VVZ millions NNS of IN Canadian JJ dollars NNS , , inflow NN outflow NN For IN the DT years NNS ended VVN December NP 31 CD 2004 CD 2003 CD 2002 CD Operating NN activities NNS Net JJ income NN 2 CD 052 CD 1 CD 705 JJ 1 CD 214 CD Cumulative JJ effect NN of IN accounting NN change NN , , after IN tax NN 4 CD Adjustments NNS for IN non JJ cash NN items NNS . SENT Depreciation NN and CC depletion NN 908 CD 755 CD 708 CD Gain NN loss NN on IN asset NN sales NNS , , after IN tax NN 32 CD 10 CD 4 CD Deferred JJ income NN taxes NNS and CC other JJ 90 CD 59 CD 148 CD Changes NP in IN operating VVG assets NNS and CC liabilities NNS . SENT Accounts NNS receivable JJ 311 CD 33 CD 356 CD Inventories NNS and CC prepaids NNS 32 JJ 31 CD 51 CD Income NP taxes NNS payable JJ 462 CD 38 CD 225 CD Accounts NNS payable JJ 308 CD 74 CD 323 CD All DT other JJ items NNS net JJ a DT 47 CD 336 CD 125 CD Cash NN from IN operating NN activities NNS note VVP 14 CD 3 CD 312 JJ 2 CD 227 CD 1 CD 688 CD Investing VVG activities NNS Additions NNS to TO property NN , , plant NN and CC equipment NN and CC intangibles NNS 1 CD 376 CD 1 CD 482 JJ 1 CD 564 CD Proceeds NNS from IN asset NN sales NNS 102 CD 56 CD 61 CD Loans NNS to TO equity NN company NN 32 CD Cash NN from IN used VVN in IN investing VVG activities NNS 1 CD 306 CD 1 CD 426 JJ 1 CD 503 CD Financing NP activities NNS Short JJ term NN debt NN net JJ 9 CD 388 CD Long JJ term NN debt NN issued VVD 818 CD 500 CD Repayment NN of IN long JJ term NN debt NN 8 CD 818 CD 71 CD Issuance NN of IN common JJ shares NNS under IN stock NN option NN plan NN 13 CD 2 CD Common JJ shares NNS purchased VVN note VVP 13 CD 872 CD 799 JJ 13 CD Dividends NNS paid VVD 317 CD 322 CD 319 CD Cash NN from IN used VVN in IN financing NN activities NNS 1 CD 175 CD 1 CD 119 CD 291 CD Increase VV decrease NN in IN cash NN 831 CD 318 CD 106 CD Cash NN at IN beginning VVG of IN year NN 448 CD 766 CD 872 CD Cash NN at IN end NN of IN year NN b NN 1 CD 279 CD 448 CD 766 CD a DT Includes VVZ contribution NN to TO registered JJ pension NN plans NNS of IN 114 CD million CD 2003 JJ 511 CD million CD , , 2002 CD 19 CD million CD . SENT b SYM Cash NN is VBZ composed VVN of IN cash NN in IN bank NN and CC cash NN equivalents NNS at IN cost NN . SENT Cash NN equivalents NNS are VBP all RB highly RB liquid JJ securities NNS with IN a DT maturity NN of IN three CD months NNS or CC less JJR when WRB purchased VVN . SENT The DT information NN on IN pages NNS F NN 7 CD through IN F NP 20 CD is VBZ part NN of IN these DT consolidated JJ financial JJ statements NNS . SENT Certain JJ figures NNS for IN prior JJ years NNS have VHP been VBN reclassified VVN in IN the DT financial JJ statements NNS to TO conform VV with IN the DT current JJ year NN s PP presentation NN . SENT F SYM 4 CD Table NN of IN Contents NNS Consolidated NP balance NN sheet NN millions NNS of IN Canadian JJ dollars NNS At IN December NP 31 CD 2004 CD 2003 CD Assets NNS Current JJ assets NNS Cash NN 1 CD 279 CD 448 CD Accounts NNS receivable JJ , , less RBR estimated VVN doubtful JJ amounts NNS 1 CD 626 CD 1 CD 315 CD Inventories NNS of IN crude JJ oil NN and CC products NNS note VVP 14 CD 432 CD 407 CD Materials NNS , , supplies NNS and CC prepaid JJ expenses NNS 112 CD 105 CD Deferred JJ income NN tax NN assets NNS note VVP 4 CD 448 CD 353 CD Total JJ current JJ assets NNS 3 CD 897 CD 2 CD 628 CD Investments NPS and CC other JJ long JJ term NN assets NNS 130 CD 97 CD Property NN , , plant NN and CC equipment NN , , less JJR accumulation NN , , depreciation NN and CC depletion NN note VVP 2 CD 9 CD 647 JJ 9 CD 267 CD Goodwill NP note NN 2 CD 204 CD 204 CD Other JJ intangible JJ assets NNS , , net JJ 149 CD 141 CD Total JJ assets NNS note VVP 2 CD 14 CD 027 JJ 12 CD 337 CD Liabilities NNS Current JJ liabilities NNS Short JJ term NN debt NN 81 CD 72 CD Accounts NNS payable JJ and CC accrued JJ liabilities NNS note VVP 16 CD 2 CD 525 JJ 2 CD 222 CD Income NP taxes NNS payable JJ 1 CD 057 CD 595 CD Current JJ portion NN of IN long JJ term NN debt NN 995 CD 501 CD Total JJ current JJ liabilities NNS 4 CD 658 CD 3 CD 390 CD Long JJ term NN debt NN note VVP 3 CD 367 CD 859 CD Other JJ long JJ term NN obligations NNS note VVP 8 CD 1 CD 525 JJ 1 CD 314 CD Deferred JJ income NN tax NN liabilities NNS note VVP 4 CD 1 CD 155 JJ 1 CD 229 CD Commitments NNS and CC contingent JJ liabilities NNS note VVP 12 CD Total JJ liabilities NNS 7 CD 705 CD 6 CD 792 CD Shareholders NNS equity NN Common JJ shares NNS at IN stated JJ value NN note NN 13 CD 1 CD 801 JJ 1 CD 859 CD Earnings NNS reinvested VVD 4 CD 889 CD 3 CD 952 CD Accumulated VVN other JJ nonowner NN changes NNS in IN equity NN 368 CD 266 CD Total JJ shareholders NNS equity NN 6 CD 322 CD 5 CD 545 CD Total JJ liabilities NNS and CC shareholders NNS equity NN 14 CD 027 CD 12 CD 337 CD The DT information NN on IN pages NNS F NN 7 CD through IN F NP 20 CD is VBZ part NN of IN these DT consolidated JJ financial JJ statements NNS . SENT Certain JJ figures NNS for IN prior JJ years NNS have VHP been VBN reclassified VVN in IN the DT financial JJ statements NNS to TO conform VV with IN the DT current JJ year NN s PP presentation NN . SENT Approved VVN by IN the DT directors NNS s PP T NN . SENT J NP . SENT Heam NP s PP P NN . SENT A DT . SENT Smith NP Chairman NP , , president NN and CC Controller NN and CC senior JJ vice NN president NN , , chief JJ executive JJ officer NN finance NN and CC administration NN F NN 5 CD Table NN of IN Contents NNS Consolidated NP statement NN of IN shareholders NNS equity NN millions NNS of IN Canadian JJ dollars NNS At IN December NP 31 CD 2004 CD 2003 CD 2002 CD Common JJ shares NNS at IN stated JJ value NN note NN 13 CD At IN beginning VVG of IN year NN 1 CD 859 CD 1 CD 939 JJ 1 CD 941 CD Issued VVN under IN the DT stock NN option NN plan NN 13 CD 2 CD Share NN purchases NNS at IN stated JJ value NN 71 CD 82 CD 2 CD At IN end NN of IN year NN 1 CD 801 CD 1 CD 859 JJ 1 CD 939 CD Earnings NNS reinvested VVN At IN beginning VVG of IN year NN 3 CD 952 CD 3 CD 287 JJ 2 CD 402 CD Net JJ income NN for IN the DT year NN 2 CD 052 CD 1 CD 705 JJ 1 CD 214 CD Share NN purchases NNS in IN excess NN of IN stated JJ value NN 801 CD 717 CD 11 CD Dividends NNS 314 JJ 323 CD 318 CD At IN end NN of IN year NN 4 CD 889 CD 3 CD 952 JJ 3 CD 287 CD Accumulated VVN other JJ nonowner NN changes NNS in IN equity NN At IN beginning VVG of IN year NN 266 CD 315 CD 77 CD Minimum NP pension NN liability NN adjustment NN note VVP 7 CD 102 CD 49 CD 238 CD At IN end NN of IN year NN 368 CD 266 CD 315 CD Shareholders NNS equity NN at IN end NN of IN year NN 6 CD 322 CD 5 CD 545 JJ 4 CD 911 CD Nonowner NN changes NNS in IN equity NN for IN the DT year NN Net JJ income NN for IN the DT year NN 2 CD 052 CD 1 CD 705 JJ 1 CD 214 CD Other JJ nonowner NN changes NNS in IN equity NN note VVP 7 CD 102 CD 49 CD 238 CD Total JJ nonowner NN changes NNS in IN equity NN for IN the DT year NN 1 CD 950 CD 1 CD 754 CD 976 CD The DT information NN on IN pages NNS F NN 7 CD through IN F NP 20 CD is VBZ part NN of IN these DT consolidated JJ financial JJ statements NNS . SENT Certain JJ figures NNS for IN prior JJ years NNS have VHP been VBN reclassified VVN in IN the DT financial JJ statements NNS to TO conform VV with IN the DT current JJ year NN s PP presentation NN . SENT F SYM 6 CD Table NN of IN Contents NNS Notes NNS to TO consolidated JJ financial JJ statements NNS 1 CD . SENT Summary NN of IN significant JJ accounting NN policies NNS The DT company NN s PP principal JJ business NN is VBZ energy NN , , involving VVG the DT exploration NN , , production NN , , transportation NN and CC sale NN of IN crude JJ oil NN and CC natural JJ gas NN and CC the DT manufacture NN , , transportation NN and CC sale NN of IN petroleum NN products NNS . SENT Imperial NP is VBZ also RB a DT major JJ manufacturer NN and CC marketer NN of IN petrochemicals NNS . SENT The DT consolidated JJ financial JJ statements NNS have VHP been VBN prepared VVN in IN accordance NN with IN generally RB accepted VVN accounting NN principles NNS GAAP NP in IN the DT United NP States NPS of IN America NP . SENT The DT financial JJ statements NNS include VVP certain JJ estimates NNS that WDT reflect VVP management NN s VVZ best JJS judgment NN . SENT All DT amounts NNS are VBP in IN Canadian JJ dollars NNS unless IN otherwise RB indicated VVN . SENT Principles NNS of IN consolidation NN The DT consolidated JJ financial JJ statements NNS include VVP the DT accounts NNS of IN Imperial NP Oil NP Limited NP and CC its PP$ subsidiaries NNS . SENT Intercompany NN accounts NNS and CC transactions NNS are VBP eliminated VVN . SENT Subsidiaries NNS include VVP those DT companies NNS in IN which WDT Imperial NP has VHZ both CC an DT equity NN interest NN and CC the DT continuing VVG ability NN to TO unilaterally RB determine VV strategic JJ operating NN , , investing NN and CC financing NN policies NNS . SENT Significant JJ subsidiaries NNS included VVD in IN the DT consolidated JJ financial JJ statements NNS include VVP Imperial NP Oil NP Resources NPS Limited NP , , Imperial NP Oil NP Resources NPS N NP . SENT W NP . SENT T NN . SENT Limited NP , , Imperial NP Oil NP Resources NP Ventures NPS Limited NP and CC McColl NP Frontenac NP Petroleum NP Inc NP . SENT All DT of IN the DT above JJ companies NNS are VBP wholly RB owned VVN . SENT A DT significant JJ portion NN of IN the DT company NN s PP activities NNS in IN natural JJ resources NNS is VBZ conducted VVN jointly RB with IN other JJ companies NNS . SENT The DT accounts NNS reflect VVP the DT company NN s PP share NN of IN undivided JJ interest NN in IN such JJ activities NNS , , including VVG its PP$ 25 CD percent NN interest NN in IN the DT Syncrude NP joint JJ venture NN and CC its PP$ nine CD percent NN interest NN in IN the DT Sable NP offshore JJ energy NN project NN . SENT Segment NN reporting VVG The DT company NN operates VVZ its PP$ business NN in IN Canada NP in IN the DT following VVG segments NNS . SENT Natural JJ resources NNS includes VVZ the DT exploration NN for IN and CC production NN of IN crude JJ oil NN and CC natural JJ gas NN . SENT Petroleum NP products NNS comprises VVZ the DT refining NN of IN crude JJ oil NN into IN petroleum NN products NNS and CC the DT distribution NN and CC marketing NN of IN these DT products NNS . SENT Chemicals NNS includes VVZ the DT manufacturing NN and CC marketing NN of IN various JJ hydrocarbon NN based VVN chemicals NNS and CC chemical NN products NNS . SENT The DT above JJ functions NNS have VHP been VBN defined VVN as IN the DT operating VVG segments NNS of IN the DT company NN because IN they PP are VBP the DT segments NNS a DT that WDT engage VVP in IN business NN activities NNS from IN which WDT revenues NNS are VBP earned VVN and CC expenses NNS are VBP incurred VVN . SENT b NN whose WP$ operating NN results NNS are VBP regularly RB reviewed VVN by IN the DT company NN s PP chief JJ operating NN decision NN maker NN to TO make VV decisions NNS about IN resources NNS to TO be VB allocated VVN to TO the DT segment NN and CC assess VV its PP$ performance NN . SENT and CC c LS for IN which WDT discrete JJ financial JJ information NN is VBZ available JJ . SENT Corporate JJ and CC other JJ includes VVZ assets NNS and CC liabilities NNS that WDT do VVP not RB specifically RB relate VV to TO business NN segments NNS primarily RB cash NN and CC long JJ term NN debt NN . SENT Net JJ income NN in IN this DT segment NN primarily RB includes VVZ financing NN costs NNS and CC interest NN income NN . SENT Segment NN accounting NN policies NNS are VBP the DT same JJ as IN those DT described VVN in IN this DT summary NN of IN significant JJ accounting NN policies NNS . SENT Natural JJ resources NNS , , petroleum NN products NNS and CC chemicals NNS expenses NNS include VVP amounts NNS allocated VVN from IN the DT corporate JJ and CC other JJ segment NN . SENT The DT allocation NN is VBZ based VVN on IN a DT combination NN of IN fee NN for IN service NN , , proportional JJ segment NN expenses NNS and CC a DT three CD year NN average NN of IN capital NN expenditures NNS . SENT Transfers NNS of IN assets NNS between IN segments NNS are VBP recorded VVN at IN book NN amounts NNS . SENT Items NNS included VVD in IN capital NN employed VVN that IN are VBP not RB identifiable JJ by IN segment NN are VBP allocated VVN according VVG to TO their PP$ nature NN . SENT Inventories NNS Inventories NNS are VBP recorded VVN at IN the DT lower JJR of IN cost NN or CC net JJ realizable JJ value NN . SENT The DT cost NN of IN crude JJ oil NN and CC products NNS is VBZ determined VVN primarily RB using VVG the DT last JJ in IN , , first JJ out IN LIFO NN method NN . SENT LIFO NP was VBD selected VVN over IN the DT alternative NN first RB in IN , , first JJ out RP and CC average JJ cost NN methods NNS because IN it PP provides VVZ a DT better JJR matching NN of IN current JJ costs NNS with IN the DT revenues NNS generated VVN in IN the DT period NN . SENT Inventory NN costs NNS include VVP expenditures NNS and CC other JJ charges NNS , , including VVG depreciation NN , , directly RB or CC indirectly RB incurred VVN in IN bringing VVG the DT inventory NN to TO its PP$ existing JJ condition NN and CC final JJ storage NN prior RB to TO delivery NN to TO a DT customer NN . SENT Selling NN and CC general JJ expenses NNS are VBP reported VVN as IN period NN costs NNS and CC excluded VVN from IN inventory NN costs NNS . SENT Investments NP The DT principal JJ investments NNS in IN companies NNS other JJ than IN subsidiaries NNS are VBP accounted VVN for IN using VVG the DT equity NN method NN . SENT They PP are VBP recorded VVN at IN the DT original JJ cost NN of IN the DT investment NN plus IN Imperial NP s PP share NN of IN earnings NNS since IN the DT investment NN was VBD made VVN , , less JJR dividends NNS received VVD . SENT Imperial NP s PP share NN of IN the DT after IN tax NN earnings NNS of IN these DT companies NNS is VBZ included VVN in IN investment NN and CC other JJ income NN in IN the DT consolidated JJ statement NN of IN income NN . SENT Other JJ investments NNS are VBP recorded VVN at IN cost NN . SENT Dividends NNS from IN these DT other JJ investments NNS are VBP included VVN in IN investment NN and CC other JJ income NN . SENT These DT investments NNS represent VVP interests NNS in IN non JJ publicly RB traded VVN pipeline NN companies NNS that WDT facilitate VVP the DT sale NN and CC purchase NN of IN crude JJ oil NN and CC natural JJ gas NN in IN the DT conduct NN of IN company NN operations NNS . SENT Other JJ parties NNS who WP also RB have VHP an DT equity NN interest NN in IN these DT companies NNS share NN in IN the DT risks NNS and CC rewards NNS according VVG to TO their PP$ percentage NN of IN ownership NN . SENT Imperial NP does VVZ not RB invest VV in IN these DT companies NNS in IN order NN to TO remove VV liabilities NNS from IN its PP$ balance NN sheet NN . SENT Property NN , , plant NN and CC equipment NN Property NN , , plant NN and CC equipment NN is VBZ recorded VVN at IN cost NN . SENT Investment NN tax NN credits NNS and CC other JJ similar JJ grants NNS are VBP treated VVN as IN a DT reduction NN of IN the DT capitalized JJ cost NN of IN the DT asset NN to TO which WDT they PP apply VVP . SENT The DT company NN uses VVZ the DT successful JJ efforts NNS method NN to TO account VV for IN its PP$ exploration NN and CC production NN activities NNS . SENT Under IN this DT method NN , , costs NNS are VBP accumulated VVN on IN a DT field NN by IN field NN basis NN with IN certain JJ exploratory JJ expenditures NNS and CC exploratory JJ dry JJ holes NNS being VBG expensed VVN as IN incurred VVN . SENT The DT company NN continues VVZ to TO carry VV as IN an DT asset NN the DT cost NN of IN drilling VVG exploratory JJ wells NNS that WDT find VVP sufficient JJ quantities NNS of IN reserves NNS to TO justify VV their PP$ completion NN as IN producing VVG wells NNS if IN the DT required JJ capital NN expenditure NN is VBZ made VVN and CC drilling NN of IN additional JJ exploratory JJ wells NNS is VBZ underway JJ or CC firmly RB planned VVN for IN the DT near JJ future NN . SENT Once IN exploration NN activities NNS demonstrate VVP that IN sufficient JJ quantities NNS of IN commercially RB producible JJ reserves NNS have VHP been VBN discovered VVN , , continued JJ capitalization NN is VBZ dependent JJ on IN project NN reviews NNS , , which WDT take VVP place NN at IN least JJS annually RB , , to TO ensure VV that DT satisfactory JJ progress NN toward IN ultimate JJ development NN of IN the DT reserves NNS is VBZ being VBG achieved VVN . SENT Exploratory JJ well NN costs NNS not RB meeting VVG these DT criteria NNS are VBP charged VVN to TO expense NN . SENT Costs NNS of IN productive JJ wells NNS and CC development NN dry JJ holes NNS are VBP capitalized VVN and CC amortized VVN on IN the DT unit NN of IN production NN method NN for IN each DT field NN . SENT The DT company NN uses VVZ this DT accounting NN policy NN instead RB of IN the DT full JJ cost NN method NN because IN it PP provides VVZ a DT more RBR timely JJ accounting NN of IN the DT success NN or CC failure NN of IN the DT company NN s PP exploration NN and CC production NN activities NNS . SENT F SYM 7 CD Table NN of IN Contents NNS Maintenance NN and CC repair NN costs NNS , , including VVG planned JJ major JJ maintenance NN , , are VBP expensed VVN as IN incurred VVN . SENT Improvements NNS that WDT increase VVP the DT capacity NN or CC prolong VV the DT service NN life NN of IN an DT asset NN are VBP capitalized VVN . SENT Production NN costs NNS are VBP expensed VVN as IN incurred VVN . SENT Production NN involves VVZ lifting VVG the DT oil NN and CC gas NN to TO the DT surface NN and CC gathering NN , , treating VVG , , field NN processing NN and CC field NN storage NN of IN the DT oil NN and CC gas NN . SENT The DT production NN function NN normally RB terminates VVZ at IN the DT outlet NN valve NN on IN the DT lease NN or CC field NN production NN storage NN tank NN . SENT Production NN costs NNS are VBP those DT incurred VVN to TO operate VV and CC maintain VV the DT company NN s PP wells NNS and CC related JJ equipment NN and CC facilities NNS . SENT They PP become VVP part NN of IN the DT cost NN of IN oil NN and CC gas NN produced VVD . SENT These DT costs NNS , , sometimes RB referred VVD to TO as IN lifting VVG costs NNS , , include VVP such JJ items NNS as IN labour NN costs NNS to TO operate VV the DT wells NNS and CC related JJ equipment NN . SENT repair NN and CC maintenance NN costs NNS on IN the DT wells NNS and CC equipment NN . SENT materials NNS , , supplies NNS and CC energy NN costs NNS required VVN to TO operate VV the DT wells NNS and CC related JJ equipment NN . SENT and CC administrative JJ expenses NNS related VVN to TO the DT production NN activity NN . SENT Depreciation NN and CC depletion NN for IN assets NNS associated VVN with IN producing VVG properties NNS begin VV at IN the DT time NN when WRB production NN commences VVZ on IN a DT regular JJ basis NN . SENT Depreciation NN for IN other JJ assets NNS begins VVZ when WRB the DT asset NN is VBZ in IN place NN and CC ready JJ for IN its PP$ intended JJ use NN . SENT Assets NNS under IN construction NN are VBP not RB depreciated VVN or CC depleted VVN . SENT Depreciation NN and CC depletion NN are VBP calculated VVN using VVG the DT unit NN of IN production NN method NN for IN producing VVG properties NNS based VVN on IN proved JJ developed JJ reserves NNS . SENT Depreciation NN of IN other JJ plant NN and CC equipment NN is VBZ calculated VVN using VVG the DT straight JJ line NN method NN , , based VVN on IN the DT estimated JJ service NN life NN of IN the DT asset NN . SENT In IN general JJ , , refineries NNS are VBP depreciated VVD over IN 25 CD years NNS . SENT other JJ major JJ assets NNS , , including VVG chemical NN plants NNS and CC service NN stations NNS , , are VBP depreciated VVN over IN 20 CD years NNS . SENT Proved VVN oil NN and CC gas NN properties NNS held VVN and CC used VVN by IN the DT company NN are VBP reviewed VVN for IN impairment NN whenever WRB events NNS or CC changes NNS in IN circumstances NNS indicate VVP that IN the DT carrying VVG amounts NNS may MD not RB be VB recoverable JJ . SENT Assets NNS are VBP grouped VVN at IN the DT lowest JJS level NN for IN which WDT there EX are VBP identifiable JJ cash NN flows NNS that WDT are VBP largely RB independent JJ of IN the DT cash NN flows VVZ of IN other JJ groups NNS of IN assets NNS . SENT The DT company NN estimates VVZ the DT future JJ undiscounted JJ cash NN flows NNS of IN the DT affected JJ properties NNS to TO judge VV the DT recoverability NN of IN carrying VVG amounts NNS . SENT Cash NN flows NNS used VVN in IN impairment NN evaluations NNS are VBP developed VVN using VVG annually RB updated VVN corporate JJ plan NN investment NN evaluation NN assumptions NNS for IN crude JJ oil NN commodity NN prices NNS and CC foreign JJ currency NN exchange NN rates NNS . SENT Annual JJ volumes NNS are VBP based VVN on IN individual JJ field NN production NN profiles NNS , , which WDT are VBP also RB updated VVN annually RB . SENT Prices NNS for IN natural JJ gas NN and CC other JJ products NNS sold VVN under IN contract NN are VBP based VVN on IN corporate JJ plan NN assumptions NNS that WDT are VBP developed VVN annually RB and CC also RB used VVN for IN investment NN evaluation NN purposes NNS . SENT In IN general JJ , , impairment NN analyses NNS are VBP based VVN on IN proved JJ reserves NNS . SENT Where WRB probable JJ reserves NNS exist VVP , , an DT appropriately RB risk VVP adjusted JJ amount NN of IN these DT reserves NNS may MD be VB included VVN in IN the DT impairment NN evaluation NN . SENT An DT asset NN would MD be VB impaired VVN if IN the DT undiscounted JJ cash NN flows NNS were VBD less JJR than IN its PP$ carrying VVG value NN . SENT Impairments NNS are VBP measured VVN by IN the DT amount NN by IN which WDT the DT asset NN s PP carrying VVG value NN exceeds VVZ its PP$ fair JJ value NN . SENT Gains NNS or CC losses NNS on IN assets NNS sold VVN are VBP included VVN in IN investment NN and CC other JJ income NN in IN the DT consolidated JJ statement NN of IN income NN . SENT Interest NN capitalization NN Interest NN costs NNS relating VVG to TO major JJ capital NN projects NNS under IN construction NN are VBP capitalized VVN as IN part NN of IN property NN , , plant NN and CC equipment NN . SENT Capitalization NN of IN interest NN ceases VVZ when WRB the DT property NN , , plant NN and CC equipment NN is VBZ substantially RB complete JJ and CC ready JJ for IN its PP$ intended JJ use NN . SENT Goodwill NP and CC other JJ intangible JJ assets NNS Goodwill NP and CC intangible JJ assets NNS with IN indefinite JJ lives NNS are VBP not RB subject JJ to TO amortization NN . SENT These DT assets NNS are VBP tested VVN for IN impairment NN annually RB or CC more RBR frequently RB if IN events NNS or CC circumstances NNS indicate VVP the DT assets NNS might MD be VB impaired VVN . SENT Impairment NN losses NNS are VBP recognized VVN in IN current JJ period NN earnings NNS . SENT The DT evaluation NN for IN impairment NN of IN goodwill NN is VBZ based VVN on IN a DT comparison NN of IN the DT carrying VVG values NNS of IN goodwill NN and CC associated JJ operating VVG assets NNS with IN the DT estimated JJ present JJ value NN of IN net JJ cash NN flows NNS from IN those DT operating NN assets NNS . SENT Intangible JJ assets NNS with IN determinable JJ useful JJ lives NNS are VBP amortized VVN over IN the DT estimated JJ service NN lives NNS of IN the DT assets NNS . SENT Computer NN software NN development NN costs NNS are VBP amortized VVN over IN a DT maximum NN of IN 15 CD years NNS and CC customer NN lists NNS are VBP amortized VVN over IN a DT maximum NN of IN 10 CD years NNS . SENT The DT amortization NN is VBZ included VVN in IN depreciation NN and CC depletion NN in IN the DT consolidated JJ statement NN of IN income NN . SENT Asset NN retirement NN obligations NNS and CC other JJ environmental JJ liabilities NNS Legal JJ obligations NNS associated VVN with IN site NN restoration NN on IN the DT retirement NN of IN assets NNS with IN determinable JJ useful JJ lives NNS are VBP recognized VVN when WRB they PP are VBP incurred VVN , , which WDT is VBZ typically RB at IN the DT time NN the DT assets NNS are VBP installed VVN . SENT The DT obligations NNS are VBP initially RB measured VVN at IN fair JJ value NN and CC discounted VVN to TO present VV value NN . SENT A DT corresponding JJ amount NN equal JJ to TO that DT of IN the DT initial JJ obligation NN is VBZ added VVN to TO the DT capitalized JJ costs NNS of IN the DT related JJ asset NN . SENT Over IN time NN the DT discounted JJ asset NN retirement NN obligation NN amount NN will MD be VB accreted VVN for IN the DT change NN in IN its PP$ present JJ value NN , , and CC the DT initial JJ capitalized JJ costs NNS will MD be VB depreciated VVN over IN the DT useful JJ lives NNS of IN the DT related JJ assets NNS . SENT No DT asset NN retirement NN obligations NNS are VBP set VVN up RP for IN assets NNS with IN an DT indeterminate JJ useful JJ life NN , , because IN such JJ potential JJ obligations NNS cannot NN be VB measured VVN since IN it PP is VBZ not RB possible JJ to TO estimate VV the DT settlement NN dates VVZ . SENT Provision NN for IN environmental JJ liabilities NNS of IN these DT and CC non JJ operating VVG assets NNS is VBZ made VVN when WRB it PP is VBZ probable JJ that IN obligations NNS have VHP been VBN incurred VVN and CC the DT amount NN can MD be VB reasonably RB estimated VVN . SENT These DT liabilities NNS are VBP not RB discounted VVN . SENT Asset NN retirement NN obligations NNS and CC other JJ provisions NNS for IN environmental JJ liabilities NNS are VBP determined VVN based VVN on IN engineering VVG estimated JJ costs NNS , , taking VVG into IN account NN the DT anticipated JJ method NN and CC extent NN of IN remediation NN consistent JJ with IN legal JJ requirements NNS , , current JJ technology NN and CC the DT possible JJ use NN of IN the DT location NN . SENT Foreign JJ currency NN translation NN Monetary NP assets NNS and CC liabilities NNS in IN foreign JJ currencies NNS have VHP been VBN translated VVN at IN the DT rates NNS of IN exchange NN prevailing VVG on IN December NP 31 CD . SENT Any DT exchange NN gains NNS or CC losses NNS are VBP recognized VVN in IN net JJ income NN . SENT Financial JJ instruments NNS The DT fair JJ values NNS of IN cash NN , , accounts VVZ receivable JJ and CC current JJ liabilities NNS approximate JJ recorded VVN amounts NNS because IN of IN the DT short JJ period NN to TO receipt NN or CC payment NN of IN cash NN . SENT The DT fair JJ value NN of IN the DT company NN s PP long RB term NN debt NN is VBZ estimated VVN based VVN on IN quoted VVN market NN prices NNS for IN the DT same JJ or CC similar JJ issues NNS or CC on IN the DT current JJ rates NNS offered VVN to TO the DT company NN for IN debt NN of IN the DT same JJ duration NN to TO maturity NN . SENT The DT fair JJ values NNS of IN the DT company NN s PP other JJ financial JJ instruments NNS , , which WDT are VBP mainly RB long JJ term NN receivables NNS , , are VBP estimated VVN primarily RB by IN discounting VVG future JJ cash NN flows NNS , , using VVG current JJ rates NNS for IN similar JJ financial JJ instruments NNS under IN similar JJ credit NN risk NN and CC maturity NN conditions NNS . SENT F SYM 8 CD Table NN of IN Contents NNS Notes NNS to TO consolidated JJ financial JJ statements NNS continued VVD The DT company NN does VVZ not RB use VV financing NN structures NNS for IN the DT purpose NN of IN altering VVG accounting NN outcomes NNS or CC removing VVG debt NN from IN the DT balance NN sheet NN . SENT The DT company NN does VVZ not RB use VV derivative JJ instruments NNS to TO speculate VV on IN the DT future JJ direction NN of IN currency NN or CC commodity NN prices NNS and CC does VVZ not RB sell VV forward RB any DT part NN of IN production NN from IN any DT business NN segment NN . SENT Revenues NNS Revenues NNS associated VVN with IN sales NNS of IN crude JJ oil NN , , natural JJ gas NN , , petroleum NN and CC chemical NN products NNS and CC other JJ items NNS are VBP recorded VVN when WRB the DT products NNS are VBP delivered VVN . SENT Delivery NN occurs VVZ when WRB the DT customer NN has VHZ taken VVN title NN and CC has VHZ assumed VVN the DT risks NNS and CC rewards NNS of IN ownership NN , , prices NNS are VBP fixed JJ or CC determinable JJ and CC collectibility NN is VBZ reasonably RB assured VVN . SENT The DT company NN does VVZ not RB enter VV into IN ongoing JJ arrangements NNS whereby WRB it PP is VBZ required VVN to TO repurchase VV its PP$ products NNS , , nor CC does VVZ the DT company NN provide VV the DT customer NN with IN a DT right NN of IN return NN . SENT Revenues NNS include VVP amounts NNS billed VVN to TO customers NNS for IN shipping VVG and CC handling VVG . SENT Shipping VVG and CC handling VVG costs NNS incurred VVN up RP to TO the DT point NN of IN final JJ storage NN prior RB to TO delivery NN to TO a DT customer NN are VBP included VVN in IN purchases NNS of IN crude JJ oil NN and CC products NNS in IN the DT consolidated JJ statement NN of IN income NN . SENT Delivery NN costs NNS from IN final JJ storage NN to TO customer NN are VBP recorded VVN as IN a DT marketing NN expense NN in IN selling NN and CC general JJ expenses NNS . SENT Revenues NNS include VVP the DT sales NNS portion NN of IN certain JJ transactions NNS where WRB the DT Company NN contemporaneously RB negotiates VVZ purchases NNS with IN the DT same JJ counterparty NN under IN contractual JJ arrangements NNS that WDT establish VV the DT agreement NN terms NNS either CC jointly RB , , in IN a DT single JJ contract NN , , or CC separately RB in IN individual JJ contracts NNS . SENT The DT purchases NNS are VBP recorded VVN in IN purchases NNS of IN crude JJ oil NN and CC products NNS . SENT These DT transactions NNS are VBP commonly RB called VVN purchase NN sale NN transactions NNS . SENT Together RB with IN non JJ monetary JJ exchanges NNS as RB well RB as IN independently RB transacted VVN purchases NNS and CC sales NNS , , purchase NN sale NN transactions NNS are VBP used VVN to TO ensure VV that IN the DT right JJ crude NN oil NN is VBZ at IN the DT appropriate JJ refineries NNS at IN the DT right JJ time NN and CC the DT appropriate JJ products NNS are VBP available JJ to TO meet VV consumer NN demands NNS . SENT Each DT purchase NN sale NN transaction NN is VBZ composed VVN of IN a DT separate JJ purchase NN and CC a DT separate JJ sale NN transaction NN and CC therefore RB is VBZ accounted VVN for IN as IN any DT other JJ independently RB transacted VVN monetary JJ purchase NN or CC sale NN , , measured VVN at IN fair JJ value NN as RB agreed VVD upon RP by IN a DT willing JJ buyer NN and CC a DT willing JJ seller NN . SENT They PP are VBP entered VVN into IN with IN our PP$ normal JJ suppliers NNS and CC customers NNS for IN substantive JJ business NN purposes NNS and CC physical JJ delivery NN is VBZ required VVN . SENT This DT accounting NN practice NN has VHZ recently RB been VBN addressed VVN in IN EITF NP Issue NN 03 CD 11 CD , , Reporting NP Realized VVD Gains NNS and CC Losses NNS on IN Derivative JJ Instruments NNS That IN Are VBP Subject JJ to TO FASB NP Statement NN No RB . SENT 133 CD and CC Not RB Held NP for IN Trading NP Purposes NP as RB Defined VVD in IN Issue NN No RB . SENT 02 CD 03 CD . SENT While IN Issue NN 03 CD 11 CD addresses NNS the DT issue NN of IN gross JJ versus CC net JJ classification NN for IN derivative JJ instruments NNS , , it PP also RB provides VVZ guidance NN for IN purchase NN sale NN transaction NN that WDT are VBP not RB accounted VVN for IN as IN derivative JJ instruments NNS . SENT In IN Issue NN 03 CD 11 CD , , the DT EITF NP concluded VVD that IN the DT determination NN of IN whether IN contracts NNS not RB held VVN for IN trading NN purposes NNS should MD be VB reported VVN in IN the DT income NN statement NN on IN a DT gross JJ or CC net JJ basis NN is VBZ a DT matter NN of IN judgment NN that WDT depends VVZ on IN the DT relevant JJ facts NNS and CC circumstances NNS . SENT In IN the DT judgment NN of IN management NN , , the DT relevant JJ facts NNS and CC circumstances NNS support VVP accounting NN for IN these DT transactions NNS in IN revenues NNS , , measured VVN at IN fair JJ value NN . SENT Stock NN based VVN compensation NN The DT company NN accounts VVZ for IN its PP$ stock NN based VVN compensation NN programs NNS , , except IN for IN the DT incentive NN stock NN options NNS granted VVN in IN April NP 2002 CD , , by IN using VVG the DT fair JJ value NN based VVN method NN . SENT Under IN this DT method NN , , compensation NN expense NN related VVN to TO the DT units NNS of IN these DT programs NNS is VBZ measured VVN by IN the DT fair JJ value NN of IN the DT liabilities NNS incurred VVN and CC is VBZ recorded VVN in IN the DT consolidated JJ statement NN of IN income NN over IN the DT vesting VVG period NN . SENT The DT fair JJ value NN of IN liabilities NNS is VBZ remeasured VVN at IN the DT end NN of IN each DT reporting VVG period NN through IN settlement NN . SENT As IN permitted VVN by IN the DT Statement NN of IN Financial NP Accounting NP Standards NPS No NP . SENT 123 CD SFAS NP 123 CD , , the DT company NN continues VVZ to TO apply VV the DT intrinsic JJ value NN based VVN method NN of IN accounting NN for IN the DT incentive NN stock NN options NNS granted VVN in IN April NP 2002 CD . SENT Under IN this DT method NN , , compensation NN expense NN is VBZ not RB recognized VVN on IN the DT issuance NN of IN stock NN options NNS as RB long RB as IN the DT exercise NN price NN is VBZ equal JJ to TO the DT market NN value NN at IN the DT date NN of IN grant NN . SENT If IN the DT provisions NNS of IN SFAS NP 123 CD had VHD been VBN adopted VVN for IN all DT prior JJ years NNS , , net JJ income NN and CC net JJ income NN per IN share NN would MD have VH been VBN as RB follows VVZ . SENT millions NNS of IN dollars NNS 2004 CD 2003 CD 2002 CD Net JJ income NN as IN shown VVN in IN financial JJ statements NNS 2 CD 052 CD 1 CD 705 JJ 1 CD 214 CD Add VV . SENT stock NN based VVN compensation NN expense NN as IN reported VVN , , net JJ of IN tax NN 84 CD 76 CD 24 CD Deduct VV . SENT stock NN based VVN compensation NN expense NN , , net JJ of IN tax NN , , determined VVN under IN fair JJ value NN based VVN method NN 86 CD 81 CD 41 CD Pro NP forma FW net JJ income NN 2 CD 050 CD 1 CD 700 JJ 1 CD 197 CD Net JJ income NN per IN share NN dollars NNS As RB reported VVD basic JJ 5 CD . SENT 75 CD 4 CD . SENT 58 CD 3 CD . SENT 20 CD diluted JJ 5 CD . SENT 74 CD 4 CD . SENT 58 CD 3 CD . SENT 20 CD Pro NP forma FW basic JJ 5 CD . SENT 74 CD 4 CD . SENT 57 CD 3 CD . SENT 16 CD diluted JJ 5 CD . SENT 73 CD 4 CD . SENT 57 CD 3 CD . SENT 16 CD Consumer NP taxes NNS Taxes NNS levied VVD on IN the DT consumer NN and CC collected VVN by IN the DT company NN are VBP excluded VVN from IN the DT consolidated JJ statement NN of IN income NN . SENT These DT are VBP primarily RB provincial JJ taxes NNS on IN motor NN fuels NNS and CC the DT federal JJ goods NNS and CC services NNS tax NN . SENT F SYM 9 CD Table NN of IN Contents NNS 2 CD . SENT Business NN segments NNS Natural JJ resources NNS a DT Petroleum NP products NNS Chemicals NNS millions NNS of IN dollars NNS 2004 CD 2003 CD 2002 JJ 2004 CD 2003 CD 2002 JJ 2004 CD 2003 CD 2002 CD Revenues NNS External NP sales NNS c SYM 3 CD 689 CD 3 CD 390 JJ 2 CD 573 CD 17 JJ 503 CD 14 CD 710 JJ 13 CD 362 CD 1 CD 216 JJ 994 CD 955 CD Intersegment NP sales NNS 2 CD 891 CD 2 CD 224 JJ 2 CD 217 CD 1 CD 666 JJ 1 CD 294 CD 1 CD 038 JJ 293 CD 238 CD 209 CD Investment NN and CC other JJ income NN 45 CD 34 CD 104 JJ 42 CD 54 CD 34 CD Total JJ revenues NNS 6 CD 625 CD 5 CD 648 JJ 4 CD 894 CD 19 JJ 211 CD 16 CD 058 JJ 14 CD 434 CD 1 CD 509 JJ 1 CD 232 CD 1 CD 164 CD Expenses NNS Exploration NP 59 CD 55 CD 30 CD Purchases NNS of IN crude JJ oil NN and CC products NNS 2 CD 110 CD 1 CD 873 JJ 1 CD 599 CD 14 JJ 769 CD 11 CD 822 JJ 10 CD 781 CD 1 CD 064 JJ 882 CD 806 CD Production NN and CC manufacturing VVG 1 CD 608 CD 1 CD 577 JJ 1 CD 228 CD 1 CD 092 JJ 1 CD 054 CD 954 JJ 184 CD 153 CD 139 CD Selling NN and CC general JJ d NN 27 CD 28 CD 21 JJ 1 CD 098 CD 1 CD 123 JJ 1 CD 076 CD 93 JJ 118 CD 115 CD Federal NP excise NN tax NN 1 CD 264 CD 1 CD 254 JJ 1 CD 231 CD Depreciation NN and CC depletion NN 633 CD 517 CD 477 JJ 257 CD 211 CD 203 JJ 13 CD 22 CD 23 CD Financing NP costs NNS note VVP 15 CD 1 CD 1 CD 1 CD 2 CD 2 CD 1 CD Total JJ expenses NNS 4 CD 438 CD 4 CD 051 JJ 3 CD 356 CD 18 JJ 482 CD 15 CD 466 JJ 14 CD 246 CD 1 CD 354 JJ 1 CD 175 CD 1 CD 083 CD Income NN before IN income NN taxes NNS 2 CD 187 CD 1 CD 597 JJ 1 CD 538 CD 729 JJ 592 CD 188 CD 155 JJ 57 CD 81 CD Income NP taxes NNS note VVP 4 CD Current JJ 763 CD 535 CD 517 JJ 299 CD 66 CD 172 JJ 59 CD 13 CD 40 CD Deferred JJ 63 CD 77 CD 21 JJ 70 CD 119 CD 111 JJ 4 CD 7 CD 11 CD Total JJ income NN tax NN expense NN 700 CD 458 CD 496 JJ 229 CD 185 CD 61 JJ 55 CD 20 CD 29 CD Income NN before IN cumulative JJ effect NN of IN accounting NN change NN 1 CD 487 CD 1 CD 139 JJ 1 CD 042 CD 500 JJ 407 CD 127 CD 100 JJ 37 CD 52 CD Cumulative JJ effect NN of IN accounting NN change NN , , after IN income NN tax NN 4 CD Net NN income NN 1 CD 487 CD 1 CD 143 JJ 1 CD 042 CD 500 JJ 407 CD 127 CD 100 JJ 37 CD 52 CD Capital NN and CC exploration NN expenditures NNS e SYM 1 CD 113 CD 1 CD 007 JJ 986 CD 283 CD 478 JJ 589 CD 15 CD 41 CD 25 CD Property NN , , plant NN and CC equipment NN Cost NN 13 CD 538 CD 12 JJ 610 CD 11 CD 612 JJ 6 CD 078 CD 6 CD 069 JJ 5 CD 827 CD 682 JJ 609 CD 579 CD Accumulated VVN depreciation NN and CC depletion NN 7 CD 337 CD 6 CD 813 JJ 6 CD 269 CD 2 CD 959 JJ 2 CD 856 CD 2 CD 867 JJ 459 CD 401 CD 383 CD Net JJ property NN , , plant NN and CC equipment NN f NN g NN 6 CD 201 CD 5 CD 797 JJ 5 CD 343 CD 3 CD 119 JJ 3 CD 213 CD 2 CD 960 JJ 223 CD 208 CD 196 CD Total JJ assets NNS h NN 6 CD 875 CD 6 CD 418 JJ 6 CD 013 CD 5 CD 570 JJ 5 CD 290 CD 5 CD 127 JJ 498 CD 440 CD 428 CD Corporate JJ and CC other JJ Consolidated NP b SYM millions NNS of IN dollars NNS 2004 CD 2003 CD 2002 JJ 2004 CD 2003 CD 2002 CD Revenues NNS External NP sales NNS c SYM 22 CD 408 CD 19 JJ 094 CD 16 CD 890 CD Intersegment NN sales NNS Investment NN and CC other JJ income NN 35 CD 26 CD 14 JJ 52 CD 114 CD 152 CD Total JJ revenues NNS 35 CD 26 CD 14 JJ 22 CD 460 CD 19 JJ 208 CD 17 CD 042 CD Expenses NNS Exploration NP 59 CD 55 CD 30 CD Purchases NNS of IN crude JJ oil NN and CC products NNS 13 JJ 094 CD 10 CD 823 JJ 9 CD 723 CD Production NN and CC manufacturing VVG 2 CD 883 CD 2 CD 782 JJ 2 CD 320 CD Selling NN and CC general JJ d NN 10 CD 1 CD 218 JJ 1 CD 269 CD 1 CD 222 CD Federal NP excise NN tax NN 1 CD 264 CD 1 CD 254 JJ 1 CD 231 CD Depreciation NN and CC depletion NN 5 CD 5 CD 5 CD 908 JJ 755 CD 708 CD Financing NP costs NNS note VVP 15 CD 4 CD 123 JJ 18 CD 7 CD 120 CD 20 CD Total JJ expenses NNS 9 CD 118 CD 33 JJ 19 CD 433 CD 16 JJ 818 CD 15 CD 254 CD Income NN before IN income NN taxes NNS 44 CD 144 CD 19 JJ 3 CD 027 CD 2 CD 390 JJ 1 CD 788 CD Income NP taxes NNS note VVP 4 CD Current JJ 18 CD 4 CD 11 JJ 1 CD 103 CD 610 CD 718 CD Deferred JJ 9 CD 30 CD 1 CD 128 JJ 79 CD 144 CD Total JJ income NN tax NN expense NN 9 CD 26 CD 12 JJ 975 CD 689 CD 574 CD Income NN before IN cumulative JJ effect NN of IN accounting NN change NN 35 CD 118 CD 7 CD 2 CD 052 JJ 1 CD 701 CD 1 CD 214 CD Cumulative JJ effect NN of IN accounting NN change NN , , after IN income NN tax NN 4 CD Net NN income NN 35 CD 118 CD 7 CD 2 CD 052 JJ 1 CD 705 CD 1 CD 214 CD Capital NN and CC exploration NN expenditures NNS e SYM 34 CD 33 CD 12 JJ 1 CD 445 CD 1 CD 559 JJ 1 CD 612 CD Property NN , , plant NN and CC equipment NN Cost NN 205 CD 145 CD 112 JJ 20 CD 503 CD 19 JJ 433 CD 18 CD 130 CD Accumulated VVN depreciation NN and CC depletion NN 101 CD 96 CD 91 JJ 10 CD 856 CD 10 JJ 166 CD 9 CD 610 CD Net JJ property NN , , plant NN and CC equipment NN f NN g NN 104 CD 49 CD 21 JJ 9 CD 647 CD 9 CD 267 JJ 8 CD 520 CD Total JJ assets NNS h NN 1 CD 382 CD 497 JJ 787 CD 14 CD 027 JJ 12 CD 337 CD 12 CD 003 CD F NN 10 CD Table NN of IN Contents NNS Notes NNS to TO consolidated JJ financial JJ statements NNS continued VVD a DT A DT significant JJ portion NN of IN activities NNS in IN the DT natural JJ resources NNS segment NN is VBZ conducted VVN jointly RB with IN other JJ companies NNS . SENT The DT segment NN includes VVZ the DT company NN s PP share NN of IN undivided JJ interest NN in IN such JJ activities NNS as RB follows VVZ . SENT millions NNS of IN dollars NNS 2004 CD 2003 CD 2002 CD Total JJ revenues NNS 2 CD 744 CD 2 CD 494 JJ 2 CD 357 CD Total JJ expenses NNS 1 CD 598 CD 1 CD 577 JJ 1 CD 520 CD Net JJ income NN , , after IN income NN tax NN 780 CD 664 CD 557 CD Total JJ current JJ assets NNS 367 CD 302 CD 321 CD Long JJ term NN assets NNS 4 CD 140 CD 3 CD 553 JJ 3 CD 038 CD Total JJ current JJ liabilities NNS 948 CD 913 CD 669 CD Other JJ long JJ term NN obligations NNS 330 CD 322 CD 293 CD Cash NN flow NN from IN operating VVG activities NNS 1 CD 188 CD 883 CD 615 CD Cash NN used VVN in IN investing VVG activities NNS 858 CD 754 CD 601 CD b SYM Information NN is VBZ presented VVN as RB though IN each DT segment NN were VBD a DT separate JJ business NN activity NN . SENT Intersegment NN sales NNS are VBP made VVN essentially RB at IN prevailing VVG market NN prices NNS . SENT Consolidated JJ amounts NNS exclude VVP intersegment NN transactions NNS , , as RB follows VVZ . SENT millions NNS of IN dollars NNS 2004 CD 2003 CD 2002 CD Purchases NNS of IN crude JJ oil NN and CC products NNS 4 CD 849 CD 3 CD 754 JJ 3 CD 463 CD Operating NN expenses NNS 1 CD 2 CD 1 CD Total JJ intersegment NN sales NNS 4 CD 850 CD 3 CD 756 JJ 3 CD 464 CD Intersegment NN receivables NNS and CC payables NNS 298 JJ 308 CD 352 CD c SYM Includes VVZ export NN sales NNS to TO the DT United NP States NPS , , as RB follows VVZ . SENT millions NNS of IN dollars NNS 2004 CD 2003 CD 2002 CD Natural NP resources NNS 1360 CD 1304 CD 942 CD Petroleum NP products NNS 1074 CD 792 CD 723 CD Chemicals NNS 678 JJ 567 CD 520 CD Total JJ export NN sales NNS 3112 CD 2663 CD 2185 CD d SYM Consolidated NP production NN and CC manufacturing NN and CC selling NN and CC general JJ expenses NNS include VVP delivery NN costs NNS from IN final JJ storage NN areas NNS to TO customers NNS of IN 307 CD million CD 2003 JJ 285 CD million CD , , 2002 CD 216 CD million CD . SENT e SYM Capital NP and CC exploration NN expenditures NNS of IN the DT petroleum NN products NNS segment NN include VVP non JJ cash NN capital NN leases NNS of IN 11 CD million CD in IN 2004 CD 2003 CD 22 CD million CD . SENT f SYM Includes VVZ property NN , , plant NN and CC equipment NN under IN construction NN of IN 1 CD , , 983 CD million CD 2003 CD 1 CD , , 426 CD million CD . SENT g NN With IN the DT announcement NN of IN the DT relocation NN of IN the DT company NN s PP headquarters NNS to TO Calgary NP , , management NN has VHZ committed VVN to TO a DT plan NN to TO sell VV a DT piece NN of IN property NN in IN north JJ Toronto NP , , Ontario NP , , acquired VVN in IN 1991 CD to TO be VB the DT future JJ Toronto NP headquarters NN site NN . SENT Consistent JJ with IN the DT commitment NN to TO sell VV and CC considering VVG its PP$ unique JJ nature NN , , this DT property NN , , previously RB reported VVD in IN the DT petroleum NN products NNS segment NN , , is VBZ now RB shown VVN in IN the DT corporate JJ and CC other JJ segment NN . SENT This DT change NN is VBZ effective JJ in IN 2004 CD . SENT Prior JJ periods NNS have VHP not RB been VBN revised VVN . SENT h NN Goodwill NP was VBD not RB amortized VVN in IN the DT past JJ three CD years NNS . SENT All DT goodwill NN has VHZ been VBN assigned VVN to TO the DT petroleum NN products NNS segment NN . SENT There EX have VHP been VBN no DT goodwill NN acquisitions NNS , , impairment NN losses NNS or CC write VV offs NNS due JJ to TO sales NNS in IN the DT past JJ three CD years NNS . SENT 3 LS . SENT Long JJ term NN debt NN 2004 CD 2003 CD issued VVN maturity NN date NN interest NN rate NN millions NNS of IN dollars NNS 2003 CD 250 CD million CD due JJ May NP 26 CD , , 2005 CD , , and CC 250 CD million CD due JJ August NP 26 CD , , 2005 CD a DT Variable JJ 500 CD 2003 CD January NP 19 CD , , 2006 CD a DT Variable JJ 318 CD 318 CD Long JJ term NN debt NN b SYM 318 CD 818 CD Capital NP leases NNS c SYM 49 CD 41 CD Total JJ long JJ term NN debt NN d SYM e NN 367 CD 859 CD a DT These DT are VBP long JJ term NN variable JJ rate NN loans NNS from IN Exxon NP Overseas NP Corporation NP , , an DT affiliated JJ company NN of IN Exxon NP Mobil NP Corporation NP . SENT b SYM Average JJ effective JJ interest NN rate NN was VBD 2 CD . SENT 5 CD percent NN for IN 2004 CD 2003 CD 2 CD . SENT 7 CD percent NN . SENT c SYM These DT obligations NNS primarily RB relate VVP to TO the DT capital NN lease NN for IN marine JJ services NNS , , which WDT are VBP provided VVN by IN the DT lessor NN commencing VVG in IN 2004 CD for IN a DT period NN of IN 10 CD years NNS , , extendable JJ for IN an DT additional JJ five CD years NNS . SENT The DT average NN imputed VVD interest NN rate NN was VBD 10 CD . SENT 3 CD percent NN in IN 2004 CD 2003 CD 12 CD . SENT 7 CD percent NN . SENT d SYM Principal NN payments NNS on IN long JJ term NN loans NNS of IN 318 CD million CD are VBP due JJ in IN 2006 CD . SENT Principal JJ payments NNS on IN capital NN leases NNS of IN approximately RB 4 CD million CD a DT year NN are VBP due JJ in IN each DT of IN the DT next JJ five CD years NNS . SENT e SYM These DT amounts NNS exclude VVP that DT portion NN of IN long JJ term NN debt NN , , totalling VVG 995 CD million CD 2003 JJ 501 CD million CD , , which WDT matures VVZ within IN one CD year NN and CC is VBZ included VVN in IN current JJ liabilities NNS . SENT On IN May NP 6 CD , , 2004 CD , , the DT company NN filed VVD a DT final JJ short JJ form NN shelf NN prospectus NN in IN Canada NP in IN connection NN with IN the DT issuance NN of IN medium JJ term NN notes NNS over IN the DT 25 CD month NN period NN that IN the DT shelf NN prospectus NN remains VVZ valid JJ . SENT The DT unsecured JJ notes NNS will MD be VB issued VVN from IN time NN to TO time NN at IN the DT discretion NN of IN the DT company NN in IN an DT aggregate JJ amount NN not RB to TO exceed VV 1 CD billion CD . SENT The DT company NN has VHZ not RB issued VVN any DT notes NNS under IN this DT shelf NN prospectus NN . SENT F SYM 11 CD Table NN of IN Contents NNS 4 CD . SENT Income NN taxes NNS millions NNS of IN dollars NNS 2004 CD 2003 CD 2002 CD Current JJ income NN tax NN expense NN 1 CD 103 CD 610 CD 718 CD Deferred JJ income NN tax NN expense NN a DT 128 CD 79 CD 144 CD Total JJ income NN tax NN expense NN b SYM 975 CD 689 CD 574 CD Statutory JJ corporate JJ tax NN rate NN percent NN 37 CD . SENT 0 CD 38 CD . SENT 5 CD 42 CD . SENT 0 CD Increase VV decrease NN resulting VVG from IN . SENT Non JJ deductible JJ royalty NN payments NNS to TO governments NNS 3 CD . SENT 9 CD 5 CD . SENT 0 CD 5 CD . SENT 4 CD Resource NP allowance NN in IN lieu NN of IN royalty NN deduction NN 7 CD . SENT 0 CD 7 CD . SENT 5 CD 11 CD . SENT 8 CD Manufacturing NP and CC processing NN credit NN 0 CD . SENT 2 CD 0 CD . SENT 3 LS Enacted VVN tax NN rate NN and CC tax NN law NN changes VVZ 1 CD . SENT 8 CD 3 CD . SENT 1 CD 0 CD . SENT 9 CD Other JJ 0 CD . SENT 1 CD 4 CD . SENT 3 CD 2 CD . SENT 3 CD Effective JJ income NN tax NN rate NN 32 CD . SENT 2 CD 28 CD . SENT 8 CD 32 CD . SENT 1 LS a DT The DT deferred JJ income NN tax NN expense NN for IN the DT year NN is VBZ the DT difference NN in IN net JJ deferred JJ income NN tax NN liabilities NNS at IN the DT beginning NN and CC end NN of IN the DT year NN . SENT The DT provisions NNS for IN deferred JJ income NN taxes NNS include VVP net JJ charges NNS credits NNS for IN the DT effect NN of IN changes NNS in IN tax NN laws NNS and CC rates NNS of IN 25 CD million CD in IN 2004 CD 2003 CD 72 CD million CD . SENT 2002 CD 15 CD million CD . SENT b SYM Cash NN outflow NN from IN income NN taxes NNS , , plus CC investment NN credits NNS earned VVD , , was VBD 641 CD million CD in IN 2004 CD 2003 CD 573 CD million CD . SENT 2002 CD 935 CD million CD . SENT Deferred JJ income NN taxes NNS are VBP based VVN on IN differences NNS between IN the DT accounting NN and CC tax NN values NNS of IN assets NNS and CC liabilities NNS . SENT These DT differences NNS in IN value NN are VBP remeasured VVN at IN each DT period NN end NN using VVG the DT tax NN rates NNS and CC tax NN laws NNS expected VVN to TO apply VV when WRB those DT differences NNS are VBP realized VVN or CC settled VVN in IN the DT future NN . SENT Components NNS of IN deferred JJ income NN tax NN liabilities NNS and CC assets NNS as IN at IN December NP 31 CD were VBD . SENT millions NNS of IN dollars NNS 2004 CD 2003 CD Depreciation NN and CC amortization NN 1 CD 287 CD 1 CD 233 CD Successful JJ drilling NN and CC land NN acquisitions NNS 403 CD 495 CD Pension NN and CC benefits VVZ a DT 343 CD 286 CD Site NN restoration NN 158 CD 167 CD Net JJ tax NN loss NN carryforwards RB b SYM 57 CD 57 CD Capitalized JJ interest NN 26 CD 16 CD Other JJ 3 CD 5 CD Deferred JJ income NN tax NN liabilities NNS 1 CD 155 CD 1 CD 229 CD LIFO NN inventory NN valuation NN 343 CD 268 CD Other JJ 105 CD 85 CD Deferred JJ income NN tax NN assets NNS 448 CD 353 CD Valuation NN allowance NN Net JJ deferred JJ income NN tax NN liabilities NNS 707 CD 876 CD a DT Income NN taxes NNS charged VVD directly RB to TO shareholders NNS equity NN related VVN to TO minimum JJ pension NN liability NN adjustment NN were VBD 41 CD million CD benefit NN in IN 2004 CD 2003 CD 57 CD million CD expense NN . SENT 2002 CD 155 CD million CD benefit NN . SENT b SYM Tax NP losses NNS can MD be VB carried VVN forward RB indefinitely RB . SENT The DT operations NNS of IN the DT company NN are VBP complex JJ , , and CC related JJ tax NN interpretations NNS , , regulations NNS and CC legislation NN are VBP continually RB changing VVG . SENT As IN a DT result NN , , there EX are VBP usually RB some DT tax NN matters NNS in IN question NN . SENT The DT company NN believes VVZ the DT provision NN made VVN for IN income NN taxes NNS is VBZ adequate JJ . SENT 5 LS . SENT Reporting VVG of IN fuel NN consumed VVN in IN operations NNS Beginning VVG in IN 2004 CD , , fuel NN consumed VVN in IN operations NNS , , previously RB included VVD in IN purchases NNS of IN crude JJ oil NN and CC products NNS , , has VHZ been VBN reclassified VVN as IN production NN and CC manufacturing NN expenses NNS in IN the DT consolidated JJ statement NN of IN income NN . SENT Prior JJ period NN amounts NNS have VHP been VBN reclassified VVN for IN comparative JJ purposes NNS . SENT This DT reclassification NN has VHZ no DT impact NN on IN total JJ expenses NNS and CC net JJ income NN or CC on IN the DT cash NN flow NN profile NN of IN the DT company NN . SENT 6 CD . SENT Headquarters NN relocation NN On IN September NP 29 CD , , 2004 CD , , the DT company NN announced VVD its PP$ intention NN to TO relocate VV its PP$ head NN office NN from IN Toronto NP , , Ontario NP , , to TO Calgary NP , , Alberta NP . SENT Completion NN of IN the DT move NN is VBZ expected VVN by IN August NP 2005 CD . SENT Severance NN , , relocation NN and CC other JJ costs NNS associated VVN with IN the DT relocation NN are VBP expected VVN to TO be VB recorded VVN in IN 2005 CD , , consistent JJ with IN management NN decisions NNS and CC the DT spending NN profile NN of IN these DT costs NNS . SENT F SYM 12 CD Table NN of IN Contents NNS Notes NNS to TO consolidated JJ financial JJ statements NNS continued VVD 7 CD . SENT Employee NN retirement NN benefits NNS Retirement NP benefits NNS , , which WDT cover VVP almost RB all DT retired JJ employees NNS and CC their PP$ surviving VVG spouses NNS , , include VVP pension NN income NN and CC certain JJ health NN care NN and CC life NN insurance NN benefits NNS . SENT They PP are VBP met VVN through IN funded JJ registered JJ retirement NN plans NNS and CC through IN unfunded JJ supplementary JJ benefits NNS that WDT are VBP paid VVN directly RB to TO recipients NNS . SENT Funding NN of IN registered JJ retirement NN plans NNS complies VVZ with IN federal JJ and CC provincial JJ pension NN regulations NNS , , and CC the DT company NN makes VVZ contributions NNS to TO the DT plans NNS based VVN upon IN an DT independent JJ actuarial JJ valuation NN . SENT Pension NN income NN benefits NNS consist VVP mainly RB of IN company NN paid VVD defined VVN benefit NN plans NNS that WDT are VBP based VVN on IN years NNS of IN service NN and CC final JJ average JJ earnings NNS . SENT The DT company NN shares NNS in IN the DT cost NN of IN health NN care NN and CC life NN insurance NN benefits NNS . SENT The DT company NN s PP benefit VVP obligations NNS are VBP based VVN on IN the DT projected VVN benefit NN method NN of IN valuation NN that WDT includes VVZ employee NN service NN to TO date NN and CC present JJ compensation NN levels NNS as RB well RB as IN a DT projection NN of IN salaries NNS and CC service NN to TO retirement NN . SENT The DT expense NN and CC obligations NNS for IN both DT funded JJ and CC unfunded JJ benefits NNS are VBP determined VVN in IN accordance NN with IN United NP States NPS generally RB accepted VVN accounting NN principles NNS and CC actuarial JJ procedures NNS . SENT The DT process NN for IN determining VVG retirement NN income NN expense NN and CC related JJ obligations NNS includes VVZ making VVG certain JJ long JJ term NN assumptions NNS regarding VVG the DT discount NN rate NN , , rate NN of IN return NN on IN plan NN assets NNS and CC rate NN of IN compensation NN increases NNS . SENT The DT total JJ obligation NN for IN retirement NN benefits NNS exceeded VVD the DT fair JJ value NN of IN plan NN assets NNS at IN December NP 31 CD , , 2004 CD , , by IN 1 CD , , 712 CD million CD 2003 CD 1 CD , , 357 CD million CD , , 1 CD , , 276 CD million CD 2003 JJ 975 CD million CD of IN which WDT was VBD related VVN to TO pension NN benefits NNS and CC 436 CD million CD 2003 JJ 382 CD million CD to TO other JJ post NN retirement NN benefits NNS . SENT The DT obligation NN and CC pension NN expense NN can MD vary VV significantly RB with IN changes NNS in IN the DT assumptions NNS used VVN to TO estimate VV the DT obligation NN and CC the DT expected VVN return NN on IN plan NN assets NNS . SENT Details NNS of IN the DT employee NN retirement NN benefits NNS plans NNS are VBP as RB follows VVZ . SENT Other JJ post NN retirement NN Pension NN benefits NNS benefits VVZ millions NNS of IN dollars NNS 2004 CD 2003 CD 2002 JJ 2004 CD 2003 CD 2002 CD Components NPS of IN net JJ benefit NN cost NN . SENT Current JJ service NN cost VVD 76 CD 71 CD 64 JJ 6 CD 5 CD 4 CD Interest NN cost VVD 237 CD 219 CD 222 JJ 24 CD 22 CD 21 CD Expected VVN return NN on IN plan NN assets NNS 223 CD 179 CD 191 CD Amortization NN of IN prior JJ service NN cost VVD 27 CD 25 CD 25 CD Recognized VVN actuarial JJ loss NN gain NN 68 CD 69 CD 34 JJ 4 CD 3 CD 1 CD Net JJ benefit NN cost VVD a DT 185 CD 205 CD 154 JJ 34 CD 30 CD 26 CD Change NP in IN benefit NN obligation NN Benefit NP obligation NN at IN January NP 1 CD 3 CD 761 JJ 3 CD 530 CD 382 CD 354 CD Current JJ service NN cost VVD 76 CD 71 CD 6 CD 5 CD Interest NN cost VVD 237 CD 219 CD 24 JJ 22 CD Amendments NNS 37 CD Actuarial JJ loss NN gain NN 405 CD 171 CD 47 CD 19 CD Benefits NP paid VVD 256 CD 230 CD 23 CD 18 CD Benefit NP obligation NN at IN December NP 31 CD 4 CD 260 JJ 3 CD 761 CD 436 CD 382 CD Accumulated VVN benefit NN obligation NN at IN December NP 31 CD 3 CD 743 JJ 3 CD 347 CD Change NP in IN plan NN assets NNS Fair NN value NN of IN plan NN assets NNS at IN January NP 1 CD 2 CD 786 JJ 2 CD 104 CD Actual JJ return NN on IN plan NN assets NNS 315 CD 377 CD Company NP contributions NNS 114 CD 511 CD Payments NNS directly RB to TO participants NNS 25 CD 24 CD Benefits NP paid VVD 256 CD 230 CD Fair NP value NN of IN plan NN assets NNS at IN December NP 31 CD 2 CD 984 JJ 2 CD 786 CD Excess JJ deficiency NN of IN plan NN assets NNS over IN benefit NN obligation NN 1276 CD 975 CD 436 CD 382 CD Unrecognized JJ net JJ actuarial JJ gain NN loss NN b SYM 1073 CD 829 CD 95 CD 52 CD Unrecognized JJ prior JJ service NN cost NN b SYM 99 CD 89 CD Net JJ amount NN recognized VVD 104 CD 57 CD 341 CD 330 CD Amount NN recognized VVN in IN the DT consolidated JJ balance NN sheet NN consists VVZ of IN . SENT Accrued JJ benefit NN cost NN note VVP 8 CD 759 CD 561 JJ 341 CD 330 CD Intangible JJ assets NNS 97 CD 89 CD Accumulated VVN other JJ nonowner NN changes NNS in IN equity NN , , minimum JJ pension NN liability NN adjustment NN 558 CD 415 CD Net JJ amount NN recognized VVD 104 CD 57 CD 341 CD 330 CD F NN 13 CD Table NN of IN Contents NNS Assumptions NNS Other JJ post NN retirement NN Pension NN benefits NNS benefits VVZ millions NNS of IN dollars NNS 2004 CD 2003 CD 2002 JJ 2004 CD 2003 CD 2002 CD Assumptions NNS used VVN to TO determine VV benefit NN obligations NNS at IN December NP 31 CD percent NN Discount NN rate NN 5 CD . SENT 75 CD 6 CD . SENT 25 CD 5 CD . SENT 75 CD 6 CD . SENT 25 CD Long JJ term NN rate NN of IN compensation NN increase NN 3 CD . SENT 50 CD 3 CD . SENT 50 CD 3 CD . SENT 50 CD 3 CD . SENT 50 CD Assumptions NNS used VVN to TO determine VV net JJ benefit NN cost NN for IN years NNS ended VVN December NP 31 CD percent NN Discount NN rate NN 6 CD . SENT 25 CD 6 CD . SENT 25 CD 6 CD . SENT 75 CD 6 CD . SENT 25 CD 6 CD . SENT 25 CD 6 CD . SENT 75 CD Long JJ term NN rate NN of IN compensation NN increase NN 3 CD . SENT 50 CD 3 CD . SENT 50 CD 3 CD . SENT 50 CD 3 CD . SENT 50 CD 3 CD . SENT 50 CD 3 CD . SENT 50 CD Long JJ term NN rate NN of IN return NN on IN funded JJ assets NNS 8 CD . SENT 25 CD 8 CD . SENT 25 CD 8 CD . SENT 25 RB a DT A DT summary NN of IN net JJ benefit NN costs NNS with IN elements NNS of IN employee NN future JJ benefit NN cost NN before IN and CC after IN adjustments NNS to TO recognize VV the DT long JJ term NN nature NN of IN employee NN benefit NN cost NN is VBZ shown VVN in IN the DT table NN below RB . SENT Pension NN benefits NNS Other JJ post NN retirement NN benefits NNS millions NNS of IN dollars NNS 2004 CD 2003 CD 2002 JJ 2004 CD 2003 CD 2002 CD Components NPS of IN net JJ benefit NN cost NN . SENT Current JJ service NN cost VVD 76 CD 71 CD 64 JJ 6 CD 5 CD 4 CD Interest NN cost VVD 237 CD 219 CD 222 JJ 24 CD 22 CD 21 CD Actual JJ return NN on IN plan NN assets NNS 315 CD 377 CD 107 CD Plan NP amendments NNS for IN prior JJ service NN 37 CD 27 CD Actuarial JJ loss NN gain NN 405 CD 171 CD 196 JJ 47 CD 19 CD 25 CD Elements NNS of IN employee NN future JJ benefit NN costs NNS before IN adjustments NNS to TO recognize VV the DT long JJ term NN nature NN of IN employee NN future NN benefit NN costs VVZ 440 CD 84 CD 616 JJ 77 CD 46 CD 50 CD Adjustments NNS to TO recognize VV the DT long JJ term NN nature NN of IN employee NN future JJ benefit NN costs NNS . SENT Difference NN between IN expected VVN return NN and CC actual JJ return NN on IN plan NN assets NNS for IN the DT year NN 92 CD 198 CD 298 CD Difference NN between IN amortization NN of IN prior JJ service NN costs NNS for IN the DT year NN and CC actual JJ plan NN amendments NNS for IN the DT year NN 10 CD 25 CD 2 CD Difference NN between IN actuarial JJ gain NN loss NN recognized VVN for IN the DT year NN and CC actuarial JJ gain NN loss NN on IN accrued JJ benefit NN obligation NN for IN the DT year NN 337 CD 102 CD 162 JJ 43 CD 16 CD 24 CD Net JJ benefit NN cost VVD 185 CD 205 CD 154 JJ 34 CD 30 CD 26 CD b SYM Unrecorded JJ assets NNS liabilities NNS are VBP amortized VVN over IN the DT average JJ remaining JJ service NN life NN of IN employees NNS , , which WDT for IN 2005 CD and CC subsequent JJ years NNS is VBZ 13 CD years NNS 2004 CD 13 CD years NNS . SENT 2003 CD 13 CD . SENT 5 CD years NNS . SENT Plan NN assets NNS The DT company NN s PP pension NN plan NN asset NN allocation NN at IN December NP 31 CD , , 2003 CD and CC 2004 CD , , and CC target NN allocation NN for IN 2005 CD are VBP as RB follows VVZ . SENT Target NN Percentage NN of IN plan NN assets NNS allocation NN at IN December NP 31 CD Asset NP category NN percent NN 2005 CD 2004 CD 2003 CD Equities NNS 50 JJ 75 CD 62 CD 62 CD Bonds NNS 25 JJ 50 CD 38 CD 38 CD Other JJ 0 CD 10 CD Total JJ 100 CD 100 CD The DT company NN establishes VVZ the DT long JJ term NN expected VVN rate NN of IN return NN by IN developing VVG a DT forward RB looking VVG long JJ term NN return NN assumption NN for IN each DT asset NN class NN , , taking VVG into IN account NN factors NNS such JJ as IN the DT expected VVN real JJ return NN for IN the DT specific JJ asset NN class NN and CC inflation NN . SENT A DT single JJ , , long JJ term NN rate NN of IN return NN is VBZ then RB calculated VVN as IN the DT weighted JJ average NN of IN the DT target NN asset NN allocation NN and CC the DT long JJ term NN return NN assumption NN for IN each DT asset NN class NN . SENT The DT 2004 CD long JJ term NN expected VVN return NN of IN 8 CD . SENT 25 CD percent NN used VVN in IN the DT calculations NNS of IN pension NN expense NN compares VVZ to TO an DT actual JJ rate NN of IN return NN over IN the DT past JJ decade NN of IN 10 CD . SENT 7 CD percent NN . SENT The DT company NN s PP investment NN strategy NN for IN benefit NN plan NN assets NNS reflects VVZ a DT long JJ term NN view NN , , a DT careful JJ assessment NN of IN the DT risks NNS inherent JJ in IN various JJ asset NN classes NNS and CC broad JJ diversification NN to TO reduce VV the DT risk NN of IN the DT total JJ portfolio NN . SENT The DT company NN primarily RB invests VVZ in IN funds NNS that WDT follow VVP an DT index NN based VVN strategy NN to TO achieve VV its PP$ objectives NNS of IN diversifying VVG risk NN while IN minimizing VVG costs NNS . SENT The DT fund NN holds VVZ Imperial NP Oil NP Limited NP common JJ shares NNS only RB to TO the DT extent NN necessary JJ to TO replicate VV the DT relevant JJ equity NN index NN . SENT Asset NN liability NN studies NNS , , or CC simulations NNS of IN the DT interaction NN of IN cash NN flows NNS associated VVN with IN both DT assets NNS and CC liabilities NNS , , are VBP periodically RB used VVN to TO establish VV the DT preferred JJ target NN asset NN allocation NN . SENT The DT target NN asset NN allocation NN for IN equity NN securities NNS reflects VVZ the DT long JJ term NN nature NN of IN the DT liability NN . SENT The DT balance NN of IN the DT fund NN is VBZ targeted VVN to TO debt NN securities NNS . SENT F SYM 14 CD Table NN of IN Contents NNS Notes NNS to TO consolidated JJ financial JJ statements NNS continued VVD Cash NP flows VVZ The DT following VVG benefit NN payments NNS , , which WDT reflect VVP expected VVN future JJ service NN , , as RB appropriate JJ , , are VBP expected VVN to TO be VB paid VVN . SENT Other JJ Pension NN post NN retirement NN millions NNS of IN dollars NNS benefits NNS benefits VVZ 2005 CD 230 CD 20 JJ 2006 CD 234 CD 22 JJ 2007 CD 238 CD 24 JJ 2008 CD 244 CD 26 JJ 2009 CD 251 CD 28 CD Years NNS 2010 JJ 2014 CD 1398 CD 161 CD In IN 2005 CD , , the DT company NN expects VVZ to TO make VV cash NN contributions NNS of IN about IN 350 CD million CD to TO its PP$ pension NN plan NN . SENT A DT summary NN of IN the DT change NN in IN other JJ nonowner NN changes NNS in IN equity NN related VVN to TO the DT minimum JJ pension NN liability NN adjustment NN is VBZ shown VVN in IN the DT table NN below RB . SENT Pension NN benefits NNS millions NNS of IN dollars NNS 2004 CD 2003 CD 2002 CD Increase VV decrease NN in IN accumulated VVN other JJ nonowner NN changes NNS in IN equity NN , , before IN tax NN 143 CD 106 CD 393 CD Deferred JJ income NN tax NN charge NN credit NN note VVP 4 CD 41 CD 57 CD 155 CD Increase VV decrease NN in IN accumulated VVN other JJ nonowner NN changes NNS in IN equity NN , , after IN tax NN 102 CD 49 CD 238 CD A DT summary NN of IN pension NN plans NNS with IN accumulated VVN benefit NN obligations NNS in IN excess NN of IN plan NN assets NNS is VBZ shown VVN in IN the DT table NN below RB . SENT Pension NN benefits NNS millions NNS of IN dollars NNS 2004 CD 2003 CD For IN funded JJ pension NN plans NNS with IN accumulated VVN benefit NN obligations NNS in IN excess NN of IN plan NN assets NNS . SENT Projected VVN benefit NN obligation NN 3 CD 876 CD 3 CD 464 CD Accumulated VVN benefit NN obligation NN 3 CD 430 CD 3 CD 126 CD Fair NP value NN of IN plan NN assets NNS 2 CD 984 CD 2 CD 786 CD Accumulated VVN benefit NN obligation NN less CC fair JJ value NN of IN plan NN assets NNS 446 CD 340 CD For IN unfunded JJ plans NNS covered VVN by IN book NN reserves NNS . SENT Projected VVN benefit NN obligation NN 384 CD 297 CD Accumulated VVN benefit NN obligation NN 313 CD 221 CD Additional JJ expenses NNS include VVP contributions NNS to TO defined VVN contribution NN plans NNS , , primarily RB the DT employee NN savings NN plan NN , , of IN 32 CD million CD in IN 2004 CD 2003 CD 31 CD million CD . SENT 2002 CD 30 CD million CD . SENT The DT most RBS recent JJ independent JJ actuarial JJ valuation NN was VBD as RB of IN June NP 30 CD , , 2004 CD , , and CC the DT next JJ required JJ valuation NN will MD be VB as RB of IN June NP 30 CD , , 2005 CD . SENT The DT measurement NN date NN used VVN to TO determine VV the DT fair JJ value NN of IN plan NN assets NNS and CC the DT benefit NN obligations NNS was VBD December NP 31 CD , , 2004 CD . SENT A DT one CD percent NN change NN in IN the DT assumptions NNS at IN which WDT retirement NN liabilities NNS could MD be VB effectively RB settled VVN is VBZ shown VVN as RB follows VVZ . SENT increase VV decrease VV One CD percent NN One CD percent NN millions NNS of IN dollars NNS increase NN decrease NN Rate NN of IN return NN on IN plan NN assets NNS . SENT Effect NN on IN net JJ benefit NN costs NNS 30 CD 30 CD Discount NN rate NN . SENT Effect NN on IN net JJ benefit NN costs NNS 45 CD 50 CD Effect NN on IN benefit NN obligations NNS 525 CD 645 CD Rate NN of IN pay NN increases NNS . SENT Effect NN on IN net JJ benefit NN costs NNS 30 CD 25 CD Effect NN on IN benefit NN obligations NNS 160 CD 140 CD For IN measurement NN purposes NNS , , a DT five CD percent NN health NN care NN cost NN trend NN rate NN was VBD assumed VVN for IN 2004 CD and CC thereafter RB . SENT A DT one CD percent NN change NN in IN the DT assumed VVN health NN care NN cost NN trend NN rate NN would MD have VH the DT following VVG effects NNS . SENT increase VV decrease VV One CD percent NN One CD percent NN millions NNS of IN dollars NNS increase NN decrease NN Effect NN on IN service NN and CC interest NN cost NN components NNS 4 CD 3 CD Effect NN on IN other JJ post NN retirement NN benefits VVZ obligations NNS 45 CD 40 CD F NN 15 CD Table NN of IN Contents NNS 8 CD . SENT Other JJ long JJ term NN obligations NNS millions NNS of IN dollars NNS 2004 CD 2003 CD Employee NP retirement NN benefits NNS note NN 7 CD a DT 1 CD 052 CD 847 CD Asset NP retirement NN obligations NNS and CC other JJ environmental JJ liabilities NNS b SYM 380 CD 393 CD Other JJ obligations NNS 93 CD 74 CD Total JJ other JJ long JJ term NN obligations NNS 1 CD 525 CD 1 CD 314 CD a DT Total JJ recorded JJ employee NN retirement NN benefits NNS obligations NNS also RB include VVP 48 CD million CD in IN current JJ liabilities NNS 2003 CD 44 CD million CD . SENT b SYM Total JJ asset NN retirement NN obligations NNS and CC other JJ environmental JJ liabilities NNS also RB include VVP 76 CD million CD in IN current JJ liabilities NNS 2003 CD 69 CD million CD . SENT The DT estimated JJ cash NN flows NNS of IN asset NN retirement NN obligations NNS have VHP been VBN discounted VVN at IN six CD percent NN . SENT The DT total JJ undiscounted JJ amount NN of IN the DT estimated JJ cash NN flows NNS required VVN to TO settle VV the DT obligations NNS is VBZ 970 CD million CD . SENT Payments NNS to TO settle VV the DT obligations NNS occur VVP on IN an DT ongoing JJ basis NN and CC will MD continue VV over IN the DT lives NNS of IN the DT operating NN assets NNS , , which WDT can MD exceed VV 25 CD years NNS . SENT The DT change NN in IN asset NN retirement NN obligations NNS liability NN is VBZ as RB follows VVZ . SENT millions NNS of IN dollars NNS 2004 CD 2003 CD Asset NP retirement NN obligations NNS liability NN at IN January NP 1 CD 327 CD 341 CD Additions NNS 16 CD Accretion NN 22 CD 20 CD Settlement NP 37 CD 34 CD Asset NP retirement NN obligations NNS liability NN at IN December NP 31 CD 328 CD 327 CD 9 CD . SENT Derivatives NNS and CC financial JJ instruments NNS No DT significant JJ energy NN derivatives NNS , , foreign JJ exchange NN forward JJ contracts NNS or CC currency NN and CC interest NN rate NN swaps NNS were VBD transacted VVN in IN the DT past JJ three CD years NNS . SENT The DT company NN maintains VVZ a DT system NN of IN controls NNS that WDT includes VVZ a DT policy NN covering VVG the DT authorization NN , , reporting VVG and CC monitoring VVG of IN derivative JJ activity NN . SENT The DT fair JJ value NN of IN the DT company NN s PP financial JJ instruments NNS is VBZ determined VVN by IN reference NN to TO various JJ market NN data NNS and CC other JJ appropriate JJ valuation NN techniques NNS . SENT There EX are VBP no DT material NN differences NNS between IN the DT fair JJ values NNS of IN the DT company NN s PP financial JJ instruments NNS and CC the DT recorded JJ book NN value NN . SENT 10 CD . SENT Incentive NN compensation NN programs NNS Incentive NN compensation NN programs NNS are VBP designed VVN to TO retain VV selected JJ employees NNS , , reward VV them PP for IN high JJ performance NN and CC promote VV individual JJ contributions NNS to TO sustained JJ improvement NN in IN the DT company NN s PP future JJ business NN performance NN and CC shareholder NN value NN . SENT Incentive NN share NN units NNS , , deferred JJ share NN units NNS , , earnings NNS bonus NN units NNS and CC restricted JJ stock NN units NNS Incentive NN share NN units NNS have VHP value NN if IN the DT market NN price NN of IN the DT company NN s PP common JJ shares NNS when WRB the DT unit NN is VBZ exercised VVN exceeds VVZ the DT market NN value NN when WRB the DT unit NN was VBD issued VVN . SENT The DT issue NN price NN of IN incentive NN share NN units NNS is VBZ the DT closing VVG price NN of IN the DT company NN s PP shares VVZ on IN the DT Toronto NP Stock NP Exchange NP on IN the DT grant NN date NN . SENT Up RB to TO 50 CD percent NN of IN the DT units NNS may MD be VB exercised VVN after IN one CD year NN from IN issuance NN . SENT an DT additional JJ 25 CD percent NN may MD be VB exercised VVN after IN two CD years NNS . SENT and CC the DT remaining VVG 25 CD percent NN may MD be VB exercised VVN after IN three CD years NNS . SENT Incentive NN share NN units NNS are VBP eligible JJ for IN exercise NN up RB to TO 10 CD years NNS from IN issuance NN . SENT The DT units NNS may MD expire VV earlier RBR if IN employment NN is VBZ terminated VVN other JJ than IN by IN retirement NN , , death NN or CC disability NN . SENT The DT deferred JJ share NN unit NN plan NN is VBZ made VVN available JJ to TO selected JJ executives NNS and CC nonemployee NN directors NNS . SENT The DT selected VVN executives NNS can MD elect VV to TO receive VV all DT or CC part NN of IN their PP$ performance NN bonus NN compensation NN in IN units NNS , , and CC the DT nonemployee NN directors NNS can MD elect VV to TO receive VV all DT or CC part NN of IN their PP$ directors NNS fees NNS in IN units NNS . SENT The DT number NN of IN units NNS granted VVN to TO executives NNS is VBZ determined VVN by IN dividing VVG the DT amount NN of IN the DT bonus NN elected VVN to TO be VB received VVN as IN deferred JJ share NN units NNS by IN the DT average NN of IN the DT closing VVG prices NNS of IN the DT company NN s PP shares VVZ on IN the DT Toronto NP Stock NP Exchange NP for IN the DT five CD consecutive JJ trading NN days NNS immediately RB prior RB to TO the DT date NN that IN the DT bonus NN would MD have VH been VBN paid VVN . SENT The DT number NN of IN units NNS granted VVN to TO a DT nonemployee NN director NN is VBZ determined VVN at IN the DT end NN of IN each DT calendar NN quarter NN by IN dividing VVG the DT amount NN of IN directors NNS fees NNS for IN the DT calendar NN quarter NN that IN the DT nonemployee NN director NN elected VVN to TO receive VV as IN deferred JJ share NN units NNS by IN the DT average JJ closing NN price NN of IN the DT company NN s PP shares VVZ for IN the DT five CD consecutive JJ trading NN days NNS immediately RB prior RB to TO the DT last JJ day NN of IN the DT calendar NN quarter NN . SENT Additional JJ units NNS are VBP granted VVN based VVN on IN the DT cash NN dividend NN payable JJ on IN the DT company NN s PP shares VVZ divided VVN by IN the DT average JJ closing NN price NN immediately RB prior RB to TO the DT payment NN date NN for IN that DT dividend NN and CC multiplying VVG the DT resulting VVG number NN by IN the DT number NN of IN deferred JJ share NN units NNS held VVN by IN the DT recipient NN . SENT Deferred JJ share NN units NNS cannot NN be VB exercised VVN until IN after IN termination NN of IN employment NN with IN the DT company NN or CC resignation NN as IN a DT director NN and CC must MD be VB exercised VVN no RB later RBR than IN December NP 31 CD of IN the DT year NN following VVG termination NN or CC resignation NN . SENT On IN the DT exercise NN date NN , , the DT cash NN value NN to TO be VB received VVN for IN the DT units NNS is VBZ determined VVN based VVN on IN the DT average JJ closing NN price NN of IN the DT company NN s PP shares VVZ for IN the DT five CD consecutive JJ trading NN days NNS immediately RB prior RB to TO the DT date NN of IN exercise NN . SENT The DT earnings NNS bonus NN unit NN plan NN is VBZ available JJ to TO selected JJ executives NNS . SENT Each DT earnings NNS bonus NN unit NN entitles VVZ the DT recipient NN to TO receive VV an DT amount NN equal JJ to TO the DT company NN s PP cumulative JJ net JJ earnings NNS per IN common JJ share NN as RB announced VVD each DT quarter NN beginning NN after IN the DT grant NN . SENT Payout NN occurs VVZ on IN the DT fifth JJ anniversary NN of IN the DT grant NN or CC when WRB the DT maximum JJ settlement NN value NN per IN unit NN is VBZ reached VVN , , if IN earlier RB . SENT Earnings NNS bonus NN units NNS may MD expire VV if IN employment NN is VBZ terminated VVN other JJ than IN by IN death NN or CC disability NN . SENT F SYM 16 CD Table NN of IN Contents NNS Notes NNS to TO consolidated JJ financial JJ statements NNS continued VVN Under IN the DT restricted JJ stock NN unit NN plan NN , , each DT unit NN entitles VVZ the DT recipient NN to TO the DT conditional JJ right NN to TO receive VV from IN the DT company NN , , upon IN exercise NN , , an DT amount NN equal JJ to TO the DT closing NN price NN of IN the DT company NN s PP common JJ shares NNS on IN the DT Toronto NP Stock NP Exchange NP on IN the DT exercise NN dates VVZ . SENT Fifty CD percent NN of IN the DT units NNS are VBP exercised VVN three CD years NNS following VVG the DT grant NN date NN , , and CC the DT remainder NN are VBP exercised VVN seven CD years NNS following VVG the DT grant NN date NN . SENT The DT units NNS may MD be VB exercised VVN early RB in IN the DT event NN of IN death NN or CC disability NN . SENT All DT units NNS require VVP settlement NN by IN cash NN payments NNS with IN one CD exception NN . SENT The DT restricted JJ stock NN unit NN plan NN was VBD amended VVN for IN units NNS granted VVN in IN 2003 CD and CC future JJ years NNS by IN providing VVG that IN the DT recipient NN may MD receive VV one CD common JJ share NN of IN the DT company NN per IN unit NN or CC elect VV to TO receive VV the DT cash NN payment NN for IN the DT units NNS to TO be VB exercised VVN on IN the DT seventh JJ anniversary NN of IN the DT grant NN date NN . SENT The DT maximum JJ number NN of IN common JJ shares NNS that WDT may MD be VB issued VVN under IN the DT restricted JJ stock NN unit NN plan NN is VBZ 3 CD . SENT 5 CD million CD . SENT For IN deferred JJ share NN units NNS , , a DT charge NN is VBZ made VVN to TO expense NN in IN the DT year NN of IN grant NN equal JJ to TO the DT cash NN performance NN bonus NN payment NN and CC directors NNS fees NNS foregone JJ . SENT The DT company NN records VVZ expense NN for IN incentive NN share NN , , deferred JJ share NN and CC restricted JJ stock NN units NNS based VVN on IN changes NNS in IN the DT price NN of IN common JJ shares NNS in IN the DT year NN . SENT Expense NN for IN earnings NNS bonus NN units NNS is VBZ recorded VVN based VVN on IN the DT cumulative JJ net JJ earnings NNS per IN outstanding JJ common JJ share NN from IN issue NN date NN , , up RB to TO the DT maximum JJ settlement NN value NN for IN the DT units NNS . SENT Incentive NN stock NN options NNS In IN April NP 2002 CD , , incentive NN stock NN options NNS were VBD granted VVN for IN the DT purchase NN of IN the DT company NN s PP common JJ shares NNS at IN an DT exercise NN price NN of IN 46 CD . SENT 50 CD per IN share NN . SENT Up RB to TO 50 CD percent NN of IN the DT options NNS may MD be VB exercised VVN on IN or CC after IN January NP 1 CD , , 2003 CD , , a DT further JJR 25 CD percent NN may MD be VB exercised VVN on IN or CC after IN January NP 1 CD , , 2004 CD , , and CC the DT remaining VVG 25 CD percent NN may MD be VB exercised VVN on IN or CC after IN January NP 1 CD , , 2005 CD . SENT Any DT unexercised JJ options NNS expire VVP after IN April NP 29 CD , , 2012 CD . SENT The DT company NN has VHZ not RB issued VVN incentive NN stock NN options NNS since IN 2002 CD and CC has VHZ no DT plans NNS to TO issue VV incentive NN stock NN options NNS in IN the DT future NN . SENT The DT company NN does VVZ not RB recognize VV compensation NN expense NN on IN the DT issuance NN of IN stock NN options NNS because IN the DT exercise NN price NN is VBZ equal JJ to TO the DT market NN value NN at IN the DT date NN of IN grant NN . SENT If IN the DT fair JJ value NN based VVN method NN of IN accounting NN had VHD been VBN adopted VVN , , the DT impact NN on IN net JJ income NN and CC earnings NNS per IN share NN would MD be VB as RB shown VVN in IN the DT summary NN of IN significant JJ accounting NN policies NNS on IN page NN F NP 9 CD . SENT The DT average JJ fair JJ value NN of IN each DT option NN granted VVN during IN 2002 CD was VBD 12 CD . SENT 70 CD . SENT The DT fair JJ value NN was VBD estimated VVN at IN the DT grant NN date NN using VVG an DT option NN pricing NN model NN with IN the DT following VVG weighted JJ average JJ assumptions NNS . SENT risk NN free JJ interest NN rate NN of IN 5 CD . SENT 7 CD percent NN , , expected VVN life NN of IN five CD years NNS , , volatility NN of IN 25 CD percent NN and CC a DT dividend NN yield NN of IN 1 CD . SENT 9 CD percent NN . SENT The DT company NN has VHZ purchased VVN shares NNS on IN the DT market NN to TO fully RB offset VV the DT dilutive JJ effects NNS from IN the DT exercise NN of IN stock NN options NNS . SENT This DT practice NN is VBZ expected VVN to TO continue VV . SENT A DT summary NN of IN the DT incentive NN compensation NN programs NNS is VBZ as RB follows VVZ . SENT Number NN of IN units NNS Expensed VVN in IN Obligationsoutstanding NP at IN Cancelled VVN Outstanding JJ at IN period NN December NP 31 CD Granted VVD Exercised VVN or CC adjusted VVN December NP 31 CD millions NNS of IN dollars NNS millions NNS of IN dollars NNS Incentive NN share NN units NNS 2004 CD 1 CD 619 JJ 907 CD 3 CD 000 JJ 5 CD 266 CD 423 JJ 94 CD 245 CD 2003 JJ 1 CD 142 CD 145 JJ 19 CD 225 CD 6 CD 889 JJ 330 CD 109 CD 216 JJ 2002 CD 7 CD 000 JJ 812 CD 550 CD 5 CD 325 JJ 8 CD 012 CD 250 JJ 39 CD 142 CD Deferred JJ share NN units NNS 2004 CD 4 CD 899 JJ 48 CD 810 CD 1 CD 4 CD 2003 JJ 8 CD 253 CD 49 JJ 486 CD 379 CD 43 JJ 911 CD 1 CD 3 CD 2002 JJ 7 CD 479 CD 9 CD 853 JJ 85 CD 523 CD 4 CD Earnings NNS bonus NN units NNS 2004 CD 1 CD 889 JJ 740 CD 1 CD 139 JJ 160 CD 3 CD 984 JJ 830 CD 7 CD 6 CD 2003 JJ 2 CD 221 CD 580 JJ 1 CD 156 CD 370 JJ 3 CD 234 CD 250 JJ 3 CD 3 CD 2002 JJ 1 CD 036 CD 500 JJ 2 CD 169 CD 040 JJ 3 CD 3 CD Incentive NN stock NN options NNS 2004 CD 274 CD 250 JJ 7 CD 400 CD 2 CD 854 JJ 500 CD 2003 CD 49 JJ 050 CD 11 CD 500 JJ 3 CD 136 CD 150 JJ 2002 CD 3 CD 210 JJ 200 CD 13 CD 500 JJ 3 CD 196 CD 700 CD Restricted JJ stock NN units NNS 2004 CD 987 CD 480 JJ 5 CD 710 CD 2 CD 642 JJ 325 CD 31 CD 41 JJ 2003 CD 872 CD 085 JJ 3 CD 300 CD 120 JJ 1 CD 660 CD 555 JJ 11 CD 11 CD 2002 JJ 791 CD 890 CD 791 CD 890 CD F NN 17 CD Table NN of IN Contents NNS 11 CD . SENT Investment NN and CC other JJ income NN Investment NN and CC other JJ income NN includes VVZ gains NNS and CC losses NNS on IN asset NN sales NNS as RB follows VVZ . SENT millions NNS of IN dollars NNS 2004 CD 2003 CD 2002 CD Proceeds NNS from IN asset NN sales NNS 102 CD 56 CD 61 CD Book NN value NN of IN assets NNS sold VVD 59 CD 44 CD 56 CD Gain NN loss NN on IN asset NN sales NNS , , before IN tax NN 43 CD 12 CD 5 CD Gain NN loss NN on IN asset NN sales NNS , , after IN tax NN 32 CD 10 CD 4 CD Investment NN and CC other JJ income NN also RB includes VVZ a DT non JJ recurring VVG loss NN of IN 53 CD million CD 42 CD million CD after IN income NN taxes NNS from IN the DT remeasurement NN at IN fair JJ value NN of IN the DT north JJ Toronto NP , , Ontario NP , , property NN described VVD in IN note NN 2 CD . SENT The DT change NN in IN intended JJ use NN of IN the DT property NN , , together RB with IN management NN s PP commitment NN to TO sell VV , , led VVN to TO the DT remeasurement NN . SENT The DT fair JJ value NN of IN the DT property NN was VBD determined VVN using VVG valuation NN techniques NNS consistent JJ with IN a DT market NN approach NN , , adjusted VVN as IN appropriate JJ for IN differences NNS . SENT 12 CD . SENT Commitments NNS and CC contingent JJ liabilities NNS At IN December NP 31 CD , , 2004 CD , , the DT company NN had VHD commitments NNS for IN noncancellable JJ operating NN leases NNS and CC other JJ long JJ term NN agreements NNS that WDT require VVP the DT following VVG minimum JJ future JJ payments NNS . SENT After IN millions NNS of IN dollars NNS 2005 CD 2006 CD 2007 JJ 2008 CD 2009 CD 2009 CD Operating NN leases VVZ a DT 62 CD 55 CD 47 JJ 41 CD 38 CD 91 CD Unconditional JJ purchase NN obligations NNS b SYM 102 CD 42 CD 42 JJ 42 CD 42 CD 55 CD Firm JJ capital JJ commitments NNS c SYM 119 CD 24 CD 8 CD 13 CD 7 CD Other JJ long JJ term NN agreements NNS d SYM 241 CD 196 CD 62 JJ 61 CD 59 CD 198 CD a DT Total JJ rental JJ expense NN incurred VVN for IN operating VVG leases NNS in IN 2004 CD was VBD 104 CD million CD 2003 JJ 124 CD million CD . SENT 2002 CD 124 CD million CD , , which WDT included VVD minimum JJ rental JJ expenditures NNS of IN 77 CD million CD 2003 JJ 93 CD million CD . SENT 2002 CD 91 CD million CD . SENT Related JJ rental JJ income NN was VBD not RB material JJ . SENT b SYM Unconditional JJ purchase NN obligations NNS are VBP those DT long JJ term NN commitments NNS that WDT are VBP noncancellable JJ or CC cancellable JJ only RB under IN certain JJ conditions NNS . SENT These DT mainly RB pertain VV to TO pipeline NN throughput NN agreements NNS . SENT Total JJ payments NNS under IN unconditional JJ purchase NN obligations NNS were VBD 117 CD million CD in IN 2004 CD 2003 CD 114 CD million CD . SENT 2002 CD 115 CD million CD . SENT c SYM Firm JJ capital NN commitments NNS related VVN to TO capital NN projects NNS , , shown VVN on IN an DT undiscounted JJ basis NN , , totalled VVD approximately RB 171 CD million CD at IN the DT end NN of IN 2004 CD 2003 CD 189 CD million CD . SENT The DT largest JJS commitment NN outstanding JJ at IN year NN end NN 2004 CD was VBD associated VVN with IN the DT company NN s PP share NN of IN upstream JJ capital NN projects NNS of IN 112 CD million CD at IN Syncrude NP and CC offshore JJ Canada NP s PP East NP Coast NP . SENT d SYM Other JJ long JJ term NN agreements NNS include VVP primarily RB raw JJ material NN supply NN and CC transportation NN services NNS agreements NNS . SENT Total JJ payments NNS under IN other JJ long JJ term NN agreements NNS were VBD 355 CD million CD in IN 2004 CD 2003 CD 332 CD million CD . SENT 2002 CD 288 CD million CD . SENT Payments NNS under IN other JJ long JJ term NN agreements NNS related VVN to TO the DT company NN s PP share NN of IN undivided JJ interest NN in IN activities NNS conducted VVN jointly RB with IN other JJ companies NNS are VBP approximately RB 37 CD million CD per IN year NN . SENT Other JJ commitments NNS arising VVG in IN the DT normal JJ course NN of IN business NN for IN operating NN and CC capital NN needs NNS do VVP not RB materially RB affect VV the DT company NN s PP consolidated VVD financial JJ position NN . SENT The DT company NN was VBD contingently RB liable JJ at IN December NP 31 CD , , 2004 CD , , for IN a DT maximum NN of IN 175 CD million CD relating VVG to TO guarantees NNS for IN purchasing VVG operating NN equipment NN and CC other JJ assets NNS from IN its PP$ rural JJ marketing NN associates NNS upon IN expiry NN of IN the DT associate NN agreement NN or CC the DT death NN or CC resignation NN of IN the DT associate NN . SENT The DT company NN expects VVZ that IN the DT fair JJ value NN of IN the DT operating VVG equipment NN and CC other JJ assets NNS so RB purchased VVN would MD cover VV the DT maximum JJ potential JJ amount NN of IN future JJ payments NNS under IN the DT guarantees NNS . SENT The DT company NN provides VVZ in IN its PP$ financial JJ statements NNS for IN asset NN retirement NN obligations NNS and CC other JJ environmental JJ liabilities NNS see VVP accounting NN policies NNS on IN page NN F NP 8 CD . SENT Provision NN is VBZ not RB made VVN with IN respect NN to TO those DT manufacturing NN , , distribution NN and CC marketing NN facilities NNS with IN indeterminate JJ useful JJ lives NNS , , because IN such JJ potential JJ obligations NNS cannot NN be VB measured VVN since IN it PP is VBZ not RB possible JJ to TO estimate VV the DT settlement NN dates VVZ . SENT These DT are VBP primarily RB currently RB operated VVN sites NNS . SENT These DT costs NNS are VBP not RB expected VVN to TO have VH a DT material NN effect NN on IN the DT company NN s PP current JJ consolidated JJ financial JJ position NN . SENT Various JJ lawsuits NNS are VBP pending VVG against IN Imperial NP Oil NP Limited NP and CC its PP$ subsidiaries NNS . SENT Based VVN on IN a DT consideration NN of IN all DT relevant JJ facts NNS and CC circumstances NNS , , the DT company NN does VVZ not RB believe VV the DT ultimate JJ outcome NN of IN any DT currently RB pending VVG lawsuits NNS against IN the DT company NN will MD have VH a DT material JJ adverse JJ effect NN upon IN the DT company NN s PP operations NNS or CC financial JJ condition NN . SENT There EX are VBP no DT events NNS or CC uncertainties NNS known VVN to TO management NN beyond IN those DT already RB included VVN in IN reported VVN financial JJ information NN that WDT would MD indicate VV a DT material NN change NN in IN future JJ operating NN results NNS or CC financial JJ condition NN . SENT 13 CD . SENT Common JJ shares NNS The DT number NN of IN authorized JJ common JJ shares NNS of IN the DT company NN as IN at IN December NP 31 CD , , 2004 CD , , was VBD 450 CD , , 000 CD , , 000 CD , , unchanged JJ from IN January NP 1 CD , , 2003 CD . SENT From IN 1995 CD to TO 2003 CD , , the DT company NN purchased VVD shares NNS under IN nine CD 12 CD month NN normal JJ course NN share NN purchase NN programs NNS , , as RB well RB as IN an DT auction NN tender NN . SENT On IN June NP 23 CD , , 2004 CD , , another DT 12 CD month NN normal JJ course NN share NN purchase NN program NN was VBD implemented VVN with IN an DT allowable JJ purchase NN of IN 17 CD . SENT 9 CD million CD shares NNS five CD percent NN of IN the DT total NN at IN June NP 21 CD , , 2004 CD , , less CC any DT shares NNS purchased VVN by IN the DT employee NN savings NN plan NN and CC company NN pension NN fund NN . SENT The DT results NNS of IN these DT activities NNS are VBP shown VVN below RB . SENT Purchased VVN Millions NNS of IN Year NN shares NNS dollars NNS 1995 CD to TO 2002 CD 202 CD 661 JJ 201 CD 5 CD 169 JJ 2003 CD 16 CD 259 JJ 538 CD 799 CD 2004 JJ 13 CD 606 CD 712 CD 872 CD Cumulative JJ purchases NNS to TO date VV 232 CD 527 CD 451 JJ 6 CD 840 CD Exxon NP Mobil NP Corporation NP s PP participation NN in IN the DT above RB maintained VVN its PP$ ownership NN interest NN in IN Imperial NP at IN 69 CD . SENT 6 CD percent NN . SENT F SYM 18 CD Table NN of IN Contents NNS Notes NNS to TO consolidated JJ financial JJ statements NNS continued VVD The DT company NN s PP common JJ share NN activities NNS are VBP summarized VVD below RB . SENT At IN stated JJ value NN , , Thousands NNS millions NNS of IN shares NNS of IN dollars NNS Balance NN as IN at IN January NP 1 CD , , 2002 CD 379 CD 159 JJ 1 CD 941 CD Issued VVN for IN cash NN under IN the DT stock NN option NN plan NN Purchases NNS 296 CD 2 CD Balance NN as IN at IN December NP 31 CD , , 2002 CD 378 CD 863 JJ 1 CD 939 CD Issued VVN for IN cash NN under IN the DT stock NN option NN plan NN 49 CD 2 CD Purchases NNS 16 JJ 259 CD 82 CD Balance NN as IN at IN December NP 31 CD , , 2003 CD 362 CD 653 JJ 1 CD 859 CD Issued VVN for IN cash NN under IN the DT stock NN option NN plan NN 274 CD 13 CD Purchases NNS 13 JJ 607 CD 71 CD Balance NN as IN at IN December NP 31 CD , , 2004 CD 349 CD 320 JJ 1 CD 801 CD The DT following NN table NN provides VVZ the DT calculation NN of IN basic JJ and CC diluted JJ earnings NNS per IN share NN . SENT 2004 CD 2003 CD 2002 CD Net JJ income NN per IN common JJ share NN basic JJ Income NN before IN cumulative JJ effect NN of IN accounting VVG change NN millions NNS of IN dollars NNS 2 CD 052 CD 1 CD 701 JJ 1 CD 214 CD Net JJ income NN millions NNS of IN dollars NNS 2 CD 052 CD 1 CD 705 JJ 1 CD 214 CD Weighted JJ average JJ number NN of IN common JJ shares NNS outstanding JJ thousands NNS of IN shares NNS 356 CD 834 CD 372 JJ 011 CD 378 CD 875 CD Net JJ income NN per IN common JJ share NN dollars NNS Income NN before IN cumulative JJ effect NN of IN accounting NN change NN 5 CD . SENT 75 CD 4 CD . SENT 57 CD 3 CD . SENT 20 CD Cumulative JJ effect NN of IN accounting NN change NN , , after IN income NN tax NN 0 CD . SENT 01 CD Net JJ income NN 5 CD . SENT 75 CD 4 CD . SENT 58 CD 3 CD . SENT 20 CD Net JJ income NN per IN common JJ share NN diluted VVN Income NP before IN cumulative JJ effect NN of IN accounting VVG change NN millions NNS of IN dollars NNS 2 CD 052 CD 1 CD 701 JJ 1 CD 214 CD Net JJ income NN millions NNS of IN dollars NNS 2 CD 052 CD 1 CD 705 JJ 1 CD 214 CD Weighted JJ average JJ number NN of IN common JJ shares NNS outstanding JJ thousands NNS of IN shares NNS 356 CD 834 CD 372 JJ 011 CD 378 CD 875 CD Effect NN of IN employee NN stock NN based VVN awards NNS thousands NNS of IN shares NNS 818 CD 143 CD 1 CD Weighted JJ average JJ number NN of IN common JJ shares NNS outstanding JJ , , assuming VVG dilution NN thousands NNS of IN shares NNS 357 CD 652 CD 372 JJ 154 CD 378 CD 876 CD Net JJ income NN per IN common JJ share NN dollars NNS Income NN before IN cumulative JJ effect NN of IN accounting NN change NN 5 CD . SENT 74 CD 4 CD . SENT 57 CD 3 CD . SENT 20 CD Cumulative JJ effect NN of IN accounting NN change NN , , after IN income NN tax NN 0 CD . SENT 01 CD Net JJ income NN 5 CD . SENT 74 CD 4 CD . SENT 58 CD 3 CD . SENT 20 CD 14 CD . SENT Miscellaneous JJ financial JJ information NN In IN 2004 CD , , net JJ income NN included VVD an DT after IN tax NN gain NN of IN 23 CD million CD 2003 JJ 9 CD million CD gain NN . SENT 2002 CD 2 CD million CD loss NN attributable JJ to TO the DT effect NN of IN changes NNS in IN last JJ in IN , , first JJ out IN LIFO NN inventories NNS . SENT The DT replacement NN cost NN of IN inventories NNS was VBD estimated VVN to TO exceed VV their PP$ LIFO NN carrying VVG values NNS at IN December NP 31 CD , , 2004 CD , , by IN 1 CD , , 013 CD million CD 2003 JJ 797 CD million CD . SENT Inventories NNS of IN crude JJ oil NN and CC products NNS at IN year NN end NN consisted VVD of IN the DT following NN . SENT millions NNS of IN dollars NNS 2004 CD 2003 CD Crude JJ oil NN 165 CD 161 CD Petroleum NP products NNS 190 CD 175 CD Chemical NP products NNS 59 CD 57 CD Natural JJ gas NN and CC other JJ 18 CD 14 CD Total JJ inventories NNS of IN crude JJ oil NN and CC products NNS 432 CD 407 CD Research NN and CC development NN costs NNS in IN 2004 CD were VBD 70 CD million CD 2003 JJ 63 CD million CD . SENT 2002 CD 64 CD million CD before IN investment NN tax NN credits NNS earned VVD on IN these DT expenditures NNS of IN 7 CD million CD 2003 JJ 10 CD million CD . SENT 2002 CD 10 CD million CD . SENT The DT net JJ costs NNS are VBP included VVN in IN expenses NNS due JJ to TO the DT uncertainty NN of IN future JJ benefits NNS . SENT Cash NN flow NN from IN operating NN activities NNS included VVD dividends NNS of IN 18 CD million CD received VVN from IN equity NN investments NNS in IN 2004 CD 2003 CD 15 CD million CD . SENT 2002 CD 18 CD million CD . SENT F SYM 19 CD Table NN of IN Contents NNS 15 CD . SENT Financing NN costs NNS millions NNS of IN dollars NNS 2004 CD 2003 CD 2002 CD Debt NN related JJ interest NN 37 CD 38 CD 40 CD Capitalized JJ interest NN 34 CD 33 CD 12 CD Net JJ interest NN expense NN 3 CD 5 CD 28 CD Other JJ interest NN 4 CD 4 CD 2 CD Total JJ interest NN expense NN a DT 7 CD 9 CD 30 CD Foreign JJ exchange NN expense NN gain NN on IN long JJ term NN debt NN 129 CD 10 CD Total JJ financing NN costs NNS 7 CD 120 CD 20 CD a DT Cash NN interest NN payments NNS in IN 2004 CD were VBD 41 CD million CD 2003 JJ 38 CD million CD . SENT 2002 CD 41 CD million CD . SENT The DT weighted JJ average JJ interest NN rate NN on IN short JJ term NN borrowings NNS in IN 2004 CD was VBD 2 CD . SENT 3 CD percent NN 2003 CD 3 CD . SENT 1 CD percent NN . SENT 16 CD . SENT Transactions NNS with IN related JJ parties NNS Revenues NNS and CC expenses NNS of IN the DT company NN also RB include VVP the DT results NNS of IN transactions NNS with IN Exxon NP Mobil NP Corporation NP and CC affiliated JJ companies NNS ExxonMobil NN in IN the DT normal JJ course NN of IN operations NNS . SENT These DT were VBD conducted VVN on IN terms NNS as IN favourable JJ as IN they PP would MD have VH been VBN with IN unrelated JJ parties NNS and CC primarily RB consisted VVD of IN the DT purchase NN and CC sale NN of IN crude JJ oil NN , , petroleum NN and CC chemical NN products NNS , , as RB well RB as IN transportation NN , , technical JJ and CC engineering NN services NNS . SENT Transactions NNS with IN ExxonMobil NP also RB included VVD amounts NNS paid VVN and CC received VVN in IN connection NN with IN the DT company NN s PP participation NN in IN a DT number NN of IN natural JJ resource NN activities NNS conducted VVN jointly RB in IN Canada NP . SENT The DT company NN has VHZ agreements NNS with IN affiliates NNS of IN Exxon NP Mobil NP Corporation NP to TO provide VV computer NN and CC customer NN support NN services NNS to TO the DT company NN and CC to TO share VV common JJ business NN and CC operational JJ support NN services NNS to TO allow VV the DT companies NNS to TO consolidate VV duplicate JJ work NN and CC systems NNS . SENT The DT amounts NNS paid VVD or CC received VVD have VH been VBN reflected VVN in IN the DT statement NN of IN income NN as IN shown VVN below RB . SENT millions NNS of IN dollars NNS 2004 CD 2003 CD 2002 CD Total JJ revenues NNS 1 CD 580 CD 950 JJ 1 CD 036 CD Purchases NNS of IN crude JJ oil NN and CC products NNS 3 CD 133 CD 2 CD 464 JJ 2 CD 134 CD Total JJ expenses NNS 43 CD 14 CD 57 CD Accounts NNS payable JJ due RB to TO Exxon NP Mobil NP Corporation NP at IN December NP 31 CD , , 2004 CD , , with IN respect NN to TO the DT above JJ transactions NNS were VBD 67 CD million CD 2003 JJ 167 CD million CD . SENT Certain JJ charges NNS from IN ExxonMobil NP have VHP been VBN capitalized VVN . SENT they PP are VBP not RB material JJ in IN the DT aggregate NN . SENT During IN 2003 CD , , the DT company NN borrowed VVD 818 CD million CD Cdn NP from IN Exxon NP Overseas NP Corporation NP under IN two CD long JJ term NN loan NN agreements NNS as RB presented VVN in IN note NN 3 CD . SENT Interest NN paid VVD on IN the DT loans NNS in IN 2004 CD was VBD 20 CD million CD 2003 JJ 14 CD million CD . SENT During IN 2004 CD , , the DT company NN extended VVD loans NNS of IN 32 CD million CD to TO Montreal NP Pipe NP Line NP Limited NP , , in IN which WDT the DT company NN has VHZ an DT equity NN interest NN , , for IN financing NN of IN the DT equity NN company NN s PP capital JJ expenditure NN programs NNS and CC working VVG capital NN requirements NNS . SENT 17 CD . SENT Net JJ payments NNS payables NNS to TO governments NNS millions NNS of IN dollars NNS 2004 CD 2003 CD 2002 CD Current JJ income NN tax NN expense NN note VVP 4 CD 1 CD 103 JJ 610 CD 718 CD Federal NP excise NN tax NN 1 CD 264 CD 1 CD 254 JJ 1 CD 231 CD Property NP taxes NNS included VVD in IN expenses NNS 85 CD 80 CD 85 CD Payroll NP and CC other JJ taxes NNS included VVN in IN expenses NNS 50 CD 52 CD 51 CD GST NP QST NP HST NP collected VVD a DT 2 CD 297 CD 2 CD 015 JJ 1 CD 717 CD GST NP QST NP HST NP input NN tax NN credits VVZ a DT 1 CD 948 CD 1705 CD 1368 CD Other JJ consumer NN taxes NNS collected VVN for IN governments NNS 1 CD 670 CD 1 CD 662 JJ 1 CD 589 CD Crown NP royalties NNS 472 CD 418 CD 314 CD Total JJ paid JJ or CC payable JJ to TO governments NNS 4 CD 993 CD 4 CD 386 JJ 4 CD 337 CD Less JJR investment NN tax NN credits NNS and CC other JJ receipts NNS 14 CD 30 CD 12 CD Net JJ paid JJ or CC payable JJ to TO governments NNS 4 CD 979 CD 4 CD 356 JJ 4 CD 325 CD Net JJ payments NNS to TO . SENT Federal JJ government NN 2 CD 472 CD 2 CD 061 JJ 2 CD 171 CD Provincial JJ governments NNS 2 CD 422 CD 2 CD 215 JJ 2 CD 069 CD Local JJ governments NNS 85 CD 80 CD 85 CD Net JJ paid JJ or CC payable JJ to TO governments NNS 4 CD 979 CD 4 CD 356 JJ 4 CD 325 CD a DT The DT abbreviations NNS refer VVP to TO the DT federal JJ goods NNS and CC services NNS tax NN , , the DT Quebec NP sales NNS tax NN and CC the DT federal JJ provincial JJ harmonized VVN sales NNS tax NN , , respectively RB . SENT The DT HST NP is VBZ applicable JJ in IN the DT provinces NNS of IN Nova NP Scotia NP , , New NP Brunswick NP and CC Newfoundland NP and CC Labrador NP . SENT F SYM 20 CD