**MANAGEMENT’S      DISCUSSION AND ANALYSIS**

**NON-GAAP      MEASURES**

**BUSINESS      ENVIRONMENT**

**BUSINESS      ENVIRONMENT IN 2005**

----

***Commodity      Price Indicators and Exchange Rates***

| *(averages                for the years indicated)*                                          |     | **2005**  | 2004   | 2003   |
|----------------------------------------------------------------------------------------------|----------|-----------|--------|--------|
|                                                                                         |     |      |   |   |
| Crude                oil price indicators *(per                bbl)*                         |     |      |   |   |
| Dated                Brent at                Sullom Voe                                      | **US$**  | **54.38** | 38.21  | 28.84  |
| WTI                at                Cushing                                                 | **US$**  | **56.56** | 41.40  | 31.04  |
| WTI/Brent                price                differential                                   | **US$**  | **2.18**  | 3.19   | 2.20   |
| Brent/Maya                price                differential                                  | **US$**  | **13.52** | 8.20   | 4.60   |
| Edmonton                Light                                                                | **Cdn$** | **69.22** | 52.78  | 43.77  |
| Edmonton                Light/Lloydminster Blend (heavy) price differential                  | **Cdn$** | **26.17** | 17.07  | 12.68  |
| Natural                gas price indicators                                                  |     |      |   |   |
| Henry                Hub                *(per                MMBtu)*                         | **US$**  | **8.55**  | 6.09   | 5.44   |
| AECO-C                spot*(per                thousand cubic feet - Mcf)*                   | **Cdn$** | **8.84**  | 7.08   | 6.99   |
| Henry                Hub/AECO                basis differential *(per                MMBtu)* | **US$**  | **1.53**  | 0.87   | 0.70   |
| New                York Harbour 3-2-1 refinery crack spread *(per                bbl)*       | **US$**  | **9.47**  | 7.02   | 5.31   |
| US$                per Cdn$ exchange rate                                                    | **US$**  | **0.83**  | 0.77   | 0.71   |

**COMPETITIVE      CONDITIONS**

----

**OUTLOOK      FOR BUSINESS ENVIRONMENT IN 2006**

**ECONOMIC      SENSITIVITIES**

***Sensitivities      affecting net earnings***

| Factor1,                2                                                                                                             |   |  Change                (+) |                       | Annual                Net Earnings Impact |   | Annual                Net Earnings Impact    |   |
|---------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------|----------------------------|-------------------------------------------|--------|----------------------------------------------|--------|
|                                                                                                                                  |   |                            |                       |                                      |   | *(millions                of  dollars)* |   |   | *($/share)**3* |   |
| **Upstream**                                                                                                                          |   |                            |                       |                                      |   |                                         |   |   |   |   |
| Price                received for crude oil and liquids4                                                                              |   | $                               | 1.00/bbl                   |                                      | $      | 43                                           |   | $ | 0.08 |   |
| Price                received for natural gas                                                                                         |   | $                               | 0.25/Mcf                   |                                      |   | 32                                           |   |   | 0.06 |   |
| Exchange                rate: Cdn$/US$ refers to impact on upstream operating earnings from                continuing operations5     |   | $                               | 0.01                       |                                      |   | (36                                          | )      |   | (0.07 | ) |
| Crude                oil and liquids production                                                                                       |   |                            | 1,000                b/d   |                                      |   | 9                                            |   |   | 0.02 |   |
| Natural                gas production                                                                                                 |   |                            | 10                MMcf/d   |                                      |   | 11                                           |   |   | 0.02 |   |
| Buzzard                derivative contracts (unrealized)6                                                                             |   | $                               | 1.00/bbl                   |                                      |   | (19                                          | )      |   | (0.04 | ) |
| **Downstream**                                                                                                                        |   |                            |                       |                                      |   |                                         |   |   |   |   |
| New                York Harbour 3-2-1 crack spread                                                                                    |   | $                               | 0.10                US/bbl |                                      |   | 6                                            |   |   | 0.01 |   |
| Light/heavy                crude price differential                                                                                   |   | $                               | 1.00                US/bbl |                                      |   | 7                                            |   |   | 0.01 |   |
| **Corporate**                                                                                                                         |   |                            |                       |                                      |   |                                         |   |   |   |   |
| Exchange                rate: Cdn$/US$ refers to impact of the revaluation of U.S. dollar                denominated, long-term debt7 |   | $                               | 0.01                       |                                      | $      | 14                                           |   | $ | 0.03 |   |

----

**BUSINESS      STRATEGY**

**BASE      BUSINESS PROFITABILITY**

*in      situ *

**LONG-TERM      PROFITABLE GROWTH**

| •   | expanding                and exploiting the current portfolio of                assets; |
|---------------------|-----------------------------------------------------------------------------------------|

| •   | targeting                acquisitions and new opportunities with a focus on long-life assets;                and |
|---------------------|------------------------------------------------------------------------------------------------------------------|

| •   | developing                an exploration program which balances risks and rewards to replace                reserves over time. |
|---------------------|---------------------------------------------------------------------------------------------------------------------------------|

***to      expand and exploit the current portfolio of assets***
*in      situ*

***to***
** **
***target      acquisitions and new opportunities with a focus on long-life      assets***
*in      situ*

| 1   | References                  to first quartile operations in this report do not refer to industry-wide                  benchmarks or externally known measures. The Company has a variety                  of                  internal metrics which define and track first quartile operational                  performance. |
|---------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2   | Throughout                  this MD&A, the company refers to reliability within the five business                  units. These reliability rates are calculated using internal methods                  that                  vary among the business units and take various factors into account.                  There                  are no existing external or industry-wide standards used in calculating                  reliability rates, and, therefore, resulting calculations are not                  necessarily comparable to other companies in the oil and gas                  industry. |
|---------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

***to      build a substantive, balanced exploration program***

**RISK      MANAGEMENT**

**PETRO-CANADA’S      RISK PROFILE**

**BUSINESS      RISKS**

***Exploration***

| 1   | Further                  detail regarding the Audit, Finance and Risk Committee can be found                  on                  page 73 of the Annual Information Form (AIF) and a copy of its                  Charter is                  attached as Schedule C in the AIF. |
|---------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2   | Proved                  reserves replacement ratio is calculated by dividing the year-over-year                  net change in proved reserves, before deducting production, by                  the annual                  production over the same period. The reserves replacement ratio                  is a                  general indicator of the Company’s reserves growth. It is only one of a                  number of metrics which can be used to analyse a company’s upstream                  business. |
|---------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

***Reserves      Estimates***

***Project      Execution***

***Non-Operated      Interests***

***Environmental      Regulations***

***Emission      of Greenhouse Gases***

----

***Government      Regulations***

***Counterparties***

**OPERATIONAL      RISKS**

**FOREIGN      RISKS**

**MARKET      RISKS**

----

***Commodity      Prices***

***Foreign      Exchange***

***Interest      Rates***

*Derivative      Instruments*

----

**CONSOLIDATED      FINANCIAL RESULTS**

**ANALYSIS      OF CONSOLIDATED EARNINGS AND CASH FLOW**

***Consolidated      Financial Results***

| *(millions                of dollars, unless otherwise indicated)*                                                                            |   | **2005**    |       | 2004   |   | 2003      |       |
|-----------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------|------------|--------|--------|-----------|------------|
| **Net                earnings**                                                                                                               |   | **$**       | **1,791**  |   | **$**  | **1,757** | ** ** | **$** | **1,650** |   |
| Net                earnings from discontinued operations                                                                                      |   |        | **98**     |   |   | 59        |       |   | 115 |   |
| **Net                earnings from continuing operations**                                                                                    |   | **$**       | **1,693**  |   | **$**  | **1,698** | ** ** | **$** | **1,535** |   |
| Gain                on foreign currency translation                1                                                                          |   |        | **73**     |   |   | 63        |       |   | 239 |   |
| Unrealized                loss on Buzzard derivative contracts                2                                                               |   |        | **(562**   | **)**  |   | (205      | )          |   | - |   |
| Gain                on sale of assets                                                                                                         |   |        | **34**     |   |   | 11        |       |   | 29 |   |
| **Operating                earnings from continuing operations**** **3,                4                                                 |   | **$**       | **2,148**  |   | **$**  | **1,829** | ** ** | **$** | **1,267** |   |
| Stock-based                compensation                                                                                                       |   |        | **(66**    | **)**  |   | (11       | )          |   | (13 | ) |
| Insurance                premium surcharges                5                                                                                  |   |        | **(77**    | **)**  |   | -         |       |   | - |   |
| Income                tax adjustments                                                                                                         |   |        | **22**     |   |   | 13        |       |   | 45 |   |
| Oakville                closure costs                                                                                                         |   |        | **2**      |   |   | (46       | )          |   | (151 | ) |
| Terra                Nova insurance proceeds                                                                                                  |   |        | **2**      |   |   | 31        |       |   | 17 |   |
| Edmonton                refinery conversion provision                                                                                         |   |        | **-**      |   |   | -         |       |   | (82 | ) |
| Kazakhstan                impairment                                                                                                          |   |        | **-**      |   |   | -         |       |   | (46 | ) |
| International                provisions                                                                                                       |   |        | **-**      |   |   | -         |       |   | 45 |   |
| **Operating                earnings from continuing operations adjusted for unusual                items**                                    |   | **$**       | **2,265**  |   | **$**  | **1,842** | ** ** | **$** | **1,452** |   |
| Earnings                per share from continuing operations *(dollars)*                                                                 |   |        |       |   |   |      |       |   |   |   |
| -                basic                                                                                                                        |   | **$**       | **3.27**   |   | $      | 3.21      |       | $ | 2.90 |   |
| -                  diluted                                                                                                                    |   |        | **3.22**   |   |   | 3.17      |       |   | 2.87 |   |
| Earnings                per share *(dollars)*                                                                                            |   |             |       |   |   |      |       |   |   |   |
| -                basic                                                                                                                        |   | **$ ** | **3.45**   |   | $      | 3.32      |       | $ | 3.11 |   |
| -                diluted                                                                                                                      |   |        | **3.41**   |   |   | 3.28      |       |   | 3.08 |   |
| Cash                flow from continuing operating activities before changes in non-cash                working capital 4,                6   |   |        | **3,787**  |   |   | 3,425     |       |   | 3,042 |   |
| Cash                flow from continuing operating activities before changes in non-cash                working capital per share *(dollars)* |   |        | **7.31**   |   |   | 6.47      |       |   | 5.74 |   |
| Debt                                                                                                                                          |   |        | **2,913**  |   |   | 2,580     |       |   | 2,229 |   |
| Cash                and cash equivalents 7                                                                                                    |   |        | **789**    |   |   | 170       |       |   | 635 |   |
| Average                capital employed 7                                                                                                     |   | **$**       | **11,860** |   | $      | 10,533    |       | $ | 9,268 |   |
| Return                on capital employed *(%)*7                                                                                              |   |        | **16.0**   |   |   | 17.5      |       |   | 19.0 |   |
| Operating                return on capital employed *(%)*7                                                                                    |   |        | **19.8**   |   |   | 18.8      |       |   | 16.1 |   |
| Return                on equity *(%)*7                                                                                                        |   |        | **19.7**   |   |   | 21.5      |       |   | 24.9 |   |

----

**2005      COMPARED WITH 2004**

**QUARTERLY      INFORMATION**

***Consolidated      Quarterly Financial Results***

| *(millions                of dollars, unless otherwise indicated)*                                                      |   | **2005** |                         | 2004   |   |
|-------------------------------------------------------------------------------------------------------------------------|--------|----------|------------------------------|--------|--------|
|                                                                                                                    |   |     | **Quarter                1** |   |   | **Quarter                2** |   |   | **Quarter                3** |   |   | **Quarter                4** |   |   | Quarter                1 |   |   | Quarter                2 |   |   | Quarter                3 |   |   | Quarter                4 |   |
| Total                revenue from continuing operations                                                                 |   | **$**    | **3,275**                    |   | **$**  | **3,945** |   | **$** | **4,721** |   | **$** | **4,838** |   | $ | 3,365 |   | $ | 3,455 |   | $ | 3,515 |   | $ | 3,623 |   |
| Operating                earnings from continuing operations                                                            |   |     | **427**                      |   |   | **476** |   |   | **597** |   |   | **648** |   |   | 500 |   |   | 453 |   |   | 444 |   |   | 432 |   |
| Net                earnings from continuing operations                                                                  |   |     | **110**                      |   |   | **322** |   |   | **593** |   |   | **668** |   |   | 496 |   |   | 375 |   |   | 393 |   |   | 434 |   |
| Cash                flow from continuing operating activities before changes in non-cash                working capital |   |     | **801**                      |   |   | **869** |   |   | **1,001** |   |   | **1,116** |   |   | 840 |   |   | 801 |   |   | 818 |   |   | 966 |   |
| Earnings                per share from continuing operations *(dollars)*                                                |   |     |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| -                 basic                                                                                            |   | **$**    | **0.21**                     |   | **$**  | **0.62** |   | **$** | **1.14** |   | **$** | **1.29** |   | $ | 0.93 |   | $ | 0.70 |   | $ | 0.74 |   | $ | 0.83 |   |
| -                 diluted                                                                                          |   | **$**    | **0.21**                     |   | **$**  | **0.61** |   | **$** | **1.13** |   | **$** | **1.28** |   | $ | 0.92 |   | $ | 0.70 |   | $ | 0.73 |   | $ | 0.82 |   |
| Earnings                per share *(dollars)*                                                                           |   |     |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| -                 basic                                                                                            |   | **$**    | **0.23**                     |   | **$**  | **0.66** |   | **$** | **1.19** |   | **$** | **1.38** |   | $ | 0.96 |   | $ | 0.74 |   | $ | 0.77 |   | $ | 0.85 |   |
| - diluted                                                                                                          |   | **$**    | **0.22**                     |   | **$**  | **0.66** |   | **$** | **1.17** |   | **$** | **1.36** |   | $ | 0.95 |   | $ | 0.73 |   | $ | 0.76 |   | $ | 0.83 |   |

----

**LIQUIDITY      AND CAPITAL RESOURCES**

***Summary      of Cash Flows***

| *(millions                of dollars)*                                                                                             |   | **2005** |       | 2004       |   | 2003      |       |
|------------------------------------------------------------------------------------------------------------------------------------|--------|----------|------------|------------|--------|-----------|------------|
| **Cash                flow from continuing operating activities**                                                                  |   | **$**    | **3,783**  | ** ** | **$**  | **3,928** | ** ** | **$** | **2,896** |   |
| Increase                (decrease) in non-cash working capital related to continuing operating                activities and other |   |     | 4          |       |   | (503      | )          |   | 146 |   |
| **Cash                flow from continuing operations**                                                                            |   | **$**    | **3,787**  | ** ** | **$**  | **3,425** | ** ** | **$** | **3,042** |   |
| Cash                flow from discontinued operations                                                                              |   |     | **245**    |       |   | 204       |       |   | 247 |   |
| **Cash                flow**                                                                                                       |   |     | **4,032**  |       |   | **3,629** |       |   | **3,289** |   |
| Net                cash inflows (outflows) from:                                                                                   |   |     |       |       |   |      |       |   |   |   |
| Investing                activities before changes in non-cash working capital                                                     |   |     | **(3,595** | **)**      |   | (4,591    | )          |   | (2,214 | ) |
| Financing                activities before changes in non-cash working capital                                                     |   |     | **(10**    | **)**      |   | (19       | )          |   | (604 | ) |
| (Increase)                decrease in non-cash working capital                                                                     |   |     | **192**    |       |   | 516       |       |   | (70 | ) |
| Increase                (decrease) in cash and cash equivalents                                                                    |   | **$**    | **619**    |       | $      | (465      | )          | $ | 401 |   |
| **Cash                and cash equivalents at end of year**                                                                        |   | **$**    | **789**    | ** ** | **$**  | **170**   | ** ** | **$** | **635** |   |
| **Cash                and cash equivalents - discontinued operations**                                                             |   | **$**    | **68**     | ** ** | **$**  | **206**   | ** ** | **$** | **227** | ** ** |

***Financial      Ratios***

|                                                                  |   | **2005** |     | 2004   |   | 2003   |   |
|-----------------------------------------------------------------------|--------|----------|----------|--------|--------|--------|--------|
| Interest                coverage from continuing operations *(times)* |   |     |     |   |   |   |   |   |   |   |
| Net                earnings basis                                     |   |     | **17.9** |   |   | 20.0   |   |   | 15.4 |   |
| EBITDAX                basis                                          |   |     | **25.4** |   |   | 29.2   |   |   | 24.4 |   |
| Cash                flow basis                                        |   |     | **28.9** |   |   | 30.4   |   |   | 23.0 |   |
| Debt-to-cash                flow *(times)**1*                         |   |     | **0.8**  |   |   | 0.8    |   |   | 0.7 |   |
| Debt-to-debt                plus equity *(%)*                         |   |     | **23.5** |   |   | 22.8   |   |   | 22.7 |   |

----

**OPERATING      ACTIVITIES**

**INVESTING      ACTIVITIES**

***Capital      and Exploration Expenditures***

| *(millions                of dollars)*                                 |   | 2006                Outlook                1 |      | **2005**   |   | 2004      |       | 2003   |      |
|------------------------------------------------------------------------|--------|----------------------------------------------|-----------|------------|--------|-----------|------------|--------|-----------|
| **Upstream**                                                           |   |                                         |      |       |   |      |       |   |      |   |   |   |   |
| North                American Natural Gas                              |   | $                                            | 850       |       | **$**  | **713**   |       | $      | 666       |   | $ | 517 |   |
| East                Coast Oil                                          |   |                                         | 305       |       |   | **314**   |       |   | 275       |   |   | 344 |   |
| Oil                Sands                                               |   |                                         | 355       |       |   | **772**   |       |   | 397       |   |   | 443 |   |
| International                2                                         |   |                                         | 815       |       |   | **696**   |       |   | 1,707     |  3 |   | 400 |   |
|                                                                   |   | $                                            | 2,325     |       | **$**  | **2,495** |       | $      | 3,045     |   | $ | 1,704 |   |
| **Downstream**                                                         |   |                                         |      |       |   |      |       |   |      |   |   |   |   |
| Refining                and Supply                                     |   | $                                            | 840       |       | **$**  | **883**   |       | $      | 656       |   | $ | 296 |   |
| Sales                and Marketing                                     |   |                                         | 150       |       |   | **108**   |       |   | 171       |   |   | 117 |   |
| Lubricants                                                             |   |                                         | 40        |       |   | **62**    |       |   | 12        |   |   | 11 |   |
|                                                                   |   | **$**                                        | **1,030** | ** ** | **$**  | **1,053** | ** ** | **$**  | **839**   | ** ** | **$** | **424** |   |
| **Shared                Services**                                     |   | **$**                                        | **30**    | ** ** | **$**  | **12**    | ** ** | **$**  | **9**     | ** ** | **$** | **14** |   |
| **Total                property, plant and equipment and exploration** |   | **$**                                        | **3,385** | ** ** | **$**  | **3,560** | ** ** | **$**  | **3,893** | ** ** | **$** | **2,142** |   |
| Deferred                charges and other assets                       |   |                                         | -         |       |   | **70**    |       |   | 36        |   |   | 147 |   |
| Acquisition                of Prima Energy Corporation                 |   |                                         | -         |       |   | -         |       |   | 644       |   |   | **-** |   |
| **Total                continuing operations**                         |   | **$**                                        | **3,385** | ** ** | **$**  | **3,630** | ** ** | **$**  | **4,573** | ** ** | **$** | **2,289** |   |
| Discontinued                operations                                 |   | $                                            | 50        |       | **$**  | **46**    |       | $      | 62        |   | $ | 90 |   |
| **Total**                                                              |   | **$**                                        | **3,435** | ** ** | **$**  | **3,676** | ** ** | **$**  | **4,635** | ** ** | **$** | **2,379** |   |

----

**FINANCING        ACTIVITIES AND DIVIDENDS**

***Sources        of Capital Employed***

| *(millions                  of dollars)*                   |   | **2005** |       | 2004   |   | 2003   |   |
|------------------------------------------------------------|--------|----------|------------|--------|--------|--------|--------|
| Short-term                  notes payable                  |   | **$**    | **-**      |   | $      | 299    |   | $ | - |   |
| Long-term                  debt, including current portion |   |     | **2,913**  |   |   | 2,281  |   |   | 2,229 |   |
| Shareholders’                  equity                |   |     | **9,488**  |   |   | 8,739  |   |   | 7,588 |   |
| **Total**                                                  |   | **$**    | **12,401** |   | $      | 11,319 |   | $ | 9,817 |   |

***2005        Financing Activities***

***Returning        Cash to Shareholders***

| Period                     |   | Shares                  Repurchased 1 |          | Average                  Price |   | Total                  Cost |   |
|----------------------------|--------|---------------------------------------|---------------|--------------------------------|--------|-----------------------------|--------|
|                       |   | **2005**                              |          | 2004                           |   | **2005**                    |   | 2004 |   | **2005** |   | 2004 |   |
| Full                  year |   |                                  | **8,333,400** |                           |   | 13,736,164                  |   | **$** | **41.54** |   | $ | 32.51 |   | **$** | **346                  million** |   | $ | 447                  million |   |

| 1   | Stated                  on a post-stock dividend basis. |
|---------------|---------------------------------------------------------|

----

*Off        Balance Sheet*

*Pension        Plans*

***Contractual        Obligations - Summary***

*(millions        of dollars)*

|                                                                      |   | PAYMENTS                  DUE BY PERIOD |       |
|---------------------------------------------------------------------------|--------|-----------------------------------------|------------|
|                                                                      |   | **Total**                               |       | 2006 |   | 2007-2008 |   | 2009-2010 |   | 2011                  and thereafter |   |
| Unsecured                  debentures and senior notes                  1 |   | **$**                                   | **6,439**  |   | $ | 175 |   | $ | 351 |   | $ | 351 |   | $ | 5,562 |   |
| Capital                  lease obligations                  1             |   |                                    | **158**    |   |   | 17 |   |   | 25 |   |   | 22 |   |   | 94 |   |
| Operating                  leases                                         |   |                                    | **678**    |   |   | 137 |   |   | 201 |   |   | 144 |   |   | 196 |   |
| Transportation                  agreements                                |   |                                    | **1,719**  |   |   | 200 |   |   | 319 |   |   | 257 |   |   | 943 |   |
| Product                  purchase/delivery obligations                  2 |   |                                    | **2,103**  |   |   | 115 |   |   | 245 |   |   | 249 |   |   | 1,494 |   |
| Exploration                  work commitments                  3          |   |                                    | **162**    |   |   | 52 |   |   | 49 |   |   | 60 |   |   | 1 |   |
| Asset                  retirement obligations                             |   |                                    | **2,839**  |   |   | 77 |   |   | 82 |   |   | 77 |   |   | 2,603 |   |
| Other                  long-term obligations                  4, 5        |   |                                    | **2,567**  |   |   | 126 |   |   | 207 |   |   | 965 |   |   | 1,269 |   |
| Total                  contractual obligations                            |   | **$**                                   | **16,665** |   | $ | 899 |   | $ | 1,479 |   | $ | 2,125 |   | $ | 12,162 |   |

----

**UPSTREAM**

**NORTH        AMERICAN NATURAL GAS**

***Business        Summary And Strategy***

| •   | transitioning                  further into unconventional gas                  plays; |
|---------------------|----------------------------------------------------------------------------------------|

| •   | optimizing                  core properties in Western Canada and developing coal bed methane                  and                  tight gas in the U.S. Rockies; |
|---------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| •   | stepping                  out of traditional operating areas, with an increased focus on                  exploration; |
|---------------------|------------------------------------------------------------------------------------------------------------------------|

| •   | developing                  LNG import capacity at Gros-Cacouna, Quebec; and |
|---------------------|------------------------------------------------------------------------------|

| •   | building                  the northern resource base for long-term                  growth. |
|---------------------|---------------------------------------------------------------------------------------------|

***North        American Natural Gas Financial Results***

| *(millions                  of dollars)*                                                                         |   | **2005** |      | 2004   |   | 2003    |       |
|------------------------------------------------------------------------------------------------------------------|--------|----------|-----------|--------|--------|---------|------------|
| **Net                  earnings**                                                                                |   | **$**    | **674**   |   | **$**  | **500** | ** ** | **$** | **492** |   |
| Gain                  on sale of assets                                                                          |   |     | **14**    |   |   | -       |       |   | 33 |   |
| **Operating                  earnings**                                                                          |   | **$**    | **660**   |   | **$**  | **500** | ** ** | **$** | **459** |   |
| Insurance                  premium surcharges                                                                    |   |     | **(4**    | **)**  |   | -       |       |   | - |   |
| Income                  tax adjustments                                                                          |   |     | **28**    |   |   | 7       |       |   | 10 |   |
| **Operating                  earnings adjusted for unusual items**                                               |   | **$**    | **636**   |   | **$**  | **493** | ** ** | **$** | **449** |   |
| Cash                  flow from operating activities before changes in non-cash working                  capital |   | **$**    | **1,193** |   | $      | 882     |       | $ | 942 |   |
| Expenditures                  on property, plant and equipment and exploration                                   |   | **$**    | **713**   |   | $      | 666     |       | $ | 517 |   |
| Total                  assets                                                                                    |   | **$**    | **3,763** |   | $      | 3,477   |       | $ | 2,341 |   |

***2005        Compared With 2004***

----

***2005        Operating Review And Strategic Initiatives***

***2005        Operating        Review***

|                                                                    |   | **2005** |     | 2004   |   | 2003 |   |
|-------------------------------------------------------------------------|--------|----------|----------|--------|--------|------|--------|
| Production                  *(MMcfe/d)*                                 |   |     | **756**  |   |   | 787  |   |   | 794 |   |
| Western                  Canada realized natural gas price *($/Mcf)*    |   | **$**    | **8.55** |   | $      | 6.73 |   | $ | 6.50 |   |
| U.S.                  Rockies realized natural gas price *($/Mcf)*      |   | **$**    | **7.17** |   | $      | 6.30 |   | $  | - |   |
| Western                  Canada operating and overhead costs *($/Mcfe)* |   | **$**    | **1.10** |   | $      | 0.92 |   | $ | 0.74 |   |
| U.S.                  Rockies operating and overhead costs (*$/Mcfe*)   |   | **$**    | **1.84** |   | $      | 2.00 |   | $ | - |   |

*Western        Canada*

*U.S.        Rockies*

***2005        Strategic Initiatives***

----

***Outlook***

| -   | production                  to average about 720 MMcfe/d of natural gas, crude oil and NGL;                  and |
|---------------|-----------------------------------------------------------------------------------------------------------------------|

| -   | unconventional                  gas production is expected to be about 25% of                  production. |
|---------------|------------------------------------------------------------------------------------------------------------|

| -   | drill                  approximately 500 gross wells in Western Canada and approximately                  450 gross wells in the U.S.                  Rockies; |
|---------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| -   | advance                  long-term opportunities in Northern Canada and Alaska;                  and |
|---------------|------------------------------------------------------------------------------------------------------|

| -   | advance                  the re-gasification project at Gros-Cacouna to a project decision                  point. |
|---------------|--------------------------------------------------------------------------------------------------------------------|

| -   | approximately                  $440 million for replacing reserves in Western Canada core                  areas; |
|---------------|-------------------------------------------------------------------------------------------------------------------|

| -   | approximately                  $150 million for new growth opportunities in the U.S. Rockies and                  LNG; |
|---------------|------------------------------------------------------------------------------------------------------------------------|

| -   | approximately                  $235 million directed to exploration in Western Canada, the U.S.                  Rockies                  and the Far North; and |
|---------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| -   | approximately                  $25 million for environmental work and                  maintenance. |
|---------------|-----------------------------------------------------------------------------------------------------|

***Link        to Petro-Canada’s Corporate and Strategic Priorities***

|                                                                                                          |  **2005                  PROGRESS**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  **2006                  GOALS**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|---------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **DELIVERING                  PROFITABLE GROWTH WITH A FOCUS ON OPERATED, LONG-LIFE                  ASSETS** | §  drilled                  100 gross wells in Western Canada and 290 wells in the Western                  Canada                  Medicine Hat region1;§  drilled                  310 wells, added 37,000 net acres of land and obtained 407 permits                  for new                  coal bed methane wells in the U.S. Rockies;§  filed                  regulatory application for the LNG facility at Gros-Cacouna;                  and§  increased                  joint land position with partner in Alaska to 2.5 million acres and                  acquired 410,000 acres in the Mackenzie Corridor.                                                      | §  create                  a stronger exploration focus;§  expand                  growth of unconventional gas plays to about 25% of                  production;§  optimize                  core asset concentric opportunities; and§  advance                  exploration prospects in the Mackenzie Delta/Corridor and                  Alaska.                                                                                                                                                                                         |
| **DRIVING                  FOR FIRST QUARTILE**** ****OPERATION OF OUR ASSETS**                          | §  achieved                  better than 98% reliability at Western Canada facilities; and§  conducted                  major turnarounds at Wildcat Hills, Wilson Creek and Gilby gas                  plants,                  with no lost-time incidents.                                                                                                                                                                                                                                                                                                                                                                                                                                                        | §  achieve                  reliability rate approaching 99%;§  conduct                  major turnaround of the Hanlan gas plant; and§  continue                  to leverage costs through strategic alliances and preferred                  suppliers.                                                                                                                                                                                                                                                                                                   |
| **CONTINUING                  TO WORK AT BEING A RESPONSIBLE COMPANY**                                        | §  saw                  44% increase in total recordable injury frequency compared to 2004.                  While                  contractor injury frequency improved, an upswing in employee injuries                  had                  a negative effect;§  continued                  to reduce injury severity;§  improved                  employee and contractor safety culture through the initial phase of                  behaviour-based safety programs;§  proactively                  remediated and reclaimed old sites; and§  saw                  slight increase in regulatory compliance exceedances compared to                  2004. | §  reduce                  total recordable injury frequency and regulatory exceedances;§  continue                  safety culture improvements by rolling out the next phase of                  behaviour-based safety for employees and contractors;§  drive                  for continuous improvement in contractor safety performance;§  develop                  and implement stakeholder relations strategy; and§  proactively                  remediate and reclaim old sites on a risked                  basis. |

| 1   | Only                  includes wells where Petro-Canada has a working                  interest. |
|---------------|--------------------------------------------------------------------------------------------------|

----

**EAST        COAST OIL**

***Business        Summary and Strategy***

| •   | delivering                  top quartile safety and operating                  performance; |
|---------------------|---------------------------------------------------------------------------------------------|

| •   | sustaining                  profitable production through reservoir extensions and add-ons;                  and |
|---------------------|------------------------------------------------------------------------------------------------------------------|

| •   | pursuing                  high potential development                  projects. |
|---------------------|---------------------------------------------------------------------------------|

***East        Coast Oil Financial Results***

| *(millions                  of dollars)*                                                                         |   | **2005** |      | 2004   |   | 2003    |       |
|------------------------------------------------------------------------------------------------------------------|--------|----------|-----------|--------|--------|---------|------------|
| **Net                  earnings and operating earnings**                                                         |   | **$**    | **775**   |   | **$**  | **711** | ** ** | **$** | **597** |   |
| Insurance                  premium surcharges                                                                    |   |     | **(25**   | **)**  |   | -       |       |   | - |   |
| Income                  tax adjustments                                                                          |   |     | **(2**    | **)**  |   | 3       |       |   | 7 |   |
| Terra                  Nova insurance proceeds                                                                   |   |     | **2**     |   |   | 31      |       |   | 17 |   |
| **Operating                  earnings adjusted for unusual items**                                               |   | **$**    | **800**   |   | **$**  | **677** | ** ** | **$** | **573** |   |
| Cash                  flow from operating activities before changes in non-cash working                  capital |   | **$**    | **1,062** |   | $      | 993     |       | $ | 869 |   |
| Expenditures                  on property, plant and equipment and exploration                                   |   | **$**    | **314**   |   | $      | 275     |       | $ | 344 |   |
| Total                  assets                                                                                    |   | **$**    | **2,442** |   | $      | 2,265   |       | $ | 2,288 |   |

***2005        Compared With 2004***

***2005        Operating Review And Strategic Initiatives***

***2005        Operating Review***

----

|                                                    |   | **2005** |       | 2004   |   | 2003   |   |
|---------------------------------------------------------|--------|----------|------------|--------|--------|--------|--------|
| Production                  *(b/d)*                     |   |     |       |   |   |   |   |   |   |   |
| Hibernia                                                |   |     | **39,800** |   |   | 40,800 |   |   | 40,600 |   |
| Terra                  Nova                             |   |     | **33,700** |   |   | 37,400 |   |   | 45,500 |   |
| White                  Rose                             |   |     | **1,800**  |   |   | -      |   |   | - |   |
| Average                  realized crude price *($/bbl)* |   | **$**    | **63.15**  |   | $      | 48.39  |   | $ | 39.91 |   |
| Operating                  and overhead costs *($/bbl)* |   | **$**    | **4.52**   |   | $      | 2.89   |   | $ | 2.88 |   |

***2005        Strategic Initiatives***

***Outlook***

| -   | East                  Coast Oil production is expected to average 94,000 b/d, reflecting a                  70- to 90-day planned turnaround at Terra Nova and a 14-day planned                  turnaround at White Rose. |
|---------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| -   | achieve                  first quartile operating performance at Terra                  Nova; |
|---------------|-----------------------------------------------------------------------------------------------|

| -   | continue                  development drilling of Terra Nova’s Far East                  Block; |
|---------------|-------------------------------------------------------------------------------------------------------|

| -   | delineation                  of the West White Rose Block at the White Rose field;                  and |
|---------------|---------------------------------------------------------------------------------------------------------|

| -   | achieve                  Hebron benefits agreement with Newfoundland and Labrador government                  and                  progress front-end engineering and design                  (FEED). |
|---------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| -   | approximately                  $275 million is expected to be spent on drilling to replace reserves                  at                  Hibernia, Terra Nova and White Rose, and on developing Terra Nova’s Far                  East Block; and |
|---------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| -   | approximately                  $30 million is expected to fund growth opportunities such as the                  Hebron development, and exploration and new                  ventures. |
|---------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

***Link        to Petro-Canada’s Corporate and Strategic Priorities***

|                                                                                                          | **2005                  PROGRESS**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | **2006                  GOALS**                                                                                                                                                                                                                                                                                                                                                                                               |
|---------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **DELIVERING                  PROFITABLE GROWTH WITH A FOCUS ON OPERATED, LONG-LIFE                  ASSETS** | §  achieved                  first oil production from the White Rose development;§  signed                  joint operating agreement for Hebron; and§  received                  regulatory approval for Far East development at Terra                  Nova.                                                                                                                                                                                                                                                                    | §  secure                  Hebron project provincial benefits agreement and begin FEED;§  achieve                  first production from the Far East development at Terra Nova;§  advance                  in-field Hibernia growth prospects; and§  delineate                  West White Rose prospect.                                                        |
| **DRIVING                  FOR FIRST QUARTILE OPERATION OF OUR ASSETS**                                       | §  improved                  Terra Nova reliability to 90%; and§  maintained                  relatively flat operating and overhead costs excluding insurance                  premium                  surcharges and startup costs for White Rose.                                                                                                                                                                                                                                                                                             | §  conduct                  a 70- to 90-day turnaround scheduled at Terra Nova for regulatory                  compliance and first quartile reliability initiatives; and§  achieve                  White Rose plateau production.                                                                                                                                                             |
| **CONTINUING                  TO WORK AT BEING A RESPONSIBLE COMPANY**                                        | §  saw                  6% increase in total recordable injury frequency compared to 2004;                  §  worked                  with regulators to address the outcomes of the 2004 oily water                  discharge;§  conducted                  Terra Nova turnaround ahead of schedule and with improved safety                  record;                  and§  improved                  the produced water system, resulting in zero regulatory compliance                  exceedances for 2005. | §  reduce                  total recordable injury frequency;§  apply                  lessons learned from oily water discharge to prevent future incidents;                  §  maintain                  zero regulatory exceedances; and§  ensure                  major TLM focus during the significant Terra Nova turnaround and                  startup. |

----

**OIL        SANDS**

***Business        Summary and Strategy***

*in        situ*
*in        situ*

|   | • | phased                  and integrated development of reserves to incorporate knowledge                  gained; |
|--------|---------|------------------------------------------------------------------------------------------------------------------|

|   | • | disciplined                  capital investment to ensure long-life projects are value creating;                  and |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------|

|   | • | a                  staged approach to development of capital-intensive Oil Sands projects                  to                  allow rigorous cost management and the opportunity to benefit from                  evolving technology. |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***Oil        Sands Financial Results***

| *(millions                  of dollars)*                                                                         |   | **2005** |      | 2004   |   | 2003    |       |
|------------------------------------------------------------------------------------------------------------------|--------|----------|-----------|--------|--------|---------|------------|
| **Net                  earnings (loss)**                                                                         |   | **$**    | **115**   |   | **$**  | **120** | ** ** | **$** | **(52** | **)** |
| Gain                  on sale of assets                                                                          |   |     | **3**     |   |   | -       |       |   | - |   |
| **Operating                  earnings (loss)**                                                                   |   | **$**    | **112**   |   | **$**  | **120** | ** ** | ** ** | **(52** | **)** |
| Insurance                  premium surcharges                                                                    |   |     | **(7**    | **)**  |   | -       |       |   | - |   |
| Income                  tax adjustments                                                                          |   |     | **-**     |   |   | 2       |       |   | 5 |   |
| Edmonton                  refinery conversion program                                                            |   |     | **-**     |   |   | -       |       |   | (82 | ) |
| **Operating                  earnings adjusted for unusual items**                                               |   | **$**    | **119**   |   | **$**  | **118** | ** ** | **$** | **25** |   |
| Cash                  flow from operating activities before changes in non-cash working                  capital |   | **$**    | **380**   |   | $      | 332     |       | $ | 122 |   |
| Expenditures                  on property, plant and equipment and exploration                                   |   | **$**    | **772**   |   | $      | 397     |       | $ | 443 |   |
| Total                  assets                                                                                    |   | **$**    | **2,623** |   | $      | 1,883   |       | $ | 1,770 |   |

***2005        Compared With 2004***

***2005        Operating Review And Strategic Initiatives***

----

***2005        Operating Review***

***     ***

|                                                                 |   | **2005** |       | 2004   |   | 2003   |   |
|----------------------------------------------------------------------|--------|----------|------------|--------|--------|--------|--------|
| Production                  *(b/d)*                                  |   |     |       |   |   |   |   |   |   |   |
| Syncrude                                                             |   |     | **25,700** |   |   | 28,600 |   |   | 25,400 |   |
| MacKay                  River                                        |   |     | **21,300** |   |   | 16,600 |   |   | 10,700 |   |
| Syncrude                  realized crude price *($/bbl)*             |   | **$**    | **70.41**  |   | $      | 52.40  |   | $ | 42.67 |   |
| MacKay                  River realized bitumen price*($/bbl)*        |   | **$**    | **18.53**  |   | $      | 18.37  |   | $ | 16.69 |   |
| Syncrude                  operating and overhead costs *($/bbl)*     |   | **$**    | **31.90**  |   | $      | 21.13  |   | $ | 23.94 |   |
| MacKay                  River operating and overhead costs *($/bbl)* |   | **$**    | **17.06**  |   | $      | 21.87  |   | $ | 23.73 |   |

*in        situ*

***2005        Strategic Initiatives***

*in        situ*

*in        situ*

----

***Outlook***

| -   | Petro-Canada’s                  share of Syncrude production is expected to average 34,000 b/d;                  and |
|---------------|---------------------------------------------------------------------------------------------------------------------------------|

| -   | MacKay                  River bitumen production is expected to average                  25,000 b/d. |
|---------------|-----------------------------------------------------------------------------------------------------------|

| -   | Syncrude                  Stage III expansion to come on-stream in                  mid-2006; |
|---------------|-----------------------------------------------------------------------------------------------|

| -   | increased                  production capacity at MacKay                  River; |
|---------------|----------------------------------------------------------------------------------|

| -   | continue                  evaluation of the MacKay River expansion                  project; |
|---------------|----------------------------------------------------------------------------------------------|

| -   | advancement                  of the Fort Hills oil sands mining and upgrading project;                  and |
|---------------|-------------------------------------------------------------------------------------------------------------|

| -   | progression                  of SAGD technology through research and                  development. |
|---------------|----------------------------------------------------------------------------------------------------|

| -   | approximately                  $135 million to enhance existing operations at MacKay River and                  Syncrude; |
|---------------|---------------------------------------------------------------------------------------------------------------------------|

| -   | approximately                  $165 million to advance the Fort Hills development and the Syncrude                  Stage                  III expansion; |
|---------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|

| -   | approximately                  $40 million to advance development of *in                  situ*                  oil sands leases; and |
|---------------|----------------------------------------------------------------------------------------------------------------------------------------|

| -   | approximately                  $15 million to replace reserves through ongoing pad development                  at MacKay                  River. |
|---------------|---------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Link        to Petro-Canada’s Corporate and Strategic Priorities**

|                                                                                                          | **2005                  PROGRESS**                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | **2006                  GOALS**                                                                                                                                                                                                                                                                                                         |
|---------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **DELIVERING                  PROFITABLE GROWTH WITH A FOCUS ON OPERATED, LONG-LIFE                  ASSETS** | §  secured                  a position in oil sands mining with Petro-Canada becoming operator                  and                  owning a 55% interest in Fort Hills;§  acquired                  the Dover UTF and oil sands leases adjacent to MacKay River;§  progressed                  construction of the Syncrude Stage III expansion; and§  undertook                  an extensive drilling program at Lewis.               | §  advance                  Fort Hills and MacKay River expansion development plans;§  start                  up Syncrude Stage III expansion; and§  increase                  MacKay River production to between 27,000 b/d and 30,000 b/d by                  year                  end. |
| **DRIVING                  FOR FIRST QUARTILE OPERATION OF OUR ASSETS**                                       | §  decreased                  MacKay River unit operating costs by 22%;§  achieved                  average reliability at MacKay River of 98%, up from 79% in 2004;                  and§  saw                  Syncrude non-fuel unit operating costs increased by 47%.                                                                                                                                                                                | §  decrease                  MacKay River non-fuel unit operating costs by 15%;§  decrease                  Syncrude non-fuel unit operating costs by 25%; and§  sustain                  MacKay River reliability at 2005 levels or better.                                               |
| **CONTINUING                  TO WORK AT BEING A RESPONSIBLE COMPANY**                                        | §  saw                  no change to total recordable injury frequency compared to                  2004;§  on                  behalf of Downstream, completed recycled waterline for reusing                  wastewater                  at the Edmonton refinery; and§  established                  the McLelland Lake Wetland Complex Sustainability Committee to                  assist in                  the management of the patterned fen. | §  maintain                  focus on total recordable injury frequency; and§  ensure                  regulators, First Nations and other key stakeholders affected by                  major                  projects are properly consulted and                  engaged.                             |

----

**INTERNATIONAL**

***BUSINESS        SUMMARY AND STRATEGY***

|   | • | optimize                  and leverage existing assets; |
|--------|---------|---------------------------------------------------------|

|   | • | seek                  out new, long-life opportunities;                  and |
|--------|---------|------------------------------------------------------------------------------|

|   | • | build                  a balanced exploration program. |
|--------|---------|--------------------------------------------------------|

***International        Financial Results***

| *(millions                  of dollars)*                                                                                    |   | **2005** |      | 2004       |   | 2003    |       |
|-----------------------------------------------------------------------------------------------------------------------------|--------|----------|-----------|------------|--------|---------|------------|
| **Net                  earnings (loss) from continuing operations**                                                         |   | **$**    | **(109**  | **)**      | **$**  | **116** | ** ** | **$** | **192** |   |
| Unrealized                  loss on Buzzard derivative contracts                                                            |   |     | **(562**  | **)**      |   | (205    | )          |   | - |   |
| Gain                  on sale of assets                                                                                     |   |     | **-**     |       |   | 8       |       |   | 10 |   |
| **Operating                  earnings from continuing operations**                                                          |   | **$**    | **453**   | ** ** | **$**  | **313** | ** ** | **$** | **182** |   |
| Insurance                  premium surcharges                                                                               |   |     | **(18**   | **)**      |   | -       |       |   | - |   |
| Income                  tax adjustments                                                                                     |   |     | **29**    |       |   | -       |       |   | - |   |
| Kazakhstan                  impairment                                                                                      |   |     | **-**     |       |   | -       |       |   | (46 | ) |
| International                  provisions                                                                                   |   |     | **-**     |       |   | -       |       |   | 45 |   |
| **Operating                  earnings from continuing operations adjusted for unusual                  items**              |   | **$**    | **442**   | ** ** | **$**  | **313** | ** ** | **$** | **183** |   |
| Cash                  flow from continuing operating activities before changes in non-cash                  working capital |   | **$**    | **770**   |       | $      | 768     |       | $ | 608 |   |
| Expenditures                  on property, plant and equipment and exploration from continuing                  operations  |   | **$**    | **696**   |       | $      | 1,707   |       | $ | 400 |   |
| Total                  assets from continuing operations                                                                    |   | **$**    | **4,856** |       | $      | 4,969   |       | $ | 2,842 |   |

***2005        COMPARED WITH 2004***

----

***2005        OPERATING REVIEW AND STRATEGIC INITIATIVES***

***2005        Operating        Review***

|                                                                                           |   | **2005** |       | 2004   |   | 2003   |   |
|------------------------------------------------------------------------------------------------|--------|----------|------------|--------|--------|--------|--------|
| Production                  from continuing operations *(boe/d)*                               |   |     |       |   |   |   |   |   |   |   |
| Northwest                  Europe                                                              |   |     | **44,600** |   |   | 54,600 |   |   | 51,000 |   |
| North                  Africa/Near East                                                        |   |     | **49,800** |   |   | 50,900 |   |   | 53,400 |   |
| Northern                  Latin America                                                        |   |     | **11,900** |   |   | 11,900 |   |   | 10,500 |   |
| Average                  realized crude oil and NGL price from continuing operations *($/bbl)* |   | **$**    | **65.90**  |   | $      | 49.19  |   | $ | 39.86 |   |
| Average                  realized natural gas price from continuing operations *($/Mcf)*       |   | **$**    | **6.97**   |   | $      | 5.27   |   | $ | 4.80 |   |
| Operating                  and overhead costs from continuing operations *($/boe)*             |   | **$**    | **7.60**   |   | $      | 7.13   |   | $ | 6.23 |   |

***Northwest        Europe***

----

***North        Africa/Near East***

**Northern        Latin America**

----

***Outlook***

| -   | North                  Africa/Near East oil and gas production to average                  55,000 boe/d; |
|---------------|---------------------------------------------------------------------------------------------------------------|

| -   | Northwest                  Europe oil and gas production to average 43,000 boe/d;                  and |
|---------------|-------------------------------------------------------------------------------------------------------------|

| -   | Northern                  Latin American natural gas production to average                  72 MMcf/d. |
|---------------|-------------------------------------------------------------------------------------------------------------|

| -   | advance                  De Ruyter development for 2006                  startup; |
|---------------|-----------------------------------------------------------------------------------|

| -   | progress                  Buzzard project for first oil in                  2006; |
|---------------|-----------------------------------------------------------------------------------|

| -   | execute                  the exploration program in Northern Latin America, Northwest Europe                  and                  North Africa/Near East; and |
|---------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|

| -   | continue                  to pursue new business opportunities in LNG and from established                  reserves                  in the Middle East. |
|---------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|

| -   | approximately                  $210 million for reserves replacement spending in core                  areas; |
|---------------|---------------------------------------------------------------------------------------------------------------|

| -   | approximately                  $515 million primarily for new North Sea growth projects;                  and |
|---------------|---------------------------------------------------------------------------------------------------------------|

| -   | approximately                  $90 million for exploration and new                  ventures. |
|---------------|-----------------------------------------------------------------------------------------------|

***Link        to Petro-Canada’s Corporate and Strategic Priorities***

|                                                                                                          | **2005                  PROGRESS**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | **2006                  GOALS**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|---------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **DELIVERING                  PROFITABLE GROWTH WITH A FOCUS ON OPERATED, LONG-LIFE                  ASSETS** | §  advanced                  Buzzard development on schedule and on budget;§  achieved                  first oil at Pict in June 2005;§  progressed                  exploration with two discoveries in the U.K. sector of the North                  Sea and                  the Hejre appraisal; and§  was                  awarded eight blocks in the 23rd                  U.K. licensing round and five Norwegian production                  licences.                                                                                                                                              | §  achieve                  first production by year end at Buzzard in the U.K. sector of the                  North                  Sea and at De Ruyter and L5b-C in the Netherlands sector of the                  North Sea;                  §  conduct                  11-well drilling program with balanced risk profile;§  complete                  seismic program in Trinidad and Tobago and refine exploration well                  locations; and§  advance                  field development plans for La Ceiba in Venezuela and Saxon in                  the U.K.                  sector of the North Sea. |
| **DRIVING                  FOR FIRST QUARTILE OPERATION OF OUR ASSETS**                                       | §  completed                  Hanze turnaround in nine days versus planned 14 days;§  participated                  in peer benchmarking studies for North Sea producing facilities;                  and§  secured                  lease on new London office building on very favourable                  terms.                                                                                                                                                                                                                                                                                                          | §  conduct                  North Sea Triton de-bottlenecking study;§  ensure                  De Ruyter operations readiness;§  increase                  technical and environment, health and safety co-operation in                  Libya;§  improve                  reliability and uptime on the Scott platform; and§  roll                  out International management system.                                                                                                                                                                                                                         |
| **CONTINUING                  TO WORK AT BEING A RESPONSIBLE COMPANY**                                        | §  reduced                  total recordable injury frequency by 22% compared to 2004;§  initiated                  program of Zero Harm inspections by management;§  rolled                  out Zero Harm supervisory training for leaders;§  worked                  with community to minimize impact of onshore well in Tunisia;§  developed                  oil spill strategy and coastline mapping for offshore well in Tunisia;                  and§  initiated                  plan to protect forest reserve during seismic operations in                  Syria. | §  maintain                  focus on total recordable injury frequency;§  consult                  with communities in Trinidad and Tobago in preparation for exploration                  drilling program;§  reduce                  oil in produced water at Triton; and§  introduce                  Employee Assistance Program for International                  employees.                                                                                                                                                                                                                                              |

----

***Discontinued        Operations***

***Discontinued        Financial Results***

| *(millions                  of dollars, unless otherwise noted)*                                                              |   | **2005** |       | 2004       |   | 2003   |       |
|-------------------------------------------------------------------------------------------------------------------------------|--------|----------|------------|------------|--------|--------|------------|
| **Net                  earnings and operating earnings from discontinued                  operations**                        |   | **$**    | **98**     | ** ** | **$**  | **59** | ** ** | **$** | **115** |   |
| Insurance                  premium surcharges                                                                                 |   |     | **(2**     | **)**      |   | **-**  |       |   | **-** |   |
| **Operating                  earnings from discontinued operations adjusted for unusual                  items**              |   | **$**    | **100**    | ** ** | **$**  | **59** | ** ** | **$** | **115** |   |
| Cash                  flow from discontinued operating activities before changes in non-cash                  working capital |   | **$**    | **245**    |       | $      | 204    |       | $ | 247 |   |
| Expenditures                  on property, plant and equipment and exploration                                                |   | **$**    | **46**     |       | $      | 62     |       | $ | 90 |   |
| Total                  assets                                                                                                 |   | **$**    | **648**    |       | $      | 985    |       | $ | 1,131 |   |
| Total                  volumes *(boe/d)*                                                                                      |   |     |       |       |   |   |       |   |   |   |
| -                  net before royalties                                                                                       |   |     | **70,100** |       |   | 79,200 |       |   | 95,000 |   |
| -                  net after royalties                                                                                        |   |     | **21,000** |       |   | 24,200 |       |   | 35,600 |   |
| Average                  realized crude oil and NGL price *($/bbl)*                                                           |   | **$**    | **61.82**  |       | $      | 46.70  |       | $ | 38.32 |   |
| Average                  realized natural gas price *($/Mcf)*                                                                 |   | **$**    | **6.43**   |       | $      | 4.81   |       | $ | 4.84 |   |

**UPSTREAM        PRODUCTION**

***2005        COMPARED WITH 2004***

| 2005                  Average Daily Production Volumes       | North                  American Natural Gas | East                  Coast Oil | Oil                  Sands | International | Total       |
|--------------------------------------------------------------|---------------------------------------------|---------------------------------|----------------------------|---------------|-------------|
|                                                         |                                        |                            |                       |          |        |
| **Crude                  oil, NGL and bitumen** *(b/d)* |                                        |                            |                       |          |        |
| -                  net before royalties                      | **14,700**                                  | **75,300**                      | **21,300**                 | **83,500**    | **194,800** |
| -                  net after royalties                       | **11,200**                                  | **69,600**                      | **21,100**                 | **77,300**    | **179,200** |
| **Synthetic                  crude oil***(b/d)*              |                                        |                            |                       |          |        |
| -                  net before royalties                      | **-**                                       | **-**                           | **25,700**                 | **-**         | **25,700**  |
| -                  net after royalties                       | **-**                                       | **-**                           | **25,400**                 | **-**         | **25,400**  |
| **Natural                  gas** *(MMcf/d)*             |                                        |                            |                       |          |        |
| -                  net before royalties                      | **668**                                     | **-**                           | **-**                      | **138**       | **806**     |
| -                  net after royalties                       | **512**                                     | **-**                           | **-**                      | **122**       | **634**     |
| **Continuing                  operations** *(boe/d)*    |                                        |                            |                       |          |        |
| -                  net before royalties                      | **126,000**                                 | **75,300**                      | **47,000**                 | **106,300**   | **354,600** |
| -                  net after royalties                       | **96,500**                                  | **69,600**                      | **46,500**                 | **97,700**    | **310,300** |
| **Discontinued                  operations** *(boe/d)*  |                                        |                            |                       |          |        |
| -                  net before royalties                      | **-**                                       | **-**                           | **-**                      | **70,100**    | **70,100**  |
| -                  net after royalties                       | **-**                                       | **-**                           | **-**                      | **21,000**    | **21,000**  |
| **Total                  volumes** *(boe/d)*            |                                        |                            |                       |          |        |
| -                  net before royalties                      | **126,000**                                 | **75,300**                      | **47,000**                 | **176,400**   | **424,700** |
| -                  net after royalties                       | **96,500**                                  | **69,600**                      | **46,500**                 | **118,700**   | **331,300** |

----

| 2004                  Average Daily Production Volumes       | North                  American Natural Gas | East                  Coast Oil | Oil                  Sands | International | Total   |
|--------------------------------------------------------------|---------------------------------------------|---------------------------------|----------------------------|---------------|---------|
|                                                         |                                        |                            |                       |          |    |
| **Crude                  oil, NGL and bitumen** *(b/d)* |                                        |                            |                       |          |    |
| -                  net before royalties                      | 15,300                                      | 78,200                          | 16,600                     | 91,300        | 201,400 |
| -                  net after royalties                       | 11,400                                      | 75,100                          | 16,500                     | 84,100        | 187,100 |
| **Synthetic                  crude oil***(b/d)*              |                                        |                            |                       |          |    |
| -                  net before royalties                      | -                                           | -                               | 28,600                     | -             | 28,600  |
| -                  net after royalties                       | -                                           | -                               | 28,300                     | -             | 28,300  |
| **Natural                  gas** *(MMcf/d)*             |                                        |                            |                       |          |    |
| -                  net before royalties                      | 695                                         | -                               | -                          | 157           | 852     |
| -                  net after royalties                       | 530                                         | -                               | -                          | 136           | 666     |
| **Continuing                  operations** *(boe/d)*    |                                        |                            |                       |          |    |
| -                  net before royalties                      | 131,100                                     | 78,200                          | 45,200                     | 117,400       | 371,900 |
| -                  net after royalties                       | 99,700                                      | 75,100                          | 44,800                     | 106,800       | 326,400 |
| **Discontinued                  operations** *(boe/d)*  |                                        |                            |                       |          |    |
| -                  net before royalties                      | -                                           | -                               | -                          | 79,200        | 79,200  |
| -                  net after royalties                       | -                                           | -                               | -                          | 24,200        | 24,200  |
| **Total                  volumes** *(boe/d)*            |                                        |                            |                       |          |    |
| -                  net before royalties                      | 131,100                                     | 78,200                          | 45,200                     | 196,600       | 451,100 |
| -                  net after royalties                       | 99,700                                      | 75,100                          | 44,800                     | 131,000       | 350,600 |

**2006        Production Outlook**

| Consolidated                  Production *(thousands                  of boe/d)* | 2006                  Outlook *(+/-)* |
|----------------------------------------------------------------------------------|---------------------------------------|
| **North                  American Natural Gas**                                  |                                  |
| Natural                  gas                                                     | 106                                   |
| Liquids                                                                          | 14                                    |
| **East                  Coast Oil**                                              | 94                                    |
| **Oil                  Sands**                                                   |                                  |
| Syncrude                                                                         | 34                                    |
| MacKay                  River                                                    | 25                                    |
| **International**                                                                |                                  |
| North                  Africa/Near East                  1                       | 55                                    |
| Northwest                  Europe                                                | 43                                    |
| Northern                  Latin America                                          | 12                                    |
| **Total                  continuing operations**                                 | 365-390                               |
| **Discontinued                  operations****2**                                | 58                                    |
| **Total**                                                                        | 425-450                               |

----

**RESERVES**

| **December                  31, 2005****Consolidated                  Reserves****1** |   | **Proved                  Liquids** |       | **Proved                  Gas** |   | **Proved                  Reserves Additions Liquids****3** |   | **Proved                  Reserves Additions Gas****3** |       | **Proved****2** |   | **Proved                  Reserves Additions****3** |   |
|---------------------------------------------------------------------------------------|--------|-------------------------------------|------------|---------------------------------|--------|-------------------------------------------------------------|--------|---------------------------------------------------------|------------|-----------------|--------|-----------------------------------------------------|--------|
| *(working                  interest before royalties)*                                |   |                                | *(MMbbls)* |                            |   | *(Bcf)*                                                     |   |                                                    | *(MMbbls)* |            |   | *(Bcf)*                                             |   |   | *(MMboe)* |   |   | *(MMboe)* |   |
| North                  American Natural Gas                                           |   |                                | 49         |                            |   | 1,825                                                       |   |                                                    | 11         |            |   | 30                                                  |   |   | 353 |   |   | 16 |   |
| East                  Coast Oil                                                       |   |                                | 132        |                            |   | -                                                           |   |                                                    | 91         |            |   | -                                                   |   |   | 132 |   |   | 91 |   |
| Oil                  Sands 4                                                          |   |                                | 342        |                            |   | -                                                           |   |                                                    | 28         |            |   | -                                                   |   |   | 342 |   |   | 28 |   |
| International                  5                                                      |   |                                | 343        |                            |   | 370                                                         |   |                                                    | 39         |            |   | (6                                                  | )      |   | 405 |   |   | 38 |   |
| Total                                                                                 |   |                                | 866        |                            |   | 2,195                                                       |   |                                                    | 169        |            |   | 24                                                  |   |   | 1,232 |   |   | 173 |   |
| Production                                                                            |   |                                |       |                            |   |                                                        |   |                                                    | 105        |            |   | 303                                                 |   |   |   |   |   | 155 |   |
| Proved                  replacement ratio 6,                  7                       |   |                                |       |                            |   |                                                        |   |                                                    |       |            |   |                                                |   |   |   |   |   | 111 | % |
| Five-year                  proved plus probable replacement ratio                     |   |                                | 195   | %                               |   |                                                        |   |                                                    |       |            |   |                                                |   |   |   |   |   |   |   |
| Proved                  plus probable reserves life index 7,                  8       |   |                                | 14.7  |                            |   |                                                        |   |                                                    |       |            |   |                                                |   |   |   |   |   |   |   |

| 1   | A                  comparative table for 2005 versus 2004 is shown on page                  74. |
|---------------|-------------------------------------------------------------------------------------------------|

| 2   | At                  year-end 2005, 65% of proved reserves were classified as proved                  developed                  reserves. Of the total undeveloped reserves, 85% are associated                  with large                  projects currently producing or under active development, including                  Buzzard, Syncrude, Hibernia, Terra Nova, White Rose, and Trinidad                  and                  Tobago natural gas. |
|---------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3   | Proved                  reserves additions are the sum of revisions of previous estimates,                  net                  purchases/sales, and discoveries, extensions and improved recovery                  in                  2005. Further detail on these categories is provided in the reserves                  table                  on page 74. |
|---------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4   | Oil                  Sands proved reserves only include reserves from Syncrude. The                  2005                  bitumen production of 8 MMboe is included in calculating the Oil                  Sands                  proved replacement ratio and proved plus probable reserves life                  index. |
|---------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 5   | The                  Company’s Syrian producing assets were in the process of being sold at                  year end. As at December 31, 2005, the sale had not closed. The                  Syria 2005                  year-end proved reserves (49 MMboe), the proved plus probable                  reserves (67 MMboe), and the 2005 production (26 MMboe) are included                  in                  reserves and calculated ratios. |
|---------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 6   | This                  ratio is the year-over-year net change in proved reserves (before                  deducting production), divided by annual production over the same                  time                  period. Proved reserves replacement ratio is a general indicator                  of the                  Company's reserves growth. It is only one of a number of metrics                  which can                  be used to analyse a company's upstream                  business. |
|---------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 7   | Reserves                  replacement ratio and reserves life index are non-standardized                  measures                  and may not be comparable to similar measures of other companies.                  They are                  illustrative only. |
|---------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 8   | This                  index is proved plus probable reserves at year-end 2005, divided                  by annual                  production. |
|---------------|------------------------------------------------------------------------------------------------------------------------------------------------|

----

*in situ*

**DOWNSTREAM**

***BUSINESS        SUMMARY AND STRATEGY***

|   | • | achieving                  and maintaining first quartile operating performance in all                  areas; |
|--------|---------|----------------------------------------------------------------------------------------------------------------|

|   | • | advancing                  Petro-Canada as the “brand of choice” for Canadian gasoline consumers;                  and |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------------|

|   | • | increasing                  sales of high-margin specialty                  lubricants. |
|--------|---------|-----------------------------------------------------------------------------------------|

***Downstream        Financial Results***

| *(millions                  of dollars)*                                                                         |   | **2005** |      | 2004       |   | 2003    |       |
|------------------------------------------------------------------------------------------------------------------|--------|----------|-----------|------------|--------|---------|------------|
| **Net                  earnings**                                                                                |   | **$**    | **415**   | ** ** | **$**  | **314** | ** ** | **$** | **248** |   |
| Gain                  (loss) on sale of assets                                                                   |   |     | **17**    |       |   | 4       |       |   | (15 | ) |
| **Operating                  earnings**                                                                          |   | **$**    | **398**   | ** ** | **$**  | **310** | ** ** | **$** | **263** |   |
| Insurance                  premium surcharges                                                                    |   |     | **(23**   | **)**      |   | -       |       |   | - |   |
| Income                  tax adjustments                                                                          |   |     | **(2**    | **)**      |   | 2       |       |   | 34 |   |
| Oakville                  closure costs                                                                          |   |     | **2**     |       |   | (46     | )          |   | (151 | ) |
| **Operating                  earnings adjusted for unusual items**                                               |   | **$**    | **421**   | ** ** | **$**  | **354** | ** ** | **$** | **380** |   |
| Cash                  flow from operating activities before changes in non-cash working                  capital |   | **$**    | **607**   |       | $      | 556     |       | $ | 601 |   |
| Expenditures                  on property, plant and equipment                                                   |   | **$**    | **1,053** |       | $      | 839     |       | $ | 424 |   |
| Total                  assets                                                                                    |   | **$**    | **5,609** |       | $      | 4,462   |       | $ | 3,827 |   |

| 1 | Capacity                  reflects small expansion of Montreal refinery, effective January                  1, 2005,                  and closure of Oakville refinery operations, effective April 11,                  2005. |
|---|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**2005        COMPARED WITH 2004**

**2005        OPERATING REVIEW AND STRATEGIC INITIATIVES**

**Refining        and Supply**

----

**Marketing**

**Lubricants**

----

***Outlook***

| -   | drive                  for first quartile refinery safety and                  reliability; |
|---------------|---------------------------------------------------------------------------------------------|

| -   | complete                  investments in Montreal and Edmonton refineries to produce low-sulphur                  diesel; |
|---------------|---------------------------------------------------------------------------------------------------------------------------|

| -   | advance                  Edmonton refinery conversion project to process oil sands based                  feedstock                  by 2008; |
|---------------|-----------------------------------------------------------------------------------------------------------------------------------------------|

| -   | evaluate                  feasibility of a coker at the Montreal                  refinery; |
|---------------|---------------------------------------------------------------------------------------------|

| -   | increase                  service station network effectiveness with a focus on increasing                  non-petroleum revenue; |
|---------------|------------------------------------------------------------------------------------------------------------------------------------|

| -   | build                  wholesale volumes primarily through our commercial road transport                  and bulk                  fuels sales channels; and |
|---------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

| -   | increase                  sales of higher-margin, value-added lubricants, supported by increased                  plant capacity in 2006. |
|---------------|-------------------------------------------------------------------------------------------------------------------------------------------|

| -   | approximately                  $245 million primarily focused on completion of diesel desulphurization                  at                  Montreal and Edmonton refineries; |
|---------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| -   | approximately                  $70 million to enhance existing                  operations; |
|---------------|---------------------------------------------------------------------------------------------|

| -   | approximately                  $180 million to improve profitability in the base business;                  and |
|---------------|-----------------------------------------------------------------------------------------------------------------|

| -   | approximately                  $535 million for Edmonton refinery conversion program and new growth                  opportunities. |
|---------------|-------------------------------------------------------------------------------------------------------------------------------------|

***Link        to Petro-Canada’s Corporate and Strategic Priorities***

|                                                                                                          | **2005                  PROGRESS**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | **2006                  GOALS**                                                                                                                                                                                                                                                                                                                                                                       |
|---------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **DELIVERING                  PROFITABLE GROWTH WITH A FOCUS ON OPERATED, LONG-LIFE                  ASSETS** | §  completed                  Eastern Canada consolidation;§  initiated                  detailed engineering of Edmonton refinery conversion to synthetic                  crude                  diet; and§  acquired                  51% interest in a paraxylene facility adjacent to the Montreal                  refinery.                                                                                                                                                                             | §  progress                  Edmonton refinery feed conversion project for completion in                  2008;§  conduct                  Montreal coker feasibility study for decision in 2007;§  de-bottleneck                  Lubricants plant; and§  continue                  to make refinery yield and reliability improvements. |
| **DRIVING                  FOR FIRST QUARTILE OPERATION OF OUR ASSETS**                                       | §  improved                  the Downstream plant reliability index score by more than                  16%;§  achieved                  leading share of retail major urban market; and§  increased                  sales of high-margin lubricants.                                                                                                                                                                                                                                                         | §  continue                  to focus on safety, and refinery operating and maintenance                  procedures;§  increase                  retail non-petroleum revenue; and§  achieve                  75% high-margin lubricants sales mix.                                                                                                      |
| **CONTINUING                  TO WORK AT BEING A RESPONSIBLE COMPANY**                                        | §  reduced                  total recordable injury frequency by 51% compared to 2004;§  surpassed                  four million hours of work without a lost-time injury on the Edmonton                  Diesel Desulphurization Project;§  reduced                  community complaints by 57% compared to 2004;§  invested                  into producing cleaner-burning fuels; and§  reduced                  regulatory compliance exceedances by 59% compared to 2004. | §  maintain                  focus on total recordable injury frequency and regulatory compliance                  exceedances in 2006;§  produce                  ultra-low sulphur diesel; and§  meet                  provincial ethanol regulations.                                                                                                 |

----

**SHARED        SERVICES**

***Shared        Services Financial Results***

| *(millions                  of dollars)*                                                                         |   | **2005** |     | 2004   |   | 2003     |   |
|------------------------------------------------------------------------------------------------------------------|--------|----------|----------|--------|--------|----------|--------|
| **Net                  earnings (loss)**                                                                         |   | **$**    | **(177** | **)**  | **$**  | **(63**  | **)**  | **$** | **58** |   |
| Gain                  (loss) on sale of assets                                                                   |   |     | **-**    |   |   | (1       | )      |   | 1 |   |
| Foreign                  currency translation                                                                    |   |     | **73**   |   |   | 63       |   |   | 239 |   |
| **Operating                  loss**                                                                              |   | **$**    | **(250** | **)**  | **$**  | **(125** | **)**  | **$** | **(182** | **)** |
| Stock-based                  compensation                                                                        |   |     | **(66**  | **)**  |   | (11      | )      |   | (13 | ) |
| Income                  tax adjustments                                                                          |   |     | **(31**  | **)**  |   | (1       | )      |   | (11 | ) |
| **Operating                  loss adjusted for unusual items**                                                   |   | **$**    | **(153** | **)**  | **$**  | **(113** | **)**  | **$** | **(158** | **)** |
| Cash                  flow from operating activities before changes in non-cash working                  capital |   | **$**    | **(225** | **)**  | $      | (106     | )      | $ | (100 | ) |

**2005        COMPARED WITH 2004**

**FINANCIAL        REPORTING**

***CRITICAL        ACCOUNTING ESTIMATES***

----

***Property,        Plant and Equipment/Depreciation, Depletion and        Amortization***

***Asset        Retirement Obligations***

***Asset        Impairment***

***Purchase        Price Allocation***

----

***Goodwill        Impairment***

***Estimated        Oil and Gas Reserves***

***Employee        Future Benefits***

----

***Income        Taxes***

***Contingencies***

**SHARE        DATA**

**ADDITIONAL        INFORMATION**

----