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U.S. SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549


Form 40-F


|  |  |                                                                                            
|- |  | -------------------------------------------------------------------------------------------
|o |  | REGISTRATION STATEMENT PURSUANT TO SECTION 12
    OF THE SECURITIES EXCHANGE ACT OF 1934   
| 
|þ |  | ANNUAL REPORT PURSUANT TO SECTION 13(a) OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934
| 
|  |  | For the fiscal year ended December 31, 2004                                                

Commission File Number 1-4307


Husky Energy Inc.


(Exact name of Registrant as specified in its charter)


|                                                                      |  |                                                              |  |                                         
|--------------------------------------------------------------------- |  | ------------------------------------------------------------ |  | ----------------------------------------
|Alberta, Canada                                                       |  | 1311                                                         |  | Not applicable.                         
|(Province or other jurisdiction of
    incorporation or organization) |  | (Primary Standard Industrial
    Classification Code Number) |  | (I.R.S. Employer
    Identification No.)

707  8th Avenue S.W.


PO Box 6525 Station D


Calgary, Alberta, Canada T2P 3G7


(403) 298-6111


(Address and telephone number of Registrants principal
executive offices)


CT Corporation System


111 Eighth Avenue, New York, New York 10011


(212) 894-8400


(Name, address (including zip code) and telephone number


(including area code) of agent for service in the United
States)


Securities registered or to be registered pursuant to
Section 12(b) of the Act:


None


Securities registered or to be registered pursuant to
Section 12(g) of the Act:


None


Securities for which there is a reporting obligation pursuant
to Section 15(d) of the Act:


6.15% Notes due 2019




|                          |  |                                          
|------------------------- |  | -----------------------------------------
|þ Annual information form |  | þ Audited annual
    financial statements





o þ


þ o












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Except where otherwise indicated, all dollar amounts
stated in this Annual Report on Form 40-F are Canadian
dollars.


Principal Documents










Controls and Procedures


A. Disclosure Controls and Procedures






B. Changes in Internal Control Over Financial
Reporting




Audit Committee Financial Expert




Code of Ethics






| |     |                                                                                                                                                                                                                                                                                                                                                                                             
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i) | amends any provision of its Code of Business Conduct that
    applies to the Registrants principal executive officer,
    principal financial officer, principal accounting officer or
    controller or persons performing similar functions that relates
    to any element of the code of ethics definition enumerated in
    paragraph (9)(b) of General Instruction B to Form 40-F, or

ii



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| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (ii) | grants a waiver, including an implicit waiver, from a provision
    of its Code of Business Conduct to any of the Registrants
    principal executive officer, principal financial officer,
    principal accounting officer or controller or persons performing
    similar functions that relates to any element of the code of
    ethics definition as enumerated in paragraph (9)(b) of General
    Instruction B to Form 40-F,



Principal Accountant Fees and Services




Off-Balance Sheet Arrangements




Contractual Obligations and Commercial Commitments




UNDERTAKING AND CONSENT TO SERVICE OF PROCESS


Undertaking




Consent to Service of Process






iii



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SIGNATURE






| |                  
| | -----------------
| | Husky Energy Inc.



| |     |                  
| | --- | -----------------
| | By: | /s/ Neil D. McGee

| |                                                      
| | -----------------------------------------------------
| |                                                      
| | Name:  Neil D. McGee                                 
| | Title:   Vice President & Chief Financial
    Officer



| |     |                      
| | --- | ---------------------
| | By: | /s/ James D. Girgulis

| |                                                         
| | --------------------------------------------------------
| |                                                         
| | Name:  James D. Girgulis                                
| | Title:   Vice President, Legal & Corporate
    Secretary



iv



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Document A


Form 40-F


ANNUAL INFORMATION FORM


For the Year Ended December 31, 2004






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HUSKY ENERGY INC.


ANNUAL INFORMATION FORM


For the Year Ended December 31, 2004


March 16, 2005




---










TABLE OF CONTENTS


|                                                                                                                            |                                                                               |      |    |    | 
|--------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------- | ---- | -- | -- | 
|                                                                                                                            |                                                                               | Page |   
|                                                                                                                            |                                                                               |      |   
|Exchange Rate Information                                                                                                   |                                                                               |      | 2  |   
|Disclosure Exemption Under National
    Instrument 51-101                                                                   |                                                                               |      | 3  |   
|Corporate Structure                                                                                                         |                                                                               |      |    |   
|                                                                                                                            | Husky Energy Inc.                                                             |      |    | 4  | 
|                                                                                                                            | Intercorporate Relationships                                                  |      |    | 4  | 
|General Development of Husky                                                                                                |                                                                               |      |    |   
|                                                                                                                            | Three Year History of Husky                                                   |      |    | 5  | 
|                                                                                                                            | Business Environment Trends                                                   |      |    | 6  | 
|Description of Huskys
    Business                                                                                         |                                                                               |      |    |   
|                                                                                                                            | General                                                                       |      |    | 6  | 
|                                                                                                                            | Social and Environmental Policy                                               |      |    | 7  | 
|                                                                                                                            | Risk Factors                                                                  |      |    | 8  | 
|                                                                                                                            | Upstream Operations  Disclosures
    for Oil and Gas Activities              |      |    | 9  | 
|                                                                                                                            | Disclosure about Oil and Gas Producing
    Activities  FAS 69                |      |    | 23 | 
|                                                                                                                            | Independent Engineers Audit
    Opinion                                      |      |    | 30 | 
|                                                                                                                            | Report on Reserves Data by Qualified
    Reserves Evaluator                   |      |    | 31 | 
|                                                                                                                            | Report of Management and Directors on
    Reserves Data and Other Information |      |    | 33 | 
|                                                                                                                            | Description of Major Properties and
    Facilities                            |      |    | 35 | 
|                                                                                                                            | Distribution of Oil and Gas Production                                        |      |    | 48 | 
|                                                                                                                            | Midstream Operations                                                          |      |    | 49 | 
|                                                                                                                            | Refined Products                                                              |      |    | 52 | 
|                                                                                                                            | Human Resources                                                               |      |    | 56 | 
|Dividends                                                                                                                   |                                                                               |      | 56 |   
|Description of Capital Structure                                                                                            |                                                                               |      | 57 |   
|Market for Securities                                                                                                       |                                                                               |      | 58 |   
|Directors and Officers                                                                                                      |                                                                               |      | 59 |   
|Audit Committee                                                                                                             |                                                                               |      | 63 |   
|Legal Proceedings                                                                                                           |                                                                               |      | 64 |   
|Interest of Management and Others in
    Material Transactions                                                              |                                                                               |      | 64 |   
|Transfer Agent and Registrars                                                                                               |                                                                               |      | 65 |   
|Interests of Experts                                                                                                        |                                                                               |      | 65 |   
|Additional Information                                                                                                      |                                                                               |      | 65 |   
|Abbreviations and Glossary of
    Terms                                                                                     |                                                                               |      | 66 |   
|Special Note Regarding
    Forward-looking Statements                                                                       |                                                                               |      | 70 |   
|Schedule A Audit Committee
    Charter                                                                                      |                                                                               |      | 72 |   
|Consent of KPMG                                                                                                            
|Consent of McDaniel and Associates Consultants Ltd.                                                                        
|Certification of the CEO pursuant to rule 13a-14(a) or 15d-14 of the Securities Exchange Act of 1934                       
|Certification of the CFO pursuant to Rule 13a-14(a) or 15d-14 of the Securities Exchange Act of 1934                       
|Certifications of the CEO pursuant to Rule 13(a)-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code
|Certifications of the CFO pursuant to Rule 13(a)-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code





Boes or mcfges may be misleading, particularly if used in
isolation. A Boe conversion ratio of six mcf to one bbl is based
on an energy equivalency conversion method primarily applicable
at the burner tip and does not represent a value equivalency at
the wellhead.





EXCHANGE RATE INFORMATION




|         |  |                         |       |  |      |  |       |      |  |  |       | 
|-------- |  | ----------------------- | ----- |  | ---- |  | ----- | ---- |  |  | ----- | 
|         |  | Year ended December 31, |      
|         |  |                         |      
|         |  | 2004                    |       |  | 2003 |  |       | 2002 | 
|         |  |                         |       |  |      |  |       |      | 
|Year end |  |                         | 1.203 |  |      |  | 1.292 |      |  |  | 1.580 | 
|Low      |  |                         | 1.178 |  |      |  | 1.292 |      |  |  | 1.519 | 
|High     |  |                         | 1.397 |  |      |  | 1.575 |      |  |  | 1.605 | 
|Average  |  |                         | 1.302 |  |      |  | 1.386 |      |  |  | 1.570 | 








|    |                                                                                                               
|--- | --------------------------------------------------------------------------------------------------------------
|(1) | The exchange rates were as quoted by the Federal Reserve Bank of
    New York for the noon buying rate.       
|   
|(2) | The high, low and average rates were either quoted or calculated
    as of the last day of the relevant month.

2



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DISCLOSURE OF EXEMPTION UNDER NATIONAL INSTRUMENT 51-101






| |   |                                                                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The FASB Statement No. 69 Disclosure about Oil and
    Gas Producing Activities  an amendment of FASB Statements
    No.s 19, 25, 33 and 39 (FAS 69);                     
|
| |  | FASB Current Text Section Oi5, Oil and Gas Producing
    Activities paragraph .103, .106, .107, .108, .112, .160
    through .167 and .174 through .184 and .401 through .408;
|
| |  | SEC Industry Guide 2;                                                                                                                                                           
|
| |  | SEC Item 102 of regulation S-K (17 CFR 229.102);                                                                                                                                
|
| |  | SEC Item 302(b) of Regulation S-K (17 CFR 229.302(b));
    and                                                                                                                  
|
| |  | The definitions and disclosures required by SEC
    Regulation S-X (CFR 210.4-10).                                                                                              









3



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CORPORATE STRUCTURE





Husky Energy Inc.


Business Corporations Act Business Corporations Act Business Corporations Act









Intercorporate Relationships




|                                                             |  |             
|------------------------------------------------------------ |  | ------------
|Name                                                         |  | Jurisdiction
|                                                             |  |             
|Subsidiaries of Husky Energy Inc.                            |  |             
|Husky Oil Operations Limited                                 |  | Nova Scotia 
|Subsidiaries of Husky Oil Operations Limited                 |  |             
|Husky Oil Limited                                            |  | Nova Scotia 
|Husky Energy Marketing Inc.                                  |  | Alberta     
|Husky (U.S.A.) Inc.                                          |  | Delaware    
|HOI Resources Co.                                            |  | Nova Scotia 
|Husky Energy International Sulphur Corporation               |  | Alberta     
|Canterra Resources Canada Ltd. (formerly 147212 Canada Ltd.) |  | Canada      
|Subsidiaries of Husky (U.S.A.) Inc.                          |  |             
|Husky Gas Marketing Inc.                                     |  | Delaware    
|Subsidiaries of HOI Resources Co.                            |  |             
|Husky Energy International Corporation                       |  | Canada      
|Subsidiaries of Husky Energy International Corporation       |  |             
|Husky Oil China Ltd.                                         |  | Alberta     
|Husky Oil (Madura) Ltd.                                      |  | Alberta     
|Husky Oil Overseas Ltd.                                      |  | Alberta     

4



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GENERAL DEVELOPMENT OF HUSKY





Three Year History




























5



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Business Environment Trends


(1) (1)







DESCRIPTION OF HUSKYS BUSINESS





General




Upstream Operations











|    |                                                                                                                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Canadian Crude Oil Production and Supply forecast,
    July 2004, Canadian Association of Petroleum Producers Oil
    Sands Technology Roadmap, January 30, 2004, Alberta
    Chamber of Resources.

6



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Midstream Operations




Refined Products







Social and Environmental Policy




7



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Risk Factors




Adequacy of crude oil and natural gas prices








Demand for Huskys other products and services and
the cost of required inputs




Huskys ability to replace reserves




Competition




Environmental risks








8



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Uncertainty of oil and gas proved reserves
estimates









Upstream Operations  Disclosures for Oil and Gas
Activities


Production


|                        |  |                        |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       |  |      |  |  |  |     | 
|----------------------- |  | ---------------------- | ----- | ------- | ------ |  | ----- | ----- |  |  | ------ |  |  | ----- | ----- |  | ----- |  | ---- |  |  |  | --- | 
|                        |  | 2004                   |      
|                        |  |                        |      
|                        |  |                        |       | Western |        |  | East  |       |  | 
|                        |  | Total                  |       |         | Canada |  |       | Coast |  |  | Canada |  |  | China |       |  | Libya | 
|                        |  |                        |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|                        |  | Crude oil  mbbls/day  |      
|                        |  | Natural gas  mmcf/day |      
|Crude Oil               |  |                        |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       |  |      |  |  |  |     | 
|Light crude oil and NGL |  |                        | 66.2  |         |        |  | 32.7  |       |  |  | 13.7   |  |  |       | 46.4  |  |       |  | 19.7 |  |  |  | 0.1 | 
|Medium crude oil        |  |                        | 35.0  |         |        |  | 35.0  |       |  |  |       |  |  |       | 35.0  |  |       |  |     |  |  |  |     | 
|Heavy crude oil         |  |                        | 108.9 |         |        |  | 108.9 |       |  |  |       |  |  |       | 108.9 |  |       |  |     |  |  |  |     | 
|                        |  |                        |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|Total gross             |  |                        | 210.1 |         |        |  | 176.6 |       |  |  | 13.7   |  |  |       | 190.3 |  |       |  | 19.7 |  |  |  | 0.1 | 
|                        |  |                        |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|Total net               |  |                        | 183.9 |         |        |  | 153.0 |       |  |  | 13.2   |  |  |       | 166.2 |  |       |  | 17.6 |  |  |  | 0.1 | 
|                        |  |                        |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|Natural Gas             |  |                        |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       |  |      |  |  |  |     | 
|Gross                   |  |                        | 689.2 |         |        |  | 689.2 |       |  |  |       |  |  |       | 689.2 |  |       |  |     |  |  |  |    | 
|                        |  |                        |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|Net                     |  |                        | 524.0 |         |        |  | 524.0 |       |  |  |       |  |  |       | 524.0 |  |       |  |     |  |  |  |    | 
|                        |  |                        |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 

9



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Production (continued)


|                        |  |                        |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       |  |      |  |  |  |     | 
|----------------------- |  | ---------------------- | ----- | ------- | ------ |  | ----- | ----- |  |  | ------ |  |  | ----- | ----- |  | ----- |  | ---- |  |  |  | --- | 
|                        |  | 2003                   |      
|                        |  |                        |      
|                        |  |                        |       | Western |        |  | East  |       |  | 
|                        |  | Total                  |       |         | Canada |  |       | Coast |  |  | Canada |  |  | China |       |  | Libya | 
|                        |  |                        |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|                        |  | Crude oil  mbbls/day  |      
|                        |  | Natural gas  mmcf/day |      
|Crude Oil               |  |                        |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       |  |      |  |  |  |     | 
|Light crude oil and NGL |  |                        | 71.6  |         |        |  | 32.2  |       |  |  | 16.8   |  |  |       | 49.0  |  |       |  | 22.4 |  |  |  | 0.2 | 
|Medium crude oil        |  |                        | 39.2  |         |        |  | 39.2  |       |  |  |       |  |  |       | 39.2  |  |       |  |     |  |  |  |     | 
|Heavy crude oil         |  |                        | 99.9  |         |        |  | 99.9  |       |  |  |       |  |  |       | 99.9  |  |       |  |     |  |  |  |     | 
|                        |  |                        |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|Total gross             |  |                        | 210.7 |         |        |  | 171.3 |       |  |  | 16.8   |  |  |       | 188.1 |  |       |  | 22.4 |  |  |  | 0.2 | 
|                        |  |                        |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|Total net               |  |                        | 186.8 |         |        |  | 149.5 |       |  |  | 16.7   |  |  |       | 166.2 |  |       |  | 20.4 |  |  |  | 0.2 | 
|                        |  |                        |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|Natural Gas             |  |                        |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       |  |      |  |  |  |     | 
|Gross                   |  |                        | 610.6 |         |        |  | 610.6 |       |  |  |       |  |  |       | 610.6 |  |       |  |     |  |  |  |    | 
|                        |  |                        |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|Net                     |  |                        | 473.7 |         |        |  | 473.7 |       |  |  |       |  |  |       | 473.7 |  |       |  |     |  |  |  |    | 
|                        |  |                        |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 

|                        |  |                        |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       |  |      |  |  |  |     | 
|----------------------- |  | ---------------------- | ----- | ------- | ------ |  | ----- | ----- |  |  | ------ |  |  | ----- | ----- |  | ----- |  | ---- |  |  |  | --- | 
|                        |  | 2002                   |      
|                        |  |                        |      
|                        |  |                        |       | Western |        |  | East  |       |  | 
|                        |  | Total                  |       |         | Canada |  |       | Coast |  |  | Canada |  |  | China |       |  | Libya | 
|                        |  |                        |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|                        |  | Crude oil  mbbls/day  |      
|                        |  | Natural gas  mmcf/day |      
|Crude Oil               |  |                        |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       |  |      |  |  |  |     | 
|Light crude oil and NGL |  |                        | 65.4  |         |        |  | 39.8  |       |  |  | 13.2   |  |  |       | 53.0  |  |       |  | 12.2 |  |  |  | 0.2 | 
|Medium crude oil        |  |                        | 44.8  |         |        |  | 44.8  |       |  |  |       |  |  |       | 44.8  |  |       |  |     |  |  |  |    | 
|Heavy crude oil         |  |                        | 95.1  |         |        |  | 95.1  |       |  |  |       |  |  |       | 95.1  |  |       |  |     |  |  |  |    | 
|                        |  |                        |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|Total gross             |  |                        | 205.3 |         |        |  | 179.7 |       |  |  | 13.2   |  |  |       | 192.9 |  |       |  | 12.2 |  |  |  | 0.2 | 
|                        |  |                        |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|Total net               |  |                        | 179.3 |         |        |  | 154.8 |       |  |  | 12.8   |  |  |       | 167.6 |  |       |  | 11.5 |  |  |  | 0.2 | 
|                        |  |                        |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|Natural Gas             |  |                        |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       |  |      |  |  |  |     | 
|Gross                   |  |                        | 569.2 |         |        |  | 569.2 |       |  |  |       |  |  |       | 569.2 |  |       |  |     |  |  |  |    | 
|                        |  |                        |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|Net                     |  |                        | 426.6 |         |        |  | 426.6 |       |  |  |       |  |  |       | 426.6 |  |       |  |     |  |  |  |    | 
|                        |  |                        |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 








|    |                                                                                                                                                                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Light crude oil includes crude oil that is lighter than
    30°API, medium crude oil is between 20° and
    30°API gravity and heavy crude oil includes crude oil that
    is lower than 20° API and lighter than 10° API gravity
    in the Lloydminster area.
|   
|(2) | Gross volumes are Huskys lessor royalty, overriding
    royalty and working interest share of production before
    deduction of royalties. Net volumes are Huskys gross
    volumes, less royalties.                                                        

Revenue


|                        |  |              |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       |  |     |  |  |  |   | 
|----------------------- |  | ------------ | ----- | ------- | ------ |  | ----- | ----- |  |  | ------ |  |  | ----- | ----- |  | ----- |  | --- |  |  |  | - | 
|                        |  | 2004         |      
|                        |  |              |      
|                        |  |              |       | Western |        |  | East  |       |  | 
|                        |  | Total        |       |         | Canada |  |       | Coast |  |  | Canada |  |  | China |       |  | Libya | 
|                        |  |              |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|                        |  | ($ millions) |      
|Crude Oil               |  |              |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       |  |     |  |  |  |   | 
|Light crude oil and NGL |  |              | 967   |         |        |  | 474   |       |  |  | 148    |  |  |       | 622   |  |       |  | 343 |  |  |  | 2 | 
|Medium crude oil        |  |              | 462   |         |        |  | 462   |       |  |  |       |  |  |       | 462   |  |       |  |    |  |  |  |  | 
|Heavy crude oil         |  |              | 757   |         |        |  | 757   |       |  |  |       |  |  |       | 757   |  |       |  |    |  |  |  |  | 
|                        |  |              |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|Total gross             |  |              | 2,186 |         |        |  | 1,693 |       |  |  | 148    |  |  |       | 1,841 |  |       |  | 343 |  |  |  | 2 | 
|                        |  |              |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|Total net               |  |              | 1,824 |         |        |  | 1,375 |       |  |  | 139    |  |  |       | 1,514 |  |       |  | 308 |  |  |  | 2 | 
|                        |  |              |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|Natural Gas             |  |              |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       |  |     |  |  |  |   | 
|Gross                   |  |              | 1,596 |         |        |  | 1,596 |       |  |  |       |  |  |       | 1,596 |  |       |  |    |  |  |  |  | 
|                        |  |              |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|Net                     |  |              | 1,248 |         |        |  | 1,248 |       |  |  |       |  |  |       | 1,248 |  |       |  |    |  |  |  |  | 
|                        |  |              |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|Processing              |  |              | 48    |         |        |  | 48    |       |  |  |       |  |  |       | 48    |  |       |  |    |  |  |  |  | 
|                        |  |              |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 

10



---



##### Table of Contents



Revenue (continued)


|                        |  |              |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       |  |     |  |  |  |   | 
|----------------------- |  | ------------ | ----- | ------- | ------ |  | ----- | ----- |  |  | ------ |  |  | ----- | ----- |  | ----- |  | --- |  |  |  | - | 
|                        |  | 2003         |      
|                        |  |              |      
|                        |  |              |       | Western |        |  | East  |       |  | 
|                        |  | Total        |       |         | Canada |  |       | Coast |  |  | Canada |  |  | China |       |  | Libya | 
|                        |  |              |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|                        |  | ($ millions) |      
|Crude Oil               |  |              |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       |  |     |  |  |  |   | 
|Light crude oil and NGL |  |              | 879   |         |        |  | 300   |       |  |  | 238    |  |  |       | 538   |  |       |  | 338 |  |  |  | 3 | 
|Medium crude oil        |  |              | 556   |         |        |  | 556   |       |  |  |       |  |  |       | 556   |  |       |  |    |  |  |  |  | 
|Heavy crude oil         |  |              | 943   |         |        |  | 943   |       |  |  |       |  |  |       | 943   |  |       |  |    |  |  |  |  | 
|                        |  |              |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|Total gross             |  |              | 2,378 |         |        |  | 1,799 |       |  |  | 238    |  |  |       | 2,037 |  |       |  | 338 |  |  |  | 3 | 
|                        |  |              |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|Total net               |  |              | 2,082 |         |        |  | 1,539 |       |  |  | 233    |  |  |       | 1,772 |  |       |  | 307 |  |  |  | 3 | 
|                        |  |              |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|Natural Gas             |  |              |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       |  |     |  |  |  |   | 
|Gross                   |  |              | 1,346 |         |        |  | 1,346 |       |  |  |       |  |  |       | 1,346 |  |       |  |    |  |  |  |  | 
|                        |  |              |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|Net                     |  |              | 1,058 |         |        |  | 1,058 |       |  |  |       |  |  |       | 1,058 |  |       |  |    |  |  |  |  | 
|                        |  |              |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|Processing              |  |              | 46    |         |        |  | 46    |       |  |  |       |  |  |       | 46    |  |       |  |    |  |  |  |  | 
|                        |  |              |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 

|                        |  |              |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       |  |     |  |  |  |   | 
|----------------------- |  | ------------ | ----- | ------- | ------ |  | ----- | ----- |  |  | ------ |  |  | ----- | ----- |  | ----- |  | --- |  |  |  | - | 
|                        |  | 2002         |      
|                        |  |              |      
|                        |  |              |       | Western |        |  | East  |       |  | 
|                        |  | Total        |       |         | Canada |  |       | Coast |  |  | Canada |  |  | China |       |  | Libya | 
|                        |  |              |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|                        |  | ($ millions) |      
|Crude Oil               |  |              |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       |  |     |  |  |  |   | 
|Light crude oil and NGL |  |              | 866   |         |        |  | 494   |       |  |  | 171    |  |  |       | 665   |  |       |  | 198 |  |  |  | 3 | 
|Medium crude oil        |  |              | 496   |         |        |  | 496   |       |  |  |       |  |  |       | 496   |  |       |  |    |  |  |  |  | 
|Heavy crude oil         |  |              | 924   |         |        |  | 924   |       |  |  |       |  |  |       | 924   |  |       |  |    |  |  |  |  | 
|                        |  |              |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|Total gross             |  |              | 2,286 |         |        |  | 1,914 |       |  |  | 171    |  |  |       | 2,085 |  |       |  | 198 |  |  |  | 3 | 
|                        |  |              |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|Total net               |  |              | 1,974 |         |        |  | 1,616 |       |  |  | 169    |  |  |       | 1,785 |  |       |  | 186 |  |  |  | 3 | 
|                        |  |              |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|Natural Gas             |  |              |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       |  |     |  |  |  |   | 
|Gross                   |  |              | 801   |         |        |  | 801   |       |  |  |       |  |  |       | 801   |  |       |  |    |  |  |  |  | 
|                        |  |              |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|Net                     |  |              | 653   |         |        |  | 653   |       |  |  |       |  |  |       | 653   |  |       |  |    |  |  |  |  | 
|                        |  |              |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|Processing              |  |              | 38    |         |        |  | 38    |       |  |  |       |  |  |       | 38    |  |       |  |    |  |  |  |  | 
|                        |  |              |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 








|    |                                                                                                                                                                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Light crude oil includes crude oil that is lighter than
    30°API, medium crude oil is between 20° and
    30°API gravity and heavy crude oil includes crude oil that
    is lower than 20° API and lighter than 10° API gravity
    in the Lloydminster area.

Sales Prices


|                                         |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       |  |       |  |  |  |       | 
|---------------------------------------- |  | ----- | ----- | ------- | ------ |  | ----- | ----- |  |  | ------ |  |  | ----- | ----- |  | ----- |  | ----- |  |  |  | ----- | 
|                                         |  | 2004  |      
|                                         |  |       |      
|                                         |  |       |       | Western |        |  | East  |       |  | 
|                                         |  | Total |       |         | Canada |  |       | Coast |  |  | Canada |  |  | China |       |  | Libya | 
|                                         |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|                                         |  | $/bbl |      
|                                         |  | $/mcf |      
|Crude Oil                                |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       |  |       |  |  |  |       | 
|Light crude oil and NGL                  |  |       | 48.34 |         |        |  | 49.35 |       |  |  | 47.87  |  |  |       | 49.64 |  |       |  | 47.66 |  |  |  | 57.88 | 
|Medium crude oil                         |  |       | 36.13 |         |        |  | 36.13 |       |  |  |       |  |  |       | 36.13 |  |       |  |      |  |  |  |      | 
|Heavy crude oil                          |  |       | 28.66 |         |        |  | 28.66 |       |  |  |       |  |  |       | 28.66 |  |       |  |      |  |  |  |      | 
|Total crude oil and NGL (before hedging) |  |       | 36.07 |         |        |  | 33.85 |       |  |  | 47.87  |  |  |       | 34.90 |  |       |  | 47.66 |  |  |  | 57.88 | 
|                                         |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|Total crude oil and NGL (after hedging)  |  |       | 28.43 |         |        |  | 26.19 |       |  |  | 29.45  |  |  |       | 26.42 |  |       |  | 47.66 |  |  |  | 57.88 | 
|                                         |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|Natural Gas                              |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       |  |       |  |  |  |       | 
|Before hedging                           |  |       | 6.25  |         |        |  | 6.25  |       |  |  |       |  |  |       | 6.25  |  |       |  |      |  |  |  |      | 
|                                         |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|After hedging                            |  |       | 6.24  |         |        |  | 6.24  |       |  |  |       |  |  |       | 6.24  |  |       |  |      |  |  |  |      | 
|                                         |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 

11



---



##### Table of Contents



Sales Prices (continued)


|                                         |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       |  |       |  |  |  |       | 
|---------------------------------------- |  | ----- | ----- | ------- | ------ |  | ----- | ----- |  |  | ------ |  |  | ----- | ----- |  | ----- |  | ----- |  |  |  | ----- | 
|                                         |  | 2003  |      
|                                         |  |       |      
|                                         |  |       |       | Western |        |  | East  |       |  | 
|                                         |  | Total |       |         | Canada |  |       | Coast |  |  | Canada |  |  | China |       |  | Libya | 
|                                         |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|                                         |  | $/bbl |      
|                                         |  | $/mcf |      
|Crude Oil                                |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       |  |       |  |  |  |       | 
|Light crude oil and NGL                  |  |       | 39.53 |         |        |  | 38.28 |       |  |  | 38.91  |  |  |       | 38.49 |  |       |  | 41.45 |  |  |  | 40.44 | 
|Medium crude oil                         |  |       | 31.42 |         |        |  | 31.42 |       |  |  |       |  |  |       | 31.42 |  |       |  |      |  |  |  |      | 
|Heavy crude oil                          |  |       | 25.87 |         |        |  | 25.87 |       |  |  |       |  |  |       | 25.87 |  |       |  |      |  |  |  |      | 
|Total crude oil and NGL (before hedging) |  |       | 31.54 |         |        |  | 29.48 |       |  |  | 38.91  |  |  |       | 30.32 |  |       |  | 41.45 |  |  |  | 40.44 | 
|                                         |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|Total crude oil and NGL (after hedging)  |  |       | 30.93 |         |        |  | 28.96 |       |  |  | 36.96  |  |  |       | 29.67 |  |       |  | 41.45 |  |  |  | 40.44 | 
|                                         |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|Natural Gas                              |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       |  |       |  |  |  |       | 
|Before hedging                           |  |       | 5.86  |         |        |  | 5.86  |       |  |  |       |  |  |       | 5.86  |  |       |  |      |  |  |  |      | 
|                                         |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|After hedging                            |  |       | 5.94  |         |        |  | 5.94  |       |  |  |       |  |  |       | 5.94  |  |       |  |      |  |  |  |      | 
|                                         |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 

|                                         |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       |  |       |  |  |  |       | 
|---------------------------------------- |  | ----- | ----- | ------- | ------ |  | ----- | ----- |  |  | ------ |  |  | ----- | ----- |  | ----- |  | ----- |  |  |  | ----- | 
|                                         |  | 2002  |      
|                                         |  |       |      
|                                         |  |       |       | Western |        |  | East  |       |  | 
|                                         |  | Total |       |         | Canada |  |       | Coast |  |  | Canada |  |  | China |       |  | Libya | 
|                                         |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|                                         |  | $/bbl |      
|                                         |  | $/mcf |      
|Crude Oil                                |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       |  |       |  |  |  |       | 
|Light crude oil and NGL                  |  |       | 36.17 |         |        |  | 33.86 |       |  |  | 35.47  |  |  |       | 34.26 |  |       |  | 44.36 |  |  |  | 40.37 | 
|Medium crude oil                         |  |       | 30.16 |         |        |  | 30.16 |       |  |  |       |  |  |       | 30.16 |  |       |  |      |  |  |  |      | 
|Heavy crude oil                          |  |       | 26.60 |         |        |  | 26.60 |       |  |  |       |  |  |       | 26.60 |  |       |  |      |  |  |  |      | 
|Total crude oil and NGL (before hedging) |  |       | 30.47 |         |        |  | 29.14 |       |  |  | 35.47  |  |  |       | 29.57 |  |       |  | 44.36 |  |  |  | 40.37 | 
|                                         |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|Total crude oil and NGL (after hedging)  |  |       | 30.50 |         |        |  | 29.17 |       |  |  | 35.47  |  |  |       | 29.61 |  |       |  | 44.36 |  |  |  | 40.37 | 
|                                         |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|Natural Gas                              |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       |  |       |  |  |  |       | 
|Before hedging                           |  |       | 3.83  |         |        |  | 3.83  |       |  |  |       |  |  |       | 3.83  |  |       |  |      |  |  |  |      | 
|                                         |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|After hedging                            |  |       | 3.83  |         |        |  | 3.83  |       |  |  |       |  |  |       | 3.83  |  |       |  |      |  |  |  |      | 
|                                         |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 








|    |                                                                                                                                                                                                                                                                 
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Light crude oil includes crude oil that is lighter than
    30°API, medium crude oil is between 20° and 30°
    API gravity and heavy crude oil includes crude oil that is lower
    than 20° API and lighter than 10° API gravity in the
    Lloydminster area.

Capital Expenditures


|                         |  |              |       |         |        |  |        |          |  |  |        |  |  |       |       |  |           |  |    |       |  |  |    |  |  |  |   | 
|------------------------ |  | ------------ | ----- | ------- | ------ |  | ------ | -------- |  |  | ------ |  |  | ----- | ----- |  | --------- |  | -- | ----- |  |  | -- |  |  |  | - | 
|                         |  | 2004         |      
|                         |  |              |      
|                         |  |              |       | East    |        |  |       
|                         |  |              |       | Western |        |  | Coast/ |          |  | 
|                         |  | Total        |       |         | Canada |  |        | Frontier |  |  | Canada |  |  | China |       |  | Indonesia |  |    | Libya | 
|                         |  |              |       |         |        |  |        |          |  |  |        |  |  |       |       |  |           |  |    |       | 
|                         |  | ($ millions) |      
|Property acquisition (1) |  |              | 116   |         |        |  | 54     |          |  |  |       |  |  |       | 54    |  |           |  |   |       |  |  | 62 |  |  |  |  | 
|Exploration              |  |              | 313   |         |        |  | 271    |          |  |  | 24     |  |  |       | 295   |  |           |  | 18 |       |  |  |   |  |  |  |  | 
|Development              |  |              | 1,728 |         |        |  | 1,208  |          |  |  | 515    |  |  |       | 1,723 |  |           |  | 5  |       |  |  |   |  |  |  |  | 

|                          |  |              |       |         |        |  |        |          |  |  |        |  |  |       |       |  |           |  |    |       |  |  |   |  |  |  |   | 
|------------------------- |  | ------------ | ----- | ------- | ------ |  | ------ | -------- |  |  | ------ |  |  | ----- | ----- |  | --------- |  | -- | ----- |  |  | - |  |  |  | - | 
|                          |  | 2003         |      
|                          |  |              |      
|                          |  |              |       | East    |        |  |       
|                          |  |              |       | Western |        |  | Coast/ |          |  | 
|                          |  | Total        |       |         | Canada |  |        | Frontier |  |  | Canada |  |  | China |       |  | Indonesia |  |    | Libya | 
|                          |  |              |       |         |        |  |        |          |  |  |        |  |  |       |       |  |           |  |    |       | 
|                          |  | ($ millions) |      
|Property acquisitions (2) |  |              | 76    |         |        |  | 76     |          |  |  |       |  |  |       | 76    |  |           |  |   |       |  |  |  |  |  |  |  | 
|Exploration               |  |              | 324   |         |        |  | 274    |          |  |  | 24     |  |  |       | 298   |  |           |  | 26 |       |  |  |  |  |  |  |  | 
|Development               |  |              | 1,378 |         |        |  | 845    |          |  |  | 533    |  |  |       | 1,378 |  |           |  |   |       |  |  |  |  |  |  |  | 

12



---



##### Table of Contents



Capital Expenditures (continued)


|                          |  |              |       |         |        |  |        |          |  |  |        |  |  |       |       |  |           |  |    |       |  |  |   |  |  |  |   | 
|------------------------- |  | ------------ | ----- | ------- | ------ |  | ------ | -------- |  |  | ------ |  |  | ----- | ----- |  | --------- |  | -- | ----- |  |  | - |  |  |  | - | 
|                          |  | 2002         |      
|                          |  |              |      
|                          |  |              |       | East    |        |  |       
|                          |  |              |       | Western |        |  | Coast/ |          |  | 
|                          |  | Total        |       |         | Canada |  |        | Frontier |  |  | Canada |  |  | China |       |  | Indonesia |  |    | Libya | 
|                          |  |              |       |         |        |  |        |          |  |  |        |  |  |       |       |  |           |  |    |       | 
|                          |  | ($ millions) |      
|Property acquisitions (3) |  |              | 108   |         |        |  | 108    |          |  |  |       |  |  |       | 108   |  |           |  |   |       |  |  |  |  |  |  |  | 
|Exploration               |  |              | 266   |         |        |  | 216    |          |  |  | 41     |  |  |       | 257   |  |           |  | 9  |       |  |  |  |  |  |  |  | 
|Development               |  |              | 1,202 |         |        |  | 709    |          |  |  | 417    |  |  |       | 1,136 |  |           |  | 66 |       |  |  |  |  |  |  |  | 








|    |                                                                                        
|--- | ---------------------------------------------------------------------------------------
|(1) | Does not include the acquisition of Temple Exploration Inc.                            
|   
|(2) | Does not include the acquisition of Marathon Canada Limited.                           
|   
|(3) | Does not include the acquisition of Titanium Oil & Gas Ltd.
    and Avid Oil & Gas Ltd.

Oil and Gas
Netbacks (1)


|                        |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       |  |       |  |  |  |       | 
|----------------------- |  | ----- | ----- | ------- | ------ |  | ----- | ----- |  |  | ------ |  |  | ----- | ----- |  | ----- |  | ----- |  |  |  | ----- | 
|                        |  | 2004  |      
|                        |  |       |      
|                        |  |       |       | Western |        |  | East  |       |  | 
|                        |  | Total |       |         | Canada |  |       | Coast |  |  | Canada |  |  | China |       |  | Libya | 
|                        |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|                        |  | $/bbl |      
|                        |  | $/mcf |      
|Crude Oil               |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       |  |       |  |  |  |       | 
|Light crude oil         |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       |  |       |  |  |  |       | 
|Sales revenue           |  |       | 46.95 |         |        |  | 46.12 |       |  |  | 47.87  |  |  |       | 46.63 |  |       |  | 47.66 |  |  |  | 57.88 | 
|Royalties               |  |       | 5.71  |         |        |  | 7.76  |       |  |  | 1.80   |  |  |       | 6.03  |  |       |  | 4.91  |  |  |  |      | 
|Operating costs         |  |       | 5.82  |         |        |  | 8.94  |       |  |  | 3.28   |  |  |       | 7.29  |  |       |  | 2.16  |  |  |  | 16.47 | 
|Netback before hedging  |  |       | 35.42 |         |        |  | 29.42 |       |  |  | 42.79  |  |  |       | 33.31 |  |       |  | 40.59 |  |  |  | 41.41 | 
|Netback after hedging   |  |       | 28.33 |         |        |  | 22.78 |       |  |  | 24.37  |  |  |       | 23.24 |  |       |  | 40.59 |  |  |  | 41.41 | 
|Medium crude oil        |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       |  |       |  |  |  |       | 
|Sales revenue           |  |       | 36.20 |         |        |  | 36.20 |       |  |  |       |  |  |       | 36.20 |  |       |  |      |  |  |  |      | 
|Royalties               |  |       | 6.10  |         |        |  | 6.10  |       |  |  |       |  |  |       | 6.10  |  |       |  |      |  |  |  |      | 
|Operating costs         |  |       | 10.07 |         |        |  | 10.07 |       |  |  |       |  |  |       | 10.07 |  |       |  |      |  |  |  |      | 
|Net back before hedging |  |       | 20.03 |         |        |  | 20.03 |       |  |  |       |  |  |       | 20.03 |  |       |  |      |  |  |  |      | 
|Netback after hedging   |  |       | 20.03 |         |        |  | 20.03 |       |  |  |       |  |  |       | 20.03 |  |       |  |      |  |  |  |      | 
|Heavy crude oil         |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       |  |       |  |  |  |       | 
|Sales revenue           |  |       | 28.73 |         |        |  | 28.73 |       |  |  |       |  |  |       | 28.73 |  |       |  |      |  |  |  |      | 
|Royalties               |  |       | 3.38  |         |        |  | 3.38  |       |  |  |       |  |  |       | 3.38  |  |       |  |      |  |  |  |      | 
|Operating costs         |  |       | 9.33  |         |        |  | 9.33  |       |  |  |       |  |  |       | 9.33  |  |       |  |      |  |  |  |      | 
|Netback before hedging  |  |       | 16.02 |         |        |  | 16.02 |       |  |  |       |  |  |       | 16.02 |  |       |  |      |  |  |  |      | 
|Netback after hedging   |  |       | 6.45  |         |        |  | 6.45  |       |  |  |       |  |  |       | 6.45  |  |       |  |      |  |  |  |      | 
|Total crude oil         |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       |  |       |  |  |  |       | 
|Sales revenue           |  |       | 35.72 |         |        |  | 33.48 |       |  |  | 42.87  |  |  |       | 34.50 |  |       |  | 47.66 |  |  |  | 57.88 | 
|Royalties               |  |       | 4.58  |         |        |  | 4.75  |       |  |  | 1.80   |  |  |       | 4.54  |  |       |  | 4.91  |  |  |  |      | 
|Operating costs         |  |       | 8.36  |         |        |  | 9.41  |       |  |  | 3.28   |  |  |       | 8.97  |  |       |  | 2.16  |  |  |  | 16.47 | 
|Netback before hedging  |  |       | 22.78 |         |        |  | 19.32 |       |  |  | 42.79  |  |  |       | 20.99 |  |       |  | 40.59 |  |  |  | 41.41 | 
|Netback after hedging   |  |       | 15.64 |         |        |  | 12.25 |       |  |  | 24.37  |  |  |       | 13.11 |  |       |  | 40.59 |  |  |  | 41.41 | 
|Natural Gas             |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       |  |       |  |  |  |       | 
|Sales revenue           |  |       | 6.25  |         |        |  | 6.25  |       |  |  |       |  |  |       | 6.25  |  |       |  |      |  |  |  |      | 
|Royalties               |  |       | 1.44  |         |        |  | 1.44  |       |  |  |       |  |  |       | 1.44  |  |       |  |      |  |  |  |      | 
|Operating costs         |  |       | 0.89  |         |        |  | 0.89  |       |  |  |       |  |  |       | 0.89  |  |       |  |      |  |  |  |      | 
|Netback before hedging  |  |       | 3.92  |         |        |  | 3.92  |       |  |  |       |  |  |       | 3.92  |  |       |  |      |  |  |  |      | 
|Netback after hedging   |  |       | 3.91  |         |        |  | 3.91  |       |  |  |       |  |  |       | 3.91  |  |       |  |      |  |  |  |      | 








|    |                                                                                                                                                                                                                                                                                                                                             
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Netbacks reflect the results of operations for leases classified
    as oil or natural gas. Co-products, such as natural gas produced
    at an oil property or natural gas liquids produced at a natural
    gas property, have been converted to equivalent units of oil or
    natural gas depending on the lease product classification.

13



---



##### Table of Contents



Oil and Gas
Netbacks (1) (continued)


|                       |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       |  |       |  |  |  |       | 
|---------------------- |  | ----- | ----- | ------- | ------ |  | ----- | ----- |  |  | ------ |  |  | ----- | ----- |  | ----- |  | ----- |  |  |  | ----- | 
|                       |  | 2003  |      
|                       |  |       |      
|                       |  |       |       | Western |        |  | East  |       |  | 
|                       |  | Total |       |         | Canada |  |       | Coast |  |  | Canada |  |  | China |       |  | Libya | 
|                       |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|                       |  | $/bbl |      
|                       |  | $/mcf |      
|Crude Oil              |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       |  |       |  |  |  |       | 
|Light crude oil        |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       |  |       |  |  |  |       | 
|Sales revenue          |  |       | 40.17 |         |        |  | 39.91 |       |  |  | 38.91  |  |  |       | 39.55 |  |       |  | 41.45 |  |  |  | 40.44 | 
|Royalties              |  |       | 4.55  |         |        |  | 7.28  |       |  |  | 0.81   |  |  |       | 4.93  |  |       |  | 3.80  |  |  |  |      | 
|Operating costs        |  |       | 5.41  |         |        |  | 9.27  |       |  |  | 3.16   |  |  |       | 7.05  |  |       |  | 1.94  |  |  |  | 15.43 | 
|Netback before hedging |  |       | 30.21 |         |        |  | 23.36 |       |  |  | 34.94  |  |  |       | 27.57 |  |       |  | 35.71 |  |  |  | 25.01 | 
|                       |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|Netback after hedging  |  |       | 29.49 |         |        |  | 22.80 |       |  |  | 32.99  |  |  |       | 26.50 |  |       |  | 35.71 |  |  |  | 25.01 | 
|                       |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|Medium crude oil       |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       |  |       |  |  |  |       | 
|Sales revenue          |  |       | 31.57 |         |        |  | 31.57 |       |  |  |       |  |  |       | 31.57 |  |       |  |      |  |  |  |      | 
|Royalties              |  |       | 5.28  |         |        |  | 5.28  |       |  |  |       |  |  |       | 5.28  |  |       |  |      |  |  |  |      | 
|Operating costs        |  |       | 9.53  |         |        |  | 9.53  |       |  |  |       |  |  |       | 9.53  |  |       |  |      |  |  |  |      | 
|Netback before hedging |  |       | 16.76 |         |        |  | 16.76 |       |  |  |       |  |  |       | 16.76 |  |       |  |      |  |  |  |      | 
|                       |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|Netback after hedging  |  |       | 14.97 |         |        |  | 14.97 |       |  |  |       |  |  |       | 14.97 |  |       |  |      |  |  |  |      | 
|                       |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|Heavy crude oil        |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       |  |       |  |  |  |       | 
|Sales revenue          |  |       | 25.98 |         |        |  | 25.98 |       |  |  |       |  |  |       | 25.98 |  |       |  |      |  |  |  |      | 
|Royalties              |  |       | 2.76  |         |        |  | 2.76  |       |  |  |       |  |  |       | 2.76  |  |       |  |      |  |  |  |      | 
|Operating costs        |  |       | 9.09  |         |        |  | 9.09  |       |  |  |       |  |  |       | 9.09  |  |       |  |      |  |  |  |      | 
|Netback before hedging |  |       | 14.13 |         |        |  | 14.13 |       |  |  |       |  |  |       | 14.13 |  |       |  |      |  |  |  |      | 
|                       |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|Netback after hedging  |  |       | 14.13 |         |        |  | 14.13 |       |  |  |       |  |  |       | 14.13 |  |       |  |      |  |  |  |      | 
|                       |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|Total crude oil        |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       |  |       |  |  |  |       | 
|Sales revenue          |  |       | 31.70 |         |        |  | 29.52 |       |  |  | 38.91  |  |  |       | 30.53 |  |       |  | 41.45 |  |  |  | 40.44 | 
|Royalties              |  |       | 3.83  |         |        |  | 4.14  |       |  |  | 0.81   |  |  |       | 3.84  |  |       |  | 3.80  |  |  |  |      | 
|Operating costs        |  |       | 7.97  |         |        |  | 9.23  |       |  |  | 3.16   |  |  |       | 8.68  |  |       |  | 1.94  |  |  |  | 15.43 | 
|Netback before hedging |  |       | 19.90 |         |        |  | 16.15 |       |  |  | 34.94  |  |  |       | 18.01 |  |       |  | 35.71 |  |  |  | 25.01 | 
|                       |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|Netback after hedging  |  |       | 19.32 |         |        |  | 15.63 |       |  |  | 32.99  |  |  |       | 17.36 |  |       |  | 35.71 |  |  |  | 25.01 | 
|                       |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|Natural Gas            |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       |  |       |  |  |  |       | 
|Sales revenue          |  |       | 5.79  |         |        |  | 5.79  |       |  |  |       |  |  |       | 5.79  |  |       |  |      |  |  |  |      | 
|Royalties              |  |       | 1.29  |         |        |  | 1.29  |       |  |  |       |  |  |       | 1.29  |  |       |  |      |  |  |  |      | 
|Operating costs        |  |       | 0.79  |         |        |  | 0.79  |       |  |  |       |  |  |       | 0.79  |  |       |  |      |  |  |  |      | 
|Netback before hedging |  |       | 3.71  |         |        |  | 3.71  |       |  |  |       |  |  |       | 3.71  |  |       |  |      |  |  |  |      | 
|                       |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|Netback after hedging  |  |       | 3.79  |         |        |  | 3.79  |       |  |  |       |  |  |       | 3.79  |  |       |  |      |  |  |  |      | 
|                       |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 








|    |                                                                                                                                                                                                                                                                                                                                             
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Netbacks reflect the results of operations for leases classified
    as oil or natural gas. Co-products, such as natural gas produced
    at an oil property or natural gas liquids produced at a natural
    gas property, have been converted to equivalent units of oil or
    natural gas depending on the lease product classification.

14



---



##### Table of Contents



Oil and Gas
Netbacks (1) (continued)


|                       |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       |  |       |  |  |  |       | 
|---------------------- |  | ----- | ----- | ------- | ------ |  | ----- | ----- |  |  | ------ |  |  | ----- | ----- |  | ----- |  | ----- |  |  |  | ----- | 
|                       |  | 2002  |      
|                       |  |       |      
|                       |  |       |       | Western |        |  | East  |       |  | 
|                       |  | Total |       |         | Canada |  |       | Coast |  |  | Canada |  |  | China |       |  | Libya | 
|                       |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|                       |  | $/bbl |      
|                       |  | $/mcf |      
|Crude Oil              |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       |  |       |  |  |  |       | 
|Light crude oil        |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       |  |       |  |  |  |       | 
|Sales revenue          |  |       | 36.22 |         |        |  | 33.66 |       |  |  | 35.47  |  |  |       | 34.15 |  |       |  | 44.36 |  |  |  | 40.37 | 
|Royalties              |  |       | 3.25  |         |        |  | 4.55  |       |  |  | 0.36   |  |  |       | 3.41  |  |       |  | 2.65  |  |  |  |      | 
|Operating costs        |  |       | 7.33  |         |        |  | 10.46 |       |  |  | 3.62   |  |  |       | 8.60  |  |       |  | 2.15  |  |  |  | 13.13 | 
|Netback before hedging |  |       | 25.64 |         |        |  | 18.65 |       |  |  | 31.49  |  |  |       | 22.14 |  |       |  | 39.56 |  |  |  | 27.24 | 
|                       |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|Netback after hedging  |  |       | 25.74 |         |        |  | 18.82 |       |  |  | 31.49  |  |  |       | 22.26 |  |       |  | 39.56 |  |  |  | 27.24 | 
|                       |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|Medium crude oil       |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       |  |       |  |  |  |       | 
|Sales revenue          |  |       | 29.92 |         |        |  | 29.92 |       |  |  |       |  |  |       | 29.92 |  |       |  |      |  |  |  |      | 
|Royalties              |  |       | 5.59  |         |        |  | 5.59  |       |  |  |       |  |  |       | 5.59  |  |       |  |      |  |  |  |      | 
|Operating costs        |  |       | 7.19  |         |        |  | 7.19  |       |  |  |       |  |  |       | 7.19  |  |       |  |      |  |  |  |      | 
|Netback before hedging |  |       | 17.14 |         |        |  | 17.14 |       |  |  |       |  |  |       | 17.14 |  |       |  |      |  |  |  |      | 
|                       |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|Netback after hedging  |  |       | 17.33 |         |        |  | 17.33 |       |  |  |       |  |  |       | 17.33 |  |       |  |      |  |  |  |      | 
|                       |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|Heavy crude oil        |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       |  |       |  |  |  |       | 
|Sales revenue          |  |       | 26.48 |         |        |  | 26.48 |       |  |  |       |  |  |       | 26.48 |  |       |  |      |  |  |  |      | 
|Royalties              |  |       | 3.45  |         |        |  | 3.45  |       |  |  |       |  |  |       | 3.45  |  |       |  |      |  |  |  |      | 
|Operating costs        |  |       | 7.18  |         |        |  | 7.18  |       |  |  |       |  |  |       | 7.18  |  |       |  |      |  |  |  |      | 
|Netback before hedging |  |       | 15.85 |         |        |  | 15.85 |       |  |  |       |  |  |       | 15.85 |  |       |  |      |  |  |  |      | 
|                       |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|Netback after hedging  |  |       | 15.85 |         |        |  | 15.85 |       |  |  |       |  |  |       | 15.85 |  |       |  |      |  |  |  |      | 
|                       |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|Total crude oil        |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       |  |       |  |  |  |       | 
|Sales revenue          |  |       | 30.19 |         |        |  | 28.81 |       |  |  | 35.47  |  |  |       | 29.26 |  |       |  | 44.36 |  |  |  | 40.37 | 
|Royalties              |  |       | 3.87  |         |        |  | 4.22  |       |  |  | 0.36   |  |  |       | 3.96  |  |       |  | 2.65  |  |  |  |      | 
|Operating costs        |  |       | 7.23  |         |        |  | 7.84  |       |  |  | 3.62   |  |  |       | 7.54  |  |       |  | 2.15  |  |  |  | 13.13 | 
|Netback before hedging |  |       | 19.09 |         |        |  | 16.75 |       |  |  | 31.49  |  |  |       | 17.76 |  |       |  | 39.56 |  |  |  | 27.24 | 
|                       |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|Netback after hedging  |  |       | 19.16 |         |        |  | 16.83 |       |  |  | 31.49  |  |  |       | 17.84 |  |       |  | 39.56 |  |  |  | 27.24 | 
|                       |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|Natural Gas            |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       |  |       |  |  |  |       | 
|Sales revenue          |  |       | 3.97  |         |        |  | 3.97  |       |  |  |       |  |  |       | 3.97  |  |       |  |      |  |  |  |      | 
|Royalties              |  |       | 0.81  |         |        |  | 0.81  |       |  |  |       |  |  |       | 0.81  |  |       |  |      |  |  |  |      | 
|Operating costs        |  |       | 0.70  |         |        |  | 0.70  |       |  |  |       |  |  |       | 0.70  |  |       |  |      |  |  |  |      | 
|Netback before hedging |  |       | 2.46  |         |        |  | 2.46  |       |  |  |       |  |  |       | 2.46  |  |       |  |      |  |  |  |      | 
|                       |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 
|Netback after hedging  |  |       | 2.46  |         |        |  | 2.46  |       |  |  |       |  |  |       | 2.46  |  |       |  |      |  |  |  |      | 
|                       |  |       |       |         |        |  |       |       |  |  |        |  |  |       |       |  |       | 








|    |                                                                                                                                                                                                                                                                                                                                             
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Netbacks reflect the results of operations for leases classified
    as oil or natural gas. Co-products, such as natural gas produced
    at an oil property or natural gas liquids produced at a natural
    gas property, have been converted to equivalent units of oil or
    natural gas depending on the lease product classification.

15



---



##### Table of Contents



Producing Wells


|                        |                  |             |        |       |                   |  |       |             |  |  |        |       |  |             |       |       |        |  |        |        |  |  |        |       | 
|----------------------- | ---------------- | ----------- | ------ | ----- | ----------------- |  | ----- | ----------- |  |  | ------ | ----- |  | ----------- | ----- | ----- | ------ |  | ------ | ------ |  |  | ------ | ----- | 
|                        |                  | Oil Wells   |        |       | Natural Gas Wells |  |       | Total       | 
|                        |                  |             |        |       |                   |  |       |             | 
|                        |                  | Gross(1)(2) |        |       | Net(1)            |  |       | Gross(1)(2) |  |  | Net(1) |       |  | Gross(1)(2) |       |       | Net(1) | 
|                        |                  |             |        |       |                   |  |       |             |  |  |        |       |  |             |       |       |        | 
|Canada                  |                  |             |        |       |                   |  |       |             |  |  |        |       |  |             |       |       |        |  |        |        |  |  |        |      
|                        | Alberta          |             |        | 5,087 |                   |  |       | 3,501       |  |  |        | 6,232 |  |             |       | 3,368 |        |  |        | 11,319 |  |  |        | 6,869 | 
|                        | Saskatchewan     |             |        | 4,976 |                   |  |       | 3,676       |  |  |        | 940   |  |             |       | 673   |        |  |        | 5,916  |  |  |        | 4,349 | 
|                        | British Columbia |             |        | 226   |                   |  |       | 78          |  |  |        | 133   |  |             |       | 66    |        |  |        | 359    |  |  |        | 144   | 
|                        | Manitoba         |             |        | 27    |                   |  |       | 1           |  |  |        |      |  |             |       |      |        |  |        | 27     |  |  |        | 1     | 
|                        | Newfoundland     |             |        | 12    |                   |  |       | 2           |  |  |        |      |  |             |       |      |        |  |        | 12     |  |  |        | 2     | 
|                        |                  |             |        |       |                   |  |       |             |  |  |        |       |  |             |       |       |        | 
|                        |                  |             | 10,328 |       |                   |  | 7,258 |             |  |  | 7,305  |       |  |             | 4,107 |       |        |  | 17,633 |        |  |  | 11,365 |      
|International           |                  |             |        |       |                   |  |       |             |  |  |        |       |  |             |       |       |        |  |        |        |  |  |        |      
|                        | China            |             |        | 21    |                   |  |       | 8           |  |  |        |      |  |             |       |      |        |  |        | 21     |  |  |        | 8     | 
|                        | Libya            |             |        | 2     |                   |  |       | 1           |  |  |        |      |  |             |       |      |        |  |        | 2      |  |  |        | 1     | 
|                        |                  |             |        |       |                   |  |       |             |  |  |        |       |  |             |       |       |        | 
|                        |                  |             | 23     |       |                   |  | 9     |             |  |  |       |       |  |             |      |       |        |  | 23     |        |  |  | 9      |      
|As at December 31, 2004 |                  |             | 10,351 |       |                   |  | 7,267 |             |  |  | 7,305  |       |  |             | 4,107 |       |        |  | 17,656 |        |  |  | 11,376 |      
|                        |                  |             |        |       |                   |  |       |             |  |  |        |       |  |             |       |       |        | 
|Canada                  |                  |             |        |       |                   |  |       |             |  |  |        |       |  |             |       |       |        |  |        |        |  |  |        |      
|                        | Alberta          |             |        | 5,098 |                   |  |       | 3,410       |  |  |        | 5,660 |  |             |       | 2,877 |        |  |        | 10,758 |  |  |        | 6,287 | 
|                        | Saskatchewan     |             |        | 4,835 |                   |  |       | 3,596       |  |  |        | 675   |  |             |       | 422   |        |  |        | 5,510  |  |  |        | 4,018 | 
|                        | British Columbia |             |        | 211   |                   |  |       | 63          |  |  |        | 111   |  |             |       | 48    |        |  |        | 322    |  |  |        | 111   | 
|                        | Manitoba         |             |        | 2     |                   |  |       | 1           |  |  |        |      |  |             |       |      |        |  |        | 2      |  |  |        | 1     | 
|                        | Newfoundland     |             |        | 8     |                   |  |       | 1           |  |  |        |      |  |             |       |      |        |  |        | 8      |  |  |        | 1     | 
|                        |                  |             |        |       |                   |  |       |             |  |  |        |       |  |             |       |       |        | 
|                        |                  |             | 10,154 |       |                   |  | 7,071 |             |  |  | 6,446  |       |  |             | 3,347 |       |        |  | 16,600 |        |  |  | 10,418 |      
|International           |                  |             |        |       |                   |  |       |             |  |  |        |       |  |             |       |       |        |  |        |        |  |  |        |      
|                        | China            |             |        | 21    |                   |  |       | 8           |  |  |        |      |  |             |       |      |        |  |        | 21     |  |  |        | 8     | 
|                        | Libya            |             |        | 2     |                   |  |       | 1           |  |  |        |      |  |             |       |      |        |  |        | 2      |  |  |        | 1     | 
|                        |                  |             |        |       |                   |  |       |             |  |  |        |       |  |             |       |       |        | 
|                        |                  |             | 23     |       |                   |  | 9     |             |  |  |       |       |  |             |      |       |        |  | 23     |        |  |  | 9      |      
|                        |                  |             |        |       |                   |  |       |             |  |  |        |       |  |             |       |       |        | 
|As at December 31, 2003 |                  |             | 10,177 |       |                   |  | 7,080 |             |  |  | 6,446  |       |  |             | 3,347 |       |        |  | 16,623 |        |  |  | 10,427 |      
|                        |                  |             |        |       |                   |  |       |             |  |  |        |       |  |             |       |       |        | 








|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The number of gross wells is the total number of wells in which
    Husky owns a working interest. The number of net wells is the
    sum of the fractional interests owned in the gross wells.
    Producing wells were producing or capable of producing at
    December 31.                                                                                                                                                                                                                     
|   
|(2) | 2004 includes 482 gross, 411 net oil wells and 538 gross, 337
    net natural gas wells and 2003 includes 271 gross, 241 net oil
    wells and 424 gross, 207 net natural gas wells which were
    completed in two or more formations and from which the
    production is not commingled. For the purposes of this table,
    multiple completions are counted as single wells. Where one of
    the completions in a given well is an oil completion, the well
    is classified as an oil well.

16



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##### Table of Contents



Landholdings


Developed landholdings


|                                |                  |                      |       |       |     |  |       |       | 
|------------------------------- | ---------------- | -------------------- | ----- | ----- | --- |  | ----- | ----- | 
|                                |                  | Developed Acreage    |      
|                                |                  |                      |      
|                                |                  | Gross                |       |       | Net | 
|                                |                  |                      |       |       |     | 
|                                |                  | (thousands of acres) |      
|As at December 31, 2004         |                  |                      |       |       |     |  |       |      
|Western Canada                  |                  |                      |       |       |     |  |       |      
|                                | Alberta          |                      |       | 3,200 |     |  |       | 2,687 | 
|                                | Saskatchewan     |                      |       | 567   |     |  |       | 506   | 
|                                | British Columbia |                      |       | 186   |     |  |       | 110   | 
|                                | Manitoba         |                      |       |      |     |  |       |      | 
|                                |                  |                      |       |       |     | 
|                                |                  |                      | 3,953 |       |     |  | 3,303 |      
|Northwest Territories and Artic |                  |                      | 7     |       |     |  | 1     |      
|Eastern Canada                  |                  |                      | 35    |       |     |  | 4     |      
|                                |                  |                      |       |       |     | 
|Total Canada                    |                  |                      | 3,995 |       |     |  | 3,308 |      
|                                |                  |                      |       |       |     | 
|China                           |                  |                      | 17    |       |     |  | 7     |      
|Libya                           |                  |                      | 7     |       |     |  | 2     |      
|                                |                  |                      |       |       |     | 
|                                |                  |                      | 4,019 |       |     |  | 3,317 |      
|                                |                  |                      |       |       |     | 
|As at December 31, 2003         |                  |                      |       |       |     |  |       |      
|Western Canada                  |                  |                      |       |       |     |  |       |      
|                                | Alberta          |                      |       | 3,208 |     |  |       | 2,684 | 
|                                | Saskatchewan     |                      |       | 550   |     |  |       | 485   | 
|                                | British Columbia |                      |       | 161   |     |  |       | 92    | 
|                                | Manitoba         |                      |       | 1     |     |  |       | 1     | 
|                                |                  |                      |       |       |     | 
|                                |                  |                      | 3,920 |       |     |  | 3,262 |      
|Eastern Canada                  |                  |                      | 35    |       |     |  | 4     |      
|                                |                  |                      |       |       |     | 
|Total Canada                    |                  |                      | 3,955 |       |     |  | 3,266 |      
|                                |                  |                      |       |       |     | 
|China                           |                  |                      | 17    |       |     |  | 7     |      
|Libya                           |                  |                      | 7     |       |     |  | 2     |      
|                                |                  |                      |       |       |     | 
|                                |                  |                      | 3,979 |       |     |  | 3,275 |      
|                                |                  |                      |       |       |     | 

17



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##### Table of Contents



Undeveloped landholdings


|                                 |                  |                      |        |       |     |  |        |       | 
|-------------------------------- | ---------------- | -------------------- | ------ | ----- | --- |  | ------ | ----- | 
|                                 |                  | Undeveloped Acreage  |       
|                                 |                  |                      |       
|                                 |                  | Gross                |        |       | Net | 
|                                 |                  |                      |        |       |     | 
|                                 |                  | (thousands of acres) |       
|As at December 31, 2004          |                  |                      |        |       |     |  |        |      
|Western Canada                   |                  |                      |        |       |     |  |        |      
|                                 | Alberta          |                      |        | 4,983 |     |  |        | 4,449 | 
|                                 | Saskatchewan     |                      |        | 1,831 |     |  |        | 1,669 | 
|                                 | British Columbia |                      |        | 787   |     |  |        | 544   | 
|                                 | Manitoba         |                      |        | 7     |     |  |        | 7     | 
|                                 |                  |                      |        |       |     | 
|                                 |                  |                      | 7,608  |       |     |  | 6,669  |      
|Northwest Territories and Arctic |                  |                      | 924    |       |     |  | 254    |      
|Eastern Canada                   |                  |                      | 3,154  |       |     |  | 2,104  |      
|                                 |                  |                      |        |       |     | 
|Total Canada                     |                  |                      | 11,686 |       |     |  | 9,027  |      
|International                    |                  |                      | 6,280  |       |     |  | 3,429  |      
|                                 |                  |                      |        |       |     | 
|                                 |                  |                      | 17,966 |       |     |  | 12,456 |      
|                                 |                  |                      |        |       |     | 
|As at December 31, 2003          |                  |                      |        |       |     |  |        |      
|Western Canada                   |                  |                      |        |       |     |  |        |      
|                                 | Alberta          |                      |        | 5,508 |     |  |        | 4,852 | 
|                                 | Saskatchewan     |                      |        | 2,057 |     |  |        | 1,911 | 
|                                 | British Columbia |                      |        | 713   |     |  |        | 491   | 
|                                 | Manitoba         |                      |        | 9     |     |  |        | 8     | 
|                                 |                  |                      |        |       |     | 
|                                 |                  |                      | 8,287  |       |     |  | 7,262  |      
|Northwest Territories and Arctic |                  |                      | 527    |       |     |  | 184    |      
|Eastern Canada                   |                  |                      | 2,414  |       |     |  | 2,104  |      
|                                 |                  |                      |        |       |     | 
|Total Canada                     |                  |                      | 11,228 |       |     |  | 9,550  |      
|International                    |                  |                      | 4,464  |       |     |  | 2,066  |      
|                                 |                  |                      |        |       |     | 
|                                 |                  |                      | 15,692 |       |     |  | 11,616 |      
|                                 |                  |                      |        |       |     | 

Drilling Activity


|                        |     |                        |       |     |      |  |       |       |  |  |       |     |  |       |       |     |     |  |       |     |  |  |       |     | 
|----------------------- | --- | ---------------------- | ----- | --- | ---- |  | ----- | ----- |  |  | ----- | --- |  | ----- | ----- | --- | --- |  | ----- | --- |  |  | ----- | --- | 
|                        |     | Year ended December 31 |      
|                        |     |                        |      
|                        |     | 2004                   |       |     | 2003 |  |       | 2002  | 
|                        |     |                        |       |     |      |  |       |       | 
|                        |     | Gross                  |       |     | Net  |  |       | Gross |  |  | Net   |     |  | Gross |       |     | Net | 
|                        |     |                        |       |     |      |  |       |       |  |  |       |     |  |       |       |     |     | 
|Western Canada Drilling |     |                        |       |     |      |  |       |       |  |  |       |     |  |       |       |     |     |  |       |     |  |  |       |    
|Exploration             |     |                        |       |     |      |  |       |       |  |  |       |     |  |       |       |     |     |  |       |     |  |  |       |    
|                        | Oil |                        |       | 45  |      |  |       | 39    |  |  |       | 12  |  |       |       | 11  |     |  |       | 21  |  |  |       | 20  | 
|                        | Gas |                        |       | 234 |      |  |       | 180   |  |  |       | 147 |  |       |       | 124 |     |  |       | 139 |  |  |       | 131 | 
|                        | Dry |                        |       | 34  |      |  |       | 33    |  |  |       | 22  |  |       |       | 21  |     |  |       | 15  |  |  |       | 14  | 
|                        |     |                        |       |     |      |  |       |       |  |  |       |     |  |       |       |     |     | 
|                        |     |                        | 313   |     |      |  | 252   |       |  |  | 181   |     |  |       | 156   |     |     |  | 175   |     |  |  | 165   |    
|                        |     |                        |       |     |      |  |       |       |  |  |       |     |  |       |       |     |     | 
|Development             |     |                        |       |     |      |  |       |       |  |  |       |     |  |       |       |     |     |  |       |     |  |  |       |    
|                        | Oil |                        |       | 552 |      |  |       | 499   |  |  |       | 520 |  |       |       | 490 |     |  |       | 497 |  |  |       | 453 | 
|                        | Gas |                        |       | 807 |      |  |       | 740   |  |  |       | 540 |  |       |       | 518 |     |  |       | 485 |  |  |       | 453 | 
|                        | Dry |                        |       | 57  |      |  |       | 53    |  |  |       | 60  |  |       |       | 57  |     |  |       | 58  |  |  |       | 55  | 
|                        |     |                        |       |     |      |  |       |       |  |  |       |     |  |       |       |     |     | 
|                        |     |                        | 1,416 |     |      |  | 1,292 |       |  |  | 1,120 |     |  |       | 1,065 |     |     |  | 1,040 |     |  |  | 961   |    
|                        |     |                        |       |     |      |  |       |       |  |  |       |     |  |       |       |     |     | 
|                        |     |                        | 1,729 |     |      |  | 1,544 |       |  |  | 1,301 |     |  |       | 1,221 |     |     |  | 1,215 |     |  |  | 1,126 |    
|                        |     |                        |       |     |      |  |       |       |  |  |       |     |  |       |       |     |     | 

18



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##### Table of Contents



Present Activities


|                  |  |             |    |  |             |  |     |       |  |  |     |  |  |  |      | 
|----------------- |  | ----------- | -- |  | ----------- |  | --- | ----- |  |  | --- |  |  |  | ---- | 
|                  |  | Exploratory |    |  | Development | 
|                  |  |             |    |  |             | 
|Wells Drilling(1) |  | Gross       |    |  | Net         |  |     | Gross |  |  | Net | 
|                  |  |             |    |  |             |  |     |       |  |  |     | 
|Western Canada    |  |             | 11 |  |             |  | 8.6 |       |  |  | 29  |  |  |  | 26.9 | 
|East Coast        |  |             |   |  |             |  |    |       |  |  | 1   |  |  |  | 0.1  | 
|China             |  |             |   |  |             |  |    |       |  |  |    |  |  |  |     | 
|                  |  |             |    |  |             |  |     |       |  |  |     | 
|                  |  |             | 11 |  |             |  | 8.6 |       |  |  | 30  |  |  |  | 27.0 | 
|                  |  |             |    |  |             |  |     |       |  |  |     | 








|    |                                                       
|--- | ------------------------------------------------------
|(1) | Denotes wells that were drilling at December 31, 2004.

Reserves Data and Other Oil and Gas Information




Audit of Oil and Gas Reserves




Oil and Gas Reserves Data




Proved Reserves


|                            |  |                    |     |  |                |            |     |                  |  |            |        |  |  |    |       |  |     |  |        |  |  |  |       | 
|--------------------------- |  | ------------------ | --- |  | -------------- | ---------- | --- | ---------------- |  | ---------- | ------ |  |  | -- | ----- |  | --- |  | ------ |  |  |  | ----- | 
|                            |  |                    |     |  |                |            |     |                  |  | Future Net |       
|                            |  |                    |     |  |                | Cash Flows |    
|                            |  | Crude Oil & NGL(1) |     |  | Natural Gas(1) |            |     | Before Tax(1)(4) | 
|                            |  |                    |     |  |                |            |     |                  | 
|                            |  | Gross(2)           |     |  | Net(2)         |            |     | Gross(2)         |  |            | Net(2) |  |  | 0% |       |  | 10% | 
|                            |  |                    |     |  |                |            |     |                  |  |            |        |  |  |    |       |  |     | 
|                            |  | (mmbbls)           |     |  | (bcf)          |            |     | ($ millions)     | 
|Proved developed(3)         |  |                    | 362 |  |                |            | 317 |                  |  |            | 1,745  |  |  |    | 1,436 |  |     |  | 11,891 |  |  |  | 7,114 | 
|Proved undeveloped(3)(5)    |  |                    | 67  |  |                |            | 58  |                  |  |            | 424    |  |  |    | 352   |  |     |  | 2,268  |  |  |  | 1,184 | 
|                            |  |                    |     |  |                |            |     |                  |  |            |        |  |  |    |       |  |     | 
|Proved total(3)             |  |                    | 429 |  |                |            | 375 |                  |  |            | 2,169  |  |  |    | 1,788 |  |     |  | 14,159 |  |  |  | 8,298 | 
|                            |  |                    |     |  |                |            |     |                  |  |            |        |  |  |    |       |  |     | 
|Heavy oil price revision(6) |  |                    | 120 |  |                |            | 112 |                  |  |            | 3      |  |  |    | 3     |  |     |  |        |  |  |  |       | 
|                            |  |                    |     |  |                |            |     |                  |  |            |        |  |  |    |       |  |     | 
|                            |  |                    | 549 |  |                |            | 487 |                  |  |            | 2,172  |  |  |    | 1,791 |  |     |  |        |  |  |  |       | 
|                            |  |                    |     |  |                |            |     |                  |  |            |        |  |  |    |       |  |     | 








|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Husky applied for and was granted an exemption from National
    Instrument 51-101 Standards of Disclosure for Oil and Gas
    Activities to provide oil and gas reserves disclosures in
    accordance with the U.S. Securities and Exchange Commission
    guidelines and the U.S. Financial Accounting Standards Board
    disclosure standards. The information disclosed may differ from
    information prepared in accordance with National Instrument
    51-101. Huskys internally generated oil and gas reserves
    data was audited by an independent firm of consulting engineers.
|   
|(2) | Gross reserves are Huskys lessor royalty, overriding
    royalty and working interest share of reserves, before deduction
    of royalties. Net reserves are gross reserves, less royalties.                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|(3) | These reserve categories have the same meanings as those set out
    in SEC Regulation S-X.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

19



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##### Table of Contents





|    |                                                                                                                                                                                                    
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(4) | The discounted future net cash flows at December 31, 2004
    were based on the year-end spot NYMEX natural gas price of U.S.
    $6.02/mmbtu and on a spot WTI crude oil price of U.S. $43.36/bbl.
|   
|(5) | Estimated future capital expenditures required to gain access to
    proved undeveloped reserves as at December 31, 2004 and
    2003 were as follows:                                             

|               |  |                           |       |  |      |  |     |      |  |  |      |  |  |      |     |  |      |  |    |            |  |  |    |  |  |  |     |  
|-------------- |  | ------------------------- | ----- |  | ---- |  | --- | ---- |  |  | ---- |  |  | ---- | --- |  | ---- |  | -- | ---------- |  |  | -- |  |  |  | --- | -
|               |  | As at December 31, 2004   |      
|               |  |                           |      
|               |  | Total                     |       |  | 2005 |  |     | 2006 |  |  | 2007 |  |  | 2008 |     |  | 2009 |  |    | Thereafter | 
|               |  |                           |       |  |      |  |     |      |  |  |      |  |  |      |     |  |      |  |    |            | 
|               |  | ($ millions undiscounted) |      
|Western Canada |  |                           | 651   |  |      |  | 218 |      |  |  | 210  |  |  |      | 107 |  |      |  | 34 |            |  |  | 13 |  |  |  | 69  |  
|Eastern Canada |  |                           | 352   |  |      |  | 390 |      |  |  | 19   |  |  |      | 9   |  |      |  | 11 |            |  |  | 4  |  |  |  | (81 | )
|               |  |                           |       |  |      |  |     |      |  |  |      |  |  |      |     |  |      |  |    |            | 
|               |  |                           | 1,003 |  |      |  | 608 |      |  |  | 229  |  |  |      | 116 |  |      |  | 45 |            |  |  | 17 |  |  |  | (12 | )
|               |  |                           |       |  |      |  |     |      |  |  |      |  |  |      |     |  |      |  |    |            | 

|               |  |                         |     |  |      |  |     |      |  |  |      |  |  |      |    |  |      |  |    |            |  |  |    |  |  |  |    | 
|-------------- |  | ----------------------- | --- |  | ---- |  | --- | ---- |  |  | ---- |  |  | ---- | -- |  | ---- |  | -- | ---------- |  |  | -- |  |  |  | -- | 
|               |  | As at December 31, 2003 |    
|               |  |                         |    
|               |  | Total                   |     |  | 2004 |  |     | 2005 |  |  | 2006 |  |  | 2007 |    |  | 2008 |  |    | Thereafter | 
|               |  |                         |     |  |      |  |     |      |  |  |      |  |  |      |    |  |      |  |    |            | 
|Western Canada |  |                         | 697 |  |      |  | 282 |      |  |  | 201  |  |  |      | 76 |  |      |  | 40 |            |  |  | 24 |  |  |  | 74 | 
|Eastern Canada |  |                         | 14  |  |      |  | 12  |      |  |  | 2    |  |  |      |    |  |      |  |    |            |  |  |    |  |  |  |    | 
|               |  |                         |     |  |      |  |     |      |  |  |      |  |  |      |    |  |      |  |    |            | 
|               |  |                         | 711 |  |      |  | 294 |      |  |  | 201  |  |  |      | 76 |  |      |  | 40 |            |  |  | 24 |  |  |  | 76 | 
|               |  |                         |     |  |      |  |     |      |  |  |      |  |  |      |    |  |      |  |    |            | 



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(6) | On December 31, 2004, the date our oil and gas reserves
    were evaluated, the calculated price of Lloydminster heavy crude
    oil was $12.27 per barrel. In accordance with SEC regulation,
    reserves that were not economic at that price were required to
    be subtracted as a negative revision from proved reserves until
    prices increase sufficiently to return those reserves to
    economic status. For further discussion refer to
    Managements Discussion and Analysis for the year ended
    December 31, 2004.

Reconciliation of Proved Reserves


|                                     |                   |                               |  |     |            |   |  |               |     |   |         |     |      |           |  |       |           |   |  |          |    |   |           |    |    |         |  |     |      |   |  |     |      |   |  |       |      |  
|------------------------------------ | ----------------- | ----------------------------- |  | --- | ---------- | - |  | ------------- | --- | - | ------- | --- | ---- | --------- |  | ----- | --------- | - |  | -------- | -- | - | --------- | -- | -- | ------- |  | --- | ---- | - |  | --- | ---- | - |  | ----- | ---- | -
|                                     |                   | Canada                        |  |     |            |   |  |               |     |   |        
|                                     |                   |                               |  |     |            |   |  |               |     |   |        
|                                     |                   | Western Canada                |  |     | East Coast |   |  | International |     |   | Total   |    
|                                     |                   |                               |  |     |            |   |  |               |     |   |         |    
|                                     |                   | Light                         |  |     |            |   |  |               |     |   |        
|                                     |                   | Crude Oil                     |  |     | Medium     |   |  | Heavy         |     |   | Natural |     |      | Light     |  |       | Light     |   |  | Natural  |    |   | Crude Oil |    |    | Natural | 
|                                     |                   | & NGL                         |  |     | Crude Oil  |   |  | Crude Oil     |     |   | Gas     |     |      | Crude Oil |  |       | Crude Oil |   |  | Gas      |    |   | & NGL     |    |    | Gas     | 
|                                     |                   |                               |  |     |            |   |  |               |     |   |         |     |      |           |  |       |           |   |  |          |    |   |           |    |    |         | 
|                                     |                   | (mmbbls)                      |  |     | (mmbbls)   |   |  | (mmbbls)      |     |   | (bcf)   |     |      | (mmbbls)  |  |       | (mmbbls)  |   |  | (mmbbls) |    |   | (mmbbls)  |    |    | (bcf)   | 
|Proved reserves, before royalties(1) |                   |                               |  |     |            |   |  |               |     |   |         |     |      |           |  |       |           |   |  |          |    |   |           |    |    |         |  |     |      |   |  |    
|Proved reserves at                   |                   |                               |  |     |            |   |  |               |     |   |         |     |      |           |  |       |           |   |  |          |    |   |           |    |    |         |  |     |      |   |  |     |      |   |  |      
|                                     | December 31, 2001 |                               |  | 182 |            |   |  | 128           |     |   |         | 232 |      |           |  | 1,823 |           |   |  | 17       |    |   |           | 40 |    |         |  | 143 |      |   |  | 599 |      |   |  | 1,966 |     
|                                     |                   |                               |  |     |            |   |  |               |     |   |         |     |      |           |  |       |           |   |  |          |    |   |           |    |    |         | 
|                                     |                   | Revision of previous estimate |  |     | (4         | ) |  |               | 9   |   |         |     | 7    |           |  |       | (37       | ) |  |          |    |   |           |    |    |         |  |     |      |   |  |     | 12   |   |  |       | (37  | )
|                                     |                   | Purchase of reserves in place |  |     |            |   |  |               |     |   |         |     | 5    |           |  |       | 6         |   |  |          |    |   |           |    |    |         |  |     |      |   |  |     | 5    |   |  |       | 6    |  
|                                     |                   | Sales of reserves in place    |  |     | (2         | ) |  |               | (14 | ) |         |     |      |           |  |       | (19       | ) |  |          |    |   |           |    |    |         |  |     |      |   |  |     | (16  | ) |  |       | (19  | )
|                                     |                   | Discoveries and extensions    |  |     | 4          |   |  |               | 1   |   |         |     | 18   |           |  |       | 382       |   |  |          | 8  |   |           |    |    |         |  |     |      |   |  |     | 31   |   |  |       | 382  |  
|                                     |                   | Improved recovery             |  |     | 1          |   |  |               |     |   |         |     |      |           |  |       | 5         |   |  |          | 11 |   |           |    | 1  |         |  |     |      |   |  |     | 13   |   |  |       | 5    |  
|                                     |                   | Production                    |  |     | (15        | ) |  |               | (16 | ) |         |     | (35  | )         |  |       | (208      | ) |  |          | (5 | ) |           |    | (4 | )       |  |     |      |   |  |     | (75  | ) |  |       | (208 | )
|Proved reserves at                   |                   |                               |  |     |            |   |  |               |     |   |         |     |      |           |  |       |           |   |  |          |    |   |           |    |    |         |  |     |      |   |  |     |      |   |  |      
|                                     | December 31, 2002 |                               |  | 166 |            |   |  | 108           |     |   |         | 227 |      |           |  | 1,952 |           |   |  | 31       |    |   |           | 37 |    |         |  | 143 |      |   |  | 569 |      |   |  | 2,095 |     
|                                     |                   |                               |  |     |            |   |  |               |     |   |         |     |      |           |  |       |           |   |  |          |    |   |           |    |    |         | 
|                                     |                   | Revision of previous estimate |  |     | 5          |   |  |               | 1   |   |         |     | 6    |           |  |       | (132      | ) |  |          | 1  |   |           |    | (5 | )       |  |     | (143 | ) |  |     | 8    |   |  |       | (275 | )
|                                     |                   | Purchase of reserves in place |  |     | 9          |   |  |               |     |   |         |     | 3    |           |  |       | 184       |   |  |          |    |   |           |    |    |         |  |     |      |   |  |     | 12   |   |  |       | 184  |  
|                                     |                   | Sales of reserves in place    |  |     | (1         | ) |  |               | (3  | ) |         |     | (1   | )         |  |       | (23       | ) |  |          |    |   |           |    |    |         |  |     |      |   |  |     | (5   | ) |  |       | (23  | )
|                                     |                   | Discoveries and extensions    |  |     | 5          |   |  |               | 2   |   |         |     | 29   |           |  |       | 300       |   |  |          |    |   |           |    |    |         |  |     |      |   |  |     | 36   |   |  |       | 300  |  
|                                     |                   | Improved recovery             |  |     | 1          |   |  |               |     |   |         |     |      |           |  |       | 1         |   |  |          |    |   |           |    |    |         |  |     |      |   |  |     | 1    |   |  |       | 1    |  
|                                     |                   | Production                    |  |     | (12        | ) |  |               | (14 | ) |         |     | (37  | )         |  |       | (223      | ) |  |          | (6 | ) |           |    | (8 | )       |  |     |      |   |  |     | (77  | ) |  |       | (223 | )
|Proved reserves at                   |                   |                               |  |     |            |   |  |               |     |   |         |     |      |           |  |       |           |   |  |          |    |   |           |    |    |         |  |     |      |   |  |     |      |   |  |      
|                                     | December 31, 2003 |                               |  | 173 |            |   |  | 94            |     |   |         | 227 |      |           |  | 2,059 |           |   |  | 26       |    |   |           | 24 |    |         |  |     |      |   |  | 544 |      |   |  | 2,059 |     
|                                     |                   |                               |  |     |            |   |  |               |     |   |         |     |      |           |  |       |           |   |  |          |    |   |           |    |    |         | 
|                                     |                   | Revision of previous estimate |  |     | 1          |   |  |               | 1   |   |         |     | (114 | )         |  |       | (23       | ) |  |          | (1 | ) |           |    | 3  |         |  |     |      |   |  |     | (110 | ) |  |       | (23  | )
|                                     |                   | Purchase of reserves in place |  |     | 1          |   |  |               |     |   |         |     |      |           |  |       | 23        |   |  |          |    |   |           |    |    |         |  |     |      |   |  |     | 1    |   |  |       | 23   |  
|                                     |                   | Sales of reserves in place    |  |     |            |   |  |               |     |   |         |     | (1   | )         |  |       | (14       | ) |  |          |    |   |           |    |    |         |  |     |      |   |  |     | (1   | ) |  |       | (14  | )
|                                     |                   | Discoveries and extensions    |  |     | 7          |   |  |               | 2   |   |         |     | 32   |           |  |       | 372       |   |  |          | 24 |   |           |    |    |         |  |     |      |   |  |     | 65   |   |  |       | 372  |  
|                                     |                   | Improved recovery             |  |     | 1          |   |  |               | 2   |   |         |     | 1    |           |  |       | 4         |   |  |          | 3  |   |           |    |    |         |  |     |      |   |  |     | 7    |   |  |       | 4    |  
|                                     |                   | Production                    |  |     | (12        | ) |  |               | (13 | ) |         |     | (40  | )         |  |       | (252      | ) |  |          | (5 | ) |           |    | (7 | )       |  |     |      |   |  |     | (77  | ) |  |       | (252 | )
|Proved reserves at                   |                   |                               |  |     |            |   |  |               |     |   |         |     |      |           |  |       |           |   |  |          |    |   |           |    |    |         |  |     |      |   |  |     |      |   |  |      
|                                     | December 31, 2004 |                               |  | 171 |            |   |  | 86            |     |   |         | 105 |      |           |  | 2,169 |           |   |  | 47       |    |   |           | 20 |    |         |  |     |      |   |  | 429 |      |   |  | 2,169 |     
|                                     |                   |                               |  |     |            |   |  |               |     |   |         |     |      |           |  |       |           |   |  |          |    |   |           |    |    |         | 








|    |                                                                                                                                                                                                                                                                                     
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Proved reserves are the estimated quantities of crude oil,
    natural gas and NGL which geological and engineering data
    demonstrate with reasonable certainty to be recoverable in
    future years from known reservoirs under existing economic and
    operating conditions.

20



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##### Table of Contents



Reserves and Production by Principal Area


|                     |                   |                                   |                            |      |             |      |       |      |      |      | 
|-------------------- | ----------------- | --------------------------------- | -------------------------- | ---- | ----------- | ---- | ----- | ---- | ---- | ---- | 
|Crude Oil and NGL(1) |                   | Proved Reserves                   |                            |      | Production  |     
|                     |                   |                                   |                            |      |             |     
|                     |                   | (mmbbls)                          |                            |      | (mbbls/day) |     
|Canada               |                   |                                   |                            |      |             |      |       |     
|                     | Western Canada    |                                   |                            |      |             |      |       |      |     
|                     |                   | British Columbia and Foothills    |                            |      |             |      |       |      |      |     
|                     |                   |                                   | Alberta and BC Plains area |      |             | 31.0 |       |      |      | 6.6  | 
|                     |                   |                                   | Foothills Deep Gas area    |      |             | 23.7 |       |      |      | 6.6  | 
|                     |                   |                                   | Ram River and Kaybob areas |      |             | 7.0  |       |      |      | 2.0  | 
|                     |                   | Northwest Alberta Plains          |                            |      |             |      |       |      |      |     
|                     |                   |                                   | Rainbow Lake area          |      |             | 83.8 |       |      |      | 7.7  | 
|                     |                   |                                   | Peace River Arch area      |      |             | 10.4 |       |      |      | 4.2  | 
|                     |                   | East Central Alberta              |                            |      |             |      |       |      |      |     
|                     |                   |                                   | Provost area               |      |             | 23.6 |       |      |      | 8.2  | 
|                     |                   |                                   | North area                 |      |             | 2.3  |       |      |      | 0.6  | 
|                     |                   |                                   | South area                 |      |             | 6.5  |       |      |      | 2.7  | 
|                     |                   | Southern Alberta and Saskatchewan |                            |      |             |      |       |      |      |     
|                     |                   |                                   | South Alberta area         |      |             | 20.0 |       |      |      | 11.2 | 
|                     |                   |                                   | South Saskatchewan area    |      |             | 72.6 |       |      |      | 17.4 | 
|                     |                   | Lloydminster Area                 |                            |      |             |      |       |      |      |     
|                     |                   |                                   | Primary production         |      |             | 80.5 |       |      |      | 81.0 | 
|                     |                   |                                   | Thermal production         |      |             |     |       |      |      | 18.8 | 
|                     |                   | Other                             |                            |      | 0.8         |      |       |      | 9.6  |     
|                     |                   |                                   |                            |      |             |     
|                     |                   |                                   | 362.2                      |      |             |      | 176.6 |     
|                     |                   |                                   |                            |      |             |     
|                     | East Coast Canada |                                   |                            |      |             |      |       |      |     
|                     |                   | Terra Nova                        |                            |      | 23.6        |      |       |      | 13.7 |     
|                     |                   | White Rose                        |                            |      | 23.5        |      |       |      |     |     
|                     |                   |                                   |                            |      |             |     
|                     |                   |                                   | 409.3                      |      |             |      | 190.3 |     
|                     |                   |                                   |                            |      |             |     
|China                |                   |                                   |                            |      |             |      |       |     
|                     | Wenchang          |                                   |                            | 19.4 |             |      |       | 19.7 |     
|Libya                |                   |                                   |                            |      |             |      |       |     
|                     | Shatirah          |                                   |                            | 0.4  |             |      |       | 0.1  |     
|                     |                   |                                   |                            |      |             |     
|                     |                   |                                   | 429.1                      |      |             |      | 210.1 |     
|                     |                   |                                   |                            |      |             |     








|    |                                                                                                                           
|--- | --------------------------------------------------------------------------------------------------------------------------
|(1) | Gross crude oil and NGL reserves as at December 31, 2004
    and average 2004 daily gross production of crude oil and NGL.

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##### Table of Contents



|               |                                   |                            |         |      |            |  |       |      |      | 
|-------------- | --------------------------------- | -------------------------- | ------- | ---- | ---------- |  | ----- | ---- | ---- | 
|Natural Gas(1) |                                   | Proved Reserves            |         |      | Production | 
|               |                                   |                            |         |      |            | 
|               |                                   | (bcf)                      |         |      | (mmcf/day) | 
|Western Canada |                                   |                            |         |      |            |  |       |     
|               | British Columbia and Foothills    |                            |         |      |            |  |       |      |     
|               |                                   | Alberta and BC Plains area |         |      | 181.5      |  |       |      | 46.9 | 
|               |                                   | Foothills Deep Gas area    |         |      | 291.4      |  |       |      | 94.8 | 
|               |                                   | Ram River and Kaybob areas |         |      | 271.8      |  |       |      | 84.0 | 
|               | Northwest Alberta Plains          |                            |         |      |            |  |       |      |     
|               |                                   | Rainbow Lake area          |         |      | 373.3      |  |       |      | 50.7 | 
|               |                                   | Peace River Arch           |         |      | 56.4       |  |       |      | 29.0 | 
|               |                                   | Northern Alberta area      |         |      | 269.7      |  |       |      | 97.4 | 
|               | East Central Alberta              |                            |         |      |            |  |       |      |     
|               |                                   | Provost area               |         |      | 63.7       |  |       |      | 16.8 | 
|               |                                   | North area                 |         |      | 148.6      |  |       |      | 54.0 | 
|               |                                   | South area                 |         |      | 184.6      |  |       |      | 55.0 | 
|               | Southern Alberta and Saskatchewan |                            |         |      |            |  |       |      |     
|               |                                   | South Alberta area         |         |      | 61.7       |  |       |      | 32.4 | 
|               |                                   | South Saskatchewan area    |         |      | 182.9      |  |       |      | 62.0 | 
|               | Lloydminster Area                 |                            |         | 75.0 |            |  |       | 58.0 |     
|               | Other                             |                            |         | 8.1  |            |  |       | 8.2  |     
|               |                                   |                            |         |      |            | 
|               |                                   |                            | 2,168.7 |      |            |  | 689.2 |     
|               |                                   |                            |         |      |            | 








|    |                                                                                                               
|--- | --------------------------------------------------------------------------------------------------------------
|(1) | Gross natural gas reserves as at December 31, 2004 and
    average 2004 daily gross production of natural gas.

Probable Oil and Gas
Reserves(1)


|         |  |                 |       |     |             |  |       |               |  |  |       |  |  |                |       |  |               |  |       |       |  |  |       |  |  |  |       |  |  |  |       | 
|-------- |  | --------------- | ----- | --- | ----------- |  | ----- | ------------- |  |  | ----- |  |  | -------------- | ----- |  | ------------- |  | ----- | ----- |  |  | ----- |  |  |  | ----- |  |  |  | ----- | 
|         |  | Crude Oil & NGL |       |     | Natural Gas |  |       |              
|         |  |                 |       |     |             |  |       |              
|Probable |  | Western Canada  |       |     | East coast  |  |       | International |  |  | Total |  |  | Western Canada |       |  | International |  |       | Total |  |  | BOE   | 
|         |  |                 |       |     |             |  |       |               |  |  |       |  |  |                |       |  |               |  |       |       |  |  |       | 
|         |  | (mmbbls)        |       |     | (bcf)       |  |       | (mmboe)       | 
|2004     |  |                 | 192.3 | (2) |             |  | 155.6 |               |  |  | 12.7  |  |  |                | 360.6 |  |               |  | 388.2 |       |  |  | 166.6 |  |  |  | 554.8 |  |  |  | 453.1 | 
|2003     |  |                 | 246.1 |     |             |  | 182.2 |               |  |  | 7.0   |  |  |                | 435.3 |  |               |  | 381.3 |       |  |  | 66.5  |  |  |  | 447.8 |  |  |  | 509.9 | 
|2002     |  |                 | 246.4 |     |             |  | 201.6 |               |  |  | 4.2   |  |  |                | 452.2 |  |               |  | 383.9 |       |  |  | 18.9  |  |  |  | 402.8 |  |  |  | 519.3 | 








|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The probable reserves presented have been prepared, using
    constant prices and costs, in accordance with NI 51-101.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   
|(2) | Probable bitumen reserves were based on constant prices
    calculated in accordance with the Canadian Securities
    Administrators Staff Notice 51-315 Guidance Regarding
    the Determination of Constant Prices for Bitumen Reserves under
    National Instrument 51-101 Standards of Disclosure for Oil and
    Gas Activities (the Staff Notice). Bitumen reserves
    at December 31, 2004 remain classified as probable reserves
    because the pricing formula in the Staff Notice results in an
    economically viable price as at that date whereas 37 mmbbls
    of heavy oil reserves were subtracted from probable reserves due
    to low December 31, 2004 heavy oil prices under the
    constant pricing calculation applicable to heavy oil, which
    differed from the bitumen calculation. See Disclosure of
    Exemption under National Instrument 51-101 for further
    discussion.
|   
|(3) | Bitumen probable reserves are included under the caption Western
    Canada.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   
|(4) | The SEC generally permits oil and gas registrants to disclose
    only reserves that meet the standards for proved reserves. Due
    to the higher uncertainty associated with probable reserves,
    disclosure or reference to probable reserves does not meet the
    standards for the inclusion in a document filed with the SEC.
    The disclosure of probable reserves is included herein in
    accordance with certain undertakings made in an exemption order
    granted to Husky pursuant to Part 8 of the Companion Policy
    to NI 51-101.                                                                                                                                                                                                                                                                                                                                                            

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Disclosure about Oil and Gas Producing Activities 
Statement of Financial Accounting Standards No. 69




Oil and Gas Reserves












Results of Operations for Producing Activities


|                                         |                                       |                                     |       |     |               |  |       |       |  |  |       |     |  |      |      |    |      |  |      |      |  |  |      |    |  |      |       |     |  |  |       |     |  |  |       |     | 
|---------------------------------------- | ------------------------------------- | ----------------------------------- | ----- | --- | ------------- |  | ----- | ----- |  |  | ----- | --- |  | ---- | ---- | -- | ---- |  | ---- | ---- |  |  | ---- | -- |  | ---- | ----- | --- |  |  | ----- | --- |  |  | ----- | --- | 
|                                         |                                       | Canada                              |       |     | International |  |       | Total | 
|Results of operations for                |                                       |                                     |       |     |               |  |       |       | 
|producing activities(1)(2)               |                                       | 2004                                |       |     | 2003          |  |       | 2002  |  |  | 2004  |     |  | 2003 |      |    | 2002 |  |      | 2004 |  |  | 2003 |    |  | 2002 |      
|                                         |                                       |                                     |       |     |               |  |       |       |  |  |       |     |  |      |      |    |      |  |      |      |  |  |      |    |  |      |      
|                                         |                                       | ($ millions except per boe amounts) |      
|Oil and gas production revenue           |                                       |                                     | 2,866 |     |               |  | 2,917 |       |  |  | 2,541 |     |  |      | 310  |    |      |  | 310  |      |  |  | 190  |    |  |      | 3,176 |     |  |  | 3,227 |     |  |  | 2,731 |    
|                                         |                                       |                                     |       |     |               |  |       |       |  |  |       |     |  |      |      |    |      |  |      |      |  |  |      |    |  |      |      
|Operating costs                          |                                       |                                     |       |     |               |  |       |       |  |  |       |     |  |      |      |    |      |  |      |      |  |  |      |    |  |      |       |     |  |  |       |     |  |  |       |    
|                                         | Lease operating expenses              |                                     |       | 874 |               |  |       | 794   |  |  |       | 676 |  |      |      | 17 |      |  |      | 17   |  |  |      | 10 |  |      |       | 891 |  |  |       | 811 |  |  |       | 686 | 
|                                         | Production taxes                      |                                     |       | 56  |               |  |       | 41    |  |  |       | 66  |  |      |      |   |      |  |      |     |  |  |      |   |  |      |       | 56  |  |  |       | 41  |  |  |       | 66  | 
|                                         | Asset retirement obligation accretion |                                     |       | 23  |               |  |       | 18    |  |  |       | 14  |  |      |      |   |      |  |      |     |  |  |      |   |  |      |       | 23  |  |  |       | 18  |  |  |       | 14  | 
|                                         |                                       |                                     |       |     |               |  |       |       |  |  |       |     |  |      |      |    |      |  |      |      |  |  |      |    |  |      |      
|                                         |                                       |                                     | 953   |     |               |  | 853   |       |  |  | 756   |     |  |      | 17   |    |      |  | 17   |      |  |  | 10   |    |  |      | 970   |     |  |  | 870   |     |  |  | 766   |    
|Depreciation, depletion and amortization |                                       |                                     | 1,018 |     |               |  | 852   |       |  |  | 784   |     |  |      | 59   |    |      |  | 66   |      |  |  | 38   |    |  |      | 1,077 |     |  |  | 918   |     |  |  | 822   |    
|                                         |                                       |                                     |       |     |               |  |       |       |  |  |       |     |  |      |      |    |      |  |      |      |  |  |      |    |  |      |      
|Earnings before taxes                    |                                       |                                     | 895   |     |               |  | 1,212 |       |  |  | 1,001 |     |  |      | 234  |    |      |  | 227  |      |  |  | 142  |    |  |      | 1,129 |     |  |  | 1,439 |     |  |  | 1,143 |    
|Income tax                               |                                       |                                     | 349   |     |               |  | 491   |       |  |  | 363   |     |  |      | 92   |    |      |  | 91   |      |  |  | 59   |    |  |      | 441   |     |  |  | 582   |     |  |  | 422   |    
|                                         |                                       |                                     |       |     |               |  |       |       |  |  |       |     |  |      |      |    |      |  |      |      |  |  |      |    |  |      |      
|Results of operations                    |                                       |                                     | 546   |     |               |  | 721   |       |  |  | 638   |     |  |      | 142  |    |      |  | 136  |      |  |  | 83   |    |  |      | 688   |     |  |  | 857   |     |  |  | 721   |    
|                                         |                                       |                                     |       |     |               |  |       |       |  |  |       |     |  |      |      |    |      |  |      |      |  |  |      |    |  |      |      
|Amortization rate per boe                |                                       |                                     | 9.11  |     |               |  | 8.05  |       |  |  | 7.47  |     |  |      | 8.19 |    |      |  | 8.00 |      |  |  | 8.33 |    |  |      | 9.06  |     |  |  | 8.04  |     |  |  | 7.50  |    








|    |                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The costs in this schedule exclude corporate overhead, interest
    expense and other operating costs, which are not directly
    related to producing activities.                                                                                                                                                                                                                                                           
|   
|(2) | Under U.S. GAAP, the depreciation, depletion and amortization
    for Canadian producing activities for 2004 amounted to
    $981 million (2003  $772 million;
    2002  $727 million). Asset retirement obligation
    accretion under U.S. GAAP for 2002 is nil. Income taxes for
    Canadian producing activities under U.S. GAAP for 2004 amounted
    to $364 million (2003  $523 million;
    2002  $393 million).

23



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##### Table of Contents



Costs Incurred in Oil and Gas
Property Acquisition, Exploration and Development
Activities (1)


|                              |                      |                      |       |       |               |  |    |       |    |   |       |       |     | 
|----------------------------- | -------------------- | -------------------- | ----- | ----- | ------------- |  | -- | ----- | -- | - | ----- | ----- | --- | 
|                              |                      | Canada               |       |       | International |  |    | Total |   
|                              |                      |                      |       |       |               |  |    |       |   
|                              |                      | ($ millions)         |      
|2004                          |                      |                      |       |       |               |  |    |       |    |   |       |      
|Property acquisition          |                      |                      |       |       |               |  |    |       |    |   |       |      
|                              | Proved (2)           |                      |       | 101   |               |  |    |      |    |   |       | 101   |    
|                              | Unproved (3)         |                      |       | 91    |               |  |    | 62    |    |   |       | 153   |    
|                             
|                              | Exploration          |                      |       | 295   |               |  |    | 18    |    |   |       | 313   |    
|                              | Development          |                      |       | 1,648 |               |  |    | 5     |    |   |       | 1,653 |    
|                              | Capitalized interest |                      |       | 75    |               |  |    |      |    |   |       | 75    |    
|                              |                      |                      |       |       |               |  |    |       |   
|                              |                      |                      | 2,210 |       |               |  | 85 |       |    |   | 2,295 |      
|Less: Proved acquisitions     |                      |                      | 101   |       |               |  |   |       |    |   | 101   |      
|                              |                      | Capitalized interest |       |       | 75            |  |    |       |   |   |       |       | 75  | 
|                              |                      |                      |       |       |               |  |    |       |   
|Finding and development costs |                      |                      | 2,034 |       |               |  | 85 |       |    |   | 2,119 |      
|Less: Actual asset retirement |                      |                      |       |       |               |  |    |       |    |   |       |      
|                              |                      | Expenditures         |       |       | 26            |  |    |       |   |   |       |       | 26  | 
|Plus: Asset retirement        |                      |                      |       |       |               |  |    |       |    |   |       |      
|                              |                      | Obligations incurred |       |       | 90            |  |    |       | (1 | ) |       |       | 89  | 
|                              |                      |                      |       |       |               |  |    |       |   
|Total costs incurred          |                      |                      | 2,098 |       |               |  | 84 |       |    |   | 2,182 |      
|                              |                      |                      |       |       |               |  |    |       |   
|2003                          |                      |                      |       |       |               |  |    |       |    |   |       |      
|Property acquisition          |                      |                      |       |       |               |  |    |       |    |   |       |      
|                              | Proved (4)           |                      |       | 541   |               |  |    |      |    |   |       | 541   |    
|                              | Unproved (5)         |                      |       | 106   |               |  |    |      |    |   |       | 106   |    
|                             
|                              | Exploration          |                      |       | 298   |               |  |    | 26    |    |   |       | 324   |    
|                              | Development          |                      |       | 1,326 |               |  |    |      |    |   |       | 1,326 |    
|                              | Capitalized interest |                      |       | 52    |               |  |    |      |    |   |       | 52    |    
|                              |                      |                      |       |       |               |  |    |       |   
|                              |                      |                      | 2,323 |       |               |  | 26 |       |    |   | 2,349 |      
|Less: Proved acquisitions     |                      |                      | 541   |       |               |  |   |       |    |   | 541   |      
|                              |                      | Capitalized interest |       |       | 52            |  |    |       |   |   |       |       | 52  | 
|                              |                      |                      |       |       |               |  |    |       |   
|Finding and development costs |                      |                      | 1,730 |       |               |  | 26 |       |    |   | 1,756 |      
|Less: Actual asset retirement |                      |                      |       |       |               |  |    |       |    |   |       |      
|                              |                      | Expenditures         |       |       | 25            |  |    |       |   |   |       |       | 25  | 
|Plus: Asset retirement        |                      |                      |       |       |               |  |    |       |    |   |       |      
|                              |                      | Obligations incurred |       |       | 101           |  |    |       | 2  |   |       |       | 103 | 
|                              |                      |                      |       |       |               |  |    |       |   
|Total costs incurred          |                      |                      | 1,806 |       |               |  | 28 |       |    |   | 1,834 |      
|                              |                      |                      |       |       |               |  |    |       |   

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|                              |                      |                      |       |       |               |  |    |       |   |  |       |       |    | 
|----------------------------- | -------------------- | -------------------- | ----- | ----- | ------------- |  | -- | ----- | - |  | ----- | ----- | -- | 
|Costs Incurred(1)             |                      | Canada               |       |       | International |  |    | Total |  
|                              |                      |                      |       |       |               |  |    |       |  
|                              |                      | ($ millions)         |      
|2002                          |                      |                      |       |       |               |  |    |       |   |  |       |      
|                              | Property acquisition |                      |       |       |               |  |    |       |   |  |       |       |   
|                              | Proved               |                      |       | 20    |               |  |    |       |   |  |       | 20    |   
|                              | Unproved             |                      |       | 88    |               |  |    |       |   |  |       | 88    |   
|                             
|                              | Exploration          |                      |       | 257   |               |  |    | 9     |   |  |       | 266   |   
|                              | Development          |                      |       | 1,110 |               |  |    | 66    |   |  |       | 1,176 |   
|                              | Capitalized interest |                      |       | 26    |               |  |    |      |   |  |       | 26    |   
|                              |                      |                      |       |       |               |  |    |       |  
|                              |                      |                      | 1,501 |       |               |  | 75 |       |   |  | 1,576 |      
|Less: Proved acquisitions     |                      |                      | 20    |       |               |  |   |       |   |  | 20    |      
|                              |                      | Capitalized interest |       |       | 26            |  |    |       |  |  |       |       | 26 | 
|                              |                      |                      |       |       |               |  |    |       |  
|Finding and development costs |                      |                      | 1,455 |       |               |  | 75 |       |   |  | 1,530 |      
|Less: Actual asset retirement |                      |                      |       |       |               |  |    |       |   |  |       |      
|                              |                      | Expenditures         |       |       | 18            |  |    |       |  |  |       |       | 18 | 
|Plus: Asset retirement        |                      |                      |       |       |               |  |    |       |   |  |       |      
|                              |                      | Obligations incurred |       |       | 33            |  |    |       | 1 |  |       |       | 34 | 
|                              |                      |                      |       |       |               |  |    |       |  
|Total costs incurred          |                      |                      | 1,470 |       |               |  | 76 |       |   |  | 1,546 |      
|                              |                      |                      |       |       |               |  |    |       |  








|    |                                                                                                          
|--- | ---------------------------------------------------------------------------------------------------------
|(1) | Costs incurred includes actual retirement expenditures                                                   
|   
|(2) | Property acquisition costs related to corporate acquisitions for
    proved properties were $98 million  
|   
|(3) | Property acquisition costs related to corporate acquisitions for
    unproved properties were $40 million
|   
|(4) | Property acquisition costs related to corporate acquisitions for
    proved properties were $517 million 
|   
|(5) | Property acquisition costs related to corporate acquisitions for
    unproved properties were $54 million









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|                      |               |              |       |       |      |  |     |      |  |          |      |     |  |      |     |     |  |  |     |     | 
|--------------------- | ------------- | ------------ | ----- | ----- | ---- |  | --- | ---- |  | -------- | ---- | --- |  | ---- | --- | --- |  |  | --- | --- | 
|                      |               |              |       |       |      |  |     |      |  | Prior to |     
|Withheld Costs        |               | Total        |       |       | 2004 |  |     | 2003 |  |          | 2002 |     |  | 2002 |    
|                      |               |              |       |       |      |  |     |      |  |          |      |     |  |      |    
|                      |               | ($ millions) |      
|Property acquisitions |               |              |       |       |      |  |     |      |  |          |      |     |  |      |     |     |  |  |     |    
|                      | Canada        |              |       | 328   |      |  |     |     |  |          |      | 56  |  |      |     | 26  |  |  |     | 246 | 
|                      | International |              |       | 75    |      |  |     | 62   |  |          |      |    |  |      |     |    |  |  |     | 13  | 
|                      |               |              |       |       |      |  |     |      |  |          |      |     |  |      |    
|                      |               |              | 403   |       |      |  | 62  |      |  |          | 56   |     |  |      | 26  |     |  |  | 259 |    
|                      |               |              |       |       |      |  |     |      |  |          |      |     |  |      |    
|Exploration           |               |              |       |       |      |  |     |      |  |          |      |     |  |      |     |     |  |  |     |    
|                      | Canada        |              |       | 475   |      |  |     | 249  |  |          |      | 61  |  |      |     | 39  |  |  |     | 126 | 
|                      | International |              |       | 35    |      |  |     | 13   |  |          |      | 16  |  |      |     | 6   |  |  |     |    | 
|                      |               |              |       |       |      |  |     |      |  |          |      |     |  |      |    
|                      |               |              | 510   |       |      |  | 262 |      |  |          | 77   |     |  |      | 45  |     |  |  | 126 |    
|                      |               |              |       |       |      |  |     |      |  |          |      |     |  |      |    
|Development           |               |              |       |       |      |  |     |      |  |          |      |     |  |      |     |     |  |  |     |    
|                      | Canada        |              |       | 1,324 |      |  |     | 487  |  |          |      | 466 |  |      |     | 371 |  |  |     |    | 
|                      | International |              |       | 18    |      |  |     | 1    |  |          |      | 1   |  |      |     |    |  |  |     | 16  | 
|                      |               |              |       |       |      |  |     |      |  |          |      |     |  |      |    
|                      |               |              | 1,342 |       |      |  | 488 |      |  |          | 467  |     |  |      | 371 |     |  |  | 16  |    
|                      |               |              |       |       |      |  |     |      |  |          |      |     |  |      |    
|Capitalized interest  |               |              |       |       |      |  |     |      |  |          |      |     |  |      |     |     |  |  |     |    
|                      | Canada        |              |       | 273   |      |  |     | 75   |  |          |      | 52  |  |      |     | 26  |  |  |     | 120 | 
|                      |               |              |       |       |      |  |     |      |  |          |      |     |  |      |    
|                      |               |              | 2,528 |       |      |  | 887 |      |  |          | 652  |     |  |      | 468 |     |  |  | 521 |    
|                      |               |              |       |       |      |  |     |      |  |          |      |     |  |      |    

Capitalized Costs Relating to Oil and Gas Producing
Activities


|                                  |  |              |        |  |               |  |     |       |  |  |        | 
|--------------------------------- |  | ------------ | ------ |  | ------------- |  | --- | ----- |  |  | ------ | 
|                                  |  | Canada       |        |  | International |  |     | Total | 
|                                  |  |              |        |  |               |  |     |       | 
|                                  |  | ($ millions) |       
|2004                              |  |              |        |  |               |  |     |       |  |  |        | 
|Proved properties                 |  |              | 13,289 |  |               |  | 452 |       |  |  | 13,741 | 
|Asset retirement obligation costs |  |              | 314    |  |               |  | 6   |       |  |  | 320    | 
|Unproved properties               |  |              | 2,399  |  |               |  | 129 |       |  |  | 2,528  | 
|                                  |  |              |        |  |               |  |     |       | 
|                                  |  |              | 16,002 |  |               |  | 587 |       |  |  | 16,589 | 
|Accumulated DD&A                  |  |              | 5,722  |  |               |  | 311 |       |  |  | 6,033  | 
|                                  |  |              |        |  |               |  |     |       | 
|Net Capitalized Costs (1)         |  |              | 10,280 |  |               |  | 276 |       |  |  | 10,556 | 
|                                  |  |              |        |  |               |  |     |       | 
|2003                              |  |              |        |  |               |  |     |       |  |  |        | 
|Proved properties                 |  |              | 11,794 |  |               |  | 442 |       |  |  | 12,236 | 
|Asset retirement obligation costs |  |              | 223    |  |               |  | 7   |       |  |  | 230    | 
|Unproved properties               |  |              | 1,814  |  |               |  | 54  |       |  |  | 1,868  | 
|                                  |  |              |        |  |               |  |     |       | 
|                                  |  |              | 13,831 |  |               |  | 503 |       |  |  | 14,334 | 
|Accumulated DD&A                  |  |              | 4,718  |  |               |  | 252 |       |  |  | 4,970  | 
|                                  |  |              |        |  |               |  |     |       | 
|Net Capitalized Costs (1)         |  |              | 9,113  |  |               |  | 251 |       |  |  | 9,364  | 
|                                  |  |              |        |  |               |  |     |       | 
|2002                              |  |              |        |  |               |  |     |       |  |  |        | 
|Proved properties                 |  |              | 10,217 |  |               |  | 432 |       |  |  | 10,649 | 
|Asset retirement obligation costs |  |              | 122    |  |               |  | 5   |       |  |  | 127    | 
|Unproved properties               |  |              | 1,318  |  |               |  | 37  |       |  |  | 1,355  | 
|                                  |  |              |        |  |               |  |     |       | 
|                                  |  |              | 11,657 |  |               |  | 474 |       |  |  | 12,131 | 
|Accumulated DD&A                  |  |              | 3,968  |  |               |  | 186 |       |  |  | 4,154  | 
|                                  |  |              |        |  |               |  |     |       | 
|Net Capitalized Costs (1)         |  |              | 7,689  |  |               |  | 288 |       |  |  | 7,977  | 
|                                  |  |              |        |  |               |  |     |       | 








|    |                                                                                                                                                                                                                                                                                               
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The net capitalized costs for Canadian oil & gas
    exploration, development and producing activities under U.S.
    GAAP for 2004 was $9,721 million (2003 
    $8,518 million, 2002  $7,014 million). The
    net capitalized costs for International property oil & gas
    exploration,

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| |                                                                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | development and producing
    activities under U.S. GAAP for 2004 was $274 million
    (2003  $249 million, 2002 
    $286 million). Please refer to note 20 to the Consolidated
    Financial Statements.

Oil and Gas Reserve Information






|                                                                                     |                            |           |       |        |               |  |         |         |   |       |           |      |         |       |      |       |           |  |         |        |   |  |         |        |   |  |         |         |   |  |     |      |  
|------------------------------------------------------------------------------------ | -------------------------- | --------- | ----- | ------ | ------------- |  | ------- | ------- | - | ----- | --------- | ---- | ------- | ----- | ---- | ----- | --------- |  | ------- | ------ | - |  | ------- | ------ | - |  | ------- | ------- | - |  | --- | ---- | -
|                                                                                     |                            | Canada    |       |        | International |  |         | Total   |  
|                                                                                     |                            |           |       |        |               |  |         |         |  
|                                                                                     |                            | Crude     |       |        | Natural       |  |         |         |   | Crude |           |      | Natural |       |      | Crude |           |  | Natural |        |   | 
|Reserves                                                                             |                            | Oil & NGL |       |        | Gas           |  |         | Sulphur |   |       | Oil & NGL |      |         | Gas   |      |       | Oil & NGL |  |         | Gas    |   |  | Sulphur |       
|                                                                                     |                            |           |       |        |               |  |         |         |   |       |           |      |         |       |      |       |           |  |         |        |   |  |         |       
|                                                                                     |                            | (mmbbls)  |       |        | (bcf)         |  |         | (mmlt)  |   |       | (mmbbls)  |      |         | (bcf) |      |       | (mmbbls)  |  |         | (bcf)  |   |  | (mmlt)  |       
|Net proved developed and undeveloped reserves, after
    royalties (1)(2)(3)(4)      |                            |           |       |        |               |  |         |         |   |       |           |      |         |       |      |       |           |  |         |        |   |  |         |        |   |  |         |         |   |  |     |     
|End of year 2001                                                                     |                            |           | 503.0 |        |               |  | 1,558.6 |         |   |       | 4.7       |      |         |       | 36.8 |       |           |  | 115.2   |        |   |  | 539.8   |        |   |  | 1,673.8 |         |   |  | 4.7 |     
|                                                                                     | Revisions                  |           |       |       |               |  |         | 14.7    |   |       |           | 0.3  |         |       |      | (0.8  | )         |  |         | (14.3  | ) |  |         | (0.8   | ) |  |         | 0.4     |   |  |     | 0.3  |  
|                                                                                     | Purchases                  |           |       | 4.2    |               |  |         | 5.4     |   |       |           |     |         |       |      |      |           |  |         |       |   |  |         | 4.2    |   |  |         | 5.4     |   |  |     |     |  
|                                                                                     | Sales                      |           |       | (14.5  | )             |  |         | (16.6   | ) |       |           |     |         |       |      |      |           |  |         |       |   |  |         | (14.5  | ) |  |         | (16.6   | ) |  |     |     |  
|                                                                                     | Improved recovery          |           |       | 10.3   |               |  |         | 3.0     |   |       |           |     |         |       |      |      |           |  |         |       |   |  |         | 10.3   |   |  |         | 3.0     |   |  |     |     |  
|                                                                                     | Discoveries and extensions |           |       | 26.9   |               |  |         | 202.4   |   |       |           |     |         |       |      | 1.1   |           |  |         |       |   |  |         | 28.0   |   |  |         | 202.4   |   |  |     |     |  
|                                                                                     | Production                 |           |       | (61.8  | )             |  |         | (155.7  | ) |       |           | (0.4 | )       |       |      | (4.3  | )         |  |         |       |   |  |         | (66.1  | ) |  |         | (155.7  | ) |  |     | (0.4 | )
|                                                                                     |                            |           |       |        |               |  |         |         |   |       |           |      |         |       |      |       |           |  |         |        |   |  |         |       
|End of year 2002                                                                     |                            |           | 468.1 |        |               |  | 1,611.8 |         |   |       | 4.6       |      |         |       | 32.8 |       |           |  | 100.9   |        |   |  | 500.9   |        |   |  | 1,712.7 |         |   |  | 4.6 |     
|                                                                                     | Revisions                  |           |       | 18.4   |               |  |         | (88.9   | ) |       |           | 0.1  |         |       |      | (2.8  | )         |  |         | (100.9 | ) |  |         | 15.6   |   |  |         | (189.8  | ) |  |     | 0.1  |  
|                                                                                     | Purchases                  |           |       | 9.2    |               |  |         | 146.2   |   |       |           |     |         |       |      |      |           |  |         |       |   |  |         | 9.2    |   |  |         | 146.2   |   |  |     |     |  
|                                                                                     | Sales                      |           |       | (4.2   | )             |  |         | (15.9   | ) |       |           | (0.1 | )       |       |      |      |           |  |         |       |   |  |         | (4.2   | ) |  |         | (15.9   | ) |  |     | (0.1 | )
|                                                                                     | Improved recovery          |           |       | 1.2    |               |  |         | 0.5     |   |       |           |     |         |       |      |      |           |  |         |       |   |  |         | 1.2    |   |  |         | 0.5     |   |  |     |     |  
|                                                                                     | Discoveries and extensions |           |       | 31.4   |               |  |         | 245.1   |   |       |           | 0.1  |         |       |      |      |           |  |         |       |   |  |         | 31.4   |   |  |         | 245.1   |   |  |     | 0.1  |  
|                                                                                     | Production                 |           |       | (61.1  | )             |  |         | (182.2  | ) |       |           | (0.5 | )       |       |      | (7.5  | )         |  |         |       |   |  |         | (68.6  | ) |  |         | (182.2  | ) |  |     | (0.5 | )
|                                                                                     |                            |           |       |        |               |  |         |         |   |       |           |      |         |       |      |       |           |  |         |        |   |  |         |       
|End of year 2003                                                                     |                            |           | 463.0 |        |               |  | 1,716.6 |         |   |       | 4.2       |      |         |       | 22.5 |       |           |  |        |        |   |  | 485.5   |        |   |  | 1,716.6 |         |   |  | 4.2 |     
|                                                                                     | Revisions                  |           |       | (105.4 | )             |  |         | (55.1   | ) |       |           | (0.4 | )       |       |      | 2.3   |           |  |         |       |   |  |         | (103.1 | ) |  |         | (55.1   | ) |  |     | (0.4 | )
|                                                                                     | Purchases                  |           |       | 1.0    |               |  |         | 17.3    |   |       |           |     |         |       |      |      |           |  |         |       |   |  |         | 1.0    |   |  |         | 17.3    |   |  |     |     |  
|                                                                                     | Sales                      |           |       | (0.7   | )             |  |         | (11.6   | ) |       |           |     |         |       |      |      |           |  |         |       |   |  |         | (0.7   | ) |  |         | (11.6   | ) |  |     |     |  
|                                                                                     | Improved recovery          |           |       | 5.9    |               |  |         | 3.4     |   |       |           |     |         |       |      |      |           |  |         |       |   |  |         | 5.9    |   |  |         | 3.4     |   |  |     |     |  
|                                                                                     | Discoveries and extensions |           |       | 54.7   |               |  |         | 308.7   |   |       |           | 0.1  |         |       |      |      |           |  |         |       |   |  |         | 54.7   |   |  |         | 308.7   |   |  |     | 0.1  |  
|                                                                                     | Production                 |           |       | (61.5  | )             |  |         | (191.6  | ) |       |           | (0.6 | )       |       |      | (6.5  | )         |  |         |       |   |  |         | (68.0  | ) |  |         | (191.6  | ) |  |     | (0.6 | )
|                                                                                     |                            |           |       |        |               |  |         |         |   |       |           |      |         |       |      |       |           |  |         |        |   |  |         |       
|End of year 2004                                                                     |                            |           | 357.0 |        |               |  | 1,787.7 |         |   |       | 3.3       |      |         |       | 18.3 |       |           |  |        |        |   |  | 375.3   |        |   |  | 1,787.7 |         |   |  | 3.3 |     
|                                                                                     |                            |           |       |        |               |  |         |         |   |       |           |      |         |       |      |       |           |  |         |        |   |  |         |       
|Net proved developed reserves, after
    royalties (1)(2)(3)(4)
    End of year 2001 |                            |           | 378.1 |        |               |  | 1,342.2 |         |   |       | 4.6       |      |         |       | 0.6  |       |           |  |        |        |   |  | 378.7   |        |   |  | 1,342.2 |         |   |  | 4.6 |     
|                                                                                     | End of year 2002           |           |       | 360.9  |               |  |         | 1,272.8 |   |       |           | 3.7  |         |       |      | 28.2  |           |  |         |       |   |  |         | 389.1  |   |  |         | 1,272.8 |   |  |     | 3.7  |  
|                                                                                     | End of year 2003           |           |       | 372.0  |               |  |         | 1,422.9 |   |       |           | 3.8  |         |       |      | 22.5  |           |  |         |       |   |  |         | 394.5  |   |  |         | 1,422.9 |   |  |     | 3.8  |  
|                                                                                     | End of year 2004           |           |       | 298.5  |               |  |         | 1,436.0 |   |       |           | 3.3  |         |       |      | 18.3  |           |  |         |       |   |  |         | 316.8  |   |  |         | 1,436.0 |   |  |     | 3.3  |  








|    |                                                                                                                                                                                                                                                                                                                                                                                       
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Net reserves are the Companys lessor royalty, overriding
    royalty and working interest share of the gross remaining
    reserves, after deduction of any crown, freehold and overriding
    royalties. Such royalties are subject to change by legislation
    or regulation and can also vary depending on production rates,
    selling prices and timing of initial production.
|   
|(2) | Reserves are the estimated quantities of crude oil, natural gas
    and related substances anticipated from geological and
    engineering data to be recoverable from known accumulations from
    a given date forward, by known technology, under existing
    operating conditions and prices in effect at year end.                                                              
|   
|(3) | Proved oil and gas reserves are the estimated quantities of
    crude oil, natural gas and natural gas liquids which geological
    and engineering data demonstrate with reasonable certainty to be
    recoverable in future years from known reservoirs under existing
    economic and operating conditions.                                                                      
|   
|(4) | Proved developed oil and gas reserves are reserves that can be
    expected to be recovered through existing wells with existing
    equipment and operating methods. Proved undeveloped reserves are
    reserves that are expected to be recovered from known
    accumulations where a significant expenditure is required.                                                        

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##### Table of Contents



Standardized Measure of Discounted Future Net Cash Flows
Relating to Proved Oil and Gas Reserves










|                                                             |                                         |              |        |       |                  |  |        |          |  |  |        |       |  |      |     |     |      |  |     |      |  |  |       |     |  |      |        |       |  |  |        |       |  |  |        |       | 
|------------------------------------------------------------ | --------------------------------------- | ------------ | ------ | ----- | ---------------- |  | ------ | -------- |  |  | ------ | ----- |  | ---- | --- | --- | ---- |  | --- | ---- |  |  | ----- | --- |  | ---- | ------ | ----- |  |  | ------ | ----- |  |  | ------ | ----- | 
|                                                             |                                         | Canada(1)    |        |       | International(1) |  |        | Total(1) | 
|                                                             |                                         |              |        |       |                  |  |        |          | 
|Standardized Measure                                         |                                         | 2004         |        |       | 2003             |  |        | 2002     |  |  | 2004   |       |  | 2003 |     |     | 2002 |  |     | 2004 |  |  | 2003  |     |  | 2002 |       
|                                                             |                                         |              |        |       |                  |  |        |          |  |  |        |       |  |      |     |     |      |  |     |      |  |  |       |     |  |      |       
|                                                             |                                         | ($ millions) |       
|Future cash inflows                                          |                                         |              | 22,681 |       |                  |  | 24,003 |          |  |  | 25,830 |       |  |      | 979 |     |      |  | 928 |      |  |  | 2,719 |     |  |      | 23,660 |       |  |  | 24,931 |       |  |  | 28,549 |      
|Future costs                                                 |                                         |              |        |       |                  |  |        |          |  |  |        |       |  |      |     |     |      |  |     |      |  |  |       |     |  |      |        |       |  |  |        |       |  |  |        |      
|                                                             | Future production and development costs |              |        | 9,353 |                  |  |        | 8,645    |  |  |        | 7,239 |  |      |     | 148 |      |  |     | 146  |  |  |       | 502 |  |      |        | 9,501 |  |  |        | 8,791 |  |  |        | 7,741 | 
|                                                             | Future income taxes                     |              |        | 4,871 |                  |  |        | 5,696    |  |  |        | 7,278 |  |      |     | 266 |      |  |     | 247  |  |  |       | 860 |  |      |        | 5,137 |  |  |        | 5,943 |  |  |        | 8,138 | 
|                                                             |                                         |              |        |       |                  |  |        |          |  |  |        |       |  |      |     |     |      |  |     |      |  |  |       |     |  |      |       
|Future net cash flows                                        |                                         |              | 8,457  |       |                  |  | 9,662  |          |  |  | 11,313 |       |  |      | 565 |     |      |  | 535 |      |  |  | 1,357 |     |  |      | 9,022  |       |  |  | 10,197 |       |  |  | 12,670 |      
|Deduct 10 percent annual discount factor                     |                                         |              | 3,712  |       |                  |  | 4,242  |          |  |  | 4,966  |       |  |      | 105 |     |      |  | 117 |      |  |  | 518   |     |  |      | 3,817  |       |  |  | 4,359  |       |  |  | 5,484  |      
|                                                             |                                         |              |        |       |                  |  |        |          |  |  |        |       |  |      |     |     |      |  |     |      |  |  |       |     |  |      |       
|Standardized measure of discounted
    Future net cash flows |                                         |              | 4,745  |       |                  |  | 5,420  |          |  |  | 6,347  |       |  |      | 460 |     |      |  | 418 |      |  |  | 839   |     |  |      | 5,205  |       |  |  | 5,838  |       |  |  | 7,186  |      
|                                                             |                                         |              |        |       |                  |  |        |          |  |  |        |       |  |      |     |     |      |  |     |      |  |  |       |     |  |      |       








|    |                                                                                                                                                                                                                                                                                                                                      
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The schedules above are calculated using year-end prices, costs,
    statutory income tax rates and existing proved oil and gas
    reserves. The value of exploration properties and probable
    reserves, future exploration costs, future changes in oil and
    gas prices and in production and development costs are excluded.

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Changes in Standardized Measure of Discounted Future Net Cash
Flows Relating


to Proved Oil and Gas Reserves


|                                                                                     |  |              |        |   |                  |  |        |          |  |  |        |   |  |      |      |   |      |  |      |      |  |  |      |   |  |      |        |   |  |  |        |   |  |  |        |  
|------------------------------------------------------------------------------------ |  | ------------ | ------ | - | ---------------- |  | ------ | -------- |  |  | ------ | - |  | ---- | ---- | - | ---- |  | ---- | ---- |  |  | ---- | - |  | ---- | ------ | - |  |  | ------ | - |  |  | ------ | -
|                                                                                     |  | Canada(1)    |        |   | International(1) |  |        | Total(1) | 
|                                                                                     |  |              |        |   |                  |  |        |          | 
|                                                                                     |  | 2004         |        |   | 2003             |  |        | 2002     |  |  | 2004   |   |  | 2003 |      |   | 2002 |  |      | 2004 |  |  | 2003 |   |  | 2002 |       
|                                                                                     |  |              |        |   |                  |  |        |          |  |  |        |   |  |      |      |   |      |  |      |      |  |  |      |   |  |      |       
|                                                                                     |  | ($ millions) |       
|Present value at January 1                                                           |  |              | 5,420  |   |                  |  | 6,347  |          |  |  | 2,354  |   |  |      | 418  |   |      |  | 839  |      |  |  | 438  |   |  |      | 5,838  |   |  |  | 7,186  |   |  |  | 2,792  |  
|Sales and transfers, net of production costs                                         |  |              | (1,952 | ) |                  |  | (2,097 | )        |  |  | (1,802 | ) |  |      | (294 | ) |      |  | (293 | )    |  |  | (179 | ) |  |      | (2,246 | ) |  |  | (2,390 | ) |  |  | (1,981 | )
|Net change in sales and transfer prices, net of development and
    production costs |  |              | 555    |   |                  |  | (1,379 | )        |  |  | 7,752  |   |  |      | 197  |   |      |  | (376 | )    |  |  | 732  |   |  |      | 752    |   |  |  | (1,755 | ) |  |  | 8,484  |  
|Extensions, discoveries and improved recovery, net of related
    costs              |  |              | 958    |   |                  |  | 541    |          |  |  | 676    |   |  |      |     |   |      |  |     |      |  |  | 40   |   |  |      | 958    |   |  |  | 541    |   |  |  | 716    |  
|Revisions of quantity estimates                                                      |  |              | (1,318 | ) |                  |  | 76     |          |  |  | (30    | ) |  |      | 85   |   |      |  | (97  | )    |  |  | (28  | ) |  |      | (1,233 | ) |  |  | (21    | ) |  |  | (58    | )
|Accretion of discount                                                                |  |              | 877    |   |                  |  | 1,055  |          |  |  | 390    |   |  |      | 61   |   |      |  | 130  |      |  |  | 59   |   |  |      | 938    |   |  |  | 1,185  |   |  |  | 449    |  
|Sale of reserves in place                                                            |  |              | (20    | ) |                  |  | (47    | )        |  |  | (189   | ) |  |      |     |   |      |  |     |      |  |  |     |   |  |      | (20    | ) |  |  | (47    | ) |  |  | (189   | )
|Purchase of reserves in place                                                        |  |              | 45     |   |                  |  | 304    |          |  |  | 45     |   |  |      |     |   |      |  |     |      |  |  |     |   |  |      | 45     |   |  |  | 304    |   |  |  | 45     |  
|Changes in timing of future net cash flows and other                                 |  |              | (233   | ) |                  |  | (237   | )        |  |  | (191   | ) |  |      | 17   |   |      |  | (49  | )    |  |  | 80   |   |  |      | (216   | ) |  |  | (286   | ) |  |  | (111   | )
|Net change in income taxes                                                           |  |              | 413    |   |                  |  | 857    |          |  |  | (2,658 | ) |  |      | (24  | ) |      |  | 264  |      |  |  | (303 | ) |  |      | 389    |   |  |  | 1,121  |   |  |  | (2,961 | )
|                                                                                     |  |              |        |   |                  |  |        |          |  |  |        |   |  |      |      |   |      |  |      |      |  |  |      |   |  |      |       
|Present value at December 31                                                         |  |              | 4,745  |   |                  |  | 5,420  |          |  |  | 6,347  |   |  |      | 460  |   |      |  | 418  |      |  |  | 839  |   |  |      | 5,205  |   |  |  | 5,838  |   |  |  | 7,186  |  
|                                                                                     |  |              |        |   |                  |  |        |          |  |  |        |   |  |      |      |   |      |  |      |      |  |  |      |   |  |      |       










|    |                                                                                                                                                                                                                                                                                                                                      
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The schedules above are calculated using year-end prices, costs,
    statutory income tax rates and existing proved oil and gas
    reserves. The value of exploration properties and probable
    reserves, future exploration costs, future changes in oil and
    gas prices and in production and development costs are excluded.

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INDEPENDENT ENGINEERS AUDIT OPINION


January 17, 2005


Husky Energy Inc.


















| |                                           
| | ------------------------------------------
| | Sincerely,                                
|
| | McDaniel &
    Associates Consultants Ltd.
|
| | /s/ B. H. Emslie                          
| |                                           
| | B. H. Emslie, P. Eng.                     
| | Senior Vice President                     

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REPORT ON RESERVES DATA BY QUALIFIED RESERVES EVALUATOR




Husky Energy
Inc.




|   |                                                                                                                                             
|-- | --------------------------------------------------------------------------------------------------------------------------------------------
|1. | Our staff has evaluated the Companys oil and gas reserves
    data as at December 31, 2004. The reserves data consist of
    the following:



| |     |                                                                                                                 
| | --- | ----------------------------------------------------------------------------------------------------------------
| | (a) | proved oil and gas reserve quantities estimated as at
    December 31, 2004 using constant prices and costs; and
|
| | (b) | the related standardized measure of discounted future net cash
    flows.                                       



|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2. | The oil and gas reserves data are the responsibility of the
    Companys management. As the Corporate Representatives our
    responsibility is to certify that the reserves data has been
    properly calculated in accordance with generally accepted
    procedures for the estimation of reserves data.                                                                                                                                                                                                                                                                                                                                                           
|  
|3. | We carried out our evaluation in accordance with generally
    accepted procedures for the estimation of oil and gas reserves
    data and standards set out in the Canadian Oil and Gas
    Evaluation Handbook (the COGEH) with the necessary
    modifications to reflect definitions and standards under the
    applicable U.S. Financial Accounting Standards Board standards
    (the FASB Standards and the legal requirements of
    the U.S. Securities and Exchange Commission (SEC
    Requirements). Our internal reserves evaluators are not
    independent of the Company, within the meaning of the term
    independent under those standards.
|  
|4. | Those standards require that we plan and perform an evaluation
    to obtain reasonable assurance as to whether the oil and gas
    reserves data are free of material misstatement. An evaluation
    also includes assessing whether the reserves data are in
    accordance with principles and definitions presented in the
    COGEH as modified or replaced by the FASB Standards and SEC
    Requirements.                                                                                                                                                                                                                                                       
|  
|5. | The following sets forth the estimated standardized measure of
    discounted future net cash flows (before deducting income taxes)
    attributed to proved oil and gas reserve quantities, estimated
    using constant prices and costs and calculated using a discount
    rate of 10 percent, included in the reserves data of the
    Company evaluated for the year ended December 31, 2004:                                                                                                                                                                                                                                                                     

|                     |  |                                         |       | 
|-------------------- |  | --------------------------------------- | ----- | 
|                     |  | Discounted Future Net Cash Flows        |      
|Location of Reserves |  | (after income taxes, 10% discount rate) |      
|                     |  |                                         |      
|Canada               |  |                                         | 4,745 | 
|China                |  |                                         | 447   | 
|Libya                |  |                                         | 13    | 
|                     |  |                                         |      
|                     |  |                                         | 5,205 | 
|                     |  |                                         |      





|   |                                                                                                                                                                                                                                                                   
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|6. | In our opinion, the oil and gas reserves data evaluated by us
    have, in all material respects, been determined in accordance
    with principles and definitions presented in the COGEH as
    modified or replaced by the FASB Standards and SEC Requirements.
|  
|7. | We have no responsibility to update our evaluation for events
    and circumstances occurring after the date of this report.                                                                                                                                      

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|   |                                                                                                                                                                                                                                        
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|8. | Oil and gas reserves are estimates only, and not exact
    quantities. In addition, the oil and gas reserves data are based
    on judgements regarding future events, actual results will vary
    and the variations may be material.

|                                 |  |                                                  
|-------------------------------- |  | -------------------------------------------------
|/s/ Preston Kraft                |  | /s/ Larry Bell                                   
|                                 |  |                                                  
|Preston Kraft P.Eng              |  | Larry Bell                                       
|Manager of Reservoir Engineering |  | Vice President, Exploration & Production Services
|Calgary, Alberta                 |  | Calgary, Alberta                                 
|January 17, 2005                 |  | January 17, 2005                                 

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REPORT OF MANAGEMENT AND DIRECTORS ON RESERVES DATA AND OTHER
INFORMATION






| |     |                                                                                                                 
| | --- | ----------------------------------------------------------------------------------------------------------------
| | (1) | proved oil and gas reserve quantities estimated as at
    December 31, 2004 using constant prices and costs; and
|
| | (2) | the related standardized measure of discounted future net cash
    flows.                                       







| |     |                                                                                                                                                                                                                                                                             
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | reviewed the Companys procedures for providing information
    to the internal and external qualified oil and gas reserves
    evaluators;                                                                                                                                 
|
| | (b) | met with the internal and, if applicable, external qualified oil
    and gas reserves evaluator(s) to determine whether any
    restrictions placed by management affect the ability of the
    internal qualified reserves evaluator to report without
    reservation; and
|
| | (c) | reviewed the reserves data with management and the internal
    qualified oil and gas reserves evaluators.                                                                                                                                                                  





| |     |                                                                                                                                                     
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | the content and filing with securities regulatory authorities of
    the reserves data and other oil and gas information;                           
|
| | (b) | the filing of the Report on Reserves Data of the Manager of
    Reservoir Engineering and Vice President, Exploration &
    Production Services; and
|
| | (c) | the content and filing of this report.                                                                                                              

Standards of Disclosure for Oil
and Gas Disclosure






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|                                                                           |  |                |  | 
|-------------------------------------------------------------------------- |  | -------------- |  | 
|/s/ John C. S. LauJohn
    C. S. LauPresident & Chief Executive Officer    |  | March 16, 2005
|                                                                          
|/s/ Neil D. McGeeNeil
    D. McGeeVice President & Chief Financial Officer |  | March 16, 2005
|                                                                          
|/s/ R. Donald FullertonR.
    Donald FullertonDirector                     |  | March 16, 2005
|                                                                          
|/s/ Wayne E. ShawWayne
    E. ShawDirector                                 |  | March 16, 2005

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Description of Major Properties and Facilities




Lloydminster Heavy Oil and Gas












35



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##### Table of Contents



Lloydminster Area





Northwest Alberta Plains


Rainbow Lake Area










36



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##### Table of Contents





Peace River Arch Area


.


Boyer Area




Sloat Creek Area




.


Marten Hills/ Muskwa Area






Cherpeta and Saleski Areas






37



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##### Table of Contents



Simons Lake Area






Northeast British Columbia and Alberta Foothills


Ram River Area












Kaybob Area






Boundary Lake Area




38



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Valhalla and Wapiti Area




Kakwa Area




Caroline Area






Edson Area




Sikanni Area




Graham Area




East Central Alberta


Athabasca Area




Red Deer and Hussar Area




39



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Provost Area




Southern Alberta and Southern Saskatchewan




Southern Saskatchewan Area








Southern Alberta Area






40



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##### Table of Contents



Western Canada





41



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##### Table of Contents



Athabasca, Cold Lake and Peace River


Oil Sands






Tucker




Sunrise




Caribou




Saleski




|                                          |  |           |             |  |       |  |         |       |  |  |          |  |  |  |     | 
|----------------------------------------- |  | --------- | ----------- |  | ----- |  | ------- | ----- |  |  | -------- |  |  |  | --- | 
|                                          |  | Oil Sands |             |  | Gross |  |         | Net   |  |  | Husky    | 
|General Location Name                     |  | Area      |             |  | Acres |  |         | Acres |  |  | Operator | 
|                                          |  |           |             |  |       |  |         |       |  |  |          | 
|South Athabasca  overriding royalty      |  |           | Athabasca   |  |       |  | 35,601  |       |  |  |         |  |  |  | No  | 
|South Athabasca                           |  |           | Athabasca   |  |       |  | 22,032  |       |  |  | 11,016   |  |  |  | Yes | 
|Sunrise  In situ (1)                     |  |           | Athabasca   |  |       |  | 64,034  |       |  |  | 64,034   |  |  |  | Yes | 
|Misthae (Drowned, Martin Hills W. & Spur) |  |           | Athabasca   |  |       |  | 28,160  |       |  |  | 28,160   |  |  |  | Yes | 
|Saleski                                   |  |           | Athabasca   |  |       |  | 154,880 |       |  |  | 154,880  |  |  |  | Yes | 
|Hoole  overriding royalty                |  |           | Athabasca   |  |       |  | 47,040  |       |  |  |         |  |  |  | No  | 
|Beaverdam                                 |  |           | Cold Lake   |  |       |  | 11,520  |       |  |  | 11,520   |  |  |  | Yes | 
|Caribou (2)                               |  |           | Cold Lake   |  |       |  | 35,840  |       |  |  | 35,840   |  |  |  | Yes | 
|Lobstick                                  |  |           | Cold Lake   |  |       |  | 37,120  |       |  |  | 37,120   |  |  |  | Yes | 
|Tucker (3)                                |  |           | Cold Lake   |  |       |  | 11,360  |       |  |  | 11,360   |  |  |  | Yes | 
|Panny (Senex & Welstead)                  |  |           | Peace River |  |       |  | 47,360  |       |  |  | 47,360   |  |  |  | Yes | 
|Peace River (Cadotte Lake)                |  |           | Peace River |  |       |  | 11,840  |       |  |  | 11,840   |  |  |  | Yes | 
|Sawn Lake (Loon)                          |  |           | Peace River |  |       |  | 20,480  |       |  |  | 20,480   |  |  |  | Yes | 
|                                          |  |           |             |  |       |  |         |       |  |  |          | 
|                                          |  |           |             |  |       |  | 527,267 |       |  |  | 433,610  |  |  |  |     | 
|                                          |  |           |             |  |       |  |         |       |  |  |          | 








|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Included in the gross and net amounts are an additional 6,400
    acres of petroleum and natural gas rights held as protection
    acreage for gas over bitumen issues. In 2003, the Alberta
    regulatory authority issued General Bulletin GB 2003-28
    that required natural gas wells within certain bitumen prone
    areas to be shut-in. The production of natural gas where natural
    gas reservoirs were believed to be in pressure contact with
    bitumen reserves was deemed to present an unacceptable risk to
    future in-situ bitumen production. Sunrise was formerly named
    Kearl.
|   
|(2) | Husky also has the exclusive right to acquire an additional
    65,280 acres in the Caribou area.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|(3) | Included in the gross and net amounts are an additional 1,280
    acres of petroleum and natural gas rights held as protection
    acreage for gas over bitumen issues.                                                                                                                                                                                                                                                                                                                                                                                                                                       

42



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43



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##### Table of Contents



Offshore East Coast  Canada






Terra Nova Oil Field






White Rose Oil Field








44



---



##### Table of Contents







East Coast


Central and Northern Jeanne dArc Basin





45



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##### Table of Contents



International




South China Sea


Wenchang




Block 39/05




Blocks 23/15 and 23/20




Block 29/26




Block 40/30




46



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##### Table of Contents



East China Sea


Block 04/35




China





Madura Strait, Indonesia




47



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##### Table of Contents





Shatirah, Libya







Distribution of Oil and Gas Production


Crude Oil and NGL






Natural Gas




|                     |               |                          |     |     |      |  |     |      |  |  |     |     | 
|-------------------- | ------------- | ------------------------ | --- | --- | ---- |  | --- | ---- |  |  | --- | --- | 
|                     |               | Years ended December 31, |    
|                     |               |                          |    
|                     |               | 2004                     |     |     | 2003 |  |     | 2002 | 
|                     |               |                          |     |     |      |  |     |      | 
|                     |               | (mmcf/day)               |    
|Sales to end users   |               |                          |     |     |      |  |     |      |  |  |     |    
|                     | United States |                          |     | 407 |      |  |     | 382  |  |  |     | 375 | 
|                     | Canada        |                          |     | 187 |      |  |     | 156  |  |  |     | 115 | 
|                     |               |                          |     |     |      |  |     |      | 
|                     |               |                          | 594 |     |      |  | 538 |      |  |  | 490 |    
|                     |               |                          |     |     |      |  |     |      | 
|Sales to aggregators |               |                          | 34  |     |      |  | 43  |      |  |  | 49  |    
|Internal use (1)     |               |                          | 61  |     |      |  | 30  |      |  |  | 30  |    
|                     |               |                          |     |     |      |  |     |      | 
|                     |               |                          | 689 |     |      |  | 611 |      |  |  | 569 |    
|                     |               |                          |     |     |      |  |     |      | 








|    |                                                                  
|--- | -----------------------------------------------------------------
|(1) | Husky consumes natural gas for fuel at several of its facilities.



48



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Delivery Commitments




|     |  |             |      |  |              |  |      |     |  |  |      | 
|---- |  | ----------- | ---- |  | ------------ |  | ---- | --- |  |  | ---- | 
|     |  | Fixed Price |      |  | Market Price | 
|     |  |             |      |  |              | 
|     |  | Bcf         |      |  | $/mmbtu      |  |      | Bcf | 
|     |  |             |      |  |              |  |      |     | 
|2005 |  |             | 25.5 |  |              |  | 3.67 |     |  |  | 47.1 | 
|2006 |  |             | 25.5 |  |              |  | 3.83 |     |  |  | 44.8 | 
|2007 |  |             | 20.0 |  |              |  | 4.47 |     |  |  | 39.7 | 
|2008 |  |             | 20.0 |  |              |  | 4.71 |     |  |  | 16.9 | 
|2009 |  |             | 20.0 |  |              |  | 4.96 |     |  |  | 4.9  | 
|2010 |  |             | 20.0 |  |              |  | 5.23 |     |  |  | 0.5  | 
|2011 |  |             | 20.0 |  |              |  | 5.28 |     |  |  |     | 
|2012 |  |             | 20.0 |  |              |  | 5.32 |     |  |  |     | 
|2013 |  |             | 20.0 |  |              |  | 5.37 |     |  |  |     | 
|2014 |  |             | 6.2  |  |              |  | 3.74 |     |  |  |     | 




Midstream Operations


Overview






| |   |                                                                                                                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Upgrading  the upgrading of heavy crude oil feedstock into
    synthetic crude oil;                                                                                                                                         
|
| |  | Infrastructure  pipeline transportation and processing of
    heavy crude oil, storage of crude oil, diluent and natural gas,
    extraction of NGL from natural gas, cogeneration of electrical
    and thermal energy; and
|
| |  | Marketing  the purchase and marketing of Huskys and
    other producers crude oil, natural gas, NGL, sulphur,
    petroleum coke and electrical power.                                                                    

Upgrading Operations










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Infrastructure and Marketing


Heavy Oil Pipeline Systems and Processing Facilities






|                             |  |                          |     |  |      |  |     |      |  |  |     | 
|---------------------------- |  | ------------------------ | --- |  | ---- |  | --- | ---- |  |  | --- | 
|                             |  | Years ended December 31, |    
|                             |  |                          |    
|                             |  | 2004                     |     |  | 2003 |  |     | 2002 | 
|                             |  |                          |     |  |      |  |     |      | 
|                             |  | (mbbls/day)              |    
|Combined pipeline throughput |  |                          | 492 |  |      |  | 484 |      |  |  | 457 | 







50



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Heavy Oil Pipeline Systems





Cogeneration






51



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Natural Gas Storage Facilities




Commodity Marketing













Refined Products


Overview






Branded Petroleum Product Outlets and Commercial
Distribution


Distribution




52



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Retail Marketing System


Branded Petroleum Product Outlets







53



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|                       |                  |            |     |    |         |  |     |       |  |  |          |    |  |         |      |    |       |  |    |       |  |  |     |     |  |  |     |     | 
|---------------------- | ---------------- | ---------- | --- | -- | ------- |  | --- | ----- |  |  | -------- | -- |  | ------- | ---- | -- | ----- |  | -- | ----- |  |  | --- | --- |  |  | --- | --- | 
|                       |                  | British    |     |    |         |  |     |       |  |  |          |    |  |         |     
|                       |                  | Columbia & |     |    |         |  |     |       |  |  |          |    |  |         | 2003 |   
|Retail Outlets         |                  | Yukon      |     |    | Alberta |  |     | Sask. |  |  | Manitoba |    |  | Ontario |      |    | Total |  |    | Total | 
|                       |                  |            |     |    |         |  |     |       |  |  |          |    |  |         |      |    |       |  |    |       | 
|                       | Travel Centres   |            |     | 9  |         |  |     | 8     |  |  |          | 4  |  |         |      | 2  |       |  |    | 13    |  |  |     | 36  |  |  |     | 37  | 
|                       | Full Serve       |            |     | 12 |         |  |     | 17    |  |  |          | 3  |  |         |      | 3  |       |  |    | 2     |  |  |     | 37  |  |  |     | 46  | 
|                       | Full/ Self Serve |            |     | 17 |         |  |     | 24    |  |  |          | 6  |  |         |      | 10 |       |  |    | 2     |  |  |     | 59  |  |  |     | 48  | 
|                       | Self Serve       |            |     | 19 |         |  |     | 11    |  |  |          | 1  |  |         |      | 1  |       |  |    | 2     |  |  |     | 34  |  |  |     | 35  | 
|                       | Bulk Distributor |            |     | 1  |         |  |     | 7     |  |  |          | 4  |  |         |      | 1  |       |  |    | 1     |  |  |     | 14  |  |  |     | 14  | 
|                       | Card/ Key Locks  |            |     | 2  |         |  |     | 6     |  |  |          |   |  |         |      |   |       |  |    | 2     |  |  |     | 10  |  |  |     | 7   | 
|                       |                  |            |     |    |         |  |     |       |  |  |          |    |  |         |      |    |       |  |    |       | 
|                       |                  |            | 60  |    |         |  | 73  |       |  |  | 18       |    |  |         | 17   |    |       |  | 22 |       |  |  | 190 |     |  |  | 187 |    
|                       |                  |            |     |    |         |  |     |       |  |  |          |    |  |         |      |    |       |  |    |       | 
|Leased                 |                  |            |     |    |         |  |     |       |  |  |          |    |  |         |      |    |       |  |    |       |  |  |     |     |  |  |     |    
|                       | Travel Centres   |            |     | 1  |         |  |     |      |  |  |          |   |  |         |      |   |       |  |    |      |  |  |     | 1   |  |  |     | 1   | 
|                       | Full Serve       |            |     | 3  |         |  |     | 12    |  |  |          | 5  |  |         |      | 4  |       |  |    |      |  |  |     | 24  |  |  |     | 30  | 
|                       | Full/ Self Serve |            |     | 13 |         |  |     | 23    |  |  |          | 4  |  |         |      | 6  |       |  |    |      |  |  |     | 46  |  |  |     | 44  | 
|                       | Self Serve       |            |     | 31 |         |  |     | 20    |  |  |          |   |  |         |      | 1  |       |  |    |      |  |  |     | 52  |  |  |     | 47  | 
|                       | Bulk Distributor |            |     | 3  |         |  |     |      |  |  |          |   |  |         |      |   |       |  |    |      |  |  |     | 3   |  |  |     | 3   | 
|                       | Card/ Key Locks  |            |     | 4  |         |  |     | 1     |  |  |          |   |  |         |      | 3  |       |  |    | 1     |  |  |     | 9   |  |  |     | 8   | 
|                       |                  |            |     |    |         |  |     |       |  |  |          |    |  |         |      |    |       |  |    |       | 
|                       |                  |            | 55  |    |         |  | 56  |       |  |  | 9        |    |  |         | 14   |    |       |  | 1  |       |  |  | 135 |     |  |  | 133 |    
|                       |                  |            |     |    |         |  |     |       |  |  |          |    |  |         |      |    |       |  |    |       | 
|Independent Retailers  |                  |            |     |    |         |  |     |       |  |  |          |    |  |         |      |    |       |  |    |       |  |  |     |     |  |  |     |    
|                       | Travel Centres   |            |     | 1  |         |  |     | 1     |  |  |          |   |  |         |      |   |       |  |    | 4     |  |  |     | 6   |  |  |     | 6   | 
|                       | Full Serve       |            |     | 24 |         |  |     | 21    |  |  |          | 9  |  |         |      | 16 |       |  |    | 7     |  |  |     | 77  |  |  |     | 84  | 
|                       | Full/ Self Serve |            |     | 18 |         |  |     | 3     |  |  |          | 5  |  |         |      | 1  |       |  |    | 1     |  |  |     | 28  |  |  |     | 40  | 
|                       | Self Serve       |            |     | 31 |         |  |     | 46    |  |  |          | 3  |  |         |      | 3  |       |  |    | 2     |  |  |     | 85  |  |  |     | 89  | 
|                       | Bulk Distributor |            |     | 2  |         |  |     | 4     |  |  |          | 1  |  |         |      |   |       |  |    |      |  |  |     | 7   |  |  |     | 7   | 
|                       | Card/ Key Locks  |            |     |   |         |  |     | 1     |  |  |          |   |  |         |      |   |       |  |    | 2     |  |  |     | 3   |  |  |     | 4   | 
|                       |                  |            |     |    |         |  |     |       |  |  |          |    |  |         |      |    |       |  |    |       | 
|                       |                  |            | 76  |    |         |  | 76  |       |  |  | 18       |    |  |         | 20   |    |       |  | 16 |       |  |  | 206 |     |  |  | 230 |    
|                       |                  |            |     |    |         |  |     |       |  |  |          |    |  |         |      |    |       |  |    |       | 
|Total                  |                  |            |     |    |         |  |     |       |  |  |          |    |  |         |      |    |       |  |    |       |  |  |     |     |  |  |     |    
|                       | Travel Centres   |            |     | 11 |         |  |     | 9     |  |  |          | 4  |  |         |      | 2  |       |  |    | 17    |  |  |     | 43  |  |  |     | 44  | 
|                       | Full Serve       |            |     | 39 |         |  |     | 50    |  |  |          | 17 |  |         |      | 23 |       |  |    | 9     |  |  |     | 138 |  |  |     | 160 | 
|                       | Full/ Self Serve |            |     | 48 |         |  |     | 50    |  |  |          | 15 |  |         |      | 17 |       |  |    | 3     |  |  |     | 133 |  |  |     | 132 | 
|                       | Self Serve       |            |     | 81 |         |  |     | 77    |  |  |          | 4  |  |         |      | 5  |       |  |    | 4     |  |  |     | 171 |  |  |     | 171 | 
|                       | Bulk Distributor |            |     | 6  |         |  |     | 11    |  |  |          | 5  |  |         |      | 1  |       |  |    | 1     |  |  |     | 24  |  |  |     | 24  | 
|                       | Card/ Key Locks  |            |     | 6  |         |  |     | 8     |  |  |          |   |  |         |      | 3  |       |  |    | 5     |  |  |     | 22  |  |  |     | 19  | 
|                       |                  |            |     |    |         |  |     |       |  |  |          |    |  |         |      |    |       |  |    |       | 
|                       |                  |            | 191 |    |         |  | 205 |       |  |  | 45       |    |  |         | 51   |    |       |  | 39 |       |  |  | 531 |     |  |  | 550 |    
|                       |                  |            |     |    |         |  |     |       |  |  |          |    |  |         |      |    |       |  |    |       | 
|Cardlocks (1)          |                  |            | 24  |    |         |  | 18  |       |  |  | 4        |    |  |         | 6    |    |       |  | 22 |       |  |  | 74  |     |  |  | 72  |    
|Convenience Stores (1) |                  |            | 179 |    |         |  | 185 |       |  |  | 40       |    |  |         | 47   |    |       |  | 33 |       |  |  | 484 |     |  |  | 507 |    
|Restaurants            |                  |            | 11  |    |         |  | 12  |       |  |  | 4        |    |  |         | 2    |    |       |  | 16 |       |  |  | 45  |     |  |  | 41  |    








|    |                                                       
|--- | ------------------------------------------------------
|(1) | All of these are located at branded petroleum outlets.



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|                        |  |                          |      |  |      |  |      |      |  |  |      | 
|----------------------- |  | ------------------------ | ---- |  | ---- |  | ---- | ---- |  |  | ---- | 
|                        |  | Years ended December 31, |     
|                        |  |                          |     
|                        |  | 2004                     |      |  | 2003 |  |      | 2002 | 
|                        |  |                          |      |  |      |  |      |      | 
|                        |  | (mbbls/day)              |     
|Gasoline                |  |                          | 28.3 |  |      |  | 28.5 |      |  |  | 26.3 | 
|Diesel fuel             |  |                          | 23.9 |  |      |  | 22.1 |      |  |  | 20.7 | 
|Liquefied petroleum gas |  |                          | 1.1  |  |      |  | 1.2  |      |  |  | 1.3  | 
|                        |  |                          |      |  |      |  |      |      | 
|                        |  |                          | 53.3 |  |      |  | 51.8 |      |  |  | 48.3 | 
|                        |  |                          |      |  |      |  |      |      | 



Supply


Prince George Refinery.


Other Supply Arrangements.


Ethanol Plants.


Asphalt Products




55



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|                   |  |                          |      |  |      |  |      |      |  |  |      | 
|------------------ |  | ------------------------ | ---- |  | ---- |  | ---- | ---- |  |  | ---- | 
|                   |  | Years ended December 31, |     
|                   |  |                          |     
|                   |  | 2004                     |      |  | 2003 |  |      | 2002 | 
|                   |  |                          |      |  |      |  |      |      | 
|                   |  | (mbbls/day)              |     
|Asphalt            |  |                          | 14.0 |  |      |  | 12.9 |      |  |  | 12.7 | 
|Residual and other |  |                          | 8.5  |  |      |  | 9.1  |      |  |  | 8.1  | 
|                   |  |                          |      |  |      |  |      |      | 
|                   |  |                          | 22.5 |  |      |  | 22.0 |      |  |  | 20.8 | 
|                   |  |                          |      |  |      |  |      |      | 






Human Resources




|                               |  |              |       |  |      |  |       | 
|------------------------------ |  | ------------ | ----- |  | ---- |  | ----- | 
|                               |  | December 31, |      
|                               |  |              |      
|                               |  | 2004         |       |  | 2003 | 
|                               |  |              |       |  |      | 
|Upstream                       |  |              | 1,822 |  |      |  | 1,753 | 
|Midstream                      |  |              | 347   |  |      |  | 326   | 
|Refined Products               |  |              | 358   |  |      |  | 349   | 
|Corporate and business support |  |              | 505   |  |      |  | 471   | 
|                               |  |              |       |  |      | 
|                               |  |              | 3,032 |  |      |  | 2,899 | 
|                               |  |              |       |  |      | 




DIVIDENDS




|                                         |  |      |      |  |      |   |      |      |  |   |      | 
|---------------------------------------- |  | ---- | ---- |  | ---- | - | ---- | ---- |  | - | ---- | 
|                                         |  | 2004 |      |  | 2003 |   |      | 2002 | 
|                                         |  |      |      |  |      |   |      |      | 
|Cash dividends declared per common share |  | $    | 1.00 |  |      | $ | 1.38 |      |  | $ | 0.36 | 

Dividend Policy and Restrictions




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Business Corporations Act





DESCRIPTION OF CAPITAL STRUCTURE


Common Shares




Preferred Shares




Credit Ratings Summary


|                              |                           |        |            |             |               |                    |  |                 | 
|----------------------------- | ------------------------- | ------ | ---------- | ----------- | ------------- | ------------------ |  | --------------- | 
|                              |                           | Rating |            | Last Review |               | Last Rating Change | 
|                              |                           |        |            |             |               |                    | 
|Moodys:                      |                           |        |            |             |               |                    |  |                
|                              | Outlook                   |        | Stable     |             | July 27, 2004 |                    |  |                | 
|                              | Senior Unsecured Debt     |        | Baa2       |             | July 27, 2004 |                    |  | April 25, 2001  | 
|                              | U.S. Senior Secured Bonds |        | Baa2       |             | June 4, 2003  |                    |  | April 25, 2001  | 
|                              | Capital Securities        |        | Ba1        |             | July 27, 2004 |                    |  | April 25, 2001  | 
|Standard and Poors:          |                           |        |            |             |               |                    |  |                
|                              | Outlook                   |        | Positive   |             | June 8, 2004  |                    |  | October 3, 2002 | 
|                              | Senior Unsecured Debt     |        | BBB        |             | June 8, 2004  |                    |  |                | 
|                              | U.S. Senior Secured Bonds |        | BBB        |             | June 8, 2004  |                    |  |                | 
|                              | Capital Securities        |        | BB+        |             | June 8, 2004  |                    |  |                | 
|Dominion Bond Rating Service: |                           |        |            |             |               |                    |  |                
|                              | Trend                     |        | Stable     |             | May 1, 2003   |                    |  |                | 
|                              | Senior Unsecured Debt     |        | BBB (high) |             | May 1, 2003   |                    |  |                 | 
|                              | Capital Securities        |        | BBB        |             | May 1, 2003   |                    |  |                | 
|Fitch:                        |                           |        |            |             |               |                    |  |                
|                              | Outlook                   |        | Stable     |             | June 8, 2004  |                    |  |                | 
|                              | Senior Unsecured Debt     |        | BBB+       |             | June 8, 2004  |                    |  |                | 
|                              | U.S. Senior Secured Bonds |        | A-         |             | June 8, 2004  |                    |  |                 | 
|                              | Capital Securities        |        | BBB-       |             | June 8, 2004  |                    |  |                | 



Moodys




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Standard and Poors




Dominion Bond Rating Service




Fitch







MARKET FOR SECURITIES






|          |  |      |       |  |     |        |       |         |  |  |        | 
|--------- |  | ---- | ----- |  | --- | ------ | ----- | ------- |  |  | ------ | 
|          |  |      |       |  |     | Volume |      
|          |  | High |       |  | Low |        |       | (000s) | 
|          |  |      |       |  |     |        |       |         | 
|January   |  |      | 24.99 |  |     |        | 22.74 |         |  |  | 6,757  | 
|February  |  |      | 25.55 |  |     |        | 22.73 |         |  |  | 6,754  | 
|March     |  |      | 28.04 |  |     |        | 25.50 |         |  |  | 9,313  | 
|April     |  |      | 28.30 |  |     |        | 25.10 |         |  |  | 8,118  | 
|May       |  |      | 27.90 |  |     |        | 24.45 |         |  |  | 7,221  | 
|June      |  |      | 26.50 |  |     |        | 23.74 |         |  |  | 11,315 | 
|July      |  |      | 29.25 |  |     |        | 25.42 |         |  |  | 12,552 | 
|August    |  |      | 29.35 |  |     |        | 26.81 |         |  |  | 11,114 | 
|September |  |      | 31.15 |  |     |        | 27.65 |         |  |  | 11,407 | 
|October   |  |      | 33.57 |  |     |        | 30.59 |         |  |  | 11,638 | 
|November  |  |      | 35.65 |  |     |        | 30.05 |         |  |  | 13,323 | 
|December  |  |      | 34.49 |  |     |        | 30.90 |         |  |  | 12,457 | 

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DIRECTORS AND OFFICERS




|                          |  |                    |  |                 |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|------------------------- |  | ------------------ |  | --------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Name and                  |  |                    |  |                 |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Municipality of Residence |  | Office or Position |  | Director Since  |  | Principal Occupation During Past 5 Years                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                          |  |                    |  |                 |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Li, Victor T.K.           |  | Co-Chairman        |  | August 25, 2000 |  | Managing Director of Cheung Kong                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Hong Kong                 |  | and Director       |  |                 |  | (Holdings) Limited (an investment holding and project management
    company) since 1999 and Deputy Chairman since 1994.
    Mr. Li has also been Deputy Chairman of Hutchison Whampoa
    Limited (an investment holding company) since 1999 and
    Executive Director since 1995. Mr. Li has been a
    Director and Chairman of CK Life Sciences Intl.,
    (Holdings) Inc. (a biotechnology company) since 2002 and
    has held the following positions for more than five years: a
    Director and Chairman of Cheung Kong Infrastructure Holdings
    Limited (an infrastructure development company), an Executive
    Director of Hongkong Electric Holdings Limited (a holding
    company). Mr. Li is also a Director of The Hongkong and
    Shanghai Banking Corporation Limited. Mr. Li is a member of
    the Standing Committee of the 10th National Committee of the
    Chinese Peoples Political Consultative Conference of the
    Peoples Republic of China and he is also a member of the
    Commission on Strategic Development and the Economic and
    Employment Council of the Hong Kong Special Administrative
    Region. Mr. Li holds a Bachelor of Science degree in Civil
    Engineering and a Master of Science degree in Structural
    Engineering.
|Fok, Canning K.N.         |  | Co-Chairman        |  | August 25, 2000 |  | Group Managing Director of Hutchison Whampoa                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|Hong Kong                 |  | and Director       |  |                 |  | Limited since 1993 and Executive Director since 1984.
    Mr. Fok has been a Director and Chairman of Hutchison
    Telecommunications International Limited (an investment holding
    company) since 2004 and of Hutchison Global Communications
    Holdings Limited (formerly Vanda Systems &
    Communications Holdings Limited) (an investment holdings
    company) since 2003. Mr. Fok has held the following
    positions for more than five years: a Director, and
    since 2002 Chairman of Hutchison Harbour Ring Limited (an
    investment holding company), a Director and Chairman of
    Hutchison Telecommunications (Australia) Limited (a
    telecommunications company), Partner Communications
    Company Ltd. (a telecommunications company), Deputy
    Chairman and a Director of Cheung Kong Infrastructure Holdings
    Limited and Hongkong Electric Holdings Limited. Mr. Fok is
    also a director of Cheung Kong (Holdings) Limited and Hutchison
    Whampoa Finance (CI) Limited (a finance company).
    Mr. Fok is also a Non-Executive Director of Hanny Holdings
    Limited and Panvas Gas Holdings Limited. Mr. Fok was a
    director of VoiceStream Wireless Corporation from
    1998  2001. Mr. Fok holds a Bachelor of Arts               

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|                                       |  |                    |  |                 |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|-------------------------------------- |  | ------------------ |  | --------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Name and                               |  |                    |  |                 |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Municipality of Residence              |  | Office or Position |  | Director Since  |  | Principal Occupation During Past 5 Years                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                       |  |                    |  |                 |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                       |  |                    |  |                 |  | degree and is a member of the Australian Institute of Chartered
    Accountants.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Fullerton, R. Donald                   |  | Director           |  | May 1, 2003     |  | Corporate Director. Mr. Fullerton has been a Director                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Toronto, Ontario
    Canada            |  |                    |  |                 |  | of George Weston Limited (a holding company) since 1991,
    Asia Satellite Telecommunications Holdings Limited since 1996
    and Partner Communications Ltd. since 2003.
    Mr. Fullerton was a director of CIBC from 1974 until
    he retired in February 2004. Mr. Fullerton was also a
    director of Hollinger Inc. from 1992 to 2003, of
    Westcoast Energy Inc. from 1993 to 2003 and of
    IBM Canada Ltd. from 1982 to 2001.                                                                                                                                                 
|Glynn, Martin J.G.                     |  | Director           |  | August 25, 2000 |  | President and Chief Executive Officer of HSBC Bank                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|New York, New York
    U.S.A.          |  |                    |  |                 |  | USA since 2003 and a director since 2000.
    Mr. Glynn has been a director of HSBC Bank Canada since
    1999 and was President and Chief Executive Officer
    from 1999 to 2003. From 1982 Mr. Glynn held
    various senior executive positions with HSBC Bank Canada
    (formerly Hongkong Bank of Canada). Mr. Glynn has been a
    Director of HSBC North America Inc. since 2002, and a
    Director of HSBC USA Inc. Mr. Glynn is also a director
    of Wells Fargo HSBC Trade Bank N.A. and Group General
    Manager of HSBC Holdings plc.                                      
|Hui, Terence C.Y.                      |  | Director           |  | August 25, 2000 |  | Director, President & Chief Executive Officer,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Vancouver, British Columbia
    Canada |  |                    |  |                 |  | Concord Pacific Group Inc. (a real estate development company)
    since 1997, Director and President of Adex Securities Inc.
    (a financial services company) since 1992 and Director and
    Chairman of Maximizer Software Inc. (formerly Multiactive
    Software Inc.) and Multiactive Technologies Inc. (computer
    software companies) since 1995. Mr. Hui was President and
    Chief Executive Officer of Pacific Place Developments Corp. (a
    real estate development company) from 1992 to 2001. Mr. Hui
    is a director of abc Multiactive Limited (a software company).
|Kinney, Brent D.                       |  | Director           |  | August 25, 2000 |  | Independent businessman. Mr. Kinney is a director of                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Dubai, United Arab Emirates            |  |                    |  |                 |  | Dragon Oil plc in the United Arab Emirates. Mr. Kinney was
    also a director of Aurado Energy Inc. from 2003 until 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Kluge, Holger                          |  | Director           |  | August 25, 2000 |  | Corporate Director. Mr. Kluge is a director of                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Toronto, Ontario
    Canada            |  |                    |  |                 |  | Hongkong Electric Holdings Limited, Hutchison Telecommunications
    (Australia) Limited, TOM Group Limited (formerly TOM.COM
    LIMITED) Loring Ward International Limited (a financial planning
    company) and Hutchison Whampoa Limited since 2004.
    Mr. Kluge holds a Bachelor of Commerce degree and a
    Masters degree in Business Administration.                                                                                                                                                                                                                            
|Koh, Poh Chan                          |  | Director           |  | August 25, 2000 |  | Finance Director, Harbour Plaza Hotel Management                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Hong Kong                              |  |                    |  |                 |  | (International) Ltd.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

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|                                       |  |                    |  |                 |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|-------------------------------------- |  | ------------------ |  | --------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Name and                               |  |                    |  |                 |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|Municipality of Residence              |  | Office or Position |  | Director Since  |  | Principal Occupation During Past 5 Years                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                       |  |                    |  |                 |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|Kwok, Eva L.                           |  | Director           |  | August 25, 2000 |  | Chairman, a director and Chief Executive Officer,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Vancouver, British Columbia
    Canada |  |                    |  |                 |  | Amara International Investment Corp. (an investment holding
    company) since 1992 and President from 1992 to 1996.
    Mrs. Kwok has been a director of Bank of Montreal Group of
    Companies and since 2002, of CK Life Sciences Intl.,
    (Holdings) Inc. and Cheung Kong Infrastructure Holdings
    Limited and Shoppers Drug Mart since 2004. Mrs. Kwok was a
    director of AirCanada from 1998 to 2003 and of Telesystem
    International Wireless Inc. from 2002 to 2003.                                                                                                                                                                                        
|Kwok, Stanley T.L.                     |  | Director           |  | August 25, 2000 |  | President, Stanley Kwok Consultants (an architecture,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Vancouver, British Columbia
    Canada |  |                    |  |                 |  | planning and development company) since 1993. Mr. Kwok has
    been a director since 1997 and President since 1999 of Amara
    International Investment Corp. Mr. Kwok is a director of
    Cheung Kong (Holdings) Limited and CTC Bank of Canada.                                                                                                                                                                                                                                                                                                                                                                                                                              
|Lau, John C.S.                         |  | President &        |  | August 25, 2000 |  | President & Chief Executive Officer of Husky                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|Calgary, Alberta                       |  | Chief Executive    |  |                 |  | Energy Inc. since August 2000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Canada                                 |  | Officer and        |  |                 |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                       |  | Director           |  |                 |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|Shaw, Wayne E.                         |  | Director           |  | August 25, 2000 |  | Senior Partner, Stikeman Elliott LLP, Barristers and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Toronto, Ontario                       |  |                    |  |                 |  | Solicitors.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|Canada                                 |  |                    |  |                 |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|Shurniak, William                      |  | Deputy Chairman    |  | August 25, 2000 |  | Director and Chairman of ETSA Utilities (a utility                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Australia                              |  | and Director       |  |                 |  | company) since 2000, Powercor Australia Limited (a utility
    company) since 2000 and CitiPower Pty Ltd. (a utility
    company) since 2001. Mr. Shurniak has been a director of
    Envestra Limited (a natural gas distributor) since 2000,
    CrossCity Motorways Pty Ltd. (an infrastructure and
    transportation company) since 2002 and Hutchison Whampoa Limited
    since 1984. Mr. Shurniak has been a director of Lane Cove
    Tunnel Company Pty Ltd. (an infrastructure and
    transportation company) since 2004. Mr. Shurniak holds an
    Honorary Doctor of Laws degree from the University of
    Saskatchewan and from The University of Western Ontario.

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|                          |  |                    |  |                 |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|------------------------- |  | ------------------ |  | --------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Name and                  |  |                    |  |                 |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Municipality of Residence |  | Office or Position |  | Director Since  |  | Principal Occupation During Past 5 Years                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                          |  |                    |  |                 |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Sixt, Frank J.            |  | Director           |  | August 25, 2000 |  | Group Finance Director of Hutchison Whampoa                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|Hong Kong                 |  |                    |  |                 |  | Limited since 1998 and Executive Director since 1991.
    Mr. Sixt hs been Chairman and Director of TOM
    Online Inc, and a Director of Hutchison Telecommunications
    International Limited, Hutchison Global Communications Holdings
    Limited since 2004. Mr. Sixt has held the following
    positions for more than five years: Chairman and Director of TOM
    Group Limited, Executive Director of Cheung Kong Infrastructure
    Holdings Limited and Hongkong Electric Holdings Limited and a
    Director of Cheung Kong (Holdings) Limited, Hutchison Whampoa
    Finance (CI) Limited, Hutchison Telecommunications
    (Australia) Limited, and Partner Communications
    Company Ltd. Mr. Sixt was also a director of
    Orange plc. from 1998 to 2000, VoiceStream Wireless Corp.
    from 2000 to 2001. Mr. Sixt holds a Masters degree in
    Arts and a Bachelors degree in Civil Law and is a member
    of the Bar and of the Law Society of the Provinces of
    Quebec and Ontario, Canada.

|                                    |  |                                                     |  |                                                                                      
|----------------------------------- |  | --------------------------------------------------- |  | -------------------------------------------------------------------------------------
|Name and                            |  |                                                     |  |                                                                                      
|Municipality of Residence           |  | Office or Position                                  |  | Principal Occupation During Past 5 Years                                             
|                                    |  |                                                     |  |                                                                                      
|McGee, Neil D. Calgary, Alberta     |  | Vice President & Chief Financial Officer            |  | Vice President & Chief Financial Officer of Husky since
    August 2000.             
|Ingram, Donald R. Calgary, Alberta  |  | Senior Vice President, Midstream & Refined Products |  | Senior Vice President, Midstream and Refined Products of Husky
    since August 2000.
|Girgulis, James D. Calgary, Alberta |  | Vice President, Legal & Corporate Secretary         |  | Vice President, Legal & Corporate Secretary of Husky since
    August 2000.          

Business Corporations Act




Conflicts of Interest


Business Corporations Act


62



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Corporate Cease Trade Orders or Bankruptcies


Companies Creditors Arrangement Act


Individual Penalties, Sanctions or Bankruptcies









AUDIT COMMITTEE
















63



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External Auditor Service Fees




|                   |  |                  |       |  |      |  |       | 
|------------------ |  | ---------------- | ----- |  | ---- |  | ----- | 
|                   |  | Aggregate fees   |      
|                   |  | billed by the    |      
|                   |  | External Auditor |      
|                   |  |                  |      
|                   |  | 2004             |       |  | 2003 | 
|                   |  |                  |       |  |      | 
|                   |  | ($ thousands)    |      
|Audit fees         |  |                  | 805   |  |      |  | 743   | 
|Audit-related fees |  |                  | 207   |  |      |  | 40    | 
|Tax fees           |  |                  | 144   |  |      |  | 220   | 
|All other fees     |  |                  | 45    |  |      |  | 40    | 
|                   |  |                  |       |  |      | 
|                   |  |                  | 1,201 |  |      |  | 1,042 | 
|                   |  |                  |       |  |      | 

Audit Fees.


Audit-Related Fees.


Tax Fees.


All Other Fees.







LEGAL PROCEEDINGS







INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS






64



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TRANSFER AGENTS AND REGISTRARS







INTERESTS OF EXPERTS







ADDITIONAL INFORMATION






Additional information relating to Husky Energy Inc. is
available on SEDAR at www.sedar.com .


65



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ABBREVIATIONS AND GLOSSARY OF TERMS




|                 |  |                                                         
|---------------- |  | --------------------------------------------------------
|Units of Measure |  |                                                         
|                 |  |                                                         
|Bbl              |  | -barrel                                                 
|Bbls             |  | -barrels                                                
|mbbls            |  | -thousand barrels                                       
|mmbbls           |  | -million barrels                                        
|Bbls/day         |  | -barrels per calendar day                               
|mbbls/day        |  | -thousand barrels per calendar day                      
|Boe              |  | -barrels of oil equivalent                              
|boe/day          |  | -barrels of oil equivalent per calendar day             
|Mcf              |  | -thousand cubic feet                                    
|mmcf             |  | -million cubic feet                                     
|Bcf              |  | -billion cubic feet                                     
|mmcf/day         |  | -million cubic feet per calendar day                    
|mcfge            |  | -thousand cubic feet of gas equivalent                  
|lt               |  | -long ton                                               
|mlt              |  | -thousand long tons                                     
|lt/day           |  | -long tons per calendar day                             
|mlt/day          |  | -thousand long tons per calendar day                    
|mmbtu            |  | -million British thermal units                          
|MW               |  | -megawatts                                              
|                
|Acronyms         |  |                                                         
|                 |  |                                                         
|API              |  | -American Petroleum Institute                           
|COGE Handbook    |  | -Canadian Oil and Gas Evaluation Handbook               
|FASB             |  | -Financial Accounting Standards Board                   
|FPSO             |  | -floating production, storage and offloading vessel     
|LLB              |  | -Lloydminster Blend                                     
|NGL              |  | -natural gas liquids                                    
|NYMEX            |  | -New York Mercantile Exchange                           
|OPEC             |  | -Organization of Petroleum Exporting Countries          
|PSC              |  | -production sharing contract                            
|SAGD             |  | -steam assisted gravity drainage                        
|SEC              |  | -Securities and Exchange Commission of the United States
|SEDAR            |  | -System for Electronic Document Analysis and Retrieval  
|WTI              |  | -West Texas Intermediate crude oil                      

API° gravity




Barrel




Bitumen




66



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Bulk Terminal




Coal Bed Methane


4


Cold Production




Debottlenecking




Delineation well




Developed area




Development well




Diluent




Dry and abandoned well




Enhanced recovery




Exploration licence




Exploratory well




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Field




Gathering System




Horizontal drilling




Hydrogen sulphide




Infill Well




Liquefied petroleum gas




Miscible Flood




Multiple completion well




Natural gas liquids (NGL)




Oil Battery




Oil Sands




Overriding royalty interests




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Primary recovery




Production Sharing Contract




Raw gas




Recoverable oil-in-place




Secondary recovery




Seismic (survey)




Service well




Significant discovery licence




Sour gas




Specific Gravity




|              |  |                                         |  |        
|------------- |  | --------------------------------------- |  | -------
|Degrees API = |  | 141.5Specific
    gravity @ F60 degrees |  | - 131.5

Spot Price




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Steam Assisted Gravity Drainage




Step-out Well




Stratigraphic test well




Synthetic oil




Tertiary recovery




Three-D Seismic (survey)




Turnaround




Undeveloped area




Waterflood




Well Abandonment Costs




Working interest







SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS




70



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www.sedar.com




71



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Schedule A


AIF


Husky Energy Inc.





Audit Committee Charter




Composition




Responsibility






| |       |                                                                                                                                                         
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i)   | the quarterly and annual financial statements and quarterly and
    annual MD&A be provided to shareholders and the appropriate
    regulatory agencies;
|
| | (ii)  | earnings press releases before the Company publicly discloses
    this information;                                                                     
|
| | (iii) | the system of internal controls that management has established;                                                                                        
|
| | (iv)  | the internal and external audit process;                                                                                                                
|
| | (v)   | the appointment of qualified reserves evaluators or auditors; and                                                                                       
|
| | (vi)  | the filing of statements and reports with respect to the
    Companys oil and gas reserves.                                                            







Authority






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Meetings




Specific Duties






| |    |                                                                                                                            
| | -- | ---------------------------------------------------------------------------------------------------------------------------
| | 1. | Review and reassess the adequacy of this Charter annually and
    recommend any proposed changes to the Board for approval.



| |           |                                                                                                                                                                                                                                                                                                                                                                                                                           
| | --------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2.    (a) | Review with the Companys management, internal audit and
    external auditors and recommend to the Board for approval the
    Companys annual financial statements and annual MD&A
    which is to be provided to shareholders and the appropriate
    regulatory agencies, including any financial statement contained
    in a prospectus, information circular, registration statement or
    other similar document.



| |     |                                                                                                                                                                                                                                                    
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (b) | Review with the Companys management, internal audit and
    external auditors and approve the Companys quarterly
    financial statements and quarterly MD&A which is to be
    provided to shareholders and the appropriate regulatory agencies.



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 3.  | Review with the Companys management and approve earnings
    press releases before the Company publicly discloses this
    information.                                                                                                                                                                                                                                                                                               
|
| | 4.  | Recommend to the Board the external auditors to be nominated for
    the purpose of preparing or issuing an audit report or
    performing other audit, review or attest services and the
    compensation to be paid to the external auditors. The external
    auditors shall report directly to the Committee.                                                                                                                      
|
| | 5.  | Be directly responsible for the oversight of the work of the
    external auditors, including the resolution of disagreements
    between management of the Company and the external auditors
    regarding financial reporting.                                                                                                                                                                                                       
|
| | 6.  | Review with the Companys management, internal audit and
    external auditors the Companys accounting and financial
    reporting controls. Obtain annually in writing from the external
    auditors their observations, if any, on significant weaknesses
    in internal controls as noted during the course of their work.                                                                                                       
|
| | 7.  | Review with the Companys management, internal audit and
    external auditors significant accounting and reporting
    principles, practices and procedures applied by the Company in
    preparing its financial statements. Discuss with the external
    auditors their judgements about the quality, not just the
    acceptability, of the Companys accounting principles used
    in financial reporting.                     
|
| | 8.  | Review the scope of internal audits work plan for the year
    and receive a summary report of major findings by internal
    auditors and how management is addressing the conditions
    reported.                                                                                                                                                                                                                                  
|
| | 9.  | Review the scope and general extent of the external
    auditors annual audit. The Committees review should
    include an explanation from the external auditors of the factors
    considered in determining the audit scope, including the major
    risk factors. The external auditors should confirm to the
    Committee whether or not any limitations have been placed on the
    scope or nature of their audit procedures.
|
| | 10. | Inquire as to the independence of the external auditors and
    obtain from the external auditors, at least annually, a formal
    written statement delineating all relationships between the
    external auditors and the                                                                                                                                                                                                           

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| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     | Company as contemplated by Independence Standards Board Standard
    No. 1, Independence Discussions with Audit Committees.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| | 11. | Have a predetermined arrangement with the external auditors that
    they will advise the Committee, through its Chair and management
    of the Company, of any matters identified through procedures
    followed for the review of interim quarterly financial
    statements of the Company, and that such notification is to be
    made prior to the related press release. Also receive a written
    confirmation provided by the external auditors at the end of
    each of the first three quarters of the year that they have
    nothing to report to the Committee, if that is the case, or the
    written enumeration of required reporting issues.
|
| | 12. | At the completion of the annual audit, review with management,
    internal audit and the external auditors the following:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         



| |   |                                                                                                                                                                                                                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The annual financial statements and related footnotes and
    financial information to be included in the Companys
    annual report to shareholders.                                                                                                                                                    
|
| |  | Results of the audit of the financial statements and the related
    report thereon and, if applicable, a report on changes during
    the year in accounting principles and their application.                                                                                                           
|
| |  | Significant changes to the audit plan, if any, and any serious
    disputes or difficulties with management encountered during the
    audit. Inquire about the cooperation received by the external
    auditors during their audit, including access to all requested
    records, data and information.
|
| |  | Inquire of the external auditors whether there have been any
    material disagreements with management, which, if not
    satisfactorily resolved, would have caused them to issue a
    non-standard report on the Companys financial statements.                                                      



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 13. | Discuss with the external auditors, without management being
    present, (a) the quality of the Companys financial
    and accounting personnel, and (b) the completeness and
    accuracy of the Companys financial statements. Also,
    elicit the comments of management regarding the responsiveness
    of the external auditors to the Companys needs.                                                                                                                                                                                                                             
|
| | 14. | Meet with management, to discuss any relevant significant
    recommendations that the external auditors may have,
    particularly those characterized as material or
    serious. Typically, such recommendations will be
    presented by the external auditors in the form of a Letter of
    Comments and Recommendations to the Committee. The Committee
    should review responses of management to the Letter of Comments
    and Recommendations from the external auditors and receive
    follow-up reports on action taken concerning the aforementioned
    recommendations.
|
| | 15. | Have the sole authority to review in advance, and grant any
    appropriate pre-approvals, of all non-audit services to be
    provided by the independent auditors and, in connection
    therewith, to approve all fees and other terms of engagement.
    The Committee shall also review and approve disclosures required
    to be included in periodic reports filed with Canadian
    securities regulators and the Securities and Exchange Commission
    with respect to non-audit services performed by external
    auditors.                                                      
|
| | 16. | Be satisfied that adequate procedures are in place for the
    review of the Companys disclosure of financial information
    extracted or derived from the Companys financial
    statements, and periodically assess the adequacy of those
    procedures.                                                                                                                                                                                                                                                                                                                                
|
| | 17. | Establish procedures for (a) the receipt, retention and
    treatment of complaints received by the Company regarding
    accounting, internal accounting controls or auditing matter, and
    (b) the confidential, anonymous submission by employees of
    the Company of concerns regarding questionable accounting or
    auditing matters.                                                                                                                                                                                                                                              
|
| | 18. | Review and approve the Companys hiring policies regarding
    partners, employees and former partners and employees of the
    present and former external auditors.                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| | 19. | Review the appointment and replacement of the senior internal
    audit executive.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| | 20. | Review with management, internal audit and the external auditors
    the methods used to establish and monitor the Companys
    policies with respect to unethical or illegal activities by
    Company employees that may have a material impact on the
    financial statements.                                                                                                                                                                                                                                                                                                           

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| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 21. | Generally as part of the review of the annual financial
    statements, receive a report(s), at least annually, from the
    Companys general counsel concerning legal, regulatory and
    compliance matters that may have a material impact on the
    financial statements.                                                                                                                                                                                                                  
|
| | 22. | Review, with reasonable frequency, the Companys procedures
    relating to the disclosure of information with respect to the
    Companys oil and gas reserves, including the
    Companys procedures for complying with the disclosure
    requirements and restrictions of applicable regulations.                                                                                                                                                                                          
|
| | 23. | Review with management the appointment of external qualified
    reserves evaluators or auditors, and in the case of any proposed
    change in such appointment, determine the reasons for the change
    and whether there have been disputes between the appointed
    external qualified reserves evaluators or auditors, and
    management.                                                                                                                                                
|
| | 24. | Review, with reasonable frequency, the Companys procedures
    for providing information to the external qualified reserves
    evaluators or auditors who report on reserves and data for the
    purposes of compliance with applicable securities laws.                                                                                                                                                                                                                                      
|
| | 25. | Before the approval and the release of the Companys
    reserves data and the report of the qualified reserve evaluators
    or auditors thereon, meet with management, the external
    qualified reserves evaluators or auditors and the internal
    qualified reserves evaluators to determine whether any
    restrictions affect their ability to report on reserves data
    without reservation and to review the reserves data and the
    report of the qualified reserves evaluators.
|
| | 26. | Recommend to the Board for approval the content and filing of
    required statements and reports relating to the Companys
    disclosure of reserve data as prescribed by applicable
    regulations.                                                                                                                                                                                                                                                                                          
|
| | 27. | Review and approve (a) any change or waiver in the
    Companys Code of Business Conduct for the chief executive
    officer and senior financial officers and (b) any public
    disclosure made regarding such change or waiver.                                                                                                                                                                                                                                                              





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Document B


Form 40-F




CONSOLIDATED FINANCIAL STATEMENTS AND


AUDITORS REPORT TO SHAREHOLDERS


For the Year Ended December 31, 2004




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MANAGEMENTS REPORT












|                                                  |  |                                                   
|------------------------------------------------- |  | --------------------------------------------------
|John C. S. LauPresident & Chief Executive Officer |  | Neil McGeeVice President & Chief Financial Officer





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AUDITORS REPORT TO THE SHAREHOLDERS
















COMMENTS BY AUDITORS FOR U.S. READERS ON CANADA U.S.
REPORTING DIFFERENCE












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CONSOLIDATED BALANCE SHEETS


|                                                                      |                                                    |                       |        |       |      |   |        |       |  |   |        |       | 
|--------------------------------------------------------------------- | -------------------------------------------------- | --------------------- | ------ | ----- | ---- | - | ------ | ----- |  | - | ------ | ----- | 
|                                                                      |                                                    | As at December 31     |       
|                                                                      |                                                    |                       |       
|                                                                      |                                                    | 2004                  |        |       | 2003 |   |        | 2002  | 
|                                                                      |                                                    |                       |        |       |      |   |        |       | 
|                                                                      |                                                    | (millions of dollars) |       
|ASSETS                                                               
|Current assets                                                        |                                                    |                       |        |       |      |   |        |       |  |   |        |      
|                                                                      | Cash and cash equivalents                          |                       | $      | 7     |      |   | $      | 3     |  |   | $      | 306   | 
|                                                                      | Accounts receivable (note 4)                       |                       |        | 446   |      |   |        | 618   |  |   |        | 572   | 
|                                                                      | Inventories (note 5)                               |                       |        | 274   |      |   |        | 198   |  |   |        | 227   | 
|                                                                      | Prepaid expenses                                   |                       |        | 52    |      |   |        | 33    |  |   |        | 23    | 
|                                                                      |                                                    |                       |        |       |      |   |        |       | 
|                                                                      |                                                    |                       | 779    |       |      |   | 852    |       |  |   | 1,128  |      
|Property, plant and equipment, net (notes 1, 6)(full cost accounting) |                                                    |                       | 12,193 |       |      |   | 10,862 |       |  |   | 9,421  |      
|Goodwill (note 7)                                                     |                                                    |                       | 160    |       |      |   | 120    |       |  |   |       |      
|Other assets (note 11)                                                |                                                    |                       | 106    |       |      |   | 112    |       |  |   | 84     |      
|                                                                      |                                                    |                       |        |       |      |   |        |       | 
|                                                                      |                                                    | $                     | 13,238 |       |      | $ | 11,946 |       |  | $ | 10,633 |      
|                                                                      |                                                    |                       |        |       |      |   |        |       | 
|                                                                     
|LIABILITIES AND SHAREHOLDERS EQUITY                                 
|Current liabilities                                                   |                                                    |                       |        |       |      |   |        |       |  |   |        |      
|                                                                      | Bank operating loans (note 9)                      |                       | $      | 49    |      |   | $      | 71    |  |   | $      |      | 
|                                                                      | Accounts payable and accrued liabilities (note 10) |                       |        | 1,489 |      |   |        | 1,126 |  |   |        | 794   | 
|                                                                      | Long-term debt due within one year (note 11)       |                       |        | 56    |      |   |        | 259   |  |   |        | 421   | 
|                                                                      |                                                    |                       |        |       |      |   |        |       | 
|                                                                      |                                                    |                       | 1,594  |       |      |   | 1,456  |       |  |   | 1,215  |      
|Long-term debt (note 11)                                              |                                                    |                       | 1,776  |       |      |   | 1,439  |       |  |   | 1,964  |      
|Other long-term liabilities (note 12)                                 |                                                    |                       | 632    |       |      |   | 519    |       |  |   | 304    |      
|Future income taxes (note 13)                                         |                                                    |                       | 2,758  |       |      |   | 2,621  |       |  |   | 2,014  |      
|Commitments and contingencies (note 14)                               |                                                    |                       |        |       |      |   |        |       |  |   |        |      
|Shareholders equity                                                  |                                                    |                       |        |       |      |   |        |       |  |   |        |      
|                                                                      | Capital securities and accrued return (note 15)    |                       |        | 278   |      |   |        | 298   |  |   |        | 364   | 
|                                                                      | Common shares (note 16)                            |                       |        | 3,506 |      |   |        | 3,457 |  |   |        | 3,406 | 
|                                                                      | Retained earnings                                  |                       |        | 2,694 |      |   |        | 2,156 |  |   |        | 1,366 | 
|                                                                      |                                                    |                       |        |       |      |   |        |       | 
|                                                                      |                                                    |                       | 6,478  |       |      |   | 5,911  |       |  |   | 5,136  |      
|                                                                      |                                                    |                       |        |       |      |   |        |       | 
|                                                                      |                                                    | $                     | 13,238 |       |      | $ | 11,946 |       |  | $ | 10,633 |      
|                                                                      |                                                    |                       |        |       |      |   |        |       | 



|               |  |               
|-------------- |  | --------------
|John C. S. Lau |  | R.D. Fullerton
|Director       |  | Director      

The accompanying notes to the consolidated financial
statements are an integral part of these statements.


2003 and 2002 amounts as restated (note 3).


79



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##### Table of Contents



CONSOLIDATED STATEMENTS OF EARNINGS


|                                               |                                                           |                                  |       |       |      |   |       |       |   |   |       |       | 
|---------------------------------------------- | --------------------------------------------------------- | -------------------------------- | ----- | ----- | ---- | - | ----- | ----- | - | - | ----- | ----- | 
|                                               |                                                           | Year ended December 31           |      
|                                               |                                                           |                                  |      
|                                               |                                                           | 2004                             |       |       | 2003 |   |       | 2002  |  
|                                               |                                                           |                                  |       |       |      |   |       |       |  
|                                               |                                                           | (millions of dollars, except per |      
|                                               |                                                           | share amounts)                   |      
|Sales and operating revenues, net of royalties |                                                           | $                                | 8,440 |       |      | $ | 7,658 |       |   | $ | 6,384 |      
|Costs and expenses                             |                                                           |                                  |       |       |      |   |       |       |   |   |       |      
|                                               | Cost of sales and operating expenses (note 12)            |                                  |       | 5,706 |      |   |       | 4,847 |   |   |       | 4,026 | 
|                                               | Selling and administration expenses                       |                                  |       | 135   |      |   |       | 119   |   |   |       | 94    | 
|                                               | Stock-based compensation (note 16)                        |                                  |       | 67    |      |   |       |      |   |   |       |      | 
|                                               | Depletion, depreciation and amortization
    (notes 1, 6) |                                  |       | 1,179 |      |   |       | 1,021 |   |   |       | 908   | 
|                                               | Interest  net (note 11)                                  |                                  |       | 33    |      |   |       | 73    |   |   |       | 104   | 
|                                               | Foreign exchange (note 11)                                |                                  |       | (99   | )    |   |       | (215  | ) |   |       | 13    | 
|                                               | Other  net                                               |                                  |       | 8     |      |   |       | 3     |   |   |       | 1     | 
|                                               |                                                           |                                  |       |       |      |   |       |       |  
|                                               |                                                           |                                  | 7,029 |       |      |   | 5,848 |       |   |   | 5,146 |      
|                                               |                                                           |                                  |       |       |      |   |       |       |  
|Earnings before income taxes                   |                                                           |                                  | 1,411 |       |      |   | 1,810 |       |   |   | 1,238 |      
|                                               |                                                           |                                  |       |       |      |   |       |       |  
|Income taxes (note 13)                         |                                                           |                                  |       |       |      |   |       |       |   |   |       |      
|                                               | Current                                                   |                                  |       | 302   |      |   |       | 147   |   |   |       | 66    | 
|                                               | Future                                                    |                                  |       | 103   |      |   |       | 329   |   |   |       | 358   | 
|                                               |                                                           |                                  |       |       |      |   |       |       |  
|                                               |                                                           |                                  | 405   |       |      |   | 476   |       |   |   | 424   |      
|                                               |                                                           |                                  |       |       |      |   |       |       |  
|Net earnings                                   |                                                           | $                                | 1,006 |       |      | $ | 1,334 |       |   | $ | 814   |      
|                                               |                                                           |                                  |       |       |      |   |       |       |  
|Earnings per share (note 16)                   |                                                           |                                  |       |       |      |   |       |       |   |   |       |      
|                                               | Basic                                                     |                                  | $     | 2.37  |      |   | $     | 3.26  |   |   | $     | 1.91  | 
|                                               | Diluted                                                   |                                  | $     | 2.36  |      |   | $     | 3.25  |   |   | $     | 1.90  | 

CONSOLIDATED STATEMENTS OF RETAINED EARNINGS


|                                                                  |                                       |                        |       |   |      |   |       |      |   |   |       |    | 
|----------------------------------------------------------------- | ------------------------------------- | ---------------------- | ----- | - | ---- | - | ----- | ---- | - | - | ----- | -- | 
|                                                                  |                                       | Year ended December 31 |      
|                                                                  |                                       |                        |      
|                                                                  |                                       | 2004                   |       |   | 2003 |   |       | 2002 |  
|                                                                  |                                       |                        |       |   |      |   |       |      |  
|                                                                  |                                       | (millions of dollars)  |      
|Beginning of year                                                 |                                       | $                      | 2,156 |   |      | $ | 1,366 |      |   | $ | 722   |   
|Net earnings                                                      |                                       |                        | 1,006 |   |      |   | 1,334 |      |   |   | 814   |   
|Dividends on common shares (note 16)                              |                                       |                        | (424  | ) |      |   | (580  | )    |   |   | (151  | ) 
|Return and foreign exchange on capital securities
    (note 15)   |                                       |                        | (6    | ) |      |   | 38    |      |   |   | (29   | ) 
|                                                                  | Related future income taxes (note 13) |                        |       | 6 |      |   |       | (2   | ) |   |       | 11 | 
|Stock-based compensation  retroactive adoption
    (note 16)     |                                       |                        | (44   | ) |      |   |      |      |   |   |      |   
|Asset retirement obligations  retroactive adoption
    (note 12) |                                       |                        |      |   |      |   |      |      |   |   | (1    | ) 
|                                                                  |                                       |                        |       |   |      |   |       |      |  
|End of year                                                       |                                       | $                      | 2,694 |   |      | $ | 2,156 |      |   | $ | 1,366 |   
|                                                                  |                                       |                        |       |   |      |   |       |      |  

The accompanying notes to the consolidated financial
statements are an integral part of these statements.


2003 and 2002 amounts as restated (note 3).


80



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##### Table of Contents



CONSOLIDATED STATEMENTS OF CASH FLOWS


|                                                 |                                                     |                                          |       |        |       |   |       |        |       |   |       |        |     |  
|------------------------------------------------ | --------------------------------------------------- | ---------------------------------------- | ----- | ------ | ----- | - | ----- | ------ | ----- | - | ----- | ------ | --- | -
|                                                 |                                                     | Year ended December 31                   |      
|                                                 |                                                     |                                          |      
|                                                 |                                                     | 2004                                     |       |        | 2003  |   |       | 2002   |      
|                                                 |                                                     |                                          |       |        |       |   |       |        |      
|                                                 |                                                     | (millions of dollars)                    |      
|Operating activities                             |                                                     |                                          |       |        |       |   |       |        |       |   |       |       
|                                                 | Net earnings                                        |                                          | $     | 1,006  |       |   | $     | 1,334  |       |   | $     | 814    |    
|                                                 | Items not affecting cash                            |                                          |       |        |       |   |       |        |       |   |       |        |    
|                                                 |                                                     | Accretion                                |       |        | 27    |   |       |        | 22    |   |       |        | 17  |  
|                                                 |                                                     | Depletion, depreciation and amortization |       |        | 1,179 |   |       |        | 1,021 |   |       |        | 908 |  
|                                                 |                                                     | Future income taxes                      |       |        | 103   |   |       |        | 329   |   |       |        | 358 |  
|                                                 |                                                     | Foreign exchange (note 11)               |       |        | (103  | ) |       |        | (242  | ) |       |        |    |  
|                                                 |                                                     | Other                                    |       |        | 11    |   |       |        | (5    | ) |       |        | (1  | )
|                                                 | Settlement of asset retirement obligations          |                                          |       | (40    | )     |   |       | (34    | )     |   |       | (16    | )  
|                                                 | Change in non-cash working capital (note 8)         |                                          |       | 169    |       |   |       | 113    |       |   |       | (198   | )  
|                                                 |                                                     |                                          |       |        |       |   |       |        |      
|                                                 | Cash flow  operating activities                    |                                          |       | 2,352  |       |   |       | 2,538  |       |   |       | 1,882  |    
|                                                 |                                                     |                                          |       |        |       |   |       |        |      
|Financing activities                             |                                                     |                                          |       |        |       |   |       |        |       |   |       |       
|                                                 | Bank operating loans financing  net                |                                          |       | (22    | )     |   |       | 71     |       |   |       | (100   | )  
|                                                 | Long-term debt issue                                |                                          |       | 2,200  |       |   |       | 598    |       |   |       | 972    |    
|                                                 | Long-term debt repayment                            |                                          |       | (1,937 | )     |   |       | (971   | )     |   |       | (678   | )  
|                                                 | Settlement of cross currency swap                   |                                          |       |       |       |   |       | (32    | )     |   |       |       |    
|                                                 | Return on capital securities payment                |                                          |       | (26    | )     |   |       | (29    | )     |   |       | (31    | )  
|                                                 | Debt issue costs                                    |                                          |       | (5     | )     |   |       |       |       |   |       | (9     | )  
|                                                 | Proceeds from exercise of stock options             |                                          |       | 18     |       |   |       | 51     |       |   |       | 9      |    
|                                                 | Proceeds from monetization of financial instruments |                                          |       | 8      |       |   |       | 44     |       |   |       |       |    
|                                                 | Dividends on common shares                          |                                          |       | (424   | )     |   |       | (580   | )     |   |       | (151   | )  
|                                                 | Change in non-cash working capital (note 8)         |                                          |       | 337    |       |   |       | 48     |       |   |       | (9     | )  
|                                                 |                                                     |                                          |       |        |       |   |       |        |      
|                                                 | Cash flow  financing activities                    |                                          |       | 149    |       |   |       | (800   | )     |   |       | 3      |    
|                                                 |                                                     |                                          |       |        |       |   |       |        |      
|Available for investing                          |                                                     |                                          | 2,501 |        |       |   | 1,738 |        |       |   | 1,885 |       
|                                                 |                                                     |                                          |       |        |       |   |       |        |      
|Investing activities                             |                                                     |                                          |       |        |       |   |       |        |       |   |       |       
|                                                 | Capital expenditures                                |                                          |       | (2,349 | )     |   |       | (1,868 | )     |   |       | (1,691 | )  
|                                                 | Corporate acquisitions                              |                                          |       | (102   | )     |   |       | (809   | )     |   |       | (3     | )  
|                                                 | Asset sales                                         |                                          |       | 36     |       |   |       | 511    |       |   |       | 93     |    
|                                                 | Other                                               |                                          |       | (19    | )     |   |       | 5      |       |   |       | (20    | )  
|                                                 | Change in non-cash working capital (note 8)         |                                          |       | (63    | )     |   |       | 120    |       |   |       | 42     |    
|                                                 |                                                     |                                          |       |        |       |   |       |        |      
|                                                 | Cash flow  investing activities                    |                                          |       | (2,497 | )     |   |       | (2,041 | )     |   |       | (1,579 | )  
|                                                 |                                                     |                                          |       |        |       |   |       |        |      
|Increase (decrease) in cash and cash equivalents |                                                     |                                          | 4     |        |       |   | (303  | )      |       |   | 306   |       
|Cash and cash equivalents at beginning of year   |                                                     |                                          | 3     |        |       |   | 306   |        |       |   |      |       
|                                                 |                                                     |                                          |       |        |       |   |       |        |      
|Cash and cash equivalents at end of year         |                                                     | $                                        | 7     |        |       | $ | 3     |        |       | $ | 306   |       
|                                                 |                                                     |                                          |       |        |       |   |       |        |      

The accompanying notes to the consolidated financial
statements are an integral part of these statements.


2003 and 2002 amounts as restated (note 3).


81



---



##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS




Note 1


Segmented Financial
Information(1)


|                                                      |                                               |          |        |           |           |                    |           |        |  |   |        |        |  |      |       |       |      |   |       |       |  |   |      |     |  |      |       |       |  |   |       |       |  |   |       |       | 
|----------------------------------------------------- | --------------------------------------------- | -------- | ------ | --------- | --------- | ------------------ | --------- | ------ |  | - | ------ | ------ |  | ---- | ----- | ----- | ---- | - | ----- | ----- |  | - | ---- | --- |  | ---- | ----- | ----- |  | - | ----- | ----- |  | - | ----- | ----- | 
|                                                      |                                               | Upstream |        |           | Midstream |                   
|                                                      |                                               |          |        |           |           |                   
|                                                      |                                               |          |        |           |           | Infrastructure and |          
|                                                      |                                               |          |        | Upgrading |           |                    | Marketing |       
|                                                      |                                               |          |        |           |           |                    |           |       
|                                                      |                                               | 2004     |        |           | 2003      |                    |           | 2002   |  |   | 2004   |        |  | 2003 |       |       | 2002 |   |       | 2004  |  |   | 2003 |     |  | 2002 |      
|                                                      |                                               |          |        |           |           |                    |           |        |  |   |        |        |  |      |       |       |      |   |       |       |  |   |      |     |  |      |      
|Year ended December 31                                |                                               |          |        |           |           |                    |           |        |  |   |        |        |  |      |       |       |      |   |       |       |  |   |      |     |  |      |       |       |  |   |       |       |  |   |       |      
|Sales and operating revenues, net of royalties        |                                               | $        | 3,120  |           |           | $                  | 3,186     |        |  | $ | 2,665  |        |  | $    | 1,058 |       |      | $ | 1,013 |       |  | $ | 909  |     |  | $    | 6,126 |       |  | $ | 4,946 |       |  | $ | 4,230 |      
|Costs and expenses                                    |                                               |          |        |           |           |                    |           |        |  |   |        |        |  |      |       |       |      |   |       |       |  |   |      |     |  |      |       |       |  |   |       |       |  |   |       |      
|                                                      | Operating, cost of sales, selling and general |          |        | 967       |           |                    |           | 873    |  |   |        | 743    |  |      |       | 884   |      |   |       | 901   |  |   |      | 811 |  |      |       | 5,914 |  |   |       | 4,747 |  |   |       | 4,038 | 
|                                                      | Depletion, depreciation and amortization      |          |        | 1,077     |           |                    |           | 918    |  |   |        | 822    |  |      |       | 19    |      |   |       | 20    |  |   |      | 18  |  |      |       | 21    |  |   |       | 21    |  |   |       | 20    | 
|                                                      | Interest  net                                |          |        |          |           |                    |           |       |  |   |        |       |  |      |       |      |      |   |       |      |  |   |      |    |  |      |       |      |  |   |       |      |  |   |       |      | 
|                                                      | Foreign exchange                              |          |        |          |           |                    |           |       |  |   |        |       |  |      |       |      |      |   |       |      |  |   |      |    |  |      |       |      |  |   |       |      |  |   |       |      | 
|                                                      |                                               |          |        |           |           |                    |           |        |  |   |        |        |  |      |       |       |      |   |       |       |  |   |      |     |  |      |      
|                                                      |                                               |          | 2,044  |           |           |                    | 1,791     |        |  |   | 1,565  |        |  |      | 903   |       |      |   | 921   |       |  |   | 829  |     |  |      | 5,935 |       |  |   | 4,768 |       |  |   | 4,058 |      
|                                                      |                                               |          |        |           |           |                    |           |        |  |   |        |        |  |      |       |       |      |   |       |       |  |   |      |     |  |      |      
|Earnings (loss) before income taxes                   |                                               |          | 1,076  |           |           |                    | 1,395     |        |  |   | 1,100  |        |  |      | 155   |       |      |   | 92    |       |  |   | 80   |     |  |      | 191   |       |  |   | 178   |       |  |   | 172   |      
|Current income taxes                                  |                                               |          | 211    |           |           |                    | 95        |        |  |   | 55     |        |  |      |      |       |      |   | 1     |       |  |   | 1    |     |  |      | 31    |       |  |   | 27    |       |  |   | 6     |      
|Future income taxes                                   |                                               |          | 152    |           |           |                    | 233       |        |  |   | 346    |        |  |      | 43    |       |      |   | 20    |       |  |   | 25   |     |  |      | 32    |       |  |   | 37    |       |  |   | 59    |      
|                                                      |                                               |          |        |           |           |                    |           |        |  |   |        |        |  |      |       |       |      |   |       |       |  |   |      |     |  |      |      
|Net earnings (loss)                                   |                                               | $        | 713    |           |           | $                  | 1,067     |        |  | $ | 699    |        |  | $    | 112   |       |      | $ | 71    |       |  | $ | 54   |     |  | $    | 128   |       |  | $ | 114   |       |  | $ | 107   |      
|                                                      |                                               |          |        |           |           |                    |           |        |  |   |        |        |  |      |       |       |      |   |       |       |  |   |      |     |  |      |      
|Capital employed  As at December 31                  |                                               | $        | 7,747  |           |           | $                  | 6,709     |        |  | $ | 6,100  |        |  | $    | 480   |       |      | $ | 456   |       |  | $ | 319  |     |  | $    | 255   |       |  | $ | 348   |       |  | $ | 429   |      
|                                                      |                                               |          |        |           |           |                    |           |        |  |   |        |        |  |      |       |       |      |   |       |       |  |   |      |     |  |      |      
|Property, plant and equipment  As at
    December 31 |                                               |          |        |           |           |                    |           |        |  |   |        |        |  |      |       |       |      |   |       |       |  |   |      |     |  |      |       |       |  |   |       |       |  |   |       |      
|Cost                                                  |                                               |          |        |           |           |                    |           |        |  |   |        |        |  |      |       |       |      |   |       |       |  |   |      |     |  |      |       |       |  |   |       |       |  |   |       |      
|                                                      | Canada                                        |          | $      | 16,002    |           |                    | $         | 13,831 |  |   | $      | 11,657 |  |      | $     | 1,084 |      |   | $     | 1,023 |  |   | $    | 999 |  |      | $     | 647   |  |   | $     | 622   |  |   | $     | 598   | 
|                                                      | International                                 |          |        | 587       |           |                    |           | 503    |  |   |        | 474    |  |      |       |      |      |   |       |      |  |   |      |    |  |      |       |      |  |   |       |      |  |   |       |      | 
|                                                      |                                               |          |        |           |           |                    |           |        |  |   |        |        |  |      |       |       |      |   |       |       |  |   |      |     |  |      |      
|                                                      |                                               | $        | 16,589 |           |           | $                  | 14,334    |        |  | $ | 12,131 |        |  | $    | 1,084 |       |      | $ | 1,023 |       |  | $ | 999  |     |  | $    | 647   |       |  | $ | 622   |       |  | $ | 598   |      
|                                                      |                                               |          |        |           |           |                    |           |        |  |   |        |        |  |      |       |       |      |   |       |       |  |   |      |     |  |      |      
|Accumulated depletion, depreciation and amortization  |                                               |          |        |           |           |                    |           |        |  |   |        |        |  |      |       |       |      |   |       |       |  |   |      |     |  |      |       |       |  |   |       |       |  |   |       |      
|                                                      | Canada                                        |          | $      | 5,722     |           |                    | $         | 4,718  |  |   | $      | 3,968  |  |      | $     | 409   |      |   | $     | 391   |  |   | $    | 372 |  |      | $     | 226   |  |   | $     | 203   |  |   | $     | 184   | 
|                                                      | International                                 |          |        | 311       |           |                    |           | 252    |  |   |        | 186    |  |      |       |      |      |   |       |      |  |   |      |    |  |      |       |      |  |   |       |      |  |   |       |      | 
|                                                      |                                               |          |        |           |           |                    |           |        |  |   |        |        |  |      |       |       |      |   |       |       |  |   |      |     |  |      |      
|                                                      |                                               | $        | 6,033  |           |           | $                  | 4,970     |        |  | $ | 4,154  |        |  | $    | 409   |       |      | $ | 391   |       |  | $ | 372  |     |  | $    | 226   |       |  | $ | 203   |       |  | $ | 184   |      
|                                                      |                                               |          |        |           |           |                    |           |        |  |   |        |        |  |      |       |       |      |   |       |       |  |   |      |     |  |      |      
|Net                                                   |                                               |          |        |           |           |                    |           |        |  |   |        |        |  |      |       |       |      |   |       |       |  |   |      |     |  |      |       |       |  |   |       |       |  |   |       |      
|                                                      | Canada                                        |          | $      | 10,280    |           |                    | $         | 9,113  |  |   | $      | 7,689  |  |      | $     | 675   |      |   | $     | 632   |  |   | $    | 627 |  |      | $     | 421   |  |   | $     | 419   |  |   | $     | 414   | 
|                                                      | International                                 |          |        | 276       |           |                    |           | 251    |  |   |        | 288    |  |      |       |      |      |   |       |      |  |   |      |    |  |      |       |      |  |   |       |      |  |   |       |      | 
|                                                      |                                               |          |        |           |           |                    |           |        |  |   |        |        |  |      |       |       |      |   |       |       |  |   |      |     |  |      |      
|                                                      |                                               | $        | 10,556 |           |           | $                  | 9,364     |        |  | $ | 7,977  |        |  | $    | 675   |       |      | $ | 632   |       |  | $ | 627  |     |  | $    | 421   |       |  | $ | 419   |       |  | $ | 414   |      
|                                                      |                                               |          |        |           |           |                    |           |        |  |   |        |        |  |      |       |       |      |   |       |       |  |   |      |     |  |      |      
|Capital expenditures  Year ended
    December 31(3)  |                                               | $        | 2,157  |           |           | $                  | 1,778     |        |  | $ | 1,576  |        |  | $    | 62    |       |      | $ | 25    |       |  | $ | 41   |     |  | $    | 31    |       |  | $ | 18    |       |  | $ | 23    |      
|                                                      |                                               |          |        |           |           |                    |           |        |  |   |        |        |  |      |       |       |      |   |       |       |  |   |      |     |  |      |      
|Total assets  As at
    December 31(4)               |                                               |          |        |           |           |                    |           |        |  |   |        |        |  |      |       |       |      |   |       |       |  |   |      |     |  |      |       |       |  |   |       |       |  |   |       |      
|                                                      | Canada                                        |          | $      | 10,897    |           |                    | $         | 9,685  |  |   | $      | 7,931  |  |      | $     | 708   |      |   | $     | 650   |  |   | $    | 659 |  |      | $     | 599   |  |   | $     | 702   |  |   | $     | 851   | 
|                                                      | International                                 |          |        | 275       |           |                    |           | 264    |  |   |        | 341    |  |      |       |      |      |   |       |      |  |   |      |    |  |      |       |      |  |   |       |      |  |   |       |      | 
|                                                      |                                               |          |        |           |           |                    |           |        |  |   |        |        |  |      |       |       |      |   |       |       |  |   |      |     |  |      |      
|                                                      |                                               | $        | 11,172 |           |           | $                  | 9,949     |        |  | $ | 8,272  |        |  | $    | 708   |       |      | $ | 650   |       |  | $ | 659  |     |  | $    | 599   |       |  | $ | 702   |       |  | $ | 851   |      
|                                                      |                                               |          |        |           |           |                    |           |        |  |   |        |        |  |      |       |       |      |   |       |       |  |   |      |     |  |      |      






|    |                                                                                                                                                                                                
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | 2003 and 2002 amounts as restated (note 3).                                                                                                                                                    
|   
|(2) | Eliminations relate to sales and operating revenues between
    segments recorded at transfer prices based on current market
    prices, and to unrealized intersegment profits in inventories.
|   
|(3) | Excludes capitalized costs related to asset retirement
    obligations incurred during the period and corporate
    acquisitions.                                                              
|   
|(4) | Includes goodwill on corporate acquisitions related to Upstream.                                                                                                                               

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|                                                      |                                               |                  |       |               |                 |   |       |       |  |   |       |       |  |      |        |        |      |   |        |        |   |   |        |        |   |      |        |        |   |   |        |        |   |   |        |        | 
|----------------------------------------------------- | --------------------------------------------- | ---------------- | ----- | ------------- | --------------- | - | ----- | ----- |  | - | ----- | ----- |  | ---- | ------ | ------ | ---- | - | ------ | ------ | - | - | ------ | ------ | - | ---- | ------ | ------ | - | - | ------ | ------ | - | - | ------ | ------ | 
|                                                      |                                               |                  |       | Corporate and |                 |   |      
|                                                      |                                               | Refined Products |       |               | Eliminations(2) |   |       | Total | 
|                                                      |                                               |                  |       |               |                 |   |       |       | 
|                                                      |                                               | 2004             |       |               | 2003            |   |       | 2002  |  |   | 2004  |       |  | 2003 |        |        | 2002 |   |        | 2004   |   |   | 2003   |        |   | 2002 |       
|                                                      |                                               |                  |       |               |                 |   |       |       |  |   |       |       |  |      |        |        |      |   |        |        |   |   |        |        |   |      |       
|Year ended December 31                                |                                               |                  |       |               |                 |   |       |       |  |   |       |       |  |      |        |        |      |   |        |        |   |   |        |        |   |      |        |        |   |   |        |        |   |   |        |       
|Sales and operating revenues, net of royalties        |                                               | $                | 1,797 |               |                 | $ | 1,502 |       |  | $ | 1,310 |       |  | $    | (3,661 | )      |      | $ | (2,989 | )      |   | $ | (2,730 | )      |   | $    | 8,440  |        |   | $ | 7,658  |        |   | $ | 6,384  |       
|Costs and expenses                                    |                                               |                  |       |               |                 |   |       |       |  |   |       |       |  |      |        |        |      |   |        |        |   |   |        |        |   |      |        |        |   |   |        |        |   |   |        |       
|                                                      | Operating, cost of sales, selling and general |                  |       | 1,694         |                 |   |       | 1,426 |  |   |       | 1,224 |  |      |        | (3,543 | )    |   |        | (2,978 | ) |   |        | (2,695 | ) |      |        | 5,916  |   |   |        | 4,969  |   |   |        | 4,121  | 
|                                                      | Depletion, depreciation and amortization      |                  |       | 38            |                 |   |       | 26    |  |   |       | 31    |  |      |        | 24     |      |   |        | 36     |   |   |        | 17     |   |      |        | 1,179  |   |   |        | 1,021  |   |   |        | 908    | 
|                                                      | Interest  net                                |                  |       |              |                 |   |       |      |  |   |       |      |  |      |        | 33     |      |   |        | 73     |   |   |        | 104    |   |      |        | 33     |   |   |        | 73     |   |   |        | 104    | 
|                                                      | Foreign exchange                              |                  |       |              |                 |   |       |      |  |   |       |      |  |      |        | (99    | )    |   |        | (215   | ) |   |        | 13     |   |      |        | (99    | ) |   |        | (215   | ) |   |        | 13     | 
|                                                      |                                               |                  |       |               |                 |   |       |       |  |   |       |       |  |      |        |        |      |   |        |        |   |   |        |        |   |      |       
|                                                      |                                               |                  | 1,732 |               |                 |   | 1,452 |       |  |   | 1,255 |       |  |      | (3,585 | )      |      |   | (3,084 | )      |   |   | (2,561 | )      |   |      | 7,029  |        |   |   | 5,848  |        |   |   | 5,146  |       
|                                                      |                                               |                  |       |               |                 |   |       |       |  |   |       |       |  |      |        |        |      |   |        |        |   |   |        |        |   |      |       
|Earnings (loss) before income taxes                   |                                               |                  | 65    |               |                 |   | 50    |       |  |   | 55    |       |  |      | (76    | )      |      |   | 95     |        |   |   | (169   | )      |   |      | 1,411  |        |   |   | 1,810  |        |   |   | 1,238  |       
|Current income taxes                                  |                                               |                  | 11    |               |                 |   | 9     |       |  |   | 4     |       |  |      | 49     |        |      |   | 15     |        |   |   |       |        |   |      | 302    |        |   |   | 147    |        |   |   | 66     |       
|Future income taxes                                   |                                               |                  | 13    |               |                 |   | 9     |       |  |   | 18    |       |  |      | (137   | )      |      |   | 30     |        |   |   | (90    | )      |   |      | 103    |        |   |   | 329    |        |   |   | 358    |       
|                                                      |                                               |                  |       |               |                 |   |       |       |  |   |       |       |  |      |        |        |      |   |        |        |   |   |        |        |   |      |       
|Net earnings (loss)                                   |                                               | $                | 41    |               |                 | $ | 32    |       |  | $ | 33    |       |  | $    | 12     |        |      | $ | 50     |        |   | $ | (79    | )      |   | $    | 1,006  |        |   | $ | 1,334  |        |   | $ | 814    |       
|                                                      |                                               |                  |       |               |                 |   |       |       |  |   |       |       |  |      |        |        |      |   |        |        |   |   |        |        |   |      |       
|Capital employed  As at December 31                  |                                               | $                | 354   |               |                 | $ | 315   |       |  | $ | 316   |       |  | $    | (477   | )      |      | $ | (148   | )      |   | $ | 357    |        |   | $    | 8,359  |        |   | $ | 7,680  |        |   | $ | 7,521  |       
|                                                      |                                               |                  |       |               |                 |   |       |       |  |   |       |       |  |      |        |        |      |   |        |        |   |   |        |        |   |      |       
|Property, plant and equipment  As at
    December 31 |                                               |                  |       |               |                 |   |       |       |  |   |       |       |  |      |        |        |      |   |        |        |   |   |        |        |   |      |        |        |   |   |        |        |   |   |        |       
|Cost                                                  |                                               |                  |       |               |                 |   |       |       |  |   |       |       |  |      |        |        |      |   |        |        |   |   |        |        |   |      |        |        |   |   |        |        |   |   |        |       
|                                                      | Canada                                        |                  | $     | 878           |                 |   | $     | 773   |  |   | $     | 706   |  |      | $      | 253    |      |   | $      | 205    |   |   | $      | 172    |   |      | $      | 18,864 |   |   | $      | 16,454 |   |   | $      | 14,132 | 
|                                                      | International                                 |                  |       |              |                 |   |       |      |  |   |       |      |  |      |        |       |      |   |        |       |   |   |        |       |   |      |        | 587    |   |   |        | 503    |   |   |        | 474    | 
|                                                      |                                               |                  |       |               |                 |   |       |       |  |   |       |       |  |      |        |        |      |   |        |        |   |   |        |        |   |      |       
|                                                      |                                               | $                | 878   |               |                 | $ | 773   |       |  | $ | 706   |       |  | $    | 253    |        |      | $ | 205    |        |   | $ | 172    |        |   | $    | 19,451 |        |   | $ | 16,957 |        |   | $ | 14,606 |       
|                                                      |                                               |                  |       |               |                 |   |       |       |  |   |       |       |  |      |        |        |      |   |        |        |   |   |        |        |   |      |       
|Accumulated depletion, depreciation and amortization  |                                               |                  |       |               |                 |   |       |       |  |   |       |       |  |      |        |        |      |   |        |        |   |   |        |        |   |      |        |        |   |   |        |        |   |   |        |       
|                                                      | Canada                                        |                  | $     | 432           |                 |   | $     | 392   |  |   | $     | 361   |  |      | $      | 158    |      |   | $      | 139    |   |   | $      | 114    |   |      | $      | 6,947  |   |   | $      | 5,843  |   |   | $      | 4,999  | 
|                                                      | International                                 |                  |       |              |                 |   |       |      |  |   |       |      |  |      |        |       |      |   |        |       |   |   |        |       |   |      |        | 311    |   |   |        | 252    |   |   |        | 186    | 
|                                                      |                                               |                  |       |               |                 |   |       |       |  |   |       |       |  |      |        |        |      |   |        |        |   |   |        |        |   |      |       
|                                                      |                                               | $                | 432   |               |                 | $ | 392   |       |  | $ | 361   |       |  | $    | 158    |        |      | $ | 139    |        |   | $ | 114    |        |   | $    | 7,258  |        |   | $ | 6,095  |        |   | $ | 5,185  |       
|                                                      |                                               |                  |       |               |                 |   |       |       |  |   |       |       |  |      |        |        |      |   |        |        |   |   |        |        |   |      |       
|Net                                                   |                                               |                  |       |               |                 |   |       |       |  |   |       |       |  |      |        |        |      |   |        |        |   |   |        |        |   |      |        |        |   |   |        |        |   |   |        |       
|                                                      | Canada                                        |                  | $     | 446           |                 |   | $     | 381   |  |   | $     | 345   |  |      | $      | 95     |      |   | $      | 66     |   |   | $      | 58     |   |      | $      | 11,917 |   |   | $      | 10,611 |   |   | $      | 9,133  | 
|                                                      | International                                 |                  |       |              |                 |   |       |      |  |   |       |      |  |      |        |       |      |   |        |       |   |   |        |       |   |      |        | 276    |   |   |        | 251    |   |   |        | 288    | 
|                                                      |                                               |                  |       |               |                 |   |       |       |  |   |       |       |  |      |        |        |      |   |        |        |   |   |        |        |   |      |       
|                                                      |                                               | $                | 446   |               |                 | $ | 381   |       |  | $ | 345   |       |  | $    | 95     |        |      | $ | 66     |        |   | $ | 58     |        |   | $    | 12,193 |        |   | $ | 10,862 |        |   | $ | 9,421  |       
|                                                      |                                               |                  |       |               |                 |   |       |       |  |   |       |       |  |      |        |        |      |   |        |        |   |   |        |        |   |      |       
|Capital expenditures  Year ended December 31(3)      |                                               | $                | 106   |               |                 | $ | 58    |       |  | $ | 44    |       |  | $    | 23     |        |      | $ | 23     |        |   | $ | 23     |        |   | $    | 2,379  |        |   | $ | 1,902  |        |   | $ | 1,707  |       
|                                                      |                                               |                  |       |               |                 |   |       |       |  |   |       |       |  |      |        |        |      |   |        |        |   |   |        |        |   |      |       
|Total assets  As at December 31(4)                   |                                               |                  |       |               |                 |   |       |       |  |   |       |       |  |      |        |        |      |   |        |        |   |   |        |        |   |      |        |        |   |   |        |        |   |   |        |       
|                                                      | Canada                                        |                  | $     | 625           |                 |   | $     | 540   |  |   | $     | 537   |  |      | $      | 134    |      |   | $      | 105    |   |   | $      | 314    |   |      | $      | 12,963 |   |   | $      | 11,682 |   |   | $      | 10,292 | 
|                                                      | International                                 |                  |       |              |                 |   |       |      |  |   |       |      |  |      |        |       |      |   |        |       |   |   |        |       |   |      |        | 275    |   |   |        | 264    |   |   |        | 341    | 
|                                                      |                                               |                  |       |               |                 |   |       |       |  |   |       |       |  |      |        |        |      |   |        |        |   |   |        |        |   |      |       
|                                                      |                                               | $                | 625   |               |                 | $ | 540   |       |  | $ | 537   |       |  | $    | 134    |        |      | $ | 105    |        |   | $ | 314    |        |   | $    | 13,238 |        |   | $ | 11,946 |        |   | $ | 10,633 |       
|                                                      |                                               |                  |       |               |                 |   |       |       |  |   |       |       |  |      |        |        |      |   |        |        |   |   |        |        |   |      |       

Note 2


Nature of Operations and Organization












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Note 3


Significant Accounting Policies


a)  Principles of Consolidation and the Preparation
of Financial Statements










b)  Cash and Cash Equivalents




c)  Inventory Valuation




d)  Property, Plant and Equipment




| |                     
| | --------------------
| | i)   Oil and
    Gas











| |  |                                                                                                      
| |  | -----------------------------------------------------------------------------------------------------
| |  |          the
    undiscounted cash flow expected to result from production from
    proved reserves;
|
| |  |          the
    costs of unproved properties, less impairment; and                                 
|
| |  |          the
    costs of major development projects, less impairment.                              





| |  |                                                                                                                           
| |  | --------------------------------------------------------------------------------------------------------------------------
| |  |          the
    fair value of proved and probable reserves; and                                                         
|
| |  |          the
    cost, less impairment, of unproved properties that do not have
    probable reserves attributed to them.



| |                                            
| | -------------------------------------------
| | ii)           Other
    Plant and Equipment



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| |                                                
| | -----------------------------------------------
| | iii)           Asset
    Retirement Obligations





|   |                                            
|-- | -------------------------------------------
|e) | Impairment or Disposal of Long-lived Assets







|   |         
|-- | --------
|f) | Goodwill





|   |                                 
|-- | --------------------------------
|g) | Derivative Financial Instruments

















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|   |                         
|-- | ------------------------
|h) | Employee Future Benefits







|   |                    
|-- | -------------------
|i) | Future Income Taxes





|   |                    
|-- | -------------------
|j) | Revenue Recognition





|   |                             
|-- | ----------------------------
|k) | Foreign Currency Translation





|   |                         
|-- | ------------------------
|l) | Stock-based Compensation





m) Earnings per Share






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n)  Reclassification




Note 4


Accounts Receivable


|                                |  |      |     |   |      |   |     |      |  |   |     |  
|------------------------------- |  | ---- | --- | - | ---- | - | --- | ---- |  | - | --- | -
|                                |  | 2004 |     |   | 2003 |   |     | 2002 | 
|                                |  |      |     |   |      |   |     |      | 
|Trade receivables               |  | $    | 448 |   |      | $ | 568 |      |  | $ | 530 |  
|Investment tax credit           |  |      |    |   |      |   | 48  |      |  |   | 45  |  
|Allowance for doubtful accounts |  |      | (10 | ) |      |   | (12 | )    |  |   | (11 | )
|Other                           |  |      | 8   |   |      |   | 14  |      |  |   | 8   |  
|                                |  |      |     |   |      |   |     |      | 
|                                |  | $    | 446 |   |      | $ | 618 |      |  | $ | 572 |  
|                                |  |      |     |   |      |   |     |      | 

Sale of Accounts Receivable










Note 5


Inventories


|                                         |  |      |     |  |      |   |     |      |  |   |     | 
|---------------------------------------- |  | ---- | --- |  | ---- | - | --- | ---- |  | - | --- | 
|                                         |  | 2004 |     |  | 2003 |   |     | 2002 | 
|                                         |  |      |     |  |      |   |     |      | 
|Crude oil and refined petroleum products |  | $    | 159 |  |      | $ | 115 |      |  | $ | 160 | 
|Natural gas                              |  |      | 100 |  |      |   | 69  |      |  |   | 50  | 
|Materials, supplies and other            |  |      | 15  |  |      |   | 14  |      |  |   | 17  | 
|                                         |  |      |     |  |      |   |     |      | 
|                                         |  | $    | 274 |  |      | $ | 198 |      |  | $ | 227 | 
|                                         |  |      |     |  |      |   |     |      | 

Note 6


Property, Plant and Equipment






|              |  |      |       |  |      |   |       |      |  |   |       | 
|------------- |  | ---- | ----- |  | ---- | - | ----- | ---- |  | - | ----- | 
|              |  | 2004 |       |  | 2003 |   |       | 2002 | 
|              |  |      |       |  |      |   |       |      | 
|Canada        |  | $    | 2,399 |  |      | $ | 1,814 |      |  | $ | 1,318 | 
|International |  |      | 129   |  |      |   | 54    |      |  |   | 37    | 
|              |  |      |       |  |      |   |       |      | 
|              |  | $    | 2,528 |  |      | $ | 1,868 |      |  | $ | 1,355 | 
|              |  |      |       |  |      |   |       |      | 



|                                        |  |      |       |   |      |   |       |      |  |   |       |   |  |           |       |   |      |   |       |            |  |   |       |   |  |  |     | 
|--------------------------------------- |  | ---- | ----- | - | ---- | - | ----- | ---- |  | - | ----- | - |  | --------- | ----- | - | ---- | - | ----- | ---------- |  | - | ----- | - |  |  | --- | 
|                                        |  |      |       |   |      |   |       |      |  |   |       |   |  | Annual    |      
|                                        |  |      |       |   |      |   |       |      |  |   |       |   |  | Increase  |      
|Western Canada                          |  | 2005 |       |   | 2006 |   |       | 2007 |  |   | 2008  |   |  | 2009      |       |   | 2010 |   |       | Thereafter | 
|                                        |  |      |       |   |      |   |       |      |  |   |       |   |  |           |       |   |      |   |       |            | 
|                                        |  |      |       |   |      |   |       |      |  |   |       |   |  | (percent) |      
|Light oil @ Edmonton ($/bbl)            |  | $    | 52.60 |   |      | $ | 47.52 |      |  | $ | 42.56 |   |  | $         | 39.78 |   |      | $ | 38.44 |            |  | $ | 38.47 |   |  |  | 1.6 | 
|Medium oil @ Hardisty ($/bbl)           |  |      | 47.08 |   |      |   | 42.55 |      |  |   | 37.96 |   |  |           | 35.52 |   |      |   | 34.24 |            |  |   | 34.27 |   |  |  | 1.7 | 
|Heavy oil @ Lloydminster ($/bbl)        |  |      | 34.21 |   |      |   | 30.93 |      |  |   | 27.73 |   |  |           | 26.08 |   |      |   | 24.88 |            |  |   | 24.92 |   |  |  | 1.7 | 
|Alberta natural gas ($/mcf)             |  |      | 7.25  |   |      |   | 6.87  |      |  |   | 6.39  |   |  |           | 5.91  |   |      |   | 5.69  |            |  |   | 5.69  |   |  |  | 1.6 | 
|Fixed price contract adjustment ($/mcf) |  |      | (0.36 | ) |      |   | (0.36 | )    |  |   | (0.22 | ) |  |           | (0.17 | ) |      |   | (0.14 | )          |  |   | (0.11 | ) |  |  |     | 

Note 7


Corporate Acquisitions




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|                    |                               |        |     |          |        |   |     |       |  
|------------------- | ----------------------------- | ------ | --- | -------- | ------ | - | --- | ----- | -
|                    |                               |        |     | Marathon |       
|                    |                               | Temple |     |          | Canada |  
|                    |                               |        |     |          |        |  
|Net assets acquired |                               |        |     |          |        |   |     |      
|                    | Working capital (1)           |        | $   | (17      | )      |   | $   | (15   | )
|                    | Property, plant and equipment |        |     | 138      |        |   |     | 1,008 |  
|                    | Goodwill (2)                  |        |     | 20       |        |   |     | 140   |  
|                    | Asset retirement obligations  |        |     |         |        |   |     | (38   | )
|                    | Future income taxes           |        |     | (39      | )      |   |     | (264  | )
|                    |                               |        |     |          |        |  
|                    |                               | $      | 102 |          |        | $ | 831 |      
|                    |                               |        |     |          |        |  






|    |                                                                                                                                                  
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Working capital of Marathon Canada acquired included cash of
    $22 million.                                                                    
|   
|(2) | Allocated to the Companys upstream segment and not
    deductible for income tax purposes. Refer to note 1,
    Segmented Financial Information.



Note 8


Cash Flows  Change in Non-cash Working
Capital


a)  Change in non-cash working capital was as
follows:


|                                                |                                          |      |     |     |      |  |     |      |   |  |      |      |  
|----------------------------------------------- | ---------------------------------------- | ---- | --- | --- | ---- |  | --- | ---- | - |  | ---- | ---- | -
|                                                |                                          | 2004 |     |     | 2003 |  |     | 2002 |  
|                                                |                                          |      |     |     |      |  |     |      |  
|Decrease (increase) in non-cash working capital |                                          |      |     |     |      |  |     |      |   |  |      |     
|                                                | Accounts receivable                      |      | $   | 209 |      |  | $   | (7   | ) |  | $    | (153 | )
|                                                | Inventories                              |      |     | (77 | )    |  |     | 28   |   |  |      | (2   | )
|                                                | Prepaid expenses                         |      |     | (12 | )    |  |     | (10  | ) |  |      | 1    |  
|                                                | Accounts payable and accrued liabilities |      |     | 323 |      |  |     | 270  |   |  |      | (11  | )
|                                                |                                          |      |     |     |      |  |     |      |  
|Change in non-cash working capital              |                                          |      | 443 |     |      |  | 281 |      |   |  | (165 | )   
|Relating to:                                    |                                          |      |     |     |      |  |     |      |   |  |      |     
|                                                | Financing activities                     |      |     | 337 |      |  |     | 48   |   |  |      | (9   | )
|                                                | Investing activities                     |      |     | (63 | )    |  |     | 120  |   |  |      | 42   |  
|                                                |                                          |      |     |     |      |  |     |      |  
|                                                | Operating activities                     |      | $   | 169 |      |  | $   | 113  |   |  | $    | (198 | )
|                                                |                                          |      |     |     |      |  |     |      |  

b)  Other cash flow information:


|                   |  |      |     |  |      |   |     |      |  |   |     | 
|------------------ |  | ---- | --- |  | ---- | - | --- | ---- |  | - | --- | 
|                   |  | 2004 |     |  | 2003 |   |     | 2002 | 
|                   |  |      |     |  |      |   |     |      | 
|Cash taxes paid    |  | $    | 213 |  |      | $ | 69  |      |  | $ | 20  | 
|Cash interest paid |  | $    | 116 |  |      | $ | 134 |      |  | $ | 139 | 

Note 9


Bank Operating Loans




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Note 10


Accounts Payable and Accrued Liabilities


|                               |  |      |       |  |      |   |       |      |  |   |     | 
|------------------------------ |  | ---- | ----- |  | ---- | - | ----- | ---- |  | - | --- | 
|                               |  | 2004 |       |  | 2003 |   |       | 2002 | 
|                               |  |      |       |  |      |   |       |      | 
|Trade payables                 |  | $    | 110   |  |      | $ | 58    |      |  | $ | 87  | 
|Accrued liabilities            |  |      | 751   |  |      |   | 794   |      |  |   | 562 | 
|Dividend payable               |  |      | 280   |  |      |   | 42    |      |  |   | 38  | 
|Commodity contract settlements |  |      | 50    |  |      |   | 8     |      |  |   |    | 
|Stock-based compensation       |  |      | 49    |  |      |   |      |      |  |   |    | 
|Current income taxes           |  |      | 119   |  |      |   | 117   |      |  |   | 51  | 
|Other                          |  |      | 130   |  |      |   | 107   |      |  |   | 56  | 
|                               |  |      |       |  |      |   |       |      | 
|                               |  | $    | 1,489 |  |      | $ | 1,126 |      |  | $ | 794 | 
|                               |  |      |       |  |      |   |       |      | 

Note 11


Long-term Debt


|                           |                             |          |  |         |  |   |        |     |  |      |       |     |      |   |       |      |  |   |       |     |  |   |     |     |  |   |       |     | 
|-------------------------- | --------------------------- | -------- |  | ------- |  | - | ------ | --- |  | ---- | ----- | --- | ---- | - | ----- | ---- |  | - | ----- | --- |  | - | --- | --- |  | - | ----- | --- | 
|                           |                             | Maturity |  |         |  |   |        |     |  |      |       |     |      |   |      
|                           |                             |          |  |         |  |   |        |     |  |      |       |     |      |   |      
|                           |                             |          |  | 2004    |  |   | 2003   |     |  | 2002 |       |     | 2004 |   |       | 2003 |  |   | 2002  |    
|                           |                             |          |  |         |  |   |        |     |  |      |       |     |      |   |       |      |  |   |       |    
|                           |                             |          |  | Amount  |  |   | Amount |    
|                           |                             |          |  | Cdn$.   |  |   | U.S. $ |    
|Long-term debt             |                             |          |  |         |  |   |        |     |  |      |       |     |      |   |       |      |  |   |       |     |  |   |     |     |  |   |       |    
|                           | Syndicated credit facility  |          |  | 2007    |  |   | $      | 70  |  |      | $     |    |      |   | $     |     |  |   | $     |    |  |   | $   |    |  |   | $     |    | 
|                           | Bilateral credit facilities |          |  | 2006-7  |  |   |        | 40  |  |      |       |    |      |   |       |     |  |   |       |    |  |   |     |    |  |   |       |    | 
|                           | 6.875% notes                |          |  |         |  |   |        |    |  |      |       |    |      |   |       | 237  |  |   |       |    |  |   |     |    |  |   |       | 150 | 
|                           | 7.125% notes                |          |  | 2006    |  |   |        | 181 |  |      |       | 194 |      |   |       | 237  |  |   |       | 150 |  |   |     | 150 |  |   |       | 150 | 
|                           | 6.25% notes                 |          |  | 2012    |  |   |        | 481 |  |      |       | 517 |      |   |       | 632  |  |   |       | 400 |  |   |     | 400 |  |   |       | 400 | 
|                           | 7.55% debentures            |          |  | 2016    |  |   |        | 241 |  |      |       | 258 |      |   |       | 316  |  |   |       | 200 |  |   |     | 200 |  |   |       | 200 | 
|                           | 6.15% notes                 |          |  | 2019    |  |   |        | 361 |  |      |       |    |      |   |       |     |  |   |       | 300 |  |   |     |    |  |   |       |    | 
|                           | Private placement notes     |          |  | 2005    |  |   |        | 18  |  |      |       | 41  |      |   |       | 107  |  |   |       | 15  |  |   |     | 32  |  |   |       | 68  | 
|                           | 8.45% senior secured bonds  |          |  | 2005-12 |  |   |        | 140 |  |      |       | 188 |      |   |       | 256  |  |   |       | 117 |  |   |     | 145 |  |   |       | 162 | 
|                           | Medium-term notes           |          |  | 2007-9  |  |   |        | 300 |  |      |       | 500 |      |   |       | 600  |  |   |       |    |  |   |     |    |  |   |       |    | 
|                           |                             |          |  |         |  |   |        |     |  |      |       |     |      |   |       |      |  |   |       |     | 
|Total long-term debt       |                             |          |  |         |  |   | 1,832  |     |  |      | 1,698 |     |      |   | 2,385 |      |  | $ | 1,182 |     |  | $ | 927 |     |  | $ | 1,130 |    
|                           |                             |          |  |         |  |   |        |     |  |      |       |     |      |   |       |      |  |   |       |     | 
|Amount due within one year |                             |          |  |         |  |   | (56    | )   |  |      | (259  | )   |      |   | (421  | )    |  |   |       |     |  |   |     |     |  |   |       |    
|                           |                             |          |  |         |  |   |        |     |  |      |       |     |      |   |       |      |  |   |       |     | 
|                           |                             |          |  |         |  | $ | 1,776  |     |  | $    | 1,439 |     |      | $ | 1,964 |      |  |   |       |     |  |   |     |     |  |   |       |    
|                           |                             |          |  |         |  |   |        |     |  |      |       |     |      |   |       |      |  |   |       |     | 



|           |  |        |       | 
|---------- |  | ------ | ----- | 
|           |  | Amount |      
|           |  |        |      
|2005       |  | $      | 56    | 
|2006       |  |        | 226   | 
|2007       |  |        | 219   | 
|2008       |  |        | 19    | 
|2009       |  |        | 214   | 
|Thereafter |  |        | 1,098 | 
|           |  |        |      
|           |  | $      | 1,832 | 
|           |  |        |      



|                   |  |      |     |   |      |   |     |      |  |   |     |  
|------------------ |  | ---- | --- | - | ---- | - | --- | ---- |  | - | --- | -
|                   |  | 2004 |     |   | 2003 |   |     | 2002 | 
|                   |  |      |     |   |      |   |     |      | 
|Long-term debt     |  | $    | 106 |   |      | $ | 129 |      |  | $ | 128 |  
|Short-term debt    |  |      | 3   |   |      |   | 2   |      |  |   | 3   |  
|                   |  |      |     |   |      |   |     |      | 
|                   |  |      | 109 |   |      |   | 131 |      |  |   | 131 |  
|Amount capitalized |  |      | (75 | ) |      |   | (52 | )    |  |   | (26 | )
|                   |  |      |     |   |      |   |     |      | 
|                   |  |      | 34  |   |      |   | 79  |      |  |   | 105 |  
|Interest income    |  |      | (1  | ) |      |   | (6  | )    |  |   | (1  | )
|                   |  |      |     |   |      |   |     |      | 
|                   |  | $    | 33  |   |      | $ | 73  |      |  | $ | 104 |  
|                   |  |      |     |   |      |   |     |      | 

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|                                                                  |  |      |      |   |      |   |      |      |  |   |    | 
|----------------------------------------------------------------- |  | ---- | ---- | - | ---- | - | ---- | ---- |  | - | -- | 
|                                                                  |  | 2004 |      |   | 2003 |   |      | 2002 | 
|                                                                  |  |      |      |   |      |   |      |      | 
|Gain on translation of U.S. dollar denominated long-term
    debt |  | $    | (129 | ) |      | $ | (315 | )    |  | $ |   | 
|Cross currency swaps                                              |  |      | 27   |   |      |   | 73   |      |  |   |   | 
|Other losses                                                      |  |      | 3    |   |      |   | 27   |      |  |   | 13 | 
|                                                                  |  |      |      |   |      |   |      |      | 
|                                                                  |  | $    | (99  | ) |      | $ | (215 | )    |  | $ | 13 | 
|                                                                  |  |      |      |   |      |   |      |      | 



Credit Facilities






Notes and Debentures














|         |  |        |     |  |               |  |      |               |  |              
|-------- |  | ------ | --- |  | ------------- |  | ---- | ------------- |  | -------------
|Issue    |  | Amount |     |  | Interest Rate |  |      | Maturity Date
|         |  |        |     |  |               |  |      |              
|Series B |  | $      | 100 |  |               |  | 6.85 | %             |  | February 2007
|Series E |  |        | 200 |  |               |  | 6.95 | %             |  | July 2009    
|         |  |        |     |  |               |  |      |              
|         |  | $      | 300 |  |               |  |      |               |  |              
|         |  |        |     |  |               |  |      |              





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Note 12


Other Long-term Liabilities


|                             |  |      |     |  |      |   |     |      |  |   |     | 
|---------------------------- |  | ---- | --- |  | ---- | - | --- | ---- |  | - | --- | 
|                             |  | 2004 |     |  | 2003 |   |     | 2002 | 
|                             |  |      |     |  |      |   |     |      | 
|Asset retirement obligations |  | $    | 509 |  |      | $ | 432 |      |  | $ | 286 | 
|Cross currency swaps         |  |      | 68  |  |      |   | 41  |      |  |   |    | 
|Interest rate swaps          |  |      | 18  |  |      |   | 26  |      |  |   |    | 
|Employee future benefits     |  |      | 23  |  |      |   | 20  |      |  |   | 17  | 
|Stock-based compensation     |  |      | 14  |  |      |   |    |      |  |   |    | 
|Other                        |  |      |    |  |      |   |    |      |  |   | 1   | 
|                             |  |      |     |  |      |   |     |      | 
|                             |  | $    | 632 |  |      | $ | 519 |      |  | $ | 304 | 
|                             |  |      |     |  |      |   |     |      | 

Asset Retirement Obligations






|                                    |                                          |                                    |   |       |        |  |   |             |      |  |                |       |        |        |   |       |             |  |   |     |      |  |   |       |       | 
|----------------------------------- | ---------------------------------------- | ---------------------------------- | - | ----- | ------ |  | - | ----------- | ---- |  | -------------- | ----- | ------ | ------ | - | ----- | ----------- |  | - | --- | ---- |  | - | ----- | ----- | 
|                                    |                                          | 2003                               |   |       | 2002   | 
|                                    |                                          |                                    |   |       |        | 
|                                    |                                          | As Reported(1)                     |   |       | Change |  |   | As Restated |      |  | As Reported(1) |       |        | Change |   |       | As Restated | 
|                                    |                                          |                                    |   |       |        |  |   |             |      |  |                |       |        |        |   |       |             | 
|Consolidated Balance Sheets         |                                          |                                    |   |       |        |  |   |             |      |  |                |       |        |        |   |       |             |  |   |     |      |  |   |      
|                                    | Assets                                   |                                    |   |       |        |  |   |             |      |  |                |       |        |        |   |       |             |  |   |     |      |  |   |       |      
|                                    |                                          | Property, plant and equipment, net |   | $     | 10,698 |  |   | $           | 164  |  |                | $     | 10,862 |        |   | $     | 9,363       |  |   | $   | 58   |  |   | $     | 9,421 | 
|                                    | Liabilities and Shareholders Equity     |                                    |   |       |        |  |   |             |      |  |                |       |        |        |   |       |             |  |   |     |      |  |   |       |      
|                                    |                                          | Other long-term liabilities        |   |       | 390    |  |   |             | 129  |  |                |       | 519    |        |   |       | 266         |  |   |     | 38   |  |   |       | 304   | 
|                                    |                                          | Future income taxes                |   |       | 2,608  |  |   |             | 13   |  |                |       | 2,621  |        |   |       | 2,003       |  |   |     | 11   |  |   |       | 2,014 | 
|                                    |                                          | Retained earnings                  |   |       | 2,134  |  |   |             | 22   |  |                |       | 2,156  |        |   |       | 1,357       |  |   |     | 9    |  |   |       | 1,366 | 
|Consolidated Statements of Earnings |                                          |                                    |   |       |        |  |   |             |      |  |                |       |        |        |   |       |             |  |   |     |      |  |   |      
|                                    | Cost of sales and operating expenses     |                                    | $ | 4,825 |        |  | $ | 22          |      |  | $              | 4,847 |        |        | $ | 4,009 |             |  | $ | 17  |      |  | $ | 4,026 |      
|                                    | Depletion, depreciation and amortization |                                    |   | 1,058 |        |  |   | (37         | )    |  |                | 1,021 |        |        |   | 939   |             |  |   | (31 | )    |  |   | 908   |      
|                                    | Future income taxes                      |                                    |   | 327   |        |  |   | 2           |      |  |                | 329   |        |        |   | 354   |             |  |   | 4   |      |  |   | 358   |      
|                                    | Net earnings                             |                                    |   | 1,321 |        |  |   | 13          |      |  |                | 1,334 |        |        |   | 804   |             |  |   | 10  |      |  |   | 814   |      
|                                    | Earnings per share                       |                                    |   |       |        |  |   |             |      |  |                |       |        |        |   |       |             |  |   |     |      |  |   |       |      
|                                    |                                          | Basic                              |   | $     | 3.23   |  |   | $           | 0.03 |  |                | $     | 3.26   |        |   | $     | 1.88        |  |   | $   | 0.03 |  |   | $     | 1.91  | 
|                                    |                                          | Diluted                            |   | $     | 3.22   |  |   | $           | 0.03 |  |                | $     | 3.25   |        |   | $     | 1.88        |  |   | $   | 0.02 |  |   | $     | 1.90  | 






|    |                                                                                 
|--- | --------------------------------------------------------------------------------
|(1) | Certain amounts have been reclassified to conform with current
    presentation.





|                                                |  |      |     |   |      |   |     |      |  |   |     |  
|----------------------------------------------- |  | ---- | --- | - | ---- | - | --- | ---- |  | - | --- | -
|                                                |  | 2004 |     |   | 2003 |   |     | 2002 | 
|                                                |  |      |     |   |      |   |     |      | 
|Asset retirement obligations, beginning of year |  | $    | 432 |   |      | $ | 286 |      |  | $ | 247 |  
|Liabilities incurred                            |  |      | 13  |   |      |   | 158 |      |  |   | 38  |  
|Liabilities settled                             |  |      | (40 | ) |      |   | (34 | )    |  |   | (16 | )
|Revisions                                       |  |      | 77  |   |      |   |    |      |  |   |    |  
|Accretion                                       |  |      | 27  |   |      |   | 22  |      |  |   | 17  |  
|                                                |  |      |     |   |      |   |     |      | 
|Asset retirement obligations, end of year       |  | $    | 509 |   |      | $ | 432 |      |  | $ | 286 |  
|                                                |  |      |     |   |      |   |     |      | 

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Note 13


Income Taxes




|                                    |                                                                 |      |       |       |      |   |       |       |   |   |       |       |  
|----------------------------------- | --------------------------------------------------------------- | ---- | ----- | ----- | ---- | - | ----- | ----- | - | - | ----- | ----- | -
|                                    |                                                                 | 2004 |       |       | 2003 |   |       | 2002  |  
|                                    |                                                                 |      |       |       |      |   |       |       |  
|Earnings before income taxes        |                                                                 |      |       |       |      |   |       |       |   |   |       |      
|                                    | Canadian                                                        |      | $     | 1,171 |      |   | $     | 1,587 |   |   | $     | 1,084 |  
|                                    | Foreign jurisdictions                                           |      |       | 240   |      |   |       | 223   |   |   |       | 154   |  
|                                    |                                                                 |      |       |       |      |   |       |       |  
|                                    |                                                                 |      | 1,411 |       |      |   | 1,810 |       |   |   | 1,238 |      
|Statutory income tax rate (percent) |                                                                 |      | 39.3  |       |      |   | 40.2  |       |   |   | 41.6  |      
|                                    |                                                                 |      |       |       |      |   |       |       |  
|Expected income tax                 |                                                                 |      | 555   |       |      |   | 728   |       |   |   | 515   |      
|Effect on income tax of:            |                                                                 |      |       |       |      |   |       |       |   |   |       |      
|                                    | Royalties, lease rentals and mineral taxes payable to the crown |      |       | 153   |      |   |       | 175   |   |   |       | 159   |  
|                                    | Resource allowance on Canadian production income                |      |       | (156  | )    |   |       | (183  | ) |   |       | (212  | )
|                                    | Rate benefit on partnership earnings                            |      |       | (42   | )    |   |       | (23   | ) |   |       |      |  
|                                    | Change in statutory tax rate                                    |      |       | (40   | )    |   |       | (161  | ) |   |       | (31   | )
|                                    | Return on capital securities                                    |      |       | (6    | )    |   |       | 2     |   |   |       | (11   | )
|                                    | Non-deductible capital taxes                                    |      |       | 20    |      |   |       | 22    |   |   |       | 18    |  
|                                    | Gains and losses on foreign exchange                            |      |       | (20   | )    |   |       | (45   | ) |   |       |      |  
|                                    | Foreign jurisdictions                                           |      |       | (13   | )    |   |       | (16   | ) |   |       | (13   | )
|                                    | Other  net                                                     |      |       | (52   | )    |   |       | (21   | ) |   |       | (12   | )
|                                    |                                                                 |      |       |       |      |   |       |       |  
|                                    |                                                                 | $    | 399   |       |      | $ | 478   |       |   | $ | 413   |      
|                                    |                                                                 |      |       |       |      |   |       |       |  
|Charged (credited) to:              |                                                                 |      |       |       |      |   |       |       |   |   |       |      
|                                    | Income tax expense                                              |      | $     | 405   |      |   | $     | 476   |   |   | $     | 424   |  
|                                    | Retained earnings                                               |      |       | (6    | )    |   |       | 2     |   |   |       | (11   | )
|                                    |                                                                 |      |       |       |      |   |       |       |  
|                                    |                                                                 | $    | 399   |       |      | $ | 478   |       |   | $ | 413   |      
|                                    |                                                                 |      |       |       |      |   |       |       |  



|                       |                                                   |      |       |       |      |   |       |       |  |   |       |       | 
|---------------------- | ------------------------------------------------- | ---- | ----- | ----- | ---- | - | ----- | ----- |  | - | ----- | ----- | 
|                       |                                                   | 2004 |       |       | 2003 |   |       | 2002  | 
|                       |                                                   |      |       |       |      |   |       |       | 
|Future tax liabilities |                                                   |      |       |       |      |   |       |       |  |   |       |      
|                       | Property, plant and equipment                     |      | $     | 2,949 |      |   | $     | 2,826 |  |   | $     | 2,226 | 
|                       | Foreign exchange gains taxable on realization     |      |       | 56    |      |   |       | 32    |  |   |       |      | 
|                       | Other temporary differences                       |      |       | 5     |      |   |       | 2     |  |   |       | 30    | 
|                       |                                                   |      |       |       |      |   |       |       | 
|                       |                                                   |      | 3,010 |       |      |   | 2,860 |       |  |   | 2,256 |      
|Future tax assets      |                                                   |      |       |       |      |   |       |       |  |   |       |      
|                       | Asset retirement obligations                      |      |       | 180   |      |   |       | 160   |  |   |       | 121   | 
|                       | Loss carry forwards                               |      |       | 11    |      |   |       | 2     |  |   |       | 7     | 
|                       | Foreign exchange losses deductible on realization |      |       |      |      |   |       |      |  |   |       | 28    | 
|                       | Provincial royalty rebates                        |      |       | 14    |      |   |       | 52    |  |   |       | 48    | 
|                       | Other temporary differences                       |      |       | 47    |      |   |       | 25    |  |   |       | 38    | 
|                       |                                                   |      |       |       |      |   |       |       | 
|                       |                                                   |      | 252   |       |      |   | 239   |       |  |   | 242   |      
|                       |                                                   |      |       |       |      |   |       |       | 
|                       |                                                   | $    | 2,758 |       |      | $ | 2,621 |       |  | $ | 2,014 |      
|                       |                                                   |      |       |       |      |   |       |       | 

Note 14


Commitments and Contingencies




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|                                         |  |      |       |  |      |   |     |      |  |   |      |       |  |      |     |  |      |   |     |       |  |   |     |  |  |   |       | 
|---------------------------------------- |  | ---- | ----- |  | ---- | - | --- | ---- |  | - | ---- | ----- |  | ---- | --- |  | ---- | - | --- | ----- |  | - | --- |  |  | - | ----- | 
|                                         |  |      |       |  |      |   |     |      |  |   |      | After |  |      |    
|                                         |  | 2005 |       |  | 2006 |   |     | 2007 |  |   | 2008 |       |  | 2009 |     |  | 2009 |   |     | Total | 
|                                         |  |      |       |  |      |   |     |      |  |   |      |       |  |      |     |  |      |   |     |       | 
|Operating leases                         |  | $    | 68    |  |      | $ | 76  |      |  | $ | 76   |       |  | $    | 78  |  |      | $ | 73  |       |  | $ | 183 |  |  | $ | 554   | 
|Firm transportation agreements           |  |      | 213   |  |      |   | 202 |      |  |   | 173  |       |  |      | 143 |  |      |   | 119 |       |  |   | 211 |  |  |   | 1,061 | 
|Unconditional purchase obligations       |  |      | 593   |  |      |   | 428 |      |  |   | 256  |       |  |      | 63  |  |      |   | 24  |       |  |   | 117 |  |  |   | 1,481 | 
|Lease rentals                            |  |      | 44    |  |      |   | 44  |      |  |   | 44   |       |  |      | 44  |  |      |   | 44  |       |  |   | 110 |  |  |   | 330   | 
|Exploration work agreements              |  |      | 27    |  |      |   | 5   |      |  |   | 10   |       |  |      |    |  |      |   |    |       |  |   | 8   |  |  |   | 50    | 
|Engineering and construction commitments |  |      | 572   |  |      |   | 241 |      |  |   | 142  |       |  |      | 12  |  |      |   |    |       |  |   |    |  |  |   | 967   | 
|                                         |  |      |       |  |      |   |     |      |  |   |      |       |  |      |     |  |      |   |     |       | 
|                                         |  | $    | 1,517 |  |      | $ | 996 |      |  | $ | 701  |       |  | $    | 340 |  |      | $ | 260 |       |  | $ | 629 |  |  | $ | 4,443 | 
|                                         |  |      |       |  |      |   |     |      |  |   |      |       |  |      |     |  |      |   |     |       | 





Note 15


Capital Securities






|                               |  |      |     |   |      |   |     |      |  |   |     |  
|------------------------------ |  | ---- | --- | - | ---- | - | --- | ---- |  | - | --- | -
|                               |  | 2004 |     |   | 2003 |   |     | 2002 | 
|                               |  |      |     |   |      |   |     |      | 
|Capital securities  U.S. $225 |  | $    | 271 |   |      | $ | 291 |      |  | $ | 355 |  
|Unamortized costs of issue     |  |      | (2  | ) |      |   | (3  | )    |  |   | (3  | )
|Accrued return                 |  |      | 9   |   |      |   | 10  |      |  |   | 12  |  
|                               |  |      |     |   |      |   |     |      | 
|                               |  | $    | 278 |   |      | $ | 298 |      |  | $ | 364 |  
|                               |  |      |     |   |      |   |     |      | 



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|                                    |                                      |                                          |   |       |        |  |     |       |      |    |          |       |       |        |     |       |       |    |   |          |      |   |        |       |       |       |   |     |       |  |   |     |      |   |   |     |       | 
|----------------------------------- | ------------------------------------ | ---------------------------------------- | - | ----- | ------ |  | --- | ----- | ---- | -- | -------- | ----- | ----- | ------ | --- | ----- | ----- | -- | - | -------- | ---- | - | ------ | ----- | ----- | ----- | - | --- | ----- |  | - | --- | ---- | - | - | --- | ----- | 
|                                    |                                      | 2004                                     |   |       | 2003   |  |     | 2002  |     
|                                    |                                      |                                          |   |       |        |  |     |       |     
|                                    |                                      | As                                       |   |       |        |  | Pro |       |      | As |          |       |       |        | Pro |       |       | As |   |          |      |   | Pro    |      
|                                    |                                      | Reported                                 |   |       | Change |  |     | Forma |      |    | Reported |       |       | Change |     |       | Forma |    |   | Reported |      |   | Change |       |       | Forma |  
|                                    |                                      |                                          |   |       |        |  |     |       |      |    |          |       |       |        |     |       |       |    |   |          |      |   |        |       |       |       |  
|Consolidated Balance Sheets         |                                      |                                          |   |       |        |  |     |       |      |    |          |       |       |        |     |       |       |    |   |          |      |   |        |       |       |       |   |     |       |  |   |     |      |   |   |    
|                                    | Assets                               |                                          |   |       |        |  |     |       |      |    |          |       |       |        |     |       |       |    |   |          |      |   |        |       |       |       |   |     |       |  |   |     |      |   |   |     |      
|                                    |                                      | Other assets                             |   | $     | 106    |  |     | $     | 2    |    |          | $     | 108   |        |     | $     | 112   |    |   | $        | 3    |   |        | $     | 115   |       |   | $   | 84    |  |   | $   | 3    |   |   | $   | 87    | 
|                                    | Liabilities and Shareholders Equity |                                          |   |       |        |  |     |       |      |    |          |       |       |        |     |       |       |    |   |          |      |   |        |       |       |       |   |     |       |  |   |     |      |   |   |     |      
|                                    |                                      | Accounts payable and accrued liabilities |   |       | 1,489  |  |     |       | 9    |    |          |       | 1,498 |        |     |       | 1,126 |    |   |          | 10   |   |        |       | 1,136 |       |   |     | 794   |  |   |     | 12   |   |   |     | 806   | 
|                                    |                                      | Long-term debt                           |   |       | 1,776  |  |     |       | 271  |    |          |       | 2,047 |        |     |       | 1,439 |    |   |          | 291  |   |        |       | 1,730 |       |   |     | 1,964 |  |   |     | 355  |   |   |     | 2,319 | 
|                                    |                                      | Capital securities and accrued return    |   |       | 278    |  |     |       | (278 | )  |          |       |      |        |     |       | 298   |    |   |          | (298 | ) |        |       |      |       |   |     | 364   |  |   |     | (364 | ) |   |     |      | 
|Consolidated Statements of Earnings |                                      |                                          |   |       |        |  |     |       |      |    |          |       |       |        |     |       |       |    |   |          |      |   |        |       |       |       |   |     |       |  |   |     |      |   |   |    
|                                    | Interest  net                       |                                          | $ | 33    |        |  | $   | 27    |      |    | $        | 60    |       |        | $   | 73    |       |    | $ | 29       |      |   | $      | 102   |       |       | $ | 104 |       |  | $ | 32  |      |   | $ | 136 |      
|                                    | Foreign exchange                     |                                          |   | (99   | )      |  |     | (21   | )    |    |          | (120  | )     |        |     | (215  | )     |    |   | (67      | )    |   |        | (282  | )     |       |   | 13  |       |  |   | (3  | )    |   |   | 10  |      
|                                    | Future income taxes                  |                                          |   | 103   |        |  |     | (6    | )    |    |          | 97    |       |        |     | 329   |       |    |   | 2        |      |   |        | 331   |       |       |   | 358 |       |  |   | (11 | )    |   |   | 347 |      
|                                    | Net earnings                         |                                          |   | 1,006 |        |  |     |      |      |    |          | 1,006 |       |        |     | 1,334 |       |    |   | 36       |      |   |        | 1,370 |       |       |   | 814 |       |  |   | (18 | )    |   |   | 796 |      



Note 16


Share Capital








Common Shares




|                                    |  |           |             |  |        |   |       | 
|----------------------------------- |  | --------- | ----------- |  | ------ | - | ----- | 
|                                    |  | Number of |             |  |       
|                                    |  | Shares    |             |  | Amount |  
|                                    |  |           |             |  |        |  
|January 1, 2002                     |  |           | 416,878,093 |  |        | $ | 3,397 | 
|Options and warrants exercised      |  |           | 995,508     |  |        |   | 9     | 
|                                    |  |           |             |  |        |  
|December 31, 2002                   |  |           | 417,873,601 |  |        |   | 3,406 | 
|Options and warrants exercised      |  |           | 4,302,141   |  |        |   | 51    | 
|                                    |  |           |             |  |        |  
|December 31, 2003                   |  |           | 422,175,742 |  |        |   | 3,457 | 
|Stock-based compensation  adoption |  |           |            |  |        |   | 23    | 
|Options and warrants exercised      |  |           | 1,560,672   |  |        |   | 26    | 
|                                    |  |           |             |  |        |  
|December 31, 2004                   |  |           | 423,736,414 |  |        | $ | 3,506 | 
|                                    |  |           |             |  |        |  

Stock Options






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|                            |  |             |        |          |                 |          |         |             |  |             |             |  |  |  |       | 
|--------------------------- |  | ----------- | ------ | -------- | --------------- | -------- | ------- | ----------- |  | ----------- | ----------- |  |  |  | ----- | 
|                            |  |             |        |          |                 | Weighted |         |             | 
|                            |  |             |        | Weighted |                 |          | Average |             |  |            
|                            |  | Number of   |        |          | Average         |          |         | Contractual |  |             | Options     | 
|                            |  | Options     |        |          | Exercise Prices |          |         | Life        |  |             | Exercisable | 
|                            |  |             |        |          |                 |          |         |             |  |             |             | 
|                            |  | (thousands) |        |          |                 |          | (years) |             |  | (thousands) |            
|December 31, 2001           |  |             | 8,602  |          |                 | $        | 13.78   |             |  |             | 4           |  |  |  | 2,853 | 
|Granted                     |  |             | 568    |          |                 | $        | 16.11   |             |  |             | 5           |  |  |  |       | 
|Exercised for common shares |  |             | (608   | )        |                 | $        | 13.63   |             |  |             | 2           |  |  |  |       | 
|Forfeited                   |  |             | (642   | )        |                 | $        | 14.37   |             |  |             | 3           |  |  |  |       | 
|                            |  |             |        |          |                 |          |         |             |  |             |             | 
|December 31, 2002           |  |             | 7,920  |          |                 | $        | 13.91   |             |  |             | 3           |  |  |  | 4,822 | 
|Granted                     |  |             | 591    |          |                 | $        | 19.17   |             |  |             | 5           |  |  |  |       | 
|Exercised for common shares |  |             | (3,789 | )        |                 | $        | 13.45   |             |  |             | 2           |  |  |  |       | 
|Forfeited                   |  |             | (125   | )        |                 | $        | 14.71   |             |  |             | 2           |  |  |  |       | 
|                            |  |             |        |          |                 |          |         |             |  |             |             | 
|December 31, 2003           |  |             | 4,597  |          |                 | $        | 13.88   |             |  |             | 2           |  |  |  | 3,564 | 
|Granted                     |  |             | 8,200  |          |                 | $        | 25.10   |             |  |             | 4           |  |  |  |       | 
|Exercised for common shares |  |             | (1,350 | )        |                 | $        | 13.11   |             |  |             | 1           |  |  |  |       | 
|Surrendered for cash        |  |             | (1,269 | )        |                 | $        | 13.32   |             |  |             | 1           |  |  |  |       | 
|Forfeited                   |  |             | (214   | )        |                 | $        | 22.73   |             |  |             | 4           |  |  |  |       | 
|                            |  |             |        |          |                 |          |         |             |  |             |             | 
|December 31, 2004           |  |             | 9,964  |          |                 | $        | 22.61   |             |  |             | 4           |  |  |  | 1,417 | 
|                            |  |             |        |          |                 |          |         |             |  |             |             | 

|                        |  |                         |       |          |                     |   |          |             |  |             |           |          |  |          |       |  |  |   |       | 
|----------------------- |  | ----------------------- | ----- | -------- | ------------------- | - | -------- | ----------- |  | ----------- | --------- | -------- |  | -------- | ----- |  |  | - | ----- | 
|                        |  | As at December 31, 2004 |      
|                        |  |                         |      
|                        |  | Outstanding Options     |       |          | Options Exercisable |  
|                        |  |                         |       |          |                     |  
|                        |  |                         |       | Weighted |                     |   | Weighted |             |  |             |           | Weighted | 
|                        |  |                         |       | Average  |                     |   | Average  |             |  |             |           | Average  | 
|                        |  | Number of               |       |          | Exercise            |   |          | Contractual |  |             | Number of |          |  | Exercise |      
|Range of Exercise Price |  | Options                 |       |          | Prices              |   |          | Life        |  |             | Options   |          |  | Prices   |      
|                        |  |                         |       |          |                     |   |          |             |  |             |           |          |  |          |      
|                        |  | (thousands)             |       |          |                     |   | (years)  |             |  | (thousands) |           |          | 
|$9.86-$14.99            |  |                         | 1,443 |          |                     | $ | 12.75    |             |  |             | 1         |          |  |          | 1,320 |  |  | $ | 12.57 | 
|$15.00-$23.99           |  |                         | 475   |          |                     | $ | 18.40    |             |  |             | 3         |          |  |          | 97    |  |  | $ | 19.39 | 
|$24.00-$32.14           |  |                         | 8,046 |          |                     | $ | 24.62    |             |  |             | 4         |          |  |          |      |  |  | $ |      | 
|                        |  |                         |       |          |                     |   |          |             |  |             |           |          |  |          |      
|                        |  |                         | 9,964 |          |                     | $ | 22.61    |             |  |             | 4         |          |  |          | 1,417 |  |  | $ | 13.04 | 
|                        |  |                         |       |          |                     |   |          |             |  |             |           |          |  |          |      

Warrants




Earnings per Common Share


|                                                                             |                    |      |       |       |      |   |       |       |  |   |     |       | 
|---------------------------------------------------------------------------- | ------------------ | ---- | ----- | ----- | ---- | - | ----- | ----- |  | - | --- | ----- | 
|                                                                             |                    | 2004 |       |       | 2003 |   |       | 2002  | 
|                                                                             |                    |      |       |       |      |   |       |       | 
|Net earnings                                                                 |                    | $    | 1,006 |       |      | $ | 1,334 |       |  | $ | 814 |      
|Return and foreign exchange on capital securities (net of
    related taxes) |                    |      |      |       |      |   | 36    |       |  |   | (18 | )    
|                                                                             |                    |      |       |       |      |   |       |       | 
|Net earnings available to common shareholders                                |                    | $    | 1,006 |       |      | $ | 1,370 |       |  | $ | 796 |      
|                                                                             |                    |      |       |       |      |   |       |       | 
|Weighted average number of common shares outstanding                         |                    |      |       |       |      |   |       |       |  |   |     |      
|                                                                             | Basic (millions)   |      |       | 423.4 |      |   |       | 419.5 |  |   |     | 417.4 | 
|Effect of dilutive stock options and warrants                                |                    |      | 2.3   |       |      |   | 2.0   |       |  |   | 1.9 |      
|                                                                             |                    |      |       |       |      |   |       |       | 
|Weighted average number of common shares outstanding                         |                    |      |       |       |      |   |       |       |  |   |     |      
|                                                                             | Diluted (millions) |      |       | 425.7 |      |   |       | 421.5 |  |   |     | 419.3 | 
|                                                                             |                    |      |       |       |      |   |       |       | 
|Earnings per share                                                           |                    |      |       |       |      |   |       |       |  |   |     |      
|                                                                             | Basic              |      | $     | 2.37  |      |   | $     | 3.26  |  |   | $   | 1.91  | 
|                                                                             | Diluted            |      | $     | 2.36  |      |   | $     | 3.25  |  |   | $   | 1.90  | 
|                                                                             |                    |      |       |       |      |   |       |       | 

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Stock-based Compensation




|                                                                    |             |             |    |      |       |   |    |      |       | 
|------------------------------------------------------------------- | ----------- | ----------- | -- | ---- | ----- | - | -- | ---- | ----- | 
|                                                                    |             | 2003        |    |      | 2002  |  
|                                                                    |             |             |    |      |       |  
|Compensation cost  all options granted (1)                         |             | $           | 14 |      |       | $ | 13 |     
|Net earnings available to common shareholders                       |             |             |    |      |       |   |    |     
|                                                                    |             | As reported |    | $    | 1,370 |   |    | $    | 796   | 
|                                                                    |             | As restated |    | $    | 1,356 |   |    | $    | 783   | 
|Weighted average number of common shares outstanding
    (millions) |             |             |    |      |       |   |    |     
|                                                                    |             | Basic       |    |      | 419.5 |   |    |      | 417.4 | 
|                                                                    |             | Diluted     |    |      | 421.5 |   |    |      | 419.3 | 
|Basic earnings per share                                            |             |             |    |      |       |   |    |     
|                                                                    | As reported |             | $  | 3.26 |       |   | $  | 1.91 |      
|                                                                    | As restated |             | $  | 3.23 |       |   | $  | 1.88 |      
|Diluted earnings per share                                          |             |             |    |      |       |   |    |     
|                                                                    | As reported |             | $  | 3.25 |       |   | $  | 1.90 |      
|                                                                    | As restated |             | $  | 3.22 |       |   | $  | 1.87 |      






|    |                           
|--- | --------------------------
|(1) | Includes options modified.



|                                       |  |      |      |  |      |   |      |      |  |   |      | 
|-------------------------------------- |  | ---- | ---- |  | ---- | - | ---- | ---- |  | - | ---- | 
|                                       |  | 2004 |      |  | 2003 |   |      | 2002 | 
|                                       |  |      |      |  |      |   |      |      | 
|Weighted average fair value per option |  | $    | 5.67 |  |      | $ | 4.00 |      |  | $ | 5.19 | 
|Risk-free interest rate (percent)      |  |      | 3.1  |  |      |   | 3.9  |      |  |   | 3.6  | 
|Volatility (percent)                   |  |      | 21   |  |      |   | 23   |      |  |   | 43   | 
|Expected life (years)                  |  |      | 5    |  |      |   | 5    |      |  |   | 5    | 
|Expected annual dividend per share     |  | $    | 0.44 |  |      | $ | 0.36 |      |  | $ | 0.36 | 



|                                       |  |   |      | 
|-------------------------------------- |  | - | ---- | 
|Weighted average fair value per option |  | $ | 7.14 | 
|Risk-free interest rate (percent)      |  |   | 2.8  | 
|Volatility (percent)                   |  |   | 20   | 
|Expected life (years)                  |  |   | 2.3  | 
|Expected annual dividend per share     |  | $ | 0.40 | 

Dividends




Contributed Surplus




|                                                 |  |      |     |  
|------------------------------------------------ |  | ---- | --- | -
|                                                 |  | 2004 |    
|                                                 |  |      |    
|January 1, 2004                                  |  | $    |    |  
|Stock-based compensation  adoption              |  |      | 21  |  
|Stock-based compensation cost                    |  |      | 1   |  
|Stock options exercised                          |  |      | (6  | )
|Modification of stock option plan  June 1, 2004 |  |      | (16 | )
|                                                 |  |      |    
|December 31, 2004                                |  | $    |    |  
|                                                 |  |      |    

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Note 17


Employee Future Benefits






|                                                            |  |      |     |  |      |  |     |      |  |  |     | 
|----------------------------------------------------------- |  | ---- | --- |  | ---- |  | --- | ---- |  |  | --- | 
|                                                            |  | 2004 |     |  | 2003 |  |     | 2002 | 
|                                                            |  |      |     |  |      |  |     |      | 
|Discount rate (percent)                                     |  |      | 6.0 |  |      |  | 6.0 |      |  |  | 6.3 | 
|Long-term rate of increase in compensation levels (percent) |  |      | 5.0 |  |      |  | 5.0 |      |  |  | 5.0 | 
|Long-term rate of return on plan assets (percent)           |  |      | 8.0 |  |      |  | 8.0 |      |  |  | 8.0 | 







Defined Benefit Pension Plan




Benefit Obligation


|                                      |  |      |     |   |      |   |     |      |  |   |     |  
|------------------------------------- |  | ---- | --- | - | ---- | - | --- | ---- |  | - | --- | -
|                                      |  | 2004 |     |   | 2003 |   |     | 2002 | 
|                                      |  |      |     |   |      |   |     |      | 
|Benefit obligation, beginning of year |  | $    | 118 |   |      | $ | 108 |      |  | $ | 95  |  
|Current service cost                  |  |      | 2   |   |      |   | 2   |      |  |   | 2   |  
|Interest cost                         |  |      | 7   |   |      |   | 7   |      |  |   | 7   |  
|Benefits paid                         |  |      | (6  | ) |      |   | (6  | )    |  |   | (6  | )
|Actuarial losses                      |  |      | 3   |   |      |   | 7   |      |  |   | 10  |  
|                                      |  |      |     |   |      |   |     |      | 
|Benefit obligation, end of year       |  | $    | 124 |   |      | $ | 118 |      |  | $ | 108 |  
|                                      |  |      |     |   |      |   |     |      | 

Fair Value of Plan Assets


|                                             |  |      |    |   |      |   |    |      |  |   |     |  
|-------------------------------------------- |  | ---- | -- | - | ---- | - | -- | ---- |  | - | --- | -
|                                             |  | 2004 |    |   | 2003 |   |    | 2002 | 
|                                             |  |      |    |   |      |   |    |      | 
|Fair value of plan assets, beginning of year |  | $    | 85 |   |      | $ | 77 |      |  | $ | 85  |  
|Contributions                                |  |      | 10 |   |      |   | 8  |      |  |   | 2   |  
|Benefits paid                                |  |      | (6 | ) |      |   | (6 | )    |  |   | (6  | )
|Expected return on plan assets               |  |      | 7  |   |      |   | 6  |      |  |   | 7   |  
|Gain (loss) on plan assets                   |  |      | 1  |   |      |   | 2  |      |  |   | (11 | )
|Foreign exchange losses                      |  |      | (1 | ) |      |   | (2 | )    |  |   |    |  
|                                             |  |      |    |   |      |   |    |      | 
|Fair value of plan assets, end of year       |  | $    | 96 |   |      | $ | 85 |      |  | $ | 77  |  
|                                             |  |      |    |   |      |   |    |      | 

Funded Status of Plan


|                                  |  |      |      |   |      |   |      |      |  |   |      |  
|--------------------------------- |  | ---- | ---- | - | ---- | - | ---- | ---- |  | - | ---- | -
|                                  |  | 2004 |      |   | 2003 |   |      | 2002 | 
|                                  |  |      |      |   |      |   |      |      | 
|Fair value of plan assets         |  | $    | 96   |   |      | $ | 85   |      |  | $ | 77   |  
|Benefit obligation                |  |      | (124 | ) |      |   | (118 | )    |  |   | (108 | )
|                                  |  |      |      |   |      |   |      |      | 
|Excess obligation                 |  |      | (28  | ) |      |   | (33  | )    |  |   | (31  | )
|Unrecognized past service costs   |  |      | 1    |   |      |   | 1    |      |  |   | 1    |  
|Unrecognized losses               |  |      | 32   |   |      |   | 32   |      |  |   | 27   |  
|                                  |  |      |      |   |      |   |      |      | 
|Accrued benefit asset (liability) |  | $    | 5    |   |      | $ |     |      |  | $ | (3   | )
|                                  |  |      |      |   |      |   |      |      | 





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|                                  |  |      |     |   |      |  |     |      |  |  |     |  
|--------------------------------- |  | ---- | --- | - | ---- |  | --- | ---- |  |  | --- | -
|                                  |  | 2004 |     |   | 2003 |  |     | 2002 | 
|                                  |  |      |     |   |      |  |     |      | 
|U.S. common equities              |  |      | 15  | % |      |  | 15  | %    |  |  | 15  | %
|Canadian common equities          |  |      | 25  |   |      |  | 28  |      |  |  | 29  |  
|International equity mutual funds |  |      | 11  |   |      |  | 10  |      |  |  | 7   |  
|Canadian equity mutual funds      |  |      |    |   |      |  | 2   |      |  |  | 2   |  
|Canadian government bonds         |  |      | 25  |   |      |  | 29  |      |  |  | 26  |  
|Canadian corporate bonds          |  |      | 16  |   |      |  | 12  |      |  |  | 14  |  
|Cash and receivables              |  |      | 8   |   |      |  | 4   |      |  |  | 7   |  
|                                  |  |      |     |   |      |  |     |      | 
|Total                             |  |      | 100 | % |      |  | 100 | %    |  |  | 100 | %
|                                  |  |      |     |   |      |  |     |      | 







Post-retirement Health and Dental Care Plan




Benefit Obligation


|                                      |  |      |    |   |      |   |    |      |  |   |    | 
|------------------------------------- |  | ---- | -- | - | ---- | - | -- | ---- |  | - | -- | 
|                                      |  | 2004 |    |   | 2003 |   |    | 2002 | 
|                                      |  |      |    |   |      |   |    |      | 
|Benefit obligation, beginning of year |  | $    | 23 |   |      | $ | 21 |      |  | $ | 16 | 
|Current service cost                  |  |      | 2  |   |      |   | 2  |      |  |   | 1  | 
|Interest cost                         |  |      | 1  |   |      |   | 1  |      |  |   | 1  | 
|Benefits paid                         |  |      | (1 | ) |      |   | (1 | )    |  |   |   | 
|Actuarial losses                      |  |      |   |   |      |   |   |      |  |   | 3  | 
|                                      |  |      |    |   |      |   |    |      | 
|Benefit obligation, end of year       |  | $    | 25 |   |      | $ | 23 |      |  | $ | 21 | 
|                                      |  |      |    |   |      |   |    |      | 

Funded Status of Plan


|                          |  |      |     |   |      |   |     |      |  |   |     |  
|------------------------- |  | ---- | --- | - | ---- | - | --- | ---- |  | - | --- | -
|                          |  | 2004 |     |   | 2003 |   |     | 2002 | 
|                          |  |      |     |   |      |   |     |      | 
|Benefit obligation        |  | $    | (25 | ) |      | $ | (23 | )    |  | $ | (21 | )
|Unrecognized losses       |  |      | 2   |   |      |   | 3   |      |  |   | 4   |  
|                          |  |      |     |   |      |   |     |      | 
|Accrued benefit liability |  | $    | (23 | ) |      | $ | (20 | )    |  | $ | (17 | )
|                          |  |      |     |   |      |   |     |      | 



|                                                     |  |          |   |  |          |   |    |  
|---------------------------------------------------- |  | -------- | - |  | -------- | - | -- | -
|                                                     |  | 1%       |   |  | 1%       |  
|                                                     |  | Increase |   |  | Decrease |  
|                                                     |  |          |   |  |          |  
|Effect on total service and interest cost components |  | $        | 1 |  |          | $ |   |  
|Effect on post-retirement benefit obligation         |  | $        | 4 |  |          | $ | (3 | )

Pension Expense and Post-retirement Health and Dental Care
Expense




Pension Expense


|                                  |                                      |      |    |    |      |   |    |      |   |   |    |    |  
|--------------------------------- | ------------------------------------ | ---- | -- | -- | ---- | - | -- | ---- | - | - | -- | -- | -
|                                  |                                      | 2004 |    |    | 2003 |   |    | 2002 |  
|                                  |                                      |      |    |    |      |   |    |      |  
|Defined benefit pension plan      |                                      |      |    |    |      |   |    |      |   |   |    |   
|                                  | Employer current service cost        |      | $  | 2  |      |   | $  | 2    |   |   | $  | 2  |  
|                                  | Interest cost                        |      |    | 7  |      |   |    | 7    |   |   |    | 7  |  
|                                  | Expected return on plan assets       |      |    | (7 | )    |   |    | (6   | ) |   |    | (7 | )
|                                  | Amortization of net actuarial losses |      |    | 2  |      |   |    | 2    |   |   |    |   |  
|                                  |                                      |      |    |    |      |   |    |      |  
|                                  |                                      |      | 4  |    |      |   | 5  |      |   |   | 2  |   
|Defined contribution pension plan |                                      |      | 12 |    |      |   | 11 |      |   |   | 10 |   
|                                  |                                      |      |    |    |      |   |    |      |  
|Total expense                     |                                      | $    | 16 |    |      | $ | 16 |      |   | $ | 12 |   
|                                  |                                      |      |    |    |      |   |    |      |  

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Post-retirement Health and Dental Care Expense


|                              |  |      |   |  |      |   |   |      |  |   |   | 
|----------------------------- |  | ---- | - |  | ---- | - | - | ---- |  | - | - | 
|                              |  | 2004 |   |  | 2003 |   |   | 2002 | 
|                              |  |      |   |  |      |   |   |      | 
|Employer current service cost |  | $    | 2 |  |      | $ | 2 |      |  | $ | 1 | 
|Interest cost                 |  |      | 1 |  |      |   | 1 |      |  |   | 1 | 
|                              |  |      |   |  |      |   |   |      | 
|Total expense                 |  | $    | 3 |  |      | $ | 3 |      |  | $ | 2 | 
|                              |  |      |   |  |      |   |   |      | 

Future Benefit Payments




|          |  |                 |    |  |                        |   |   | 
|--------- |  | --------------- | -- |  | ---------------------- | - | - | 
|          |  | Defined Benefit |    |  | Post-retirement Health |  
|          |  | Pension Plan    |    |  | and Dental Care Plan   |  
|          |  |                 |    |  |                        |  
|2005      |  | $               | 7  |  |                        | $ | 1 | 
|2006      |  |                 | 7  |  |                        |   | 1 | 
|2007      |  |                 | 7  |  |                        |   | 1 | 
|2008      |  |                 | 7  |  |                        |   | 1 | 
|2009      |  |                 | 8  |  |                        |   | 1 | 
|2010-2014 |  |                 | 45 |  |                        |   | 6 | 

Note 18


Related Party Transactions




Note 19


Financial Instruments and Risk Management


Carrying Values and Estimated Fair Values of Financial Assets
and Liabilities






|               |  |          |       |  |       |   |       |          |  |   |       |  |  |          |       |  |       |   |       |  |  |   |       | 
|-------------- |  | -------- | ----- |  | ----- | - | ----- | -------- |  | - | ----- |  |  | -------- | ----- |  | ----- | - | ----- |  |  | - | ----- | 
|               |  | 2004     |       |  | 2003  |   |       | 2002     | 
|               |  |          |       |  |       |   |       |          | 
|               |  | Carrying |       |  | Fair  |   |       | Carrying |  |   | Fair  |  |  | Carrying |       |  | Fair  |  
|               |  | Value    |       |  | Value |   |       | Value    |  |   | Value |  |  | Value    |       |  | Value |  
|               |  |          |       |  |       |   |       |          |  |   |       |  |  |          |       |  |       |  
|Long-term debt |  | $        | 1,832 |  |       | $ | 1,991 |          |  | $ | 1,698 |  |  | $        | 1,869 |  |       | $ | 2,385 |  |  | $ | 2,579 | 

Unrecognized Gains (Losses) on Derivative Instruments


|                                 |                            |      |   |     |      |  |   |      |   |  |   |    |  
|-------------------------------- | -------------------------- | ---- | - | --- | ---- |  | - | ---- | - |  | - | -- | -
|                                 |                            | 2004 |   |     | 2003 |  |   | 2002 |  
|                                 |                            |      |   |     |      |  |   |      |  
|Commodity price risk management  |                            |      |   |     |      |  |   |      |   |  |   |   
|                                 | Natural gas                |      | $ | (9  | )    |  | $ | (8   | ) |  | $ | (4 | )
|                                 | Crude oil                  |      |   |    |      |  |   | (109 | ) |  |   | 6  |  
|                                 | Power consumption          |      |   | (1  | )    |  |   | 2    |   |  |   |   |  
|Interest rate risk management    |                            |      |   |     |      |  |   |      |   |  |   |   
|                                 | Interest rate swaps        |      |   | 52  |      |  |   | 31   |   |  |   | 86 |  
|Foreign currency risk management |                            |      |   |     |      |  |   |      |   |  |   |   
|                                 | Foreign exchange contracts |      |   | (30 | )    |  |   | (19  | ) |  |   | (7 | )
|                                 | Foreign exchange forwards  |      |   |    |      |  |   | 15   |   |  |   | (5 | )

Commodity Price Risk Management




| |                           
| | --------------------------
| | Natural Gas
    Production





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| |                         
| | ------------------------
| | Crude Oil
    Production





| |                      
| | ---------------------
| | Power
    Consumption





| |                          
| | -------------------------
| | Natural Gas
    Contracts



|                            |  |         |         |   |              |   |    |  
|--------------------------- |  | ------- | ------- | - | ------------ | - | -- | -
|                            |  | Volumes |         |   | Unrecognized |  
|                            |  | (mmcf)  |         |   | Gain (Loss)  |  
|                            |  |         |         |   |              |  
|Physical purchase contracts |  |         | 14,276  |   |              | $ | (2 | )
|Physical sale contracts     |  |         | (14,276 | ) |              | $ | 3  |  

Interest Rate Risk Management




|                        |  |        |           |  |               |                   |                     |                     
|----------------------- |  | ------ | --------- |  | ------------- | ----------------- | ------------------- | --------------------
|Debt                    |  | Amount |           |  | Swap Maturity |                   | Swap Rate (percent)
|                        |  |        |           |  |               |                   |                    
|6.95% medium-term notes |  |        | $200      |  |               | July 14, 2009     |                     | CDOR + 175 bps      
|7.55% debentures        |  |        | U.S. $200 |  |               | November 15, 2011 |                     | U.S. LIBOR + 194 bps
|6.15% notes             |  |        | U.S. $300 |  |               | June 15, 2019     |                     | U.S. LIBOR + 63 bps 





Foreign Currency Risk Management






|             |  |        |     |  |            |   |     |               |  |                   |  |  |      | 
|------------ |  | ------ | --- |  | ---------- | - | --- | ------------- |  | ----------------- |  |  | ---- | 
|             |  | Swap   |     |  | Canadian   |   |     |               |  | Interest Rate     | 
|Debt         |  | Amount |     |  | Equivalent |   |     | Swap Maturity |  | (percent)         | 
|             |  |        |     |  |            |   |     |               |  |                   | 
|7.125% notes |  | U.S. $ | 150 |  |            | $ | 218 |               |  | November 15, 2006 |  |  | 8.74 | 
|6.25% notes  |  | U.S. $ | 150 |  |            | $ | 212 |               |  | June 15, 2012     |  |  | 7.41 | 





Credit Risk








100



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Note 20


Reconciliation to Accounting Principles Generally Accepted
in the United States




Consolidated Statements of Earnings


|                                                                                                  |                      |      |       |       |      |   |       |       |   |   |     |       |  
|------------------------------------------------------------------------------------------------- | -------------------- | ---- | ----- | ----- | ---- | - | ----- | ----- | - | - | --- | ----- | -
|                                                                                                  |                      | 2004 |       |       | 2003 |   |       | 2002  |  
|                                                                                                  |                      |      |       |       |      |   |       |       |  
|Net earnings under Canadian GAAP                                                                  |                      | $    | 1,006 |       |      | $ | 1,334 |       |   | $ | 814 |      
|Adjustments:                                                                                      |                      |      |       |       |      |   |       |       |   |   |     |      
|Full cost accounting (a)                                                                          |                      |      | 37    |       |      |   | 80    |       |   |   | 88  |      
|                                                                                                  | Related income taxes |      |       | (13   | )    |   |       | (30   | ) |   |     | (37   | )
|Foreign exchange on capital securities (b)                                                        |                      |      | 21    |       |      |   | 67    |       |   |   | 3   |      
|                                                                                                  | Related income taxes |      |       | (3    | )    |   |       | (12   | ) |   |     | (1    | )
|Return on capital securities (b)                                                                  |                      |      | (27   | )     |      |   | (29   | )     |   |   | (32 | )    
|                                                                                                  | Related income taxes |      |       | 9     |      |   |       | 11    |   |   |     | 11    |  
|Derivatives and hedging (c)                                                                       |                      |      |      |       |      |   | (1    | )     |   |   | 22  |      
|                                                                                                  | Related income taxes |      |       |      |      |   |       | 1     |   |   |     | (9    | )
|Energy trading contracts (c)                                                                      |                      |      | (1    | )     |      |   | (15   | )     |   |   | (2  | )    
|                                                                                                  | Related income taxes |      |       |      |      |   |       | 6     |   |   |     | 1     |  
|Asset retirement obligations (d)                                                                  |                      |      |      |       |      |   |      |       |   |   | (14 | )    
|                                                                                                  | Related income taxes |      |       |      |      |   |       |      |   |   |     | 4     |  
|Stock-based compensation (e)                                                                      |                      |      | 2     |       |      |   | (46   | )     |   |   |    |      
|Accounting for income taxes (f)                                                                   |                      |      |      |       |      |   |      |       |   |   | (37 | )    
|                                                                                                  |                      |      |       |       |      |   |       |       |  
|Earnings before cumulative effect of change in accounting
    principle under U.S. GAAP           |                      |      | 1,031 |       |      |   | 1,366 |       |   |   | 811 |      
|Cumulative effect of change in accounting principle, net of
    tax (d)                           |                      |      |      |       |      |   | 9     |       |   |   |    |      
|                                                                                                  |                      |      |       |       |      |   |       |       |  
|Net earnings under U.S. GAAP                                                                      |                      | $    | 1,031 |       |      | $ | 1,375 |       |   | $ | 811 |      
|                                                                                                  |                      |      |       |       |      |   |       |       |  
|Weighted average number of common shares outstanding under U.S.
    GAAP (millions)               |                      |      |       |       |      |   |       |       |   |   |     |      
|                                                                                                  | Basic                |      |       | 423.4 |      |   |       | 419.5 |   |   |     | 417.4 |  
|                                                                                                  | Diluted              |      |       | 425.7 |      |   |       | 421.5 |   |   |     | 419.3 |  
|Earnings per share before cumulative effect of change in
    accounting principle under U.S. GAAP |                      |      |       |       |      |   |       |       |   |   |     |      
|                                                                                                  | Basic                |      | $     | 2.44  |      |   | $     | 3.26  |   |   | $   | 1.94  |  
|                                                                                                  | Diluted              |      | $     | 2.42  |      |   | $     | 3.24  |   |   | $   | 1.93  |  
|Earnings per share under U.S. GAAP                                                                |                      |      |       |       |      |   |       |       |   |   |     |      
|                                                                                                  | Basic                |      | $     | 2.44  |      |   | $     | 3.28  |   |   | $   | 1.94  |  
|                                                                                                  | Diluted              |      | $     | 2.42  |      |   | $     | 3.26  |   |   | $   | 1.93  |  

Condensed Consolidated Balance Sheets


|                                          |                                           |          |        |   |      |   |        |          |   |   |        |   |  |          |        |     |      |   |        |   |  |   |        |     |  
|----------------------------------------- | ----------------------------------------- | -------- | ------ | - | ---- | - | ------ | -------- | - | - | ------ | - |  | -------- | ------ | --- | ---- | - | ------ | - |  | - | ------ | --- | -
|                                          |                                           | 2004     |        |   | 2003 |   |        | 2002     |  
|                                          |                                           |          |        |   |      |   |        |          |  
|                                          |                                           | Canadian |        |   | U.S. |   |        | Canadian |   |   | U.S.   |   |  | Canadian |        |     | U.S. |  
|                                          |                                           | GAAP     |        |   | GAAP |   |        | GAAP     |   |   | GAAP   |   |  | GAAP     |        |     | GAAP |  
|                                          |                                           |          |        |   |      |   |        |          |   |   |        |   |  |          |        |     |      |  
|Current assets (c)                        |                                           | $        | 779    |   |      | $ | 837    |          |   | $ | 852    |   |  | $        | 911    |     |      | $ | 1,128  |   |  | $ | 1,276  |    
|Property, plant and equipment, net (a)(d) |                                           |          | 12,193 |   |      |   | 11,633 |          |   |   | 10,862 |   |  |          | 10,264 |     |      |   | 9,421  |   |  |   | 8,686  |    
|Other assets (b)(j)                       |                                           |          | 266    |   |      |   | 269    |          |   |   | 232    |   |  |          | 236    |     |      |   | 84     |   |  |   | 89     |    
|                                          |                                           |          |        |   |      |   |        |          |   |   |        |   |  |          |        |     |      |  
|                                          |                                           | $        | 13,238 |   |      | $ | 12,739 |          |   | $ | 11,946 |   |  | $        | 11,411 |     |      | $ | 10,633 |   |  | $ | 10,051 |    
|                                          |                                           |          |        |   |      |   |        |          |   |   |        |   |  |          |        |     |      |  
|Current liabilities (b)(c)(j)             |                                           | $        | 1,594  |   |      | $ | 1,663  |          |   | $ | 1,456  |   |  | $        | 1,635  |     |      | $ | 1,215  |   |  | $ | 1,301  |    
|Long-term debt (b)(c)                     |                                           |          | 1,776  |   |      |   | 2,099  |          |   |   | 1,439  |   |  |          | 1,761  |     |      |   | 1,964  |   |  |   | 2,406  |    
|Other long-term liabilities (d)           |                                           |          | 632    |   |      |   | 632    |          |   |   | 519    |   |  |          | 519    |     |      |   | 304    |   |  |   | 266    |    
|Future income taxes (a)(b)(c)(d)(f)(j)    |                                           |          | 2,758  |   |      |   | 2,555  |          |   |   | 2,621  |   |  |          | 2,372  |     |      |   | 2,014  |   |  |   | 1,772  |    
|Capital securities and accrued return (b) |                                           |          | 278    |   |      |   |       |          |   |   | 298    |   |  |          |       |     |      |   | 364    |   |  |   |       |    
|Share capital (e)(g)(h)                   |                                           |          | 3,506  |   |      |   | 3,740  |          |   |   | 3,457  |   |  |          | 3,737  |     |      |   | 3,406  |   |  |   | 3,640  |    
|Retained earnings                         |                                           |          | 2,694  |   |      |   | 2,085  |          |   |   | 2,156  |   |  |          | 1,478  |     |      |   | 1,366  |   |  |   | 683    |    
|Accumulated other comprehensive income    |                                           |          |        |   |      |   |        |          |   |   |        |   |  |          |        |     |      |   |        |   |  |   |        |    
|                                          | Cash flow hedges, net of tax (c)          |          |        |  |      |   |        | (20      | ) |   |        |  |  |          |        | (76 | )    |   |        |  |  |   |        | (7  | )
|                                          | Minimum pension liability, net of tax (j) |          |        |  |      |   |        | (15      | ) |   |        |  |  |          |        | (15 | )    |   |        |  |  |   |        | (10 | )
|                                          |                                           |          |        |   |      |   |        |          |   |   |        |   |  |          |        |     |      |  
|                                          |                                           | $        | 13,238 |   |      | $ | 12,739 |          |   | $ | 11,946 |   |  | $        | 11,411 |     |      | $ | 10,633 |   |  | $ | 10,051 |    
|                                          |                                           |          |        |   |      |   |        |          |   |   |        |   |  |          |        |     |      |  

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Condensed Consolidated Statements of Retained Earnings and
Accumulated Other Comprehensive Income


|                                                                      |  |          |       |   |      |   |       |          |  |   |       |   |  |          |       |   |      |   |       |   |  |   |      |  
|--------------------------------------------------------------------- |  | -------- | ----- | - | ---- | - | ----- | -------- |  | - | ----- | - |  | -------- | ----- | - | ---- | - | ----- | - |  | - | ---- | -
|                                                                      |  | 2004     |       |   | 2003 |   |       | 2002     | 
|                                                                      |  |          |       |   |      |   |       |          | 
|                                                                      |  | Canadian |       |   | U.S. |   |       | Canadian |  |   | U.S.  |   |  | Canadian |       |   | U.S. |  
|                                                                      |  | GAAP     |       |   | GAAP |   |       | GAAP     |  |   | GAAP  |   |  | GAAP     |       |   | GAAP |  
|                                                                      |  |          |       |   |      |   |       |          |  |   |       |   |  |          |       |   |      |  
|Retained earnings, beginning of year                                  |  | $        | 2,156 |   |      | $ | 1,478 |          |  | $ | 1,366 |   |  | $        | 683   |   |      | $ | 722   |   |  | $ | 23   |  
|Net earnings                                                          |  |          | 1,006 |   |      |   | 1,031 |          |  |   | 1,334 |   |  |          | 1,375 |   |      |   | 814   |   |  |   | 811  |  
|Dividends on common shares                                            |  |          | (424  | ) |      |   | (424  | )        |  |   | (580  | ) |  |          | (580  | ) |      |   | (151  | ) |  |   | (151 | )
|Return and foreign exchange on capital securities, net of
    tax (b) |  |          |      |   |      |   |      |          |  |   | 36    |   |  |          |      |   |      |   | (18   | ) |  |   |     |  
|Stock-based compensation  retroactive
    adoption (e)               |  |          | (44   | ) |      |   |      |          |  |   |      |   |  |          |      |   |      |   |      |   |  |   |     |  
|Asset retirement obligations  retroactive
    adoption (d)           |  |          |      |   |      |   |      |          |  |   |      |   |  |          |      |   |      |   | (1    | ) |  |   |     |  
|                                                                      |  |          |       |   |      |   |       |          |  |   |       |   |  |          |       |   |      |  
|Retained earnings, end of year                                        |  | $        | 2,694 |   |      | $ | 2,085 |          |  | $ | 2,156 |   |  | $        | 1,478 |   |      | $ | 1,366 |   |  | $ | 683  |  
|                                                                      |  |          |       |   |      |   |       |          |  |   |       |   |  |          |       |   |      |  
|Accumulated other comprehensive income, beginning of year             |  | $        |      |   |      | $ | (91   | )        |  | $ |      |   |  | $        | (17   | ) |      | $ |      |   |  | $ | 3    |  
|Cash flow hedges, net of tax (c)                                      |  |          |      |   |      |   | 56    |          |  |   |      |   |  |          | (69   | ) |      |   |      |   |  |   | (10  | )
|Minimum pension liability, net of tax (j)                             |  |          |      |   |      |   |      |          |  |   |      |   |  |          | (5    | ) |      |   |      |   |  |   | (10  | )
|                                                                      |  |          |       |   |      |   |       |          |  |   |       |   |  |          |       |   |      |  
|Accumulated other comprehensive income, end of year                   |  | $        |      |   |      | $ | (35   | )        |  | $ |      |   |  | $        | (91   | ) |      | $ |      |   |  | $ | (17  | )
|                                                                      |  |          |       |   |      |   |       |          |  |   |       |   |  |          |       |   |      |  

Condensed Consolidated Statements of Earnings and
Comprehensive Income


|                                                                        |  |          |       |  |      |   |       |          |  |   |       |  |  |          |       |  |      |   |       |  |  |   |       | 
|----------------------------------------------------------------------- |  | -------- | ----- |  | ---- | - | ----- | -------- |  | - | ----- |  |  | -------- | ----- |  | ---- | - | ----- |  |  | - | ----- | 
|                                                                        |  | 2004     |       |  | 2003 |   |       | 2002     | 
|                                                                        |  |          |       |  |      |   |       |          | 
|                                                                        |  | Canadian |       |  | U.S. |   |       | Canadian |  |   | U.S.  |  |  | Canadian |       |  | U.S. |  
|                                                                        |  | GAAP     |       |  | GAAP |   |       | GAAP     |  |   | GAAP  |  |  | GAAP     |       |  | GAAP |  
|                                                                        |  |          |       |  |      |   |       |          |  |   |       |  |  |          |       |  |      |  
|Sales and operating revenues (c)(i)                                     |  | $        | 8,440 |  |      | $ | 7,038 |          |  | $ | 7,658 |  |  | $        | 6,823 |  |      | $ | 6,384 |  |  | $ | 5,635 | 
|Costs and expenses (b)(c)(e)(i)                                         |  |          | 5,790 |  |      |   | 4,366 |          |  |   | 4,732 |  |  |          | 3,892 |  |      |   | 4,117 |  |  |   | 3,345 | 
|Accretion expense (d)                                                   |  |          | 27    |  |      |   | 27    |          |  |   | 22    |  |  |          | 22    |  |      |   | 17    |  |  |   |      | 
|Depletion, depreciation and amortization (a)(d)                         |  |          | 1,179 |  |      |   | 1,142 |          |  |   | 1,021 |  |  |          | 941   |  |      |   | 908   |  |  |   | 851   | 
|Interest  net (b)                                                      |  |          | 33    |  |      |   | 60    |          |  |   | 73    |  |  |          | 102   |  |      |   | 104   |  |  |   | 136   | 
|                                                                        |  |          |       |  |      |   |       |          |  |   |       |  |  |          |       |  |      |  
|Earnings before income taxes                                            |  |          | 1,411 |  |      |   | 1,443 |          |  |   | 1,810 |  |  |          | 1,866 |  |      |   | 1,238 |  |  |   | 1,303 | 
|Income taxes (a)(b)(c)(d)(f)                                            |  |          | 405   |  |      |   | 412   |          |  |   | 476   |  |  |          | 500   |  |      |   | 424   |  |  |   | 492   | 
|                                                                        |  |          |       |  |      |   |       |          |  |   |       |  |  |          |       |  |      |  
|Earnings before cumulative effect of change in accounting
    principle |  |          | 1,006 |  |      |   | 1,031 |          |  |   | 1,334 |  |  |          | 1,366 |  |      |   | 814   |  |  |   | 811   | 
|Cumulative effect of change in accounting principle, net of
    tax (d) |  |          |      |  |      |   |      |          |  |   |      |  |  |          | 9     |  |      |   |      |  |  |   |      | 
|                                                                        |  |          |       |  |      |   |       |          |  |   |       |  |  |          |       |  |      |  
|Net earnings                                                            |  |          | 1,006 |  |      |   | 1,031 |          |  |   | 1,334 |  |  |          | 1,375 |  |      |   | 814   |  |  |   | 811   | 
|Other comprehensive income (c)(j)                                       |  |          |      |  |      |   | (56   | )        |  |   |      |  |  |          | 74    |  |      |   |      |  |  |   | 20    | 
|                                                                        |  |          |       |  |      |   |       |          |  |   |       |  |  |          |       |  |      |  
|Comprehensive income                                                    |  | $        | 1,006 |  |      | $ | 975   |          |  | $ | 1,334 |  |  | $        | 1,449 |  |      | $ | 814   |  |  | $ | 831   | 
|                                                                        |  |          |       |  |      |   |       |          |  |   |       |  |  |          |       |  |      |  

Condensed Consolidated Statements of Cash Flows


|                                                     |                                            |      |        |     |      |   |        |      |   |   |        |     |  
|---------------------------------------------------- | ------------------------------------------ | ---- | ------ | --- | ---- | - | ------ | ---- | - | - | ------ | --- | -
|                                                     |                                            | 2004 |        |     | 2003 |   |        | 2002 |  
|                                                     |                                            |      |        |     |      |   |        |      |  
|Cash flow  operating activities  Canadian
    GAAP |                                            | $    | 2,352  |     |      | $ | 2,538  |      |   | $ | 1,882  |    
|Adjustments:                                         |                                            |      |        |     |      |   |        |      |   |   |        |    
|                                                     | Return on capital securities payment       |      |        | (26 | )    |   |        | (29  | ) |   |        | (31 | )
|                                                     | Settlement of asset retirement liabilities |      |        |    |      |   |        |     |   |   |        | 16  |  
|                                                     |                                            |      |        |     |      |   |        |      |  
|Cash flow  operating activities 
    U.S. GAAP     |                                            |      | 2,326  |     |      |   | 2,509  |      |   |   | 1,867  |    
|                                                     |                                            |      |        |     |      |   |        |      |  
|Cash flow  financing activities  Canadian
    GAAP |                                            |      | 149    |     |      |   | (800   | )    |   |   | 3      |    
|Adjustments:                                         |                                            |      |        |     |      |   |        |      |   |   |        |    
|                                                     | Return on capital securities payment       |      |        | 26  |      |   |        | 29   |   |   |        | 31  |  
|                                                     |                                            |      |        |     |      |   |        |      |  
|Cash flow  financing activities 
    U.S. GAAP     |                                            |      | 175    |     |      |   | (771   | )    |   |   | 34     |    
|                                                     |                                            |      |        |     |      |   |        |      |  
|Cash flow  investing activities  Canadian
    GAAP |                                            |      | (2,497 | )   |      |   | (2,041 | )    |   |   | (1,579 | )  
|Adjustments:                                         |                                            |      |        |     |      |   |        |      |   |   |        |    
|                                                     | Settlement of asset retirement liabilities |      |        |    |      |   |        |     |   |   |        | (16 | )
|                                                     |                                            |      |        |     |      |   |        |      |  
|Cash flow  investing activities 
    U.S. GAAP     |                                            |      | (2,497 | )   |      |   | (2,041 | )    |   |   | (1,595 | )  
|                                                     |                                            |      |        |     |      |   |        |      |  
|Change in cash and cash equivalents                  |                                            | $    | 4      |     |      | $ | (303   | )    |   | $ | 306    |    
|                                                     |                                            |      |        |     |      |   |        |      |  








|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Under Canadian GAAP the ceiling test has been modified by
    Accounting Guideline 16, Oil and Gas
    Accounting  Full Cost (AcG-16).
    Under AcG-16 the ceiling test is performed by comparing the
    carrying value of the cost centre based on the sum of the
    undiscounted cash flows from proved reserves using future prices
    and costs expected from the cost centres use and eventual
    disposition. If the carrying value is unrecoverable the cost
    centre is written down to its fair value using the expected
    present value approach of proved plus probable reserves using

102



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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | future prices. Previously, the
    Company performed the cost recovery ceiling test for each cost
    centre which limited net capitalized costs to the undiscounted
    estimated future net revenue from proved reserves plus the cost
    of unproved properties and major development projects less
    impairment, using year-end prices or average prices in that year
    if appropriate. In addition, the aggregate value of all cost
    centres were previously further limited by including financing
    costs, administration expenses, future removal and site
    restoration costs and income taxes. Under U.S. GAAP,
    companies using the full cost method of accounting for oil and
    gas producing activities perform a ceiling test on each cost
    centre using discounted estimated future net revenue from proved
    reserves using a discount factor of 10 percent. Prices used
    in the U.S. GAAP ceiling tests performed for this
    reconciliation were those in effect at the applicable year-end.
    Financing and administration costs are excluded from the
    calculation under U.S. GAAP. At December 31, 2001, the
    Company recognized a U.S. GAAP ceiling test write down of
    $334 million after tax. Depletion expense for U.S. GAAP is
    reduced by $76 million (2003  $80 million;
    2002  $88 million), net of tax of
    $27 million (2003  $30 million;
    2002  $37 million).



| |                                                                                                                                                                                                                                                                                                                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Under U.S. GAAP, prices used in determining proved reserves
    are those in effect at the applicable year-end. For Canadian
    GAAP, commencing in 2004, future prices and costs are used in
    determining proved reserves. The different prices result in
    lower proved reserves for U.S. GAAP. Additional depletion
    of $39 million, net of taxes of $14 million has been
    recorded under U.S. GAAP in 2004.



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) | The Company records the capital securities as a component of
    equity and the return and foreign exchange gains or losses
    thereon as a charge to retained earnings. Under U.S. GAAP,
    the capital securities, the accrued return thereon and costs of
    issue would be classified outside of shareholders equity
    and the related return and foreign exchange gains or losses
    would be charged to earnings. See note 15, Capital
    Securities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   
|(c) | The Company records all derivative instruments as assets and
    liabilities on the balance sheet based on their fair values as
    required under FAS 133, Accounting for Derivative
    Instruments and Hedging Activities. At December 31,
    2004, the Company recorded additional assets and liabilities for
    U.S. GAAP purposes of $52 million (2003 
    $52 million; 2002  $111 million) and
    $93 million (2003  $172 million;
    2002  $122 million), respectively, for the fair
    values of derivative financial instruments. The Company also
    recorded a loss of less than $1 million, net of tax
    (2003  loss of $2 million; 2002  gain
    of $1 million), in revenue for U.S. GAAP purposes with
    respect to derivatives designated as fair value hedges relating
    to commodity price risk. In addition, the amount included in
    other comprehensive income was reduced by $51 million net
    of tax (2003  increased by $69 million;
    2002  reduced by $10 million), for changes in
    the fair values of the derivatives designated as hedges of cash
    flows relating to commodity price risk and foreign exchange risk
    and the transfer to income of amounts applicable to cash flows
    occurring in 2004. On November 10, 2004, the Company
    unwound its long-dated foreign exchange forwards. The unrealized
    gain of $5 million, net of tax continues to be deferred in
    other comprehensive income and will be recognized at the dates
    that the underlying transactions are to take place. In prior
    years, the gains net of tax (2003  $1 million;
    2002  $11 million) on foreign currency
    derivatives and natural gas basis swaps that did not qualify for
    hedge accounting under FAS 133 were included in income for
    U.S. GAAP purposes.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Under U.S. GAAP, energy trading contracts entered into and
    physical energy trading inventories purchased on or before
    October 26, 2002 were recorded at fair value. These
    contracts include derivatives as well as energy trading
    contracts that do not meet the definition of derivatives.
    Effective October 26, 2002, inventories and the associated
    natural gas purchase and sale contracts entered into after the
    effective date are no longer recorded at fair value in
    accordance with Emerging Issues Task Force 02-03, Issues
    Involved in Accounting for Derivative Contracts held for Trading
    Purposes and Contracts Involved in Energy Trading and Risk
    Management Activities. Under Canadian GAAP, the impact of
    energy trading contracts is recorded as they settle. Under
    U.S. GAAP, at December 31, 2004 the Company recorded
    additional assets and liabilities of $4 million
    (2003  $7 million; 2002 
    $37 million) and $3 million (2003 
    $5 million; 2002  $19 million),
    respectively, and included the resulting unrealized loss, net of
    tax of $1 million (2003  loss of
    $9 million; 2002  loss of $1 million) in
    earnings for the year. Under U.S. GAAP, gains and losses on
    energy trading contracts have been netted against sales and
    operating revenues.



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(d) | In 2003, the Company adopted FAS 143, Accounting for Asset
    Retirement Obligations, which requires the fair value of a
    liability for an asset retirement obligation to be recorded in
    the period in which it is incurred and a corresponding increase
    in the carrying amount of the related tangible long-lived asset.
    The standard applies to legal obligations associated with the
    retirement of long-lived assets that result from the
    acquisition, construction, development and normal use of the
    asset. The liability is accreted at the end of each period
    through charges to accretion expense. The change was effective
    January 1, 2003, and the related cumulative effect of
    change in accounting principle to net earnings to
    December 31, 2002 was an increase of $20 million, net
    of tax of $11 million or $0.02 per share (diluted).
    Effective January 1, 2004, under Canadian GAAP the Company
    adopted CICA section 3110, Asset Retirement
    Obligations, which is substantially the same as the
    recommendations in FAS 143. CICA section 3110 was
    adopted retroactively with restatement. The application of asset
    retirement obligations did not have a material impact on the
    Companys depletion, depreciation and amortization rate.
    There was no impact on the Companys cash flow as a result
    of adopting asset retirement obligations.

103



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| |                                                                                                                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The following table shows the effect on the Companys net
    earnings and earnings per share as if FAS 143 had been in effect
    in prior years. There would have been a $10 million
    increase to net earnings for the year ended December 31,
    2002.

|            |                                    |                   |   |     |      | 
|----------- | ---------------------------------- | ----------------- | - | --- | ---- | 
|            |                                    | As at and for     |  
|            |                                    | the year ended    |  
|            |                                    | December 31,      |  
|            |                                    | 2002              |  
|            |                                    |                   |  
|As reported |                                    |                   |   |    
|            | Net earnings under U.S. GAAP       |                   | $ | 811 |     
|            | Earnings per share under U.S. GAAP |                   |   |     |     
|            |                                    | Basic             |   | $   | 1.94 | 
|            |                                    | Diluted           |   | $   | 1.93 | 
|Pro forma   |                                    |                   |   |    
|            | Net earnings under U.S. GAAP       |                   | $ | 821 |     
|            | Earnings per share under U.S. GAAP |                   |   |     |     
|            |                                    | Basic             |   | $   | 1.97 | 
|            |                                    | Diluted           |   | $   | 1.96 | 
|            | Asset retirement obligations       |                   |   |     |     
|            |                                    | Beginning of year |   | $   | 269  | 
|            |                                    | End of year       |   | $   | 286  | 



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(e) | On September 3, 2003, the Company modified the exercise
    price of all outstanding options. Under U.S. GAAP these
    options are required to be accounted for using variable
    accounting where the in-the-money portion of the vested stock
    options outstanding is adjusted through the statement of
    earnings as compensation expense over the remaining vesting
    period. The amount of stock-based compensation expense charged
    to earnings for the year ended December 31, 2003 was
    $46 million. The compensation expense is revalued at each
    reporting date based on the share price and the number of vested
    stock options outstanding. In 2003, under Canadian GAAP no
    compensation expense was recorded for modified options.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Effective January 1, 2004, under Canadian GAAP, the Company
    adopted CICA section 3870, Stock-based Compensation
    and Other Stock-based Payments, retroactively without
    restatement of prior periods, which requires the Company to
    record a compensation expense over the vesting period of the
    options based on the fair value of the options granted. CICA
    section 3870 is consistent with the recommendations in
    FAS 123, Accounting for Stock-Based
    Compensation.



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(f) | The liability method under Canadian GAAP requires the
    measurement of future income tax liabilities and assets using
    income tax rates that reflect substantively enacted income tax
    rate reductions provided it is more likely than not that the
    Company will be eligible for such rate reductions in the period
    of reversal. U.S. GAAP allows recording of such rate
    reductions only when enacted.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   
|(g) | As a result of the reorganization of the capital structure which
    occurred in 2000, the deficit of Husky Oil Limited of
    $160 million was eliminated. Elimination of the deficit
    would not be permitted under U.S. GAAP.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   
|(h) | The Company recorded interest waived on subordinated
    shareholders loans and dividends waived on Class C
    shares as a reduction of ownership charges. Under
    U.S. GAAP, waived interest and dividends in those years
    would be recorded as interest on subordinated shareholders
    loans and dividends on Class C shares and as capital
    contributions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   
|(i) | Under U.S. GAAP, transportation costs are included in cost
    of sales. Effective January 1, 2004, for Canadian purposes,
    certain transportation costs that were previously netted against
    revenue are now being recorded as cost of sales on a prospective
    basis. Transportation costs for 2003 and 2002 were
    $112 million and $113 million, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   
|(j) | The Company amortizes the portion of the unrecognized gains or
    losses that exceed 10 percent of the greater of the
    projected benefit obligation or the market-related value of
    pension plan assets. The market-related value of pension plan
    assets is the fair value of the assets. Under U.S. GAAP, an
    additional minimum liability is recognized if the unfunded
    accumulated benefit obligation exceeds the unfunded pension cost
    already recognized. If an additional minimum liability is
    recognized, an amount equal to the unrecognized prior service
    cost is recognized as an intangible asset and any excess is
    reported in other comprehensive income. At December 31,
    2004, the additional minimum liability was decreased by
    $1 million (2003  increase of $6 million;
    2002  increase of $19 million) with a decrease
    to other comprehensive income of less than $1 million
    (2003  decrease of $5 million; 2002 
    decrease of $10 million), net of tax.

Additional U.S. GAAP Disclosures


Corporate Acquisitions




Accounting for Derivative Instruments and Hedging
Activities




104



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Stock Option Plan




|                             |               |          |       |      |       |   |       |          |  |   |       |      |  |   |      |      | 
|---------------------------- | ------------- | -------- | ----- | ---- | ----- | - | ----- | -------- |  | - | ----- | ---- |  | - | ---- | ---- | 
|                             |               | 2003     |       |      | 2002  |  
|                             |               |          |       |      |       |  
|                             |               | As       |       |      | Pro   |   |       | As       |  |   | Pro   |     
|                             |               | Reported |       |      | Forma |   |       | Reported |  |   | Forma |     
|                             |               |          |       |      |       |   |       |          |  |   |       |     
|Net earnings under U.S. GAAP |               | $        | 1,375 |      |       | $ | 1,407 |          |  | $ | 811   |      |  | $ | 798  |     
|Earnings per share  Basic   |               | $        | 3.28  |      |       | $ | 3.35  |          |  | $ | 1.94  |      |  | $ | 1.91 |     
|                             | 
    Diluted |          | $     | 3.26 |       |   | $     | 3.34     |  |   | $     | 1.93 |  |   | $    | 1.90 | 





Depletion, Depreciation and Amortization




|                                                 |  |      |      |  |      |   |      |      |  |   |      | 
|------------------------------------------------ |  | ---- | ---- |  | ---- | - | ---- | ---- |  | - | ---- | 
|                                                 |  | 2004 |      |  | 2003 |   |      | 2002 | 
|                                                 |  |      |      |  |      |   |      |      | 
|Depletion, depreciation and amortization per boe |  | $    | 8.76 |  |      | $ | 7.35 |      |  | $ | 6.96 | 

Accounting for Variable Interest Entities




SAB 106




105



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Accounting for Inventory Costs




Accounting for Exchanges of Nonmonetary Assets




106



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Document C


Form 40-F


MANAGEMENTS DISCUSSION AND ANALYSIS


For the Year Ended December 31, 2004




107



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MANAGEMENTS DISCUSSION AND ANALYSIS


February 16, 2005






OVERVIEW


Summary of Results






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The upstream segment includes the exploration for and the
    development and production of crude oil and natural gas in
    Western Canada, offshore the Canadian East Coast and offshore
    China and other international areas.                                                                                                                                                                                                                   
|
| |  | The midstream segment is organized into two reportable business
    segments: heavy crude oil upgrading operations and
    infrastructure and commodity marketing operations. The
    infrastructure and commodity marketing segment comprises heavy
    crude oil pipeline and processing operations, natural gas
    storage, cogeneration operations, and marketing of crude oil,
    natural gas, natural gas liquids, sulphur and petroleum coke.
|
| |  | The refined products segment includes the refining of crude oil
    and the marketing of refined petroleum products including
    asphalt products.                                                                                                                                                                                                                                                                                                   

108



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Selected Annual Information


|                                               |                            |                                      |        |         |        |  |     |         |         |   |        |       |  |         |     |     |   |   |        |      |  
|---------------------------------------------- | -------------------------- | ------------------------------------ | ------ | ------- | ------ |  | --- | ------- | ------- | - | ------ | ----- |  | ------- | --- | --- | - | - | ------ | ---- | -
|                                               |                            | Year ended December 31               |       
|                                               |                            |                                      |       
|                                               |                            |                                      |        | Percent |        |  |     |         | Percent |   |        |      
|                                               |                            | 2004                                 |        |         | Change |  |     | 2003(1) |         |   | Change |       |  | 2002(1) |    
|                                               |                            |                                      |        |         |        |  |     |         |         |   |        |       |  |         |    
|                                               |                            | ($ millions, except where indicated) |       
|Sales and operating revenues, net of royalties |                            | $                                    | 8,440  |         |        |  | 10  |         |         | $ | 7,658  |       |  |         | 20  |     |   | $ | 6,384  |     
|Segmented earnings                             |                            |                                      |        |         |        |  |     |         |         |   |        |       |  |         |     |     |   |   |        |     
|                                               | Upstream                   |                                      | $      | 713     |        |  |     | (33     | )       |   | $      | 1,067 |  |         |     | 53  |   |   | $      | 699  |  
|                                               | Midstream                  |                                      |        | 240     |        |  |     | 30      |         |   |        | 185   |  |         |     | 15  |   |   |        | 161  |  
|                                               | Refined Products           |                                      |        | 41      |        |  |     | 28      |         |   |        | 32    |  |         |     | (3  | ) |   |        | 33   |  
|                                               | Corporate and eliminations |                                      |        | 12      |        |  |     | (76     | )       |   |        | 50    |  |         |     | 163 |   |   |        | (79  | )
|                                               |                            |                                      |        |         |        |  |     |         |         |   |        |       |  |         |    
|Net earnings                                   |                            | $                                    | 1,006  |         |        |  | (25 | )       |         | $ | 1,334  |       |  |         | 64  |     |   | $ | 814    |     
|                                               |                            |                                      |        |         |        |  |     |         |         |   |        |       |  |         |    
|                                               | Per share  Basic          |                                      | $      | 2.37    |        |  |     | (27     | )       |   | $      | 3.26  |  |         |     | 71  |   |   | $      | 1.91 |  
|                                               | 
    Diluted              |                                      | $      | 2.36    |        |  |     | (27     | )       |   | $      | 3.25  |  |         |     | 71  |   |   | $      | 1.90 |  
|Dividends declared per common share            |                            | $                                    | 0.46   |         |        |  | 21  |         |         | $ | 0.38   |       |  |         | 6   |     |   | $ | 0.36   |     
|Special dividend per common share              |                            | $                                    | 0.54   |         |        |  | (46 | )       |         | $ | 1.00   |       |  |         |    |     |   | $ |       |     
|Total assets                                   |                            | $                                    | 13,238 |         |        |  | 11  |         |         | $ | 11,946 |       |  |         | 12  |     |   | $ | 10,633 |     
|Total long-term debt and capital securities    |                            | $                                    | 2,047  |         |        |  | 18  |         |         | $ | 1,730  |       |  |         | (25 | )   |   | $ | 2,319  |     
|Return on equity (percent)                     |                            |                                      | 16.2   |         |        |  |     |         |         |   | 24.1   |       |  |         |     |     |   |   | 16.9   |     
|Return on average capital employed (percent)   |                            |                                      | 12.8   |         |        |  |     |         |         |   | 18.1   |       |  |         |     |     |   |   | 12.3   |     






Business Environment






| |   |                                                                             
| | - | ----------------------------------------------------------------------------
| |  | crude oil and natural gas prices                                            
|
| |  | the price differential and demand related to various crude oil
    qualities
|
| |  | cost to find, develop, produce and deliver crude oil and natural
    gas    
|
| |  | availability of pipeline capacity                                           
|
| |  | the exchange rate between the Canadian and U.S. dollars                     
|
| |  | refined products margins                                                    
|
| |  | demand for Huskys pipeline capacity                                        
|
| |  | demand for refined petroleum products                                       
|
| |  | government regulations                                                      
|
| |  | cost of capital                                                             

Average Benchmark Prices and U.S. Exchange Rate


|                                                 |  |      |       |  |      |   |       |      |  |   |       | 
|------------------------------------------------ |  | ---- | ----- |  | ---- | - | ----- | ---- |  | - | ----- | 
|                                                 |  | 2004 |       |  | 2003 |   |       | 2002 | 
|                                                 |  |      |       |  |      |   |       |      | 
|WTI crude oil (1) (U.S. $/bbl)                   |  | $    | 41.40 |  |      | $ | 31.04 |      |  | $ | 26.08 | 
|Canadian par light crude 0.3% sulphur ($/bbl)    |  | $    | 52.91 |  |      | $ | 43.56 |      |  | $ | 40.28 | 
|Lloyd @ Lloydminster heavy crude ($/bbl)         |  | $    | 28.75 |  |      | $ | 26.44 |      |  | $ | 26.71 | 
|NYMEX natural gas (1) (U.S. $/mmbtu)             |  | $    | 6.14  |  |      | $ | 5.39  |      |  | $ | 3.25  | 
|NIT natural gas ($/GJ)                           |  | $    | 6.44  |  |      | $ | 6.35  |      |  | $ | 3.86  | 
|WTI/ Lloyd crude blend differential (U.S. $/bbl) |  | $    | 13.65 |  |      | $ | 8.55  |      |  | $ | 6.47  | 
|U.S./ Canadian dollar exchange rate (U.S. $)     |  | $    | 0.769 |  |      | $ | 0.716 |      |  | $ | 0.637 | 






|    |                                                                                       
|--- | --------------------------------------------------------------------------------------
|(1) | Prices quoted are near-month contract prices for settlement
    during the next month.

109



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Commodity Price Risk




Crude Oil












WTI and Husky Average Crude Oil Prices





|                                          |  |  |       |       |  |       |  |   |       |  |  |       |   |       |       |  |  |       |       |  |       |  |   |       |  |  |       |   |       |       |  |  |       |       |  |       |  |   |       |  |  |  |   |       |  |  |  |   |       |  |  |  |   |       |  |  |  |   |       |  | 
|----------------------------------------- |  |  | ----- | ----- |  | ----- |  | - | ----- |  |  | ----- | - | ----- | ----- |  |  | ----- | ----- |  | ----- |  | - | ----- |  |  | ----- | - | ----- | ----- |  |  | ----- | ----- |  | ----- |  | - | ----- |  |  |  | - | ----- |  |  |  | - | ----- |  |  |  | - | ----- |  |  |  | - | ----- |  | 
|                                          |  |  |       |       |  |       |  |   |       |  |  |       |   |       |       |  |  |       |       |  |       |  |   |       |  |  |       |   |       |       |  |  |       |       |  |       |  |   |       |  |  |  |   |       |  |  |  |   |      
|                                          |  |  | Q1-02 |       |  | Q2-02 |  |   | Q3-02 |  |  | Q4-02 |   |       | Q1-03 |  |  | Q2-03 |       |  | Q3-03 |  |   | Q4-03 |  |  | Q1-04 |   |       | Q2-04 |  |  | Q3-04 |       |  | Q4-04 | 
|                                          |  |  |       |       |  |       |  |   |       |  |  |       |   |       |       |  |  |       |       |  |       |  |   |       |  |  |       |   |       |       |  |  |       |       |  |       |  |   |       |  |  |  |   |       |  |  |  |   |      
|West Texas Intermediate (WTI) (U.S.$)   |  |  | $     | 21.64 |  |       |  | $ | 26.25 |  |  |       | $ | 28.27 |       |  |  | $     | 28.15 |  |       |  | $ | 33.86 |  |  |       | $ | 28.91 |       |  |  | $     | 30.20 |  |       |  | $ | 31.18 |  |  |  | $ | 35.15 |  |  |  | $ | 38.32 |  |  |  | $ | 43.88 |  |  |  | $ | 48.28 |  | 
|                                          |  |  |       |       |  |       |  |   |       |  |  |       |   |       |       |  |  |       |       |  |       |  |   |       |  |  |       |   |       |       |  |  |       |       |  |       |  |   |       |  |  |  |   |       |  |  |  |   |      
|Husky average light crude oil price (C$)  |  |  | $     | 30.35 |  |       |  | $ | 35.56 |  |  |       | $ | 39.64 |       |  |  | $     | 42.23 |  |       |  | $ | 48.58 |  |  |       | $ | 36.45 |       |  |  | $     | 38.49 |  |       |  | $ | 38.55 |  |  |  | $ | 42.50 |  |  |  | $ | 47.99 |  |  |  | $ | 53.94 |  |  |  | $ | 50.29 |  | 
|                                          |  |  |       |       |  |       |  |   |       |  |  |       |   |       |       |  |  |       |       |  |       |  |   |       |  |  |       |   |       |       |  |  |       |       |  |       |  |   |       |  |  |  |   |       |  |  |  |   |      
|Husky average medium crude oil price (C$) |  |  | $     | 24.84 |  |       |  | $ | 30.90 |  |  |       | $ | 34.76 |       |  |  | $     | 30.12 |  |       |  | $ | 37.86 |  |  |       | $ | 30.48 |       |  |  | $     | 29.68 |  |       |  | $ | 27.25 |  |  |  | $ | 32.97 |  |  |  | $ | 35.98 |  |  |  | $ | 40.59 |  |  |  | $ | 35.06 |  | 
|                                          |  |  |       |       |  |       |  |   |       |  |  |       |   |       |       |  |  |       |       |  |       |  |   |       |  |  |       |   |       |       |  |  |       |       |  |       |  |   |       |  |  |  |   |       |  |  |  |   |      
|Husky average heavy crude oil price (C$)  |  |  | $     | 20.95 |  |       |  | $ | 27.75 |  |  |       | $ | 31.41 |       |  |  | $     | 26.20 |  |       |  | $ | 33.02 |  |  |       | $ | 25.13 |       |  |  | $     | 25.13 |  |       |  | $ | 20.84 |  |  |  | $ | 26.38 |  |  |  | $ | 27.54 |  |  |  | $ | 34.92 |  |  |  | $ | 25.81 |  | 
|                                          |  |  |       |       |  |       |  |   |       |  |  |       |   |       |       |  |  |       |       |  |       |  |   |       |  |  |       |   |       |       |  |  |       |       |  |       |  |   |       |  |  |  |   |       |  |  |  |   |      



Natural Gas




110



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##### Table of Contents









NYMEX Natural Gas, NIT Natural Gas and Husky Average Natural
Gas Prices





|                                         |  |  |       |      |  |       |  |   |       |  |  |       |   |      |       |  |  |       |      |  |       |  |   |       |  |  |       |   |      |       |  |  |       |      |  |       |  |   |      |  |  |  |   |      |  |  |  |   |      |  |  |  |   |      |  |  |  |   |      |  | 
|---------------------------------------- |  |  | ----- | ---- |  | ----- |  | - | ----- |  |  | ----- | - | ---- | ----- |  |  | ----- | ---- |  | ----- |  | - | ----- |  |  | ----- | - | ---- | ----- |  |  | ----- | ---- |  | ----- |  | - | ---- |  |  |  | - | ---- |  |  |  | - | ---- |  |  |  | - | ---- |  |  |  | - | ---- |  | 
|                                         |  |  |       |      |  |       |  |   |       |  |  |       |   |      |       |  |  |       |      |  |       |  |   |       |  |  |       |   |      |       |  |  |       |      |  |       |  |   |      |  |  |  |   |      |  |  |  |   |     
|                                         |  |  | Q1-02 |      |  | Q2-02 |  |   | Q3-02 |  |  | Q4-02 |   |      | Q1-03 |  |  | Q2-03 |      |  | Q3-03 |  |   | Q4-03 |  |  | Q1-04 |   |      | Q2-04 |  |  | Q3-04 |      |  | Q4-04 | 
|                                         |  |  |       |      |  |       |  |   |       |  |  |       |   |      |       |  |  |       |      |  |       |  |   |       |  |  |       |   |      |       |  |  |       |      |  |       |  |   |      |  |  |  |   |      |  |  |  |   |     
|NYMEX natural gas (U.S.$/mmbtu)          |  |  | $     | 2.38 |  |       |  | $ | 3.37  |  |  |       | $ | 3.26 |       |  |  | $     | 3.99 |  |       |  | $ | 6.60  |  |  |       | $ | 5.39 |       |  |  | $     | 4.97 |  |       |  | $ | 4.58 |  |  |  | $ | 5.69 |  |  |  | $ | 5.97 |  |  |  | $ | 5.76 |  |  |  | $ | 7.11 |  | 
|                                         |  |  |       |      |  |       |  |   |       |  |  |       |   |      |       |  |  |       |      |  |       |  |   |       |  |  |       |   |      |       |  |  |       |      |  |       |  |   |      |  |  |  |   |      |  |  |  |   |     
|NIT natural gas (C$/GJ)                  |  |  | $     | 3.17 |  |       |  | $ | 4.19  |  |  |       | $ | 3.08 |       |  |  | $     | 4.98 |  |       |  | $ | 7.51  |  |  |       | $ | 6.63 |       |  |  | $     | 5.97 |  |       |  | $ | 5.30 |  |  |  | $ | 6.26 |  |  |  | $ | 6.45 |  |  |  | $ | 6.32 |  |  |  | $ | 6.72 |  | 
|                                         |  |  |       |      |  |       |  |   |       |  |  |       |   |      |       |  |  |       |      |  |       |  |   |       |  |  |       |   |      |       |  |  |       |      |  |       |  |   |      |  |  |  |   |      |  |  |  |   |     
|Husky average natural gas price (C$/mcf) |  |  | $     | 3.10 |  |       |  | $ | 3.98  |  |  |       | $ | 3.42 |       |  |  | $     | 4.76 |  |       |  | $ | 7.80  |  |  |       | $ | 5.50 |       |  |  | $     | 5.40 |  |       |  | $ | 4.87 |  |  |  | $ | 6.05 |  |  |  | $ | 6.38 |  |  |  | $ | 5.92 |  |  |  | $ | 6.64 |  | 
|                                         |  |  |       |      |  |       |  |   |       |  |  |       |   |      |       |  |  |       |      |  |       |  |   |       |  |  |       |   |      |       |  |  |       |      |  |       |  |   |      |  |  |  |   |      |  |  |  |   |     



Upgrading Differential




Refined Products Margins




Integration




Foreign Exchange Risk




111



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##### Table of Contents





Interest Rates




Environmental Regulations




International Operations




Sensitivity Analysis




Sensitivity Analysis


|                                       |                            |          |                   |                   |           |  |               |                        |   |              |       |       |               |  |     |     |   |  |       |       |  
|-------------------------------------- | -------------------------- | -------- | ----------------- | ----------------- | --------- |  | ------------- | ---------------------- | - | ------------ | ----- | ----- | ------------- |  | --- | --- | - |  | ----- | ----- | -
|                                       |                            |          |                   | Effect on Pre-tax |           |  |              
|Item                                   |                            | Increase |                   |                   | Cash Flow |  |               | Effect on Net Earnings |  
|                                       |                            |          |                   |                   |           |  |               |                        |  
|                                       |                            |          |                   | ($ millions)      |           |  | ($/share) (4) |                        |   | ($ millions) |       |       | ($/share) (4) | 
|WTI benchmark crude oil price          |                            |          |                   |                   |           |  |               |                        |   |              |       |       |               |  |     |     |   |  |       |      
|                                       | Excluding commodity hedges |          |                   | U.S. $1.00/bbl    |           |  | $             | 87                     |   |              | $     | 0.20  |               |  | $   | 59  |   |  | $     | 0.14  |  
|                                       | Including commodity hedges |          |                   | U.S. $1.00/bbl    |           |  |               | 46                     |   |              |       | 0.11  |               |  |     | 30  |   |  |       | 0.07  |  
|NYMEX benchmark natural gas price (1)  |                            |          |                   |                   |           |  |               |                        |   |              |       |       |               |  |     |     |   |  |       |      
|                                       | Excluding commodity hedges |          |                   | U.S. $0.20/mmbtu  |           |  |               | 38                     |   |              |       | 0.09  |               |  |     | 25  |   |  |       | 0.06  |  
|                                       | Including commodity hedges |          |                   | U.S. $0.20/mmbtu  |           |  |               | 36                     |   |              |       | 0.09  |               |  |     | 23  |   |  |       | 0.06  |  
|Light/heavy crude oil differential (2) |                            |          | Cdn. $1.00/bbl    |                   |           |  | (30           | )                      |   |              | (0.07 | )     |               |  | (20 | )   |   |  | (0.05 | )    
|Light oil margins                      |                            |          | Cdn. $0.005/litre |                   |           |  | 15            |                        |   |              | 0.04  |       |               |  | 10  |     |   |  | 0.02  |      
|Asphalt margins                        |                            |          | Cdn. $1.00/bbl    |                   |           |  | 8             |                        |   |              | 0.02  |       |               |  | 5   |     |   |  | 0.01  |      
|Exchange rate (U.S. $ per Cdn. $) (3)  |                            |          |                   |                   |           |  |               |                        |   |              |       |       |               |  |     |     |   |  |       |      
|                                       | Including commodity hedges |          |                   | U.S. $0.01        |           |  |               | (54                    | ) |              |       | (0.13 | )             |  |     | (35 | ) |  |       | (0.08 | )






|    |                                                                  
|--- | -----------------------------------------------------------------
|(1) | Includes decrease in earnings related to natural gas consumption.
|   
|(2) | Includes impact of upstream and upgrading operations only.       

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|    |                                                                                                                                                                                                                                                                                                                  
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(3) | Assumes no foreign exchange gains or losses on U.S. dollar
    denominated long-term debt and other monetary items. The impact
    of the Canadian dollar strengthening by U.S. $0.01 would be an
    increase of $10 million in net earnings based on
    December 31, 2004 U.S. dollar denominated debt levels.
|   
|(4) | Based on December 31, 2004 common shares outstanding of
    423.7 million.                                                                                                                                                                                                                                       

RESULTS OF OPERATIONS


Upstream


Upstream Earnings
Summary(1)


|                                         |  |                        |       |  |      |   |       |      |  |   |       |  
|---------------------------------------- |  | ---------------------- | ----- |  | ---- | - | ----- | ---- |  | - | ----- | -
|                                         |  | Year ended December 31 |      
|                                         |  |                        |      
|                                         |  | 2004                   |       |  | 2003 |   |       | 2002 | 
|                                         |  |                        |       |  |      |   |       |      | 
|                                         |  | ($ millions)           |      
|Gross revenues                           |  | $                      | 4,392 |  |      | $ | 3,796 |      |  | $ | 3,120 |  
|Royalties                                |  |                        | 711   |  |      |   | 584   |      |  |   | 460   |  
|Hedging (gain) loss                      |  |                        | 561   |  |      |   | 26    |      |  |   | (5    | )
|                                         |  |                        |       |  |      |   |       |      | 
|Net revenues                             |  |                        | 3,120 |  |      |   | 3,186 |      |  |   | 2,665 |  
|Operating and administration expenses    |  |                        | 967   |  |      |   | 873   |      |  |   | 743   |  
|Depletion, depreciation and amortization |  |                        | 1,077 |  |      |   | 918   |      |  |   | 822   |  
|Income taxes                             |  |                        | 363   |  |      |   | 328   |      |  |   | 401   |  
|                                         |  |                        |       |  |      |   |       |      | 
|Earnings                                 |  | $                      | 713   |  |      | $ | 1,067 |      |  | $ | 699   |  
|                                         |  |                        |       |  |      |   |       |      | 










| |   |                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | hedging losses which were related primarily to 85 mbbls/day of
    crude oil production hedged at a strike price of U.S. $27.46
    compared with 27.6 mbbls/day hedged at a strike price of U.S.
    $29.50 in 2003
|
| |  | higher royalties resulting from higher commodity prices                                                                                                                                                             
|
| |  | lower sales volume of light and medium crude oil                                                                                                                                                                    
|
| |  | unit operating costs were $0.40/boe higher in 2004 compared with
    2003 as a result of:                                                                                                                           



| |   |                                          
| | - | -----------------------------------------
| |  | higher field facilities maintenance costs
|
| |  | higher fuel costs                        
|
| |  | higher transportation costs              





| |   |                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------
| |  | lower electrical power costs due to lower rates and initiatives
    that resulted in lower consumption



| |   |                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------
| |  | unit depletion, depreciation and amortization expense
    (DD&A) increased by $1.01/boe to $9.06/boe in
    2004 compared with 2003 as a result of:



| |   |                                                                                                                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | higher maintenance capital requirements for properties in the
    Western Canada Sedimentary Basin, particularly for mature
    properties under secondary or tertiary enhanced recovery schemes
    and shallow natural gas operations
|
| |  | offshore operations requiring substantial capital investments                                                                                                                                                                          
|
| |  | purchased proved oil and gas reserves in-place, whether as
    individual properties or through a corporate acquisition, cost
    more per boe of reserves added than our current DD&A per boe
    of $9.06/boe                        



| |   |                    
| | - | -------------------
| |  | higher income taxes





| |   |                                                       
| | - | ------------------------------------------------------
| |  | higher prices for crude oil and natural gas           
|
| |  | higher sales volume of heavy crude oil and natural gas



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##### Table of Contents





Net Revenue Variance Analysis


|                             |                        |              |       |      |         |   |       |       |   |   |       |    |  |   |       |      |  
|---------------------------- | ---------------------- | ------------ | ----- | ---- | ------- | - | ----- | ----- | - | - | ----- | -- |  | - | ----- | ---- | -
|                             |                        | Crude Oil    |       |      | Natural |   |       |       |   |  
|                             |                        | & NGL        |       |      | Gas     |   |       | Other |   |   | Total |   
|                             |                        |              |       |      |         |   |       |       |   |   |       |   
|                             |                        | ($ millions) |      
|Year ended December 31, 2002 |                        |              |       |      |         |   |       |       |   |   |       |    |  |   |       |     
|Net revenues                 |                        | $            | 1,987 |      |         | $ | 637   |       |   | $ | 41    |    |  | $ | 2,665 |     
|                             | Price changes          |              |       | 85   |         |   |       | 450   |   |   |       |   |  |   |       | 535  |  
|                             | Volume changes         |              |       | 59   |         |   |       | 58    |   |   |       |   |  |   |       | 117  |  
|                             | Royalties              |              |       | 16   |         |   |       | (140  | ) |   |       |   |  |   |       | (124 | )
|                             | Hedging                |              |       | (50  | )       |   |       | 19    |   |   |       |   |  |   |       | (31  | )
|                             | Processing and sulphur |              |       |     |         |   |       |      |   |   |       | 24 |  |   |       | 24   |  
|                             |                        |              |       |      |         |   |       |       |   |   |       |   
|Year ended December 31, 2003 |                        |              |       |      |         |   |       |       |   |   |       |    |  |   |       |     
|Net revenues                 |                        |              | 2,097 |      |         |   | 1,024 |       |   |   | 65    |    |  |   | 3,186 |     
|                             | Price changes          |              |       | 359  |         |   |       | 98    |   |   |       |   |  |   |       | 457  |  
|                             | Volume changes         |              |       | (36  | )       |   |       | 172   |   |   |       |   |  |   |       | 136  |  
|                             | Royalties              |              |       | (67  | )       |   |       | (60   | ) |   |       |   |  |   |       | (127 | )
|                             | Hedging                |              |       | (514 | )       |   |       | (21   | ) |   |       |   |  |   |       | (535 | )
|                             | Processing and sulphur |              |       |     |         |   |       |      |   |   |       | 3  |  |   |       | 3    |  
|                             |                        |              |       |      |         |   |       |       |   |   |       |   
|Year ended December 31, 2004 |                        |              |       |      |         |   |       |       |   |   |       |    |  |   |       |     
|Net revenues                 |                        | $            | 1,839 |      |         | $ | 1,213 |       |   | $ | 68    |    |  | $ | 3,120 |     
|                             |                        |              |       |      |         |   |       |       |   |   |       |   

Daily Production, before Royalties


|                                           |  |                        |       |  |      |  |       |      |  |  |       | 
|------------------------------------------ |  | ---------------------- | ----- |  | ---- |  | ----- | ---- |  |  | ----- | 
|                                           |  | Year ended December 31 |      
|                                           |  |                        |      
|                                           |  | 2004                   |       |  | 2003 |  |       | 2002 | 
|                                           |  |                        |       |  |      |  |       |      | 
|Light crude oil & NGL (mbbls/day)          |  |                        | 66.2  |  |      |  | 71.6  |      |  |  | 65.4  | 
|Medium crude oil (mbbls/day)               |  |                        | 35.0  |  |      |  | 39.2  |      |  |  | 44.8  | 
|Heavy crude oil (mbbls/day)                |  |                        | 108.9 |  |      |  | 99.9  |      |  |  | 95.1  | 
|                                           |  |                        |       |  |      |  |       |      | 
|Total crude oil & NGL (mbbls/day)          |  |                        | 210.1 |  |      |  | 210.7 |      |  |  | 205.3 | 
|Natural gas (mmcf/day)                     |  |                        | 689.2 |  |      |  | 610.6 |      |  |  | 569.2 | 
|Barrels of oil equivalent (6:1) (mboe/day) |  |                        | 325.0 |  |      |  | 312.5 |      |  |  | 300.2 | 
|                                           |  |                        |       |  |      |  |       |      | 

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Average Sales Prices


|                   |                             |                        |   |       |      |  |   |       |  |  |   |       | 
|------------------ | --------------------------- | ---------------------- | - | ----- | ---- |  | - | ----- |  |  | - | ----- | 
|                   |                             | Year ended December 31 |  
|                   |                             |                        |  
|                   |                             | 2004                   |   |       | 2003 |  |   | 2002  | 
|                   |                             |                        |   |       |      |  |   |       | 
|Crude oil($/bbl)   |                             |                        |   |       |      |  |   |       |  |  |   |      
|                   | Light crude oil & NGL       |                        | $ | 48.34 |      |  | $ | 39.53 |  |  | $ | 36.17 | 
|                   | Medium crude oil            |                        |   | 36.13 |      |  |   | 31.42 |  |  |   | 30.16 | 
|                   | Heavy crude oil             |                        |   | 28.66 |      |  |   | 25.87 |  |  |   | 26.60 | 
|                   | Total average               |                        |   | 36.07 |      |  |   | 31.54 |  |  |   | 30.43 | 
|                   | Total average after hedging |                        |   | 28.43 |      |  |   | 30.93 |  |  |   | 30.50 | 
|Natural gas($/mcf) |                             |                        |   |       |      |  |   |       |  |  |   |      
|                   | Average                     |                        | $ | 6.25  |      |  | $ | 5.86  |  |  | $ | 3.83  | 
|                   | Average after hedging       |                        |   | 6.24  |      |  |   | 5.94  |  |  |   | 3.83  | 

Upstream Revenue
Mix(1)


|                                                       |                       |                        |  |      |      |  |  |      |  |  |  |      | 
|------------------------------------------------------ | --------------------- | ---------------------- |  | ---- | ---- |  |  | ---- |  |  |  | ---- | 
|                                                       |                       | Year ended December 31 | 
|                                                       |                       |                        | 
|                                                       |                       | 2004                   |  |      | 2003 |  |  | 2002 | 
|                                                       |                       |                        |  |      |      |  |  |      | 
|Percentage of upstream sales revenues, after royalties |                       |                        |  |      |      |  |  |      |  |  |  |     
|                                                       | Light crude oil & NGL |                        |  | 27%  |      |  |  | 29%  |  |  |  | 24%  | 
|                                                       | Medium crude oil      |                        |  | 11%  |      |  |  | 12%  |  |  |  | 25%  | 
|                                                       | Heavy crude oil       |                        |  | 27%  |      |  |  | 26%  |  |  |  | 25%  | 
|                                                       | Natural gas           |                        |  | 35%  |      |  |  | 33%  |  |  |  | 26%  | 
|                                                       |                       |                        |  |      |      |  |  |      | 
|                                                       | Total                 |                        |  | 100% |      |  |  | 100% |  |  |  | 100% | 
|                                                       |                       |                        |  |      |      |  |  |      | 

Effective Royalty
Rates(1)


|                                      |                       |                        |  |     |      |  |  |      |  |  |  |     | 
|------------------------------------- | --------------------- | ---------------------- |  | --- | ---- |  |  | ---- |  |  |  | --- | 
|                                      |                       | Year ended December 31 | 
|                                      |                       |                        | 
|                                      |                       | 2004                   |  |     | 2003 |  |  | 2002 | 
|                                      |                       |                        |  |     |      |  |  |      | 
|Percentage of upstream sales revenues |                       |                        |  |     |      |  |  |      |  |  |  |    
|                                      | Light crude oil & NGL |                        |  | 13% |      |  |  | 12%  |  |  |  | 13% | 
|                                      | Medium crude oil      |                        |  | 18% |      |  |  | 17%  |  |  |  | 17% | 
|                                      | Heavy crude oil       |                        |  | 12% |      |  |  | 11%  |  |  |  | 11% | 
|                                      | Natural gas           |                        |  | 22% |      |  |  | 22%  |  |  |  | 18% | 
|                                      | Total                 |                        |  | 16% |      |  |  | 16%  |  |  |  | 15% | 






Operating Netbacks


Western Canada


Light Crude Oil
Netbacks(1)


|                              |  |                        |       |  |      |   |       |      |  |   |       | 
|----------------------------- |  | ---------------------- | ----- |  | ---- | - | ----- | ---- |  | - | ----- | 
|                              |  | Year ended December 31 |      
|                              |  |                        |      
|                              |  | 2004                   |       |  | 2003 |   |       | 2002 | 
|                              |  |                        |       |  |      |   |       |      | 
|                              |  | (per boe)              |      
|Sales revenues before hedging |  | $                      | 46.12 |  |      | $ | 39.91 |      |  | $ | 33.66 | 
|Royalties                     |  |                        | 7.76  |  |      |   | 7.28  |      |  |   | 4.55  | 
|Operating costs               |  |                        | 8.94  |  |      |   | 9.27  |      |  |   | 10.46 | 
|                              |  |                        |       |  |      |   |       |      | 
|Netback                       |  | $                      | 29.42 |  |      | $ | 23.36 |      |  | $ | 18.65 | 
|                              |  |                        |       |  |      |   |       |      | 

115



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##### Table of Contents



Medium Crude Oil
Netbacks(1)


|                              |  |                        |       |  |      |   |       |      |  |   |       | 
|----------------------------- |  | ---------------------- | ----- |  | ---- | - | ----- | ---- |  | - | ----- | 
|                              |  | Year ended December 31 |      
|                              |  |                        |      
|                              |  | 2004                   |       |  | 2003 |   |       | 2002 | 
|                              |  |                        |       |  |      |   |       |      | 
|                              |  | (per boe)              |      
|Sales revenues before hedging |  | $                      | 36.20 |  |      | $ | 31.57 |      |  | $ | 29.92 | 
|Royalties                     |  |                        | 6.10  |  |      |   | 5.28  |      |  |   | 5.59  | 
|Operating costs               |  |                        | 10.07 |  |      |   | 9.53  |      |  |   | 7.19  | 
|                              |  |                        |       |  |      |   |       |      | 
|Netback                       |  | $                      | 20.03 |  |      | $ | 16.76 |      |  | $ | 17.14 | 
|                              |  |                        |       |  |      |   |       |      | 

Heavy Crude Oil
Netbacks(1)


|                              |  |                        |       |  |      |   |       |      |  |   |       | 
|----------------------------- |  | ---------------------- | ----- |  | ---- | - | ----- | ---- |  | - | ----- | 
|                              |  | Year ended December 31 |      
|                              |  |                        |      
|                              |  | 2004                   |       |  | 2003 |   |       | 2002 | 
|                              |  |                        |       |  |      |   |       |      | 
|                              |  | (per boe)              |      
|Sales revenues before hedging |  | $                      | 28.73 |  |      | $ | 25.98 |      |  | $ | 26.48 | 
|Royalties                     |  |                        | 3.38  |  |      |   | 2.76  |      |  |   | 3.45  | 
|Operating costs               |  |                        | 9.33  |  |      |   | 9.09  |      |  |   | 7.18  | 
|                              |  |                        |       |  |      |   |       |      | 
|Netback                       |  | $                      | 16.02 |  |      | $ | 14.13 |      |  | $ | 15.85 | 
|                              |  |                        |       |  |      |   |       |      | 

Natural Gas
Netbacks(2)


|                              |  |                        |      |  |      |   |      |      |  |   |      | 
|----------------------------- |  | ---------------------- | ---- |  | ---- | - | ---- | ---- |  | - | ---- | 
|                              |  | Year ended December 31 |     
|                              |  |                        |     
|                              |  | 2004                   |      |  | 2003 |   |      | 2002 | 
|                              |  |                        |      |  |      |   |      |      | 
|                              |  | (per mcfge)            |     
|Sales revenues before hedging |  | $                      | 6.25 |  |      | $ | 5.79 |      |  | $ | 3.97 | 
|Royalties                     |  |                        | 1.44 |  |      |   | 1.29 |      |  |   | 0.81 | 
|Operating costs               |  |                        | 0.89 |  |      |   | 0.79 |      |  |   | 0.70 | 
|                              |  |                        |      |  |      |   |      |      | 
|Netback                       |  | $                      | 3.92 |  |      | $ | 3.71 |      |  | $ | 2.46 | 
|                              |  |                        |      |  |      |   |      |      | 

Total Western Canada Upstream
Netbacks(1)


|                              |  |                        |       |  |      |   |       |      |  |   |       | 
|----------------------------- |  | ---------------------- | ----- |  | ---- | - | ----- | ---- |  | - | ----- | 
|                              |  | Year ended December 31 |      
|                              |  |                        |      
|                              |  | 2004                   |       |  | 2003 |   |       | 2002 | 
|                              |  |                        |       |  |      |   |       |      | 
|                              |  | (per boe)              |      
|Sales revenues before hedging |  | $                      | 35.01 |  |      | $ | 31.58 |      |  | $ | 27.04 | 
|Royalties                     |  |                        | 6.22  |  |      |   | 5.48  |      |  |   | 4.46  | 
|Operating costs               |  |                        | 7.85  |  |      |   | 7.56  |      |  |   | 6.54  | 
|                              |  |                        |       |  |      |   |       |      | 
|Netback                       |  | $                      | 20.94 |  |      | $ | 18.54 |      |  | $ | 16.04 | 
|                              |  |                        |       |  |      |   |       |      | 

Terra Nova Crude Oil Netbacks


|                              |  |                        |       |  |      |   |       |      |  |   |       | 
|----------------------------- |  | ---------------------- | ----- |  | ---- | - | ----- | ---- |  | - | ----- | 
|                              |  | Year ended December 31 |      
|                              |  |                        |      
|                              |  | 2004                   |       |  | 2003 |   |       | 2002 | 
|                              |  |                        |       |  |      |   |       |      | 
|                              |  | (per boe)              |      
|Sales revenues before hedging |  | $                      | 47.87 |  |      | $ | 38.91 |      |  | $ | 35.47 | 
|Royalties                     |  |                        | 1.80  |  |      |   | 0.81  |      |  |   | 0.36  | 
|Operating costs               |  |                        | 3.28  |  |      |   | 3.16  |      |  |   | 3.62  | 
|                              |  |                        |       |  |      |   |       |      | 
|Netback                       |  | $                      | 42.79 |  |      | $ | 34.94 |      |  | $ | 31.49 | 
|                              |  |                        |       |  |      |   |       |      | 








116



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##### Table of Contents



Wenchang Crude Oil Netbacks


|                              |  |                        |       |  |      |   |       |      |  |   |       | 
|----------------------------- |  | ---------------------- | ----- |  | ---- | - | ----- | ---- |  | - | ----- | 
|                              |  | Year ended December 31 |      
|                              |  |                        |      
|                              |  | 2004                   |       |  | 2003 |   |       | 2002 | 
|                              |  |                        |       |  |      |   |       |      | 
|                              |  | (per boe)              |      
|Sales revenues before hedging |  | $                      | 47.66 |  |      | $ | 41.45 |      |  | $ | 44.36 | 
|Royalties                     |  |                        | 4.91  |  |      |   | 3.80  |      |  |   | 2.65  | 
|Operating costs               |  |                        | 2.16  |  |      |   | 1.94  |      |  |   | 2.15  | 
|                              |  |                        |       |  |      |   |       |      | 
|Netback                       |  | $                      | 40.59 |  |      | $ | 35.71 |      |  | $ | 39.56 | 
|                              |  |                        |       |  |      |   |       |      | 

Total Upstream Segment
Netbacks(1)


|                              |  |                        |       |  |      |   |       |      |  |   |       | 
|----------------------------- |  | ---------------------- | ----- |  | ---- | - | ----- | ---- |  | - | ----- | 
|                              |  | Year ended December 31 |      
|                              |  |                        |      
|                              |  | 2004                   |       |  | 2003 |   |       | 2002 | 
|                              |  |                        |       |  |      |   |       |      | 
|                              |  | (per boe)              |      
|Sales revenues before hedging |  | $                      | 36.34 |  |      | $ | 32.69 |      |  | $ | 28.12 | 
|Royalties                     |  |                        | 5.96  |  |      |   | 5.11  |      |  |   | 4.20  | 
|Operating costs               |  |                        | 7.32  |  |      |   | 6.92  |      |  |   | 6.24  | 
|                              |  |                        |       |  |      |   |       |      | 
|Netback                       |  | $                      | 23.06 |  |      | $ | 20.66 |      |  | $ | 17.68 | 
|                              |  |                        |       |  |      |   |       |      | 






Upstream Plans and Outlook




Western Canada Sedimentary Basin










Canadas East Coast




117



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##### Table of Contents







Offshore China






Offshore Indonesia






Midstream


Upgrading Earnings Summary


|                                      |  |                           |       |   |      |   |       |      |  |   |       |  
|------------------------------------- |  | ------------------------- | ----- | - | ---- | - | ----- | ---- |  | - | ----- | -
|                                      |  | Year ended December 31    |      
|                                      |  |                           |      
|                                      |  | 2004                      |       |   | 2003 |   |       | 2002 | 
|                                      |  |                           |       |   |      |   |       |      | 
|                                      |  | ($ millions, except where |      
|                                      |  | indicated)                |      
|Gross margin                          |  | $                         | 383   |   |      | $ | 313   |      |  | $ | 246   |  
|Operating costs                       |  |                           | 214   |   |      |   | 205   |      |  |   | 154   |  
|Other recoveries                      |  |                           | (5    | ) |      |   | (4    | )    |  |   | (6    | )
|Depreciation and amortization         |  |                           | 19    |   |      |   | 20    |      |  |   | 18    |  
|Income taxes                          |  |                           | 43    |   |      |   | 21    |      |  |   | 26    |  
|                                      |  |                           |       |   |      |   |       |      | 
|Earnings                              |  | $                         | 112   |   |      | $ | 71    |      |  | $ | 54    |  
|                                      |  |                           |       |   |      |   |       |      | 
|Upgrader throughput (1) (mbbls/day)   |  |                           | 64.6  |   |      |   | 72.5  |      |  |   | 65.4  |  
|Synthetic crude oil sales (mbbls/day) |  |                           | 53.7  |   |      |   | 63.6  |      |  |   | 59.3  |  
|Upgrading differential ($/bbl)        |  | $                         | 17.79 |   |      | $ | 12.88 |      |  | $ | 10.81 |  
|Unit margin ($/bbl)                   |  | $                         | 19.48 |   |      | $ | 13.51 |      |  | $ | 11.05 |  
|Unit operating cost (2) ($/bbl)       |  | $                         | 9.07  |   |      | $ | 7.77  |      |  | $ | 6.48  |  






|    |                                                   
|--- | --------------------------------------------------
|(1) | Throughput includes diluent returned to the field.
|   
|(2) | Based on throughput.                              





| |   |                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------
| |  | wider upgrading differential, which averaged $17.79/bbl in 2004
    compared with $12.88/bbl in 2003





| |   |                                  
| | - | ---------------------------------
| |  | lower throughput and sales volume
|
| |  | higher operating costs           
|
| |  | higher income taxes              

118



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##### Table of Contents



Upgrading Earnings Variance Analysis


|                             |                                      |              |     |     |  
|---------------------------- | ------------------------------------ | ------------ | --- | --- | -
|                             |                                      | ($ millions) |    
|                             |                                      |              |    
|Year ended December 31, 2002 |                                      | $            | 54  |    
|                             | Volume                               |              |     | 18  |  
|                             | Differential                         |              |     | 49  |  
|                             | Operating costs  energy related     |              |     | (49 | )
|                             | Operating costs  non-energy related |              |     | (2  | )
|                             | Other                                |              |     | (2  | )
|                             | Depreciation and amortization        |              |     | (2  | )
|                             | Income taxes                         |              |     | 5   |  
|                             |                                      |              |    
|Year ended December 31, 2003 |                                      |              | 71  |    
|                             | Volume                               |              |     | (48 | )
|                             | Differential                         |              |     | 118 |  
|                             | Operating costs  non-energy related |              |     | (9  | )
|                             | Other                                |              |     | 1   |  
|                             | Depreciation and amortization        |              |     | 1   |  
|                             | Income taxes                         |              |     | (22 | )
|                             |                                      |              |    
|Year ended December 31, 2004 |                                      | $            | 112 |    
|                             |                                      |              |    

Infrastructure and Marketing Earnings Summary


|                                          |                                    |                           |     |     |      |   |     |      |  |   |     |     | 
|----------------------------------------- | ---------------------------------- | ------------------------- | --- | --- | ---- | - | --- | ---- |  | - | --- | --- | 
|                                          |                                    | Year ended December 31    |    
|                                          |                                    |                           |    
|                                          |                                    | 2004                      |     |     | 2003 |   |     | 2002 | 
|                                          |                                    |                           |     |     |      |   |     |      | 
|                                          |                                    | ($ millions, except where |    
|                                          |                                    | indicated)                |    
|Gross margin                              |                                    |                           |     |     |      |   |     |      |  |   |     |    
|                                          | Pipeline                           |                           | $   | 84  |      |   | $   | 66   |  |   | $   | 55  | 
|                                          | Other infrastructure and marketing |                           |     | 136 |      |   |     | 141  |  |   |     | 147 | 
|                                          |                                    |                           |     |     |      |   |     |      | 
|                                          |                                    |                           | 220 |     |      |   | 207 |      |  |   | 202 |    
|Other expenses                            |                                    |                           | 8   |     |      |   | 8   |      |  |   | 10  |    
|Depreciation and amortization             |                                    |                           | 21  |     |      |   | 21  |      |  |   | 20  |    
|Income taxes                              |                                    |                           | 63  |     |      |   | 64  |      |  |   | 65  |    
|                                          |                                    |                           |     |     |      |   |     |      | 
|Earnings                                  |                                    | $                         | 128 |     |      | $ | 114 |      |  | $ | 107 |    
|                                          |                                    |                           |     |     |      |   |     |      | 
|Aggregate pipeline throughput (mbbls/day) |                                    |                           | 492 |     |      |   | 484 |      |  |   | 457 |    
|                                          |                                    |                           |     |     |      |   |     |      | 





| |   |                                                       
| | - | ------------------------------------------------------
| |  | higher heavy crude oil pipeline throughput and tariffs
|
| |  | higher Lloyd blend marketing margins                  
|
| |  | higher crude oil and NGL trading                      





| |   |                                              
| | - | ---------------------------------------------
| |  | lower natural gas commodity marketing margins
|
| |  | lower cogeneration income                    

Midstream Plans and Outlook


Upgrading




119



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##### Table of Contents







Pipelines






Refined Products


Refined Products Earnings
Summary (1)


|                              |                                                     |                           |     |      |      |   |     |      |  |   |     |      | 
|----------------------------- | --------------------------------------------------- | ------------------------- | --- | ---- | ---- | - | --- | ---- |  | - | --- | ---- | 
|                              |                                                     | Year ended December 31    |    
|                              |                                                     |                           |    
|                              |                                                     | 2004                      |     |      | 2003 |   |     | 2002 | 
|                              |                                                     |                           |     |      |      |   |     |      | 
|                              |                                                     | ($ millions, except where |    
|                              |                                                     | indicated)                |    
|Gross margin                  |                                                     |                           |     |      |      |   |     |      |  |   |     |     
|                              | Fuel sales                                          |                           | $   | 93   |      |   | $   | 71   |  |   | $   | 81   | 
|                              | Ancillary sales                                     |                           |     | 30   |      |   |     | 28   |  |   |     | 26   | 
|                              | Asphalt sales                                       |                           |     | 51   |      |   |     | 51   |  |   |     | 45   | 
|                              |                                                     |                           |     |      |      |   |     |      | 
|                              |                                                     |                           | 174 |      |      |   | 150 |      |  |   | 152 |     
|Operating and other expenses  |                                                     |                           | 71  |      |      |   | 74  |      |  |   | 66  |     
|Depreciation and amortization |                                                     |                           | 38  |      |      |   | 26  |      |  |   | 31  |     
|Income taxes                  |                                                     |                           | 24  |      |      |   | 18  |      |  |   | 22  |     
|                              |                                                     |                           |     |      |      |   |     |      | 
|Earnings                      |                                                     | $                         | 41  |      |      | $ | 32  |      |  | $ | 33  |     
|                              |                                                     |                           |     |      |      |   |     |      | 
|Number of fuel outlets        |                                                     |                           | 531 |      |      |   | 552 |      |  |   | 571 |     
|Refined products sales volume |                                                     |                           |     |      |      |   |     |      |  |   |     |     
|                              | Light oil products (million litres/day)             |                           |     | 8.4  |      |   |     | 8.2  |  |   |     | 7.7  | 
|                              | Light oil products per outlet (thousand litres/day) |                           |     | 11.7 |      |   |     | 10.8 |  |   |     | 10.0 | 
|                              | Asphalt products (mbbls/day)                        |                           |     | 22.8 |      |   |     | 22.0 |  |   |     | 20.8 | 
|Refinery throughput           |                                                     |                           |     |      |      |   |     |      |  |   |     |     
|                              | Prince George refinery (mbbls/day)                  |                           |     | 9.8  |      |   |     | 10.3 |  |   |     | 10.1 | 
|                              | Lloydminster refinery (mbbls/day)                   |                           |     | 25.3 |      |   |     | 25.7 |  |   |     | 22.0 | 






|    |                                                                                                 
|--- | ------------------------------------------------------------------------------------------------
|(1) | 2003 and 2002 amounts as restated. Refer to Note 3 to the
    Consolidated Financial Statements.





| |   |                                               
| | - | ----------------------------------------------
| |  | higher light oil product margins              
|
| |  | higher restaurant and convenience store income





| |   |                                     
| | - | ------------------------------------
| |  | higher depreciation and amortization
|
| |  | higher income taxes                 

Refined Products Plans and Outlook




120



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##### Table of Contents











Corporate Earnings
Summary (1)


|                                |  |                        |     |   |      |   |      |      |  |   |     |  
|------------------------------- |  | ---------------------- | --- | - | ---- | - | ---- | ---- |  | - | --- | -
|                                |  | Year ended December 31 |    
|                                |  |                        |    
|                                |  | 2004                   |     |   | 2003 |   |      | 2002 | 
|                                |  |                        |     |   |      |   |      |      | 
|                                |  | ($ millions)           |    
|Intersegment eliminations  net |  | $                      | 14  |   |      | $ | (14  | )    |  | $ | 19  |  
|Administration expenses         |  |                        | 27  |   |      |   | 22   |      |  |   | 10  |  
|Stock-based compensation        |  |                        | 67  |   |      |   |     |      |  |   |    |  
|Accretion                       |  |                        | 2   |   |      |   |     |      |  |   | 1   |  
|Other  net                     |  |                        | 8   |   |      |   | 3    |      |  |   | 5   |  
|Depreciation and amortization   |  |                        | 24  |   |      |   | 36   |      |  |   | 17  |  
|Interest on debt                |  |                        | 109 |   |      |   | 131  |      |  |   | 131 |  
|Interest capitalized            |  |                        | (75 | ) |      |   | (52  | )    |  |   | (26 | )
|Interest income                 |  |                        | (1  | ) |      |   | (6   | )    |  |   | (1  | )
|Foreign exchange                |  |                        | (99 | ) |      |   | (215 | )    |  |   | 13  |  
|Income taxes                    |  |                        | (88 | ) |      |   | 45   |      |  |   | (90 | )
|                                |  |                        |     |   |      |   |      |      | 
|Earnings (loss)                 |  | $                      | 12  |   |      | $ | 50   |      |  | $ | (79 | )
|                                |  |                        |     |   |      |   |      |      | 






|    |                                                                                                 
|--- | ------------------------------------------------------------------------------------------------
|(1) | 2003 and 2002 amounts as restated. Refer to Note 3 to The
    Consolidated Financial Statements.

Foreign Exchange Summary


|                                                                         |                      |                        |       |       |      |   |       |       |   |   |       |       |  
|------------------------------------------------------------------------ | -------------------- | ---------------------- | ----- | ----- | ---- | - | ----- | ----- | - | - | ----- | ----- | -
|                                                                         |                      | Year ended December 31 |      
|                                                                         |                      |                        |      
|                                                                         |                      | 2004                   |       |       | 2003 |   |       | 2002  |  
|                                                                         |                      |                        |       |       |      |   |       |       |  
|                                                                         |                      | ($ millions)           |      
|(Gain) loss on translation of U.S. dollar denominated
    long-term debt |                      |                        |       |       |      |   |       |       |   |   |       |      
|                                                                         | Realized             |                        | $     | (10   | )    |   | $     | 11    |   |   | $     | 11    |  
|                                                                         | Unrealized           |                        |       | (119  | )    |   |       | (326  | ) |   |       | (11   | )
|                                                                         |                      |                        |       |       |      |   |       |       |  
|                                                                         |                      |                        | (129  | )     |      |   | (315  | )     |   |   |      |      
|                                                                         |                      |                        |       |       |      |   |       |       |  
|Cross currency swaps                                                     |                      |                        |       |       |      |   |       |       |   |   |       |      
|                                                                         | Realized             |                        |       |      |      |   |       | 32    |   |   |       |      |  
|                                                                         | Unrealized           |                        |       | 27    |      |   |       | 41    |   |   |       |      |  
|                                                                         |                      |                        |       |       |      |   |       |       |  
|                                                                         |                      |                        | 27    |       |      |   | 73    |       |   |   |      |      
|                                                                         |                      |                        |       |       |      |   |       |       |  
|Other losses                                                             |                      |                        | 3     |       |      |   | 27    |       |   |   | 13    |      
|                                                                         |                      |                        |       |       |      |   |       |       |  
|                                                                         |                      | $                      | (99   | )     |      | $ | (215  | )     |   | $ | 13    |      
|                                                                         |                      |                        |       |       |      |   |       |       |  
|U.S./Canadian dollar exchange rates:                                     |                      |                        |       |       |      |   |       |       |   |   |       |      
|                                                                         | At beginning of year |                        | U.S.$ | 0.774 |      |   | U.S.$ | 0.633 |   |   | U.S.$ | 0.628 |  
|                                                                         | At end of year       |                        | U.S.$ | 0.831 |      |   | U.S.$ | 0.774 |   |   | U.S.$ | 0.633 |  





| |   |                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------
| |  | lower foreign exchange gains                                                                              
|
| |  | stock-based compensation first recorded in June 2004 (refer to
    the section New Accounting Standards)

121



---



##### Table of Contents





| |   |                                      
| | - | -------------------------------------
| |  | higher intersegment profit eliminated
|
| |  | higher administration expenses       





| |   |                                                                                                
| | - | -----------------------------------------------------------------------------------------------
| |  | lower depreciation and amortization                                                            
|
| |  | lower interest expense resulting from lower rates                                              
|
| |  | higher capitalized interest resulting from a higher capital base
    for the White Rose project

Consolidated Income Taxes








|                                               |  |              |     |  |      |   |     | 
|---------------------------------------------- |  | ------------ | --- |  | ---- | - | --- | 
|                                               |  | 2004         |     |  | 2003 |  
|                                               |  |              |     |  |      |  
|                                               |  | ($ millions) |    
|Income taxes before tax amendments             |  | $            | 445 |  |      | $ | 637 | 
|Canadian federal and provincial tax amendments |  |              | 40  |  |      |   | 161 | 
|                                               |  |              |     |  |      |  
|Income taxes as reported                       |  | $            | 405 |  |      | $ | 476 | 
|                                               |  |              |     |  |      |  

Huskys Canadian Tax Pools


|                                            |  |              |       |  |      |   |       | 
|------------------------------------------- |  | ------------ | ----- |  | ---- | - | ----- | 
|                                            |  | Year ended   |      
|                                            |  | December 31  |      
|                                            |  |              |      
|                                            |  | 2004         |       |  | 2003 |  
|                                            |  |              |       |  |      |  
|                                            |  | ($ millions) |      
|Canadian exploration expense                |  | $            |      |  |      | $ | 42    | 
|Canadian development expense                |  |              | 1,616 |  |      |   | 1,103 | 
|Canadian oil and gas property expense       |  |              | 557   |  |      |   | 814   | 
|Foreign exploration and development expense |  |              | 212   |  |      |   | 142   | 
|Undepreciated capital costs                 |  |              | 3,269 |  |      |   | 2,909 | 
|Other                                       |  |              | 22    |  |      |   | 22    | 
|                                            |  |              |       |  |      |  
|                                            |  | $            | 5,676 |  |      | $ | 5,032 | 
|                                            |  |              |       |  |      |  

CAPITAL RESOURCES


Operating Activities




Financing Activities




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Investing Activities




Capital
Expenditures (1)


|                                                               |                              |                                |       |    |       |   |       |      |     |   |       |    |     | 
|-------------------------------------------------------------- | ---------------------------- | ------------------------------ | ----- | -- | ----- | - | ----- | ---- | --- | - | ----- | -- | --- | 
|                                                               |                              | Year ended December 31         |      
|                                                               |                              |                                |      
|                                                               |                              | 2004                           |       |    | 2003  |   |       | 2002 |    
|                                                               |                              |                                |       |    |       |   |       |      |    
|                                                               |                              | ($ millions)                   |      
|Upstream                                                       |                              |                                |       |    |       |   |       |      |     |   |       |   
|                                                               | Exploration                  |                                |       |    |       |   |       |      |     |   |       |    |    
|                                                               |                              | Western Canada                 |       | $  | 322   |   |       | $    | 326 |   |       | $  | 304 | 
|                                                               |                              | East Coast Canada and Frontier |       |    | 24    |   |       |      | 24  |   |       |    | 41  | 
|                                                               |                              | International                  |       |    | 18    |   |       |      | 26  |   |       |    | 9   | 
|                                                               |                              |                                |       |    |       |   |       |      |    
|                                                               |                              |                                | 364   |    |       |   | 376   |      |     |   | 354   |   
|                                                               |                              |                                |       |    |       |   |       |      |    
|                                                               | Development                  |                                |       |    |       |   |       |      |     |   |       |    |    
|                                                               |                              | Western Canada                 |       |    | 1,211 |   |       |      | 869 |   |       |    | 739 | 
|                                                               |                              | East Coast Canada              |       |    | 515   |   |       |      | 533 |   |       |    | 417 | 
|                                                               |                              | International                  |       |    | 67    |   |       |      |    |   |       |    | 66  | 
|                                                               |                              |                                |       |    |       |   |       |      |    
|                                                               |                              |                                | 1,793 |    |       |   | 1,402 |      |     |   | 1,222 |   
|                                                               |                              |                                |       |    |       |   |       |      |    
|                                                               |                              |                                | 2,157 |    |       |   | 1,778 |      |     |   | 1,576 |   
|                                                               |                              |                                |       |    |       |   |       |      |    
|Midstream                                                      |                              |                                |       |    |       |   |       |      |     |   |       |   
|                                                               | Upgrader                     |                                |       | 62 |       |   |       | 25   |     |   |       | 41 |    
|                                                               | Infrastructure and marketing |                                |       | 31 |       |   |       | 18   |     |   |       | 23 |    
|                                                               |                              |                                |       |    |       |   |       |      |    
|                                                               |                              |                                | 93    |    |       |   | 43    |      |     |   | 64    |   
|                                                               |                              |                                |       |    |       |   |       |      |    
|Refined Products                                               |                              |                                | 106   |    |       |   | 58    |      |     |   | 44    |   
|Corporate                                                      |                              |                                | 23    |    |       |   | 23    |      |     |   | 23    |   
|                                                               |                              |                                |       |    |       |   |       |      |    
|Capital expenditures                                           |                              |                                | 2,379 |    |       |   | 1,902 |      |     |   | 1,707 |   
|Settlement of asset retirement obligations                     |                              |                                | (30   | )  |       |   | (34   | )    |     |   | (16   | ) 
|                                                               |                              |                                |       |    |       |   |       |      |    
|Capital expenditures per Consolidated Statements of Cash Flows |                              | $                              | 2,349 |    |       | $ | 1,868 |      |     | $ | 1,691 |   
|                                                               |                              |                                |       |    |       |   |       |      |    






|    |                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------
|(1) | Excludes capitalized costs related to asset retirement
    obligations incurred during the period and corporate
    acquisitions.

Upstream Capital Expenditures


Western Canada








| |   |                                                                                                                                                                                                                                                                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | In 2004, we increased exploitation spending in the Lloydminster
    heavy oil area to $362 million. We hold in excess of one
    million net undeveloped acres in the Lloydminster area and have
    established an integrated infrastructure throughout the area.
    Spending in 2004 continued to focus on primary production
    utilizing cold

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | production techniques and thermal production utilizing cyclic
    steam and steam assisted gravity drainage techniques. Production
    from thermal operations accounted for approximately
    20 percent of heavy oil production from the Lloydminster
    area, up from 17 percent in 2003. In addition, considerable
    capital spending is devoted to optimization of existing
    operations employing updated technology and efficient practices.
    In 2003 and 2002, we spent $303 million and
    $273 million, respectively, in the Lloydminster area.                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |  | In 2004, we increased development spending in the foothills and
    Deep Basin region of Alberta and northeastern British Columbia
    and in the plains of northern Alberta to $464 million. We
    hold interests in well established operations at Rainbow Lake,
    Ram River, Valhalla/ Wapiti, Ansell/ Galloway, Boyer/ Haro,
    Martin Hills and Slave Lake. Spending in 2004 continued to focus
    primarily on natural gas potential, approximately 85 percent of
    this areas total development spending. In the plains area
    spending was primarily directed to step-out exploitation of
    shallow natural gas reservoirs and follow-up development of
    discoveries. The majority of our new field wildcat exploration
    drilling for natural gas is conducted in the foothills and Deep
    Basin of Alberta and northeastern British Columbia. In 2003 and
    2002, we spent $305 million and $306 million,
    respectively, in this area on exploration and development
    activities.
|
| |  | In 2004, we increased exploitation spending in the east central
    and southern areas of Alberta and southwestern Saskatchewan to
    $364 million, up from $259 million in 2003. Our
    operations consist of mature oil operations, including a number
    of waterfloods and extensive shallow natural gas primarily
    located at Sylvan Lake, Drumheller, Provost, Taber and Suffield
    in Alberta and Swift Current in Saskatchewan. Spending is
    focused on step-out exploitation and operational optimization.
    Over half of capital spending is directed toward natural gas
    assets including an emphasis in the new plays in the Shackleton,
    Lacadena and White Bear areas.                                                                                                                                                                                                                                                                                                               
|
| |  | In 2004, we spent $26 million on the development of the
    Tucker oil sands project.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 



Western Canada Drilling


|            |     |                        |       |     |      |  |       |       |  |  |       |     |  |       |       |     |     |  |       |     |  |  |       |     | 
|----------- | --- | ---------------------- | ----- | --- | ---- |  | ----- | ----- |  |  | ----- | --- |  | ----- | ----- | --- | --- |  | ----- | --- |  |  | ----- | --- | 
|            |     | Year ended December 31 |      
|            |     |                        |      
|            |     | 2004                   |       |     | 2003 |  |       | 2002  | 
|            |     |                        |       |     |      |  |       |       | 
|            |     | Gross                  |       |     | Net  |  |       | Gross |  |  | Net   |     |  | Gross |       |     | Net | 
|            |     |                        |       |     |      |  |       |       |  |  |       |     |  |       |       |     |     | 
|            |     | (wells)                |      
|Exploration |     |                        |       |     |      |  |       |       |  |  |       |     |  |       |       |     |     |  |       |     |  |  |       |    
|            | Oil |                        |       | 45  |      |  |       | 39    |  |  |       | 12  |  |       |       | 11  |     |  |       | 21  |  |  |       | 20  | 
|            | Gas |                        |       | 234 |      |  |       | 180   |  |  |       | 147 |  |       |       | 124 |     |  |       | 139 |  |  |       | 131 | 
|            | Dry |                        |       | 34  |      |  |       | 33    |  |  |       | 22  |  |       |       | 21  |     |  |       | 15  |  |  |       | 14  | 
|            |     |                        |       |     |      |  |       |       |  |  |       |     |  |       |       |     |     | 
|            |     |                        | 313   |     |      |  | 252   |       |  |  | 181   |     |  |       | 156   |     |     |  | 175   |     |  |  | 165   |    
|            |     |                        |       |     |      |  |       |       |  |  |       |     |  |       |       |     |     | 
|Development |     |                        |       |     |      |  |       |       |  |  |       |     |  |       |       |     |     |  |       |     |  |  |       |    
|            | Oil |                        |       | 552 |      |  |       | 499   |  |  |       | 520 |  |       |       | 490 |     |  |       | 497 |  |  |       | 453 | 
|            | Gas |                        |       | 807 |      |  |       | 740   |  |  |       | 540 |  |       |       | 518 |     |  |       | 485 |  |  |       | 453 | 
|            | Dry |                        |       | 57  |      |  |       | 53    |  |  |       | 60  |  |       |       | 57  |     |  |       | 58  |  |  |       | 55  | 
|            |     |                        |       |     |      |  |       |       |  |  |       |     |  |       |       |     |     | 
|            |     |                        | 1,416 |     |      |  | 1,292 |       |  |  | 1,120 |     |  |       | 1,065 |     |     |  | 1,040 |     |  |  | 961   |    
|            |     |                        |       |     |      |  |       |       |  |  |       |     |  |       |       |     |     | 
|Total       |     |                        | 1,729 |     |      |  | 1,544 |       |  |  | 1,301 |     |  |       | 1,221 |     |     |  | 1,215 |     |  |  | 1,126 |    
|            |     |                        |       |     |      |  |       |       |  |  |       |     |  |       |       |     |     | 

East Coast Canada




124



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International






Midstream Capital Expenditures




Refined Products Capital Expenditures




Corporate Capital Expenditures




Oil and Gas Reserves










125



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Reconciliation of Proved
Reserves (1)


|                                     |                               |                                   |     |     |            |  |    |               |   |  |         |      |   |           |       |      |           |  |    |           |   |  |         |    |   |         |     |      |   |  |       |      |   |  |     |      |  
|------------------------------------ | ----------------------------- | --------------------------------- | --- | --- | ---------- |  | -- | ------------- | - |  | ------- | ---- | - | --------- | ----- | ---- | --------- |  | -- | --------- | - |  | ------- | -- | - | ------- | --- | ---- | - |  | ----- | ---- | - |  | --- | ---- | -
|                                     |                               | Canada                            |     |     |            |  |    |               |   |  |        
|                                     |                               |                                   |     |     |            |  |    |               |   |  |        
|                                     |                               | Western Canada                    |     |     | East Coast |  |    | International |   |  | Total   |     
|                                     |                               |                                   |     |     |            |  |    |               |   |  |         |     
|                                     |                               | Light                             |     |     |            |  |    |               |   |  |        
|                                     |                               | Crude Oil                         |     |     | Medium     |  |    | Heavy         |   |  | Natural |      |   | Light     |       |      | Light     |  |    | Crude Oil |   |  | Natural |    |   |        
|                                     |                               | & NGL                             |     |     | Crude Oil  |  |    | Crude Oil     |   |  | Gas     |      |   | Crude Oil |       |      | Crude Oil |  |    | & NGL     |   |  | Gas     |    |   |        
|                                     |                               | (mmbbls)                          |     |     | (mmbbls)   |  |    | (mmbbls)      |   |  | (bcf)   |      |   | (mmbbls)  |       |      | (mmbbls)  |  |    | (mmbbls)  |   |  | (bcf)   |    |   | (mmboe) |    
|                                     |                               |                                   |     |     |            |  |    |               |   |  |         |      |   |           |       |      |           |  |    |           |   |  |         |    |   |         |    
|                                     |                               | (constant price before royalties) |    
|Proved reserves at December 31, 2003 |                               |                                   | 173 |     |            |  | 94 |               |   |  | 227     |      |   |           | 2,059 |      |           |  | 26 |           |   |  | 24      |    |   |         | 544 |      |   |  | 2,059 |      |   |  | 887 |     
|                                     | Revision of previous estimate |                                   |     | 1   |            |  |    | 1             |   |  |         | (114 | ) |           |       | (23  | )         |  |    | (1        | ) |  |         | 3  |   |         |     | (110 | ) |  |       | (23  | ) |  |     | (114 | )
|                                     | Purchase of reserves in place |                                   |     | 1   |            |  |    |              |   |  |         |     |   |           |       | 23   |           |  |    |          |   |  |         |   |   |         |     | 1    |   |  |       | 23   |   |  |     | 5    |  
|                                     | Sale of reserves in place     |                                   |     |    |            |  |    |              |   |  |         | (1   | ) |           |       | (14  | )         |  |    |          |   |  |         |   |   |         |     | (1   | ) |  |       | (14  | ) |  |     | (3   | )
|                                     | Extensions and discoveries    |                                   |     | 7   |            |  |    | 2             |   |  |         | 32   |   |           |       | 372  |           |  |    | 24        |   |  |         |   |   |         |     | 65   |   |  |       | 372  |   |  |     | 127  |  
|                                     | Improved recovery             |                                   |     | 1   |            |  |    | 2             |   |  |         | 1    |   |           |       | 4    |           |  |    | 3         |   |  |         |   |   |         |     | 7    |   |  |       | 4    |   |  |     | 8    |  
|                                     | Production                    |                                   |     | (12 | )          |  |    | (13           | ) |  |         | (40  | ) |           |       | (252 | )         |  |    | (5        | ) |  |         | (7 | ) |         |     | (77  | ) |  |       | (252 | ) |  |     | (119 | )
|                                     |                               |                                   |     |     |            |  |    |               |   |  |         |      |   |           |       |      |           |  |    |           |   |  |         |    |   |         |    
|Proved reserves at December 31, 2004 |                               |                                   | 171 |     |            |  | 86 |               |   |  | 105     |      |   |           | 2,169 |      |           |  | 47 |           |   |  | 20      |    |   |         | 429 |      |   |  | 2,169 |      |   |  | 791 |     
|                                     |                               |                                   |     |     |            |  |    |               |   |  |         |      |   |           |       |      |           |  |    |           |   |  |         |    |   |         |    






|    |                                                                                                                                                                                                                                                                                     
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Proved reserves are the estimated quantities of crude oil,
    natural gas and NGL which geological and engineering data
    demonstrate with reasonable certainty to be recoverable in
    future years from known reservoirs under existing economic and
    operating conditions.





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|                                                                      |  |                |     |  |            |  |    |               |  |  |         |  |  |           |       |  |           |  |    |           |  |  |         |  |  |         |     |  |  |  |       |  |  |  |     | 
|--------------------------------------------------------------------- |  | -------------- | --- |  | ---------- |  | -- | ------------- |  |  | ------- |  |  | --------- | ----- |  | --------- |  | -- | --------- |  |  | ------- |  |  | ------- | --- |  |  |  | ----- |  |  |  | --- | 
|                                                                      |  | Canada         |     |  |            |  |    |               |  |  |        
|                                                                      |  |                |     |  |            |  |    |               |  |  |        
|                                                                      |  | Western Canada |     |  | East Coast |  |    | International |  |  | Total   | 
|                                                                      |  |                |     |  |            |  |    |               |  |  |         | 
|                                                                      |  | Light          |     |  |            |  |    |               |  |  |        
|                                                                      |  | Crude Oil      |     |  | Medium     |  |    | Heavy         |  |  | Natural |  |  | Light     |       |  | Light     |  |    | Crude Oil |  |  | Natural |  |  |        
|                                                                      |  | & NGL          |     |  | Crude Oil  |  |    | Crude Oil     |  |  | Gas     |  |  | Crude Oil |       |  | Crude Oil |  |    | & NGL     |  |  | Gas     |  |  |        
|                                                                      |  | (mmbbls)       |     |  | (mmbbls)   |  |    | (mmbbls)      |  |  | (bcf)   |  |  | (mmbbls)  |       |  | (mmbbls)  |  |    | (mmbbls)  |  |  | (bcf)   |  |  | (mmboe) |    
|                                                                      |  |                |     |  |            |  |    |               |  |  |         |  |  |           |       |  |           |  |    |           |  |  |         |  |  |         |    
|Proved reserves at                                                    |  |                |     |  |            |  |    |               |  |  |         |  |  |           |       |  |           |  |    |           |  |  |         |  |  |         |     |  |  |  |       |  |  |  |     | 
|December 31, 2004                                                     |  |                | 171 |  |            |  | 86 |               |  |  | 105     |  |  |           | 2,169 |  |           |  | 47 |           |  |  | 20      |  |  |         | 429 |  |  |  | 2,169 |  |  |  | 791 | 
|Heavy oil price revision at $12.27                                    |  |                |    |  |            |  |   |               |  |  | 120     |  |  |           | 3     |  |           |  |   |           |  |  |        |  |  |         | 120 |  |  |  | 3     |  |  |  | 120 | 
|                                                                      |  |                |     |  |            |  |    |               |  |  |         |  |  |           |       |  |           |  |    |           |  |  |         |  |  |         |    
|Proved reserves excluding heavy oil revision at
    December 31, 2004 |  |                | 171 |  |            |  | 86 |               |  |  | 225     |  |  |           | 2,172 |  |           |  | 47 |           |  |  | 20      |  |  |         | 549 |  |  |  | 2,172 |  |  |  | 911 | 
|                                                                      |  |                |     |  |            |  |    |               |  |  |         |  |  |           |       |  |           |  |    |           |  |  |         |  |  |         |    







Reconciliation of Proved Developed
Reserves (1)


|                                               |                   |                                   |     |     |            |   |    |               |     |   |         |     |     |           |       |       |           |   |    |           |    |   |         |    |    |         |     |     |     |   |       |       |      |   |     |     |      |  
|---------------------------------------------- | ----------------- | --------------------------------- | --- | --- | ---------- | - | -- | ------------- | --- | - | ------- | --- | --- | --------- | ----- | ----- | --------- | - | -- | --------- | -- | - | ------- | -- | -- | ------- | --- | --- | --- | - | ----- | ----- | ---- | - | --- | --- | ---- | -
|                                               |                   | Canada                            |     |     |            |   |    |               |     |   |        
|                                               |                   |                                   |     |     |            |   |    |               |     |   |        
|                                               |                   | Western Canada                    |     |     | East Coast |   |    | International |     |   | Total   |    
|                                               |                   |                                   |     |     |            |   |    |               |     |   |         |    
|                                               |                   | Light                             |     |     |            |   |    |               |     |   |        
|                                               |                   | Crude Oil                         |     |     | Medium     |   |    | Heavy         |     |   | Natural |     |     | Light     |       |       | Light     |   |    | Crude Oil |    |   | Natural |    |    |        
|                                               |                   | & NGL                             |     |     | Crude Oil  |   |    | Crude Oil     |     |   | Gas     |     |     | Crude Oil |       |       | Crude Oil |   |    | & NGL     |    |   | Gas     |    |    |        
|                                               |                   | (mmbbls)                          |     |     | (mmbbls)   |   |    | (mmbbls)      |     |   | (bcf)   |     |     | (mmbbls)  |       |       | (mmbbls)  |   |    | (mmbbls)  |    |   | (bcf)   |    |    | (mmboe) |    
|                                               |                   |                                   |     |     |            |   |    |               |     |   |         |     |     |           |       |       |           |   |    |           |    |   |         |    |    |         |    
|                                               |                   | (constant price before royalties) |    
|Proved developed reserves at                   |                   |                                   |     |     |            |   |    |               |     |   |         |     |     |           |       |       |           |   |    |           |    |   |         |    |    |         |     |     |     |   |       |       |      |   |     |    
|                                               | December 31, 2003 |                                   |     | 159 |            |   |    | 86            |     |   |         | 156 |     |           |       | 1,712 |           |   |    | 17        |    |   |         | 24 |    |         |     | 442 |     |   |       | 1,712 |      |   |     | 727 |     
|                                               |                   | Revision of previous estimate     |     |     | 4          |   |    |               | 3   |   |         |     | (43 | )         |       |       | 114       |   |    |           | 1  |   |         |    | 3  |         |     |     | (32 | ) |       |       | 114  |   |     |     | (14  | )
|                                               |                   | Purchase of reserves in place     |     |     | 1          |   |    |               |    |   |         |     |    |           |       |       | 22        |   |    |           |   |   |         |    |   |         |     |     | 1   |   |       |       | 22   |   |     |     | 5    |  
|                                               |                   | Sale of reserves in place         |     |     |           |   |    |               |    |   |         |     | (1  | )         |       |       | (14       | ) |    |           |   |   |         |    |   |         |     |     | (1  | ) |       |       | (14  | ) |     |     | (3   | )
|                                               |                   | Extensions and discoveries        |     |     | 3          |   |    |               | 2   |   |         |     | 19  |           |       |       | 159       |   |    |           |   |   |         |    |   |         |     |     | 24  |   |       |       | 159  |   |     |     | 51   |  
|                                               |                   | Improved recovery                 |     |     |           |   |    |               | 2   |   |         |     |    |           |       |       | 4         |   |    |           | 3  |   |         |    |   |         |     |     | 5   |   |       |       | 4    |   |     |     | 6    |  
|                                               |                   | Production                        |     |     | (12        | ) |    |               | (13 | ) |         |     | (40 | )         |       |       | (252      | ) |    |           | (5 | ) |         |    | (7 | )       |     |     | (77 | ) |       |       | (252 | ) |     |     | (119 | )
|                                               |                   |                                   |     |     |            |   |    |               |     |   |         |     |     |           |       |       |           |   |    |           |    |   |         |    |    |         |    
|Proved developed reserves at December 31, 2004 |                   |                                   | 155 |     |            |   | 80 |               |     |   | 91      |     |     |           | 1,745 |       |           |   | 16 |           |    |   | 20      |    |    |         | 362 |     |     |   | 1,745 |       |      |   | 653 |    
|                                               |                   |                                   |     |     |            |   |    |               |     |   |         |     |     |           |       |       |           |   |    |           |    |   |         |    |    |         |    






|    |                                                                                                                                                                      
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Proved developed oil and gas reserves are reserves that can be
    expected to be recovered through existing wells with existing
    equipment and operating methods.

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|                                                                                |                   |                |     |     |            |  |    |               |  |  |         |    |  |           |       |       |           |  |    |           |  |  |         |    |  |         |     |     |  |  |       |       |  |  |     |     | 
|------------------------------------------------------------------------------- | ----------------- | -------------- | --- | --- | ---------- |  | -- | ------------- |  |  | ------- | -- |  | --------- | ----- | ----- | --------- |  | -- | --------- |  |  | ------- | -- |  | ------- | --- | --- |  |  | ----- | ----- |  |  | --- | --- | 
|                                                                                |                   | Canada         |     |     |            |  |    |               |  |  |        
|                                                                                |                   |                |     |     |            |  |    |               |  |  |        
|                                                                                |                   | Western Canada |     |     | East Coast |  |    | International |  |  | Total   |   
|                                                                                |                   |                |     |     |            |  |    |               |  |  |         |   
|                                                                                |                   | Light          |     |     |            |  |    |               |  |  |        
|                                                                                |                   | Crude Oil      |     |     | Medium     |  |    | Heavy         |  |  | Natural |    |  | Light     |       |       | Light     |  |    | Crude Oil |  |  | Natural |    |  |        
|                                                                                |                   | & NGL          |     |     | Crude Oil  |  |    | Crude Oil     |  |  | Gas     |    |  | Crude Oil |       |       | Crude Oil |  |    | & NGL     |  |  | Gas     |    |  |        
|                                                                                |                   | (mmbbls)       |     |     | (mmbbls)   |  |    | (mmbbls)      |  |  | (bcf)   |    |  | (mmbbls)  |       |       | (mmbbls)  |  |    | (mmbbls)  |  |  | (bcf)   |    |  | (mmboe) |    
|                                                                                |                   |                |     |     |            |  |    |               |  |  |         |    |  |           |       |       |           |  |    |           |  |  |         |    |  |         |    
|Proved developed reserves at                                                    |                   |                |     |     |            |  |    |               |  |  |         |    |  |           |       |       |           |  |    |           |  |  |         |    |  |         |     |     |  |  |       |       |  |  |     |    
|                                                                                | December 31, 2004 |                |     | 155 |            |  |    | 80            |  |  |         | 91 |  |           |       | 1,745 |           |  |    | 16        |  |  |         | 20 |  |         |     | 362 |  |  |       | 1,745 |  |  |     | 653 | 
|Heavy oil price revision at $12.27                                              |                   |                |    |     |            |  |   |               |  |  | 60      |    |  |           | 3     |       |           |  |   |           |  |  |        |    |  |         | 60  |     |  |  | 3     |       |  |  | 61  |    
|                                                                                |                   |                |     |     |            |  |    |               |  |  |         |    |  |           |       |       |           |  |    |           |  |  |         |    |  |         |    
|Proved developed reserves excluding heavy oil revision at
    December 31, 2004 |                   |                | 155 |     |            |  | 80 |               |  |  | 151     |    |  |           | 1,748 |       |           |  | 16 |           |  |  | 20      |    |  |         | 422 |     |  |  | 1,748 |       |  |  | 714 |    
|                                                                                |                   |                |     |     |            |  |    |               |  |  |         |    |  |           |       |       |           |  |    |           |  |  |         |    |  |         |    

Crude Oil and Natural Gas Reserves Summary


|                   |             |                                   |       |        |             |  |       |              |  |  |                     |     |  |      |     |    |      |  |     |      |  |  |      |    |  |      |       |     |      |  |       |      |  |  |       |     |  |  |       |     |  |  |       |     |  |  |       |     | 
|------------------ | ----------- | --------------------------------- | ----- | ------ | ----------- |  | ----- | ------------ |  |  | ------------------- | --- |  | ---- | --- | -- | ---- |  | --- | ---- |  |  | ---- | -- |  | ---- | ----- | --- | ---- |  | ----- | ---- |  |  | ----- | --- |  |  | ----- | --- |  |  | ----- | --- |  |  | ----- | --- | 
|                   |             |                                   |       | Proved |             |  |       |              | 
|                   |             | Proved Developed                  |       |        | Undeveloped |  |       | Total Proved |  |  | Proved and Probable |    
|                   |             |                                   |       |        |             |  |       |              |  |  |                     |    
|                   |             | 2004                              |       |        | 2003        |  |       | 2002         |  |  | 2004                |     |  | 2003 |     |    | 2002 |  |     | 2004 |  |  | 2003 |    |  | 2002 |       |     | 2004 |  |       | 2003 |  |  | 2002  |    
|                   |             |                                   |       |        |             |  |       |              |  |  |                     |     |  |      |     |    |      |  |     |      |  |  |      |    |  |      |       |     |      |  |       |      |  |  |       |    
|                   |             | (constant price before royalties) |      
|Crude oil (mmbbls) |             |                                   |       |        |             |  |       |              |  |  |                     |     |  |      |     |    |      |  |     |      |  |  |      |    |  |      |       |     |      |  |       |      |  |  |       |     |  |  |       |     |  |  |       |     |  |  |       |    
|                   | Light & NGL |                                   |       | 191    |             |  |       | 200          |  |  |                     | 193 |  |      |     | 47 |      |  |     | 23   |  |  |      | 42 |  |      |       | 238 |      |  |       | 223  |  |  |       | 235 |  |  |       | 465 |  |  |       | 474 |  |  |       | 511 | 
|                   | Medium      |                                   |       | 80     |             |  |       | 86           |  |  |                     | 94  |  |      |     | 6  |      |  |     | 8    |  |  |      | 13 |  |      |       | 86  |      |  |       | 94   |  |  |       | 107 |  |  |       | 96  |  |  |       | 108 |  |  |       | 131 | 
|                   | Heavy       |                                   |       | 91     |             |  |       | 156          |  |  |                     | 152 |  |      |     | 14 |      |  |     | 71   |  |  |      | 75 |  |      |       | 105 |      |  |       | 227  |  |  |       | 227 |  |  |       | 150 |  |  |       | 319 |  |  |       | 379 | 
|                   | Bitumen     |                                   |       |       |             |  |       |             |  |  |                     |    |  |      |     |   |      |  |     |     |  |  |      |   |  |      |       |    |      |  |       |     |  |  |       |    |  |  |       | 79  |  |  |       | 79  |  |  |       |    | 
|                   |             |                                   |       |        |             |  |       |              |  |  |                     |     |  |      |     |    |      |  |     |      |  |  |      |    |  |      |       |     |      |  |       |      |  |  |       |    
|                   |             |                                   | 362   |        |             |  | 442   |              |  |  | 439                 |     |  |      | 67  |    |      |  | 102 |      |  |  | 130  |    |  |      | 429   |     |      |  | 544   |      |  |  | 569   |     |  |  | 790   |     |  |  | 980   |     |  |  | 1,021 |    
|Natural gas (bcf)  |             |                                   | 1,745 |        |             |  | 1,712 |              |  |  | 1,547               |     |  |      | 424 |    |      |  | 347 |      |  |  | 548  |    |  |      | 2,169 |     |      |  | 2,059 |      |  |  | 2,095 |     |  |  | 2,724 |     |  |  | 2,507 |     |  |  | 2,497 |    
|                   |             |                                   |       |        |             |  |       |              |  |  |                     |     |  |      |     |    |      |  |     |      |  |  |      |    |  |      |       |     |      |  |       |      |  |  |       |    
|Total (mmboe)      |             |                                   | 653   |        |             |  | 727   |              |  |  | 697                 |     |  |      | 138 |    |      |  | 160 |      |  |  | 221  |    |  |      | 791   |     |      |  | 887   |      |  |  | 918   |     |  |  | 1,244 |     |  |  | 1,397 |     |  |  | 1,437 |    
|                   |             |                                   |       |        |             |  |       |              |  |  |                     |     |  |      |     |    |      |  |     |      |  |  |      |    |  |      |       |     |      |  |       |      |  |  |       |    

LIQUIDITY


Sources of Capital




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|                                                 |                                                     |                                                   |       |       |      |   |       |       |     |   |       |       |     | 
|------------------------------------------------ | --------------------------------------------------- | ------------------------------------------------- | ----- | ----- | ---- | - | ----- | ----- | --- | - | ----- | ----- | --- | 
|                                                 |                                                     | 2004                                              |       |       | 2003 |   |       | 2002  |    
|                                                 |                                                     |                                                   |       |       |      |   |       |       |    
|                                                 |                                                     | ($ millions)                                      |      
|Cash sourced                                     |                                                     |                                                   |       |       |      |   |       |       |     |   |       |      
|                                                 | Cash flow from operations (1)                       |                                                   | $     | 2,223 |      |   | $     | 2,459 |     |   | $     | 2,096 |    
|                                                 | Debt issue                                          |                                                   |       | 2,200 |      |   |       | 669   |     |   |       | 972   |    
|                                                 | Asset sales                                         |                                                   |       | 36    |      |   |       | 511   |     |   |       | 93    |    
|                                                 | Proceeds from exercise of stock options             |                                                   |       | 18    |      |   |       | 51    |     |   |       | 9     |    
|                                                 | Proceeds from monetization of financial instruments |                                                   |       | 8     |      |   |       | 44    |     |   |       |      |    
|                                                 | Other                                               |                                                   |       |      |      |   |       | 5     |     |   |       |      |    
|                                                 |                                                     |                                                   |       |       |      |   |       |       |    
|                                                 |                                                     |                                                   | 4,485 |       |      |   | 3,739 |       |     |   | 3,170 |      
|                                                 |                                                     |                                                   |       |       |      |   |       |       |    
|Cash used                                        |                                                     |                                                   |       |       |      |   |       |       |     |   |       |      
|                                                 | Capital expenditures                                |                                                   |       | 2,349 |      |   |       | 1,868 |     |   |       | 1,691 |    
|                                                 | Corporate acquisitions                              |                                                   |       | 102   |      |   |       | 809   |     |   |       | 3     |    
|                                                 | Debt repayment                                      |                                                   |       | 1,959 |      |   |       | 971   |     |   |       | 778   |    
|                                                 | Special dividend on common shares                   |                                                   |       | 229   |      |   |       | 420   |     |   |       |      |    
|                                                 | Ordinary dividends on common shares                 |                                                   |       | 195   |      |   |       | 160   |     |   |       | 151   |    
|                                                 | Return on capital securities payment                |                                                   |       | 26    |      |   |       | 29    |     |   |       | 31    |    
|                                                 | Settlement of asset retirement obligations          |                                                   |       | 40    |      |   |       | 34    |     |   |       | 16    |    
|                                                 | Settlement of cross currency swap                   |                                                   |       |      |      |   |       | 32    |     |   |       |      |    
|                                                 | Other                                               |                                                   |       | 24    |      |   |       |      |     |   |       | 29    |    
|                                                 |                                                     |                                                   |       |       |      |   |       |       |    
|                                                 |                                                     |                                                   | 4,924 |       |      |   | 4,323 |       |     |   | 2,699 |      
|                                                 |                                                     |                                                   |       |       |      |   |       |       |    
|Net cash (deficiency)                            |                                                     |                                                   | (439  | )     |      |   | (584  | )     |     |   | 471   |      
|Increase (decrease) in non-cash working capital  |                                                     |                                                   | 443   |       |      |   | 281   |       |     |   | (165  | )    
|                                                 |                                                     |                                                   |       |       |      |   |       |       |    
|Increase (decrease) in cash and cash equivalents |                                                     |                                                   | 4     |       |      |   | (303  | )     |     |   | 306   |      
|Cash and cash equivalents  beginning of year    |                                                     |                                                   | 3     |       |      |   | 306   |       |     |   |      |      
|                                                 |                                                     |                                                   |       |       |      |   |       |       |    
|Cash and cash equivalents  end of year          |                                                     | $                                                 | 7     |       |      | $ | 3     |       |     | $ | 306   |      
|                                                 |                                                     |                                                   |       |       |      |   |       |       |    
|Increase (decrease) in non-cash working capital  |                                                     |                                                   |       |       |      |   |       |       |     |   |       |      
|                                                 | Cash positive working capital change                |                                                   |       |       |      |   |       |       |     |   |       |       |    
|                                                 |                                                     | Accounts receivable decrease                      |       | $     | 209  |   |       | $     |    |   |       | $     |    | 
|                                                 |                                                     | Inventory decrease                                |       |       |     |   |       |       | 28  |   |       |       |    | 
|                                                 |                                                     | Prepaid expense decrease                          |       |       |     |   |       |       |    |   |       |       | 1   | 
|                                                 |                                                     | Accounts payable and accrued liabilities increase |       |       | 323  |   |       |       | 270 |   |       |       |    | 
|                                                 |                                                     |                                                   |       |       |      |   |       |       |    
|                                                 |                                                     |                                                   | 532   |       |      |   | 298   |       |     |   | 1     |      
|                                                 | Cash negative working capital change                |                                                   |       |       |      |   |       |       |     |   |       |       |    
|                                                 |                                                     | Accounts receivable increase                      |       |       |     |   |       |       | 7   |   |       |       | 153 | 
|                                                 |                                                     | Inventory increase                                |       |       | 77   |   |       |       |    |   |       |       | 2   | 
|                                                 |                                                     | Prepaid expense increase                          |       |       | 12   |   |       |       | 10  |   |       |       |    | 
|                                                 |                                                     | Accounts payable and accrued liabilities decrease |       |       |     |   |       |       |    |   |       |       | 11  | 
|                                                 |                                                     |                                                   |       |       |      |   |       |       |    
|                                                 |                                                     |                                                   | 89    |       |      |   | 17    |       |     |   | 166   |      
|                                                 |                                                     |                                                   |       |       |      |   |       |       |    
|                                                 | Increase (decrease) in non-cash working capital     |                                                   | $     | 443   |      |   | $     | 281   |     |   | $     | (165  | )  
|                                                 |                                                     |                                                   |       |       |      |   |       |       |    






|    |                                                                                                                                                                                                      
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Cash flow from operations represents net earnings plus items not
    affecting cash, which include accretion, depletion, depreciation
    and amortization, future income taxes and foreign exchange.

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Capital Structure


|                                    |                              |                   |       |       |           |   |       |          |  |   |       |     | 
|----------------------------------- | ---------------------------- | ----------------- | ----- | ----- | --------- | - | ----- | -------- |  | - | ----- | --- | 
|                                    |                              | December 31, 2004 |      
|                                    |                              |                   |      
|                                    |                              | Outstanding       |       |       | Available |  
|                                    |                              |                   |       |       |           |  
|                                    |                              | (U.S. $)          |       |       | (Cdn. $)  |   |       | (Cdn. $) | 
|                                    |                              | ($ millions)      |      
|Short-term bank debt                |                              | $                 | 5     |       |           | $ | 49    |          |  | $ | 123   |    
|Long-term bank debt                 |                              |                   |       |       |           |   |       |          |  |   |       |    
|                                    | Syndicated credit facility   |                   |       |      |           |   |       | 70       |  |   |       | 880 | 
|                                    | Bilateral credit facility    |                   |       |      |           |   |       | 40       |  |   |       | 110 | 
|                                    | Medium-term notes            |                   |       |      |           |   |       | 300      |  |   |       |     | 
|                                    | U.S. public notes            |                   |       | 1,050 |           |   |       | 1,264    |  |   |       |     | 
|                                    | U.S. senior secured bonds    |                   |       | 117   |           |   |       | 140      |  |   |       |     | 
|                                    | U.S. private placement notes |                   |       | 15    |           |   |       | 18       |  |   |       |     | 
|                                    |                              |                   |       |       |           |   |       |          | 
|Total short-term and long-term debt |                              | $                 | 1,187 |       |           | $ | 1,881 |          |  | $ | 1,113 |    
|                                    |                              |                   |       |       |           |   |       |          | 
|Capital securities                  |                              | $                 | 225   |       |           | $ | 271   |          |  |   |       |    
|Common shares and retained earnings |                              |                   |       |       |           | $ | 6,200 |          |  |   |       |    

















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Financial Ratios


|                                   |  |                        |        |   |      |   |        |      |  |   |        |  
|---------------------------------- |  | ---------------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                   |  | Year ended December 31 |       
|                                   |  |                        |       
|                                   |  | 2004                   |        |   | 2003 |   |        | 2002 | 
|                                   |  |                        |        |   |      |   |        |      | 
|                                   |  | ($ millions)           |       
|Cash flow  operating activities   |  | $                      | 2,352  |   |      | $ | 2,538  |      |  | $ | 1,882  |  
| financing activities             |  | $                      | 149    |   |      | $ | (800   | )    |  | $ | 3      |  
| investing activities             |  | $                      | (2,497 | ) |      | $ | (2,041 | )    |  | $ | (1,579 | )
|Debt to capital employed (percent) |  |                        | 22.5   |   |      |   | 23.0   |      |  |   | 31.7   |  
|Corporate reinvestment ratio (1)   |  |                        | 1.1    |   |      |   | 0.9    |      |  |   | 0.8    |  






|    |                                                                                              
|--- | ---------------------------------------------------------------------------------------------
|(1) | Reinvestment ratio is based on net capital expenditures
    including corporate acquisitions.

Credit Ratings




Capital Requirements




|                 |                   |                  |       |       | 
|---------------- | ----------------- | ---------------- | ----- | ----- | 
|                 |                   | Year ended       |      
|                 |                   | December 31      |      
|                 |                   | 2005 Estimate(1) |      
|                 |                   |                  |      
|                 |                   | ($ millions)     |      
|Upstream         |                   |                  |       |      
|                 | Western Canada    |                  | $     | 1,688 | 
|                 | East Coast Canada |                  |       | 556   | 
|                 | International     |                  |       | 44    | 
|                 |                   |                  |      
|                 |                   |                  | 2,288 |      
|Midstream        |                   |                  | 140   |      
|Refined Products |                   |                  | 240   |      
|Corporate        |                   |                  | 25    |      
|                 |                   |                  |      
|                 |                   | $                | 2,693 |      
|                 |                   |                  |      






|    |                                                                                                          
|--- | ---------------------------------------------------------------------------------------------------------
|(1) | Includes capitalized interest of $112 million and
    capitalized administration expenses of $36 million.

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Contractual Obligations and Commercial Commitments




Contractual
Obligations (1)(2)


|                                         |  |                        |       |  |      |   |       |           |  |   |           |  |  |            |       |  |  |   |       | 
|---------------------------------------- |  | ---------------------- | ----- |  | ---- | - | ----- | --------- |  | - | --------- |  |  | ---------- | ----- |  |  | - | ----- | 
|                                         |  | Payments due by period |      
|                                         |  |                        |      
|                                         |  | Total                  |       |  | 2005 |   |       | 2006-2007 |  |   | 2008-2009 |  |  | Thereafter |      
|                                         |  |                        |       |  |      |   |       |           |  |   |           |  |  |            |      
|                                         |  | ($ millions)           |      
|Long-term debt (3)                       |  | $                      | 1,832 |  |      | $ | 56    |           |  | $ | 445       |  |  | $          | 233   |  |  | $ | 1,098 | 
|Capital securities (3)                   |  |                        | 271   |  |      |   |      |           |  |   |          |  |  |            | 271   |  |  |   |      | 
|Operating leases                         |  |                        | 554   |  |      |   | 68    |           |  |   | 152       |  |  |            | 151   |  |  |   | 183   | 
|Firm transportation agreements           |  |                        | 1,061 |  |      |   | 213   |           |  |   | 375       |  |  |            | 262   |  |  |   | 211   | 
|Unconditional purchase obligations       |  |                        | 1,481 |  |      |   | 593   |           |  |   | 684       |  |  |            | 87    |  |  |   | 117   | 
|Lease rentals                            |  |                        | 330   |  |      |   | 44    |           |  |   | 88        |  |  |            | 88    |  |  |   | 110   | 
|Exploration work agreements              |  |                        | 50    |  |      |   | 27    |           |  |   | 15        |  |  |            |      |  |  |   | 8     | 
|Engineering and construction commitments |  |                        | 967   |  |      |   | 572   |           |  |   | 383       |  |  |            | 12    |  |  |   |      | 
|                                         |  |                        |       |  |      |   |       |           |  |   |           |  |  |            |      
|                                         |  | $                      | 6,546 |  |      | $ | 1,573 |           |  | $ | 2,142     |  |  | $          | 1,104 |  |  | $ | 1,727 | 
|                                         |  |                        |       |  |      |   |       |           |  |   |           |  |  |            |      






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The above table does not include asset retirement obligations.
    The Company currently includes such obligations in the
    amortizing base of its oil and gas properties. Effective
    January 1, 2004 with the adoption of the Canadian Institute
    of Chartered Accountants section 3110, Asset Retirement
    Obligations, the Company records a separate liability for
    the fair value of its asset retirement obligations. See
    Note 12 to the Consolidated Financial Statements.                   
|   
|(2) | The above table does not include post-retirement obligations.
    Husky has a defined contribution pension plan and a
    post-retirement health and dental care plan for its employees.
    In addition Husky has a defined benefit pension plan for
    approximately 200 employees. In 1991 admittance to the defined
    benefit pension plan ended after the majority of members
    transferred to the newly created defined contribution pension
    plan. See Note 17 to the Consolidated Financial Statements.
|   
|(3) | Obligation related to long-term debt includes principal
    repayments only. If interest payable on our fixed interest rate
    debt was included, the total amount of the obligation would
    increase by $897 million. If the return on capital
    securities was included, assuming the capital securities were
    redeemed in 2008, the obligation would increase by
    $84 million.                                                                                                                           

Investment Canada Undertakings




Other Obligations




OFF BALANCE SHEET ARRANGEMENTS








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TRANSACTIONS WITH RELATED PARTIES AND MAJOR CUSTOMERS






FINANCIAL AND DERIVATIVE INSTRUMENTS




Commodity Price Risk Management






Natural Gas




Crude Oil




Power Consumption




|                     |  |          |      |  |      |  |                   |       |              |   |             |  |  |   |      |  
|-------------------- |  | -------- | ---- |  | ---- |  | ----------------- | ----- | ------------ | - | ----------- |  |  | - | ---- | -
|                     |  | Notional |      |  |      |  |                   |       | Unrecognized |  
|                     |  | Volumes  |      |  | Term |  |                   | Price |              |   | Gain (Loss) | 
|                     |  |          |      |  |      |  |                   |       |              |   |             | 
|                     |  | (MW)     |      |  |      |  |                   |       | ($ millions) |  
|Fixed price purchase |  |          | 10.0 |  |      |  | Jan. to Dec. 2005 |       |              | $ | 49.25/MWh   |  |  | $ | (0.1 | )
|                     |  |          | 12.5 |  |      |  | Jan. to Dec. 2005 |       |              | $ | 50.50/MWh   |  |  |   | (0.3 | )
|                     |  |          | 15.0 |  |      |  | Jan. to Jun. 2005 |       |              | $ | 48.00/MWh   |  |  |   | (0.2 | )
|                     |  |          |      |  |      |  |                   |       |              |   |             | 
|                     |  |          |      |  |      |  |                   |       |              |   |             |  |  | $ | (0.6 | )
|                     |  |          |      |  |      |  |                   |       |              |   |             | 

Foreign Currency Risk Management






| |   |                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------
| |  | U.S. $150 million at 7.125 percent swapped at $1.45 to
    $218 million at 8.74 percent until November 15,
    2006.
|
| |  | U.S. $150 million at 6.250 percent swapped at $1.41 to
    $212 million at 7.41 percent until June 15, 2012.        







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Interest Rate Risk Management














APPLICATION OF CRITICAL ACCOUNTING ESTIMATES






Full Cost Accounting for Oil and Gas Activities








| |   |                                                                                                  
| | - | -------------------------------------------------------------------------------------------------
| |  | estimated costs to develop the proved undeveloped reserves                                       
|
| |  | estimated fair value of the asset retirement obligation related
    to the oil and gas properties
|
| |  | estimated impairment of costs excluded from the DD&A
    calculation                             





| |   |                                                             
| | - | ------------------------------------------------------------
| |  | previously estimated proved oil and gas reserves            
|
| |  | estimated proved reserves added compared to capital invested

Depletion Expense




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Withheld Costs




Full Cost Accounting




Impairment of Long-lived Assets




Fair Value of Derivative Instruments








Asset Retirement Obligations








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Legal, Environmental Remediation and Other Contingent
Matters




Income Tax Accounting




Business Combinations




Goodwill




NEW ACCOUNTING STANDARDS


Asset Retirement Obligations






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Accounting for Stock-based Compensation






Employers Disclosures about Pension and Other
Post-retirement Benefits




Inventory Costs




SAB 106




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Accounting for Variable Interest Entities




Accounting for Exchanges of Nonmonetary Assets




QUARTERLY FINANCIAL SUMMARY


|                                                                     |                         |                                      |        |         |      |   |        |         |      |   |        |         |      |    |        |         |      |   |        |         |      |   |        |         |      |   |        |         |      |   |        |         |      | 
|-------------------------------------------------------------------- | ----------------------- | ------------------------------------ | ------ | ------- | ---- | - | ------ | ------- | ---- | - | ------ | ------- | ---- | -- | ------ | ------- | ---- | - | ------ | ------- | ---- | - | ------ | ------- | ---- | - | ------ | ------- | ---- | - | ------ | ------- | ---- | 
|                                                                     |                         | 2004                                 |        |         | 2003 |  
|                                                                     |                         |                                      |        |         |      |  
|                                                                     |                         | Q4                                   |        |         | Q3   |   |        | Q2      |      |   | Q1     |         |      | Q4 |        |         | Q3   |   |        | Q2      |      |   | Q1     |        
|                                                                     |                         |                                      |        |         |      |   |        |         |      |   |        |         |      |    |        |         |      |   |        |         |      |   |        |        
|                                                                     |                         | ($ millions, except where indicated) |       
|Sales and operating revenues, net of royalties                       |                         | $                                    | 2,018  |         |      | $ | 2,191  |         |      | $ | 2,210  |         |      | $  | 2,021  |         |      | $ | 1,800  |         |      | $ | 1,871  |         |      | $ | 1,769  |         |      | $ | 2,218  |        
|Net earnings                                                         |                         | $                                    | 218    |         |      | $ | 286    |         |      | $ | 239    |         |      | $  | 263    |         |      | $ | 236    |         |      | $ | 249    |         |      | $ | 441    |         |      | $ | 408    |        
|                                                                     | Per share               |                                      |        |         |      |   |        |         |      |   |        |         |      |    |        |         |      |   |        |         |      |   |        |         |      |   |        |         |      |   |        |         |     
|                                                                     |                         |  Basic                              |        | $       | 0.53 |   |        | $       | 0.70 |   |        | $       | 0.54 |    |        | $       | 0.60 |   |        | $       | 0.60 |   |        | $       | 0.56 |   |        | $       | 1.09 |   |        | $       | 1.01 | 
|                                                                     |                         |  Diluted                            |        | $       | 0.52 |   |        | $       | 0.70 |   |        | $       | 0.54 |    |        | $       | 0.60 |   |        | $       | 0.59 |   |        | $       | 0.56 |   |        | $       | 1.09 |   |        | $       | 1.01 | 
|Share price                                                          |                         |                                      |        |         |      |   |        |         |      |   |        |         |      |    |        |         |      |   |        |         |      |   |        |         |      |   |        |         |      |   |        |        
|                                                                     |  High                  |                                      | $      | 35.65   |      |   | $      | 31.15   |      |   | $      | 28.30   |      |    | $      | 28.04   |      |   | $      | 23.95   |      |   | $      | 20.95   |      |   | $      | 18.14   |      |   | $      | 17.49   |     
|                                                                     |  Low                   |                                      | $      | 30.05   |      |   | $      | 25.42   |      |   | $      | 23.74   |      |    | $      | 22.73   |      |   | $      | 20.40   |      |   | $      | 17.35   |      |   | $      | 16.15   |      |   | $      | 16.03   |     
|                                                                     |  Close (end of period) |                                      | $      | 34.25   |      |   | $      | 30.79   |      |   | $      | 25.65   |      |    | $      | 26.20   |      |   | $      | 23.47   |      |   | $      | 20.50   |      |   | $      | 17.50   |      |   | $      | 16.93   |     
|Shares traded (thousands)                                            |                         |                                      | 37,417 |         |      |   | 35,074 |         |      |   | 26,654 |         |      |    | 22,824 |         |      |   | 22,171 |         |      |   | 35,453 |         |      |   | 24,858 |         |      |   | 18,371 |        
|Dividends declared per common share                                  |                         | $                                    | 0.12   |         |      | $ | 0.12   |         |      | $ | 0.12   |         |      | $  | 0.10   |         |      | $ | 0.10   |         |      | $ | 0.10   |         |      | $ | 0.09   |         |      | $ | 0.09   |        
|Special dividend per common share                                    |                         | $                                    | 0.54   |         |      | $ |       |         |      | $ |       |         |      | $  |       |         |      | $ |       |         |      | $ | 1.00   |         |      | $ |       |         |      | $ |       |        
|Number of weighted average common shares outstanding
    (thousands) |                         |                                      |        |         |      |   |        |         |      |   |        |         |      |    |        |         |      |   |        |         |      |   |        |         |      |   |        |         |      |   |        |        
|                                                                     |  Basic                 |                                      |        | 423,708 |      |   |        | 423,610 |      |   |        | 423,413 |      |    |        | 422,711 |      |   |        | 421,702 |      |   |        | 419,729 |      |   |        | 418,539 |      |   |        | 418,163 |     
|                                                                     |  Diluted               |                                      |        | 426,825 |      |   |        | 426,043 |      |   |        | 425,169 |      |    |        | 424,720 |      |   |        | 423,830 |      |   |        | 422,010 |      |   |        | 420,331 |      |   |        | 419,985 |     

RESULTS OF OPERATIONS FOR 2003 COMPARED WITH 2002






Upstream




| |   |                                                                
| | - | ---------------------------------------------------------------
| |  | higher realized crude oil and natural gas prices and production
|
| |  | lower income taxes                                             

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| |   |                                
| | - | -------------------------------
| |  | higher operating costs and DD&A
|
| |  | higher royalties               

Midstream




| |   |                                            
| | - | -------------------------------------------
| |  | wider upgrading differential               
|
| |  | higher upgrader throughput and sales volume
|
| |  | higher heavy crude oil pipeline throughput 
|
| |  | higher cogeneration income                 





| |   |                                                                 
| | - | ----------------------------------------------------------------
| |  | higher unit operating costs, which were primarily energy related
|
| |  | lower crude oil and natural gas commodity marketing margins     

Refined Products




| |   |                   
| | - | ------------------
| |  | lower fuel margins





| |   |                                         
| | - | ----------------------------------------
| |  | higher asphalt margins and sales volumes
|
| |  | lower income taxes                      

Corporate




| |   |                                                                                    
| | - | -----------------------------------------------------------------------------------
| |  | foreign exchange gains on translation of U.S. dollar
    denominated long-term debt
|
| |  | lower intersegment profit eliminations                                             
|
| |  | lower net interest expense due to higher capitalization                            





| |   |                    
| | - | -------------------
| |  | higher income taxes

DISCLOSURE OF OUTSTANDING SHARE DATA






| |   |                                     
| | - | ------------------------------------
| |  | unlimited number of common shares   
|
| |  | unlimited number of preferred shares



|                                  |  |            
|--------------------------------- |  | -----------
|                                 
|   common
    shares             |  | 423,794,385
|                                 
|   preferred
    shares          |  | none       
|                                 
|   stock
    options             |  | 9,783,958  
|                                 
|   stock
    options exercisable |  | 1,291,552  
|                                 
|   warrants                      |  | 24,500     





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FORWARD-LOOKING STATEMENTS


CAUTIONARY STATEMENT FOR THE PURPOSES OF THE SAFE
HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995








| |   |                                                                                                                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | fluctuations in commodity prices                                                                                                                                                                                                            
|
| |  | changes in general economic, market and business conditions                                                                                                                                                                                 
|
| |  | fluctuations in supply and demand for Huskys products                                                                                                                                                                                      
|
| |  | fluctuations in the cost of borrowing                                                                                                                                                                                                       
|
| |  | Huskys use of derivative financial instruments to hedge
    exposure to changes in commodity prices and fluctuations in
    interest rates and foreign currency exchange rates                                                             
|
| |  | political and economic developments, expropriations, royalty and
    tax increases, retroactive tax claims and changes to import and
    export regulations and other foreign laws and policies in the
    countries in which Husky operates
|
| |  | Huskys ability to receive timely regulatory approvals                                                                                                                                                                                      
|
| |  | the integrity and reliability of Huskys capital assets                                                                                                                                                                                     
|
| |  | the cumulative impact of other resource development projects                                                                                                                                                                                
|
| |  | estimated production levels and Huskys success at
    exploration and development drilling and related activities                                                                                                                          
|
| |  | the maintenance of satisfactory relationships with unions,
    employee associations and joint venturers                                                                                                                                    
|
| |  | competitive actions of other companies, including increased
    competition from other oil and gas companies or from companies
    that provide alternate sources of energy                                                                 
|
| |  | the uncertainties resulting from potential delays or changes in
    plans with respect to exploration or development projects or
    capital expenditures                                                                                   
|
| |  | actions by governmental authorities, including changes in
    environmental and other regulations                                                                                                                                           
|
| |  | the ability and willingness of parties with whom Husky has
    material relationships to fulfil their obligations                                                                                                                           
|
| |  | the occurrence of unexpected events such as fires, blowouts,
    freeze-ups, equipment failures and other similar events
    affecting Husky or other parties whose operations or assets
    directly or indirectly affect Husky            

OIL AND GAS RESERVE REPORTING


Disclosure of Proved Oil and Gas Reserves and Other Oil
and Gas Information




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NON-GAAP MEASURES


Disclosure of Cash Flow from Operations






|         |  |                                            |  |              |       |   |      |   |       |      |  |   |       |  
|-------- |  | ------------------------------------------ |  | ------------ | ----- | - | ---- | - | ----- | ---- |  | - | ----- | -
|         |  |                                            |  | 2004         |       |   | 2003 |   |       | 2002 | 
|         |  |                                            |  |              |       |   |      |   |       |      | 
|         |  |                                            |  | ($ millions) |      
|Non-GAAP |  | Cash flow from operations                  |  | $            | 2,223 |   |      | $ | 2,459 |      |  | $ | 2,096 |  
|         |  | Settlement of asset retirement obligations |  |              | (40   | ) |      |   | (34   | )    |  |   | (16   | )
|         |  | Change in non-cash working capital         |  |              | 169   |   |      |   | 113   |      |  |   | (198  | )
|         |  |                                            |  |              |       |   |      |   |       |      | 
|GAAP     |  | Cash flow  operating activities           |  | $            | 2,352 |   |      | $ | 2,538 |      |  | $ | 1,882 |  
|         |  |                                            |  |              |       |   |      |   |       |      | 

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES






PUBLIC SECURITIES FILINGS




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EXHIBITS


|        |  |                                                                                                                                                                          
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  | Description                                                                                                                                                              
|        |  |                                                                                                                                                                          
|23.1    |  | Consent of KPMG LLP, independent accountants.                                                                                                                            
|23.2    |  | Consent of McDaniel and Associates Consultants Ltd., independent
    engineers.                                                                                          
|31.1    |  | Certification of Chief Executive Officer pursuant to
    Rule 13a-14(a) or 15d-14 of the Securities Exchange Act of
    1934.                                            
|31.2    |  | Certification of Chief Financial Officer pursuant to
    Rule 13a-14(a) or 15d-14 of the Securities Exchange Act of
    1934.                                            
|32.1    |  | Certifications of Chief Executive Officer pursuant to
    Rule 13(a)-14(b) and Section 1350 of Chapter 63
    of Title 18 of the United States Code
    (18 U.S.C. 1350).
|32.2    |  | Certifications of Chief Financial Officer pursuant to
    Rule 13(a)-14(b) and Section 1350 of Chapter 63
    of Title 18 of the United States Code
    (18 U.S.C. 1350).

142