<Page>

                                                                       EXHIBIT 3

MANAGEMENT'S DISCUSSION AND ANALYSIS

Management's Discussion and Analysis should be read in conjunction with the
Consolidated Financial Statements and Auditors' Report included in this Annual
Report. The Consolidated Financial Statements have been prepared in accordance
with accounting principles generally accepted in Canada. The following
discussion and analysis refers primarily to 2003 compared with 2002 unless
otherwise indicated. The calculation of barrels of oil equivalent ("boe") is
based on a conversion rate of six thousand cubic feet of natural gas to one
barrel of crude oil.

     Management's Discussion and Analysis contains the term "cash flow from
operations", which is determined before changes in non-cash working capital and
should not be considered an alternative to, or more meaningful than, "cash flow
from operating activities" as determined in accordance with generally accepted
accounting principles ("GAAP"). Canadian Superior's determination of cash flow
from operations may not be comparable to that reported by other corporations. A
reconciliation between net earnings and cash flow from operations can be found
in the consolidated statements of cash flows in the audited financial
statements. The Corporation also presents cash flow from operations per share
whereby per share amounts are calculated using weighted average shares
outstanding in a manner consistent with the calculation of earnings per share.

     The MD&A as well as other sections within this Annual Report, contain
forward-looking or outlook information regarding the Corporation. Because
forward-looking information addresses future events and conditions, it involves
risks and uncertainties that could cause actual results to differ materially
from those contemplated by the forward-looking or outlook information. These
risks and uncertainties include, but are not limited to: commodity price levels;
production levels; the recoverability of reserves; transportation availability
and costs; operating and other costs; interest rates and currency exchanges
rates; and changes in environmental and other legislation and regulations.

     One of the major accomplishments of the Corporation during the past year
was the closing of the Drumheller property acquisition on March 20, 2003. This
strategic acquisition provided Canadian Superior with a significant, stable core
operating base and dramatically increased the Corporation's production and cash
flow. The Drumheller transaction had an unadjusted purchase price of
approximately $65.0 million and an effective date of October 1, 2002. In
accordance with Canadian generally accepted accounting principles, the
properties' net cash flows from the effective date to the date of closing,
approximately $11.5 million, were treated as purchase price adjustments and
deducted from the gross acquisition costs. This resulted in the Corporation
recording net acquisition costs of approximately $53.5 million. Additional
capitalized transaction costs of $0.7 million were also incurred. Only revenues,
expenses and production volumes related to production volumes of the properties
from March 21, 2003 forward were recorded on the statement of earnings of the
Corporation in the 2003 annual report.

     The following table sets forth selected financial information of the
Corporation for the periods indicated:

<Table>
<Caption>
Years ended December 31 ($000's except per share amounts)          2003             2002            2001
                                                            --------------------------------------------
<S>                                                         <C>              <C>               <C>
Oil and gas revenue net of royalties                        $    25,568      $     6,007       $   4,078
Cash flow from operations                                        13,347              799           1,729
   Per Share - basic                                               0.16             0.01            0.04
   Per Share - diluted                                             0.15             0.01            0.04
Net earnings (loss)                                                (312)         (28,173)          8,109
   Per Share - basis                                              (0.00)           (0.51)           0.20
   Per Share - diluted                                            (0.00)           (0.51)           0.19
Total assets                                                    139,952           49,956          68,588
Net debt (surplus) including working capital                      3,744            5,484          (1,203)
</Table>


                                       1
<Page>

PRODUCTION, PRICING AND REVENUE

<Table>
<Caption>
Years Ended December 31

Natural Gas                                    2003               2002           % change
-----------                                ----------------------------------------------
<S>                                        <C>                <C>                <C>
Average Daily Production (mcf/d)             10,210              4,725             116
Average Sales Price ($/mcf)                $   6.60           $   4.04              63

NATURAL GAS REVENUE ($000'S)               $ 24,589           $  6,968             253

OIL & NGLS
Average Daily Production (bbl/d)                583                 59             888
Average Sales Price ($/bbl)                $  33.03           $  35.69             (7)

OIL & NGLS REVENUE ($000'S)                $  7,029           $    769             814

BARRELS OF OIL EQUIVALENT (6:1)
Average Daily Production (boe/d)              2,285                846             170
Average Sales Price ($/boe)                $  37.92           $  25.07              51

TOTAL OIL AND GAS REVENUE ($000'S)         $ 31,618           $  7,741             308
</Table>

     Average daily production for 2003 increased to 2,285 boe/d, up 170 percent
from 846 boe/d in 2002. The increase in production during 2003 is largely
attributable to the Drumheller property acquisition, which closed on March 20,
2003.

     Oil and gas revenue increased 308 percent to $31.6 million in 2003, as
compared to $7.7 million in 2002. This revenue increase is due to both higher
production levels and higher average price realizations achieved during 2003.
The average realized sales price in 2003 was $37.92/boe ($6.60/mcf for natural
gas and $33.03/bbl for oil and NGLs) up 51 percent from $25.07/boe in 2002
($4.04/mcf for natural gas and $35.69/bbl for oil and NGLs).

     While the Corporation sells all its production within Canada, and receives
its production payments in Canadian dollars, the Canadian dollar prices for oil,
NGLs and natural gas are strongly referenced to US commodity prices. During
2003, the Canadian dollar increased approximately 20 percent versus the US
dollar, resulting in the Corporation's realized Canadian dollar denominated
sales prices showing lower increases than the US dollar reference prices.

HEDGING

The Corporation enters into commodity sales agreements and certain derivative
financial instruments to reduce its exposure to commodity price volatility.
These financial instruments are entered into solely for hedging purposes to
protect the Corporation against negative commodity price movements and are not
used for trading or other speculative purposes. After acquiring the Drumheller
property in March 2003, the Corporation entered into agreements to hedge
approximately 40 percent of its 2003 production. These 2003 activities resulted
in income of $269,000 which was recorded as increased oil and gas revenues
during the period.


                                       2
<Page>

     The Corporation has the following contracts in place relating to 2004:

<Table>
<Caption>
Contract             Volume           Price                   Term
-----------          ----------       ---------------         ----------------------------
<S>                  <C>              <C>                     <C>
NATURAL GAS
Fixed Price          1,000 gj/d       $5.68/gj (Aeco)         January 1 - January 31, 2004
Fixed Price          2,000 gj/d       $6.53/gj (Aeco)         January 1 - March 31, 2004
Fixed Price          2,000 gj/d       $5.95/gj (Aeco)         March 1 - March 31, 2004
Fixed Price          2,000 gj/d       $6.14/gj (Aeco)         April 1 - October 31, 2004

CRUDE OIL
Fixed Price          275 bbl/d        $35.75 CAD/bbl WTI      January 1 - May 31, 2004
</Table>

ROYALTIES

<Table>
<Caption>
Years ended December 31 ($000's)           2003                2002            % change
----------------------------------------------------------------------------------------
<S>                                     <C>                 <C>                <C>
Crown                                   $ 5,219             $ 1,949                 168
Freehold and overriding                   1,248                  85                1368
----------------------------------------------------------------------------------------
Total royalties                           6,467               2,034                 218
Alberta Royalty Tax Credit                 (417)               (300)                 39
----------------------------------------------------------------------------------------
NET ROYALTIES                           $ 6,050             $ 1,734                 249
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
     Per boe                            $  7.26             $  5.61                  29
     Percent of total revenue                19%                 22%                n/a
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
</Table>

Royalties, net of royalty credit, totaled $6.0 million in 2003, up 249 percent
from $1.7 million in 2002. The increase in royalty expense is due to a 170
percent increase in average daily production rates and a 51 percent increase in
realized prices in 2003. The average royalty rate, as a percentage of revenue,
fell to 19 percent in 2003, down from 22 percent in 2002.

PRODUCTION AND OPERATING EXPENSES

<Table>
<Caption>
                                                                2003                             Year
                                             ------------------------------------------- ---------------------
                                                Q1         Q2         Q3         Q4        2003       2002
                                             ---------- ---------- ---------- ---------- ---------- ----------
<S>                                          <C>        <C>        <C>        <C>        <C>        <C>
Production and Operating Expenses ($000's)        724      1,989      1,771      1,508      5,992      2,542
     Per boe ($)                                 8.65       7.89       7.02       6.16       7.19       8.23
</Table>

Production and operating expenses increased to $6.0 million for 2003, up 136
percent from $2.5 million reported in 2002, as a result of a significant
increase in the Corporation's production during 2003. Measured on a boe basis,
2003 production and operating expenses fell to $7.19/boe, down 13 percent from
$8.23/boe in 2002. Drumheller area production has significantly reduced the
Corporation's per barrel production and operating expenses. The Corporation's
Northern access properties generally have higher operating costs per boe
compared to the Drumheller area. Production and operating expenses consistently
fell throughout 2003 as our field team worked diligently to implement operations
efficiencies. Fourth quarter of 2003 production and operating expenses averaged
$6.16/boe, down 29 percent from the first quarter average cost of $8.65/boe.


                                       3
<Page>


GENERAL AND ADMINISTRATIVE EXPENSES

<Table>
<Caption>
Years ended December 31 ($000's)             2003               2002             % change
------------------------------------------------------------------------------------------
<S>                                       <C>                 <C>                <C>
Gross G&A Expenses                        $ 9,172            $ 6,328                   45
Recoveries                                   (260)              (250)                 n/a
Capitalized                                (4,063)            (3,180)                 n/a
------------------------------------------------------------------------------------------
Net G&A                                   $ 4,849            $ 2,898                   67
------------------------------------------------------------------------------------------
     Per boe                              $  5.82            $  9.39                  (38)
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
</Table>

Net G&A expenses increased to $4.8 million in 2003, up from $2.9 million in
2002. This increase can be attributed to increased staffing and associated
expenses to support the Corporation's increased operations base and activities,
as well as to a one-time contractual payment made to an officer and director of
the Corporation. On a unit of production basis, G&A expenses fell 38 percent to
$5.82/boe for 2003. The Corporation capitalized $4.1 million of overhead related
to exploration and development, representing 44 percent of gross G&A costs.

INTEREST EXPENSE

During 2003 the Corporation paid $1.5 million in interest on its revolving
production loan facility, which at year end had a drawn balance of $12.55
million. Only $158,000 of interest expenses were incurred in 2002 due to the
relatively small size of the facility draws in that year.

INTEREST INCOME

Interest income of $364,000 was earned by the Corporation in 2003 on its
Offshore Nova Scotia licence term deposits. Interest income was marginally
higher in 2002 because of higher interest rates in that year.

DEPLETION AND AMORTIZATION

Depletion and amortization expense for 2003 totaled $13.3 million in 2003 up
from $5.6 million in 2002. This increase principally relates to the 170 percent
increase in production resulting from the Drumheller acquisition. 2003 depletion
and amortization expenses averaged $15.91/boe. 2004 depletion and amortization
expenses are expected to average approximately $20.00/boe as a result of
negative reserve revisions to the Corporation's non-Drumheller area properties
in the January 1, 2004 independent reserve evaluation.

FUTURE SITE RESTORATION

The Corporation accrues a provision for future site restoration based on its
existing number of wells and production facilities. The provision was $1.2
million in 2003 and $0.3 million in 2002. The rise reflects both higher 2003
production and the increased well count resulting from the Drumheller
acquisition.

TAXES

The Corporation recorded current taxes only in respect of the federal Large
Corporations Tax. The Large Corporations Tax is based on the Corporation's
year-end book value, and was $288,000 in 2003. As a result of the loss from
operations of $1.2 million reported in 2003, a reduction in future income taxes
of $828,000 was recorded. The Corporation does not expect to be cash taxable in
2004.


                                       4
<Page>


CAPITAL EXPENDITURES

<Table>
<Caption>
Years ended December 31 ($000's)                 2003               2002          % change
------------------------------------------------------------------------------------------
     <S>                                  <C>                <C>                  <C>
     Acquisition                          $    54,160        $         0               100
     Exploration & Development                 17,801             35,535               (50)
     Plants & Facilities & Pipelines            2,787             11,130               (75)
     Land & Lease                               1,325              4,962               (73)
     Seismic                                    3,859                217              1678
     Capitalized Expenses                       4,063              3,181                28
------------------------------------------------------------------------------------------
                                          $    83,995        $    55,025                53
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
</Table>

The Corporation incurred $84.0 million of capital expenditures in 2003,
including $54.2 million on the Drumheller acquisition in the first quarter of
the year. Exploration and development expenses include the costs of drilling 13
wells at Drumheller in the second half of 2003 and two East Ladyfern wells in
the first quarter of 2003. Exploration and development expenses also include
approximately $5.5 million for the Corporation's share of the Mariner I-85 well
costs incurred to December 31, 2003. It is anticipated that the Corporation
incurred approximately $8.5 million of additional expenditures on this well in
the first quarter of 2004, subject to final adjustments with the operator.

CEILING TEST

The Corporation has adopted CICA Accounting Guideline 16 "Oil and Gas Accounting
- Full Cost" effective for its fourth quarter 2003. This guideline limits the
carrying value of oil and gas properties to their fair value in a ceiling test
calculation which must be performed at least annually. The fair value is
estimated to be the future cash flow from proved and probable reserves using
future price forecasts and costs discounted at a risk-free rate. No write-down
of oil and gas assets was required for 2003, under this guideline.

NET INCOME AND CASH FLOW FROM OPERATIONS

<Table>
<Caption>
                                                  ($000's)                            ($ per boe)
                                           -----------------------              -----------------------
Years ended December 31                        2003         2002     % change       2003        2002     % change
-----------------------------------------------------------------------------------------------------------------
<S>                                         <C>         <C>          <C>          <C>         <C>        <C>
REVENUE                                     $31,618     $  7,741         308      $37.92       25.07         51
   Royalties, net of ARTC                     6,050        1,734         249        7.26        5.61         29
   Production and operating expenses          5,992        2,542         136        7.19        8.23        (13)
-----------------------------------------------------------------------------------------------------------------
OPERATING NETBACK                            19,576        3,465         465       23.47       11.23        109
   General and administrative expenses        4,849        2,898          67        5.82        9.39        (38)
   Net interest expense (income)              1,092         (296)        n/a        1.31       (0.96)       n/a
   Large Corporations Tax                       288           64         350        0.34        0.21         62
-----------------------------------------------------------------------------------------------------------------
CASH FLOW FROM OPERATIONS                    13,347          799       1,570       16.00        2.59        518
   Depletion and amortization                13,264        5,599         137       15.91       18.13        (12)
   Future site restoration                    1,223          295         315        1.46        0.96         52
   Write down of oil and gas assets              --       43,000         n/a          --      139.25        n/a
   Future income tax recovery                  (828)     (19,922)        n/a       (1.00)     (64.52)       n/a
-----------------------------------------------------------------------------------------------------------------
NET LOSS                                    $  (312)    $(28,173)        n/a      $(0.37)     (91.23)       n/a
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
</Table>

     The Corporation recorded a net loss of $0.3 million, or $(0.00)/share, for
2003, as compared to a loss of $28.2 million $(0.51)/share, in 2002. The
principal reason for the large loss in 2002 was the $24.7 million after tax
ceiling test write down in that year.


                                       5
<Page>

     Cash flow from operations increased nearly sixteen-fold to $13.3 million in
2003, from $0.8 million in 2002. The Drumheller acquisition, providing
substantial production increases to the Corporation, was the primary contributor
to the large cash flow increase in 2003.

LIQUIDITY AND CAPITAL RESOURCES

The Corporation's current $28.0 million revolving production loan facility
expires on May 31, 2004. At December 31, 2003, $12.55 million was drawn on this
facility. As at April 30, 2004, approximately $9.7 million is outstanding on
this facility, and the Corporation has approximately $18.0 million in cash
deposits available for corporate purposes. In addition to the $18.0 million of
available cash currently on hand, the Corporation has $13.8 million of term
deposits posted as security against its remaining Offshore Nova Scotia work
expenditure bids.

     At December 31, 2003, the Corporation had $13.8 million ($12.0 million -
2002) in interest bearing term deposits posted as security against work
expenditure bids. The security deposits are released to the Corporation on a
basis proportionate to 25 percent of expenditures incurred. It is the
Corporation's intention to secure a joint venture partner for its deepwater
"Mayflower" block which, if successful, will release up to $10.3 million in
secured term deposits assigned to this block.

     The Corporation's 2004 Western Canadian exploration and development
expenditures are expected to be primarily funded from operating cash flow. If
additional cash is required to fund planned 2004 capital programs, in particular
programs Offshore Nova Scotia and Offshore Trinidad, it may be sourced from
equity financings or, in the case of Offshore Nova Scotia activities, from
potential releases of secured term deposits as additional work expenditures are
incurred. The Corporation may also elect to farm-out portions of its Offshore
Nova Scotia acreage, or enter into other arrangements with third partied,
thereby reducing capital required from the Corporation to fund these prospects.

CONTRACTUAL OBLIGATIONS

In the normal course of business, Canadian Superior is obligated to make future
contractual payments. These obligations represent contracts and other
commitments that are known and non-cancellable.

<Table>
<Caption>
                                                                         PAYMENTS DUE BY PERIOD
----------------------------------------------------------------------------------------------------------------
Payments due by period ($000'S)                      2004 - 2006      2007 - 2008      Thereafter       Total
----------------------------------------------------------------------------------------------------------------
<S>                                                  <C>              <C>              <C>             <C>
Office Leases                                         $ 2,719          $ 1,697           $  205        $ 4,621
Operating Leases                                          408              136                8            552
Flow-through share renunciation obligations            11,000               --               --         11,000
Firm service transportation                               329                8               --            337
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
</Table>

BUSINESS RISKS

Companies engaged in the oil and gas industry are exposed to a number of
business risks, which can be described as operational and financial risks, many
of which are outside of Canadian Superior's control. More specifically these
include risks of economically finding reserves and producing oil and gas in
commercial quantities, marketing the production, commodity prices and interest
rate fluctuations and environmental and safety risks. In order to mitigate these
risks, the Corporation has an experienced base of qualified personnel, both
technical and financial, and maintains an insurance program that is consistent
with industry standards.

     At December 31, 2003, the Corporation had $13.8 million of term deposits
posted as security against its remaining Offshore Nova Scotia work expenditure
bids. To the extent that expenditures are not incurred within the periods
allowed, the Corporation would forfeit its proportionate share of any remaining
deposits relating to the unexpended work commitment.

     The Corporation's existing production loan facility expires on May 31,
2004. The Corporation has sufficient cash on hand to fully pay out the current
drawn balance.


                                       6
<Page>

SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES

The amounts recorded for depletion and amortization of oil and gas properties
and equipment and the provision for future site restoration and abandonment
costs are based on estimates. The ceiling test is based on estimates of proved
and probable reserves, production rates, oil and gas prices, future costs and
other relevant assumptions. These estimates are subject to measurement
uncertainty and the effect on the financial statements of changes in such
estimates in future periods could be significant.

STOCK-BASED COMPENSATION PLANS

The Corporation will be adopting the application of the new accounting policy
for stock-based compensation (CICA Section 3870) as of January 1, 2004, with
retroactive effect to January 1, 2002. This section requires all stock options
granted to employees, directors or consultants of the Corporation to be fair
valued and recorded as a compensation expense when granted.

ASSET RETIREMENT OBLIGATIONS

The Corporation will be adopting the retroactive application of the new
accounting policy for asset retirement obligations (CICA Section 3110) as of
January 1, 2004. All existing reclamation and abandonment liabilities will be
reversed and the new standard will be set up with prior years being restated.
The obligation will be measured and recorded at fair value and the corresponding
oil and gas assets will be increased. The capitalized cost will be amortized to
depletion expense over the useful life of the asset. The liability will be
adjusted over time with a corresponding accretion expense until the obligations
are settled. This is not expected to have a significant impact on the
Corporation's earnings.

CONTINUOUS DISCLOSURE OBLIGATIONS

Effective March 31, 2004, the Corporation and all reporting issuers in Canada
will be subject to new disclosure requirements as per National Instrument 51-102
"Continuous Disclosure Obligations". This new instrument is effective for fiscal
years beginning on or after January 1, 2004. The instrument proposes shorter
reporting periods for filing of annual and interim financial statements, MD&A
and the Annual Information Form ("AIF"). The instrument also proposes enhanced
disclosure in the annual and interim financial statements, MD&A and AIFs. Under
this new instrument, it will no longer be mandatory for the Corporation to mail
annual and interim financial statements and MD&A to Shareholders, but rather
these documents will be provided on an "as requested" basis. It is Canadian
Superior's intention to make these documents available on the Corporation's
website on a continuous basis.


                                       7