Choice — it’s what companies and investors value most in challenging times. Whether it’s how we allocate capital, fund our growth, or which projects make the most sense in current economic times, choice is key. Our strategy is to build a sustainable energy company focused in three areas: oil sands, unconventional gas and select conventional exploration and exploitation.

To be sustainable we must be better than average. So we operate where we see the greatest opportunity for long-term value creation. Then we invest in solid land positions, developing expertise and applying technology that give us a competitive advantage.

Our goal is to grow long-term value for our shareholders responsibly. Key drivers to growing value include increasing reserves, production, cash flow and net income on a cost-effective basis over the long term. We leverage off our competitive advantages to generate opportunities for long-term success in our evolving industry.

As conventional basins in North America mature, we’ve developed specific capabilities in oil sands, CBM, deep-water technology and international experience. These skills enable us to focus on specific types of projects, as we transition toward major projects in established basins, exploration in less mature basins and exploitation of unconventional resources.

Today, we are building sustainable businesses in western Canada, the North Sea, Gulf of Mexico, and offshore West Africa, capitalizing on the following corporate strengths:

• diversification — our assets are geographically diverse and we produce oil and gas, onshore and offshore. We have large conventional and unconventional legacy assets in our portfolio;
• significant captured resource — we have key resource plays with a low cost of entry. Our Long Lake Project is developing only 10% of our oil sands leases in the Athabasca oil sands, we hold 195 net sections in the emerging Horn River shale gas play in northeast British Columbia and we hold unexplored acreage in the Gulf of Mexico, the North Sea, western Canada and elsewhere;
• focus on growth — we are growing our business through exploration and innovative technology. We are successful explorers with significant undeveloped discoveries at Knotty Head and Vicksburg in the Gulf of Mexico, the Golden Eagle area in the UK North Sea and at Usan, offshore Nigeria. Long Lake is the first oil sands project to use gasification technology to significantly reduce the cost of producing bitumen and we are advancing new techniques for unconventional production of CBM and enhanced heavy oil recovery in western Canada;
• international expertise — we are an international operator with a proven track record of successful business ventures in Yemen, the United Kingdom, Nigeria, Colombia and Australia;
• strong financial position — we have access to $3.5 billion of liquidity (after acquiring the additional 15% interest in Long Lake in January 2009) through cash and undrawn committed credit facilities to allow us to proceed with investments at the pace of our choice and to take advantage of opportunities as they arise like we did with our strategic entry into the UK North Sea in 2004 and our recent acquisition of an additional 15% working interest at Long Lake; and
• sustainable business practices — leveraging our strength in business practices such as Health, Safety, Environment and Social Responsibility (HSE&SR) to access opportunities and responsibly create and demonstrate both long-term benefits and value growth for our investors, for the communities in which we operate and for other stakeholders. This makes us a desired business partner and/or joint venture operator.

The location and scale of our operations often result in: 1) an extended period of time from the capture of opportunities to first production and 2) non-linear, year-over-year growth in reserves and production. Significant up-front capital investment is often required prior to realizing production and free cash flows. We fund this investment by maximizing cash flow from our producing assets, issuing long-term debt and/or equity and selling non-core assets into attractive markets.

Our financial position is strong. We have financial flexibility with major capital projects complete at Buzzard and Long Lake, and industry-leading cash netbacks. We have available liquidity of approximately $3.5 billion (after acquiring the additional 15% interest in Long Lake), split between cash and undrawn committed credit. We have no debt maturities until 2011 and our average term-to-maturity of our long-term debt is approximately 18 years.

In creating sustainable businesses, we are committed to good corporate governance practices and social responsibility. We believe that over the long term, companies that follow sustainable business practices outperform those with narrower priorities. We foster dialogue with stakeholders about our operational opportunities and challenges, from exploration to development to reclamation. Our goal is to help stakeholders become engaged participants in a continuing consultation process, while balancing multiple, and sometimes conflicting goals.

For financial reporting purposes, we report on four main segments:

• oil and gas;
• Syncrude;
• energy marketing; and
• chemicals.

Our oil and gas operations are broken down geographically into the UK North Sea, US Gulf of Mexico, Canada, Yemen and Other International (currently Colombia, offshore West Africa and Norway). Results from our Long Lake Project are included in Canada. Syncrude is our 7.23% interest in the Syncrude Joint Venture. Energy marketing includes our crude oil, natural gas, natural gas liquids and power marketing businesses in North America, Europe and Asia. Chemicals includes operations in North America and Brazil that manufacture, market and distribute sodium chlorate, caustic soda, muriatic acid and chlorine through Canexus Limited Partnership.

Production, revenues, net income, capital expenditures and identifiable assets for these segments appear in Note 22 to the Consolidated Financial Statements and in Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) in this report.