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Canada’s Oil Sands: Responsibly unlocking Alberta’s vast resource

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1 Canada’s Oil Sands: Responsibly unlocking Alberta’s vast resource
Good afternoon, and thank you for the opportunity to speak to you today. It’s a pleasure for me to be here at the Global Energy Security Forum and Florida International University to share with you some of the story of the oil sands industry and Cenovus’s place in it. It is an especially interesting time for Cenovus and our industry with the increased scrutiny on Alberta’s vast oil sands resource and the role it will play in providing long-term energy security for North America. As Janet has just outlined for you, there are many challenges for the industry. [NEED TO CONFIRM AGAINST CAPP PRESENTATION] So first, I’d like to speak to you about where Cenovus is at now in meeting those challenges. Second, I’ll spend some time on how our company is working to become more efficient in our operations to reduce our impact on the environment. And on the successes in innovation and technology development that are helping us to continually improve our environmental performance to meet those challenges and ensure responsible development of the resource. Canada’s Oil Sands: Responsibly unlocking Alberta’s vast resource Drew Zieglgansberger Senior Vice-President Global Energy Security Forum | Miami | February 21, 2012

2 Forward-looking information
But before we go any further our lawyers have asked that we always stop here: this slide is so you understand certain information in this presentation is based on estimates… I can’t guarantee it!! Forward-looking information This presentation contains certain forward-looking statements and other information (collectively “forward-looking information”) about our current expectations, estimates and projections, made in light of our experience and perception of historical trends. Forward-looking information in this presentation is identified by words such as “anticipate”, “believe”, “expect”, “plan”, “forecast” or “F”, “target”, “project”, “could”, “focus”, “vision”, “goal”, “milestone”, “proposed”, “scheduled”, “outlook”, “potential”, “may” or similar expressions and includes suggestions of future outcomes, including statements about our growth strategy and related schedules, projected future value or net asset value, forecast operating and financial results, planned capital expenditures, expected future production, including the timing, stability or growth thereof, anticipated finding and development costs, expected reserves and contingent, prospective or in-place resources estimates, potential dividends and dividend growth strategy, anticipated timelines for future regulatory, partner or internal approvals, forecasted commodity prices, future use and development of technology and projected increasing shareholder value. Readers are cautioned not to place undue reliance on forward-looking information as our actual results may differ materially from those expressed or implied. 2012 guidance is based on an average diluted number of shares outstanding of approximately 759 million. It assumes WTI of US$90.00/bbl; Western Canada Select of US$75.00/bbl; NYMEX of US$3.50/MMBtu; AECO of $3.10/GJ; Chicago Crack Spread of US$14.50; and exchange rate of $0.975 US$/C$. For the period 2013 to 2021 assumptions include WTI of US$85.00-US$105.00/bbl; Western Canada Select of US$71.00-US$85.00/bbl; NYMEX of US$4.00-US$6.00/MMBtu; AECO of $3.30-$5.25/GJ; Chicago crack spread of US$9.00; exchange rate of $0.98-$1.07 US$/C$; and average number of shares outstanding of approximately 752 million. Developing forward-looking information involves reliance on a number of assumptions and consideration of certain risks and uncertainties, some of which are specific to Cenovus and others that apply to the industry generally. The factors or assumptions on which the forward-looking information is based include: assumptions inherent in our current guidance, available at our projected capital investment levels, the flexibility of capital spending plans and the associated source of funding; estimates of quantities of oil, bitumen, natural gas and liquids from properties and other sources not currently classified as proved; ability to obtain necessary regulatory and partner approvals; the successful and timely implementation of capital projects; our ability to generate sufficient cash flow from operations to meet our current and future obligations; and other risks and uncertainties described from time to time in the filings we make with securities regulatory authorities. The risk factors and uncertainties that could cause our actual results to differ materially, include: volatility of and assumptions regarding oil and gas prices; the effectiveness of our risk management program, including the impact of derivative financial instruments and our access to various sources of capital; accuracy of cost estimates; fluctuations in commodity prices, currency and interest rates; fluctuations in product supply and demand; market competition, including from alternative energy sources; risks inherent in our marketing operations, including credit risks; maintaining a desirable ratio of debt to adjusted EBITDA and debt to capitalization; our ability to access external sources of debt and equity capital; success of hedging strategies; accuracy of our reserves, resources and future production estimates; our ability to replace and expand oil and gas reserves; the ability of us and ConocoPhillips to maintain our relationship and to successfully manage and operate our integrated heavy oil business; reliability of our assets; potential disruption or unexpected technical difficulties in developing new products and manufacturing processes; refining and marketing margins; potential failure of new products to achieve acceptance in the market; unexpected cost increases or technical difficulties in constructing or modifying manufacturing or refining facilities; unexpected difficulties in manufacturing, transporting or refining of crude oil into petroleum and chemical products at two refineries; risks associated with technology and its application to our business; the timing and the costs of well and pipeline construction; our ability to secure adequate product transportation; changes in the regulatory framework in any of the locations in which we operate, including changes to the regulatory approval process and land-use designations, royalty, tax, environmental, greenhouse gas, carbon and other laws or regulations, or changes to the interpretation of such laws and regulations, as adopted or proposed, the impact thereof and the costs associated with compliance; the expected impact and timing of various accounting pronouncements, rule changes and standards on our business, our financial results and our consolidated financial statements; changes in the general economic, market and business conditions; the political and economic conditions in the countries in which we operate; the occurrence of unexpected events such as war, terrorist threats and the instability resulting therefrom; and risks associated with existing and potential future lawsuits, indemnification obligations and regulatory actions against us. The forward-looking information contained in this presentation, including the underlying assumptions, risks and uncertainties, are made as of the date hereof. For a full discussion of our material risk factors, see “Risk Factors” in our 2011 Annual Information Form and “Risk Management” in our most recent Management’s Discussion and Analysis, available at and

3 Cenovus: Building from a strong base
I’d like to begin with some facts and figures about Cenovus – as most of you here have likely not heard of us. Cenovus was launched in December 2009 after splitting from another Canadian company, Encana. Our main focus is on our oil sands projects in northern Alberta, with production currently at our Christina Lake and Foster Creek properties. These oil sands properties are co-owned in a partnership with ConocoPhillips, a company most of you likely know. We also have significant conventional oil and natural gas production in southern Alberta and Saskatchewan. The partnership with Conoco also includes a 50 percent share of the Wood River and Borger refineries in Illinois and Texas. We currently employ about 4,100 people, with slightly more than half of them based in Calgary in western Canada. In 2011, we hired more than 600 people and expect to reach about 7,000 staff members by 2021 when our total oil production is anticipated to be about 500,000 barrels per day. So as you can see, we have big, long-term plans for our company. Cenovus is not an oil sands mining company as we use a process known as steam-assisted gravity drainage, or SAGD, to produce our heavy oil. I will explain more about SAGD in a moment. Oil sands projects in northern Alberta Oil and natural gas production in Alberta and Saskatchewan Joint ownership in two U.S. refineries Tickers – TSX, NYSE CVE Enterprise value $30 billion Shares outstanding 754 MM 2012F production Oil & NGLs 163 Mbbls/d Natural gas 588 MMcf/d 2011 proved & probable reserves 2.7 BBOE Refining capacity 226 Mbbls/d Borealis Region Greater Pelican Lake Region Christina Lake Region Foster Creek Region ALBERTA Alberta oil & gas SASKATCHEWAN MANITOBA Viking 2011 Verts Shaunavon Bakken Weyburn Values are approximate. Forecast production based on midpoint of 2012 guidance dated December 7, 2011. 3

4 Oil sands production history
This chart shows the history of oil sands production and technology progression. As you can see, mining operations have been producing since the 1960s and have shown tremendous growth. In-situ, which indicates the oil-soaked sand is too deep to be mined, has had a much shorter history. Cyclic steam stimulation, or CSS, was made commercial by Imperial Oil, the Canadian unit of ExxonMobil, in 1985. The next big change in the industry wouldn’t happen for another 16 years when our Foster Creek SAGD property began as a commercial operation. My main message here is that the in-situ segment of the oil sands industry is still in its very early stages and will see significant innovation in the coming years. 1st SAGD project payout (CVE Foster Creek 2010) MMbbls/d 1st commercial SAGD (CVE Foster Creek 2001) 1st commercial CSS (IMO Cold Lake 1985) 1st commercial mining (Suncor* 1967) Source: CAPP, company reports *Refers to a predecessor of Suncor Energy Inc.

5 Foster Creek – leading the way
Cenovus is an industry leader in oil sands production using SAGD technology and a good deal of what we have learned about improving the process has come through the development of the Foster Creek facility, which is located on the Cold Lake Air Weapons Range. Foster Creek has a current gross production capacity of 120,000 barrels per day. We are working on expansions and expect Foster Creek to reach gross production capacity of about 300,000 barrels per day in We’re also expanding at Christina Lake where we anticipate production reaching 278,000 bbls/d by the end of 2019. The learning from Foster Creek is being applied across our oil sands operations to make us more efficient and to reduce our impact on the environment. For example, Cenovus has reduced the size of its SAGD well pads by 25 percent since 2004, while significantly increasing production. And of course, when we are finished producing oil at Foster Creek, in another three decades or so, the site will be reclaimed.

6 SAGD: Steam Assisted Gravity Drainage
I’d like to spend a few moments to touch on the specifics of SAGD, as most of you probably aren’t familiar with the process. The oil in the oil sands is too thick to be pumped out of the ground on its own. And since I’m from Canada, I’ll use a Canadian comparison here: the oil has the consistency of a hockey puck in our reservoirs. Let’s have a look at this animated simulation of the process Cenovus uses to produce its heavy oil. RUN ANIMATION So we drill horizontal wells in pairs — running parallel above one another about 5 metres apart. Typically there are eight or nine well pairs on a pad, and the wells extend out about 1,000 metres. The wells access about 185 acres of underground resource from a surface site that is about five percent of that. Steam is injected in the upper well to warm the thick oil so it can drain to the lower production well and then be pumped to the surface. The oil and water mix is then sent to a processing plant, where the two are separated. The vast majority of the oil sands, about 80 percent, is expected to be developed using SAGD, with mining accounting for the balance. Christina Lake 6


8 Christina Lake SAGD injection wells
This is a typical row of SAGD injection wells that you would find at our other operating oil sands property, Christina Lake, with steam being injected through these wells and oil being pumped to the surface via wells on the other side of this well pad. The mixture of water and oil that returns from underground is sent by pipeline back to a processing plant where it’s separated. Most of the water is reused to generate new steam, while the oil is treated before being sent south to our U.S. refineries to be turned into gasoline, diesel and jet fuel.

9 Reservoir quality drivers performance
Low SOR means Steam-to-oil ratio (bbl/bbl) Lower capital cost Lower operating cost Smaller surface footprint Lower energy usage Lower emissions Less water usage One of the biggest goals of a SAGD operator like Cenovus is to reduce the steam to oil ratio – or SOR. SOR refers to how much steam you need to create a barrel of oil. A low SOR means lower capital and operating costs, a smaller footprint, less water needed. And, because we burn less natural gas to create the steam, a lower SOR also means fewer emissions. As you can see by this chart Cenovus properties are at the lowest end of the SOR comparison. That’s good for the environment and our budget. Peers include: CNQ, COP, CLL, DVN, HSE, IMO, JACOS, MEG, NXY, RDS, SU. Source: ERCB public domain data, Nov, 2010 – Oct, 2011.

10 GHG intensity comparable across crudes
You hear lots of claims from oil sands critics that the oil sands produce multiple times more greenhouse gas, or GHG, emissions than any other oil production. This chart shows the GHG intensity of various types of oil. The orange section of the bars prove that criticism is simply not true. Projects such as our Foster Creek and Christina Lake facilities - which have a low SOR - have similar emissions intensity to the average barrel of conventional oil consumed in North America. The other fact that is quite obvious from this chart is that the largest opportunity for GHG reductions is with the end use of oil products, or the “tank to wheels” as shown in blue on the bars. About three-quarters of emissions come from consumption. Cenovus will continue to do its part to reduce emissions from production. But each and every one of us who consumes oil products must also take steps to reduce that usage. Conventional oil Mining SAGD dilbit Grams CO2e/MJ of RBOB gasoline SOR 6.0 CVE 2.2 SOR Conventional Oil Avg Range SOR 2.0 65% – 75% of total emissions Source: Jacobs GHG Lifecycle study funded by AERI, Cogen credits not shown. Jacobs estimates cogen benefit from -7 to -17 g/MJ.

11 Driving environmental performance
While greenhouse gas emissions are one of the biggest challenges for Cenovus, they’re not our sole focus. The oil sands are an enormous source of energy that can help the U.S. and Canada reduce their reliance on overseas suppliers and lead to greater energy self-reliance in North America. The challenge we all face is how to supply this important product, while limiting our impact. Cenovus wants to be a leader in this effort. So, we’re integrating the environment into how we do business. We’re forecasting energy and water consumption, GHG emissions and land reclamation and then measuring our progress throughout the year. At Cenovus, we’re linking environmental stewardship with strategic planning to ensure our business decisions are respectful of the land, air, wildlife and water. We’ve already demonstrated our leadership through our low SORs and through projects such as our Weyburn enhanced oil recovery operation where we’ve stored more than 18 million tonnes of CO2 since 2000. Our CO2 comes from the Great Plains Synfuels Plant in Beulah, North Dakota, and is a byproduct of coal gasification done at that plant. This is another great example of the close working relationship our company and Canada have with the U.S. The total that has so far been stored is the equivalent of taking about 3.5 million cars off the road for an entire year. The International Energy Agency estimates the Weyburn field has the capacity to store 55 million tonnes of CO2. We’re committed to continually improving our environmental performance with respect to land use, emissions, air quality, water use and biodiversity. Water monitoring at Christina Lake oil sands project 18 million tonnes of CO2 stored at Weyburn, SK enhanced oil recovery operation since 2000 Integrate environment into business planning Demonstrate performance Incorporate innovations into projects and existing operations Communicate, educate and engage

12 Minimal fresh water usage
One example of how we’ve improved our environmental performance is fresh water usage. The chart shows the history of our Foster Creek project’s water usage. I’m proud to be able to tell you that we have reduced the fresh water usage at our facility to less than 5 percent of our total water needs. It’s also important to note that none of that water for our oil sands production comes from surface sources such as rivers or lakes. More than 95 percent of the water we use is salt water from deep underground, which is not fit for human or animal consumption. And we recycle almost all of the water used for our operations. Use mostly salt water for production Only 0.15 bbls of fresh water used to produce a bbl of oil at Foster Creek Recycle 90% of the water used at Foster Creek Foster Creek fresh water to oil ratio

13 Impact of technology development
Technology innovation plays a major role in helping us achieve our environmental improvements. Across the Cenovus operations, our technology development teams are working on about 140 different projects. Implementing new technologies will improve our production and decrease costs while at the same time reduce our impact on the environment. In fact, three-quarters of the technology projects are expected to further improve our environmental performance. Our goal at Cenovus is to introduce at least one new commercial technology into our operations every year. In 2011 we did this with our blowdown boiler technology, which I will explain more about in a moment. Listed here are just a few of the projects we’ve either implemented or continue to test. You can see there is also a clear financial benefit to investing in technology through a reduction in supply costs. 18 16 14 12 10 8 6 4 2 Time Supply cost reduction ($US/bbl) history forecast Wedge WellTM technology Insulated tubing Liner improvements Electric Submersible Pumps Accelerated startup Blowdown boilers Reservoir tailored process Low pressureSAGD $10 - $12 reduction target Solvent Aided Process Chemical SAGD Others Supply cost is defined as the average WTI or NYMEX price required for an after-tax cost of capital return of 9%.

14 Wedge WellTM technology
Wedge Well technology is one of our big success stories, especially at Foster Creek and increasingly at Christina Lake. Our SAGD well pairs are drilled about 100 metres apart. After about two years of production, the steam chambers between pairs begin to grow and eventually overlap at the top. This leaves a wedge of unproduced oil between the well pairs at the base of the reservoir. By drilling a single, horizontal well into that ‘wedge,’ we are able to recover the stranded oil. Wedge well technology improves our economics as well as lowers our environmental impact by producing more oil from existing well pads with little or no additional steam needed. By using the wedge well process, we expect to increase oil recovery rates by about 10 percent while reducing our operating costs per barrel, water use, emissions and overall environmental impact. These wells at our Foster Creek operation now account for about 10 to 15 percent of production – and we keep drilling more, with 41 now operating. We plan to have one of these wells between every producing SAGD well pair at Foster Creek. We are also operating four wells using the wedge well technology at Christina Lake. Standard SAGD well pair and steam chambers coalesce Wedge Well producer

15 Blowdown boiler commercialized in 2011
Another new technology that we're commercializing is the blowdown boiler. Basically the whole world since the 1940s has been generating steam at about 77 percent quality. We take the remainder of that and put it through another boiler, so we're effectively generating 92 percent quality steam. This saves on fuel gas, emissions and water. We’ve patented this process. It seems like a simple concept, but we try to look for common sense stuff, and it’s working out for us. As you can see, we’re working continuously at improving how we do things. Utilizes boiler water (blowdown) as feed water for second boiler Generates more steam from the same water Improves heat recovery Lowers operating costs & emissions Improves steam quality from ~77% to ~92% SAGD steam 77% OTSG Blowdown 23% SAGD steam 15% Blowdown boiler BFW 1st BD 2nd BD Blowdown 8%

16 Impact of technology So, before I hand things over to Cindy, I’d like you to consider for a moment the enormous impact of technology development on items we now take for granted: cell phones and personal computers. There’s been a lot of change since they first showed up 30 or so years ago. The oil sands are no different. The in-situ oil sands business is still in its infancy. We have a long way to go and many, many more innovations to develop as an industry. If there’s one message I’d like to leave you with today, it’s that we are doing all we can at Cenovus to meet the challenge we face each day of responsibly unlocking this resource to the benefit of both the United States and Canada.

17 Thank you for the opportunity to speak with you today.

18 Supplemental slides

19 Solvent Aided Process (SAP)
Here’s another example of a technology Cenovus is developing, at Christina Lake. Other oil sands companies are also working with solvents as a way to reduce water usage across the industry. Solvent-aided process (SAP) is a technological improvement applied to our SAGD operations that helps us increase the amount of oil recovered and improve production rates. It takes the benefit of injecting steam in the SAGD process and combines it with thinners, such as butane, to help bring the oil to the surface. SAP may also allow for greater distance between well pairs, which may further reduce our environmental footprint. So far, it’s showing great promise. We are anticipating a 30% increase in production using SAP and a 20% to 25% decrease in the steam-to-oil ratio by reducing greenhouse gas emissions, water usage and the amount of land needed. SAP versus SAGD ~30% production rate improvement ~15% incremental total oil recovery ~3% reduction in annual fuel gas usage ~30% increase to initial capital Environmental benefits lower SOR and emission intensity lower water usage & footprint Steam only (SAGD) Steam & solvent (SAP)

20 Wooden mat roads Innovation doesn’t have to mean complex systems or products. These wooden mats are an example of an excellent invention that’s good for business and for the environment. The mats are laid out as roads and work areas, helping to protect the ground and allowing us to work in conditions that would have previously been too soggy. When we’re done, we simply pick up the mats and move them to the next location. The plants underneath are hardly disturbed at all. Unfortunately, it’s often not these ‘good news’ developments in our industry that are highlighted in public discussions. There’s no question that we face some challenges in telling our story.

21 Spreading the word As we all know, the oil sands are big attention grabbers these days and certain groups do a great job of attracting sensational headlines that are often misleading. The oil industry – and the Canadian and Alberta governments – are becoming more proactive in telling people about the oil sands, though we still have a ways to go in raising the level of understanding about our industry, especially the non-mining area. That’s why we are always willing to take the time to meet with groups like AWNA and others, as you can see from the photos above. We’re working to help spread the word to dispel the myths about the oil sands industry. You may have seen our “A Different Oil Sands” television advertising campaign and we’ve also participated in the Canadian Association of Petroleum Producers TV campaign, with a recent ad featuring our surface water monitoring at our Christina Lake operation. We’re being proactive. By inviting media to visit our properties and by sitting down and talking to reporters like you about how we get the oil out of the ground, our innovations and our environmental improvements. And we’re reaching beyond the business and trade journalists. You’ll notice a photo of movie director James Cameron on a tour of our operations as well as a crew from The Daily Show with Jon Stewart. CEO Brian Ferguson at a media event for Cenovus’s donation to the AB Children’s Hospital Drew Zieglgansberger is interviewed by “The Daily Show” correspondent Wyatt Cenac Drew Zieglgansberger gives director James Cameron a tour of Christina Lake Cenovus television and print ad campaign

22 Doing business with First Nations
Now I’d like to turn for a moment to address the importance of community involvement. At Cenovus, we want the communities where we operate to share in our success. And we want them to be better off because we’re there. We make great effort to support local businesses and hire locally. And we invest in educational programs that will provide the training for local residents to learn the skills needed to work in the oil industry. The group in this photos is from Heart Lake Construction, a company run by the Heart Lake First Nation in NE Alberta. Cenovus uses this First Nations company to build roads and well pads and for dirt moving services. Another First Nations business that provides services to Cenovus is Primco Dene, which runs our oil sands camps.

23 Building better futures - together
Beyond providing business and employment opportunities, we look for other ways to improve the quality of life in the communities where we operate. We have a goal of working with Cenovus’s community partners to build better futures – together. As you can see from this slide, we cover the gamut of being involved in our communities. The company’s Community Investment program concentrates on three main areas – learning, safety and well-being as well as sustainable, or vibrant, communities. For example, Cenovus last year donated $1 million to the three Ronald McDonald Houses in Alberta, Calgary, Red Deer and Edmonton. And our support goes beyond just handing over money. It’s very important to Cenovus that these community organizations are true partners. We look for opportunities for our staff to volunteer and share their expertise. This results in a positive experience for the community organization and Cenovus. (Use only if needed to respond to question about the program or group on the slide) Roots of Empathy brings a parent and infant into classrooms from Kindergarten to Grade 8 to help children develop their social and emotional abilities, with the goal of reducing levels of aggression among school children and setting the stage for responsible citizenship and responsive parenting. The Calgary Police Service Cadets is a new program that engages the city’s youth in a positive way and allows them to experience the unique nature of the Cadet fraternity and the world of policing. Cenovus sponsors many events in Alberta, including programs like the Vancouver Aquarium’s AquaVan tour in northern Alberta as part of our commitment to Sustainable Communities. Building better futures - together Learning Sustainable Communities Safety & Well-being Calgary Police Service Cadets Roots of Empathy AquaVan in Alberta Vancouver Aquarium

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