Calgary, AB., Dec. 7, 2006 (TSX – COS.UN) — Canadian Oil Sands Trust (the “Trust” or “Canadian Oil Sands” or “we”) today announced its Budget for 2007, which includes production targets, estimated capital expenditures and a revised financial plan following proposed income trust tax changes by the federal government.

“We expect to enjoy a continuing lift in our production in 2007 while our capital program declines with the recent completion of our Stage 3 expansion,” said Marcel Coutu, Canadian Oil Sands’ President and Chief Executive Officer. “The progression of our financial plan should accelerate the move to fuller payout of free cash flow, thereby optimizing unitholder value in the near-term. Our long-term value is supported by a renewed focus on operational reliability and expansion projects, which should be greatly enhanced by the management services agreement.”

On November 1, 2006 Canadian Oil Sands announced the launch of a long-term management services agreement between Imperial Oil and Syncrude Canada Ltd. Under this agreement, Imperial Oil will provide operational, technical and business management services to Syncrude Canada Ltd., which is expected to result in further sustainable improvement in Syncrude’s operating performance. The agreement also supports the development of Syncrude’s preliminary Stage 3 debottleneck and Stage 4 expansion plans, ultimately expected to increase production to over 500,000 barrels per day, gross to Syncrude, late in the next decade.

Syncrude and its joint venture owners now are entering an “opportunity assessment” phase of the agreement. Recommendations from the assessment will be brought forward to the owners by the end of the first quarter of 2007. Once endorsed by the joint venture, work will begin to implement action items, including the adoption of global best practices and operating systems from Imperial and ExxonMobil operations.

Highlights of the 2007 Budget

The Budget reflects a 36.74 per cent interest in Syncrude, assuming Canadian Oil Sands’ completion of the acquisition of Talisman Energy Inc.’s indirect 1.25 per cent Syncrude interest (the “Talisman acquisition”). This transaction has an effective date of December 1, 2006 and is expected to close on or before February 28, 2007.

• Syncrude production is estimated to range between 105 to 120 million barrels, or 39 to 44 million barrels net to the Trust. The single point estimate is 110 million barrels, or 40.4 million barrels net to the Trust, which includes one coker turnaround scheduled for the third quarter of 2007. The low end of the range reflects the possibility of an additional unscheduled coker turnaround while the upper end reflects higher than budgeted operational reliability and stability.
• Operating costs are estimated to be $25.76 per barrel with purchased energy costs accounting for $7.06 per barrel of this amount. We are assuming an average AECO natural gas price of $7.50 per gigajoule for 2007.
• Funds from operations are expected to total $881 million, or $1.84 per Trust unit, based on an average WTI crude oil price of US$55 per barrel and a foreign exchange rate of $0.88 US/Cdn during 2007.
• Free cash flow is expected to be $1.30 per Trust unit. Free cash flow is defined as funds from operations less capital expenditures and reclamation trust contributions.
• Annual Crown royalties are expected to be $6.15 per barrel, reflecting the shift to the higher royalty rate of 25 per cent of Syncrude revenues net of capital, operating and non-production costs.
• Capital expenditures are expected to total $255 million with approximately 57 per cent directed to maintenance of operations, 33 per cent directed to the Syncrude Emissions Reduction Project (“SERP”) and 10 per cent to Stage 3 completion and modification costs. Combined with the sulphur reduction technology in the completed Stage 3 expansion, the SERP is designed to reduce sulphur dioxide emissions by 60 per cent from today’s approved levels by 2011. It is a multi-year special project expected to total approximately $772 million, gross to Syncrude.
• We estimate that over 95 per cent of the distributions pertaining to 2007 will be taxable as other income. The actual taxability of the distributions will be determined and reported to Unitholders prior to the end of the first quarter of 2008.
• The Trust’s crude oil production remains unhedged, and under the current financing plan, we do not intend to undertake any crude oil hedging transactions. The Trust may hedge its crude oil production in the future depending on the business environment and our growth opportunities.

Changes in certain factors and market conditions could potentially impact this Budget. In particular, funds from operations and free cash flow are highly sensitive to crude oil prices; every US$1.00 per barrel change in the WTI crude oil price impacts funds from operations and free cash flow by $0.07 per Trust unit. A sensitivity analysis of the key factors affecting the Trust’s Budget is provided in its December 7, 2006 Guidance Document, which is available on the Trust’s Web site at: http://www.cos-trust.com/investor/guidance.aspx. Canadian Oil Sands intends to continue providing quarterly updates to its guidance.

Canadian Oil Sands’ finance plan
On October 31, 2006, Canada’s Minister of Finance, Jim Flaherty, announced the government’s intention to impose a new tax on distributions from existing income and royalty trusts effective in 2011. Canadian Oil Sands is disappointed with the proposed tax changes because we feel the government does not appreciate the significant contribution made by income trusts to the Canadian economy and the destruction of value being borne by investors. While we will continue to express our concerns to the government and press for a more pragmatic solution, Canadian Oil Sands has adjusted its financial plan to respond to the income trust tax changes as they are currently proposed. We will continue to review this plan in light of the actual legislation when it is tabled by the federal government.

In order to optimize value to its investors and reduce the Trust’s cost of capital, the Trust is revising its net debt target to $1.6 billion from its previous target of $1.2 billion. Actual net debt is expected to fluctuate around this target as changes in variables, such as crude oil prices, foreign currency exchange rates and production, cause variances in free cash flow. In addition, our balance sheet now can support a higher debt level because of the increase in our asset base following the Talisman acquisition and the completion of the Stage 3 project.

An investment grade credit rating continues to be the foundation of the Trust’s financing strategy, and we do not expect the revised plan to materially impact our long-term debt ratings. Under the Trust’s 2007 Budget, which includes the additional equity and debt to finance the Talisman acquisition, we expect to reach our new net debt target in the first quarter of 2007, again assuming a US$55 per barrel WTI crude oil price.

The higher net debt target should allow the Trust to maximize distributions until the new tax rules take effect in 2011 by accelerating fuller payout of free cash flow. The Trust remains committed to its previously stated objective of approaching fuller payout of free cash flow once we approach our net debt target, unless capital investment growth opportunities exist that offer unitholders better value. Distributions are expected to reflect some of the variability of free cash flow once we approach fuller payout; they will be determined quarterly by the board of directors in light of current and expected economic and operating conditions, and with the objective of maintaining an investment grade credit rating and ensuring financing capacity for Syncrude’s expansion projects and/or acquisitions.

The Trust intends to suspend its Premium Distribution, Distribution Reinvestment and Optional Unit Purchase Plan (“DRIP”) prior to the February 28, 2007 distribution date. The DRIP provided cost-effective equity to support our financing plan for the Stage 3 expansion. The Trust no longer requires this source of funding; however, it may reinstate the DRIP to fund new investing activities if required in the future.

Non-resident ownership declines to 36 per cent
Based on information from the statutory declarations by unitholders, we estimate that, as of November 3, 2006 approximately 36 per cent of our unitholders are non-Canadian residents with the remaining 64 per cent being Canadian residents. Canadian Oil Sands’ Trust Indenture currently provides that not more than 49 per cent of its Units can be held by non-Canadian residents.

The Trust continues to monitor its foreign ownership levels on a regular basis through declarations from Unitholders, and posts the results of the declarations on its web site at www.cos-trust.com under investor information, frequently asked questions. This section of the web site and page 45 of the Management’s Discussion and Analysis section of the Trust’s 2005 annual report describe the Trust’s steps for managing its non-Canadian resident ownership levels.

Canadian Oil Sands Trust provides a pure investment opportunity in the oil sands through its 35.49 percent working interest in the Syncrude Project. Located near Fort McMurray, Alberta, Syncrude operates large oil-sands mines and an upgrading facility that produces a light, sweet crude oil. Canadian Oil Sands is an open-ended investment trust managed by Canadian Oil Sands Limited and has approximately 470.9 million units outstanding, trading on the Toronto Stock Exchange under the symbol COS.UN.

Advisory: in the interest of providing Canadian Oil Sands Trust (“Canadian Oil Sands” or the “Trust”) unitholders and potential investors with information regarding the Trust, including management’s assessment of the Trust’s future plans and operations, certain statements throughout this release contain “forward-looking statements” under applicable securities law. Forward-looking statements in this release include, but are not limited to, statements with respect to: the expected increase in production in 2007; the reduced capital spending; the completion itself and the timing of closing of the Talisman acquisition; the expected production and operating costs for 2007; the capital forecast for 2007; the type of maintenance that will be required in 2007; energy costs for 2007; the amount of Crown royalties in 2007; the amount of funds from operations in 2007; WTI prices and foreign exchange rates in 2007; the level of reductions in sulphur emissions from and the cost of SERP; the timing in reaching the net debt target and future distribution payout levels. You are cautioned not to place undue reliance on forward-looking statements, as there can be no assurance that the plans, intentions or expectations upon which they are based will occur. By their nature, forward-looking statements involve numerous assumptions, known and unknown risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and other forward-looking statements will not occur. Although the Trust believes that the expectations represented by such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct. Some of the risks and other factors which could cause results to differ materially from those expressed in the forward-looking statements contained in this release include, but are not limited to: labour and cost pressures in the oil sands industry and in the Fort McMurray area in particular; the regulatory changes that impact oil and gas operations; the nature of the regulations imposed by the federal government on income trusts; general economic, business and market conditions; commodity prices; and such other risks and uncertainties described from time to time in the reports and filings made with securities regulatory authorities by the Trust. You are cautioned that the foregoing list of important factors is not exhaustive. Furthermore, the forward-looking statements contained in this release are made as of the date of this release, and the Trust does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained in this release are expressly qualified by this cautionary statement.
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Canadian Oil Sands Limited
Marcel Coutu
President & Chief Executive Officer

Units Listed – Symbol: COS.UN
Toronto Stock Exchange
For further information:

Siren Fisekci
Director Investor Relations
(403) 218-6228
investor_relations@cos-trust.com

Web site: www.cos-trust.com